I guess my first question to you Jameson, should we use Bitcoin as medium of exchange?
So I have been developing lightning based applications and products for about a year
now because I believe that we should be using Bitcoin as an exchange, but doing it on chain,
especially for your average retail stuff, it doesn't really make sense to me because
the question you have to ask yourself is, does the entire world need to know about this
transaction that I'm making?
In a retail standpoint, I don't think that it's important that my transaction gets broadcast
to 100,000 other people who verify it if I'm just buying something at a store.
If I'm transferring my life savings or I'm making a large life changing purchase, then
sure I want lots of people to verify it, I want that to be on the record forever.
But if we're talking about day to day spending, then it makes more sense for me that you would
have greater privacy and scalability type of solution, which is where these second layer
solutions come in.
I think that it is important for people to have the option at the very least to make
those type of transactions in a more private setting where you don't have to go through
your third party surveillance apparatus basically to make it.
But with where we are right now, it's still pretty difficult to do unless you're technically
minded, unless you're willing to put in some time.
We'll talk about it, but I guess I want to focus on the question.
There's a lot of people out there that hold a Bitcoin.
They don't want to spend their Bitcoin.
They don't want to actually use it for real world commerce.
So Giacomo, what do you think?
Should we use Bitcoin as medium of exchange?
No, spending is a scam.
I will elaborate a little bit.
So first of all, I think there is some kind of chronological order between the function
that you listed of store of value and medium of exchanges.
Of course, they are completely coupled, they are completely entangled.
But there is a chronological succession.
What is a medium of exchange?
A medium of exchange is not just some object, some good that we exchange.
Because even in barter, there is no medium of exchange, but we exchange one apple for
one fish.
So when you have a medium of exchange, it means that you have an indirect exchange in
which I give the apple in exchange of something else, and I will store this something else
until I can exchange it for a fish with money.
So the problem is that you can have a medium of exchange when people is willing to take
something they don't need immediately, store it for a while, and exchange it later for
something else.
So the medium of exchange is not something with two goods, it's something with three
goods of which one is stored until needed.
So the store of value function of money somehow precedes the spending and the spending and
the medium of exchange function and the unit of account, which is, we could argue, the
last one.
Bitcoin is not yet there as an established store of value.
It's still quite experimental, it's still quite volatile.
The price discovery of the market, the process of price discovery is still going on, and
it's quite, let's say, quite lively.
And so until that's completely established, it will be very difficult to have a very strong
function as medium of exchange.
I think that's natural, and that should not be pushed over its natural course.
Of course, that doesn't mean that nobody really should spend Bitcoin.
I give you some very clear example of people that should be spending Bitcoin.
People who wants to buy something that cannot be purchased with fiat money.
For example, if you want to buy something online, and that something online cannot be
bought with credit cards, either because you want to buy something that you shouldn't buy,
don't do drugs kids, or you want just to donate to WikiLeaks, or you just want to, well, these
days you want to do whatever is not politically correct, then you cannot use credit cards
because they're super easy to censor.
So if you want to use defiance against some kind of external rule, you need to spend Bitcoin
because you have no alternative.
If you are in brick and mortar real life, if you want to buy an illegal coffee in some
country where coffee is illegal, then probably you should still use US dollar cash because
it has the greatest adoption so far.
The second reason you should spend Bitcoin is because you are one of those very, very
ideologically driven guys, and maximum respect, that you don't even have a bank account.
You only have Bitcoin.
You gave up all your fiat, so of course you should spend Bitcoin.
Some of my friends, they are triggered when I say that spending will be something that
will happen in the future because they have to spend every day because they only own Bitcoin.
That's great, but that's a very niche.
It will remain a very niche use case for a long, long time.
Most of the people we know will still own some fiat shit coin for some years.
And the third reason we could spend Bitcoin is for something which is not forbidden, but
is so complex from the regulatory point of view that you want to be in the finance of
the system not because you want to break rules, but because you want to circumnavigate rules.
For example, international payment is not illegal to pay a developer in India from Switzerland.
It's just very expensive and annoying with bank transfer.
So if he can accept Bitcoin, that's way better because we just cut through a lot of regulatory
annoyance.
So it's okay to spend, but spending will naturally come after a better establishment of Bitcoin
as a store of value.
That's obvious for the price dynamics.
If you, I mean, you are in Venezuela, you have pesos and you have dollars.
Actually, you have pesos, dollars, and petro shit coin.
Anyway, you have pesos and dollars in the black market.
Which one you spend first?
Of course, the peso shit coin, and you keep the store of value for later.
When you are out of shit coins, then you spend dollars.
When you will be out of dollars, then you will spend Bitcoin.
It's just a progression.
If I can, fourth reason.
We're talking about spending.
You might also want to spend Bitcoin because you want someone to receive Bitcoin.
Create new hodlers if you will.
Got it.
So before we're drilling down into the benefits of using Bitcoin as medium of exchange, you
said Giacomo that the two are coupled, right?
The store of value and the medium of exchange.
So many, I want to ask you, could we have Bitcoin, let's imagine in the world that we
want to live where Bitcoin changes the gold standard and Bitcoin becomes the new standard
of money.
Can we have Bitcoin as the new gold standard, but have medium of exchange using fiat?
So that definitely can happen, but it will not be very good if it happens.
So yeah, the store of value and the medium of exchange are very strongly coupled.
You can't really have a medium of exchange without the store of value because what it
means, the medium of exchange, you get it as payment and then you pay with it.
And from point A to point B, it needs to store its value.
And the other way around, it can't really be a store of value if it's not at some level
a medium of exchange because in order to store value, you need to first get value and then
give the value to someone else so that two things are very strongly coupled.
And it also manifests in the fact that in order to be a stable store of value, it needs
to have some underlying use.
So for example, this is example is that people who invested in Bitcoin at the end of 2017,
they did not store their value, right?
Their value got cut in half.
And of course, most Bitcoins believe that long term everyone will be all right.
But in the shorter term, the value of Bitcoin is very volatile and this is not what makes
a good store of value.
A good store of value should not only increase over time but also the same.
So you're saying that in order to be a stable store of value, we need to use it as medium
of exchange?
Yes, indeed.
Because as long as Bitcoin is just a speculative investment, it will be volatile, it will be
affected by market trends and so on.
But if it's used more widely, then its value is more stable.
There is something called the equation of exchange, MV equals PQ, which connects a few
parameters, most important of which are how much a currency is used and what is its total
value.
And right now, the value of Bitcoin has nothing to do with the equation of exchange, it just
has to do with the speculation.
This is very volatile.
Once people use Bitcoin much more, its value will come from the medium of exchange and
that's much, much more stable, which in turn will make it much more effective as a store
of value.
And I think the other point you touched on and Jameson mentioned choke points in his
keynote is the switch between store of value and medium of exchange.
Can it be defined as a choke point?
I'm not sure, I think these aren't Boolean variables.
I think both uses can be quantified, they can be in case of a time.
So unlike what Giacomo said that first you need store of value and then you can have
medium of exchange, I think the two kinds of users can go together, each one enhances
the other.
So you guys don't agree, right?
Well, we agree on some things, we disagree on others.
I disagree on the key point that many made that there is a symmetry, I don't think there
is a symmetry.
I think that as many said, you cannot have a medium of exchange without being a store
of value because you have to store it for a while, but I think you can have a store
of value which is not a medium of exchange.
It's difficult, but you can because of course a store of value must be exchanged, but it
mustn't be indirectly exchanged.
For example, a house – But don't you believe that the store of value needs to be attached
to real world resources?
Sure, but let's take real estate.
Real estate is, can be in certain circumstances a store of value.
It's almost never an indirect medium of exchange.
So most of the money, the kind of money we used today, we used in the past, shells, kettles,
they were firstly collectibles mostly and then from collectibles means to show – there
is a – Nick Sabo published a very interesting theory of the evolution of money.
Usually in school you learn that first there is barter, then you find somehow the medium
of exchange to simplify barter and then people start to store it.
While there are many logical and historical evidence that it could be the other way around.
Most people start to store some collectibles which are hard to make, hard to produce – oh
sorry, I hijacked your answer.
Anyway, I think there is a key disagreement there.
Sure, no problem.
I just want to add that I think each person should be the change he wants in the world
because what I got from Giacomo is that, okay, we'll wait, we'll hold and sometime in the
future people will use Bitcoin.
That's why I want to ask.
And I don't really believe in that.
I think people who think that Bitcoin should be used, they should use Bitcoin themselves
and that's what promotes this state of mind where Bitcoin is actually used.
So Sergey has a business based on Bitcoin, right?
Let's ask Sergey, are people using Bitcoin as medium of exchange in your experience?
Well, obviously, a bunch of people are but I mean it's also the case that we saw the
show of hands that a lot more people are currently using Bitcoin as a medium of exchange.
Why are people using Bitcoin?
That's a good question.
For a lot of reasons, it's a lot of the cases that Giacomo listed actually.
A lot of the time it's simply people who live in the Bitcoin economy who get paid in
living coins, who earn coins in different ways, like we do have a circular economy.
It's just smaller than the speculative investment economy.
But we have people who earn a living, who get paid like regular salaries in Bitcoins.
We have people who earn ways online, if you're a web savvy 17 year old in Bangladesh and
you want to make a living out of that, probably Bitcoin is going to be a great tool for you.
We have people who earn coins just trading and we have people who bought coins in 2013
and now they're stinking rich and they want to buy $10,000 of iTunes credits because they
have a really big character.
We have people like that as well.
You try to incentivize people to use Bitcoin, right?
You're doing discounts and I think CASA doing like cash back programs.
Well, I mean we're a crypto only service.
We do accept a couple of other coins but the vast majority of our activity is in Bitcoin.
I actually think that incentivizing empirically we've seen that it's not as effective as people
think.
Like we've done a lot of different discounts and this and that and in the end it doesn't
affect that much because I think that people who use Bitcoin use Bitcoin because they need
to use it or because they strongly prefer to use it and those things are both worth
a lot more than the couple of percent that we can give in a discount.
How do we get out of these niche use cases because not everyone earns money in Bitcoin?
So what would be the trigger for larger adoption?
I think that there are certain external triggers like geopolitical and whatnot but I think
on a big way like I see Bitcoin as the building of a nation without physical land, right?
It's a country in the sky and in this country we have all of these rules and these things
about how it works like James had presented and I think that there's certain things that
forces people to migrate their wealth into this country.
Give me an example.
What would be the geopolitical triggers to…
Venezuela, Argentina, things like that.
But I think also that it's simply if you want to be the change that you want to see
in the world, there's also the saying if not us then who, if not now then when.
I understand these arguments, I'm a Bitcoin maximalist myself, I'm doing this out of
ideology but I think the people in the room, the people who are not using Bitcoin to purchase
products I guess they're looking for tangible value, for tangible benefits of using Bitcoin.
So James, do you have a take on that?
Well yeah but it can be hard to directly explain to people what some of the incentives are.
So for example, we've said for a long time running your own node is how you have the
greatest security, it's how you participate in the consensus of the ecosystem but ultimately
a lot of people are like well I don't see what's my incentive to run the node and then
you're like well you go down this ideological path of if you actually want the system to
spread the power around, you don't want just a few nodes, yada yada yada.
You can make similar type of ideological arguments when you're paying for things in Bitcoin or
Lightning or whatever, the privacy gain is amazing because you have this native internet
money where you don't have to give away all of your personal information, you don't have
to give your private keys, your credit card number away, they get stored in some database
that's inevitably going to get hacked or leaked or whatever.
It's really hard to convey or quantify what the real world savings is around that because
what are you going to do?
You're going to say well you got your identity stolen so many years ago or you're probably
going to get your identity stolen.
A lot of these things are hypothetical problems that may happen in the future and it's kind
of like the problem that I've had for my entire time in this space because I've worked on
the security side, how do you pitch or sell security to someone?
It's really hard to do that unless they've already been a victim, unless they've been
hacked, unless they've had a major critical security failure that affects them personally,
it's really hard to get people to see.
So that's why I think it's really challenging to sell it as a mean to wider adoption.
Can it be seamless?
I think personally, I think that if we'll do the right thing then people will spend less
money.
For example, you mentioned Giacomo, you mentioned the international transfer, it's cheaper to
do that in Bitcoin.
Can't everyday transaction be cheaper if we'll use Bitcoin as a medium of exchange?
Many?
Yes, so it depends on the kind of transaction for some transactions, yes.
I want to point out that at this point of time what I want to see is not the mainstream
using Bitcoin, I want to see the hardcore Bitconers using Bitcoin like Giacomo for example
because I think that for the hardcore Bitconers, the ideological arguments are very strong
because people like Jason talked about defying the banks and so on and a lot of people are
talking about defying the banks and the problems with the monetary system and so on, but then
they just continue using the banks and don't use Bitcoin when they have the option.
So first I want to see…
So you see as the leader of the Bitcoin embassy, your guys at the embassy are using Bitcoin?
Not enough of them.
There are some, like I said, some hardcore Bitconers also in the Bitcoin embassy which
do not use Bitcoin so much and they have to try to convince them to use Bitcoin and I
think that's the main challenge right now.
I mean the mainstream could come later, we need to begin in-house, we need the Bitconers
to use Bitcoin and so in this sense, the ideological arguments are very strong, getting independent
from the banks, defying the banks and so on.
I think that should be enough for them.
When we get to the mainstream, then yeah, it can be cheaper in some cases, right?
So for example, one of the paradoxes is that someone often first encounters the problems
with the traditional banking when he tries to use Bitcoin.
So for example, back in 2011 when I tried to buy some Bitcoins and I did some wire transfers
to empty box in Japan, then I saw that bank transfers are slow and they cost a lot of
fees and they are not reliable and there's a bureaucracy and so on.
I think Bitcoin can really help with that in a lot of use cases and also in the smaller
use cases, especially if we use a Lightning and then the fees are much lower and it's
faster and so on, it can be very usable for day-to-day transactions.
That's a good segue to my next question.
We haven't talked about Lightning.
We haven't talked about user experience.
Do you guys think that the Bitcoin user experience right now is an obstacle for wider adoption?
Sorry, I just want to plug in about Lightning that of course this is a very Lightning-heavy
panel and I love Lightning and actually eight months ago in this very space, we had a huge
Bitcoin 10th anniversary party and Lightning was one of the main design teams of the party.
In Purim this year, I dressed up as Zeus, the God of Lightning, so yeah, we love Lightning.
Jameson?
Yeah, well, I think usability, not only Lightning, but Bitcoin in general, the problem that we're
encountering is not just the user interfaces that we're showing to people, but it is another
fundamental shift in thinking that is required because we're asking people to move from a
system where they have almost no accountability, where if something goes wrong, you go complain
to customer support and they fix a lot of your problems.
Now we're asking people to move to a system where you have all the accountability because
you have all the power and this is one of the reasons why I don't think we're going
to see mainstream adoption happen just in a matter of years.
This may very well be a generational shift where it has to happen more slowly due to
a change in thinking, a change in your day-to-day operation.
So that is why I think the ideology behind it is also important.
It's because we have to get ourselves out of a style of thinking that humanity has been
doing for millennia.
Yeah, there is a paradigm shift from a philosophical point of view.
One is responsibility, so from great powers come great responsibility.
People are not used to that outside Spider-Man movies.
There is also a shift in a lot of things that actually come before Bitcoin itself.
If you run a node, you have to have a computer running at home, not a cloud service.
People just use cell phones and cloud service.
Even very smart, technical people working in IT, they may not have their own server
running.
They don't check signature on software.
They don't let alone deterministically compile software.
I never deterministically compile software and I pretend to be a Bitcoiner.
There is a lot of stuff before Bitcoin that there were no strong reason to change before
because, yes, okay, before there is money involved, I may be interested in open source
ideology but I don't have strong incentives to secure my PGP keys just to play around
with PGP KC parties.
But now that there is Bitcoin, I have incentives to come back to cover all this stack of previous
stuff.
Of course, user experience is also important.
But I think it's key and we get back to the previous discussion is that the priority should
stay on what makes Bitcoin special.
So we can make Bitcoin easier but not making it easier to corrupt without compromising
on its values.
Without compromising because adoption itself is not the goal here because if there is adoption
losing the key characteristic of Bitcoin, we gain nothing.
If there is a niche adoption keeping the main characteristic of Bitcoin, we got something
anyway.
There are two possible counter arguments.
One is if there is no adoption of Bitcoin, then something else will take over so we need
to rush.
I think this is not a real counter argument because if we don't rush with Bitcoin, something
else good enough takes over, I mean, that's good.
We are all happy.
It would still be good to make progress with adoption if it doesn't compromise.
Win or win.
Either Bitcoin win being conservative or something else, which I don't believe is possible,
wins being reckless.
I mean, net win.
The second possible counter argument is that we need fast adoption to hide ourselves in
the crowd.
Like government will not ban Bitcoin if it's adopted enough.
I think that's another fallacy because alcohol had a pretty widespread adoption.
I don't think Bitcoin can hope for the same adoption of alcohol for a while and yet prohibition
banned alcohol completely.
So the point is creating a strong niche.
People using Bitcoin and storing is also using it.
I want to make a compromise here.
I'm okay if you use Bitcoin.
I'm okay even if you exchange Bitcoin, especially if you accept Bitcoin.
So accepting Bitcoin is always good.
Thank you, Giacomo.
Sergey?
Yeah, I mean, the first question you asked, how many people bought some Bitcoins, right?
There was no UX problem there.
Clearly, if there is a will, there is a way, right?
And the UX is super important and we should make it better and Lightning does make it
better and all of that.
But I think that the important part is figuring out why people use Bitcoin, how we can grow
that and simply like having this economy grow.
Every time money comes into this, every time startup receives an investment or somebody
buys Bitcoin and there is value pushed into the system, eventually this value is gradually
spread around to a larger group.
And so it is growing, it's just, you know, I think these things may take a little bit
of time.
Yeah, and there's so much to talk about, about building this circular economy, but we're
out of time.
So thank you so much, guys.
Thank you.