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A

Hey, bankless station. Welcome to Debrief after our episode with Patrick McKenzie, the crypto critic, even though we waited until the end to talk a bit about crypto. Good conversation, I thought. Patrick is.

B

He's fun to talk to. He's fun to listen to.

A

Yeah, I enjoy him. He has just a lot of knowledge, and, yeah, he thinks about things from a very different perspective. Kind of like a deep perspective, I find, but kind of a contrarian perspective. He likes to peer into why things are the way that they are. He made the comment that he knows exactly what a merkle tree actually is and can explain that probably better than David and myself and most people in crypto. And I think that's because I do it. I can do that.

B

I can claim Mercury.

A

Why didn't you challenge him on the spot? Let me ask you, do you think people. I wondered at the end if people would be frustrated with this episode, bankless listeners would be frustrated with this episode, that we didn't take the opportunity to push back more on what Patrick was saying near the end. Cause I sort of. I felt myself like, uh, metaphorically biting my tongue, but, like, almost physically doing it in parts. Um, and I can enumerate some of those. Those parts right now. But we didn't. We didn't push back. I didn't push back very much. I just kind of, like, we let him speak toward the end. Part of that was like, we were running like, it was getting close to 90 minutes and wanted to kind of wrap it up. The other part was, I don't know that that that was the purpose of the episode, to sort of host a debate. Like, I just.

B

It's not what the guest signed up for. Yeah, yeah.

A

But I just didn't really care to either. Like, I could.

B

That's kind of been me for the last, like, two years. Like, there's plenty of debates to be had inside of crypto and also outside of crypto. And I'm like, I just can't get myself to care about debates anymore.

A

And I just wonder if some listeners aren't there, you know, like, some listeners.

B

Some listeners are more hungry for it.

A

Yeah. So, so me in 2020, I would have been a bit more like, let's talk about that. So you think that crypto people cheering number go up and the bitcoin ETF is very contrary to our philosophy around holding your private keys and not your keys, not your crypto. Let's talk about that, because I disagree with you, and I would have been much more ready to do that in 2020, but I just felt like I didn't hear anything new from Patrick in terms of objections for crypto. And I feel like I have answers in my head to basically everything that he raised, and I know that I'm not about to convince him. If. If a almost $1 trillion asset price of bitcoin has not convinced him, he knows.

B

What am I going to, like in the realm of $1 trillion? Wrong. But he also thinks that he has points that are valid. But I think that the points that he was making and many who, like, critique crypto are, like, making points that are, like, points about the banking system. Like, if the banking system is a monkey, then they are making points about, like, well, this monkey can climb the tree, but we're like, no, but, like, we are fish, and we have this entire ocean that we just discovered. And so, like, it's. Everyone's making points, and they're all good and valid, but just, like, he's making trad points about trad systems and where crypto people make points about, like, a completely different universe, and it's often people talking past each other.

A

Yeah, I just feel like he. Yeah, he wasn't going to be convinced, and he's also. He's partially right about things, but, like, overall, right. I just. Overall, he's much more wrong than he is right.

B

If we are even positioning him as, like, completely contra to crypto. I don't think he's, like. I think there are pro, like, elements about crypto that he's, like, indifferent on. Like, we told him when the episode was over. Like, hey, go listen to the crypto Renaissance episode and, like, hear what you think. Because I think. I think it's a hard time to frame to argue against crypto from the perspective of permissionless access to financial tools, unless you're a statist. The only, like, there's elements, though, with him, he's definitely a status a little bit. Yeah, yeah, yeah. But like. But also, just, like, there's so many elements of crypto that, like, the only directly opposing perspective to crypto is, like, the authoritarian one.

A

Well, okay, so let's. Let's. I want to get back to some of those objections that he raised, and I raise them with you, and maybe we can kind of, like, discuss them in detail. Because some things, he's partially right on, some. Some things, he's all the way right on. Some things I think he's just flat out wrong on. But I want to address kind of the. He called himself jokingly, a dirty statist, uh, in the episode, and I would not characterize him that way. Like, that's his own, um, like, framing. But there are elements where I feel like he is downplaying the significant need for civil liberties to be embedded in our money system and the absolute erosion given the digital age and given kind of the creeping state of those civil freedoms, civil liberties that were kind of embedded when, I don't know, the US originally started or like, you know, pick your nation state before we had complete digital surveillance on our, on our money systems. And I think he has focused more on, like, efficiency. And it's always the case that a centralized, top down, everybody agree, consensus database will be far more efficient. It's always the case that a system that is, like, fully trusted will be far more efficient than something that is decentralized. But the reason we also need a decentralized option is to be a check and balance on corruption in that centralized system. Right? Like we need a, you know, he was talking about, well, you're putting all your transactions publicly on a database. And I wanted to retort, well, we could fix that with privacy technology.

B

Yeah, it's like, stuff like that. It's like, yeah, that's what you think now, right?

A

And like, if we propose doing that, or let's say there was an EIP, you know, two years from now, that's like, hey, breakthrough ZK technology. Just everything on layer one is going to be private, and all our layer twos are private as well. I'm guessing that somebody like Patrick would push back against that and just be like, but what about the terrorists and money launderers and criminals? And then we would be like, but I thought you were criticizing us for plain text transactions that are publicly visible for everyone. I just don't think he actually wants that either.

B

Yeah, you're saying his position is crypto won't be able to win and he'll always find a counter argument.

A

I kind of think so. I kind of think so. And maybe that's like, he'll never be a crypto bull.

B

He's just permanently a crypto.

A

Something about it he just doesn't averse to crypto. It's just like, something about it. I just love, I just will never not love crypto. Like, it's just something deeply kind of like, I don't know if it's a personality traits or what, but I just gravitate towards this way of thinking and the technology itself and the idea of self sovereignty. And I think there's something that he just does not like in that. But anyway, I guess back to the point of. He is, I think, more tolerant of state encroachment and power and less in designing the perfect financial system and just not thinking as much about the silver liberties that we tend to emphasize.

B

Yeah, well, I also think, like, he's probably, like, Gen X, right?

A

I don't know.

B

Probably Gen X with Boomer tendencies is what I'll label him. And I kind of think that those generations, they're, like, built inside of the dollar empire, right? So they can't even, like, they don't even know how to be the frog who jumps out of the water. And, like, the opposite of the boiling the frog metaphor. They're like, that's the water that they swim in, the air that they breathe. And so they can't even think about, like, a non state financial system, even though that is the more natural version of a financial system to exist, is the free market rather than, like, contained by the state. And, like, this is the reason why crypto is such, like, a wealth opportunity for young folk is because, like, boomers are going to have to sell all of their equities and real estate and dump them on the millennials and the zoomers, whereas with crypto, there's no one, there's no prior generation with, like, trillions of dollars of wealth to dump their bags onto.

A

Right?

B

Like, and so crypto is, like, up only from a generational perspective because there's only buyers, there's no net sellers, unlike equities in real estate, for example. But this is where the boomers have made all the wealth. This is the cage that they are in. This is the system that they have been built around. It's the system that they govern over and point towards themselves. And so these older generations are part of the whole narrative around the system. There's no coincidence that Elizabeth Warren wants to regulate everything because that's the system that she's born in. She wants. I mean, did you watch that talk where, like, the. All the regulators just want every want to regulate everything because that's how they basically take bribes from that industry. Yeah, exactly. That's how they see the world. And, like, the younger generation don't have these lenses. They're kind of, like, out of the cave. They're out of Plato's cave, and they can see the light for what it is. Yeah, I think it's just, like, as simple as that.

A

There's an element of that for sure, probably. And yet also, I do want to give him more credit than that because I think that you don't think he's.

B

Like, a boomer sheeple.

A

Well, no, I think he is somebody who definitely embraced the Internet. And one question I didn't get to ask him, but I wanted to, is like, you embrace a decentralized, open communication technology called the Internet. You're hyper bullish on the Internet. This is that for value. And why are you not now hyper bullish on.

B

Yeah, there's a line there that not everyone crosses.

A

Yeah, that's exactly it. That's exactly it. And maybe it is kind of like generational and sort of, you have to be sort of alive in the movement. And by the way, I cannot wait to dump all my bags on Gen alpha and beta, or whoever the future generations are. They come after us.

B

David, I think the next generation after Gen Z is Gen AI.

A

Yeah, they're actually called Gen Alpha right now, but maybe it will come Gen AI. But anyway, yeah, and they'll like, yeah, there'll be all sorts of things that they call us boomers about.

B

I think one of the lines, one of the reasons why that line is different than like, oh, now we have money on the Internet. When the Internet was created a line. But, like, now we have money in crypto. Like, there's two different lines there, and many people made it over the Internet. Hump, or at least the ones that didn't all, like, you know, didn't make it. And so, but like, there's a difference in making the jump from money on the Internet to money in crypto, which is like, one of the things that you started off with just now is like, um, but like, are the. There are like, our civil liberties and rights as humans, like, baked into these financial systems. No one, like, that's a hard leap. Like, I think Patrick sees finance and technology, and he can put those two particles together. Yeah, but when you add, like, politics.

A

Yeah.

B

Into as a part of particle and add that to the money money technology system, like, not many people can get behind.

A

I think it's more that than generational. Part of that is generational, but I think it's more that I think it's. He is so not okay with the separation of money and state. I think he thinks money and state is actually a good idea, and it's generally, it's working out, and he doesn't see a big problem there. And that is also probably the reason why he doesn't see a need for a non state store of value. Right. Like, he thinks that that is the root of. He just does not acknowledge that the store of value use case is, like, legitimate, actually useful for the world in any way, and has a presence. And there, by the way, is where crypto has been the most successful. Bitcoin sucks as a peer to peer payment network. It absolutely sucks. He's right on when it comes to that. He he is, he is not right. Uh, from the perspective of, like, bitcoin being a store of value, he just completely discounts that use case because we already have a store of value that's secured by the state, not necessarily the dollar, but it's called the s and P 500, and it's pretty great. And, like, Warren Buffett has been doing this for, like, you know, 70 years, and that's his store of value. And so why do you need bitcoin as a store of value when you can get a state secured, like a property rights system for american companies, and that can be your store value. So shiny gold metal, that's stupid. Bitcoin being a shiny gold digital metal, that's even dumber. And by the way, it's far more volatile. And so why in the world would you want this thing if we already have a store of value, too? It's just called gold. Go buy the gold ETF. It doesn't fluctuate as much. It's not as correlated with the stock market. I think it's basically the root of it is he doesn't have the separation of money and state ethos. He doesn't have the political lens on this, which is like, hey, a non state money system that is Internet native is actually a good and necessary thing. And that's kind of what we're building from first principles here.

B

Yeah, yeah. I think understanding store value from first principles is also understanding, like, some very deep things, like human nature psychology. I'm going to make a shoot from the hip here and just claim that the institution of politics arose when there was more than one person, as in, when there was two people that had to govern over capital, and capital was defined, but that's an institutional politics. And so we have bitcoin, like a money system by the people, for the people. That is a political system. Nick Carter was actually the first person to bake this idea in my brain that these blockchains are political systems. Uh, like, each one has its values invoked in them. Uh, and. And so, like, it is like, we talk about, like, bitcoin, Ethereum. Bitcoin is money, um, is separation of money from state. Ethereum is a separation of, like, markets from state or finance from state. But also, at the same time, like, bitcoin is a state. Ethereum is a state. Like the state of ethereum. Uh, bankless nation. Right. Like, the reason why we use these words. Uh, and like, I. That is the thing that I think boomers and Gen xers have a hard time getting outside of, because to them, the state is like a nation state. And one of the coolest things that crypto does is it shatters the identity of a state into a bunch of different pieces. And then we have Balaji's network states, which is way too far. We should stick to the Internet for now. But just Internet states. These are Internet states, and I don't think boomers are really going to be able to comprehend that concept or the power of that concept.

A

Some will, some are, some will. Of course, it's more difficult, for sure. I think another concept that he probably is right on is sometimes crypto make extraordinary claims that are not backed up by the use cases. We do do that, though, a ton. We do that a lot.

B

It's like our hobby.

A

Bank, the unbanked, is definitely an unfulfilled mission of crypto, and I don't think we've done a lot of that. I think our best use case there is, again, using crypto as a store of value.

B

Yeah, but they use. That's like, that's actually been the bigger tool.

A

It's probably more stable coins. And what's interesting about stable coins is that it's partial crypto technology, but it's also partial banking technology. We're just like exporting the us banking system, right.

B

Stable coins are like a fintech layer on top of banks, and we're just.

A

Exporting that to emerging markets of the developing world. And he looks at that use case as legitimate, but he said it's paltry. It's still pretty small compared to what I think it's small in the context of take crypto's biggest banking. The unbanked use case is probably tether and tron, honestly, or like something on BNB or something, but, like tether on Tron, it's still not doing a whole lot for people. Like, I don't have kind of the comparison, but you compare it to a successful fintech platform, and it's just like, maybe a mediocre kind of successful fintech platform. My argument is that's just the first inning of this, and our wallets are getting way better. We could build fintechs on top of this infrastructure. I think that will completely change in ten years time. So I actually think he'll be wrong on that over the long run. But up to this point, it is true. We haven't done a lot of banking the unbanked, let's say, and that remains an unfulfilled mission. We haven't really scaled are blockchains that is now just happening with layer twos. So I think from if he looks at that audacious claim and then he sees all kind of the rampant speculation, kind of like the meme coins and this sort of thing, and he kind of points to an underlying hypocrisy here with crypto claiming to be something that it's not like selling a bill of goods. Right? You talk about these things, but what you're actually selling is gambling and speculation. And I think he's not entirely wrong there. But what say you?

B

Yeah, yeah. I mean, like, the, there's an outsized amount of gambling and speculation and, like, degeneracy versus actually banking the unbanked. But also, at the same time, I'm also not totally sure about that because, like, the whole, like, web three adoption in, like, South America and Africa, which is, like, where the majority of, like, the actual true banking of the unbanked is happening, that's like, it's like a silent part of crypto. Like, it doesn't make any noise, like, it doesn't catch any eyeballs. No one's writing articles about it, but, like, there is, like, stable coin adoption across the board in both Africa and South America. It's just like, it's just, like, not a sexy topic. So, like, no one really makes content about it. And, like, we don't know who to go talk to other than, like, the few, like, people I've run into in my travels at, like, Zuzalu or, like, you know, out and about. Right. And so I do think it's just like, it's like this silent seek. It's like, secretly crescendoing subject matter that I think, like, at one point in time, we're going to look back and I'm like, oh, no. There was adoption this whole entire time. It was just silent because people just silently used binance and tether to store their value away from their deflating fiat currencies. And that's. That's a crypto win.

A

And I also think it's what one thing he doesn't see is that it's a fail safe against a local political banking system that fails its people. Right? So very easy for the government of Nigeria, let's say, or government of Argentina or something, have a failing banking system, a failing local currency, very easy for them to block. Fintechs just shut them down. They can shut down any kind of western fintech that seeks to enter or an asian fintech or any local fintech. Easy to shut down. Just lock them into the banking system. Very hard to shut down private key stablecoin on a blockchain. Right.

B

I do think there's, like, probably a world where, like, a lot of crypto stuff, like the crypto people are like, but like, but what if this, like, kind of doomery future happens and we look like Doomer conspiracy theorists, and then that future might actually happen, and then the crypto people are like, this is why we're building this, right? Like it's the. It's the file of Gaetriel or whatever.

A

One thing that some of the stablecoin people, like Paulo from Tether pointed out to me is how much the dollar is actually an apex predator inside these local fiat. They're not scared of. At some level, they're a lot less scared of bitcoin and ethereum than they are of a stable coin in their local market.

B

Yeah. The global permissionless payment rails is going to kill fiat currencies, not because bitcoin is going to go to, like, $10 trillion, but because dollar stable coins are going to go to a trillion dollars in supply.

A

Right. I mean, they want to keep those out too. Right? So they've very, you know, it's been very intentional to not let their economies kind of dollarize. But when you have. When you have unstoppable blockchains and crypto networks, then, like, do you even have that option anymore without really clamping down on your freedoms? Anyway, there's a lot of political things I don't think he got here. I want to bring up.

B

I love these debriefs where we can just rag on our guests without them defending themselves.

A

We appreciate you, Patrick, if you ever listen to this. First, thanks for being a bankless citizen. We're glad you're on the crypto bandwagon. And secondly, we do appreciate it.

B

We're spinning up sock puppets of our guests and assuming what they would say.

A

Well, do you think that there's a conflict between us saying, yes, go bankless self custody, hold your own private keys, not your keys, not your crypto. And us also cheering on the bitcoin ETF and being so excited that number is going up?

B

No, no, no. Because it's always been about having the option to do these things. It's never about being maximal, about, it's not about being like, bankless extremists. It's about being bankless pragmatists. I've always been a bankless pragmatist.

A

That's why you still have a Wells Fargo account. You a hypocrite.

B

Yeah, where am I gonna pay my rent from? My landlord? He is 87 years old. He is taking, he only knows how to take a check.

A

Okay, yeah, I totally agree.

B

I would like to live.

A

I totally agree with that. My groceries less banking is not about completely forsaking all of it, or you're a hypocrite. It's just like about migrating some of your wealth over there over time and some of your transactions on chain over time.

B

I have the most minimal possible banking footprint that exists. Okay, but it's food and rent.

A

The other thing people just seem to identify as hypocrisy is like the constant cheering of number go up. And so that's another thing that Patrick like, okay, so why not?

B

Because these are political systems that have values and purpose and direction and optimism, in my mind, imbued in them. And when number goes up, it validates those values, is a strengthening of those values.

A

Okay, but isn't the real reason your cheering number go up? Because you're just a greedy son of a bitch?

B

David Hoffman the future of humanity is the integration and synergy of greed and human values. If we can combine with there are, there is no success if we don't leverage human incentives with values along the way. The best thing about crypto is that we have the technological means to produce coordination shelling points on these systems that align with our human values that go up in price when more people leverage those good human values as shelling points.

A

Yeah. And what I would add to that is I would say we among, kind of crypto tribe think that a non nation state store of value is a good thing. And the more of that, the better because it is a counter ballast and check on power on the nation state. And so we each year number go up because that makes our liquidity higher, that increases.

B

It's a big tent advertising number go up is big tent. When we have higher market caps, more people can use our stuff.

A

Yes. It's also free marketing, by the way, as the best marking we have. Also, it directly contributes to our military defense, the economic security of our networks. And that's our thing.

B

Our pacifist peace, only defense, only military defense of our blockchains, which is proof of work and proof of stake.

A

Yes.

B

No weapons involved.

A

It's not, it's not like a missile.

B

Shove that tank up your butt.

A

It's more like a shield. It's more like a shield.

B

Only shield. Shield, no arms.

A

And also, this is a concept we haven't talked about in a while, but it increases our economic bandwidth as a classic bankless term, which basically means we can build things on top of this property of money, this crypto native money that require value. So one classic example is, maybe someday, David, we can have a stable coin that's completely decentralized.

B

Stablecoin.

A

Decentralized and uses ether as a store of value, or bitcoin as the kind of the underlying store of value. And the stable coin is kind of built on top of that. So these are all of the benefits we get, and this is why we cheer. Number go up.

B

I think the number goes up. Actually turns a lot of people off in the outside world. Like, I'm going to go and just invoke the boomers once again. Sorry, boomers.

A

Stop blaming the boomers.

B

Love you, boomers.

A

You blame some more status, because I.

B

Feel like it's more the status. The status. When the status. See bitcoin and eth and all this stuff, like, number go up, they're like, how dare it go up.

A

Rowan. Crazy. It's like this. Do you remember?

B

Yeah.

A

Do you remember?

B

Yeah, yeah. Totally big. He's our favorite statist. Yeah. Um, and, like, I think that the whole, like, number go up just doesn't compute for them because they're used to the dollar, which is strictly number go down. Like, you're not allowed to have money that captures value. You're supposed to take a value away from the money and give it to the political parties that are proximate to you. That's how these systems work. That's how my systems work. So, like, the idea of a money capturing value means that they don't get to leverage that value because it's the money is absorbing it rather than the surrounding political sphere and apparatus. And so it's an offense to the political elite to have a money that goes up in value, because that's what. That's their lunch that is getting eaten by the money. Yeah.

A

Yeah.

B

I don't know if anyone's ever. Have you ever heard it articulated like that before? I need to say that more often.

A

That. That was beautiful, David.

B

Thank you.

A

I can't wait to listen to this debrief myself on the bankless premium feed. You know, another thing he said where I almost jumped in again, just biting my tongue a little bit. Patrick, I appreciate you listening to this podcast say all this. He said, self custody is impossible. I wrote that in my notes for crypto or nearly impossible.

B

He meant, like, global, like, everyone doing it right.

A

He's so wrong about that, David. He is so freaking wrong. So, first of all, his current state acknowledged not everyone is going to self custody. I completely agree. And that that is why we should have coinbases and Krakens built on top of. And we do have that in crypto, right, to protect your private keys. But secondly, my friend, social recovery smart contract wallets, like, we can do a lot more than we're doing with respect to self custody. That is going to be, like, generations from where we are today on the wallet front. And that statement is heavily just self custody is impossible, is heavily discounting the rate of progress that we are going to make over the next decade in our crypto wallets. I think that it will be possible for somebody who is 70 years old to self custody, actually, and to have, like, a decent user experience and also acknowledge not everyone is going to do it.

B

I will say that we've been saying that for a long time now, and, like, we actually kind of need to get that.

A

Have you, have you tried some of the, like, the Coinbase smart contract wallet recently?

B

The coinbase wallet is great. Great. Is that social worker?

A

I think grandma can do things like she could have her legal guardian as a social recovery agent or something, like her lawyer or tax accountant or something like this.

B

There's gonna be services to do account recovery 100%.