{ "episodeId": "SLP2", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "vijay_boyapati": { "name": "Vijay Boyapati", "role": "guest", "tag": "VIJAY" } }, "segments": [ { "speaker": "stephan", "time": "00:01", "start": 0.64, "text": "Hi guys, welcome to Stephan Livera podcast episode two with Vijay Boyapati. Vijay is a software engineer and Austrian economist. He's been around Bitcoin for a while and he commonly shares his thoughts on Twitter. Most famously, I think you'll like his article \"The Bullish Case for Bitcoin,\" a great one-stop-shop case for Bitcoin. So this discussion is fantastic and it's filled with insights, but unfortunately, during this recording, unknown to us, just for a short period around five to ten minutes, where- worth of it, there was some audio distortion, so I apologize for that, but the discussion was too good to just let it go. hopefully that's okay for you, and I'll try and fix it up for the next episode. So without any further ado, here's my conversation with VJ. For our guest today, we've got VJ. So, VJ, Tell me a little bit about your, intellectual influences that led you into Bitcoin." }, { "speaker": "vijay_boyapati", "time": "00:57", "start": 56.89, "text": "so I've been interested in Austrian economics for probably about, let's see. Fifteen years now. and so I've been interested in the, the topic of money for a really long time, and I came across Bitcoin in 2011 when a friend of mine who's, also interested in Austrian economics We had a bet with each other about Federal Reserve policy and, what the Fed would do at one of its meetings. And, I won the bet, and the bet was for, a single silver eagle, a silver coin worth about twenty dollars." }, { "speaker": "stephan", "time": "01:37", "start": 97.3, "text": "Yeah." }, { "speaker": "vijay_boyapati", "time": "01:38", "start": 97.84, "text": "It was worth about fifty dollars at the time. and so I won the bet, and my friend said, \"Hey, there's this new thing called Bitcoin, and don't, don't take the silver eagle, let me just give you Bitcoin instead.\" And I think Bitcoin was about ten dollars at the time, so he, he sent me five Bitcoin and, he was like, \"You need to download this software and, it took like a couple hours, it was on an old laptop, I was downloading it, downloading the blockchain.\" and After, after it had, transmitted on the blockchain and it confirmed a couple of times, he showed me this really old, crappy block explorer, and he was like, \"See, here's the, here's the bitcoins I sent you.\" It was just a bunch of strings and numbers, and I'm like, \"What the hell is, what the hell is this thing?\" and, so that, that was the start. I, I had no idea what it was, but it quickly became apparent to me that this was a, a monetary good, and, and was absolutely fascinating because it's sort of- Created out of thin air and yet it has value on the market, how is that possible? And, you know, most economists before Bitcoin was created would have thought such a thing was completely impossible." }, { "speaker": "stephan", "time": "02:57", "start": 176.64, "text": "yeah, no, that's a great point, and I think that sort of leads in really well to one of the themes that I, I've seen you write about recently, which is Bitcoin's process of mental capture, and I think at that point, you had then been, you know, captured from that point onwards. So, yeah, I saw you had a really good, Twitter thread on this. did you wanna maybe outline a little bit on that process of mental capture?" }, { "speaker": "vijay_boyapati", "time": "03:21", "start": 200.93, "text": "Yeah, so I, I think what happens for a lot of people when they first get exposed to Bitcoin, they either hear about it and they buy a little bit or someone gives them a little bit. So I, I've, I've had a, you know, a bunch of friends and family who I've given small amounts of Bitcoin to, over the years. I mean, it was small at the time, the purchasing power was, quite small, but over time it started increasing in value, and, you know, I'd give someone twenty or fifty dollars worth of Bitcoin and then a It'd be five hundred dollars worth, and they'd start paying attention, like, \"What is this thing? \" And I think there's this sort of transition from hearing about it and getting a mild interest in it to becoming sort of an active, participant in the market, and, and that process takes a while and, and involves what I call mental capture as a person becomes more interested and, Eventually becomes a really active participant and, and starts buying bitcoins and becomes a, a hodler." }, { "speaker": "stephan", "time": "04:22", "start": 261.95, "text": "Yeah, no, that's a great, way to explain it. And I think what many people experience, and I think you point this out in the thread, is that basically people might buy a small chunk and then see it go up in value, and then it might crash a bit, but then now, now that they've made a bit of a gain, now all of a sudden they, they just become so much more interested in it, and then maybe that's what causes some people to then go Hole, and understand, oh, okay, what's, what's Austrian economics, what's, what's sound money. So that's a really interesting process." }, { "speaker": "vijay_boyapati", "time": "04:54", "start": 293.81, "text": "Yeah, absolutely. And I, I think it also ties into the, you know, the The sort of biological chemical reaction that happens in the body when you gamble, trading and gambling are pretty similar things, psychologically. You get the, the oxytocin response when you have, a profit and you, you feel a little bit depressed when you, when you lose money. And that's a very addictive thing. And part of my point was that when you first buy some Bitcoin and you see it go up and you see it go down, it's a really volatile asset So it, it tends to trigger that response, and someone who's bought some Bitcoin and then s- seen it double, it's really, really hard after that to forget about the price of Bitcoin. Like, you could have bought Bitcoin in, in the past hype cycle, for instance, when it was like a hundred dollars, and then seen it go all the way up to a thousand, and then crash all the way back down to two hundred, and then maybe you forgot about it because it was flat for a couple years, but it's there in the back of your head head, and if you hear someone else talk about it or there's a new story about it, it rekindles that interest. and so part of my point was there's a lot of people out there who are sort of partially activated. They, they have some interest in Bitcoin, but they're not active traders. And when a new hype cycle comes, these are the people who are ready to start participating and allocating capital to Bitcoin. and, you know, there are tens of millions, hundreds of millions of other- People who haven't even heard of Bitcoin, and they're not ready yet to, to purchase Bitcoin. But a-as each hype cycle pro-progresses, it brings in new participants, and, and usually they're the ones who are Willing to, to play a bigger part in the subsequent hype cycle." }, { "speaker": "stephan", "time": "06:47", "start": 406.52, "text": "Yeah, no, that's, these are all fantastic points. And I think you also had, that reminds me that you had another thread. I think it was kind of late last year, and it's, it's something like, \"While there are no, a-priori rules about the path the monetary good will take as it is monetized, a curious pattern has emerged during the relatively brief history of Bitcoin's monetization.\" And basically, you go on in that thread to talk about how it's really about these different Hype cycles, and that, one point I like that you've really made is that, you know, few people really anticipate how high, you know, prices will go, and then when that cycle ends, that like people attribute, a popular cause to it, but really that's, that's not really the reason for the end, it's just that we've reached the end of, the, we've exhausted the number of participants who are reachable in that cycle." }, { "speaker": "vijay_boyapati", "time": "07:40", "start": 460.33, "text": "Yeah, yeah. So my view is that in each hype cycle, there's a pool of people who are, reachable in the sense that they're able to understand it, they've, they've heard enough about it, they're ready to even consider putting some money in, and, and it's a finite number, and each hype, hype cycle, that number grows. in the first hype cycle, the, the people who really understood what, what Bitcoin was and that it had any kind of potential is a very small- circle of cri-cryptographers, people like Hal Finney, and that to me, the first hype cycle was from like zero, when it didn't have a market price, up to about a dollar. The next hype, hype cycle brought in people who were sort of ideologically interested in Bitcoin, libertarians and, and people of that sort. And then in the, the latest hype cycle, the one that we saw in two thousand and seventeen, we started seeing a lot of retail investors, people who'd heard about Bitcoin before in the previous hype cycle, and, and they were now ready to participate and, and buy some bitcoins." }, { "speaker": "stephan", "time": "08:46", "start": 526.07, "text": "Yeah, no, that's a, yeah, I think that's, it's interesting that that's, it's each era, we've had different eras, let's say. a-and I think as you pointed out that there, a-along with that, that point that you were making about the different types of people, we've had these different eras of Bitcoin as well, which I think you've mentioned in another, one of your threads where you're basically talking about how there was an era, there was an era of protocol risk, and then it became an era of exchange And then regulatory risk and then product market fit." }, { "speaker": "vijay_boyapati", "time": "09:22", "start": 562.34, "text": "Yeah, yeah. So I think the, the risk that has surrounded Bitcoin has decreased with each hype cycle and, and as the risk decreases, the number of people who are willing to entertain even owning it, has increased a dramatic amount you know, in the beginning, even the cryptographers who kind of understood what it was about weren't fully convinced that, What Satoshi had published was possible that you could have digital cash, and I think, you know, even someone as, brilliant as Greg Maxwell, Maxwell was pretty skeptical that this was possible, so in the beginning, it's, it's pretty obvious that, there wasn't gonna be much capital allocated to Bitcoin because the risk was just tremendous. It's just made up internet money. but over the years, people have sort of become more confident that the cryptography is solid, the protocol solid, they started becoming confident that the exchanges were solid, you know, after," }, { "speaker": "stephan", "time": "10:30", "start": 629.6, "text": "yeah, the" }, { "speaker": "vijay_boyapati", "time": "10:30", "start": 630.06, "text": "Gox, after the Gox hacks, yeah, the, the Gox, The Gox hacks and the crash that happened around then, a lot of the exchanges, really improved their game and i-improved security. So, The amount of capital that's, that people are willing to allocate to Bitcoin is been growing a lot because the risk has been dropping at the same time." }, { "speaker": "stephan", "time": "10:54", "start": 653.81, "text": "that's right. And I think the other thing is that in terms of resolve or conviction, what we're seeing now is that Some of those early holders, after they've kind of been through a crash and then they've seen the next hype cycle come, they now become a bit more hardened in their resolve and they're now more willing to sort of be the holder of, holder of last resort, as someone like Trace Mayer might say." }, { "speaker": "vijay_boyapati", "time": "11:16", "start": 675.75, "text": "Yeah, if you, if you've been through a crash where you've seen, you know, eighty, up to ninety percent of your investment disappear, and you're able to hold on because you have such strong conviction, almost religious conviction that this is better money, then nothing is gonna shake you out, absolutely nothing. And I agree with Trace, this is, these, these hodlers provide a really strong base. There's, there, there's a number below which it, it can't, Bitcoin can't go because there's enough people who'll just say, \"Well, if it goes below this level, I'm just gonna buy the entire supply up.\" yeah. If it, if it goes below, say, a hundred, there are enough, wealthy, Bitcoiners who enough, who have enough fiat who will just say, \"I'm gonna buy up ten percent of the supply or twenty percent of the supply.\" Of course, that's not gonna happen, but, it puts a strong floor under Bitcoin, this, this incredible conviction that people have that it's better money." }, { "speaker": "stephan", "time": "12:16", "start": 736.3, "text": "bullish indeed. And I think, one of the other things that you've done well to highlight to people Is that, a-and I think you refer to William Stanley Jevons, where he talks about how money progresses in stages. So it's, you know, collectible, storage of value, medium of exchange, and then unit of account. And I think that was from your article, \"The Bullish Case for Bitcoin.\" So maybe if you could outline a little bit around how money progresses in stages?" }, { "speaker": "vijay_boyapati", "time": "12:44", "start": 764.34, "text": "Yeah, sure. so the interesting thing I think about money is it's the most important good in any society. Without money, economic calculation would be impossible and there'd be no division of labor. so without money, you have no civilization and would basically all be living in poverty. yet despite the fact that it's that important, it's The people have an incredibly poor understanding of money, a-and I blame this mostly on the economics p-profession, which has propagated really bad explanations of how and why money arises. and one of the big problems I see with money is the way it's defined. People, and this is true of all schools of economics, I, I consider myself an Austrian, but I think even the Austrians make this mistake. They define money as a generally accepted medium of exchange. the problem with that definition is that, medium of exchange is just one of the roles that money plays. There are other roles which are just as important, or I think actually more important, so for instance, the store of value role of money, that you, you keep some of the value that you've earned over time in money, and you can tap into that later on if you need it. It's sort of a nest egg or insurance policy against uncertainty in the future. And then there's the- The, the unit of account role of money, which is, you, you price goods in terms of money and you calculate profit and losses in terms of money, a-and this role of money allows for economic calculation, which is, you know, such a, an important part of a, a market economy, and the great Austrian economist Ludwig von Mises, made the point that socialist economies just can't work because it's impossible to have economic- Calculation when you don't have money. but so, so I wanna go back to the, the point about the definition of money. Almost all economists define money as a generally accepted medium of exchange. But the problem, of defining money in terms of one of its roles, i-is kind of like defining, let's say, defining a car as a vehicle which has four wheels." }, { "speaker": "stephan", "time": "15:05", "start": 904.64, "text": "Yep." }, { "speaker": "vijay_boyapati", "time": "15:05", "start": 905.08, "text": "And while that's kinda descriptive, it's not really a complete picture, and in fact, it- It hinders our ability to understand what makes a car different to, say, a bus, and it, it hinders our ability to understand the properties of a car because a car is more than just wheels. So I, I, I sort of went back and dug into a bit of the history of, the, the evolution of money. Which of these roles of money come first and which one's more important? And I, I came across, Jevons is writing, and he made the point, and Jevons is actually a pretty famous economist, he's one of the fathers of marginalist economics with Carl Menger, and he made the point that In its path to becoming money, gold went through four stages. It started as, a collectible or sort of ornamental use where people valued it because it was kind of Shiny and, and good for jewelry and, and, and it was pretty rare. and after it was valued for that use for a while, people started saying, \"Hey, people will accept this as in, you know, in exchange because they can use it for these things that, they, they find valuable, the ornamental use.\" And so it developed, the store of value use because people were willing to hold it and they recognized that others valued it. And over time, over a long, long period of time, when enough people were willing to hold it and valued it, it became stable, much more stable in purchasing power, and then it was useful as a medium of exchange where you could, use it in day-to-day use to buy, you know, a cow or," }, { "speaker": "vijay_boyapati", "time": "16:59", "start": 1019.04, "text": "a tractor or whatever it is. and finally, after it was a medium of exchange, it became a unit of account. It became the thing that everyone priced Their, their goods for sale in. So they would say, \"You know, I, I'm, I'm a grocery store, and I have all these goods. I want the prices for, for these goods aren't gonna be listed in terms of bushels of wheat anymore or whatever I demanded when I was in a state of bata. They're gonna be...\" Priced in terms of gold, and so it, it reached the final stage of monetization, which was becoming a unit of account." }, { "speaker": "stephan", "time": "17:33", "start": 1052.84, "text": "Yeah, no, that's a great, way to explain it, I think. One of the, you know, common criticisms of Bitcoin is its volatility, right? And I think that, that, that process that you've just outlined there is part of the explanation or the counter argument of Okay. This money has just been formed, and as you said, you know, nobody in living memory has ever seen something be monetized, so we're kind of, we're all sort of clutching in the dark a little bit, and we have to sort of look at parallels in history to try and understand how this might evolve over time." }, { "speaker": "vijay_boyapati", "time": "18:11", "start": 1091.37, "text": "Yeah, absolutely. And," }, { "speaker": "vijay_boyapati", "time": "18:16", "start": 1095.73, "text": "one of the things I, I find kind of amusing is that, is that establishment economists deride the fact that Bitcoin is volatile as if you can go from something that didn't exist to being a stable form of money overnight. It's, it's completely ludicrous. Bitcoin, when it, when it, was first created and first began to be traded, was incredibly volatile because, it was kind of like a penny stock. It, it really didn't have much purchasing power and the, the pool of people who owned it was quite small And as, as the pool of people who own Bitcoin grew over time, its price also increased and its volatility started to decrease a little bit as well. it's only when you have, widespread ownership, say you have one billion or two billion or even most of the world's population who own Bitcoin, that you can expect that its purchasing power is gonna really, really stabilize and it's going to, it's gonna- Look a lot more like something like gold, which is fairly stable in purchasing power over time." }, { "speaker": "stephan", "time": "19:25", "start": 1164.93, "text": "Yeah, that's a great point. And I think the other factor is just the-- it's just a function of size, right? Like the global market for, you know, stocks and bonds might be, you know, a hundred trillion, the global market for M3 money might be ninety trillion, the global market for Bitcoin right now is like a hundred and twenty billion or something like that. So it's just a-- I think it's just a function of size. As it gets larger, it will have less Movement as a percentage." }, { "speaker": "vijay_boyapati", "time": "19:51", "start": 1190.73, "text": "Yeah, absolutely, and I think, you know, you can almost think of these assets as sort of pools of liquidity, and, and when, when you compare it to those other pools like you did, Bitcoin is like a little puddle. And, and when, when you have one foot step on a puddle, it's gonna, it's gonna cause a big splash. Whereas you have one foot stepping in an ocean, it's not gonna make much of a difference. And as Bitcoin, as the liquidity increases, the effect of big people, big sources of capital coming into Bitcoin will have a much smaller effect than it does now." }, { "speaker": "stephan", "time": "20:26", "start": 1226.0, "text": "Yeah, that's right. I think, that's a good, way to come back to the, the no coiners. So, Vijay, in your opinion, who is, how, how would you define, a no coiner, and who are some of your favorite no coiners?" }, { "speaker": "vijay_boyapati", "time": "20:40", "start": 1240.35, "text": "Favorite no coiners. so I guess a no coiner is just defined as someone who doesn't own Bitcoin, and it's, it's a very sad existence, and I, I feel sorry for these people, but just kidding, kidding. I love no coiners." }, { "speaker": "vijay_boyapati", "time": "20:58", "start": 1257.54, "text": "you know, there's, there's a difference I think between people who don't own Bitcoin because they don't really understand it and, they're not yet convinced that it's a better form of money or that they should own it. Allocate capital to it, and I totally respect that. I mean, it's really, money is a very, very difficult subject, and, you know, even people who practice economics, I, I would say that ninety percent of them don't really have a clue about money. so I, I, I don't really have a problem with people who don't feel confident enough in their understanding to, to be willing to allocate money to Bitcoin, allocate their savings to Bitcoin. But then you have people who are ideologically against Bitcoin, you have people like, oh, Paul Krugman and, I'm trying to think of that fellow, the other economist, Noriel Rubini. Noriel Rubini, yeah. And these, these are people who are Have an ideological axe to grind. They, they don't-- Bit-- Bitcoin is sort of built on a school of economic thought, Austrian economics, which is hard money and, and a limited supply of money, and the supply of money isn't in the hands of the state. And so when they see something like this, it, it really rubs them the wrong way because they think the government should be controlling money, and they think that government does a great job of controlling money and, Obviously they don't have much of an understanding of history, they haven't really looked at the history of fiat money and, and how frequently it sort of, Falls into oblivion and its value disappears and, and millions of people lose their savings. they're, they're quite convinced that governments are, are great stewards of our money. so I, I wouldn't say they're my favorite no coiners, but they're, they're some of the, the more prominent ones. If I'd say my favorites, I'd probably have to say someone like my mom and my dad. They don't, they don't, they don't own Bitcoin, and I, I still love them." }, { "speaker": "stephan", "time": "23:09", "start": 1389.12, "text": "Yeah, yeah. I think, I mean, I was a bit tongue in cheek with that. I think, I, I think some Bitcoiners actually use a slightly different definition. They think of no coiners not as people who just simply" }, { "speaker": "stephan", "time": "23:24", "start": 1404.47, "text": "view against Bitcoin, so I mean, you know, you've got the guys like Nuriel Rubini and so on, and the funny thing with some of these guys is they, they come out and they do this sort of victory lap When they first pronounced that it was a bubble at, you know, six hundred dollars, and it crashed from, you know, twenty thousand down, and at that point it was down to like six thousand. So It's still ten, ten times up from the point that he had come out against it. and I think the other thing with that is that it's very, it's coming from a charlatan view, which we would contrast with, you know, that sort of Mengerian view, which he, outlines in his, book, the, or essay on the origins of money, which I'm sure you've read, a-and that's, I, I think it's an interesting point, I, I suppose that leads me to the next question, is, and maybe you've kind of already touched on this, is, can the different uses-- and when I say uses of money, we're talking store of value, medium of exchange, unit of account, can they really be separated or are they really all taking root together at the same time, but maybe it sort of manifests in those different stages, as you pointed out before?" }, { "speaker": "vijay_boyapati", "time": "24:39", "start": 1478.83, "text": "Sure, yeah, I think that, you can sort of think of the store of value role as sort of a prolonged," }, { "speaker": "vijay_boyapati", "time": "24:49", "start": 1488.97, "text": "sort of equivalent of a medium of exchange role, like when you hold something like gold as a store of value You're hoping at some point in the future to exchange it potentially for something else, it's just your time horizon is much longer. When, when you're thinking of a store of value, a medium of exchange is something that you're, you're thinking about using in the very near future, and the reason that you use- A, a medium of exchange is to solve, you know, to go back to the Austrian story about, the origins of money, there's this double coincidence of wants problem where if you have two people who wanna, trade with each other and, you have one person who's, selling apples and one, one person who's selling oranges, if they don't desire the trade at the exact same moment, the trade's not gonna happen. Or if, say- The, the orange seller doesn't want apples, they want bananas. so unless you have something that they both value at the same time, the trade's not gonna happen, and, and money serves the role of, satisfying the coincidence of wants problem so, so when you think of the medium of exchange role, it's much more of a short term thing, whereas the, the store of value role is a, a long term thing." }, { "speaker": "stephan", "time": "26:12", "start": 1572.0, "text": "Yeah, yeah. okay. Let's, talk now about some of the Bitcoin Cash and B-Cash kind of components. So I think what's- I, I guess economically, if you had to sort of break down what, that sort of pathway that Bitcoin Cash wanted to go, is that they They, they seem to argue that even at the, you know, the maximum, like Bitcoin's fees went to sort of, I think, forty or fifty dollars, a-and I think they neglected the fact that Bitcoin was still fantastic for h-large value transfer, even at forty or fifty-dollar fees. so maybe if you just wanted to comment a little bit around Bitcoin Cash and what- economically, how you would sort of assess them versus Bitcoin?" }, { "speaker": "vijay_boyapati", "time": "27:05", "start": 1625.47, "text": "I'm not sure what Bitcoin Cash is. I know there's something called B-Cash, and it's a, a shitcoin, that was, it was copy and pasted from Bitcoin, under the delusion that they could, they could make a better Bitcoin by increasing the block size, and they completely- Misunderstood the, the value of Bitcoin and, and they also misunderstood the path that, money takes, that a monetary good takes to become fully fledged money. The, the people who are behind B-Cash are sort of obsessed with the medium of exchange role of money, and they, they kind of mirror modern economists who are also obsessed with the medium of exchange role of money and who define money in terms of being a medium of exchange. and this is, I think, completely ba-backwards and mistaken. Something has to be a store of value first before it can be a good medium of exchange. If it's not widely valued, then it's not gonna be used in exchange. And, you know, you actually go back to the early days of Bitcoin, there were people who were really obsessed with getting merchants to accept Bitcoin and, It's just completely backwards way of getting adoption for Bitcoin." }, { "speaker": "stephan", "time": "28:22", "start": 1702.32, "text": "Yeah, great argument. I think, yeah, to" }, { "speaker": "vijay_boyapati", "time": "28:24", "start": 1704.34, "text": "focus, to focus on merchants, because you imagine the story for merchants. You go to a, a brick and mortar, mortar merchant, you go to a coffee shop, you say, \"Hey, there's this awesome new digital currency, and it's a great medium of exchange, and let's not mention its store of value. People like Roger, people like Roger Ver were doing this.\" And so the store says, \"Okay, this sounds interesting, and oh, it, it has low fees because at the time no one was using Bitcoin, so the, the, the miner fee was quite low and, so it seemed like it was a good idea. The problem was no one owned Bitcoin, no one valued Bitcoin. So you're a coffee shop who proudly says they accept Bitcoin, and no one comes into your store using it. It's complete waste of time. What you need to focus on first is, growing the store of value use case, a-and getting millions or billions of people to value it. And once you have millions of people, mi-millions or billions of people valuing Bitcoin, then you can move on to the medium of exch-exchange role for money, and, and then you can say to people, \"Hey, y-you should probably take Bitcoin in exchange, because there are so many people who hold it now, that you'd probably do a decent business, accepting it.\" And, I, I think that the problem with that way of thinking was that these guys like Roger Ver were really obsessed with keeping the miner fee low, and so they wanted to increase the block size, and they said, \"Look, this is, this is really easy. These core people don't know what they're doing. It's just, it's a parameter in the code. You increase...\" One megabyte to eight megabytes and we're done. We just do a hard fork, it's, it's not gonna be backwards compatible, but who cares? We, we will have increased. What they, what they didn't realize is that making a change like that completely undermines your confidence in the monetary policy, the fixed, the fixed supply of Bitcoin being twenty-one million bitcoins that could ever be produced. if someone can just change Bitcoin, if someone can just change a parameter and hard fork, and then it's the new Bitcoin, then there's, you can, you can have no confidence that at some point in the future, someone's gonna say, \"Hey, twenty-one million, maybe that was good once upon a time, but let's make it forty-two million now, because forty-two is a much better number.\" And, and, and we need more because all these economists have told us that we need to increase the supply. That completely undermines the store of value use case. And, and so you, you're never gonna get to the medium of exchange role of money if you undermine the store of value use, use case of money. And by doing this hard fork and showing that they could really easily change a parameter and hard fork, the B hash people destroyed that preliminary stage of money. And they've done it a few times now, they've done like two or three hard forks, and it really shows that it's, it's quite trivial to change these core parameters of B-Cash. And, and if I was owning B-Cash, I would be wondering like, okay, right now I own like point zero zero one percent of the supply of B-Cash, I own, say, ten Be cash tokens, but in the future that might be a much smaller percentage of the supply, they might just inflate that supply away. And if, if the miners think that it's a good idea, then what control do I have? Whereas the thing with, the fork that happened and, and the two X split, that was going to happen, it really proved that it's incredibly hard to change Bitcoin. And, and the fact that it's really, really hard to change Bitcoin, despite what all these big companies wanted to do and what all these, prominent B-cashers wanted to do, they, they couldn't change it, and that gives you- gives you incredible confidence that, into the future when you buy some number of bitcoins, the percentage that you own of the total will never decrease. And so as, as Bitcoin grows in value, then, The value of your savings will grow too, they're not gonna be inflated away." }, { "speaker": "stephan", "time": "32:35", "start": 1954.85, "text": "Yeah, and that's a great point, and I think some other points that you, you sort of touched on there is also the, is how Because of this pathway that they've gone down, they are risking the decentralization of Bitcoin, and in doing so, they are kind of Risking the very thing that makes Bitcoin so valuable, and that's why-- Now, I don't regard B-Cash as any sort of serious threat, but I just think it's a useful teaching lesson for new people to sort of understand what, what really is Bitcoin and what makes it more valuable. And the other point I really liked you made is it's, it's like going back to the whole 2013 days, there were people trying to- Get merchants to take Bitcoin, but really that's putting the cart before the horse, right? What we want is those merchants to-- they want, you want the merchant to want Bitcoin in its own right, not just as a payment rail." }, { "speaker": "vijay_boyapati", "time": "33:32", "start": 2012.22, "text": "Yeah, absolutely. I mean, you want people to take Bitcoin and then just hold it, and, and to recognize that it has value, and you want the pool of people who think that way to grow, and eventually it'll be large enough and the, the price- the price volatility of Bitcoin will drop a lot, and then it'll be, it'll be great as a medium of exchange." }, { "speaker": "stephan", "time": "33:55", "start": 2034.62, "text": "Yeah, yeah. Okay. I think, another topic that might be good to get into is, Hodling as freeriding. So I know you had some comments on this, maybe you wanna just provide a little bit of context around how this discussion came up on Twitter?" }, { "speaker": "vijay_boyapati", "time": "34:12", "start": 2052.44, "text": "Yeah, so Naval Ravikant, who's a pretty prominent, a person in the, the crypto space, came out with a controversial, argument that people who are hodling Bitcoin are freeriders, that, using an economic term here, which is, they're people who are gaining some economic benefit without doing anything. they're sort of-" }, { "speaker": "vijay_boyapati", "time": "34:41", "start": 2080.75, "text": "it, it's like, for instance, someone who has a house, next to a park or something, and other people invest in the park, and the person who owns the house is free riding, they're getting a benefit of this beautiful park that other people are investing in, but they're, they're not contributing anything to it. and, and this was very controversial, obviously to hodlers who didn't feel this way, and, and Navala is, is very well known and, and so this got a lot of play on Twitter and other places." }, { "speaker": "stephan", "time": "35:13", "start": 2113.41, "text": "Yep, yep. And then, so what happened then was essentially some guys on Twitter, basically started doing a hashtag, \"Look at me, I'm Naval,\" and basically having a joke at Naval's expense. Now, I thought it was mostly good-natured fun, but then he, he did sort of start arguing back against that, and I think- You had some great p- points that you made, in response to that as well. So I think you were pointing out that actually hodling isn't free riding, that you're taking a risk. and then also you, you had a good point around, protocol incentives versus the open source mentality. So maybe, if you could just expand on that point a little bit." }, { "speaker": "vijay_boyapati", "time": "35:57", "start": 2156.89, "text": "Yeah. So, so regarding the, the, the mob justice that happened to Novar," }, { "speaker": "vijay_boyapati", "time": "36:05", "start": 2165.2, "text": "I guess I, I wasn't really, really a fan. I, I'm, I like Nivalt, I think he's a smart guy and he's, he seems like he's, he's pretty libertarian, his heart is in the right place. he can be wrong, we can all be wrong, and- You know, the people who, who were, are criticizing him, who, who created this hashtag, the, the tough part is it, it's really attacking his identity. He's, he's kind of, a lot of people think of him as a thought leader, and, some of his tweets sound very philosophical, like a, a Greek philosopher, and they were, they were kind of making fun of that. So, you know, I can, I can see why he was a little bit defensive. Some of them, I'm sure, were just doing it in fun, but Some of them were doing it to, really undermine him as well. so w-when I responded to Naval, I just, I wanted to point out to him that he, I think he brought up a reasonable topic that's worthy of discussion. It's, you know, not something that requires mob justice. I think he's wrong, and I gave the reasons why I thought he's wrong. And in particular, I think people who are hodling aren't free riders because they're Going to a great deal of risk holding Bitcoin and," }, { "speaker": "vijay_boyapati", "time": "37:26", "start": 2246.23, "text": "holding it while its price is going up and down and going all over the place, it's, it's an ex- it's, it's a really scary ride. And, and by ho-holding Bitcoin, they're providing" }, { "speaker": "vijay_boyapati", "time": "37:36", "start": 2256.49, "text": "a price level for Bitcoin. And that price level is sort of, a global signal of the significance of Bitcoin. And the higher the price level, the more people pay attention to it Bitcoin at ten dollars, it's not that interesting, it might be interesting to a few cryptographers. Bitcoin at a thousand, you know, the news is, news agencies are starting to get interested in it. Bitcoin at a hundred thousand, that's when governments are starting to sort of- Look over their shoulders and say, \"Well, this is getting scary.\" So the price level's actually really, really important, and," }, { "speaker": "vijay_boyapati", "time": "38:15", "start": 2295.25, "text": "the price level is also a signal to get developers interested Like if you're a developer and you wanna work on a project, and you're looking around for like what's world-changing, 'cause for a lot of developers, their motivation isn't just \"give me a paycheck,\" their motivation is \"can, how do I change the world?\" And if you look at something like Bitcoin and it's got a price level of ten thousand, it's like, \"Wow, this, this could really change the way we think of money, could completely- Up in the banking system, it could, have a big impact on whether nation states are able to fund themselves through taxation. And so there's a lot of appeal to people who might be ideologically motivated to, to start helping build this thing. And, and that's what I think has happened, the, the kind of people who have come to Bitcoin and want to help build Bitcoin, the developers who've come there Are very ideologically committed to it. They're not the kind of person who's just looking for a paycheck and is writing some JavaScript code. They, they wanna build something that's important, and, and so Nivelle's point I think was that it, it would be really good if we had something in the protocol that that pay developers as an incentive mechanism to make the protocol better. And a criticism of that was that, that doing that really solidifies the protocol, you create like a special class of people who are, who are being Funded by the pro-proto-pol, and, and it really turns people off. It's like, are we, is this something that we're building to change the world or is it something that we're building to make- This small group of people rich, a-and so I think Bitcoin is a, a world-changing technology and, a very important form of money And people who are hodling are the ones who are giving it the significance that could change the world, and so they're, they're taking a huge risk to, to give it that significance. So I, I don't think there'll be free riders at all." }, { "speaker": "stephan", "time": "40:17", "start": 2417.46, "text": "Yeah, yeah, got it. And I think that's a great point you make around the incentivization of developers as well, because it's, it's, as you say, they wanna work on some grand challenge, they wanna, you know, be a part of history, and that's what many of the, many of the I think, yeah, you make a great point around ideological commitment, because I think nobody's gonna go die on a hill to make, you know, the founders of some secondary, you know, some altcoin rich, right? now some people do try and come back and say, \"Oh, yeah, but aren't you making Satoshi rich by, you know, by building onto that coin?\" What would you say in response to them?" }, { "speaker": "stephan", "time": "41:06", "start": 2465.76, "text": "Satoshi's gone. No one," }, { "speaker": "vijay_boyapati", "time": "41:10", "start": 2469.56, "text": "no one really honestly knows, what has happened to Satoshi, but I think The most likely story is he is gone forever. Anyone who, could hold a Bitcoin and not sell or move, not only not sell, but not even move a single one when it's worth Billions of dollars, has just incredible willpower that no normal human being has. So You know, my theory is that Satoshi, God bless him, destroyed his private keys, and so those bitcoins that he mined in the beginning are all dead and, are never gonna return." }, { "speaker": "stephan", "time": "41:55", "start": 2514.66, "text": "Yeah, no, that's a, that's probably a fair theory. Like, I think it's either that or, you know, Satoshi died, so, you know, we don't know. but I think, it, it, it, it is, it is a good point there around What we might call the importance of money being neutral, and not neutral in the kind of value sense, but neutral in the political sense, that, you know, no one- Country or party or company or person owns it or controls it. Maybe you wanna talk a little bit about that?" }, { "speaker": "vijay_boyapati", "time": "42:30", "start": 2549.58, "text": "Yeah, I think a lot of the value of Bitcoin comes from the fact that it's a non-sovereign store of value that people realize isn't copy- Told by anyone. and it's interesting how in, in the early days, there were a lot of people, even libertarians that I have a lot of respect for, who sort of, the great value of Bitcoin was it allowed people to do things anonymously. for example, buy marijuana or something like that. the, the real value of Bitcoin isn't from anonymous transactions or teenagers, buying pot It's," }, { "speaker": "vijay_boyapati", "time": "43:05", "start": 2585.21, "text": "it's from the world's savings fleeing to a currency that's un-inflatable and that can't be controlled, and that has profound geopolitical consequences for the world. If the world's savings flee into Bitcoin, it makes it very, very hard for governments to inflate the pool of savings, the global pool of savings, because Bitcoin's not inflatable. And if they can't inflate the pool of savings out there, they have to rely on direct taxation Inflation to, to get, to get the capital to fund their activities, and direct taxation is much harder to do than inflation. People, people don't like being taxed. Inflation's something that's kind of invisible, they don't even realize it's happening in it. It results in prices increasing slowly over time, so people are kind of fooled into, to thinking that everything's fine, but with taxation, someone's reaching into your pocket and taking your money. And so my view is that, a world in which Bitcoin is global money is a world in which nation states have to shrink substantially, and, and things which are, very capital intensive like, waging war on another country will be, become much harder." }, { "speaker": "stephan", "time": "44:22", "start": 2661.99, "text": "yeah, no, these are great points. I think I agree with that. another topic that might be interesting as well, so this is a, a fellow Austrian economist, Peter Schiff. Now, he's got, he's sort of famous, for kind of debating against a lot of Bitcoiners, and he recently did debate with, Eric Voorhees. How would you sort of come back against gold? And how would you compare Bitcoin versus gold? And let's say you, you know, you were debating against Peter Schiff, what sort of arguments would you make?" }, { "speaker": "vijay_boyapati", "time": "44:56", "start": 2695.67, "text": "so, so Peter, I've actually met Peter Schiff in person. I, I met him back when I was campaigning for Ron Paul, in two thousand and seven. How cool. Ron Paul, Ron Paul invited me to, his office in Congress, and he also invited Peter Schiff, and we got to meet there. So, you know, I, I had a lot of respect for Peter Schiff in, in 2007. He was explaining things about the crash that a lot of people didn't understand. But really, I don't think of Peter Schiff as an economist. He's, he's sort of someone who's read a little bit of Austrian e-economics and, is sort of regurgitating the, the little that he, he understands about it. He's not, he's not a deep thinker like someone like Guido Hulsman or, or Hans Stern and Hopper. So, you know, while he's kind of a well-known figure, I don't think he has the best arguments from the point of view that he's taking. But it does raise a really, interesting topic, and I think the problem actually starts going all the way back to Menger, and this might be controversial amongst, my fellow Austrian economists, I, I think there's a problem in the Austrian story of the origin of money that Menger came up with. And let's just, let's review that, that story a little bit. And, and the idea is that, you know, some, some time in the very distant past, humans lived in a state of barter, which means we didn't have money and, and when we wanted to trade things, we sort of, We traded them based on some very rough estimation of how much we thought they were worth, like I'll trade one sheep for three hundred coconuts or something like that. but a-as I said before, with the double coincidence of wants problem, that kind of barter trading is, incredibly inefficient and it makes trade very difficult. So the Austrian story is that when you, you exist in a state of bazaar, there's certain, certain goods which have greater salability. that means they're, they're more widely, a-accepted by other people. Say coconuts are more widely accepted than sheep. So you, you sort of build up a store of coconuts because when you wanna exchange with someone else, they might not want the sheep you have, but at least they'll take the coconuts and you can get what you want." }, { "speaker": "stephan", "time": "47:21", "start": 2840.79, "text": "Yeah." }, { "speaker": "vijay_boyapati", "time": "47:22", "start": 2841.85, "text": "and so over time, one good becomes more and more saleable, and, and eventually, all goods get priced in terms of this good, and it becomes money. and, and the problem I have with this story is that it doesn't account for the fact that as something is becoming more and more saleable and people are demanding it more for the purpose of using it in, in exchange, its value is also increasing. The demand for it is increasing, so its price level is increasing. And if the price level of something is increasing ac-across all other goods, that will encourage speculation in that good. And the speculation, will actually increase the price level itself, and so there's this feedback loop, game theoretic feedback loop and this is the part of the story that I don't think Austrians really got, and I think a lot of the, sort of old school Austrians associated with the Mises Institute, they were very skeptical of Bitcoin, and I think a lot of them still are. They don't, they don't really understand it. It's this thing where it was created out of nowhere, it's not a commodity, it's not like a physical, tangible thing, and so it doesn't fit in their mental model, and they completely dismissed it. And it's really sad because it's, Monetary development in the last thousand years, perhaps since the minting of coins, it's, it's, a very, very important development to economics, and yet these economists just dismissed it. And so- The, the thing I find interesting is that as a good is increasing in purchasing power because people are demanding it, you get these speculators coming in saying, \"Hey, I can just- Make money by buying Bitcoin and then it'll be worth more at a future point in time. And as it goes up, as value goes up, it brings more people in who see that there's, there's value in speculating in it. And eventually you get a whole bunch of people who are speculating it, who also value it, they're holding it as well because they're speculating it. And so it's increasing its," }, { "speaker": "vijay_boyapati", "time": "49:35", "start": 2975.39, "text": "usage in the role of a store of value because the pool of people- People who are willing to hold it has increased, and I think it's, it, it's this part that the Austrians have missed, that there is speculation involved, and I think it was just completely obvious when you looked at the, the- The way that Bitcoin has evolved over time, the speculation is a really important part of its development, and, a lot, a lot of people have poo-pooed this and said that it's just like, it's just a speculative vehicle, it doesn't have any value. But I think this is actually part of the, the process in which anything becomes money, and I think it probably applied to gold as well. You know, as, as gold became more marketable, it was increasing in purchasing power at the same time. So people may have been getting- You know, acquiring gold to, to do trades with other people, but by doing so they were increasing the value of gold, and so other people come in just for the sake that gold was increasing in purchasing power and say, \"I want gold so that, you know, today a gold coin buys ten sheep, but tomorrow a gold coin could buy twenty sheep, so I'm just gonna buy gold for that very fact that it's increasing in its purchasing power.\" and that, that hastens the process of monetization. so I think the specula-speculative part is really important, and it's, it's a part of the, the, the story that's completely missed by the Austrians." }, { "speaker": "stephan", "time": "51:02", "start": 3062.17, "text": "yeah, yeah, okay, no, that, I think that makes, good sense to me. and also on the point that, I've seen, Peter Schiff make around, \"Oh, there's nothing else that you can use Bitcoin for.\" He seems to operate under this idea that, \"Oh, well, see, with gold...\" You know, you can use it as money, but you can also melt it down and do all those industrial things and make jewelry with it. I, I, I'm not really aware of any kind of, you know, requirements in any of the kind of e-economics literature that, you know, money has to have some other purpose. How would you, what, what, what do you think about that?" }, { "speaker": "vijay_boyapati", "time": "51:43", "start": 3102.99, "text": "Yeah, so this, this goes back to the, regression theorem by Ludwig von Mises, and I think, you know, Peter may not have a deep understanding of that, but that's basically what he's referring to. And, one of the, paradoxes that we're, was facing the 19th century economists was, well, why does money have any value? it-- and they, they sort of understood that it had value because it had value yesterday, and so because it had value yester- than people today will probably still value it, but that caused a circularity that they didn't quite understand, and they thought it was, you know, where does this- regression backwards end, and, and Mises sort of solved this problem by saying it, it, it ends in a commodity. Go, you go back far enough in time, and the good is valued as a commodity. And so someone like Peter Schiff, has an understanding of this regression theorem and, and he probably thinks that a monetary good has to have some original value that comes from commodity use. A-and one of the things that I talk about in the article that I wrote about Bitcoin, and I think the one small thing that I can take credit for as my contribution to economics is that, monetary goods have a monetary premium, which is The, the premium over the price that could be justified by the use value alone." }, { "speaker": "stephan", "time": "53:08", "start": 3187.77, "text": "Yeah." }, { "speaker": "vijay_boyapati", "time": "53:09", "start": 3189.27, "text": "and for something like gold, that premium is, let's say it's eighty or ninety percent of the, the, the price level of gold is explained by its monetary premium, that, that is ho-- people holding bullion and central banks holding bullion. The use value probably only explains gold, the price of gold is like thirteen hundred dollars or something like that. The, the use value of gold, you know, people using it, for, for dental uses and in ele-electronics could probably only explain one or two hundred dollars of that price. The rest of it is all monetary use. some of it's jewelry use, people in India buying jewelry, but that's essentially a monetary use as well. Indians are- Using it as an ornamental store of value, something that has value that they can also wear and, they can display to, to show off their wealth, And then you look at something like silver, which used to be a form of money as well, and it was completely demonetized in the 19th century, when, when, governments basically- got rid of their, supplies of silver. And now the monetary premium for silver is very small, like there, maybe there are a few people, silver bugs out there who have a few silver coins, but most of the price level of silver is explained by its industrial use. and then you have something like Bitcoin, which is pure monetary premium, it's all monetary premium. It, there, there is, it really isn't no sort of underlying use. You can't use Bitcoin to, you know, build something, you can't wear a Bitcoin. Well, I guess you could print your private key. Very risky. Yeah, you could walk around with that. But so, so Bitcoin is a monetary good that's, it's pure in the sense that it, it doesn't have any use value, but that really the, the use value I, it's only sort of the fuel to get it off the ground. Once it's off the ground, then, it, its level is determined by people's willingness to hold it, for, for monetary purposes, not for its original use case. people buying volume don't care that you can use it in, you know, people's teeth. they're, they're holding it because they think other people will hold it, for monetary purposes." }, { "speaker": "stephan", "time": "55:30", "start": 3329.79, "text": "Yeah, that's a great way to put it." }, { "speaker": "vijay_boyapati", "time": "55:32", "start": 3331.83, "text": "And, so the, the thing, what it, it raises the question, how does Bitcoin get that original value, that first value? With something like gold, you can say, \"Well, it was used as jewelry or something like that.\" But with Bitcoin, you can say the original value came from someone saying, \"There's a non-zero probability that other people in the future will value this thing as money.\" And, and someone, one person having that belief is enough to give Give it a, a market price, and then it just bootstraps from there. So the, the epsilon price that comes at the beginning is just one person believing that it could be money, and that's why, you know, that you have thousands of altcoins, shitcoins, which have a non-zero price, because people, you only need a very small number of people to believe that it could potentially be money for it to get a market price, and then, you know, getting off the ground isn't hard, but getting up to sort of cruising Existing altitude, that, that's the hard part." }, { "speaker": "stephan", "time": "56:32", "start": 3391.93, "text": "Yeah, yeah, that's a good way to put it. And the other thing is around liquidity, right? So there are many of these altcoins, and then they've been around for, you know, but what happens is they have basically no liquidity. There's no one who really wants to buy and sell it, and you look at the volumes on some of these very small altcoins, it's nowhere near what Bitcoin has." }, { "speaker": "vijay_boyapati", "time": "56:52", "start": 3412.46, "text": "Yep, yep, that's true. And I think for a lot of them, they're just pump and dump schemes. People who don't even honestly really believe that it could be money, it's just a way of, Scamming some other person to accept it and convincing them that maybe it could be money, and then when you've convinced enough people, dumping your supply of, the old coin so you can acquire more Bitcoin. And I think The vast majority of altcoins, I'd probably say all of them, were, were created as a, as a way for, for some people to try and get more Bitcoin, because everyone wishes they bought Bitcoin early. Anyone who knows about Bitcoin Wishes that they had bought back in 2010 or 2011. And if you can't be that, then, if you can't be Satoshi, if you can't be the guy who, who created it and got a lot of it from mining, then why not create your own one and, and with the hope that it could be Bitcoin? Obviously it can't because, it, it's lacking the network effect, effect that Bitcoin has. But if you can convince other people it might be as good as Bitcoin, then you can transfer it to something that actually is Bitcoin" }, { "speaker": "stephan", "time": "58:04", "start": 3484.22, "text": "Yeah. Okay. let me see. Yeah, no, I think the, the most of the, the key questions, I had for you, maybe we'll start to wrap it up now because I know your, your time is limited. have you got anything else coming down the pipeline for you in terms of, you know, have you got any Bitcoin writings or projects that you wanna, talk about?" }, { "speaker": "vijay_boyapati", "time": "58:28", "start": 3508.04, "text": "yeah, I have a few more articles I wanna write. I have unfortunately very limited time because I have two small children and I have, I have a full-time job, but there definitely are other things I wanna write about Bitcoin. I think it's, like I said before, I think it's the most important, development in Monetary economics for a thousand years, and I'm re-really surprising that there aren't more professional economists who are paying attention and writing about it And, and so few of them who actually understand it at all, it's, it's a subject that's ripe for investigation and, and there should be a lot more people, people like Saifedean, who, who wrote a great book on, on this topic. There, there should be at least a hundred people who are also thinking about the same ideas and, and the implications Bitcoin will have for our world." }, { "speaker": "stephan", "time": "59:19", "start": 3559.3, "text": "Yeah, agree, agree. alright, well then, I suppose with that we'll, end the call. And what I'll do is link to VJ's Twitter, and guys, you've really gotta follow VJ on Twitter. He, his Twitter handle is at reel underscore vj, and I'll put the link. And, h-his other must-read, must-read article is the, bullish case for Bitcoin, which again, I'll put the link for that in the description. is there anything else you wanted to, how, how else can the guys, find you, VJ?" }, { "speaker": "vijay_boyapati", "time": "59:52", "start": 3592.18, "text": "I think Twi- Twitter is the best place to find me, that's where you'll find me tweeting about things, and because my time is limited, I, I typically, well, where I would love to write an article, I'll do a tweet storm and, give a short view on my thinking on something." }, { "speaker": "stephan", "time": "01:00:09", "start": 3609.4, "text": "Yeah, fantastic. That'll be great. yeah, this has been a great episode. I think, the listeners will get a lot of value out of listening to you, Vijay, and, yeah, we'll definitely have to get you back on very soon. Thank you. Thanks, Stefan. Alright, that was my conversation with Vijay Boyapati. I'll put a show notes page on my website, stephanelivera dot com, just search S L P two. And lastly, just as this is a new podcast, I'd really appreciate if you guys could share and subscribe and give the podcast a rating. Thanks, guys. See you in the next one." } ] }