 So, our first speaker today will be Manuel Anders. Manuel Anders is a senior economist at Bayern LB. And this is the Bavarian State Bank. And before really falling into the Bitcoin rabbit hole, Daniel won several awards from Bloomberg Finance as a foreign exchange analyst. And so he had a very good preparation to really look into Bitcoin as an alternative financial system. He will talk about Bitcoin today as a decentralized monetary assistant and about the monetary hunger that Bitcoin has. Yeah, thank you, Moritz. I think we can turn it down a bit. But can you hear me well? Too well, perhaps? I have a loud voice anyway, but if it's too loud, just say something. So what I will start with in the first talk is more of an introduction to Bitcoin. I tried at least to bring also some new perspective so people are into Bitcoin for quite some time. But in general, the purpose is to later foundations a bit for our discussions, especially later when we talk about the discussion between Bitcoin and gold. I think it's a bit too loud. So I will just try to do something here. Is this mine? Is it better? Probably. OK, so I wanted to start off with, OK, I always start with a bold statement because, obviously, the point of the value of Bitcoin conference is to have lively debates. And I think this is also one of the success ingredients of the whole concept. So I already start with a bold statement here. And you will probably hear a lot of other bold statements from my side as well. So what do I mean with Bitcoin as the only real global money? We have to first start with this chart here, where you can see the evolution of information networks. So we have in the very beginning the telegraph. And as you all know, we ended up with the internet. It took quite some time to get there. But the interesting point is that there are still shortcomings of the internet because you can only transfer information with this information network. And what was missing was a technology to also transfer value globally and digitally. And this is how I think about Bitcoin because, for me, Bitcoin starts where the internet ended because it solved the problem of digital scarcity. So you had digital objects that you couldn't duplicate at will, what you couldn't do with the internet as an information network. So when you then say, OK, how does Bitcoin fit into the monetary map that we have today? I mean, this is obviously a bit superficial. And the light is also a bit biased towards Bitcoin. But when you have your F here, you have two categories actually, digital versus physical. This is pretty easy. And then you have the more central category here that you have borders. And you have money which is only valid within certain borders and where you have a dedicated monetary policy. And then you have global money. So Bitcoin, obviously, and you also have gold there. And if you look at this chart where you have a global digital information network and then you have a digital global money, you will probably always say, OK, Bitcoin sounds like the better deal given this information network that we rely on. But I wanted at this point to do something else. And not just say, OK, this just fits very well with the internet, which it does. And it relies heavily on the internet, obviously. But I wanted to derive a bit more from first principles since we are in Vienna. And we will hear a lot of oxygen thinking later. So I tried to do the same approach a bit and go into a more deductive approach there to address the question, do we actually need global money? I mean, you could argue, well, it fits the internet, but are there any economic reasons or is there an economic reasoning to end up with the conclusion that global money has certain advantages? And in order to understand this or to go through this mind journey, we first have to start a question, ask ourselves the question, what is the purpose of money? What is it for? And you cannot avoid addressing this question by looking at the problem that money was trying to solve is solving. And I mean, most of you are economists I can see at least here or you know this problem. It's the problem of the coincidence of wants. So it's the problem that what I want at a certain point in time and what you want and what you can also give and what I can give in this moment rarely coincidates. And so the problem is we really need a mechanism to circumvent a bit this problem. And if you think about it, it's very interesting that, I mean, there are a lot of discussions and I'm not an historian, but if you think about the fact that perhaps the first system was not directly money, which solved this problem was at least circumvented it a bit. It was probably a system which was based on debt. So if you think about small communities, you didn't have to introduce money directly. Probably had some form of money, but you could still base this society, if it's very small at least, you could base this society on a system of favors, assets and liabilities. So I bring you a pork today and you repay me by bringing me a lamp, I don't know, one year later or something. Why did this system work? It worked because it was a very close society, a small community. It's actually the same that we have today when we act within our family borders. It's rarely the case that too much money is involved, it's more a system of, I help you today and you help me tomorrow. And this worked because there was a strong web of trust and what game theorists would call, it was a series of repeated games. So it was never the case that the neighbor was just leaving the community and was disappearing and couldn't repay the debt that he owed me. But this was, and the interesting thing for me is when you think about like this, that you already have to have your opportunities to have gains from specialization there. But the problem was it was restricted to small communities where you could have this system of trust-based interactions. So most of you are probably familiar with the so-called Dumbled Number which is around 150 and what is the Dumbled Number? Dumbled Number says that you can only have meaningful relationships with people up to 150. And this is at least how I like to look at the phenomenon of money is that money came into play to make this binding constrained a bit less binding and because you could scale your society with money because now you could interact and transact with strangers as well. So you didn't need this system of trust and you could, for example, transact with a community or a different tribe. And the interesting thing then is if you scale your society like this, you have the possibility then to engage much more in specialization. So beforehand you had a bit of specialization and then you had much more specialization because you could, for example, say, okay, the one tribe is providing agricultural food and the other society or the other tribe is providing, I don't know, some form of weapons or whatever. Weapons probably a better example there, but something else. So the major point that I'm trying to get at is if you say money is scaling societies, enabling specialization, enhancing trade, then the question for me is where does this stop then? So if this, mathematically speaking, this welfare function of Bitcoin or not of Bitcoin, of money in general, but also of Bitcoin is monetarily increasing. So a bit more global money is better because it enhances productivity which comes from specialization and you get welfare effects there. Why would you say, okay, at some point it's enough welfare gains, I had enough welfare gains, I had enough productivity gains, nobody would say the society doesn't need more productivity gains. So this is how I personally look at this, right now at least, I've also thought about it a bit that the major point of money was to scale societies. I mean, this is not a new concept that I came up with, it's the example in the Bitcoin community who laid out all of these points but I think it's the appropriate way to think about it. And then the question is, okay, what form of global money, so if you just say for a moment global money is good because it maximizes this welfare function which form of global money is preferable? Or does it play any role whether the money is physical or digital? Well, I mean, obviously digital fits better or matches better with the information network that we have which is digital obviously but I also wanted to make a different argument here or I wanted to start with the debate that we will have later because in my view there are two problems when it comes to the physical nature in this case of gold for example but also other precious metals because the problem of gold is there are many problems but one of the problems is that you have extremely high cost for full validation of gold. So if you want to validate gold you need a smetting furnace which costs around 700,000 euros which you probably don't have at home and the other problem is the point of portability. This is obviously not all these are just the major points we'll discuss about this later so you could argue I can send gold peer to peer from Austria to China by delivering it for example myself well you could do this but it's economically not really feasible so the same goes for I could theoretically validate Bitcoin myself, gold myself, Bitcoin you can, gold not but the problem then is it's you couldn't argue okay I incur this high economic cost for this for one or two transactions so this always leads us to the fact that you have some intermediaries who are involved because you need economies of scale so they don't they have a smetting furnace and they are checking gold not for one person but for a thousand of people and then it's becoming economically viable but then, I mean this is just my personal thinking and we can debate about this later my problem then is that I have in my head if I have those intermediaries they can always censor transactions so if I want to reach someone in the world if I really want to have a global form of money and I want to address everybody in the world which is in the end the global money when I have a physical good involved and I have intermediaries coming along with them I have the problem that it might be the case that I can't really transact I could theoretically transact if the intermediaries allow it but it could very well be the case that they don't allow it for whatever reasons is another discussion I think but this is how I think about it conceptually and so what I'm trying to get at here is that if you have your scarcity at the level of on the physical layer you run into a lot of problems because you have this centralization forces and it's just a thesis but my thesis from the very beginning here is perhaps, I want to try out this now here okay, no it doesn't work this thesis is that perhaps the only real global money that you could have is if you solve the scarcity problem not on the physical level like you have with gold but on the digital level as it is the case with Bitcoin I think now we have enough to discuss later so the question then is okay, I put Bitcoin here in this category to the right but why is this monetary policy so decentralized why can't it be changed? I think it's a very important point to make well, okay actually there should be another slide well the point is that with Bitcoin you have basically software code so Bitcoin, no this is too far yeah, okay, that's it so Bitcoin is software code so it's actually Bitcoin is what the peer to peer network is running so much more than these six guys here these are purpose built nodes mini computers that run the Bitcoin code and the most important part of the code for us right here when it comes to monetary policy is this we don't go through all the code here we just focus on this part here in light blue and this is the monetary policy rule like the Taylor rule of Bitcoin so the number of Bitcoins that is produced every 10 minutes is equal to this formula and it's important to know that the half things variable is an integer so it can only be one, two, three, four, five right now it's two very soon it will be three in May and this is everything that you have to know about the monetary policy rule that only this half a number increases when you reach a certain block height which means a certain progression of the blockchain with transactions and very soon we will have the 630 block and that's why the half things will change from two to three so we will enter a new era we'll get into this much more later with the stock to flow model but here it's important to have this in mine so the point then is okay if I have this code I can just change it or I can copy it I hear this very often when people see the previous slide and say okay but I can just copy it well first if you think about Bitcoin network as a fish swarm like here and you are one of those fish and you say okay I want to copy the code what you're actually doing if you are copying exactly each and every line of the code you're just replicating yourself you're just creating another fish you're just creating another node so this is well you could do it if you want it's good for the network you have another fish you have another network node the probably more interesting point is that you say okay I'm one of those fishes but I want to change something I want this half thing and variable I don't know what an integer is I want to get rid of this variable I just want to have 50 divided by two that's much easier you can do this but the problem then is that you will become this little guy you will be alone or perhaps you have some other fish that are doing the same then you have perhaps five little Nemo's there but in the end you create a new network and you separate yourself from the rest of the Bitcoin network and the question then is okay but couldn't it be the case that a lot of those fish are doing this? Well, you would have to convince there are probably more than 100,000 nodes right now probably even more than this and you would have to convince a large portion of those fish and if you think about it in a different way if you think in a more traditional way you don't have a monetary policy council of three, five, 25 people but you have a monetary policy council of more than 100,000 people you could very well imagine what happens if they decide on monetary policy they wouldn't change anything they would just decide okay, we don't change anything we don't change anything and this is exactly what the Monetary Policy Council of Bitcoin is doing every 10 minutes they are saying we don't change anything we leave this code as it is just for the pure fact that they know that they can't change the network dynamics because the network is too large to convince a significant portion to change it obviously there are also incentives in play so if you are a node you usually have a stake in the system so you own some Bitcoin and any change to the monetary policy would dilute your own asset that you're having so you have like a firewall in the background if for whatever reason you could change the network dynamic you still have the incentives in play as well as a backup security so we've established a lot of things actually there might be an argument to say that only digital money can be real global money we have seen that the monetary policy of Bitcoin can't be changed or it's very unrealistic that it can be changed now the third point is especially for people from the investment community that are probably around here today why is this guy always talking about the fact that Bitcoin is money and why are people buying Bitcoin obviously Bitcoin is not a fully established form of money yet so you have this weird transition period where you can and it's actually a unique probably unique event in human kind or in human history that you can speculate that it can invest in the future of the money so it is in the equilibrium state it's a form of money but during the transition it's an investment because it's risky because usually you only have investment or you have cash reserves which are riskless by definition so now you have this strange situation that you have a money which is for a certain period of time in investment because obviously it's not completely clear whether it will become the money of the future and then of course next question is okay I somehow understand this but where does the value come from and this is what I wanted to show here that there is no utility value of Bitcoin the same goes for Euro and for gold it's also almost no utility value in my opinion at least and it's completely the different case for example with oil with oil you only have utility there's no monetary premium whatsoever there so the hunting field for Bitcoin so to speak is this middle row the light blue columns where Bitcoin could absorb monetary value from other assets with monetary value and I mean this is just a rough illustration so here I have the status quo of Bitcoin with some monetary premium already and this is well obviously the theoretical potential is 100% with Bitcoin obviously because it doesn't have any utility so the next question then is okay how far could this go then how far what would it mean if Bitcoin gets more and more monetary value from other assets and I wanted to finish off by two ways to address this topic the first one is the stock-to-flow approach where you can we get into this in a second talk later tonight for the time being I just want to say that the stock-to-flow approach tries to evaluate Bitcoin by its hardness and the hardness is quantified by this ratio of stock-to-flow which you could arguably use as a very good measure of the hardness of of an asset which is regularly done for example also with gold and then you can see that right now Bitcoin is about 100 billion probably a bit more than this right now and in May when it the next next half epoch that we saw earlier will have taken place we will be with Bitcoin very near to the stock-to-flow ratio of gold so we will enter a new era and obviously these are not price predictions and whatever but if you just apply this stock-to-flow approach you can see that the fair valuation of an asset within stock-to-flow above 50 would rather be in a vicinity of one trillion instead of 100 billion so the very interesting it's getting very interesting when you don't think about the halving this year but halving in 2024 because then for the first time you have a stock-to-flow asset and you have an asset with a stock-to-flow ratio above 400 which you have never seen before in the history of humankind and then you would have a valuation of probably another factor 10x of 10 trillion so people when they hear this they often say this can never happen this can never happen because where should this value come from and I recommend you I don't know how much time I have because this is just showing zero but since the beginning so I'm not sure I recommend you if you are interested in this to read I think it's a pretty new book from Andy Adstrom he is also a former goldman no I'm not a goldman guy but he's also a former financial guy and and he he's a wealth manager right now so it's very fitting for today's event and he did some number crunching in his book and he said hey look let's just do a rough calculation what amount of monetary value could Bitcoin absorb from different asset classes and I mean I know that I can already see Professor Polart being a bit skeptical because this is obviously not a really Austrian approach but I like it because you can have very conservative very conservative estimates here and you arrive very quickly at a very high number so let's just go through it if you think about gold you have a market cap of nine trillion more or less if you assume that only ten percent of it is non-monetary value you have roughly eight trillion which is pure monetary value and the value that Bitcoin is after so to speak and you just say it takes one third of it you already have a big number like 2.7 or something like this then you have the fiat currencies especially I would say the Vika currencies Argentine peso Venezuela and stuff like this and you have base money around 20 trillion in the world global base money if you just say you take ten percent of this you have another two trillion then you can look at stocks real estate so real estate just think about apartments in London central London or Manhattan where nobody lives in because they use the store of value this number is around like stocks and real estate together 270 trillion which is a huge number obviously so if you say they have multi-value of 10 percent and you have 27 as a base and you take not just 10 percent of this yeah it doesn't have to be that much very conservative another 2.7 and then this is a point that I got from Andy in his book if you've never thought about this that one of the target groups is also offshore accounts because they are very similar when it comes to uh... unseasability censorship resistance obviously the estimates for those are even more difficult because well their offshore accounts one the the lowest estimate is 10 trillion and if you say perhaps here Bitcoin takes a bit more because it's a better match you take twenty percent there you have another two trillion and you already got almost 10 trillion uh... market cap uh... and my obviously these are just estimates in a number crunching but what I want to show you here is since the addressable market for global money is so huge so the uh... the base that you are addressing and the market that you are trying to uh... compete with other multi-asset with is so huge that doesn't take uh... doesn't take huge proportions to take uh... already 10 trillion from this market cap and we will see how hungry Bitcoin will be within this year in the coming years uh... but I think there's a lot to eat for it out there thank you very much and we will talk about the flow of water later then and this was just an introduction thank you very much