In a world of MPC's and centralized control, the most
radical thing that you can do is to reclaim your own agency.
In this episode, I'm joined by Eric Yikes, Bitcoin VC and the
author of The 7th Property. We move past number, go up and
discuss the monetary revolution that Bitcoin brings.
We explore how immutability is the only thing that can fix our
corrupted relationship with value and why Bitcoin, AI and
personal hardware are merging to create a world where you no
longer have to trade your freedom for convenience, but you
do have to act today. All right, let's dive in.
Eric Yates, welcome to Bitcoin for Millennials.
Ram, my first time on. I'm ready to rock.
Boom, I'm ready to rock too. I'm very happy you're on.
Like I just, I, I just said to you before we started recording,
I love how you see Bitcoin in the, in the big picture.
And I think more people need to understand the big picture
because it's a big battle. It's slow, it's going to take
time. And I think, I think people
need, need more of that. So I'm happy to, to dive into
that with you in this conversation.
And I, I just want to dive in straight and want to mention
your book. And like, one of the big ideas
from your, from your book is you've identified immutability
as the 7th property of money. So before Bitcoin, money was
always elastic, right? People could clip coins, central
banks could just print, you know, infinite amounts of money
units. Basically, why is immutability,
in your opinion, the most important variable for the
survival of the money? And therefore also in the bigger
picture, where civilization, the community that's using a certain
money, why is that so important? So I, I wouldn't characterize it
as necessarily the most important.
What I would characterize it as is the like the new innovation
that has changed money that Bitcoin brought about.
And and that was kind of the primary thesis around my book,
other than just being like an educational resource for people
who want to understand the case for Bitcoin in general,
particularly people coming from more of like a finance
background. To answer this question, it
helps to provide context. And in a lot of what I discuss
up in the making this point within the book is, you know,
getting into the history of money and some of the
technological developments that happened in how society
progressed over time. That gives you the right
understanding to say, oh, OK, so This is why Bitcoin was
different. This is why this new
characteristic of immutability mattered so much.
And, and it really just starts with, you know, money in
antiquity was just like this very private phenomenon.
It was something that was created by people themselves.
It was stored on people themselves.
And then people verified it amongst one another themselves.
And it was something that everybody participated in.
It was like, you know, drinking water or cleaning your house.
It was just something that everybody did and, and it was
over time as society scaled and became more structured that we
started to specialize more in it.
And as we had like technological improvements in money, it made
more sense for certain people to specialize in different
functions. So like those three functions I
just described as its production, its storage, and
then it's verification. And it really kind of started on
the production side when we had this shift from, you know,
commodity based monies like seashells or flints, furs, all
these different things that were basically people finding scarce
goods that had good properties of money within whatever
geography that they lived in. And, and those eventually, you
know, those kind of scaled a bit in like agricultural economies
to a specific set of goods like cattle and salt.
And, and it really wasn't until the precious metal era that the
production started to become much more centralized.
And it was like, OK, not everybody can go mine gold, not
everybody can go buying silver, not everybody can smelt it.
After that whole process was something that started to become
entrusted to a smaller group. And, and the reason that that
made sense was because, you know, the precious metals had
superior characteristics to prior forms of money, namely
they were much, much scarcer. They held value much better
because their supply was much more limited.
We knew that on a year over year basis, the supply wouldn't
increase drastically. And and that evolution was
enough for people to say, OK, well, we're going to trust in
the production of this. And that what that's fine in the
emergence of it. But if we look at, you know,
some of the like the early societies and like one of the
most cited would be like the Roman Empire, we started to see
how people would take advantage of that process over time.
And there are there are really like two things.
When the production of money turned into like coinage
systems, it wasn't governments, but it was the merchant class
that was attributed with creating practices, or just
anybody conducting trade really, but primarily merchants of coin
clipping where you would provide, you know, you'd paint
some sort of coin, a merchant would receive the coin, they
would start shaving off like tiny amounts of the coin on the
edges of it, and then they give it to the next guy at a slightly
lighter weight. And that was, it was important
because that needed happening coinage.
Prior to coinage, people were weighing money.
But once it got into coinage, people kind of trusted the
weight because it said so on the coin.
And you could take advantage of that trust as a merchant.
So that coin flipping practice was kind of used as a scapegoat
by certain governments and, you know, state authorities to say,
no, we needed to actually control this production.
And in the irony was that the government ended up doing the
exact same thing. They like the, if you read the
history of the Roman Empire and the hyperinflation that occurred
within these currencies, it was largely attributed to the
government, you know, effectively diluting its value
and the smelting process and mixing it with other precious
metals that were not as scarce as gold or silver.
And so that was kind of like that first function of money
that ultimately led to this moral hazard that came from
trusting people with the process that didn't hadn't existed
before. And then what one of the next
major events that caused it was the emergence of banking
systems. And once again, these were a
private phenomenon. These were, you know, a, a lot
of it was attributed at least within like Western banking
systems to the emergence of the Goldsmith bankers in London.
And and that was kind of a product of, you know, people
didn't have a lot of places to store their money at the time.
And they would store it in either monasteries or government
institutions. And then it was under Charles
the 1st in London that, you know, the money was actually
stolen from one of these government institutions.
And people were like, OK, well, we don't really trust that we
can keep it under the control of the government.
We're going to, you know, take our gold and we're going to put
it in other places. And it was these Goldsmiths who
had a lot of storage for gold that became the natural storage
place for people to be putting it.
And, and that was the, you know, the antiquity of like modern
Western banking. That was the start of it because
people realized, well, OK, we now have paper and at this point
in time, like a printing press. And it made a lot more sense for
them to say, rather than like pulling gold in and out all the
time, why don't we just trade receipts that these Goldsmiths
give us instead of trading the gold directly.
Then we can just keep the gold in there.
And then it's way more efficient for us to trade receipts.
And and that was another form of trust and storage.
And then that is what spawned ultimately like fractional
reserve banking. And then once again, when there
were issues that have started to emerge in private markets, it
was, you know, that was kind of the inception of the Bank of
England was designed to protect people and say, OK, well, you
know, we can't trust private markets to manage the banking of
this. We need to have a central bank
that's making good on this and protecting these institutions.
And then ultimately we want to try to control the Fiat money
ourselves or control the money ourselves.
And then they try to convert it into Fiat money to the Bank of
England, which ultimately failed.
And, and we had this period of like centuries basically where
there was kind of this battle between the central bank and
private banking institutions over that control.
And, and it was like, you know, during this period, Well, what
we can see the pattern is that as we have technological
innovation, you know, as we were able to actually mine and smelt
metals that led to 1 innovation and money.
And then we had another technological innovation, which
is, you know, during like the paper area of like the printing
press and then double entry bookkeeping, accounting, and
then like ultimately centuries later, the Telegraph.
And like with the Telegraph paired into that equation, paper
money was the ideal medium of exchange because you could move
trade all over Europe very rapidly by updating ledgers
between different people on paper and settling the physical
cash notes in the like a more local area.
So money kind of progressed through this and with each step,
it started to become more centralized on these different
functions. And then when nobody was really
involved in the monetary process at that point, verification
became something that you're kind of trusting to other
institutions as well. So we can, you know, Fast
forward that to where we ended up in the US today and what
happened when we were on a gold standard and then how that was
repealed under Nixon. And then ultimately, we're just
kind of in this Fiat monetary era where everything about money
is 100% completely trusted, completely controlled,
completely centralized. We are living in a world that's
completely uncharted territory where not only do we have
government money, but all of its, you know, unbacked by gold.
And they have expanded debt because of that to the largest
proportions of GDP in history. And there's no end inside as
terms of how that's actually going to stop.
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Now let's continue. And so when when we think about
all of that, it's like, OK, so at each step in the monetary
revolution, we had these benefits, these things that
actually benefited the property of money.
Precious metals made money better than it was before for a
variety of reasons, but it required trust.
Paper made money better than it was before.
It made it far more portable than it had ever been.
The problem with paper money was that it wasn't scarce.
Outside of that, it was pretty superior.
So we had to tie it to something that had a scarce supply.
And as long as it remained tied to that supply, it remained
scarce. But it required trust.
And, and one of the key ideas from my book is that whenever
you know, it's a very, you know, basic economic construct of the
principal agent problem. Where when an individual trusts
an agent to carry out something on behalf of them, but that
agent has a conflict of interest with you that that results in
moral hazard, AKA they act in their own best interests and not
in yours. And, and, and a good example of
that's if you were to hire a Courier to send some legal
documents that make no difference to them and you're
going to pay them $100, then you can be reasonably assured that
they're going to deliver those documents.
But if you hired that same Courier, paid them the same
amount of money, and you ask them to deliver, you know,
$1,000,000 worth of gold bars, then those gold bars probably
are getting delivered. And and that's where this
fundamental conflict of interest exists over the control of
money. And it's been pervasive
throughout history. And that's why financial
institutions are arguably the most littered with fraud out of
any other category. It's why it's both heavily
regulated system in the world because there's just such an
inherent conflict of interest within it.
So that's what society was trading off with all these
technological evolutions. And then we move into the
Internet area where everything's on a digital Ledger and it's
totally trusted because, you know, money can be created at
the push of a button now. And now that we're in this era,
we like the key innovation of Bitcoin was that we found a way
to find all these other properties of money that were
very valuable, make them even better.
You know, digital money is much better than paper money.
We can move it at the speed of the Internet.
And that's a very, very valuable innovation in the modern world.
And it fits into how people behave in the modern economy.
It's much more durable because you can't shut the Internet
down. You know, it's another very
valuable property and and we had all these other properties that
were improvements over other forms of money historically.
And it's also immutable. It's something where we know
that it will still remain scarce despite, you know, all of these
other things being good as well. Whereas historically the other
properties, there was always some sort of trade off and it
was like, OK, well, if you want something that's scarce, it's
not going to be as portable. You got to trade in gold bars.
You know, there's, there's all these trade-offs that you had.
And we kind of removed that trade off with Bitcoin and gave
it this immutable property to say, no, you, you actually can't
change this. And you can control and store it
on yourself in a very cheap way. And you can move it across the
world in a very cheap way, much better than any other form of
money. And like that, that's kind of
like the true innovation that we see in Bitcoin is that it didn't
have a trade off. And like you call that an
innovation. A lot of people nowadays just
think like all the money we have today is or we, we organically
came to this point in time and collectively we've decided that,
you know, This is Money and this is the best way that that money
could even work. So I think in order to get the
immutability and like how important it is, you first have
to accept that humans are corruptible, including yourself,
right? You have to accept that and that
you kind of need this technology that takes that opportunity away
away from you. So that the only logical option
and self interested option is to follow the incentive of
following the rules of in this case, Bitcoin has money.
How do you think this changes just how people communicate?
We follow an objective truth. Everyone can verify Bitcoin, the
Ledger of Bitcoin instead of this forced trust, right?
Like I'm the central bank, I'm the governor or I'm the king or
the OR the OR the whatever. How do you think about this,
this change? Because I, I think that a lot of
people don't really see this. And it's also hard to see
because all we know is just outsource trust to other people
that have a certain position. I, I think that I feel like, you
know, 5-10 years from now, we'll be looking at kind of this very
specific point in time that we're in and we are going to
look back on this is like is really an inflection point.
And the, the distributed world where when we, when I think
about what Bitcoin does is money, and then I think about
the intersection of that with what's happening with AI, there
is a lot more independence that's starting to happen.
I think that we're, you know, a lot of that started with the
distribution of media. I think that we've moved away
from a lot of centralized sources of media.
And we look at some of the most influential groups now.
And it's like podcasts, You know, Joe Rogan's podcast has so
much, so many more viewers than mainstream media at this point.
And we see all these podcasts emerging all the world where
people can get into their own local communities or their own
particular interests or people with, you know, similar
personality characteristics as them and they can start to
follow information within a specific niche.
Information is just so much more accessible.
And and that led to like a more distributed environment of it.
So the production of that information and then the ability
to access it is what made it more distributed.
And I think we're kind of seeing a similar thing happen right now
where we're witnessing it happen with money and, and I think
we're witnessing it starting to happen with like hardware.
I think that people are realizing in the same way that,
you know, when personal computing first entered people's
homes, that was because people expected a massive improvement
in their lifestyle from being able to access a personal
computer. The learning curve and all the
effort that they had to put into ultimately learning how to use a
computer and access the Internet and all the protocols and
behaviors and terminology, etcetera.
People put thousands of hours into getting competent enough to
be able to use a personal computer.
And I think we're going to witness a similar thing happen
where AI is providing that for people as well.
If you want to use your own local information, you want to
run it locally for better performance, you know, hardware
is going to be an access point for that.
And then you look at Bitcoin self custody and it's like you
want to control your assets here, here, here it is.
And like the way we're, you know, I run a venture fund that
invests in like Bitcoin companies and like the way that
in some of our research that I qualify this point or not
qualified to find this point is what give it any good or service
In an economy when it's marginal cost decreases to a certain
threshold that it's low enough to where people don't really
feel it as much, that's when you start to see distribution happen
a lot more. And that's when you start to see
a more decentralized view of the system.
And, and that's kind of what we did with money by lowering the
storage costs of it so that we don't have to store, you know, a
ton of gold bars in our basement or somewhere else in a treasure
chest. And we can hold it on a USB hard
drive and send it wherever we want.
And that lowered the marginal cost of participation.
And holding value. And that's, that's like the
massive, massive innovation that we're witnessing.
It's going to continue to distribute.
I think that right now we're just in very early periods of
time where people are still all stuck in this old system.
So the way that they access the new system is from what they
already know, and it'll be some time until they go up that
learning curve. And it'll require a lot more
negative things to happen with the current system for people to
realize like, oh, why do taxes keep going up?
And yet and Social Security benefits are going up and yet,
you know, inflation is spiking and everything.
I feel poorer and nobody knows why because it's such a
convoluted system, but I think that we'll get to a point where
people really do start to realize a pain point when enough
of their friends continue over a decade to keep getting rich off
of just owning Bitcoin independently and be like, maybe
I should on this. I'm going to learn about what's
happening in the in the system. Like most people will be LED
this way, right? Like they're it's, it's not
because they care. It's because it's just going to
be so patently obvious to them at a certain point because
everybody around them is going to be doing it.
And so I go, yeah, system scary. It's like, yeah, man, I wouldn't
touch that. Like I just, I'm just owning
Bitcoin. I controlled myself.
All my data is on my home server and my AI has been, I'm running
most of my tasks for me. And like, it's, it's, it's a
completely different paradigm shift of how people are going to
be living. And, and like, I think we're
kind of at the inflection point for that right now.
And that that means that communities are going to
structure themselves differently.
That means a societal restructuring is going to be
happening. That means new jobs are going to
emerge after old jobs die. And and I think that Bitcoin is
going to be the key source of value and ownership within kind
of this new paradigm. So yeah, I guess to like loop it
all back to answering your question of, you know, how, how
does that really change the way that people communicate?
I think that it increases agency.
I think that when people have enough of a reason to want to
take ownership over things for themselves and they can get a
benefit from doing that, then that's going to change the way
that they're thinking because they're going to be like, oh,
well, I did that one thing. I've been doing this myself.
I learned how to do this myself. That's benefited my life
drastically. I'm going to keep doing this.
Whereas we've been in this trusted consumer debt based
economy for so long where you, you people aren't thinking for
themselves as much. You follow this playbook that's
existed for decades. You spend money on this, you
take out debt to go to college, you get this corporate job that
you hate. You act like a drone.
You behave politically so that you can keep that job.
And in like all of these things that are driven by like a
fundamental conflict of interest that has emerged from Fiat
money. And that fundamental conflict of
interest is that you don't get the fruits of your creation.
So it creates this form of like malincentive within the economy
where people don't really have much else to do other than
appeal to the structure. And, and when you do get that
agency back and you do find novel ways to actually extract
value from your wealth and your time and your resources and your
thought, that's when things really start to change for
people and people start to become human again from that.
Man, I, I, I love that and I I agree.
But there's one thing that I wonder what do you think like it
when you when you think about these technological advancements
that we've had before and you you mentioned a few, right?
I always think that the although there were obviously people that
shunned the Internet, right? Or the what did Paul Krugman say
something about the fax machine, something like that.
But there are there are always people that dismiss new
technology, right? But I think up until now, a lot
of new technology that we use today that replaced old
technology actually was clearly better.
Like it improved your life or, or gave you more entertainment
or, you know, whatever. Like it.
It was pretty surface level in a sense.
But with changing the technology of money, I feel the, the, I
call this the enchantment of Fiat money, right?
Just the, the ignorance about money, the fact that it's even a
technology that it should have certain characteristics, all
these things is just non existent on 99% of of people's
radar. Basically they don't, they don't
really think about it. So that's why I, I, I fully
agree with you. But I do think this takes longer
just because this disinterest or not knowing or, you know, the
enchantment, whatever, it just runs so, so deep that, you know,
even even when the bread is 10 bucks or you know what, whatever
is fucking, it's expensive that that you want to buy now
compared to let's say 5 or 10 years ago.
I still don't really see a lot of people move to to be honest,
right? I see them point towards, you
know, greedy companies, billionaires, you know what,
whatever all these things where as we know, you can literally
just switch to another money, as enormous amount of people have
done before us in in different times.
So I, I just wonder how you think true that and and if you
agree or if you have another point of view on that.
Yeah, I I definitely agree. It's it's not a clear path.
There is very entrenched behaviors, incentives,
technologies in the older system, a lot of things that
prevent their shift over, you know, there's regulations,
there's taxes, there's all these things that make this system not
want to exist. And, and I don't see those
necessarily going away. And I see them potentially
expanding in certain parts of the world.
What what the clear the clear aspect of this is like the
truest thing in the world to people is when you actually make
money out of something. It just like, I, I think a good
example is like another way to think about this is like when
like this debate about defining intelligence, like what is
intelligence? And some people think like, oh,
if somebody's really analytical or they have good pattern
recognition or they're highly strategic thinkers or, you know,
there's all these different characteristics that you can be
good at. But like on the whole, who's the
person that's most intelligent? And, and kind of the best
definition that you can really come up with is getting the
things that you want out of life.
Are you achieving the outcomes that you want?
If you're highly effective at doing that, Whoever is best at
achieving those things, it's probably a highly intelligent
person. And the, you know, money talks.
Money is the universal mechanism.
And it's just like, OK, whoever is probably best at attaining
economic wealth is probably that that's the game everybody's
playing. And they're, you could argue
that they're like the most intelligent person in the world
because they're achieving the best outcomes.
So I think that, you know, from that perspective, number go up,
tech or bitcoins price going up is certainly the thing that's
going to be converting the most people over time.
And and I think the reality is, is that it's gone up so much.
It's converted a significant amount of people, it's made
material progress. You know, it's owned by or at
least a hundreds of millions of people have exposure to it at
this point in time. And there's very few people in
the world you can encounter that haven't heard the word Bitcoin,
aren't aware of it at this point.
They have no idea what it is. But the brand, it's so big that
it's just a globally known thing at this point.
So I, I think it's gone very far in terms of its adoption, but to
get it to the next level where right now it's $2 trillion asset
and what makes it 10 trillion now we're talking about make it
the most valuable thing in the world.
You know, we're talking about pretty big numbers that we're
going after once we say it's going to attack the market of
gold or some other major commodity.
And like we're, we're talking about the top of the billboards.
This is the top of the leader chart.
So big, big things have to be on the horizon to really start
moving at that direction. And, and I see the opportunity
for all that. The way that I think you can
directly answer the question is the way that we think about
things internally at our firm is, you know, we kind of see
like 3 major S curves of Bitcoin that are coming.
And the like the meme of gradually then suddenly is
certainly the the mode that it's going to be following throughout
each one. And like the three main S curves
are kind of getting a hitting a massive inflection point of
adoption across each function that it performs.
So the first one is store value. For something to become a good
form of money has to start is a really good store value.
That's something that makes everybody want to own it over
time and, and there's going to be some sort of S curve in that
process. And you know, the best marketing
tool for Bitcoin is the the neglect of fiscal austerity the
politicians are practicing today.
And there's going to come a point when it hits that S curve,
either because of that or because the narrative is simply
spreading far enough and people start to realize it
preemptively. Either way, one or the other is
going to cost something that direction.
And to look at the trends and think anything else is a very
hard argument to make. But I, I see like the way that
we wrote our annual report and we kind of gave our perspective
on where's Bitcoin price going, you know, kind of near term.
And I think that we're close. I think that we're going to look
back on 2026. It won't be obvious by the end
of 2026, but I think in like 2028 we'll be looking back and
seeing like, oh, this kind of was starting in 2026.
When I think about all these big pools of money that could start
buying Bitcoin and drastically move the price upward, these
large pools of money all think in terms of the traditional
finance Fiat type mindset. And, and, and I'm not
discrediting a lot of it, a lot of it's very true.
A lot of it's still built in a world of Fiat money though.
And it's going to be very wrong because of that.
But within the world that they exist, it makes a lot of sense
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Now let's continue. And I think the biggest
characteristic that's changing with Bitcoin is when you look at
its volatility declining and how that impacts major money
managers and how they look at the asset as its volatility
declines. Like we put in our annual report
this chart that shows that, you know, in the US at least, NVIDIA
stock and Tesla stock are owned by about 62% of the population.
This is like a basically a savings vehicle for, you know,
US investors. And the volatility of those
assets is higher than Bitcoin over the past year.
And everybody has this perception that Bitcoin is still
this very risky asset. The reality is, is that what
majority of people own today is actually riskier.
And there's a lot of assets out there that we can look at the of
exposure to that are going to have high volatility.
There's a lot that's still lower.
But the biggest thing is Bitcoin has this very persistent
declining volatility and that only increases as it grows.
It only becomes more likely that it becomes less volatile.
And that gives it a deeper capital market, which makes it
easier for people to large amounts of money to say like,
oh, now that bitcoins, not just $2 trillion asset, now that
bitcoins say A5 or $10 trillion asset, I can go liquidate $20
billion worth of it tomorrow. And it's not going to move the
market substantially like that. That's a really big deal for a
nation state when they're adopting something.
Gold today being at the size that it's at, I think around
like 30 trillion, probably more because it keeps going up all
the time. But you know, some very large
market capitalization. You can be a nation state and
say, I want to go liquidate $100 billion of gold and you're going
to move the market much less drastic, particularly much less,
and you would move a $2 trillion market like Bitcoin.
Cause $100 billion worth of Bitcoin being sold is a very
large amount compared to the supply and the demand.
And so that's how I think a lot of these larger institutions are
thinking about things. And that's one of the main
things that we see is looking at Bitcoin today.
It's kind of like, it's like looking at LeBron James when he
was in high school. It's like everything he about
him is historically significant in terms of a basketball player.
He's just 14 years old. Imagine what he's going to be
like when he's 20 years old. And that's kind of what it's
like looking at Bitcoin today. It's just like everything about
this asset is superior. It's just still small and young
and it's still growing. So I I think that like that can
cause an S curve and then it's like, OK, and then we get to
this point where there's a huge run up of the price because now
everybody's like, oh, this asset is much safer.
It's kind of a safe haven or risk off type asset.
And a bunch of money managers start putting, you know, not
even a large amount, 1 to 2%. Go look at our annual report.
We have all these charts that show how much 1 to 2% from a
lot, a lot of these money pools could move the price of Bitcoin.
And, and then that's an S curve. And then all of a sudden it's
like, OK, well, a lot of people are going to start owning
Bitcoin at this point. Now it's like, OK, well, we so
many people own it. It's a lot easier to say pay me
in Bitcoin because we're creating more on ramps for it.
Most people are familiar with it, have some sort of amount of
it. Most people start demanding it
because they're late. They realize it.
They're like, oh, this thing just went up, you know, 5-10 X.
It was, you know, 2 to 5% of my wealth.
Now it's maybe the biggest position I have in my wealth.
I think about it all the time and people start saying, well, I
want to be paid in Bitcoin. In our annual report, we wrote
about like medium exchange adoption for Bitcoin.
It's like people are like, well, nobody's ever going to want to
spend their Bitcoin. And it's like, sure, I mean, I
don't even want to spend my dollars today.
I would like to pay you in dirt, but you won't accept dirt.
You want something that you can go trade that's a marketable
good. And and that's what's going to
drive demand as a medium exchange is when people start to
say no, pay me in Bitcoin, because that's a more valuable
asset for me to be holding. And and I think that starts to
happen at that store of value inflection point.
And then, and then that's when you start to see an S curve
happen with medium exchange type adoption.
And then it's like when people start trading into so much.
Well, now it's like, why don't we just start denominating our
prices in it? And, and like those are kind of
like the three main S curves we see with adoption over time.
So it's like the point is, is today gradually is what creates
suddenly like we want Bitcoin to be more gradual because that's
what gives everybody who manages a lot of money the all the
indications they need to justify within their mental framework.
Oh, I should own a lot more of this because it is a lot safer.
It is a lot more boring. And then it spikes a bunch and
they're like, oh, well, I'm happy that happened too.
It's kind of like we have to, like I was just saying this on
Walker's podcast, like it's kind of like when you want a dog to
take its meds and you have to kind of force feed it with a
candy or wrap it in something that it likes to eat.
It's like that's kind of what's happening is that bitcoins
getting into mode where you don't, maybe you don't
understand it the correct way, but you're still understanding
in a way that you can actually digest.
And that's happening for a lot of people around the world right
now. Yeah, yeah, very interesting
because I think when you really dive into Bitcoin and you
understand the fundamentals, you understand that it is a very
boring thing. Bitcoin, the promise of Bitcoin
in my opinion, is literally, I'm just going to stay the same.
These are my set of rules. I'm just going to chug along.
You know, like Jeff Booth says, as long as it's decentralized
and secure, the the blockchain grows, which makes it more
trustworthy, predictable, secure, etcetera.
And in essence, it's extremely boring fundamentally, I would, I
would say, right, but maybe because it's boring, right?
And it's so different than everything we know.
It's a total opposite of Fiat money.
You have this difference in understanding of not only people
holding it, but also people trading it, you know, gambling
leverage of all these things happening within the paradigm of
Fiat money losing its value at also well consistently about
that different speeds and and rates, right.
So I think fundamentally the the boring part of Bitcoin is very
good. And once you get it, you
understand that it's way more trustworthy than any other
option. You have to basically store your
store your value. So it's low risk.
But people seem to think that volatility is inherent risk to
to Bitcoin, right? And they mix these things up as
if it's like fundamentally risky, but they're actually
talking about market risk. And I think you argued that the
volatility is actually good, right?
So that that stability is an illusion that is only created by
manipulation. They don't really let it run
free like in Fiat money, right? They set rates if capital
controls and stuff like that. So there is not really a free
market for money. But Bitcoin is a parallel and
Bitcoin does act in this free market of money.
People are trying to figure out what is this actually.
So can you kind of talk through your, your thoughts around this
volatility part and why you think or might think it's
actually a healthy thing like how do how do you approach that?
Yeah, Bitcoin volatility is when when I'm when I'm making this
point, I'm thinking in terms of the world that thinks in terms
of dollar denominated assets and, and how they're perceiving
it. And, and I think that's like a
really it's kind of an important distinction.
I think the best way to consider why it matters is that the the
perception so important is what I think what I like the black
pills of finance. Like when I was a, you know,
budding undergraduate in college, getting my finance and
economics degree and I was I was learning about all of it.
And you spend all this time kind of.
Learning about these models and these concepts that we've
constructed around here's how markets work, here's how they're
supposed to behave. And, and you know, there's
different camps of economists and theorists and philosophers
or whatever you want to call them who have different
perspectives on what that should be.
And then we look at history and we kind of see how things have
behaved. And, and I think like the real
black pillar on finances, like when you get this education,
you, you think that there is a should, that there is some sort
of thing things should adhere to.
And, and you get, and eventually you kind of realize that it's a
mode of idealism. Like I was trained as a value
investor and there's all these fundamental tenants that value
investors kind of believe in. The reality is is that since I
graduated college would have been a bad idea for me of to
like truly been a value investor for a long period of time.
A lot of other types of investors made more money who
didn't adhere to those fundamental tenants.
And the reality is, is that because the system that value
investing was designed to, you know, capture wealth from over
the long term isn't really the system that we're in today.
And the reality is, is that markets behave in response to,
you know, endogenous and exogenous factors that are
emerging at any point in time. And those things are changing
with the political environment, with the geopolitical
environment, with consumer preferences and, and the black
pills that like really today, the way that markets work is
based on narrative. And, and once you once you kind
of like really embody that, I think it helps you perceive how
things work in this type of an economy where persisting credit
and exacerbation of, you know, consumption and investment,
things start to just depart from reality.
They depart from what we think they should be.
And the result is, you know, much more speculative behavior
and these gambling markets and you know, GameStop and shit
coins and, and, you know, overspending and credit card
debt and all of these things that I think are really just a
product of this like misalignment incentives.
So like when you think about markets today and you could go
run a bottle or whatever and say this asset should be worth that,
the reality you're going to, you're going to be a lot more on
point. If you could say, oh, I know
what the narrative of this asset is going to do in the next year
or two and how that'll be perceived.
And I think that that's how a lot of people are making money
in markets today is kind of based on this misalignment
between what should be and what the reality of perception starts
to become. So that I think is an important
aspect for what we think about bitcoins volatility.
It's like when you think about the world from a Bitcoin
standard, these things don't matter to you as much.
But to people who still think in these terms, certain narratives
are very important to them for them to buy Bitcoin.
And it's like whether you buy Bitcoin because you want to get
rich, whether you buy Bitcoin because you want freedom for
society and for the world, whether you buy Bitcoin for any
reason. Well, what matters to me is that
you're buying Bitcoin and whatever gets people to start
buying Bitcoin, I think is generally a good thing.
Eventually they might learn the right reasons.
And there's tons of people that do the right thing for the wrong
reasons. I mean, when you think about how
people behave in their lives today to the point about like
the lack of agency, most people do things because somebody they
know and trust told them to do it or because their parents did
it that way and they never really asked questions about it.
And and that's how the majority of people are going to end up
owning Bitcoin. The majority of people are going
to do it just because most people around them do it.
And and it's really this early adopter, a group that's pushing
these narratives and then big money comes in because it fits
into their Fiat narrative. And their Fiat narrative says it
needs to be a risk off asset for it to be a reasonable allocation
within my commodity portfolio. And, and I'm going to wait and
see until that happens. And and they're not the movers
and shakers necessarily that are ever going to make outside as
well through the people that wait until a lot of the wealth
has been had and then they come in towards the end.
But that's just like the reality that we're dealing with.
So it comes down to just like difference in perception.
And that's how I think is less in terms of like what is and
what's right and what happened in Weimar Germany when the
currency was collapsing. Does that mean Bitcoin is going
to become more volatile at some point?
It's just like, yeah, sure. Maybe.
But when I think over the next few years and I think about very
practical, like who are guys who can push a button and own
hundreds of millions of dollars of Bitcoin, and these are the
narratives that matter to them before they push that button.
Maybe this was already an answer to to this question, but I I
wrote down some Eric Yakes hot takes from your from your
Twitter and one of the posts that I really liked was the
middle of the bell curve is selling to the tips.
Don't mid curve Bitcoin. And I just wanted to ask you why
is it so hard to grok Bitcoin? Maybe your answer is, you know,
people just are comfortable in their own paradigm and, and, and
when there's no need to look outside of that.
Now, maybe that's just it, but my angle on this question was
more kind of like the, the size of the idea.
I think more, but I I wonder what do you think?
It's interesting the size I, I, I actually, I think that's a
really good point. Like Bitcoin exists at the
confluence of various technologies, various different
fields of study. And that's kind of how I think
about its size. It's like a really big idea that
impacts a lot of different things.
And, and because of that, it, it's like when you're starting a
new job and they call it like drinking from a fire hose.
There's so much that you have to learn that it gets really hard
and confusing and you get, you know, it's so much harder.
Whereas if it's like very one focused, very simple thing to
understand, then it's a lot easier to grasp something.
But yeah, you're right. It's such a big idea.
It's so complex that people can often get, you know, analysis
paralysis or, you know, lost in the detail and they ultimately
try to, you know, prevents them from fully learning it because
they realize how long the road's going to be to getting to that.
Like most people in Bitcoin get it because we're a demographic
that was meant to get it. You know, we are primarily
millennial aged men who had some sort of interest in owning
assets. And and like these are things
that, like our type of demographic is naturally
inclined to do. There's all these other
demographics that just don't know anything about, you know,
any sort of investing like, you know, I'll, I'll talk to people
all the time where it's just like they'll think Bitcoins like
a stock or like even when it comes to financial literacy, you
know, they're clues of what a stock really is.
It's like this thing that maybe their boyfriend does or
something. And, and I think that's just
kind of the reality is like we're just, it's a, it's a very
big idea coming from a very small world.
And, and because of that, it's something where the vast
majority of people are never going to care to really learn
about it. And and they're really just,
it's the social proof around them that's eventually going to
push them to do it. Like in the same way that the
vast majority of these people, you know, want to own a home or
want to invest in real estate. And the reason they do it is
because, you know, their parents did it and their parents told
them to do it. They never looked at the
historical price returns of real estate.
They don't understand the operating costs of having it.
They don't understand the tax implications.
You know, they don't understand, you know, what geographies and
markets, you know, they're, they're not looking at any of
this. They're just behaving in a way
that somebody else told them to do.
And it's generally accepted within their community and
society. And, and I I think that's kind
of like the biggest reason. But the reality is, is that,
yeah, it just, it's a very hard thing to understand.
I quit my job and basically spent a year of my life to get
deep into it. That was after I already kind of
got it enough to want to quit my job, spend another year, you
know, reading and writing a book to still be like, OK, there's so
much where I have to learn. And, you know, now I have a
venture firm and I work in this industry every day.
And all I think about is how little I know about everything
that's going on with it. And there there's this.
Yeah. It's just, it's a, it's a
revolutionary movement. It's a new technology.
It's impacting everything. And very few people are ever
going to totally, you know, get a comprehensive understanding of
it. Yeah, When you think about the
future you just mentioned, you know, Fiat money will exist for
some time, banks, etcetera. Also, I mean a lot of people in
Bitcoin they talk about, you know, and the Fed, they think
banks will disappear. I think you have a bit more
nuanced view on like free banking and a free market on
monies. Let's say we get to a hyper
bitcoinized world. Like do do banks still exist?
Does credit still exist? Will people still, although I
think it's a dumb idea, but try fractional reserve banking on a
Bitcoin standard, right? Like they can try to create
paper, but I don't think they can create as much abstracted
layers as they can create now. Yeah.
What? What does that look like?
So when, when answering these types of questions, I would all,
I think we're all often see people kind of miss the, the
bigger picture is you don't want to think about these questions
from your perspective. You, you don't want to think
about from whether or not you would want it or whether or not
it's something that needs to exist.
That's probably the key thing needs to exist.
You'd be like in a Bitcoin world, maybe we don't need
something like credit. The reality is, is will the
market demand it and, and will the substitutes in the market be
better? And, and I think when you think
about it from that framing, it's like, OK, so will the market
demand it? Well, what is credit?
Why would you want credit? And, and when you contrast
something like credit with Bitcoin money or scarce
commodities as a form of money, it's a way that you can take
value created from the past and carry it with you into the
present. And, and what credit is, is not
the same thing. Credit is a way to take value
that could be created in the future and carry it to the
present. It's a, it's a different
function. And, and where they overlap is
in that we need to facilitate trade against people in some
form. And depending on the situation
one person's in what they have a lot of value they've accumulated
from the past, it might make more sense for them to use that
to conduct trade. Or if they don't have that, it
might make a lot more sense for them to use value they might
create in the future. And and that's based on this
constant market balance, the different market actors are
acting around at any point in time.
So for that reason, I think it's like very fundamentally credit
will exist in less people have whatever they want, whenever
they want it. Like if we do get into a true
form of abundance where the marginal cost of production of
any good or service is basically zero, then sure, like credit
won't exist. Money's not going to matter
either. You know, it's there.
It's something where everybody can just like it, snap their
fingers and have what they want. We don't need to trade anymore.
I think that's really the argument.
I think that the fractional reserve argument gets a little
bit more complicated and I can kind of like, I'll try to keep
it a bit high level and not dive into it too much, but fractional
reserve is just a means of creating credit.
It's a means that has existed in markets historically.
So it's not that I'm, I don't advocate for fractional reserve.
What I try to do is try to anticipate what's going to
emerge in a market and why. And, and the best I think way
that we can look at that is just like, OK, well, how is
fractional reserve emerge historically and, and fractional
reserve, when I go back to that talking about the Goldsmith
bankers in London, it was a natural phenomenon that emerged
in private markets. And then we also had famous free
banking systems that have emerged throughout history,
primarily in like 18th century through the 20th century.
And you know, Scotland and Canada are kind of like the two
primary ones that are cited, but there is there's a multitude of
others and you know, none of these systems really perfect.
But what we can say about them is that we had fractional
reserve systems that emerged in private markets and were chosen
naturally in those market dynamics.
Now, markets could be very different today.
And I think the argument against something like fractional
reserve emerging today is that, well, people in this Goldsmith
banker system, it was so much more valuable for them to trade
in something like paper because lugging gold around was so much
harder to do in this economy. I, I think you could, you know,
you can make a very similar argument today, like one of the
arguments against gold bugs saying like, oh, you know, it's
a buy gold as our hedge against inflation.
It's just like, well, it's not permissionless because you can't
actually conduct trade in the modern economy with it.
Bitcoin, something where you can do that.
So Bitcoin should take the market over time because it's
actually a substitute. Gold isn't a substitute.
It's just kind of a path dependency at this point.
And, and I think that like from from that perspective, when when
we think about how fractional reserve could be emerging in the
future system, the questions like will the market demand it?
And, and that comes down to, OK, well, if we look at these prior
systems and say there is basically this, there was enough
reason for people willing to accept that trade off or there
wasn't enough information transparency for them to be
aware of it in the first place. And so I think the argument to
make of like, will fractional reserve banking emerge on
Bitcoin or not? It's kind of based on one of
those two things. Is there going to be some sort
of inordinate amount of benefit that people are receiving from
saying, oh, no, it's better for me to store my Bitcoin and take
a receipt here. And, and I, it's a lot cheaper
for me because they make money off of senior Ridge from
fractional reserve banking. So this system has been
operating that way for a long period of time and I'm
comfortable with it, right. Like, is that one mode of
thinking? And, or the other question is,
is like, is, is the fractional reserve something that people
just simply still are not aware of and it's just happening in
the background the whole time? So like do you have to make an
argument that information is going to get a lot more
transparent and you have to make an argument that credit emerging
through fractional reserve is not as good as credit emerging
in some sort of other way. And I think you could say it's
not as good, like it's just another form of credit.
I can make a credit, I can make a loan out of a fully reserved
system. That system just limits how much
credit can come into the system because once the total amount of
reserves exist and all of those have been lent, then it's like,
OK, there's no more. We can't fractionalize it in
theory, right? And so fractional reserve allows
you to expand that. And then fiat's like, you know,
the final boss of there is no limit.
You can expand it as far as you can basically until
hyperinflation. And yeah, so it's a question of
what the market will accept. And I don't think I'm like
intelligent enough to say one way or another.
I can just like, you know, way out the framework.
But I do think that the burden of proof is on Bitcoiners to say
that it won't, because history tells us that it will.
And we need to build technologies that don't that
work without fractional reserve. Something like Lightning that
can work without fractional reserve and be just as good as a
centralized alternative. If we can build something that's
like a fully trustless peg in for Bitcoin and the user
experience and the cost of sending transactions is just as
good as a centralized institution doing that, then I
think the the argument for their ever being fractional reserve is
very, very low. Yeah, I this is one of the
topics that I find most interesting.
But it's really hard to predict what that's going to look like,
right? And I think I agree with you
when you say there there's a limit that doesn't really make
sense, you know, if you want to use credit for people to be
productive and build things. And then on the other side, you
could also say like fractional reserve banking has actually
worked up until a certain point, right?
It, it worked and it's created growth and increased
productivity, people actually doing things in, in, in the
productivity sense, right? But fundamentally it's it's
flawed if you don't put on an artificial break, which perhaps
is naturally occurring on, on a, on a harder money or limited
money standards. But yeah, maybe that's where the
where the moral hazard or the OR the the principal agent dilemma
come, You know, where that comes in again, because, yeah, am I
the person that's going to put my foot on a break?
You know, if I'm profiting from being part of the system,
probably not, right. So I think that's where that
comes from. But yeah, I think interesting
answer and just something to to ponder.
It's really hard to to look at the future like that.
I'm I'm looking at the time I do, I, I have some Eric Yikes.
Hot takes still from your Twitter.
So maybe maybe we can go through them in, in, in kind of a quick,
a quick way because I I really want to, I really want to get
your take on this. OK.
When I say Bitcoin trades like a NASDAQ stock, what is your
reply? Yeah.
I mean, yeah, it's true. So if other people don't
understand Bitcoin, I'm going to be bearish.
Can can we I'm, I'm, I'm alluding to someone who talked
about Bitcoin like this in a, in a in a recent time.
And I just think it's interesting that if other people
don't understand Bitcoin and they trade it like an NASDAQ
stock, right or they don't understand it.
So I become bearish because the path is is slower than what I
would want. I would say that this is a
signal that we are very early. What do you think?
Yeah. I think it's a signal of don't
think about things from a trader's perspective that like
it is obvious that the vast majority of money that's been
made is from people that have held this asset and other assets
for extended periods of time and thinking about like the ups and
downs. And, you know, if you zoom out
enough and you look at Bitcoin, it doesn't trade like a NASDAQ
stock. But what people mean is that
over some shorter periods of time, it does.
But then there are these huge periods where Bitcoin runs up a
bunch in price. And yeah, no NASDAQ stock has
been close to that in comparison.
It's the best performing asset in measurable history.
So over a long period of time it trades like the best performing
asset measurable history so far. Yeah, on a recent podcast, I
heard you say nobody knows why Bitcoin crashed, and that's
exactly why you should buy it. What's the biggest What's the
biggest signal for you that is flashing right in front of
everyone's eyes? Well, what do you mean in terms
of like? Is it like what is so obvious to
you that you should buy Bitcoin that other people might not see?
Read our report. Look at the size of all the
potential buyers that are all on the edge.
There's conversations being had in board meetings, there's
conversations at government institutions.
All these people are looking into a Bitcoin strategy since
the past year. And if you look at the size of
this, these pools of capital, very, very small percentages of
that money can move the market a Bitcoin drastically.
Bitcoin is always an everywhere the headline announcement away
from a massive run up in price. And and that's when the vast
majority of your gains in Bitcoin come from are from this
very small percentage of days when that happens.
So you sit and you wait for that to happen and you understand the
fundamentals and you know that it's going to continue to
happen. All right, 22 questions to wrap
up. I think we're arguably in a very
dangerous periods where we're by some luck or or not, I don't
know, we're living in a transition from a dying field
system to a new system and a lot of different people blocks,
alliances attempting to, you know, be be the winner of
whatever comes after. We obviously have Bitcoin.
That's what what we are looking at.
What is your biggest fear for the next 5 to 10 years?
And also what's your biggest hope?
My, my biggest fear is Bitcoin becomes just like a digital
gold. If enough of the demand flows
through and not enough of through, you know, financial
products and not enough happens through creating technologies
that allow it to be freedom money, then I think that that
would be, I think that's the most likely negative outcome for
Bitcoin. I don't believe that that's the
most likely. I believe it will become freedom
money. But I think if things were to go
wrong, that there is other a lot of institutions that support it,
like governments, for example. I think Trump would love for his
family and his own family's wealth for Bitcoin to become the
new gold. I don't think he would love if
it were to become a substitute for Fiat money.
And so I think that the the interests are aligned for some
people to want that outcome to happen.
And, and I think that like building technologies that allow
Bitcoin to be moved more cheaply, stored, more easily
integrated into more things so that you can use it for things
other than just, you know, holding it in a financial
product that makes the alternative more appealing than
a financial product. And that's a lot of what we're
doing to our firm is trying to like make a lot of that happen.
And then what was the second part of the question?
Your biggest hope? Oh, my biggest hope.
I, I think that in stranded energy markets we're going to
see a large proliferation over the next decade.
I think it when you dig into like the trend with AI compute
and what I think it's going to be very good for making large
Bitcoin miners turn into AI compute guys.
And it's going to make the case for stranded energy only for
Bitcoin mining much greater, which is going to distribute the
network much more. And then I think if you look
into like heat reuse applications for Bitcoin mining,
that's another great incentive for stranded energy, effectively
stranded energy type applications that is going to
distribute the mining network. The more distributed the mining
network becomes, the better and stronger Bitcoin is.
And, and I think that that's that's one of the big things
that I'm looking forward to. Yeah, love that.
All right. My last question, and I ask
everyone the same question, which is what is a core belief
that you will never let go of? Oh, core belief is to make
decisions based in courage and not in fear.
Never going to let go of that one.
Love that awesome Manuel. Thanks so much for your time and
your insights. I really enjoyed it.
Hope people found it valuable and yeah, let's stay in touch.
Likewise, Bram. Thanks man.
Thanks. Cheers.
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