{ "episodeId": "SLP8", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "murad_mahmudov": { "name": "Murad Mahmudov", "role": "guest", "tag": "MURAD" } }, "segments": [ { "speaker": "stephan", "time": "00:02", "start": 1.78, "text": "Hey guys, welcome to the Stefan Livera podcast episode eight, and we've got a great guest for you today, it's Murad Mahmudov. And so Murad is a managing partner of Digital Frontiers, which is a fund which is starting up soon, and he is very well known for some of his articles and his Twitter posts, some of which are Bitcoin Past and Future, The Many Faces of Bitcoin, and he's, yeah, he's got some really viral Twitter threads that have just gone crazy. Crazy on Twitter, so I thought it would be fantastic to get him on the show. So, Murad, thanks very much for coming on. How are you?" }, { "speaker": "murad_mahmudov", "time": "00:39", "start": 38.93, "text": "hello, Stefan. super glad to be here. really humbled for the invite. Before the, before we proceed, I would like to thank you for taking the time to start your podcast in general. I maintain my own list of my favorite Bitcoin slash cryptocurrency podcasts, and it's quite remarkable. I was just telling my brother this morning, in just two weeks, you went from-- your podcast went from non-existence to top three podcast in my view, and every single one of your guests and episodes so far have been nothing short of legendary. So, I'm very humbled for the invite and thank you for starting this project, man." }, { "speaker": "stephan", "time": "01:16", "start": 76.08, "text": "wow, thank you very much. That's very kind of you, Murad. yeah, no, that's, that's excellent. And, you know, I thought, I think very highly of your, your analysis as well, so I thought, you know, it'd be fantastic to get you on. So, let's, let's start with, some of your articles. one of them was The Many Faces of Bitcoin, which you co-wrote with, with Adam Tash, and I thought that was a fantastic summary of various" }, { "speaker": "stephan", "time": "01:45", "start": 104.64, "text": "Currencies. And so one thing that struck out, struck really stuck out to me was the Crypto Austrian view, the summary of that. So maybe you wanna tell us a little bit about what you've read and who have your influences been?" }, { "speaker": "murad_mahmudov", "time": "01:59", "start": 119.48, "text": "For sure. I've sort of always considered myself a libertarian for many, many years, and in my view, sort of on a more economic, financial, monetary side, I believe, Austrian economics complements sort of the, the general libertarian philosophy very, very well. But, I'm a big fan of Mises, Hulsmann, Rothbard, Murphy, Dasura, and many, many others." }, { "speaker": "stephan", "time": "02:26", "start": 145.62, "text": "Nice man, that's excellent. Yeah, so I think, and that's the thing, you're quite young as well, like I think you're in like your, like early or mid twenties as well. So, quite, good of you that you're, you've been so well developed in terms of your knowledge. okay, cool. So maybe you wanted to, offer just a bit of a summary of some of the different schools of thought as you did in your Bitcoin Past and Future." }, { "speaker": "murad_mahmudov", "time": "02:52", "start": 172.43, "text": "Definitely. And before, before I do describe them, I think some of them at this point are nonsensical, relative to the crypto- Austrian view, but, we sort of wanted to be objective and sort of, describe the predominant approaches without sort of offering our own subjective biases. But, the, the four, the four schools of thought that we generally described in our first article was, Well, A, the crypto-austrian view that you already mentioned, and this is sort of, in, in a very loose metaphor, sort of approaching Bitcoin as digital gold? though I like to say that Bitcoin isn't digital gold, it's more akin to, digital monetary nuclear weapons, but, but, so first, the first view, and that's, I believe that, that is the view that the market is increasingly converging upon, thankfully, is sort of this view that we need to sort of saturate the store of value before we proceed to medium of exchange, et cetera, et cetera. and that's sort of like the general, Neo Gold approach. And, Safteen, that you already had on the first episode of your podcast, it, it has, repeatedly sort of, driven the hammer home on sort of that approach. the second approach was sort of, prioritizing sort of the medium of exchange, or rather the medium of payment, functionality and capacity first, and that's sort of what Bitcoin Cash, and I would argue Several other altcoins are taking, which, which I consider to be sort of a, a futile or rather a less wise approach. the third approach was sort of more in line with, John Nash's idea, idea of ideal money, and sort of it has some similarities with the neo gold approach, but it, it diverges in the sense that, a couple of authors and bloggers who take this view of Bitcoin, they think that fiat currency These eventually, like they won't go away, but rather similar to, the, I guess, late 19th century in Europe, instead of fiat currencies going away, they will be, either redeemable for Bitcoin or they'll be like, backed by Bitcoin, in some capa-- in some way, shape or form, and this would still allow for some, or, or though less than today, it would still allow for some sort of discretionary local monetary policy and, and sort of, diverge- in terms of like consumer prices around the world, but, or rather influencing the consumer price around the world, but, essentially the Bitcoin would still grow big in that sort of scenario, but like fiat currencies would remain. and in my view, in my view That may as well be the case, but I think at best it would be temporary, and I increasingly believe that hybrid Bitcoinization is, is possible, And if, if not plausible. And in the long run, I believe that something like that is likely to take place. And then the fourth view, and that's sort of, it's, it's quite abstract. Desantis, Mark Wilcox, and a couple of, other very interesting and colorful characters in, the, in the crypto Twitter space, so to speak, have been espousing this view. And essentially, they sort of try to approach Bitcoin from a, this Claude Shannon information theory, George Gilder type perspective, and, they believe that, like, in the very, very, very long run, Bitcoin isn't just money, but rather it will be a massive computational network which will do much, much more than just, Be our global reserve currency, and even within that view, some people believe that the more prudent approach is to increase sort of block sizes and allow massive computation to happen on chain. There are others who think that all of these cool applications should exist on layer two, layer three, layer four, but in general, they believe that Bitcoin and its forks are this massive sort of like tree of life or this black hole that will like subsume not just money, not just financial applications, not just like digital- Banking, et cetera, but, a lot of sort of the, technological and computational, applications, services and products as well. So those are sort of the general portfolios." }, { "speaker": "stephan", "time": "07:31", "start": 451.4, "text": "Yeah, that's a great summary, I think. It's, it's quite difficult to sometimes step aside and really still man the position of people who you don't necessarily agree with. And so I think, you know, you, you guys did a great job with that article, yeah, and I think, yeah, you've done a, yeah, it's, it's a great read. So for anyone who's new, it's, that's a great post, and I'll obviously put that in the show notes page for this episode. the next one I wanted to talk about was in your article Bitcoin Past and Future, where actually you also do a bit of a great summary, and I think I'm leading to this as well, that I think you're actually, you're actually quite well read across different, theories of, you know, economic thought. And so, you, you provide a nice sort of summary on some of the different schools of economic thought, within Bitcoin and crypto-currencies. Do you mind outlining some of those, such as, you know, the Austrian full reserve, the Austrian frac-fractional reserve, free banking, Keynesian, Nash money, which, which you've already touched on?" }, { "speaker": "murad_mahmudov", "time": "08:33", "start": 512.53, "text": "For sure. so- The, one of the biggest sort of debates within Bitcoin, and that's sort of one of the topics we delve into, that second article, past and future, is whether, fractional reserve, banking would end up emerging atop Bitcoin or not. And there are, we've seen sort of a lot of debates on this topic in the last couple of weeks and months, even among sort of the prominent Austrian economists, on Twitter and sort of on, other- platforms lately, and, essentially sort of Safing, who I, I would imagine considers himself closer to sort of the hardcore Rothbardian approach, They believe, they, they're generally against the idea of fractional reserve banking and like consider it to be, fraudulent on like an ethical level, and they believe that fractional reserve banking would, is un- is unlikely to emerge atop Bitcoin, as Bitcoin's, it's important to note that like Bitcoins lack the physical centralization of gold, and it, it's unlikely in my view to repeat sort of, The, the, it's, it's, it's much more unseizable than gold, and like as we know, in many parts around the world, gold was repeatedly, seized from the populace. Or rather, the convertibility or redeemability of paper money was often stopped for like many, many years, throughout the 19th and 20th centuries, and, it's unlikely that something like this would happen to Bitcoin, which is one of the several arguments why it's unlikely to emerge. so like the governments- Had so much control that they were able to sort of eventually, get rid of the gold standard and introduce their own fiat standards, but like essentially with respect to fractional reserve, Several people in Bitcoin believe that it's unsustainable in the long run without the lenders of last resort in conjunction with the monopoly on money that exists today. And even if it were to emerge, in the long run, after one or two sort of collapses of such a system, people would essentially like get burnt and learn not to trust. said Bitcoin substitutes because, the way I understand it is a fractional reserve system can't exist like with Bitcoin, with like physical Bitcoin itself. There would have to be, Bitcoin notes or Bitcoin certificates or like this fiduciary media that would be required to, like, temporarily expand the sup-- like the total supply of Bitcoin? a lot of people believe that such fiduciary media, like due to obvious risks involved, would, if, even if they are to emerge, would trade at a discount? To, like real Bitcoin itself, which obviously has like less risks, of bank, bank fraud. So I want to jump in here." }, { "speaker": "stephan", "time": "11:42", "start": 701.69, "text": "Yeah. Yeah. Sorry. could you just, like obviously I understand, but just for the listeners, could you explain what fiduciary media means or what that term is?" }, { "speaker": "murad_mahmudov", "time": "11:51", "start": 711.3, "text": "For sure. So, I believe fiduciary media is, it would, for example, under a gold system, a bank, a private bank would, have sort of Gold in its reserves, or, or rather, it would accept gold and then issue, fiduciary media that would be redeemable for gold. But, oftentimes, the amount of fiduciary, like in the, in a fractional reserve system The amount of fiduciary media in circulation would be much bigger than, the total amount of gold that it's actually backed by." }, { "speaker": "stephan", "time": "12:32", "start": 751.96, "text": "Yep, that's right, that's right. So i-in this example, let's say, the bank had one hundred pieces of gold in its vault, and if it issued, say, one hundred and ten tickets to piece-- to a piece of gold, well, the fiduciary media refers to those ten pieces-- those ten tickets that are issued above and beyond the actual- Total amount of gold they have in their vault. So, yeah, that's a great, great way to, think about it. I thought I'd just make sure it's clear for the, for the listeners what exactly what fiduciary media is. but yeah, carry on. Yeah. And," }, { "speaker": "murad_mahmudov", "time": "13:07", "start": 786.86, "text": "So some people believe that like these fiduciary media would trade at a discount to Bitcoin itself. Others believe that, either after a certain time or even never, essentially like the market wouldn't accept these fiduciary media as Bitcoin itself. Although, like as a counterpoint to that, Hal Finney, who was, The second, the second most prominent Bitcoin developer and, and, and the second person to ever get involved in Bitcoin after Satoshi himself, he believed that like a free banking type system would actually emerge, and, like different, it would, like Bitcoin itself would be essentially like high-powered money or base money, and different banks would issue sort of their own, their own- Currencies backed by Bitcoin, some would be full reserve, some would be fractional reserve, and then like they would trade at like different ratios to one another based on like the market's perception of like the risk levels of different currencies. but, but yeah, like th-th-the, of course, we will, we will, we will see what happens. I increasingly find myself, I think, I think the free banking school, that like the George Selgin, Lawrence White, and several others have been proponents of for many decades. It's a, it's a very elegant sort of school and very interesting, but, I increasingly find myself in, agreement with, sort of this, the stricter full reserve wing of Austrians." }, { "speaker": "stephan", "time": "14:39", "start": 879.12, "text": "Yeah, nice summary there. I think that was a really great summary for the listeners to sort of understand and contrast the different positions there. and then, yeah, I think you also do touch a little bit on the Keynesian sort of way of thinking as well. Maybe you wanna just touch on that as contrasted with, say, the crypto Austrians?" }, { "speaker": "murad_mahmudov", "time": "14:57", "start": 897.3, "text": "Definitely, and I, I'm so Keynesians, or rather mainstream economists, a lot of them, among other things, are worried about sort of the so-called deflationary death spiral, and like just as a sideline I increasingly think that, like, this idea that, like, deflation will necessarily lead to a massive societal collapse, it almost feels like propaganda at this point, and, like- There essentially needs to be a governmental monopoly on money and that, otherwise without quote-unquote mild inflation, the economy would drop to a halt. But, George Huelsman, among several others, has several, several books, several pieces, several online lectures, clearly describing why that's not the case. But essentially the Keynesian argument is that, like, the inability, like, for money supply to get continuously expanded and essentially like diluted would result in Bitcoin's purchasing power growing by like two, three percent per annum. And essentially, they, they're worried that like people would hoard money and like instead of spending it, which would, like reduce the aggregate demand and like reduce the levels of consumption. And like, consumption is like holy and sacred in the Keynesian approach to the economy. And like if consumption is suddenly reduced, they believe that it, it, it would be very damaging." }, { "speaker": "murad_mahmudov", "time": "16:35", "start": 995.02, "text": "the Austrian answer to that is twofold. First of all, Austrians don't believe that it's consumption that drives the economy, but rather the long-term, production, or rather long-term investment, long-term production, long-term accumulation of capital, productive goods, and it's these kinds of things that lead to, sustainable economic growth over the- The long run, rather than sort of the more short termist, year-to-year consumption levels by the populace. And, they also believe that sort of the deflationary concerns are-- the deflationary spiral concerns are overblown, and many of them believe that sort of deflationary spiral is largely a mi- a myth. And, The answer is that like the, the delay in spending, it doesn't last in perpetuity, but rather it's delayed into the future, and people will end up having the, the deflationary money and the return to, sound deflationary economics would result in like lower time, time preferences, and instead of buy-buying like a lot of useless things and like these plastic goods and a lot of like this dumb shit that people just keep buying these days, it, with their quote-unquote hot potato decaying money They would instead, l- they would instead turn their attention to savings, long-term investments and long-term productivity, and it would also, result in much milder and much less damaging like boom and bust cycles." }, { "speaker": "stephan", "time": "18:03", "start": 1082.81, "text": "Excellent, yeah, and I like that summary, and I think the, the key point that you've made there is around the, the redirection or the, different allocation, let's say. So instead of spending now, that spending would get directed into the future, so to speak, and then entrepreneurs would try to re-architect or re-engineer their businesses such that they're serving those longer-term interests. So, you know, it's kind of like, we, we don't, we don't just stop spending forever. We just- Just either spend it now or we spend it later, and so entrepreneurs will then adjust to that. So, yeah, that's a, that's a great summary there, Murad. Right. okay, so I think, the next cool aspect that I would like to go into was one of your, what I'm gonna call your super viral thread, which was called, which started with, \"Bitcoin will usher an era of unprecedented peace and prosperity.\" So I thought that was an absolutely fantastic thread, and I, you, you know, full credit to you, you, you, you scored 600 retweets on the, on that thread, it was an amazing thread. maybe you wanna sketch out the vision for us a little bit. What might we anticipate in the Bitcoin Standard world? Definitely." }, { "speaker": "murad_mahmudov", "time": "19:15", "start": 1155.02, "text": "and, and before I go into that, it's, it's of course very speculative on my side, but I believe that, it's, it's directionally correct. And, I was essentially, I was inspired by some of my, Austrian reading. I was also inspired by some of my reading of the sovereign individual, and, essentially the idea is that Things like mass scale wars, things like mass scale prison networks, torture networks, and this general sort of top down exploitation, it becomes much more expensive if you have to pay soldiers or quote unquote punishers salaries with scarce gold bricks, which, which is what I consider Bitcoin to be. Essentially, I think what's going to happen is I don't think governments are going to like eventually, and this is like super, super long term, but I don't think governments are going to go away entirely, but rather, what's going to happen is what, People are calling the \"Swissification of society,\" and essentially, the" }, { "speaker": "murad_mahmudov", "time": "20:26", "start": 1226.09, "text": "various kinds of exit costs. Particularly starting from monetary ones, they will get reduced in this sort of era of, decentralization. And what, what is likely to happen is that, governments Due to sort of reduced, tax revenues and sort of reduced strength due to, no longer having a monopoly on money, monopoly on money printing, money creation, money transmission, they would end up having to be more competitive amongst one another to maintain, entrepreneurs on their soil, to maintain capital investments on their soil, to maintain sort of the smartest, most productive citizens on their soil. And I think that, like the- The level of interventionism, whether-- and I'm, I'm not even trying to be like prescriptive, in, in, in my thoughts, I'm just trying to like, like descriptively predict what's going to happen. But essentially, like, it will, like, it will create what I call hypercapitalism and like hypercompetition and like this relatively more, particularly economically, more borderless and more decentralized world of like unstoppable commerce. And, essentially the power of individuals, power of businesses would likely increase, and the power of centralized authorities would likely slightly decrease." }, { "speaker": "stephan", "time": "21:48", "start": 1307.55, "text": "Murad, you, you also mentioned in that thread around, you know, this concept of when an Asian central bank or when a sovereign wealth fund buys Bitcoin, do you have any speculation or thoughts on how that might carry, how, how that might happen? For" }, { "speaker": "murad_mahmudov", "time": "22:01", "start": 1320.95, "text": "sure. And" }, { "speaker": "stephan", "time": "22:02", "start": 1321.65, "text": "it, it," }, { "speaker": "murad_mahmudov", "time": "22:02", "start": 1322.31, "text": "it ties back to sort of a bigger point. A lot of people who are new to Bitcoin or haven't thought about it as deeply, their number one sort of, pushback is that, \"Oh, governments are going to ban it.\" Or, Or like governments aren't going to let something like this take place. But it's very, very, very important to understand that I don't, I can't even remember a time in history when all governments around the world have essentially like banded together to achieve one goal. Like even during World War One or World War Two, like even within the alliances, of certain countries, they oftentimes couldn't like agree on certain things and they were very adversarial And, I haven't, listened to your podcast, with, Vijay Boyapati yet, but I'm sure he talks about like these things, On, when, when he was on. But essentially, the idea is that governments are adversarial and governments aren't sort of all in cahoots with one another. That's on a macro scale. On a micro scale, even individuals within governments, like, i-i-within one country or within, like, the Communist Party of China or whatever, like, they aren't like one uniform, like, sort of Being, they even members within, within those sort of, bodies, they are adversarial, they're competitive, they have their own sort of self-interests and When people understand, and Pierre Rochard makes this point quite frequently, just how hard and just how sound Bitcoin is, I mean, the, if, if you consider the, the supply to be twenty-one million, Bitcoin's still growing at the, like Four or five percent, I think. which is like, which is still relatively high, if you consider the lost bitcoins and if you go off of the seventeen million number, the inflation is actually like six to six point five percent or whatever, which is like a bit higher. So we don't quite intimately feel the hardness of Bitcoin yet, but each year, its hardness and its level of disinflation will get like higher and higher and closer and closer to fixed as years go by. And And I think that even though people don't quite understand it yet, with every year it will be more and more obvious to everyone around the world how great of a savings vehicle it is. and this doesn't just concern average people or, nerds, cypherpunks, crypto anarchists, libertarians, o- Austrian economic sympathizers, but, but really, literally everyone. And I believe that like funds themselves will eventually find themselves attracted to, not just speculating, but eventually just simply allocating, just like they're allocating to cash or some funds are allocating to gold, I think like an allocate, like a zero point five to two to three percent allocation to Bitcoin Bitcoin will become more and more common in the coming decade, both by high net worth individuals as well as large asset managers. And essentially, I think that, like, once it becomes like an open secret or even, or even like open information that one of the central banks, has Essentially allocated or, or one of the sovereign wealth funds, one of, one of the big banks, among the, among the big company, among the, among the big countries, that they've allocated to Bitcoin, it's essentially going to like legitimize Bitcoin as an asset and will increasingly like make it a more and more competitive currency. And even though it might start as a sort of a digital gold, digital commodity, digital store of value type narrative, the bigger it gets, the more likely it is to become a currency in the future." }, { "speaker": "stephan", "time": "25:55", "start": 1555.08, "text": "You, you have a real way with writing and speaking, and I think that's really epitomized in another tweet in that thread where you mention, \"Bitcoin is a profound economic re-renaissance falsely wrapped in a tech bubble, itself falsely wrapped in a get rich quick scheme.\" do you wanna comment on that?" }, { "speaker": "murad_mahmudov", "time": "26:12", "start": 1572.22, "text": "Definitely. And, I think like there's layers to what's been happening in the past couple of years. To a lot of people, it's a get rich quick scheme. To a lot of, A lot of newcomers get attracted to Bitcoin like in, in these boom and bust cycles, especially like during the boom part, the price is increasing, so I have to sort of get in before it's too late. A lot of sort of scammers and a lot of quote-unquote entrepreneurs starting all these shit coins, to them it's also a get rich quick scheme, sort of capitalizing on the hype of blockchain, riding off of the wave of the Bitcoin price appreciation, trying to create sort of the next Bitcoin, et cetera. So that's like the, like the bottom, like the Then you have sort of the tech bubble. You have like the Etheeriums, oh, this is a faster blockchain, this is a blockchain six point oh, bu- it's a DAG nine point oh, et cetera, and you have like this people trying to, trying to like make something that go faster or trying to improve, quote unquote, the UX And to them, like it's, it's all about like the speed and the efficiency, et cetera. But really, I think, and, and I like to tell this to every single person, and I like to talk about this every single week, and I will continue to do this despite it being repetitive, because I think the point needs to be driven home, is that In this entire quote-unquote crypto or quote-unquote blockchain space, I like to say the most powerful thing and the most powerful Innovation, the most powerful social innovation and potentially world-changing innovation, is Bitcoin's difficulty adjustment, or rather, the credibility of the Bitcoin's monetary policy. And really, it all stems from that, and without this, we wouldn't be here. And that is the most important thing. And to me, it's not about the DApps, it's not about the speedy blockchains, it's not about any of these things. To me, it's first and foremost about reinventing money and going back to a sounder, harder money, and hopefully Ending up with a fixed supply money or as close to a fixed supply money as possible. And I think sort of this economic renaissance, the return to sound money, the return to sort of free commerce, the return to the mildly deflationary economics, which I think is natural in a free, in a truly free market, this is really what it's all about. And I like to say that both from the perspective of investment returns Both from the perspective of total addressable market, as well as from the potential for global world-changing socioeconomic change, it's the reinvention of money that's by far the most interesting and by far the biggest." }, { "speaker": "stephan", "time": "28:54", "start": 1734.3, "text": "Yeah, fantastic. I really like that. yeah, that's a really great summary. particular, I particularly like the parts you mentioned there around the sort of natural two to three percent growth deflation that the world is going to experience, combined with all of the other, you know, prosperity that it's going to bring. and I think the other thing that you've done really well is sort of read the tea leaves well and kind of summarize the different thoughts and be quite well read around what's happening. So one graph that you've posted up, and basically the tweet sort of goes Now that we're all Bitcoin maximalists, and basically, it shows this chart, and I'll, I'll, and I'll post this chart in the show notes for this, show, but essentially it sort of shows all these different stages, so for example, digital collectible for nerds and arccapitalists and cypherpunks, and then, you know, all these different steps along the way, so greater security, you know, we are here, greater perceived safety, greater education, reliable store of value, and then sort of out in the future Of account and full global money. So it's an interesting graph, and I like the way you've, tried to sort of understand where we are or where the various stages were. I can see various elements of, people, from the Bitcoin space who've commented and some of their phrases and their terminology. You know, I can see Safdean, Vijay, Pierre Rochard, Trace Mayer, Giacomo. Who were some of your influences in this graph?" }, { "speaker": "murad_mahmudov", "time": "30:21", "start": 1820.83, "text": "everyone you've mentioned are essentially like in the top ten people. huge fan of, Sifting, huge fan of Pierre Rochard, Bitstein, Jacomo, a big fan of your own tweets. Actually, someone recently told me that you've been tweeting on, like, Austrian economy and Bitcoin since like 2012, 2011 or something?" }, { "speaker": "stephan", "time": "30:43", "start": 1842.8, "text": "Yeah, I did actually delete my account. I sort of stopped my account and then kind of started back up. But, thank you. Yeah, yeah, that's-- I'm definitely not in the same league. But yeah, okay. So I, I think, that's a great, graph, and I think maybe it's-- we, we could talk about what's, what's missing for some of the, you know, the vanguards and the black rocks of the world to start offering, you know, more Bitcoin mutual funds. Is it, you know, is Exchange, the owner of that, or is it just a time factor, a Lindy effect?" }, { "speaker": "murad_mahmudov", "time": "31:19", "start": 1878.52, "text": "I think it's both simultaneously, and they sort of, go hand in hand with each other. I like to say, and this is something very, very important, every ten minutes and every single hour and every single day that Bitcoin doesn't explode and collapse from a technological point of view, from its blockchain point of view, it, like the probability of Bitcoin succeeding in the long run increases And essentially, the longer it stays alive, the more people's perceived protocol reliability increases and the, like, and the people's anxiety about this sort of new technology and about this new paradigm shift with respect to money, it-- this, the anxiety gets, de-decreasingly intense. And I think that I was inspired to draw this chart from some of Vijay Boyapati's previous articles. Just wanted to sort of expand upon some of the shorter milestones, but I think both, like as Bitcoin survives People are going to increasingly think that, okay, it's here to stay. And at the same time, greater, I think, more insurance solutions, more robust and proven custody solutions, which will require some miner lending effect of their own. sort of general, m-more liquidity, more sort of institut-institutionalization. As well as generally more regulatory clarity. And I think all of these things, are like smaller r-rivers that will eventually be inflows into this greater river. And as Bitcoin survives, and as there are more solutions around this protocol, I think that more and more investors will increasingly consider it to be a store of value and a monetary good." }, { "speaker": "stephan", "time": "33:14", "start": 1993.57, "text": "Yeah, that's great. And I think you, you, some of the focus I've seen from you lately in terms of some of your, output on social media is around what are the criteria that will determine the monetary store of value winner, and that's probably the key, the key thing that you need to win in order to then kind of proceed on. do you have any other comments around, other important criteria that define the SOV winner?" }, { "speaker": "murad_mahmudov", "time": "33:41", "start": 2020.59, "text": "For sure. So I think first and foremost, it's about security, and security both in terms of sort of the cost of attacking the system, as well as sort of the quality of the code and the quality of the software engineering involved, The, the censorship resistance and the general levels of sort of the decentralization of block production and decentralization of the node is also highly important. And perhaps the most important to me is, to me, Bitcoin is first and foremost a potential future money, and I think the moni- the disinflationary monetary policy coupled with the credibility of that monetary policy is highly, highly important. And, I would like to say that recently somebody has, emailed me a draft of a future article called \"Why Inflation Is Good for Crypto Networks.\" And really it just made me more bullish on Bitcoin. And, a lot of people, and like this is what I like to-- this is, I think this is the biggest misconception. Well, there's really two big misconceptions, and the, the biggest one is a lot of venture capitalists and a lot of technology investors, they approach blockchains as software platforms, and they approach blockchains in general just as software Instead of approaching them as monetary systems, and instead of approaching them as money, and to me, crypto assets, all crypto assets are in com- all unpegged crypto assets are in competition for Becoming that one monetary winner. And really, like, that is the biggest misconception. And I, I replied to that email saying something along the lines of, \"No UX improvements imaginable are-- essentially, like, the, the argument of that piece was that...\" Like higher inflation can allow for greater UX because essentially you can pay for secure, quote-unquote, security of the network and you can pay for everything for, you can pay for everything with inflation, and this way, like, the fees would like be very, very, very small to nonexistent, and you would essentially allow, like the- Like just like EOS or, or Nano or all these other things, like with, with the inflation, you can have like faster blockchains, you can have low fees, et cetera. And once again, these people keep thinking of these platforms as payment rails, which is like totally, totally wrong Which is like the biggest misunderstanding, and essentially, like to me, this revolution isn't about speed, and it isn't about smoothness, and it isn't about quote-unquote software UX. It's about one thing and one thing only, unprintable, uninflatable money. And I think people will come to realize this as Bitcoin like proves its hardness, the way hard money works is that over the long run, it will bankrupt everyone holding any monetary media but the hardest money. And so better UX, and like the UX they have in mind is like the speed, et cetera, it won't necessarily lead to higher network value. and this is like where, where the argument collapses. only wealth parking inside the asset leads to higher network value over time. And like sovereign wealth funds and billionaires in the coming decades, they will almost exclusively care about security and disinflation, and that's what really matters, especially when they're going to be choosing a wealth parking mechanism or the tap- Of the future, so to speak. And users may gravitate to better UX when it comes to software, but wealth and trillions of dollars will gravitate towards disinflation, and sort of that's my view" }, { "speaker": "stephan", "time": "37:33", "start": 2252.73, "text": "Yeah, agreed. And I think what you're kind of pointing out there as well, it brings to mind this idea that you wanna do one thing and do one thing well. You don't want to try to be all things, and I think that's really a point that you're hammering on there as well. and I think this sort of ties into the next question, which is around this discussion of, \"Oh, maybe Ethereum or some of these smart contract platforms, maybe they're gonna win because, quote unquote, more people are building apps on it.\" So how would you re- Respond to those people. Right. Yeah, it," }, { "speaker": "murad_mahmudov", "time": "38:03", "start": 2282.99, "text": "it comes back to the same exact argument, which is viewing," }, { "speaker": "murad_mahmudov", "time": "38:09", "start": 2289.37, "text": "viewing like these systems, crypto networks, blockchains, whatever, these projects, they're viewing them either as software platforms for things to get built on top, and it's understandable why like VCs and like some Silicon Valley investors would approach blockchains in this way, because like in the centralized web two point o world of the past fifteen Years, these have sort of been the big winners, but or they approach like Bitcoin Cash and some of the others, they approach these systems as like predominantly or most importantly or first and foremost as, means of payment or payment rails. And really, that's, that's the big misconception, because If, like, a, we f- we already have thousands of, of payment rails around the world. Two, we already, like, we already have ways to, like, pay relatively quickly. Like, this isn't what, what's, what, what it's really about. A lot of people in the Western world, in America, in Canada, which haven't really experienced the high levels of inflation, they don't really understand, like, why it's such a big revolution. But when I, when you talk to the people sort of in the second and the third world, they, they understand Bitcoin's disinflation very, very acutely. And essentially, the point is that I like to describe these systems as hybrid money softwares. But Contrary to what a lot of people think, we have to analyze them as money first and monetary systems first and software second. And in my view Absent sort of absent legal tenders and state decrees and high returns on violence and military monopolies and debt extinguishing laws and borders and all these things which like don't exist or don't exist as much in the digital realm, in the internet realm where I believe Bitcoin resides, essentially an inflationary money, which most of these altcoins are, an inflationary money will never defeat a deflationary money as a wealth storage mechanism and as a store of value in the free market And in my view, in the grand scheme of things, smart contracts, DApps, software UX improvements, all these things, they pale in comparison to the size, to the need, and to the desire to-- for people to preserve and protect their hard-earned wealth. So that's that." }, { "speaker": "stephan", "time": "40:41", "start": 2440.84, "text": "Yeah, fantastic articulation there. It's, it's really money first and software second. okay, so the next big story that I thought would be great to get your views on is obviously this new backed, you know, New York Stock Exchange owner, the ICE, Story where they are essentially launching this new, company that will enable basically the idea is it will clear the way for major money managers to offer Bitcoin mutual funds. Now, there's been some debate in the community, some people have said, \"Oh, look, Bitcoin doesn't need the banks,\" but- My question then to you is, is that perhaps neglecting the value of people being able to invest money that's currently locked up in, say, the US 401k system or in the Australian superannuation system or just the ease of investing? Do you have any comments on that?" }, { "speaker": "murad_mahmudov", "time": "41:32", "start": 2492.3, "text": "Yeah, so in general, I think that was relatively bullish news, and some have described it as the biggest news of, 2018 so far, and I think that's reasonable. The fact that the market, like in the, in the twenty-four hours after that announcement, the fact that the market barely reacted or didn't react at all, it was essentially flat Confirms my short term bearishness on Bitcoin, and don't get me wrong, you will not find a bigger long term Bitcoin bull, but I still remain mildly bearish in the short term." }, { "speaker": "murad_mahmudov", "time": "42:06", "start": 2525.68, "text": "I think the news itself were very, very positive, and I think it's a great step towards, the legitimacy of Bitcoin. If the New York Stock Exchange, gets into this business And starts essentially evangelizing Bitcoin as a product, and when the co-founder of, when the owner and the founder of the New York Stock Exchange and its parent company comes out and says that Bitcoin, it's, it's possible that Bitcoin is sort of the money of the future or an important digital monetary asset of the future, that's very, very bullish, and that's very, very positive, because it- Let's be honest, we do need institutional money for Bitcoin to, continue climbing higher and to continue, going on these major bull runs, and something like this is definitely positive. In my view. On the other side, recently Trace Mayer and Caitlin Long have been talking about some of the potential dangers of over-financialization of Bitcoin as well. And this sort of tangentially ties into sort of these," }, { "speaker": "murad_mahmudov", "time": "43:22", "start": 2602.04, "text": "fractional, reserve sort of fears. Essentially, the idea is that," }, { "speaker": "murad_mahmudov", "time": "43:32", "start": 2611.63, "text": "it is possible that over-financialization of Bitcoin can't," }, { "speaker": "murad_mahmudov", "time": "43:41", "start": 2621.01, "text": "potentially be damaging to, Bitcoin's scarcity. And like obviously this isn't happening at the moment, but some have speculated that, too much financialization could see an emergence of various Bitcoin derivatives. Various financial products, margin loans, hyp-hypo-hypothecation and leverage instruments that some of which wouldn't be fully backed by physical Bitcoin itself, and if sort of the total size of these instruments gets too big" }, { "speaker": "murad_mahmudov", "time": "44:14", "start": 2654.23, "text": "then relative to the size of Bitcoin itself, especially like in the early days, it could have an impact on Bitcoin's price and it could have a damaging bitcoins on, in general like bitcoins Scar-scar-scarcity, because like you could view some of these instruments as, well, you could tangentially view some of these instruments as a form of fiduciary media that we've, discussed earlier." }, { "speaker": "stephan", "time": "44:41", "start": 2681.38, "text": "Yeah, sure, sure. No, I understand that, appreciate that, and I think that is a, a risk. I was actually curious as well, you were mentioning earlier around, being bearish in the short term. Do you wanna expand a little bit on that and, you know, maybe we're overbought at the moment and, you know, sometimes Bitcoin kind of gets ahead of itself and then it's gotta sort of spend some time in the doldrums before its next big run. do you wanna comment on that?" }, { "speaker": "murad_mahmudov", "time": "45:04", "start": 2704.49, "text": "Yes. so Even though we are already down, around seventy percent in with, with Bitcoin and up to ninety-five percent with some of these other altcoins. I still think that, the space as a whole is overvalued relative to the point where we are right now in history. And, obviously I think that Bitcoin is much, much less, much more fairly valued than some of these other assets. I still think we're in the euphoria and in the mania, in the mania stage." }, { "speaker": "murad_mahmudov", "time": "45:48", "start": 2748.27, "text": "if these, if these Borderline scammy networks like TRON, IOTA, Ripple, and others are still, despite these massive drops and despite the altco- alt- alt-coin Apocalypse that we're seeing these weeks. if they're still trading at multi-billion dollar valuations, then I still consider the space as a whole to be a, misunderstood, and two, wildly overvalued. And, I'm just concerned that as we see money outflow from these, scammy altcoins, and these shitcoins essentially, and, it, it might not have a perfect flight to quality nature to it and flow to Bitcoin, but rather in this big fear and this big collapse of the- Shitcoins as people wise up, as retail, even retail un-sophisticated investors wise up, it might sort of pull Bitcoin downwards as well. In general, like altcoins aside, if we look at Bitcoin itself, I think sort of the jump to twenty K that we witnessed in December of last year It might have been," }, { "speaker": "murad_mahmudov", "time": "46:54", "start": 2814.14, "text": "too much even for Bitcoin itself at this point in time, because let, let's be honest, not everyone is sort of this like Austrian sound money libertarian advocate as we are, and to many, many people, it's still very much a speculative asset. I like to say that Bitcoin is considered to be like a riskiest asset today, but, twenty, twenty-five years from now, it could be the safest asset. it could be far safer than what cash and what the US dollar is today. But essentially today, in the eyes of large asset managers It's still a risky asset, and like, let's be honest, it takes somewhere between, six to eight months to sort of fully, or even more, to fully get up to speed to what's going on. I still think that we're probably halfway or sixty percent done with the general bear market correction. My prediction, and, this is of course very speculative on my side, and this isn't investment advice, but I think we will break five thousand, and we will bottom somewhere in the, forty-five thousand range, somewhere between sort of November and March, April of next year. And I think that it will be very, very prudent if you're a believer in the, in Bitcoin and if you're a believer in the future of sound money, I think, converting some of your fiat and some of your investments in general to Bitcoin In the vicinity of the upcoming bottom, I think is a very prudent move and something that I plan to personally do as well." }, { "speaker": "stephan", "time": "48:32", "start": 2912.36, "text": "Yeah, I like that, I like that. I think, one of the points I liked that, you know, Vijay has made as, as well, is around how It's, it's almost like you need to wait for the boring low. It's, you know, when people are still, you know, crying about the, the price coming down, you prob- you probably, you may not be at the bottom, but who knows, right? We, we, we really don't know. I mean, it could also be that, you know, we're just waiting for the next big, you know, we're just kind of taking a breather before the next big run up, and, you know, right? that's, that's" }, { "speaker": "murad_mahmudov", "time": "49:07", "start": 2947.3, "text": "the crazy Because like we are like subjectively biased towards like these kinds of monetary systems, and we essentially like spend a couple of hours a day on crypto Twitter at least, and like we are in this Bitcoin bubble, and it's possible that because like it's such a reflexive asset, like people like to say that Bitcoin's price is like the fundamental, and so, it's possible that This is going to be like a prolonged bear, like that's the worst case scenario. But in my view, the sort of that, like that general bottom, like the length of that bottom is going to be a bit shorter than what it was in twenty fourteen, twenty fifteen, just because like there are just more eyeballs on this asset class now, more eyeballs on Bitcoin, more people who understand what it's all about, more Bitcoin, more people, who, even in the traditional finance world, who understand what the value proposition is. much many more funds, dev- devoted to this space now. And so I think that sort of that flat horizontal bottom is going to be a bit less U-shaped and a bit more V-shaped, relatively speaking. and I think that there has been more, as, as, Willie Wu likes to point out, there's general more buying going on without the scenes, behind the scenes these days than there was in 2014 when some people generally thought like Bitcoin could die or Bitcoin was on the verge of collapsing. I think there are a lot fewer people who think that Bitcoin is going to go away completely, and there are a lot more people, despite the volatility and despite the seven, seventy percent drop, who think that Bitcoin is here to stay and who are Dollar cost averaging in to this investment, at these levels, and they will continue to do it more fiercely as we see, sort of the, a, a bit lower levels in the coming months." }, { "speaker": "stephan", "time": "51:11", "start": 3071.18, "text": "Yeah, I like that. I think, and that's, that's really highlighting the importance of the long-term view. And I think you're right, what, what we are seeing is more and more people taking that long-term view, and now we've got more people who are sort of hardened against, you know, the big dips, let's say. Right. okay, so I think that, that, that's, they're the main points I was, keen to hit today. So, Murad, let's, start wrapping it up. but" }, { "speaker": "stephan", "time": "51:40", "start": 3100.4, "text": "Coming up that you, want to speak about at this stage? for sure. I am" }, { "speaker": "murad_mahmudov", "time": "51:46", "start": 3106.07, "text": "in the process of launching a, cryptocurrency Hybrid ve-venture slash hedge fund, and, I will be very excited to talk more about it, in the coming weeks. But in the meantime, you can always, find me on Twitter at muststopmurad." }, { "speaker": "stephan", "time": "52:11", "start": 3130.8, "text": "Excellent. Yeah, that's great. So guys, definitely go out and follow, follow Murad on Twitter at muststopmurad. I'll put links in the show notes page. Also see the articles he wrote on, Medium, written by him and Adam Tash. again, the, the notes for those will be on the episode as well. and, suppose just to wrap up the conversation, this is, SLP episode Episode eight. You can find the show notes on my website, stephanelivera dot com. make sure you subscribe, rate, and also share it with your friends. but yeah, that's it from us. So, thanks very much, Murad, and, we'll speak soon. For sure. Bye." } ] }