It's time to Double Down with Max and Stacey on Sputnik Radio.
Now coming up on the show, we talk to BitGo engineer and CoinDesk contributor Jameson
Lopp.
But first, the first American to win the Nobel Memorial Prize in Economics, Paul Samuelson
once said, investing should be more like watching paint dry or watching grass grow.
If you want excitement, take $800 and go to Las Vegas.
I know what you're thinking.
You're thinking, if Paul Samuelson were alive today, he'd think gambling in Vegas was like
watching paint dry and that if you want real excitement, take 800 satoshis and invest in
altcoins.
Is that true, Stacey?
Yes, it's a wild world in the Bitcoin cryptocurrency altcoin sort of Ethereum sort of ripple space
and there's been a lot of action.
As you know, Bitcoin has surpassed the price of gold.
It's well over $1,500 as we speak.
And it's definitely not like watching paint dry.
Yahoo Finance says Bitcoin is becoming the new gold.
This was in January.
Look how quaint this is only, what, four months ago, five months ago.
Bitcoin, the digital asset that many skeptics still dismiss as a scam, was the best performing
currency of 2016.
It began the year just above $400 and rose to more than 80% to close the year near $1,000.
So it was $1,000 only a few short months ago.
Oh, yeah.
Well, you know, it wasn't too long ago when we were talking about the remarkable achievement
of Bitcoin achieving a $1 billion market cap.
You know, here we are in the total universe of altcoins or crypto coins pushing $50 billion
with the dominance of Bitcoin falling from over 90%, 95% down to around 55% or 60%.
As the market becomes more diverse, there's more players, there's greater adoption.
So this is really, as some have called it right from the beginning, Internet 2.0.
At that time when folks were talking about it in those terms, it seemed far-fetched.
But no more.
You know, this is really redefining the digital space in a big way.
And I'm looking forward to talking to our guests in a couple of minutes.
But first, I'm in a little more background, Stacey, right?
Well, I actually want to turn to Jameson Lopp of BitGo because, you know, you and I have
been talking about Bitcoin for quite a long time and we've experienced it when we were
talking about it when it's two or three dollars and then it went up to seven dollars and fell
back to three dollars and then it went up to fourteen dollars and fell back to seven
dollars.
And every single time people would scream at us, oh, my God, I just poured all my life
savings into Bitcoin at fourteen dollars and now it's seven.
You've lost me everything.
So it's been quite a wild ride.
And Jameson Lopp's most recent article on CoinDesk is titled, Nobody Understands Bitcoin
and That's OK.
I recommend everybody read it.
But what do you think about this notion of Bitcoin now being the new gold?
That's a little bit politically charged if you really speak a lot in the Bitcoin scaling
debate.
And so what we've been doing for several years now is saying, you know, how should Bitcoin
change?
Should we be targeting these low cost retail payments or should we really be going for
a higher cost digital gold settlement system?
So there are some people who are very happy with a higher cost digital gold, but we have
a very vocal part of the community that wants to get those transaction fees back down.
They want to be buying their coffee, their Internet digital items.
They want to be making as many payments as possible with Bitcoin because they like the
ability to do that without having intermediaries.
They like that feeling of sovereignty when they're making the purchases rather than just
holding on to their their store of value.
Let's jump into that a little bit more, Jameson.
So this has been the classic debate from the beginning, whether it's purely for transactions
or whether it's a store of value and if it's or is it both.
And then we didn't really see much of a debate until the last year or two when it came into
the fore and folks are really focusing on this and it became now known as the scaling
debate.
I remember I had some guests on my show even two years ago talking about the scaling debate
and this is the the the knucks of it.
Is that how you perceive this this digital token as it were.
But in the meantime, competition has come around.
So you have other coins like Litecoin, Dash, Monero, these so-called alt coins that have
faster transactions.
You have I guess Litecoin has adapted or adopted one of the scaling technologies of a segregated
witness.
So now we have that becoming going up in value quite dramatically in the multi but you have
a lot of coins and now over a billion dollars.
So I guess the question is, is the fact that you have a scaling debate, is that ultimately
a healthy thing and does it matter if it's ever resolved?
And your thoughts?
Yeah, you know, I don't think that it will ever be permanently resolved because I see
Bitcoin just as a new type of database because I'm a software engineer.
So a new type of database with innumerable potential applications and a lot of us want
we would love for Bitcoin to be everything for everyone.
But there are all these technical limitations to being able to do everything for everyone.
So we're focusing on a few things right now and then over a long period of time, hopefully
we can safely find ways for it to be more available for everyone.
But because the system itself is backed by finite resources and it always will be I as
an engineer see that no matter what amount of resources you make available to developers
and users, they're always going to want more.
So I think there's always going to be people who want more out of Bitcoin than is currently
available for using it.
It's an interesting question because other open source projects like let's go back to
Linux for example.
Here we have a bunch of engineers.
They figured out that you know what Microsoft's a ripoff.
We're going to come up with an alternative system.
We're going to create the kernel around which we're going to revise periodically and it
scaled beautifully and it took over a big part of the market.
Similarly with Bitcoin, it's an open source project, but it's also used as money.
So is this the first time that engineers have ever been forced to confront economics?
I guess from a financial standpoint definitely, though you could argue that a lot of these
open source projects have had to confront economics from other resource costs.
So there are a lot of times when engineers have to make what could be considered economic
trade-offs though they usually actually talk about these trade-offs in terms of CPU and
RAM and hard drive and other costs.
But at the end of the day, there are costs and economics involved.
Just to follow up on that, I guess the question is that unlike these other projects, no lay
person would sit around and decide, you know what, I've got to get some Monero, I've got
to get some Litecoin.
They know nothing about economics, nothing about engineering.
They just know it's the thing to get.
And so this seems different in the history of engineering in that people are coveting
software for the monetary value.
And so it's brought out a different class of quasi-engineer slash promoter, I guess
you say.
It just seems very different.
And is that good?
Is it bad?
Or maybe you don't even agree.
It is.
And I think that's mainly due to the network effects.
I mean, because we're not only building software now, we're building new types of networks
and new types of economic networks.
And so I think that if you were looking at Linux back in the day, you didn't have as
much of a network effect.
Like if 100 other people or 10,000 other people were using Linux, that wouldn't directly impact
your usage of it.
But when we're talking about these financial networks, it definitely makes an impact, especially
if you're storing your value in them.
By the way, we are in North Carolina and we've met halfway.
We're in a sort of a cafe, outdoor cafe.
So you might hear some cars.
And I mentioned cars because of course your car is emblazoned with Bitcoin all over it,
speaking about promotion.
So we were easily able to find you in this parking lot.
Bitcoin vanity license plate.
I think we need to be specific about that.
So how many years ago did you get that?
That was two or three years ago.
And I actually had to fight for it to the North Carolina Department of Motor Vehicles
initially rejected my application for the Bitcoin license plate because they had some
fuzzy profanity filtering that caught the BITC part of it.
So I had to submit additional paperwork showing that Bitcoin was a real thing and not some
derogatory term that I was trying to piss people off with.
You know, I saw a tweet of yours that was quite interesting and I want you to elaborate
further on that.
You write that only 65 countries stand in the way of Bitcoin achieving top position
in terms of global M1 supply.
That was quite interesting.
Can you elaborate?
Yeah, it's something that I track and if you have the zero block app, it makes it very
easy to see.
So essentially if we're just looking at Bitcoin as a network store of value, then you start
to want to compare it to the mainstream global systems, which is of course going to be the
nation state currencies.
And so it's actually I believe the CIA is the statistics that are being used for this
where they're tracking what they believe are the M1 global supply and Bitcoin slowly but
surely continues rising through the rankings.
And tell the audience what M1 is?
Well, so that's basically going to be your liquid monetary supply.
You've got everything from M0 to I think M5, but I think it's almost impossible to track
M0, so they usually start at M1.
And what about money velocity?
Because of course part of the problem in our advanced economies in the US and Europe is
that there's an absolute lack of monetary velocity.
Money is not circulating.
Is that a problem at all with Bitcoin?
Do you see that?
Well, I think it once again comes back to what you think Bitcoin should be used as.
You can definitely perform a lot more analytics because all of this transactional value is
on the blockchain and you can see how much is being transacted.
There are plenty of people who of course will start throwing out terms like Gini coefficient
and say that the wealth is too concentrated.
But I think we're seeing a lot of parallels with other healthy economies.
This is a very tiny, tiny economy.
But I saw one analysis that looked at the data and they found that a lot of Bitcoin
is actually bought and spent within 24 hours of acquiring the Bitcoin, the new Bitcoin.
Those who have the Bitcoin blocks from 2009, 2010, 2011, they say that the data shows are
sitting on those blocks.
But do you believe that a lot of those are actually lost?
Because I know I lost a lot of my early Bitcoin.
Yes, it's impossible to prove the amount that's been lost.
I would suspect well over 10%, if not 20% have been lost.
And then you can talk about whether or not you think Satoshi's coins are lost.
But yeah, I think it's been a while since I've looked at the specific statistics.
But I think that there is a tiny amount of the Bitcoin monetary supply that's very high
velocity.
And that's basically, you know, your currency usage, the people that are actually buying
and selling stuff all the time.
And then you've got the rest of it, which is being used as a store of value is not really
moving that much.
All right, Jameson, let me ask you what you think the potential threat is from patents.
You know, we've seen in other industries, corporations will try to block competition
in the patent courts with nuisance patents and this type of thing.
You're seeing this word pop up more and more now patents.
People are trying to squeeze their way into the space.
How do you see this?
Is this a genuine threat?
What do you think?
I'm a little bit concerned, especially with some of the stuff that we're hearing now with
in chain, I believe they're supposedly have quite a few patents.
I'm not sure what countries they have filed those in, but I'm optimistic.
I'm hopeful, mainly because Bitcoin was born out of the cypherpunk movement.
And that I think that even if there are some companies that start patent trolling, there
will be a number of cypherpunks who, if they're not already anonymous, will create new anonymous
identities and start doing whatever they want, regardless of what a few courts or a few patents
may say.
Now, in the remaining time we have here, I'd like to turn to ICOs, initial coin offerings.
Last year in 2016, there were $236 million raised in ICOs.
It looks this year is even on course to perhaps match that or more.
What do you think about this whole ICO markets?
Every single day or week, there's some more involved.
I think it's dangerous.
I think a lot of people are going to get hurt.
A number of people may also become very wealthy, but my general speculation as to why these
ICOs are so hot is because of the general crypto economy growing so much.
Now we have a lot of people who have actually pulled themselves out of poverty simply from
speculating on these crypto assets.
And now a number of them are wealthy enough that they're actually saying, well, I need
to invest my wealth.
And so if you're in the crypto economy, it's a lot easier to invest within the crypto economy
and move into other types of digital tokens.
And so I believe that that's really the big explanation for a lot of the speculation happening.
I call that a phenomenon called investing narcissism.
We saw with America Online, people were on America Online, so they bought into the stock
of America Online.
And then it fantastically crashed because it's what they know type of thing.
I don't know, let me just ask you a quick question, Rand Paul, Peter Thiel, at one point
they were trying to combine Bitcoin with a political agenda.
I don't hear much about that lately.
Is there any progress on that?
No, I think a lot of the politicians have kind of cooled off from it.
I think a number of them were dipping their toes in just to see if they could help their
campaign contributions from this new fringe.
But it seems to have died off a lot.
And in general, I think we haven't really heard much about government and Bitcoin, at
least in the United States lately.
I think a lot of the people in the government have just come to accept that it is and it
exists and it will continue to exist.
All right.
Well, that's going to do it for this episode of Double Down with me, Max Kaser and Stacy
Herbert on Sputnik Radio.
Thanks for our guest, Jameson Lopp.
Until next time.
Bye, y'all.