{ "episodeId": "SLP72", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "eric_voskuil": { "name": "Eric Voskuil", "role": "guest", "tag": "ERIC" } }, "segments": [ { "speaker": "stephan", "time": "00:10", "start": 9.85, "text": "Hi and welcome to the Stephan Livera podcast focused on Bitcoin and Austrian economics. Today my guest is Eric Voskuil, lead developer of Libbitcoin and author of Crypto Economics. Here's the interview. Eric, welcome to the show." }, { "speaker": "eric_voskuil", "time": "00:26", "start": 25.79, "text": "Hey, thanks for having me." }, { "speaker": "stephan", "time": "00:28", "start": 27.78, "text": "So, Eric, I know, you know, you've, got a following and you've got your, you're the lead developer of Libbitcoin and you're also, the author of Crypto Economics, which is like a wiki page or GitHub page rather, attached to, the Libbitcoin. but, perhaps you wanna just, give a little bit of a background on yourself just for the listeners, just for the those listeners who aren't familiar with you." }, { "speaker": "eric_voskuil", "time": "00:53", "start": 53.43, "text": "Sure. yeah, I've, I've been leading the Libcoin, I don't say leading, but, I've kind of the, have been the primary contributor, the main, largest single contributor for, three years or so now, but I've been working on the project for about five years. I, I started, when I was working-- I, I started working on Bitcoin about five years ago and was working on a hardware wallet, and I, I found the Bitcoin, I went out and met Amir, and decided this is The software stack I wanted to use, to build on, and, I ended up putting the wallet on the shelf after about a year of, R&D and, decided to continue, working on the Bitcoin. The, the writing I've done has largely been a consequence of, figuring things out. in the last couple years, I started writing, just so I don't have to stop, you know, tweeting everything out, repeatedly that I, that I had learned and, it's grown to over seventy topics now and, it's hidden nicely in the Libcoin system repo where nobody can find it, but people keep finding it anyway, so," }, { "speaker": "eric_voskuil", "time": "02:01", "start": 121.29, "text": "Yeah, it's, some of it seems to be pretty straightforward, and other bit, other, other things, cause people to wonder what I'm thinking. So, maybe we'll have some interesting discussion over it. as far as my, my background, I, I got a CS, a computer science degree, at Rensselaer. In '89, joined the Navy because I was bored at IBM, when I was, an intern there, and, did ten years in the Navy. I, I flew, Did two, two cruises on the aircraft carrier. And, but I was programming the whole time. did some stuff for the Navy that I think they still use. And, in '98, I left the Navy, to create a startup company, and, ended up selling that one to Microsoft, which is why I live in Seattle. And did two and a half years there as a, Software architect in their Windows division, and, I left them to join a spin out of my original company, and, that's still out there. I, I don't own any more of it anymore, but it's called Beyond Trust. I did a third company that, failed, and the day I closed that, finished closing that up, I, I read the Forbes magazine article by Andy Greenberg on Silk Road, and, because of my background, I immediately went to, the Bitcoin white paper, read it, and I've been working on The Bitcoin, on Bitcoin ever since, so I, back in the nineties, I had a, I had a, I, I, I was a card carrying member of the Libertarian Party for about twenty-two, twenty-five years or so, and that was kinda when I was getting started, and I was very interested in PGP and DigiCash, And after that, DigiCash kind of folded up, I, I really kind of ignored, digital money stuff, for a long time. And, had I not picked up that article, I don't know when I would have actually taken a look at, at Bitcoin, but that was fortunate. I later met Andy, And, read his book, and, great guy. So, I've, I, I've done a lot of other things. I travel a lot, I speak now and write, on, on Bitcoin. I do a lot of meetups, podcasts, so it's kind of taking time away from my development effort, but, I still work, consider myself working full time on the Bitcoin. and I do it, I, I'm kind of semi-retired, so I, I do this, on my own." }, { "speaker": "stephan", "time": "04:22", "start": 262.05, "text": "Fantastic, yeah. That's excellent. I, I think, it's, to me, it's interesting because obviously it's different speaking with you, e-e-even if we're, you know, speaking through like Skype or Google Hangouts, Because, I'll be honest, right? There are times when I'm, when I'm interacting with you on Twitter or sort of, I see what you've written, it sort of comes off, I, I think it's easier to kind of understand someone's point of view when you're actually speaking to them. So there are times when I'm sort of reading, crypto economics, your, GitHub pages on the Libitcoin, or I'm seeing your Twitter perspectives, and to me, it sort of comes off sort of literalist or certain, like very, Kind of precise, I suppose, and I can understand, like, you know, again, from a software development background, you have to be precise. I can sort of appreciate that, but then, on the other hand, I can also see a, a perspective of- There are certain colloquial terms that we might use in and around Bitcoin, and you, you sort of take a more kind of literal interpretation of them. So, a quick example might be, when, you know, people might say things like, \"Oh, the ability to, so-called, order the supply of Bitcoin,\" right? So, and I suppose that was an area where, you, you know, what, what's your sort of views there?" }, { "speaker": "eric_voskuil", "time": "05:37", "start": 337.03, "text": "Well, yes, I, I, I completely agree with your, with your, perspective on my writing." }, { "speaker": "eric_voskuil", "time": "05:46", "start": 345.76, "text": "I do it for a reason. I, I, I think I even tend to talk that way, but I'm not always like that. It's just, to me it's about precision, it's about, conveying the intended meaning words take on different meanings, multiple meanings, conflicting meanings. You can have a system of words like the system we use in Bitcoin, where you end up with direct contradictions. In the, in the use of the words, right? You end up, you end up, looking at this and looking at that and going, \"Well, that doesn't make sense. There must be a different interpretation of this word.\" So I, when I started writing, I, I, I started linking to my own glossary, and I put the most brief definitions I could possibly write, right, what I consider formal. in the glossary so that people would know what I meant when I used a given word. so I've tried very hard not to redefine existing terms, unless they're contradictory or am-ambiguous, Or just unclear. and so, and in some cases, I have had to kind of refine for my own use, an existing common use term. but for the most part, I don't. If there's a new concept, I, I use a different word, right? if-- but what happens is I tend to be more strict about my interpretation of economic terms, and I use economic terms, I don't use financial terms. So, for example, if somebody says \"invest in Bitcoin,\" I say, \"You're buying Bitcoin and you're speculating, that's not an investment, not from an economic perspective.\" That's not my invention, that's, that's, that's strict Austrian, you know, economics terminology, but some people don't know that, so I, I put it in the glossary. So it's about precision. in other words, I, I look, a-and a lot of the approach I have in my Bitcoin writings comes from You know, decades of just an interest in economics and reading and, you know, in politics, I've, I've really less or, or no interest in politics at this point, but that's, part of my economic, you know, understanding. And, I write in a very similar style that I think Rothbard writes in, because I really appreciated his precision and, and brevity, even though, you know, his, his magnum opus is a monster-sized book. and economy in the state. if you read it, you realize he's, he's actually making very short explanations but being very precise with his terminology. and I found that extremely helpful, specifically because the Austrian approach to economics is as a proof, right? An, an axiomatic system called praxeology. that's not true of other forms of economics, so they tend to use words very loosely 'cause they're not actually doing a logical proof. so when I write, I, I try very clear, clearly to, Avoid opinions, I try to write, kind of an informal proof, but a rigorous informal proof of what I'm saying. anyway, so that's why it sounds very different, 'cause it's more mathematical, you know, in terms of proof, logical, than it is just an explanation or, you know, just blogging about something." }, { "speaker": "stephan", "time": "09:05", "start": 545.12, "text": "Right, okay. Yeah, and while we're on that topic, I think, the listeners would probably like to hear more about who are some of your influences. So obviously you mentioned Rothbard, who, like, economically, who would you s-cite as your influences?" }, { "speaker": "eric_voskuil", "time": "09:18", "start": 558.46, "text": "Well, you know, the Austrian school is the only thing I, I have any interest in. It took me a long time to kind of understand the stuff. It's kind of like investing, right? If you don't do it, you don't really understand it. It takes a while, and that took me" }, { "speaker": "eric_voskuil", "time": "09:33", "start": 573.39, "text": "The same thing with economics, it kind of drifted around for a while, found some stuff, it was wrapped up in my political, approach, and kind of it ended up reversing. My political approach became consequence of my economic, understanding. So, you know, I, I use Rothbard as a reference, most of the time because, he's, he writes so clearly. And, anything you ever, ever wanted to reference from an economics perspective is in Man Economy of the State. So I tend to use that as the, as the basis. but I don't use as-- use them as an authority. I make my own explanations, and if people wanna learn more than I wanna talk about, I'll, I'll send them over there. But, I really try to avoid, just saying, \"Well, no, this is what the Austrians say,\" you know? That's, that's really irrelevant. It's, it's what I can prove. So, he, he was a big influence. That, that book kind of changed me from kind of A, a libertarian to an anarchist, actually. I just decided it was-- I, I understood the contradiction in libertarianism, but it wasn't until a kind of more complete, economic understanding that I was comfortable saying, \"Well, no, I'm just, I'm just an an-anarchist, right?\" so, but, you know, the long line of, of kind of classical economists, including the Austrian school and kind of ending with Rothbard is, is, been my main influences economically. And politically." }, { "speaker": "stephan", "time": "11:02", "start": 662.23, "text": "Excellent, yeah. So I think, look, I think then essentially you and I have very similar views then, both coming from that Austrian economics informed libertarian anarcho-capitalist vision, right? but I think maybe one of the areas that maybe we might disagree is around credit expansion. So do you wanna go into that around, and I think some of this comes up in this, and also listeners, you might be interested to check out But there was an earlier discussion on the World CryptoNet with Max Hillerbrand as the host and Eric, you were one of the guests, and also, Fernando Ulrich and, Matthew Majinski and also Nick Carter were on that, and so Eric, did you wanna outline some of your thoughts around, you know, fractional reserve banking in a free market sense versus full reserve Austrian views?" }, { "speaker": "eric_voskuil", "time": "11:50", "start": 709.77, "text": "Sure. so yeah, it was a, it was a great podcast. I, I recommend it. get a couple hours of talking about this subject on there. I Excuse me. so, I think I as- so I will assume that the reason we made, you, you may see our, our, beliefs, Or understanding of, of this question differently is because this is the one question that Rothbard equivocates on in Man, Economy, and the State. I, I can't think of any other, and I read that book very closely more than once. and what he, what he does is he, he, he, he, he talks about, you know, the- Banking system without initially being very clear about whether it's a state system or whether it's a free system. And to me, there's a very bright line between that, right? There's no gray area. It's not like a corporate system and then the state that influences or anything like that. It's either controlled by the state or it's not. and so he talks kind of in this area of, about it, and then comes back and says, \"Well, if you make a distinction between state banking and free banking, this may be different, right? That's the equivocation, right?\" And so maybe people gloss over that, maybe it's not picked up in all writings about this. Certainly other Austrians, don't make that equivocation, but remember Rothbard's rigorous. If he couldn't prove it, he was uncomfortable, and he couldn't prove it, right? What he was saying, to me was giving, giving a little bit of credit to, to others in the school while not fully endorsing it. And, I've looked at it, you know, every way I can, and to me, it's just it's a nonsensical idea that's put forth that credit expansion is some sort of bad thing that's just caused by banking in general, and, you know, bad is a word that would have to be more clearly defined, but, as an, as an anarchist, you know, libertarian type and a, and an Austrian, to me, the line between good and bad is aggression. I, I adhere to the non-aggression principle, and so," }, { "speaker": "eric_voskuil", "time": "13:55", "start": 835.24, "text": "You know, if, if people do it voluntarily, it's by definition good. Therefore, the objective of, of a free society, or somebody who wants a free society, is to remove aggression so people can do what they want. It's not to build great monuments, fancy artwork, increase the GDP, you know, increase people's standard of living. It's for them to make the choices that they wanna make. So that's what I mean when I say good, okay? So or bad. So the, the question is fractional banking. Is it good or bad? Should we allow it? Should we not allow it? What does it have to do with the state? so free banking is just a natural consequence of people interacting freely, right? So inherently good. There's nothing bad about it because it's the consequence of people doing what they want, voluntarily trading. state banking is, like everything the state does, is a form of taxation or cro-control to achieve tax revenues. So very different, right? So credit expansion, is one of these things that, well, you know, when the state intervenes in markets, markets still exist, the concepts still exist. Credit expansion is a natural consequence of credit. Right? and it exists in a free market, and if there wasn't any, there'd be no products, none, right? Because there'd be no capital used for production. Even if you're lending it to yourself, right, you're taking some savings and you're, you're gonna start this project, call it a company, whatever, right? You're gonna invest that capital in production. If there's no capital to be invested in production for future earnings, there's no products, right? Which means everybody starves to death or, you know, hunts and gathers, and eats as they walk, you know, through the forest. But that's about it. So, credit is essential, right? And by credit, again, I speak economically, not re-in a regulatory sense or a financial sense. credit, some people would interpret as lending, as an a debt contract, right? A loan Credit isn't just a loan, it also includes, what we consider an equity investment. You give somebody your money in expectation of future yields, part-- you basically take ownership of a fraction of their company, therefore a fraction of its returns, or if it goes under, a fraction of its assets when it's liquidated. Those are both true of both, both types of investment. The distinction in those types of investment is purely regulatory. so in financial terms, people will use, use them as, as very distinct, but that's not what I mean. When I talk about credit, I mean people lending other people money so they can produce things, and they take a-- they basically become part owner in the company." }, { "speaker": "stephan", "time": "16:36", "start": 996.26, "text": "Got it. Okay, so let me try and, articulate, I think my understanding is slightly different to yours, Eric, so let me just try and articulate that and we can sort of try and understand, where that difference lies. So my understanding of it is more like, you can still have credit in a full reserve world, it's just that you would need to, banks would need to, in some sense, partition away, right? So it would be like, okay, Eric, let's say Bank of Stephan, and you put some money with me, and You know, I say, \"Oh, Eric, this money that you've deposited with me, that's in a demand deposit account. You have access to that at any time. You aren't relinquishing control of your hundred dollars or whatever.\"" }, { "speaker": "eric_voskuil", "time": "17:18", "start": 1037.55, "text": "Right. So you're a vault. If you- Right, you're a vault, and I have poured, I have poured my money." }, { "speaker": "stephan", "time": "17:22", "start": 1042.42, "text": "Yes, and then banks have another function, which is obviously the investment kind of aspect of it, right? So that's why, where, let's say, okay, Eric, you're coming to the bank of Stefan, and you're putting a hundred dollars with me, and it's a six-month term deposit, and crucially, you are giving up access to that one hundred dollars for the six months that it is locked away in this term deposit, and that's where the sort of full reserve Austrian view would, come from. And another point to add, to layer on here, is that, Mises, in his theory of money and credit, which actually as Gito Hulsman has, sometimes explained, he's explained that it might be more accurate to term that theory of money and fiduciary media. And what is fiduciary media? That is the amount of credit extended in the economy beyond the amount voluntarily saved. So that's the understanding that I picked up from reading, so obviously Rothbard and also others such as Huerta de Soto in Money, Bank, Credit And economic cycles. So what's your view?" }, { "speaker": "eric_voskuil", "time": "18:24", "start": 1103.82, "text": "So if we were to interpret, so you could just set aside the whole bank as a, as a vault hoarding thing, and you just assume you put it, you keep it in your pocket, right? Doesn't really make any difference. We're just talking about the function of banking, which is lending or investing your money so that you can get a return, otherwise you wouldn't do it. That return might be in the form of free services and nothing else, zero percent, but you still do it, to get that return. Again, otherwise there's no reason to do it. in a free banking system, and even many times, most time in a non-free banking system, people are fully aware that their money is invested and that they have a demand right on that money, but they don't fully have a demand right. A bank can say, \"No, we're closed today, we don't have the money, come back tomorrow,\" right? But when you get to state banking, they don't do that, they just take some money from the taxpayer, right? So state banking is a very different Austrians will say, again, a, a Rothbard mentions this, that, that you could consider demand withdrawal coincident with, invested money, invested, deposits, a fraud, right? But a fraud implies that the investor, in other words, the saver, doesn't know about it, right? If they know about it, it's not a fraud. So, it's a voluntary contract. It's good. So that's where I fall on that, right? If you, if you're putting your money with somebody who's investing it, and they're telling you, \"You can get it out as long as we have it, whenever you want,\" right? Then they're doing what every company does, right? They're estimating their cash flow requirements They're estimating. No company knows absolutely for sure how much cash they're gonna need to satisfy their daily operations. That portion of cash that every company holds, every person, every family holds, is their hoard, right? They-- in banking, they call it a reserve, which I think is a mis-- I consider a misnomer. It's a hoard from an economic perspective. It's, it's cash, it's, it's assets are cash that are readily available for liquid-- for, for, consumption, right? Or, or, purchase of whatever you need at the moment. So, yeah. So the-- so, so a hundred percent reserve implies that there is no lending, right? Because Let's just think about the word bank. Is it really important that we use this term bank, or is anybody who's doing what a bank does also part of this situation? I would argue that's a, that's a distinction without a difference. Anybody who takes in money and offers it back on demand and invests it is doing what a bank does, and banks don't only do that, as you said, they have CDs and other, other options for people if they want them. so companies do this, you know, you-- they may run out of cash flow requirements, and, and when they do, they borrow more money or they go broke, right? Their cost of capital goes up as they become in extremis and they become a higher risk. As their cost of capital goes up, it's kind of a death spiral, right? Cap-capital becomes more expensive, they're already in extremis, things get worse, they load up more debt, and unless they can, Earn their way out of it, they're done. That doesn't happen with state banking because of the lender of last resort function, but without state banking, these banks would be doing the same thing that every company does, which is estimating their cash flow requirements, and if they get in extremis, borrowing from somebody else, and if they, if they aren't able to do that, going out of business. That would determine that the, the, the needs that they have or for cash flow would determine their so-called reserve requirement, just like it does for every company. So, there's re- really, if you think about it," }, { "speaker": "eric_voskuil", "time": "22:05", "start": 1325.46, "text": "You know, the, to get rid of the effect, right? So there's, there's the one, one, one concept is the fraud, right? Well, I just, I, I dismiss the fraud outright, it's not a fraud if both parties agree. Right?" }, { "speaker": "stephan", "time": "22:16", "start": 1336.01, "text": "Yeah. And on that point, I would probably say, I would agree, like I think it's-- I'm one of those people who believe it's not necessarily fraud, right? Like we could have agreed to that arrangement, but it might still be economically bad in that it drives this economic instability and the cycles." }, { "speaker": "eric_voskuil", "time": "22:30", "start": 1350.28, "text": "Let's focus on the word bad. Economically bad, what do you mean?" }, { "speaker": "stephan", "time": "22:35", "start": 1354.97, "text": "So in that sense, I would say that that credit expansion beyond the amount voluntarily saved is what kicks off this malinvestment, and then we see a cluster of entrepreneurial errors, which we perceive, you know, these are the malinvestments. This is the cluster of economic errors, and that's what we saw in the dot com bubble and the housing bubble and so on." }, { "speaker": "eric_voskuil", "time": "22:55", "start": 1375.04, "text": "Okay. Well, don't, don't reference state banking, 'cause we're talking about housing bubble and etcetera bubble, which, I think- We might recognize, are state driven, right? The lender of last re-resort function distorts this whole picture. So again, we're talking about free banking, whether the essence of banking is itself bad somehow. And you use the term bad in the way I described good earlier, people doing what they want, right? So we disagree on the fundamental principle, and that's, that's the issue to resolve first. Is it bad if people do what they want? Well, okay, there's a bubble, things get priced more highly than in the future people- People will be willing to pay, maybe, right? You don't know what people are willing to pay 'cause you can't predict what's in their minds. Prices aren't predictable. So, so this, this idea that people make- Make decisions that are maybe not beneficial to them in the future is inherent in humanity, right? So we can't make-- i-if you believe in good is people doing what they want with their own stuff, non-aggression principle, then you can't see the consequence of free banking, which in, in your description might result in What you're calling price distortions or bubbles, right, or the business cycle, you couldn't see that as a bad, as you'd see it as natural behavior, right? A consequence of good. so a side effect of good, right? This is how things work. So sometimes, you know, people don't estimate the amount of product they need and they, they, they run out, right? But then they, then they catch up. There's all kinds of errors made. Entrepreneurial error is, is a form of speculate-- entrepreneurship is a form of speculation, right? You're, you're, you're gambling your money on a, on a fifty-fifty chance that somebody's gonna buy it for what you're willing to-- able to sell it for in the future. Which you don't know, right? So there's always error, and that's, that's a very Austrian perspective on, on entrepreneurial error. what you're talking about is error being magnified by money flowing in one direction or another as a consequence of lending Right? Well, lending is necessary for money to flow at all, right? I, I, I'm, I'm, I'm speaking loosely when I say flow, I'm not-- velocity of money starts to enter the picture, and that's, that's another thing altogether. So when I, when I say flow, I just mean one person lending to another. So if a, if a, if a bank lends, say, say a company has some money or you have some money and you wanna invest it, you're lending it to somebody else. What do they do with it? They take a certain percentage of it and they hoard it for, for current cash flow requirements, and they take the rest and invest it, right? And that goes on and on and on until all capital is always hoarded. Right? All capital's hoarded, but it's also invested. This is credit expansion, right? And the amount of expansion is a direct consequence of the interest rate. If the interest rate is zero, if nobody's willing to pay for money, there's no investment. If the, if the interest rate is, So let me back up. What's driving interest rate is time preference, right? People's willingness to surrender their capital now for the expectation of more later. So time preference determines the glo-interest rate, again, speaking economically, and interest rate determines the level of credit expansion Expansion, right? D-directly. So, i-if, i-i, you either have no interest and no credit expansion and no products, or you have credit expansion. It's inherent in, in human behavior, in, in econ- in economics. So There will be errors, but we're talking about now errors being magnified, right? And there are reasons that state banking, hugely magnifies errors because it removes risk from certain sectors of the economy, puts the risk on the taxpayer. In exchange for political favor. So when you have the opportunity to make some potentially gross reward, right? Some profit, say in the housing sector, which has taken off, and you know it's probably gonna explode at some point, but when it does, and you run out of capital. You're covered by the taxpayer. That's called the moral hazard, right? So you get the profits when things are going well because you, you, you invest everything legally you possibly can. Of course, you're regulated, because otherwise, you know, this moral hazard, brings everything down. So you have some amount of regulation that tries to keep it under control, right? Reserve requirements. but the banks don't care about the reserve requirements. They'd be zero if they're allowed to be, because they're not gonna lose anything, right? Or they're not-- they're gonna be covered by the taxpayer. So that is what creates these gross distortions, not people making investment decisions and hoarding some of their capital, right? That's, that's necessary." }, { "speaker": "stephan", "time": "27:38", "start": 1657.81, "text": "Okay, so let me, try and, try another kind of angle then. So as you were saying, I think, you, you know, you're, it's a fair point you say the difference between what would exist in a fully free market, free, like in your view, free banking, like fractional free, free, fractional reserve, but in a free market sense, versus what we- We have now, due to the state, induced by state interventions, central bank lender of last resort, ex-implicit and explicit bailout guarantees, things like in the US the FDIC or in Australia a similar kind of thing here as well. I, I guess the, probably the full reserve, the full reserve Austrian on this would probably say something like, \"This, this whole, that whole system of fractional reserve, like banking, would only be sustainable in a world where we have the government central bank lender of last resort.\" And I think in some of the prior Austrian debates on this, some examples that have been raised were even, during examples of so-called free market free reserve bank, fractional reserve Banking where, specie redemption was blocked, meaning, you know, a person, you know, thought they could have access to their money, but they couldn't, and this was for an extended period of time. So what, what are your thoughts on that?" }, { "speaker": "eric_voskuil", "time": "28:57", "start": 1736.71, "text": "Well, when you invest your money, you can lose it. When you put your money into an interest-bearing account, what you're doing is you're joining a mutual fund, right? You're, you're buying into a mutual fund. Somebody else is investing your money for you, and everybody else is collectively. So if you just switch over to, let's not talk about a bank, let's talk about Vanguard, a mutual fund company, right? I, I use both, for different reasons, different services, whatever. We get, we started getting into regulatory requirements and features and whatever, but these are economically the same thing if you remove the, the state aspect. The state doesn't ensure my Vanguard, money market. Right? Vanguard takes that money, invests it, holds onto a certain amount of-- It's a money market, I can take my money out whenever I want. There's only one bank that's broken the buck, you know, in-- I mean, sorry, one, Money market that's broken the buck, if you, I don't know, listeners know what that means, but has failed to maintain, their net asset value for their money market at one dollar per share. US, for example. So, and only slightly, only for a very short period of time, right? So, so it's kind of an example of free market banking that happens right now where it works and it's not in I don't know what their reserve requirements are, but they're managing their money so they can maintain that demand withdrawal. Okay, but let's set that aside. Let's say it didn't work, it's just not feasible. Okay, so what? Right? Then people would lock up their money, put them in CDs, and have, have a, have a time threshold. But let's, let's assume, let, let's assume we, we don't know that that's gonna work either. I mean, can't we, can't we look at that and go, \"Well, geez, after six months, the investments they made might all be bad. You might still lose your money.\" Right? Oh, yes. There are no guarantees in investment, so we're betting on whether the, the bank can properly est- can properly evaluate its, its investments and be able to return your money on time, or whether it can, it do the same thing when it's investing, without a lockup Right? It's just a time difference, that's all we're talking about. So let-- but we can assume that, that it doesn't work. Fine, no problem. Okay? But it's still not an evil, right? It's not a bad. It just might not work. Well, let it not work. Right? There's a lot of things that don't work in the economy, many, many, many, many, un-- I would say an infinite number of products never get created. Right? And, and there's, as an Austrian, as Rothbard, said very clearly, the cheapest thing on the planet is ideas. There's no limit to ideas, which may be, may be good, may be not good. The only limit we have is capital, and without capital, the ideas never become products. So there's all these products that never get made, maybe fractional banking wouldn't get made, maybe no banking would get made But if we didn't do that, there'd be no products at all, right? Right. And that's what it comes down to, the, the-- So when we say credit expansion, what that means is, the effect of interest That's all. It's inherent, it's like tautological. if you have lending or capital investment in production, you have credit expansion. Doesn't matter if you call it banks. If you have, Banks that a-offer demand withdrawal and it doesn't work, then they'll just start, you know, putting limits on your withdrawal ability, and I think you s- you would see if you look at the fine print, there are limits on people's withdrawal ability. One of them you just mentioned. Right? I, I would assume that that's in the fine print somewhere. People, you know, they got locked up and get-- didn't get their money. Maybe it's not, but that's a consequence of failure, which happens." }, { "speaker": "stephan", "time": "32:33", "start": 1953.3, "text": "Yeah, I suppose. And then the other point here is not just like a localized failure to that specific bank, but rather obviously economic wide cluster of e-entrepreneurial errors. And I think that's also the point that the Austrians would make, and I think Huerta de Soto really nails that one in, Money, Bank Credit, and Economic" }, { "speaker": "stephan", "time": "32:53", "start": 1973.0, "text": "Greater understanding of capital structure and there are different stages, and what he's trying to articulate in that book is he's saying, \"Well, the amount of capital associated for those different stages, like through different times, so the goods in whatever year three, year five, year seven, whatever, they don't align with what actually are the consumer preferences.\" We don't know if they could-- Do you have any thoughts around that? They never" }, { "speaker": "eric_voskuil", "time": "33:14", "start": 1993.91, "text": "align with consumer preferences. If you could predict consumer preferences with perfect accuracy, right, you'd be infinitely rich. Right? That, that, that's never the-- and that's a very Austrian idea, right? You can't pr-- when you set out to make a product, which takes time, even if you knew exactly what everybody wanted today, which you don't, you certainly don't know what they want two, three, four years down the road. I mean, I've made products that nobody wanted. Okay? The fact that I put a lot of money into them doesn't matter, right? It's irrelevant. They just didn't want them, so they're not worth anything. And that has to happen for people to figure out what people actually want. That's, that's risk, and risk isn't necessary. Risk means failure, and failure is necessary." }, { "speaker": "stephan", "time": "33:53", "start": 2033.43, "text": "So, so I would see, so I would see that sort of like a bit of an equivocation though, because I think it's more like entrepreneurs will, yeah, every now and again, of course, like in fact, many businesses fail, but I think that's a bit of an equivocation between entrepreneurs failing in general, in the general case, versus like induced errors. Right, well, who would buy the credit?" }, { "speaker": "eric_voskuil", "time": "34:14", "start": 2054.07, "text": "well, no, again, credit expansion is necessary. It can't be inducing errors if it didn't exist, there'd be no opportunity for errors. Credit expansion is a Right? And again, think, think about-- I mean, I know, it took me a while to figure this out, I know it's not obvious to everybody. I, I think you get it, but just to highlight for your listeners, If, if I have some capital that I've saved, I've hoarded, and I lend half to you, and you take it and go, \"I need half for my daily capital, you know, requirement, I need this liquidity,\" so you hoard that half, and you lend half to somebody else, and they do it, and they do it, and they do it, right? Well, on the books, there's a lot more capital out there. Than my original amount. That's called credit expansion. That's a consequence of each person's willingness to lend, right? And that's a consequence of their time preference. And that determines the interest rate, right? So, so credit expansion is absolutely inherent. In, in the production cycle, you can't have production without credit expansion. so, you, the, the question is, I mean, I think The next question is, okay, if you understand that credit expansion itself can't be done away with, it can't be changed, even if you shut down all the banks, made them all just safe deposit boxes, right? Nothing would change because you'd still have the same rate of lending because of the same time preference. Right? So, so unless you-- and, and it can't even be determined what determines people's time preference, that's another inherent Austrian, idea. That time preference is a preference, it's in each person's mind. Nothing determines it except their mind. We can make, you know, we can make guesses at what determines it, but we can't prove it. So, you know, humans aren't automatons. so you can't, you, you can't really-- there's nothing you can do about credit expansion, right? you can make, you can even make it, and this is actually fairly common, believe it or not, even in the US, you can make it illegal to issue credit, right? There are- Right. In the past, there was" }, { "speaker": "stephan", "time": "36:28", "start": 2188.06, "text": "usually laws and so on. Right?" }, { "speaker": "eric_voskuil", "time": "36:30", "start": 2189.69, "text": "Okay, well, that just moves the credit market somewhere else, loan-sharking, equity, right? But it's still the credit, it's still credit in the, in the, in the Austrian sense. You're still lending people m- money, and people still borrow it. And the-" }, { "speaker": "stephan", "time": "36:43", "start": 2202.51, "text": "So what?" }, { "speaker": "eric_voskuil", "time": "36:44", "start": 2203.79, "text": "Sorry, in, in parts of the, parts of the world, you know, all lending is illegal, but it doesn't stop people from lending. They just banks become investors in companies instead of- Accreditors to companies, but it's functionally-- I mean, it's economically equivalent. If we want partnerships, right? So" }, { "speaker": "stephan", "time": "37:01", "start": 2221.22, "text": "let me, let me try and, explain something else here. So for us, as kind of full reserve Australians, it's not-- we're not saying there shouldn't be any credit, right? What we're saying is credit expansion beyond the amount voluntarily saved, right? So that would mean the amount beyond what people have voluntarily put into those, say, those term deposits, knowing that there's a risk they won't get it back, right? And then here's another, the second point I'd like you to touch on as well is the other factor is, you know, in some of your early explanations, you're talking about this Out, right? And that's kind of that fractionalization of kind of deposits on top of deposits or, you know, so on as, as, as I think you, you understand. The other component, I think Austrians such as Gerd Hulsman or, Rothbard, they, they would probably make this point, which is that It's those IOUs. I, the crucial, one crucial factor is all of those IOUs trading at par, right? And I think if we bring that back to a Bitcoin sense, let's say we kind of lived in some future Bitcoinized world, and there would, there, you know, the question is, would there be a difference between a Bitcoin on-chain, like verified, you know, with your node, compared to, you know, these fractiona- fractionized, say Coinbase is a fractional reserve, whatever, and people would likely not make them, they wouldn't trade at par, whereas in our current day world with the government and legal tender, they can force you to treat their, you know, AUD or USD trading at par. So what are your thoughts" }, { "speaker": "eric_voskuil", "time": "38:37", "start": 2317.13, "text": "there? Okay, quick answer, Bitcoin won't change anything, not in that context. you can lend it, therefore it creates credit expansion. You can lend it under the same terms as you can lend, dollars, so it doesn't change anything. You can make it illegal, doesn't change anything, right? It just moves somewhere else. So, all you can do by making it illegal is raising the cost of capital and therefore making people poorer. You know, you could become North Korea or, you know, a lot of Middle Eastern states that make it a lot harder to, to borrow capital. People go to loan sharks and, you know, get their kneec You're not gonna, you're not gonna, aside from raising the cost, you're not gonna, do anything. Bitcoin's not gonna do anything, 'cause it's, it doesn't have that ability to not be traded, right? Or to not be lent or not be encumbered. on the, on the question of trading at par, you have to realize that what we're talking about in these examples that you're citing is state banking, right? State banking guarantees It's lenders, right? So they should trade at par, they're guaranteed. Now, if you go to a company that's, maybe, maybe an investment company, maybe not one as, as Titanic as, as Vanguard, but, but, you know, somebody who's in, is investing money and they go, they go to, they go to borrow money and they use their own, deposits, You know, contract says collateral. You think that's gonna trade at par when they're failing? No, right? They're not gonna be able to borrow against that on a one to one basis or sell it for-- they're gonna be steeply discounted, which they are actually even in our state banking system when they're not guaranteed. So, th-this is just a, a, you know, a not a, a real evaluation of what happens. these, these IOUs, as you call it, which is a, it's a fair description, right? This is encumbered money. It's, it's-- the bank doesn't own, bank doesn't own the money that, that you gave them. The bank owns A fraction of a company that they lent it to. It's not the same thing. They can account for it as a dollar, you know, invested, that's a dollar on their books because if they lose it, they're gonna get it back, right? So, okay, fine. If they didn't have that guarantee, they wouldn't be able to, account for it like that, not, not rationally, right? And they don't. So," }, { "speaker": "stephan", "time": "40:58", "start": 2458.21, "text": "Yeah, so, again." }, { "speaker": "eric_voskuil", "time": "41:00", "start": 2459.51, "text": "Go ahead. No, go ahead. I, I had a thought, but I lost it." }, { "speaker": "stephan", "time": "41:02", "start": 2462.11, "text": "Yeah, okay. So one other point I would say, even, even in today's world, right? So I'm, you know, more on the full reserve side, obviously, but there are some fractional reserve Austrians who believe in, you know, fractional free market, and even in their point of view, they believe that even today, banks still have to maintain some level in terms of reputational risk, right? Because if they go too far, then they may not be able to get funding. So in their, like, in the current view, in the current- world where, you know, banks do this maturity, transformation, right? So the typical way banks operate nowadays is that they borrow short and they lend long. So they might, issue certain instruments on like a six-month basis or whatever, but then go out on the other side and say, \"Oh, okay, here, Eric, here's a mortgage for a twenty-five year loan.\" And that's how they let, you know, borrow short and lend long, and they do that maturity transformation. but yeah, I, I guess that's-- That's" }, { "speaker": "eric_voskuil", "time": "41:58", "start": 2518.09, "text": "just investing. I mean Proven to be more effective, it probably relates more to the regulatory requirements than anything. you know, the most effective way to invest is to, is to invest, long, right? The, because you reduce volatility. but if you have a business requirement that requires you to have cash on hand, you, you, you know, you do things like ladders or, you know, s- you like stage your investments so you can liquidate them periodically, you don't, you know, not everything's invested for a hundred years and then, then you're gonna get How people invest depends on your business model, but I wouldn't say that all people who invest invest like that, and I consider all people who invest creating this fractional system. banks again are just a business category, That deal strictly with investing and follows certain state laws. Vanguard, same exact process from my perspective with my money market, except I know I'm not insured by the state. so my, my, you know, they do have reputational risk if they start getting ugly, right? My money and other people's money is gonna come out of that because we know the risk is increasing, which increases their cost of capital. Alright? and if they don't get it under control, they're gonna fail. so that's what drives-- and when I say \"they,\" it's kinda funny, 'cause in the example of Vancaard, it's not \"they,\" it's \"me.\" The fund holders are the owner of the company. So, you know, it's kind of an interesting, perspective." }, { "speaker": "stephan", "time": "43:30", "start": 2609.76, "text": "So and Vanguard has a very particular structure about it as well. It is actually owner, kind of operated in something." }, { "speaker": "eric_voskuil", "time": "43:36", "start": 2615.78, "text": "And they're not, but they're not unique in, in that perspective. I mean, I, I'm also a USAA member, and USAA now does full banking and investment services, used to be just insurance. and, you know, they're, they're owned by their, their account holders. I, I wouldn't use a, I wouldn't use an investment vehicle that I didn't own." }, { "speaker": "stephan", "time": "43:53", "start": 2632.75, "text": "Yeah. Okay. Look, anyway, I, I think, you know, I think we've done enough on the, fractional reserve aspect. I had another topic I was really keen to discuss with you as well, just in the time we've got. Sure. it's around jurisdictional arbitrage, right? And so this is a, a theme that I've often hit on" }, { "speaker": "stephan", "time": "44:15", "start": 2654.69, "text": "Listened on, your prior appearance on the World Crypto Network with Max, it's sort of like you have this almost dystopian view of governments fully cracking down to the maximum level and there not being kind of any other places in the world that might, at, in some ways, slightly open up to Bitcoin. So can you just outline some of your views on that? And I guess the other thing is, just why you are still kind of still doing Bitcoin if you believe that?" }, { "speaker": "eric_voskuil", "time": "44:40", "start": 2680.47, "text": "Well, I don't believe that, so, but that, I, that wouldn't stop- me from doing Bitcoin, so that, that doesn't really, I mean, I know it's not intentional, but it doesn't accurately represent, what I believe in terms of the, okay, going, the jurisdictional arbitrage. It's not that I believe, you know, necessarily all countries will come down and have this massive crackdown and all work together. That's, that's actually the, the, the point of the jurisdictional arbitrage fallacy is that's not necessary. and it doesn't change anything, right? the security model of Bitcoin is based on being able to operate without government permission, which means when the governments, some of them, you know, to different degrees, say you can't- You can't accept Bitcoin, that's money laundering, or you can't mine Bitcoin because that's money laundering, right? You're, you're confirming unauthorized transactions. all white market activity in that jurisdiction by definition is gone. Right? But as a matter of definition, if it's white market, it's gone. So it becomes black market in that jurisdiction. Now, okay, so we have, say, just take the US for example, or Venezuela, whoever you want, right? Take some jurisdiction, some sovereign, and say they outlaw outright mining and transacting, which are the two aspects of Bitcoin that are Bitcoin. receiving and mining. Those are the people who actually do things in Bitcoin, so that, that, that provide security and that make it function, so- If you can't do those things legal, you're doing them illegally, which means in that country, you've got a black market, or you just don't have any Bitcoin, right? So, so this black market is what is it doing? It's hiding. It's not the state, and unless it becomes the state, it has to hide, right? So that's why we have, lack of identity in Bitcoin. you know, we have a great, the greatest anonymity we can achieve, and we, we also, adhere to this principle of, or we" }, { "speaker": "eric_voskuil", "time": "46:37", "start": 2797.26, "text": "Decentralizability, but, decentralization is nothing more than a tool to achieve anonymity, to hide, right? It's not about, anything else. It's, if, if you can hide, you can do it. If a lot of people are hiding and doing it, that makes it, you know, more resilient. But decentralization itself achieves nothing. Say, you know, businesses around the world are very decentralized, and they can't, they can't, you know, do what they want. So, anyway, I, I mean, white market businesses. So, so let's, let's now say, so I, I've painted a picture of, a closed white market in jurisdiction and an operating black market in that jurisdiction. Say there's another jurisdiction, which the state says, \"Fine, you know, we don't care about signurage and we don't care about black, money laundering, we just wanna, you know, poke a finger in the eye of the US, and so we're gonna, we're gonna let everybody come here and mine, transact all perspective of the US. There's black market in the US, there's black market out of the US. Doesn't change anything, right? The security model remains the same. We would, you know, the US would call that country what? A rogue state. This happens all the time, right? You have a rogue state that's trafficking, doing drugs, or, you know, selling drugs or, you know, allowing, you know, offshore gambling or Liberty Reserve or what have you, right? All these things that, that have happened, that do happen, terrorism, So we have these rogue states, and now we have a state of war between, you know, whether it's, whether it's outright, drones, bombs, troops, or it's, embargoes, its financial embargoes, those are all acts of war, right? When you prevent people from trading freely, it's an act of war. So, okay, so you have these states at war with each other. Okay, fine. You know, the security model I'm describing is the same. The, the, the state presumably, if Bitcoin- Is, what it purports to be, which I believe it is, will not be able to simply stop its operation in the black market. and I don't believe that. It, it's trivial to stop its operation in the white market, i-i-in, in your jurisdiction. So, so, okay, the black market has a certain size and importance. Great, that, that's, that's what I'm saying. Well, if, if, if somebody believe-- so this is the difference between what I'm talking about and what, what many people tend to believe. They, they will, well, well, Bitcoin will continue to operate as a white market money it just won't operate in the states that ban it. Great, that's white market in the state you're in and black market from the perspective of the other state. So this situation continues, this state of war now continues between these states, really between once, you know, the states that have banned and the states, and people that still do it illegally from their perspective. Well, what's the next step for these states that want to stop it? Sometimes they'll send in the troops, but the easiest way to stop Bitcoin is just to mine it. Right? So the next step would logically be, these states that care, if they're big enough and powerful enough, to just start mining Bitcoin so they can censor it. Right? So what I'm saying is that jurisdictional arbitrage does nothing to prevent that. Nothing. Right? I mean, at, at best, it allows more people to operate openly if there's no outright war, right? But that's gonna happen anyway. People are gonna operate Covertly, anyway. So the question is, only is there, is there an ability of the black market from the perspective of the attacker state, right, the state that wants to stop it, strong enough to defend itself? That's what matters. And by strong enough, people have really interesting, ideas about how Bitcoin is strong. if a state operates a fifty-one percent attack, some people say, \"Well, they'll never get enough hash power.\" Nonsense. It's not that expensive. And they'll never get to fifty percent. No, it's been done. And it's been done by private individuals. It's actually profitable to get to fifty-one percent. The bigger you are as a miner, the more money you make. All it requires is capital investment. So the state can actually get-- and remember, it's anonymous, so nobody can actually know you're doing it. You just get up to fifty percent. Remember, it's illegal, so nobody's telling anybody who they are, nobody knows. So, so we're in the situation where the state can profitably get to fifty percent, and then, yeah, I'll start, I'll start, censoring transactions by executing a fifty-one, just not building on any blocks that, that auth-- that, mine, unauthorized transactions. So it's nonsensical that they can't get the hardware, they could just seize it right now or just go build it. They built a freaking atomic bomb, right? It's, it's not that hard if it's important. And they can profitably get to fifty percent, and they can start censoring, and that will be profitable, right? So the, the quest-- the question then is, what stops that? It's not stopped by these other states, right? Unless they're willing to, do the same thing, right? Mine, invest their capital, and fifty, you know, create an opposing fifty-one percent attack. But that's, that's what I'm saying, the black market has to, has to raise, has to raise more hash power than the attacker. And the question becomes, where does that money come from? Right? The, the, when the attacker censors, the attacker loses money on transactions that they're, that they're not accepting, because those transaction fees will rise, because they're not getting confirmed. So as those fees rise, more hash power is incented in the black market miners, and so they increase their hash rate until the point where they're now a greater hash rate than they, they can be, not necessarily, but they can rise to the point where they're a greater hash rate than the censor. Now the censor is losing money. Right? Because they're not accepting the higher value transactions, so what do they do? They have to subsidize their mining operation, increase hash rate without increasing revenues. That means taxes have to go into the, the attack now. They're losing money So you have a conflict between the state and the black market, the, the censoring states and the black market, which could be other states included, where one side is raising tax money to stop this thing and the other side may be contributing tax money, just donating it to the cause. Or the free market is simply paying high enough fees to get their transactions confirmed. It's not knowable who's willing to pay more money, right? But at least it's economically rational to think that people will increase their fees if the, if the transactions are important enough. And it's also economically rational to, to understand that they may not value it highly enough, and they may not, and the state may win. So it's not knowable whether Bitcoin is secure absolutely against such a threat But the point of the jurisdictional arbitrage fallacy, as I've written it, is that it doesn't change anything, right? It's not politically-- Bitcoin isn't a politically secured money. If it was, it would be no better than any other money." }, { "speaker": "stephan", "time": "53:46", "start": 3225.58, "text": "Right, okay. So let me just throw a few, interesting discussion, Eric, and let me just throw probably what most Bitcoin, like, hardcore, what I'm gonna call, hardcore Bitcoiners would think, a couple points that they would say. So they would probably say, there's a chance of losing money, right? So the state may not-- There's a chance the state wouldn't successfully execute that attack. reasons being people could fork, alright? there could be, you know, they might not be, careful enough, and the knowledge of them doing an attack might leak. Someone might try something else. And I suppose the other com-- one that you mentioned also is just this idea of competition between countries, right? What if multiple states were trying to, they weren't coordinating amongst each other, but they were both trying to do their own Bitcoin mining?" }, { "speaker": "eric_voskuil", "time": "54:33", "start": 3272.95, "text": "I've addressed that already. I've addressed that already, right? All that means is that, is that States who aren't actually transactors here, they're just, they're just wanting to contribute to the cause, are donating tax money, which means the taxpayers are paying to support this money system That can happen, right? tax isn't rath-- well, it's rational from the state's perspective, but when you look at a rational economic perspective, you have to find out where the self-interest is for the individual. How is the individual helping all these black marketeers around the world, right? And they're helping by paying the fees necessary to get their transactions confirmed, which is perfectly rational. This is something that Satoshi never, I don't think he ever understood, because he actually made the case that people, that basically people would have to band together and generate more hash power Which is basically a charity argument, right? We'll, we'll do, we'll, we'll give in for the good of the, of the coin, right? Maybe we have self-interest in the coin, but now, now it's a, commons tragedy, right? I'm gonna donate my money to help everybody else. no, an economically rational system has to be based on me paying something because I want to, because it helps me. and it has to be priced, right? I'm not just donating some arbitrary amount of money. So fees are priced, they're Unauthorized transactions, you are, you are essentially defending the money against, against that attack. That's not to say that another state can't donate to the cause, but it's not from an individual perspective economically rational. States are irrational from an individual perspective, so they can do whatever they want. But this comes down to which state can generate more capital. That's it. I'm not saying that the black market states, the rogue states, can't generate more capital in donating to Bitcoin and overpowering the censor. That's not what I'm saying, right? Right. But states, states do work together to preserve fiat, and most states, certainly all of the large ones, make a significant amount of revenue off of fiat. All right, and off of transaction transparency, which allows them to enforce all of their other taxes. So, take away transaction transparency, money, you know, make everything money laundered, and take away sign your revenues, and it's likely that big states will care. Right? If nothing is done, that's probably what will happen. So eventually, they'll care enough to actually do something, and the first thing they'll do is the simplest and cheapest, which is to make it illegal to use Bitcoin as it is. They'll create Fedcoin, make Coinbase and all the other white marketeers either go out of business or accept their new rules, one inflation rule and one censorship rule. One affects miners, one affects merchants. And, so I have a topic on that called, the Fedcoin objectives. you mentioned, okay, state won't do this attack 'cause they might lose money. Yeah, they might. They lose money all the time. Okay, that, that's not necessarily a proof of security. However, you mentioned, a fork. Well, you know, forking your way out of a set of miners is a suicide attack. Right? Because you're basically putting the smaller miners out of business, the ones, the ones that are hiding, the ones that you want, right? The ones that are willing to take black market transactions, because the way mining works is the larger you're mined, which means the less hidden it is. the more centrally located it is, the more money you make, proportion-- disproportionately more money. So the state can operate a large mine and make, I mean, they could, I don't know, let me just pick a number, maybe they have forty percent, thirty-five percent of the hash rate, but they have fifty percent of the hash power. Which means percentage of blocks generated, right? And I'm just picking a number, but it's just to, just to, just to demonstrate that it's actually cheaper to be a big miner, and when you, when you wipe out all the mining equipment What happens? I've asked big miners this, they said, \"Oh, I'm gonna just go retool. I've got capital, I can do this, right?\" Smaller miners, they're much more likely to be out of business. Right. So, because they have a, a thinner margin, they're always going out of business. They're the ones that can't stay in business because they're not earning the same return on capital as the larger miners. So, so what you do is you, you do two things. You, you, you, you help the larger miners execute their attack over the long run, and you, every time you fork, you, you split the consensus, right? Some people join you, some people don't. and even if they don't knowingly, you're, you're, you're continuing to fragment your economy, and you, you've seen this with altcoins, right? Yeah. so the, the-- every time you do this, you get weaker and weaker from an economic-- and by the economy, I mean the set of all merchants that accept the coin. That set gets weaker, they're selling less stuff with the coin, there's fewer of them. so it's bad on both sides. It's not a viable strategy, and it's not one that Satoshi ever suggested," }, { "speaker": "eric_voskuil", "time": "59:18", "start": 3558.34, "text": "described in Bitcoin, it's something that people cooked up because they don't understand how Bitcoin is secured. They can't think of any other reason. I gave them the reason. It's the fee premium that people are gonna pay. That's, that's where This, the, the free market gets to push out the censor. so, you know, the design is brilliant, if not intentional." }, { "speaker": "eric_voskuil", "time": "59:43", "start": 3582.77, "text": "Yeah, I mean, if, if Bitcoin wasn't fee based, it was entirely, entirely inflationary, mining reward, there'd be no censorship resistance, because every miner makes the same money, whether they're censoring or not. There's no reason for them to take the black market transactions. So, if, if Bitcoin was, proof of-- there's only two types of proof, there's proof of stake or proof of what's on the chain, and there's proof of something outside the chain which reduces to work, everything reduces to work that you could introduce. So if Bitcoin was not proof of work based, if it was proof of stake based, then it would also be, not censorship resistant, because once the censor gets to fifty percent or whatever stake he needs, he-- it's done, right? There's no-- and he can do that without anybody knowing. you can't get 'em out, there's no way to get 'em out. With proof of work, you can always add more energy. You can always-- it, there's an unlimited amount that can be added externally. So And decentralizability, which is the, you know, the, the third principle that defines Bitcoin, Bitcoin is, identity free. It can operate at low scale, people can hide, they can spread the risk. By b- being able to do that, they can add energy in secret, right? Privately, and they can raise their fees privately, right? So you can, you can, you have a secureable system because of those three principles that Satoshi laid out, and they're all perfectly economically rational. But none of them allow you to prove that you can overpower the censor. That's an economic choice that people have to make collectively, right? If the, if the market will bear the cost of the tax, tax-driven censorship then they'll have the money. If they won't, then they won't." }, { "speaker": "stephan", "time": "01:01:25", "start": 3685.55, "text": "So in your view, it comes to essentially people paying enough on a fee market, to get their transaction confirmed? When" }, { "speaker": "eric_voskuil", "time": "01:01:32", "start": 3692.04, "text": "it's, when it's being censored, whether they know it or not, they may have no idea they're being censored. Nobody may know. And you also said, you know, lea- you mentioned leaking knowledge. It doesn't matter if people know or not. You can do it completely openly. Or you can do it covertly. yeah, it's, that's not really a factor in the security model." }, { "speaker": "stephan", "time": "01:01:50", "start": 3710.54, "text": "Yeah. Sure. Okay, look, I think we're pretty much about out of time, but maybe if you just got any closing thoughts on, you know, what, what you're, kind of looking forward to with Bitcoin over the next few years." }, { "speaker": "eric_voskuil", "time": "01:02:03", "start": 3723.85, "text": "Well, you did ask me a question that I didn't answer, it's kind of along those lines. you, you said, \"Well, why would he work on this thing if, you know, thinks, thinks it can't work?\" Yeah. Right? But I just described to you how it works, and I think it's brilliant. And but I accept What I know about Bitcoin, right? What I think I can prove. I'm not a cheerleader. I don't go out and tell people it's this, that, you know, you know, it's, it's immutable, it's absolutely secure, you know, it's going to go up forever in value because there's a limited supply, which is, is a nonsensical statement. People ignore all kinds of facts about Bitcoin, even when they're pointed out. Because they want it to succeed, which is understandable. I want it to succeed, but it's not gonna succeed based on lies or, you know, untruths, I should say. So, i-it's gonna succeed based on the fact that, I mean, it's not like other people, you know, the state, for example, doesn't know these things, right? And they're stupid or incompetent. Those are the, some of the worst arguments I was, you know, I, I was employed by the US government for ten years and very capable people. and very smart, they're in a bureaucracy which can be very stupid, but, you know, when they wanna get something done, they can, they can get it done, and certainly building some mines isn't a hard task. So, I, I want a system, I understand that the system is a black market money, no matter how it operates today, it's designed to operate without state permission. It's not, it doesn't re-- it's permissionless, right? That's the term we use. Well, that by definition means it's a black market money. It operates without permission. So I'm willing to accept that and to say, like, ultimately, Bitcoin's destiny is to be a black market money, at least from some segment of the, you know, states that care in the world. and I'm okay with that because the black market is the free market, right? you know, people transacting freely and voluntarily, not, not being co-- you know, compelled, to do things. So I believe in non-aggression, therefore I'm an anarchist. I believe in free markets and therefore black markets, and I believe in Bitcoin as a very effective tool. To save people money, ultimately, when transacting, by eliminating state control or reducing state control over the, over the money. so I'm very positive about it, but my, my vision isn't the same as, you know, anybody that's operating a big white market business, right? and it's not, it's not unique. I mean, Amir and I had this conversation, you know, five years ago, and it would be exactly what he said. he just had more foresight, I think, than I did even at the time. So that's, so I'm very positive, but I'm positive in a different way, and I want people to understand, not, cheerlead, right? Or follow" }, { "speaker": "stephan", "time": "01:05:00", "start": 3900.63, "text": "blindly. Well, yeah, very interesting thoughts, Eric. so look, obviously I'll put the notes, put the links in the show notes, but, just for anyone who, you know, where can the listeners find you?" }, { "speaker": "eric_voskuil", "time": "01:05:12", "start": 3912.61, "text": "Twitter eVoskuil, e v o s k u i l. GitHub, same, same, pretty much E-Voskuil anywhere. LinkedIn, GitHub, my full bio is on LinkedIn. my, all my, all my, LeBitcoin work is in, and every- and a lot of other people's too, in LeBit, in the Bitcoin repo. On GitHub. And, my writings are there in the Libcoin system, repos wiki, libcoin.org is, is usually up, but not always. It's a, it's a landing page for Libcoin, Yeah, but that's, that's about enough, I guess." }, { "speaker": "stephan", "time": "01:05:50", "start": 3950.47, "text": "Okay, great. Well, look, thanks very much again for coming on the show today, Eric." }, { "speaker": "eric_voskuil", "time": "01:05:54", "start": 3954.71, "text": "Yeah, thank you for having me, appreciate it." }, { "speaker": "stephan", "time": "01:05:57", "start": 3957.89, "text": "So there you go. I hope you guys found that interesting. I think obviously Eric and I disagree on this whole aspect of whether it will be a full reserve future versus a more, what we might term a fractional reserve free market banking future. I think where the Austrians sort of differ on that point is that the- Free market fractional reserve types believe that the reserve ratio might settle much, much lower, maybe who, who knows, five percent or whatever, whereas those of us more on the full reserve side believe that it's gonna be at or very near one hundred percent. And, you know, from the full reserve side, it's more like This fractional reserve position is only sustainable in a world with central banking, legal tender laws, etcetera, whereas it seems the fractional reserve side take a slightly different view. In any case, let me know your thoughts and perhaps I could have articulated some of the concerns a little bit better, so definitely let me know your thoughts there. Thanks guys, and I'll chat to you soon. Bye!" } ] }