The Center Cannot Hold
The Language of Bitcoin: 6
Every company on Earth is sitting on a balance sheet that is normally cash and credit. With a few exceptions, everyone is holding some form of local fiat currency. If they want an alternative to that, they’re holding low risk debt or sovereign debt. Cash and credit.
Cash and credit are crumbling. They’ve always been crumbling. But now they’re crumbling at a faster rate. In good times they’re crumbling at 7% a year and in bad times they’re crumbling at 10 or 15 or 20% a year. In horrific times, if you’re in Venezuela, Argentina, or Lebanon, they’re crumbling at 60-80% a year. That’s hyperinflation.
One year ago we were staring at a balance sheet with $500 million dollars in cash and credit and it looked like it was almost certainly going to crumble at a rate of 15% a year for four years. That drove us to discover Bitcoin. A lightbulb went off and I realized we could swap out that $500 million dollars for something better.
There are a lot of ways to view Bitcoin. You can view Bitcoin as digital property, digital money, or digital energy. If you characterize it as digital property, then I bought a $500 million block of property in cyber space. If you characterize it as digital money, then I bought $500 million of a currency that nobody can print any more of. If you characterize it as digital energy, then we took analog energy and digitized it.
You can hold digital energy as Bitcoin on the network forever with no power loss. No real cost to move it. No cost to hold it. No constraints on the storing of it. The half-life of Bitcoin is forever.
When I look at Bitcoin I think, let’s just convert the balance sheet from analog money to digital money, or from a depreciating asset to an appreciating asset. We did that. We took the first bite of the apple in August of 2020. Bitcoin did what it’s supposed to do, which is appreciated. From that point our stock started appreciating.
MicroStrategy had the ability to raise more money through business operations. We generated cash flow. We sold equity. We sold convertible debt. We continue to build our Bitcoin position because we realize that we can and should have two strategies. One strategy is to run the software business. The other strategy is to run a property business. MicroStrategy is in essence running a cyber development company, or a cyber REIT, if you will.
If I tell you there’s 21 million blocks in cyber space, and each one is a Bitcoin, and this world is only going to consist of 21 million blocks, and you showed up there 200 years before everybody else showed up, you would think, I’m just going to start buying city blocks in cyber space as fast as I can.
So we bought ourselves some, and then we realized there were more to be bought, and so we kept buying.
Let’s contrast this. A year ago we were a $500 million business growing 0% a year, with $500 million on the balance sheet in crumbling cash and credit. The company was valued at about $1 billion dollars. Maybe 1x revenue for the enterprise software business, and the cash and credit was worth $1 billion. That’s where we were a year ago.
Today, MicroStrategy is a $500 million software business growing at about 10% a year. So we got some growth out of it. We got more notoriety. Better for employee moral. Better for product awareness. We’re a $5 billion Bitcoin property business growing 100% a year or more.
Our high-growth business is digital energy or digital property. Our low-growth business is enterprise software. They’re both linked. They both benefit from each other in different ways.
Why did we do it? First we did it defensively. Stage one is I don’t want to lose my money. Stage two is opportunistic, I did it because I could. Stage three is strategic.
This is a pretty good idea to buy up all of cyber Manhattan before everybody else moves here.
If Bitcoin is appreciating at 100% a year, and if I can borrow money at 6% or 5% or 1%, then my arbitrage is going to be 100%, 95%, whatever the number is. I think Bitcoin went up 130% on average for a decade and it’s up faster this year.
Let’s say we think it’s going to go up 110% for the near future. If I can borrow money at 5%, I’m going to get 105% arbitrage. Why wouldn’t you?
You’ve come to Bitcoin defensively for the number go up technology, as most people do, they come to make money and to stop leaking wealth. Many long-term Bitcoin holders have transitioned their financial world view from this number go up, fiat mindset, to that of collecting digital property and holding Bitcoin. There is no volatility when you’re accumulating Bitcoin and thinking of it on Bitcoin’s terms. Can you speak to that mindset?
First I just wanted the number not to go down. Most people don’t think their number goes down when they’re holding dollars, but once you understand the inflation rate you realize your purchasing power is going down if you’re not keeping up with the cost of capital. Your wealth is being destroyed. So first I just wanted to preserve wealth.
Then we realized Bitcoin is a high quality property. I think the epiphany comes when you realize that Bitcoin is the dominate digital property network, and digital property is better than physical property in every way conceivable. If I theoretically designed digital property to store a billion dollars, I would want to hold it in the palm of my hand, move it at the speed of light, vibrate it one thousand times per second. I want it to last forever. I want immortal, indestructible, infinite, all powerful, programmable energy.
Matter is energy. Energy is matter. I can take a billion dollars and turn it into a building. I can in theory turn a building back into a billion dollars. I can buy a billion dollars worth of electricity. I can buy a billion dollars worth of guns. Whatever it is you want to do. Money is ultimately monetary energy and you can convert it into any kind of product or service or property. It is the apex.
Once you realize that Bitcoin is digital property, or digital money, or digital energy, all of these things, then it becomes clear that everything else you could possibly own is inferior to that. You would really never want to own anything other than pure digital energy.
Why do you want to own a building? It’s something to come in from the cold to. A building is something to live in. That’s a good reason. But if you chose to own a 50 story skyscraper in Manhattan, is that as good as digital property?
No, because the mayor of Manhattan can seize your building by eminent domain. If you’re thinking you’re going to rent the building out, a politician can tell you that you’re not allowed to evict any of your tenants even though they don’t pay you. Property in the physical realm can be impaired by anyone with political jurisdiction over the property. That means the neighborhood review board, the mayor, the governor, the regulator, OSHA, environmental review boards, the congress, the senate, the white house. . . Everybody in that domain can impair the value of your physical property.
Not only that, your physical property is going to be taxed. When they decide to tax your building you can’t move your building. If you have a billion dollars of property in Manhattan it’s not fungible and it’s not desirable to everyone else on earth.
What I want is something that is universally desirable through all space and time. How desirable will your building be in 500 years? There’s another interesting dynamic here with physical property. There’s a maintenance cost. The cost of maintenance is the theoretical investment you have to make every year to preserve the property value. If you ever owned a boat, you know what that is. If you stop investing in the boat, the boat sinks.
Property in the physical domain doesn’t hold its value through time and it doesn’t hold its value through space, and it’s not fungible. The Rockefeller center is not the same thing as 1,000 acres in Kansas. The Rockefeller center is not even the same as another big building in Manhattan. Whereas a Bitcoin is the same as a Bitcoin.
How do you get rid of volatility? One Bitcoin is equal to one Bitcoin. One Bitcoin is one twenty-one millionth of all the energy in the network. What is that going to be in 1,000 years? One twenty-millionth of all the energy in the network. Who is that interesting to? Everybody that joins the network. Who can join the network? It’s open and permissionless. Anybody on earth can join the network. Is that everybody? It’s not everybody, because some people haven’t join the network. But, it is more inclusive than any other property network.
A building in Manhattan is interesting to people who do business in Manhattan. Land in the US is interesting to people who can traverse to, or do business in the US. A Picasso is interesting property to people who appreciate Picassos. Presumably, a lot of people do, but not everyone does. Gold has value to people who value gold. Bullets have value to people that want to fire bullets. But if the bullet doesn’t actually fit in your gun it’s like a rock. There’s a certain bullet you want and a certain bullet you don’t want. So why Bitcoin?
Bitcoin is the most universally desirable property in space and time. It’s the property with the lowest maintenance cost. You can put one billion dollars of Bitcoin in cold storage and you don’t have to pay to maintain it. You have to pay to store your gold, pay to store your artwork. There’s a cost to storing everything else. You own a company? There’s a cost to owning a company. You actually get diluted by the CEO or the executive team when they issue stock options. If the company didn’t have any employees and didn’t have any cost then maybe there wouldn’t be as much maintenance. But what do you call a company that has no employees or no maintenance cost? Bitcoin.
I think that when you embrace Bitcoin as your property strategy you can get away from maintenance costs. The likelihood that your Bitcoin is going to be impaired decreases exponentially. It’s a lot harder to seize a billion dollars of Bitcoin than it is to seize a billion dollars of land or art or gold or a building or stock. Exponentially harder. It’s easy to seize a billion dollars in the bank.
If I wanted to take all the money from everybody in Argentina, I could do it overnight if it was sitting in cash or credit. If they all used Bitcoin and held their own private keys, I’d have to incarcerate 70 million people for 90 days, and I’d have to sweat it out of them. So how hard is it to jail 70 million people for 3 months? How many people do I need to do that? Very difficult. It’s probably 10 million to 100 millions times harder to seize Bitcoin than it is to seize cash or credit or securities.
Seizing companies and seizing buildings is easy. The Cuban’s seized all the buildings, everybody lost their private property in Cuba when Castro took over. It’s easy to nationalize an oil company. It’s easy to seize all the gold. It’s very difficult to seize passwords in people’s heads.
So I look at Bitcoin and I think it’s a universal property. It’ll last forever. It’s very hard to seize. It’s very hard to tax. It’s easy to move. That makes it universally appealing. On the day that you wake up and you find it’s illegal to own Bitcoin in your country you can take it to another country. Try taking a billion dollars of gold to another country with you.
So you can take Bitcoin with you, or you can send it somewhere, or you can sell it. The ability to send it, to take it, to keep it, or to sell it, all those are rights that you sacrifice when you buy a house, or a building, or land, or securities, or credit, or cash, or art, or collectibles, or sports teams. You don’t have the property rights you think you have with those things.
Ultimately, the idea of Bitcoin is elegant. One twenty-one millionth of all of the value on the network for as long as the network may last. There’s nothing more stable, nothing more predictable in the entire financial universe than that. That is the single most stable body in the entire financial universe. If you’re looking for something to revolve around there is nothing more stable.
Bitcoin has the potential to be the most useful asset for meeting the coincidence of wants for the most people. It doesn’t predict the future but it can alleviate future uncertainty for the most people on the planet. Those people have the freedom to accumulate property because of this technology. What do you think from a humanitarian standpoint?
I think it naturally follows, digital energy, digital property, digital money is the greatest utilitarian asset, the greatest utilitarian value on the greatest utilitarian network in the world and in the history of the world.
That means for 8 billion people Bitcoin offers the possibility of economic empowerment. I think if you want to give joy to 8 billion people, you need digital music. If you want to give enlightenment to 8 billion people, you need digital books or digital education. If you want to give wealth to 8 billion people you need digital property, digital money.
There is no other. There is nothing else that offers that promise. The reason Bitcoin is powerful is because at the end of the day you can put trillions and trillions of dollars of energy on the network and you can distribute it over something like the Bitcoin Lightning Network to 8 billion mobile devices and the mobile devices cost $50.
Bitcoin is the ability to give economic energy to 8 billion people on a $50 device and to do it with integrity and to do it with no friction. When you move energy on the Lightning Network you’re moving it for like one Satoshi. It’s friction free, speed of light, at any scale, at any frequency.
Understand frequency. If I have $1 billion of gold and put it in a vault the frequency is like once every ten years. That’s the velocity of gold. If I have $1 billion of fiat currency and I move it over the Visa rails and the Fed wire, then it takes one to two months to move it. If I make a charge transaction, before final settlement it’s going to be 30 days before you know that you’re not going to get clawed back in another 15 days. So 45 to 60 days after I pay you for something you can move it. So you’re talking about an annual velocity of 6 per year.
I put the same money on the Bitcoin Lightning Network and the velocity is 6 per hour, 6 per minute, 6 per second. You’re talking about a velocity which is orders of magnitude higher, and the cost is incomparable.
Bitcoin is a revolutionary transaction network and it’s also a revolutionary monetary network at the same time. Dual revolutions. In one case you can distribute economic energy to billions and billions of people, billions of times per hour. That is something of wonder. In the other case you can store a billion dollars of energy in a battery for 100 years and still have the energy. We don’t have any other credit or cash, or asset instrument or property instrument where you can store $1 billion of economic energy for 100 years without dissipating it. It’s just a question of how fast.
In gold you dissipate 90% of it in 100 years. In fiat, in US dollars you dissipate 98%, 99% in 100 years. In electrical energy you dissipate 100%. No one can store electrical energy for 100% years. You dissipate it all. It’s all gone.
Last year they were pumping oil out of the ground and the oil price went negative because there was no where to store the oil. Once you run out of containers or tanks to store the oil you’ve got to pour it on the ground or into the ocean, you can’t store it. We run into the same issues with natural gas and the like. Every single form of energy or form of property is challenging to move, to store over time, and Bitcoin solves that problem.
If you want to empower 8 billion people, you need a monetary network that can reach all of them at an economic cost with something like lightning on top of Bitcoin. There are other layer 3 apps. Centralized solutions such as Square’s Cash App have exponentially decreasing transaction costs that you get by accepting counter-party risk. If you accept a central Bitcoin bank, and you make Google, or Apple, or Facebook, or Square, or PayPal that bank, you can still move a billion transactions per hour. It’s almost frictionless.
Bitcoin offers the promise of monetary superconducting. In a superconducting network, when you get the temperature to a low enough level and there’s no friction anymore, you can do some pretty amazing things. That’s what we have in Bitcoin. Call it weightlessness. If I actually took you into a weightless orbit and I can all of a sudden push a million pounds with a finger, interesting things happen. I think that’s what we have here. It’s a major breakthrough.
I think of it as the next logical evolution of energy. The advent of electrical energy was a big deal. When we had mechanical energy, a mill was put around a turbine because we were running water through the mill and every machine had to run off of that turbine. Then we got to electrical energy, and you didn’t have to build around the turbine anymore. You could spread out the plant across 18 acres. You can move electricity up and down in multiple dimensions in space.
With digital energy I’m not limited to a plant. I can move the energy through time and space a million times more efficiently, so the kinds of structures that you could build and the kinds of things you can do are now exponentially more efficient.
Until we found a use for it, oil on a plot of land would depreciate its value for most of human history. We’ve solved the problem of monetary entropy by decentralizing the whole system and keeping it moving through proof of work, which secures Bitcoin as the strongest asset. But what does the transition look like toward Bitcoin becoming the strongest currency?
I think Bitcoin as a network is going to continue to grow. It’s going to demonetize other assets. The assets it’s going to demonetize will be a function of the cultures it is within. For example, in a culture where you have hyperinflation and the government collapses, it’s going to demonetize the currency, because everybody desperately needs a currency and there isn’t an alternative. In a culture where people feel that it’s unsafe to own property, for example if you had weak property rights, and you felt like the government was going to seize your house or seize your land, or you couldn’t own land, maybe it’s illegal to own land, then Bitcoin is going to demonetize the property.
If you have a million dollars, you’re not going to invest it in land if you don’t trust your property rights. For example, I wouldn’t be comfortable making an investment in an apartment building in a city that has shown itself willing to strip landlords of their rights.
You’re holding an apartment building. You can’t charge your tenants to live in the apartment building, nor can you evict them. What’s the logical value of that building? Does it go up or does it go down in that circumstance? If I had discretionary cash am I going to reinvest it in more apartment buildings or not?
The answer is, wherever we see property impaired, the monetary energy in the property is going to flow to an alternative which is better. I think that in the US people are comfortable with the US dollar, and what they’re not comfortable with, or what they’re less comfortable with is maybe risky stocks or risky property investments or say gold, things like that. It’s logical that Bitcoin strips the monetary premium from commodities, securities, indexes, and credit.
My company would normally put 90% of our treasury into sovereign debt, and only $50 million of it, or 10% of it was sitting in cash. What we did is we demonetized the sovereign debt for the most part. We rolled it into Bitcoin.
I think in the developed world, in Europe and the US, Bitcoin is going to demonetize debt, low-grade debt, or low-yielding debt, and credit. It’s going to demonetize savings accounts. By 2020 most people had already given up on savings accounts. What’d they go to? ETFs.
I think Bitcoin actually grabs monetary energy or capital from ETFs, commercial real estate, and debt in the developed world. In the developing world, in places like Iran, China, North Korea, Lebanon, Syria, Iraq, Afghanistan, you don’t have a stable banking system, you’re not even dollarized, your currency is much worse than that.
What you’re going to see is out of about 180 countries, 15 or 20 of them keep their currency privileges. The bottom 100 lose their currencies. I think they’re going to dollarize first. But how do I dollarize? The best way to dollarize is the El Salvador strategy, which is a mobile application that has dollars and Bitcoin on the lightning network. What you want is a currency as a medium of exchange, a coin that is stable versus all of the pricing of the retailers, such as the dollar, and then you want an asset which is an appreciating token that will hold its value over time. That’s Bitcoin. If you wanted to maximize your utility you put 90% of your balance sheet into the asset, and you put the last piece, the working capital, the checking account into whatever is the currency that most of the retailers that you’re surrounded by take.
If I was in Japan, I’d be holding one month worth of Yen. If I was in Italy, I’d be holding one month worth of Euro. If I was in a dollar economy, I’d be holding one month worth of dollars and then the rest I’m sweeping into my long-term asset portfolio, property portfolio.
Maybe I buy a property to live in because it’s a nice house and I want to live in it for the rest of my life and I don’t rent it. Maybe I buy my trophy art. Maybe I buy the car or maybe I buy the boat or the plane, because I want to fly in it, float in it, live in it, whatever I want to do. But all of my discretionary assets I would put into the highest quality property, which is of course Bitcoin.
I think generally what you’re going to see is $100 trillion worth of capital flow out of investment properties in the developed world into Bitcoin and the currencies will get stronger. I don’t mean stronger in purchasing power. I mean you’ll probably see the dollar become the currency you see used in Venezuela, Argentina, and why wouldn’t you see it spread to every country in Africa. Name a currency in Africa that you would prefer to hold in your wallet versus the dollar. None. Is there a better currency in Africa than the dollar?
If I have $10,000 dollars, I’m probably going to hold $50 in my currency wallet, and I’m going to convert the other $9,950 into Bitcoin. That’s my checking account versus savings account. The ideal situation you want to get to is to eventually put 100% of your assets into Bitcoin. And then you have a credit card or credit line which is drawn against the Bitcoin.
I never really sell my Bitcoin in this case. I just generate a debt against my Bitcoin. We’re a little early here, but if your expense ratio is less than your expected appreciation over time, you never have to sell anything, ever. You can borrow against your assets from now until the end of eternity.
Now it requires that you have a Bitcoin banking sector developed. You have to have a credit line against the Bitcoin and we see that developing in different ways around the world. Ultimately that would be the ideal situation, you would want to hold Bitcoin and draw credit lines in the currencies that exist.
I think what we’ll see is that the world reduce down to 10 currencies or to 5, such as the Chinese currency, the US dollar, the Euro. The only way for currencies can exist is for the government to stay viable. There’s no Afghan currency right now right? There’s not going to be one of those. It’ll probably dollarize. It’s already dollarized.
I think that what we see is a collapse of currencies to a few, and a collapse of properties to a few. For example, there’s 100,000 buildings in the US you can buy for the cost of one Bitcoin, or you can buy Bitcoin. Which of the two is the easier decision? Why do I need a security, a REIT, a bond, stuff that’s manufactured as a store of value, when I could just buy Bitcoin?
How will Bitcoin develop? It will develop at different rates organically in different countries in different markets based upon the culture, the law, the circumstances of the people, based on crises, and based on common sense.
You’re in Argentina. Do you feel safe in Argentina? You have $1 million dollars, do you want to own $1 million worth of a company, a ranch, a building, gold, a boat, currency, or Bitcoin? If you’re thinking you’re going to flee the country, everything I named is worthless except for the Bitcoin.
When I had money in Argentina and I was trapped there I could have bought gold but I couldn’t get that out of the country. I thought I could float a yacht out of the country, but that was before I knew about Bitcoin. Today if you asked me the question I would say buy Bitcoin.
On the other hand, if you’re living in Texas and you like Texas, you might feel like it’s okay to own 100 acres there. You feel safe in Texas. You have a gun. You have some horses. You have a tractor, or a truck, or a Jeep. You don’t need to smuggle the gun, the Jeep, and the horses across the border tomorrow. So you can own that property. If you think Texas is not going to impair the value of your land you might feel okay there. I feel like the circumstances of the individual and common sense will dictate your property distributions. But the apex property is always Bitcoin.
My opinion, which is pretty well known, is if you had $10 million converted to Bitcoin, and you wanted to buy anything, you’re best not to sell the Bitcoin. You’re best to borrow against the Bitcoin.
If the volatility of Bitcoin is going to be plus or minus 80%, then keep your loan to value 10% and you’re safe. If you’re reasonably certain that Bitcoin is going to appreciate at 20% a year, and if you can keep your expenses at 5% a year, and if the volatility is not going to cause a max draw down of more than 80% a year, or 50% a year, you figure out what the number is… Once you figure out those three calculations you can get to the point where you decide, I’m just going to hold my assets. I’m going to let my assets appreciate. I’m going to fund my living expenses with debt.
If I want to buy something, another asset, I might still want to borrow against my Bitcoin to buy that other asset. If you actually sell your Bitcoin to buy an asset, that is a diversification. You could diversify because you want to, that is a personal decision. But if you’ve got an asset going up 130% a year, and you said to me Mike name something else that you think will go up 130% a year that I can diversify into, the answer is I don’t have anything.
If you said to me I have to split my money fifty fifty, half goes into Bitcoin, what is the other half? I don’t know. A portfolio of big tech stocks maybe? Maybe the Nasdaq? Maybe a combination of Apple and Amazon and Facebook and Google? You buy some wickedly cool technology. Maybe. Or if I want to be very conservative I just buy a house that I expect to live in for the rest of my life because I know I’m going to get value from that because there’s value to me getting up in the morning and being in my space. That’s rational.
I don’t expect a million dollar house to be worth a billion dollars in twenty years. But there are people that put a million in Bitcoin and will make a billion off of it by holding it. Of course it’s a very simple principle, which is, your house in Texas isn’t universally appealing to everybody with money on Earth. And I can’t oscillate the house in Texas a million times a second on an iPhone. The problem is the velocity of the asset is slower and the appeal of the asset is lower and there’s a maintenance charge. The house leaks. You’ve got to paint it. There are things you have to do to it. There’s a property tax on it.
So if you’re looking for a measure of energy that’s easiest to develop or property that you can develop on top of, then you want the most universally desirable property that’s hardest to impair, that’s easiest to develop, that can be utilized at the highest frequency.
I have a hotel. If the hotel had every room booked 365 days a year I’m obviously squeezing more revenue out of the hotel. But let’s do a thought experiment. What if I had a 100 rooms in the hotel and every room is booked every night, 365 days a year and you’re charging by the hour. Well that’s interesting. How many hours of the year, how many room hours are actually unoccupied in the hotel even though the hotel is theoretical booked every room night?
Even if 100 people book every room night in the hotel for 365 days they have to leave the room. They leave to go to work. They leave to go out to a bar, they leave to commute. In point of fact, the hotel that’s fully booked is empty two thirds of the time. If I could really book out the rooms hour by hour my revenues would triple. Now what if I could actually book out the rooms hour by hour to anybody on any city on Earth? What if I could actually move the hotel or teleport the hotel every hour?
Well not only could I drive the occupancy up by a factor of ten, I could also increase the pricing. I could move the hotel to the place in the world where the room rates are highest by the hour. Venice for the Venice Film Festival. I could move it to wherever the Super Bowl is. My utilization would go up. My price per hour would go up. What if my costs were fixed?
Well now, if you think about it, the profitability of a hotel running at 47% occupancy, at standard rates in Dallas Texas, is 10%, the profitability of the hotel running at 100% occupancy running at standard rates goes to 70%, the profitability of the hotel running at 300% occupancy goes to 200%, the profitability of the hotel running at 300% occupancy at the highest marginal rate you can get for a room anywhere on Earth at any point in time is going to 3,000% or 30,000%.
What did I just do? I just dematerialized the property and I moved it with a frequency which was unimaginable. That’s what Bitcoin is. That’s what happens when you dematerialize property. You have the option to move it with a frequency which is unimaginable, to the highest marginal use. When people get their heads around that they realize, do I want to own a hotel in Texas? No. Do you want to own anything fixed in the real world? No.
What do you want to own? You want to own the apex property in cyber space that’s universally desirable to everybody and then you want to loan it out to them for the number of seconds that they want to use it, and then snatch it back at no cost, or for one Satoshi.
That really is what’s interesting about Bitcoin and everything around it, all of the possibilities to develop those businesses and develop those applications. We don’t have them all now. I just described defi by the way. I described defi on lightning, on Bitcoin, with an intelligent exchange that is hunting for highest optimal use. But you don’t have to develop all those businesses immediately to grasp the potential.
All you’ve got to do is figure out that the potential is there. The incentive is there. You can do one of two things. You can either build one of those businesses, which is hard. It’s hard to build Binance. It’s hard to build an exchange. It’s hard to build PayPal. It’s hard to build Fidelity. It’s just hard. You have to deal with the regulatory issues, the technical issues, the security issues. Or, the other thing you can do is just own the Bitcoin and wait.
There’s an intermediate, you can own the Bitcoin and you can loan it out but that means that basically you have to pick the counter party you trust. So maybe I get 130% appreciation by just waiting in cold storage. Maybe I get 135 or 140% appreciation, I get an extra boost of 5% to 10% by loaning it out and trusting someone else. Or maybe I go and create my own Coinbase, create Abra, create Square, create the next great payment network or the next great bank. And maybe if you’re really good and work really hard you’ll create something worth billions and billions of dollars. But that’s a different thing. That’s industry.
So the way I look at it is you have capital. You’ve got to invest it. If I lived 200 years ago, if you go back ex post facto, if I had a priori knowledge, I would go back and buy Manhattan in 1900. All of it. Why wouldn’t you?
Buy everything. Just buy the land. Hold it. Keep it in the family. That would be a good idea. Buy apex property 100 years before everybody else has to move there and wait. That’s what I would do then.
Today? Knowing what we know now, I would buy the apex property in cyber space. And the apex property in cyber space is Bitcoin. I would just wait and let nature take its course. People are going to do everything they can to develop those applications, those businesses on top of digital property and as they succeed they’re going to lock up the property, they’re going to create more demand for it, they’re going to drive up the price of it, and you’re going to benefit as a property holder at any scale.
You can have $37 worth of it or $37 billion worth of it. That’s the option you didn’t have in Manhattan. You couldn’t buy $37 worth of dirt in Manhattan. You had to buy it one block at a time and so today if you want to own natural gas rights, or commodities, or commercial real estate, you’ve got to buy into a REIT or something like that. You have to buy a security which gives you a share of the thing.
The beauty of Bitcoin is you don’t have to buy the security. If you want you can buy the underlying property in a pristine unit, 37 million Satoshis, and it has the same security and the same financial appreciation potential as if you bought as much as we bought.
One of the ways we’ve dematerialized property is by open sourcing Bitcoin. So what I’m wondering is, as a patent holder, what do you think about the free flow of ideas? Do you think it’s a net positive for society to have patents on things? Or are they more of a business opportunity?
I think that the only reason to pursue a patent, in my opinion, and this is my opinion over the course of a 30 year career, the only reason you get a patent is defensively, so you can defend yourself against patent trolls when they sue you. I’ve used it over and over again. There are people with one patent and they just sue for a living. Someone finds out that you’ve used mathematics on a phone, or that you’ve used the color green in the interface. And they show up saying that you’ve used math or the color green in your software, and they want 10% of your company, and then you have to defend yourself. It turns out that in our legal system the best way to defend yourself is to knock out their patent by having a prior claim or a different related patent. So defensive portfolios of patents make sense.
Am I a fan of patents? Not really, no. If I could wave my hand I would eliminate all patents because I think they’re a restraint to trade and I really don’t think that society is served by people laying claim to the right to send messages over the air, or to add numbers on a screen. Ultimately all these patents boil down to is, I have an idea to do something. Well yea, everybody in the human race has ideas. Sometimes people have ideas twice. So why should you be able to prevent every other human from starting a fire before it starts raining. I’m not a big fan of them.
If we got rid of them all the world would be a better place, but in a world where we can’t get rid of them, then accumulating them to defend sovereignty is useful. Putting together the crypto patents as part of the COPA initiative is primarily a defensive move and it’s a useful thing to do, to defend it.
I do think the open network is obviously much more powerful, especially in this context. I think the closed network is helpless. First of all, you can’t have a centralized money, because you can’t establish it as being anything other than a security. Every centralized system is going to pass the Howey Test. It’s going to be a common enterprise in pursuit of profit. And if that’s the case then you lose your moral standing.
As a senator, or congressmen, or mayor, or governor, or president, you can’t actually promote a security. If a senator said I think that Apple stock is better store of value than the US dollar, that’s a violation of House ethics rules. That’s just wrong in so many different ways that you can’t imagine how wrong that is.
So I think that things that are patented and to any degree centralized, they don’t serve as a universal medium of exchange or a universal store of value, or a universal unit of account. They’re not money. They can’t be money.
If you’re trying to create digital energy, the whole idea is, I want to be able to move my energy between 8 billion people, across every political jurisdiction, across 100 million corporations, on a universal open protocol. So if you attempt to constrain or license the protocol, it’s no longer a universal language of energy anymore. Imagine if half the people in the world weren’t able to use the word four? How does anything work if you’re not allowed to use the number four because someone’s got a patent on it?
The answer is it doesn’t work as a protocol. You’ll never install a universal monetary protocol unless it’s open, for so many obvious reasons. It would never be successful.
Information is by definition copyable, this is everything, including Bitcoin private keys. The one trade off with Bitcoin is the burden of responsibility can fall on the user to protect that one piece of information. What do you think about the future of Bitcoin lending? What do you think about banks coopting the custody of Bitcoin from the majority of people, who aren’t going to put in the 1,000 hours to learn how to do it successfully?
I think there’s a very vibrant dynamically evolving market of Bitcoin applications that are mutating faster than we can speak or describe them, in every jurisdiction. A petri dish of life.
For example, there’s a use case for Bitcoin, which is, I’m going to use it and I’m going to use a hardware wallet, and place a certain amount in cold storage. There’s a lot of people that have mastered that, and that’s a good thing. But even people who have mastered that would admit there’s another use case, which is the Chivo application in El Salvador. That is a downloadable wallet that’s moving around Bitcoin on the Lightning Network. It’s riskier. You’ve got KYC involved so it is not as private. It’s riskier because you could lose your mobile phone, but it’s faster.
Then you’ve got a third application which is like Strike, or a third party lightning wallet. There are some like Muun or Breez, that are not KYC. They are non-custodial. That’s a third option. Did that benefit from the existence of the Chivo wallet? Sure it does. The demand for those wallets will go up because that of the Chivo wallet goes up.
In defense of the president of El Salvador, it’s kind of hard to give $30 worth of Bitcoin to every citizen unless you do some kind of KYC citizenship check. Otherwise one citizen claims it 10 million times, and everybody else gets nothing. So there’s an application that’s different there.
Now, there’s a fourth application. What if you’re a company? A corporation is going to take the view that they don’t want a single individual, they’ll want to have a multi-signature relationship when it comes to the custody of their Bitcoin and they’ll have more sophisticated custodial rules.
A government needs a different application also. If you were a citizen of a city, and the city put a billion dollars of Bitcoin on its balance sheet, would you want the mayor to carry the keys around? And by the way, if you were the mayor, would you want people to know that you actually have the keys? I mean wouldn’t you be concerned about being kidnapped and having your fingers ripped off one at a time? Or having a family member kidnapped?
So in that particular case they’re going to be interested in a different thing. That’s another application. That’s multi signature application. Who should be signing it? In some cases it’s not even multisig across people. It’s multisig across organizations like three agencies, or three corporations or auditors might need to have some involvement.
I’m not threatened by the entry of banks. I think that they’re all just different manifestations of Bitcoin. Bitcoin is property and you can build things on top of it. One thing you can build on top of it is a checking account and savings account. We need Square and PayPal to offer their mobile apps on top of it. But we also could use an ETF.
For example, if I’m an institutional investor, I have $2 billion. It took me 30 years to raise the $2 billion. The money is raised from firemen’s pension funds and unions, and other organizations and foundations. The Rockefeller foundation. They gave me the money and they gave it to me 15 years ago. I have the ability to buy securities with it, but I don’t have the ability to buy property with it. I don’t have the ability to buy Bitcoin with it.
If I wanted to buy Bitcoin, I would have to convince a board of directors with 28 people on it that meets once every 6 months. Then I’d have to convince my outside auditors. Then I would have to go change the law in the state of Utah. Then I’d have to go back to all of my limited partners and explain to them. Then I’d have to actually educate 252 people and my outside auditors.
After I did that I go through a one year process to establish my relationship with a Bitcoin exchange. Then I’d have to figure out how we’re going to custody it. That would take me about, oh, five years, and I’d probably fail 99% of the time. Or, I could punch a button and buy $27 million worth of the Bitcoin ETF, and I could do that in 30 seconds.
Now, is there a role for an ETF? Sure there is. You can say well, the person that invests the firemen’s fund ought to actually hold their own keys. Well, if you were a retired fireman, and you had your entire pension, and someone said there’s one dude we hired last week and he has $2 billion of your money and he’s got the keys and he just disappeared. You might not take kindly to that.
It’s not always the case that the right answer is cold storage, hardware wallet, self custody. It depends upon who you are. We can’t let the perfect be the enemy of the good. I would say there’s probably 1,000 different instantiations. In fact more than that. For example, the ETF is a way to get Bitcoin exposure. You could say, is that as good as holding the Bitcoin? No. Is it better than holding an ETF that’s invested in negative yielding sovereign debt of Italy? Yes. My choice isn’t the choice to own Bitcoin or to own the ETF. My choice is to own the Italian sovereign debt ETF or to own the Bitcoin ETF. That’s my choice.
Once you realize that, you realize that what we want is we want traditional banks to offer certain types of Bitcoin accounts. We want the new mobile banks like Square and PayPal. You’re going to have Square. But you’ll have Square that lets you hold Bitcoin and move it out of Square, and move it on a cash tag. But they don’t support Lightning yet. But at some point Square’s Cash App will support Lightning. They’ll be better.
When PayPal supported Bitcoin they didn’t support Bitcoin withdrawals. They were worse. When they add Bitcoin withdrawals they’re better. When they add Lightning they’ll be better still. Then there’s going to be non-custodial wallets. They’re better better. You’re going to have layers of better. But the guys in the hardware wallet business say non-custodial hot wallets on mobile phones aren’t as good.
So I’m going to stack up layers of Bitcoin. I can name probably 20 off the top of my head. You can own a junk bond from MicroStrategy that yields 6.8% interest. Is that as good as owning Bitcoin? No. Is it better than owning a junk bond that isn’t backed by Bitcoin that yields 2% interest? Yea. You see?
You can own a convert in MicroStrategy and that yields like whatever, .5% interest. But it’s backed by Bitcoin and if Bitcoin goes up by a factor of 10 your bond is going to go up by a factor of 5. Is that better than owning Bitcoin? No. Is it better than owning another convertible bond that’s back by space tourism or something? Maybe. It depends.
What you have is a universe of people that can own certain types of securities and certain types of properties by charter. And then you have a universe of securities and properties of Bitcoin that are being offered as the banking sector, and the financial sector evolves. When the sector evolves, when we have a Bitcoin ETF in the US, billions and billions of dollars will flow into Bitcoin that under no circumstances would have found their way into Bitcoin otherwise.
I know a 70 year old guy who has a phone in his hand with something like PayPal on it. He can do this, he can go $2000 dollars, Bitcoin. That’s what he can do. If you go back to him and say, you know I need you to listen to 500 hours of videos and learn to go through a 97 step process and buy these 14 things… I can’t do it. I cannot do it.
In theory it would be nice if we all had our own gun and our own shack on our own ranch with our own livestock, and we could grow our own food, and we could ride our horses, and we could go off the grid. It gets real when you have to perform your own appendectomy. At that point you start thinking maybe this living off the grid thing wasn’t such a good idea.
I think with Bitcoin you’ve got different services in every country, in every market, and what’s legally possible and possible from a regulatory point of view and what’s technically possible and what’s practical is changing all the time.
I happen to think that the best outcome is the greatest diversity of market opportunities. I’m not smart enough to know the one right answer. I do think that if you look at consumers there’s a different solution for different types of individuals. If you look at my 83 year old dad, he’s not going to buy anything with a mobile app. But he might sell his stock portfolio and put it into a Bitcoin ETF, he could do that.
Individuals, they have their own needs. Corporations are different. Some companies can buy Bitcoin. Some companies, for example would want a treasury service from Fidelity that gave them 3% yield where they could just buy $10 million worth of it on a phone call. They don’t want to custody it. Right now their choice is hold cash or tell JPMorgan or Bank of America or Citigroup to put it in. The treasurers they just sweep billions of dollars into short-dated sovereign debt portfolios. Buy me a $157 million worth of 90-day government debt. Thank you. Click.
They need something like a treasury-type service backed by Bitcoin. If you go to institutions, every institution has got a different charter. Some people, by law they can do convertible debt arbitrage. If you give them a convertible debt instrument, they can buy it. If you don’t, they can’t. It’s not really an issue of do they want to. They can’t. They guy that’s sitting with you can talk with you for five minutes, punch a button and buy $500 million worth of the security. You could talk to him for 10,000 hours and he can’t buy the underlying Bitcoin and take personal custody of it. Just can’t.
All those institutions are different. Stuff gets really real when you get to municipal, state and federal governments. What if Jerome Powell said tomorrow, we decided to buy $100 billion of Bitcoin. How do you feel about that? How would you like him to do that? How should he go about that?
You want Jerome Powell to walk around with the keys? You want the twelve members of the federal reserve board? Who do you really trust? What if we elect a new president and the old one just won’t give up the money? What if my family just keeps the $100 billion.
When you get in the political domain, now it’s different. I tend to think there’s a place for all those things. And there’s some that will be more successful than others. Some Bitcoin banks will fail. Some Bitcoin exchanges are crooked. Sometimes they have security issues. Sometimes somebody steals all the Bitcoin. Right? It’s happened. It will happen again.
The market needs to squeeze out the weak offerings. Even hardware wallets, there are some that are better than others. Software wallets, some are better than others. Non-custodial, custodial. They’re not all equal. They’re not all perfect.
I think the competition should continue. The beauty of the open network is the protocols are out there. When Apple computer decides to build their own Apple Pay Bitcoin offering, they have access to the protocols. Will they do better than Square? Will they do better than PayPal? Will they do better than Google? I don’t know.
Here’s what I do know, they should be punished if they don’t. Right? The money, the capital should go away from the people that do a poor job, to the people that do the best job. Who gets to make the decision? The people with the capital get to make the decision. If I tweet at you, take all your money and put it in this software wallet, you’d think it’s a little bit offensive.
Let the people with the money make the decision. Give them an entire universe of options. Some are going to make a mistake. Some are going to lose their keys. Some are going to lose their phone. Some exchanges are going to get hacked. That’s life in the universe. That which does not kill us makes us stronger. Some stuff kills us. That still makes us stronger. The part of the herd that doesn’t die is the stronger part of the herd. That’s Darwinian, natural selection. All the alternatives are less desirable in my opinion.
Bitcoin is good at promoting its own production, much like genes. What, if any, are the predator prey dynamics of Bitcoin and how are they different from those of the potentially infinite asset class of fiat currency.
I think there’s a very dynamic competitive market in Bitcoin mining on the security side of the network. I think there’s a very dynamic competitive market of Bitcoin exchanges. I think there’s a dynamic competitive market in the financial applications, call them the banks. All three of those are very Darwinian to the benefit of the network.
For example, if I take an S19 miner and 20 megawatts of energy I can create an exahash. It took me 150 megawatts of energy to create an exahash with an S9 miner. If you take the generation before that, you’re talking about 500 megawatts of energy. So if I’m sitting on mining equipment after six to eight years, I’m obsolete. The break-even point for the S19 is 45 cents per kilowatt hour. The break even point for the S9 is 9 cents per kilowatt hour. The break even point for the previous generation is 2 cents per kilowatt hour.
What’s happening is the Bitcoin mining network is upgrading its technology and squeezing off the grid all of the obsolete or the third generation, the older technology. If you can’t upgrade, if you don’t have the money to buy the new generation technology, you have to pay the price with energy, and at some point you need 50x as much energy and you can’t afford the price. You’re getting squeezed out no matter what.
If you can’t get the Bitcoin mining equipment vendor to sell to you… what if Bitmain won’t sell to me? Well, you’re still losing. It’s a competition to maintain the trust of the vendor. There’s a competition at the hardware layer. If you don’t like the fact that Bitmain controls most of the market you go to another vendor and you get them to manufacture a mining rig which is comparable.
We’re continually creating new hash power. That’s competitive. We’re looking for cheaper sources of energy. That’s competitive. If you trusted a free source of energy in China, and the government cut you off, well you lost. That was a bad decision. So you’re looking for political support.
If the energy provider isn’t trust worthy, if they pull the rug out from under you, you’re out of luck, you’re lost. If the politicians pull their political support you’re lost. If you can’t upgrade your hardware you’re lost. If you engineer your mining facility poorly and you don’t do the right heat dissipation and you burn out your rigs, you’re lost. If you can’t raise capital in order to buy new mining equipment, you’re lost.
If you don’t have the trust of the capital markets, Marathon and Riot are publicly trading, they can go and they can raise equity and debt. If you can’t go public you’re at a disadvantage. If you’re in a market where there are no capital markets, the Chinese can’t take their Chinese mining companies public, they’re at a disadvantage.
On the mining side there’s a competition for capital. There’s a competition to engineer mining facilities. There’s a competition to design semiconductors, SHA-256 mining rigs. There’s a competition to operate. By the way you can’t get ripped off by your employees either. There’s a competition to find supportive political jurisdictions. That’s never ending. What’s the result on Bitcoin?
Bitcoin gets more secure, and more robust, and more antifragile. It’s not inflationary, because the protocol is locked in. The only result is the network decentralizes. Would Bitcoin be at risk if all the mining was in one place and one politician could turn it off at the same time with the snap of a finger? Yes. So what happens when someone does that on a small part of the network? It teaches everybody else and they decentralize, and they’re looking for places.
If I’m going to invest $500 million in Bitcoin mining, don’t you think I’m going to pick a jurisdiction they’re not likely to outlaw me in the next decade? There’s a reason I might want to go to Texas and not go to, say, New York, or California. Right? I’m going to go find a supportive jurisdiction.
So the mining network has got a very healthy competitive dynamic across five different types of capital. Engineering capital, semiconductor, technical capital, political capital, financial capital, and even human capital. So that’s going on, and that’s good to the entire network. On the exchange side, well you see that in process right now. All of the migration, Coinbase is competing with Binance is competing with FTX is competing with Square is competing with PayPal.
What’s going to happen? Do I want a crypto exchange? A Bitcoin-only exchange? Do I want a Bitcoin-only non-custodial? Custodial? Do I want to have leverage or not leverage? Well, there’s legal issues, there’s technical issues, there’s market driven issues. Ultimately the competition is driving more diversity and more choice and people are going to migrate to the thing they’re most comfortable with.
The other day I bought $30 worth of Bitcoin. I bought it on one application and paid a .69 cent fee. I went and I tried Strike and I paid next to nothing. I thought that’s kind of cool. Okay so thank you Jack Mallers, we appreciate that. Competition. It makes us all better. Right? There’s pressure. And that pressure will continue. When will that end? That won’t end.
It’s a herculean lift that El Salvador managed to deliver the Chivo wallet in 90 days, but there’s already people complaining about it, that it’s custodial, or that it’s KYC. Well if we roll forward to the next generation every 90 days or every six months, that seems pretty healthy to me. We need that because we can never make the exchanges too efficient. We can never make the wallets too functional or too secure. We’re going to continue with that.
The beauty is, look, we need Square to do what they’re doing. Why? Because you need a big company to actually compete with Apple. Apple computer is not going to enter the Bitcoin space because they’re threatened by a non-custodial wallet coming out of South America. Right? They’re not going to enter the space for Chivo either.
But they will enter the space if they see Square and PayPal generating hundreds of billions of dollars of market cap. If you think Square that is going to take 500 million users off of Apple Pay? That will cause a response from a Facebook or a Google or an Apple. So it’s useful to have that competition going there because we might want Apple to decide to buy $100 billion in Bitcoin, and to build Bitcoin into a billion iPhones and create a secure element as a hardware wallet on the iPhone, that would be a useful thing.
So that competition is useful in that regime, but on the other hand, the competition of Muun versus Breez versus Strike versus whatever, that’s useful too. Non-custodial versus custodial. Lightning only. There’s going to be a different wallet in every single country and you’re going to have jurisdictions that are going to have an impact. I think that’s good.
I think the third area we talked about that I mentioned is just applications or banking apps. MicroStrategy has a convertible bonds. There are hundreds of billions of dollars of capital that can buy convertible bonds. Is it good or is it bad? Well it’s the only Bitcoin-backed convertible bond. There’s only two convertible bonds in the world that are backed by bonds and we issued both of them. Then there’s a junk bond that’s back by Bitcoin. There’s one of them in the world. We issued it.
There’ll be ETFs. There’ll be other kinds of products. They all compete with each other. Each one of them meets a different need in the market. What if someone comes along with a better convertible bond? Well that’s good too. What if Coinbase turned around tomorrow and decided to issue $20 billion worth of convertible bonds to buy Bitcoin? Would I be upset? Well maybe it would make the MicroStrategy bond less desirable but on the other hand it would make the Bitcoin more desirable and then the Bitcoin would trade up and then MicroStrategy equity would trade up and then the MicroStrategy bond would trade up. So the competition is probably a good thing. If JPMorgan and Morgan Stanley and Goldman Sachs decided they wanted to start to do this, maybe that’s a good thing for everybody.
In fact, I won’t say maybe. The competition is good. The more options there are for Bitcoin securities, the better it is for Bitcoin. The more options there are for Bitcoin wallets and Bitcoin exchanges, the better it is for Bitcoin. And the more competition in Bitcoin mining, the better it is for Bitcoin. The more Bitcoin mining rig companies there are the better it is for Bitcoin. Bitcoin wins no matter what happens.
Having said all that, and this is what I say to entrepreneurs, if you have a Bitcoin company, there’s a 99% failure rate for most corporations over a long period of time. There were hundreds and hundreds of companies that wanted to be Apple’s iPhone. How many companies wanted to be Instagram? And how many companies wanted to be Facebook? How many companies wanted to be Amazon? For Amazon to win 15,000 retailers have to lose.
Competition is good for the underlying network, it’ll be great for the protocol of Bitcoin, it’ll be great for the asset value of Bitcoin. It’s not good for the competitor. You’re going to have to fight tooth and nail with every iota of your energy to succeed in whatever market you choose to go into. And if you’re going to go into that market you need to have a set of strategic assets.
For example Fidelity has 22 million customers and they’ve been selling treasury services and funds to big institutions for the last 50 years. Can they offer a Bitcoin fund? Sure. Can they put Bitcoin into their fixed income fund products? Yea. They have $2 trillion worth of that stuff. Are they going to defeat Square’s Cash App? No.
Who has got more customers? Jack Dorsey or Fidelity? Jack Dorsey. He’s got more than 20 million. Now, Jack Dorsey is not competing against Fidelity, he’s competing against Apple and PayPal, in a different way, and they’ve got their assets. And so what’s his advantage? He’s more nimble than they are.
And what’s your advantage? Maybe you’re more nimble than someone bigger than you. Can you turn that into a compelling sustainable advantage? Maybe. Apple did it. Google did it. Yahoo came first. You can. Are the odds in your favor? No. What’s the most rational strategy if you’re a competitor?
Take your entire balance sheet and invest it in Bitcoin and then borrow against your balance sheet to fund your operations. If you raised $100 million to build a new Bitcoin software wallet I would say take the $100 million and buy Bitcoin with it and now pay your payroll by borrowing against the Bitcoin and if you succeed more power to you, you’ll be worth a lot more.
20 Bitcoin per million, so you buy 2,000 Bitcoin right? So you’ll be worth 2,000 Bitcoin if you just invest your treasury. I think Bitcoin is going to one million next stop right? So 2,000 times a million is pretty good. Nothing wrong with that. And if the business itself works you’ll be worth 4,000 Bitcoin. But if you hold $100 million in cash and the business doesn’t work you’re going to be worth nothing. Worth zero.
That same logic holds for Bitcoin miners. If you’re mining Bitcoin you never want to sell any Bitcoin and if you raise money you want to buy Bitcoin with the money you raised, and then you want to borrow against the Bitcoin to pay the operating expenses.
If you believe in Bitcoin it’s obvious. If you don’t believe in Bitcoin, maybe you shouldn’t be in the business. If you’re going to look me in the face and you don’t think Bitcoin is going to $1 million per coin and then $10 million per coin, I don’t think you should be a Bitcoin miner. I don’t think you should be a Bitcoin exchange. I don’t think you should be a Bitcoin wallet. I just don’t think you should be pure-play focused in the business at all, because you’re already a loser. You’ve already decided you’re going to lose. If you think your asset is going to zero, it’s hopeless all these other things.
If you think it’s not going to zero, then rational thinking is, the competition in the market is making my Bitcoin more valuable. That’s good. But the competition is making my existing business less profitable. That’s bad. If I’m a genius and I execute well, maybe I can stay ahead of everybody else. Maybe. Maybe.
But while I’m doing that, every single free dollar I can raise I should convert to Bitcoin. Because, out of 100 possibilities, there’s 99 paths where you fail and Bitcoin succeeds, and there’s one path where you succeed and Bitcoin succeeds. Some people don’t think Bitcoin is going to succeed but they’re not with us, right? If you don’t think Bitcoin is going to succeed, go do something else, whatever with your life, but don’t try to create a Bitcoin business.
Any closing remarks for today Michael?
My closing remark is, I thought Bitcoin was a good idea in August of 2020. Every single month for the past 13 months there have been fundamental developments in the space that have made it a better idea. Every single month. Every week I almost see, a new development that makes the network stronger, smarter, faster, harder. It makes it more antifragile. It becomes clearer and clearer that this is the future of digital property. This is digital energy. This is the future of digital money. This is the solution to the problems of the world.
This is a macroeconomic imperative for $500 trillion worth of capital. This is a technical imperative for everybody in the technology industry, in the energy industry, and this is a moral imperative for everybody on Earth.
I’ve just become more convicted every single week, every single month that’s gone by. There’s not a single thing that’s happened in the last 13 months that caused me to think that the future was riskier or less certain. Even the China exodus, which was probably the most brutal event that we’ve seen, it was a good thing for the network and it removed the biggest existential threats. Is Bitcoin going to be hijacked by the Chinese government? What about a 51% attack? How antifragile is the network? Is Bitcoin American or Chinese technology?
After the China exodus it became clear that Bitcoin is US technology. This is good for the Western world. This is part of the Western technology stack. This is Google and Apple and Amazon and Facebook and Bitcoin. The worst thing that happened was the best thing that happened. Everything else has been a good thing to happen.
You’re watching every shoe drop. Companies adopting, banks adopting, politicians supporting. The negative FUD in the media is just people noticing that Bitcoin is the most disruptive technology of the decade. Even the negative publicity is positive publicity. It’s all just marketing Bitcoin. If these people hate on it so much it must be really good, that they’re so afraid of it.
A shockwave forms when you move fast than the air. If I move through the air faster than the air can flow around me, then I create a shockwave. I’m disrupting Laminar flow and I’m getting turbulence, because I’m going too fast. Bitcoin is creating turbulence because it’s going too fast.
When you see some uninformed politician that critiques it, it’s because they were asked to have an opinion and they had ten minutes to study it and so they gave an uninformed opinion.
When some billionaire investor says they like gold better it’s because they were asked to have an opinion and they spent 30 years studying gold and they haven’t spent 30 hours or 300 hours or a thousand hours studying Bitcoin. They had 30 minutes, or 60 minutes, 15 minutes.
You know when these editorials are written in the Wall Street Journal and the New York Times, I’ve never seen anybody ever say I’ve spent 1,000 hours studying Bitcoin, let me break down my problems with it. I never seen anybody say I spent 100 hours studying it let me tell you the 13 problems I have. You know?
There are no informed critiques. I have yet to see them. There are uninformed critiques. And what is that? That’s the same as your fighter jet slamming into a wall of air faster than the speed of sound and you get a shock wave, and you get turbulence, and you get heat, and you get sound and fury.
Is that a bad thing? It just means we’re moving fast. We’re moving very fast and we’re getting noticed and everyone has to notice it. When you’re asking the spokesperson for the Kremlin, for Putin, whether or not Russia is going to adopt Bitcoin as the national currency, when they say not yet, or no, that’s not a negative signal. That’s a positive signal. Nobody asked Putin whether they’re going to adopt Apple stock, or gold, or silver, or the giant stone coin of the Yap people, as currency in Russia.
There’s only one question they’re asking them. And they’re asking them the question because it’s on the table, and that’s indicative of the success of Bitcoin.
So to summarize, I am more bullish than ever.
19 September 2021
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