Bitcoin: The Future of Money? | Bitcoiner Book Club | EP 186

[Music] Well, hello everybody. Uh, I'm trying something a little different today. I'm speaking with a book club set up by John Vallis, essentially centering on Bitcoin, which is a phenomenon that I'm very interested in but know very little about. I ran across John's podcast partly because their book club also focused on my first book, Maps of Meaning, and so I looked up Gigi Durr, who's speaking with me today, John Vallis, Richard James, and Robert Breedlove, who make up the four people in this particular incarnation of John's book club.

I was interested in their thinking about Bitcoin, and I noticed they were also interested in Maps of Meaning, and so I thought we could try a free-flowing discussion. I haven't done a podcast or YouTube video with five people before, so we're going to see how it goes, and hopefully we'll have an interesting discussion about money, about Bitcoin, about Maps of Meaning, about Maps of Value, about languages of value, about information— all of that.

So I'd like to introduce Gigi Durr, John Vallis, Richard James, and Robert Breedlove. And maybe I could start with Gigi, and you could just introduce yourself, and we'll move from Gigi to John to Richard to Robert. So Gigi, it's all yours.

Gigi: Yes, I'll do my best. First of all, thanks for having us. It's a great pleasure. I think we're all great fans of yours. I think that's obvious, and yeah, about me— I think most people know me in the Bitcoin world because I wrote a little book called 21 Lessons. It's basically a short summary of what I've learned from falling down the Bitcoin rabbit hole. Other than that, I've been involved in the Bitcoin space for a couple of years, and I've just learned a lot, I've read a lot about it, and so I tried to pay it forward and share it with the community, and I think that's what brought me here.

John: Yeah, my name is John Vallis, and as you said, Jordan, I host the Bitcoin Rapid Fire podcast. First, I'll echo what Gigi said—it's a pleasure to be here. You know, big fan of your work, have listened to many hours of your stuff and, of course, read your books. I've been focusing in the podcast over the last year on exploring Bitcoin and what it is and what it means and speaking with all the different people that are involved in it. But as we told you a bit earlier, I've been placing— the phenomenon that's been most interesting to me has been the transformations that seem to be occurring in individuals as a result of understanding and engaging with Bitcoin.

And it's a very peculiar phenomenon, of course, and so that's why I found it so interesting. And of course, I think there's— the book Maps of Meaning, and part of the reason why we explored it in the book club, is because I think that provides a framework for understanding that phenomenon better. So hopefully, we'll get into some of that today.

Jordan: Well, part of the reason I wanted to talk to you guys was because when I started looking into what you were doing, I was struck by two things: that there seemed to be a psychological element to your endeavor, but also perhaps to Bitcoin and the Bitcoin community, such as it is. And then also, I was interested in your philosophical speculations about the domain of value.

So, we'll delve into that. What have you noticed about individual transformation, and do you think it's particular to Bitcoin? And like, it's a strange thing to notice and to bring up, so maybe you could elaborate on that a little bit.

John: Sure. Well, one of the— the answer is yes. And one of the interesting overlaps between your work and you and the changes that are represented in people that get involved in Bitcoin is I think there's a lot— a lot of the instantiation of a lot of the things you talk about are represented in the changes we're seeing in people that engage with Bitcoin. And of course, notwithstanding that your work generally permeates out into the culture, it's providing people with ideas to chew on, and that causes some degree of change. But what I've noticed in people in Bitcoin is that it rapidly accelerates this change toward taking more responsibility, as it were, changing—

John: That is— well, there's a couple of reasons, and I think the other aspect, to sum up and not take up too much time initially here, is that it changes people's time preference as well. It changes the relationship to time. And so the first why I think that is— it's a very peculiar thing, but I think the genesis of it is that Bitcoin allows you to own something, and to allow you to exclusively own something for the first time ever, and that is the private keys to your Bitcoin.

So it's an extreme form of ownership that is not represented in any other domain of life. It's an inherent property right.

Jordan: What do you think? What difference do you think this idea of unique ownership makes? And then how do you relate that, or if you do, to a difference in time preference? And what does that mean?

John: Well, for one, I would say that because it's the first time to experience something like that, it changes your relationship to responsibility. And I think one of the outcomes from that is it causes you to contrast that extreme form of both ownership and responsibility in that domain to all the other domains of your life where, let's say, there's a dependence that exists. And so this is kind of the idea of freedom that Bitcoin seems to engender is that when you take, you know, complete sovereignty and control over the thing that most reflects, you know, who you are out into the social world at the very least, and that is money, that is the emblem of your time and sacrifice or what you gain, rather, for your time and sacrifice.

Once you take control over that, I think it provides a, you know, a very powerful impetus to look at other areas of your life and see where you might establish greater sovereignty and take the responsibility to do that. Another part of it, once you come into this space, you start to realize basically the impact of the current system of money that we use.

And I know this is a term that you use and you reference in the book, but you begin to see how Bitcoin represents the information, let's say, the truthful speech that rectifies pathological hierarchies that evolved as a result of false money, you know, as a result of fiat money, let's say. And I think you could broadly say that money is information regarding your own value hierarchies when you—and everybody else—

Jordan: Right, right. And so when you use it, you communicate those. And to the extent that there's an intermediary or that there's anything that's distorting the fidelity of that communication, pathological hierarchies, incongruencies between what you're attempting to communicate and what you actually are communicating to that market, I think, emerge. And I think that was what I found interesting about the claims that you guys are making, and I wanted to have this discussion in part two to evaluate that claim, to see if there's— well, to see how solidly developed that idea is, because it's a very interesting idea that in some manner Bitcoin is an incorruptible—provides an incorruptible language of value preferable to gold, say.

So maybe you have to buy the argument first that gold is preferable to a currency that isn't dependent upon something like gold. And that's also a separate argument, but you’re making the case that Bitcoin is superior even to gold.

Jordan: And so we'll go into that. But what's your background?

John: I started my career in finance. I lived in Shanghai, China for about a decade, and then whilst I was there, I got out of that because I didn't enjoy the incentives that, you know, the behavior that came from the incentives in that industry. And I went into natural medicine and did a degree in that and worked in that capacity for a couple of years, and then all the while, I had been interested in Bitcoin and studying Bitcoin, and in 2019 it just kind of became overwhelming. So at the time I was living in Thailand, and I decided to start the podcast. And as everyone on this part—this current podcast will attest, once you go down the Bitcoin rabbit hole, it's very, very difficult to claw your way out. You know, you're attempting to find the bottom rather than back to the surface.

Jordan: So that kind of characterizes my pursuit since 2019.

Rich: What's your background?

Richard: So I have a heavy tech background. I studied computer science, and I studied a little bit of physics, and I've been a computer programmer for the last, like, 15-plus years. So yeah, I think that sums it up. I grew up with computers, and I grew up online. And so I know a thing or two about distributed systems and those kind of ideas that are very helpful to make sense of Bitcoin.

But still, it took me a very, very long time to make sense of Bitcoin—like many years and multiple touchpoints—because I liked the economic knowledge that is required to understand this beast. And so the last couple of years, I read up on my economics and discovered Austrian economics, and that was most helpful to make sense of Bitcoin.

Jordan: Right, so that's another touchpoint, because I've become interested in Austrian economics. I'm going to be discussing Austrian economics with some Austrian economists—well, they're not actually Austrian, but they're from that school.

You also have a profound sense of sartorial splendor, just so that you know it.

Richard: Oh, thanks very much, Dr. Peterson. So yeah, my name is Richard James. I'm a filmmaker by trade, although, you know, in more recent years, I've sort of worked in other areas and just been running a small business in a completely unrelated area. But I mean, I've had an almost lifelong interest in economics, and I studied that through school and into university, but sort of fell out of love with it, I suppose. You know, I kind of dropped out of economics at university, but yeah, I maintained an interest in that. And then I also came across the Austrian school of economics, and I found that to be particularly eye-opening.

And it led me down this path of asking that question of what is money. And as we've already mentioned, gold plays such an important role in that, and I think that understanding gold is the first step to understanding Bitcoin. And so, you know, in the last couple of years, I've sort of turned back to filmmaking and trying to link that interest to Austrian economics and Bitcoin. And last year, I sort of set myself a goal for a project to make a film related to Bitcoin, and it had two particular parameters: one was that I wasn't allowed to spend a dollar, and it had to cost zero dollars, and the other thing was I wasn't allowed to leave my desk. So I sort of basically put this thing together using content that had already been created by people, you know, working in Bitcoin and talking about Bitcoin, and the film's called Hard Money. It's available free online, so that's sort of been my contribution, I suppose.

But I'm more interested in the philosophy of money, the history of money, and particularly the phenomenon of inflation and the way that links to things like time preferences, as we've already talked about. And also, I suppose, political philosophy and libertarianism and these ideas that there's a certain way of thinking in Austrian economics called praxeology, which is about human action and the way that, you know, really analyzing the way that people sort of pursue—it's very general in the way that they use means to pursue ends. Like, that's the very first kind of axiom of the system, and from that, we can draw a whole lot of deductions.

And it's interesting the way that leads you down an ethical framework as well. And that's where, I guess, your own work came into it, where, you know, I found myself interested in this libertarian system of ethics or morals, and, you know, Maps of Meaning I think is essentially a book about morality as well, in that it's a book about how to act. So I found some very interesting parallels there.

Jordan: And what was it about—how would you define the Austrian school of economics, and why was it of particular interest to you?

Richard: Well, the Austrian school, I would say, it's a way of thinking that is about logical deduction rather than empiricism. I think the problem with economics in its current form, you know, modern economics, Keynesian economics, because it's largely influenced by the work of John Maynard Keynes, I think it has a problem where it has this desire to imitate a physical science. You know, it wants to analyze data, you know, get complex in a mathematical sense, but there's a fundamental problem there in that when you're trying to analyze something in economics, you know, we can't set up an experiment and run a test on a parallel universe. We're dealing with real-world, you know; you can't isolate the independent variables, basically.

So it makes that kind of analysis fraught with a lot of danger, whereas the behavioral economists are trying to deal with that to some degree, right, by running actual economic experiments. They're more like psychologists—they are psychologists fundamentally. And the Austrian school takes a very different approach, which is to say, you know, we'll take a certain set of fundamental axioms, you know, and then we’ll just build our philosophy based on logical deductions. So it's sort of all done from the armchair, basically, rather than trying to validate anything via real-world data.

I guess the relationship between action and economics and value, I suppose, is that people choose to act in relationship to those things that they value, and that the manner in which they act is all actually an indication of what they value. And so money becomes an index of people's value preferences and value preferences associated with their preferences for action. I mean, that shapes even such things as perception, right? Because perception, when we think about that as something that's automatic, essentially, because the world just appears to us in some sense, but you move your eyes constantly and orient your head so that you can hear one thing rather than another, and you pay preferential attention to one thing rather than another, and you do all of that as a consequence of comparative value.

And I was reading a book on Austrian economics last night, and they were talking about trying to define economics, and it struck me that the most suitable definition was something like the science of comparative value. It looks like that's what economists concentrate on, and then money becomes an index of comparative value.

And then that leads—well, I'm going to talk to Robert next. I'll get him to introduce himself, but I know Robert has written a fair bit philosophically on the implications of money in general as a signal of value and of Bitcoin in particular.

Robert: Hey, Jordan. Yeah, my name is Robert Breedlove. It's a great honor to speak with you today. I'll just say that your work has had a profound impact on my life that I'd probably struggle to put into words, so I'll just leave it at thank you. I'm a lifelong student of philosophy and economics, although more recently, thanks to Bitcoin, I actually was introduced to Austrian economics. I've been going down that rabbit hole for the past four years. My background before that is I have a master's degree in accounting and finance; I was a CPA for a number of years, so I did tax strategies for high-net-worth individuals, investment partnerships. From there, I moved on to be pretty much a career CFO focused in technology, and then most recently I was operating a hedge fund before last year.

You know, 2020 was transformative for a lot of us, and this quote from H.G. Wells really struck me and resonated: he said that civilization is a race between education and catastrophe. And my realization is that the world is so poorly informed about the socio-economic significance and even philosophic significance of Bitcoin that it was incumbent upon me to take what I think I see as the solution to many problems in the world and just pour all my energy into education.

And to that end, I started the "What is Money" show. I called it this because I do believe that question—what is money—this is the gateway to this rabbit hole that we've all fallen down. It is the key to unlocking a lot of the untruths in the world, and I think it's also the key to perceiving the corruption that's embedded in our current socio-economic system, at the core of which is central banking, which I'm sure we'll get into a lot today.

And yeah, I would just echo a couple of the things that were mentioned earlier. That question, "What is money?" has a lot of answers, one of which is, I think you've related in the past, is that money is essentially a contract of the future. And today, fiat currency is a violated social contract. So we have a money by which an institution effectively robs our future. They're compelling the demand for this money and they're violating its supply to enrich themselves and dispossessing everyone else—mostly people economically vulnerable. And to the point about morality, it's like if we don't have a secure social contract in the most important market in the world, which is money, then we can't possibly have a foundation for a sound social morality.

So it causes people to be more short-term thinking. When your money doesn't hold value over time, you can't plan; you can't create trusting long-term relationships. And then the last piece of that is, you know, with central banking violating the supply of money, they are twisting our perceptions. We perceive the world economically through prices, and when that perceptual mechanism is twisted, it breaks down your valuations, your goal orientations, your trust—really just trust. Yeah, it really corrodes the socio-economic fabric, social morality, and even individually, to John's point, I think it really breaks us down.

Jordan: And I've experienced that personally in my life. I've kind of flown high and mighty on the fiat currency standard, and I've experienced a certain set of character traits developing myself. And I've experienced an antithetical set of traits developing myself as a result of studying and interacting deeply with Bitcoin.

So can you elaborate on that a little bit? You're making a moral contrast; it's personal; there's a story there—I'm kind of curious about it.

Robert: So yeah, I made a lot of money quickly at a young age. And I would say that I walked a bit of a darker path where I just thought that I had made it; I had arrived. I would just kind of party and cut up and travel. I didn't have a lot of—I lost that deeper sense of meaning or sense of purpose that you speak so eloquently to. And, you know, you don't know it when you're up against it. I still thought that I was doing good things and was more or less a good person, but I was just going further and further off course, you know, becoming more and more short-term oriented, more and more pursuing immediate biological gratification, whether it's drinking or whatever.

And Bitcoin and this rabbit hole just gave me the larger lens, which we talked about time preference. And when we say lowering your time preference, what we mean is we're expanding your time horizons. So, you gain a greater sphere of concern, let's say, beyond yourself. And that sphere is made up of space and time. And as you do that, you start to see yourself as increasingly a more humble and infinitesimal piece of the total picture. But somehow it also enriches you to want to really dig into whatever gifts you have and give back to the whole picture.

And why do you think the fiat currency—why do you think the fiat currency versus Bitcoin issue is relevant to that conundrum?

Robert: Do you know what? We could say in the very severe original state of nature, we're all just cavemen running around trying to eat and, you know, have shelter. That is an environment with a lot of scarcity, right? There's a lot of economic scarcity because we haven't begun to trade; we haven't created the division of labor and specialization that creates wealth. And I would argue that fiat currency, because it generates arbitrary inflation—it's artificially magnifying prices in the world. It's increasing prices when prices should be declining as we get smarter; it's actually magnifying the perception of scarcity in the world. And I think that contributes to social divisiveness up to and including things like cancel culture and other things we see in the world today. I really believe that artificial central bank-induced inflation is a corrosive moral cancer on society.

Jordan: Yes. And I think we understand. So let's get some terms straight so that everybody knows what we're talking about. So maybe we start with fiat currency. And Gigi, I'm going to pick on you next because I want you to give us a technical description of Bitcoin, if you would, and then we can start exploring its psychological and philosophical implications.

So let's talk about fiat currency, contrast that with a gold standard of Bitcoin, and then let's talk also about central banking and inflation, and just flesh that out so everybody knows where we're at.

Robert: That's for you, Robert.

Jordan: Sorry, that's for Robert. I'll get Gigi—I’ll turn to you for the technical description of Bitcoin.

Gigi: You'd like me to start with central banking?

Robert: Sure, yeah.

Robert: So to give the very high-level description again, the answer to "What is money?" has many questions or many answers. But one of them is we could say that it's a device for moving value or expressing value across space and time, and historically it's a technology, right? The free market selects what the best tool for the job is. That's true for essentially every market in the world today, but we've never allowed that to be the case in the realm of money.

And the best approximation of that historically was gold. So if we understand that as a technology, money needs to fulfill five critical properties: it needs to be divisible, durable, recognizable, portable, and scarce. And I'll gloss over a lot of history, but essentially, monetary metals best satisfied the divisibility, durability, recognizability, and portability properties of money, and of the monetary metals, gold was the most scarce.

And scarcity of money—so what scarcity means is when demand outstrips supply. But what's unique about money is that demand always exceeds supply. There's never enough; people always want more money, right? It's not like you're going to reach a certain amount of apples in your kitchen and you're satisfied with apples. You always—there's always more demand for money. So we could say that money always has this scarcity property inherent to it.

But the market gravitates towards the good that best satisfies those first four properties, and then fifthly has the most inflexible supply. So another way to say this is the most inflation-resistant monetary technology tends to be favored by market actors because, as it turns out, surprisingly enough or not surprisingly, people don't like to get stolen from via inflation. You want to hold the money that holds its rarity and scarcity across time such that no one can dilute you. And so why do you regard inflation as theft?

Robert: So inflation, it's just very simple supply and demand economics. If price or purchasing power, in the case of money, is where supply meets demand, if someone can arbitrarily increase the supply, they can steal purchasing power from the others using that as a store of value. So that's why, again, gold was selected on the market because there was sacrifice necessary to obtain gold. You had to expend time and energy to dig it out of the ground such that in this game theoretic selection of money, everyone could trust that no one could arbitrarily violate the supply of gold because if they could, they would just print gold.

If you could still dilute it with silver or something like that, that's right. On occasion, which they did. Yeah, they've counterfeited gold and any number of things. The problem with gold, though, essentially, is that it was great for holding value—again, back to our original definition of money as a device for moving value across time and space.

So gold is excellent at holding value across time, but it's a metal—a metal are pretty poor, especially for a globalizing society—at expressing value across space. They're very heavy and difficult to move; they're expensive to move, expensive to secure, etc., etc. So this is where paper currency was introduced by abstracting gold into a paper currency. We could now increase its transactability across space, and so long as it was redeemable one for one, right? One unit of currency for one ounce of gold, for instance, then it maintained its ability to express value across time as well.

So we're basically augmenting this free market selected technology to make it more transactable across space and time. The problem, of course, is that it introduced the need—first of all, it made money debt. So now all of a sudden we don't have money; we have a paper certificate that's redeemable for money, which is gold. So this paper certificate becomes a debt instrument, and the problem is you now needed to trust the custodian, the bank—whoever's holding that gold. You have to trust they will not produce paper currency in excess of their gold reserves; otherwise, they are then the one artificially inflating the currency and able to steal from everyone else.

And as it turns out, you know, again, money is like being the most important technology in the world. The temptation to manipulate its supply has proven historically to be essentially irresistible. And banks, which tend to become central banks or nationalized banking operations over time, have always violated that trust function placed—can you give us some recent examples of that?

Robert: Well sure. In 1971, the infamous Nixon shock, he took the world off a gold standard. You know, subsequent to World War II, we held the Bretton Woods conference, where it was determined unilaterally by the United States that the dollar would be pegged to gold; every other currency in the world would be pegged to the dollar. So this gave the United States the infamous exorbitant privilege to just basically be able to print whatever amount of money they want, send the world these paper certificates called dollars, and then receive goods and services in exchange.

But other countries agreed to this one because the U.S. was the dominant military power of the time and two because dollars were redeemable for gold. But from between 1944 and 1971, it reached a point where enough countries had lost faith in the dollar that they were asking to redeem their currencies for gold. Then Nixon decided to spontaneously close the gold window, so he just moved the world off of a gold standard onto a purely fiat currency standard.

And then since that point—actually, since 1971 through today, it's been about a 50-year experiment. We have had disastrous socio-economic consequences across a whole gamut of data. There's a great website to this effect—I would just encourage listeners to check out—called wtf happened in 1971.com. And it, you know, we've had obesity, suicide, addiction. Clearly, global debt to GDP has exploded. It just points towards the devastating force that is arbitrary inflation.

So yeah, I hope that answers it.

Jordan: Yes, go ahead and just jump in for a sec before we move on. We're talking a lot about value, and I think, Jordan, you mentioned something earlier that I just wanted to pull the string on a tiny little bit. And you talk about this in your work, but in order for value to emerge, right, we need to define limitations. So things are defined by their limitations, and as a result of that, we're able to separate them, right? So things emerge out of the void; their limitations allow us to separate them.

Then the problem is how do we order them, right? And then so that is how these value hierarchies emerge. And the internal measuring stick we use to order things is our own limitations of time and energy.

So for a very basic example, if I'm going to look at the lamp, then I'm excluding everything else that I could look at. I'm devoting my time and energy resources to look at that lamp at the exclusion of everything else. The opportunity cost is infinite to anywhere you place your limited resources.

And so the journey or the evolution of money, of finding a money, has been to try to find something that mimics our limitations, that mimics the sacrifices that we make when we bestow value on something.

Jordan: So why would you say mimics?

Richard: Well, because we want something to reflect the same limitation. You know, when we're bestowing value on something through our sacrifices, that's basically what value is.

Jordan: I'm sacrificing my time and energy and perception to focus on one particular thing. If I want to express that out into the external world, the ideal way of doing that is to find something that is similarly limited as my own.

Richard: So that's interesting. So money—I mean, it's obvious in one sense that money is a reflection of human value, but I hadn't exactly thought about it as a form of mimicry. So what we want is an arbitrary external agent that's mobile across people that signifies what people value, of course. So that's a significant value structure.

Jordan: Why sacrifice?

Richard: Well, that's how we create wealth in the world. We sacrifice our time and energy to create things, so money—that's just another definition. I didn't mean to interrupt. Money as a measure of sacrifice.

Okay, Gigi, let's go to you now and let's fill in some of the gaps about Bitcoin per se. Do you want to fill us in about what it is and why you think it's significant? What's revolutionary about it?

Gigi: I'll try my best, and I'll try to link it towards what's just discussed. Like, we always try to zero in on something that, yeah, doesn't just melt away and that we can use as money.

Historically, as we just discussed, gold and silver precious metals were very good at that because gold is virtually indestructible, and it's also very scarce and visible and so on and so forth. The problem is, and that's what computer scientists tried to solve for, I guess, 50 years plus, is if you want to do that in the informational realm, have something that represents value, it's basically impossible because you can copy information indefinitely.

And that's what's described by the double spend problem: like, if you can read information, you can also copy it. So you cannot have a token in the digital realm that can't be copied. If you can read it, you can also write it down again, and that's a basic copying mechanism; that's how computers work—computers are just basic copying machines.

So digital scarcity is kind of an oxymoron and was never possible before Bitcoin. And also, in Bitcoin, like the way that Bitcoin works, it doesn't produce anything that can't be copied—everything in Bitcoin is copied all the time, and you can copy every aspect of it. And there is also nothing that is really encrypted, you know? It uses encryption technology, like cryptographic technology, but it doesn't really encrypt anything. It only uses digital signature schemes to make sure that the ownership of things is clear, but you can read everything in Bitcoin; it's completely plain text.

That's why we also say it's speech. You know, you can basically print out how Bitcoin works and put it in the book and you can actually read it, and you can feed it into another computer and just spin it up again. And also, the output that Bitcoin produces—this ledger, which records who owns what—is completely plain text. Like, you can make sense of it by just looking at it, kind of.

And so we have this problem that historically we found physical artifacts to represent this value—gold coins, for example—and the gold coins— they speak for themselves. Whoever has the gold coin is in possession of this value, the stored value. Someone else put work into it to extract the gold first and foremost, and after exchanges, you know, that—whoever earned this gold coin or also stole it—like, it doesn't matter, whoever has this bearer instrument, whoever has this gold coin, is in possession of some value and can redeem it—um, go to society and redeem it. You can, like, whatever goods and services you want to have, you can exchange your gold coin for that.

And in the digital realm, doing that without any trusted third party before Bitcoin was impossible because of this double spend problem, because of the nature of information that you can't have any token that can't be copied.

So what Bitcoin actually does is it is this play, kind of—it's this intricate dance of computers all around the world that spin up a system that checks and verifies copies of this ledger and it makes invalid copies useless. So you can copy it and you can kind of transform the copies as well, but everyone who participates voluntarily in this game agrees to certain rules, and the rules say that we only accept valid copies according to the rules that we signed up to.

And this is what makes all this possible, and what comes out of it is simply—it's an unbreakable contract of trust.

Jordan: Yeah, it's like unbreakable is a really big word. And everything in Bitcoin works kind of probabilistically, including, like, cryptography itself. It's basically—it makes use of an asymmetry that some problems in our universe are very hard to solve unless you know the exact solution to it.

So that's basically all like the root of all cryptography. Like if I know the secret, I can decipher the message instantly, very easily. But if you don't know the secret, you will have to guess every possible secret, and this is where this asymmetry of power comes from. So cryptography is inherently defensive, and this is what Bitcoin makes use of as well.

Like if you don't have my private key, you cannot spend my Bitcoin, period! Like the heat death of the universe will come first before you will be able to do that. And this is the power of Bitcoin.

Jordan: So can you get extremely simple and describe what Bitcoin is?

Gigi: Yeah, that's the 21 million Bitcoin question. I'm afraid there is no simple answer. Like the best I can give you is it's basically you can think of it as a shared Excel sheet, like a shared ledger that simply attests to who owes what to whom. Like it has a list of these are the 21 million bitcoins that we have, and John owns some and Robert owns some, and it's a list of transfers, so it's a list of transactions.

And if you add all this up and make sense of all the transactions, it's what is recorded is, from the genesis of Bitcoin up to the present moment, everything that happened in the Bitcoin ecosystem. And so that's true—that's what makes it trade. Exactly: ownership. That's what makes it so trustworthy. It's like a computerized accountant; it's keeping track of who owes who, owns what, and who owes who what. And it's distributed everywhere, so no one can corrupt it, and you can't get access to anyone's store because their key is encrypted in a way that makes it impossible to break.

It's because everyone holds their own keys in the best case. Like I hold my own keys, and you don't even know—like you can't associate my Bitcoin addresses with myself. That's also why I'm the invisible man. So a lot of Bitcoiners take care about their privacy, and that's a big topic in the Bitcoin world as well.

And so there is simply no attack vector. You cannot invade all the homes of all the Bitcoiners across the world and steal the private key. So that's what you would have to do to break the whole system. So the security is distributed in the sense that the security is at the edges, and the system itself is insanely resilient.

And what enables this trust is exactly as you have said: it's transparent and it's radically distributed. Everyone has a copy so I can check it for myself from the very first block, like the genesis of Bitcoin up to the present moment I can verify everything myself.

Jordan: Right, so it's completely transparent, it's completely distributed, there's no centralized authority, it can't be cracked, it can't be stolen, it doesn't inflate, it can't be inflated, and it isn't subject to—at least so far—to any form of overt administrative control.

So let me ask all of you guys a question. Maybe John and Richard can chime in on this because they haven't spoken too much yet. So one of the questions that might arise, especially in relationship to Robert's comments, is that we switched to a fiat currency back in 1971, and obviously you guys are no fans of fiat currencies, but we do have money, and it does work. We can still— it still stores value, we can still spend it, and so I would say, please tell me why I'm wrong or if I'm wrong or if you agree.

The American dollar has been the currency of record essentially since 1971, perhaps since before that. Despite the fact that we’ve switched to a fiat exchange system, and my sense is the reason that people use the American dollar is because the judgment of the world is that by and large the social structure of the United States—social and economic structure of the United States—is such that it's more reliable than any alternative. And so people trust them—individual Americans, in some sense.

They trust the trusted interrelationship they have with each other; they trust the emergent social institutions; and as a consequence of that, they're willing to put the same kind of faith into the dollar that you guys put into Bitcoin. And so that's working. And so what's the problem exactly, and is there something wrong with my reasoning?

Maybe Richard, you could comment on that, and if not, someone else jump in.

Richard: Well, I think we have—we can make a fundamental distinction between a money that is chosen by the free market and a money that is forced upon someone by the use of the threat of force, which is essentially what the U.S. dollar is and any other fiat currency. Your point is well taken, which is that the U.S. dollar works as money; but I guess the question is in relation to what or compared to what.

And I think that because we sort of can't imagine this universe that doesn't exist where the free market was simply allowed to do what it would do, so there's two problems with the U.S. dollar. One is that, yeah, it's basically imposed by this legal tender law. So in the United States—and yes, the United States has economic and political dominance, and that extends around the world—but citizens in the United States aren't free to transact in money that they choose.

If I wanted to make a transaction in gold, I'm legally not allowed to do that. I'm not allowed to denominate a contract in gold, and I'm also, in a technical sense, prevented from saving my money in gold. And that's really because of capital gains taxes.

If I want to use gold, for example, to protect my savings from debasement, because slowly but surely the value of the U.S. dollar does decline over time, if I then want to go and use that saved money to actually make a transaction—because I'm legally obliged to—I have to pay a capital gains tax and sort of give back to the state the value I've tried to save.

So I think, yeah, there's a utilitarian domain. So you wouldn't regard that, you wouldn't regard necessarily any increase in value that pertain to investment in gold as an actual capital gain; you'd be more inclined, I may be putting words in your mouth, I hope not—but you'd be more inclined to think of that as a hedge against inflation, and so not an increase in wealth but an actual maintenance of wealth because gold hypothetically is more reliable than the dollar.

You could make that case.

Jordan: So exactly correct. And this is the thing is that, you know, gold, holding gold is—yes, technically, it's not an investment, because there's no return. But the other interesting thing is that things that we put our money into these days that are investments, such as real estate or shares and things like that, most people are only doing that in an effort—not to earn a real return—but only to sort of offset the loss of value that comes from the slowly depreciating currency.

So, you know, that's part of the problem of having a currency where the supply constantly inflates, is that people aren't able to simply save money in a simple sense; they're not able to hold money. They have to take that money and invest it and take on the inherent risk in investing simply to maintain their purchasing power over time.

And then that purchasing power is taken away from them again when they try and go rotate out of that investment back into money.

Jordan: Okay, so let me ask you a question about that. So maybe I could make a case that, you know, because we're all interdependent—whenever I generate wealth, I generate it as a consequence of my interdependence with other people. I wouldn't be able to do it on my own; I'm dependent on the infrastructure, I'm dependent on the government, or at least I have the advantages that those things provide me.

And so could I not make a case that if I've managed to accrue a substantial sum of excess capital savings, that it's reasonable for the rest of society to expect me to allow some of that to inflate away as a tax on my hoarding as a consequence of the fact that part of my wealth is generated as part of a shared endeavor?

Because, you know, you could posit a wealth tax, right, that might address inequality. So that there's a two percent wealth tax or something like that on fortunes over $500 million, and so they decay with time to restore that hoarded wealth back to the general community.

Do you—what do you think of an argument like that?

Richard: Well, there's the problem—it comes back to, you know, we have to go right back to first principles about what we think about the nature of the government or the state. Like, do we think that that institution helps or hinders? Do we think that institution can actually redistribute resources in a way that's fair and equitable? And can it kind of do that efficiently?

That's almost an entirely different question. You know, I tend to be very skeptical of what the state can do in that respect, and I think that freely acting individuals would possibly be able to do a better job.

Jordan: So you have a—basically, you have a free market response to that objection that the free market is going to do better as a calculating device.

Richard: Absolutely. And the only other thing I'll quickly say before I think about handing over is that the problem with using inflation as a redistributive method is that it actually unfairly works against the poor people in society. Because those that have wealth—you know, you're talking about a wealth tax or that sort of happens through inflation—but the way that it generally plays out is those people who are wealthy, they don't store their money as dollars; they store it in assets.

And those assets appreciate in value as a result of the inflation, whereas those people who are living on fixed wages, salaries, you know, living week to week with a bank balance there—and because they're spending a larger proportion of their money on goods and services, they're the ones who are actually most unfairly targeted by inflation.

Jordan: So it actually has the effect of increasing inequality.

Jordan: Do you guys have any faith in the idea that there is actually measurable inflation? Because I—I— is it reasonable? I don't understand inflation; there's a basket of goods and services that are calculated—the price of them is calculated every year—but what's in that basket of goods and services seems to me to be a relatively arbitrary choice. I mean, what makes you think that there has in fact been objectively reliable inflation, say over the last 30 years, given, for example, that many, many manufactured goods and so forth have got dramatically cheaper?

Now, I know housing in many places has skyrocketed, you know, to a tremendous degree, but do you really feel that the currency has become corrupted and that you can—and what do you rely on to make that case? What data do you rely on?

Robert: I could jump in here. I think I would say unquestionably the debasement of the currency—it is an arbitrary harvesting of the economic surplus. A productive free market economy is creating—so as an economy gets more efficient, it generates more wealth that's passed back into market actors in the form of declining prices.

So we’re getting smarter at making chairs, smarter at providing services, electronics, all these things, but by printing money, you're basically stealing claims on that productive economic surplus and doling it out arbitrarily. So we could say another way to think about this is that the free market itself, as you've described, Jordan, it's a distributed computing system.

So we all have our 120 bits per second conscious attention span. You multiply that out by 8 billion market participants. That is the cognitive power of the free market, right? I want to emphasize that because it's such an important point and could easily be skipped over. Because, you know, there are people who admire the ideas of central planning and you think, "Well, maybe there's 40 people doing your central planning, and so maybe they're the smartest people in the world, and they're doing your central planning."

But they have to calculate on the fly a virtually infinite amount of information if they don't have free market prices at their disposal. They have to calculate what metal is worth, what nails are worth, what labor is worth, what rubber is worth, what cleanup is worth, what nursing is worth, etc., etc. And they have to do all those comparisons, and they have to do those computations, and there's actually no way even technically of doing that.

And the alternative is to distribute that calculation across a virtually infinite number of actors, or actors in the billions at least, and let every single person act as a computational device and sum all that. And that's what the free market does. It's not even in principle replaceable by a logical cognitive mechanism. I can't see how it is.

Robert: That's exactly right. It's not even possible that a centralized bureaucracy, a centralized computing model, can compete with a distributed computing model of the free market. We could actually, in fact, say that the free market is a pure economic democracy. People are voting by buying and selling, and whatever price is generated on any given asset, that's effectively the truth of what it trades at.

Any intervention on that, any regulation, any pricing czar, as they had in the USSR, you move towards— you move along that spectrum towards an economic tyranny, where we have now the arbitrary wishes of a few overriding what the free market democracy is selecting.

And to tie this back to the problems with the dollar: the dollar was gold, by the way. Fiat currency never emerges on the free market. That distributed computing model never selects fiat currency by itself. It's only when natural law is violated, when they step across the line of life, liberty, and property and say, "I'm going to impose this technology on you or else." That's the only time fiat currency has ever emerged.

And in fact, the dollar itself was just kind of a bait and switch. It was something redeemable for free market money—gold—that was then replaced with this compelled money. And again, if money is speech, we could say then that fiat currency is effectively compelled speech. It's the same thing; they're forcing a language—a language of value—they're forcing its use on you.

And though if you boil it down to brass tax, the U.S. dollar today and all fiat currencies—they are mechanically pyramid schemes. So a pyramid scheme is a system of network marketing that's using— that's useful for enriching those in higher tiers at the expense of those in lower tiers, and you're constantly recruiting more lower tiers to enrich the top.

Jordan: Okay, so let me draw an objection to that just briefly. So let's—I'm going to accept the pyramid scheme hypothesis, but I'm going to say that it's a pyramid scheme that sacrifices the future to the present, but that doesn't matter because the future is going to be so much more productive than the present that we can afford that leverage.

Robert: It would be—so to make this—this is the kernel of economics, right? Is that I can delay consumption or gratification today, invest for the future, and then enjoy more in the future. Fiat currency and central planning, more generally, reverses that. It actually induces you to consume and take on debt today and disregard the future.

This is the raising of the time preference that we spoke to earlier.

Jordan: So that—and it's arbitrary nature—again, it's as Mises would describe, all centrally planned action runs countervailing to what the free market would choose on its own. So no matter what you do, the government cannot make a good decision if they're coercing people to do it, because they're withdrawing productive factors from the economy to fund that decision.

If they want to go to war, for instance, the market may have not selected to go to war, but a government has decided that, "No, we're going to pull these productive factors from the economy and push us into warfare." So it's contradictory to the essence of democracy itself.

Jordan: Right, so you guys really see that Bitcoin as— you really do see it as a distributed form of government as well, disruptive to centralized government?

Robert: Yes, yeah. And I think one of the elements of inflation—and again, this is the string back to what we were talking about earlier—I do think it is a fundamental point to make, but it—if money is how we express our sacrifices and therefore our values into the matrix of value hierarchies that exist in the market, then inflation is doing so without the commensurate sacrifices that everyone else needs to make into it to allow them to communicate that to the market.

And so this is where the idea of pathological hierarchies is applicable, is because a naturally emerging market where the fidelity between one's actions, one's choices, one’s valuations, and the signal that they send out into the market is pristine.

And I would make the case that’s what Bitcoin represents. Whenever that is diluted, in whatever capacity, to a small degree or to a larger degree, that's what creates incongruencies between the matrix of value hierarchies that are out in the market. If they are pristine, if we are all able to communicate with perfection our value hierarchies to the market, we will see, in my opinion, emergent order.

I don't see how it could be any other way. Where that gets thrown off is when that signal that we're sending carries all alternative information—not information that we, you know, through our divine process of, you know, mediating chaos in order to bestow value on things and then express that through our actions—not that process, but through some other process of someone who controls the mechanism by which we communicate that.

And so inflation is just is changing the relationship between the matrix of value hierarchies without the commensurate sacrifices, and that is what creates pathological hierarchies, and that's what creates— you mentioned, you know, the inequality—why do we—why do we allow this?

Jordan: Now, we're not going to degenerate into conspiratorial thinking, and I'm always wary of any conversation that involves "they," you know, an external actor like we— we've allowed this as a global community; and if what we've done is flawed in the manner that your analysis indicates, why have we allowed it to happen?

Robert: I could say who benefits, and we could go there to begin with. But again, as I said, I'm very leery of conspiratorial thinking. I tend to think of large-scale social problems as everybody's problem, you know, but so—so what do you think about that? Why have we allowed this to happen, and let's say who benefits, and why?

Jordan: Well, there's— the problem—well, a lot of this comes back to, you know, we have to go right back to first principles about what we think about the nature of the government or the state. Like, do we think that that institution helps or hinders?

Robert: I think you're right. I think it has to do with the institutions, and I think it also has to do with education.

Jordan: So it has to do with education, too.

Robert: If a society is poorly educated, it cannot see the forces that are in play and how they affect us. So if you take a society that's been largely wealthy for a period of time— it becomes very easy to just wander along, consuming and living your life and assuming that things are going to be good. Well, they aren't necessarily going to be.

Jordan: Yeah, that's the thing. There's no shortage of dire stories about the future and how we're going to end up in horrible places if we don't manage ourselves carefully, and I suspect that's part of what motivates your thinking as well.

Jordan: There are still people who believe in central planning, for example, for these very reasons, and I often think of that as a fundamental—like I've engaged in a discussion about whether or not I believe in a regulated economy or whether I believe in a competitive market economy. And I'm firmly in the competitive market economy camp. But I see people, too.

And there are people who, despite the evidence of the past, truly do still believe in the notion that the right people will be able to calibrate the economy, and it will work out better under a regulated approach.

Jordan: And the argument would be that the systems are complex enough that we don't understand how they function thoroughly enough yet to make these decisions.

Robert: That's right, and we'll just go back to, again, you know, you mentioned earlier—if someone suggested that there be no more political entities, it would have a detrimental effect on knowledge and markets as well.

Because I think we still need to be able to deal with the effects of fiat currencies and need to be able to understand that institutions need to be available for checks and balances.

Jordan: Yeah, for sure.

Robert: They need to be—

Jordan: Yes, that's a crucial point!

Jordan: So if we were to take this back to the essence of the conversation, and we think about Bitcoin, have those concerns even been addressed yet?

Robert: Right.

Jordan: And let's evaluate them, and let's let the community decide.

Robert: And so with Bitcoin, and now that we have a network that can preserve this incredible innovation, it's a key part of our development.

Jordan: So the question will then become, how do we integrate the use of Bitcoin into our current body of transactions?

John: Exactly. So that’s why I’m so excited! I think Bitcoin is shining light on these issues that society was unaware of until very recently.

Jordan: Yeah, that’s right.

Robert: That's exactly what I think. It brings a lot of philosophical and economic discussion to the forefront, and I hope it encourages more people to ask the hard questions.

Jordan: Right, so maybe that brings us to the question of what does this mean for the future? How do we see Bitcoin evolving? Is it going to become a dominant currency in the future?

Robert: Well, I think that there are two ways to look at it: one is as Bitcoin continues to compound over time, few will be fortunate enough to experience significant gains.

John: Right.

Robert: Additionally, people will have to determine how they want to hold Bitcoin, and as adoption grows, it may develop its own standards and mechanisms.

Jordan: Right, right, right.

John: Thank you all very much for your time. This has been fantastic.

Jordan: Yes, it has.

All: Thank you!

Jordan: Thank you!

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