All right, welcome to the Bitcoin Brainstorm.
Alongside my co-host, Yassine Alamandra, analyst at ARK Invest, I'm your host, Rod Rudy, co-founder
of Bitcoin Park, a community supported campus focused on grassroots Bitcoin adoption and
a home for Bitcoiners to work, learn, collaborate, and build.
We are now on episode number three.
And if this is your first time tuning in, let me explain what we're doing here.
Thanks again to the support from Cathie, Yassine, and the ARK team.
We're taking our monthly Bitcoin topic-based approach at Bitcoin Park and applying it to
this new monthly podcast series we are calling Bitcoin Brainstorm.
Each month we plan to have a different topic and invite amazing people from a variety of
areas within the Bitcoin community.
Our aim is simply to drive conversation around Bitcoin.
And after going deep into Bitcoin with the first two episodes, building and scaling,
and AI and Bitcoin, respectively, we're going back to the basics this month.
So we have approximately 60 minutes and we'll be covering a lot.
So let me do some quick introductions for everyone and then jump right in.
So joining us this month, we have Alex Gladstein, Chief Strategy Officer at the Human Rights
Foundation.
We hosted the inaugural Global Bitcoin Summit with HRF at Bitcoin Park last month, and it
was truly an honor hosting 100 plus developers, activists, organizers, and entrepreneurs from
six continents representing 55 plus countries.
Also Jameson Lopp, co-founder and CTO at Casa and creator of some of the best Bitcoin resources.
Including, Bitcoin.page, Lightning.how, and Statoshi.info.
And also Kurok Rai, as I like to call him, the Bitcoin professor at Texas A&M, who is
now teaching two Bitcoin classes this semester at Texas A&M.
One in engineering and a new one in the business school.
And also Eric Hirsman, who has built a number of companies in Africa and is now the co-founder
and CEO of Gridless Compute, a distributed rural hydro Bitcoin mining company in Africa
that supports local energy development.
Also, Cathie Wood, founder, CEO, and CIO at ARK Invest.
And Cathie's mentor, Dr. Art Laffer, a distinguishedly recognized economist and also a fellow local
Nashvillian.
So with that said, Yassine, my friend, where should we start?
Oh man, well, first of all, we'll just start with some of the smiles that I see on these
screens because we just had a pre-conversation with the podcast and I could sense that there's
just going to be a lot to talk about here.
I'll quickly set this up and then ultimately take it away.
This podcast is for you, Dr. Laffer, just by the way, I must say.
I think the audience might need a little bit of context here.
We had a really incredible conversation, I think, between Cathie, Dr. Laffer, and Ophelia
Snyder.
That was the second conversation that we had about Bitcoin, really exploring some of the
economic merits of Bitcoin.
And I think what really resonated with the audience was, Dr. Laffer, your really understanding
and ability to provide a little bit of context as to what makes Bitcoin so special without
necessarily explaining it in the context of Bitcoin.
And I think sort of the ability to have the economic background that you have and explain
the merits of Bitcoin without necessarily understanding the technical merits adds a
lot of credibility to the case for Bitcoin and the case for private money in general.
I think that this conversation, when we sort of explore, call it falling down the Bitcoin
rabbit hole, the hardest thing that I've found to convince people of is the economic
merits and less so the technical merits.
And it seems like right now we kind of have that in reverse, where the economic case for
Bitcoin, the ability to create an alternative money outside of central banking is pretty
much something that everyone in this conversation can agree with.
And now the conversation can sort of extend to, OK, why Bitcoin from a technical perspective?
Dr. Laffer, we've had conversations behind the scenes on, you know, you just wanting
to understand Bitcoin from, you know, cryptography lens, from the lens of, you know, how it works
as a technology, as a software.
And so we wanted to use this conversation as really like an evergreen content piece
by which you can really open up about some of the questions that you have about how Bitcoin
works and have a lot of our esteemed guests answer that to the best of their ability.
Also understanding that our esteemed guests have a really strong understanding of the
economic merits of Bitcoin.
And I think very rarely are you able to get that strike that balance.
So I'm really, really excited about this conversation.
Maybe Cathie, if you want to explain a little bit of context as to how we came up with this
conversation, your relationship with Dr. Laffer, your conversation with Dr. Laffer and why,
you know, this is a really cool round three of the conversation about Bitcoin with Dr.
Laffer.
Yes.
Well, Art and I go back a long way.
I met Art at the University of Southern California.
He was trying to set up there a supply side school of economics, a little bit Austrian
in its emphasis.
And I was there and fell into his, into the rabbit hole that he created.
And he gave me my big break and introduced me to this business, Capital Group on the
West Coast.
And Art started a consulting business not long after that.
And, you know, I've subscribed to that and, you know, I talk to Art all the time.
In 2015, I called Art and I said, we are writing a paper on Bitcoin.
Can Bitcoin serve the three roles of money?
And would you collaborate with us?
And he said, well, let me read it first.
And he read it and there was one very economic centric part and there was one very technology
centric part.
And he said, I will sign on to that first part.
I don't understand the rest of it.
And we'll get into some of that here.
But what his conclusion after reading the economic part of the paper was, you know,
I've been waiting for this since we closed the gold window, a rules based monetary system,
a global rules based monetary system.
Now, I'm not sure I agree with the rule, meaning it's a quantity rule.
But they'll figure that out over time.
And so I said to him, I said, OK, Art, that's a very big idea.
How big could this be?
And at that time, 2015, Bitcoin was six billion dollars in network value or market cap, as
you might call it.
And he said, well, how big is the U.S. monetary base?
And at that time, it was four and a half trillion dollars.
Today, it's eight trillion dollars.
And I said, oh, my gosh, this is a very big idea.
And then Art plowed right into it.
Certainly, I did personally and Art, as we did all of our due diligence, plowed into
it through the only way we could, which was GBTC, the only security available at the time.
And so we've been having this conversation.
And during the during the regional bank crisis this year, I felt that was a very important
moment for Bitcoin.
And Art and I did a conversation about what was going on with the regional bank crisis.
And it was very interesting for both of us to observe that while bank, regional bank
stocks were imploding, some banks were going bankrupt.
Bitcoin appreciated from 19000 to 30000.
Flight to safety.
You know, this idea of the idea of truly transparent, decentralized, no counterparty risk resonated
with those who really understand Bitcoin.
And so I think that's when we really came back together and said, OK, we have to do
more with this because I have not seen Art.
So Art is 83, he just told me.
And I have I have never seen Art.
Art, you have been so rejuvenated by this discussion of the potential of private money
taking us back, taking us back to the future before 1913.
So I will leave it there.
And Rod, Yassine and Art, you take it from here.
Well, should we jump into the question that Dr. Laffer asked us right before that we had
one of the best podcasts before?
What are all the criticisms?
I want to hear from you.
What are all the criticisms?
That's great.
I'd love to hear that.
What are they?
And Alex had a great answer.
Alex, you have a list of them, Alex.
I constantly get engaged by the mainstream media on this.
And there's a there's quite a few, but they boil down to that.
It's a waste of energy, that it's good for criminals, that it's too volatile, that deflationary
money, which Bitcoin sort of one day will be, is bad for society and that it's too slow
for retail transactions.
I think those are the kind of top five that I personally see.
And by the way, I just heard Jamie Dimon of JP Morgan today echo all of those.
Let me let me I'm writing down what you do it, Alex.
Can you just tell me you said energy?
And I'm assuming that's the mining, what it takes to mine?
That the proof of work consensus is a waste of energy, that we should, you know, we should
figure out a different currency that doesn't waste energy, that it's good for criminals
because you don't need ID to use it.
So anybody can use it.
So authoritarians get very concerned about that, that it's too volatile.
Obviously, it's fixed supply is something that makes it very volatile during its adoption
phase.
So people get worried about that.
And that deflationary money is bad for society.
Currently, Bitcoin has inflation, but it's scheduled to end at some point.
So people get worried about that.
And then finally, that it's too slow.
So Bitcoin, at its kind of most fundamental layer, only updates every 10 minutes or so.
And a lot of people don't realize that there's been a lot of technological innovation to
ameliorate that.
But that's kind of what they take with and they run with that.
A lot of the criticism is, is either, you know, Keynesian economic theory, or it's various
technical or security issues.
And most of them, I think, can be addressed by the fact that, you know, Bitcoin is a distributed
system run by many independent operators.
And if there is some sort of catastrophic issue, humans can always come together to
figure out how to address it.
I've got it pretty well, what you said.
Is there one of those, Dr. Laffer, that you wanted to get into, that you're interested
in?
Well, the volatile one, I'd love to handle.
I'd love to handle the deflation one.
You know, what we talked about in the last podcast was what was money like prior to the
bank in 1913, the Federal Reserve Bank.
You know, that's when they put in the income tax and the Federal Reserve Bank.
Prior to that, U.S. money was private completely.
Bank notes were all issued by banks, etc., bank notes.
The federal government had two functions, basically, one critical.
It defined what a dollar was.
A dollar was one twentieth of an ounce of gold or one ounce of silver.
And it also minted coins.
You could take your gold in and they would be minted or silver.
You could, but there were lots of other minters in the country.
The government was just one of many in a competitive marketplace.
So that's what it was prior to 1913.
In 1913, they started taking control over money, trying to.
In 1932, they took control over it very extremely.
There was something called the Bank Holiday Act, and that prohibited private ownership
of gold in the United States.
So everyone had to turn it into the central government, which they did in March of '33.
And then they devalued the dollar by 75 percent in the next six months.
And then that was all confiscated in Fort Knox.
And since then, then you got the Smithsonian Accord, which was in '71, which really eliminated
all gold and all all currency backing entirely.
And that's sort of where we are today.
The inflation rate from 1933, early '33 to today is prices have risen 23 fold.
And the prior two centuries, it was zero, effectively zero.
Well, you know, some bibble to babbles, but net there was no inflation.
Now, I don't understand why people think it's going to be deflationary, but they can have
their own wish.
But what we need to do with a currency or a coin like Bitcoin or like gold or like anything
else is a quantity rule will not work.
You know, you could have a quantity, but when you have when you have shifts in demand, you're
going to find the price changing.
That will be the volatility.
So what what happens with gold, which is also basically quantity restrained in the world
prior to 1913, for sure.
What you had is institutions set up to guarantee the value of the unit convertible, make it
convertible.
So we had a price rule, not a quantity rule inside a quantity system.
And the Bank of England did that function very well for centuries.
And what you had there is basically they they monitor the buyings and sellings of gold and
pounds on a daily basis, three times a day, the Bank of England morning, noon and night
to guarantee the value of the British pound.
And there were moments there of cessation of convertibility.
For example, a war would start in France and there'd be a huge disruption in the market.
So they just pull out and not do intervention there to stabilize it.
And then when things settle down, they come back in and stabilize it.
So those are the things that can develop very easily with a Bitcoin system, I think.
I mean, they sure did with the gold system and why not with a Bitcoin system?
But it would take other institutions to make a price rule rather than to convert a quantity
rule into a price rule.
Art, can we stop there?
This is so important because when we were doing the the podcast with Ophelia, you were
talking about how, yes, quantity rule right now.
But once you get the market into equilibrium, whether it's institutions coming in, finally,
corporate treasuries, state sovereign funds, once you get through that, what you talked
about that I thought was so interesting, that is, if you have a system where you have funds
like ours, ETF funds and futures oriented funds, you would end up and I'd love to get
the reaction to this from everyone here.
You would end up evolving it if it is what we think it is, into a price rule situation.
I mean, you can make a price rule situation also.
It fits in with the deflation because deflation depends.
I don't know if you think of it in terms of Milton Friedman or stuff, and I don't.
But let's just say you did because there's a limited number of Bitcoins that therefore
as GDP grows in the world over time and all that, that then you would find less and less
Bitcoin per unit of GDP.
And then you'd start finding deflation occur to get the real value of Bitcoin up to being
the same ratio as GDP.
That's sort of the monetary view of the world.
If you look at that, there's no reason why that's true because you can surely have a
system that uses Bitcoin as sort of a monetary base the way gold was.
And then you had the banks, which then used the leverage on the gold system.
So banks would issue liabilities that were larger than their reserves based upon the
cash inflows and outflows on that.
So you can have clearly a monetary base and a monetary expansion and allow Bitcoin assets
total to expand quite along with GDP or whatever else the demand for money is.
Now you probably have substitutes in the system as well.
I don't know if you do, Will or not, but we have all sorts of substitutes and money in
the system.
I wrote a piece in the JPE called Trade Credit in the Money Market.
You can use trade credit to arbitrage the transactions demand for money by using trade
credit there and matching income and expenditure streams on credit.
So there are just lots of ways.
So I don't see a serious complaint about Bitcoin with regard to deflation.
And if you get a price rule system in there, if something like a banking system comes in
and decides to do that, I don't see why you'd have a problem on volatility either.
I mean, all of these are there.
With regard to anonymity, I think anonymity is a wonderful trait, not a bad trait.
Yes, it can be used by criminals.
That's for damn sure.
But it cannot be used by governments.
And I sent you that book, Cathie, on coding.
If you know prime number coding, you can make literally codes today that are unbreakable
and you can transfer them to an owner and a thing and you can guarantee.
And Cathie, you may want you have that book there.
I don't know if you did.
I didn't bring my copy today.
I should have.
But if you read the thing and I think it's called Code and if not, I'll get the name
to you there.
But you know, you can have systems today that are literally unbreakable and that you can
have guaranteed anonymity using the prime number systems in the code where just the
user, just the one party and the other party have the code and you can do that.
No one can break that code.
I mean, they literally can't.
So all of that stuff seems to me to be very, you know, very easily done.
The energy one, I don't really understand.
But I understand it takes a lot of energy to mine Bitcoin.
And I don't understand why that's the case and why you would want that to be the case.
That does seem to me to be waste.
It's like mining gold and gold mining.
It makes no sense whatsoever if you're just going to put it in the vault.
I mean, you might as well make it something you hate and put it in the vault so it takes
it out of the circulation in the world.
But but the mining one, I don't I don't have an answer to because it is expensive and there
shouldn't be the mining costs should not be there.
It just doesn't make sense.
Adding a zero to a dollar bill is not expensive.
Am I right, Rod, or wrong?
I'm going to have Jameson start and answer that question because you're not wrong in
the sense that if you don't dig into the proof of work mechanisms and see how Bitcoin mining
is affecting a number of areas and repurposing energy and revitalizing towns in a number
of different ways, that energy use is exceptional, in my opinion.
It's kind of like saying like this data center that supports the Internet is a waste of energy
or this dishwasher dryer is a waste of energy because it just washes.
But we're supporting the monetary network of eight billion people.
And I think that's, in my opinion, the best use of energy.
But I'll pass it to Jameson who can answer it.
And Eric, I'd love to hear your thoughts on that as well.
Yeah, yeah.
Mining is a fascinating industry and there's a lot of interesting economic results and
incentives that are occurring due to the fact that mining incentivizes people to seek out
the cheapest forms of energy that are out there.
And that's often renewable and stranded energy.
And I won't go into that because Eric is the expert there.
I will speak about the security mechanism.
Why is mining so expensive?
There's no reason why mining has to be expensive.
We could make a proof of work system where the difficulty of generating a block only
takes a couple of CPU cycles on a laptop.
And that is, in fact, how Bitcoin operated for several years as the network was being
bootstrapped by miners.
The reason why that doesn't actually work, if you're running a global network that is
full of adversarial actors, what ends up happening is that everybody starts proposing their own
blocks.
And so think of it as Bitcoin has tens of thousands of independent node operators running
their machines around the world, validating the transactions and blocks coming in.
Everybody has to create the next block to sort of move the history of the system forward.
And if you don't put some sort of cost function on that creation of adding history to the
blockchain, then everybody is just going to go crazy.
There'll be thousands or millions of blocks flying around all over the network.
It's essentially a denial of service attack.
So this proof of work mechanism, it was actually originally invented as a denial of service
prevention and was originally proposed by Adam Back as denial of service prevention
for email sending and receiving.
But what we have now is we have a system that has become so valuable, it pays for its own
security.
We sometimes call this thermodynamic security, but the point is the system is paying for
its own security for making it difficult for people to add another block.
The flip side of that is it's insanely simple for anyone to validate, receive that data
and then propagate it around.
But it really is, it's a sanity check and it prevents the system from being overwhelmed
by bad actors in this one particular use case.
Yeah, so maybe I can give some more color on the energy use too.
You know, Bitcoin does use a lot of energy.
Mining takes a vast quantity of energy to do all the compute cycles that are necessary
to secure the network.
I think what's interesting about it though is maybe best encapsulated by what Troy Cross
says, which is that Bitcoin keeps energy from being wasted.
It doesn't just use energy, it pays for energy.
And the way that works in our world is that when we look at the energy poverty parts of
the world, energy isn't going there because there's not a good return on investment.
The national power grids only go so far.
And when we look at the mini grids that are populating across places like Africa, where
the largest portion of people don't have energy, they have a problem that they're not financially
viable on their own.
They don't have an anchor tenant, just like you wouldn't build a mall without a Macy's
or something like that.
And so they need somebody like us who could be geographically agnostic.
We can be in the mountains of Malawi or on the Zambezi River in Zambia, and we can make
that energy work for the first time ever and be financially viable.
And that has, of course, big opportunities for the people in that area, but it also helps
to decentralize this Bitcoin network that we're all a part of.
I can also offer a little bit of a color from Texas here, where we have 17% of global hash
rate happens in Texas.
Some of the biggest mines in North America are right in Texas, about an hour from where
I live.
The one thing that we have been studying here at Texas A&M, we have a blockchain and energy
research consortium, is the ability for Bitcoin miners to stabilize the energy grid.
And this is a little counterintuitive because people always talk about the level of Bitcoin
mining, the level of energy use, but for the purpose of the grid, what really matters is
the volatility.
And the reason the miners can benefit and help the grid is that they're a large load
and they are flexible.
And so they have huge amounts of power that they can stop and turn on and off on a dime.
And that actually has a huge benefit for the grid because it allows the grid operator ERCOT
to be able to smooth out the energy uses across the state.
And so during the summer, when there's a huge demand for energy because of the hot summer
months, Bitcoin miners can turn off and that smooths out the energy consumption over the
whole state.
And the challenge is just getting the ERCOT has to coordinate among the miners, but we're
building out incentive programs to make that happen.
Yeah, but Kurok, let me if I can, you stabilize it by balancing to the highest cost by taking
energy and using it when it's cheap and making it not cheap.
And when it isn't, when it's expensive, you don't use it and you stabilize.
But it is a net resource use to get Bitcoin.
And that resource use could be used for air conditioning or something.
The argument here is Bitcoin, I don't think, needs the energy used to be valuable.
I think it's valuable in its scarcity and its use purposes.
And a dollar bill doesn't have any use whatsoever, but it sure as hell is valuable.
For sure, you want to compare benefits and costs.
The problem is when most people talk about the energy use, they're only looking at the
cost side of Bitcoin and they're not evaluating the benefit at all.
And if you want to do it, what is the benefit?
What is the benefit?
Oh, the benefit is that you have secure, immutable money.
I mean, sound money for the first time in a generation.
But why can't we just have Bitcoin?
I mean, I don't know the computer program that Yatoshi built.
I've heard about it, but I have no idea what the program is, but it's asymptotically approaching
units or something.
Why don't you just go to the 21 million units and be done with it?
I just have no cost to produce and just get that done.
Don't use the energy up.
And now we've got a quantity of Bitcoin that's fixed.
And let's go.
Let's go from there like gold.
You don't need mining operations in gold to make gold valuable.
Yeah, well, maybe it would just help to underline how valuable Bitcoin is.
I think a lot of the energy talk misses the fact that it's profoundly valuable for tens
or even hundreds of millions of people in the world right now and that in the future
it'll be even more valuable.
Most critics look at the energy cost and they don't understand that Bitcoin is really valuable.
They think it's literally just a waste of energy.
So once you realize that the overwhelming majority of the world's population lives
under very weak currency regimes and under political oppression where they experience
very high inflation, capital controls, oftentimes they get demonetized.
Their savings gets evaporated very quickly.
Their bank account gets frozen.
They can't interact or transact with colleagues, friends, family abroad.
Once you realize that for most people on earth, money is like this huge problem and that Bitcoin
is a very helpful tool for a lot of them, it could even save a lot of lives.
It has saved a lot of lives.
Then I think that conversation changes a little bit.
Once you acknowledge it's valuable, then you start to realize the energy use is worth
it to secure the system.
I'm sure Jameson...
Yeah, go ahead.
It might be helpful to just take a step back, Alex.
Explain why you can't just print 21 million Bitcoin.
Well, there's basically...
Sure, I mean, and I'm sure Jameson has more to add, but basically people tried to create
e-cash for decades.
One of the biggest problems was that you had a centralized issuer.
You had a centralized mint.
So, really, one of the big revelations of Bitcoin was the idea of creating a decentralized
mint.
The issuance process is no longer in the hands of a handful of people or a corporation.
You had really, really good private money created in the 1990s by David Chom and his
colleagues.
It was extraordinary privacy, but it was centralized, and so the government could take it down.
Then after 9/11 happened, the AML rules, anti-money laundering rules, for any of this technology
became extremely, basically, overwhelming.
So it kind of prevented innovation in this area.
People said, "Let's try to create an online digital money that has a decentralized mint."
Basically, the way you do that is you create a global competition that anyone can enter
by contributing some electricity, and now the issuance process is no longer centralized.
The other way to approach digital money is by having a group of people determine the
issuance, and then that's more like fiat money in terms of they're kind of always tweaking
how much there should be.
If you want to look at an alternative, it would be something like Ethereum, where the
monetary policy is kind of always changing because people are trying to figure out what
the best way of doing it is.
That's a centralized sort of scientific process where they're always tweaking the interest
rate, essentially.
They're always tweaking the tax, essentially.
So this is an alternative way of doing it where there's no human tweaking, where it's
like set in stone, and it's one rule for everybody.
The only other way to do that is to have a system called proof of stake, which again
is kind of like dollars or Ethereum, where the people who have the most of it, they control
it.
But this is a very different system where the people who have the most Bitcoin don't
control the system.
I categorize it in two different ways, right?
There's many different proofs, proof of stake, proof of space, time, proof of authority,
whatever.
But you can generally categorize these in one of two ways.
As I said earlier, the point is to create a cost of creating a block and moving the
system forward and also creating a cost against people rewriting the history of the blockchain.
So the question is, is that cost going to be internal or external to the system itself?
And basically every system other than proof of work uses an internal cost.
It does something with the tokens that have already been issued by that system to basically
say I'm going to steal your tokens if you look like you broke the rule and you were
acting naughty.
Whereas with proof of work, we have this external cost, which it turns out I think is pretty
nicely incentivized and distributed in the sense that energy itself is distributed all
around the world.
And my thesis is that over the long term, we are going to see this particular aspect
of Bitcoin become more and more decentralized, whereas a lot of these other networks that
are essentially working off of the rich get richer systems are going to become more centralized
from that aspect.
The question comes to me is, will the marginal cost and energy determine the value of a unit
of Bitcoin?
And I don't want that to be the case.
That has been argued since the very beginning of Bitcoin.
The argument is, I mean, there will always be a monetary premium based on the intrinsic
No, I don't mean a premium.
Yes, let me.
Yeah, there'll be a premium, but it's like the mining cost of gold.
If you've got gold, let's say, what is it, 1860 today or something like that?
If you've got that cost, your mines can operate and produce gold when it's announced.
If the marginal cost is 1860 and that will be the cost.
Now, maybe there are premium there, a hundred bucks or something.
That's not what I'm after is if you have it, the energy cost, you will be really affecting
the value of a unit of Bitcoin by the marginal cost of production, by the cost of the electricity,
depending where in the world you're operating.
So I don't think so.
The marginal cost of energy will affect the mining and the proof of work and ultimately
the security of the blockchain.
And that's not a binary decision.
Security is a sliding scale.
But the value of Bitcoin will be determined in the market for Bitcoin, the supply and
demand for Bitcoin.
And so the demand of Bitcoin is going to be the most important thing for determining that.
And also the cost of mining.
I mean, if there is any mining going on, that marginal cost will be the value of a unit
of Bitcoin.
I mean, it might impute loosely to the value of Bitcoin, but I mean, I still think it's
pretty indirect how that marginal cost of energy is going to directly filter down to
the actual value of Bitcoin because the miners are just securing the network.
The users are the ones that are determining the value in the marketplace.
Well, don't the miners just get can determine how much Bitcoin they can produce by the amount
of electricity, by the amount of energy they use?
No, no, the they they get their block subsidy from the protocol.
So the protocol determines their compensation.
Correct.
Yeah.
You want to explain the Coinbase reward and then the transaction fees and maybe break
it down?
Yeah, for sure.
For sure.
I think the difficulty adjustment is the important thing to touch on here.
Just to build off what Alex and James were saying.
So the miners are essentially playing a lottery and they're constantly playing this lottery
to essentially guess random numbers.
And the reason is that the system, which I will call the protocol, needs a way to select
which block is going to be the next block in the blockchain.
And so this permissionless lottery allows anyone in the world to mine Bitcoin and to
essentially guess these random numbers.
There's a target that they have to hit or be below.
Once they are below that target, then the first one to win the lottery gets their block
placed onto the blockchain.
And your probability of winning is based upon the amount of energy you use?
Yes, essentially.
Yeah.
The more energy you use.
It is a marginal cost, even though it's a probabilistic marginal cost.
It's the expected marginal cost.
It's a marginal cost versus the expected value.
And what they're doing then is trying to optimize that group, at least the way I understand
it.
Yeah.
So, okay.
So the miners face this marginal cost and that will affect their ability to play the lottery.
And the reward is fixed.
The reward is determined by the protocol.
Yeah.
I got that.
I got the reward fixed, but you can change your probability of winning the lottery by
using more energy.
By using more energy.
Yeah.
By hashing.
And that will determine the marginal cost.
So what you're saying is that there will be a marginal cost for the expected value?
Yeah, there will be a marginal cost.
Yeah.
That cost is factored into the miners' production function, so to speak.
And that will affect the value of a unit of Bitcoin?
For the miner, correct.
Or vice versa.
It will ameliorate the rise in the price or it will cause the rise in the price.
Can I just point that brings your attention, like right now, it's the all time high, roughly,
of how much electricity is being expended into the Bitcoin network.
And yet the price is nowhere close to its all time high.
So I think it's important to distinguish these things.
They're not going to necessarily be connected.
So they're not even necessarily correlated.
Well, they are connected.
They just aren't unit connected.
They aren't just connected in a straight, simple rule.
You have variations in the demand curve.
You have the supply curve sitting there and you have both of them operating simultaneously.
So what you said about what it does for tyranny regimes and all that is so, so true.
And it is global.
And that's so, so true.
And that's where I love Bitcoin is because it's global, because it's not controlled by
a monetary authority in one country.
And it can be circumvented totally.
And it can be made anonymous.
I love that anonymity.
So your fear is that if energy gets too expensive, that the network will freeze up?
Or what is your fear around this piece?
I don't know.
I don't know why it would be there, why you would want to have that.
If you can just have a fixed quantity and have people get it elsewhere.
You know, it just seems to be a cost.
It's like charging, you know, it's like you have to mine a hundred dollar bill.
Dr. Lefter, I think the best way to think about Bitcoin is actually very similar to
gold in its sort of natural resource characteristics.
Think of Bitcoin like a digital natural resource where you can actually pose the exact same
hypothetical.
Why don't I just print a fixed amount of gold and just leave it at that?
Well, if you could, wouldn't you do it if you could?
Yeah, but the reason why gold is valuable is because it's costly to produce.
You can't.
There is a scarcity element to it that along with its fungibility and its atomic property.
Let me ask you, Yassine, do you think gold would be valuable today if it weren't costly to
produce?
You couldn't cost it.
There's just a fixed quantity.
No, I don't think it would be.
If there's a fixed quantity of gold, you don't think the value would be high?
Oh, yeah, but you're asking for the cake and eating it too.
Well, that's what I'm asking for here because Bitcoin is a constructed thing, not a natural
thing given by some sort of protons and neutrons and whatever.
That's a good point.
I think that the beauty or the miracle of Bitcoin was one where it's like, how do we
actually create artificial constraints to replicate the costliness to produce in the
same way that we would in a natural resource?
I don't think that you can trade off.
There's basically the idea of Bitcoin's computational inefficiency is precisely what gives it its
security and assurance guarantees.
That's simply a trade-off that no one has been able to resolve.
I'll drop the topic here.
I have a little checkmark just that I'm not quite there yet.
Dr. Laffer, let me add one more piece.
It's a little bit forward thinking, but I think it's actually pretty profound in terms
of the way it could impact the world.
Let's say this thing does succeed and a lot of people start using Bitcoin around the world.
Today, the whole global economy is controlled by the U.S. government and its allies.
We can costlessly print the U.S. dollar more or less.
Malawi cannot.
Their local currency is not accepted on world markets.
If they want to buy fertilizer or oil or whatever, they have to earn dollars.
There's only a handful of ways they can do that.
It really constrains their ability to develop their nation.
If you go fast forward to the future, and there's this ... Who knows how probable it
is, but let's just say for our discussion today that Bitcoin becomes really a widespread
powerful currency in the world market.
That allows the people in that country or that government to permissionlessly turn their
electricity into the global reserve currency without having to do a deal with one particular
power or country.
It could have major, major implications for global economics if it goes out.
Let me ask you, Alex, and then I'll drop out because I don't want to ... The marginal cost
of creating a Bitcoin is going to escalate dramatically over time until the 21 millionth
... Did I get it right this time?
The 21 million number is reached, but as you get closer and closer to that, the cost on
the marginal will be higher and higher and higher, and that Malawi, as you say, won't
be able to afford it even with all of ...
No, but as Eric can attest, it's not ... For example, a lot of people have free electricity.
If you have a river, you're not paying for your electricity.
There's a lot of energy sources in the world, and what you can think about Bitcoin as is
that it's a hunter.
It hunts relentlessly for the cheapest possible energy in the world, and we're going to innovate
ways to unlock amazingly cheap energy all over our planet that we haven't really thought
of yet.
I think, Eric, it'd be worth you just building off that.
We should probably drop on this part.
When you say costless energy, I don't believe you for a second.
It's surely not costless.
If it were, it would be everywhere and no one ... Oil would be a tenth of a penny a
gallon.
Maybe just to finish it off, and maybe we didn't start in the right place with energy,
but maybe, Eric, you can finish this off and then we can get into some of the other variables
that really do excite you about this movement.
Yeah, I won't spend too much time on this.
There's a lot of nuance around mining, around everything from the energy and where it's
found to the difficulty adjustment that's a really important part of understanding the
cost of Bitcoin mining.
What I would say, though, is that even in places very far from where people would think
would be the cheapest energy, like in Ethiopia, you're already seeing a retail price of energy
under two cents.
That's pretty remarkable, right?
Now, will we ever go to zero?
There's always a cost to ... There's a CapEx cost, there's an OpEx cost to running things,
and so there's always going to be a cost for something.
But I think what we're going to find is that that cost is worth it to secure and make more
Bitcoin.
That's something that I think not just people in the US or Europe can appreciate, but people
in emerging markets that maybe need it even worse.
What I was hoping that Bitcoin would do is the marginal cost would be the stabilizing
element.
See, what you really need to do is people care about prices, not quantities.
What you need for a transactions medium is you need to know what the value of that transactions
medium is today, tomorrow, next week, so we can all make contracts in that medium, long-term
and short-term, and be assured that both the lenders and the borrowers know what the value
will be five, 10, 15, 20 years out.
There we need a price rule rather than a quantity rule, because you'll always get stochastic
excess demand functions that will lead to volatility in pricing in any product where
you use the product.
But if you've got a price rule, you can do all of this stuff and circumvent all these
totalitarian governments.
You can get around them all, especially the US one.
When Janet Yellen wants to get rid of $100 bills, you know why she does.
And the only reason is so she has control of your life, not you.
We all understand that.
But we need a price rule in there, but a price rule can easily come from an entity or a group
of entities stabilizing the value of a unit of Bitcoin.
That can come in the marketplace.
All you need to do is have a definition of it, and then people then do the price rule
within the quantity rule, which is really what I love, because it has to be a price
rule.
I don't know how you would enforce that.
This is a highly decentralized system.
But markets will do that.
That's what you've got.
So my first proposition is basically you're suggesting a Bitcoin standard in the same
way that we had a gold standard.
Of course.
That's exactly what I'm saying.
And I think that's quite a compelling proposition if you think about it.
Basically, why the gold standard failed, I think Bitcoin solves for.
And I think you can really have synergies with managing the economy.
I'm not going to let you get away with why the gold standard failed.
It didn't fail.
The government's prevented it in 1913 that it did in 1933.
They destroyed the gold standard by not allowing private holdings of gold, etc.
The gold standard didn't fail.
The government overtook a private sector.
You're spot on.
And I think part of that were the logistical limitations of gold.
And it was much easier to call it make the case to centralize gold reserves because it
was clunky and you shouldn't have it in your under under your bed.
And there's just this slow boiling frog syndrome where if you think 250 years is a is a weakness
in the commodity standard, I'll differ with you there.
Day of the week and twice on Sundays, I take a 30 year period of stabilized Bitcoin value.
You know, you're always going to get these people trying to control your lives.
That's the end of that story.
That's their nature.
That's the beast in humans.
And I think Bitcoin circumvents that beautifully.
Now, a lot of other things circumvented it as well, but nothing like Bitcoin.
Now, the reason I love Bitcoin so much is because it was costless to produce and it's
obviously not costless.
And that's that's a problem I have with Bitcoin.
But, you know, baseball cards when we were kids, we trade we trade goods and serve with
the baseball cards that, you know, tokens for bathrooms in New York.
They use that all sorts of money substitutes have existed to try to get around the government.
And this is a classic case of a big one on a global scale with anonymity being successful.
And if it's not successful for 100 years, maybe only 90 years, I'd take that every day
of the week.
So one of the things I love about, you know, debating with art is he has no preconceived
notions.
He's a monetary scholar.
His his mentor or one of his mentors, I think I can say was Robert Mundell.
Am I right on that?
Yeah.
Monetary scholar, Nobel Prize.
And so when I'm debating with art, I'm just getting it as he sees it from a theoretical
point of view.
And I am and grounded in a theory that that I have trusted over my career.
Now, one of the things we talked about are and I felt like we were getting somewhere.
This is a quantity rule right now.
Like that's just what it is.
Twenty one million.
Twenty one million.
And what I sensed in one of our podcasts was, OK, twenty one million.
And how does how do we and I forgive me all of you here who assume that twenty one million
is it and there's no price rule.
It's only a quantity rule.
But you seem to suggest that there was that this quantity rule, if successful in the way
that you're hoping it is and we're hoping it is and believe it will be that that there
would be as futures markets evolved and structured products evolved around it, that it would
evolve into some kind of equilibrium.
Banks just playing banks, banks hold gold reserves.
They issue gold certificates and they can change the amount of liabilities they have.
We have right now we have risk associated with the currencies, but they took the gold
as a monetary base and then they did issued liabilities and they issued more liability.
And it's a it's a it's a multiplier banking system that would come out of Bitcoin.
I would say I don't see any reason why that couldn't exist.
You can still have the twenty one million.
You can still have twenty one million and have many more liabilities.
I think, yeah, the idea with like a call it a Bitcoin standard is that you would basically
just have a unit of currency pegged to a specific amount of Bitcoin.
Yes.
And then that everyone would agree upon that peg.
And then you can basically have more predictability and easier sort of balance.
But see, I wouldn't even make it a currency.
I would have the Bitcoin being the piece itself.
You don't want to have a tie to a currency.
What you want to do is have the Bitcoin locked to some composite goods in twenty five different
countries, Malawi being one.
And you do have that.
And you could have done a price rule where you have monetary organizations, private issuing
liabilities in the currency.
There's no reason why a bank can't issue.
No.
Are there any any thoughts on that proposition from the panel?
Well, I'm curious, Dr. Laffer, can you explain a little bit more why we need this price rule?
Why is the quantity rule not sufficient and also stable in value over time so we can have
contracts around Bitcoin like we do with dollars and the dollars is where the government gets
the thing there.
If you can have contracts five, 10, 15, 20 years out, markets develop where we can realize
the stability of value and Bitcoin will replace all currencies in minutes.
I mean, in minutes it will replace it because you know that the dollar is the most unstable,
uncontrolled thing in the world, except for all the other currencies by other, as you
call them, totalitarian despotic states.
I guess my reaction, Dr. Laffer, would just be that Bitcoin is going to take a long time
to get to that level of stability.
And it's not going to be the best money for, I think, quite some time for most people.
You know, if you have a choice between a dollar and Bitcoin, you're not going to denominate
your contracts in Bitcoin, most likely, unless you have some, you know, hardcore evangelical
belief about its value in the future.
That being said, you know, you know, the reason why I care about it is obviously a lot of
people around the world don't have dollar access.
But also I think that there's just, again, this gradual, gradual process.
Like there's no possible way it could stabilize when you, so you think it's going to be sudden.
Well, you don't need too many large institutions adopting it to have that gradualness.
Well, gradually then suddenly, right?
It will never, it will never durk in Zambia, out in the bush in Zambia with five people
in a village.
It's probably not going to be a Bitcoin village.
It's probably be trading a cow for a sheep and, you know, but you know, for the massive
amounts of the global community, I see Bitcoin as a replacement of the dollar.
I see a replacement of the euro, of the yuan.
I see it replacing the yen in the bulk of international transactions, just the way the
dollar did in the 19th and early 20th century and the way the pound was earlier.
This is what I really am very excited about.
Because only now the pound is not controlled by the Bank of England.
It's controlled by the value of a pound created else.
Euro dollars, perfect example.
In the 70s, euro dollars were all over.
We had institutions in Europe issuing dollar liabilities and accepting dollar loans developed
there without any relation to the US, without any relation to the Fed controlling that
quantity.
And that's what I'm really excited about.
Bitcoin is getting rid of domestic.
So you think there's going to be, you think there's going to be like, for lack of a better
term, euro Bitcoins, right?
You think there's going to be a lot of paper Bitcoins?
Yeah, US Bitcoins and all over.
And every country will be using them and every major business will be transacting them.
And you know, you may have some specific laws in the US, for example, you have to pay your
taxes and dollars, but that monopoly will disappear very quickly.
And the senior age gains from dollars will disappear overnight.
That's what I'm really excited about, because it literally takes away the monopoly on money
from the Fed and the Treasury.
So I have moments like this.
I know it's been a little messy getting here, but I have moments like this of clarity because
I know Art knows what he's talking about.
And when he says this can happen much more quickly than we think, I believe him.
I believe him.
He is a student of monetary history and he does, as you can tell from the energy conversation,
he's going to drill, drill, drill until he understands this.
So the fact that he's saying this could happen so much faster than anyone now believes is
really interesting to me.
Right?
Absolutely.
I think the two main topics that we kind of touched on, which is like too volatile and
waste of energy, I think are pretty solid in terms of like a basics, getting back to
basics.
And Dr. Laffer, I think we continue to dig in.
I mean, because the waste of energy is literally almost undoubtedly the topic that is brought
up at most in our conversations now.
I don't know why, but it is.
And it's like, how does 21 million, how is it, why 21 million?
How is that 21 million possible?
And doesn't it waste too much energy?
So I appreciate you digging into that.
Yeah.
I would love to see you guys who think this is good on the energy thing to write up a
paper on it and express your views very critically in written form so that people can look at
the words themselves and criticize and ask questions back and forth to sort of asymptotically
come to a good explanation of why energy really is good as a use.
Getting the value of Bitcoins locked in, I love it.
I love the idea it would replace the dollar and these other currencies and get stable
prices for a long period of time.
There's no reason why the treasurer and the fed should control money.
Money should not be a public entity.
It just shouldn't.
Now the other topics is I love the anonymity because I damn it, I don't want them tracking
me because you know why they want to track me and I know why they want to track me.
And the two are very different reasons.
I don't want them to track me.
It's not because I'm a criminal.
Maybe we can touch on that point, like private key cryptography identification.
Well, I've got the book that I gave it to Cathie.
You guys, if you haven't seen the book.
Yeah.
Just to give you some nuance, and I'm sure others on this call will go deeper or could
if you want, but I would probably describe Bitcoin more as a permissionless system and
that's what gives it its power.
Like anybody can use it.
It can be tracked, especially if you're not careful.
The beauty of it is that you don't need to link your real world ID with your Bitcoin
activity.
As soon as you do so, you can absolutely be tracked and you will get caught.
So that's the beauty of it is you can use it with like cash without a government ID
to buy and sell.
The thing is, if you do attach your ID to your Bitcoin, it can be tracked.
I just wanted to kind of clArty that.
I don't think that's necessarily true with the encryption devices that we have available
to us.
I think we can get around that if you want to get around it.
No, it's true.
And I would recommend you call it pseudonymous, not anonymous.
But anyway, maybe Jameson has more than that.
All right.
Pseudonymous.
Well, to be clear, Bitcoin is not encrypted.
It uses cryptographic functions, but unlike some alternative networks that have actual
strong privacy, Bitcoin does not actually encrypt information to make it difficult for
people to read.
In fact, it's quite the opposite where everything that happens on the Bitcoin main chain goes
to everybody in the world who is running a node.
Now you can build alternative technologies on top of Bitcoin that are more private, and
that has been happening.
But it's like dollar bills.
It's like checking accounts, like all of those you can.
But that to me is one of the really attractive things of Bitcoin.
Do you want to explain what ties ownership of Bitcoin in the network?
That it's really just the possession of a private key and how that's generated?
Bitcoin is a system of rules and of math, really.
And so what you're doing whenever you want to spend Bitcoin that you have, you have to
provide proof of that via a cryptographic signature, and that has to match a public
key that the rest of the world knows.
By signing with your private key, which only you know, you can provide this proof to the
world that you own that particular entry in the ledger and you should be able to manipulate
it as long as you're following all of the other rules of the protocol.
This is how basically every one of these networks is operating.
They just tend to change a bunch of the other rules around the transaction formats and volume
and so on and so forth.
Now is this written up by Jameson?
Well, there are many books and many websites that have been written to describe the protocol.
It's very difficult to concisely talk about all of the different mechanisms, but suffice
to say there are hundreds, if not thousands of individual rules that are a part of the
protocol.
And whenever you're running a node, you're essentially, you're automating the auditing
of all of those rules.
I think one of the things that we haven't dug into too much is kind of what makes the
Bitcoin network and actually the use of Bitcoin so valuable and so resilient against the very
thing that you don't like, Dr. Laffer, which is governments being able to control it.
Is that decentralization?
And, you know, I'm not sure I'm the best person to talk about that.
Somebody like Kaurak, who kind of teaches us every day, might be a better person for
it.
But it's a very important part of Bitcoin and probably should be discussed to understand
the security and the value of it.
Yeah.
One thing, Dr. Laffer, that might help is you can think this is a little simplistic,
but you can think that there really are two kinds of security in Bitcoin, the security
within a transaction and the security across transactions.
Within transaction, that's what Jameson was talking about.
It's the cryptography, the hard science, the digital signatures that unlock your ability
to spend the Bitcoin.
Those Bitcoin all live in the blockchain.
What you have is your private key, which is the ability to spend that Bitcoin.
And that's a private key, right?
Yeah, that's a private key.
And the only person who can get that private key is the person that you're spending it
to.
No, no.
You have that private key and when you want to spend your Bitcoin, you essentially create
something called a signature and that signature unlocks the Bitcoin that is connected to the
public key that the private key generated.
OK.
It's kind of, if you're ever interested, there's a lot of cool pictures.
These are elliptic curves that are defined over finite fields, over big, big prime numbers.
And the private key is kind of how many times you...
That's the book I was talking to Cathie about was called Code, I think it is.
And it goes through all the methods of developing these codes.
Absolutely unbreakable.
That's right.
It's absolutely unbreakable.
Like, the biggest risk of this is you just losing your own private key.
That's the real risk.
That's true of everything when you're 83.
Right.
Yeah.
So that's what happened when people, you know, in early Bitcoin days, they lost their private
key.
They didn't lose their Bitcoin.
They just lost the access to that Bitcoin because they lost their private key.
That just shrunk the whole quantity of Bitcoin, did it not?
That's right.
Teach you to lose your key.
Yeah.
So, and the other thing we already talked about, the security of cross transactions is the
blockchain.
That's the security that the miners are doing to constantly make sure that we have one true
chain that everyone agrees on, on all transactions.
The question I would ask then, is there any way of making Bitcoin such that the governments
can't trace back all the transactions to each unit?
Well, then it would not be auditable and we would lose the best property of it, which
is the fact that we know exactly how much Bitcoin there is at any one given time and
we can prevent debasement of currency.
So what people do instead is they build applications on top of Bitcoin to allow you to transact
with someone else more privately.
And there's all kinds of ways to do that.
And those are proliferating.
That's the concept I was talking about a bank, right, Alex, that you can have another person
issue a liability in Bitcoin, which can be private, even though the Bitcoin's on the
monetary base there are part of the recourse.
That's what I was talking about.
Exactly.
So there's a cool concept that goes back to the creation of Bitcoin, Bitcoin banks.
And these are, these are like, they could be federations, but basically the idea is
you deposit your Bitcoin and you get a fully anonymous like token.
That's exactly what I'm talking about.
That's the part I love.
You can spend that and then anybody can then redeem that at the bank, at the, at the Bitcoin
bank for real Bitcoin.
So yeah, there's all kinds of ways to do that.
Yeah.
And that shouldn't be very difficult to do.
It has been though, because it's technically hard to do, but I will tell you that in the
next few years, it'll get way, way easier.
With quantum computers, it'll be really easy.
Yeah.
I mean, it's a Chami and e-cash variant.
That's been around since the nineties and just, you know, applying that technology to
Bitcoin.
But, you know, at the end of the day, you're still, you still have custodians.
And I think a lot of this whole conversation has been very interesting to me because I
feel like a lot of what we've been talking about is what I think is actually one of the
bigger weaknesses of Bitcoin.
And that basically has to do with what you might call paper Bitcoin or IOUs or essentially,
you know, custodians running as fractional reserves.
And, you know, while those of us who understand the protocol are quite sure of the game theory
and the inability for anyone to change that 21 million number, you know, the rest of the
world outside of the protocol is far more manipulable.
Well, now, let me ask you about the 21 million question.
How well do you know the program that can, that causes the 21 million?
I mean, that guy, what's his name?
Satoshi?
Yeah, it's five lines of code, which I myself have personally audited and many other people
have audited as well.
So it is in fact, probably one of the simplest mechanisms for distributing, you know, newly
issued money that I've come across.
And that is it.
So you're comfortable with that?
We don't have to trust Amos, by the way.
I'll actually come to your office.
I'll walk to your office.
We'll set up a node and you can just run the Bitcoin blockchain yourself and verify yourself.
Yeah, but you know, anyone can change that, right?
And in fact, back in 2012, at the first Bitcoin halving, a bunch of miners got together and
said, hey, we don't want for our revenue to get cut in half.
So we're actually going to change the code that we're running so that it doesn't cut
the block subsidy from 50 Bitcoins a block to 25 per block.
And what happened?
Everybody else ignored them.
Their blockchain that they forked off on was completely worthless because nobody wanted
to trade those tokens and they were forced back into consensus with the rest of the world.
So this is kind of the magic of a lot of the game theory that's going on with the network.
Hey, Jameson, how did they ignore them?
Well, it's automated, right?
So basically those miners, they kept chugging along and they started creating blocks that
were still giving themselves 50 Bitcoin.
But the thousands of nodes around the network, when they received that block, they checked
it against the rule and it said, hey, at this block height, you should only be getting 25.
So what happens?
They basically throw that data away.
They cut off their network connection with those people and they say, you know what?
You're a bad actor.
I'm not talking to you anymore.
And that is fundamentally how the governance of Bitcoin works.
It is this bottom up emergent property amongst tens of thousands of independent operators
who they're just they're receiving data, they're checking it, and then they're deciding whether
or not to accept it and whether or not to relay it to their other peers on the network.
So that's a really good example about having the Coinbase reward going from 50 to 25 to
12 and a half.
And right now we're at 6.25.
So on average, every four years, the Coinbase reward is cut in half.
And then we're talking about a waste of energy.
These miners that colluded and said, hey, let's collude together and it'll be 50 Bitcoin
per mine block.
They lost a lot of money.
They lost a lot of energy resources and so on.
And the folks that were just node operators, that were just one of the participants.
So there's miners, investors, node operators and such.
They just said, we're going to continue to adopt and support the rules of the protocol
and carried on their way.
Is that a fair explanation, Jameson?
Yeah, the nodes really are the beauty of the decentralization of Bitcoin.
That's where all the beauty is.
Can I flip the topic to volatility back again?
What do you people think makes Bitcoin valuable?
I think the ability to transfer and store value in a permissionless and guaranteed way
without...
What do you mean by guaranteed, Yassine?
Tell me, I want you to define these words as you go.
What do you mean by guaranteed?
Guaranteed value?
Guaranteed settlement.
So if I were to, let's say, send one Bitcoin from my wallet to another, I am effectively
guaranteeing a transfer of ownership in a way that doesn't rely on, call it a centralized
counterparty to approve or deny that ownership.
What about volatility and value?
That's the one then.
I understand that.
And you really need to have the transfer assuredness clearly.
Yeah.
I think the volatility in many ways highlights the credibility of Bitcoin's monetary policy.
I don't know if you're familiar with, I'm sure you are, but that macroeconomic policy
trilemma, the impossible trinity, where you have basically three edges.
You can do fixed exchange rate, free capital movement, and an independent monetary policy.
So for instance, a classic gold standard is one that chooses a fixed exchange rate and
free capital movement, but foregoes an independent monetary policy.
Well, you have to because a gold standard guarantees that there is no independent monetary
policy.
Exactly.
So the idea of this impossible trinity is that you can only satisfy two out of the three
objectives and that-
And that's what I love.
That the third will contradict one of the first two.
And so all Bitcoin does is it chooses an independent monetary policy and free capital movement
and foregoes a fixed exchange rate.
And so because it's chosen two of the three, volatility is really just an emergent property
and one that isn't necessarily, that we haven't necessarily seen in the past.
Like a Bretton Woods is an independent monetary policy and a fixed exchange rate, but there's
no free capital movement.
So I would say that, I mean, there are two points here.
I think the first is in the early stages, volatility is really just this natural consequence
of Bitcoin's monetary policy.
It doesn't prioritize exchange rate stability, and that's why you can have a free flow of
capital and it limits that growth of money supply where you can have an independent monetary
policy.
So by definition, you have to forego a stable exchange rate.
And that's where I think to Kourek's point, the Bitcoin's price and its value is really
just the function of demand relative to supply.
Let me pull you back a little bit, Yassine.
A gold standard, let's just go right back to the gold standard system there.
If you have a gold standard with many countries, you've got that guaranteed monetary system
that can't, the Fed independent authorities can't do anything about their money.
They cannot.
You've automatically got fixed exchange rates.
An ounce of gold equals an ounce of gold, whether it's in Britain or in the US.
It's there.
Yeah, I agree.
I think, but- Now the question is about gold is what is
its volatility with respect to goods and services for people doing transactions?
That's what really interests me is the demand for money really is one of time horizons.
Can we make contracts in a unit that has a guaranteed value going forward?
Now gold tended to work pretty well.
The price level was defined in terms of gold.
Who defined that price level?
The Fed or the US government.
An ounce of gold was a 20, 1/20 of an ounce of gold was a dollar.
And the gold was then banged.
Now the price of gold was fixed.
That's why you had complete deflation during the depression because that depression was
the rise in the price of gold, the real value of gold.
But the volatility is what you want is a new morale that stays common value over time.
Doesn't have volatility.
So people will want to hold it for transactions purposes and negotiate contracts into the
future for that.
And that's what you really want in value.
We had gold clauses in all of our contracts in the US until 1933.
And then they were all outlawed.
I mean, that's really, that's really interesting.
I think I love your thoughts on you.
You would still need though that third party like the Fed or the government to define.
I don't think so.
You and I could do that across.
You're in Casablanca and I'm here in Nashville.
We can have a gold clause.
We don't need to do it.
I guess in an ideal scenario, if you can get like global consensus.
But that's what Bitcoin is.
That's what Bitcoin is.
It is a global consensus.
It's a money that's not a dollar.
It's money that's not a ruble.
It's money that's not a peso.
I mean, it depends on your, your reference point, but gold's obviously been highly volatile
against the dollar.
It's gone up by six X in the last 20 years.
Right?
See, I would, I would argue it the other way around, but that's okay.
No, I would agree with you, but that's from gold's reference point, right?
From the dollar's reference point.
Yeah.
It's collapsed completely against gold.
Dollar reference point, the cost of goods and service.
The CPI has gone up 23 fold since 1932, 23.
Who the hell wants to live in a system like that?
Hey, I think we all agree.
Well, then what I'd like to see with Bitcoin is I'd like to see the purchasing power of
a unit of Bitcoin, like the dollar, like gold, prior to 1913, you had about two and a half
hundred year, two, two and a half centuries of literally stable prices.
So all right.
I have a question.
We're talking about quantity rule versus price rule, but when we discuss this in at another
moment in time, you thought that this quantity rule, Bitcoin based on the quantity rule would
evolve to, to be able to serve, to stabilize.
Yes, I do think that.
And I think that's what happened to gold, Cathie.
As gold was there, there were a lot of other quantity monies.
If you know the word fee is cattle and then you have salary, salt was used.
All these different units were used as money over historical times.
And what you do is you have that, you have the value determined, become stabilized by
private sector, buying and selling the commodity to guarantee its value and lending and borrowing
it.
Gold in isolation as a standalone, let's say, commodity is a quantity rule.
Is that?
Yes, that's why.
And so is Bitcoin.
It makes sense.
But within gold, financial institutions arose to guarantee the value of gold.
And they did.
They arose right in the center of a quantity of fixed gold in the world, let's say.
All right.
And then the banks came in and they monitored in such a way that they guaranteed the value.
What they would do is they'd buy and sell their units of currency or whatever the values
would be in terms of pressure.
That's what the Bank of England did.
It's a really interesting conversation because I guess to Jameson's point, you over rely
on counterparties and then you just get the abandonment of gold entirely and then it just
doesn't work.
And so I think there's this interesting tradeoff where it's like, let's say, the more you call
it build on top of Bitcoin and build infrastructure, let's say, to facilitate a price rule, the
greater you are at risk, the greater counterparty risk that you have, where you no longer have
as much control or you're no longer preserving sort of the free properties that Bitcoin operates
on standalone.
That's correct.
That's totally correct.
That what you have happening is all of a sudden you've got the supply of Bitcoin infinitely
elastic with respect to the price rule.
Within the range we're talking about.
Basically does not have counterparty risk, but it has exchange rate risk.
And it's the only digital asset to have no counterparty risk.
And that's why I think we're so interested in it.
I agree.
I would just I think, Dr. Laffer, one thing that would be a good action item is there's
this book that came out recently that I think does such a good job of describing the evolution
of money and of Bitcoin.
And, you know, to your point, and I've written a lot about how the U.S. government defeated
gold in many ways.
But at the same time, science also helped defeat gold in terms of when that when the
telecommunications came out, it became easier to exchange fiat balances over the Atlantic.
It just there was some science and there was some politics.
Right.
So this book, Broken Money by Lynn Alden, is so awesome.
And it really, I think, cuts to the heart of a lot of your questions.
I would totally recommend it.
I think the thing here is you really want to do is have a universal money that no government
controls.
I think we can all agree with that.
And I think we all want also want to have it anonymous and maybe not the Bitcoin itself,
but because of your block chain stuff.
But but surely substitute liabilities can be perfectly encrypted.
Well, Dr. Laffer, tomorrow night here at Bitcoin Park, we're actually hosting, I think, 20
or 25 Vanderbilt students.
And the topic is what is Bitcoin?
So we're going to go from the nodes to mining to the economic incentives to deep down the
rabbit hole.
Why 21 million and such?
So if you want to walk down or take a two minute drive, I would love to.
I can't.
I'm going to down to Florida tomorrow for a day, but I'll be back.
But Rod, will you make sure you come over to the office shortly?
Give a call here.
You must.
It's a museum, Rod.
It's a museum of history.
It's unbelievable.
100 percent.
And I'm going to bring some presents as well.
And we're going to bring some books.
We're going to bring some books.
We're going to bring some boxes.
We may even run a note at your office, Dr. Laffer.
If you really want to do it, we'll last a little late and maybe have a little bourbon.
I'll bring my friend Hank's O.H. Ingram over and we'll have some nice bourbon.
That's for sure.
That sounds great.
I'm very excited by all of this, by the way, and I'm very excited by you guys and what
you're doing.
And how fast now, Alex, how fast are they advancing on the transaction speed?
Very.
I mean, now you can you can use Bitcoin in a way where it settles instantly anywhere
on Earth.
Like I've sent value from my living room to the Middle East in three or four seconds.
So that is being solved for sure.
Great, because that's really important.
I think of V2, if we will.
And sorry, to be clear, it's an asset like that's that's an exchange.
It's like a bear instrument moving at the speed of light beforehand.
All we had were liabilities.
Everything else is a digital liability.
This is a digital asset.
And the fact that it can move like that is huge.
That's the new paradigm, Dr. Laffer.
Whereas you couldn't really have the bear instrument in gold retain its properties because
it was physical in nature.
You can with Bitcoin.
You don't need.
No, that's what I understand.
And the neat thing about Bitcoin, I thought, but now I'm having hesitation on is that it
doesn't isn't a net resource loss to the planet.
But now with your energy requirements, it all of a sudden has become a net resource
loss.
I will send you all the resources on on Bitcoin, the case for Bitcoin and energy.
And I think Jameson actually brought up.
I'm really excited about reading about those.
Yes, please do.
We're going to link to him in the show notes as well.
So all of the stuff that we're talking about, we're going to do our best to link to him
so the audience can also follow along to the conversation and the resources that we're
talking about.
I'll just finish by saying he Jameson brought up a very subtle point on the cost to mine
Bitcoin in the early days.
It actually ends in theory costless like you can just you can spend call it ten dollars
to mine 50 Bitcoin.
But I think the beauty and the incentives that Bitcoin provides is it's a marketplace and
it's a free market of competing nodes.
And the very fact that we have as much energy expended is really just a function of the
demand to mine Bitcoin and people realizing how important and valuable of an asset it
actually is.
But if no one was mining Bitcoin, it would be completely free to mine.
So there is a strong signal as to the interest in Bitcoin is directly correlated to its energy
expenditure.
And that's a completely different conversation.
Just remember the thing here.
If in fact financial intermediaries do evolve and if they do evolve, they do.
And if they have disciplined that strong, you know, I've always wanted to make the dollar
as good as gold because if you made the dollar as good as gold, no one would want to hold
gold.
And the value of the value of gold would fall sharply if you knew that the dollar were as
good as gold.
And all I'm saying here is if you get good financial mediation, don't think that Bitcoin
necessarily is value is going to keep rising.
Just it's not.
The motto of Bitcoin is don't trust, verify.
So that's don't trust, but verify.
That's a guy I worked with very closely said that, too, by the way.
And if they are interested, they will have no edge over anyone.
They'll just be a market participant like everyone else.
If they want to mine Bitcoin, they can join the crew.
But it's not there are no special preferential treatment like you might get in sort of a
centralized system.
But there'll be no there's no there's no restrictions on mining gold either.
There isn't.
No.
And I mean, look at what we saw.
We saw sort of the at least investment banks getting full stack.
There are huge restrictions.
If your country doesn't have any gold, you can't mine gold.
But every country has electricity.
If your country doesn't have any energy, you can't mine gold.
Bitcoin.
OK.
All countries have some access to some kind of energy.
Thank you, Alex.
No, it does depend upon energy and what it costs and all that.
Yeah.
Lots of things in the supply function.
All I'm saying is if you can make a dollar as good as gold, there's no reason for gold
and the gold price falls.
When we did that under Reagan with Volcker, we got the price of gold down hugely, just
dropped like a stone.
And all the gold hoarders got hammered.
They called me a gold bug back then.
Mandela and I were both gold bugs and that stuff.
But by making the dollar as good as gold, which is what we should do.
But the government is unwilling to not take the senior age gains they can take by printing
money.
They just can't resist taking.
Now, we did it in Argentina with the currency with the currency block down there in Argentina.
We got the Argentine peso to be as good as the dollar.
Bang.
And we did that with the 100 percent convertible, 100 percent reserves.
I mean, so there are ways.
All I'm saying is that right now it's a store of value.
But if you were able to do a good financial intermediary system, no one would need to
hold the Bitcoin per se if they had an instrument that was as good as that.
You follow me on that?
Please do.
100 percent.
You know, the Argentinian reserve currency, that was Steve Hankey did that one.
And we did a bunch of other ones there.
But all we try to do is just make the local currency.
And you never can when you've got Yellen in there and these other people.
God knows.
So this is my professor.
And this is and I had him on such a pedestal when I was his student.
And over these how many years, Art?
Forty years?
Twelve or thirteen.
And you know, during crises, during '08-'09, I'm consulting with Art only in a crisis usually.
And Art asks a question.
It's like, oh, yeah, the Treasury bill rate did drop below the Fed funds rate.
He said, red alert.
We're going we're in trouble.
And they're just like he he doesn't follow the markets the way we do.
He just knows his economics and knows the warning signals.
And the most important thing to me is he says he loves Bitcoin.
And I believe him.
He is absolutely true to his monetary theory and his monetary stripes are so strong.
It's a perfect substitute for for for currencies.
I mean, it's just the perfect one.
And I don't think it'll take long.
It doesn't take long to bend over to pick up a $50 bill up, you know, and if that there's
real market transaction value to this and companies could use it, the dollar's gone.
And the reason why you're why Russia and China are trying to get a new currency in there
to do the transactions in is because of the weakness of the dollar.
And the reason Bitcoin is strong is because the dollar is weak and the dollar is mismanaged
and unhandled.
I know the Fed people very, very well personally, and they are not trained in this.
Powell talks to economists to get his answer, as opposed to telling them what the answer
is like Volcker did or Greenspan or McChesney Martin.
So, you know, when you've got when you've got that type of problem, it's a perfect time
in this world to have a new currency come into play, I think.
And the most important thing that I learned from this is.
This can happen very quickly and it can happen really quickly in very large quantities.
I mean, you don't need to have many large companies start transacting in bitcoins to
have it really supplant all sorts of numerators.
I mean, really, you don't.
So I think we should just compound that with some closing thoughts, because we've just
gone an hour and a half and this has been fantastic.
And I want to be cognizant of everyone's time and definitely we need to do this again, Dr.
Laffer, because this was fantastic.
The questions you're asking and the way you're inquisitive and such.
I really, really appreciate it.
Shall we go around the horn with some closing thoughts?
I can kick it off real quick because, Dr. Laffer, when I do come over, I do want to
I'm not going to debate you.
I just want to learn from you.
It's not debate.
I just want to know.
No, no.
Meaning like around the five properties that make up a medium exchange or a store of value,
because we've been talking a lot about gold.
But I would say on the verifiability, there's portability, acceptability, portability, verifiability,
acceptability and divisibility.
And then the most important we're talking about is scarcity, right?
Gold being perceived scarcity with Bitcoin.
It's got every one of those.
It has assayability.
It's got divisibility.
It's got all those characteristics as well, to lesser extent, much lesser extent than
Bitcoin.
Bitcoin can divide it down below a molecule.
Gold can't.
Keep going.
Verifiability.
I don't know how much.
Verifiability is very easy with Bitcoin.
It's not with gold.
You can find a thing.
If you have a chunk there, you have to do a core sample to be able to test it.
And that's why core samples and silver and all that, because you can have a medium there
and you can have an inside being different combination so that what you would call it
could say Eureka and it's gold and it's not.
Portability, $1 billion worth of gold versus-
Oh God.
You figure out how many pounds can you carry.
And of course, you know, 12 ounces is a pound.
So you try to figure that out.
Let's imagine it's 2000.
So it's what?
$24,000 a pound.
You know, 10 pounds is 240,000 and then 100 pounds, whatever it is.
And I'm bringing Jameson and Eric with me to move that because I'm going to need a lot
of ammo and a lot of people.
And when you run across borders because they're chasing you, it's hard to carry that much
gold.
I mean, and especially if you have to carry it where they can't see it, if you know what
I mean.
On the visibility side, you come to the park, we'll buy a very cheap cup of coffee.
Gold unfortunately is not accepted, but you will buy a cheap cup of coffee on me.
And then on the-
Bitcoin?
Will you pay for it in Bitcoin?
Yes, sir.
It's Bitcoin Park.
We only accept Bitcoin.
Oh, okay.
Well, how much is a cup of coffee just for the record in Bitcoin?
It's about 4,000 sats.
So 100 million sats or satoshis equals one Bitcoin.
And that's where I think as a V2 conversation, because V1 we were talking a lot about layer
one.
And I think we were conflating layer one and layer two, layer two being from stable coins
to other cryptos to other mediums of exchange in the local currencies, which Alex, Jameson,
Kurok, as well as Eric can speak deeply on.
I think with Bitcoin, it's actually just that at least at the end of the day, the settlement
layer.
And we kept on talking about volatility.
My aspirations in life, I'm a little over 40 years old.
I have four kids under the age of five, and I have a lot of future expenses, private school,
house.
Maybe I'll be able to afford one vacation or maybe two in my lifetime if the dollar
doesn't rip away from me.
But what does Bitcoin, the lowercase B, do for me?
It preserves my future purchasing power better than any other investable asset.
So on the volatility side-
Why do you say that?
Why do you say that?
Now, this is interesting.
Why do you say that?
What is your forecast of what Bitcoin will be 10 years from now?
So Dr. Laffer, that's a great point.
10 years.
10 years, that's not the time frame.
I'm 40, but 10 years is not my outlook because in 10 years, my daughter will be 15 years
old, still in private school, knock on wood.
And then the other three boys will be in private school as well.
So those tuitions are going to be compounding for me.
So in 10 years, I'm knock on wood preserving.
I'm going to have, it's probably going to be like 10 to 15 years outlook.
And it's not like a dollar denominated number.
It's more of my costs and my aspirations.
No, that's what I want to know.
I'm talking not about dollars.
I'm talking about what the cost, what will be the price level in Bitcoin be?
It's going to be greater than it is today.
How about if you were three years ago, what would you have said?
Well, didn't Bitcoin get up to about $60 there for a little bit?
$60,000, yeah.
$60,000, $70,000.
What caused that sharp drop?
Yeah, that's a good point, Alex.
I'm just saying 10 years ago, maybe Bitcoin could have bought you a nice bicycle.
And then a few years later, it bought you a nice phone.
And today, one Bitcoin can buy you like an okay car.
I think that in 10 years, it'll buy you a pretty good house anywhere in America, one
Bitcoin.
That's the way I think about it.
I don't think about it in dollars or in whatever.
But it does have the volatility there.
Yeah, it's got to be volatile.
Volatile up and to the right over as long as it's there.
Look, if governments could be trusted not to devalue currency and de-platform people,
then we wouldn't need Bitcoin and people would stop feeding it energy and it would die.
But that's not going to happen.
That's not going to happen.
That is the point, is that this replaces government currency.
It replaces the dollar.
And you're going to tell me we need to now make sure Bitcoin stays stable in terms of
goods and services.
But there's still, I think, to Alex's point, there's still a lot of room for Bitcoin to
grow.
But the demand hasn't been fully saturated.
And I also think you need to look at Bitcoin's preservation of purchasing power over longer
time horizons than just two or three years.
Like if you even just did it over a four year time horizon, Bitcoin is above where it is
and it continues to compound over time.
So it's like in four years, I believe Bitcoin will be greater than it is today.
Will it stabilize at any point in time?
Hypothetically, under a full monetization of Bitcoin, it stabilizes over time because
then the asset value of Bitcoin will drop dramatically if its returns are lowered.
If you don't have that forecast of the future of a house, 10,000, 300 houses, the expected
returns will drop.
The characteristics of Bitcoin are retained despite a subdued appreciation.
I can still divide my Bitcoin.
I can still port it.
I can still wholly own it.
I can still send it across the world.
All that's true.
But the expected appreciation will go down and therefore the value of the Bitcoin will
fall with it.
Yeah.
So, you know, we keep talking about everything's, you know, Bitcoin is volatile.
But what about this future you're talking about on the Bitcoin standard where everything
else is volatile to it right now?
You know, I think that's what Alex was getting at, right?
In January of 2020, you could buy, you know, it's like 180 barrels of oil to Bitcoin and
now it's over 400.
And so there's like a there's a way that we're thinking about money and the way that we're
thinking about value that I think kind of flips on its head in the future.
Yeah.
But what you want to do is have Bitcoin as the numeraire here where relative prices of
commodities are going to change, relative prices of goods are going to change.
That is.
But if you get a posh or a spares index of all goods and services, what you want to do
is have Bitcoin stabilize that bundle.
So you'll have a lot of volatility of individuals.
But for one up, there'll be one down there so that in purchasing power units, you'll
have that value be stable over time so we can make contracts.
And the reason we make contracts is because we think there will be volatility and you
think one will go up and I think it'll go down.
That's why you have contracts.
Differences of view.
Well, I think I think when Alex talked about volatility in the beginning, you know, he's
talking about the volatility of the Bitcoin dollar exchange rate.
It sounds like you're talking about volatility once we move on to a Bitcoin standard when
anything is demanded, denominated.
That's what I'm talking about.
One hundred percent.
Right.
And in that in that case, right.
Once once we reach the post subsidy world, right, there's going to be no more Bitcoin
issued.
And so we don't care about what the dollar the dollar Bitcoin exchange rate is.
We care about.
Right.
The only reason I talk about dollar Bitcoin is because I take I don't think quite as good
as well as you guys do.
So I think of dollars and goods and then dollars.
Right.
Bitcoin goods.
So then what matters there is the volatility that matters there is going to be the inflation
of Bitcoin, how much new Bitcoin is created.
And we know from the issuance schedule that inflation is going down year by year.
It's already very low and it'll converge down to zero.
And so eventually we'll have everything denominated in Bitcoin.
Right.
And the only thing that's what's going to happen is we'll just have a finite number
of Bitcoin.
And as economic growth, as GDP grows, right, everything will be denominated in a finite
number of Bitcoin.
Then you'll have synthetic Bitcoins because of a financial intermediary system.
And you'll have producers of Bitcoins with fractional reserve systems.
And that's what will develop that.
Yeah.
But those synthetic Bitcoins are going to have a massive discount ultimately, like because
they're synthetic.
And I can I can own the real thing, which is not the same thing as gold, really, because
it's so hard to move gold around.
So this is the difference.
But the financial intermediary will owe a certain amount of Bitcoin as reserves, and
then it will issue liabilities and set assets on it, make loans on Bitcoins, and they can
keep that around.
There's no reason why that should lead to a depreciation of the value of those Bitcoins.
Credit creation, I think, is still valuable in a fully...
I think it's hugely valuable with Bitcoin.
Why not?
To Alex's point, I mean, that would only work if those financial institutions were extremely
transparent with how much Bitcoin they held and what they were doing with that Bitcoin.
And I think you can do that in a way with Bitcoin that you can't do with previous monies
just because of the opaqueness.
Well, I think it would be transparent.
I mean, that's one of the things the government did do prior to 1913 was have audits of banks.
That they did.
They went around to all the banks and checked their reserves of the currency and the gold
in their reserves.
That they did do.
But that was their only function was to say the reserve claims of the banks.
And that would be perfect transparency, but then you don't need to have continuous deflation
going on with a fixed quantity of Bitcoin and growth.
You wouldn't need that.
You could have a supply of Bitcoin money, transactional, equal to the growth of GDP
if you want to say velocities fixed.
I wouldn't say that.
So I think in the Bitcoin community now, this idea of paper Bitcoin is pretty controversial
and there's probably resistance against it.
I think primarily because of what happened with the fiat, under the fiat regime, when
you have a central bank that's doing managing all this fractional reserve banking.
I think there probably is a way to design this in the future where you could have disciplined
Bitcoin paper.
But I think right now, that's not a conversation people want to be having.
Yeah, well, that's the conversation I'd really like to.
The only way you'll lose on that one is if there's some one world government that can
enforce it everywhere on the planet.
And then you have to have it in Mars or Jupiter or maybe.
Well, you know, even in the US, right, pre-Civil War, we had before there was a central bank,
right?
There were banks like the Suffolk Bank in Boston that would issue their own bank notes
on top of gold and the banks would discipline each other.
Right.
So Scotland had something like this.
There you go.
There you go.
You got the point.
I'm not going to go into the details of the Suffolk.
That's exactly what I started the conversation with here.
Yeah, that's right.
Yeah.
Randy, Randy Krasner had a paper on this at Chicago when I was there.
We talked about this and you know, Scotland had.
Were you trained in Chicago?
Yeah, I was.
Yeah.
I undergrad and I taught there actually for several years after my PhD.
What topic area?
I was in finance and accounting.
Yeah.
I got my PhD from Stanford, just like you, actually.
So we have that in common.
God, my condolences to you.
That's right.
Were you an undergraduate at Yale?
No, no.
My undergrad was at Chicago, but my.
Well I thought there were only 10.
I thought there were only 10 years.
Oh, OK.
Going through all the ranks.
That was, I mean.
It's a great place, right?
I mean, if you think about it.
I love it.
It's the best university in the world.
At least it was.
Oh, 100%.
It's the best.
Now that you and I have left, it's deteriorated a lot.
Rules versus discretion, right?
This was the debate of Friedman and John Taylor.
See, Friedman wanted a quantity rule and he was wrong on that.
Yeah.
He wanted a price rule because people don't care about the quantity of money.
They care about what the price of something is.
Yeah.
And he also did.
Well, he also did want constant inflation, 3 to 5%.
Yeah.
Well, that's because he wanted to fake that you could take a price for a quantity rule
and make it into a price rule by time.
And that's just bullshit.
Excuse me.
That's just masculine.
But he did.
You know, one thing he did say, which is consistent with Bitcoin, is that he did say that it doesn't
matter so much what the rule is, as long as there is a rule.
Rules are important.
I don't disagree with that.
But it does matter what the rule is.
Maybe in the first best world, it matters, right?
Given that the world has no rules right now.
What you want to do is make sure people in the government don't control the game.
Right.
That's what you want.
And rules stop that.
But there are some rules that are even worse than people.
Right.
Yeah.
But Bitcoin is not that bad.
Not that.
So you take a price primal and a quantity dual and how do you do it?
The difference between a tArtf and a quota.
Why would you have a quota on a trade or a tArtf?
The two are not the same.
It depends upon the stochastic excess demand functions, what the results of those two systems
are.
And in this case, we want stable prices, not stable quantities.
Yeah.
We really do.
And this is where Mondell and I and some of the others really did beat the monetarists
on this.
Yeah.
And then the monetarists claimed that the quantity rule would give price stability.
Nonsense.
That's not true.
I would point out that there is actually a lot of real world data within the crypto ecosystem
that I think we can use to decide what the market really wants.
So a few times you brought up privacy and anonymity.
There are a number of different projects that have made that their primary focus.
And I would say those have not done very well from an adoption and value standpoint.
There was an entire multi-year war within Bitcoin about whether it should be a store
of value or a medium of exchange.
And there are multiple versions of Bitcoin now that have forked off.
They've created their own networks that were meant to be better medium of exchange.
The valuation of those networks is less than 1% of Bitcoin at this point in time.
However, on the flip side, stable coins have had massive adoption.
So there clearly is demand for a more stable value.
Multiple characteristics.
Why it can't be a store of value as well as a medium of exchange, as well as anonymity.
If you can get all of those characteristics together, you'd have a winner.
No one wants to have you know every transaction you ever made.
That hooker last week would really be upset.
Just kidding.
I think that the short version is, you know, there is no perfect money.
I would say even Bitcoin is far from perfect.
Juan Jameson, because you know all the risks in return here.
We're here to make a better world, maybe not a perfect world, but I'm not willing to sacrifice
perfection.
I want to run for that too.
That's well said, Dr. Laffer.
While we're having this discussion and this brainstorm, I sent instant final settlement.
Eric, remind me where are you in the world again?
Yeah, I'm in Nairobi, Kenya.
So in Nairobi, Kenya, Dr. Laffer, while we're having a awesome Riverside conversation, I
don't even know how much I sent you.
Maybe even a dollar.
I don't know how many sats that was.
Yep, there you go.
All done.
Cost a fraction of a fraction of a sat.
Yeah, but basically nothing.
You're absolutely right, Cathy.
And that's the beautiful thing about Bitcoin.
It just works.
But don't give up the ghost, Jameson.
You can get all those characteristics in there.
It's neither one nor the other.
Let's not go down the governance rabbit hole of how difficult it is to change Bitcoin.
Jameson, you got to send him the who controls Bitcoin piece.
Sure.
There are a lot of follow up pieces that I'm sure we'll be sending over, Dr. Laffer.
Remember our conversation, I was able to invest in the Biggin Fund?
Yes, that is.
I feel pissed off.
I just want you to know.
Well, Cathy or Yassine, is there anything else before we wrap up that you want to touch on?
Yeah, I mean, I really enjoyed this conversation.
I think the biggest thing is it actually seems like we're really on the same page with so
much.
And Dr. Laffer, your sort of point of view is one where I think a lot of Bitcoiners are
hesitant to fully embrace just because it's a walk before we run kind of situation.
I'm feeling there's a global financial crisis brewing right now.
I don't know if it's China, Japan over leveraged now that its interest rates are going up.
I'm seeing all kinds of warning signs out there.
So when Art, Dr. Laffer says that this could happen much more quickly, I think back to
the regional bank crisis just in this March.
Bitcoin goes from 19,000 to 30,000.
What's that?
Flight to safety.
Fear of counterparty risk.
So I have been with Art through many crises and these things do happen more quickly.
And it's just like our Catholic experiences.
You get the run ups, you get the run downs.
And if you get the settlement in here with the bank where it becomes the world currency,
everyone wins.
Although it's not just an investment, it's also against the economics of the world.
That's really well said.
So let me maybe wrap now.
If anyone else had any closing thoughts that they'd like to share.
Again, thank you to everybody.
Thank you, Cathy.
Thank you, Yassine.
Thank you, Dr. Laffer, Jameson, Alex, Eric, Kurok.
This was truly a pleasure.
For the folks that are still listening, if you haven't checked out either of the past
two episodes, you can subscribe on ARK's YouTube channel and go to the dedicated Bitcoin
brainstorm playlist.
We'll also link to it in the show notes as well.
Thank you very much.