Chris DeRose is a software developer and the former co-host of the Bitcoin Uncensored podcast.

In this episode, we speak to Chris DeRose, software developer and former co-host of the Bitcoin Uncensored podcast, about both the downsides and upsides of cryptocurrencies and the associated technologies. We took the time to dive deep into the subject with Chris and learned about some of the common misconceptions about blockchain technology, the value of cryptocurrencies to society, ways in which the crypto space has evolved, using economic theories to understand financial systems, the definition of money, what he thinks about the associated technologies, the role blockchain technology can have in society and why cryptocurrencies will not replace the dollar.

Key Points From This Episode:

• The motivation behind Chris’s decision to get involved with Bitcoin in 2010. [0:00:48]

• How the Bitcoin community has evolved since Chris got involved in 2010. [0:03:00]

• Some of the common misconceptions associated with blockchain technology. [0:06:03]

• Whether new technologies pushing back against regulations is common. [0:08:08]

• Ways in which Chris’s perception of crypto has changed since he discovered it. [0:09:53]

• Chris explains what his definition of money is. [0:11:19]

• Find out what Bitcoin actually is, if it is not money. [0:14:39]

• Aspects of the current financial system that Bitcoin improves on. [0:16:42]

• A discussion around the recent controversy regarding Canadian trucker convoys. [0:17:54]

• Some of the problems anonymity associated with cryptocurrencies causes. [0:20:33]

• Why not being able to verify transactions is a problem for privacy coins. [0:21:18]

• A discussion about the US monetary system and the US dollar. [0:24:12]

• Chris discusses the reliance on economic theories to understand the economy. [0:30:59]

• What he thinks about crypto markets through the lens of market efficiency. [0:32:26]

• Whether crypto markets can be manipulated or not. [0:33:49]

• Why Chris thinks Bitcoin will not make traditional regulations around payments obsolete. [0:35:32]

• Another discussion regarding the economy through a theoretical lens. [0:39:15]

• Reasons why Chris thinks cryptocurrencies have value. [0:40:32]

• Chris explains what fungible value is. [0:45:49]

• Why Bitcoin is regarded as digital gold. [0:49:25]

• How possible it is for Bitcoin to replace the dollar. [0:50:46]

• Chris tells us if he thinks Bitcoin and Ethereum are decentralized. [0:53:39]

• Why Chris thinks there is a mythical aspect to the economy. [1:00:49]

• We find out if Chris thinks blockchains are immutable. [1:02:29]

• Immutability: find out if this is a good aspect of cryptocurrencies. [1:03:37]

• An explanation of consensus and if proof of work alternatives offer solutions. [1:04:33]

• Reasons why he thinks Vitalik Buterin is a charlatan. [1:09:22]

• Chris tells us if Vitalik’s claims are living-up to the expectations. [1:12:41]

• The role that blockchains can play regarding international money transfers. [1:15:22]

• Outline of how ransomware could be beneficial to society. [1:16:20]

• How possible is it to see nation-states existing only on the blockchain. [1:17:43]

• Learn what value private blockchains offer. [1:18:37]

• What are the most promising crypto products/technologies in Chris’s opinion. [1:19:49]

• The technical aspects of NFTs are explained. [1:21:23]

• Find out what his opinion on DAOs is. [1:24:20]

• Examples of the best application of smart contracts that Chris has seen. [1:25:13]

• Whether cryptocurrencies and public blockchains are revolutionary technology. [1:27:38]

• What role cryptocurrencies can play in reducing wealth inequality. [1:28:35]

Read the Transcript:

Ben Felix: This is a limited series of the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision making focused on cryptocurrencies. We're hosted by me, Benjamin Felix, and Cameron Passmore, portfolio managers at PWL Capital.

Cameron Passmore: Welcome to episode 16 of the Understanding Crypto Miniseries. The miniseries is actually going on longer than I think you had originally anticipated, Ben.

Ben Felix: I don't know if I had a good prediction on how many episodes we would get to.

Cameron Passmore: But it has been pretty amazing. And this week we welcome another very interesting guest in Chris DeRose. And I think you've got quite a story about how you came across Chris as a guest.

Ben Felix: I have a history with Chris that's not shared with Chris, an asynchronous history. And I'll explain what that means. And people who listen to our podcast might understand what I'm talking about. But before I explain that, I do also want to say that this is actually one of the first episodes. The first or the second. I don't know. It was early, one of the first episode that we recorded for this series, but the timing just hadn't felt right to release it. I don't know. I don't have a good explanation for why the timing felt right now, so that's why we're releasing it. I re-listened to the episode before recording this intro and I don't think it matters. I don't think there's anything timing specific in there. Just so people are aware, we recorded this months ago. Do you remember when we actually recorded it? It was a while ago.

Cameron Passmore: It's a while ago. Five months ago.

Ben Felix: Yeah, crazy. Chris is a former co-host of the Bitcoin Uncensored podcast. So that's my asynchronous relationship with him. I listen to many, many hours of Chris and his co-host, Josh Unseth, talking to each other and talking to guests. He was kind of like our podcast, but in crypto and a little crazier, which maybe just fits with crypto, especially in the earlier days. Their podcast ran from 2015 to 2017. You can't find it on the internet. You can, but you have to really dig for it. It's not on podcast platforms. You can't find it on iTunes, for example. Very good podcast though. It was my entry point into perspectives on crypto from people who were at the same time, bullish on crypto, on Bitcoin, specifically in their case, and some things built on top of Bitcoin and the implications for the world. And there's a bit of libertarianism in there because it gives us censorship resistant transactions, which you can argue is a good thing if you're libertarian.

But they were also, and this is what made their podcast so good for me, trying to understand the space. They were highly skeptical of most of the people involved and most of the development being done in the space. So they would have guests on their podcast who were representatives of some crypto company and they would roast them. Chris and the co-host Josh, they understood. Chris is a software developer. His co-host Junseth had a degree, and I think sociology from Dartmouth, but a reasonably educated individual. They both believed in market efficiency, but they had this fundamental understanding of the technology and what its implications could be. And they would use that to just absolutely roast people who would come in with what sounded like a shiny sales pitch. But these guys would just pick it apart partially for that reason because they would be mean to people who were pitching what these guys viewed as scams.

The podcast was controversial in this space for that reason. They were mean to a lot of people. They made a lot of people look stupid by roasting them in that way. Frankly, they were kind of mean about it. The podcast was generally pretty rough around the edges, highly critical, like I said, of a lot of people. In the end, it turned out a lot of people they were critical of were running scams. We know that now five years since the end of their podcast, a lot of cryptos ended up being scams on that line of thinking. Chris, during this episode does have some pretty harsh words about Vitalik Buterin, the co-founder of Ethereum. When we heard that the first time, I think Cameron, we both squirmed a bit. Maybe that shows up in the YouTube video. Chris calls him a charlatan and we're like, I mean, I think I even asked. Can you elaborate on that?

Anyway, I was uncomfortable with that at first, then I read the book. The Cryptopians, a detailed journalistic view of the founding of Ethereum. And I think in many ways that actually corroborates from many different accounts from a professional journalist writing the book, corroborates a lot of things that Chris said, maybe not explicitly but implicitly, which was enough for me to be like, you know what? We can let those comments ride. Because were thinking like, did we leave that in its anyway. In Bitcoin Uncensored they had episodes with prostitutes and drug dealers, among other colorful individuals to talk to them about how they're using Bitcoin. One of the principles of their podcast or of their view of Bitcoin is that its main use is censorship resistant transactions. So they were speak with people as guests who needed to conduct censorship resistant transactions, which is just fascinating. They also believe in market efficiency. Chris, I don't know if he talks about that in this podcast with us, but that was one of the other guiding principles. Markets are efficient. They actually had Fama on their podcast in an episode, which was kind of cool. Chris has lectured at a lot of universities, so did his co-host because early days they were some of the only guys that really understood the technology. And you can hear from the conversation, Chris is reasonably knowledgeable and clearly passionate about the sort of intersection of economics and money and sociology and computer science. So I think that comes through in this conversation. Chris has been involved with Bitcoin since 2010, pretty early. He is a software developer, although I think he's got a pretty broad set of knowledge on other important fields to understanding crypto. He also worked on Counterparty, which is a peer-to-peer financial platform and distributed, open-source internet protocol built on top of the Bitcoin blockchain network.

My understanding of Counterparty is that it's kind of like it lets you do Ethereum type stuff, but ultimately executed on the Bitcoin blockchain. I don't know if I just butchered that explanation, but that's my understanding of it. I found Chris's podcast through Robin Wigglesworth of all people. Robin Wigglesworth interviewed Chris for an article about The Cult of Crypto because Chris had been effectively excommunicated due to his harsh criticism of the space. Anyway, so let me do his podcast. Last thing before we finish this introduction here. Chris, during this conversation was in South America in a street level apartment, and there's like people yelling in the background there's horns honking, there's whistles, there's horns.

Cameron Passmore: There's something.

Ben Felix: So we did our best to clean up the audio. I would just embrace this as an experience of sitting down with Chris, who's living the cryptocurrency lifestyle, traveling around the world. We get to be along for the ride for a bit.:

Cameron Passmore: That was a pretty good setup. That's exactly the experience.

Ben Felix: Yeah. Yeah, so I think that's good. We'll go to this episode with Chris DeRose where we're getting a perspective here from somebody who was early in crypto, had some of the libertarian ideology, ideological motivations to view crypto as a good thing, but also just a much broader set of knowledge and reasonableness that I think gives a really good, well-rounded perspective to understanding the topic. So hopefully it's useful.

Cameron Passmore: All right, let's go to our conversation with Chris DeRose.

Chris DeRose, welcome to the podcast.

Thanks for having me.

Super excited to be talking to you. And I got to say off the top that I appreciate all of the content that you and Junseth produced back in the day. I've listened to many of your episodes and it's just a wealth of unconventional knowledge on these topics.

Thank you so much. I think this space is filled with unconventional phenomenon, so that was an equal and opposite reaction maybe.

Makes sense. Chris, what brought you to Bitcoin back in 2010?

Well, my progression into Bitcoin, first started with a Slashdot post. For those who are unaware Slashdot is a kind of... I wouldn't call it social media, it's more of a bulletin board-esque website for computer nerds. And the first time I had heard of Bitcoin was a posting on Slashdot, which was a site that I frequented as a computer programmer. That was probably 2010, but at the time, I didn't know really what problem it solved. I definitely liked what I saw, but it just seemed like a toy. Candidly. They're like 3D printers has struck me in recent years at first. And then when the killer app, as I saw it came out in about 2011, which was Silk Road, it immediately clicked with me and I said, "Oh, I see how this is going to work. I get it." And that was my entrance into the space.

Can you go a little deeper on that and describe what it was that you got?

Yeah, well, you had this sort of island of value transfer that may or may not have existed at the time of the Slashdot post. It was a entirely theoretical idea, but I think a lot of good theoretical ideas, there's a chicken and an egg problem off the bat. How is it that you get people into Bitcoin without having people into Bitcoin? And then on top of that, I think that lacking a place to differentiate the solution, it was just nothing more than a thought experiment. So we could similarly come up with, I don't know, pulling off the top of my head like a video game system without video games, and then maybe that's very cool on paper, but who's going to use it? And then when so road came around, it was immediately at that point evident not only how you break the chicken and the egg problem, but who's going to use it.

Interesting. So it was both the user base was one piece of it, and then it was also the fact that what you guys always used to talk about was the censorship resistant transactions. But it wasn't either one of those things, it was both of them at the same time that made you realize there was something there.

Yes. Although I think that I've always championed the censorship resistance and I still would today. I think that it's hard to decouple any of those effects. I think from that sort of prima fascia existence of censorship resistance in my mind.

How has the Bitcoin community evolved since 2010?

Holy cow, has it evolved and in what ways? Wow, that could take up a lot of time. I guess there are so many ins and outs in that it's quite a psycho drama, but I would say in the earliest days you had a combination of decipher punks that was a movement that was perhaps kin to the Blade Runner-esque, small independent hacker against the man kind of mentality, armed only with the cleverness of the individual in spite of great odds. That was one aspect of the space. The other very quickly thereafter was this sort of libertarian slash gold bug crowd. I think it's fair to say it was a very conservative group that espoused varying talking points in the libertarian movement and who we're looking for perhaps a alternative goal both offline and on in this technology, that was the earliest crowd. Now, from there, things evolved and there's a lot of different paths that this has taken.

Perhaps what it would be controversial at this point is the degree to which you have gray fools entering the equation and messages targeting varying rounds of gray foolery. So in my mind at least, we saw an influx of fools early on in the sense of the Altcoin crowd. There was limited success there. We had Litecoin and Ripple that then turned into a Ethereum crowd, which was not conservative at all. That was more of a venture capital-esque crowd. These were not venture capitalists necessarily, but they thought they were. And they had similar values to what you would think when you think of a... I don't know, a Steve Jobs persona, someone who's going to change the world with empathy and great design ethos, something like that, wearing a Patagonia shirt or some such thing. And then from there, we've had I think varying rounds of great fools that come in through alternative blockchain ideas.

Some which are predicated on social media and social media schemes, displaced Facebook, maybe we have had a round of NFT madness. I think we had a round of ICO madness. For me, watching all of the manifestations of demographic influx, I am at this point very much with the belief that we have a sort of postmodern finance thing going on here where whatever the fashion of the day is, that's what blockchain delivers and we know that. So because we hear that so and believe that. So it sort of reality be damned otherwise. Maybe that's a bit cynical for some of the viewers, I don't know. But that's roughly an overview. Each of those chapters can take up a lot of time. They're very, very interesting chapters too, I would say sort of influx of a new kind of blockchain or cryptocurrency person and the tropes associated with them. So yeah, that's why I see it at least.

And when you're talking about that evolution because we asked about Bitcoin, you answer more broadly than that, which was perfect. But the thing that you're talking about is the public blockchain technology, if I understand correctly, is that right?

Yeah. Again, this is postmodern finance. So the problem you're going to have in talking in this space is that almost everybody has their own conception of what this thing is. So if you say blockchain in one room, it means something completely different to blockchain in the next room. I'm not trying to be difficult here, this is just what I see. So the technology at work in recent years seems to be less about any form of applied science and more case of applied rhetoric. And some of that might just be a vacuum of power that is arisen in the form of the regulatory space. So if the regulators aren't going to enforce certain jurisdictions onto us, or alternatively those jurisdictions are manifestation of rhetoric alone, then we can expect the quote technology to follow suit. Technology being not an applied technology, a sort of referendum on how we feel about these given platforms.

I know that's a bit wishy-washy to say, but that has been the case. I think, I'm trying to think of a very good example. NFTs might be a very good example of that where you have something that has almost nothing to do with technology yet this sort of consensus opinion that there has been some technological breakthrough, thus this thing has value.

Another way of looking at it too is that this is kind of written on the coattails of companies such as Airbnb and Uber, both of which they have something to do with technology. But in many ways the technology for Airbnb and Uber has been around since the '90s when the internet first manifested, but what I think was new was the regulatory space that permitted us to call a hotel, a house sharing service and the regulatory conditions that led us call a taxi sharing system. So is there a technology solution in Airbnb or is there a regulatory solution in Airbnb? And you can decide that yourself, but I would say that same level of consideration is applied to a lot of the technology here that is in this space dubbed blockchain, and I guess now cryptocurrency.

That's interesting. Is it fair to say that that's often true with revolutionary in quotation technologies or new technologies? They always end up pushing against existing regulations.

I think about that a lot. I don't know what to say. I definitely think there is a lot of truth to that, but it's typical that there's some coupled component to it. So if you look at radio or something, it is true that there has been a regulatory purview that permitted the radio technology, but that sort of apex was technological. Now does that apply here with blockchain? Yeah, probably. It probably does. But it would be hard pressed to find a technology component to many of these claims save for the sort of superordinate technology that is Bitcoin, which was I think the actual occurrence of blockchain as a technical manifestation. So let the reader decide I guess you can decide which it is, but both, I think it is both true that there's a coupling and that there isn't, depending on what stage of this you're looking at.

It's also different in the sense that you mentioned the censorship resistant idea earlier. It's pretty hard even if regulators want to do stuff because people can just go open an accountant, a no KYC jurisdiction and they can completely bypass any US, for example, regulation.

Yes and no. So that is apparently the case as of 2022, but there are now wars being fought it like Ukraine dealing with some of these issues. So it remains to be seen how true that is. I could see that certainly a case at this moment, but we're now finding ourselves at a crossroads with the Russian ruble and the US dollar system. And so, that regulatory space is being closed maybe on the ruble. I think it's the ruble. Is it Russian ruble, yeah. But maybe not if there's gun powder involved now to determine that.

Oh, okay. So you talked a little bit about the evolution of the space. How was your perception of crypto changed since you discovered it?

Oh God, so much. I got into this space, so naive and young and I mean this space has been wonderful to me. It's been a wild ride. I came into this with a very different set of ideas in my head about what this was, and I thought there would be a lot of technology applied, technology involved. And it turned out that really there's a lot of people skills at the heart of this thing. And for me, bridging that world has been just the best thing that's ever happened to me. I don't know that I've done that very well and I think I was maybe in the right place at the right time more so than anything else. But being able to jump that gap has been amazing. I will say too that I had... There's a lot of secularism in my life. When this thing started, I was Mr. Science man with the logic, I wasn't as bad as Spock, but I was aspiring to be.

And then this funny thing happens with money where you think that there's some logic behind the damn thing. And so you go there and you take all your logical weapons, and you try to engage in battle against the marketplace. And then what you find out very quickly is that there's actually no almost entirely a matter of faith in this damn thing, and confidence maybe is a huge component of how systems work. And if you start to go down that rabbit hole, you're going to be out of the secular world so fast you won't even know it. And you'll be very surprised at when you end up. I don't know if I answered your question or not, but that's kind of how it's clear to me.

It's interesting. Chris, you mentioned money. So what is your definition of money?

Unfortunately, succumbed to chartalism, which I think is something we really broached on for the audience, I think doesn't know what that means. I struggled with this, so bear with me. Roughly, the gist is that taxes are what creates value or what makes money, money, that's very bridged. So I think at this stage I'm very unfortunately at the point where I think money is what you pay your taxes in. And there's a lot of exceptions to that rule. It is not airtight, but I think that's what makes gold not money. And I think that unfortunately for Bitcoin, it's improbable that Bitcoin is money in my mind.

Now, that being said, there's a lot of exceptions there. I'm currently located in Columbia where it's interesting, everybody knows the value of the Columbian peso in dollars. You can go down the street, you can ask anybody what the value of the Columbia peso is, and they'll tell you it's roughly 3,700 pesos for the dollar, which then makes me wonder if Columbian pesos are money. There's a spectrum here. So I think your best answer is that it's what you pay your taxes in and there are exceptions to that rule, but that's what I think money is to be now. We can get into all of the different manifestations of money if we want and the arguments for it against that. But at the end of the day, if you know what your money is worth in some other unit, it's probably not money, unfortunately.

Well, that's interesting. I can tell you what the value of a Canadian dollar is in US dollars, but I also pay my taxes in Canadian dollars.

Then that makes it money. I would say by this sort of definition, yeah. And again, there are exceptions, I think all the way down the line, any rule you try to find, you'll find an exception to it. I think in this space of money. We're only take you so far. Your kind of approaching a matter of faith. If you ask a thousand people what is money, they're going to weigh in with their faith-based comprehension of this thing. And it doesn't mean that money doesn't exist, but it also kind of means that maybe it's inevitable that it's sort of this flux in the social space that is morphing at all times, and it approximates these sorts of ideas, but it doesn't have a rigidly defined boundary.

Yeah. I spent a lot of time reading about money recently, and that's pretty similar to what I've concluded. There is nothing that you can call money. It's not even if you ask a bunch of different people, if you ask a bunch of different experts in various aspects of money, they'll give you materially different answers with different theories, with different evidence.

Yeah. And I think it also depends on your times and some of the topical questions you're asking may apply to our times now. Because if we went back 3000 years ago or something, it would've been seashells or whatever maybe it was. And it would've just been like an open and shut answer and that would be it, everyone would know it. And that would be the end. And we may now be very well be transitioning into some new form of money and this is a step in that process. And because it is no longer rigid, that is an assessment of our times or so than an assessment of money. It could be, I don't know. We'll find out.

I'm even shaken up on that right now because you go back and read about 3000 years ago and money was credit that was recorded on tablets. It wasn't an object, yet that stuff came later. Tokens came later and metal money came later.

Yeah, sounds like you reading David Graver's book.

I read that among a bunch of other stuff. Yeah, that was in there for sure.

He's great. I love him. But yeah, there's a bunch of good offers on the subject.

Yeah. So I think you answered the question by saying that Bitcoin's not money. Can you talk a little bit more, I guess the chartalism is the answer. Why do you not think Bitcoin is money? Actually, I'm going to change the question. What is Bitcoin if it's not money?

Yeah, it's a perennial question. It clearly has money like properties. I do think that is a value transfer protocol. I see that it is a analog to value transfer and an analog to money and a similar way that email is an analog to postal service and email is not a letter, but it does sort of perform that job often. So you can't maybe send flowers to your girlfriend by email, but you can tell her your lover. And so yeah, it's strictly speaking, not a letter, but it is overlapping in many ways. So Bitcoin I think, serves in that niche. It very evidently does a lot of the things that money does, which is principally value transfer and entirely a matter of internet-based body transfer.

We talked to Eugene Fama three days ago.

Me too. Awesome.

I listened to him on your podcast. That was very cool.

Good for you.

But we talked to him about this, a little bit about Bitcoin. I summarized what he had said on your podcast and just said, you said this back then, as have you changed your thinking at all.

That's great.

That was cool. But he said something interesting. He said, you've got to separate out the accounting system from the monetary unit and you got to assess those two things separately. So is Bitcoin a good money. It's not because it's volatile, like full stop, that's it. Is the payment network useful? That's a separate question. I thought that was an interesting way to think about.

Yeah, that's very good advice. Frankly, I struggled with that, even in my accounting today. In the years since my podcast, if I got really into accounting, probably. Now, I'm struggling with the challenges of inflationary currency accounting, which makes me wonder if something whose advice doesn't apply to the dollar even at this point, who knows a lot of the criticism in this space, an awful, damned lot of it applies to incumbent system. It's like whether or not the dollar is money is a valid question. I think it is for the four mentioned reasons of tax payment, but it is certain that it is not functioning in the capacity that it always has. And it may be that Bitcoin is a response to that in this sort of uncertainty about past securities. We now are permitted to ask and find solutions to past solutions. I don't know. So his advice there could actually apply to the dollar in some sense. I have to listen to show, I would like to know.

So what does Bitcoin improve on?

I think friction. I mean the friction issues that we have incumbent or legacy payment solutions of which there's a litany, some of which Russia's finding out the hard way, some of which we all kind of know just in our interpersonal lives. The society, if you're in the midst of some serious up people and asking some seriously hard questions, a big one is what rights do we have as citizens? And one of the rights we used to have was conducting payment without the intrusion of government monitors. Whether or not we want that or have the option to do that going forwards is a big question. And then we see that Bitcoin sits very squarely in that set of questions. There is no form of cash money online and Bitcoin has arrived offering a potential solution to that need. Whether or not we want that need or whether or not we want to permit that need. This is another issue. But generally anything to do with friction, I'd say bitcoin's the advantage and efficiency in the market.

I wonder even about that because I don't know if you saw what happened in Canada with the whole trucker convoy thing and...

Oh, I did. Yeah, for sure. Exactly. Yeah, so that was right. There you go. That's part of this.

Did Bitcoin solve that for those people though?

This is one of the limitations I have about Bitcoin. Unfortunately, I hate to disappoint some of the people out there, but I think we've faced some major failings in this community and that might be evidence of one such failing. In the early days, money exchangers were adding a lot of liquidity to the space. People who were ad hoc, informal and under the radar. You could call a number, you could look at a book of Bitcoins and go through a advisor team, set up of meeting somebody who will take your Dollars and give you Bitcoin or vice versa. And as the space has grown for a lot of other reasons as well, we have lost that versatility.

So I would say we had both a success and a failure. I think there was a press and media success in the trucker space. In that I think a lot of people who felt the legitimacy of those truckers, was being undermined by our incumbent solutions in a way that was unjust or unfair, was broached. We succeeded there. But I think we failed in that does not appear to be some random guy that they could have called to convert that into the Dollars that they needed. Take your pick on those two aspects.

I didn't follow it super closely and I'm by no means a legal expert, but I saw they filed something called a Mareva injunction, I believe it was called, where they made it illegal for people to access the wallets at all. But I guess what you're saying is if they had a way to anonymously extract that value from the system, that wouldn't matter.

Yes. And here's another thing I have to broach, I don't want to be a shell. So let me just not mention any specific cryptocurrencies, but there are some serious failings in Bitcoin that have manifested to present. Those failings entirely have to do with the anonymity of Bitcoin. And like you said, there are now the ability for governments to censor addresses and even to determine addresses. So there are other blockchains out there that I have now taken a stake in because I feel that their solutions are vastly superior to Bitcoin. Now, whether or not they'll perform financially, I can't tell you because it's also evident that utility be dammed, the performance is not particularly reflective of utility. But that particular instance is a good case of why I think Bitcoin ultimately is going to have some severe problems servicing the markets that it used to have.

I saw a random post on Reddit about, and I know you said you're not going to mention any coins, but I'm going to mention I think it was Monero where they're-

Yeah. Okay. If you rate it up, that's great. I don't want to pump it, but yeah, that's exactly where I'm at. Keep going. Sorry.

I saw that because it's so good at being anonymous, you can't see any of the transactions. And now there's speculation that exchanges are creating fake transactions, I guess, so there's not actually liquidity behind what they say is there. Is that a problem with super private coins like that?

Well, that's a problem with the entire space. I don't think that is limited to privacy coins or otherwise. It certainly exists in privacy coins. I am very bearish about Tether. I think that's a major black eye in this whole space. And I consider the near entirety of those transactions to be fraudulent, in combinations of wash or just non-existent value transfers.

So with a public blockchain, everything's auditable because everything's, well, it's on a public ledger. But with a privacy coin like Monero, you can't do that audit. So I saw this thing on a Reddit that they're organizing a run on exchanges to see if there's actually liquidity there because you can't go and verify that the exchanges hold the tokens that they say they do. Do you think that's a problem with privacy coins?

I do. I think that's a problem with the privacy coins, but I also think that that's a problem that applies to the whole space in different forms, Tether being at the top of that list. I think most Tether transactions are completely fraudulent and often a form of wash trading, if not exactly wash trading. We also are assuming that the exchanges are to be trusted when we have a litany of evidence to suggest that they too are in on these frauds. So that is a constant problem in the space. And the valuations in this space, they just could be entirely fraudulent, that the amount of non speculative transactions plus the amount of speculative transactions that are based in people, it could just be so small compared to that other transactions. We really have no idea.

We like academic research. There is a paper... We actually have the author coming up on this podcast, Igor Makarov and Antoinette Shore. Do you read that paper? It's very interesting. They're both academic researchers in finance, but they clearly have some ability in computer science. They wrote an algorithm or algorithms that let them trace the ownership of wallets back to entities. So basically gave them clarity on what's actually happening on the Bitcoin blockchain. And one of their findings, if I remember correctly, was that 90% of transactions are not economically meaningful. So it's kind of what you're saying, the vast majority of transactions are-

I'm surprised it's even that low. I would not be surprised if it was higher still. Some of this too is reflected in the general market. We have large economic issues that are leading into this space, so that's also part of what I think we're seeing. It's Wall Street bets, legitimate economic activity when you're buying GameStop at AMC. Not to diminish their findings, but the severity of the ramifications, it's probable that they are correct and it also is possible that that is just the way it is now in this minute market.

I think I've got an interesting counterpoint to that, which is that speculation has driven down GME's cost of capital and they've actually been able to raise and generate maybe... They're going into making NFT marketplace I think. So I don't if that's real economic activity or not, but still, they were able to raise capital and invest high asset prices and make that easier.

I like the GME story. So if that's the case, then great. I let the little man win.

I agree. I agree. It's just interesting that yes, there was rampant obvious speculation, but it potentially led to actual economic activity. It's just too bad they're investing in an NFT marketplace, but oh well. You've mentioned broader economic problems a couple times. You talked a little bit about the US Dollar and inflation. What do you think about the US monetary system and the US Dollar? From your perspective, is it rigged or fraudulent itself?

Yeah, we got big problems. Ever since 2008, I think the general consensus is that there's some serious issues with the economy and how it's run. Ray Dalio I think has some very good commentary here that I share a lot of my thinking with. To his credit, it is probable that these monetary systems run in cycles and that we're nearing the end of one here. I know that every generation says that, and so for this time to be different is a wild claim. But I can't help it to think these valuations are insane for almost everything. We're in the everything asset bubble kind of thing. I also see one of the most jarring signs of where we're at economically is in this centralization of regulators and companies in the market. I don't think that the small business economy is very healthy. If I go to other countries and I compare how the economy is working there to the United States, there are a lot of very stark differences.

Proliferation of signage in America, this sounds like a tangent but it's not, it is extreme. So if you go into any town in America, you're going to find that 80% of the signs are owned by the same handful of companies. You're going to find Subways, McDonald's, banks, et cetera. And there's homogeneity there. It is a bit disturbing to me. If you go into other countries, depending on how coupled they are with our economy, you either see those signs as well or alternatively small businesses. So like I'm here in Columbia and as I go down the street, I'm seeing many different types of convenience stores, very few chains. I'm seeing many different types of stores, just in general commerce stores, clothing stores, electronic stores, things like this. I see repair shops. I don't really see that in most American cities. And most American cities, you see the Walmarts and the Supercuts, et cetera, et cetera.

So you're seeing the money find its way into a smaller number of hands, if not reflected on the actual balance sheet, although I think it is certainly in the sense of public perception and power. So I don't know what you do with the rate we're going, but even in 10 years, it's accelerated quickly. Another 10 years of this, it's going to be weird. Are we really going to live in the Amazon country or in the country of Walmart or something, where everything is a subsidiary of one company? That exists in some country. Laos. And then this is another thing that I get into that it's part of this is at what point is this even a market? So you go to Laos and in Laos everything is owned by the Laos Beer Company. And it's strange because the signage is homogenous. You can go to the Laos Beer Company, it's almost like a... If you ever see those, you go to a social mixer and they have these stickers. It says, Hi, my name is, and then you write your name in. The sticker.

All the stores there have that approach to its design. You go to the Laos Beer Company and there's a white field where the company writes in what they do. So it would be like Laos Beer Company hairstyle to Laos Beer company fried food restaurant or something. And it's like when you see that and then you go to America, we're not the same by a lot, but we're starting to get towards that. So in terms of whether or not the economy's rigged, it's hard to defend to justify the economy after some threshold of homogenization. So we're not there yet, but we're getting close. It's a spectrum. And somebody has to justify this system, and I don't know, nobody can do that anymore. And that's okay, we can still coast. But at some point, the pitchforks will come out and the justifiers and the rationalizer are going to be fewer and fewer and farther between.

I think we see that even in the libertarian space weirdly, where you had a group of people who in the 1990s were justifying free market capitalism, whatever that might mean to you. There was a very healthy community there. That community seems less healthy to me now. I liked those guys in many ways. In many ways, I thought they were morons. But I see less of them online that are successful and compelled. So who's going to justify the damn system? And if the answer is nobody, then yeah, if nobody can justify it at that point, I think it would be very officially rigged. So we have those people still and hopefully we have them for long. But they seem to be dwindling in numbers, so that's little concerning.

There's a movie called Demolition Man from the 1990s where everything is a Taco Bell. It's like what you're talking about.

Yeah. That was a good movie. I like that movie.

Have you thought at all about on Ray Dalio? I'm not a fan personally. Do you know Niall Ferguson?

I know of Niall Ferguson.

Economic historian, really good stuff. He's got a book on money called The Ascent of Money. But he's got a book about the history of catastrophe anyway, the book's called Doom. He says that the difficulty with this approach, this approach being Dalio's approach, and he lays out what Dalio's approach is, the difficulty with this approach is that it cannot explain the non-events that the model, had it existed in the past, would've wrongly predicted. And then he goes on to give a bunch of examples of what Dalio's theory would've incorrectly predicted.

Yes. To Dalio's defense, and I haven't heard the arguments, this is irresponsible of me but I'll just throw it out there, what if teleporters came out tomorrow? And then we have a perfect theory, but oh by the way, this new technology just completely destroyed the table with playing we're playing the game at. That kind of stuff does happen.

That's disagreeing with Dalio's theory. Because Dalio's theory is like, this is it, this is the cycle, this is how it happens. I've looked at hundreds of years of history, here we go.

I understand why you would say that. I think that the way I understand Dalio's theory would be in a vacuum of said events. I don't know for sure, but I think if Dalio were here, you would be like, well this is the theory in this context and in that context, it's no longer what I'm trying to tell you. But I could be just giving him more credit than he deserves. I would like to read that. None of these authors ever are right quote unquote. So anybody who comes to you that tells you that they've the right answer, is probably a little disillusioned, and in the best possible way quite honestly, because they're being differential in some sense, authority that is presumably more educated in some sense. So that caveat aside, I would like to read criticism. I think that one of the things that I find very interesting at this point is there does seem to be a decline in the power of words and in faith in general.

And so this doom prophecy is discouraging and it is a bit much admittedly. But it's hard to reconcile some of the more optimistic economic theory in a world where the words are just increasingly meaningless. It does look a little bit late Roman times, at least for the myths, where you had a devaluation of the currency corresponding to the devaluation of morals and societal values. So I do find that parallel alarming. I could also just be coming of age. It could just be that when you hit 40, you have enough of a view of society where you can understand how optimism has its limits, and then you start to progress the other way where you have a pessimism, because the tenants of your youth are no longer fashionable. I could be evicted for that. I reckon that. So I don't know, I guess you'd understand.

I even wonder about the currency devaluation. I don't know. Excessive government debt is not a good thing historically. I think the market priced debt being excessive to an extent and that's arguably our reason why we're seeing inflation, at least if you believe in the fiscal theory of the price level. But are we going to see spiraling inflation? I think that's a very open question. And do we have inflation because of the US government creating money as opposed to fiscal stimulus? I don't think monetarism is a very good theory of money. I don't know. I don't know.

Another point too, I don't know anything about your fiscal theory. But all of our futures is still in flux. It hasn't been decided. So any theory you come up with, if it's offered in the sense of theory, then great, but it's not necessarily about our prescription. Let's say the theory says with certainty that the money's going to inflate and that's everything the theory says. We have sovereignty. We have the ability to change things. So if some passion occurs where we all are motivated to change, then we can just throw the theory completely out the window because we had some older writing zeal that arrived and that took care of that.

And that would be my hope. And that doesn't necessarily disprove the theory either because the theory, even if it's not predictive, it could have been a hundred percent correct given circumstances. Like we're maybe playing a game of roulette with the universe here, and you can come up with statistical chances that we're going to get the red on the next turn, but at the same time that almost means nothing because of all the reasons that we know that past performance is not necessarily impact future performance, et cetera, et cetera. So these systems are in gray stages.

It's important. Economic theories make conditional predictions, not predictions. They only make conditional predictions.

There you go. That's very well centered.

I didn't make that up.

I like it. That's what I was trying to say. Yeah, I was going to say, that's great. Who said that?

That was an economist named John Cochran who we had on our podcast a while ago. He said that and I was like that, that's really insightful.

It sure is.

So speaking of economic theory, how do you think about crypto markets through the lens of market efficiency?

Right. So that was a big part of the show. And on the show, it was already refrained, the markets are efficient, end of story, you shut the hell up. And there is a lot of truth to that. I still believe that. But I also believe at this point that there's a caveat, and we even covered this in some length of the show, but markets are efficient to the degree the regulation exists. Meaning you can have perverse regulation and the market will efficiently map to that perverse regulation, creating inefficient results. So I can think of some highly politicized examples that maybe spars of, but in a lot of the debates over what is merit maybe in contemporary society, we may choose to devalue merit. And at that time, we would find that the markets will very efficiently represent those regulatory goals and produce inferior results at the same time. So that would be my bridge on the original thesis of the show.

You mentioned manipulation with Tether and stuff like that. And there's another good paper, I don't know if you've seen, I think it's a 2018 paper. It's in the Journal of Finance, is Bitcoin really untethered or something like that. But they did a forensic accounting analysis of Tether and they concluded in that case, that the 2017 price pump of Bitcoin was heavily related to fraudulently created unbacked Tether I guess. Anyway, one of the things you guys talked about on your podcast a while ago was that markets can't be manipulated or something like that. Do you still believe that to be true?

Yeah. I don't know. That's such a great question. Here, the NFT market's a really easy example of that being tested in a way that I think would... I think it becomes a question of what is a manipulation because the thesis of the show is that yes, markets are manipulated, but also that's what you want and there's no decoupling of legitimacy there. Because if you are venturing to quote unquote manipulate the market, there's a risk involved maybe, probably. And it is as legitimate as the case of when you are earnestly buying something for a price because you would have the same level of inputs into that decision, I think, both ways. It's a bit abstract. But take the NFT market, where you have a collusion between buyer and seller to sell... What was this one? The Jack Dorsey tweet, most recently, for $30 million. Okay. So there's probably certainly some level of collusion between buyers.

You would cast a moral aspersion on that because there was collusion. But if they hadn't colluded, is that now legitimate or is it just as illegitimate? And I don't know. It's a moral question I think. Comes down to your personal values. And so then I think the question reverts to is there an objective morality, to which I think there's no, although there's excellent arguments for why there is, and most people probably believe that there is. And that might be a case of where it's a bad question. The question itself is positing an assumption that has to do with your own personal values. And if the person who's hearing the question shares those values with you, the question will go one way. And if they don't share the values, then they'll go another. It may not represent any great truth. It's a guess.

Good answer. I liked it. I think it's probably right.

One of the benefits of Bitcoin that I've heard a lot is that it can make traditional banking, especially sending wires and things like that, obsolete. Is that true or is there a ton of regulation we have to get through to get there?

I don't think that's true. This demonstrates ignorance on most people as to what it is that banks do. What banks work very well in general and 99% of the time, they do nothing but sit in between transactions. They're a kind of insurance function in many cases, where for the 1% or less of times when the transaction goes South, that's when they show up and get involved. And their fees often advertise that cost over the cost of the corpus of the transaction. So I know a guy who had a wire fraud on a home sale, for example, where there was... I wasn't clear on whether or not there was a typo in the wiring instructions, or there was a moron or there was outright fraud. But in any case, which should have been a routine transaction, ended up being a giant fiasco. It took months to resolve, but was ultimately resolved by way of safeguards and insurances on the part of the bank.

That happens so rarely as to be statistically negligible. But you want that function in all likelihood because the cost is $10 to you or something maybe for a wire transfer in that case. And if you were the unlucky person, one out of a thousand who ends up losing their house, it would've been stupid if you have not paid $10. So there's a giant number of those cases that happen in banking. That's just one easy example. There's so many examples where you really, really, really love and want the bank to get involved. So crypto will do nothing in that case and rather infamously, all the time, we see these explosions on the news of just fraudulent and stupid mistakes that people make that cost them millions of Dollars, life changing amounts of money, and Bitcoin or any cryptocurrency wasn't able to solve that.

So what'll end up happening in a world where you got rid of buyer transfers and replaced them with cryptocurrency blockchain, is that cryptocurrency blockchain will perform identical to what we have now with banks sitting in your transactions offering you the same service, but probably a higher cost, and you'll be happy to pay them. And we'll have different terms for what is effectively the same solution, insurance.

Will it be faster?

Probably, yeah. But to that end, I don't know that we want that. It turns out that settlement delays are often a really good idea. And a lot of them are enshrined in legislation in a way that I think it's probably counterproductive on average. That's just like a feel. I don't have data. Someone does. I'm not the best person to ask. I think it's because banks err on the side of caution. So in an environment where you accelerated or approached to transfer and rebooted the legislation, you would assume that that airing would no longer be the case and it would be faster. But I don't know you would want that. It could very well be the cost that is higher. That insurance cost of $10 on a wire transfer goes up to a $100. And then the question is that what you wanted? Did you want to pay the extra $100? Something like that.

Yeah. I think having the middleman in the case of the bank is actually is pretty good like you're saying. I had to send a wire transfer to Cameron yesterday and I did it through the bank, and the guy I deal with the bank texted me to say, hey, just making sure this was you and you wanted to do this. I said, yeah, no problem. And it's going to take an extra day to do it or whatever, but I'm okay with that, and I know it's going to go to the right place.

Yeah, exactly. And you should aspire not to be the kind of person who needs your money, like is desperate for money. There's also that. Try not to be that guy. It happens sometimes and there's a whole class of people, that that's the only way they operate in life. But maybe rather than try to fix the monetary system, you should try not to be the kind of person who's super desperate for money right in the second.

You're in a different country right now, but we maybe speak in Canada from a place of privilege, where I did that transaction and no one was trying to censor me or anything like that. That's not what Cameron asked. Cameron asked about efficiency is very different from censorship resistance. You would accept inefficiency in return for censorship resistance.

Yes.

Why do you think cryptocurrencies have... We talked about the fact that prices are ridiculously high and we don't know if that's right or not. If the market's efficient, it is right. Why do you think that they have value?

I spent a lot of time on this question. There's a point where harkening earlier to the conversation, what is it that I had changed in me over time? And the logic of value, there is no logic of value. So then what is there to value? And then I have just been reading a lot on that. And you're going to get into very religious books and you're going to get into a lot of philosophy, sociology, et cetera, the humanities. And there's a lot of good answers. There's really no accounting in the matter. I personally think that a pervasive cynicism of incumbent monetary system is usually responsible for the value, meaning more so that you believe in Bitcoin, you see that Bitcoin is the enemy of your enemy. So you join in with a tea party of people and rather than having an affirmational environment, where there was this positive thing that you saw or whatever, instead you are generally cynical about the monetary system. And then you create a mythology that push you in a better light.

You don't want to go around town telling people these terrible things about their system. So instead, you paint it in the best possible light. And then everybody in a space competes for who has the most empathetic story or the best sounding story basically. And then people seize on it. But I don't actually think that the story is necessarily why people come. I think why people come is because they're looking for the story. And the reason they're looking for the story is because they feel something isn't right with either their situation in life or the situation of the system. That's my current theory. So I think that that level, it's a loss of faith in the Dollar and general system. Wealth inequality could also be a big part of it. If you don't feel that you're going up the social dominance hierarchy in your society, you now have a problem.

And that might be the problem that big one solves for a lot of people. We can all probably agree that that's true for at least some people in the space. So I think that's what starts it off. And then, once you have a critical mass there, I think it becomes a snowball effect where you just have these me too people. Not the political me too people, just apolitical sense, like I'm with the winning group kinds of people. They show up and then they just parrot. They just mimic. They mimic whatever they hear that they think is the prestigious person in the group. So sometimes that's like say – because that's what prestigious people do.

And then sometimes it's like Vitalik. I don't even know anymore what Vitalik has to say, but you get the idea. I think that these sort of coalition groups form along those lines, and I think that's what gives Bitcoin its value. And not to diminish that by the way either. I don't think that that's a knock again. There were good knocks against Bitcoin, I don't think that's one of them. It's just the way that bulls general work in the market, generally. It's just that now we have currency issues and maybe that's what's new, maybe.

I watched a little bit of the Bitcoin conference by video. And there was one where they had three people from countries where there's not a great legal system, not a great monetary system, lack of monetary sovereignty and all that kind of stuff, I'm thinking that's pretty cool. That's one of the things that Bitcoin is supposed to do. And then I scroll down to the comments and they're all comments about how the price is going to pump. And I'm just like, man, it's such a disconnect between why people say they're here at Bitcoin and why they're actually there.

Absolutely. To that end, cryptocurrency may offer some solutions, but a lot of private arbitration systems have existed in the past and will exist again in future. I was in Honduras last year. I visited a place called Prospera. They actually made an announcement to the effect they had a bond they were issuing at Bitcoin 2022 conference. They're interesting. They're offering some interesting solutions to the arbitration issues that these poor countries could have.

Unfortunately, these arbitrations are often as good as the paper they're written on, because if you can appeal to a higher authority, then that's what you're going to do. So even in the case of crypto, it doesn't matter if you are binding on the blockchain, in many senses, if your blockchain can just be censored by the local government. So we'll see the degree that that's efficient, but it requires a level of good faith amongst the actors of the system to put together a coherent community. If we are in the community of, let's say, I don't know, Prospera or Ethereum or whatever your community is, am I going to elevate to a higher authority? If I'm not, then these arbitrations are going to be useful. If I am, then they're basically a waste of time for everybody, because you're just going to go to a local court anyways at the end of the day, which is what we see happening all the time in the space. So that's not always the easiest to solve problem.

While we're on the subject of Bitcoin and Bitcoin 2020, I don't see anyone talking about this, but I find this to be slightly amusing. The goal that was in the headlines there, I can't help but to draw parallels to the golden cow mythology in the modern state of Bitcoin at these conferences. And in particular, as you see in the comments section. I think that's actually probably one of the better knocks against Bitcoin at this point is that it's becoming very literally a case of the golden cow, which I think is a bad prognosis for the space. Not even for religious reasons, just like because the optics of the thing is going to get grating for everybody if we abate that at some point. It's at least amusing to me how literal that has become. And that would be a bigger problem with the lacking leadership where very literally reenacting some of the worst aspects of contemporary culture in this space will come back to bite us someday.

What is fungible value?

That is a slightly ironic term, I guess. In the sense that this is a rhetorical innovation, it's important that we use the right words in order to comply with the regulations. Similar, you can't call Airbnb a hotel. You have to call it a home sharing service. So whatever it is, Airbnb at this point. Fungible value is similar. It's a euphemism of sorts for anonymity and it is a euphemism of sorts for various forms of secrecy. It is a legitimate saying that also, in its more objective sense, like dedicational sense, means the ability to swap out units in the sense of a perfect commodity, in the sense that there is no tracking or uniqueness to any token in the system, that they are perfectly swappable with each other and useful. I actually don't think Bitcoin is fungible at this time. I think technology has changed, but, again, you have to consider the euphemism. In the sense that it is euphemistically valued as a form of secretive money transfer, sometimes Bitcoin can be fungible. In the literal sense, it is not fungible I think. But that's an overview of what fungibility means.

This took me a long time to figure out. From listening to you guys, when I first heard you talking about it, I was like, "What are they talking about?" And then eventually I think I got it. But it's like a $10 bill is close to perfectly fungible because I can do whatever I want with it and then give it to you and then you can do whatever you want to do with it. Whereas if I have $10 in my bank account and I electronically transfer it to you, there's a trail. So if I just committed a crime and transferred you the $10, it's tainted to you. Likewise, the $10 bill, if it's got to die from a bank robbery on, it's not fungible. But that took me a long time to figure out. And then Bitcoin, because it has the public ledger, can't be fungible unless you can get on to the blockchain anonymously. Is that right?

100% right. Yeah, you get it. That is in fact the issue. Yes. I think Monero is probably more fungible at this point. For better or worse, that appears to be the case.

Is the guy that you guys used to talk to about Monero still leading it. I can't remember his name. Fuzzy…

Yeah, Fluffypony. His leadership is minimal to none at this point. He's an interested guy. He had his share of controversy. Ricardo/Fluffypony. I like him. He's a nice guy. He may be mired in scandal, he may turn out to be a very embarrassing person to be around, but he gets it. He's smart. He knows what he's talking about. And he plays the game pretty well. But he hasn't really been involved in the technical side of things for a very long time.

At the end of the day, the problem we're going to have in the space that nobody wants to hear is that this is in fact fiat. People can take umbrage with that, there's fine criticism. It is at least my belief that this is fiat. And one of the ways you can know that is because there has to be somebody in charge of the commits. That person has to be a trusted person in the community. And Ricardo did his time and was that person. His name was effectively on the door there of the project.

Bitcoin has this too. This is one of the big secrets in this space is that there aren't 79 protons in Bitcoin. It turns out not to be the case. This is where the postmodernism is very evident, I think. I don't see that as being a bad thing. I really don't. I genuinely, truly don't. But what I do see is that we have to make sacrifices going forward, that being the case, and it remains to be seen if anyone's going to do that. But his function in this space was as a trusted fiduciary of the declaration of Monero.

I 100% agree with you that cryptocurrencies are fiduciary currencies or fiat currencies, whatever you want to call them. And that's one of the things I want to ask you about actually. Is Bitcoin digital gold? That's something that I hear a lot.

This is going to sound evasive, but actually I think it's very technical. I think Bitcoin is a gold simulacrum in the Baudrillian sense. It is, in all sense of righteousness and morality, gold. But that is also to say it is not gold in any sense of the word in matters of truth. Some of this is Kierkegaardian. So I guess you have to ask yourself, is something that appears to be a thing then what it is? If your answer is yes, then Bitcoin's gold. But if it could be the case that that which appears to you as a thing is not, is possibly not the thing, then, no, it is not gold.

It's sort of this weird Heisenberg uncertainty where, can we know a rose by another name? It's like a personal question you have to ask yourself. And depending how you answer that, Bitcoin either is or isn't gold. And I both believe that humans cannot know a rose by another name, thus Bitcoin is gold, and I also believe that Bitcoin doesn't have 79 protons in its nucleus. Mostly because I've read arguments on both sides and they're completely valid.

Like I said, it is very wishy-washy. I apologize, but that's where I'm at with that. If you ask me to put my money on it, I'd say, no, it's not gold. But anybody who did that, anybody who put their money on it and said that it wasn't gold, lost a whole hell a lot of money. But when I was younger, I put my money on it. I did well for it. That's the state of things. This is like the post-modern condition we're in. I apologize. I didn't do it.

Interesting. So can Bitcoin replace the dollar?

No, because the size of its army is zero. This goes back to chattelism. The US government can and probably will just shut this thing down at any time. We'll see when that happens. Probably will happen when North Korea, China, and Russia decided that that's how they're going to do an alternative to ACH and Swift, if it gets to that point.

We play these games in society, one of which is the game that is money is yours. That's the game. It's not yours. It's "Render unto Caesar that which is Caesars." It's the government's money. Yeah, the government works for you sort of, but at the end of the day, the government could very easily shut down all the off ramps to Bitcoin and/or just take control of the Bitcoin repository and integrate it fully with the US financial system.

So in an extreme world, what could happen as an alternative to my whatever I just said, is in fact the dollar goes bust in a style similar to the Albanian Civil War of 1997. In that model, the government employees effectively defected their allegiance to the government. But what happens then is, in this model where government employees are more allegiant to Bitcoin than they are to the dollar, you'll probably see the military become a rogue force and then just move the country under a new flag or something. There'd be war and tragedy. And anybody who's going to fight for Bitcoin, I guess, has the opportunity to do so. And we very quickly find out that you're not going to win against this rogue army that was once called the United States Army. And so that would be the end of that. So you'd have a period of a couple years where it was in stasis, but it was, in my estimation, doomed.

A lot of the Bitcoin stuff, like the hyper Bitcoin- ization dream, happened in 1997 in Albania. That's an interesting story everybody should know because it's just kind of fun. It's kind of funny, I think, because I wasn't there, but the gist of that is that a series of Ponzi schemes took over the entire country and it created a runaway speculative bubble. It swept all the bureaucrats into the bubble, adjusting the allegiances from their employers and the government to seeing number go up and then they started to act in a way that was ultimately detrimental to the health of the country because they were longer acting in the interest of the country.

That is a crazy story. I heard that story from Robin Wigglesworth, who he interviewed you for a story a while ago. Do you know who he is?

No.

But you know what actually? The beginning of my journey to finding you is from him. So he was a guest on our podcast. He wrote a book called Trillions, which is the story of index funds. And so I was researching his writing and he had done an interview with you where he talked about the sort of counter culture of Bitcoin. So I started looking for your podcast, which doesn't exist on the internet.

Yeah.

I eventually found a download link on Reddit anyway.

Awesome.

So it all started with Robin Wigglesworth.

I don't remember that interview. I should look. I'm sure I did. I did a lot. Forgive me, Robin.

Yeah, he's with the Financial Times. Do you think that Bitcoin is decentralized?

Yes and no. I mean this is a word game. It is clearly on the decentralization spectrum. I believe it is fairly centralized, though, within that spectrum. If you take something like BitTorrent and compare it to Bitcoin, I think BitTorrent is far word decentralized. But the big problem Bitcoin has in that sense is that we failed to create a standard. Had we created a standard through positive leadership efforts, I think we could have then had the possibility, at the very least, of multiple Bitcoin implementations. In so doing, we then wouldn't have an apex fiduciary of the protocol that we could have evolved in the sense that HTTP did. HTTP is probably more decentralized even than the bits were, now that I think of it really.

And at the end of the day, the problem Bitcoin, I think, has is that the implementation is the spec. Meaning that there's no internet engineering task force that defines standards. There's no ad hoc comprehension that we can… We can't do that for technical reasons, but there's no way we can have it like Gemini's protocol that has the sort of ad hoc approach to standardization. And because we don't have any of these consensuses, then we only have one program that runs Bitcoin, which is then under the power of a single individual ultimately. And so I would say that it is in the decentralized spectrum, but on the low end of the spectrum.

There are very good arguments why we cannot do any of the things that I just said and I understand those arguments well. Nonetheless, I think we could have, under the right conditions with the right social structures, surpassed that. So it's in there but it's not as decentralized as should be. And in general, I don't think blockchains can be unfortunately, without an IETF kind of approach to the system and probably a reversion to much of the banking system that we have now. You have to have delays of transfers and some certain degrees of insurances, et cetera, et cetera.

Ironically, it's like you have these sort of circles in life where if you want to go 100% in one direction you end up going right back to zero. So maybe that's fine that it's not fully decentralized, because if it were it would end up looking something like what we have now where you have Bitcoin countries like Bitcoin North America, Bitcoin South America, with banks inside of them and then odd little interchange points. So then you'd be like what did we achieve here? Because it looks exactly like what we were doing before.

When you say it's on the low end of the decentralization spectrum, is that referring to the people who can commit code or the mining or what aspect of it are you referring to?

I would say as a technology. We can talk about the granularity of that assessment, but when I think of protocols, so if I compare Bitcoin decentralization as a protocol, torrents decentralization as a protocol, to HTTPs with the protocol, and, again, Gemini with the protocol, I would say Gemini probably stands out as a very good example of decentralization in recent times.

So for those that don't know, Gemini is an alternative to HTTP. It's a very cool protocol. And it has an ethos that is very ad hoc. So there's multiple versions of Gemini, basically, with various revisions and many different clients on many different platforms. So there's no person who really says what is Gemini, but there's this loose understanding of the basics and then people added their interpretation to it and are interoperable with other implementations. It's not a very successful protocol, either, by the way. But that's also part of its charm.

And what about Ethereum? Is it decentralized?

I don't think so and I think it's actually led. Ethereum to me has been like the bane of my blockchain existence, I have to confess. So I have a lot of emotions maybe that are impacting beyond that. Mostly because I never believed in the pitch. I've always seen Vitalik as an outright fraud. We have the DAO hack is just a very obvious…

You know what? I'm going to be more fair. I'm going to say it's exactly the same as Bitcoin. I'm going to say, you know what, if I put my motions aside and I had to be honest, I would say it's exactly the same as Bitcoin. Because Bitcoin has its own style of scandal. It was swept under the rug, but it is just as equivalent to the DAO. For those that don't know, the DAO was a case of blockchain override where there was a cabal of collusion in prominent developers that just overrode a major transaction and changed the protocol. And it was very hypocritical and it went against everything that they said. And nobody cared because it made money. But Bitcoin has its own brand of that. There's been a couple of hard forks of Bitcoin as well. I would say it's exactly the same.

Is that CORN Classic that you're talking about with Bitcoin? Is that the analog?

No. So this is like censored history. This is things that people, they don't like hearing it. I forgot the exact date, you can look this up or I can provide supplemental documentation. I want to say in 2010, maybe it was in 2011, Luke Dashjr was at the helm of the wheel where a published version of Bitcoin went out that had a bug that was causing a split in the consensus. And Luke Dashjr went ahead and updated the code, proposed a silent release, drops a side of the fork that was deemed bad and the blockchain continued from there.

It is very similar to the DAO in almost all respects except that it was at an earlier point in the history when there's fewer people and the mythology, the lore, kind of justified the decision after the fact in a way that was more successful, meaning that the people who came up with the justifications for why it was "right" were more effective at the time really was all. So it's basically the same thing. I can give you literature on that.

But you know what? What else are you supposed to do? Especially, I mean the other side of this, though, you should walk away? In the case of Bitcoin, I think it was a little less vulgar because it wasn't so overtly collusion amongst… In the case of Ethereum, the DAO hack really would not have affected the blockchain in the sense that the blockchain would've continued just fine. It wasn't like two blockchains exactly. There was just an inconvenient transaction was entered. In the case of the Bitcoin fork, the justification was that we would have two blockchains in the sense of Bitcoin classic, although this was before that ever happened. So justifications were different. Which one was more valid is up to the audience, but it's basically the same occurrence. Then how you want to justify it before-wise is fine.

There's a paper called the Social Life of Bitcoin. It's from a sociologist. But he basically talks about a lot of this, not that specifically, but this kind of stuff, about just the people that are involved to make all this stuff work and to say that it's trustless or just an objective existence is incorrect.

Oh, I like that. I got to look that up. Sociologists are like the worst people. Worst people on the planet. I love them. They're my kind of people. I really like them.

It's by a guy named Nigel Dodd, is the paper. He wrote a book, too, called The Social Life of Money. It's a very difficult read. He talks about Graeber's book a lot in there, but he also talks about a whole bunch of other money theorists from a bunch of different disciplines. I don't know, Cameron and I both tried to read that book and he pulls so heavily from other people's work that it was just a bit difficult to absorb all the information. Anyway, it's pretty interesting.

Sociology is hard reading. I'm reading a sociology book right now. I read a lot of sociology. If you're not steeped in the literature, it's a lot. It's taken a lot for me even to get to the point that I'm at even.

Maybe that's the problem. It was my first go at sociology. I'm used to financial economics. It's a bit different.

Yeah, very different. It's kind of equal and opposite. It's kind of neat actually. It's interesting, because I came into this space with the, forgive me in the audience but I'm going to say it, the mythology of economics, like a believer in the mythology of economics. Not to say that economics is wrong and I don't believe in it, but there's significant degree of mythology there.

And then if you're at the point, I guess, where I'm at now, you read the antidote of the mythology of economics, which is the mythology of sociology. It's no more right or wrong, it's that these are competing myths effectively. Like that's, I think, illegibility in much of the sociological literature. So if you don't go into it understanding some of that or with the humility or maybe accepting the arrogance of the sociologists, take your pick, you're going to have a bad time. It's going to be offensive. It's going to be terrible. You're going to be mad. You're going to throw it away. And it's going to be wrong and et cetera, et cetera. That's the way I see it. And that doesn't legitimize sociology, I know this.

Oh, yeah, everything's wrong, right? Reality's reality, everything else is a model.

Yeah, but I would suggest that where economics strive to be right, in many cases sociology almost strives to be wrong. Because sociology will question social conventions in a way that is not from the perspective of the human. If you can get over that, that's where a lot of the wrongness comes from. If you're an alien and you're just 100% heretical, you have zero compassion and zero… you're just not coupled to the human condition, then you're probably going to make a really good sociologist, in my expectation of the field. So you got to get through a lot to get through sociology. It's not fun. But it'll make you real cynical really. It's sad.

Do you think that blockchains are immutable?

Sort of. This is a spectrum question. The problem you're going to have is ultimately rhetorical, because "What is Bitcoin" or "What is Ethereum" eventually becomes an issue, meaning like what is the true Bitcoin blockchain? Which side of the fork was the true Ethereum blockchain? Which side of the DAO fork? I think there's a very good case to make Ethereum classic is the true Ethereum. And then does that mean Ethereum is immutable? The answer would be no.

But that's like we're trying to approximate social consensus with energy and then we're trying to use the language which is social consensus based to describe the energy and you're just going to have a complete mismatch. So it is true that changing the bits that are actively used on exchanges is not impossible after a couple blocks on any blockchain, but it is also the case that social consensus can arrive and overturn the blockchain at any time and that's happened in many cases. And in fact we're using mutated blockchain as a result.

Your job as the podcasters is to often find simple solutions to complex problems. And then my job as Chris DeRose is to add nuance. And so you're not going to get what you're looking for sometimes. This is one of those cases.

So is immutability a good thing?

That's a perennial question. For some applications, yes, absolutely, it's required. Like censorship resistance probably is one of those. For most applications, no. Most people want mutability. That's why you have chargebacks on your credit card. Immutability is good if it's your last option. If you can't get service in a mutable world, then you want immutability and you're going to have to deal with a lot as a result, because you'd have to incur a lot of sacrifice. So it depends what kind of an actor you are in the economic system.

We've talked about Bitcoin and Ethereum, they both use a proof of work consensus. I think Ethereum's talked about moving to proof of stake, but that, as I understand, hasn't happened yet.

That has been promised for years. Since day one it's been promised.

Can you talk a little bit about consensus and about proof of work and why would Ethereum be talking about moving to something else? And do the alternatives to proof of work solve its problems?

Yeah, so proof of work is the core innovation of blockchain. The reason that any of this came to be is the "solution" to the Byzantine Generals' Problem. And we pulled that blockchain in the first iteration of the word blockchain. It is my belief that that's what blockchain is, is the solution to the Byzantine Generals' Problem and that is solved by proof of work. Now the benefits of the professed proof of stake solutions are that they're environmentally efficient, the code conceivably is more accessible to, I guess, miners, countries, individuals, et cetera. All that being said, blockchain without proof of work is not a blockchain in my mind, it's a database at that point.

And there's an extensive amount of literature that defined the Byzantine Generals' Problem. The reason that was a problem is because proof of state was attempted for decades by computer science experts, academics, without any solution and for good reason. If you know what the problem is testing to, it's akin to perpetual motion. It's almost like asserting that you can define a state boundary without war. It's just not doable. There has to be some matter of state, will be a testing of territory, and going to be a testing of truth. And these are lofty ideas. And they're analogies, so they're leaky. But in the computer science realm, proof of stake is not possible. Now Ethereum may very well go to proof of stake, as have other blockchains, but what they end up being are consensus systems by humans. It's no longer computer science at that point. Now you have a committee, now you vote. You can call that proof of stake, if you want, but I would just call it a committee and I would call it a database.

The reason I think people want it is because the environmental benefits would be awesome. No doubt. That weighs on my conscience even in this space, is the environmental issues. But it's not going to happen in Ethereum and it's never going to happen to any real degree, I would suggest. I'm not the best computer science guy, but I know at least enough to know why that's a very tall claim.

Again, one the beefs I've had with Ethereum is that you have this sort of affected seer archetype that is sort of the apex of the Ethereum myth. His name is Vitalik Buterin. Fine. But I've talked to this guy before he was famous, I've dealt with him even in person. Yeah, much meshugah. And he's just not who he says he is. The guy's a charlatan. I don't even blame him, because I actually do think he has a profound affectation. And I think what happened is a lot of people got to him and put him in a space that he wasn't ready for. I kind of feel bad for the guy, because he's like at the head of a ship that is not really a fair place for him to be.

And so Ethereum made this claim from the start and people feel that they're owed it. There's a "hope springs eternal" demographic in the space that demands that this be on the development schedule. And every time this is going to come to fruition, it's going to get delayed. It's happened over and over and over again. And that will always be the legacy of Ethereum out there, this matter, I sense.

So that's the gist of how I see the proof of work and proof of stake fields. What's going to happen with proof of stake is that it will succumb to the kinds of things we saw with the DAO. It'll become even more trivially censored, I think, than these other proof of work blockchains. And it mostly will just be a lie, because to the degree that it's proof of stake is to the degree that it's controlled by a committee.

And these are problems that are like our daily lives. What makes right? Because democracy may or may not exist to the degree that you want to believe it exists, but theoretically that's the same phrasing of this problem. How do you determine what's right in society? Do you take a group of random people and ask them? Do you have lobbyists determine? Do you do this whatever it is that we do now in America? It's the same set of problems really. It's not technical.

That's deep.

It's not technical.

That's deep. It is. I don't think people realize, in general, how deep all this stuff goes. What you just said, I think, is true, but people look at this stuff and think, "Oh the Fed's printing money and therefore Blockchain's good." But there's so much between those two statements that's not easy to understand.

Agreed. And I think it's funny because I spend more time in BudCoin than Bitcoin, but mostly because they don't censor, honestly. I don't even agree with BudCoin in a lot of stuff. But yeah, if you're a Bitcoin skeptic, you're probably really stupid and if you're a Bitcoin proponent, you're probably really stupid. So it's right in the middle point there, where you're going to find a lot of the really cool stuff in the space.

You said something that was a pretty big statement, I want you to elaborate a little bit. You said that Vitalik is a charlatan.

Yeah.

Lots of people listening probably shot back in their seat, because he's viewed, publicly, as prominent figure in business today. Can you elaborate on why you would say that?

Yeah, well the reason he's understood to be the way that he is because of the social media bubbles that we were all living in. If you try to bring a person's history to light in a way that isn't what the group wants to hear, you're going to get removed from the space. So all those people ever heard are the positive things about Vitalik. But I remember when he was pitching perpetual motion machines in the form of the quantum computing schemes of, I guess, was that probably even 2012 or something? It wouldn't surprise me if the video's down. But you can see him soliciting investors on quantum computer and I believe it was the Amsterdam Bitcoin Conference in 2012.

He's a charlatan in the sense that most people are charlatans, where they believe their own bull. I don't think that he's really out to defraud people. What I see, for sure, is that he's a useful figure because of his affects and be it autism or otherwise, he's an effective individual, so there's a mysterious thing going on there. And it seems like people have a lot of faith in that, that archetype. But I remember him in the early channels, he was not that impressive of a person. For little kid, he was very impressive, no doubt, he's not a stupid man, but he wasn't of the level that he was being regarded as, then, certainly not now, he's been deified at this point. And he had very run-of-the-mill ideas and they were bad ideas at best, and I would submit the quantum computer examples at the top of that list. He had a few others and he was just doing my script kiddie stuff in the bitcoin talk forums. That was fine, and again, precocious for a young man, he was probably 17 or 16 at that time.

But he's not a computer science person to the degree that he presents. And what's happened over time is that people who are speculators and the people who are like financeers, pushed him into a spot. He's kind of dumb socially, and so he didn't know that the worlds were putting him in a place that he was set up to defraud people, telling him what he needed to hear, congratulating him for the kind words and that whole thing. He's had a lot of speeches on these 10-dimensional hypercubes. When he puts that kind of stuff out there, I can't help but think, he does know, on some level, that he's a fraud.

Maybe he has imposter syndrome at some level or maybe he doesn't. But if you press him on these things, he goes into autism land, which I think is a defense mechanism, whether or not he's conscious of him doing it, I don't know. But other people respect that, there's this culture, I guess, in the world now where, if somebody's affected, you can't press them, which I respect, up until the point at which you're taking people's money, and now I don't respect that culture anymore. So then he gets sheltered and then if you're coming to him with an honest, very honest attempt at critical thinking, you're going to get ushered away and you're going to get removed from the room and the believers are going to keep giving him their money and then the scam continues. That's how I've seen that.

But for me, he was just a normal guy in the space up until the Bitcoin Miami Conference of, I think, 2013. I watched his presentation, this was my mistake, I guess, I should have put money into the job and I was very underwhelmed with all the claims in the theory and him in general. That was stupid financially, I suppose. And to this day, I still remain of that mind. I'm yet to see very much come out of the project, that I would consider successful, other than numbers going up.

I wanted to ask about that. Has it lived up to the claims that he made at that conference?

The audience can decide and they'll probably decide that it has, because the number went up. But, to this day, I have yet to understand why you would put code on the Blockchain because you can solve a lot. You're always going to have the Oracle problem. This for those that don't know, the Oracle problem is that some truth has to enter the system from outside the system. If you want to make a bet, a sports bet on a team, you have to broadcast onto the Blockchain who won the game. If you want to have some sort of arbitration of any kind between businesses, some judge has to enter onto the Blockchain, their decision. Well as it turns out the way that code refactors, you can do that with Bitcoin. You can do that with almost any Blockchain, because the levels of trust required to transmit money in a two or three contract is identical to the efficiency as presented of smart contracts and code in Blockchain.

I guess what I would say is that all smart contracts ultimately can be expressed as a two or three, and of multisig contract, and all that the smart contract code on the Blockchain does is make your Blockchain gigantically huge size and complex and hard to prove and on and on. So the pitch is very dubious there, to me, you have to not know much about computer science, I think, in order to believe it in general. And why you would run Ethereum as opposed to Python, which is a much better ecosystem and much faster and on and on, is something that's beyond me.

And you also have to consider, this is tangentially of that concern, but the cost to run the code on the Blockchain is ridiculous and promises made by Bitcoin, by Ethereum, is that you're going to replace Uber or Airbnb with decentralized systems. But I don't know what the numbers are of Ethereum, but you're talking about, I don't even know what's under one megahertz. What is a thousand from a hertz. You're talking about calculations, by hertz speed, we get 10 hertz or 100 hertz. That's the kind of system you've created here with Ethereum.

So I just don't really understand the pitch. I don't think anybody does, which is why they've hired this affected person to get everybody to trust him. He surely knows what's going on because he's affected. This is, again, the postmodern condition in the sense of Blockchain. You have a lot of trust in the archetype of the blind sea, this goes back in literary history for thousands of years. The man comes to the village and he's blind, but he can see things that you can't see. And there is this demographic on the internet that is compelled to invest in that archetype and that's what Ethereum seems to be, to me.

I have another banking question for you about money transfers. Can public Blockchain solve international money transfers?

Yes. I actually think it's pretty good at that. And again, North Korea's the very obvious example of that. North Korea is solving a lot of this money transmitting problems with Blockchain. We may not like that and there's a lot of reasons why that may be terrible, but that example exists. Ordering drugs from China, another great example of this. Ultimately, I think there are regulatory solutions that have to manifest, ultimately. The United States is not going to permit a black market for nuclear weapons to exist on Blockchain. There's a lot that they can do at the level if it becomes that bad.

But until then, it's doing a great job. Ransomware, Ransomware's another great example. Ransomware is absolutely, that's also probably a killer app, a big one. I know there's some world repugnance into these matters, I don't entirely share them in some cases, particularly with Ransomware. I actually think Ransomware's probably a net benefit to society, even if it doesn't look like it right now. But that would be another case of international remittance, is fighting efficiency of Blockchain.

Why is Ransomware a net good thing?

Because all my career computer programming, I watch as buggy software after crappy software gets released, and there's never been an incentive to fix it. And so what ends up happening is, you end up with entire industries with existing serious security vulnerabilities to foreign state actors and just bad actors on the internet, and it's only the benevolence or the lack of economic incentive that has prevented widespread calamity thus far. And so yeah, these Ransomware people are solving the problem in a repugnant way, but finally, finally we're seeing somebody give a shit about the quality of the engineering coming out of these companies. The problems were always there and these were ticking time bombs.

So in my estimation, this isn't the ideal way to solve it, but it's at least the manifestation of a solution that has finally arrived. I think that for, all considered, that's how I see the Ransomware. You, the individual who's listening to this, you are choosing to get Ransomware when you run Windows at this point. I'm sorry, I know that Windows has a great software, but run it as a VM, that's what I do. I wouldn't do my banking on Firefox on Windows. I wouldn't do a lot. I wouldn't watch porn on Windows. Sorry, just gaping hole, you really don't. It's on you if you're still using that.

I'm going to ask you about a claim that I've heard somebody make, maybe you'll recognize where the claim comes from, maybe not. Do you think that we'll see nation states that exist only on the Blockchain?

No, because at the end of the day, the efficiency of censorship resistance, and this is a perennial confusion in the space, you're not going to protect yourself from censoring yourself. That's, at best, an oxymoron. This is the DRM problem, in some senses. But if you are a nation state, then you can just use a database, because you trust yourself. I don't think that that's a tractable, idea goal. All that Blockchain's going to do at that point is add a lot of unnecessary energy burden to your country.

Although, what I will say, what I'll add to that is that Blockchain's a working flux. So what'll probably happen is, what will almost certainly happen is one of these countries, let's say El Salvador, will declare that they have Blockchain. And because the word has no definition, at that point I'll look stupid, 'cause it'll be some headline shows up and then I have to answer to my ignorance somehow. I don't know.

What value do private Blockchains provide?

It's the exact same thought question as the last question. Private Blockchain showed up at one point. That was a phase, when we asked another question about the different types of people who showed up, that was one of the phases. The private Blockchain people showed up and they decided this was things that somebody needed and you don't. I guess if you in your company don't trust your company, then theoretically, private Blockchains could be appealing to you, although it still wouldn't solve problem because you can't trust yourself. It's a very schizophrenic question, really, I think, because, and again, this has the same measurement as the last question where someone's gonna announce that they have a Blockchain in their company and then you're going to look at it and it's going to like lo and behold, either not use proof of work or it's going to be beautiful and it's just going to be a big overt machine that would've been better implemented using either Git or Bicycle.

And you say this as a software developer who has built software.

Yes.

Which I think is a good perspective.

Thank you. This is, I think, a general consensus in the space amongst developers who have not gotten their start in developing and developing with my sequel.

What do you think are the most promising projects or tokens or coins or whatever in the space today?

So, we've talked about Winarrow, that's really, in terms of my investment exposure, where I've actually put a lot of the money that I have in the space now. I sold Bitcoin, I sold other things, but I don't know if it's going to perform financially, I would be very clear about that. That might just be the very first watching sensor. It wouldn't surprise me at all if this value ends up being zero for that reason. But in terms of what I came here for and what solutions I found that was doing the best job, that is very impressive. I also like their approach to mining is amazing. We haven't talked about that, but that's also very impressive.

Outside of that, I actually do think the NFTs are kind of interesting. I don't think that there's... Their valuations are absurd, but they're at least fun and they're interesting. Much of what's going on there with NFTs actually, I think, is a fairly complicated social dynamic, which I think is inheriting a lot of the cultural attitudes of the art collection markets. And I think that there's a lot to be said for NFTs in the context of, if anybody's seen the $50,000 banana that was sold at Art Basel in Miami last year, that's coupled very much with, I think, the kind of mentality behind NFTs. So it is interesting in many ways. I think there ultimately can't be applications for NFTs, but the valuations are insane, so I wouldn't want to condone that.

And past that, I just don't really see a lot of stuff in the space that's speaking to me. I don't doubt that there's going to be a lot of successes, but I doubt that they're going to last successful for very long. They're going to be constant blips on the market cap followed by versions of zero.

What about the technical aspect of NFTs? I've read that they all go through centralized services or are they really decentralized and I don't know, stuff like that.

Yeah. They have the same kinds of problems as all Blockchains, some more and less than others. I was very involved in counterparty in the early days of Bitcoin because I liked this idea of issuing non fungible assets on the Blockchain. There are environments where you don't want to go through a traditional counterparty to perform a lot of action. So like the counterparty project, so I should throw the counterparty project, I have exposure to the counterparty project. It's not a fashionable project, I think it's a very impressive project. It's got a lot of warts, but I think it set out to do a thing, it has done it and I credit it for the entirety of the success of NFTs. For those that don't know, counterparty is what the name says. It is a counterparty system built on Bitcoin. It is not its own Blockchain, it works on Bitcoin and it offers the ability to declare assets, buy and sell assets, trade assets and some other incidentals around that, entirely on the Bitcoin Blockchain, and without the use of an exchange.

So, I don't know how to describe the story at this point, but rare Pepe was a fantastic example of this in action. It is the killer app of counterparty. Take it for what it is, but I think that it is a very impressive project, and I think that all of the NFT success is anchored in the technology that is counterparty. But the thing is, the demographic of the NFT market is not this irreverent, forshamed crowd. So the history of NFT means it's never going to tell the story that is counterparty, because no-one wants to hear that story. But that is, nonetheless, true that the entire innovation there came from counterparty.

I was in a hotel in, I want to say, was it Nicaragua? No, it was Guatemala, maybe, where I saw, I forgot what football player on Fox or maybe ESPN, shilling his NFTs, and this was at the start of the NFT thing. And it was very evident to me, it was John Elway, is that a person? I don't know, some famous football personality was on there selling NFTs of his Heisman trophy or some active thing that he did on ESPN. And I was just watching this and I was like, "This guy has no idea. No idea that there's a picture of me kissing John Seth's butt on the Bitcoin Blockchain, and that's where he got this idea from." And the story's never going to tell that and that's fine. But for me at least, I am vindicated and I actually really like the counterparty technology still. I think that's a cool project and if you sit around and play with it, you're probably going to get sucked in because it's absurd and it is irreverent.

That being said, put a bunch of money into it, just enjoy it for what it is and have fun with it. The shame in this space too is that we actually can do more innovative things. There's a lot that we can do in this space, but until the rampant speculation subsides, I don't see it happening. We're storming out innovation with "Get rich quick" schemes. So that would be a case of innovation there, I think, and I like that project a lot.

What do you think of DOWs or DAOs?

I don't think much of them. I mean, look, if counterparties are DOW, then I like DOWs, but DOWs are typically this idea of social consensus, but not calling it social consensus, and pretending that it's code. And when you actually look at it, it's entirely a matter of social consensus. It's no different than Instagram or any other company. There is some degree of regulatory compliance that may or may not have been achieved with DOWs, meaning if you don't call your company a company, then it's legal. If you don't call your hotel or a hotel, then it's legal. So there's something to be said for DOWs there. But I think that a lot of that regulatory efficiency has not actually come to pass, and I think the SEC has instigated regulatory action against these DOWs. And so to the degree that it be centralized is no longer anything applicable.

What are some of the best applications that you've seen for smart contracts?

Well, M-of-N is, in fact, fantastic, I think. So the problem you have, I think again with the over funding, is that you have good M-of-N systems. For those that don't know, M-of-N is where a transaction only goes through if four out of five people pass, or two out of five people pass, or two out of three people pass the transaction. So that does let you do a lot of basic legal services, as it turns out, there's a lot of very complicated ideas that can be done through M-of-N. And very good exchanges will often incorporate M-of-N in their security systems. So if you want to take something out of cold storage, you may need three of the company's principles to sign off on the transaction and then move that cold storage.

But you can also facilitate betting, you can facilitate... Almost anything you've heard in terms of finance can probably go be reduced to M-of-N with the code existing on a server and the parties who are responsible weighing in and signing off on the value transfer. Now unfortunately, because there are very openly broadcast authorities in that model, that technology hasn't actually been successful because nobody wants to be that guy in this space, because this is a den of thieves. But I think M-of-N contracts are very impressive, I like them. That is the smart contract in my mind. There's a lot of people who are against this, but that's the way I see it. And then from there, yeah, you end up with counterparty being a very cool solution.

Have you read Larry Lessig's stuff?

Much of it. I generally really like what he has to say a lot. I don't like his prescriptions a lot, but I agree with his comprehensions. And I just don't like his prescriptions because – I just don't like it. They're good prescriptions, I just have my own personal... But continue.

I haven't read his stuff too in depth, but I actually, I've heard him speak and read a couple of his articles, not his book, though. One of the big takeaways from his stuff was that there's always a silent additional party to any contract and that is the state. I think you mentioned earlier that a lot of legal arbitration ends up happening with cryptocurrency transactions.

Yeah, that's right. He's a cool guy. He has a really good commentary. We ask him for solution, it gets a little bit sobering, which I don't think I like. Yeah, he'd been known to say, "Blockchain in the trash" kind of thing. Even though I agree with everything he says, even probably how he sees it, it's not what I want to hear. Doesn't mean he's wrong, doesn't mean it's bad advice, just not what I want to hear.

We got two more questions for you. Do you think that cryptocurrencies and public Blockchains, do you think this is revolutionary technology?

Yes. That was easy. I think 3D printers are revolutionary too, I got to say. That one's really creep up on my radar lately. Getting that 3D printer itch. More specific, the robotic side is impressive, but also the whole gun side is just, if you haven't looked into what's going on there, that's going to change things a lot. Maybe not for the better. It's very impressive, it's revolutionary stuff happening there.

I've followed the gun stuff loosely, but I am a 3D printing hobbyist-

Oh cool.

... But using plastics.

Yeah. Well, there's a lot of impressive plastics now they've got, I don't really know how the material science works, but metal infusions into the plastics and things, the gun market's getting real good real fast. So that's probably going to work and that's going to change a lot. For the better, I don't know, but it's revolutionary.

Yeah, 3D printing is amazing. Ah, okay, last one. You alluded to this earlier, but we didn't really talk about it. Do you think that crypto solves or helps with wealth inequality?

No. It could have. There's an alternate universe where the regulations were different and the people were less apt to engage in zeal and mania, but that world is not the one we're living in. So unless we change things, I don't think that's going to come to pass, unfortunately. 'Cause that was a possibility. But there's still time left, let's see.

One of my takeaways from the paper I mentioned earlier by Makarov and Schoar, they talk about the concentration of Bitcoin ownership in not that many wallets.

Oh yeah, absolutely. Yeah. I'm here in Columbia and I'm looking at... All of South America has the craziest import export controls. They don't make sense and everybody knows it. Uruguay actually might make a lot of sense, that would be an exception. Little hypocritical for me to say, 'cause they have a lot of import restrictions there. But for a lot of these countries, it just doesn't make sense, and there's seemingly a lot of corruption at the heart of the rules. So I could have seen more vibrant exchanges happening between countries with a more sane cryptocurrency world, because I think a lot of these sort of Banana Republics are able to exercise weird, export controls over their citizens that are onerous by way of making regulations that just don't really benefit the people. Unfortunately, this sort of floating unit of account that is just incentivizing people never to actually use the damn stuff, it's just going to concentrate the well further and decreasingly make it a solution for these kinds of problems. And that's it.

All right. That was our last question, Chris, this has been, it's been awesome to talk to you.

Thank you.

But it's also been awesome to hear what you have to say.

Thank you. Yeah. I really appreciate being on guys.

Yeah, great to meet you. Thanks.

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