 You're watching the Daily Decrypt, where we are long on currency competition. I'm your host, Amanda B. Johnson, and today's episode is brought to you by Exmo. What does gold 2.0 mean? Will humanity come to prefer one currency or many? Why do we even use currency? It's time to explore these questions and more with economist and crypto enthusiast Jeffrey Tucker. So, yes, Jeffrey Tucker. Well, I guess I'm on my sixth book now, which is just great, and tens of thousands of articles by now, and I have 150 introductions to books. I work for the Foundation for Economic Education as the Director of Digital Development, so I have a big team and we're doing awesome digital things every day. Founder of Liberty.me, which is going strong, affiliated with Acton Institute and many others. You know, an early advisor to Ethereum, so I'm pleased to brag about that. So, I had no idea. Yeah, yeah, and I must say, in the Bitcoin space, Amanda, let's just tell you. I was out there pretty early on with an explanation of why I think this currency and this technology really matters, and it was interesting. You sent me my first Bitcoin as some people who watch my show might know. That's right. And at that time, there were a lot of skeptics, a lot more than there are now. So, in many ways, the ceiling sort of fell in. But I felt very confident about the future of blockchain technology and Bitcoin. And I think, you know, my opinions and many of our colleagues and yours, we've all been sort of indicated by events. So, there, I can see why right off the bat, someone who is a programmer, is a computer programmer, would be attracted to cryptocurrency. And same for mathematicians. And you are neither of those. Why did you, why as an economist, were you pretty early on, like, oh, hell yes, this cryptocurrency? Well, that is a fascinating thing to talk about, Amanda, because I felt like from very early on, there was a disconnect between the programmers who understood the value and meaning and substantive historical importance of code and the economists who just don't get it. I mean, they just don't understand this world and why it matters. And economists for so long have been tied to a paradigm in which money really has to be rooted in some kind of physical bartered commodity, you know? And this is economists from all schools, Austrians, Keynesians, whatever. They all tell basically the same story about money's history. And they always have this sort of perception that money is fundamentally rooted in this sort of a physical reality and they couldn't even imagine how you could sort of, how would you say, like, duplicate in an allegorical sense that same physical reality in a digital realm. So, it was just beyond the realm of possibility for them. And you think that economists of all people would be imaginative about undiscovered truth, but it's not really true. I mean, economists are fundamentally intellectuals and intellectuals have a natural sort of, you know, sort of inbred arrogance, you know, so that prevents them from seeing the next new thing. You know, I thought it was interesting and I had not considered it before and I'd be interested to get your feedback. But I saw a video last year that was by a Bitcoiner guy. I'm going to say whence Cesaris, but I totally could be wrong. And I'm going to try to look it up and put it in the description if I can find it. But he basically said that according to his research, perhaps barter was, like, not so much of a thing historically and perhaps never was a thing because barter is so wildly inefficient that it's more likely that, like, pre-monetary societies used, like, the gift economy, like the, hey, I owe you this, you owe me that. We'll just, like, give each other stuff when we've got it. Well, that is, and there's a lot of controversy about this right now. But I think the important thing to remember is that the story that economists tell each other about the origin of money basically is conjecture. It's kind of, how would you say, well, it's a conjectural history and has less to do with true historical documentation. I mean, we can look back and see many occasions, many types of money and our logical sense tells us that money is invented as a way of sort of facilitating exchange in a way that's more impressive than barter. But that's certainly right. I mean, that barter stage might last, you know, 10 minutes before people figure it out, you know. But, you know, what's remarkable about Bitcoin is that it never seemed to go through those barter stages. So that was very confusing for economists. I mean, it's just awkward to think that an anonymous programmer would sit down and bang out a protocol that looks and feels like money and actually achieves monetary value without having gone through the requisite stages. So I've unpacked this history in a number of articles. And what I concluded is that Bitcoin's fundamental value is a marketable commodity. Well, first of all, there is no such thing as Bitcoin. It's basically a mathematical fiction. But it's fundamental value in the market. First of all, it's undeniable it exists and has existed since 2009, really, essentially. But given that it exists, there has to be some reason for it. And what I've concluded in my writings on this is that the value of Bitcoin traces to its blockchain services. It's the capacity to bundle up, you know, information units and immutable forms and port them weightlessly and almost almost, you know, to port them anywhere weightlessly and instantly in a way that's not contingent upon any kind of geographical constraints. And blockchain technology allows us to do that for the first time in the history of humanity. So that turns out to be pretty awesome. Yeah, that was something actually that I picked up from reading your book bit by bit because you discussed to introduce anyone to this concept who hasn't heard of it. There's this concept in at least Austrian economics called the regression theorem that says if something came about as money, it had a use value before it was circulated as money. And so, you know, when salt was money, well, hell, its use value before money was also, it's delicious and people eat it anyway. And so as you pointed out in your book, the original use value before the monetary value came about was the payment network. Like in what other way can you send a scarce, provably scarce bit from one person to another? Right, yeah, that's right. And you know what's great about this, Amanda, is that the blockchain services allow this kind of documented reporting of the actual history of transactions, you know, that will live forever. You can go back and look at all the blockchain transactions between January 2008. No, it's January 2000, yes, 2009, I guess, and October of 2009 and see every transaction taking place during a time in which Bitcoin had no market value whatsoever. And there were about 100 transactions per day. So what you had was, you know, probably several thousand, you know, high level geeks around the world were hammering on the system saying, you know, here's an information unit. Did you get it? Yes, I got it. Here's an information unit back. Well, let's slice it in half. I'll slice it in half again. How about I send a tiny fraction? How about if I send, you know, thousands? And you know, banging on the payment network for about nine months. So that was a crucial period during which time there was no posted price, exchange ratio between Bitcoin and any other currency. So that's the crucial 10 months in which we discerned the value of the services attached to Bitcoin. Now, the regression theorem still works. I mean, a lot of times we used to think of regression theorem as being, as you said, identified with physical things, like, you know, gold has an industrial use, salty, you know, tastes good and so on. Beaver Peltry can make an awesome hat, you know, that sort of thing. But if you think of use value as not just restricted to commodity value or use value of physical things, but also encompassing the prospect of valuable services, then that concept of use value actually makes sense as a kind of a pre-monetary stage through which Bitcoin had to enter and finally emerge from. So it does, in fact, follow the story of money's origin. But you have to understand something about the history. But that's the beautiful thing about it. This history is thoroughly documented. It's documented not in newspapers, but in the blockchain itself. That's nice. My goodness. Yeah. So I ask you what your advisory capacity is at Ethereum. That is brand news, brand new news to me. I wanted to address one. I made a video yesterday and I basically said that while gold, aside from the value given to it for, like, industrial purposes, much of its value is as a hedge that people use against mostly unstable currencies or currencies which look like they're going to be unstable and are just our shitty. I basically, at the end of the video, I said, whoa, cryptocurrency is gold 2.0, hence excellent prospects. And someone in the comment section, yes, I always read the comment sections. Every hateful comment I am sent, you can warm your little hearts. I will read it. And someone was like, I'm giving you thumbs down because you didn't tell us how cryptocurrency is like gold. So, and I thought who better to talk about that with than you, Jeffrey Tucker, because the reason I even started learning about cryptocurrency is because you were making a presentation at Freedom Fest in Las Vegas in the summer of 2013 and you messaged me and you said, hey, do you know a whole lot about cryptocurrency? Because Bitcoin in particular, because if you don't, you should. And you should get yourself educated and come present on my Bitcoin panel. That's right. And I was like, oh my God, I don't know. And so I started getting all of these educational materials and like went to like the Khan Academy and watch their Bitcoin series. And I read all these Bitcoin books and then I gave the presentation with you. And if you'll remember, my portion of the panel was comparing the monetary properties of gold with the monetary properties of Bitcoin. And so I talked about divisibility and you know, I don't want to list them off or do you want me to? Because I kind of want you to list them off. But there are like five that they have in common, right? Divisibility, fungibility, high value per unit, immutability, a limited supply. Yeah, easy to store, transportable, highly divisible, like homogenous, like every unit is recognizably the same as every other unit. Fungibility, right? Yeah, just like you said. And so, yes, so for a person who asked that question yesterday, Jeffrey Tucker, paid economist, do you agree that those properties, do gold and cryptocurrency have those properties in common? Well, they do. And not only do they have them in common, but Satoshi Nakamoto actually used gold as the metaphor, sort of the allegorical relationship for the creation of Bitcoin itself. I mean, there's a reason we refer to mining, right? These are really verification services that are compensated in exchange for CPU power, essentially that you have to cough up yourself. But we call it mining because it feels like mining out of the history of gold. And there is an analogy there too with Bitcoin mining and real mining because in the early days, think about the early days of the gold rush, right? People discovered they were golden than their heels. They went out there with pans and they were able to just put a pan and a river and spin it around and discover gold. But then that quickly was depleted and they had to go to the mountains and then that was depleted. They had to dig further in. You have to dig further and further into the mountains to get gold. And so the higher the price of gold, the more it's worth it to expend the resources that are necessary to get more gold. And it turns out to be exactly the same in Bitcoin mining, right? The early miners, you just turn on your laptop and go to bed and wake up with 100 Bitcoin. Yeah, nice times to be alive. That's very much like finding gold in the river in 1820 or something like that. But as time has gone on, mining has become more difficult, more resource intensive. And therefore, it's had to fly around the world trying to find the lowest prices for electricity and a little more centralized. Nowadays, that's not worth it for any individual to bother mining. And that sense, there's an exact analogy again, but that's not by accident because Satoshi was very aware of the history of the gold standard. Now, Amanda, the crucial thing because Bitcoin is not the first cryptocurrency. People have been trying to do this stuff for 20 years prior. The question was, how can you achieve scarcity? That was always the issue because the digital world specializes in reproducibility. I mean, if somebody sends me an email, I can forward it to five other people. I can take a picture, I can send it on Instagram. It can be seen by billions of people instantly. You can download it and forward it to another billion people and so on. Reproducibility is the key feature of the digital age. So if you're going to have a digital currency, how do you hack it in a way that helps it reproduce the scarcity of the physical world? That was really the difficult challenge. There have been many cryptocurrencies. Bitcoin is really the first one that used the blockchain ledger idea to scarcify in an artificial sense and timestamp and really title ownership units to particular features of the blockchain, which we call Bitcoin, in a way that really establishes a kind of an allegory between the digital and physical world. That was the innovation. That's what it took 10 months to test before Bitcoin obtained its first value. So it was the scarcity that was the crucial issue. That was the one that was the most difficult and that was really the crucial innovation. Interesting to think that something that required so much crafting to achieve scarcity, hopefully, and as many predict, will be the kind of thing that facilitates trade in a world that becomes ever closer to what could be called post-scarcity. That's right, ever more abundant prosperity. But that's one thing about money, that you have to have it. There has to be a limited supply. If it is infinitely reproducible, then it's no better than the leaves that fall off the trees in the autumn. It's valuable fall to zero. The irony is, and this is interesting to think of, every national currency in the world, government currency, lacks the property of scarcity. They are all capable of being infinitely reproduced. It's very interesting. If you reintroduced the dollar today and said, hey, here's a dollar, let's give it value, nobody would ever accept it. Because they'd say, well, I mean, why couldn't you just produce trillions of these tomorrow if you wanted to? Surely it has no value. So it's funny that Bitcoin has a property of money that actually national monies does not have anymore. So in that sense, it's actually vastly better. There's two senses in which Bitcoin actually improves on even gold, though. Because gold is naturally scarce, so that's awesome. But Bitcoin takes up no space, so it doesn't need, you don't need warehousing services like you do with banks. The other thing is that it has no weight. So its portability is vastly more impressive than you would ever get from gold. If I wanted to send gold from here to Beijing, I would have to either send a promise to pay or put it on a slow boat. It would take several weeks to get there. But Bitcoin, if I wanted to send to Beijing, I'd just press about 10 minutes there a couple of seconds later. I've had a couple of people ask me what I think about gold warehousing services lately where crypto tokens are assigned to say a gram of gold or something. And people are like, oh, well then we can send the crypto tokens back and forth among us and it really represents the scarcity of real gold. And that makes zero sense to me. I agree that I don't mind any of these ideas as entrepreneurial ideas. All the power to me and I would go for it and let's see what works. But yeah, I think it does. I agree with you actually. I think it reflects a sort of a failure to understand the essence of Bitcoin's value. Well, and what's more, they're trusting that these warehouses actually are keeping like 100% reserve and that there's going to be no fractional anything and that there's going to end. And so it puts you back in the trust model and it's like, no, the whole point of an open source blockchain is that you don't have to trust that anybody's telling you the truth anymore because the truth is out in the open, not locked away and evolved. That's right. And have you been fascinated to see, I'm sure you've followed it. Just ever since the Mt. Gox blow up, you know, where people were given promises and they had to trust the Mt. Gox had their Bitcoin for them and that they really own them and that sort of thing. And that whole thing just blew up completely. That ever since then, all the Bitcoin services have really emphasized 100% reserves, you know, and people are really scrupulous about that. And I think that if any major Bitcoin exchange actually started keeping fractional reserves, we'd know about it in about two minutes and it would be the end. So, yeah, I mean, I don't know, I don't know like what actually happened with Cryptsy, but I do, I do know that it seems like every time it's looked like an exchange is about to make an exit scam. There are plentiful warnings ahead of time like people will be online being like XYZ exchange won't give me my money, they won't let me withdraw, they won't let me withdraw. And after several months of this, it's then that things happen. And so certainly, I mean, certainly people using cryptocurrency, there's so much, there's so much self policing going on. There's so much, there's so much regulatory effort. You know, it's like real market regulation where people are like, yo, don't use business A and people are like, oh, maybe I won't use business A. Right, there's you get huge geek cred, you know, if you ever discover any real problems out there, you know, and you can demonstrate it and prove it. I mean, I don't know if you follow the Bitcoin Reddit forum, so there are many of them. But yeah, you're awesome if you discover problems in the Bitcoin, in the Bitcoin space, you know, I mean, everybody rewards you. And that's great. You're right. It is a kind of a regulation. It's proof that we don't need a central bank. You know, the big problem with Amanda right now in the Bitcoin communities, I think many of us expected a greater degree of consumer adoption than we've seen up to now. And I think partially, and I'm probably guilty of this, I was a little unrealistic about the network stickiness of prevailing national currencies. The question in my mind is how long is that going to persist? I mean, will it persist in the event of a big monetary crisis? I tended out it. Anything, you know, even if it's like 2008, much to say nothing of actually worse, we're going to see a tremendous interest in the cryptocurrency. And I was intrigued the other day. I guess you saw that Trump is talking about, you know, you know, outrage of the day. No, I didn't see this. Jeffrey, tell me. Well, his outrage of the day was that he wanted to stop Mexican immigrants in the United States from sending money back home, from earning money, you know, laying bricks or, you know, tallying their bathroom or whatever. If you pay them in cash, then they use money exchange services to send the money back to Mexico. He wanted to make that illegal. In fact, that's how he said he would pay for the wall is that he would just confiscate all this money. Well, I mean, first of all, that's just outright theft and outrageous and despicable. But beyond that, you know, you can't do that. With Bitcoin, he would have absolutely no hope of stopping that transaction. There's just no chance. Because if you pay in Bitcoin, I mean, you can send it across borders with no problems whatsoever. I mean, governments ultimately can only control their own currencies. They can't control the crypto currencies. I mean, once you own it and you're in that ecosphere, you can move the money anywhere. Borders don't matter. So things like that are going to help consumer adoption of Bitcoin. I'm talking too much, but one other thing that I find it really interesting is that I was one of the earliest people to discover that the source of Bitcoin's value was, in fact, its payment network. The blockchain services themselves. And in the meantime, we've seen a lot of innovation that takes the blockchain technology and innovates around it. And Ethereum is a good example of that. I mean, it's not a side chain. It's not a colored coin. It's not just an altcoin existing on a Bitcoin blockchain or anything like that. It actually creates a separate network of its own. And the currencies associated with that, which are really sort of investor assets of a blockchain application, have themselves been rising in value. And we've seen the so-called ether go from zero to something like $10 and a very short period of time, something like three months. So it's interesting. It's something I never would have really expected. So it's exciting to be in this space and to be surprised at all the innovations that are going on out there. What is your advisory capacity at Ethereum? Well, I've been there for years and I'm good friends with Vitalik. And since I'm not so much of a technician, I've always been in the position of sort of a more theoretical advisor. Is this possible? Is it likely? Can an asset associated with the Ethereum blockchain application actually begin to embody a monetary value? These are the kinds of questions I've been in position to sort of explain. And should Ethereum itself just be a kind of operating system for smart contracting applications? Or should it actually try to demonstrate these things with applications itself? These are the sorts of issues that have come up over the years. And it's very interesting because like even two years ago, people were declaring the Ethereum project dead. And now, of course, it's just rocking it so hard. It's just beautiful. Very good. So I have a question to ask you a final question about sort of your prediction. I've gone back and forth in the past between wondering, okay, so is the nature of money and payment networks such that we humans will tend to prefer fewer over more? Basically, will we tend to want like a one global currency? Or can the nature allow for like, oh, like I love many currencies, I own many currencies because they're like shoes to me like some are red and sparkly and some are chunky and yellow. And what do you think? Well, I think that's a really interesting, I'm glad you asked the question because economists have traditionally always said that there's a tendency to unite around one money. Like every economist has said this for forever that competing currencies are essentially inefficient and that we want one final currency because that saves on transactions costs essentially. And that your confidence is then everybody, the whole world is happy with a single currency. Hayek challenged that idea in the early 1970s with his book, Choicing Currency, actually. And he said that money is much more like toothpaste in the sense that, yes, in some idealized world, we'd have just one awesome toothpaste that the whole of humanity said, this is our great toothpaste. We don't need another. But in fact, we never quite get to that in-state. And in the meantime, we seriously need competition as a constant check and a test and as a template for innovation. So you need the competition out there so that you can constantly have currencies learning from each other, one currency innovates in some particular area. And we're seeing this in the Bitcoin Ethereum space, right? And so the blockchain, the core developers of Bitcoin were rather inflexible in adapting the protocol to accommodate the robustness that are necessary for smart contracting. So Ethereum comes along with a very robusting framework for scripting and that sort of thing that allows for the creation of much more robust and vast forms of smart contracting. So you've got a competition going on there in the innovation. So I think, Amanda, look, Bitcoin challenges everything that every monetary economist in the world and banking economists have thought about their profession and the way things work. And they're just now starting to learn and catch up. You're starting to see the journals now six years later, starting to deal with the reality of cryptocurrency and what that implies about their theory, which is good. Our theory is never perfect and the advice to economists that this elicits, I think, is get your head out of the books and look out the window. See what's going on outside there because the market is more than likely smarter than you are. Smarter than any of us. Yeah, and that is a humbling lesson, but that's the awesome thing about the market. It's just so intelligent and smarter than any intellectual. Yeah, and by the market, I mean, it's just like humanity, right? Just like the aggregate of all of our preferences at any given moment is like the market. It's crowdsourced, crowdsourced knowledge, you know, and that's smarter than any one individual. It moves faster, it's more creative, it's far more unpredictable. But for that reason, it's much more beautiful. And this is the problem with states, essentially, that they presume to know things they can't know. And intellectuals and states have similar problems, you know, with arrogance and unwillingness to deal with the uncertainty of the future and have confidence that if we allow freedom to flourish, freedom itself will discover things that we ourselves alone cannot discover or anticipate. And that's a hard place to come to as an intellectual, but I think it's the essential insight that F.A. Hyatt gave us. And I think Bitcoin proves its proof of concept, really. That's a good way to end. All right, well, thanks for your time, Jeffrey. It's wonderful to see you. And you know, it's just glorious. I mean, you and I both have learned so much by being in this space. We both entered into it in a very early point and we were both in a sort of state of discovery. And it's been thrilling to me to see your knowledge grow and your sophistication grow and to see how intensely you've thrown yourself into this realm. And you've made such an immense contribution because your podcast is enormously popular and highly educational. So thank you for your dedication to it and your scrupulosity of detail and your enthusiasm, which is absolutely infectious. Well, I learned from the best. And before we sign off, mind giving us a URL where people can find your work. Yeah, I'm I've thrown myself into reviving fee.org, which is a 70 year old organization. But I want to make it a cutting edge digital space and go have a look at it, see what we're doing. And our traffic is rocking it so hard right now. I want to get you back writing for it, by the way. And we're doing we're doing a good job and I'm really happy. It's just proof that, you know, 30 years ago, everybody said, oh, fee is dead. No more. We're we're moving so hard right now. We're latest Alexa rank is 25,000 with the 25,000th most popular website on the planet Earth, which is saying something. So just go have a look. Yeah. Fantastic. All right. Well, you have yourself a fine day, Jeff. Thanks so much, Amanda. Bye bye. Bye bye. Today's episode is brought to you by Xmo.com, a cryptocurrency and fiat trading platform in business since 2013. Xmo recently added a Dash Bitcoin trading pair as well as a Dash US dollar trading pair. And they're the only exchange currently compatible with Dash Instant X for four second confirmation times on both your deposits and withdrawals. You can learn more at Xmo.com. And speaking of such things, brothers and sisters, I have some freshly dark send mixed Dash that I want to send back to you. So the first five comments that post their Dash address in the comment section below are going to get a dollars worth of Dash. Just a fun give back from me to you. Have a good day. In 50 years, are people going to have five different coins in their wallet that are all purely for payments? I don't think so. I think that wouldn't make sense. But they may have 20 different types of blockchain assets that all do different things.