 Celsius, three-aero capital, FTX, and now BlockFi. 2022 has seen crypto companies falling one after another, undermining trust in the ecosystem. All of crypto is trying to rebuild a financial system that we already have, based on manipulation. But Bitcoin is something different, say the Bitcoin maximalist. To them, Bitcoin is the only crypto that has no counterpart risk, and therefore the only one that can be trusted. But can Bitcoin really fix all this mess? Can Bitcoin really be the one and only base layer for the financial system of the future? We discuss these questions with Jeff Booth, entrepreneur and author of The Price of Tomorrow. I'm Giovanni. On this show, we challenge the ideas that shape the world of crypto. In each episode, we assess a crypto narrative, a macroeconomic outlook, or a potentially disruptive technology. Only the most solid ideas will make it to the other side. If you enjoy our content, please consider leaving a like and subscribing to our channel. Now let's get into it. I understand that you envision Bitcoin as the base layer for the future financial system so that people won't have to rely on these third-party entities to decentralize entities like FTX, like Celsius, like all these examples that we saw this year. All of crypto is trying to rebuild a financial system that we already have based on manipulation and centralization, the entire stack besides Bitcoin. Bitcoin is the only thing that changes that. We don't need another system requiring greater credit that can never be paid back, that has to manipulate our time and information to pretend it can pay it back. We need a different system that puts the incentives of all of us together and aligned incentives to the best of us instead of based on the theft. That's actually partly the reason why the entire crypto ecosystem is going to go to zero besides Bitcoin. After the collapse of all these C-5 platforms, a lot of people are saying, this is time for DeFi to emerge. We noticed that there has been an increase in activity on DeFi platforms because as we know DeFi offers this sort of peer-to-peer services which don't require custodians third-party risk. They seem to provide a solution, but you don't believe those are a solution, right? If we talk about DeFi, decentralized finance cannot exist. It's impossible for it to exist on a centralized platform. When you say centralized platforms, you mean Ethereum, right? I mean anything other than Bitcoin because I have not seen something that passes the test that can be decentralized in security. A lot of people see decentralization as a sort of spectrum. You can have more or less decentralization and probably the traditional financial system is still far more centralized than those platforms that you are criticizing on which the DeFi system is working on. So maybe right now, but if you project it forward and the world moves on top of it, not a chance. Not a chance because functionally they have to become more centralized. That's not a guess that is looking at the logic on how it's built. If you look at Ethereum today and if you look at how the state could just take it over, it has to become more centralized as a function of how the blockchain works. And now let's explain better how Bitcoin is addressing this tree lemma, the blockchain tree lemma. So you claim that Bitcoin is the perfect protocol for building the future financial system specifically because it solves two of the three components of the blockchain tree lemma and it doesn't need really to solve the third. I'm saying it doesn't have to solve that in a layered system. Technology protocols develop in layers instead of one big behemoth that solves everything and for the layers to function properly, they have to harden and that means they have to be super resistant to any changes at the base layer until the next layer can be built on. That base layer needs to be proven decentralized and secure and so Bitcoin is hardened for 13 years, provable more secure, provable more decentralization and outside of control of any government, nothing can stop it on the base layer and then layer two comes on and can talk to the base layer and layer two becomes lightning and it opens up an entire new payment rail on top of payment rails on top of layer one that we couldn't see that many people that were talking about crypto that why they went into crypto the first time is Bitcoin couldn't provide the payment layer because it could only do five to seven transactions a second on layer one. So they solved scalability or they tried to solve scalability and sacrificed the decentralization by doing so. So Bitcoin critic and Ethereum proponent Ryan Bergmans explained three reasons why Bitcoin won't be able actually to become this base layer for everything like the one that you explained. So here are Bitcoin's three problems according to him. Let's address them one by one. So the first problem according to him is that Bitcoin is uncompetitive because of its lack of apps and the high cost of proof of work. So let's address that first. So the high cost of proof of work on the base layer as we've already talked about is a feature not a bug. It is the way that you drive decentralization and security period. It's the only way to be able to from a physics standpoint to be able to do that. And yes, it doesn't on the base layer because it doesn't allow apps to be built. It doesn't allow scalability. That's actually the feature. But in layer two, it allows all of that scalability. I can send lightning transactions around. I do send lightning transactions around the world right now for fractions of a penny unlimited. So now you have your second layer talking to your first layer facing the second layer, facing the first layer, they can build an entire ecosystem on top of that for the lowest cost period. Okay, and a short follow-up question. Why there are not so many developers on the Bitcoin blockchain compared to Ethereum, for example? And that's a pretty simple question. So if you had, let's just use block size as an example. Let's say the increasing block size, you could put more things in that you could build smart contracts in. And then that would give a whole bunch of developers a way to build a whole bunch of interesting things on top of your blockchain. So it would empower an entire audience. But by doing that at the base layer meant that block size would have to increase and the compute power to audit the system would have to increase. And that would concentrate the centralization in very few nodes that had the money to be able to do that. It would be a trade-off. Okay, that was pretty clear. So now let's address the second concern. So Bitcoin security budget is unsustainable because its transaction fees haven't and won't grow nearly enough to make up for BTC issuance reduction from the halvenings. So as a result, Bitcoin is currently on track to suffer successful 51% attacks. To solve this, the Bitcoin community must become willing to sacrifice a 21 million supply cap and inflate BTC on an ongoing basis to buy security. So how could you comment on this? Okay, so when I see a question like that that is just so factually backwards it's hardly even a question that it's worth it because if that was true then hash rate wouldn't be moving up on Bitcoin. Security wouldn't be increasing. And security wouldn't be increasing on Bitcoin. So if it was easier to attack Bitcoin today and there was that much power to attack it then why hasn't it been attacked? So security is exploding. If you look at exahashes on Bitcoin as a measure of the energy use of Bitcoin and mining of Bitcoin then it's exploding all around the world. So it gets harder and harder every year, not last hard. Let's address the last of the concerns which is about quantum computing. So he's making the point that one day there will be this technology, quantum computing that will be able to break the cryptography that Bitcoin is based on thus kind of undermining its security. You just say, okay, quantum is going to break security at some point. Wouldn't you expect quantum to try to break security on something like a bank first or the Federal Reserve first? Because this security underlying this is encryption security that runs the entire world. And so if quantum in some time is able to break this then it could also break every other security instrument and every other crypto, every other financial institution every single other thing, the nuclear codes and wouldn't there as well as that would happen wouldn't you expect that all of the people within Bitcoin if that were to happen to develop quantum resistance in that threat just like that would happen all over the world. So that's the way technology evolves and you're constantly looking to, okay, what's the next threat and you're moving ahead of that. Even if you took that to its logical conclusion tomorrow there's quantum that could break that. It's likely not going to break Bitcoin first because there's not enough incentive to do so. And if it did it would ruin the same incentive that it was trying to crack to be able to crack it. Thanks a lot Jeff for this incredibly insightful conversation. I hope to have you again on our show. Thanks Giovanni.