All right. Hey everyone, this is Bram
Constein and you're listening to Bitcoin for Millennials.
Together with my guests on this podcast, I go on a journey to
discover how our current financial system works, why it's
flawed, and why Bitcoin is the most relevant technology that
you, my fellow millennials, should understand and adopt.
In this episode of Bitcoin for Millennials, I'm joined by CJ
Constantinos. He's a nine year Bitcoin veteran
and has been stacking and holding Bitcoin since 2014 and
even mining Bitcoin since 2016. He believes Bitcoin is
commoditized energy. We'll definitely talk about that
in the form of money, the reserve asset of the Internet
economy, and the most pristine form of collateral in the world.
Because of these attributes, he believes that the future of
finance will be built around Bitcoin.
Well, these are a lot of topics to explore and I'm excited to
dive in. So welcome man.
Thank you. Thanks for having me.
Yeah, that's basically my entire Bitcoin thesis right there.
All right, well, that's that's a lot to talk about.
I love, before we skip to my first question, like
commoditized energy, like I use that as well and I I love that.
And I think it kind of ties in to when people say like, oh,
Bitcoin is not backed by anything.
Is this the answer to that? Oh, absolutely, absolutely.
It's one of the most stressful things that I'm experiencing
right now in the marketplace is that people don't understand the
basic concepts of business. I mean, you start a business to
make a profit, right? So.
A lot of people in this zero interest rate policy, it was
about getting customers. The bottom line was not as
important as the top line because the money was cheap,
basically free for the big corporations.
So capture as many customers as you can because one day later
we're going to monetize them. Well, that's not really how it
works in an economy where rates are where they're supposed to
be, and they're still too low for where they need to be right
now. But.
As they correct, what we'll see is that companies become more
focused on the bottom line rather than the top line.
It's not about customer acquisition, it's about quality
of product and profit and profit drives the whole economic
engine. So if you're in business and you
have a cost, it should be common sense that you can't offer your
product or service for less than the cost, right?
Because then you have no profit, You're better off just.
Closing down your business and getting a job because at least
you'll make money for your time and energy.
But if you run a business that can't run a profit, what are you
doing? Well, the bottom line, where you
determine your cost versus your profit, that is what drives the
whole decision making processes for producers.
So this, you know these laws of economics, these are natural
laws of economics that apply directly to running a business.
And it's no different for Bitcoin.
You know the cost to produce a Bitcoin if I'm mining Bitcoin?
And it costs me $20,000 to mine a Bitcoin or earn a Bitcoin.
I'm not going to sell it to you for less than 20.
I can't. The laws of business say that if
I sell that for less than 20,000, I'm going to go out of
business. It's a bad business, yeah.
Yeah, the natural laws of economics and the business cycle
are what back Bitcoin as commoditized energy in the form
of money. That's absolutely the answer to
people who say it's not backed by anything.
And to maybe try to simplify that, like is that I once I
tried this in a tweet, right? Like anything, people create
anything, a service, a product, a building, a car or whatever
even, you know, jobs that require thinking, you know you
expend a certain amount of energy or you utilize that in a
certain way, right. And as you mentioned, like the
concept of a business is that you by putting in value, you
create value and what someone pays for you pays for that value
basically. Or well, you put in energy, you
create value, someone else pays with energy as well or something
that represents value, right. And if you run a good business,
the thing they pay is more than what they get.
Exactly. And if it's not, then that is
actually the free market price signal.
Telling you, that's the marketplace.
Telling you, hey, the value proposition of your good or
service is not good enough, you know, so you're not solving a
big enough problem for me that, in other words, the demand isn't
going to be there. So the company can't charge a
price that's above the cost. So as price falls below cost,
that's the marketplace's natural signal to the producer that you
should redistribute or reallocate your resources.
And focus on something where profit can be generated.
So the lack of profit is how the market signals to producers
reallocate, redistribute resources, and figure out a
better product or service. That's going to solve a bigger
problem of mind that I'm willing to pay for a price above the
cost. Would you say?
That's then perhaps true capitalism in a sense, right?
Like if we both have a bakery and I make better breads than
you and no one you know, even though we have bread quote UN
quote, but no one goes to to your bakery because your bread
doesn't taste good. You're not as good in bread
making as I am. Then I would win naturally,
right? So, so then the market requires
you to to shift your your your energy expenditure.
Absolutely. But not only that too.
And Satoshi has a quote about this.
I've tweeted this before, it's one of my more popular threads,
but. I'm not.
I can't directly quote him, but basically what he said was that
the cost of production of pretty much any commodity or any good
or service always tends to gravitate towards its cost of
production. And the reason Is it because if
we have two breaker bakeries and I'm making bread and people need
bread and then you see, hey, he's making that bread for a
dollar and selling it for $2.00, I want to get in on this
business. Well then, as you start to make
bread, what happens? The supply of bread goes up
against a fixed demand, or maybe a slowly rising demand with
population, unless you invent A cronut or you know, some crazy
new bread type. Sorry, absolutely.
So as the supply of bread goes up, the price comes down.
Well, where does it come down to?
It trends down towards its cost of production and this, this
natural law of economics. It governs Bitcoin as well as
business. And if we follow the bread
example, but if the price goes down right, some people will
say, well, I'm going to quit my bakery because you know, I
cannot make enough money anymore.
The demand for bread stays the same.
There are then less bakeries and then the price will slowly go up
again, right? Absolutely.
And the amazing part with Bitcoin is where the difficulty
adjustment comes in. Right, because if somebody is
making that bread and the the cost is is too high and they
can't profit and they stop making the bread, well it
doesn't become cheaper for anybody else who's making the
bread to make the bread. What happens is the difficulty
decreases and as the difficulty decreases, it becomes cheaper to
earn a Bitcoin through mining. So it's kind of like a
self-sustaining protective mechanism that we don't see in
any other good service or commodity.
In the world, the difficulty adjustment is truly the
technological upgrade to Bitcoin as a commodity that makes it the
best form of money and the least risky commodity to produce in
the world. And how could we translate that
into a word people would understand like is is that like
I almost, I want to use the word like market maker, but that's
not the word like it's kind of like this automated incentivizer
for people to keep contributing to, let's keep with the, let's
stay with the example, right, like baking breads in that in
this example. Yeah, so the way I say is price
drives hash rate, Hash rate drives difficulty and difficulty
drives cost of production. So as the hash rate goes up and
blocks are being added to Bitcoin at a faster than 10
minute pace. The difficulty?
Just wait a second. It's my job to make sure that
blocks get added at 10 minute intervals.
So if it's if the pace is too fast and there's more hash rate
than there was in the previous epoch, then the difficulty will
increase. And it will target a difficulty
that it believes will allow the existing amount of hash rate to
produce a block every 10 minutes.
So as that difficulty goes up, it increases the cost.
For minors to earn that Bitcoin, which that is the definition of
store value, right? Store value is higher lows.
Everybody gets really excited about the peaks.
Oh, 1020 thousand 70,000. When you're in Bitcoin for long
enough, you don't care about the peaks anymore.
You care about the bottoms. Where are those bottoms going?
And that is what Bitcoin does best.
That's what was designed to do. That's the technological
innovation. The difficulty adjustment and a
digital commodity where the cost of production, even if miners
are unprofitable and they have to turn off their machines, the
difficulty will adjust downwards and then they become more
profitable. So taken with that same thing,
imagine you were making bread, but then all of a sudden because
other people stopped making bread, it became cheaper for you
to make bread. So that increases your profits,
it incentivizes you to create more.
Of course, we don't see that in the real world.
It's only. Something that's built into
Bitcoin, That's to me, that's the real genius of the
commoditized energy because it is.
It reduces the risk of competition, right?
And every other aspect of the economy.
If a business starts and starts making profit, competition is
going to pop up. Look at streaming services, for
instance, right? Netflix came up and now boom,
everybody has a streaming service.
Well. With Bitcoin, the more and more
streaming services or bakeries that pop up, the more expensive
it becomes to offer that service to the marketplace.
And that mechanism is what protects bitcoins.
True. Let's call it fair value, yeah.
Or maybe maybe to to talk in like classic terms of like
marketing. It's like an automated barrier
to entry in a sense or barrier to to keep participating
perhaps. Yep.
And and that's a self-sustaining mechanism.
So that's for Bitcoin. That's amazing because you know,
I like to compare, we'll move off bread and streaming
services. Let's move the gold, right,
because gold is the the direct comparison.
You know, if the price of gold goes below, it's all in
sustaining costs. And and let me try to simplify
this down. If it goes below the cost of
production, right, that goes below.
The point at which it costs the making it out of the ground?
Literally, yes. Then they have to stop mining
because they can't mine at a loss.
Yeah. And then as they stop mining, we
it's the same economics. Supply goes down against the
consistent demand, price goes up.
Same thing happens with Bitcoin, except Bitcoin is in the process
of its moving through that S curve adoption, right?
We're still at the bottom of the S We're not.
We haven't made that big parabolic move yet.
Where where Bitcoin gets full scale adoption.
So at this point in time, I think what's so interesting for
millennials to understand, I mean if you can take away from
this interview one thing, understand this.
We are at the point in Bitcoin price discovery where we at the
bottom of the S curve when you're at the bottom of our
extra out. What this is basically exactly
right? Yeah, Yes.
When you're there, that's your point of a maximum opportunity
because. The price is going to be
relative to the commodity value. So that's why I call it the
commodity, the commoditized energy in the form of money.
Because right now the the price of Bitcoin is really it.
Like Satoshi said, it gravitates towards its cost of generating.
But in the future, after we have that huge S curve adoption move
to the top. It's going to be about the
monetary value of Bitcoin, and that goes back to your last
interview of people that watch it with Peter, where he talks
about all the different values in the world.
That Bitcoin is going to have to represent, whether it's
accounting and purchasing power store about all of the all of
these different forms of uses. That's the monetary value of
Bitcoin. You you almost can't even put a
dollar number on it because it's so vast, because it's it's
literally all the economic energy in the world divided by
21 million. That's the monetary value of
Bitcoin. But right now, you have the
chance to buy Bitcoin for its commodity value.
And in all honesty, nobody knows when that transition is going to
take place. So the fact is explanation.
Now's the time to get in. As a Millennial, now's the time
to establish your position and forget about everything else.
Focus on Bitcoin. It is the only decentralized
network, and if you if you're able to do that, Bitcoin will
empower you through its design by putting in those higher lows.
And you'll be able to preserve and even grow your purchasing
power through time. All right, we got straight into
the deep into deep. Yeah, I know.
I love it. I love it.
You know, like one of my, one of
my goals also with this podcast is like you.
You use a lot of terms and I understand all of them, you
know? And I'm I I love that we went
with the bread analogy because I'm also trying to like find
ways where we can you know, explain, simplify a bit more.
You know, like kind of I want to say like create these little
threads that different people could pull on, you know, like
whatever, whatever triggers them, you know, or maybe hooks
them into, you know, learning about Bitcoin more.
But I love, I love what you said.
And also maybe to add to that, like now Bitcoin, I actually had
a like a Twitter conversation about this today.
Like now you know Bitcoin is priced in dollars and later like
as you mentioned like and I think this is still the thesis,
right? At least for me like Bitcoin is
either going to be nothing or is it going to be everything.
Like I don't, I don't see a middle in there like this is
this is just my fault. So if it goes to everything then
it will also turn around right? Like Bitcoin will not be priced
in dollars, but everything will be priced in Bitcoin, not in a
supermarket sense of way, but in a value sense sense of way.
And I think I think we'll get to that.
You know, what is the difference between price and value and
money and currency and and and yeah, those things.
Yeah, absolutely. Well, I think a great way to
kind of simplify this down is getting into money versus
currency. Yeah, right.
Because Bitcoin is the. Bitcoin is money, but what we're
what we call money today is not really money, it's currency.
And that's that's the real problem.
So that we've gone through this process of of I guess I want to
call it evolution, but I guess it's more like devolution
because we've gone backwards. You know, we had real money in
the form of a of gold and then banks would take that gold and
hat and hold it on their balance sheet as an asset and then they
would issue paper. And that paper note would be a
claim for the gold that they held.
So that's a, you know, that's what I would call a paper
commodity money because it's paper, but it's still derived
its value from the underlying asset which was gold, which is a
commodity. The the real trick that happened
here and we're not taught about this in school.
You know, some millennials, we're not going to hear about
this going through K through 12 or even in secondary education.
Right. You're just not going to hear
it. You're not going to be taught
this. But there is a difference
between money and currency. And the main number one
difference is store of value, right?
So the dollar is a fantastic currency.
It's a fantastic medium of exchange.
And some could argue actually that the existence of the dollar
strengthens Bitcoin, right? Because as the the abuse of the
dollar continues to rise with the US government spending.
In the last 30 days, they spent $9.88 billion per day, right?
And at the same time, the Federal Reserve, through their
quantitative tightening, destroyed about $200 million per
day. So on a net net basis, there's
about $9.6 billion that the government is spending into
circulation. Well, that is the definition of
inflation because you're increasing the amount of
circulating currency units. And they can do that based on
the vote, based on the budget, right?
They take a vote, they pass the budget, they borrow the money
and then they spend it into circulation.
That is our problem here today. You hear a lot of people, a lot
of economists talk about the 1970s like we have 1970s
problems. Our problems are more like the
1940s, because in the 70s a lot of that inflation took place by
the banks lending. So people came to the banks to
borrow money, and they happily lent money.
Well, the amount of money they lent increased the amount of
circulating credit units, and that created inflation.
Well, when Vachler raised interest rates all the way up to
20%, there wasn't a large debt, there wasn't a big government
deficit, and the amount of people who wanted to borrow went
way down. And that's not the scenario that
we see today. So what?
What's happening today where everybody's waiting to see?
Recessionary prices and even the economy itself is slowing down,
but the prices keep going up. They call that stagflation.
How is this happening? Well, we can look back to the
1940s to explain this instead of the 70s, because in the 40s we
had inflation as well. But the inflation came from
government spending, government spending.
That's the two. These are the two biggest ways
to increase the dollar supply because you know a lot of
people, they don't understand that there are actually four
different. Types of currency.
So of course you have Fiat cash currency, but the there's only
about $5 trillion of of cash that's circulating right now and
that's as of last quarter. The new numbers, you know,
changes every quarter, but then you have central bank reserves
are another form of the dollar bank deposits and treasuries.
So Fiat bank deposits, central bank reserves and treasuries.
Those are four different types of dollars.
I bet you most millennials watching this podcast, when they
think of dollar, they only think of one thing or maybe two.
They think of cash or they think of a bank deposit, but they're
not thinking of central bank reserves and they're not
thinking of treasuries. But these two are also a form of
the dollar. And if anyone of those forms of
the dollar expands, its supply is expanded by government vote
or by bank lending. That right there is inflation.
Well, of course, as you know, with Bitcoin, nobody can expand
the supply. There's 21 million coins and
there will never be any more. That fact, coupled with the
difficulty adjustment, is what creates this magical synopsis,
this magical synchronicity between the laws of economics
and then the real world consequences of the actions of
our government and as they continue to increase all four of
those forms of the dollar and create inflation.
Bitcoin is here to protect our value, it's savings, technology,
and if our generation can understand that, then we can
easily opt out. It reminds me of that meme where
the politician is on a plank, over a Cliff and all the people.
The rest of the people are holding him up.
Yeah, yeah. And it's just like, hey, instead
of saving dollars and holding this guy up, take your dollars
that you earn at work. Spend them at the store for what
you need. But when you have something
leftover, you know what to do with it.
You can't save currency. You can save money.
Well, the best form of money by far is Bitcoin.
So let's just opt out peacefully.
We don't have to crush the Federal Reserve and fight the
government. Let them do what they're going
to do, because Bitcoin will protect you through the laws of
economics. Take your savings and saving in
Bitcoin. Don't fall for the idea that
higher interest rates means a stronger dollar.
If you don't mind, I can kind of go off into a tangent on that.
That's one of the hot topic right now.
Yeah, yeah. Let's, let's take a little break
like also what I wanted to say. And and I think you illustrate
that with that meme as well, right.
Like it's also teaching and and hopefully demonstrating to
people that you can also be more sovereign when when you actually
have Bitcoin, right? Like the rules of Bitcoin, the
the rules of the Bitcoin protocol.
As I like to say, you know, they're open and transparent,
like the whole monetary policy is transparent.
It can be audited 24/7, 365, right.
So if you understand and then believe that it's an asset that
you can hold which keeps its value over space and time, so
into the into the future that once you hold it, you are fully
sovereign like you are not. Dependent on whoever decides
whatever, right. Changing a policy, pushing a
button, printing money, you know whatever, like you, you
basically opt out of that as you mentioned and I also fully agree
like this is not like an anti bank or anti dollar type of well
some people see it like I don't really see it like that.
It's more like, OK, you have a system System A.
Which is provably not so good. And you have a system B which is
provably way more superior plus even plus more transparent than,
well, anything like you can list a lot of things, right?
And so I think it's just a fair choice for people, right?
Like, once you know and just like I recorded another podcast
today with Mark and he also said like once you know that this is
there. You cannot hide anymore, right?
Like, you have to choose, like once you know that this is there
and you decide not to study it, totally fine.
But if you also decide not to study the other thing, you know,
the flawed system, basically, yeah, Then you cannot cry when
when something happens there, right?
Like there is no, there's no free pass.
There's no free pass in life, basically.
Right. So you either.
Study it or not. Both.
The choice, both. Fine, like no judgment but but
there is going to be some sort of consequence, whatever it is
that you actually have to live with, right.
And I think now and also like one of the goals with this
podcast is to like show people like this is the other thing.
This is the other thing as a real like antagonist to to the
thing that already exists that you probably also don't
understand, right. Like that's that's one of my
motivations. Basically, like, I was
participating in the system until I understood that the, you
know, money in the bank is not yours.
And that was for me to try to think like, OK, I'm
participating in a system that I have no clue about.
I should do some research, right?
Well, that was kind of like one of the things that led me to
Bitcoin. So yeah, that actually leads
perfectly into part of my, the last part of my thesis, which is
Bitcoin is the most pristine form of collateral in the world.
Because you know where that saying comes, be your own bank.
Well, what like you said and you what you, when you were talking,
you said they can't change anything about it.
Well, what's the one thing that people do these days?
They just sit around waiting for the Federal Reserve Board of
Governors to decide the price of money, right, To decide what the
interest rate is going to be. It's not a free market process.
It's a stated rate. Well, Bitcoin as the reserve
asset of the Internet economy is the only money in the world
where the economy doesn't try to name the price of their money.
Every other economy in the world has a sense just is that tries
to tell you what the price of that money is.
Bitcoin is a free market price of money and that that is where
the rest of the marketplace is missing this right now.
When I say that the future of finance is going to be built
around Bitcoin and the Bitcoin equity, the value of Bitcoin,
what I mean is that true free market principles are going to
out compete and outlast these fixed fake market principles
that we see in the Fiat system where they can state rates.
I mean it's this simple the the interest rate should be based on
the supply of money and the demand for loans.
It's funny because maybe like two years ago you could go into
Defy and you could, you know, wrap your Bitcoin and you could
start earning on your Bitcoin and people are like, wow, this
is fantastic because in the traditional system we were still
at 0 interest rate print the oh, so there's like 0 interest rate
policy in the traditional system that I can't earn anything
there. You know, my bank has given me
0.01%, but you know, if I buy some Bitcoin and I wrap it and I
put it in one of these protocols, I can start to earn
345 percent. And that was like
groundbreaking. And now here we are during a
bear market and the traditional interest rates are higher than
the defy interest rates. So it's like well now you can go
borrow against your Bitcoin for two or three percent.
Two years ago it was costing you 8 to 12%.
So you know the fact that interest rates are allowed to
move based on the supply of money and the demand on loans
that free market mechanism will out compete and out perform
versus the the Fiat system where they the the governor of the
Central bank is saying this is what the rate should be based on
our analysis and our data. And you know, forget about going
into whether the data they have is correct or not, but it's not
the marketplace signal that's more.
About early more the principle right like it's the principle
and I love a Bitcoin is written with memes obviously, but this
is one of them. It's like follow.
Do you want to follow the rulers or do you want to follow the
rules? That's right.
And Bitcoin is the rules in this example, right?
It's just a thing. It's just there.
And anyone who wishes to participate can decide on the
price of it or the value of it. But whatever you think of it, it
just keeps going, right? And so I think that's.
And I find that interesting actually.
Like, you can go into a deep end and get research or this was
like this in 1990 or 60 or whatever.
But I love that Bitcoin is so beautiful in a sense that you
can really drill it down to certain types of principles,
like System A does things in this way, which.
OK. It is there, but it doesn't,
it's not really logical. And then you see like how
Bitcoin works, like for example, it's auditable to like I said
24/7, 365, the Federal Reserve or any central bank is not.
So just that, right, Like like just that I would love to like
share more, right. Because I think if you're like
an interested, somewhat intelligent, rational person
that that should not make sense, right?
Like. If you and and I say this a lot,
but if you have to say you're transparent or honest or fair
and you cannot show it, then you're not right.
Like also that's, that's another one, right.
It's just basic principles in some sense.
But I find it very logical. But well, I don't know how your
orange Pilling goes, but sometimes it's actually
difficult to, you know, trigger people in that way.
But let's go back like I still wanted to ask my first question.
But it's funny like how we how we not at all we're all good
like this is funny. No.
But as you mentioned, you're a millennial as well.
And I think it's fun like you're you're obviously really into
this. You know you share a lot about
it like but why even for me and and it's a lot, right.
Like why, why is financial literacy so important especially
for millennials, right. Like for our, our generation
like you know you barely scratched the surface in what
you just mentioned, right. And and I think that's the point
of this question like why? Why is it so important?
Is it? Is it because it's so opaque or?
You don't learn about it, like what's your, what are your
faults there? Yeah, I think you know what
comes to mind is a Bible verse that where it says my people are
destroyed for a lack of knowledge.
And the translation there really is because we don't understand
these things and because we're not being taught these things.
Other people who understand these things and are in control
and in power are using it against us to destroy us because
inflation really is taxation without representation, right?
I mean, if you think about this, you know, in other words, why do
we pay taxes? Well, the the reason that we pay
taxes. Without representation, you mean
this is property tax or this is. Yeah.
And like any type of tax, why do we pay taxes to the government?
And the whole idea is that, you know, if you think of the
government in, in terms of a corporation, which it really is,
then you you need money, right? Just like a business, If a
business doesn't have profit, it disappears.
Well, if the government doesn't have profit, it disappears.
So the entire system itself is based off of those tax revenues.
So you know, we go to work and we get a paycheck and you get a
W2. And the government, you know,
they also. Been services W2 is pension
earned, income earned it so like a salary and you pay these taxes
to the government and the government is supposed to take
the tax and then spend it to survive.
That's where it gets its income from that.
But now we're at the point where the rules are so twisted.
And the reason that it's gotten like that is because people in
my generation and even the generation above us, they kind
of ignored these things. These things went on autopilot.
And as Satoshi said, there was too much trust in the system.
And we, you know, that trust afforded them the opportunity to
take advantage of people who didn't understand everything
that's going on in finance right now.
And I think that you know what's happening in it's.
Because it just worked, right? And we didn't have, well, at
least like at least in the Western countries.
It's just there, it worked. That's also why I want to focus
on millennials. Like, we grew up in the best
time ever. Like the easiest time of anyone
who's ever lived, basically. Oh, yeah, you know, like I, even
the generation after us has it worse, I think, right?
So we we had like the most prime childhoods growing up.
There was money. Like, no problem, nothing.
Yeah, I definitely think we got prime time because where we're
going from here, see, everybody's waiting for lower
prices. But what's going to happen is
the lower prices aren't going to come.
And we know that because that's what stagflation is.
The definition of stagflation is the prices are going up and the
economy is shrinking. It's going down.
And that's what we've been seeing now for multiple
quarters, even here in the United States.
And pretty much even though the United States is not a big
producer, the way the United States goes, the rest of the
world tends to go. That's why they call the dollar
the the cleanest dirty shirt in the laundry, right, Because we
kind of lead the way. Well, our economy is going down,
yet prices are still going up. The problem with this is that we
come back to those natural laws of economics and the natural
laws of economics. Yeah, when the supply goes down,
when the economy goes down, the prices should come down.
And that's a good thing because eventually the prices come down
far enough to where people can start to participate again.
Yeah. Oh, I couldn't go to dinner, but
it for three people and pay $90.00.
But now I can go to dinner for three people and pay $50.00.
I can afford that. Let's go to dinner.
Right. So prices come down it and it
creates a natural floor, a natural place for the economy to
rebound and restart. But now, as everybody is sitting
on the sidelines in cash, by the way, I've never seen it like
this $5.6 trillion in the United States alone, sitting on the
sidelines in Treasuries, nonetheless waiting for lower
prices. Well, as someone has been in
Bitcoin for nine years, the psychology of the market cycle,
I can testify to its truth. Right?
When I go to the grocery store and I'm checking out and the guy
asked me, hey, have you heard of Bitcoin before?
I'm like, oh man, you know, the guy who's bagging my groceries
is asking me about Bitcoin. I should probably sell some
Bitcoin here, right? Because we're.
You got to be out of top or something.
Yeah. Yeah.
And you know, I. But when I go to the bear market
and I wear like a Bitcoin shirt, I get dirty looks.
I'm like, all right, this means I should be buying more Bitcoin
because people think I'm stupid for wearing a Bitcoin shirt.
You know, it's the opposite of what the mainstream sentiment
typically turns out to be. The reward from the market, you
know, In other words, the marketplace rewards the few and
punishes the many. Well, right now the few are
holding Bitcoin and the many are holding dollars.
And they the scary part is that these people are holding dollars
not because they think that it's going to benefit them for lower
prices in the future. They think at some point in time
in the future it's going to be like March 2020.
Prices are going to drop down really quick, really low.
And if you have money on the sidelines and you're not afraid
you're going to get all these good deals and then just a
couple months later prices are going to be right back up to
where they were and even beyond. I mean that that concept, that
that ideology, that strategy is actually has the power over $5.6
trillion. That's that's an amazing concept
to think about because even if only a very small percentage of
that sideline cash enters into the Bitcoin marketplace, you're
going to see, you know, I think that the Bank of America
multiple is like for every $1.00 that goes into Bitcoin, the
price can go up $118, right? So if you have hundreds of
billions of dollars coming into Bitcoin, then the the amount of
price movement you can get at one point in time because the
supply is so limited is just it's almost unfathomable to
understand. But we're going to continue to
see that. We're going to continue to see
it from companies like Micro Strategy with Michael Saylor.
I don't even know why BlackRock is who would buy an ETF?
Why would anybody buy a Bitcoin ETF when they can buy a company
like Micro Strategy? You get cash flow from the
company, you get no management fee, you'll get dividends.
It's like micro strategy is the best version of an ETF that
there can be. So the fact that BlackRock is
getting in there, all these other guys are getting in there,
it just shows you that people are finally starting to wake up
to this. People are finally starting to
understand, you know, what if I got 5.6 trillion on the
sidelines? It's OK if I have 100 billion in
Bitcoin because of where this is going.
And that the recognition of that by the biggest players in the
industry is a result of demand, right?
Because you don't launch an ETF to not profit.
You launch the ETF to profit, and you're only going to profit
if there's demand. So we're seeing the demand.
The mathematics are sound of commoditized energy in the form
of money. The value is backed and it's
protected. This is the answer for
millennials out there who are asking how do I save, How am I
going to buy a house in the future?
How, you know, how am I going to, how are my wages and my
savings going to outpace prices? The answer is Bitcoin.
That's your that's your solution.
The solution to the problem is Bitcoin.
And that's what gets me so excited because you know the
value proposition of bread is, well, you're going to be able to
eat well. Eating is important, but
sometimes you know bread, you don't want bread, you want
something else. And the value proposition of
gold is, well, we can, we can store your value, we can protect
your value. You know, 100 years ago, 1000
years ago, an ounce of gold would buy you one really nice
suit. Well, even today, one ounce of
gold is going to buy you one really nice suit so you can
store your value. But with Bitcoin, you're not
just getting the store of value characteristics, you're getting
the, the, the exponential growth from being at the bottom of the
S curve to the top of the gold is already at the top of its S
curve. So it's going to store that
value perfectly. Bitcoins at the bottom.
So it's not just about storing value through the natural laws
of economics, it's about growing your value and growing your
wealth and purchasing power because of where it is in its
process of adoption. So we are not only did we get
the best lifestyle growing up as millennials, but we have this
very unique opportunity in time that when people look back on
it, they say, Oh my gosh, could you imagine if we were alive
when Bitcoin was 30,000? So would you even say that that
that millennials are actually the perfect adopters of Bitcoin?
Yeah, absolutely. We are.
Legends will be made. You know, I joke with my wife
all the time that in our Citadel there'll be a picture of us next
to each other, like that farmer and his wife, right.
We're like, yeah. Oh, Grandpa CJ.
Man, he was buying bitcoins back when they were $200.
Yeah, the like that meme. You know what did you do when
BlackRock and ETF I bought? I bought before them all.
Ledge effing legend. Yeah.
Yeah, yeah. So.
Oh man, I love how much you love this.
But I also realized that, you know, it's a lot.
So I'm trying to think like I wrote down some questions for
you. Also, I think if I ask you, can
you explain the concept of money to me like I'm five, maybe
that's too much, but like what is the what is like value, what
is money and what is currency? Maybe that's even a bigger
question. I'm so bad at this because I
just go off on tangents, but the the core?
Stereo. I'll steer you.
Yeah. The core concept of money versus
currency is that money is a store of value and and currency
is is not a store of value. And the reason is it goes back
to what you originally said. And store value is I can versus
rulers. I'm sorry.
Good, no? No, but like store value is when
I put in value for a job or a venture, someone pays me value
in money that they also earned. By giving value right?
That's the concept. So when you think of it in terms
of time and energy, that might even be a better idea because
let's say you're you're going to work and you're working a 40
hour workweek. Well, a lot of people understand
that. Wait a second, I'm working 40
hours, but after I account for taxes, it's like I only worked
30 hours, man, that's, you know, that's not fair, right?
Because everybody thinks about that.
Everybody understands that, especially if you're a paycheck
to paycheck. You know, I remember when I
first came out of school, I was paycheck to paycheck and I was
thinking, man, I'm not buying that watch.
That watch is is 3 days worth of work.
So hell no, I'm not buying that watch.
Right? And you and you thinking you
think of things in terms of hours, like how many hours do I
have to work to earn this? Well, if you think of money and
currency the same way as in time and energy, well, you're you're
doing the 40 hour workweek after taxes, you're down to 32 hours.
Well, if you keep the value of your 32 hours of time and energy
and currency, it's going to slowly leak.
It's like you're keeping it in a bag that has a hole in it.
Which is Dollar, euro, etc, right?
Any of those, any paper currency that's issued by a government
and backed by the tax receipts that the government receives,
that kind of currency is is being abused because its supply
is being continuously expanded and the expansion of that supply
and currency see money can't, you can't expand.
If you want to expand the amount of gold, you have to go spend
time and energy to pull it out of the ground.
So that protects the amount of gold that can be pulled out of
ground. That protects the amount of
supply that can come to the market.
With Bitcoin, it's an absolute finite supply.
So there you can't just pull out more because you want you want
to or you spend more money. And then if you spend more money
and you get the hash rate, then the difficulty adjustment kicks
in. And two weeks after you invested
all that money to produce more of it, now you're right back at
a neutral level, so bit. Basically also what you say is
that money and currency got conflated.
Yeah. Oh yeah, absolutely.
People think they're using money, but they're really using
currency. But this since 1971, we have
been in a currency experiment because up into that time, the
dollar was redeemable for gold. So it was a commodity money.
It wasn't a paper currency. Yeah.
For the last 50 something years, we've been in a paper currency
experiment and that experiment. Is that also the difference?
Is money backed by something and currency is I want to say.
Conceptualized or created in a sense is is that more like a
paper? Yeah, so without going like a.
Paper concept instead of actually representing something
of value. Yeah.
I think the the best and easiest way to think about it is paper
currency is backed by taxes because that's.
That's really love the government, the income of the
government. So the fact that the government
is legally allowed to tax its people, that is what backs paper
currency because ultimately paper currency, just like that,
that commodity, paper money, it derived its value from the
underlying asset which was gold. Well, the underlying asset here
is government treasury. It's government debt.
So to see it on the banking balance sheet, it's a the asset.
Is government debt a treasury? And then the liability is the
actual currency. So the currency derives its
value from the treasury, but the treasury derives its value from
tax receipts. So the revenue of the government
is really what backs the paper currency.
And that should be alarming people because as the economy is
slowing down, the revenue of the government is going to go down.
But at the same time, most governments in the entire world,
they aren't slowing down the expansion of their currency
supply, they're speeding up the expansion of their currency
supply at the same time that their tax revenue is going down.
So on a personal level, imagine you were making $50,000 a year
and now your boss comes to you and says, listen, I'm going to
have to let you go and you go please, I'll, I'll take a pay
cut. But I gotta stay here.
I love this job. I don't want to go elsewhere.
I know I'm making good money here.
Even if you bring it down to $40,000, I'll stay here for you.
Well, taking that pay cut means that you're going to make
changes in your lifestyle because you're not going to be
able to afford some things or another.
Well, the government is making that decision for you and it's
and it's done through inflation. So as they continue to explain,
expand that currency supply and you continue to trade your time
and energy, they actually dilute your time and energy.
They take away the value of your time and energy through issuing
more and more treasuries. And as they issue more and more
treasuries, that's what really creates the problem of inflation
and now they're doing it at a higher interest rate.
So and is the simple is the simple illustration perhaps?
Let's say there's 1000 units of money and I own 10 and tomorrow
the government decides there's going to be 2000 amounts of
money units of money. I still have 10 which means.
My share of the total units of money became less, right,
Percentage wise, absolutely. So that devalues, that's what I
have basically. Absolutely.
But in order, let's say for a store store to keep up with
that, they will up the units that make the price for a
certain thing. Let's stick with bread again,
right? So they up the number, the price
basically, which is the number of units you have to pay for the
bread, right. But that will account for a
bigger share of my share, of my 10, right.
So because there's more money, my more units, my units are
devalued in a sense. But the value of a bread, just
the bread is the same, but the price of it will go up.
Yeah, because there is more units of the money, which makes
me. Uh, it's impacts me in a way
that I can buy less bread, let's keep it with bread.
But like I can buy less, right? Like that's basically what
happens. And and if somebody got lost in
that, because that is a very great simplification of how that
process works. But let me peel the onion back
just one more layer, because now what's happening is the grocery
store is paying a higher cost to get the bread on their shelf.
And that's where that it's not just the stores saying, oh,
well, we think there's more currency units, the whole issue.
So we're going to raise the price.
No, the costs to the grocery store to get the bread on the
shelf increases because they have to pay the trucker more and
they have to pay this and that it it.
And by the way, interest rates are a cost.
So isn't it funny that they try to fight inflation by raising
the price? You know, let's fight rising
prices by rising the price of money.
That doesn't make sense at all. If you want to, if you want to
help alleviate price pressures, then what you need to do is you
need to reduce a business's cost because if you can reduce the
cost for a business, they can lower the price and and higher
interest rates are a higher cost and the hot.
And as that same exact process you said there's more units.
So I own a smaller percentage of those units.
And because of the increase of the units, the price goes up,
yes. But the additional price
pressure comes from the increased cost and that cost
gets pushed to the consumer, from the producer to the
consumer. So it's like a double whammy.
It's not only the devaluation of the currency through the
increase of the supply, but then it's also the positive price
pressures created by the increased cost through the
devaluation of the currency that get pushed to the consumer.
It's a double whammy. And so when we talk about this,
right, and I I think that actually, you know, if you're
into politics or finance or whatever, like if your
geopolitical stuff, like if you're, if you're following that
right, Like sometimes I talk also with my friends about it,
right? Like or are this conversation
that that we have together, right?
Like we are kind of arguing why we think something doesn't work,
etc. But it is still happening,
right? So are we geniuses?
It Are there things we don't understand?
Are the people running these idiots, or are they geniuses?
And we are idiots? Like, do you know what I mean?
Like, how do you view that, right, Like, because, well, if
we can come up with this, there's probably even smarter
people that could also come up with this, right?
Like, why? Why is this still happening?
Yeah, that's that's a really good question.
And I think it's because the rulers are referring to a rule
set that is to an old game. It's not to this.
We're playing a different game, right?
It's like we were playing Monopoly and now we're playing
Clue and you're trying to play Clue with monopolies, rules.
It doesn't make sense. It doesn't work.
So in a traditional mindset that this is what the politicians and
the central bankers are thinking, I'm going to raise in
the rate, the interest rate. When I raise the interest rate,
that's going to attract buyers for my currency.
When people buy the currency, the value of the currency is
going to go up. When the value of the currency
goes up, prices are going to come down.
Well, look, that's. Because you need to ask less
units for the same thing, right? Because the value of the money
is higher, correct. So that is their thought
process. But what they're ignoring is the
fact, specifically in the United States.
But this is in the EU and all over the world, what these guys
are ignoring is the mountains of debt.
So in the United States, we have 33.
We just crossed $33 trillion well worth of debt.
Yeah, but we also have $200 trillion of unfunded liabilities
in Social Security, Medicare, Medicaid, and a few other
things. Which is on paper money that is
going to be paid. Yes.
We. For which there is no money.
Correct. So an unfunded liability is we
promised to make this payment. Yes, But we don't have the money
to make this payment. So it's an unfunded liability
because we promise to make this payment.
We know we're going to vote to make this payment, but we don't
have the money. We don't have the tax money.
We're not collecting enough tax money to make this payment.
So we have to borrow it in order to make the payment.
And what these guys aren't understanding is that when you
raise the interest rates, it raises the cost for all the
governments to borrow the money. So if you think of it on a
personal level, and I gave you an offer and I said, hey, brand,
you want to borrow some money, You want to borrow $1,000,000.
OK, no problem. I'll let you borrow that
$1,000,000. At 8%, you'd be like 8%.
I'll let you borrow that money at 2%.
It's common sense which one you would choose.
You'd obviously want to borrow at 2% instead of eight,
obviously. Yeah, because your costs are
lower, right? Well, it's the same thing for
the government. When the government is borrowing
in order to deficit spend, to fund its its budget, to spend
the money into circulation that they promised that they were
going to spend, but that they didn't collect in taxes the
extra money that they didn't have.
They have to borrow it. Well, when they borrow it,
they're borrowing it at 8% instead of 2%, right?
They're borrowing it at the higher rate instead of the lower
rate. And when you borrow it at the
higher rate, that means over the life of the loan, you're going
to have to create more currency units.
Well, that's the problem, right? The this is what I mean by we're
playing a different game every single time.
The financial We've ran into a financial problem in this
economy. The Federal Reserve has had to
create inflation. Whether it was, it doesn't
matter. What happened that the solution
to the problem was let's create inflation.
Now the problem is inflation. So you can't fix inflation with
more inflation. And that's where they're making
these decisions. They're using the old playbook
of creating inflation to try to fix the problem.
But this time around, the problem is inflation.
And you can't fix inflation with more inflation.
You can't reduce the amount of currency units in circulation
when you're creating more currency units.
One more thing. I'd like to interject on this
point, because people ask me all the time, OK, CJ, you get it,
You get it. But what can we do?
I'll tell you how easy it is. That's going to be one of my
questions. This is how easy it is guys.
The government simply spends the money it collects in taxes and
not one penny more. That's all you have to do.
And and matter of fact, in the old days, the government would
spend less money than it collected and that's how you
would help bring prices down. Because.
That's like a great idea, right? Collect the money in taxes and
then spend less money, less that you collect in taxes.
And guess what? That piece of money that you
didn't spend, you're now taking that out of circulation that is
going into the Treasury general account and it becomes the
country's savings. And now the country is saving
money and that country and that money is taken out of
circulation. And then in the future, if
something bad happens, you have a pile of savings that you can
spend into circulation to help stimulate the economy.
Man, I have to laugh like, this is what this is what's been told
in any like, bookkeeping 101 or finance 101, right?
Yeah, I mean, it's really that simple.
So that's funny, right? Like, OK, it's that simple, but
they're not doing it right. Which which that also.
There's a question is that also, you know, we talked about when
you have Bitcoin, you're a full sovereign.
You are also fully responsible to what happens with that,
right? Like it's totally in your circle
of control. There's no outsourcing of any
responsibility. Basically, if a society or an
economy runs on broken money and we say it's broken because it's
not backed by anything. Right.
Like what we mentioned before, can you say that there's then
also like no responsibility or there's no, let's say even
feeling of responsibility or like the responsibilities
outside of anyone's circle who's participating in the group
decision making in in this example, you know in America
also other other of course field countries.
Does that make sense to you? Like is there?
Is there anything in there? Well, absolutely, because it, it
changes the incentives, it changes the underlying
incentives of the economy. Here's how I'd like to put it,
because you hear a lot of Gen. Xers, they they come out and
they say debt is a bad thing. And the reason that they say
debt is bad is because when they were in their prime, right when
when they were entering into their 30s and 40s, when they're
making the most money and their wealth multiplies, the most debt
was a bad thing. And that's because real interest
rates or the amount of return you would get would be positive,
right? So if you take the the interest
rate and you subtract the inflation, you get the real
rate. And if that real rate is
positive, then it makes sense to save money.
It doesn't make sense to have debt because debt is a
liability. It's it's a burden to you.
It requires more of your time and energy.
So when you take out debt, be careful and don't carry debt
because it's that is bad. You should only use it in search
situations. Well, this is where the the game
has changed. Those Gen.
Xers don't understand that today debt is actually an asset and
it's an asset for the borrower and a liability for the lender.
Right Back in their days, the banks wanted to lend money
because they would make money off the debt.
Today the banks lend money and then they sell that loan to
pension funds and eat, you know, a whole bunch of different.
Divert a responsibility. Exactly.
Well, yeah, to remove the risk from their book.
Well, yes, because if they write what I mean.
They while you take on the responsibility when you correct,
when you lend it out, that's well, that's what I mean
exactly. They say we can't be responsible
for this. So we'll put this risk on
somebody else and and So what I'm trying to say is if if you
want to buy a home in today's with the way today things are,
it makes sense to borrow money. Because let's say you, let's say
you borrow money and you buy your home and your monthly
payment is $3000. Well think about that in 2019
you're you took out your loan, you're paying $3000 a month,
everything is fine. This is within your budget
within you know you can afford this.
Well, now Fast forward from 2019 to 2020.
Three $3000 is much less in 2023 in terms of purchasing power
than it was in 2019. See, So to you it's an asset
because you still have a fixed payment.
All you got to do is pay $3000 a month.
Well, the bank or whoever owns the loan now becomes a liability
because they're only getting $3000 a month.
But that is that and is worth much less now.
And is that? You know, I don't have a finance
or econ background, so I'm learning as I go, but this is a
great example I think. So numbers wise, you're spending
the same amount of units, right? In this case like the 3000 a
month and for you as the borrower, that's great, but that
doesn't take into account the value of that amount of money,
which or maybe the price, but correct me if I'm wrong that.
The bank financed it for eventually, right, Because they
also got the money from somewhere, you know, with these,
with the rates. So for the bank, it's more
expensive than for the lender, Is that correct?
Yeah. So a lot of people think the way
a bank works is that they actually need a depositor's
money to lend. Yeah.
When did those? Yeah.
But they don't. When you, when you deposit your
money at a bank, you are actually lending your money to
the bank. So the bank can go and do
whatever they want with it. Now when somebody borrows money
from the bank, this is where we go back to where we're talking
about inflation created by the banks.
The banks go to their balance sheet and they say, OK, this
person owes me $1,000,000. And here's the $1,000,000 I'm
going to get. They create it out of thin air.
They create it through inflation.
So to them there's a little bit less of a risk, but it it should
shine a real light and the alarms and bells and whistles
can be going off. Because if the bank can create
that money for free and they're still deciding that there's too
much responsibility, there's too much risk to keep free money on
their book and they'd rather sell that loan off to the
marketplace, yeah, that tells you the amount of risk in it.
So the when the rate of inflation is greater than the
interest rate, then real rates are negative.
And when real rates are negative it makes sense to borrow money.
That's why the Gen. Xers are so confused.
In their time, real rates were positive, so debt was bad.
You didn't want to have any debt, you wanted to pay off your
debt as quickly as possible. Today, it makes sense to carry
debt. If you have a 30 year mortgage
here in the United States and you have that $3000 payment in
10 years, maybe even sooner than that, you might be able to go
out to the street and pick up $3000 off the ground and then
walk into the bank and make your monthly payment.
Well, that's great for you. That's what I meant.
Like on paper, then on paper the number, the 3000 number stays
the same, but the value of that 3000 is being debased, right?
And that is the problem for the bank.
Right, that was what I was trying to illustrate.
Yeah, I think that is absolutely correct and that that risk, that
problem has been shifted through multiple securities products
back on to the people and it goes back to what you originally
said. Why don't we understand these
things? Why aren't we taught these
things well? Because if we were, we wouldn't
be buying debt when it was 1% to save an asset.
So let's tie it back to Bitcoin and transparency, etc, right.
Like I think you you illustrated a bit like these and these
security products and yada da da, like we don't even know.
We don't even know all the things that are out there,
right? But the fact that is obscured
by, you know, and abstracted by multiple layers basically and
also even within finance professionals, right, like
someone at a pension fund is buying this, I don't know.
Is that what you call a subprime mortgage?
No, that's not a subprime mortgage.
That is what the asset value is. But like a mortgage that's
deemed too risky of the bank is being taken over by another
finance professional who works at a pension fund and well,
multiple layers and all these things.
My point is, it's very obscure and vague, right, and very hard
to trace as well until it potentially blows up.
And then you know, when you pick up the pieces, you'll see who
had what and why they blew up, right?
If we put that against Bitcoin, which is again 24/7 365
auditable, everything is transparent.
You can see all the transactions, you can see which
account has what and all these things.
How can you mentioned to me before you said Bitcoin as a
mean is a means to accomplish the American dream and to grow
wealth which is purchasing power in the future.
It's the solution to the problem that millennials have, which is
they are getting paid in what we talked about the currency versus
money. How do you, how do you take that
step? Like, why?
Why is Bitcoin that that solution?
Yeah. So it's the characteristics of
money that make Bitcoin the solution, because no government.
No agency, no financial product can be designed to dilute
Bitcoin. There's only 21 million units
and there'll never be more. And that fact alone is what
allows you to use it as a as a tool for savings.
But in today's world, I know a lot of millennials, you know, my
peers, they come and they ask me, well, CJ, are you telling me
that I shouldn't buy a three month U.S.
Treasury bond or a six month bond and earn 5?
Percent plus, I shouldn't be earning 5% yield, right?
So the idea has transitioned from savings to cash flow.
Like there's just there's been a huge transition in the
underlying psyche of the marketplace to where savings is
less important than cash flow. And when rates are positive,
that's true. But the yield on Bitcoin the the
the cash flow, the satoshi flow on Bitcoin.
Really can be viewed to two different ways.
The 1st way is that Bitcoin over the last 10 years has a
compounded annual growth rate of 80% plus, so let's just call it
80%. So imagine if U.S.
Treasuries were paying 80%. That has been the compounding
annual growth rate of Bitcoin because of the difficulty
adjustment and the exponential growth of the network and
because we're at the bottom of the S curve moving to the top
through adoption. All of those factors allow
bitcoins store value property to produce over the last 10 year
period, 80% increases in your purchasing power per year over
the last 10 years. Whereas right now with the US
Treasuries you're getting 5% of an of an increase, but real
inflation is probably 10%, so really you get like -5% whereas
bitcoins giving you 80. That's the first way.
The 2nd way is through mining Bitcoin.
The difference between the cost of producing a Bitcoin and the
price that you can sell on the market price, that's the yield.
So if it if it cost me $20,000 to mine a Bitcoin and I can sell
to you today for $26,000 that's a 30% yield.
I'm selling it to you for 30% above my all in cost.
That is where you can you you can yield.
So you can take advantage of Bitcoin through its.
Compounding growth rate through the adoption cycle.
Or you can mine Bitcoin and take advantage of the difference
between the cost of production and the price that you can sell
it for on the marketplace. Those are the two best ways to
yield with Bitcoin. And if you're a new and you're
just starting, obviously you buy it and you use it as savings.
But the more and more you get into this and the more and more
you study it and start to understand, you know, you're
going to go down that path of how can I get involved, you
know, let me run a node. Let me start mining.
Let me figure out different ways that I can use Bitcoin, because
Bitcoin empowers us in a whole new set of ways that the quite
honestly and frankly the traditional world is not ready
to for the full unlocking of of Bitcoin and all that it's going
to do for for people in the future.
And so when when people hear this and you think, OK, you got
me, I'm interested, they will see all the other
cryptocurrencies, right? What's what's your like?
Go to explainer why Bitcoin is different and why they should
ignore the other stuff. Yeah.
My go to explanation for this is Bitcoin.
Let's let's think of these as networks, right?
So you have like, Facebook, and you have Twitter, and then you
have Like, Gab and Truth, Social, and probably a whole
bunch of other networks that you never heard before.
Right. And Facebook is Facebook because
of how many users it has, right? Twitter is Twitter because of
how many users it has. And these other companies are
lower, less name, no Brent because they have a smaller user
base, a smaller network. So now let's take a look at like
Bitcoin and Aetherium and say Monaro.
Well, when you look at the Bitcoin network, Bitcoins
network is like an ocean. And Ethereum's network is like a
lake, like a small lake. And then Monero's network is
like a puddle, right? So when it comes, we have a
whole bunch of soda cans and like, shelf glasses.
Yeah, 99 Percent, 99.9% of of coins and networks are scams and
shit coins and you should stay as far away from them as you
possibly can. And why are they there?
Why are they like, I agree. But like why are they there?
Is it like trying to profit of the invention?
I would say that is Bitcoin right?
Like okay this new invention broke True.
I'm gonna say it's good but not that good enough and so I have a
better solution right. Like is it just?
Optimistic. So if you hear something
described like that, it's a scam.
Because there is nothing that can compete with Bitcoin.
The Bitcoin network is the only network that is truly
decentralized. There is no other network at all
that exists that's decentralized besides the Internet.
Really, the Internet isn't like the wheel, you know?
Like, the wheel was invented and now, like, it's not like we have
like, Octagon right? Wheels.
And once the wheel wasn't like. You don't need another wheel.
Bitcoin. Bitcoin is the wheel.
But you know what you have to do with the wheel.
You have to attach it to a cart because when you attach it to a
cart, it makes you that much more productive.
And that's where some of these other things start to make
sense. For instance, when I
participated in the Ethereum ICO, my thought was, oh,
Ethereum is going to be better than Bitcoin.
It's going to, it's, it fixes the problems better.
And I'm so disgusted with where the network has gone because the
first idea around Ethereum was Bitcoin is money.
And now? I want to have gas South that I
can execute smart contracts for my money.
In other words, instead of rammed the car with the wheel
writing. So we got the wheel.
Now let's put the wheel on the cart because the cart is going
to allow me to offer all these different products and certain
if I have the wheel, I can't carry the dirt from point A to
point B, right? But if I have the wheel on the
cart now, I can offer a product or service that allows me to
carry the dirt from point A to point B.
So all these other networks that exist to compete with Bitcoin
are shit coins and they're scams and you should stay away from
them. But there are a few that
complement Bitcoin that only exists because of Bitcoin, that
in their greatest dreams never compete with Bitcoin.
Their goal is and desire is not to compete with Bitcoin because
they can't be money because they're shit coins that can the
the. It's just there is no other need
for another wheel. Bitcoin is the wheel.
But you know what, Let's build a cart and that cart is only going
to exist because of the Bitcoin wheel and that's going to allow
us. That's where that, you know,
when I say Bitcoin is the reserve asset of the Internet
economy, this is what I mean. All that wealth that's
structured into these treasuries and backed by tax receipts in
the Internet economy, all of that wealth is centered in
Bitcoin. Right.
And then you have all these different types of products that
are based off of the government's tax.
So the government collects tax and they create a product called
a treasury. So now you can buy government
tax receipts through a treasury. Well, a treasury would never
exist if they weren't collecting taxes.
Well, if we didn't have Bitcoin, then there'd be no if there'd be
no need for Ethereum. Because what were you gonna,
what is the theory I'm going to do be money.
It's there's an unlimited supply you can't even audit the supply
of. I can't tell you what the supply
of Ethereum is going to be. At any point in time with
Bitcoin, I can tell you exactly what it's going to be at any
point in time. So there's no need for Ethereum
without Bitcoin. But with Bitcoin, like I was
saying earlier when D Phi first came out, this is when I really
started becoming passionate and starting to understand that
Bitcoin. I think Bitcoin is evolving from
digital gold to digital collateral.
Right. Because you had gold and the
problem with gold was it's too expensive when when gold is a
collateral me and collateral is like if you want to borrow
something for me, then I need something to protect the money
that I'm giving to you. I'm not just going to give it to
you based on credit. Protect the risk of the of
right. Given it so, you know, if you
want to build, if you want to borrow $1,000,000 from me and
you give me $2,000,000 of Bitcoin, I have no concerns that
you're borrowing $1,000,000 from me.
You know, because I have $2,000,000 worth of collateral.
Well, you're going to, I'm going to earn interest from the
$1,000,000 that you're borrowing from me.
So these types of products are are interesting to me because I
think the future of finance is going to be built around Bitcoin
equity and people who hold Bitcoin are going to have access
to the best interest rates because it is the most pristine
form of collateral if you can post Bitcoin collateral.
You're going to get reduced interest rates.
If you can post Bitcoin collateral, you're going to be
able to earn cash flows because it's the reserve asset of the
Internet economy. The entire financial structure
of the Internet economy is going to be backed and supported by
Bitcoin equity, a lot like the traditional economy is backed by
tax receipts and and in the form of treasuries.
So treasuries are the number one.
Reserve collateral where there's the most demand in the future,
Bitcoin is going to be the number one reserve collateral
with the most demand. But of the Internet economy and
what I love about the Internet economy and our generation, we
understand the Internet. Look, no one economy can out
compete the Internet economy because it's an aggregate
economy of the entire world. So it doesn't matter.
Who? Who tries to compete with it?
The game is already over. The the wars already been
fought. The battles already been won.
The Internet economy is is the best economy in the world.
It may only be the actually the only growing economy in the
world at this point. Every other economy is
stagflating. The Internet economy continues
to grow. That's why if you're on
Instagram and all this other stuff, you always see these.
Start your Shopify store. Do, do, do, do you know
e-commerce. You know, why are these things
so popular? Because the Internet economy,
that's where these things are growing.
You don't need a storefront anymore where you can sell to
your local town, you can sell the whole world.
Well, Bitcoin secures that economy that is selling to the
whole world, whereas the treasuries, they secure the
local economy. So being able to draw that
parallel, it really shows you, you know, what Bitcoin is poised
to do, but without, you know. I don't want to say Ethereum
because I think Ethereum made the wrong.
If I was, if they listened to me, we would have did 1000 to 1
split on Ethereum. For every one Ethereum you had,
you would have got 1000 more Ethereum.
The price of Ethereum would have went from $4000 down to $4.00.
Much more people would have entered into the marketplace.
Remember we were paying gas prices.
If you wanted to do 1D5 transaction, it could cost like
five $600.00 just to execute that transaction well.
Imagine if it was only $0.50. All these other shit coins, all
of these other L2 S wouldn't even exist if Aetherium had just
accepted its role, which was We're not the wheel, we're not
money, right? We're not sound money, Bitcoin
of sound money. But they're just gas.
And the reason our gas exists is because these smart contracts
are the cart to your wheel that are going to help us build this
future of finance around Bitcoin equity.
So yes, most of it is shit. Most of it.
You should stay as far away from you and if you don't have
Bitcoin, you shouldn't have anything else, right?
Don't think of it as, oh, I gotta take a risk on something
else to just one or that one. Yeah.
Or buy Ripple, because it's only this and that scent or whatever.
Forget about it. Bitcoin is the way.
So can you share a common misconception about Bitcoin that
you would wish to debunk? This is this is the moment so.
I think I, yeah, I mean that goes back to the way we
originally started the conversation.
The, the, the, the thing I hear back most not only from the
millennials but from all generations is oh, bitcoins not
backed by anything. Well, and and and also Bitcoin
is new, right. So let's, let's dive into both
of those things. The first thing let's talk about
Bitcoin is just some new idea. Well, that's absolutely false
because if you go back and you look at some of the great minds
like Hayek. And others.
They were talking about a decentralized port even all the
way back. All the way back.
So there there has really been probably about I would say over
50, probably close to 50 years of development on a on a private
digital commodity money. So actually that development and
research right. And why?
I said Ford and Tesla, they conceptualized a money backed by
energy, right? Actually like on record.
Henry. Yeah.
Henry Ford, this was back in 1921.
He, he actually made an announcement that if the
government gave him permission to use this factory, he was
going to demonstrate how he could create an energy currency,
a currency backed by energy. Sound familiar?
And this was in 1921. So, you know, this is an old
idea. It's just that we now have the
technology, not just. Computer technology, but
advancements in mathematics and cryptography and other things
that have finally come together and allowed a private digital
commodity, money that cannot be stopped by the existing powers
that control over money. High accepted the best way that
law, language, and money are the three basis that government
forms around. Thank God law and language have
been able to develop. But money has not been allowed
to develop. Bitcoin is the first
development, and money the first technological evolution and
money to change its fundamental structure, right?
We went from paper to credit cards.
So that was cool because you went from cash to credit cards
and Venmo and all these other things?
But there was no fundamental change because it was still a
currency that derived its value from a treasury which derived
another abstraction, basically. Now we have a private, digital,
decentralized commodity money that cannot be stopped by any
one power and it's completely decentralized.
So the idea that Bitcoin is new, it's risky.
It's unsafe, it's dangerous. It hasn't been well thought out.
They've been talking about this for over 100 years.
It's just now we have the technology and the means to
actually bring it to market and and thank God we have because
it's it's the solution to our problems.
Now the second thing is that it's not backed by anything and
this is goes back to what we were originally talking about.
Proof of work equals cost of production equals natural asset
value. So what is the natural asset
value of Bitcoin? Most people would say, well,
it's zero. But that's simply not true,
because there's a cost to generate a Bitcoin, and the cost
to generate a Bitcoin is its natural asset value.
So the so the question becomes that's also why maybe to add to
that, that's why the miners also are incentivized to find the
cheapest energy, right, the value of that energy.
Absolutely. And because then lower their
costs, the higher their profit and why are they in business?
To profit. So Bitcoin is the only besides
basic human demand for energy, Bitcoin is the only human
network that incentivizes energy technology innovation in a
sustainable way. So the so because the technology
aspect of it actually keeps the energy that's used or that's
transformed from wind or solar or hydro or whatever, it
actually packages. That sounds weird, but that's
how I see it, right. It packages it in a digital way
and it stores it in a digital way into space and time, right.
So possibly into the future. And for me that's what that
innovation is. So that combination of what you
said, right, the actual proof of work, you have to do work, you
have to spend money or use energy, you capture that energy
and that energy stays, but it's digital.
I mean, like, even when I say this, it sounds so weird, right?
Like it's very hard. It's hard to understand that you
could digitalize physical energy, but right, that is
basically what's happening. Right, apps, Well, apps.
Look at El Salvador, El Salvador has this, all these volcanoes
that they could take advantage of that energy, but they don't
have the infrastructure and they don't have the demand from a
population. So the reason that they don't
have? Huge energy facilities in El
Salvador is because number one, they never had the
infrastructure because they never had the demand.
So there was number way for them to build all that stuff and then
sell the energy. But now with Bitcoin they can
build a small infrastructure to capture that energy and then
sell it back to the marketplace and that's what I think you
define the world quite a ties perfectly worldwide marketplace.
Yeah. A worldwide marketplace with a
tremendous base layer of demand. A base layer of demand that's
growing faster than any other base layer of demand in the
world. As you know, Bitcoin base layer
demand is growing faster than the Internet did, right?
The pace of adoption of Bitcoin is actually outpacing the
adoption of the Internet. So that is leading to the
ability for countries to harness power of electricity and
electricity. We live in an electromagnetic
universe. Electricity is all around us.
We can now capture that electricity and we're
incentivized by Bitcoin to capture it for the cheapest
price. Now that could mean going to a
place like El Salvador where you get free energy, but it could
also mean somewhere down the line somebody invents or
upgrades an existing invention to be more efficient with the
energy. So in that manner, Bitcoin is
the only sustainable incentivized network in the
world that is driving energy technology innovation.
And I have to just add in there because you said wind and solar,
I am not a fan of wind and solar.
I think that there it's just not proportionate.
Methane is my primary interests, I think.
So for Bitcoin miners, I think where our focus really is is #1.
It's nuclear #2, it's hydro #3, it's grid stabilization, and
then #4 is waste. So if we can focus on those four
areas with Bitcoin mining, we're going to actually produce much
more positive outcomes in the world than if we attach
ourselves to this green energy, solar, wind.
Yes, using Bitcoin to supplement the cost of solar and wind makes
it more affordable, but the real thing is not Greenpeace, It's
orange piece. Orange piece is let's supplement
nuclear, hydro, grid balancing and waste and those will being
real benefits to our society versus of you know supporting a
make believe narrative. But those reasons are created
through the natural laws of economics, which start with
lowering my cost so that I can profit more, and that the lower
cost is the incentive to innovate different energy
technologies. And there is nothing else in the
world doing that. Yes, I agree.
I once replied to This is it, Maybe I'm going off track, but
to Jason Lowry on Twitter, who has a thesis about that
countries are going to like, there will always be war.
There will always be a power struggle, right?
But instead of using kinetic force or shooting guns and
shooting not like dropping bombs, they're going to have
hash wars, basically computer power wars.
And I once replied to him. And said Okay.
So if I follow your thoughts and there's always wars, there's
always power projection and we're going to fight wars with
computer power. And so his thesis that's
underlined with Bitcoin computing power, basically, I
asked him, so does that mean that because minors are
incentivized, you know, the people who create hash power are
incentivized? To look for the cheapest energy
possible that will eventually result in new innovations, as
you just mentioned, right. So then we're going to save the
world by having war with each other, which is something that
we cannot, cannot, not have, because there was always a power
struggle. There's always war.
And then he agreed with me and then I was like, oh, that's
interesting. I think I get, I get where
you're going, but I I thought that was really a bit mind
blowing to be honest. Right.
Like like that you can take that.
What is bad about humanity in a sense that power projection,
that war, and then through a certain type of technology that
incentivizes you to innovate to battle in that war or win that
war, that's how you like, make the world better.
Man, that was a really big, big thought.
But that's what I had to think about what?
Because of what you just said. And I I I still agree with it.
Like I I find it very intriguing.
The rebuttal to that then is I what I usually get is CJ, if
it's going to create energy technology innovation and the
and the overall cost of and price of energy is going to go
down, well then doesn't that lower the value of Bitcoin
because then the cost to produce it goes down?
If it's easier, yeah. But then this is where they have
to remember the difficulty adjustment because when you get
into these hash wars and all this hash rate comes online,
well, that's going to force the difficulty to go up.
So yeah, the price of energy can continue to go down and provide
massive benefits to society, but at the same time because the
difficulty adjustment, the cost of production per Bitcoin, the
natural asset value is still being protected because of that
difficulty adjustment. So yeah, you can get it's a win
win situation, so. Driven, Yeah.
So even in a situation where the energy would be free, let's say
we can capture the ether energy in a sense with super, you know,
simple copper or whatever Tesla power stuff, let's say something
very basic, right? Even when the energy would be
free. You still have, well, if there's
then more people mining, the difficulty will just go up
infinitely, right? In that sense, does that make
sense? Right, Absolutely.
If that cost goes to 0, which it'll never be because you have
to organize a space and people and there's some sort of cost in
operational cost in that sense. That's the answer to the
question is even when the energy is free, energy is just one line
item in my cost. I still have to pay my
employees, I still have to rent the land, I still have to pay
for my capital. There's a whole bunch of
different costs that go into this.
So if just one of those line items goes down to free in the
form of energy, that doesn't get rid of my other line items.
So there's always going to be a natural asset value relative to
the cost that acts as a floor price for the value proposition.
That's the that's the other thing floor price for what for
the value proposition do we need a money that?
Protects money backed by something, Yes, right.
Do we need a digital comma? Do we need commoditized energy
in the form of money that allows us to save and store our value
through time and space that nobody else can dilute?
Is that a value probable decision to?
Of course you can transact with anyone in the world.
Permission less, a religious, all these things, all the
benefits of Bitcoin, that's the value proposition.
What is the value proposition worth?
Remember, if the marketplace was going to deny Bitcoin and reject
Bitcoin, then what? You would see it in the form of
price because people wouldn't be willing to pay 27,000.
They'd be say, I'm not paying that much because I'm not
getting any value for that. Well, today the marketplace
isn't saying that at all because look at the profitability of
minors. They're saying, hey, I need you.
Yeah. What?
You're what, you're producing. Yeah, though, because I need
what you're producing and it's solving my problem.
And the value proposition of your solution to my problem is
worth me paying a price that creates profit for you.
That's the that's the free market signaling the acceptance
of Bitcoin. If we if it went the other way,
then the price went below costs. Miners would turn off,
difficulty would go down. You get into that whole thing.
But this is a textbook. Explainer I'd say yeah, textbook
explainer for for our product market fit type of situation.
Exactly. So you know how our prices, how
our price is discovered. That's probably one of the If
you are looking up anything, let's say you've read about
Bitcoin, you read the white paper, you've read a couple
books, and you're like, all right.
I feel like there's nothing else I can learn.
Here's something that's a great topic for people to study price
discovery. Look up and look into how free
market price discovery works. So if you're a business owner,
if you're an entrepreneur, how are you deciding what your price
is? Answer that question and Bitcoin
will start to make a lot more sense.
The at least the price action, the price action of Bitcoin when
it's at its commodity value on the bottom half of this S curve
will start to make a lot more sense because you can be defined
as a free market price discovery cycle rather than just like
volatility, right? Because that's what, oh,
Bitcoin, so volatile? No, it's going through price
discovery. We're trying to discover the
value of the underlying proposition, the value of the
solution to everybody's problem. And we haven't arrived at that
number yet. And we won't until we get to the
top of the S curve. And at by that time it's too
late because we won't even keep track and Bitcoin.
We'll keep track in Satoshi's. I love that.
That's a great point. So we've been talking for 1 1/2
hours. Which is great.
I love it. I wanna move on to my last
question, which I asked to everyone.
What's a core belief that you will never let go?
That's a hard question. And it's even more embarrassing
cuz you told me it earlier so I had time to think about it.
But I think a core value that I have that I just can never be
explained away or given away is the concept of a true free
market. That's that's really what I
think empowers Bitcoin. I think, you know, Bitcoin wins
because it's free market. And and what do I mean by that?
I mean everything we just talked about the the natural asset
value the the way that the price discovery works on Bitcoin, the
way that interest rates work on Bitcoin right.
Price discovery works on cost and profit, interest rates work
on the supply of money and the demand on loans price works on
the the variables in demand as we go through bull and bear
cycles. These free market concepts are
what empowers Bitcoin to out compete anything else that the
the rest of the world has to offer.
Because we're in the position today where the rest of the
world has decided we are smarter than the free market, we can
figure this out better than the market can figure it out.
And I I could not disagree with that statement more.
I don't think any human or team of humans or conglomerate of
humans or conglomerate of central banks, the Bank of
internationals, the international Monet, I don't
think any of these people can collaborate and figure out what
a price should be. I think that free market
principles based on supply and demand not only of the good and
service but of the money and or currency that's being used to
buy that good or service. Those are the principles that
are protected by the natural laws of economics.
And trying to change those laws, trying to state the rate of
interest and trying to outsmart the free market is kind of like
trying to change the laws of mathematics or change the laws
of gravity. You know, like if I take my
phone and just throw it up, I can't just say that my phone's
not going to fall back down to the ground.
It's heavier than the, you know, there's natural laws of physics
that are going to guarantee that this phone comes back down to
the ground. You can't change those laws.
You can't change the natural laws of economics.
And Bitcoin, through its design, strategically leverages those
laws to empower we the people. I love it, man.
Thanks for sharing and thanks for coming on.
I really enjoyed this. I think we we went deep and
everywhere. So that's nice.
Yeah. Where where can people find more
of your thoughts and writings? And you also have a YouTube
channel. Yeah.
Well, thank you so much for
having me. I really enjoyed the
conversation and I apologize. I can, I can go off in so many
different directions. So I appreciate everybody's
patience, but if you're interested in hearing more about
my thesis of Bitcoin as commoditized energy in the form
of money, the reserve asset of the Internet economy and the
most pristine form of collateral in the world, then you can just
follow me on Twitter at CJ Constantinos.
I did recently launched a YouTube channel, mainly it just
has interviews like this, but hopefully I'll be able to start
creating content soon. So yeah, Twitter and YouTube are
the best places to to follow along.
Awesome man. Thanks again and let's keep in
touch. Thank you.
Cheers. I hope you enjoyed this episode.
If you did, it would be amazing if you could rate, review and
subscribe on the podcast platform of your choice.
It will help us educate more millennials on the importance of
Bitcoin. You can follow and connect with
me on Twitter. I'm Bramk, that's at bramk.
And if you are or know someone who has an interesting
perspective on Bitcoin that's worth sharing, hit me up.
I read and reply to every single message.
Appreciate your support and hope you'll be here for the next
episode. Thanks for listening.
Bye.