← The Peter McCormack Show
The Peter McCormack Show
The Ultimate Bitcoin 101 with Vijay Boyapati - WBD300
01:14:08
Location: Remotely Date: Thursday 14th January Company: Independent Role: Software Engineer and Author As we are in another Bitcoin bull market, many new people will be considering investing, but understanding what Bitcoin is and why it is important...
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- [00:03]
Vijay Boyapati
Go and buy some bitcoin. Even if it's a small amount, you don't have to have a huge amount in your portfolio. But you shouldn't have zero. Zero doesn't make any sense. This is one of the most exciting innovations to money in a thousand years.
- [00:15]
Peter McCormack
Hello there from Bedford, the Bitcoin Mecca of the world. How are you all? Welcome to episode 300 of the what Bitcoin did podcast which is brought to you by the mighty Kraken. The best place, place to buy, sell and trade bitcoin.
- [00:28]
Vijay Boyapati
Another milestone.
- [00:29]
Peter McCormack
Amazing. Thank you to everyone who has supported this show over the last three crazy years. I'm your host Peter McCormack. And today to mark this milestone show, as we are in the early stages of a bull market, I decided to make the show that you can send to all your friends who may have an interest in learning about Bitcoin to make this ultimate Bitcoin 101. I am joined by my good friend Vijay Boya Pati, the author of the Bullish Case for Bitcoin. But before we get into this, I do have a message from my amazing show sponsors who I could not make this show without. So first up Today we have BlockFi, the future of bitcoin and financial services. And they had a massive announcement pre Christmas. Blockfi is launching a Bitcoin Visa rewards credit card early this year. Something I've been massively excited about because you are going to be able to stack sats with all your card purchases. Card users will be able to earn a market leading 1.5% rewards rate in Bitcoin on all card purchases. The wait list registration now is open for Blockfi clients and if you want to join the priority waiting list then you just need to open up a BlockFi account. And they also have a public wait list opening very, very soon. If you're interested in checking Blockfi out, I recommend you do your own research and then head over to blockfi.com which is B L O C K F I com. Also we have Kraken, the best place for buying and selling bitcoin and the only place I use for buying and selling bitcoin. Why though? Well, Kraken is consistently rated the best and most secure. Crypto, exchange and security is really important to me. They also have the best in class in customer service. So whatever issue you have, whoever you are, wherever you are, whatever it's about, if you reach out, they're going to get that fixed for you. And if you want to start trading bitcoin, they have every tool you could possibly need. So whatever your level of experience@kraken.com, it could not be easier to sign up and start trading bitcoin. They also have a beautiful mobile first app so you can buy bitcoin on the go. And with their margin trading futures and OTC desk, Kraken has every option covered for you. There is no better place to trade bitcoin. Find out more@kraken.com or download the app. It's available for the iPhone and Android. Just search for Kraken Pro which is K R A K E N P R O okay, so onto the show today, episode 300. Can't believe it. Just over three years ago I sat down with Luke Martin, recorded episode one. Didn't know what I was doing, didn't know what the future held. And here we are 300 shows later and I've looped around the world a few times and met some amazing and interesting people. But right now we are in the early stages of a bull market. I've had it. I've got friends texting me. Am I too late? Is bitcoin too volatile? All those same questions we get over and over again. So I wanted to mark this show with a very special show. I got my good friend Vijay Boyer party on where we made what I think is the ultimate Bitcoin 101. The show you can send out to all your friends. The show that introduces your friends to the basics of bitcoin, what they need to understand, and deals with a lot of the FUD and misconceptions. Vijay is one of my favorite writers in the space. His bullish case for Bitcoin is an article I read a long time ago and really, really helped me build my conviction around bitcoin. And it's often something I send to people early on. If you haven't checked that out, it is in the show notes. Please do go and read that. Anyway, I hope you enjoy this one. Send it out to your no coiner friends who are interested and if you've got any questions or feedback you know you can reach out to me. It's hellotbitcoindid.com I do reply to anyone, just don't send me any weird nonsense. Outside of that. Go and check out Defiance, our latest show looks at election fraud and media bias. That's available at Defiance News. Hope you're having a love Sunday and I will see you all next week.
- [04:11]
Vijay Boyapati
Vijay man, how are you?
- [04:13]
I'm doing great Pete. It's great to be with you again.
- [04:16]
Always Good to be with you. Right, we're at that time again where we've been telling our friends about bitcoin for the last year. Two years, three years. And they've been ignoring us. And it's gone to 10,000, they've ignored us. It's gone to 15,000, they've ignored us. Now it's up near 40,000. And I'm getting the phone calls, getting the messages on Facebook, I'm getting the text messages. Am I too late? Is it too expensive? All the same stuff. And I thought, as I said to you, I reached out you recently and I said, look, we need to make this ultimate 101. I'm going to go just go and listen to the show. And I thought the best person's vj. I tell you why I thought you're the best person is because when anyone asks me what bitcoin is, I keep stealing your line from when you were on what's His Name show. Who's. Who's that guy? The Tom Woods. Yeah, Tom Woods. And you're like, it's like gold, but with this magical property. You can teleport it. So I was like, there's no one better to get on than VJ. So we're gonna make the 101 Ultimate Bitcoin Guide. You ready for this, man?
- [05:16]
Awesome. I'm so ready.
- [05:17]
Oh, man. Let's do this. Okay, let's kick this right off because this is the perennial question, man.
- [05:21]
Peter McCormack
What is bitcoin?
- [05:23]
Vijay Boyapati
Okay, so bitcoin is a new form of money that exists on the Internet. And many people may not know that gold was money just 100 years ago. And the simplest way I like to describe bitcoin is that it's digital gold because it shares many of the properties that make made gold fantastic as money for thousands of years. Except like you said in the intro, it has this extra magical property that you can teleport it anywhere around the world. Gold. You can't do that.
- [05:54]
Okay, so why would I even care about gold? Like, some of my friends would never have bought gold before, so why would they? Why should they care about digital gold? What's the big deal with gold?
- [06:03]
The big deal about gold is that you can hold your savings and never be afraid that they're going to be debased by a government. And that may not sound that interesting or relevant to people who live in the west, but if you've lived in a country like Zimbabwe or Venezuela or Argentina, then you really viscerally understand what it feels like to have your savings destroyed. By a government mismanaging their monetary system. And the western monetary systems are not immune to this. And we are really in uncharted waters right now with the way central banks are managing monetary policy. So we don't know what the future is going to look like. And the ability to keep your savings free of debasement and confiscation is a very, very powerful thing that gold offered to people for thousands of years.
- [06:56]
Okay, so one of the things about bitcoin is right now we've got to be honest, most people, when they're going to invest for the first time, a lot of people are going to be find it difficult to be able to afford to buy bitcoin. The last bull run, it wasn't so difficult. Maybe around a thousand, $2,000. That kind of time, people could do it. Even 5,000.
- [07:16]
Peter McCormack
Right.
- [07:16]
Vijay Boyapati
And the one before that, like $150. You know, it's less challenging when we're at something around $40,000. People are going to be looking. That thing is quite expensive. We all know that. They don't need to just think in terms of bitcoin. We know that there's eight decimal places and these things called sats. So just explain what bitcoin and sats are and what the difference is and why that's important.
- [07:36]
Yeah, absolutely. So the dollar and pound can be divided into smaller units and the smallest unit is $0.01, and there are $0.100 in a dollar. Bitcoin is the same. And the smallest unit is called a satoshi. The big difference is that a bitcoin can be divided much more than a dollar or a pound, and there are a hundred million satoshis per bitcoin. So if you wanted to, you could buy, for instance, 100 satoshis or 100,000 satoshis and only spend a few dollars to do that.
- [08:07]
Right. So that's like an easier way for someone to get involved, not worrying about the fact they can't get a bitcoin. They could go and buy a thousand, ten thousand, fifty thousand satoshis. And this is. Are we saying that sats is now, that's a term that people are starting to regularly use.
- [08:22]
I think it's still a little uncommon. I think it'll become much more common because the price of bitcoin has gotten so high and people are a lot more. People are not going to be able to afford a whole bitcoin. So they're going to be thinking, how much of a bitcoin can I have? And the unit that they'll be Thinking of is satoshi. So I think it's going to be within the next year or two, it's going to be much more common than it has been in the past.
- [08:43]
Okay, so why should people actually care about bitcoin? Because for a lot of people, they're looking, they go, ah, this is just some funny money on the Internet. Why should they actually care?
- [08:55]
So money is the most important economic good in any developed society. It's the foundation for all trade and savings. And bitcoin is the most important, at least in my opinion. It's most important innovation to money in a thousand years. And bitcoin. Bitcoin makes it possible to do something that has literally never been possible to do in the history of the entire world, and that is to send value quickly and easily to anyone, anywhere on earth without anyone's permission, as easily as sending an email. And one comparison I like to use is the printing press or the Internet. And these are two things which in the early days, it wasn't obvious how important these things were going to be and how big they would be. But ultimately they were transformational to society because they made something that is very important, which is the communication of information, much easier to do, and it gave far more power to the individual. And bitcoin is the same thing, except for the transmission of or transmittal of value around the world.
- [10:03]
Okay, I just want to touch on the thing you said without anyone's permission, Vijay. If I wanted to send you some money, if I want to send you some dollars, I could send it through PayPal, send it through the bank. I don't have to get any permission to do that, do I?
- [10:16]
Well, it depends on what your political views are. I think more and more people are realizing that these large corporations have a tremendous amount of power to decide who is censored and who is not censored, and whether you agree or not with who they're censoring. It could be that at some point in the future, you're the person getting censoring. And that's a really disturbing thing to happen when your ability to communicate with others or to send value to people you care about is stopped by a corporation or by a government. And that's really something that bitcoin disrupts and prevents. No one has control, and no one can prevent you from sending value to anyone that you want to send value to.
- [11:00]
Okay, all right. So what else does bitcoin fix?
- [11:05]
So fundamentally, bitcoin creates a foundation for a new financial system where individuals can keep their savings and transfer them without requiring anyone's permission. And like we've talked about, for many people in the west, it's not immediately obvious why that's important, but anyone who grew up in a country where money was debased or where it was confiscated will know why. That's really powerful. And yeah, like I said, the monetary systems in, in the Western nations are not immune from this. We're sort of wading into uncharted waters with central banks printing gigantic amounts of money. We don't know how this experiment is going to end. And it could be that the Western nations experience the same kind of financial collapses that have been seen in places like Argentina. So it really is a great insurance policy against something like that. And it's just, it's a very powerful feeling if you've never experienced it before, to be able to hold your savings in your pocket and to go anywhere on earth without anyone stopping you. So you could cross a border with a USB drive holding $10 million, if you had $10 million and no one would be the wiser. It's a very, very powerful feeling if you've ever experienced that, being able to keep your savings on you without anyone being able to interfere with that.
- [12:29]
Yeah, it's interesting. You should pick up, pick on Argentina, because I was in South America last year and talking to people from Argentina. Bitcoin makes total sense to them. When I try and explain it sometimes to my friends, it doesn't make total sense. But Argentina has been through multiple inflationary events, but also been through events where people haven't actually been able to go into the bank and get their money out. They've actually been stopped from accessing their money just due to incompetent central bank policy. And I think as what you're saying is we're in uncharted territories with this Covid event, which has really sparked a situation whereby there's unprecedented levels of money printing. And you're saying we could be heading towards those type of inflationary events. There is that risk.
- [13:15]
Yeah, yeah, absolutely. And I think we've, I would say we've been in uncharted waters since the financial crisis in 2007, 2008, when central banks started printing money at unprecedented rates. And really, we've never, the world has never been in a situation where interest rates have been zero for as long as they've been. So we, we don't know how this is going to end. And, you know, it seems like everything is normal, but we also, you know, having experienced the financial crisis of 2008, we know how quickly things can turn. And we know that things can go south very, very quickly once confidence is lost system, it can disappear overnight. So I would say that the future is very, very uncertain. Central bankers like to pretend that everything's okay, but we don't know. And having something that you can trust, that doesn't rely on the whims of central bankers who really, honestly, I don't think know what they're doing. They're making this up as they go. Having something that you can hold on to that no one else controls is a powerful thing.
- [14:28]
Okay, so if anyone's listening, you want to take a little pause at this moment, I'm going to recommend you go and read the Bullish case for Bitcoin. It'll be in the show notes. It is probably the best piece of writing about bitcoin. It's done by our guest here. Vijay, go and check it out because it's really important for this section. Now, I often send people to this. I've often got it up in interviews as well because I've got your chart. But what we're going to be talking about now is why bitcoin is the best form of money. Because bitcoin is often compared to gold. Fiat. Some people don't even know the name fiat, but fiat, that's the pounds and the dollars. It's often compared to both of them, VJ and I, as bitcoin as we know, we know that bitcoin is the best form of money. Trying to convince that to other people is, you know, it's quite a tricky thing. But this is what we're going to do in the next section. So, Vijay, why is bitcoin the best form of money?
- [15:15]
Bitcoin is the best form of money because it has the properties that make for good money. And we've known what these properties are since the time of Aristotle. So we've known them for a very, very long time. Divisibility, that can be divided into smaller units, durability, it can't be destroyed easily. So for instance, wheat is not a very good form of money. Portability, so it's easy to transport. A cow is not very good money. And perhaps most importantly, is scarcity. Something that's super abundant, like sand, is not good as money because money fundamentally gets its value from its scarcity. Anything that people perceive is very abundant is not going to be very useful as money.
- [16:00]
So quite an interesting thing we can throw in there, as it always, I find is a really good example, is that cigarettes in prison are a great form of money?
- [16:08]
Yeah, absolutely. And part of that is because there is a perception of scarcity within the prison. And you know, the thing that bootstraps the value of a cigarette in prison is that some people want to smoke and they have an addiction to smoking. So it gives that sort of base demand. And once there's that base demand, people realize, hey, this is useful for trade as well, because people will accept it. And once they accept it, then you can use it for savings and you can use it for trade.
- [16:37]
Another interesting one I found out recently was in Africa. I think it's phone minutes have become a form of currency. And I think that's because they, I think they're more stable as a form of currency as well than the local currency.
- [16:52]
Yeah, I mean, the phone companies probably don't print as many as the government prints money, so it wouldn't surprise me. And again, there's that base demand that people have for wanting to make phone calls. So once you realize that that base demand is there, you can then sort of bootstrap value on top of that, which is the demand for savings and the demand for a medium of exchange.
- [17:16]
Okay, so if we're comparing Bitcoin to fiat, which is the pounds, the dollars, etc and gold, what are its advantages?
- [17:24]
So Bitcoin's primary advantage over gold is its portability. It's, it's really inconvenient to carry gold around, which is why most gold sits in a bank vault. And the problem with having gold in a bank vault is that you then have to trust the bank. And so to give an example of this, not at the individual level, but at the level of a nation state, Venezuela had a lot of its gold with the bank of England. And recently they said, hey, can we have our gold back? And the bank of England said, no, we're not going to give you your gold back because we don't like your government anymore. And so that's a real problem, is that gold is inconvenient. And the inconvenience, its physicality means that there's this tendency to store storage being centralized in these institutions like banks. And then the banks have a lot of power and control over whether you can get your gold or not. Bitcoin's primary advantage over fiat money is that you don't require the permission of governments or banks to use it. And all you really need is a connection to the Internet to be able to use your Bitcoin. The other big advantage over fiat money is that fiat money is debased over time by governments and Governments try and fund their operations through inflation, which means that anyone who's holding their money loses the value of that money over time. So really, the twin pillars of bitcoin's value proposition, I see as you can hold your money without anyone's permission, and no one can debase the value of that money.
- [18:58]
Let's focus on that debasing just for a moment, because I think for some people listening, they won't fully understand what that means. I know for myself, before I got into bitcoin, I didn't realize what inflation actually meant. I knew it meant that price increases, but I thought that was a natural part of the economy, that was a natural growing economy, had an increase in prices. I actually thought it was the sign of a successful economy. That's a bit of a myth, right?
- [19:22]
Yeah, that's absolutely right. It's definitely a myth. And it's a myth that governments try to foster because they are the source of the inflation. And governments have operations and they want to fund those operations. And you can do that in two ways. You can tax your citizens, go directly and say, you're earning some money, I want to take a percentage of that. Or you can inflate the money supply and tax them sort of insidiously so that they don't see that they're having their savings taken away from them. And the benefit politically of inflation is that people don't realize that their savings are being taken away. It's very unpopular to tax people. It's very unpopular to go into someone's pocket and say, I'm going to take 30% of what you just earned. So there's natural political pushback against that. You can get much further with inflation. And historically, governments wanted to fund wars with inflation, that the bank of England was created to fund a war. And it's very hard to get a population to get behind funding a war in another country, like France, for instance, in the 17th century, because what good is that to me? Why do I want to go over to that country and kill people? I don't want to pay for that. So you just inflate the money supply. So governments like inflation, it lets them do things that otherwise would be politically much harder to do. And the losers are people who are saving in the money of the nation.
- [20:53]
All right, what about its weaknesses? There must be some weaknesses to bitcoin.
- [20:59]
Yeah, I think because it's so new, it's still not easy enough to use. And people who are coming to bitcoin with no experience in the space, maybe they're not computer scientists. They're not tech geeks. It might seem a little scary, rightly so. And I think there's, there's still a lot of work that needs to be done to make Bitcoin much, much easier to use. And so it's sort of similar to the Internet in the early days. Like, my parents would have had no idea how to use the Internet in the late 90s, but now it's a very important part of their lives. And I think the same thing is going to be true for bitcoin. But this also means that there's a huge opportunity for people who are willing to put in the effort and read about it and go figure it out and figure out how to go buy and own some bitcoin and store it themselves. There's a huge, huge opportunity for those people to go ahead and put the work in.
- [21:58]
So is it a little bit like buying Amazon or Google one or two years into their. After the launch of their business?
- [22:06]
Yeah, but I think a better analogy would be to say imagine that there was something which was a share of the Internet, not a specific company, but a share of the Internet in 1993, and you could buy a fraction of the Internet. I mean, that sounds like one of the greatest bets in history if you could have done that. And that's what I think bitcoin is. It's buying a share of a new financial system which I think is going to replace the global financial system in the next 20 years.
- [22:32]
Well, I often talk about your percentage of the 21 million. Bitcoin is your score. In some ways it's a game. You know, you're saying it's a share, I'm saying it's your score. But what I see it as for me personally is I am stacking sats. I'm buying Bitcoin for that point whereby we do get to that kind of like much wider adoption. And then I've got like a much larger percentage of that and it gives me a much larger, you know, like you say a share of that future financial system. So that's super interesting. Okay. Could bitcoin then end up destroying other currencies?
- [23:10]
So that's a great question. I think first and foremost, I think people will no longer want to save in fiat currency. So when you think about saving in the future, you're going to think about Bitcoin. And when you think about spending, you might still think about using your nation's currency. And that's not that crazy an idea. In Argentina, for example, they've had several monetary crises over the last few decades. People want to save in dollars. If they can, they'll save in dollars. And when they want to spend, they'll spend in pesos because the peso loses value really quickly. And I think that's pretty much a vision for what might happen in the future. Nations are going to be very reluctant to get rid of their own money, but even if their money exists, people won't want to use it for anything. But that last minute spending when they're saying, I, you know, I went to work, I earned some money, I want to keep it in bitcoin. I think that's going to be the mindset that's very interesting.
- [24:14]
Okay, so this is a really important question because I honestly, Vijay, for the last, I think since. Well, I mean, the whole time I've done the podcast, I've been telling people about bitcoin, but I've really been on it since the start of COVID lockdowns back in March of last year because we knew what was coming. We all saw the writing on the wall. So I've been trying to explain to people what inflation is, what the government printing means, why bitcoin is a good investment. Really struggle to convince people. So how do you convince the doubters?
- [24:48]
Well, I don't, I don't want to sound too disappointing or I don't want to disappoint you really, but I honestly don't think you can convince anyone. I think everyone needs to feel like they've come to an understanding on their own. And for many people, that means they need to be exposed to an idea many times before they're willing to look into it themselves. And that's true for any new technology. It's true for the Internet, it's true for phones. Some people, early adopters, and they'll see a new thing and they want to try it straight away and figure it out. Other people will be skeptical and say, that doesn't seem interesting or useful at all. I'm not going to even look at that. And I have this idea that I've talked about a little bit on Twitter, of touch points. And that's the number of times a person has to hear about something before they're willing to look into it. And each of bitcoin's hype cycles, or market cycles, where it's gone through these huge booms and busts, is defined by a different cohort of people who are willing to look into bitcoin. So the first cohort were the computer scientists and cryptographers who already understood why bitcoin was important. The next cycle were early adopters and, you know, people who are willing to try new technology early on. And then after that, you got sort of early retail investors. And now you're seeing kind of a wider swathe of the community. People who are really interested in looking into bitcoin because they've heard about it so many times. They've heard about it, like in the past cycle, they've heard about it from their friend, they might have heard about it from their son or daughter. And they've received enough touch points that they've said, okay, this seems important. I've heard about it from enough people I've trust. I trust that I'm going to go look into it and maybe put a little bit of savings into bitcoin.
- [26:35]
One of the things I've been trying to do, because I've tried the explanation and I've also tried when people ask me what bitcoin is, to explain what it is. One of the things I've been doing recently, Vijay, is I either say, download a wallet. If I'm with somebody, I get them to download a wallet, wallet, and I just send them five bucks of bitcoin. That experience, when they see it pop up on their screen. And then I say to them, if that was via the bank, the bank had to make that happen and have it sent to you. If it's via PayPal, PayPal had to do that. I say, what you've just seen happen, it went from my wallet on my phone to your wallet and your phone without any third party doing anything and nobody could stop it. That's almost like a magical moment. And once they've got a little bit of bitcoin, you can usually get them to go that step further. But I appreciate what you're saying. It's just more of these touch points. Okay, so this is. We're getting this important, really important questions now. This one at the moment keeps coming in. I've had it happen to me three times. You know, only the other day, one of my friends at bitcoin was around 27,000, was thinking of investing and it went up to 40,000. She said, I can't do it. It's too expensive now. But, Vijay, come on, are we too late? Is bitcoin too expensive?
- [27:42]
No, I definitely don't think we're too late. And I think anyone who's listening to your show is very, very early. I kind of think the question is like asking, am I late to the Internet in 1999 and to give an example of that. If you'd bought Amazon at the absolute peak of the dot com bubble, you would be. And you had held onto it, you'd be up like 15,000% or some huge number now. So sort of locally in that period of time, it might have felt really hard and like, oh, man, you know, the value of my stocks have crashed. But really, when you zoom out and you look back in time, you realize that we were really, really early in the Internet in 1999, and much of the value of creation was to come in the future. And this is sort of a lesson of history that people tend to overestimate the importance of something in the short term, but they underestimate it in the long term. And I think that's definitely true of bitcoin. I think people are underestimating how important this is going to be in the long term. And so when I talk about bitcoin, a lot of people like to talk about the price is going to be so and so in the next month or in the next year. I really have a time horizon of 20 to 50 years when I think bitcoin will transform the world. And whatever happens in the meantime, before then, I could be wrong, I could be right about my predictions, but I have very, very high confidence this is going to transform the world for my children.
- [29:16]
Well, we're going to get into some of the monetary policy soon. But I say to people, there's no point investing if you're not willing to hold for a minimum of four years from any point you start investing. I always say you've got to, you've got to be patient and play the long game here. But the reality is probably a few tens of millions of people may own bitcoin. We're talking about billions of people on the planet. We're talking about only 21 million bitcoin existing. The fundamentals of supply and demand, say if demand continues to increase, which it has through its entire life cycle, then the price will continue to go up. Which takes me to another point, which is the volatility, because I think this is something else that puts people off. They think it can't be money because it's volatile. They're scared to invest because it's volatile. Most people are scared. I had it the other day. Someone sent me a text. You know, they bought in at 36,000, it dropped to 33 and they panicked and sold. So let's talk about volatility.
- [30:08]
Yeah. So I think you need to start by answering the question of why is bitcoin volatile. And there is literally no way that you can have an asset go from zero to being a world reserve currency which is worth trillions of dollars. Without volatility in between, that's not possible. So the volatility, volatility is really a function of more people deciding to save in bitcoin, which raises its price. And right now, just like you said, there's only a few percent of the world who own bitcoin. When bitcoin reaches widespread adoption, the volatility in its price is going to decrease significantly because there's not going to be new savings flowing into bitcoin. And it will have volatility, which is comparable to gold when gold was money, which is, it might move a percent or two up or down over a year, but it's going to be very, very stable. So until we get there, though, you should expect volatility. It's the volatility of massive amounts of new savings moving into bitcoin. And then sometimes it gets ahead of itself and some people panic and then it' pull back a little bit. That's where the volatility is coming from. It should be expected. But we should also expect that as it becomes globally adopted, that volatility is going to drop significantly.
- [31:26]
Okay, so if I'm interested, I'm thinking, right, Vijay, you're talking a good game here. I think I want some bitcoin. I can't afford $40,000. What do I do? Where do I start?
- [31:37]
So we talked about this earlier. The idea that bitcoin can be divided and if you want, you don't need to buy a whole bitcoin. You can go out and buy a fraction of a bitcoin. You can buy say 10,000 satoshis or a hundred thousand satoshis, which you can do for a few dollars today. And some people do that. They, they do this on a regular basis. And it's called dollar cost averaging. Or if you're in, if you're a Brit, pound cost averaging doesn't sound quite as good.
- [32:05]
But it's not. No, it's not. I actually still tell, I, I did it today. I told my friend, you have to dollar cost average.
- [32:13]
Yeah. So you can dollar cost average. You can periodically buy small amounts of bitcoin to accumulate your savings in bitcoin. And some people do this through their paycheck. They will take out a fraction of their paycheck, say 5% or 10%, and use that to save some bitcoin every month.
- [32:29]
Okay, well, maybe I've gone a step further. Vijay. Maybe I've been to Coinbase or Kraken and I've had a look and I'm thinking of buying. And I've seen that there's like these other things. There's bitcoin, cash, there's a theorem, there's all these other cryptocurrencies. Some of them seem cheaper. Maybe they can go up to $40,000. Maybe I'll make a lot more money if I invest in them. Like, I know why we shouldn't. But you tell, you tell anyone listening why they need to focus on bitcoin only.
- [32:57]
Yeah, I think it's very dangerous to get fixated on the nominal price of something. And choosing to buy one of these altcoins versus bitcoin in my mind is kind of like saying, should I buy Enron at $1 or should I buy Amazon at $50? And the vast majority of these altcoins are outright scams that were created to make the founders of these coins rich. That's not true of all of them, but the vast majority. So you have to be very, very careful out there. And I don't think people who are coming, who are new to this market should overthink it. This is a winner take all market as, as it is in any market where there's a strong network effect. And the safest thing to do is to, to put your money in the, the, the asset or the company or whatever it is that has the biggest lead or has the lead. And in the case of cryptocurrencies, bitcoin has a massive lead. It's not even close. So, you know, you could have, you could have said the same thing about social Networks in say, 2010. Do I put some money in my space or do I put some, some money in Facebook? Facebook seems really expensive. MySpace is much smaller, but it's a winner take all market. And Facebook took the entire market and MySpace is dead. And if you actually look at the history of altcoins, the vast majority of them die after a couple of years because there really isn't anything to them except a means of making money for their founders.
- [34:26]
Right, okay. So it's a bit like there's only one ebay, really. There's only one Amazon. Within technology, you tend to get these kind of monopolies, network effects, and bitcoin has the biggest network effect that makes sense. I mean, I mean, you know that. All right, so let's, let's, let's teach people a little bit how bitcoin works. Because it is this unusual thing when, when you Hear about it, you're like, what? It's a money that nobody controls. It's not backed by anyone. What. How does it work? Come on, Vijay. How does Bitcoin work?
- [34:55]
So I think the way we should start is to understand how banks work. And when you have money at a bank, the bank just records your balance on a computer somewhere. And when you transfer money, so when I'm transferring some money from me to you at the bank, the bank just decreases my balance on the computer and increases your balance. And another way of explaining this is the bank has a ledger of all of the balance balance information of all of its customers. That is, how much does each person own. And that's how a centralized system works. That's how a bank works internally. With Bitcoin, the ledger isn't stored on a single computer. It's stored on thousands and thousands of computers around the Internet. And the real trick of Bitcoin is how these computers coordinate to keep a consistent record of how many bitcoins each person has without anyone cheating. And that was really the genius of Bitcoin's invention. It's a system that has a perfect balance of economic incentives, coupled with the use of cryptography, that allows the ledger of balance information to be spread across the world without any centralized point of control. And, you know, I don't want to go into the specific details about how that decentralized system works, but just to say that I think bitcoin is so revolutionary to both economics and computer science that I think its inventor, Satoshi Nakamoto, should be given a Nobel Prize in economics and the Turing Award for computer scientists. Computer science, because it's just. It's an incredible breakthrough in computer science and economics.
- [36:37]
Yeah. So what I would say, if anyone is listening and they're thinking, what. What was all that about? Look, the tech stuff you get, it takes some time. I've got plenty of shows about it. You can go spend some time learning about it. I think the first point is to understand the economics of it first and realize it's something you want to invest in and then go and spend some time understanding the technology. But it really is like a revolutionary system. And the thing I really like about it, Vijay, is is this decentralization concept. We're going to come to the fact that it is spread all over the world. So we'll do some more of that in a bit of detail later. But you just mentioned Satoshi Nakamoto. We know who that isn't, but who is it?
- [37:14]
Well, we don't really. We don't know much about the person who created bitcoin except the pseudonym that they use to post to various mailing lists announcing bitcoin and explaining bitcoin to people. And amazingly, just a few years after he invented bitcoin, he disappeared from the Internet. So someone who created a system that will soon be worth over a trillion dollars is completely unknown to us. And I think it's literally the greatest mystery of the last century. And he mined a bunch of bitcoin in the early days, which have never been spent, never been transferred. And if this bitcoin bull market goes up as high as the previous ones have gone, Satoshi Nakamoto is going to be the richest person on earth based on the bitcoins he mined. And that's an incredible thing. The richest person on earth will be completely unknown to the world and may.
- [38:10]
Never even spend that money.
- [38:12]
He hasn't spent it in 10 years, and it's never moved. So it's highly unlikely that it's ever going to be spent. Either he threw away the private keys which give him control of those bitcoins, or he died, or we don't know what happened. But those bitcoins are worth tens of billions of dollars. So there's already. There already has been a huge incentive to spend them, and he hasn't spent them. So it's very unlikely that they're ever going to be spent.
- [38:39]
I would also argue it's actually one of the features of bitcoin, one of the benefits that we don't know who it is, that we don't actually have this leader to look towards to make decisions. But that puts us to another point. It's like, well, if we don't have a leader who actually runs bitcoin.
- [38:56]
Yeah, that's a great question. And that's a great point that you make, that there's no central point of control. And having a founder for cryptocurrency that's around is actually a big disadvantage because they become a point of pressure that governments can sort of coerce and try to influence and say, well, could you. Could you add this backdoor in for us? So with bitcoin, anyone can participate on the bitcoin network by downloading the free software and running it on their computer. So no one controls bitcoin, but everyone can participate in. It's a completely free and open system.
- [39:31]
Amazing. Okay, I think that's another one. I think if people want to find out a bit more about, they can go down the rabbit hole later.
- [39:38]
Peter McCormack
Next up, I talked to Vijay Moore about the important question around Bitcoin. But before that, I've got a message from my amazing show sponsors. I'm going to kick off now with Sportsbet IO the best place for online gaming.
- [39:50]
Vijay Boyapati
Do you know what?
- [39:50]
Peter McCormack
They accept Bitcoin. And today there is a massive game. Liverpool are playing. United are rivals. United. A lot of people think our rivals are Everton and yeah, they kind of are, but we just feel sorry for them. But United, it's a massive rivalry. They're top of the table, we're behind them, we need to win. So I think I'm going to stick a little wager on this one. I think we're going to do United quite convincingly today. I'm gonna go, I know this sounds bold. I'm gonna go for a 31 for Liverpool now. Also, if you have been seeing the bitcoin logo while watching Premier League football, it's because of sportsbet IO they are the front of shirt sponsor for Southampton and also the betting partner for Arsenal. They are spreading the word of bitcoin around the world to people who watch Premier League football. And look, with Sportsbet you have every market you could possibly be interested in. They got football, tennis, US Sports, motorsports, even esports. Everything you can think of is there for new customers. They always have a range of promotions available. Just head over to Sportsbet IO promotions to find out more. And that is S P O R T S B E T IO Also.
- [40:52]
Vijay Boyapati
I've got a new sponsor.
- [40:54]
Peter McCormack
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- [42:42]
Vijay Boyapati
Okay, how do we know this is going to work though, Vijay? Could it fail? Could I put some money in and it will collapse and fail?
- [42:50]
We don't know that it will work. It's still experiment, I think, but it's already very obvious that it's shown a huge amount of promise. And we didn't know the Internet would work when it was first created in the 90s either. But because it dramatically improved on a fundamental human need, it turned into this massive thing that we all depend on today. And as long as humans have the desire to keep their savings safe and desire to have the freedom to take their savings wherever they want, Bitcoin will have demand. So I have a lot of confidence that this is going to work because I think those human needs are very, very important and they're not going to go away.
- [43:33]
And arguably it just seems to get stronger and stronger with every cycle. I've kind of been through two, but this is my second proper one. But it feels a lot stronger both as a group of developers working on it, the competence of the technology, the tools available, the regulatory environment. It just feels like bitcoin is getting stronger and stronger. And if it was going to die, it probably would have and should have in the early days. I mean, yeah, that's a, that's a story for another day. All the things that bitcoin has survived. But I would say bitcoin is just getting stronger and stronger. Okay, so people are listening. They're like, vijay, I'm in, man. I want to become A bitcoiner. How do I do this? How do I. How do I get my hands on some bitcoin?
- [44:16]
It's in the same way you'd buy a foreign currency. So if you have dollars and you want to buy British pounds, you'd go to a foreign curr exchange and you give them your dollars and get pounds back. So with bitcoin, it's the same thing, but you have to find a bitcoin exchange that takes your local currency and allows you to buy bitcoin with it and some of the big ones. If your listeners are interested in going by buying some bitcoin, Kraken, Binance and Coinbase, and there's a whole bunch of others that are specific to various nations around the world. So you'd need to find out what's available in your country and go there, deposit some of your nation's currency and go ahead and buy some bitcoin.
- [44:59]
And is it easy to spend bitcoin? Should I spend it? How do I spend it?
- [45:04]
Well, there are two ways. You can either sell your bitcoins back to your local currency and then use the local currency to go and buy whatever you want, or you can find a merchant that accepts Bitcoin and spend it that way directly. Right now, the number of merchants who are accepting Bitcoin directly is relatively small, and that is a function of the fact that Bitcoin is still not widely adopted. As Bitcoin's adoption grows and the number of people around the world hold Bitcoin, the number of merchants that will accept bitcoin will grow. So some people have been very focused on building out infrastructure for allowing people to spend Bitcoin and merchants to accept Bitcoin. I think that's kind of a waste of time at this stage because we're still at that point of adoption where people are putting savings into Bitcoin. When there is widespread adoption of Bitcoin as a savings tool, people will use it to spend, and that's when we should work on merchant adoption.
- [46:05]
All right, Vijay. I've been aware of Bitcoin for some time, and every now and again, I've seen stories of people who've had their bitcoin stolen or lost it or lost passwords and that Bitcoin is worth millions of dollars. I'm a bit worried about security. What do I do? Where do I even start with my bitcoin security?
- [46:23]
So for most people when they decide to buy bitcoin, I think probably the safest thing to do is just keep it on the exchange. That you buy the bitcoin and these exchanges act a little bit like banks custodying your funds and keeping your funds for you. And once you start to learn a little bit more about Bitcoin, you might want to figure out how to store your Bitcoins on a hardware wallet, which is kind of like a USB drive. And the amazing thing about using a hardware wallet and storing your own Bitcoins is that you can carry your wealth around wherever you go. And that once you experience it, it's a very, very powerful feeling to be able to carry your wealth in your pocket like that. But there is a learning curve. And for people who are new to Bitcoin, it may take some time. So I would say when you first come to Bitcoin, it's okay to store them on an exchange until you figured it out, figured it out, and figured out how to use a hardware wallet and some of the technical details involved. And for some people, maybe they'll never figure that out. So my parents may never be able to figure that out and they'll keep their bitcoins on an exchange. That's okay. A future where Bitcoin is widely adopted is still going to have financial institutions that help people out with keeping their savings.
- [47:38]
I've had a few people get in touch recently and ask about hardware wallets and what should they do? And I say, look, if you're going to do it, here's a few steps. Firstly, choose the one you want to buy, and once you've ordered it, set it up, write down your seed phrase, which is your backup phrase. And then I say, just put $10 worth in. Once that's done, wipe the device and restore it from the seed phrase. If the $10 is still there, you're set up and you've backed up. But that seed phrase is really important. I think I took that from our mutual friend Stefan Levera. I think that's his steps. Okay, right. I've got some. I'm interested. I've bought it, I've secured it. I want to learn a bit more about Bitcoin's monetary policy because this is really important. I always hear about this, like, 21 million fixed cap, firstly, why is it 21 million? Why is it fixed? You know, why can't it be more, you know, I know my government prints more money as we need it. Why is it fixed to 21 million? And why is that important?
- [48:32]
So Bitcoin is, is unique as a monetary asset in that it has ultimate scarcity. There will never be more than 21 million bitcoins ever produced. And the majority of them, a little less than 19 million, have already been produced. And we know that fiat money is not scarce. The US Federal Reserve, for example, just created trillions of dollars in the last year. And even gold isn't scarce because the supply of gold increases by about 2% every year. And if anyone figures out how to. How to mine gold more efficiently, that number could go up a lot. This is really the first time in history that we've had an asset which has ultimate scarcity. And it's a really important property because it makes it very desirable as a place to keep your savings.
- [49:18]
Okay, so does that mean essentially, if there's only 21 million, the value or the price of bitcoin could essentially, on a long enough time frame, just continually go up?
- [49:29]
No. Oh, that would be nice. It can go up to the point where bitcoin represents all the savings on earth. And at that point, it will go up at the same rate as the savings of the earth go up, which is how productive are people in their country at, you know, producing new goods. When bitcoin becomes global money, it essentially is a representation of the value of all assets on earth. And yes, the value of all assets on earth can go up as we produce new assets. So it won't go up at the speed it's going up now, but it'll go up at the speed of human productivity, which is usually, you know, 5 to 7% per year of productivity growth.
- [50:17]
So that's a really important point because you have a two choices. Well, you have a choice to ignore this all, but you really have a choice to get in now before it becomes global money, or you get in when it is global money, because that's all people will accept.
- [50:30]
Yeah.
- [50:31]
Like it's inevitable.
- [50:32]
Yeah, absolutely. At least I think it's inevitable on a long enough time horizon. And that's the great thing about bitcoin. It doesn't matter if you're the last one in line. If you are the last one in line, well, then you're not going to get like 10,000% returns, but you can expect to get returns equal to the productivity of the human race. And over time, the human race has been, you know, pretty ingenious at inventing new things, building new things, and making our lifestyle improve. So I think as a foundation for the world monetary system, Bitcoin will make the world more productive. It's a. It's an honest money. It can't be controlled or debased. And it's going to make people Much more productive. And so you. You will enjoy the fruits of that just by holding bitcoin, even if you're the last one in line.
- [51:26]
You mentioned mining earlier, and I've heard about this mining, but I don't really understand it. How much about bitcoin mining do I need to know right now?
- [51:34]
So, miners are computers that participate on the bitcoin network, and their job is to verify transactions as being legitimate. For example, that you're not trying to send me more bitcoins than you actually have. Miners are rewarded for the work they do by being given bitcoins every time they verify a batch of transactions. The number of bitcoins rewarded for each batch of transactions is fixed, but that fixed number gets reduced by half every four years. So in the first four years, miners were given 50 bitcoins for every batch of transactions they verified. Then it became 25 after four years and 12.5. And the Bitcoin halving happened last year. Now, the number of bitcoins that are given to a miner when they verify a batch of transactions is 6.25 bitcoins. Eventually, miners, the reward that miners get will go to zero, and no new bitcoins will be mined. And then miners will have to rely entirely on transaction fees to be compensated.
- [52:39]
Okay, can we go back to this decentralization thing? Because we talked about a little bit earlier, And I know it's important, and I keep hearing about it, but I don't fully understand what it means or why it's important.
- [52:51]
Yeah. So decentralization means that there's no central point of control. And it's important because it means there's no way to shut bitcoin down without really shutting down the entire Internet, which is never going to happen. There's no office that you can go to and say, stop doing this or we'll throw you in jail. So it's a new monetary system that exists without the permission of any corporation or any government. And it's something that inherently increases human freedom because you don't have to get permission from someone else to use it.
- [53:24]
Okay. Okay. Also, I keep hearing about this blockchain thing. Everywhere. Companies are blockchaining, people are blockchain consultants. What is the blockchain? How important is it? Do I need to care about it?
- [53:36]
Well, it's a technical detail about how bitcoin works. And whether you need to know about it or not depends on your level of curiosity. But bitcoin's blockchain is the full financial history of all transactions that ever happened on the bitcoin network. And a copy of the blockchain is kept by all computers that are running on the bitcoin network. It's a completely open and transparent record that allows anyone who's running a computer on the bitcoin network to independently verify that all transactions are legitimate and that no one's cheating by trying to give themselves more. Bitcoin, for instance.
- [54:15]
Okay, I've also heard about this thing, censorship resistance. I've heard this is really important. This is one of the base use cases of bitcoin. So what is censorship resistance and how does this relate to bitcoin?
- [54:27]
Censorship resistance means that no one controls the bitcoin network, so no one can censor your ability to keep and to transfer your bitcoins. So a government can't say, hey, we don't like your political views, so we're going to prevent you from receiving money from or receiving money to your account. So anyone can create a bitcoin address if they have a computer, and then they can receive bitcoins from anyone anywhere on earth. And that doesn't require anyone else's permission to do that. So that is what censorship resistance is.
- [55:00]
Pretty fucking neat, man. All right, listen, we're gonna have to talk about the Lightning Network now because, you know, we're not gonna get into the history of block size and block size wars. People have got other shows, people go and check out about that. But one of the things we need to talk about is the fact that bitcoin is great for sending large amounts of money, but as those amounts of money get smaller, certainly sub$100, definitely sub$10. It's not the most efficient system to use, therefore, it's not an efficient payment system for small amounts of money. Now, you and I know that the Lightning Network is something that offers this, but can you explain what the Lightning Network is and why that's important to bitcoin?
- [55:37]
Yeah, that's a great way to explain it, Pete. Bitcoin is really good for large value transfers. And when you send bitcoins, there's a transaction fee that the miners charge you to send bitcoin. And for large value transfers, the transaction fee is negligible. But if you're sending small amounts of money, it can feel costly to send, say, $10. If you have a fee of 50 cents, that feels quite expensive. So the Lightning Network is a system that's built on top of bitcoin that allows people to send bitcoins more cheaply than using the regular bitcoin network. And the analogy I like to use about this is gold might be confused about why, but if you go back to the 19th century when gold was money, it was really cumbersome to move gold around. So they invented this thing called a promissory note, which said this note is worth 5 ounces of gold. Then you could easily transport the piece of paper around and take it to a bank, for instance, and say, now I want to get my 5 ounces of gold. And it really improved the efficiency of transmitting gold around the world. You could just transmit the piece of paper. And the lightning network is sort of a similar idea. It makes it much easier or more makes it less costly to send bitcoin around the world and send small amounts of bitcoin around the world. The lightning network is actually much, much more powerful than this example or analogy I give of promissory notes, because promissory notes have this element of trust where you have to trust the institution that gave you the promissory note. The lightning network doesn't need trust in that same way, but it gives you a flavor for why it's useful. It makes sending small amounts of bitcoin much cheaper.
- [57:24]
All right, okay. Now we need to get into the risks before we cover some of the fud. But is there any significant risk of a catastrophic bug that can destroy bitcoin or any technical issues that are a significant risk for Bitcoin?
- [57:42]
Bitcoin is built on top of cryptography, which is the field of codes and code breaking. And in the beginning, it wasn't entirely clear whether the software was free of bugs. And over the years, a lot of really brilliant minds have tried to break the Bitcoin protocol. And it's become more and more clear that the software is sound and doesn't have any bugs. Of course, it could be possible that at some point someone breaks the cryptography or invent something like a quantum computer that breaks the cryptography. But I think these are the. At this point, these are outlier risks. And I sort of view it in. In the same vein as like a gold meteorite hitting the earth and reducing the value of all the gold on earth. It's possible. Sure, it's possible. But I think at this stage, it's a very. It's. It's an outlier risk that I don't really worry about very much.
- [58:35]
Okay, are there any regulatory risks?
- [58:41]
Yeah, I mean, governments can try to regulate bitcoin. They could try to ban Bitcoin, and various governments have tried to ban bitcoin over the years. The Chinese government so famously has tried to ban Bitcoin like 10 times. But ultimately, you can't stop Bitcoin without shutting down the whole Internet, which no country is going to do, because it would totally impoverish the population of that country. Governments can, however, try to make it harder for you to buy and sell Bitcoins for your local currency by regulating the exchanges. But in the west, at least in the Western countries, most governments haven't shown much of an interest in doing this because the desire to foster innovation has been much greater than the desire to crack down on monetary competition. And it's. I think it's kind of an open question whether governments will be as friendly to Bitcoin in the future. And I think that basically comes down to whether Bitcoin grows a large enough base of users and advocates that will make it politically infeasible to want to regulate Bitcoin in the future. And an example of this that I like to give is the company Uber. Uber would go into cities around the world, and there were entrenched lobbies that were very antagonistic to Uber and who want Uber kicked out. And they would lobby their local government to get Uber banned or regulated. But because Uber would go in and very quickly get a base of users and drivers, they were natural advocates for Uber. And it became very difficult politically to shut Uber down in a lot of these locations because politicians trying to regulate Uber would have literally thousands of people showing up saying, hey, don't do that. We, we really want Uber. We use Uber all the time, or I make money from Uber. And the same thing is going to be true for Bitcoin. Once you have a population that has savings in bitcoin, they are going to become natural advocates for Bitcoin. And I believe that in the next four years, when we see the first big wave of regular people getting savings in Bitcoin, there's going to be a shift in the kind of people who are elected to office in places like the UK and in America. And people will be much friendlier to Bitcoin. And an example of this is there's a senator, a US Senator, who was just elected, who's very pro bitcoin and is a longtime holder of bitcoin. She's the first of many, I think her name is Cynthia Lummis. And, you know, four years from now, I think there's going to be more than a handful of people just like her in Congress.
- [61:23]
Yeah, Senator Elect Lummis has been on the show. You can go and check out the previous ones and listen to my interview with her. She's very pro bitcoin, I think. Is it Warren Davison? I think he maybe is in Ohio, Ohio quite pro bitcoin as well. And the other point, the other key point is as certain markets become perhaps more, I don't know, put in stricter regulations, it creates opportunities for other jurisdictions. We know that Malta is friendly. We know Estonia is friendly. We know in the states, Wyoming is friendly. And what that actually leads is to a brain drain from other certain regions into these regulatory friendly areas. So, yeah, I'm less worried. Okay, so next, can I lose all my money in bitcoin? Vijay?
- [62:08]
Well, I think the downside risk of investing in bitcoin is much, much lower than it was even just a few years ago. And in the first few years when bitcoin was created, one of the refrains that you'd hear from people about investing in bitcoin is that just put 1% of your portfolio into bitcoin and if it goes to zero, it's okay because you're not going to even notice it. And you know, anyone who actually did that put 1% of their portfolio in Bitcoin in 2012, or 13 or 14, made a lot of money. But I personally think that number could be much higher than 1% now, depending on your risk tolerance and your age, because the risk profile of bitcoin is much lower than it was in 2012. In 2012, we had no idea what governments were going to do about bitcoin. We didn't completely know if the protocol was safe from bugs. There was still the risk of like, what is bitcoin? And, you know, there was this fork that happened in 2017 where Bitcoin split into kind of two versions, and one of them's basically dead right now. And we just have the bitcoin we know and love. So there were all of these risks and all of those risks are gone. I think the, the vast majority of risk in bitcoin is gone. The only risk that's ahead of us is nation state attack. And I view that as kind of an outlier risk. It still exists, but even that risk has been reduced substantially.
- [63:38]
I say bring it on. We'll defeat it. Okay, so I think they're really interesting points. It's funny, I can even say for myself personally, the most bitcoin I've ever bought with cash from my bank account has been with Bitcoin, over $10,000. And I've been in Bitcoin since, gosh, properly, 2016, late early 2017. My conviction goes up as the price goes up. My conviction goes up also with the amount of companies that have got involved this year, which, you know, we could talk about. But also on the regulatory side, we kind of have regulatory acceptance rather than outright bannings. I know it's banned in China, essentially, in, I think Bolivia as well, and I think there's another country. But generally speaking, we have. We have regulations which has restrictions around, you know, KYC and monitoring who's using it, but not outright banned. So I'm less worried about that as well now. Okay. I heard bitcoin is slow, as inexpensive to use. If I want to send money, you know, we talked about it early. It's great if I want to send, you know, basically, because more efficient, the more money you're sending on it. But if I want to send, like, if I want to send you 10 bucks now, Vijay, it would be slow and expensive. And I've heard that's a bad thing.
- [64:53]
Yeah. So bitcoin is actually much faster than the traditional banking system. So if you imagine. So you're talking about small amounts. But let's say if you're sending millions of dollars to someone in another country, first of all, you'd have to fill out a bunch of paperwork and provide id, and then you have to wait three days for that transfer to actually be cleared. With bitcoin, you know, your money has made it to the other person in less than an. So that's actually a huge win over the traditional financial system. When you're talking about small amounts of money, like sending me, say, $10 on PayPal, that's not quite the same thing because you're not sending money to me. You're just transferring money on PayPal. PayPal still has control over that. So it's a little bit of an apples and oranges comparison when you're talking about transfer, a real transfer from one person to the other, where they control it, completely control it, and it's not in the hands of another institution, Bitcoin is orders of magnitude faster than any alternative.
- [65:58]
Right, okay, okay. We're nearly there. We're nearly there. Okay. Let's talk about the environment. I've heard bitcoin is killing the polar bears. It's melting the ice caps. Is bitcoin. You know, I think the latest country measures uses more electricity than Pakistan. Is this right? Is bitcoin killing the environment?
- [66:17]
So bitcoin mining requires the expenditure of energy. And some people are worried that if bitcoin were to succeed and become global money, that the amount of power consumed would be bad for the environment and There are two reasons, I think, not to worry about this. The first is you have to compare bitcoin to its direct competitors and the competitors that it would disrupt if it became global money. The first competitor is gold. Gold mining is far more destructive than bitcoin mining and produces toxic chemicals that are dumped into the environment. So bitcoin disrupting gold would actually be really great for the environment. And when you compare it to its other competitor, which is the fiat monetary system, you can't just measure the cost of running the banks, the electricity to run banks and ATMs and all that financial infrastructure. You have to recognize that fiat money has no value without the military might to back it. A nation that can't defend itself will have worthless money. And the cost of managing a military is actually pretty massive when you think about it. The other thing that I think is really important to note about bitcoin mining is it tends to gravitate towards places where there's an overcapacity of energy production. Places like Sichuan in China, where they massively overbuilt the hydroelectric electric dams and they don't have enough people to use that energy. And most of that energy just goes to waste. It's just thrown away. It's places like that, which are usually green sources of energy and very low cost, that bitcoin mining gravitates toward. So the carbon footprint of bitcoin mining is actually very, very low.
- [68:03]
All right, what about the fact that I've heard bitcoin is only used by drug dealers and terrorists and for shutting down the computer systems of hospitals and use for ransom? Is it just a criminal money?
- [68:18]
So bitcoin is actually pretty terrible as a currency for criminals and for drug dealers because the blockchain records all transactions that have ever been made and these remain public forever. So police can do a forensic analysis and trace transactions from years ago to figure out crimes that took place. US Dollars in, in the form of cash, actually much more anonymous than Bitcoin. And, and just looking at it empirically, drug dealers and terrorists much, much prefer US Dollars to any other currency. So we should really be banning the US dollar. Boo.
- [68:55]
Vj, come on, man. You can't say that. You're going to scare people. No, I agree with you. Dude, fuck the US dollar. All right, final question before we wrap up, man. Nobody's using Bitcoin anyway, so why the hell should I buy it?
- [69:07]
So this comes up a little bit and the confusion people have, I found is when they say bitcoin is not being used, they think of the purpose of money is just to buy things and to spend. And this, in my opinion, is an unfortunate consequence of the failure of modern economics to explain that money serves more than one purpose. And in fact, historically, money has not been used to, not just being used to spend, but also to save. And someone who's saving in bitcoin and merely holding that bitcoin is actually using it for the purpose of saving. By saving in bitcoin, they're transporting the fruits of their labor into the future without fear of debasement or confiscation, which is, to me, one of the most powerful uses that you can have for money.
- [69:53]
Amazing. Well, listen, we've dumped a whole load of information on people here. I think it's a really good start. Now I know some people are going to feel overwhelmed. They're gonna be like, what? What was all that? Look, the thing about bitcoin is it rewards investment. Not of just money, but your time to go in and learn. I would say if you've got the remotest amount of interest right now, there's a few things you need to do. Go and read Vijay's article, the Bullish Case for Bitcoin. It accompanies this very well. A couple of years ago, I think it was written, we also made a podcast about it. I think that's a really good starting point. I would recommend buying $50 a Bitcoin and just moving around and have a play. Go and listen some podcasts, not just mine, some other great shows, but just go and embed yourself in. It's. I don't know anybody really. I can't think of anybody I know who's invested in bitcoin and stuck around for a couple of years who regrets it. I think almost every single person who's stuck around, hoddled, not traded their way out. I don't, I think everybody is, is happy they made that decision. You got any last comments, Vijay? Anything you want to tell anyone?
- [70:57]
Yeah, I completely agree with everything you said and I think it's one of the greatest returns on investment of time that you can make. So now is that. Now is a perfect time to learn about bitcoin. It's. It's still so early. This is, this is a 50 year project at least, and we're in the earliest days of it. It's going to transform the world, the world, the way the world works. And it's going to make the world a better place, I think, for my kids. So it's a really exciting time. I think you should go out and learn as much as you can about bitcoin. And I like the way you said it. Pete, go and buy some bitcoin. Even if it's a small amount, you don't have to have a huge amount in your portfolio, but you shouldn't have. Zero. Zero. Doesn't make any sense. This is one of the most exciting innovations to money in a thousand years. So be involved, get involved. It's exciting time.
- [71:47]
Yeah, get in there, stack, sats, hod, all that shit. Get on Twitter, see what people are talking about. Learn as much as you can. You won't regret it. As long as you stick around for a few years, you won't regret it. Vijay, man, listen, I appreciate you so much. I love all your work. You do. It's good to get to know you. Hopefully once all this Covid shit's over, we can actually hang out and cook a steak up at some point on one of our Traegers. But look, I appreciate everything you do. I'm always here for you. Anything you need, you give me a shout.
- [72:13]
Cool. Thanks, Pete. It's always awesome to chat with you and I do hope that this year will be the year we actually. We can meet.
- [72:19]
Yeah. All right, man. You take care, brother.
- [72:22]
Thanks, Pete.
- [72:25]
Peter McCormack
All right. How good was that? What do you think of it? Did you enjoy that? Was that not the perfect show for the episode 300 milestone? Vijay is one of the best at breaking down the importance of bitcoin in an easy to understand way. He absolutely smashed this. So a massive thanks to Vijay for coming on. And as I said in the intro, this meant to be for people who are just looking to get involved in bitcoin, a little bit confused, a little bit like they don't understand. Asking those same questions we get over and over again. Send it out to them. If they enjoy that, stick them on my beginner's guide. That will take them further down the rabbit hole. And as ever, thanks for listening. And if you do have any feedback, you can hit me up. It's hellohatbitcoindid.com I reply to everyone who doesn't send me weird shit. Okay. Outside of that, if you want to support the show, I always ask. Reviews on itunes are really helpful. If you don't have itunes, there are Google products, there's pocket cars and Stitcher. You can go there and leave me a review. It really helps with the rankings. I want to get that number one UK slot for finance at some point. I hit number two recently. I really want to get it. Look, if you think the show's shit. Go and give it a one star review. Obviously we can't be friends after that, but honesty is important.
- [73:30]
Vijay Boyapati
Okay.
- [73:31]
Peter McCormack
Outside of that. Also, go and check out Defiance, the latest show on media bias. It's really interesting. It's an interview with Isaac Soul that's at Defiance News. And it's Sunday. I'm going to go off now. Gonna go and chill. I hope you have a great rest of your weekend and I will see you all next.