 My good friend George Mandrick, who sold bacon weaves and baklava and basically baked himself into retirement and sold that for Bitcoin in 2013 and 2014 and just held on to it. That's the way to do it. Life on Bitcoin, eight years later. In the early days of the show, we saw a few wild individuals who attempted to live on Bitcoin. The first I'm aware of was a pseudonymous cyberpunk who went by the name Plato. I think that was 2012, even before we started. Then there was the life on Bitcoin documentary where a newly married couple, plus a film crew, tried to pull it off. But mostly spent their time trying to explain to gas station attendants why they were trying to pay with something other than the money you'd expect. Forbes writer, and I think CNBC host, would eventually try the same things in San Francisco and New York respectively. Mostly they were hungry. But a lot has changed. From crypto credit cards to universal acceptance by PayPal compatible merchants, and seemingly more on the horizon as the Lightning network becomes a bigger and bigger part of Bitcoin, have we crossed the threshold? Can you now really live on Bitcoin without sacrificing so much of the convenience we're used to? On today's show, we'll talk about it. My name is Andreas and I'm Antonopoulos and this is Speaking of Bitcoin. I'm joined as always by the other hosts of Speaking of Bitcoin, Stephanie Murphy. Hello, this is Stephanie on Bitcoin. Jonathan Mohan. Hey, hey. Adam is out this week. Hearing the intro to this segment really brought back a lot of memories for me. And specifically this documentary, did you guys watch that documentary? It was called Life on Bitcoin. It's probably still available. And yeah, there was a couple. I think it was in 2013 or 14, really back in the early days. And we started the show in 2013, by the way. We've been doing this quite a while. So we saw some of the stuff happened at the time. But yeah, they were trying to go around and trying to buy gas was like particularly a problem. I also remember there was someone who was kind of developing a technology where you could kind of meter liquids like gasoline and pay with Bitcoin. And then there was maybe even a feature where you could sell extra gas back to it or something like that. But as far as I know, I haven't really seen that come to fruition yet. Certainly not if you go to any gas station, you can pretty much expect to pay with good old US dollars. And the Forbes journalist that Adam was referring to in this intro that he wrote was Kashmir Hill. And she was actually trying this, not just living on Bitcoin, but she was also trying another experiment, I think a few years later, where she tried to live without Google. And this was also surprisingly difficult. She was like, you know, not able to do email or calendar or it was just an experiment to see how much you depend on these things. And just like that, trying to live on Bitcoin is an experiment in seeing how much you depend on the odd currency or the, quote, normal forms of payment that everyone just kind of takes for granted. And I think it's pretty safe to say a lot has changed, but a lot has also stayed the same. We still have a lot of dependence on those forms of payment. And it would probably be pretty difficult if you were going to try to go around and live on Bitcoin. I haven't seen anyone doing that lately because now it's like not a novelty anymore, I guess. Bitcoin's been around for, you know, well over 10 years. So it's not a new thing. I don't think that there's been that much progress on this front. If you really wanted to pay for everything with Bitcoin and totally live on Bitcoin, maybe because there's not that much demand for it. What do you guys think? Well, I think there's also a distinction to be had here. And maybe we can, you know, do another topic on this. But in the payment realm, there's a distinction between delivery and payment and actual settlement systems. It's called DVP delivery versus payment. And that's the difference between when you receive goods for something versus when you actually settle out the delivery of the payment to the person for that good. And so when money was gold ours, delivery and payment were atomic. You want some chicken, you gave them some ounces of silver or a lot of chicken, you gave them some gold. And then when we transitioned into what we consider currency, they were promissory notes for the bearer instrument, which was the gold in a vault. And so you weren't actually getting the payment. You were getting a promissory note for the payment, right? And so while a lot of people found it insurmountable to directly pay for Bitcoin, Bitcoin's a lot like gold in that it is a commodity. It is a deliverable instrument. It's not a promissory note for an instrument. And I know a number of people who live on Bitcoin, but they don't directly pay for it. They pay for promissory notes that they got with Bitcoin. So for instance, gift cards. I know a ton of people that lived off of Bitcoin in 15 and 16 and 17 by buying Marriott gift cards, by buying Amazon gift cards. And so in the same way that when you use a dollar, you're not giving someone an actual bearer instrument. You're not giving them an ounce of gold. You're giving them a piece of paper that's deliverable to a real instrument. It sort of comes down to how much do we think the person needs to receive Bitcoin for that payment to have been a Bitcoin payment. I think when I started this, I neither understood Bitcoin nor money. And at that time, I wanted to try this almost ideological experiment of living on Bitcoin. And I failed as everyone else has. And then I realized over time, once I understood both Bitcoin and money after, then actually that wasn't a desirable goal. And I know this sounds like a trite excuse, like you tried, you failed, and now you're gonna sour grapes all over this thing and tell me why you didn't actually fail. You just didn't really want that. But unfortunately, that's the truth. Here's the thing. We've had Bitcoin since 2012. And in the beginning, I'd spend it. And then I'd regret spending it every single time. And as I kind of grew more comfortable with the idea of Bitcoin, and as I absorbed the meaning of a currency that is disinflationary in nature, that for me became almost like an endowment fund. Like my Bitcoin allowed me to maintain the same purchasing power with less and less actual Bitcoin being spent, if at all. And then that made me realize that I really didn't want to spend it. In fact, what I wanted to do was get rid of dollars. And the only times I spent Bitcoin was when I ran out of dollars, which made me realize that the best way to huddle is to have enough dollars to allow you to huddle. So that you don't have to spend Bitcoin? Yeah, exactly. The times when I really regretted spending Bitcoin was when I ran out of dollars and I had to liquidate Bitcoin in order to pay rent. And then it wasn't my choice of timing. It was whatever time I had to make that difficult sale. And usually the market timing wasn't good at that moment. And so I realized that actually holding some dollars allowed me to hold more Bitcoin. The ultimate answer to huddle was to huddle a bit less so I could huddle more strongly if that makes any sense. Yeah, no, it's kind of like you can't get a loan unless you don't need one. It's like if you have economic pressures that are forcing you to make decisions that are not always to your best advantage, then the deck is pretty much stacked against you, I guess. But that brings up a great point, Andreas, that I wanted to follow up on. I think at the beginning, I remember a lot of people trying to live on Bitcoin and it wasn't just the people who were documenting it and writing about it. I also knew a bunch of people who were doing this and just doing it in their private lives. And the reason they were doing it was because at that time, it was definitely ideological, like they were excited about Bitcoin, they wanted to spread the word, they wanted wider adoption. And they thought that if they offer it to people who sell stuff, then merchant adoption would drive all kinds of adoption in the economy. And I guess that is a little bit at odds with the idea of huddling, right? Because huddling also drives value of Bitcoin because if you huddle, there's less available for people to buy and it drives up the price, you know? And also it's a statement, right? If you invest in something and you keep it, you're saying, this is the good money. I wanna spend the bad money and keep the good money, right? It's like Gresham's law. I don't know if those two things are necessarily at odds with each other. Maybe they are a little bit because if you wanna huddle, but you also wanna encourage adoption, then you have to end up doing a little bit of both. Huddling and also spending. But then I think the idea became more, well, we may not actually get to our goals by just encouraging merchant adoption. There was a period of time where there was, it seemed like a lot of merchant adoption going on where there were a lot of, you know, fairly big names that announced that they were kind of accepting Bitcoin for payments and stuff. But a lot of them dropped it and I don't really know like how clear it is that that drove broader adoption in general. Maybe it did a little bit, but there were some problems with it. At the time there was no lightning network and not even Segwit. So, you know, the fees were becoming an issue, the confirmation times and the issue of, like Jonathan was saying, you're delivering the goods right then and there, but you need to wait 10 to 60 minutes for a confirmation, depending on how big or high value the thing is to make sure that the transaction is settled. I think that's the narrative that kind of got added later. I remember this era of rapid retail adoption. Maybe it's a bit sarcastic, I'll call it the bit pay era. Yeah, a lot of them were using these payment processors. Right, and that payment processor specifically was really, really driving retail adoption. But it was a strange kind of retail adoption because they were instantly converting it to dollars to avoid any volatility, but also to avoid getting any of the benefits of a disinflationary asset. So it was kind of a soft adoption, a very soft adoption with almost no strings attached. But what ended the bit pay era, despite BitPay's preferred narrative, wasn't actually the fees. I think the real Kudugra came a bit earlier. At the end of 2013, the IRS memorandum that clarified the capital gain situation and required very, very cumbersome accounting, that made it so difficult for the customer to do small payments in Bitcoin. Because if they had to account for capital gains, essentially what the IRS did was they clarified that they were not going to give the de minimis exception that exists for every other foreign currency. They were not going to treat it as a foreign currency. They were going to treat it as a commodity, which means if you buy a $2 cup of coffee and that $2 cup of coffee appreciated from $1.98 cents, you had to account for the two cents in capital gains, even if the tax was below the threshold for every single purchase. Now for merchants who are transmitting directly into dollars, doesn't really matter. The difference in price is zero and BitPay was doing the accounting. But for all of the customers, that became such a huge burden. I immediately dropped my Bitcoin denominated credit cards or debit and I stopped buying things, especially small things with Bitcoin because it would cost me, I estimated on average, about a buck 50 in accounting costs or transaction. So it really wasn't worth it. Yeah, or you have to give up your privacy and use one of these creepy crypto tax tracking software, which I don't think a lot of people are excited about. So maybe they help some people, but it's like you can automate it and give up privacy and also pay for the privilege too, or you can do it yourself, costing you time and money if you have an accountant, even if you do it yourself. So yeah, you're right. That was kind of a party pooper for the people who wanted to use Bitcoin for everyday transactions. That was the end for me. And I can see the caught off very clearly. My 2013 taxes were a fricking mess. I had to go back into them at great expense, had several hundred transactions with Bitcoin. And then for 2014 onwards, we're down to dozens and then tens of transactions per year because it wasn't worth the accounting costs. And from that point on, between the tax treatment and Gresham's law, I really stopped even trying to live my life on Bitcoin. But interestingly enough, the rumor persisted. Even to this day, people will reach out to me on Twitter, reach out to me from media organizations and be like, aren't you the guy who lived exclusively on Bitcoin since 2012? And I'm like, no. Oh really? There's only one guy too. I don't know. I accept it as payment, but I also accept a bunch of other currencies. And trust me, I spend my dollars first. Not only that, I mean, I'll go as far and say that I am one of those craven people who uses credit cards from the enemy in order to get reward points and loyalty points for hotels and airlines, because I can and it makes sense and it would be stupid not to. And why not spend the garbage currency, which is the US dollar that's losing purchasing power, and then not only spend it, but spend it through a credit card, which by the way, I pay off every month in full, so I'm not paying interest. But I get the loyalty points and that way I can get the odd free hotel stay. So I'm not the poster child for ideological commitment to Bitcoin. I'm the pragmatist. I think you'd be hard pressed to find anybody who was. I mean, I think it was more of a PR thing. Like anyone who was doing this was doing it to document it, to create interesting content. It's like, I did a hunter-gatherer challenge and I only ate what I could hunt for three weeks or something like that. It's like, ooh, that sounds interesting. I think I'm going to click on it, but I don't think it was ever really meant for much more than entertainment and to make a point, I guess, to like say, okay, if you try to do this, I tried it for you, so you don't have to. Here's what happens. It works like the hunter-gatherer example, exactly as you said, Stephanie. After 12 consecutive meals of only squirrel and rat, you get really sick of that plan. I also think there's like a realistic approach to it, which is it's not to say, I'm a raw food vegan. I don't eat anything beyond a seed. But if you're 100% in Bitcoin, you get paid in Bitcoin, and then you just treat America like a foreign country and Bitcoin as your own currency. And so whenever you know you need money, you spend the amount of dollars you would need that week of your Bitcoin to get the foreign currency to live in the foreign land that week. I would consider that person living on Bitcoin. Someone who is 99.9% in Bitcoin earns in Bitcoin and then only sells in order to portion out what they need that week in their foreign land. I wouldn't do even that. Honestly, what I did in practice was I earned some Bitcoin, and when I did earn Bitcoin, I prefer to hold it and not spend it at all, just vault it and forget about it. And then I also earned dollars and I use that to cover my expenses. And I was fortunate enough that I was earning enough to cover my expenses and living within my means. And that meant that I could get rid of my dollars. As fast as they would come in, they would go out and I would use the Bitcoin earnings as my savings. So I wouldn't do the conversion. And that also meant that for a very long time I didn't have any exposure to exchanges or having to deal with any of that or capital gains accounting very, very rarely. And I felt much more comfortable. The odd occasion where I did and I still do transactions is doing payroll directly in Bitcoin. And that's because other people wanted to be paid in Bitcoin directly, but I was quite happy to take dollars or Euro or yen or whatever, really. Yeah, I mean, I've dabbled in this too. I think like I've done all of the above, right? Like one time I was going to a festival and a lot of the merchants there were accepting Bitcoin for food and stuff like that, whatever you wanted to buy. And so I tried it. I was like, okay, I'll pay for stuff with Bitcoin. I had all the usual problems, bad internet, transactions not confirming, but everybody kind of knew each other. So it worked out. I've also done the thing where you kind of sell just enough for like a monthly budget if you're running short on cash or whatever. And I've been paid for my services in Bitcoin and paid other people for their services or goods in Bitcoin. So yeah, I guess I'm a part of the Bitcoin economy in that sense, but trying to have your whole life on it, I still think it's more of a thought experiment or like a promotional thing or like a documentary kind of thing. I really admire the people who did it the other way. Who didn't focus on spending Bitcoin and living their life by spending Bitcoin, but focused on earning Bitcoin and only Bitcoin exclusively. All of those people I know have retired. The perfect example of that is my good friend, George Mandrick, who sold bacon weaves and baklava and basically baked himself into retirement and sold that for Bitcoin in 2013 and 2014 and just held onto it. That's the way to do it. What you spend and how you spend it isn't as important it was what you earned and how you earned it. Do we think any of this is gonna change in the future? Tie in El Salvador, a lightning network, places where currency is not really usable? You know, on the topic of lightning, I was thinking about what we're saying, Andre, is about how transaction volume for Bitcoin as a merchant adoption transaction basis went down after that overly onerous accounting ruling occurred. And I look at this omnibus poison pill, you know, $2 trillion plan that's getting passed. $2 trillion? I thought it was like $5 trillion. My mouth can't say these words anymore, but you know, that's exactly what they're proposing is just a change on how overly onerous the reporting requirements will be. And so like I am becoming, you know, very cautious with this broad rule set as to what constitutes a broker and how it may be the death nail of lightning in a commercial context if it ends up being applied in the very similar way that, you know, it kills bit pay with the cap gains reporting rules. That's a very good point. Of course, it would only apply in the United States. What it would basically do is drive the use of lightning network for merchants, at least outside of the U.S. And it would force more of them to use custodial services instead of run their own notes which would serve the purposes of the surveillance schools of this type of legislation, but would ultimately cripple economic activity. But I don't think it's as big and as broad as really the lack of a de minimis exception on the capital gains. I think that affected so many aspects of the use of Bitcoin. It was a brilliant move to attack Bitcoin in an indirect way. But you might be right. We'll have to see how it goes. But you know, these rules are becoming so broad, right? That once you make something a low probability risk, as a commercial enterprise, you have to start accounting for how you would react if that were to occur. And you know, I've heard people that are in mining say, you know, well, if mining gets determined to be as regulated as payment processing, we'll just buy a bank. But at that point, you know, what problem are we solving? Are we just like reinventing the same situation we tried to avoid? That would be the ultimate irony and unintended consequence. If these rulemaking proposals didn't encourage any of the old players, give them some comfort and allow them to enter the new realm, but encourage the players in the new realm, the realm of cryptocurrency, to go and buy themselves some compliance offices on bulk by buying the banking license and the infrastructure that comes with it, which they can probably afford. I think the flippening that's going to occur for Bitcoin adoption, funnily enough, is going to be Jeb McKaleb. And I say that, you know, eating the crow from all the bad things I've said about him over the years jokingly. But, you know, Stellar right now has a market cap equal to the market cap of Western Union. And so if we have another 10x increase in this economy, in the crypto economy, if we go another 2x, Stellar could just take a 30% of their market cap and buy Western Union. And then they are Western Union. I think people don't realize like how incredibly close we are to the size of this economy when it goes from 1 trillion to 5 trillion to 8 trillion and what that will enable for miners and protocols and actors not to, you know, replace the old guard, but to literally own them. Perhaps the real AOL moment in crypto isn't the moment on Black Monday when AOL dumped 2 million newbies onto the internet, but the second AOL moment when AOL bought Time Warner and killed the media landscape that existed before. What do you guys think about some place like El Salvador, which we've been talking about a lot on the show lately, is it possible to live on Bitcoin there now because they have this seamless or, well, nearly seamless, it's supposed to be seamless, exchange between Bitcoin and dollars and it looks like there's going to be a local economy that's really supported to exist in Bitcoin. Well, there's this area called the Bitcoin beach or something like that that was doing this on a small level within El Salvador. I don't know how much broader that could get, but yeah, that's a perfect example. Well, they were also seated with a donor who gave each merchant there or each family or something some amount of Bitcoin to begin with. And I've heard something else too, like there was some mayor in a town in, oh boy, I don't know where, but somewhere in the southeastern US where this mayor wanted to give everybody in the town $1,000 worth of Bitcoin, give them. I mean, they would probably pay for it in their local taxes. I don't know how he was planning on funding it, but he wanted to give every resident $1,000 in Bitcoin, but the catch was they couldn't sell it for some amount of years, four or five years or something. Now, I don't know how you would enforce that unless you have the government holding the Bitcoin, the devils and the details, but... If only there were a way to lock over time Bitcoin sent to a particular address. Oh yes, well, there is, yeah. But would they do it that way? I'm not sure. But I mean, it seems like there are people who are interested in this idea, at least on a local level of economies that are supported to exist in Bitcoin. And will people transact directly in Bitcoin, maybe using Lightning or other ways, like maybe even paper notes or promissory notes or something like that, or will they exchange the currency to something else before they do it? I think the Lightning network is showing its true potential, especially in environments like El Salvador, where it's not really a choice of, do we do this with Lightning or not? It's, if we do this, it can only do it with the Lightning network. That's the only way to really use this on a retail basis for the purchasing power that you have in less developed economies. Now, what's interesting is that the strategic drive to have a neutral currency with a neutral monetary policy, the same drive that perhaps led El Salvador to adopt Bitcoin as legal tender is felt by many other countries. So one of the rumors that is circulating right now is that Ukraine is seriously considering doing the exact same thing that El Salvador did, almost like a second act of that and adopting Bitcoin as legal tender. And there the motivation is clearly not to remove themselves from the sphere of influence of the United States as El Salvador did, but to remove themselves from the sphere of influence of Russia, you know, the ones who invaded part of Ukraine. And so this creates an interesting effect. And in all of these places, as Bitcoin is adopted as legal tender, that creates a circumstance where we can really see this idea of living life in a closed loop Bitcoin economy using the Lightning Network to do micropayments really flourish. It's becoming a real possibility. And I think in the future, it's going to be very different than it was in the past when we were trying it as an ideological experiment. This is now becoming not only a pragmatic option, a practical option, but perhaps even the most reasonable pragmatic option. What would you say is the over and under on the next 10 years, Bitcoin becoming used transactionally? Do you think that that's missing the point or that there really will be a point in the future in which people can use it every day as a currency? I think it's the same thing as the slogan. The future is already here, is just unevenly distributed. Bitcoin as a retail instrument as an everyday currency is already here, is just in these tiny pockets and islands. I think what's going to happen in the future is these pockets and islands are going to get bigger. They might get as big as entire countries or even bigger than that. But I think this trend isn't going away because all of the barriers to that level of adoption have disappeared over time, especially with the Lightning Network and all of the motivations for that kind of behavior, the disinflationary effects, the currency wars, the embargoes, the sanctions, all of these kind of geopolitical pressures are making it ever more necessary to detach from traditional financial systems. So what is that in over-under odds? I think that's a yes. And that's all the time we have for this episode of Speaking of Bitcoin. Thank you very much for listening. Today's show featured Dr. Stephanie Murphy, Jonathan Mohan and myself, Andreas and Antonopoulos. Adam B. Levine was out for this episode. This episode featured music by Jared Rubens and Gertie Beetz with editing by Jonas. You can send us an email at adam at speakingofbitcoin.show or leave us a review on your favorite podcast player. Until next time, thanks for listening.