{ "episodeId": "SLP294", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "lyn_alden": { "name": "Lyn Alden", "role": "guest", "tag": "LYN" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.97, "text": "Hi and welcome to Stephan Livera podcast, a show about Bitcoin. Today, for episode two hundred and ninety-four, Lyn Alden of Lyn Alden Investment Strategy re-joins me on the show, and we're talking about a range of things in the macro world and the impact onto Bitcoin. So we're talking about CPI, government debt, oil and gas, the bull case, as well- as stablecoins and the Lightning Network. So we cover a range of things, I think you'll really enjoy this one. The show is brought to you by Swan Bitcoin, the best way to accumulate Bitcoin with automatic recurring buys and instant buys. They've got fast setup and it's really cheap to automate your stacking for US customers. They are also available internationally over Wire as well. Swan specifically take a focus on education and content. They are Bitcoin only, so there's no confusion with altcoins. This is the best place to send pre-coiners. And new coiners. And for those of you who are high net worth or business and corporate, there is Swan Private. With Swan Private, you're getting direct access to the Swan Private team, and you'll get a dedicated Bitcoin account expert available for one-on-one calls. So to sign up with Swan, go to swanbitcoin dot com slash livera. Lend at HoddleHoddle is a peer-to-peer Bitcoin-backed lending platform where you can lend stablecoins or borrow against your Bitcoin globally and anonymously. So with stablecoins like USDT, you can earn extra income by lending them out with an average of twenty five percent APR. On the other hand, if you have Bitcoin and you need some fiat liquidity, well, you can borrow against that and you still hold one key in the two of three multi-signature controlling your Bitcoin during that loan period. HodlHodl doesn't hold your funds, so lend at HodlHodl is peer-to-peer lending and borrowing directly between users. So you sign up on the platform, you set your own terms, and put up offers depending on how How long you want to borrow or lend and the interest rate, go to lend dot hodl hodl dot com. Are you interested in getting involved with Bitcoin mining? Compass mining dot io are here to help you do that. So with Compass Mining, you can choose an ASIC machine, they've got Whatsminer and Antminer equipment available, then you select a hosting facility which has been vetted by the team at Compass Mining, and then you can join a mining pool. Once your ASIC is installed in that chosen facility, the team will configure your machine to the mining pool of your choice. Choice, and then after that, you're receiving Bitcoin. So with CombusMining, you can tap into economies of scale and access reasonably priced hardware and cheap industrial power rates. So go to CombusMining dot io and start mining Bitcoin today. On to the show with Lyn. Lyn, welcome back to the show." }, { "speaker": "lyn_alden", "time": "02:47", "start": 167.08, "text": "Thanks for having me, happy to be back." }, { "speaker": "stephan", "time": "02:49", "start": 168.8, "text": "So, Lyn, I saw you were participating in the B word, and, there was a segment that you did, and I thought that was a great segment, and I know you've been, doing a lot of great work recently. You had an oil and gas piece as well, but I also wanted to start on, obviously for a Bitcoiner, inflation. So there was recently a big CPI print of five point four percent on an annualized basis for the US. So I Thoughts on that?" }, { "speaker": "lyn_alden", "time": "03:18", "start": 197.54, "text": "Yeah, so it came in a little bit higher than I, I was expecting, but overall, I've been in the more inflationary camp. So there's, you know, if you follow, people in the macro world, there are some, there have been some people that are expecting more types of disinflation, whereas a number of us are expecting a higher degree of inflation. And so overall, this is, this is roughly going a line, along with what I expected in terms of the types of, outcomes we get from policies we've seen Basically, we got a very high CPI print in the US, we got, I believe it was five point four percent, even other measures of inflation, generally came in hotter than, than, economists were expecting. And, you know, there's certain categories that are contributing to that, right? So basically, my overall framework for the type of inflation we're getting is that this is a very fiscal-driven type of inflation, so because of the large amount of stimulus we've had, we've increased the broad money supply by quite a bit, which is different than just increasing base We're Fed balance sheet, we're actually increasing the broad money supply, so, so p- money that's available for people's checking accounts, savings accounts, currency in circulation. and so when you get that, increase in broad money supply, we've improved people's, demand, right? So we've given them money they didn't otherwise have, and so they can go out and expend it, but we haven't increased the amount of goods and services, by corresponding amount. And so we're specifically running into bottlenecks wherever there's a, a supply" }, { "speaker": "lyn_alden", "time": "04:46", "start": 285.68, "text": "Suits, for example, they're actually still in deflating, and so there's no issue there, but there's an issue in certain things like semiconductors, so that's, that's going up the supply chain into automobiles and especially used automobiles, because there's, there's constraint in new automobile production, and so that raises the cost of existing, cars and, and, and light vehicles. and we're also of course seeing, energy prices warm up. we've seen commodity prices, you know, some of them spiked and came back down due to very specific bottlenecks, but we generally have a higher price level commodities than we had in the past several years. and so one of the things I'm looking at going forward Is that a lot of this inflation happened without rent increases going up by a dramatic amount, and yet we've had, of course, house price, inflation, and the, and the cost of building, materials go up. and so when you, when you look later this autumn, I think the next kind of leg of this inflation will be, rent-driven, in large part, and we also have to see what happens with wages because we're also seeing a labor shortage, in certain industries. And so overall, you know, Year-over-year comparison is still looking at, say, a, a somewhat of a disinflationary period from last year, that kind of that May to June period was, was, you know, prices took a dip. but as we move out of that, you know, the year-over-year comparison gets a little bit harder, so we could see that, we could see that year-over-year figure go down a little bit. however, you know, we still have these, these other underlying things like rents, I think, that are gonna kind of keep that elevated and probably above expectations" }, { "speaker": "stephan", "time": "06:26", "start": 385.52, "text": "Money is not neutral, and therefore inflation isn't necessarily equal across every different kind of product or industry or what we're looking at. And so as you rightly say, the price of some things is still going down, but the price of other things, quite important things like semiconductors, is still rising. And so I think the interesting question as well is, now historically people from the Austrian camp have been sort of saying, \"Oh, very, very high inflation,\" but it could also be that it might not be like hyper- Hyperinflation, it just might be like slightly higher inflation than what we've historically seen in the more three percent range. Is that essentially your view that we're going to see high, but not crazy high inflation going forward in the, in the sort of medium term?" }, { "speaker": "lyn_alden", "time": "07:10", "start": 429.97, "text": "yes, that's how I'm viewing it, but there are, there are upcoming decision points to watch. And so, you know, overall my view is that the, the amount of inflation will partially correspond to how much fiscal stimulus we get, and so we already had a certain amount, and that is still working its way system, especially as we come out of lockdowns in some cases, well, some areas are still in lockdown, so that's actually still holding down certain things like energy prices, they're not as high as they could be if there was actually, you know, say a full unlocking. but basically, you know, we have certain constraints still in place, but, you know, and this is still rippling through the system, so we have to see what happens with wages, we have to see what happens with rents. but for, let's say for example, just fiscal" }, { "speaker": "lyn_alden", "time": "07:55", "start": 475.4, "text": "Come back down, to, to some extent. however, if we do more rounds of fiscal stimulus, then we'll probably get ongoing inflation. Of course, that comes with certain trade-offs. and so if they don't do fiscal stimulus because it's so much, they, they build up so much debt in the system, then you have more default risk and recession risk. but if you do that stimulus, then you, you run the risk of having another burst of inflation and continuing to run hot. And so there's, there's kind of to go and how high it could reach." }, { "speaker": "stephan", "time": "08:28", "start": 507.6, "text": "Yeah, good explanation there. And so I'm also curious then, how you think that will play out into other markets, and I think an important one is the bond market, because historically it has been seen like bonds were the defensive play, and yet now because of inflation rising, it means the real return for a bond investor is coming down. So how do you see that? And also, the, the is, that recent, I believe it was the ten year where there was a recent, rise in the, i-interest rate there. So how do you believe the inflation story coming is going to play out into the bond market?" }, { "speaker": "lyn_alden", "time": "09:10", "start": 549.93, "text": "so overall, yeah, this isn't a very attractive environment to be holding bonds or cash. and so that's one of those things where even in a moderate inflation environment, however you wanna define that, let's say three to five percent inflation, rather than say, you know, fifteen percent inflation, let's say you have three, three And if interest rates are like zero or one percent, you're, you're getting devalued on your purchasing power, by holding that. and of course, there are other ways to measure inflation, right? So there's, there are arguments about how accurate those, those CPI measurements are. So, you know, the real measure could be somewhat above those figures, and yet your rates are still zero to one percent, and you're getting, you're getting devalued. And so that's, that's one of the bigger challenges. we also, you know, Economy. And so, for example, when you have a steep yield curve, and bond yields are rising on the long end of the curve, that generally means that the economy expects more inflation, more growth, right? Because they wanna go into riskier assets. and so that's, that's, you know, up, up to a certain point, that's a good thing. towards the end of a business cycle, historically, we started to see that, that, that long end bonds start to go down, because the market is starting to sense that there's less" }, { "speaker": "lyn_alden", "time": "10:26", "start": 625.68, "text": "Longer duration Treasury assets, they're expecting the central bank to cut interest rates on the short end of the curve, and so they're, they're going ahead and buying some of those long duration assets. now the tricky thing now is that because the central banks are large buyers of those Treasuries, that's basically adding a, a kind of a, like a, a complex signal to those bond markets. And so we've seen, for example, that, you know, we started to see bond yields rising earlier this year, in anticipation of higher inflation and things like that," }, { "speaker": "lyn_alden", "time": "10:56", "start": 656.04, "text": "Spiking, but then we've seen some of, of a cool off in, in a handful of those commodities, and we've also seen bond yields, come back down part of the way. So bond yields have actually cooled off, even though inflation's higher this month than it was last month, bond yields are actually lower than they were last month. And so we've seen kind of conflicting signals. And so some market participants are, are expecting that, they're saying, \"Oh, the bond market knows this is transitory, it's looking down for inflation to come You're still the largest buyer of treasuries, and that's true for many central banks around the world, and so the ECB's, you know, the, the biggest buyer of, of, of those sovereigns, and that's true for, for most, most developed countries in the world where they're kind of eating their own cooking. There's that old quote, like, you know, the measurement becomes a target, it ceases to be an accurate, measurement, and so we're kind of in that sort of field with bonds" }, { "speaker": "stephan", "time": "11:48", "start": 707.83, "text": "at the moment. Right. And so" }, { "speaker": "stephan", "time": "11:56", "start": 715.5, "text": "You have been speaking about and many others have been commenting on this idea. What does it look like? Is it, you know, is it-- Are we going to be in a place where rates have to rise back up because the private market is going to reassert itself, or is-- Do you think it's more like because the governments are so active in the government debt bonds, government debt markets, that they're gonna keep the rates down effectively, because of all the central bank and other operations going on to basically keep The rate's low." }, { "speaker": "lyn_alden", "time": "12:26", "start": 746.24, "text": "My base case is that yields would remain pretty low, regardless of inflation, at least for a period of time, and so I think that's a danger that market participants are not realizing, that, you know, they, they have this kind of implicit assumption that if inflation gets too hot, you know, interest rates will go up as well, and that'll cool off inflation like we saw Volcker do in the late '70s. and, you know, I, I think a better model for this environment is the 1940 You know, the countries, because at that point we had already inflated a lot of debt away, and we, we also grew pretty considerably. That was a big period for productivity, you know, the fifties, sixties, seventies, you know, we, we, we had this environment of pretty low public debt as a percentage of GDP and pretty low private debt as a percentage of GDP, at least in most countries, including the United States, which is my kind of cleanest data set, and, so when you had inflation" }, { "speaker": "lyn_alden", "time": "13:25", "start": 805.4, "text": "To, you know, keep those, you know, to, to try to keep inflation in check. and it, it put the economy into a recession, but, you know, it didn't cause like mass insolvencies because debt was pretty low. But in the nineteen forties, you know, because of the war and because of other factors, let's use United States as example, we had like a hundred and thirty percent, debt to GDP, just, just the federal debt. And so they couldn't pay high interest rates. and but for different reasons, the Fed still held rates literally at, at like zero, and they actually went a step further and they even capped long duration bonds. and so they were-- and the way they did that, they maintained that peg was they were willing to print money and buy any bonds that try to go over that interest rate. So they were basically the buyer of last resort that said, \"We will buy any number of bonds at this price point, so don't try to sell them over that price point.\" and they were, they were able to do that" }, { "speaker": "lyn_alden", "time": "14:25", "start": 865.4, "text": "Able to, have that mechanism inflate debt away, prevent government finances from getting out of control, but then the release valve ends up being the, the value of the currency. And so if you're holding cash or you're holding bonds, you're, you're getting zero percent, one percent, two percent, whatever the case may be, while inflation could be three, four, five, ten, you know, in that environment, in the forties, the highest inflation print was nineteen percent year over year, while interest rates were zero and long duration bonds were like" }, { "speaker": "stephan", "time": "14:54", "start": 894.42, "text": "two People getting robbed in real terms. So they are sitting there in bonds, thinking, \"Oh, I'm just making zero or one percent,\" but in real terms, purchasing power terms, they're, they're really losing out. And so I think that may drive a lot of bond investors and out of bonds where they have the ability to. So obviously there are some people who, for regulatory reasons or for some other kind of market technical plumbing reason, that they have to hold bonds. The other people People who choose to hold bonds, they may not choose to do that, and maybe some of those people will come into Bitcoin, some of those people will go into, potentially equities as well because they're chasing for some kind of yield, they want some kind of return. What's your view on that?" }, { "speaker": "lyn_alden", "time": "15:39", "start": 938.93, "text": "Yeah, I think we're see, we're already seeing that to some extent. So I just, I just, in my newsletter I just posted a couple days ago, in the United States, we have, households have record high equity allocations as a percentage of their total assets They were holding equities that then became very expensive, right? So equities are at, at historically high valuations by many metrics. But in addition, you know, we also saw ever since that March crash, we saw a lot of, retail enthusiasm that hasn't existed for the past five to ten years, right? Pretty much going back, we have to go back to the dot com bubble to find the last time that there was so much retail enthusiasm for holding equities. and so we are seeing pretty high allocations of equities, we're seeing people willing to buy real estate, Silver, people going into Bitcoin, people going into, you know, Dogecoin, like all sorts of things that they, that they're going into, rather than hold their money in, in, in cash or bonds. But yeah, like you point out, there are some pools of capital that for regulatory or technical reasons are still buying those, those treasuries. but generally you're, you know, you're seeing pensions buy them, you're seeing certain international, you know, types of, central banks buy them," }, { "speaker": "lyn_alden", "time": "16:54", "start": 1013.85, "text": "but A lot of treasuries at the current time. Now, there's also still some, you know, locked up in risk parity funds, there's still some locked up in target date, types of kind of index approach, type of investments. You know, there's even a case that a, a tactical trader might not, might wanna have some cash and bonds in case you get kind of a deflationary kind of, you know, move that they could, they could rotate some capital back into those other types of assets. But yeah, basically depending on the types of, you That could mean very different things for very different people." }, { "speaker": "stephan", "time": "17:28", "start": 1047.78, "text": "Yeah, good explanation there, and quite a balanced, point of view, I think. And so the broader situation that we're living in now is that governments are in such high levels of debt, and the, perhaps the prevailing view, if we went back ten or twenty years, it might have been more like, \"Oh, governments will eventually outgrow that debt, where they're gonna encourage more people to have children and help the demographic problem that way, and therefore over time, we're just gonna grow this...\" out and it won't be an issue. But now it seems that we are actually getting to levels that it would require just ridiculous sustained growth levels. We're talking twelve percent or something in that range, which is just crazy to sustain that kind of level, which when most of the time a big developed economy is getting something in the two to three percent range growth. so I, I think where I'm going with this is this idea that it seems that as central banks and governments generally don't want the party to end on their watch, but- Potentially the quote-unquote least pain way that they, from their point of view, can get out of this is to keep the economy in financial repression for longer. So is that aligned with your view or how are you seeing this?" }, { "speaker": "lyn_alden", "time": "18:39", "start": 1118.64, "text": "That's how I view it, yeah. And, and there have been a number of people that have seen this coming well before the pandemic, and the pandemic, I, I would argue, brought forward maybe five years of this type of thing into like one year, you know, not the pandemic and then also the lockdowns, the whole thing. and so From, reading the research of Ray Dalio over the past ten years, and then also d-- you know, taking those seeds of research and then doing my own research with it, and so he, he, he fores- like foresaw a lot of this happening. And then in addition, back in twenty nineteen, there was actually a paper released by BlackRock, and so the, you know, the world's largest asset manager. And then actually they, they were in that paper, they were advised by Stanley Fischer, who was the former Fed vice chair, You know, literally like starting less than a year later, countries around the world were doing, especially United States, which was they said, okay, in the next downturn, interest rates are already so low, so, you know, cutting interest rates isn't gonna be very effective, and so we're gonna have to go direct, we're gonna have to have more fiscal spending, up to potentially even including helicopter money. But they said, okay, this, the risk there is that it could be somewhat inflationary, and if, if rates go up, that could offset some of the benefits, You'll need some sort of, you know, quote unquote, soft coordination between the central bank and the fiscal authorities, where the central bank is willing to hold rates low even if you get that, that period of inflation. And it's, it's, it's uncanny if you go back and read that, because it's literally, you know, they didn't, they didn't predict, predict a pandemic obviously, but, you know, this, this period that we had is literally almost down to the line exactly what they saw playing out. And that, that's a topic that I started covering back" }, { "speaker": "lyn_alden", "time": "20:25", "start": 1225.38, "text": "Twenty, I was like, okay, here's the, here's the playbook. My own research shows that, you know, I, I expect the same thing. And so far, now that we're, you know, deep into twenty twenty-one, that is the playbook that we're seeing playing out, where, you know, they're not going to-- at least in, in countries that control their own currency, the, the chance that they're gonna default on their own currency is very, very low. and so instead, what you'll see is that, you know, they'll basically spend" }, { "speaker": "lyn_alden", "time": "20:55", "start": 1255.42, "text": "Sovereign defaults, it's usually because they run into some constraint that they can't print, and so you see that, for example, in emerging markets, where, let's say, Argentina has dollar-denominated debt, and for whatever reason, say that, you know, they, they run into an economic problem, they don't manage things well, and then they have, they have too many dollars, they can't print dollars, right? They can only print their local currency, and so eventually they say, \"You know what? We, we can't pay it back, let Another one would be, for example, the United States in the '70s, you know, we backed our dollar by gold, and so we can't print gold, we had a finite amount of, of gold in reserves, which is actually, which at the time was going down pretty quickly, and so they, they defaulted on the fact that the dollar was backed by gold, but they didn't, of course, default on, on, say, the nominal value of, of treasuries. you basically just got, you know, partially The treasures themselves weren't defaulted on. And so, you know, basically they'll default on things they can't control, but then they, they will rarely default on things that they, that they can control or that they can print." }, { "speaker": "stephan", "time": "22:06", "start": 1326.18, "text": "Yeah, really fascinating. And so maybe another way to come at this and just explain it, just for listeners who might not be as familiar. So, as an example, they're-- it's like they're trying to play this Goldilocks game of keeping not going too hard or too soft, because at the same time, if they print too hard, situation that you were saying, this idea that, oh yeah, we'll still repay you this number of dollars, but the value is much, much less, and then on the other side, it's also that in various markets around the world, it's almost like they don't want equity, bear markets. They don't want too much of number go down in various other, whether it's, say, in the Australian housing market context, they don't want the housing market to crash because they've let all these people bet their lives on housing market, on the housing market, I don't wanna let that go down either. So then they're sort of playing this game of trying to keep interest rates low to keep stimulating things, but at the same time have, as you were saying, the fiscal stimulus aspect, but they're trying to play this Goldilocks game of not making inflation rise too high because that would scare everyone off, but then also not let markets crash because then that looks really bad on your watch too, because if the stock market crashes or if the housing market crashes, then that also looks bad. As well, agree, disagree, what do you think? Yeah, that's, that's" }, { "speaker": "lyn_alden", "time": "23:28", "start": 1408.06, "text": "the approach. I mean, even in that paper, for example, they were talking about the risk of it getting too hot, and so they proposed different ways to kind of moderate it. and so that's, you know, we're, we're seeing, you know, we-- They didn't do that full playbook for that part, but we are basically currently at, at the moment seeing that kind of moderate outcome. we'll see how high it gets or how long it goes, but They have cover from the pandemic, they can be like, \"Look, we had to do this because of X, Y, Z, and so, you know, there, there's all sorts of things that they can use to kind of make it look like it's, it's pretty normal. and so, you know, from their point of view, they want a decent amount of asset price inflation, and then they do want a decent amount of, of just, you know, prices going up for consumer goods, as long as it's not too hot or too quickly Social unrest, and we're seeing that in emerging markets, in many cases, we're seeing it in Cuba, we're seeing it in Lebanon, we're, we're seeing it in a bunch of, of countries, and so that's, that's overall what they're aiming for, and one of the risks is that because over the past four decades, we've financialized the economy so much in many different countries, that if asset prices fall, that can actually reduce GDP, because, you know, so many, either people or organizations have their wealth tied up in assets And both psychologically and just mathematically, if those asset prices go down, that can affect their level of consumer spending, which can then impact other companies' revenues, which can then mean they, they hire fewer people, they have less money to spend, and you actually get a recession from asset prices going down. And so in the United States, we, we tend to hold a lot of our assets in our equity market, right? And so that, that's one of our kind of pain points, whereas in Australia, it's about the housing market more so. and so different markets have, you know, same with Canada, so different markets have their different areas, of assets that they, that they have favored for, you know, one reason or another. For Canada and Australia, partly it's because of the, the Chinese buyer, the, the, you know, foreign buyer, that is, is committing capital to kind of prop up, those as well. So, whereas in the United States, we have a lot of foreign buyers of our equities," }, { "speaker": "lyn_alden", "time": "25:50", "start": 1550.14, "text": "and so, you know, there's that Navigate that over the course of the next decade, because as the prices are so high already, while also debt is still very high." }, { "speaker": "stephan", "time": "26:02", "start": 1562.14, "text": "Yeah, I like that explanation around how they need asset bull markets from their point of view to keep the, the quote-unquote party going, because there are a lot of people who are reliant on that for their ability to keep on spending, because for example, they may have drawn against the equity on their home to take on another loan and using that credit to spend, or they may be, I know in the- I think in the US there was this recent, a bit of drama around this whole concept of buy borrow die, right? This idea that rich people who, just not, having-- they don't take income into their personal name, they're just borrowing against their rising assets. So it's like the smart people are essentially realizing, \"Oh, I'm just gonna put my wealth into this thing that's going up, and I'm going to borrow against that, I'm gonna collateralize against that.\" And, you know, obviously there are risks associated with collateralizing, and I mean Big price drop, but in things that are quite well-established large markets like equities, housing, that seems to be the tax-efficient strategy that the wealthy people are employing." }, { "speaker": "lyn_alden", "time": "27:07", "start": 1626.69, "text": "Yeah, exactly. We also see it the middle class with, with, you know, thirty-year mortgages, tied to a property, in the US. And so, basically the whole play there is that, you know, you benefit from the house going up in nominal terms, while your, while your mortgage is, is generally, you know, basically getting partially inflated away. Or just treading water with inflation, whereas housing, house prices, if it's a decent piece of property, has generally gone up higher than the official CPI, metric. and so that, that is the kind of thing we're seeing playing out. and so let's say, you know, someone, you know, they have a big portfolio of equities, they're upper middle class, let's say, and, and they're, they're about to go on a vacation, they're planning on a big vacation. Well, you know On a vacation, they might downsize their vacation, or let's say they were gonna buy a second car, you know, for, for someone, and they said, \"You know, we, we can't buy that car this year, let's see what happens with markets first.\" and so whether it's, whether it's their home equity, whether it's their portfolio, you know, there's all sorts of things that basically can, if those prices go down, can influence their spending, and then that trickles into the real economy and has all those, all those kind of butterfly" }, { "speaker": "stephan", "time": "28:25", "start": 1705.3, "text": "Recently, you did a great piece on oil and gas, so you were basically explaining, I guess, some of the misconceptions out there, because it, it, it, it-- there's almost this, public perception of what energy markets are and how they work, and then there's that real-- if you're an engineer and you're really looking at the numbers, there's that view. So could you tell us a little bit about what you were getting at and what, what people can learn from that idea?" }, { "speaker": "lyn_alden", "time": "28:52", "start": 1732.12, "text": "Sure. That was, that was an exceptionally long article, so it's, it Challenging one to summarize, but overall, it, it kinda made the case for why oil and gas are unlikely to be phased out anytime soon, and also why their prices could be somewhat elevated, mainly because we're not, we're not putting a lot of money into developing new supply, while demand is still pretty persistent, and so, and there's a bunch, and then it kinda goes into a deep list of reasons as to why, and so the, you know, a couple reasons are, for example, you know, there's the idea that we're gonna Of course, the big challenge there is that, as I showed in the article, historically whenever humanity found new energy sources, there are two things. One is they were generally more dense energy sources. and so, you know, coal was more dense than wood, you know, oil is, more, energy dense than coal, nuclear is more dense than that. and so we added these new energy sources, but we never actually reduced the old source. We just, we just, we reduced them as a percentage, we And so it's, it's very hard to actually remove yourself from a prior energy source. and whereas now, you know, the idea that wind and solar, which are less dense energy sources, are gonna come in and we're, we're just gonna dis- displace a large part of our previous energy stack, especially, you know, quickly, like let's say ten, twenty years, you know, the probability of that is, is so very low. and so basically we have kind of fundamental challenges with energy density that I don't think a lot of people are Energy mix, but, you know, and they have their own downsides too. So for example, we call them sustainable or clean energy, but, you know, in many cases they're not recyclable, they, they, you know, they, they do take a lot of energy input, and so, you know, they're, they're harvesting a sustainable source. So solar is, is renewable, wind is renewable, but the actual mechanical and electrical components to harness that energy, that's, that's really not renewable. and so the article just kind of go About energy, and kind of made the case why oil and gas are probably gonna be around for quite a while, potentially with periods of elevated prices due to us not really investing in them. and also, I, I kind of reiterated the fact that I, I think nuclear energy is a very strong energy source that, you know, I, I'm, I'm kind of expecting that at some point the world's gonna kind of more catch on to that. You know, we're starting to see rumblings, where it's starting to be a little bit more accepted in some" }, { "speaker": "lyn_alden", "time": "31:25", "start": 1885.42, "text": "Phase, phase that out, and I think that's going to be a pretty big challenge in the years ahead." }, { "speaker": "stephan", "time": "31:30", "start": 1889.54, "text": "Back to the show after a message for the sponsors. Unchained Capital are providing a concierge onboarding program for those of you who are looking to upgrade to multi-signature. Now, this program is getting very popular, and it's worthwhile talking about why. So there's this urgency to upgrade your Bitcoin security beyond custodians or single-signature wallets, and with Unchained, you can go and create a collaborative custody wallet where you hold two of three. Three keys. 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Yeah, nuclear is an interesting one because it seems like the perception of big accidents like Chernobyl and the like have colored people's minds to be overly bearish or negative on nuclear, and despite the fact that if done correctly, it can be very, very safe and very, very efficient long term, but it's just maybe not as viable right now for a lot of the new nuclear projects to come online, which is why we're sort of the-- it seems like If you just looked, if you just read the news, you would get this impression of, \"Oh, see, everything's wind and solar, and we're never gonna buy-- we're never gonna do any coal and natural gas again.\" But it seems that the reality is quite different from that, because there's still a need for base load power, there's still a need for cheap and reliable, scalable energy." }, { "speaker": "lyn_alden", "time": "34:36", "start": 2075.9, "text": "Yeah, with nuclear, I, I use the analogy of like airplanes. So, you know, people are, are kind of intrinsically more afraid to fly than to drive," }, { "speaker": "lyn_alden", "time": "34:46", "start": 2085.73, "text": "and Much, and of course, every few years there's like a huge crash that's on the nu-global news and it's terrible. but if, when you actually run the numbers, you know, if you're going a long distance, it's much more dangerous to drive, a-and so, we see that we say, \"Let's compare coal to nuclear. \" so, you know, coal is kind of our, is kind of the enemy you know, rather than the one you're, you're, you don't know. And so, for And those, you know, are, are linked to all sorts of, of types of death. and so they-- there's actually papers out there that estimate how many people die from air pollution that's related to coal, that's related to, you know, kind of other types of fossil fuels, and that's somewhat measurable and it's pretty, it's a pretty high number every single year. It's like, you know, a hundred thousand in the US, and then that can be, you know, far higher globally. Whereas if you look at nuclear energy," }, { "speaker": "lyn_alden", "time": "35:48", "start": 2148.11, "text": "Masters is like a dozen or so, a couple dozen, and then when you actually, you know, the, the estimate for how many people were negatively impacted by, by, say, Chernobyl and Fukushima, you know, there's, there's a big range of estimates for what that number is, but even the high end estimates, you know, throughout the entire, like, say, fifty year history of nuclear power, they're like less than like one year of like coal related deaths. and so it's one of those things where the, it looks, ends up incidences, and yet the whole industry, is actually very safe compared to many of our other types of energy. And what I would like to see is, you know, those, the three, the three disasters that we've had, Three Mile Island, Chernobyl, and Fukushima, and of course, they had different levels, the Chernobyl being the worst. those were, you know, even though they occurred in different decades, those were all built on 1960s and 1970s technology, because, you know, we haven Which, as we have, say, electronics, and so nuclear's just not, not been an area that we've advanced as quickly as we could've. And so you could have, for example, smaller nuclear reactors using twenty-first century technology to make them even safer than they historically have been, and to reduce the probability of some massive incident. And I've actually, you know, I don't know if you saw the news, with Aklo and Compos Mining, where Compos Mining, you know, there's a, there's a startup named Aklo, and they're, they Smaller nuclear facilities that, that, they, they take the discarded waste of conventional nuclear facilities, and then they can actually run off that and basically get more juice out of, out of that, and so they actually partnered with, Compass Mining, that was on a press release, where they're actually gonna power Bitcoin mining with that. And, you know, the whole point there is that, you know, the downside of those small nuclear reactors is that, you know, when you're running a smaller facility, you have kind of lower margins, and so they're actually, About it, they were kind of proposing, trying to run these unmanned. But of course, when you hear about unmanned nuclear facility, you're like, \"I, I don't know about that. I don't know if you wanna-- I don't know if regulators wanna let that happen. \" so you-- basically it's better, you have to kind of collocate that with something that's using that power, that is providing security and providing, personnel. And so of course, if they collocate with Bitcoin miners, they basically have on-site security and they're able" }, { "speaker": "lyn_alden", "time": "38:18", "start": 2298.13, "text": "They do business with Aklo, Aklo comes in, builds one of these facilities, but let's say that town only needs half the power, well, like Bitcoin miners, co-located with that power plant can soak up some of the remaining power and help make that project, profitable. And so I'm hoping we'll see more, more types of that kind of innovation, because, you know, we're gonna need a, a bunch of different energy sources going forward, to be both clean, and, and something that we can, you know, In clean as possible." }, { "speaker": "stephan", "time": "38:50", "start": 2329.61, "text": "Yeah, that's a great, example there. Now, Compass Mining is actually a sponsor of my podcast, so certainly, oh, nice. good one. and so I think the similar dynamic, just like what you were saying, this idea of like a plug factor, if you will, that you can use where, where there is energy that can be created in an area, and, I think it's another good example that's related is hydro and geothermal that potentially can have a similar kind of story where it might be only able- to be made in certain places, and so they can go set up a facility there, draw that pow- use that power, and then any excess power that's not being used by the local town, because you can't transport it che-cheaply or easily, then you can, people, bitcoin miners would be happy to go and set up there and start contributing to the network security while also helping make these projects viable where otherwise they may not have been." }, { "speaker": "lyn_alden", "time": "39:45", "start": 2384.51, "text": "Exactly. And, and so, you know, we've seen, for example, bitcoins- Been very good at sucking up excess capacity from hydroelectric dams in China, and then also in, in Quebec, for example, those are just two that come to my head. and then with geothermal, I mean, you know, we'll see what kind of innovations come there. I mean, that's, that's, you know, it's one of the cleanest types of energy, with the downside being that it's historically only suitable in certain types of areas. You know, there are proposals for deeper types of, of geothermal, that can tap into a" }, { "speaker": "lyn_alden", "time": "40:18", "start": 2418.13, "text": "Much broader range of geographies, but kind of like, nuclear power, there just hasn't been a lot of money going into that space to really kind of spearhead that type. But we are seeing developments, that might make geothermal, you know, potentially a more widespread use of power." }, { "speaker": "stephan", "time": "40:33", "start": 2433.24, "text": "Yeah. And also, I'd love to touch on some of the examples you raised in that piece. You spoke about the examples of Germany and also of India. So Germany has this example where they've been really trying to do all the renewable stuff. They've been really trying to- Trying to do the wind and solar, and it seems they're even trying to mandate that car manufacturers transition to using electric cars, and you see like Mercedes come out with like, you know, an electric AMG version and things like that. but at the same time, you quite rightly point out that, well, hang on, they still need base load power, you know, it's not like you can just go to this wind and solar, only. And so that aspect of it was really interesting to me. Could you explain a little bit around that?" }, { "speaker": "lyn_alden", "time": "41:17", "start": 2477.37, "text": "Germany has one of the, the grids, the electrical grids that is, you know, the most focused on wind and solar. but even there, as you point out, they need base load power, and so they use a lot of coal for" }, { "speaker": "lyn_alden", "time": "41:32", "start": 2491.56, "text": "Nuclear. and after the, the, Fukushima incident, in addition to Japan taking some of their reactors offline, actually had Germany, decide to start phasing out some of their nuclear, nuclear power plants. and so the interesting thing there is that, you know, they, they could have phased out coal more rapidly instead. and so they actually chose nuclear over coal. So they don't-- It's like, there's always a trade-off when you make a decision like this. So like, hey, we wanna get rid of dirty nuclear or Coal in place longer. Like people don't hear that second part, and so they, they could've kept the nuclear and phased out coal more. And so you've actually seen, despite all of the growth we've seen in, in German, wind and solar, their coal usage is pretty much flat, whereas they could've, they could've reduced it. And there's even been papers showing that act-- that actually had kind of measurable, death counts, most likely in Germany, because as I pointed out, there, you know, the number of deaths related to coal and Potentially died due to the decision to phase out nuclear instead of coal, unless of course the improbable event that one of those nuclear reactors would have otherwise blown up or something. And so, yeah, you have that kind of, that outcome there. And then two, it's, you know, one is You know, when you look at overall energy consumption, ele-electrical grids are only like twenty percent of our total energy consumption, and so we often think of it most of our electricity coming through the grid, but that's not really not the case. You know, the, of course, automobile energy, and then also energy that we use in like all sorts of diesel equipment to go mine our commodities. And so we, we basically in terms of how much energy is used by the world, only about twenty percent of it is grid, and so Germany's actually still using quite a bit of," }, { "speaker": "lyn_alden", "time": "43:16", "start": 2595.96, "text": "manufacturing, and it just so happens that their grid is, is somewhat more solar and wind focused. and so, you know, basically it is a decent region for wind power, for example, so it does make sense to make, make use of wind when you have it, but, you know, I think over time, basically they're gonna find that, you know, they're, they're already-- they had a period where they had a, a big energy surplus, right? So they're producing more than they're using, but ever since they've kind of accelerated that" }, { "speaker": "lyn_alden", "time": "43:46", "start": 2626.0, "text": "Kind of project that, they're in a, in a case where, you know, they're gonna need base load power, and it's just a question of, do they want it to come from coal, do they want it to come from nuclear, do they want it to come from natural gas? you know, we'll see what direction they go in. probably some combination of the above. Of course, ideally you wanna phase out the ones that are, say, say more dirty or, or, or less safe than other ones. And a contrasting example I use, or a" }, { "speaker": "lyn_alden", "time": "44:16", "start": 2656.08, "text": "They, they've, they've, you know, every year they've been dramatically increasing how much solar capacity they install, and it, you know, it makes for great visuals, but then if you look at actually how much coal capacity they installed, it actually dwarfs how much solar capacity they, they installed. And so on a percentage basis, solar was growing faster, because it was growing from a very small base, whereas their coal, grew at a slower percentage, but because the coal, is like the vast majority of their grid power, the fact percent percentage meant that that actually was a, a, a much larger, absolute addition to their grid over the past, you know, five, ten years than solar. And so that, that's an example of the challenge you have when even if you find a new energy source that you wanna go ahead, ahead and add to your grid, it's very hard to replace prior energy sources, especially because a, a market like India is growing more quickly, and so they're, they generally have a preference for fast turnaround energy sources, of which coal is, is kind of, you know, well Already have most of their energy needs met, they're able to invest in longer projects, and so you, you kind of have those different dynamics in different markets." }, { "speaker": "stephan", "time": "45:24", "start": 2723.94, "text": "Yeah, great explanation there. And as it's probably fair to say that over human, humanity's history, our story is being able to use more energy so that we can do more. So as you say, once we've st-found an energy source, we're very unlikely to turn it off, unless it has some really horrific, health impacts and we've got a better alternative. Alternative, I mean, maybe an example would be in some parts of the world where people don't have access to energy, they're using wood and burning the wood inside, inside a home, and so that can be very bad from a health standpoint. So people, you know, if they can transition over to a better energy source, they will, but if not, well, they would rather have that because then at least they can, they can cook food instead of not being able to do that and that sort of thing. and it's a really interesting point as well around the decision of which one we" }, { "speaker": "stephan", "time": "46:16", "start": 2775.94, "text": "It's like with air pollution and maybe even concepts that people don't like to think about, like this idea of statistical value of a life, which is used in insurance calculations as well, where effectively do have to think about these trade-offs because all life is precious, but they still have to think about how many resources they're going to expend to save more lives in this, that, or the other area. And so to the point around electricity, it's also that, or energy as well, as you rightly point out, that we have to look at what is Going to enable all of these other things, right? I guess the, the Alex Epstein point to make here would be that, yes, coal has all these, it can have all these negative pollution impacts, but on the whole, it's enabling all these people to produce and to eat and to live and to do all these things that they otherwise wouldn't be able to, unless you rightly point out, in, say, countries like India, there's a defi- there's a demand, there's a huge demand for energy, there's a need for that. And a, a really funny point, and The developed world is outsourcing production of things into the developing world and, and effectively saying, \"Oh, I'm just, I'm gonna look more green myself, but you do all that dirty work using coal and natural gas, right?\" Yeah, that's, that's" }, { "speaker": "lyn_alden", "time": "47:31", "start": 2851.09, "text": "kind of a, a kind of a balance sheet trick we've done over the past twenty-five years. For let's say the United States, for example, if you look at our overall energy consumption, it's, it's pretty flat, it hasn't really gone up that much, and so we've been able to, to gradually And things like that, which is, I think it's a good thing, you know, 'cause coal by, by many metrics is, is among the dirtiest sources, and so, you know, our energy mix looks, you know, pretty flat there, we can say, \"Oh, look, we're keeping our carbon emissions in check, we're, we're, we're doing all this,\" but then the, the part that they're leaving out of that calculation is that over those twenty-five years, we've radically expanded our, our trade deficit, particularly with China" }, { "speaker": "lyn_alden", "time": "48:16", "start": 2896.18, "text": "Gradually shipped our manufacturing chain over to China, and that's very coal heavy, it's very energy intensive in general, regards to what type of energy source you're using. And so, part of, you know, China's developing on its own, so it's, it's increasing its, its, say, middle class, qualities of life. But in addition, that, you know, part of the way they've done that is that they've become a big manufacturing hub, along with other countries in, in parts of Asia," }, { "speaker": "lyn_alden", "time": "48:43", "start": 2923.39, "text": "and so they've, Those countries, so it's off of our balance sheet, and so we say, \"Look, you know, our grid's pretty clean, we've managed to keep our carbon emissions in check, and look at China over there burning all that coal, but, you know, a lot of that coal, a big chunk of that is actually coming back to us in the form of all the things that they're, they're physically making for us, which is, you know, all that energy expenditure and all the, the, the raw materials that go into that. and so, you Demand, and also reducing some of their dirtiest sources of energy like coal, but it's very hard for the world as a whole to do that because that means essentially that you'd be, you'd be flattening it out without also outsourcing it to somewhere else, if the whole world kind of, you know, let's say, flattened out its energy usage. and so those are two very different comparisons. And so I think it's important, you know, when we're talking about the future of global energy, it's much harder to flatten that out, their energy demand." }, { "speaker": "stephan", "time": "49:48", "start": 2987.56, "text": "Yeah, really fascinating to think about. It reminds me as well of when people talk about, say, tax policy historically in, say, even in the US as an example, there are examples where the total tax take as a percentage of the economy sort of stayed the same, even though the tax rate has varied, because in practice what would happen is people might use different accounting techniques or tax, you know, strategies, and effectively the amount of tax take that the government would receive was Staying roughly constant, and it's a similar kind of idea here, even in energy, right? So this idea that we're trying to-- in some countries, the more developed countries, we're trying to say, \"Oh, look how clean we are. Look at you, you're dirty, you're doing all this dirty stuff.\" But the reality is, it's more just like globally, it hasn't actually changed that much. So it's a kind of interesting action and reaction example there. but yeah, also another area I really want to chat with you about is, stablecoins Some of us, you know, now some listeners might get annoyed, we're talking about stablecoins, I wanna hear Bitcoin stuff, but I, I think there are interesting impacts onto the traditional banking system coming out of stablecoins, as, my recent episode with Caitlin Long and- some conversations around the space as well. I'm wondering, do you have any thoughts on this idea of stablecoins impacting the traditional banking sector, money market funds?" }, { "speaker": "lyn_alden", "time": "51:11", "start": 3070.92, "text": "So we are seeing a, a rapid, you know, shift towards stablecoins, and we've had pretty rapid growth, in, in that space. and so it is becoming large enough that it's a, it's a macro, you know, phenomenon now. It's not just a few billion here and there, it's like a hundred billion dollars of stablecoins." }, { "speaker": "lyn_alden", "time": "51:29", "start": 3088.51, "text": "and, you know, And so she could, she's, paying a lot more attention to that space than I am. She's a lot more qualified to talk about that, so I would actually reference, I would say people should go check out that episode. and so there's all sorts of kind of those intricacies to look at. but overall, I think what we're basically seeing is, you know, you know, for anyone that's kind of used stablecoins or is kind of active in the, in the, in the digital asset ecosystem, those are just generally much faster payment rails than Start using them, you don't go back, where possible to the previous legacy system, and so, you know, unless regulators kind of slow that down, you're likely to get that continued migration, to stablecoins. And we're even seeing, for example, you know, Facebook and, and DM, right? So, so it was, it was the Libra project, then they had some regulatory scrutiny, they kind of, you know, they, they retooled that a little bit, and so, you know, ultimately what that is, is, is regulated stablecoins, that, you know, it can apply certain technologies associated with blockchain to, to say making payments, you know, quicker or programmable in a way that can, say, be, be more beneficial than the current system, but of course, it doesn't solve the same problems that Bitcoin solves, right? So it's not like a, a permissionless, trustless, decentralized system, but it can still have certain advantages over the existing, rails, that have been around. You know, we've been kind of iterating on rails for a very long time, like we get Fedwire, and that's like a hundred-year-old system, and, you know, they-- as technologies come across, I mean, they say, okay, now we made the radio, and now we, you know, we, we added layers of technology to that, so we're not actually, like, you know, bringing wheelbarrows full of cash or gold between banks anymore, and so, but it's still fundamentally the kind of the same types of rails, whereas stablecoins are kind of a, a whole 'nother Around how is that going to interact with central bank digital currencies for the countries that choose to launch that, in the, in the kind of the near term or the, I should say, like a, an intermediate term? And so for example, if you look at DM's white paper, they reference central bank digital currencies, and in their view, they kind of, you know, potentially view themselves as like an overlay on top of central bank digital currencies where, you know, they can kind of like how if you look at, say, Circle, you know, like a stablecoin, they will ostensibly and then they'll issue tokens that are backed up by those reserves, whereas something like DM, you know, if you have central bank digital currencies, they can have an account with the Fed or however that system's going to work where they hold central bank digital currency units, then they issue their own token, and those tokens are say more programmable, more flexible than the central bank digital currency units are. and so they're, you're potentially kind of a private sector extension of central bank digital currencies. And so this, this field's still very new, and it's, you know Did it reach macro significance? I mean, I remember I wrote an article, earlier this year, when I was touching on, on, on Ethereum and kind of, you know, critiquing that to some extent. but one thing I pointed out in that article was, I, you know, I do think that stablecoins, the volume of stablecoins is going to increase, pretty rapidly. And since then, it actually, it actually like tripled, in, in say, you know, seven months or six months, whatever the case may be. And was, was much smaller, not really on regula-regulators' radar in the way it is now." }, { "speaker": "stephan", "time": "55:05", "start": 3305.24, "text": "Yeah, excellent comments there. And so do you see it like we're going to just see continued growth in that sector, and we're going to see a lot more competition come into that space, because right now, obviously, the big names, people like Tether, do you see it like we're gonna see more and more people starting their own stablecoins or doing stablecoins for other curren-currencies as well, not just the US, maybe Euro, stablecoins or others?" }, { "speaker": "lyn_alden", "time": "55:30", "start": 3329.62, "text": "We are seeing we're interested in that. I mean, you know, I've been covering, you know, Spur Bank is interested, of Russia, of doing, you know, stablecoins there. you know, it's generally a pattern we're seeing around the world is that many major currencies they wanna do stablecoin implementations of" }, { "speaker": "lyn_alden", "time": "55:48", "start": 3348.3, "text": "Stablecoins of multiple currencies around the world, they wanna expand the number over time, and so I do think that, you know, barring certain regulatory actions, that is likely to increase, and, you know, that, their use cases can rotate. So, you know, historically, stablecoins were primarily used within exchanges, especially the offshore exchanges, and so, you know, we're starting to see more regulatory crackdown on, like, finance, and some of those offshore exchanges, and so that, that could potentially, you know, Just hype, like, kind of estimating here, that could slow down the usage of, of Tether, for example, whereas you could see other types of stablecoins like, let's say, DM or other ones, that are more intended for use as, as a payment mechanism, they could start to, to take off more. Of course, we've also seen algorithmic stablecoins, some of them more successful than others. you know, we could, for example, have Lightning Channel stablecoins, right? There are a couple people talking about those In the space, both in terms of the number of currencies that could be used and the mechanisms used to do that, so either custodial ones or synthetic, algorithmic ones, and there's a bunch of different options depending on what the use case is. So I, I think that the long term shift to watch primarily is the idea of stablecoins primarily being for, trading as a unit of account, towards, if they actually start to become more used as a, as a medium of exchange, you know, in the broader economy." }, { "speaker": "stephan", "time": "57:18", "start": 3437.68, "text": "Right. And so People may here and there use them as method of payment or to potentially get around, say, the difficulties of trying to use the normal system to do wire, wire international wire payments and things like that. But fundamentally, it still doesn't compete with what Bitcoin does, right? Bitcoin is special and, and for good reason. I think this is another thing where it's worth reiterating that eGold and Liberty Reserve were shut down for a reason, and that Bitcoin was built the way it was to be permissionless for a reason. And so stablecoins, while they may- They have a little bit more of a superficial convenience to them, they just fundamentally don't have the same characteristics that, say, Bitcoin has and Bitcoin's, overall network effects that are growing. And, on, the B word today, I saw you, well, it was a prerecord, I think, but I saw you made a great presentation there as well talking about some of the network effects, and you were talking there about how, you know, comparing Bitcoin's security versus, other, coins out there or the security of Bitcoin versus, say, the fiat system. I'd love if you could touch on some of those aspects of Bitcoin's network effect that's growing. And, I think you also had a great explanation around the whole MySpace Bitcoin aspect as well, because that's a common one that people hear. So how do you answer that, let's say if somebody asks you the, \"Is Bitcoin MySpace?\" question?" }, { "speaker": "lyn_alden", "time": "58:40", "start": 3519.51, "text": "Yeah, so yeah, a couple different questions there. I guess going back to the root, you know, I totally agree that Bitcoin is just fundamentally different than stable coins and things like that, and that's of course because Bitcoin is a decentralized, permissionless bearer asset, so it can be used non-custodially, non-trust, non-trustfully, and so that's the whole point there. Whereas if you're using, say, a stable coin, you're relying on them to, custody it for you, assuming it's that custody type of stable coin, and in addition, they can, you know, they can" }, { "speaker": "lyn_alden", "time": "59:11", "start": 3551.41, "text": "They can, they can make them less permissionless than they seem, and so whereas, whereas bitcoins, you know, pretty much the unique asset that doesn't really have those issues. and so, you know, overall, it's, it's, it's a fundamentally different asset class, and that's why we can monitor what's happening with stablecoins for other purposes, but I just fundamentally don't consider them a competition to Bitcoin. They're, they're, they're, they're more of a competition to the way that the current system runs. So, you know, if I was" }, { "speaker": "lyn_alden", "time": "59:41", "start": 3581.17, "text": "You know, there's, there's, there's a couple different attack vectors there if you're, if you're a legacy system that's relying on high fees. now, yeah, going into Bitcoin's network effect, this is a topic that I've, I wrote an article about, you know, it's something that I've been emphasizing, partly because it was, it was one of my initial questions with Bitcoin. and so, you know, my, my initial question with Bitcoin when I was kind of looking at it, years ago was, okay, so These other entities can copy it, and so what makes Bitcoin special? and so of course, one is the fact that it's well designed, it had a really good path dependence, it's leaderless, so there's all sorts of those qualities, but then in addition, it has the, it has the widest network effect, and of course, in, in, in blockchains, your network effect is, is your usage is heavily tied to how secure you are, like how much hash rate you have, how sufficiently decentralized you are. And so in that sense, Bitcoin Well designed enough that it's very, very, very hard for, you know, other blockchains to come and try to dethrone Bitcoin, at least in the, in the things that Bitcoin is aiming to do. And so I wouldn't be shocked if, say, that the total stablecoin market cap were to exceed Bitcoin for a period of time, who knows? but it's not, it's not, it's, it's fundamentally not competing with the same thing that, that Bitcoin's competing in, as an example. and so, you know, the overall and then the fact that, you know, compared to some of the hard forks or compared to some of the other protocols, you know, you're, you're more decentralized and you're more assured when you send a large payment, the, of, of its security and its ability to arrive in that location. and then in addition, I didn't get into it in that, in that B-word presentation, but also the Lightning Network adds a whole nother network effect onto the base layer, and this is something I've talked with Elizabeth Stark about," }, { "speaker": "lyn_alden", "time": "01:01:38", "start": 3698.15, "text": "you know, my view Network effects than Bitcoin, because Bitcoin is a broadcast network, whereas Lightning is a channel by channel network, and so it's very, very reliant on having adequate liquidity. And so the more that we build that Lightning network on top of Bitcoin, that further strengthens the network effect, both of Lightning and of Bitcoin, and kind of creates more and more usability in the network. And then once you have usability, you can bring in more apps and more users, which then further increases liquidity and usability and keeps that flywheel going. And so I'm, I'm really optimistic With the development path that I'm seeing Bitcoin using, I really like that layered approach, because that's the best approach where, you know, every layer has trade-offs, but when you, when you use each layer for the purpose that they're designed for, you can greatly minimize the trade-offs, for your use case. and so, I think that overall development path is going really well, and I'm really excited to see it catch on. I mean, I, I, I tweeted back in January that I think people are sleeping on the Lightning Network. and, and, and, you know, I basically said that I think it's starting to reach critical mass, both in terms of liquidity and applications." }, { "speaker": "lyn_alden", "time": "01:02:47", "start": 3767.58, "text": "and, you know, since then, it's al- the capacity to, Far larger than you can probably imagine right now." }, { "speaker": "stephan", "time": "01:03:10", "start": 3790.88, "text": "Yeah, right. Yeah, I, I mean, I'm, I'm a big fan of Lightning. I've, you know, done a lot of interviews on Lightning. I, I guess, I'm curious though your view because it seems that right now a lot more people are using Bitcoin as a savings technology and they're not as interested in the kind of medium of exchange aspects of it for now because it might be capital gains tax implications or it might be, you know, various other things. and so I'm not saying this But I'm curious your view there on, you know, do you view that as a conflict or do you see that as like, it's just another whole network effect that we're growing this whole thing? I," }, { "speaker": "lyn_alden", "time": "01:03:47", "start": 3827.96, "text": "I think it's a lo- it's a long-term planning, right? So you wanna build out before you need it, and especially because as we saw, you know, one of the criticisms of Lightning is that it was going slow, that it wasn't just like, it's not like you turned it on day one and it was usable right away, and that's because Like a DeFi project, like, making a decentralized exchange. It's as much, it's a slower process, but it's kind of like a train where it starts slow, but then the momentum's really, really strong. and so I'm glad that they got that, you know, going over the past three years, because, you know, eventually, you know, as on-chain fees potentially grow, you know, you need that lightning, network, more and more if you're trying to do small transactions, even if, even if all you" }, { "speaker": "lyn_alden", "time": "01:04:38", "start": 3878.8, "text": "You know, there, there's all sorts of use cases there. But then, you know, from another point of view, you know, people in emerging markets can make better use of Lightning potentially, right? So for, if you're doing smaller transactions with, with, you know, the need for smaller fees, that can matter. And so for, for me, I, you know, I've not been someone who's, who's rushed into making extensive use of Lightning, because I've been primarily interacting with Bitcoin as a store of value asset, whereas many other markets, like we" }, { "speaker": "lyn_alden", "time": "01:05:09", "start": 3909.08, "text": "Lightning related, and so, and another topic is that, you know, I think in the intermediate term, you can use Lightning as a, a monetary network without even relying on the, on the asset. and so we've seen that with Strike, for example, where you can, you can do dollar to Bitcoin to dollar payments, in a way that is, is faster, and cheaper than, say, Western Union for, for remittances and things like that. And eventually, you could have, you could have dollar to Bitcoin to euro payments or euro to Bitcoin to Aussie dollar payments. and so that's a, that's a kind of a competing way to do efficient payments compared to stablecoins even, and so, or even interacting with stablecoins, you can do stablecoin to Lightning to stablecoin type of payments. and so, you know, it, it's another tool in the tool chest, to basically give developers, abilities to just fix things that, that, you know, kind of find efficiencies in the current system and to iterate them as much as possible to make them cheaper, faster, better, you Especially for people who those fees are, are a very meaningful part of, of what they're, what they're dealing with. And so I think that, you know, I don't view, I don't view any sort of conflict with Lightning, especially 'cause not everyone has to use it, at least not at the current time. It's just, it's something that, it's there for people that need to use it or wanna start trying it out, but then it's not needed for other people. And in addition, you know, I think it's, it's like a couple months ago" }, { "speaker": "lyn_alden", "time": "01:06:38", "start": 3998.52, "text": "They are, are heavily, in the Bitcoin space and a lot of their revenue is denominated in Bitcoin, and so they actually do spend some of their Bitcoin because, you know, they have, they have to live their life. and so, you know, for someone like me, my income's in fiat, and then I can choose what percentage of it do I wanna put in Bitcoin, and it just kind, it's kind of a one directional thing there. But if I was getting most of my revenue in Bitcoin, I'd be, say, saving some of my Bitcoin, but then Most countries, the tax burdens around, around spending your Bitcoin aren't great, right? Because you're triggering a taxable sale, and, you know, most people, I, I have good access to credit cards and PayPal and other fairly cheap forms of payment, you know, whereas that's not an option in many countries, and so I think it's one of those things, people that need it should, should explore it, and even people that don't need it, I think it's, they should be happy the fact that developers have been working on it, building it That we'll need that in the future." }, { "speaker": "stephan", "time": "01:07:40", "start": 4060.2, "text": "Yeah, of course, I agree wholeheartedly there, and it also enables, it opens up new possibilities. For example, people might want to start business models that aren't otherwise feasible or profitable, or people might be setting up online, who knows, lightning poker gambling websites or some other betting website, and it's all done with lightning payments. And I, I think some of those do exist already, but of course, these could grow over time and the experience that they could offer with lightning might be far greater Greater than they would otherwise be offering if they were having to do everything Bitcoin on chain, right? So, yeah, probably a good spot to wrap up here, Lyn. Have you got any closing thoughts for listeners and where can they find you? Of course, I will link to the oil and gas piece in the show notes, but, where can people find you online?" }, { "speaker": "lyn_alden", "time": "01:08:25", "start": 4105.81, "text": "Yeah, no, I think that covers it. I, I guess the last point I'd make is that, you know, a lot of it is about usability. and so in early technologies, you know, you start" }, { "speaker": "lyn_alden", "time": "01:08:38", "start": 4118.52, "text": "A lot of those details are kind of worked out so that, you know, the end user, is, is not a- isn't worrying about some of those underlying technical details. And so, you know, with Lightning, you know, it progressed and it's, it's over time, it's becoming more usable. So is Bitcoin, the base layer, and, you know, all these, all these kind of things that abstract, some of the technical details from us. And so it's, you know, it's one of those things, again, you wanna start it before you" }, { "speaker": "lyn_alden", "time": "01:09:08", "start": 4148.54, "text": "I view it. And so, yeah, I'm available at lindaln dot com for people that wanna check out my work. I, I cover multiple asset classes, including Bitcoin, and I'm on Twitter at lindalncontact. and so I, I really appreciate you having me on again." }, { "speaker": "stephan", "time": "01:09:21", "start": 4161.18, "text": "Yeah, Lynn, it's great to chat with you. You've always got a lot of interesting points of view, and you're very well-researched across multiple fields, you know, you're not, just Bitcoin only, i-i-in, in your" } ] }