Unknown (4:40)

So, as I said, I pestered him.

Unknown (4:42)

I said, come on and we've made this show and I think you're gonna enjoy. I think it's a bit of a cracker because it's Balaji though, and because he's super smart and knows everything about everything. We go on a few tangents here or there. We also talk about what's going on in Silicon Valley. Honestly, Balaji is one of my favorite people to interview, so I hope you enjoy this one. If you've got any questions about it, you can reach out to me. My email address is hellohatbitcoindid.com I do reply to everyone. I'm getting a lot of emails at the moment, something like 30 a day. I do try and reply to everyone, just not the weird stuff or the people asking me to promote stuff or what shitcoins they should buy. But if you just send me a normal, sensible email, I will get back to you. Outside of that, do go over to neveredit.com and sign up to my newsletter. That's gonna be your daily dose of macro tech, bitcoin, all those topics you're interested in. Also, head over to Defiance News, a couple of great shows over there at the moment. We've got Hacking the Brain, which was produced by Edwina Start. That's a fascinating show. But we've also got this trailer for our new series about Britney Spears. And I know you're thinking, p, you're a bitcoiner. What are you covering Britney Spears for? I don't care about this pop shit. Listen, the story of her conservatorship is wider than the story about her and it's definitely going to be something you want to hear about because the whole story is weird as fuck. That's all available at Defiance News. Anyway, it's Tuesday. Markets are looking good. Have a great week and I'm going to see you all on Friday.

Unknown (6:00)

Balaji, how are you, man? Good to see you.

Unknown (6:02)

Good to be here.

Unknown (6:04)

Always love talking to you. As you know. I can't remember that first one we did, that was that three hour monster.

Unknown (6:10)

About two years ago now.

Unknown (6:11)

But listen, look, you approaching a topic.

Unknown (6:13)

That'S really, really something.

Unknown (6:15)

I can't stop thinking about your article about India adopting bitcoin. It's really on my mind right now. I've had a couple of conversations recently, one specifically where I was explaining that Michael Saylor a few months ago seemed like a crazy guy putting $450 million into Bitcoin at $11,000. And now probably everyone on the SMP is jealous of him with Bitcoin at 50, well, nearly 53,000.

Unknown (6:40)

So for me it's really interesting because.

Unknown (6:42)

I'm thinking, well, who's going to be the microstrategy of nations? And here you come out with this article about India. So what was the starting point for you with this?

Unknown (6:50)

Well, so, you know, obviously, you know, as someone of Indian descent, I've, I've been thinking about India and crypto for a long time and I, I know that India banned crypto a few years ago and then unbanned it. There's a court decision and now was thinking about rebanning it. And I just wanted to put a marker down to say that India shouldn't ban bitcoin first. It can't really ban bitcoin. It can only ban itself from buying bitcoin Right. And its people. But that what it should do is actually buy bitcoin at the national level, just like it holds, you know, tons of gold, you know, for an emergency. And, you know, one way of, of assessing the wisdom of this decision is, you know, if India bought as much bitcoin as it had bought gold on the day that I said for them to buy it every year or six months or whatever, I will just mark how much money they would have made. And there'll be the point at which it passes probably their gold reserves and there's a point at which it passes like 5x or gold reserves. And so that's, you know, obviously it's better if they buy before then, but that'll be like, kind of like a marker, right? A way to show that I was correct in this very obvious prediction in some ways. Right. But one of the things about it is, you know, crypto is actually very advantageous for India because it's a way for it to, as the number three power, to sort of have a third way which is outside of either being in the US or China, the dollar versus renminbi trade war, currency war that is erupting, that is about to erupt, that's about to get even hotter. And also the platform war where it's TikTok versus Twitter and so on. You can imagine India going global with these decentralized platform, these crypto protocols and leapfrogging and embracing in a way that other countries have not. And so that's the high level in terms of why I think this is important for India and I'm happy to talk any specific detail. I mean, we can go through the. You had a bunch of good bullets here. Maybe we can go through them one by one, like national security and so on.

Unknown (8:42)

Yeah, well, firstly, just, let's just get to the point whereby this kind of can relate. You know, my, my show title will be the Nation State Case for Bitcoin. We're going to use India as the lens because that's the article you've written. But this can apply to other countries, right?

Unknown (8:56)

Yes, absolutely. And, and frankly, I think you could make an argument even for the US and China. But this applies for short, every country that is not the US or China. And if you can't be number one, you want to get behind. It's kind of like if you're not Microsoft, you're behind Linux.

Unknown (9:12)

Right?

Balaji Srinivasan (9:13)

Right.

Unknown (9:14)

Because Microsoft has the interest in having Windows, or rather, let me be more precise, if you're not Microsoft or Apple.

Balaji Srinivasan (9:19)

Right.

Unknown (9:20)

If you don't have Windows or OS X, you're behind Linux.

Balaji Srinivasan (9:23)

Right.

Unknown (9:24)

And it's in that sense where if you don't have the dollar or the renminbi, you want to be behind crypto.

Unknown (9:30)

Right. Okay. Well, before we get into the thesis, I think we should deal with the issue relating to the banning of Bitcoin in India because it's come up again. I think it's the fourth time. It feels like this time it's actually going to get through potentially. It seems very advanced. I'm not that close to it.

Unknown (9:46)

No, no, yeah, yeah, I'm very close to it. I can't give all the details, but there's a lot of smart people in the government who have seen all the energy on social media. I mean, that thread, both my posts have been viewed literally millions of times at this point. And they're smart people in the government. One of the things about India is just sort of out of sight of Western view. They have really become a country that ships. Okay, I'm not sure how many of your viewers know this, but they should read this post called India the Internet country by. I think it's tigerfeathers.substack.com I'll get you the exact title. And it basically goes through the incredible development over the last 10 years. Of APIs? Yeah, it's the Internet country by tigerfeathers.substack.com, like T I G E R how India created a digital blueprint for the economies of the future. So this should be eye opening to people who have not been following this closely because India built something called India Stack. And what that is is a set of national APIs for identity, payments and data. And what's really powerful about that is it's like a functional government set of software APIs that all of these companies can use that works for a billion people and that has just gone absolutely vertical in terms of its adoption over the last five years. It's just something where I was sort of like ah, you know, Mount Agape because it's just a completely new place.

Balaji Srinivasan (11:19)

Right.

Unknown (11:19)

You know, the India that of my youth was felt like it was stuck in amber. You know, it had these Ambassador cars. I don't know if you've ever seen them. If you Google Ambassador car, it's like this very old fashioned like 1950s kind of car. And like the most fancy Ambassador had air conditioning. Holy cow.

Balaji Srinivasan (11:35)

Right?

Unknown (11:36)

And I mean I loved India in terms of the culture, but I didn't think of it as a technology capital or a technology leader. Even though it had plenty of smart people obviously who are good at math and good at computer science and so on. Like a of developing countries. They had the smart people that the talent just didn't have it together as an ecosystem. But now they're number three in tech unicorns. They have all the India Stack stuff. They also have Reliance Geo, which is just sign, which is like not an afterthought that just signed up 400 million people to 4G LTE. It has the cheapest LTE service in the world, it's cheaper than America. Serious national hardware project that happened in the last like four years. Just talk about execution speed, right? And so that's now a country that actually is potentially capable of doing some interesting things, you know and if we can steer, you know, the sort smart like folks in India towards a, even a, even a non negative stance.

Balaji Srinivasan (12:25)

Right.

Unknown (12:25)

Even like buying bitcoin would be ideal. But even if India just regulates and legalizes crypto and is more neutral to positive towards it, that's a huge step forward. And I think that over time people will find that actually this is a national security thing, it's an economic security thing, it's a civil liberties thing for everybody who's not the US or China.

Unknown (12:44)

Okay, before we get into that, because we're Going to discuss the potential global monetary competition coming up. I think for some people listening, it'll be good to understand the role of the dollar internationally because as you said, it's a technology, but how there's a potential for that to be changing over the next kind of few years. And the rise of the digital Yuan. And what does that all actually mean?

Unknown (13:07)

Yeah, so essentially, as I mentioned, I don't think the concepts of developed world and developing world are valid anymore. I'm actually starting to think in terms of the declining world and the ascending world.

Balaji Srinivasan (13:18)

Right.

Unknown (13:19)

And whether folks have realized it or not, the US is part of the declining world. And you can see that on the GDP graph, right? Relative share of gdp. Of course, it's not a zero sum game, you know, like your. Even if your relative share of something is declining, your absolute can be increasing. But I feel in absolute terms as well, the US is regressing, you know, power outages and fires and public health failures and so on and so forth. It's just something where, just system failure, like a lot of things are failing at once and people are sort of in denial about this. So you have this declining country that still has the doll not just as a currency, but a global technology platform.

Balaji Srinivasan (13:54)

Right.

Unknown (13:55)

It controls Swift. It is the default for buying barrels of oil in the Middle East. The petrodollar, which is basically somewhere. Saudi Arabia only sells oil in dollars because the US Government, the military, protects it. The dollar is used as a bilateral instrument between two countries that otherwise would have to agree on something like, let's say Brazil and Russia. Well, I mean, Russia is a hostile, but let's say, I don't know, if Brazil and Nigeria were doing a deal, they might use dollars rather than the real or the naira, respectively. And so the dollar is this technology platform, but it's part of a country that's declining. And it's also something where you have the renminbi, the digital Yuan rising. You have China very aware that the US has weaponized the dollar and uses it as basically a weapon of war. It's nonviolent war, but it certainly causes pain. And China's really good at executing and they're very serious about this stuff. They've got a blockchain government in Beijing. They will just crack the whip and they ship, you know, like people. There's a lot of cope. You've heard that term cop? Yeah, yeah, there's a lot of cope about China. But like, if, if you're like realistic, you, you know, it's, it's kind of like, it's a difference between Steve Ballmer and Satya Nadella. You know, Steve Bomber was just basically in denial when he was at Microsoft. Oh, the iPhone. Will anyone buy the iPhone? You know that sucks, right?

Unknown (15:14)

Google?

Unknown (15:15)

Well, yeah, they have a search engine, but they suck, right? Oh, PlayStation. Well, they also suck. Everybody sucks, right? Microsoft is great. You know, like, to be clear, like Bomber wasn't. I mean, like, it's hard to do what someone like that does. He was an execution machine on the enterprise side of things, you know. But in many ways he sort of spent down Microsoft's future. And they're very fortunate that Satya Nadella was able to turn it around and understand open source is good, search is good, cloud is good, mobile is good. You know, we don't have to actually be zero sum in everything. You know, there's a more enlightened form of leadership.

Balaji Srinivasan (15:48)

Right.

Unknown (15:49)

And in the same way, like understanding that China actually can execute, that it has drone delivery, that it has like thermometers that can build a hospital in a day that can do all this stuff is also important for understanding that the digital yuan is going to be a real thing. It's going to be a thing where, you know, perhaps Americans won't use the digital yuan to settle in Starbucks or whatever.

Balaji Srinivasan (16:08)

Right.

Unknown (16:09)

Because that's just still within dollars. So your consumer may not see it, but your. Anybody who's doing international trade will definitely see it. And they'll, they'll basically, you know, China will offer a lot of different kinds of incentives for this sort of belt and road countries. Do you know what that is? Do your peers know what that is? Yeah, yeah.

Unknown (16:24)

I mean, you can explain it because other people might not. And especially across Africa.

Unknown (16:29)

Sure, yeah. So the Belt and road is basically, you know, like China's revival of a maritime belt and the Silk Road, you know, and it's people, you know, this is a huge project of Xi Jinping to essentially build infrastructure in all these countries, global trade routes to Europe and to Africa, to basically take the, you know, the world island of Eurasia and, and just put roads and trains and stuff. So, you know, trade would accelerate. And then all the countries that you were putting these overland routes into, China would do deals with them, you know, where they basically say, okay, hey, we're going to build all this infrastructure for you with Chinese engineers, we'll give you big loans and then all you have to do is repay the loans. Oh, and guess what if they can't repay the loans? Well, China gets like kind of the equivalent of like a military base or something there. They had this sort of repo thing, they did this sort of in Sri Lanka. They basically bought a port there. They did a deal with Israel for like a big chunk of like Haifa. You know, they're very smart about that type of stuff. You know, they're basically thinking about global footprint and having Chinese bases and economic bases to just expand their markets and ship all their goods all over the world.

Balaji Srinivasan (17:31)

Right.

Unknown (17:32)

And that's a belt and road now that slowed down to some extent after Corona. I'm not sure exactly where it is right now, but I do know that at least the digital belt and road of having folks accept the digital yuan is very much still on the radar. They've been pushing the blockchain based government in Beijing and whatnot right now. You know, the US by contrast is like basically attacking all its tech companies. And you know, maybe it'll make a move in some sort of jerky way after China launched the digital yuan, but it may do like a cargo cult copy, you know, in the same way that there's a cargo copy, the US copied Chinese lockdown by way of Italy without ever admitting that it was copying China. You know, it's also copied Chinese censorship without ever admitting it's copying China. You know, it's copied like a lot of Chinese things without admitting it. It's just this thing where it denounces, ah, you suck. And then imitates it without ever actually admitting it. And the thing is that when you do that, you the original, you know, that's the reason that Steve Jobs had that saying, right? You know, good artists copy, great artists steal. Because a great artist has the self confidence to just use somebody else's library without having to pretend that it was an original innovation or having to like make some edit to make it their own. A great artist feels self confident enough to be like, okay, you know, you had a good idea, I'm just going to use that idea, thank you very much.

Balaji Srinivasan (18:47)

Right.

Unknown (18:48)

Whereas a good artist has to make it like some mediocre, crappy cargo cult version.

Balaji Srinivasan (18:52)

Right.

Unknown (18:53)

And so the point is that, you know, the US is declining, China is ascending, but a lot of countries don't want to pick between China or the U.S. europe doesn't want to pick. A lot of Americans think, oh well, Europe was with us in the Cold War, they'll be with us in the next Cold War. And it's just not the case because Europeans aren't interested in just a war for the sake of, you know, they opted out of Iraq or that many of them did if they could. They don't want to be in a war with freaking China. You know, like, China's pretty crazy, right? And so is the US in many ways.

Balaji Srinivasan (19:21)

Right.

Unknown (19:22)

So like, you know, the whole thing about a war is people lose.

Balaji Srinivasan (19:26)

Right.

Unknown (19:26)

You know, businesses are bankrupted. You know, it doesn't have to be a shooting war for there to be economic and social tidal waves where your poor company is just caught in the wreckage of that day's cancellation or that day's sanctions and it's just cut off from a screw that it needs out of some serious silly bureaucratic order. And then you're bankrupt.

Balaji Srinivasan (19:44)

Right.

Unknown (19:44)

Or some capacitor and you die. So nobody wants that.

Balaji Srinivasan (19:47)

Right.

Unknown (19:48)

And so for all the countries that want to opt out of this conflict, who are neither the declining nor the ascending, you know, the Thucydides thing, are you familiar with that? I may be mispronouncing it, but T H U C Y the Thucydides trap.

Unknown (20:04)

No, I don't.

Unknown (20:06)

So it's basically like a tendency towards war when an emerging power threatens to displace an existing great powers international hegemon.

Balaji Srinivasan (20:14)

Right, Right.

Unknown (20:15)

And so it's the trap. Right. And it's used to describe the potential coming conflict between the US and China.

Balaji Srinivasan (20:23)

Right.

Unknown (20:24)

And the thing that's interesting is sort of to articulate a new doctrine which says, have you seen the meme which is like, let them fight.

Unknown (20:32)

Yeah.

Unknown (20:33)

You know, look, it's obviously best if they don't fight, but if you assume that's like inescapable, Let them fight and just go to crypto, which is peace and it's trade and it's privacy and it is civil liberties and so on, and use that as your global platform so that neither country can ban it. And both countries have crypto sympathizers or adherents within. Certainly the US has millions and so does China, as you know.

Balaji Srinivasan (20:57)

Right.

Unknown (20:57)

And so the negative energy around it, when you have something, Crypto is many people's first choice and many people's second choice. And that is something where it tends to win in the end. It's like grudgingly. The American may not really like using bitcoin as international settlement rather than the dollar, but at least it's not the renminbi. And similarly with the Chinese potentially.

Balaji Srinivasan (21:24)

Right.

Unknown (21:24)

So that's like how I see things playing out by 2030 or 2035. And you know, that might sound crazy now, but remember in 2010 if, you know, we were to be talking about how so and so politician is tweeting it, so and so politician and so on and say they're tweeting, you know, the Federal Reserve, you know, like, yeah, or like, I mean, Twitter existed of course, but the idea that, you know, every single head of state, every politician would know, like the vagaries of this interface cooked up in San Francisco. Oh, likes, retweets, follows, ratios, quote, tweets, dunks, reply. Guys, all of these stupid things about Twitter that you know, just by spending too much time on Twitter, every politician and world leader knows about this. It's insane actually.

Balaji Srinivasan (22:09)

Right, yeah.

Unknown (22:10)

And in the same way, all the stuff that you and I saw, right, all the stuff that you and I saw over the last several years with the crypto civil wars, with the, like the, you know, maximalist versus Ethereums versus XRP army and so on and so forth, all of that is just a preview of what is to come when it's happening at 10 or 100x scale with nation states in the game, with big companies in the game putting their own crypto tokens out. All of these are like swarms of different kinds of social networks competing for global dominance. And it's like this social war of networks expanding where they're taking intellectual territory as opposed to geographical territory. Go ahead, give me your thoughts.

Unknown (22:48)

Right, okay. Well, no, so it's a question before we get into the detail, just something else I, I don't understand, but I need to understand in terms of when a country holds reserve currencies of other countries currencies, how do they actually hold that reserve? Like how does that exist?

Unknown (23:04)

Great question. Often it's just buying Treasuries. It's unusual for them to have large stacks of cash for lots of reasons because you can't store that and there's a robbery risk or whatever. But yeah, it's just like buying Treasuries or buying other instruments that are equivalent to USD. And now, now of course, if you buy Treasuries, you have negative interest rates or actually I haven't checked recently, but I believe.

Unknown (23:30)

But some people listening Balaji will go.

Unknown (23:32)

What do you mean by buying Treasuries? What does that actually mean?

Unknown (23:35)

What does it mean? It means you're buying a bond which will pay you back a certain amount like you buy. Let me see if I can give you an actual quote here on a T bill that someone has actually bought. So I'm going to give you the formal definition. So usually these are things which are basically, they're good for dollars. You can sell them in denominations of like 1000, but you can basically buy like a $5 million worth t bill. And it's something where they have maturity typically of like one year or less. And the longer the maturity date, the higher the interest rate the T bill will pay to the investor. And so the idea is like, this is like a safe way of basically holding dollars, right? And because you're not, you can hold $5 million in a T bill and it's backed by, quote, the full faith and credit of the US Government as distinct from a bank account where there's an FDIC, you know, threshold, which is a lot less than $5 million. And so it's essentially. Go ahead.

Unknown (24:38)

Well, so, so what the hell, what.

Unknown (24:40)

Is a T bill? Is it certificate like you get issued?

Unknown (24:43)

Is it like, is it just like something, an agreement? Is it a contract you have with the US Government? What is the actual thing itself?

Unknown (24:49)

Yeah, it is effectively a contract you have with the US Government in the same way like a dollar is sort of. You don't usually think of it as a contract you have with the US government, but it is because they will accept it for certain kinds of things. Like parking tickets. Yeah, it's like a contract you have the US Government and it's like used to fund public projects. When an investor is buying a T bill, then it's like an IOU from the US Government to the investors and you're basically trusting that the US Government will pay out, you know, like how much that T bill is worth. So, for example, you buy a T bill of a thousand bucks and you pay 950 for it today, and you get back, you know, 1,000 bucks in, you know, a year from now or something. But actually more recently you've had negative interest rate bills where, you know, I should quote the exact numbers. I'm not sure if it's negative as of this exact moment, but you buy a thousand dollars, you pay $1,000 today, and you get back, you know, $995 in a year from now, which means you're just guaranteed to lose money. And that doesn't make any sense in theory.

Balaji Srinivasan (25:50)

Right?

Unknown (25:51)

Why would you pay negative interest rates? That kind of defeats the whole point of investing in something. And the answer is basically to store money at that scale. You can't store it in a bank account, so people will just go and buy T bills with it. And then what that does is because you're getting negative interest rates on T bills, they have to chase higher upside things in the rest of their portfolio. And so they end up investing in venture and they end up investing in higher risk things. So in an interesting way, the whole negative interest rate regime has meant that many academic endowments and stuff like that that are money managers have steadily increased the percentage that goes into high upside things like venture and tech.

Unknown (26:28)

Right, so this is why Michael Saylor can borrow $900 million at 0%.

Unknown (26:33)

Yeah, exactly.

Balaji Srinivasan (26:34)

Right.

Unknown (26:35)

Because basically it's something. I mean, the problem with all of this is, no, you know, it's not like the blockchain where you can get a global view on what the F is going on.

Balaji Srinivasan (26:46)

Right.

Unknown (26:47)

There is no way to track where the money is going. I mean, you know, the Fed has a global view, but I'm not even sure they're actually analyzing the economy as a graph in quite this way and figuring out what's happening with it. But one thing that I am quite concerned about is, as you know, the numbers are getting crazy in terms of valuations of companies and stock market prices and so on. Did you see the tweet by Joe Colangelo, which. I knew about this, but I'd forgotten about it till he mentioned it. This was like a day or so ago.

Unknown (27:19)

No, which one is that?

Unknown (27:20)

He basically said that during Weimar Germany, in the run up to hyperinflation, everybody thought they were getting rich because asset prices were just going through the roof.

Balaji Srinivasan (27:30)

Right.

Unknown (27:31)

And here I'll get the exact tweet. It's like currently reading When Money Dies, the history of hyperinflation in Weimar Germany. One of the wildest aspects I never knew was that early on people all thought they were getting rich. They were selling hard assets for what they thought were insanely high prices in marks.

Balaji Srinivasan (27:49)

Right.

Unknown (27:50)

And that is actually similar to the asset inflation regime we're going through now. And I think it's very much worth tracking that. And the thing about it, by the way, is, people, there's this weird thing, I saw this with COVID as well, where you can make this rational argument with all these graphs, all these historical citations, all of these plausible things, and people will deny it, they'll mock you as crazy, etc. And then when it happens, they don't spend actually a lot of time saying, oh, I'm sorry, or you were right or whatever. I mean, that's not even the point to say that you're right, because the point is not to be right. The point is to avert that.

Balaji Srinivasan (28:36)

Right.

Unknown (28:36)

They just kind of like flipped yelling at the other side. So. So you're gonna. I think this is like one of the Most predictable things in the world that's gonna happen. I'm not sure at what level of printing we're gonna get to serious inflation, if not hyperinflation, but they're gonna try, they're gonna push it until it gets there. 787 billion.

Balaji Srinivasan (29:00)

Right.

Unknown (29:00)

10 years ago, 12 years ago that was considered this insane thing.

Balaji Srinivasan (29:03)

Right.

Unknown (29:04)

Remember during 2008. 2008, right. 787 billion, that was like this, awww, jaw dropping number. And now it's like a trillion, now it's like a trillion a week. Who even knows? Has there been anything on how many trillions was printed?

Balaji Srinivasan (29:16)

Right.

Unknown (29:17)

So, so the reason I just say that is you're right. People can pull out these loans that are massive to go and buy crypto or leverage up, but it does feel like they're surfing something which is roaring beneath them, you know, and, and I again, I don't have. Do I have the numbers on that yet? No, because I don't have a global view on the economy. There's no blockchain of dollars. But that's my strong intuition based on the past. We'll see.

Unknown (29:42)

And another thing I need to understand, when you talked about maybe there's a deal between Brazil and Nigeria and they don't want to use their sovereign currencies and they're using dollars. What's the movement of dollars there? Are these part of the T bills. How's this actually? Because how are they holding dollars to do this?

Unknown (30:01)

I don't understand about this flow of dollars.

Unknown (30:03)

That's a good question actually. So how do countries do international settlement in dollars? I actually, I'm not sure I know the mechanics of that. It's possible that they both have, they have some intermediary take care of it for them or they just, you know, sell Treasuries. You know, one, one party accepts ownership of Treasuries to the other because there's a secondary market in that. You know, I actually, I should research that. I actually don't know the mechanics of how they do it. Yeah, go ahead.

Unknown (30:37)

Because the thing I'm getting into is this point of CBDCs, because once we get to CBDCs, will they issue treasury bills or will they just issue dollars?

Unknown (30:46)

Well, CBDCs. Ah. The point I'm getting to, CBDCs are different.

Unknown (30:49)

Yeah.

Unknown (30:50)

But the point I'm getting to is will a country perhaps hold CBDCS as a reserve currency?

Unknown (30:56)

Yes, absolutely.

Unknown (30:59)

Because you don't need to hold the dollars in the bank.

Unknown (31:02)

Well, here's the thing. You're using dollars and CBDCs equivalently. And they're distinct.

Balaji Srinivasan (31:06)

Right.

Unknown (31:06)

Like a CBDC could just mean the digital yuan, it could mean the digital franc or the digital pound. It's just a central bank digital currency, you know, and 80% of countries, according to Borad Al 2020. In that recent paper that I cited in my most recent post, How India Legalizes Crypto, there's a paper there by BOAR At AL 2020, 80% of central banks are looking at digital currencies of some kind. So a CBDC is not the same as the dollar. What you're asking, I think, is what is the distinction between holding a dollar versus holding a T bill? They are different. Where a dollar is like that is just a currency instrument where you can just spend it. A T bill is something where you can value it in terms of dollars and you can kind of think of it as worth $5 million worth, for example, but it's not quite the same. It's like an IOU for dollars. But people think so long as the US government is solvent, it'll be worth that. So it's not quite the same as dollars, but it's something that you can often treat much like that as a money good kind of thing.

Unknown (32:12)

Now, shall I explain where I'm going with this?

Unknown (32:15)

Sure. But the thing is, a CBDC would probably be architected quite differently. It would not be based in terms of Treasuries. It would actually be an outstanding amount of digital cash where you can actually track it back and forth. And like a Treasury would actually be a smart contract on top of that central bank digital currency blockchain, where it would be something where there's some interest rate and some payback period or maturity date. And you could see those people who had bought them with different maturities, like one month or three months or whatever, and those would be smart contracts on top of that, as opposed to the underlying base digital franc or whatever.

Unknown (32:54)

So I'll tell you where I'm going with this.

Unknown (32:55)

It's going back to your article, which.

Unknown (32:56)

By the way, anyone listening definitely read this ideally before you listen to this episode or have it alongside. But it's where you talk about India adopting Bitcoin alongside digital. Sorry, the digital rupee. So if they were going to back the digital rupee with digital gold. Yep.

Unknown (33:14)

Would people therefore be incentivized not only.

Unknown (33:16)

To hold Bitcoin, but potentially hold the digital rupee as a reserve asset as well as a foreign.

Unknown (33:25)

As a foreign reserve?

Unknown (33:26)

And they would trust it more because it is backed by bitcoin.

Unknown (33:29)

Well, there's a basket of currencies that the IMF has which is like the str, the special drawing, right? And a while back they updated it to include the yuan. Right now it's like, like 40% dollars, 30% euro, 10% Chinese yuan, 8% Japanese yen, 8% pound sterling, right. Which is frankly still massively overweighted towards the West. You know, like these institutions are frankly obsolete. But, you know, it was a big deal for China to be in there. So the rupee isn't even seen there, right. India isn't on the National Security council. Like essentially 2020 is still running on 1945 or 2021 is still running on 1945 institutions. So. So in the STR, the rupee is not there. What I think you're asking is something somewhat different, which is could people have the rupee as part of their national holdings? And quite possibly what you're asking, I think, is the question of whether the currency is internationalized. That is to say, is it intended for people to hold beyond the borders of the country. For example, the Swiss franc is an internationalized currency and it's meant to be held abroad. And the thing is that there's pros and cons to currency internationalization. One of the pros is you have more access to capital markets and so on. One of the cons is that because your currency is held by foreigners, you can't use coercion to the same extent.

Balaji Srinivasan (34:55)

Right?

Unknown (34:56)

You have to do convincing as opposed to coercing, because coercing is only possible for that few people who you can point a gun at, who are members of Switzerland or whatever. And everybody else who holds a franc is outside of your jurisdiction.

Balaji Srinivasan (35:11)

Right?

Unknown (35:11)

So is it possible for someone to have a portfolio that includes a digital rupee? Of course it is. You know, that's, that's forex foreign exchange. Today people would have the rupee, they'd have some bets on this or that currency. And in fact, the thing about forex markets is because they're so large, if you can time it right, you can put in a billion and make a billion two in a few days or lose 200 million in a few days. Right? So like a swing, you know, could be a very, very big deal for you in forex, right? And I think what happens is lots of individuals are going to become forex traders because I think the not too distant future, just like you've got, I mean, how many Twitter feeds do you follow?

Balaji Srinivasan (35:49)

Right?

Unknown (35:49)

How many websites do you look at a lot, right? So I think the near future is something where your crypto wallet holds your Bitcoin. All the national digital currencies that you're interested in, maybe the dollar, maybe if you go to Canada, you've got the, the Canadian dollar or the British digital pound. It's got all your stocks, it's got all your bonds, it's got other cryptocurrencies you hold, it's got tokens that were issued to you. That's obvious, right? You're going to have a crypto wallet that just holds everything and then everything just gets traded against everything. You have this gigantic pair matrix and forex and crypto exchanges and remittances and secondary markets and primary sales are basically just different parts of this matrix. For example, a stock to stock trade is like, that's just one submatrix of stocks versus other stocks. Or a secondary sale of stock is like currency for stock or Forex is currency for currency. So this gigantic asset by asset matrix where all wallets are against all others, Uniswap is like a V1 of this. They've got all these pairs and I think that's what the future is. And one of the consequences of that, by the way, is one country's national digital currency is like another country's cryptocurrency. Because if you think about that, right, it's like, you know, one man's terrorist is armist free and fire. Yep. So the reason is if you're in India, the digital pound, like digital gold, you don't have control over it.

Balaji Srinivasan (37:17)

Right.

Unknown (37:18)

It's basically as whether it's no one has control or whether it's a foreign entity that has control, you don't have control. You know, and depending on how these CBDCs are set up, what I expect is them to be architected similarly to how we set up USDC.

Balaji Srinivasan (37:32)

Right.

Unknown (37:33)

So most of your viewers know USDC, second largest stablecoin in the world, stablecoinstats.com does several hundred million dollars a day. I was involved heavily with launching it at Coinbase. Work closely with Jeremy Allaire at Circle. And that's pretty widely adopted at this point. Right. So USDC is interesting because it's intermediate between a banking API and a private key.

Balaji Srinivasan (37:55)

Right.

Unknown (37:56)

If you have a banking API key at Wells Fargo or Chase or something, they can basically and they will shut you down. I mean, you try sending $1,000 to 100 people in 20 countries with JPMC's API or Wells Fargo's API, it'll just get Shut down very quickly, you'll go some fraud check or whatever, it won't work. Work, Right, but you can do that with a stablecoin, right? It's just much more free, much more programmable. Yes, it is true that there is still, depending on which stablecoin you're using, that there is still some root user that can freeze other funds or lock accounts, whatever, in exceptional circumstances. But this is similar, more similar to an API key for Amazon.com, where 99.9% of the time you're able to write files to hard drives, spin up computers, spool them down, and in extraordinary circumstances, Amazon will intervene, but it's just much, much freer than it was before, right? And then of course you go to crypto, which is private key, which can never be intradited, and then that's like the full, you know, like full, you know, local sovereignty.

Balaji Srinivasan (38:59)

Right?

Unknown (39:00)

What's my point? The point is, if you've got a country that has anything that's similar to usdc, where it's an API key that you hold on your laptop, right? If that is the case, that can be held anywhere. So you can have Nigerians holding Swiss francs, or more to the point, Venezuelans holding Swiss francs. And if you've seen the dollarization of Venezuela, that's clearly something they want. And so you start to have this world of global currency competition where sheer coercion is simply not enough. It's just one feature in the feature matrix. You also need a stable monetary policy. Maybe you have upside, maybe you have smart contracts and programmability, scalability, transparency and or censorship resistance. You've got a bunch of features in this feature matrix and your portfolio will include different things that are useful for different things, right? Just like you've got some dollars and you've got some stock and you've got some bonds or whatever, you'll have a different kind of profile when you have thousands, millions of different assets in your crypto wallet and you'll optimize for different things, you know, daily consumption, upside, privacy, scalability, if you're writing programs and so on. So the reason I just say all that is I think some national digital currencies are going to compete on axes that look very similar to a cryptocurrency. For example, I wouldn't be surprised if Estonia does something like. And whether they acquire or partner with an existing blockchain and have that L1 powering their national digital currency, that's the kind of thing that they might do. The reason I think that's Possible is they have this E residence program, right, where you can go, I was one of the first three E residents and Estonia is very smart because they're like, look, they're a million person country. They're on the border of Russia, which historically occupied them and was not very nice to them. And if they do get hit, they would like to have, have friends around the world. And they don't have the space to invite 50 million people to Estonia, but they can scale software wise, right? So they have all these Estonian E residents which probably doubled their population around the world. And they could do something like this where they have a software expert, a software platform, so you have a lot of people who are using it and you know, then it's just about like sober management of this thing, you know, because, you know, 12 people built Instagram, which a billion people use, certainly a million Estonians which built Skype and so on, could do something like that. They could build a global digital currency that folks could use. So the reason I just say this is I think we're just at the beginning of this where the concept of currencies and national currencies and cryptocurrencies being completely disjoint. I think those blend together and of course companies can issue these as well.

Balaji Srinivasan (41:29)

Right.

Unknown (41:29)

And you might say, well, what about the legality? And I think what you're going to see is places like Miami, Singapore, Israel, Estonia, Switzerland, Dubai, the historical tech and finance capitals of the world. You know, those places will be the earliest adopters of this kind of thing. You're seeing Miami call itself like bitcoin country and so on.

Balaji Srinivasan (41:49)

Right.

Unknown (41:49)

You know, in terms of the, the, the branding.

Balaji Srinivasan (41:52)

Right.

Unknown (41:54)

And that's awesome because that means that you have these financial centers which cannot coerce. So they must convince. Right? Because they cannot coerce, they must convince. And so they adopt crypto. And so lots of businesses are incorporated there and they may get turned off in some of these big countries, but you know what, that's just a cost of doing business and you just bring it back when it's possible later. So as long as there's like even 10%, 20%, I think it's going to be more than this. But even that percentage of the world that doesn't ban crypto, it'll be alive forever and then eventually other countries will continue adopting it. That's kind of my forecast of the future.

Unknown (42:30)

So we're obviously moving to a world of CBDCs. It's inevitable. I don't think today's the day to discuss the the impact of those in.

Unknown (42:39)

Terms of surveillance and control by the state and blah, blah, we can do that.

Unknown (42:42)

Let's save that for another day. That's just the acceptance that it's coming. What do you see as the impact on a CBDC between a country that is pro bitcoin and a country that is hostile to bitcoin? Do you think it has an impact on their cbdc?

Peter McCormack (42:58)

Absolutely, because it's not like bitcoin offers a small premium over holding the CBDC through. It offers a life change. It's basically like the best investment of all time.

Balaji Srinivasan (43:09)

Right.

Unknown (43:10)

And I have a feeling that it's.

Peter McCormack (43:12)

Not going to settle down for a while. I mean it could go to a million, even 10 million or whatever, right? Like a million is no longer a crazy number to put out there for Bitcoin. 10 million is no longer a crazy number. It's crazier, but it's not completely insane. We don't know where it's going to get to.

Unknown (43:29)

And even if it only gives you.

Peter McCormack (43:31)

Like an appreciation of a few percent a year when it hits its terminal price, that's more than almost any cash.

Unknown (43:37)

Like thing will give.

Peter McCormack (43:39)

So there'll be an enormous incentive for.

Unknown (43:41)

People to be able to partake in the upside.

Balaji Srinivasan (43:44)

Right?

Unknown (43:45)

And so any country that doesn't embrace.

Peter McCormack (43:47)

That, you know, like they just have to give up control, you know, and they give up some degree of control.

Unknown (43:53)

To get financial upside for their people.

Peter McCormack (43:55)

Now conversely, there are downsides of giving up that control.

Unknown (43:58)

I'm not, I'm not saying that there's.

Peter McCormack (43:59)

Zero, you know, there's folks who can send money into the country who might be bad actors, you know, like that is, that is a real thing. You know, I, it happens rarely, but.

Unknown (44:08)

It'S the kind of thing that people are really scared of, you know.

Peter McCormack (44:11)

And you know, on the third hand, if you try to ban legal use of cryptocurrency, the criminals aren't going to be deterred from that.

Balaji Srinivasan (44:19)

Right?

Peter McCormack (44:19)

Like, you know, this is like the only if, if crypto is criminalized, only.

Unknown (44:24)

Criminals will use crypto.

Peter McCormack (44:26)

I think there's some truth to that. You know, you can argue that, that criminals can't swim among the law abiding.

Unknown (44:31)

And so on, but I think that.

Peter McCormack (44:33)

On balance you want to legalize crypto and take the good with the bad and use the money that you get from the good to figure out other.

Unknown (44:41)

Solutions for the bad. You know what I mean?

Peter McCormack (44:44)

Because you just can't give up a.

Unknown (44:45)

Trillion dollars that easily. There's other ways of solving problems.

Peter McCormack (44:49)

I mentioned this before, but banning crypto to prevent crypto crimes is like banning driving to prevent drunk driving. There's other ways of going about it. There's too much cost associated with that.

Unknown (45:00)

So I think that that's the issue, basically.

Peter McCormack (45:03)

I think CBDCs are actually a good idea. It's actually good in many ways because it moves the world towards a pro crypto direction. It is something where, I mean, that's a huge.

Unknown (45:13)

Just think about that, right? Satoshi's white paper.

Peter McCormack (45:16)

And not just his white paper, of course, his code and his execution over the span of years catalyzed something that is still compounding today.

Unknown (45:23)

One man's anonymous post or pseudonymous post.

Peter McCormack (45:26)

On a message board has every government in the world reacting.

Unknown (45:32)

Even if they say, oh, bitcoin is.

Peter McCormack (45:33)

Bad, so therefore we're doing a bitcoin inspired thing, Just think about the impact that that had.

Balaji Srinivasan (45:38)

Right.

Unknown (45:39)

It's remarkable.

Peter McCormack (45:40)

It reminds me, Peter Thiel, three months.

Unknown (45:42)

Actually after the bitcoin blockchain was launched.

Peter McCormack (45:44)

But I don't think he was aware of it at that time. He had this quote in April 2009 that really sticks with me where he said, the future is a race between.

Unknown (45:51)

Politics and technology, and it may be very close.

Peter McCormack (45:55)

And our future may depend upon one man who makes the world safe for.

Unknown (45:59)

Capitalism, and that's Satoshi. Now, he didn't know it was Satoshi at that time.

Peter McCormack (46:04)

He thought it might be Patrick Friedman, who, by the way, is also a very smart guy and had the concept of competitive government with seasteading and so on. I think seasteading in retrospect was early, but I don't think it's never going to happen. I think something like that will happen.

Unknown (46:16)

Competitive government, maybe it'll be cloud countries.

Peter McCormack (46:18)

It's a book I'm, I'm coming out with.

Unknown (46:21)

But the concept of one man who.

Peter McCormack (46:23)

Makes the world safe for capitalism, that happened. How amazing is that, that Thiel saw that coming 10 years ago, 11 years ago, the race between politics and technology. Right.

Unknown (46:32)

But those two things, Balaji, are complementary. Like bitcoin and seasteading are complementary.

Unknown (46:37)

Absolutely. Absolutely complementary.

Peter McCormack (46:38)

Yeah, that's right. I'm just saying that in terms of immediate material results, crypto produced them over the last decade.

Balaji Srinivasan (46:45)

Right.

Peter McCormack (46:45)

Seasteading has a longer burn on it.

Unknown (46:47)

I think it'll work eventually.

Peter McCormack (46:49)

All these cruise ships are cheap. You know, the concept is out there by 2040, you know, 2030, who knows what can happen?

Balaji Srinivasan (46:54)

Right.

Peter McCormack (46:55)

Some concepts have a long burn. Digital currency had a long burn. Going from chami and ecash and whatnot. There it was years of people kind of, you know, stoking the fires, keeping the ideas alive. And for bitcoin to work, by the way, you know, you had to have people, you had to have lots of fairly powerful computers. You needed people to know, peer to peer networks.

Unknown (47:12)

There were a lot of things that had to combine.

Balaji Srinivasan (47:14)

Right.

Peter McCormack (47:14)

And then the cultural moment had to happen. One thing I will say, I remember thinking when bitcoin came out, like around that time, I was like, is Satoshi too late? Didn't they just already print the money?

Unknown (47:25)

It's over, right.

Peter McCormack (47:26)

Like, you know, it was a great.

Unknown (47:27)

Idea, I understand why we need it.

Peter McCormack (47:28)

But it's kind of over now. And of course he wasn't too late, he was just on time.

Unknown (47:33)

Interesting. Okay, so in terms of, let's put the lens back on India because I think it's a very good lens that you put to put out there. And obviously it's personal to you, but I still think it's a good, you know, as such a powerful nation. You've also said they can't ban bitcoin. I think you've got kind of like a wider view on this. We know like bitcoin is essentially banned in China, but people still use it. I went out to Bolivia last year, well, a year before last, before the ban. Bitcoin's banned there, but I still met up with bitcoiners and we hung out.

Unknown (48:03)

Yeah, so you can't ban bitcoin.

Unknown (48:05)

So what does it, I mean, it just creates a premium on the price.

Unknown (48:10)

Yeah.

Peter McCormack (48:10)

So the thing is, look, India did something called demonetization in late 2016 where they took a bunch of, you know, 100 and 500 rupee notes and they just said these are all worth nothing in so, so many weeks and you have to come in and exchange them for new notes. The idea was that for years so called black money had been hoarded by bad actors. And this was a way of forcing them all out into the open and.

Unknown (48:36)

Making them all exchange their money for new money.

Balaji Srinivasan (48:38)

Right.

Peter McCormack (48:39)

And then those that didn't have a way to show that that money had been earned legitimately, poof, Vanished in a cloud dust. Right now there's a lot of arguments over, you know, whether this policy was good or bad or what have you. It did a few things. First, it caused, you know, humongous lines for people to go and exchange their currency. And number two is it did accelerate the transition towards fintech and online payments in India because people, it Just it was kind of a shock to the system like Covid that did actually shift them into this, quote, cashless economy. And UPI adoption has gone vertical over the last four years. So there was some, it wasn't just disruption, there was also something that was built there to accommodate the inflow. Okay. Now with respect to these countries that quote, ban crypto, clearly they haven't had an impact on the crypto price.

Balaji Srinivasan (49:28)

Right.

Unknown (49:29)

What they do is they push it.

Peter McCormack (49:31)

To otc, they push it underground, they push it overseas. It's something where there's still millions of Chinese users. They just have to do things like get a VPN and buy it overseas, or they have to do it through legal channels. Like you have an overseas vehicle that buys Tesla or MSTR stock now or invests in a fund that has exposure to crypto, or you actually travel overseas and found a company in a jurisdiction, which is the issue is the upside is so large that it's not like a small thing, you know, for this is actually a life changing thing. So that's why you do have people circumventing it in ways legal and illegal, people flouting it. And that actually over the long time breeds disrespect for the law, you know. And so essentially there's, as I mentioned.

Unknown (50:25)

In this post, the follow up post, how India legalizes crypto, there's essentially three ways in which you can't really ban crypto.

Balaji Srinivasan (50:34)

Right.

Unknown (50:34)

The first is technically, you know, it's not like demonetization. You can't just set the price to zero. You can't seize all the private keys because you'd have to degauss every device. You know, you'd have to find every laptop, erase every text. You know, finding 12 words on a billion laptops, that's not that easy, right? Piece of paper, yeah. So it's something which you really just can't delete it and you can't. I mean, people can speak 12 words, I mean not just 12 words, but the digital signature, you know, or the, or they could broadcast a transaction in theory over the phone by just reading out bytes and someone could do it somewhere else.

Balaji Srinivasan (51:13)

Right.

Unknown (51:13)

I'm not saying these won't inhibit it, but you know, you have to really lock down the country pretty aggressively, very aggressively, stopping immigration and immigration, stopping any form of communication, stopping satellites, you know, basically grinding the economy to a halt to find these needle in a haystacks of crypto transactions, let alone holders. So technically they can't ban it socially, they can't ban it because there's now 100 million crypto users. And they're disproportionately enriched among tech people, finance people, early adopters. You're seeing a lot of celebrities, athletes, entertainers. And it's just hard to demonize because it's not a person.

Balaji Srinivasan (51:49)

Right.

Unknown (51:49)

Satoshi did this amazing thing where he just vanished. And so all the normal character attacks, character assassinations, all the stuff they're set up to do, it might as well be Covid. The thing about COVID I mentioned this a while ago, is all the normal weapons the US uses, they can't bomb Covid, they can't regulate it, they can't freeze its accounts, they can't demonize it in the press. It's just something where all the normal tools that the US uses on something, this is immune to that. And bitcoin is actually similar. Bitcoin itself, not all the people who hold it, you can't attack them. But bitcoin itself, the protocol can't be hit by those measures. It can be retarded in some ways, but it's just too strong. I think at this point. We'll see though. We'll see. It is possible. I mentioned the firewall attack. Did I mention the firewall attack?

Unknown (52:39)

Nope.

Unknown (52:39)

Yes. No.

Unknown (52:40)

No.

Unknown (52:41)

So people talk about a mining attack on crypto. I think more likely a mining attack is straightforward. It's kind of like seeing a big bodybuilder and going up to him and just punching him.

Balaji Srinivasan (52:51)

Right, right.

Unknown (52:51)

That's like the thing he's prepared for. Maybe you can do it if you're also a bodybuilder. But it's like the obvious attack.

Balaji Srinivasan (52:56)

Right.

Unknown (52:57)

So mining seems like it wouldn't be a smart attack. The alternative would be the Chinese basically use a great firewall to just try to block bitcoin related packets. And this is like, we don't know how good they'd be at that if they really tried. Okay. But if you did the Predator prey, step one, the Chinese block or the state, really, I should say CCP blocks Port 8333. Okay. Then the bitcoin developers do port randomization. Then the Chinese do deep packet inspection to figure out, okay, like. Or they just look at the source code and they just look at all the ports that they're chosen. Okay. So then the bitcoin developers do tunneling. They send bitcoin traffic over something else, like ssh. Then the Chinese try to do deep packet inspection or some kind of AI packet sniffing on all packets to figure out which ones of those are Crypto related. And there'll probably be certain patterns of those that look like that and they'll try to interrupt those and then impose penalties on the people for running them. And that's like a cat and mouse back and forth where it's not obvious to me. I'd have to really study, let's say the art of networking to figure out what happens there. But in the worst case scenario, what happens is you have a peekaboo problem where the transactions are happening in the rest of the world, but mining is still disproportionately in China. So the chain gets extended in China, but it can't synchronize quickly enough with the rest of the world because there's these weird patchy firewall issues. Like one of the things that Bitcoin protocol assumes is a global Internet, right? That nodes can reach other nodes. That is an assumption.

Balaji Srinivasan (54:29)

Right.

Unknown (54:30)

And if you have significant partitions, especially persistent partitions in the network where some nodes cannot synchronize with other nodes, especially mining nodes cannot synchronize with other mining nodes quickly enough.

Balaji Srinivasan (54:43)

Right.

Unknown (54:44)

If that is the case due to nation states and the firewall and so on, you need something which is a partition tolerant consensus algorithm that can tolerate large durations of time where some of the network cannot see the other network. Because what would happen right now is you'd have like two chain extensions, one in China and one in the rest of the world. One the rest of world would have transactions, one in China would not. They'd only have the Chinese transactions. And whenever they synchronized up up, you'd have a chain reorg where all the.

Peter McCormack (55:12)

Blocks from the rest of the world.

Unknown (55:13)

Were thrown away and the Chinese chain was number one. Right now you might be able to tolerate this by just radically increasing the number of blocks that you acquired from 6 to 50 or 100 or whatever, whatever the period would be for the chain synchronization to happen. Because that might be one way you work around it. And what that does is it means that finality for Bitcoin transactions goes up from an average of 6 blocks to 60 blocks or 600 or whatever it is for them to finally synchronize up. So that's a hackish way to deal with it. It's better than nothing. It's not great. So that's the firewall based attack on it, which I think is the most likely technical attack from the Chinese side. On the US side, I don't think the US is competent enough to do anything technically. It can't send checks to people in the mail. So the US Government people have this vision from Marvel superhero movies and all these Hollywood movies that the US government is got all these superpowers and stuff. And that was the 1950s US government which could do the Manhattan Project or 1968, that could do Apollo and even 1980s, the US could do some things. But it is in such sharp decline that it couldn't even stand up healthcare.gov in 2012. And that was nine years ago. So you're seeing it with the power outages, you're seeing it with the failure of public health and public schools and fire and police and local, state and federal governments versus Corona. You're seeing it with, you know, all of this other stuff. So the US government is unable in my view, to launch a technical attack on it. But what it can do is it can try to launch a regulatory attack, you know, where it's just going and harassing people who are holders of it or exchanges or things like that.

Balaji Srinivasan (56:52)

Right.

Unknown (56:52)

And that, that does have its, you know, that like we'll see what happens. Right. Like some of those kinds of acts, like this very stable genius act has been proposed.

Balaji Srinivasan (57:02)

Right.

Unknown (57:04)

But there's a lot of also protest against that.

Balaji Srinivasan (57:06)

Right.

Unknown (57:07)

If you saw the number of comments that are put on the kind of midnight bill that was put out right before like Mnuchin left office, that was fairly harsh comments, thousands of them. You know, so I think there will be pushback within the west on the regulatory attack. And I think that it's TBD as to what will happen with the Chinese on the technical attack. The only reason I just say this is I'm pretty sure cryptocurrency will win. I think bitcoin will win. Even if the current Bitcoin protocol doesn't win, the bitcoin ledger will win because it can be backed up and put onto. It's like it can be rejuvenated and brought onto different bodies.

Balaji Srinivasan (57:42)

Right.

Unknown (57:43)

So anyway, let me pause there, get your thoughts because a little bit of a digression.

Unknown (57:47)

Well, no, no, I mean, I'm with you. Look, every attempt to ban bitcoin or wherever it is, whoever's tried it, all it's ever done is increase the price in that, that territory. It's just created a premium. It's not, it's not been effective. People will use it.

Unknown (58:00)

Remember in early, remember early 2017 when all this Chinese volume dropped off exchanges and everyone's like, oh shoot, right, yeah, like what's going to happen? And it went from a thousand to twenty thousand. And if China the most competent, large.

Peter McCormack (58:14)

You know, ruthless in some ways.

Balaji Srinivasan (58:16)

Right.

Unknown (58:17)

Like State. If they can't ban it, like, because the thing is like their scale, their technical sophistication, their ruthlessness when they're pursuing a goal, when they threw all of that at it and they didn't actually it 20x the price, that was a huge moment. That was comparable in my view to the recovery from 2011 to 2012. That's a huge proof point.

Unknown (58:42)

Yeah, it doesn't worry me. I mean, the only thing that would worry me is it's like a coordinated international bank. Like, if it was like that, that would be very bad.

Unknown (58:54)

You know what? That's very. The reason I think that's unlikely to happen is what's the international coordination on anything? Well, I know on Covid, on climate, on anything.

Balaji Srinivasan (59:07)

Right.

Unknown (59:08)

There's a trade war. You know, if somebody says the sky is blue, someone else is going to say the sky is red at this point. So. So I think that's unlikely. Of course it's a possibility. I'm not as sanguine about. No one will ever be able to ban it or able to stop it, technically or regulatorily. I think it's unlikely. I enumerated a bunch of things there. What I think I'm absolutely certain about is no one will be able to ban the idea of cryptocurrency. That will never go away. But the concept is out there.

Unknown (59:38)

No, I'm with you. I'm with you. Okay, so look, we're talking about the negative side here. India's considering banning it and why they couldn't. But actually there's a much more pro positive way to approach this that actually you just think they've got this completely wrong. And there's a solid number of reasons why they actually should adopt bitcoin. Should we work through those?

Unknown (59:58)

Yes, yeah, absolutely. Let's go through it.

Unknown (60:00)

Right, well, so I mean, I'm going to go via your article, but let's go one at a time. Let's start with. Start with national security.

Unknown (60:10)

Yep. So national security. So basically any country that is not the US or China wants to hold Bitcoin and more generally wants to build a lot of native skills in crypto because it doesn't want to be deplatformed from, you know, like the international financial system or from communication systems. And this is a real concern. If you saw Macron and you saw amlo of Mexico and you saw Merkel, all these people were sort of shocked that sitting head of state could be deplatformed by A tech company in the absence of a court order or anything like that, just a decision by a tech CEO.

Balaji Srinivasan (60:49)

Right.

Unknown (60:49)

And again, whether or not you think that decision was legitimate, it's sort of like you might see a bad guy who is like, you know, captured by police or shot by police in a really brutal way. And you might be like, yeah, that guy was a bad guy. But I really don't like that process that was used because that's not, that's. That's not like rule of law. You know, that's something where if they, they'll get away with it today because that's a bad guy, but tomorrow it might. Might be a somewhat less bad guy. And so this is obviously an obvious argument, right?

Unknown (61:19)

I mean, it's the same with the Trump ban on Twitter, right? A lot of people don't like Trump. They didn't think he should have been deplant.

Unknown (61:25)

That's what I mean. That's what I'm. That's what I'm referring to. Yeah, yeah, exactly. That's right. So basically, whatever their feelings on Trump, it's the process that was followed that was so basically instant. I mean, there was obviously a huge lead up to it, right? You could see it coming with the banners and stuff, right? But just like that, crossing that Rubicon and having a sitting President with 88 million followers deplatformed and then following it like, like parlor getting pulled from Amazon and Google and Apple and Facebook and whatever at the same time, right? Like that was kind of like, whoa.

Balaji Srinivasan (62:01)

Right.

Unknown (62:02)

You know, it was, it was quite a moment. And all these countries have realized actually, you know what, like, we can be demonized like that too. You know, 2019, you know, Brazil, there was this fake photo of Brazilian fires that went viral. It was printed, you know, Macron tweeted it. It was. Was printed in nyt. And it was fake because it was taken by a photographer who had passed away in 2003. There's a guy in the Atlantic who actually wanted to use that to justify war on Brazil.

Balaji Srinivasan (62:29)

Right?

Unknown (62:31)

I mean, people are excitable now. They're just cray this truly false information that's really agitating spreads. And it's like sugar, right? Humans are simply not evolved to deal with this much sugary stuff around. And restaurants spike your food with sugar because it is advantageous to their business model. It's something which trades off your health to make the food tastier and to bring you back and to, you know, charge higher prices. And I understand why they do it because they got to make a living, you know, but what happens is you pay the price and society pays the price in diabetes for that, you know, $10 Big Mac or whatever the price is, you know, the fried nuggets, so on. You have diabetes in whatever years, it costs you way more than 10 bucks.

Balaji Srinivasan (63:20)

Right?

Unknown (63:21)

And what used to be the case is you used to have home cooked food where you may not have been as tasty, there may not be as much variety, so you didn't eat as much and your family would essentially internalize the cost of both the food and whatever healthcare bill you had. And so there was a degree of check on both parts.

Balaji Srinivasan (63:41)

Right.

Unknown (63:41)

Like, even if you just talk about alignment of economic interest, forget about the love that they would have for you, which is also obviously very important. But, but just there you've got the same entity that's doing both.

Balaji Srinivasan (63:51)

Right.

Unknown (63:51)

So what's the analogy? What's the point? Point is that all of these outlets, all these individuals, frankly, everybody's found that you can just strip context, add exclamation marks, you know, like, just like the equivalent of sugar. You just juice your tweet with the most inflammatory words.

Balaji Srinivasan (64:07)

Right.

Unknown (64:08)

And there's no penalty.

Balaji Srinivasan (64:09)

Right.

Unknown (64:10)

You just, it just goes, you know, you're, you're just trying in that war every day for attention. This is the most surprising and crazy thing. And a nation can easily, easily just get killed by something like this, as we saw with the Brazil thing. And so they don't want to. The smart ones are starting to realize that this is actually the real theater of cyber war. Yeah, everybody has thought that cyber war was about, oh, they're going to hack my electrical grid. Oh, they're going to hack my power plants and stuff. And you know what? Yeah, that's a threat also, don't get me wrong, that is right.

Balaji Srinivasan (64:43)

Right.

Unknown (64:43)

But it's also the much more in your face version, which is they just deplatform you from communication channels. They shut off your transaction capability and they do so by attacking your reputation beforehand. So you're a bad guy, you're Saddam and you've got the WMDs, even if you don't have them. And you know what, like, if the US Invades you and, and breaks all your stuff or whatever, then later in like 2007, you know, remember Bush did the, did the White House correspondence dinner where he's like, where's the WMDs? Oh, I don't find them.

Peter McCormack (65:12)

I don't see them here.

Unknown (65:13)

And made a joke out of this thing, you know, after the country had been invaded and the entire thing has been turned into this free fire zone. You know, it's kind of crazy, right? You know, it's like, oops.

Unknown (65:24)

Next up, I talked to Balaji more about the nation state case for bitcoin. But before that, I do have a message from my amazing show sponsors. Okay, firstly, Exodus Wallet, who I am using as my desktop wallet for my bitcoin. Now, I had been looking for a wallet to manage my day to day bitcoin. I've been telling you, listen, if you're following the show, you know I'm increasingly using bitcoin to run my business. Especially since the banks wrote to me and said to me, we're closing down your accounts. Fuck you, Lloyds Bank, I don't need you. I've got Exodus Wallet. But seriously, I do get increasingly paid in bitcoin and I'm increasingly paying people in bitcoin and my accountant was getting on my back about tracking this. So I needed a good desktop solution for my audits at my end of month month accounts. Now when Exodus reached out and they were like, pete, can we sponsor the show? I was like, okay, let me check out your wallet. And I went ahead and played with it. And you know what? They crushed the ux. And I always care about ux. They crushed it. So listen, if you want to check out Exodus Wallet, head over to exodus.com or search for Exodus in the Apple or Google app stores. Next up, we have my friends Casa. Oh my God, can I go on about this anymore? Have you got your security shit sorted? Seriously, are you making gains in bitcoin? Have you got a load of bitcoin and you've not stored it securely? Now you really should check out Casa. I became a customer nine months ago, not because they're a sponsor. I actually went to them first and said, I need an account. They offered it to me for free and I was like, no, I'm paying. I want to see if it's worth it. And I've been a customer for nine months. And you know what? That peace of mind of having my keys distributed and protecting myself from my own stupid mistakes, attacks, in person, device failure, and so much more has been well worth the price. Now with Casa, they have a product for every bitcoiner. With CASA Gold, you get triple the security of a hardware wallet and that's only $10 a month. With Casa Platinum, you get their three or five multisig. And with Casa diamond, which I think I'm going to upgrade to, you get their full service offering this Comes with a personalized security review, inheritance planning and of course their best in class in security. There is no better time to upgrade your bitcoin security than in a bitcoin bull market. You can find out more at Keys Casa, which is K E Y S Casa. And this week we're finishing off with my friends over in Estonia. Sportsbet IO love these guys. They put a bitcoin logo on the Southampton shirt. So anyone watching Premier League football, watching Southampton, is seeing a bitcoin logo. And why do they do this? They love bitcoin, right? They want to promote bitcoin around the world. So big props to Sportsbet for doing that. They also the best place online gaming because they accept bitcoin. And with Sportsbet IO you have every market you could possibly be interested in. They got football. So if you want to bet on Tottenham losing, you've got that. Tennis, American Sports, Motorsports, they've even got esports. And for new customers, they always have a range of promotions available. So just head over to Sportsbet IO Promotions to find out more. Which is S P O R T S B E T IO Promotions.

Unknown (68:22)

Okay, so the next thing that's kind of interesting, that really didn't cross my mind, but when you were explaining that essentially because of bitcoin, there's going to be a number of ultra wealthy people created like beyond what we've known and very quickly and they're going to want to deploy capital. But if India bans bitcoin, they're going to prevent deployment of that capital in the country.

Unknown (68:43)

That's exactly right. So what happens is the flippening, the billionaire flippening is coming, right? And depending on the number. I actually have a post on this where I just kind of called it out separately on my site. You can make assumptions and it's a very broad range, but somewhere between 100,000 and a million dollars for bitcoin. Probably half the world's billionaires come from crypto and that's remarkable.

Balaji Srinivasan (69:07)

Right?

Unknown (69:07)

And there's a lot of assumptions that go into that. You can argue with all of them, but let's at least say a very good chunk of the world's billionaires likely come from crypto.

Balaji Srinivasan (69:14)

Right?

Unknown (69:15)

And that's this incredible rapid global transfer of wealth to people who are rational technologists generally, but made big large bets against the establishment. The more you have, the earlier and stronger you bet against the US establishment. And that's really interesting because these are folks who still are. It's this, as I said, thesis, antithesis, synthesis.

Balaji Srinivasan (69:42)

Right, Right.

Unknown (69:42)

There's people who are still western enough to believe in free speech and free markets, in fact, arguably the real west and yet are like the new western elite. So those folks who are global investors, any country that bans crypto is saying, let me ban a big chunk of global investors. Let me ban a big chunk of global entrepreneurs. In fact, let me force out some of the smartest and earliest adopters in my country who are technologists and financiers who saw this thing coming and put in some money. Money, you know, and, you know, maybe the tech people saw it earlier and the financiers had more money to put in or whatever, you know, this combination of the two.

Balaji Srinivasan (70:20)

Right.

Unknown (70:22)

But, but that is, that's not a good thing for a country especially, you know, a country like India, which is rising, has. It's not. I mean, no country is really rich enough to be able to turn down a trillion dollar opportunity. You know, you might think you are, but it compounds. And there aren't just aren't too many of those. There's very few things that are a trillion bucks and growing electric. Crypto is actually, there's nothing other than the Internet itself, you know, that I can think of as a unitary thing, you know, so, yeah, you're basically. People have this concept, oh, crypto will cause capital flight. Actually, the crypto ban is what causes capital flight. And conversely, crypto legalization causes capital landing.

Unknown (71:00)

Well, you'd be a potential investor.

Unknown (71:04)

That's right, yeah, exactly.

Unknown (71:05)

Blocking you, man. You've got a strong background in this.

Unknown (71:08)

I do.

Unknown (71:08)

Okay. Yeah. I think the next interesting area to talk about is also the strengthened monetary policy which you talked about earlier because you actually, she mentioned the fact. So what was the price? You made the recommendation at the price.

Unknown (71:23)

I'll tell you, actually, I mean, it's moving.

Unknown (71:24)

So the date of the article.

Unknown (71:25)

Yeah, it's the date of the article. Let's call it that. Right. So that was February. It's an eternity to go. It's probably 30,000 there February 4th.

Balaji Srinivasan (71:34)

Right.

Unknown (71:34)

So two weeks ago. Okay. And so bitcoin coin market cap.

Unknown (71:41)

So we're at, at 37,000.

Balaji Srinivasan (71:43)

Yeah.

Unknown (71:44)

Okay, so it would have made, you know, 20%.

Unknown (71:46)

Is that 20%?

Unknown (71:47)

Yeah, 20%. So. Well, they would more than that because 50,000. Yeah. So let's say, I mean, it's actually.

Unknown (71:54)

Kind of crazy that I made a billion dollars.

Unknown (71:58)

The graph is crazy, but it's also completely expected. Like, we knew this was going to happen about six months after the halving, everything goes vertical.

Balaji Srinivasan (72:04)

Right.

Unknown (72:05)

February 4th, it was 37,000.

Balaji Srinivasan (72:07)

Right.

Unknown (72:07)

So, yes. Had they put in $3 billion of Bitcoin, then they would have $4 billion a few weeks later.

Unknown (72:12)

You know, actually probably more. Because if they'd have declared it.

Unknown (72:16)

Yeah.

Unknown (72:16)

Oh, it would have gone. The price would be way above that. Yeah, that's right. But let's talk about this.

Unknown (72:21)

Yep.

Unknown (72:21)

Because you talk about India's love affair with gold. And I saw it. I went to India a few years ago. I had an amazing trip. Went to Mumbai and then down to Goa. And so where I was in Goa, I took a motorbike up to the. Like, the little local town, and there were just gold shops everywhere. I couldn't believe it Just. It's amazing. Yeah. It just blew my mind. And, you know, somebody was explaining to me, tell me if this is true. Someone's explained to me what it is. It's a store of wealth. It's not just the jewelry itself is storing wealth, and it's a way of handing down wealth.

Unknown (72:53)

Yes.

Unknown (72:54)

Is that correct?

Unknown (72:54)

Absolutely. Because, I mean, India gets it right. India, for better or worse, you know, India is like something where folks don't have. The state has not always been functional in India. The recent Indian state is actually way, way, way better than it's been in a long time. You know, and so because of that, India for a long time has essentially been, you know, small l. Libertarian in that sense.

Balaji Srinivasan (73:22)

Right.

Unknown (73:22)

Like, practically libertarian. Immigration abroad. Buy gold, you know, like, you know, have hard skills in engineering or medicine. You know, like a lot. This is a big part of Indian culture.

Balaji Srinivasan (73:34)

Right.

Unknown (73:35)

And it's not exactly the same. I mean, the firearms bit is different. American libertarian culture has that piece.

Balaji Srinivasan (73:43)

Right.

Unknown (73:43)

But there are some significant overlaps.

Balaji Srinivasan (73:45)

Right.

Unknown (73:46)

And so the gold thing is huge for Indians for all those same reasons. Exactly. It is something that's both an attire and it's part of our culture, but it's also a store of wealth where in tough times, buy it on some gold and you might be able to use that, and that kind of gets a family out of a tough spot.

Unknown (74:05)

So in some ways, bitcoin is natural, especially for the. Because the state holds a lot of gold as well. Right. How much gold does the state hold?

Unknown (74:14)

Yeah, like, I think 30 tons or thereabouts. Or actually, was it 30 tons? It was like 30 billion, maybe 600 tons worth. Yeah, 600 tons. About.

Unknown (74:21)

Yeah, 30 billion. 30 billion. So a 10x on the 3 billion. Cross it. So Bitcoin hitting about 370,000. What happened? And, yeah, interesting. So in terms of the monetary Policy, though, does it not come with any risks in that the price of gold is quite stable? Is it quite risky for a nation state to adopt Bitcoin and then see its reserves drop if there is some kind of bear market after they do it?

Unknown (74:46)

Well, yeah, I mean, of course there's risk. It's something which is a very. It's a volatile cryptocurrency, but that's what international relations is like. Every decision you're making at that scale has some risk. I think we are definitely moving into a time when the world is just. I mean, this is a cliche, but it is becoming more volatile. The post war order does not hold anymore. The relative stability of roughly 1991-2016 is just no longer operative. Everybody's straining at the seams until. So the thing is that the biggest risk is not taking lots of small risks.

Unknown (75:29)

Right. Okay. So it's risky not to adopt Bitcoin because if it becomes a standard across other countries, you don't want to be the last person to buy Bitcoin.

Unknown (75:38)

Yeah, I mean, cryptocurrency as a concept is not going to vanish from this earth. It's like saying networking is going to vanish. This is a breakthrough in computer science. This is a breakthrough in cryptography and distributed systems in a bunch of things. And it's clearly, it's at a trillion dollars, it's got 100 million users. It's not something that's going to go away. And so of course you can basically say this is verboten, this is forbidden or whatever, and then kind of bury your head in the sand culturally and lose a generation of technology, sort of like North Korea or whatever. But that wouldn't be smart. You want to say, okay, look, this is happening. The world is adopting it. There's clearly some benefits here. We might. It's like Bezos's thing, right? You know, he's like, you know, we've taken some bets that have been huge bets that, you know, vaporized hundreds of millions of dollars, like Kindle Fire or whatever. It's like. But if you don't take those bets, you don't have the Kindle, you don't have aws. You never want to do a bet the company right bet. The company bet is like the bet the country bet. It means that you've put yourself in a situation where it's all on, like you're betting it all on black in the sense of a roulette wheel, right? Oh, it's better make it. And that means that excessive risk aversion is extremely risky. You know what it's like? It's like the guy who doesn't change jobs and is at the same company and is at Microsoft, for example, forever and has become a Microsoft lifer. And he kind of sees open source rising, kind of ignores it and he just knows everything about Windows, APIs or whatever until one fine day he's laid off and suddenly his pay, he doesn't have the skills to have the same pay that he had at Microsoft and his consumption has been at the level that was so high that he can't just easily find a comparable thing. And so he suffers a pay cut and he's 40 something or whatever and that's a serious issue for him. And he just feels like he's declined in life, life. And you know, I'm not saying that's the only outcome. I saw some folks, you know, go through that. And that comes from not constantly trying to reinvent yourself, right? If you reinvent yourself every few years and you push yourself, I mean, it's hard. Of course it's hard. The older you get, it's hard, right? I'm not saying it's easy, but if you don't do that, you are vulnerable to, to getting disrupted. And this is as true for countries, right? And the good thing is India is in that hungry stage, right? In its own way, it's hungry in the same way that that Estonia is hungry and now Miami suddenly became hungry.

Balaji Srinivasan (78:13)

Right?

Unknown (78:13)

Well, this is back to your ascending descending thing.

Unknown (78:16)

Yes, that's right. The thing is that the entire terminology of developed world and developing world is just no longer applicable. I mean, I would much rather, much rather be in Bangalore than San Francisco. First of all, huge parts of Bangalore are cleaner than San Francisco. You can look, you may not believe me. You have to go there, there.

Unknown (78:36)

Like, dude, I've been watching the decline of San francisco For the 15 years I've been traveling there. And I like going to the Bay, I like going to Marin County.

Unknown (78:45)

But the city, Nah, dude, it's actually insane. And there's so much that you could say about it, but it's 100 government. Cause it's basically all these people who have optimized for popularity over truth and there's a bunch of voters who have gone along with them. And it's just something where these people, it's like, like it's like the cycle of civilizations or something. Everything just has an up and then a down. You know, it's hard for me to fully understand what is going through the heads of the People who have made SF into what it is today. But fundamentally, if you see them tweet or whatever, they just have fundamentally wrong premises. You know, like that housing is not governed by supply and demand, right? Or that, you know, all the tech people can leave and it'll just be fine and screw them, It'll just mean that prices decrease, right? Or that, you know, it's okay to have like people being randomly attacked on the streets. And you know, if you're against that, you're a bad person or whatever. And like just, these are just like stupid ideas. They're just like wrong.

Unknown (79:46)

Listen, let me tell you something. Yeah, I'll tell you something funny. So on my last Vinna, I had a proper Blade Runner moment in San Francisco. So like a couple of visits previously, I didn't know about the Tenderloin, right? And I can't remember the name of the street I was staying on. Got up, up.

Unknown (79:58)

Oh, you got, you got a cheap hotel. You got a cheap hotel in the Tenderloin, huh?

Unknown (80:02)

Dude, no, no, no, I wasn't in the Tenderloin. No, I was down near, near the shops.

Unknown (80:07)

Union Street. Is it Union?

Unknown (80:09)

Union Square?

Unknown (80:10)

Union.

Unknown (80:11)

No. I don't know. Anyway, I ended up running, going for a run and I ended up in the Tenderloin. I was like, what the is this? But, but the actual last visit, the weirdest thing happened. I, I, in the same five minutes I saw somebody getting yelled at by a homeless, dried out drug addict. And then a robot went past, like one of these robots that would, you know, that go down the street. And I was like, what the is going on here? Like, I feel like, I feel like I'm in Blade Runner.

Unknown (80:40)

Yeah, no, no, have you seen the thing which is like robot coffee and there's like the person who's passed out in front of it. It's like, I mean, it's the kind of thing where. Here's the problem with that, by the way, okay? The problem is that people will blame the former on the latter, right? They, they will say, oh, it's the, the tech guys caused this. And I'm like, how do the tech guys cause anything? You have this, this guy from New Delhi and this guy from Shanghai and this guy from Nigeria and they are collaborating on something and they're just working in their apartments and typing on keys and they had absolutely nothing to do with public policy in the city. They can't even vote. Vote. They're not even citizens, right? And you're blaming them for the fact that these native born Americans just Screwed up everything, right? Like, what. That's. It's like the dumbest thing in the world, you know, And. And the thing is that other cities show that you can have technology without this craziness, right? So I actually, that's why I said, you know, I'm like, I'm glad that San Francisco in particular is investing so heavily in the decentralization of technology. Out of California and out of San Francisco, they're really. They're really playing an amazing game, you know, and what that does is actually. It actually is good, you know, because there's a good conversation we had back in December on Twitter on this, where folks were like, oh, we need to, like, commit to the Bay. You know, we need to like, oh, you got. Cause after years of saying, techies, get out, techie, we hate you, blah, blah, people are like, okay, we're going out Miami, going out, going to Austin, going.

Peter McCormack (82:15)

Overseas, you know, going to Israel, going.

Unknown (82:17)

To Singapore, going to Korea, etc, Right. My friend David Lee, for example, just took a very senior job at Samsung.

Balaji Srinivasan (82:22)

Right.

Unknown (82:22)

A lot of Asians are going home, you know, because, look, I mean, here's the thing. I have nothing against America, but it's nice to be part of a culture where people can pronounce my name, you know, and where I can speak my mother tongue. And, you know, I never do that on Twitter because just not where my audience is. But that's. That's important to me, you know, and it's like. It's like religion or whatever, you know, you don't want to. You don't have to be publicly demonstrative about that. That's not what people are there for. Fine, it's a private thing. But all else being equal, would you prefer a functional culture that is your own culture? Absolutely. It's kind of like a British guy who enjoys the pub or whatever. If they don't have to go to Texas, they may not want to go to Texas.

Balaji Srinivasan (83:04)

Right.

Unknown (83:04)

It's like a small things, creature comforts, if that makes any sense. Go ahead.

Unknown (83:07)

Yeah, no, it does. Because, look, Balaji, I've built up this bitcoin podcast, right? Giving me opportunity and money, and I can live anywhere, pretty much that I want. And I'm still here in Bedford because, you know.

Unknown (83:17)

Exactly.

Unknown (83:18)

I love it. I know the guy down the street. I can go into town and I'll see five people. I know, I know my friends, I know the parks. Like, I won't be here forever, but, like, I get that, right?

Unknown (83:28)

That's right. And you and I are as Internationalist as it comes in many ways. You know what I mean? We have friends from all over and so on and so forth. But the point basically being is that lots of folks, you know, gave up their home countries and their home cultures to come to sv, to come to Silicon Valley to sacrifice and whatnot and then get blamed for like, the 28.

Peter McCormack (83:48)

Days later scenario that they had absolutely.

Unknown (83:50)

Nothing to do with, you know, and.

Peter McCormack (83:52)

And now they're like, you know, f.

Unknown (83:53)

That I'm just gonna go home, right? I'm just gonna go. Because the opportunity is greater in Asia, you know, like the, the US also makes it really hard to get visas and it's got Covid. And then all this power outages.

Peter McCormack (84:04)

It's not even a first world country.

Unknown (84:06)

All the power's on in Korea, you know, why am I dealing with this again? You know? And plus, of course, half the country isn't so fond of immigrants. The other half isn't so fond of founders or entrepreneurs. So the immigrant entrepreneurs.

Unknown (84:19)

What about these?

Unknown (84:20)

Go ahead.

Unknown (84:21)

What about those people who've just left San Francisco to move to Austin and they've got no power?

Unknown (84:25)

Well, I told them, I told them. I was like, you know, basically, once Covid, you know, was coming, it was something where, where I was like, you know, how have you seen like Star Trek or something like that where there's.

Peter McCormack (84:36)

A spaceship and it's moving at some speed and then it sees and it's.

Unknown (84:39)

Got to go warp speed like that.

Balaji Srinivasan (84:41)

Yeah, right.

Unknown (84:42)

Like Covid was something, was like, you know what? You know, Peter Thiel's thing about your 10 year plan to do it in six months. I was like, whatever. The thing about Austin is, I knew it was going to become like California and San Francisco because the whole like homeless thing came from San Francisco to Austin.

Balaji Srinivasan (84:58)

Right.

Unknown (84:59)

So the bad governance was imported. You know, you saw the sit stand like it was a functional city. And then one day they repealed the sit stand ban, so that now someone had to actually basically attack you before you could say they shouldn't be lying in front of your store, you know?

Balaji Srinivasan (85:14)

Right.

Unknown (85:14)

And I mean, that's literally what it is. It's like, oh, you can't punish the act of sitting or standing or punish. You couldn't just call a police officer because someone was passed out in front of your hairdresser's doorstep. They actually had to attack a passerby or something. It's roughly along those lines.

Unknown (85:32)

Something's insane. Yeah, yeah.

Unknown (85:33)

Which is insane.

Balaji Srinivasan (85:33)

Right.

Unknown (85:34)

And it's basically something where the poorest, you Know, the one place they exempted was City Hall. Okay. Of course. Okay.

Peter McCormack (85:41)

And so you have this thing where.

Unknown (85:43)

These small business owners who, you know, are again, often immigrants, often, they're definitely not like rich. In fact, they've got one of the hardest things where they've got a limited market, they're trying to sell bagels to somebody or whatever at 10 bucks and their foot traffic is impeded by this crazy guy in front.

Peter McCormack (86:01)

They can't raise venture capital.

Unknown (86:02)

You know, they don't have like the.

Peter McCormack (86:04)

Sophistication to do like a web shop.

Unknown (86:06)

These guys are often really hand to mouth.

Balaji Srinivasan (86:08)

Right.

Unknown (86:08)

And they're, they're, they're just getting crushed by this thing. And of course, if you're like a tech person, you can be like, okay, well, I'm just going to go to the other shop, I'm going to order Uber Eats. And you push it off onto that. So for tech folks, it doesn't touch them as much. It's true, though it's unpleasant for everybody. Anyway, point is because when I saw that, I was like, okay, I knew.

Peter McCormack (86:25)

That Austin was just a few months to years behind SF's decay. When I saw that they had just followed them on this horrible policy. And the issue with that is you realize that there's something going on at the mayor's office or in that circle, which they have an incentive structure. It's just completely different than the citizens and everybody who has to deal with the policy.

Balaji Srinivasan (86:48)

Right.

Peter McCormack (86:49)

And it's fundamentally, I think that they just have. We have not spent time making the moral argument because it's a moral argument. That's the foundation. You need to be able to catch and meet the alternative moral argument and actually win it in an arm wrestle. And if the alternative, if it's phrased as, oh, we're good because we're so selfless that we will allow you to have a crazy person on your front doorstep. And when I say crazy, like, I actually mean, you know, a significant fraction.

Unknown (87:23)

Dude, I've seen it.

Peter McCormack (87:24)

Yeah, they're actually literally mentally ill.

Balaji Srinivasan (87:26)

Right.

Peter McCormack (87:27)

And they need treatment. Or like there's a video called Seattle is Dying which actually showed if something like 70% are mentally ill or on drugs and, or violent. And so that's something where it doesn't benefit anybody, including this person, to have them sleeping on the street. You know, Anyway, these are like completely obvious points. Yet to raise them, people would be able to try to try to score moral points.

Balaji Srinivasan (87:59)

Right.

Peter McCormack (87:59)

And the issue is just that people need to develop the alternative moral language. You Know, which is, you know, for example, that women, that gay people, that minorities, et cetera, can't walk the streets of San Francisco safely, you know, and that's like 80%, 90%. Of course, neither can white guys, you know, but. But it just. It is actually true that all of those groups have a story of it. You're seeing these attacks on Asian Americans. Certainly women are being attacked. And so then you're talking about something where you've got an alternate moral language to discuss this issue anyway. I mean, that's just like one version of it. There's like 15 different versions of ways you can come about it. Point being that I'm very bearish on the US not necessarily on the west, broadly, because Australia and New Zealand actually did better than the U.S. right. And that's because there's sort of leadership. It's leadership. But you know what I actually think it is? I think it's also the peer group of being within the Asian time zone.

Unknown (88:58)

Yeah, true, But I mean, just pretty firm leadership. There's also somebody. I wrote a. Did I read an article somewhere where, like, female led nations handled Covid better with a female prime minister?

Peter McCormack (89:10)

I'm not sure that that actually holds up. I think that if you look at the GR graph, because, you know, Jacinda Arden, sure, she did a good job. But the thing is, if you look at New Zealand or Australia, right. Australia is run by a man during this. New Zealand is progressive, Australia's conservative, but they both did a pretty good job on Covid. Now you can say, oh, they're island countries, but so is the uk and it didn't really do that great. Neither did Hawaii, you know.

Balaji Srinivasan (89:34)

Right.

Unknown (89:35)

And.

Unknown (89:35)

Well, we're slightly different. That we're also a hub country. Like, their island country is, like, in the middle of nowhere. We're a hub country where, you know, it's a final refueling stop before going over to South America or America.

Unknown (89:46)

Fair. Fair, But.

Peter McCormack (89:47)

But basically, like, you know, the thing is that there's been a big switch, which I saw during COVID which is really interesting, where, you know, people went from sort of chess, something like, you know, America F. Yeah, America's number one. You know, we're number one to. Yeah, we're not number one, but how could you expect us to be number one? This is like small countries and they're islands and they're this and they're that. Yeah, we're number 17. But we're not the worst.

Unknown (90:12)

Dude.

Peter McCormack (90:13)

Dude, you know, like, we're not the worst is so different from.

Unknown (90:16)

We're the best.

Peter McCormack (90:17)

You know what I mean? And that's like, it's just not the same thing at all.

Balaji Srinivasan (90:22)

Right.

Peter McCormack (90:24)

And you no longer. I mean, if you do the graph of COVID roughly speaking, it's democratic Asia and Australasia that I think should be the model for the world.

Balaji Srinivasan (90:34)

Right.

Peter McCormack (90:35)

So factor out China. I think China did do a good job on Covid at the end of the day, from a result standpoint. You know, a lot of people say, oh, you trust Chinese stats and so on. It's not that I trust Chinese stats, it's that I've just seen enough triangulated reports that it looks like they weathered the storm overall. Okay, but, but even if you don't believe that, if you look at Japan, South Korea, Singapore, Taiwan, Hong Kong, I know it's Hong Kong is now more part of China, but, you know, Thailand, Australia, New Zealand, like democratic Asia and Australasia, Australasia being Australia, New Zealand has I think done the best overall. And that's where the camera is shifting of the world economy.

Unknown (91:14)

You know, we've gone on a bit of a tangent here. I do want to ask you something because I've read it on the news the other day that like India's had like a sudden kind of drop in Covid numbers and they don't know why.

Peter McCormack (91:27)

Yeah, I did see this. And I mean, look, Covid is something where there's been drops and surges and all this type of stuff, right? And it's very premature to declare a victory, but, you know, it's possible that, you know, roughly speaking, they've done about 8 to 10x better than the US has from on a per population basis. And I don't know why. It could be that they've got a younger population, it could be that they have, you know, less diabetes. There's various things like that that people postulate.

Balaji Srinivasan (91:55)

Right.

Peter McCormack (91:55)

So I don't know the answer in terms of. Of to truly know. What you'd want to do are like SERO surveys, you know, where you're looking at antigens, you're looking at what antibodies people have to different things and seeing if, you know, quote, herd immunity actually did happen or whether cross infection actually, you know, cross immunity actually manifested where infection with some other coronavirus strain gave you immunity. I don't know. You know, there were some studies on cross immunity prior to the current epidemic and it didn't seem like it worked, but. But maybe. So it's early to declare victory because Europe was also like, yeah, we did such a good job, or Whatever, in the summer. And then they went. Or actually it was Europe. I forget who. Someone was saying they did such a good job and it looked like it was low and then it kind of just surged back up again. Right, so we'll see what happens.

Unknown (92:47)

Yeah. All right, well, listen, look, we've got a massive tangent here. We've got a fur track. But listen, I'm conscious it's late and we been recording for ages now, so let's close it out. Listen.

Unknown (92:57)

Sure.

Unknown (93:00)

Do your closing out case. India or any nation state to buy bitcoin. Why they should do it, why they should adopt it. I know your story is more broad. Crypto. My show is bitcoin, so I'd rather keep to the bitcoin for now.

Peter McCormack (93:12)

Sure.

Unknown (93:13)

Okay, let's like the closing arm. India should buy bitcoin. Why?

Unknown (93:18)

Okay.

Peter McCormack (93:19)

All right, so why should India buy bitcoin? Why should every country that is not want the US Or China buy bitcoin? First, this is a trillion dollar industry. Crypto is a trillion dollar industry. So you want that to be within your country simply from an economic growth standpoint. This is like the financial Internet. You want it to be there. Second, it means that your country can't be deplatformed. So, you know, even if PayPal or what have you turns you off, you can still settle internationally, you know, both at the individual level and then at the, you know, country level or company level, Swift or what have you, you can use cryptocurrency instead. Right? Prevents financial deplatforming, which is a bigger and bigger thing given that you've seen the Twitter deplatforming of Trump, for example. Third, it brings capital to India. There's all these bitcoin millionaires and billionaires, all these tech CEOs, all these tech companies, as well as traditional companies, financial institutions that have bought crypto and held it. And you want those people to be able to invest in India. Fourth, remittance is remote. So crypto enables a remote economy. All these Indians are online. All these jobs can now be done remotely. India is a world leader in business process, outsourcing and in remittances. Cryptocurrencies work across borders. You put those together and crypto will result in this huge boom of remote work and remittances with people being able to pay Indians for growing remote work and to send money back into the country. Okay. Fifth, strengthen monetary policy rather than weakening the monetary policy, just like you have hundreds of tons of gold in an emergency situation to kind of back your fiat currency all the central banks do. For the same reason you want to have digital gold as a rainy day fund in the event that that happens. And so for the same reason you have gold, you want digital gold. Gold was not a threat to India. Gold is an asset for India. And similarly, digital gold is neither a threat, it's not a threat, it's an asset. Right, okay. Six Mathematically provable accounting. So, you know, many people don't know this, but, but the big four accounting firms use the Bitcoin blockchain and other blockchains as gold standards of truth when they're auditing firms that engage in crypto transactions. And the reason is because the blockchain gives corroborating information. It gives a third entry, not just your debit and another company's credit when you do a payment, but a third entry in this blockchain, this neutral thing which is cryptographic. It's cryptographically verifiable, it's immutable, it's got this history. And so you can have a record of who paid who. Even if you have an internal bug, you can reconcile that to on chain. And that's a game changer because it allows all kinds of accounting to be automated. You're no longer just relying on the company's books. The more stuff that's on chain, the more you can automate. And this is a big deal because you cannot just do audits. You can do novel things like proof of reserve, right to continuously certify do you have the needed assets on hand. Okay, then number seven, like crypto is the financial Internet. All of these things from, you know, derivatives to lending to, you know, various kinds of services. You know, all these things are being built on crypto. And you know, you, you, you just want to have that domain knowledge within your country. You know, otherwise it's like Soviet Union which bans finance for a long time and everybody has to learn capitalism from scratch. You need to have that knowledge of the financial Internet and want that within your country. Then point number eight, crypto is like the open source alternative to foreign corporations. Many governments, including the Indian government, encourage the use of open source over proprietary code. You know, like there's a quote, the government of India shall endeavor to adopt open source software and all e governance systems implemented by various government organizations as a preferred option in comparison to close source software. And so crypt APIs are preferable to corporate APIs for exactly the same reason. Because blockchains aren't just open source, they're also open state and open execution. You prefer Bitcoin to PayPal because you can see the source code, you can look at the database and you can replay every action executed. And that's very different from a centralized service. Okay. Ninth, from a soft power perspective, India is number three. It's not America, it's not China. It can't wrestle countries outside of its borders into doing things. It has to convince them. And it is in its interest to back back neutral crypto platforms for the same reason that everybody who wasn't Microsoft or Apple, who didn't have Windows or osx, they backed Linux. The same reason everybody who's not America or China, who doesn't have the dollar or the renminbi, they want to back crypto and bitcoin. And that's something where by using crypto protocols they're a successor to the rules based international order that the US is now abandoning and the the so called Non Aligned Movement. The third world of the last Cold War which came in third place could come in first place in this Cold war as a decentralized movement which opts out of trade war and opts into trade and peace. And India's already been embracing the non Aligned Movement as sort of this balance, this balancing role in the coming US versus China Cold War and cryptocurrencies. Give an intellectual framework to economically align very disparate nations like Brazil or France and India. Right, okay then digital internationalism basically you know, nationalism is fine within your country, but you know, Indian nationalism is, is not appealing to a Brazilian or a Hungarian or something like that. And so if you're doing foreign trade, nationalism is fine for home but you have to have something which is like a neutral thing for working with people abroad. And that's another reason that crypto platforms are pretty important.

Balaji Srinivasan (98:49)

It.

Peter McCormack (98:50)

And so you know, in terms of my recommendations I recommend a creating a digital repeat backed by digital gold. So just like you've got you know, 30 tons of or 600 tons of gold, buy you know like a few billion dollars of bitcoin digital gold alongside your gold. Number two, add crypto to India stack to add on chain accounting and a stock chain. You know, basically have much of the country's financial system on chain by 2030 and with cryptographically approval financial statements, you could have a lot more foreign investment flow into country including bitcoin investment. That's related to point number three. Using the legislation passed by Singapore, Switzerland, Wyoming, Dubai, create a crypto favorable regulatory regime to attract billions of capital to India. Number four, encourage development of decentralized protocols so that you can build things that can be trusted by any country because they don't require trust. And number five, help other nations with crypto. So either they can use directly the APIs India has built, or they can fork it and use it on their own. And this is very similar to, for example, the US Training military advisors around the world, or China going and building up physical infrastructure in various countries. India can help countries build software infrastructure. And they can say, look, this is good enough. India stack. The crypto. India stack. It was good enough for a billion Indians. So it'll probably be big enough and good enough for your country. You just need to retrofit it. It'll work for your small 30 million person country or what have you. And that's the idea.

Unknown (100:14)

Can you get in there and talk to them? Consult. Can you be advisor?

Peter McCormack (100:20)

I just gave a talk actually yesterday to Nascom, which is awesome, actually. It's as if TechCrunch Disrupt was run by the Indian government. So it's this completely different world, Peter. It's like this alternate universe where the government and media and tech are on the same side and everybody speaks English. Accomplish. It's really just. It's just.

Unknown (100:43)

Think about that, right?

Peter McCormack (100:43)

Like, how different is that from the Western experience? Right? And that's why I think, like, you know, with all these hundreds of millions of Indians online, I think we're going to see a new force that people don't get. The bright sun as the opposite of the West's black mirror.

Unknown (101:00)

You know, interesting.

Peter McCormack (101:01)

Like, you have something where all of the Global south has risen with Tetra. You know, they've become like, they've seen their living standards. You cannot be cynical about a smartphone that corresponds to an increase of like 5x in your annual income over the last 10 or 15 years.

Balaji Srinivasan (101:18)

Right?

Peter McCormack (101:19)

That's a skyhook. That's opportunity, Right? As distinct from in the west, where that has corresponded with people descending into political infighting or seeing their jobs disappear if they're in traditional media, you know, so there's a very different culture there. I encourage everybody on your podcast, for example, to watch the Indian movie Super 30. Even just watch the trailer online. Okay. And you watch that movie and you're like, you'll be like, you know, the difference between that versus black mirror is the difference between the bright sun and black mirror.

Unknown (101:52)

All right, I definitely have to check that out then. I love India. Honestly, I had such a good time there. I'm not a spiritual person, but something felt a little bit different when I was in India and I couldn't put my finger on it. I couldn't explain what it was. But I felt at a lot of peace when I was in the country. And I'd love to go back. I think I'd say it's one of my top five, maybe three places I've visited. It's crazy as well.

Peter McCormack (102:19)

It's crazy in its own way. The creature comforts have really improved. You can live a pretty comfortable. I mean, it's silly to put it this way, but the things you might look for, like the Starbucks or, you know, whatever food you want, you basically have it there, right?

Unknown (102:36)

But that was the thing.

Unknown (102:37)

I didn't want that shit.

Unknown (102:38)

I didn't want that shit.

Unknown (102:38)

When I went out to Goa, I was in one of those things on the beach where it was like a hut and I had no future coffee.

Unknown (102:45)

And I loved it.

Peter McCormack (102:47)

But let's just say that in the event that that is important to you, that's there now and Internet is there, right? Fast connectivity is there and mobile phones are there. All that stuff is there, right? And that's like. That helps a lot, you know, because it actually feels like. Okay, it's almost like the alternate universe, you know, it said, like the declining world and the ascending world. It feels like the ascending world now. I'm not saying about it. I think that we. It's almost like rebooting back to 2007 and seeing the bad outcome. And now it's like Day After Tomorrow or Groundhog Day, where we can avert the bad outcome and get the good outcome. Outcome, hopefully right. Steer India in a good direction, a positive direction. We'll see. Let's hope we can do that.

Unknown (103:31)

Fingers crossed, man. Well, listen, love talking to you, Balaji. We could. Every time I talk to you, we could talk for hours. We've gone down a number of rabbit holes here, but.

Unknown (103:37)

Love it, man.

Unknown (103:39)

It's late for you, so I'm gonna bid you. Well, thank you for your time. As ever, as I said, this topic, I'm really interested in anyone listening. You've got to read the article. Well, I put both articles now because I'm gonna have to read the second one. Put both them in the show. Notes by Balaji. Go and check them out.

Unknown (103:54)

Out.

Unknown (103:55)

But I appreciate you, brother. And stay safe.

Peter McCormack (103:57)

Awesome. Thank you, Peter.

Unknown (103:58)

Talk soon.

Unknown (104:01)

How good is Balaji? Crushed it again. As he does every single time. A monster episode, man. He's so smart. And because he has such a broad knowledge, we ended up going down these other rabbit holes and getting into topics that I hadn't even intended to cover but I loved it. I always love talking to Balaji. Okay, so listen, if you have not read his article on the top topic, go and read it. Links are in the show notes why India should buy Bitcoin but for me it's just a wider case for why all countries should be considering adopting bitcoin. I do think outside of like the us, maybe parts of Europe and certainly China, it's a different case. But any emerging nation, I think it's very, very important why they consider this. So go and read that. Like I said, it's in the show notes. I think this could be the year where we see a nation date by bitcoin. Or maybe they already have and we see them announce it. It could be absolutely massive. It could be like what Michael Saylor did with MicroStrategy. Now everybody is looking at what he did last year probably with a lot of regret. You know, he made a bold move and it was the right move. There will be a first nation state to do this. There will be one that will announce it and it will be another game changer. If you found this one interesting, I do recommend you go back and listen to the two parter I did with Balaji a while ago. They were episodes 146 and 147. We went down a whole bunch of rabbit holes, got into the virtual world, AI and bitcoin maximalism. Definitely worth checking out. Also, if you want to reach out to me, my email address is hellohatbitcoindid.com As I said in the intro, I do try and reply to everyone but I'm getting a lot of emails at the moment, like 30 a day. I'm ignoring the weird shit. Some of you, some of you people sent me. Some really weird stuff. I'm ignoring that stuff. But anything sensible, any questions you have, do reach out to me. I will eventually, eventually get back to you. And if you're enjoying the show, you want to support it. If you listen every week or you know, you listen regularly, like you know I like this show. I want to help Pete out. Please go over to Apple Podcasts and leave me a review or a review on any other application that you're using. But Apple Podcast is the main one. It helps me with the rankings so I would appreciate that. Five star if you think I deserve it. Also head over to neveredit.com there you can sign up to my newsletter. It's a daily dose of tech, macro, bitcoin. Pretty interesting stuff. We're getting out each day on that and also head over to Defiance News and check out the latest show, which is Hacking the Brain, produced by Edwina Starr. She's absolutely smashed it. And also we've got the trailer for our new series coming out, Everyone Loves Britney. It's about Britney Spears and her conservatorship. And as I said in the intro, I know you'll be like, Pete, you're a bitcoiner. What the fuck do you care about Britney Spears? Well, firstly, I think she's kind of cool, but outside of that, the issue is really weird and something that needs exploring. So get definitely go and check that out. The series hopefully will be dropping next week and it's a four parter and we're going to do it as our first binge series that's available at Defiance News. Anyway, listen, have a great week. I love you all and I'll see you all on Friday.