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bankless_DEBRIEF_-_What_is_Bitcoin

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Speaker A: Hey, guys, welcome to the debrief episode with, um, from our episode with Robert Breedlove on what is bitcoin. Wow. We are hundreds of episodes in David, and this is the first time we actually title an episode on what is bitcoin. Can you bring folks to the reason for that? Like, why have we waited this long to. To create kind of a canonical what is bitcoin episode?

Speaker B: Yeah, I think a part of that perspective also just comes with the story arc of bankless. Like, because you can't answer that question without talking about why Bankless was created and the environment that it was created in. So you and I were really getting to know each other in late 2019, early 2020, when we started the podcast. And the supply of bitcoin podcasts in the crypto industry was incredibly saturated. Like, every bitcoiner had a bitcoin podcast. And breaking into that space, I think. I mean, like, I think it's naive to say, like, oh, there's so many bitcoin podcasts, or. And so, therefore, like, why would I just add another one to the mix? I think that's a pretty common cop out for people that want to do podcasts, but they're like, oh, the supply is also oversaturated. It's because the demand is so saturated. Um, but that's a podcast side, side. Uh, ramble, really. The supply of Ethereum podcasts at the time was on the floor. There was, um, eth hub, and I don't even know if there was ethub at the time that we started. Bankless maybe had started for. No, just kidding. It had a. But really, there was no version of a podcast that was really advocating for Ethereum and also what you and I call bankless ideas. Bankless theses. And so doing a bitcoin episode at the time would have seemed so redundant. Every one of our listeners would have been like, oh, another one of these. Another one of these whole things. Whereas the triple point asset thesis, the crypto fees, economic sustainability, proof of stake, all of that was totally underserved by the market. So we started there and then led that momentum into the bull market. And really, there was never really a time where it felt appropriate to do a bitcoin show because everyone else had it covered.

Speaker A: Yeah, I think that's true from a market perspective, for sure. For a media market perspective, I guess I'll take another advantage point to it, which is the what is bitcoin story had already been told, like, ten years, man, and they had it nailed. Like, it was told, like, people in crypto actually knew that already. So, like, to your point, it would. It would have felt redundant to just go through and extol the virtues of bitcoin because, like, and I actually thought that the industry had that mostly right. So my way into crypto was through bitcoin. I don't know if that was true for you, David. Was that that wasn't true for you? Your way into crypto was through what, mining ethereum? Yeah, mining ethereum. Okay, so I can't. I came to crypto by way of bitcoin, and then I sort of discovered more than, um, than bitcoin. I was like, okay, well, ethereum to me was like, you can have something like bitcoin, but make it programmable, and it's like smart contracts and Defi and all of these things. And that was the story bankless was really created to tell, because bitcoin is a bankless monetary unit, but it's not an entire, like, bankless banking system. Like, the way we used to tell the story is you can't do the other money verbs inside of the bitcoin coin network. So you can just, like, you can pay, you can send money, but you can't lend, you can't borrow, you can't trade, you can't swap, you can't do all of these things. And also, if the base layer of bitcoin doesn't increase in kind of throughputs, then you actually have to go through a centralized intermediary anyway. I mean, there's. There's always the promise of lightning. We could just use lightning, but it's had so many flaws, it's never really taken off. So, like, practically a lot of people just pay if they ever use bitcoin to pay using centralized exchanges or something like this. Anyway, the reason bankless came to be was because we had a different thesis. We had a thesis of, like, bitcoin and all of this other stuff, all of these other bankless things that we can do. And much of the industry in 2019, 2020, when we started this podcast was just focused on bitcoin. So it was kind of an answer to your question that. And also, David, your history, maybe some bankless listeners aren't familiar with this. You had just done, like, I don't know, how long had you done another podcast? It was called POV Crypto, and it was basically, you was coming on the Ethereum side, and your co host was not me, Christian, and he was the bitcoiner. And by the way, I used to love this podcast. I used to consume it.

Speaker B: It was a bear market darling podcast.

Speaker A: I really enjoyed it. And it was basically a bitcoin and ethereum argue about crypto stuff mostly collapsed.

Speaker B: It's mostly philosophical differences about why we're in the systems and platforms that we're in. It was, to me, it was a big question where people would come into crypto and then they would immediately categorize themselves into a specific tribe. They would tribalize themselves. And this is still true to the state. People come into crypto and their background, whether they're conservative or liberal or they're from some corner of the world, or they're personality traits. Personality traits. And then they're in a tribe that, like, is reflective of that. And, like, that was kind of my motivations for that podcast because me and my friend Christian, like, similar, went to college together, had relatively similar backgrounds. But he's a bitcoiner, and I'm an ethereum.

Speaker A: And it was very clear to this day he hasn't been like, oh, David, you were actually right about some things. Has he?

Speaker B: Right. No. Except bitcoiner. Listeners of the podcast have been like, yeah, well, you know, if you listened to David, you would have made a lot more money.

Speaker A: But that's different than kind of like saying, now I am open to non bitcoin things. Right. Which he's never.

Speaker B: He is still just as committed to bitcoin as he always was.

Speaker A: What do you think? What do you think it is about that? Right? Is there something in, you know, this episode with Robert where I was like, my God. So first of all, I get some reflections as you're going through it. It's like, fantastic explanation of money killer. Just fantastic.

Speaker B: So good, so precious.

Speaker A: A plus. The only person that has done, like, in the ballpark of that good job is something like Lynn Alton, who, like, he's also a bitcoiner, is interesting. Like, bitcoiners know monetary history, and they tell that story so incredibly well, so well that, like, you know, other communities should be envious of that.

Speaker B: Like, they just, they know it better than most macro people. Yeah.

Speaker A: And as I was listening to Robert explain this, I was like, oh, my God. And now you're relating this to bitcoins. Like, all of these problems with fiat money, and now what's the solution? Like, bitcoin is the solution. End of story. Like the solve. There's something so beautiful about the simplicity of that narrative. It's almost like, as I was listening, almost like a religious experience, you're just like, preach it, you know, like, amen. Like, yeah, that's the problem. And what's the solution? Bitcoin is the solution. It's just, it feels so, like, on a primitive level, so good to just be like, we have this.

Speaker B: It just triggers, it triggers the dopamine in your reptilian brain very much.

Speaker A: And so I had that kind of experience throughout it, and I would rate the explanation of money as, like, an a plus part of the episode, and only a seasoned, I think, bitcoiner who really understands this stuff can, can do that justice. Yeah, so that was my first reflection. What else you got?

Speaker B: Yeah, I mean, right after we were done recording with Robert, I think the first thing I asked him is like, robert, do you meditate? And he goes, yeah. I'm like, yeah, I can tell. He's just got that precision in wording that is obvious from meditators. Legion is also one of these types. Cooper Turlo is also one of these types. Big meditators who also podcast anyways. Yeah. So bitcoin is, I've always credited with just, like, insane clarity of the machinations of the universe, if you will, just like, the structure of a state. They understand the concept of seeing, like, a state and seeing what a state wants. Like, all the libertarian types who understand, like, well, the states always grow, they never shrink, et cetera. And the incentives around these whole things, um, they're all Hayekian, they're all austrian economists. Uh, and so bitcoiners, I would think I've always said this about bitcoiners generally is like, they're correct in ideology. They just whiffed on execution in terms of just like, they get the motivations for why. Why crypto? They just say it's bitcoin. And so, like, to me, bitcoin has always represented an idea. If you go talk like, Brian Armstrong does this every now and then, I, where he'll tweet out something and it'll be like, and this is why I believe in the power of bitcoin. And it's something about, like, democratizing science. And, like, Brian, like, bitcoin's not doing that, bro. These are just crypto ethos that you're talking about. This is the ethos of crypto. And so he applies a halo effect, a big, big halo effect, to bitcoin, which in my mind, is this relatively impotent protocol in the grand scheme of things.

Speaker A: Well, tell me how you really feel.

Speaker B: And, like, there's this big magical, like, big. People were talking about identity on bitcoin talk in, like, 2012 because they understood the relationship between the assurances of a signature and a human, a unique human on the other side of that thing. And they're like, okay, cool. Bitcoin can solve identity, but, oh, no, actually, like, that's private key cryptography. And bitcoin is a ledger that keeps it global. But bitcoin can't. It's not expressive enough.

Speaker A: It does.

Speaker B: And so that's why we have smart contracts.

Speaker A: Right?

Speaker B: And so bitcoin has always been a fantastic ideology, but with a very imperfect execution. And this has been always my main critique of the bitcoiners is, like, there's. They're so resonant with very deep truths about just nature and universal laws, and then they apply all of that learning lessons and funnel it into bitcoin. I'm like, guys, bitcoin does not have capacity for all of these ideas. It can't do that.

Speaker A: Yeah, I get it. It's a container for a lot of hopes, imagination, desires, and imagination. I guess my take on this is I have much more, also more moderate views than somebody like Robert, I think, on kind of the solution is hard money type of thing. I think we have very much veered far too in the direction of just fiat money, backed by nothing, state controlled, surveilled, all of these things. Yet I don't think that if we just reverted to the gold standard.

Speaker B: The pendulum. Yeah, yeah.

Speaker A: Or the bitcoin standard, that, like, all the problems would go away and, like, you know, war would be, you know, no one could fund their wars.

Speaker B: Fiat culture.

Speaker A: Yeah. Fiat art would be better, and the music would be better, and, like, our.

Speaker B: Food would be more nutritious.

Speaker A: Yeah. I'm like, just like, ugh, that sounds great. But that, again, to me, is why it has the flavorings of almost, like.

Speaker B: A religious type of compelling. It is very compelling.

Speaker A: It is very compelling. And I guess I. This is why I like bringing something like Robert on, is because, like, you want to have that perspective, and you want to have that view. I think if you dial all the way in, at least for me, I just. I can't get there. It's just there's not enough there, actually there in bitcoin to solve all of the problems that he is surfacing, although it does solve some things, uh, fairly well. One question I have for you is you've observed, um, various bitcoiners over the years. Like, I wouldn't say, uh, Robert. I mean, the reason we had him on for this episode is because he hasn't devolved into what, um, some, I think, in the bitcoin community have, which is like, this toxic maximalism.

Speaker B: Yeah, yeah.

Speaker A: Which is like, f you. I wouldn't even. Come on bankless. Like, I wouldn't even talk to two shit coiners like Ryan and David. You guys are scammers and grifters. He. He hasn't devolved into that. He has, though, stayed laser focused on bitcoin. It's just like, I had this problem. I learned the problem has existed. I got red pilled on it, and now I found the solution, and it's bitcoin, and there's really nothing else that can compete with that. And so I'm not interested in learning very much more about crypto outside of bitcoin. Why? Because bitcoin is kind of it. Why do you think there's a certain type of person that doesn't go into toxicity but is also just contemporary on bitcoin? Yeah, it's problem, solution. I found the solution, and I'm not really interested in learning much about other crypto currencies, other networks, other decentralized freedom cryptography type tech. It's probably a scam. I don't know if he doesn't go as far as that, but there's an element of that where it's just not going to, you know, hold any value relative to bitcoin.

Speaker B: Yeah, well, we never really asked him about this, like, why his. What his critiques of Ethereum would be, but I'm without, like, intentionally trying to put words in his mouth.

Speaker A: Why didn't we?

Speaker B: Because we wanted to be the episode about bitcoin.

Speaker A: That's right. I don't. I just. I haven't. The answers aren't really satisfying.

Speaker B: Yeah. And I've gotten general and like, oh, here we go again. Like, when you remember when he had David Marcus on and he was like, yeah, I don't like proof of stake because it's governance. I'm like, it's nothing. Governance, God damn it.

Speaker A: I know. I just don't even want to kill the vibes by, like, yes, it's killing the vibes.

Speaker B: It's killing the vibes. But, yeah, this is like the. I'm going to probably assume that if we asked Robert Breedlove about his opinions on Ethereum, he would make very similar noises as Linnalden would. Right. Like, there's some inherent, like, truth about energy that is good and keeps bitcoin grounded. Proof of stake is governance, which is nothing. Proof of stake is rich gets richer, which is not. But it's all the same kind of things over and over and over again, which I feel like we have totally debunked as an industry multiple times over and over and over again. But some people just don't see it that way. And so they just stick to bitcoin because there's bitcoin and then there's shitcoins.

Speaker A: Well, I think there's a couple of elements that really cement this as kind of like a strong narrative for people. One is Satoshi, who just like, left, gone, immaculate conception. You know, this person who set the thing in motion is now gone. I mean, that is just such a fantastic, like, origin story and origin myth. Right? And then, and then the second is, I. What I've observed is interesting. When you asked Robert, like, what would you say is the most important thing about bitcoin? Like, what makes bitcoin bitcoin? His answer was basically like, well, didn't he say difficulty, adjustment? But what he really meant when he got into more detail was like, proof of work. It's like the energy consumption and the gamification of that energy consumption. There's something about the physicality of that that feels stronger, I think, to people.

Speaker B: This is even the thing.

Speaker A: Go listen to Michael Saylor.

Speaker B: Yeah. This is one of the things that bitcoiners energy, right. Always really grounded about bitcoin in that they really give a fuck about the connection between bitcoin and physics via proof of work. They really care about that relationship, even though it makes no sense to me. Like, if. If you could go two ways with bitcoin, like, it, you take energy and then you burn it, and then you get bitcoins. And then if you could take bitcoins and then reproduce that energy, like, that would, like the whole, like, bitcoin is a battery thing, which is nothing. It's just like a monetary unit. But, like, they love the fact that you can consume energy to produce bitcoins because they think it goes both ways.

Speaker A: Why is that? I don't. So my, my, maybe you could help me understand this. So the. The way I think about bitcoin, right, is basically, let. Let's use a proof of stake type terminology, okay? You have a particular type of token. It's called an ASIC, which is a specialized physical piece of equipment that is, you know, specializes in one thing, which is like mining bitcoin. That's the equivalent of, like, your token and proof of stake. That's kind of like the, like the staking unit, if you will. Now, one thing that's different between that ASIC and a token is in bitcoin. The ASIC, like, degrades over time, you know, the technology improves. So like, you know, your ASIC isn't going to perform two years from now as well as it performed beginning. So you've got like depreciation and like, you know, so, so it breaks down, whereas a token as a valid doesn't break down. And so you have the ASIC, which is like the token, and then you have energy that you use to essentially mine the blocks. And the energy and the token just represent a cost of capital, just like a cost in general. And that can be abstracted. There's no reason to me why it actually has to be energy. Basically, what proof of stake networks do is they abstract all of that? And they're like, well, if you add bitcoin, like if you add the ASIC and the energy, then you have some sort of capital cost that you've locked to produce these blocks. Right? Well, we could just abstract all of that, make it native to the internal economy, call it a token, and then you stake it and it's like one to one equivalent. In fact, maybe it's even better because like the internal system produces that. And now you can like slash, you can like penalize if, you know, the network does something you don't want it to do. And no one has an advantage of like, oh, we've got a better supply chain to provide ASIC. So everyone's kind of co equal. Anyone can buy the staking on exchange, right? There's all of these things. Am I wrong here?

Speaker B: Like what's, well no, you're just, you're just being an ethereum. Like, okay, you ready? You ready for me to put on my bitcoin?

Speaker A: Yes.

Speaker B: Okay, this is now. This is now. You're the, you're David and POV crypto and I'm now ck. So I'm not a bitcoiner.

Speaker A: Hi, Christian.

Speaker B: You don't want that token to have perfect, you know, immutability over time. It needs to decay. The bitcoin Asic needs to decay. You can, you know, the whole like um, queen of hearts race in. You know, that metaphor is like you gotta keep on sprinting to keep up.

Speaker A: Yeah.

Speaker B: And if you do, if you're not going as fast as possible, then you're falling behind. So your asics have to decay as a check to make sure that no bitcoin miner is ever in power for, you know, in infinity. It's a way to make sure that there's always a decay in the centralization of bitcoin miners. Uh, and so all you always have to be reinvesting your bitcoin profits that you have from bitcoin mining to buy more asics, because you have to replace your asics that are about to go kaput. And so it keeps you on the treadmill, committed to bitcoin and also your eth asset when you. It's just the cost of capital. Yeah, but you're showing no alignment to the protocol because you can just sell all of your ether for Solana and stake it to a different network. And so when somebody gives up their capital to buy a SHA 256 ASIC, they can really do one thing to monetize that ShA for 256 ASIC, which is to mine bitcoin. So it keeps bitcoin decentralized, it keeps its service providers committed to the system, and it keeps the security of bitcoin secure. And so you need that Asic to decay. Otherwise you have centralization of stake.

Speaker A: I think that decay is actually the most interesting argument for anything I've heard of proof of work. But also, isn't there, like, there's actually no reason you couldn't implement something like that on the proof of stake side of things. Couldn't you have, like, the stake be like, decay over time? I know Ethereum hasn't done this, but, like, I guess you can ruin your.

Speaker B: Monetary properties that way, don't you?

Speaker A: I guess so, yeah. Maybe that is the most interesting argument I've heard for it. But, like, what about the attachment to energy? Does that matter in any way? Because it seems to. The physicality of bitcoin seems to matter. Is it just the idea that it's ungamable?

Speaker B: Yeah. So energy is a universal constraint of ungamable energy consumption. And it also rewards bitcoin miners to get more and more efficient so that they can add more hash power for cheaper costs to the network. So the efficiency of, the efficiency of security of bitcoin is always up, only it's always becoming more secure for least cost as a network. So it's, it's the darwinian effect of security, of the proof of work layer over bitcoin.

Speaker A: What do you think of that argument then?

Speaker B: It's fantastic. You dismantle it, bro. You're the ethereum.

Speaker A: Oh, okay. So I think that basically energy is just a cost. And you could abstract that. I mean, I could purchase oil, I could purchase solar energy, I could purchase any type of energy. And it's essentially money, it's just capital. And so it doesn't necessarily have to be energy. Energy is fungible with money, with any type of capital. So rather than energy, you could just use capital itself. And in fact, I think there is some value in doing that. In the case of slashing, for instance, you can actually do things internal. If you have a token, you can do things internal to the capital. If a validator does something that is out of bounds, you don't have this type of power in the bitcoin network. I guess from a cold, all this.

Speaker B: Slashing sounds like the fiat system. Like they're just. You're going to, like, destroy people's property rights, bro. Slashing. Get out of here with that.

Speaker A: I am. So let's take off our hats. Like, I am capital.

Speaker B: You can mince capital out of thin air. Energy is truth. Energy is physics.

Speaker A: See, that's the thing that just doesn't work for me. It just never made sense to me. I'm kind of glad that proof of work still exists. Or just in case, like, I'm missing something, or just in case, like, you know, they're right or something like that. Like, I'm glad that experiment is also playing out in parallel to proof of stake. Now, crypto as it as itself, like, crypto as a whole, has both paths that's pursuing and, like, it gets to continue.

Speaker B: Yeah, the bitcoin path and the shitcoin path.

Speaker A: I don't get it. The energy piece, I don't actually get what else from this episode was interesting to you. I know we didn't get into the critiques, and so I think some bankless listeners would probably be frustrated at that. And let me just say, the point of this episode was not to just be like, well, but Robert, what about the security budget? We didn't talk about that.

Speaker B: Security is made up on feeds, bro.

Speaker A: Right. That's another thing that is very difficult for me to kind of understand from a bitcoin perspective.

Speaker B: But the bitcoin perspective is that the bitcoin. Bitcoin. Hyper bitcoin. Hyper bitcoinizes the world. And so the unit of account is bitcoin. And bitcoin is so incredibly valuable that this midgen of fees that are being paid are worth it because that it's the unit of account of the currency of the whole globe.

Speaker A: I always find it interesting, David, that you just, like, you just don't own bitcoin. And, like, why? Like, a lot of people in crypto, they own at least some bitcoin. I guess. Me, like Anthony Sasano, he doesn't. I don't think he owns any bitcoin.

Speaker B: I don't think he does anymore.

Speaker A: But, like, you just have never felt the need to go back in time and go purchase some bitcoin to, like, kind of diversify out of your, what, primarily ETH investment and other shitcoin investments that you own.

Speaker B: Yeah.

Speaker A: Why?

Speaker B: Well, I think a lot of people that I know have bitcoin that have bitcoin came into crypto with bitcoin via bitcoin. And so they kind of have it as like, maybe there's like a first love effect also, maybe there's like some capital gains taxes they don't want to pay, so they have, like, momentum there. I never had that. I came in straight to ether. I didn't even purchase my first ether. I mined my first ether. And so maybe that's my first love effect. My first love effect is ether. And also, just the whole time, this investment case around ether has always been stronger. And so, like, why? I don't. I don't get it. Like, I've never really understood diversification either, to be honest.

Speaker A: Like, like, in general.

Speaker B: In general, yeah.

Speaker A: Why not just be bullish on the things?

Speaker B: Why not just be bullish? Like, if you have two assets. I'm like, I'm more bullish on this one than I am on this one. Then you should do that. I'll just buy the one I'm more bullish on. I don't really, I don't have to overthink it.

Speaker A: Imagine being wrong. Like, that's not. Imagine that. Yeah.

Speaker B: You just be right all the time.

Speaker A: Yeah.

Speaker B: It works.

Speaker A: Yeah, it's great. Great advice coming out of bank list. Just be right and you don't have to think about diversification.

Speaker B: That's exactly it.

Speaker A: The key is just to be right.

Speaker B: Yeah.

Speaker A: Yeah.

Speaker B: Well, back when I was buying bitcoin, when the ETH bitcoin, or, excuse me, buying ether when the ETH bitcoin ratio was zero three. I've been right ever since. Although it's been a little bit less right in the last month or so.

Speaker A: I just. So one thing I actually feel, and some bitcoin listeners may get upset at this or may completely disagree, but. But I think that the torch has actually been passed to Ethereum to carry on this legacy of bankless money system. Right?

Speaker B: Yeah. Even though bitcoin is number one in market cap. Like, the bitcoiners know Ethereum has the momentum well.

Speaker A: But the reason is a couple fold. Like, one is I get very worried about bitcoin transactions and they haven't solved things like oFAC sanctions. Right. Like miners have lists and they can sanction transactions too, and they do from time to time. And I feel like that is not something that the bitcoin community has sufficiently addressed. I also believe that, like, on the base layer, if you don't scale out the base layer, if lightning worked, that's cool. The capital cost of lightning. I mean, Ethereum tried the state channels experiments back in 2017, 2018. That's what lightning is still pursuing. I just. I don't think that's going to be the substrate. Like, I just haven't seen that work at scale right now. And so if that's the case, then all you have is like ten transactions per second to do peer to peer cash.

Speaker B: Three, maybe three.

Speaker A: Three transactions per second to be a peer to peer cash system for the globe. So what ends up happening? Well, you actually have to do the pay layer in coinbase or in a kraken or some centralized exchange, and you have to do the lending because you don't have defi in a blockfire celsius, right. And so you become kind of this impotent. What does the bitcoin network do? It just allows if, like, you want to pay lots of money.

Speaker B: It's Internet gold. It's gold transfers.

Speaker A: It's gold transfers, like settlement just for big whales, basically, and large institutions. And that, to me, is not the full manifestation of what crypto can actually do in the world. It's not the full bankless vision, certainly. And so I feel like they've given up on that. I also feel like the security budget is actually going to bite them in the hand in the decades to come. Right. Ethereum already has more economic security than all of the bitcoin mining and ASIC in the world. I saw a Justin Drake tweet six months ago where six x.

Speaker B: The security of bitcoin, ethereum is six.

Speaker A: X or something like that. When you talk about six x security.

Speaker B: The economic security is bitcoin while being one third of the market cap.