 I was really pessimistic for a few years but then I came across Bitcoin and I realized you can shift the political landscape through technology and so today I feel much more optimistic because I think we have something which is a very powerful tool which can't be shut down and for which you don't need to go through the regular political channels. You can just buy Bitcoin and own it and that's being part of this revolution. During the 2008 presidential election VJ Boyapati quit his job as an engineer at Google to campaign for Ron Paul in New Hampshire. Then he discovered Bitcoin and in 2018 he published an essay on Medium titled The Bullish Case for Bitcoin which got widespread attention and was translated into more than 20 languages. Boyapati launched a Kickstarter to expand the essay into a book and it was released at the Star Studded 2021 Bitcoin Conference Miami which was held in early June. Reason caught up with Boyapati at Bitcoin Miami to talk about inflation, how Bitcoin fits with the Austrian School of Economics, his libertarian origin story and what has to happen for Bitcoin to finally become the new global monetary standard. VJ Boyapati, thanks for talking to me. Thank you Nick. It's great to be with you. You have a book out based on a blockbuster article you published first in 2017. You've updated it but it's called The Bullish Case for Bitcoin. What's the elevator pitch of The Bullish Case for Bitcoin? I think Bitcoin is the most important innovation to money in a thousand years and I think it allows the average citizen to keep their savings without debasement or confiscation very easily and very cheaply but there's a lot of misconceptions surrounding Bitcoin and it's a fairly difficult thing to understand completely. You need understanding of economics, politics, some law, legal theory, computer science. If you really want to understand how it works you need to understand all of these things. So there's a lot of misunderstandings out there about what it's about, whether it's a scam, whether it's bad for society, bad for the environment and I really wanted to address these concerns because I'm interested in economics, I'm interested in Austrian economics and I felt like I had a tool chest with which I could explore and understand Bitcoin and answer what I think is the fundamental question. Why does this thing, this digital good, have any economic value? It's really a stunning thing to happen that someone invented money de novo out of nothing and it is now worth a trillion dollars. It's stunning. And we don't even know who that person is. We don't know their real name. We have their pseudonym Satoshi Nakamoto and so it calls for an explanation and I really wanted to provide that explanation. In your writing you talk a lot about the history of money kind of up through and you say that you know Bitcoin, we're witnessing a kind of rapid evolution of the way money is created in a way that has really never been witnessed before because it's so compressed. You talk about money going from a stage of being a collectible to being a store of value to being a medium of exchange to a unit of account. Can you walk through like basically what's happening? What is the typical kind of money supply story and then how does Bitcoin depart from that? Sure. So the typical definition that economists use for money is a generally accepted medium of exchange. I actually think that's very problematic because it's defining money as one of the roles of money. Money serves different roles, three major roles. It serves as a medium of exchange, a store of value and a unit of account. And so some economists when they came across Bitcoin early on said well this isn't money because it's not really medium of exchange. People aren't using it to buy milk and bread at the store. But William Stanley Jevons, who is the father or one of the fathers of marginalist economics was the first to come up with this explanation that money evolves in stages. And he was describing gold at the time. He's an economist from the 19th century. And he said that gold started off as something like a collectible. It was just something that was desired for its innate properties. It was shiny and it was cool, something that early man saw and thought I want some of that. And after it's a collectible and it's owned as a collectible by enough people it becomes a store of value because people recognize that there are other people in society that value it. Once enough people value something as a store of value in a society. It's purchasing power will stabilize to the point where it becomes usable as a medium of exchange. So in that period when it's becoming a store of value people are saying I want to have some of that because it seems to retain its value and I can hold it as savings into the future. Its purchasing power is going to increase over time. The thing is with gold that process took millennia, several millennia. So you couldn't really see that happening. And once most people in society own that economic good it will stabilize and then it can start being used in exchange. So people start saying well you know it's not easy to trade my fish for your sheep because you don't want my fish so I'll look for something that is more tradeable, more valued. And so I'll give you gold instead of this fish. And so then it start taking on the medium of exchange roll of money. And eventually when enough people are using it in exchange people begin to price things in terms of it. So they say well this sheep is two ounces of gold and this fish is half an ounce of gold. And so you get prices and that's when money gets its final form which is the unit account form. I think it's really important to understand this evolution of money because people saw Bitcoin and they said well it's not money it's not doing all the things that money does but if you understand money as an economic good that evolves through stages you recognize that Bitcoin is an early stage of the evolution. It's sort of moving from the collectible stage into the store of value stage as you know in the beginning people who owned Bitcoin owned it just as a whimsy. It was like oh this is a cool new technology I just want to hold it. It's not really worth anything. More and more people saw that other people were valuing it and they said well it could potentially become money and so it's slowly transitioning to that store of value use case. Now that it has a market capitalization or at least it got to a market capitalization of trillion it sort of backed off that a little bit. It's being taken much more seriously as a store of value by financial institutions and by corporations. And then the end point is when we start talking about things instead of the gold standard we're talking about the Bitcoin standard. That's right. That's right. What you've also written or you've predicted you've pronounced that Bitcoin will be the reserve currency within 50 years. What has to happen next for that to happen? Well there's a number of stages to adoption. In the beginning you have people who are just motivated by the technology and they just think it's cool that they were the cypher punks and the computer scientists who understood cryptography and were working on digital money for a decade before Bitcoin came about. And so it's a very small coterie of people who are interested in it. Next after that came the people who are ideologically aligned with Bitcoin, libertarians and people who are anti-state or who wanted freedom for themselves and didn't want their money to be debased. After that you started having early investors who saw that there was some value in this thing. They were kind of the pioneers who were willing to try out new technologies. Venture capitalists who were like early to various things said well let's put some money into Bitcoin. Now we're at the stage where institutions and corporations like MicroStrategy and Tesla and Square are saying we want to keep some of our corporate balance sheet in Bitcoin. Now eventually you're going to have larger financial institutions like sovereign wealth funds and eventually at the last stage you're going to have nation states putting Bitcoin on their balance sheet. So the Federal Reserve and the US Treasury have gold on their balance sheet and have had it for a long time. Eventually I think nation states are going to have Bitcoin on their balance sheet because I think most nations want a form of money, a global form of money which doesn't bear the mark of any particular nation. And those are the words of Charles de Gaulle he said in the 60s we need to return to the gold standard so that no nation has an exorbitant privilege over any other nation. And the US really won itself that privilege when it crafted the Bretton Woods Agreement and made the dollar the reserve currency of the world. Do you think your interests are bringing back to Gaulle is kind of interesting in this context? Do you assume that the first nation state or even maybe sovereign wealth funds that go big into Bitcoin is it going to be, I mean it's not going to be the US or China it's going to be a kind of second tier major economy. So who is likely? I think that you're absolutely correct. It's not going to be the bigger nations and especially the US. This kind of irony that the US is in terms of its regulation the most open to Bitcoin right now but at the same time the US stands the most to lose geopolitically because it has the reserve currency. So what country, I mean at this point can you say like you know what I think it's going to be Bora Bora or it's going to be who? I think unfortunately it's probably going to be some tin pot dictatorship or kleptocracy like North Korea and it wouldn't surprise me if North Korea has a team of computer programmers who are looking to just steal Bitcoin because Bitcoin is digital, it can be stored on the internet so unless you take care of your Bitcoin and your private keys they can be stolen. And so I suspect it's going to be a nation like North Korea and it's really unfortunate that the Western democracies are probably going to dither in their adoption of Bitcoin. I believe it's fairly inevitable. It's the best form of money ever invented. So I think it's going to be globally adopted and it's just sad that the Western nations where you have the most freedom are going to be the last to adopt. But it's not money yet, right? So I guess to drill down a little bit more what has to happen between the store of value phase to it becoming a medium of exchange. And we're clear, I mean you're arguing and I think most people would agree that we're in that phase but we don't know where we are on that adoption curve, right? Yeah, that's a great question and it really has to do with the stability of the purchasing power. Bitcoin's purchasing power fluctuates quite wildly right now and that's just a function of its adoption. As more people adopt to Bitcoin the price goes up because the supply is fixed. So when you have a big flow of funds into Bitcoin the price can move a lot and as Bitcoin gets bigger the flow of funds that comes into Bitcoin has to be bigger to move it as much. So in the early days when Bitcoin was fairly small the Winklevoss twins came in and put in I think $10 million and that had a pretty dramatic effect on the price in percentage terms. If you put $10 million into Bitcoin now it wouldn't budge Bitcoin, it wouldn't move even a percent but now the size of capital coming into Bitcoin is much bigger. So you have people who are or corporations allocating billions of dollars eventually when you get closer to global adoption meaning everyone has some Bitcoin the purchasing power will stabilize and that is when it becomes suitable as a minimum exchange because you don't have the opportunity cost and the opportunity cost is if I trade my Bitcoin away now I lose the opportunity of holding it and seeing the appreciation into the future and the classic story of this is the guy who bought two pizzas for $10,000 Bitcoin which are now worth $350 million and most people in the Bitcoin space have learnt that lesson they recognize that this isn't something for spending yet eventually it will be but right now it's for saving it's a really good medium of saving. So elsewhere you've written that this non-sovereign store of value of Bitcoin will have profound geopolitical consequences what are the top two or three that Bitcoin is going to change when it comes to geopolitics? So I think the most important one is that when the global savings of the world are in a deflationary non-inflatable currency it becomes much harder for nation states to inflate away the savings of their populations which means that if a nation state wants to fund its operations it can't rely on inflation it must rely on taxation or they're good by America, right? Perhaps America is really funded with inflation right now not through taxation and whether or not whatever role you think the state should have I think there is a huge benefit of taxation as a form of funding versus inflation because taxation is at least honest you're going into people's pockets and you're saying we need this much money because we need to fund X, Y and Z So this is I mean it's classic economics of you know the government doesn't want to charge the full price of its services because people will want less Yes exactly right and so what happens is that there is political pushback against taxation there is a limit with taxation because people will say that's too much I don't like that and historically you know over-taxing your population will can lead to revolution and that sort of thing so I think that's a very healthy thing and historically central banks were created as a means of funding warfare and so for me that's a big sort of political issue is I really believe that we need to minimize warfare in the world and sort of pulling back that ability of governments to fund their most destructive behavior is a very important and powerful thing so governments could under a Bitcoin standard still wage war but they would have to tax people for that and people really don't like to be taxed for something that doesn't provide a direct benefit to themselves What's another geopolitical effect of Bitcoin? I think it helps well trade definitely it lowers the friction of people being able to trade with each other you don't have intermediaries anymore Satoshi Nakamoto's invention made something possible which had never been possible in the history of the world which is I can send value to someone on the other end of the world without an intermediary and it's a profoundly important thing I can trade with someone in Bangladesh without getting the permission of a bank or a government and so I think that lowers the barrier to trade and I think it will be really good for global trade The last thing I think is it will generally lower people's time preference when you can keep your savings in a form of money that can't be debased you have more confidence that your savings aren't going to disappear and so that allows people to plan more for the future rather than thinking about the present which I think will have cultural impacts as well So one of the interesting debates that you've been involved in the last decade or so really was with Bob Murphy a libertarian Austrian school economist who was predicting in 2010 or there about we're going to have runaway inflation because according to kind of certainly most market based economic ideas like if you just pump a massive amount of new money into the economy you're going to see inflation you argued with him or you bet that we would see deflation or not inflation can you walk through what the argument you were making was because you're talking about Bitcoin as a deflationary currency which is really kind of fascinating and is very different than almost any other money supply that we've seen but we're also in kind of a deflationary period right now Right, it was funny that you mentioned Bob Murphy because Bob and I just spoke on his podcast just a week ago about this and we did have a bet and I won that bet and it's interesting because we both subscribed What did you get by the way from the bet? I think just glory It was a bet for glory We both subscribed to the Austrian school of economics but to me the Austrian school of economics isn't a school which necessarily says there will always be inflation or there'll be deflation it's a methodology of how you approach economics and how you understand economics and I felt the Austrians who were looking at the Federal Reserve's policies in 2008 were misapplying that methodology to understanding what the consequences would be and you really need to understand the banking system and how the banking system works and I think some of the Austrians who predicted hyperinflation in 2008 didn't really understand the banking system they had this view of lending that the Federal Reserve put reserves into the banking system and then the banks have all this extra money that they lend out and that creates this multiplier effect which then creates inflation so they saw the Federal Reserve create I think three or four trillion dollars of new reserves and they said well this means hyperinflation is coming because the banks are going to lend this out the mistake was the banks didn't want to lend it out because the banks were really capital constrained they had massive losses on their balance sheets so it was the equivalent of printing four trillion dollars and burying it underground I think the problem in that case was you need to understand the lending mechanism and you need to understand when banks want to lend why they want to lend, when they're constrained in lending and all of those things I think will miss And you don't see that changing now or as time goes on are they going to dig up those dollars and start? I think we're living in actually quite a different period to 2008, 2009 and 10 in that quantitative easing isn't necessarily inflationary when the Federal Reserve creates new reserves that doesn't mean that we're going to have inflation only if the banks want to lend it out that you will see new inflation but what we're seeing now and what we saw in 2020 is much more akin to Ben Bernanke's helicopter drop of money where instead of printing reserves and giving those reserves to the banks which don't do anything with them the Federal Government has created money and put it in the hand of consumers through these stimulus checks that is far more inflationary because it's like Ben Bernanke used this analogy of having it or maybe it was Milton Friedman before him and Ben Bernanke reprised it but flying around with a helicopter and dropping cash on the economy and the context in which he was bringing up was we have no problem with deflation because central bankers hate deflation and so he said we can always solve deflation what we'll do is we'll just drop money on people and then they'll have free money and they'll just want to spend it that is basically what has happened in 2020 but it was not what Bernanke was actually doing because he was dropping it on banks he was dropping it on banks so he never did what he talked about doing it was very theoretical but the current administration has done something very different which is to drop cash on the population and I think we're in a much more inflationary period and we're starting to see it in commodity prices going up and I think there is a chance that inflation will get to the point where it hurts people and they will start to recognise the savings that they have in their bank which are earning 0% are really losing value very quickly because goods at the store are going up 5 or 10% per year One of the most interesting things about your take on all of this is your emphasis on Bitcoin as deflationary Most people are like I don't want to live in a world of deflation where the general price level goes down over time explain why Bitcoin is deflationary and why that's a good thing that people should look forward to a world in which they're making less money every year So Bitcoin is a deflationary currency because its supply is fixed it's a form of money with ultimate scarcity so it's even more scarce than gold So gold is hard money and when I say hard money I mean it's hard to produce it's very hard to produce an ounce of gold you have to dig and expend all of this energy but yet the supply of gold still goes up by 2% a year we still extract more gold Bitcoin was designed in a way that there will never be more than 21 million Bitcoin So what that means is that over time as people adopt Bitcoin and its price goes up the price of goods in terms of Bitcoin goes down So if you have one Bitcoin if you owned one Bitcoin in 2010 maybe you could buy some candy with it or something like that If you have one Bitcoin now you can buy a very nice card you could probably buy Tesla just you would have to convert it into cash before you bought Tesla now Sure Well there was a period when Elon was accepting Bitcoin he stopped we can talk about that later and maybe 5 or 10 years from now you could buy a house with one Bitcoin So that's what a deflationary currency is it's something that because its supply is fixed or scarce and that's being masked because of the speculation now Right, exactly because this price discovery people are trying to figure out is this going to be the next reserve currency and markets are a noisy messy process they don't work in a straight line they go up and they go down So pitch people on the idea of living in a world let's say all the Bitcoin is mined it's been adopted as a global standard Why is it good to live in a world where essentially your salary goes down every year Well we see small pockets of this in our economy where the segments of the economy which is so productive they can overcome the inflation that's being pumped into the economy by the Federal Reserve So technology is a good example of this Every year the price of an iPhone goes down or the quality for the same price goes up So the argument against this kind of deflationary behavior as well if it's deflationary people are never going to spend their money because they'll just hold their money waiting for something better in the future and we know already this is not true You probably have upgraded your phone in the last couple of years I'm guessing you don't have a phone from 2010 in the anticipation of a better phone in 2030 So when people find enough benefit from buying a good with a currency that's appreciating a value they will exchange their currency So this is a fallacy that's used by Keynesian economists to argue that a deflationary currency is bad But I think if you look at the pockets of the economy which is so productive that you do see deflation they are the most productive, innovative parts of our economy and that's the kind of economy I want across the board I would like all of the economy to be like that and I'd love for people to be able to save and to think my savings will have as much or slightly more value in the future than less value because one of the huge disadvantages of having an inflationary currency is people get worried about keeping cash or keeping savings in the bank and so this leads to speculation and when interest rates are zero you get this speculative further where people are day trading on Robinhood and buying things like GameStop because they're worried that if they keep cash it's going to lose value and this is generally a bad thing for society because people should not be gambling and doing things that they're not an expert in they should be focusing on their own craft and bettering themselves that's better for the division of labour it's better for everyone in society if doctors for example go to conferences and learn more about being a better doctor than gambling on stocks To push on this a little bit it's one thing if prices go down or purchasing power goes up because technological innovation increases it's another thing if there's a limit in the money supply and people start making less money isn't there? Well this is, you know, George Sullivan is someone who has talked about this and I've had some debates with him on Twitter and he believes that the money supply should be elastic if there's more demand for money more money should be produced and this is an open debate I'm not going to say that this is a resolved question I think Seljan is wrong on this but this is an experiment where we get to see as people adopt it whether these things happen or not I don't think it's a problem that people are paid in a deflationary currency you would live in a world where people may not necessarily expect raises in the same frequency because people are getting raises now because the value of their currency is going down they need a raise just to keep up with that So they're not necessarily getting rewarded for more productivity it's kind of a political decision to kind of keep the natives happy I think it wouldn't be baked in that you would always get a raise you might get a raise because you became more productive but it wouldn't be like this standard every year you should expect a 3% raise because if they didn't get that then the salary that they would be getting would be going down in purchasing power and it's purchasing power that matters more ultimately Exactly there was this argument made by Tyler Cohen that I thought was really interesting which was we need an inflationary currency because workers don't really understand this idea that they're getting less salary or the same salary over time I don't buy that people are intelligent enough to understand hey this is different this is something that retains its value and is fixed in supply so you don't need to worry that you're not getting more of it, that you're getting the same amount I think it's just we need better economic theory we need people to explain this kind of stuff and we need to live through it as well You've mentioned the Austrian school as an approach to economics how do you define that what is your shorthand of what's the Austrian method I would say the Austrian method is to recognize that we are the ultimate cause our decisions are the ultimate cause of price formation in the economy and if we recognize ourselves as the causal agent for economic phenomena we can do some introspection about the motivations that we have you know when we decide to buy things or how we react to different policies an Austrian insight is that this is actually common to most economics but an Austrian would say that if you raise the minimum wage above the rate at which a person is profitable the owner of the business that's employing that person will let go of that person they'll be unemployed and that's just really a psychological insight that an owner is going to be motivated by profit to run their business so their business doesn't go out of business and that they don't want to lose money doing something and so when they have an employee which is producing $5 worth of value and the minimum wage is $7 they just simply cannot continue to hire that person and that's not something that you need to look at in aggregates or anything it's what's called an a priori insight and so that's the difference in methodology Austrian economics is a deductive science whereas classical economics or Keynesian economics is much more an empirical science where they sort of pretend to be like physics or chemistry and use the empirical method and look at aggregate statistics and try and come up with economic laws by doing that whereas the Austrian start from first principles and use deductions based on knowledge of human desires and then it ties in with Hayek's interest in methodological individualism of reducing the the object of study to individuals exactly right having said that Mises, Ludwig von Mises in particular was pretty insistent that money is not a store of value that money is a means of exchange can you talk so you're even as you are invoking the Austrian school you're kind of being heretical right against Mises and his protege Murray Rothbard can you talk about that a little bit? I find that interesting sometimes they come to different conclusions to other Austrians so one of you has to be wrong that's right absolutely correct because it's a deductive science axiomatically we know somebody's wrong we need to either look at our assumptions and see whether we disagree in our assumptions and in the case you brought up with Bob Murphy and hyperinflation versus deflation that was a case where I think I disagreed with their assumptions we had the same method but I just disagreed they had an understanding how the banking system worked and if you change those assumptions and use the same methodology come up with different conclusions so I've disagreed with Mises and Rothbard on a few things but I really have this huge admiration for Mises because he pioneered the method of Austrian economics I think it's one of the biggest mistakes in modern economics to define money as a medium of exchange because that is one of the functions of money and if you define something as one of its functions it makes it much harder to understand that thing it's sort of like defining a car as the steering wheel or something like that you miss the bigger picture you miss that money is these other things and I think at least Keynesian economists have an incentive to define money in this way because Keynesians are in bed with the government and they usually push government friendly policies and governments don't like money being used as a store of value or people thinking of it as a store of value because they like to extract people's savings through inflation so they don't want people to keep as soon as people start saving in dollars and the purchasing power of the dollar goes up it's a big emergency at the Federal Reserve they say we need to print more dollars and we need to get the value down and we need to be exchanging it they don't believe in the store of value use case I think the store of value use case is the most important function of money where the world's savings are held is incredibly important because I'll give you an example of Argentina it's a country where the medium of exchange is the peso but the store of value when possible is the dollar people don't want to save in pesos because they see the value dropping really quickly so that's an example where the store of value in the medium of exchange are two different economic goods and you can see going back to the geopolitical implications no state or central bank is going to be comfortable if the store of value is bitcoin which is out of their reach and out of their control of manipulating one way or the other and you can hide it anywhere if the world's savings flee to bitcoin that really reduces the power that central banks have over monetary policy because monetary policy is really a way of controlling the world's savings trying to make the world's savings move and if the world's savings are in something that can't be controlled they can't make it move anymore so Mises Rothbard at all talk about money is the medium through which we can exchange things but the actual store of value is in things like commodities real estate things that can grow and develop and that's what our savings should be pointed towards is there a distinction here I disagree with that I think if you look historically under a gold standard people did keep significant savings in gold it wasn't simply a medium of exchange and just by the fact that gold held its purchasing power over time if you look at the average person today most people don't hold much cash you don't want to hold cash you want to have something else that potentially goes up in purchasing power so in today's world certainly you want to hold commodities or stocks or real estate but under a gold standard people did keep a lot of their savings in gold and it sort of goes all the way back to biblical times I think it was the Old Testament which said keep a third of your money in this and a third of your money in your house or in real estate so historically people did hold a lot more cash because the value stayed the same over time and didn't drop so Mises had a theory that money emerges from commodities called it the regression theory Bitcoin doesn't fit neatly into a lot of the categories of kind of in our other economic thinking a lot of Austrian school people particularly who were fans of the gold standard were very skeptical of Bitcoin in the early days at least how does Bitcoin fit into the regression theorem yeah that's a great question because it was a big debate in the early years of Bitcoin whether Bitcoin is money, whether it could be money and it really did center around the regression theorem the regression theorem was Mises' insight that the purchasing power of money today comes from the fact that it had purchasing power yesterday people have this awareness that there's money around and it's valuable because I remember it was valuable yesterday but this gets you into this kind of circularity where you think well where does it originally get its money from is this an infinite redress and Mises said no it eventually ends some point in the past when money was a commodity such as gold and it was valued for some some other purpose Rothbard took this and he went even further and Rothbard did this a few times that's surprising he's a model of restraint Rothbard I'm a huge fan of Rothbard by the way but I think in this case he made a mistake he extended what Mises said which I think was a historical insight he was trying to explain why does money have purchasing power today and Rothbard said money must originate as a commodity it's not originate as a commodity it cannot become money I think that was a mistake and I think when you look at the regression theorem it's just trying to explain why money has purchasing power and it goes back to some beginning and you with Bitcoin you look at the beginning and Bitcoin wasn't a commodity but someone bought it and someone gave it a market price and it doesn't matter why it got a market price whether it was used as a commodity market price was established and that's an irrefutable fact from that point on the process of monetization began and we're still in that process so I don't think it really violates Mises' regression theorem at all but it does it moves away from Rothbard's interpretation exactly it moves away from Rothbard's interpretation so you know we've been talking a lot about the Austrian school which is increasingly influential in the broad-based Libertarian movement and thinking is Bitcoin in some profound way a fulfillment of Austrian insights or is it just that a lot of people who are into Bitcoin are also into Austrian economics I think in the early days certainly a lot of people who are Bitcoiners were influenced by the Austrian school but it's really interesting as well a lot of prominent Austrians never became interested in Bitcoin or dismissed it people who were I would call almost neo-Austrians who were influenced by the Austrians but weren't necessarily Austrians who I think had the deepest insights into Bitcoin people like Nick Szabo and Curtis Yavin is another example people who knew about Mises and Hayek in Rothbard but didn't necessarily follow them dogmatically they saw that there was value in the method and they applied the method in a way that was a new thing so it's interesting because I feel like now the Bitcoin community is much larger so you have people who do nothing about Austrian economics who are coming to Bitcoin but then some of them start as they get interested they go down the rabbit hole they learn Bitcoin's history and why it's valuable and then they pick up Austrian economics and become interested in it that way How did you become interested in Austrian economics? I'm from Australia originally and we don't really have a remnant in Australia this sort of libertarian core in America it's kind of connected all the way back to the American Revolution this sense of wanting to be free and not be oppressed by the government so I came to America without really any strong political beliefs at all and I started working at Google in 2002 and I came across all these libertarians and I was really struck by their arguments they made complete sense to me I felt like they were arguing very logically rather than emotionally and one of my friends gave me a VHS tape of Ein Rand being interviewed by Phil Donahue in the 1970s I'm glad to hear you were still using VHS in 2002 a little embarrassing but watching Ein Rand being interviewed by Donahue in front of a hostile audience sitting very calmly very small Russian lady sitting very calmly and answering logically it really felt like being hit by a bolt of lightning and I felt like that was a turning turning moment for me and I felt like this is really important this is a way of understanding the world I want to know more about this and the next VHS tape was a Phil Donahue interview of Milton Friedman and then I got interested in economics and I thought wow this is great and you know whenever I heard criticisms of Milton Friedman by Keynesians I didn't feel like they were very strong they weren't very logically argued but I wanted to sort of press press on these ideas and challenge them see if there were any flaws and I was looking around for criticisms of Milton Friedman then I found these Austrians so some of them were pretty hostile to Milton Friedman and I thought they had a methodology which was really interesting and so I became a fan of the Austrian methodology it's a little sad I think that there's this fractious nature of the libertarian community people have gone into these little cliques like objectivists and Friedmanites and Austrians I think we all share a lot of common values but you know I've been interested in libertarianism and all these different schools of thought since the early 2000s you know so you were at Google and you met a bunch of libertarians there right now you know Big Tech is you know widely perceived among libertarians as hostile to libertarian ideas has something changed in Big Tech or are we just kind of talking hysterically about things? Certainly I think something has changed Google was always a company that leaned left but something happened in the Obama administration I can't put my finger on what it is it's begun to ratchet up and this sort of woke culture has become overwhelming almost oppressive almost Stalinist in these companies where you have to speak the right way otherwise you're not welcome or you're kicked out of the company and you know I have friends who are still at Google who tell me how oppressive it feels and the thing that's really I think scary is that there's just a massive concentration of power in just a few companies which all have these same values Facebook, Google, Twitter they all lean very left now I think they've become much more left-wing than they were What does that mean exactly is it culturally left or are they trying to I mean are they trying to make people believe the same things or have the same attitudes towards society and culture or are they trying to actually kind of clamp down on economic freedom? and I wouldn't necessarily say they're overly trying to brainwash people it's just that there's so much power concentrating in those few hands which have the same ideological belief and they have become the dominant global communications platform so they get to choose which viewpoints are allowed they get to choose what's extreme and they get to choose what's allowable and they get to censor I mean it's absolutely incredible that a president of the United States could be banned Nigeria, from Twitter Yeah, from you know these they have that much power that they can take away the speech of US President whether or not you believe that he was a good president or not that is a very scary development I think even politicians on the left like Elizabeth Warren are recognizing this is too much power for these companies How do you, you know the standard libertarian response to that is Twitter is a private platform Facebook is a private platform it's their sandbox they get to decide who shits on it Do you think that there needs to be some kind of government regulation of social media? Well, it's a very difficult nuanced topic in general I think the government should stay completely out of the marketplace but these companies have become so powerful that they have political influence as well and I think it's important to understand that there isn't this clean distinction between corporations and state their corporations and the state get in bed there's this view as the state as having agency as being a kind of person or thing that decides things, I think you should think of the state rather not as something or a person that has agency but as a sword it's a weapon that people pick up and they wield against each other and corporations wield this sword as well So what do you do though? I mean there are, you mentioned Elizabeth Warren she's talking about breaking up entities like Facebook and Google under antitrust other Republican politicians and Democrats are passing laws saying that they can't moderate anybody they can't kick anybody off or they should enhance hate speech penalties where do you stand on that? I would prefer not to use the state to solve this problem Ultimately though I do think if these companies are regulating speech and they are the major platforms where most speeches are consumed then they are inviting regulation because there is no way that you can have half the population in the US not having the same values as these companies and these companies deciding whether or not that half of the population is allowed to say what they want on these platforms but I think the ultimate solution is we need to decentralize these systems. Bitcoin is an example of decentralization for money we need decentralization of communication as well. So that brings, you know we're at Bitcoin Miami Bitcoin 2021, huge 12,000 people are reportedly here. Jack Dorsey the CEO of Twitter spoke on the one hand Twitter is a bet noir of a lot of free speech people because it seems to randomly and arbitrarily kick people off its platform which is less popular. I mean if you're on Twitter Twitter is the entire universe if you're 90% of Americans you don't have a Twitter account or never check it but Dorsey is also probably the most profoundly invested literally and figuratively tech CEO in Bitcoin and he's pushing for all kinds of decentralized plays in Bitcoin as well as in communication peer to peer social media. Is somebody like Jack Dorsey a hero or a villain or do we need to be thinking about people like him in radically different ways? I think a person can be both a hero and a villain and I think he can play both roles I think as the CEO of a large tech company you have multiple constituencies one of them is your users of course but also your employees and they exert a lot of political pressure and people outside may not know this but CEOs aren't like the leader of companies who can do whatever they want if you're someone like Sundar Pichai at Google and you have half your employees walk out because they don't like the way you're doing things you're going to change what you do so they're almost like running in a democracy in a way so Jack needs to cater to his employees and I think probably in some cases these policies coming up aren't necessarily his desired outcome and he's talked about Twitter shouldn't be a platform for communication it should be an app built on top of a decentralized network and he wants that to happen so the benefit to him of having Twitter being built on top of a decentralized network is that he won't have regulators coming to him saying you need to do this and you need to do that he was like well this is a decentralized network there's all the speech that happens on this I've just built kind of a user interface on top of it and I think he recognizes that he's in a very very difficult position having the power that he has he will be constantly scrutinized for the influence he has on politics around the world To turn back to Bitcoin the early critique of Bitcoin was mostly let's just ignore it because it's too small to matter it's a bunch of libertarian weirdos or cypher punks doing whatever then once it got bigger more critiques of it are now emerging one which is increasingly popular is the idea that it's really the only use case for Bitcoin is criminal activity how do you respond to some? I think it's actually one of the worst criticisms of Bitcoin because if you look at the numbers just in absolute terms and even in percentage terms far more illicit trade and activity happens with the US dollar than with Bitcoin Bitcoin perhaps in the early days because of the people who are attracted to Bitcoin had this very strong anarcho capitalist ideology they wanted anyone to be able to trade drugs and so they were like this is a perfect currency for that I think over time In an early kind of demonstration project that Bitcoin was Silk Road Exactly, exactly right and so it got this brand it was associated with Silk Road and the drug trade I actually think that was a big branding problem for Bitcoin because Bitcoin is not really good for that kind of trade the Bitcoin blockchain is open and transparent and exists in perpetuity so if you are transacting drugs online with Bitcoin you know 5 or 10 years down the road someone might be able to trace those bitcoins to something that you buy at another store like Amazon and then get your identity and say you know this was used for drugs so Bitcoin is actually not a good currency to use for drug trapping and I would say the overwhelming usage of Bitcoin is as a savings vehicle rather than for illicit trade What about the environmental attacks on Bitcoin the idea that Bitcoin is already hogging all the electricity in the world and if we shift to it we are going to need to start mining other planets for electricity Well there's the premise which I personally disagree with which is that energy consumption is in and of itself bad I think energy consumption is strongly correlated with human civilization and human flourishing so we should celebrate the fact that we are using more energy but if you do buy the premise and you take the most charitable interpretation of it which I think is always important with your intellectual adversary steelman their arguments let's assume that energy consumption is bad because of the greenhouse effect if you look at Bitcoin's energy consumption it mostly comes from clean energy sources and there's a reason for this Bitcoin miners are looking for places around the world which produce energy very cheaply because that's their primary input cost and so they gravitate towards places where there's a mass of excess energy and an example of this is the Sichuan province in China which is one of the biggest Bitcoin mining centers on earth and what happened there is the Chinese government you know the government is never very good at allocating resources they built all these massive hydroelectric dams and so they have this gigantic amount of energy but not enough people in the region to use that energy and energy is not fungible so you can't take that excess energy and say well we can use it in Texas it doesn't work that way that excess energy is just thrown away it's wasted so what Bitcoin miners do is they go to places like this and say well you got all this excess energy can we use it can we get it cheap and it's great for the power companies they're like yes now we can actually sell some of this excess energy and so the greenhouse effect is actually quite low with Bitcoin because it gravitates to places like that hydroelectric dams in the Sichuan province or Iceland where they have a lot of geothermal energy and excess energy so in a way I think Bitcoin is good for the environment because it incentivizes the production of renewable energy sources in places where creating renewable energy may not be economic because you may not have enough economic infrastructure in an area but you have an energy source you can then monetize that energy source and Bitcoin kind of becomes a battery you store the value of that energy and then you can transmit it around the world so I think we're going to bring online a lot of renewable energy sources that previously would not have been economic and people are going to start moving to places because now you've got energy which is the basis of civilization if those are bad critiques of Bitcoin in your arguments for the bullish case for Bitcoin you talk about real risks and they include things like exchange shutdowns the fungibility issue protocol issues discuss what do you see as the most serious threat to Bitcoin going forward in the early years protocol risk was the biggest risk because Satoshi Nakamoto had come up with this new system for decentralized money and people had been trying this for at least a decade before and had been unsuccessful so when he posted his email to the cryptography mailing list it was met with general skepticism people didn't believe it could actually work and so I think in the first few years people were really bashing on Bitcoin actually trying to break it and I think it's become clear over time people have become more and more confident that the protocol is actually rock solid it can't be broken at that layer so protocol risk has diminished over time and you've said that basically if Bitcoin is around for 20 years or so then people will accept it as if it's always been around yeah there's this thing called the lindy effect where the longer something exists the more confident people are that it will exist forever and so one of the advantages I talk about between gold and Bitcoin when comparing different monetary goods in my book is that gold has been around forever so it has this long established history but I say that's not actually a huge advantage because Bitcoin's been around for 10 years I think when something's around for 20 years people assume it's a permanent institution in the world the internet is a good example like at Joe Bach he's been around for 50 years he'll probably be around for another year what about the other risks of Bitcoin though state attack I think is by far the most important risk I think eventually nation states are going to recognize the emergence of Bitcoin as a global store of value is going to threaten their control over monetary policy and I think states will become more realistic towards it and part of the process of monetization is just people transferring their financial energy from fiat so their savings from fiat currencies like the dollar into Bitcoin nation states can attack those on ramps so exchanges where people buy Bitcoin they're fairly easy to shut down and it's really a question of in my mind where the Bitcoin gets enough political capture that this becomes impossible the example I like to give is the company Uber and Uber had this strategy of going into cities and launching their product without permission they just go and do it and local city governments are generally slow and not good at regulating new things but the taxi lobby would get really angry and hostile and lobby the local city government so you need to shut this down but by the time they had the attention of the local city government Uber was being used by enough people in the city to trade as drivers that it had a constituency a very strong vocal constituency and that's happening with Bitcoin you have this growing very passionate minority of people and if you go down the road to the Bitcoin conference you'll see 12,000 people from around the world who are very very passionate by the same token in places like China where a plurality if not a majority of Bitcoin miners are currently the government is making moves to shut things down you know how does that play out in less authoritarian economies I guess I think authoritarian countries will you still have the power to shut things down because they simply have that power and they can decide whether to do that or not I think they will probably eventually realize it's a bad idea to do that because if you see something becoming global money you don't want to prevent your people from getting you don't want to be lost in line when it becomes the reserve currency of the world so I think China is actually in a great place having most of the mining capacity I think they will eventually recognize that Bitcoin is a good thing for them geopolitically they would love to see, Peter Thiel has talked about this they would love to see the dollar replaced as the world currency they would prefer Bitcoin to be the world reserve currency the dollar but not necessarily the Yuan not necessarily the one they are a mercantilist country they like to keep the Yuan weak but displacing the dollar would be good for them perhaps they may not want Bitcoin to be the world's reserve currency but if everyone else is adopting it they don't have a choice in the matter so the western democracy is the one that interests me in the US in particular I am just looking at where the Bitcoin gets enough political capture enough adoption by people who own Bitcoin that you see politicians in Congress start advocating for Bitcoin and I think we're just starting to see this we have our first US senator who is an open advocate for Bitcoin actually owns Bitcoin and that's a very powerful thing to have in the US Senate is an advocate and someone who can defend Bitcoin when it's attacked by other politicians who may not know much about it and I think it's really great Cynthia Lamas has talked about educating her fellow senators they're pretty slow learners they're slow learners but it's they're slow learners but when their constituents start talking about it and when their constituents say I don't like this thing that you're pushing because it hurts my savings Bitcoin will eventually get to the point where trying to shut it down in the US will be like trying to shut down 401Ks you just it's politically impossible because there are enough people bought into having their retirement in 401Ks that they would they would riot on the streets if you banned their 401K you recently tweeted at the Bitcoin conference Ron Paul was a speaker and you took a photo with him and tweeted out that Ron Paul is a hero of yours why is Ron Paul a hero for you I first you know when I was going along my Libertarian journey at Google I came across Ron Paul in the 2007 presidential debate for the Republican Party they're trying to choose a candidate and I remember that moment as an electric moment almost like watching Ayn Rand that felt the same way where Ron Paul tried to explain why people in the Middle East are hostile towards the US and Rudy Giuliani just sort of got in a half and said I can't believe you just said that they hate our freedom something like that I want you to apologize and Ron barely fitting in his suit kind of cowered a little bit but he stood his ground and he got booed in that audience that night but across the country he was being cheered by people because people believe that that's the truth people around the world love America for its values for its freedom they just don't want to be interfered with I think that's a universal value and I think Ron was one of the first politicians I saw talking about that is one of the first politicians I saw talking about sound money and the Federal Reserve and he was popularizing these ideas that I thought were so important so I thought he was just he is incredible to see him talking about this stuff. It both seems like a minute ago and you know a century ago there was that moment with the Paul ascendancy or insurgency in the 2008-2012 elections the Tea Party which brought his son to power as well as people like Justin Amash and a number of other explicitly Libertarian legislators are you optimistic for a kind of Libertarian vision of the world or because on another level Ron Paul is getting older and older and it's not clear who's replacing him are you optimistic or pessimistic about the next era in American politics and culture so when Ron Paul came to Google in 2007 he gave a talk and I was so excited I got up and I said if I was allowed I would write you a blank check and I quit my job at Google and I went to New Hampshire and I raised millions of dollars and brought hundreds of people to Canvas for Ron Paul and that process seeing the political process in action actually made me really pessimistic at the time and much more cynical because I realized there were much more powerful forces so in New Hampshire Fox News decided to exclude Ron from the debate and so that one decision had much bigger impact than all the people I spoke to you know all the US constitutions that I gave at that that was cool but it didn't have as much as an impact as Fox News saying we don't like this guy you're out so I was really pessimistic for a few years but then I came across Bitcoin and I realized you can change the world through technology as well you can shift the political landscape through technology and so today I feel much more optimistic because I think we have something which is a very powerful tool which can't be shut down and for which you don't need to go through the regular political channels you can just buy Bitcoin and own it and that's being part of this revolution there, thanks so much we've been talking with Vijay Bipati thanks, thanks Dave