SLP436 Juraj Bednar Bitcoin as Parallel Economy

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Juraj Bednar (Author, speaker, co-founder of Paralelni Polis) joins me on the show to chat about:

  • Cypherpunk and libertarian thought
  • Building out the Bitcoin parallel economy
  • Vekslaks and p2p
  • Tips for onboarding bitcoin and lightning users
  • Lightning wallet comparison

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Podcast Transcript:

Stephan  – 00:00:08:

Hi, you’re listening to Stephan Livera podcast, a show about bitcoin and Austrian economics brought to you by Swan Bitcoin. Today for episode 436, my guest is Juraj Bednar. He’s well known as one of the co-founders of Parallel Polis, and he has a lot of interesting thoughts around Bitcoin as a parallel economy. So we get into some of that discussion around cypherpunk and libertarian, thought building out the bitcoin parallel economy and peer to peer, as well as tips for onboarding Bitcoin and Lightning users. We have an interesting discussion towards the end of the episode around Lightning wallet and what are the best tools to onboard people with? Are you looking for a smartphone and desktop wallet for bitcoin and Liquid? Blockstream Green is a great choice here. It has support for multisignature security, it has full node verification if you choose, and also Tor support. It’s available on Apple, Android or desktop. And the multi signature feature has Blockstream holding one key on their server, protected with two factor authentication. And you still have a time lock or a third backup key to ensure you always retain full ownership of your funds. There is also an integration with hardware worlds like Blockstream, Jade, Ledger and Trezor. So you get the best of both worlds. You can have cold storage with your private keys combined with Blockstream Green’s suite of features. So if you’re interested in this, go to blockstream. com/GREEN. Now, when it comes to bitcoin, hardware coinkite.com are producing a range of products that you will find interesting. The cold card is the top of the line hardware device which has multiple secure elements.It has NFC support and really interestingly. You can spin up a wallet without even connecting it to a computer. You can just plug it to the wall and set it up in this way. So it’s a really reliable format and it’s a very secure option. Now, for those of you who are looking for a cheaper device, you can look at the tap signer, also available over at Coin Kite. This uses NFC and you can use it easily with phone wallets such as Nun Chuck. They’ve also got a range of other products like the block clock, the range of block clocks, and they have other metal backup devices. Also. You can get all of this over coinkite.com and get a discount on your cold cards with the code Livera. Now, when it comes to securing your cold storage, Unchained Capital are here to help. With Multi signature, you can remove single points of failure from your setup using their multisignature vaults. And if you need some help with setting this up, they have a concierge onboarding program where you can go, they can guide you over a call, they can send you the hardware devices that you need, and they can help you withdraw from an exchange into your own vault. Now, they have a range of other products and services around this. So for example, there are people who may want to collateralize a loan and use the loans product unchained, also offer a trading desk and they also have a range of educational content which you can find over on their website. Over unchained.com use code Liverafor a discount on your concierge package. And now on to the show with Juraj Bednar.

Stephan – 00:03:03:

Yurai, welcome to the show.

Juraj  – 00:03:04:

Thanks for having me. Hello everyone.

Stephan – 00:03:07:

So Juraj, I know you’ve been doing some writing and speaking about Bitcoin and obviously related ideas that many of us believe from the libertarian world. Things like algorithm crypto, anarchy, cipher, punk ideals and things like this. So obviously, I’m interested to chat with you and talk a little bit about this idea of building a parallel economy and the right tools to use for that, whether that is tools for us to use for ourselves or when we are helping onboard our friends, our family. What are some of the ways, methods that we use to do this and tools? So do you want to just give us a little bit of a background on yourself, just for people who don’t know you?

Juraj  – 00:03:46:

Sure. So I was interested in it. I was programming since I was six years old. Obviously I had to learn to read first and then from It security. I learned about this thing called Bitcoin maybe eleven years ago, very early, but I was looking at it from the point of view of it, how do we reach consensus in decentralized way and so on. But of course I didn’t know if this could work as money. So I pinged my friend who is another Juraj who is an economist of Austrian school, and I explained, okay, this is how it works. Can it actually work as money? It works as a software. So he said probably not, but it’s very interesting. Now he’s very much into Bitcoin as well. So then I was cooperating with an art group, a Czech art group called Stohovan. And I was part of like we are two guys who were hackers and we’ve been doing some projects together. And then artists, of course, they are like, okay, you are talking about this Bitcoin thing all the time, but let’s see if it can actually work. Talking white papers and software is nice, but can you actually build something with this? So they signed the rental contract for a three story building in Prague and we decided to power this building with Bitcoin. So everything from customer payments to employee salaries, everything was working on Bitcoin. So I was kind of involved in this kind of experiment very early on. Parallel Polis is now nine years. There are other locations not only in Prague. We had one in Bratislava that’s closed ,unfortunately. There’s one opening in Koshitza in Slovakia. So we’ve been playing with this technology. So my background is it more specifically it security. And now I’m basically full time in Bitcoin. I’m a writer. I wrote several books. So that’s my current background and focus.

Stephan – 00:06:01:

Yeah, sure.

So let’s talk about the theme then of parallel economies. And obviously Bitcoin can play a big part in this, and many of us would like to see the growth of that. So could you tell us a little bit about why, from your point of view, why is that essential?

Juraj  – 00:06:17:

So it comes from the idea we were inspired by the idea of India. So just a very short historic background. I’m from what was formerly Czechoslovakia. I grew up during communism. And there was in 1977, they tried to reform the government. They wrote this petition. Important people signed it. It was called Charter 77. And it was not like, reform, don’t be communist or let’s have democracy. It was like, just be a little bit better. And the establishment, the dictatorship of the party completely refused it. And so some of the people, including this VAT Salbenda, who is behind the idea of parallel polis, said, okay, so what do we do now? Reforms are difficult to organize, revolutions are bloody and expensive, so let’s do something. So the idea is we can say, let’s leave everything in society as it is. Don’t try to reform and build something in parallel that is better or at least competes with a normal mainstream society. So a good example would be, for example, during communism, you had to send your children to a school that was of course a little bit, or actually quite a lot, just a brainwashing institution teaching, Marxism, Leninism, and so on. And if you didn’t send your children there, they would take them from you. And basically it’s mandatory. You cannot say, oh, I don’t agree with what you’re teaching, but no one would forbid you from organizing an evening school of whatever democracy or Western thought or something like that. So people would meet in a kitchen at 6:00 p.m., and someone would give a talk about whatever. I’ve been to the US. Once, and this is how it works for 5-10 kids. So basically the idea is if you have these parallel structures and that could be also monetary trade they had religious, cultural, doesn’t matter. So if you have these parallel structures, they are competing. So they exist in parallel to the mainstream society. And it’s interesting because people either switch to the new one, which kind of forces the mainstream society to become better, because if everyone is leaving, you have to do something, or people just leave and use a better service. So this idea is to create as many parallel structures as possible. So for us, what is important, of course, is a parallel financial system. That’s why we only work with Bitcoin. We do not accept state fiat. But also you have things like, okay, what happens when there’s a dispute among us? How is it solved? So you need some kind of dispute resolution system, how to do education. Of course, it’s another huge topic, and many, many others. There’s spiral energy production, there’s food production. It doesn’t have to be. You do not need to build everything from scratch. If something works and no one is interested in building this parallel structure, then you can just use the mainstream one. But for the important stuff we wanted to try, and we are beginning nine years ago. So just to give you an idea, many people were paying for coffee by typing the address into their laptop, super Long bitcoin address or scanning the QR code with a webcam with a laptop.

Stephan – 00:10:33:

Really hoping to check some works there. Hey, yeah.

Juraj – 00:10:38:

When we were starting, we were not like, oh, okay, this is the future. We were handing away one bitcoin just for people to accept it. And you can see it in your wallet. It works. So it’s not about necessarily going there from the point we know how to do it better, but you can just start building. Maybe it’s like entrepreneurship. You start building. If it doesn’t turn out well, then you do something else. Or you say, okay, maybe the mainstream solution is good enough. So you don’t know with economic or with this parallel financial system. What is interesting is that we also opted out from the state surveillance, which was very interesting. In many European countries, it is now mandatory to upload all purchases to a government database. So when you go to a pharmacy and you buy whatever medicine or let’s say Viagra, then the pharmacy has to upload this information to the government database that someone bought it. Of course, if you pay with credit card, then this information about the purchase can be paired with your identity. They often share location and so on. So Parallel Polis was one of the few places that openly said, we are not submitting you any information. So if you want, you basically have to raid us and confiscate something. But we are not going to comply with this law. And this is interesting because we found ourselves, especially in Czech Republic, in Parallel Polis. It’s a bit different, but we found ourselves in a position where we gained a little bit of sovereignty because it is my opinion that they figured out that it’s not worth their time trying to prosecute us because we will always win in the media. Let’s say they would force us to join the surveillance system. So what would media say? Government raided a nonprofit organization that is doing a lot of good and they are forcing them to spy on their users. So if you can work with the media, have a good idea, and are creating actually something parallel, you don’t want anything from the mainstream society that is crucial. So we do not take state subsidies and EU funds and so on, then you are in a quite a unique position where you’re kind of isolated also from some of the rules of the mainstream society. So that’s interesting, right?

Stephan – 00:13:23:

And so this may be applicable for listeners somewhere else in the world that maybe they want to just set up their own BTCPay server and just be a freelancer and earn using bitcoin. And so I think we’re just really early. It’s just difficult to convey that for a lot of people. But you could be using BTCPay today. You could be using Muun wallet or Breez or Phoenix or one of these easy Lightning wallet and just take payment. That way you could be doing it on chain, right, obviously with hardware wallets and so on hardware signing devices. So I think that there’s all of these different angles to it. But I think probably best might be to contrast with because people might be listening and thinking, no, I just want to hodle right.

Stephan – 00:14:12:

Now. Personally, I am happy to earn and spend, but I also understand and appreciate the people who are just saying, no, I just want to hoddle. So what would you say to that person who’s saying, no, just hoddle?

Juraj  – 00:14:23:

I would say that they have a shitcoin problem. I’ll explain what I mean. So for me, one of the ways how to look at money is that it is one of the meanings I think is it can be used as a memory of good deeds of society. So I help you and you give me money. And this money is recorded in a database, let’s say distributed database in this case. And I can use this, let’s say thank you note to get another good deed of society. So let’s say, I know that you like bitcoin, but I only hodl, I’m only more sad. So I will never spend my sats. So you do a good for me and I give you a thank you note of whatever, €100. That’s to me, this is probably like writing this thank you note on a piece of paper, maybe spit on it and throw it at you. I know that you prefer bitcoin as a form of gratitude. And I have a shitcoin problem. I want to get rid of my shit coins. In this case, €100. So I dumped it on you. And I don’t think that’s very nice. Of course, if I know that you don’t have even a wallet and you don’t care about it, then okay, I give you €100. But it would be much nicer if I knew that you like bitcoin if I paid you in bitcoin. So what is the shitcoin problem? So obviously I had €100 that I wanted to get rid of and instead of buying bitcoin for it and showing my appreciation to you in a way that you would appreciate more, I was solving my shitcoin problem by dumping this coin. So in Parallel Polis, we had one guy who was he didn’t want to spend. It was actually Litecoin back then because bitcoin had fees and Lightning was not ready yet for payments. And he was like, oh, no, I cannot buy this espresso with my precious coins because in a few years I will probably be able to buy whatever a bicycle for it. So he had a strategy. He would go, he would pay for espresso and then he would buy twice as much litecoin or Bitcoin in the ATM. So he just solved his shitcount problem and that’s it. For people who are not in Bitcoin right now, I think this way of looking at it as a memory of good deeds of society is good. And what I always say to people is if the main database or main memory of good deeds of society gets corrupted, which is being corrupted every day by central bankers, it might be a good idea to have some entries in the backup database which is bitcoin, but then use it also as a form of showing your gratefulness. If you want to have more Bitcoin than just buy more. It’s very simple.

Stephan – 00:17:37:

Yes, it’s an interesting framing and an interesting way of putting it. And I think one other interesting point or question that I think would be interesting to hear your view is in some of your writing. You point out this idea now in relation to doing a parallel society or parallel structure. You say it’s not about mass adoption or about gaining acceptance by the system. Why is that?

Juraj  – 00:17:59:

So? These are two topics. So mainstream adoption, I think is a wrong goal because the value of Bitcoin is different to other people. So some people who, let’s say, travel a lot or live in an oppressive government, they might want it right now. For some people, they’re just not ready. They’re afraid of volatility. They would do something stupid such as keep it on an exchange or something like that. And I’ve learned that if you push it too much at people, they kind of start being a little bit reluctant, they don’t want to talk to you. And we push it because in parallel police, everyone who wants to buy anything, they have to go through this Bitcoin torture, get their wallet and so on. I’ve actually onboarded a lot of people, but I don’t think that this is a good goal. I think for many people, they should start using it in their own terms and they should get it when it’s ready. That being said, this entry in a backup database is a good idea. But not everyone is crazy like many of us in parallel polis who are all in on Bitcoin and are even borrowing fiat because why would you not short fiat, especially if the interest rate is lower than inflation. But for mainstream, not everyone is ready. And if we start slowly building these parallel societies and people go there, people join this parallel society because it brings them value. The quality of the relationships between people and the reasons and the quality of acceptance of Bitcoin will be better. So it’s not someone pushed this on me and then it crashed 50% and now I’m poor and why did you talk me into it? And so on. I don’t like this idea of pushing. I think people have to choose it. As for acceptance by the institutions and mainstream society and the system, let’s say I don’t think that’s a good idea because if you are building a parallel, you don’t want them to bring the corruption basically into the parallel society. So that’s why we not only not accept fiat, but we also refuse all the money from like, for example, there are sometimes exhibitions or you cooperate with artists, but you do not want to interact with artists that are financed by Ministry of Culture. Why? Because that didn’t come up organically. There’s someone in some commission that decided that this is a good art. But you’re basically perpetuating these ideas of the system, which doesn’t have to be bad. I have to admit, sometimes they finance good art, sometimes the train runs, sometimes the road works. But if you are trying to build a parallel society, it’s not a question of picking what is good from the mainstream society. The question is, okay, can we build it better? If not, why is there a demand for it or not? And the mainstream, especially financial system, brings a lot of corruption. There’s a lot of printed money, low interest rates. We are still quite a lot of dependent on, let’s say, US dollar interest rates and these things. And if you bring institutions, it becomes more and more corrupt. I will give you an example because it’s not only regulations by law, but also regulations by the network effects of the financial system. So, for example, there are bitcoin ATM providers here in Czech Republic and Slovakia. And they were they were selling Monero without KYC. So that just, of course, bitcoin as well. But but I want to make a point about regulation. So what is the business of an ATM operator? Once a week, someone comes with a key, unlocks the ATM, takes out the cash, goes to a bank, meaning regulated mainstream bank. They do a cash deposit, then they wire the money to, let’s say, Kraken, or a mainstream bitcoin exchange, which is also a part of traditional financial system. And then they swap it to bitcoin, and then they can sell more bitcoin. So we expect, okay, it’s the best bitcoin, it’s non KYC. You have nothing to do with the traditional financial system. But once a week this round happens and it can break. So two things happened. First, many ATM operators had a problem with banks. Banks just closed their bank accounts because they weren’t okay, you are selling bitcoin without KYC. For us, the banks, we are risking our license because someone could whatever launder money, whatever explanation, but their license is at stake. They only can do their business if the state allows them. So they said, okay, we are not going to risk it. You know, we are not making any money from, from you. You know, cash deposit is one dollars, wires are free. We are not making any money from you. And we, we have a lot of risk. So actually it was a case we, we even did a video by shining the giant bitcoin logos on banks and central banks. But this was the problem. And they didn’t break any law. It was not mandatory by regulation to do any kind of KYC. It was self regulated by the banking system. The next thing that happened, okay, they’ve finally got some bank account and they could operate, but then an exchange told them, okay, it’s all good, you have your AML policies and forms and everything, but you cannot sell Monero. We list Monero on our exchange, you can buy Monero on our exchange, but you cannot offer it in the ATM because we are afraid that the banks will disconnect us from the banking system. So the banks actually regulate also the exchanges because they need a banking connection. So a lot of these regulations are not actually passed in the parliament, but they are enforced through this. Everyone wants to be part of this huge network effect of wire transfers and SEPAtransfers.

Stephan – 00:25:13:

Yeah. So you were saying basically that banks in effect regulate or they push conditions onto the exchange to say, no, you’re not allowed to sell Monero because we don’t like the regulatory risk that pushes onto us. Basically they’re worried that they’re going to lose their banking license or that their own regulator is going to come after them for that, or other banks will.

Juraj  – 00:25:31:

Not want to have a banking connection with them. So this is interesting. So I think for us bitcoiners, it is much more important to kind of build out this parallel society than to ask for acceptance. Because with acceptance of the system of the mainstream society, there are many more strings attached than people realize. Because again, buying non-KYC bitcoin in an ATM, it feels very parallel. But actually, if you see what’s behind it, it’s not so parallel. So I think that building and actually spreading bitcoin to people that want to use it is much better than praying for institutions to come. And they came in 2017, everyone was, institutions will come, they will accept ETFs, and then pension funds will buy bitcoin, and countries will buy bitcoin, and it will be great, it will moon the price. But now you see, institutions bought it. They started with a custodian, they lent the money out, and we have this giant crash and a lot of problems. And the question is, was it worth it? Did we actually need the institutions? Was it something I don’t know. I’m not hyped about institutions and acceptance of the mainstream society because I’m trying to build something that is in the end, hopefully better.

Stephan – 00:27:05:

Yeah. So I think there’s a lot in there that I agree with. There’s maybe some small things I disagree with. Or maybe I maybe take a slightly in between position. I see it more like we can take advantage of the fact that there are favorable regulations or laws in different countries. So obvious example being El Salvador. Right? Having a bitcoin legal tender law. I know from a principle point of view it’s not ideal for there is article seven. I certainly get that article seven of the law theoretically mandates that merchants must accept bitcoin. Now, I know in practice, of course, it’s not enforced. In practice, it’s probably more businesses don’t accept bitcoin than do in El Salvador for now. Right. Obviously, I would like to see the number grow voluntarily. But let me put it this way. I think there are times where the enemy of your enemy can be your friend. And in some ways you can see the way that President Bukele has come out and spoken out against the IMF and other entities out there that in some ways, okay, yes, we’re libertarians and we don’t necessarily like the state. But in some ways I also have appreciation for what they’re doing because they could have done it a lot worse, right? So, for example, they could have started their own bitcoin, right? Venezuela, they started their own petro shitcoin in the past cycle. In 2017, they basically did say no bitcoin, only they have this digital securities law. They are trying to treat other coins as securities. So I think there’s aspects of that that I can appreciate because in a way, they’re actually restraining their own power, right? Because otherwise they would have been leveling capital gains taxes on people who spend bitcoin in the country. But because it’s a legal tender, they’re not. So aren’t there some aspects of that that we can actually say, hey, that’s actually a good thing. It’s a net reduction in state intervention in the market for money. Right?

Juraj  – 00:28:52:

Yeah, I agree with this. I’m a great fan of regulatory arbitrage, so I like to go where I’m treated best. I spent more time in Panama and Paraguay. Panama has actually a constitution that forbids government to say what is a legal tender. So you can use whatever you want. And there’s no capital gains taxes also in Paraguay, no taxes. I agree that El Salvador is of course this regulation is favorable to bitcoin. I agree less taxes always better. So that’s nice, but I think it is more a PR thing. So if you want to do a regulatory arbitrage, you can also go to Dubai, you can go to Panama, you can go to Paraguay and be treated the same. Of course, not every hot dog stand will accept bitcoin because it’s not promoted. But it’s more of a PR thing. And I think people should definitely make use of these regulatory opportunities. But what I say is do not rely on it. So what I mean by that is, even if you are in a country that doesn’t have capital gains taxis. That doesn’t mean you should go to a KYC exchange because at some point there might be a new dictator and they might say, oh, we are confiscating all Bitcoin. So it is still a good idea, even though you’re not legally taxed on your Bitcoin holdings. Maybe don’t go overboard and wire money to whatever Coinbase or any other KYC exchange and withdraw it to your wallet. But maybe also buy peer to peer, maybe don’t tell everyone how much bitcoin you have and don’t dox your addresses and things like that because yes, situation right now might be favorable in El Salvador or all these countries that I mentioned, but it might not be the case in the future and it might be a problem in the future.

Juraj  – 00:31:12:

And I think yeah, that’s a fair point. Also, I’m not disagreeing with you there. Things can change. I also think there is a broader point here about some of these problems are just fiat problems, right? Like the problem today is that most people have a lot of their money in bank accounts, right? And the challenge here is how do we help them get out of that and get that money out of there and get it into Bitcoin. And that’s obviously what we want to achieve or at least promote in whatever way we can. So that’s why I take a bit of an in between position. I see it like we want to grow our base. We want to win as many hearts and minds as possible of Bitcoiners. Meaning build up the base of Bitcoin users, people who are earning and spending and everything. And hopefully then that helps us in terms of the amount of people that the government would be screwing over if they start to become very unjust or raise the taxes or do all these kinds of things. But I mean, to your point, I think you’re right that people have to be wary and if they can have a plan B, like have some somewhere else that you could go. I understand. Obviously costs can be prohibitive, but it depends on where you go, what countries you are looking at. There are ways to find lower cost, ways to have a plan B as an example. So I think that’s something that we can look at. But I want to get into this whole parallel system as well. I know this is obviously something you are quite vocal about. You’ve been writing about this and talking about this. So let’s talk a little bit about that. So what does that look like? If you want to help grow the parallel Bitcoin economy for your family and friends, I see in your writing you mentioned this idea of is it vex lax? I think this is like a check term. Is it vex lax or Vexel or something? Yeah. Can you tell me a bit about that?

Juraj  – 00:32:54:

So, again, this is coming to our communist heritage. During Czechoslovakia. So in Czechoslovakia there was not a good way of exchanging foreign currency to Czech crowns and the other way around, travel was prohibited. So there were people, if someone came from abroad via bus, airplane or train at the stations or airports, there would be these shady looking guys that were saying Geldwechsel. So that means money exchange and it’s from German because most traded foreign currency was Deutsche mark, the German currency. So they would actually give you a pretty good rate. Of course, there were a lot of scammers, so you had to make sure that you were not scammed by them, but they actually gave you or helped you get what you wanted, basically. So these mutually beneficial exchanges, so they are quite known. There are even movies about them in especially Czech Cinematography. And also what is super interesting to me is when the communist regime fell, which was that there was a 33rd anniversary a few years ago, the people from the Central Bank, after the fall of communist regime, they needed to set an exchange rate, an official exchange rate. So they came to the Vexlaks and they asked them, okay, if I want to buy Czechoslovak crown right now, how much would you give me for 100 Deutsche mark? And the Vexlak said it, and they kind of averaged it out and they said, okay, so this is the official exchange rate, because they didn’t know. So that’s why I use this term. But you have many similar people, similar exchangers merchants. For example, in Argentina they’re called Arbolitos and these people will give you pesos for dollars in what is called blue market exchange rate. So not the official government one, but the real exchange rate. And there is an argument I’m sorry, you’re right.

Stephan- 00:35:14:

Can you just explain the one comment just to help explain for listeners what’s the point of this blue rate. Now, as I understand, basically in many cases, what happens is the government gives a bad rate. Basically the government is trying to give like a false rate. And so then when tourists who are unaware, just come and, that they spend with their card, they are spending at the official rate. Whereas let’s say the blue rate is kind of arguably at three times better. Yeah, so if you could explain a bit about that.

Juraj – 00:35:41:

Yeah, so it’s a way to control the exchange rate, basically to pump your Fiat shitcoin, which is inflating. And because these dealers, they are neutral to the exchange rate, so they want to make their fees. So let’s say their fee is whatever, 3%, 5%, that’s what they’re after. So they know that if they sell you pesos and get your US Dollars, they will be able to do the opposite trade in 30 minutes because someone else has an opposite problem and it’s a going rate. So it is discovered by the competition, it’s not one company, they are competing for their business. So they have to give you a good rate. So that’s why these opportunities exist in crypto. So a lot of times people are changing stable coins for Bitcoin or cash for Bitcoin. So these are the two most common cases and sometimes stable coins for papers for fiat banknotes. So normally what I recommend people doing is start your own, we call them backslider groups, but your trading group, meaning you can have five to ten friends who sometimes buy, sometimes sell, someone wants to pay rent, they need Fiat, someone wants to buy more Bitcoin. So it can be a signal group, it can be any other form of social interaction, except for telegram, which is a spyware, but please use end to end encrypted messengers. And in these situations, this is quite common, that trade clears. You don’t need a service like, I like all these BISQ and Hodl Hodl and all these services to facilitate these trades. But in most cases, you can actually find a counterparty for cash. That is important because many services actually don’t use cash, but use wire transfers. And that can be a problem. And I know of several people who had problems because they were trading wire to Bitcoin.

Stephan – 00:38:08:

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Stephan – 00:39:44:

I see. So to be clear, what we’re talking about here is if they were using Fiat bank account transfers, then they might have had their Fiat bank account either frozen or shut down because they were maybe running a lot of volume through investigated, right, volume.

Juraj – 00:39:57:

Or you sold bitcoin to some drug dealer and they’re being investigated now. Everyone is being investigated. It’s a permanent record in a fiat database. Often banks want to verify your source of funds, so that might be quite difficult because they treat it as income, even though you are just selling bitcoin and it’s not necessarily an income. So for cash it’s good. So in your city, in your town, where you live, find five to ten friends. It is very surprising that you don’t need 100 people. Usually you can clear a trade among five to ten people, works very well. There are several groups you have trust because you know these people, it’s not at everyone I recommend. People have also a parallel chat group where they can post news and links to podcasts and everything and discuss. But a trading group is for clearing trades. But sometimes what happens is there is this imbalance. So Imbalance right now, when we are recording is 25th November, bitcoin is, whatever, $16,000. So it’s a crash. Everyone wants to buy bitcoin. So if I open the trading group with the friends, everyone says buy buy buy. No one is willing to sell cheap bitcoin. So this is an opportunity for semi professional trader that sells bitcoin. And they are not after cashing out of bitcoin, so they want to stay neutral to the exchange rate. So they need to hedge the price somehow and then they will buy it from you later. So basically, same idea as the Vexlak, they want to make their three to 5% fee, they do not care about the exchange rate. And this is one of the ways how people in bitcoin parallel economy can either make a living or just get some additional income. And it is not for everyone. But usually when you see these trading groups, there are one or two people who start doing this and they actually help with the demand. So normally you would clear the trades with 0% fee because there are like two matching demands. Someone wants to buy, someone wants to sell, so they go 0% and everyone is happy. But when there’s this imbalance, someone who is semi professional can actually clear the trade, help people get their cheap bitcoin, or if they want to sell their expensive bitcoin or whatever else, and they make their fee, they need to know how to be hedged. But that’s about it.

Stephan – 00:43:02:

On that, can we just talk a little bit about that hedging aspect then? So let’s say the listener of this show wants to think about being that semipro person to help their friends. Does that mean they then need to go to an exchange. As an example, let’s say you want to buy a certain amount, I’m willing to sell you some of that. That means I have to sell that to you, get the physical cash, and then go buy that on an exchange, let’s say, or some other way that I have to acquire more coins so that I’m net neutral in terms of my Bitcoin stack. Is that the basic idea?

Juraj – 00:43:31:

Yes. But I don’t recommend just buying Bitcoin because then you are wiring money somewhere. So I prefer derivative exchanges. In this case there are many that don’t require KYC. So the advantage of derivative exchange is that they do not deal with fiat. So they do not have this problem of I need to keep my bank connectivity. So basically what you would do it’s one of the easiest way to have a dollar value represented in Bitcoin is buy Bitcoin and short derivative. If you maybe our listeners know Collider wallet, which is a collider project, they actually do this in the wallet. So you can actually see USD balance in their new it’s a Lightning wallet with integration to the derivatives exchange. So what they do is you have, let’s say Bitcoin worth $1,000. If you have Bitcoin worth $1,000, that means you are long Bitcoin. Then you open a short. You’re not shorting Bitcoin because you own it. So long and short cancel out and you have a variable amount in Bitcoin but the same dollar value. So you can do this. The advantage of doing this through derivative exchange is that the collateral on the exchange doesn’t have to be the full amount. So you can actually keep most of the Bitcoin in your hardware wallet and just risk the part you need for handling the fluctuations in the exchange rate. Many people do stablecoins. I’m not a fan of stable coins, especially not Tether. And the reason it’s different than with many people actually Tether is backed if we believe what they say, but let’s say we believe what they say. I think 60% of it is US Treasuries and I think buying debt or is directly financing the US state. You are basically buying their debt with your crypto. So that’s the reason. Of course many people say that there might be a bank run on Twitter or other problems, but for me it is philosophical. I do not want to help the US government to finance itself. So if stablecoins, I actually recommend more decentralized that are collateralized with Bitcoin or another crypto. So that can be collateralized by raw Bitcoin. And it actually creates pressure for Bitcoin, it removes Bitcoin supply. So it actually is a small pressure for appreciation of Bitcoin price. So you can do stablecoins, you can do derivatives. What many people don’t know is they can. One more thing, if you do derivatives, you are usually paid something called the funding rate. So this is good when there are no trades. When there’s, boring, everyone clears their trades in the group. There is no one that actually wants to pay you the fee. You can actually get an interest rate just from holding the short. Another thing you can do is you don’t want to be in US dollars, you want to be the other way around. So what you can do is you can take $1,000 and open $1,000 long on Bitcoin. So you have these papers, but you are keeping the Bitcoin value. So you are not exposed to price depreciation of US dollar. You are actually holding Bitcoin value. It’s not Bitcoin because it’s a derivative product, but you have these papers and on top you have the long position that will actually it will be the same as holding Bitcoin worth $1,000 at a time when you open the position. But for this you are usually paying the funding rate. So it’s a little bit more costly, but you’re not holding fiat. So that might also be an option.

Stephan – 00:48:03:

Yeah. Interesting. So just to be clear, this generally will include custodial risk. Right. But I guess what you’re saying is this would only be for a small portion, and this is only for the person who’s doing that let’s call it semipro Vexlak guy in a group who’s doing this to sort of help facilitate for that group that he’s operating as part of to help them do their trades. That he’s using the derivatives and a certain portion of coin is used and he’s accepting the custodial risk in that time period. Right, obviously. And I know it’s interesting, there are projects out there, as you said, Collider has this, I know LN Markets, I think they recently launched a similar feature and even Bitcoin Beach Wallet has a feature called Stablesats. So I did an interview with Nicholas Bertie talking about that and basically it’s a similar thing.

Juraj – 00:48:50:

That’s on Orchex, whichIs a centralized custodial exchange now.

Stephan – 00:48:54:

I see. Yeah. But even with Collider or et cetera, they are still connecting through to some derivative exchange at the end of the day. Right. So at the end of the day, you’re taking the custodial, right?

Juraj – 00:49:02:

Yeah. They are actually clearing it themselves so they’re not sending it anywhere else. Collider has the exchange itself, so it’s stored with the Collider. It’s not a third party big exchange. But you can also do it in non custodial. So one of the fun ways of doing it is actually borrowing the fiat. So you can do the same thing. You use Bitcoin as a collateral. You can do two or three multi SIG or something. You find someone, okay? You find a family member, you tell them, I’m going to pay you 3% per year interest rate, which is better than the bank, or 5%, and then you can actually have the fiat value. That way so many people don’t understand it. You should write it down and draw it on the paper. To really understand, I’m not going to explain it, but the general idea is that culturalized loan and derivative is the same product. You can do one with the other. Borrowing is shorting fiat and you can go long bitcoin and that is also shorting fiat. So you can actually replicate this and you can do it in a total peer to peer fashion with people, with friends, with family members, and you get basically the same exposure. It’s like Lego bricks, there’s little pieces.

Stephan – 00:50:30:

And you can put them together in different combinations. I kind of get that idea. And look, I mean, at the end of the day, it’s not that everyone has to go be the semi pro Vexlak, right? You could just be literally just having group where it’s just peer to peer and nobody really bothers and you just kind of okay. At the times of big market moves, there’s just probably going to be a lot of people who aren’t trading yet and oh, well, you just going to have to wait until people are ready to trade again and so be it, right? And at least that way there’s no custodial risk. It’s only peer to peer trading. And so that’s another way to grow this call it bitcoin circular economy, or at least for people who can’t easily access it for whatever reason. Let’s say they don’t want to use KYC Exchange or for whatever reason, or they prefer for privacy reasons, to just do it peer to peer.

Juraj – 00:51:15:

A tip for people is many people, when I talk about this, they ask me, what about paying in coins? And so on. So pro tip use Lightning. You don’t want to stand on the street in a cold waiting for the transaction to confirm. And with Lightning, you don’t care about the origin of the UTXO because there are no UTXO. If you actually use Lightning, here you go, cash. I see the transaction, it’s final goodbye, takes 30 seconds because of possible double spend. With on chain, I recommend waiting for the confirmation, but then you have the risk of, okay, where does the transaction come from? And so on. So with Lightning, all these problems just go away. So if you can, if it’s not a huge amount, I recommend doing Lightning and then you can do whatever you want when you come home. You can offramp from Lightning to on chain if you need to.

Stephan – 00:52:20:

Yeah, right. And that makes a lot of sense. And I know you also did a bitcoin wallet overview, so now might be a good time to talk through some of the key ideas. So, listeners, I’ll put the links in the show notes, but you’re right, if you could just give us a bit of an overview. What were you hoping to achieve here with your bitcoin Lightning wallet overview?

Juraj – 00:52:37:

All right, so there were many myths about this and of course the ecosystem is developing. So many people would say, okay, I have a problem with sending from Breez to Phoenix, let’s say. And everyone would say, oh, it’s a Breez’s fault or it’s Phoenix’s fault. So I thought, okay, maybe it would be a good idea to do test of every wallet that I’m testing to every other wallet. So I would say okay, if Breez has problems sending to Phoenix but not to Muun and not to blue wallet, then it might be a problem with Phoenix or other way around. Another thing that people were kind of there have been a lot of discussions is that a lot of people were saying that Android wallets are better because of how the push notifications work and accepting into Android might work better. And there were even people saying Phoenix on iOS is worse than Phoenix on Android and things like that. So I wanted to see if that’s the case. So that’s why I did both iOS and Android. And then the last question was does it still make sense to use custodial wallets or we are in a position where we can just go with noncustodial. So I remember I was in some Lightning hack day in Munich maybe three, four years ago and everyone was buying their flat whites with Lightning wallets. And then I asked the barista what’s your experience with accepting all these coins? It was accepting to some note, not a mobile wallet. Someone just did I don’t remember what kind of note it was, so it was some point of sale terminal and the guy said oh, everyone is paying in very weird ways, including connecting to the note with SSH and doing LN command like pay invoice and paste. It was really dead wild, like the first days of bitcoin but Lightning edition and the barista said that the only wallet that has no problems is blue wallet, which is custodial in a case of Lightning, not in case of on chain. It’s a good on chain wallet, but for Lightning it’s custodial unless you run your own note. So I wanted to verify if this is still the case, if we should recommend people custodial wallets and then I wanted to see the fees and the amount. So just a quick results, maybe if you want to read the article, I would be happy if you dive into the details, but I found very little problems with liquidity. So any wallet to any other wallet basically works. One exception was Muun Wallet for receiving larger amounts. It didn’t work as much or I would say up to 1.5 million sats. Basically everything except of receiving into Moon worked 3 million sats things kind of broke down and it’s also the amount where it might make more sense to do an on chain transaction also because of the fees. So that’s the first thing. Doesn’t matter if you have Breez or Phoenix or anything else, the payment will go through. At least during my test, I had no problems. It was basically instant. Second thing that is interesting that the custodial wallets were no better in terms of reliability. In terms of fees, I was very surprised that Blue wallet is the most expensive. So if people were wanting, okay, I don’t want to deal with channels because I want to save on fees, then sending with Blue wallet was the most expensive to any other wallet by far. Wallet of Satoshi was actually the cheapest. So in this case, it might be a good idea if you really want to save on fees. It was quite okay. But I don’t think that there is a good case to use custodial wallet anymore because of Breez and Phoenix. They’re reliable, they work, the fees are reasonable. Breez is a little bit more transparent about the fees with Phoenix you don’t know if you are going to pay a fee for an incoming transaction, so you might not. And Breez is also a little bit cheaper, phoenix is a little bit faster. And one thing that it is hard to convey to other people is Muun Wallet is not actually Lightning wallet. And I like it. I’m happy that they’re doing what they’re doing. They should be a little bit more transparent about how it actually works. And I’ll give you just one. So basically, you are always paying on chain fees. So sending to Muun is expensive. The sender pays the fee. So they might not be happy because they don’t know they’re paying to Muun, but it will be probably most expensive. But the biggest problem is that sometimes Moon, even for paying Lightning invoice, requires on chain confirmation. So imagine you are standing at the cashier at the cafe. You think you have a Lightning wallet, which is instant, you press send and then you see the screen, which happens to me during the test that sorry for this, we deem this transaction too risky and you have to wait for confirmation, which is 18 minutes or ten minutes. It was 18 minutes in my case, but average is ten minutes and it won’t go through. The other problem is you cannot cancel it. You can’t say, oh, okay, so I’ll pay cash or I’ll pay with other wallet. You send it to the blockchain. So you have to actually wait for the transaction and then you’re blocking the queue. And it’s kind of weird. I like Moon for one use case, and that is off ramping from Lightning to on chain because that works really well. So if you have a Phoenix wallet and you want on chain coins, it is actually cheaper to send it to Moon and then send it on chain than to use the Phoenix swap out service. So that might be something that also anonymizes a little bit the UTXOs and so on.

Stephan – 00:59:24:

Right, I think one thing to add there now I say as well, I’ve played around with Bitfinex, Breez and Moon a lot myself, and I think my experience is pretty much mirrored yours almost exactly right. So I am a fan of all three of them, I will disclose. I am an investor in Breez as part of Bitcoin ventures, so I have an interest here. But I think it’s fair to say with Breez, it’s arguably more self sovereign because it is doing its own route finding on the node on the phone. It is a Lightning node on your phone. So that’s one interesting part. Whereas with Phoenix, it is relying on ACINQ because you can only do have a channel with ACINQ sync and ACINQ basically knows who you’re paying. So it is arguably a bit of a privacy aspect there. Although Phoenix is probably a bit more slick, it’s a little bit more faster in terms of making the payment. Right. Because of that, and you don’t have to synchronize because.

Juraj – 01:00:16:

There’s no graph sync. Yeah, it’s an SPV wallet. So there’s a sync.

Stephan- 01:00:20:

Yeah. Let me explain with Moon. So one other thing with Moon is, I think for listeners, it’s probably useful to think of it more like a bitcoin on chain wallet that can pay Lightning. I think that’s an easier way for most people to understand. Yes, it can receive lightning too. And that’s because of the model that they’re using currently, where it’s not a Lightning native wallet per se. Now, I still think it’s a great first choice for a lot of people. It’s a great first wallet for a lot of people, especially if, let’s say, they have their coins on an exchange and they are going to get their coins off that exchange. Moon is actually a pretty good choice there because you don’t have a 4 million sat limit like you do with Breez, right? And because you’re not having to do swap in and swap out, you’re just taking it like an on chain payment that can make the fees a bit cheaper for that person who just wants to withdraw like it’s their first wallet, I think it’s a good choice there. So now that’s at Muun, I know they will eventually have to switch their model. I know they’re going to switch more to a Lightning native model. So some of this could change in the future. Right. But in terms of just as things are today, right?

Speaker C – 01:01:24:

That’s why it’s so confusing, because they are talking about where they want to go to and I’ve heard various podcasts with them and they’re talking about the vision and it’s not clear when they’re talking about the vision and when they’re talking about their current situation. One more thing I would add, and that actually mirrored our experience from Bitcoin Coffee, from people paying, and not many people actually understand what’s going on there. It’s a problem, especially with Phoenix and also some unchangeableets. The problem is that it connects to Electrum ports and they are blocked by many data providers, mobile phone mobile data providers. So that’s the first problem. You would open the wallet and it would be in the connecting mode and you are not able to pay. So just that, you know, if this happens to you, you have a problem with your internet connection. They’re filtering the ports so that’s the most probable cause. There is another cost which is that they select the Electrum server randomly and some of them don’t work because they’re not operating by Async. It’s just a random list of Electrum servers. So sometimes you would open it and you would see it connecting and it would not work. So you have to kill it and run it one more time and it will choose a different Electrum server and then it will connect. So if this happens to you or if you are accepting Lightning payments and this happens to your customers, either tell them to connect to the WiFi in the cafeteria or restaurant or wherever and use their connection that will allow connecting to the electron ports. Or another option is if the user has a VPN, they might connect to the VPN that will go around this problem. And this is quite common. So if you are in Parallel Polis and people are trying to pay like I see it twice an hour maybe because the operators that people use really block the ports. So that is another thing I also verified during the test and it might be a good idea for async to first of all, if it doesn’t connect in 3 seconds, then pick another electrum server and second, drop the connection through SSL on standard port four four three. And then it would be more reliable because many people like if you’re testing it, maybe if you’re a developer at ACINQ , you don’t know because you always use the same Internet connection.

Stephan – 01:04:06:

And you know what, it could also be that certain countries have this. So it could be even this is a check, maybe it’s a Czech Republic thing that maybe telecoms providers in the Czech Republic are blocking it and other countries aren’t or I don’t know.

Juraj – 01:04:16:

Yeah, but people use I experienced this at Hcpp, which is an international conference and there were people with French providers that had the same problem and not all check and select providers are actually blocking these connections.

Stephan – 01:04:32:

Got you.

Juraj – 01:04:34:

But I think the more common problem is just Phoenix select server that is down for maintenance upgrade or something.

Stephan – 01:04:45:

I think the point is, though, that we and I think I agree with you I think we’re now at a point where the noncustodial user experience with these Phone Lightning wallet is good enough. Now that if you are talking to a beginner and you want to try to get them on boarded, right? Of course. We’re not expecting them to be on Zeus with their own Lightning node if they’re a beginner for them I think Phoenix and Breez are great choices and you can start getting them on that idea of being Lightning native if they can where they can. Earn on Lightning and spend on Lightning. And I think that’s really cool because once you start achieving that, it just feels really cool. Right. You can see it, right? I was in El Salvador recently for adopting bitcoin and a lot of the cafes, the restaurant, the hotel, and the stalls and bitcoin beach. And I basically was walking around that whole week not even having to do an on chain transaction. I was just, like, spending and receiving just like this easily. And I was playing around with, obviously, my own Zeus wallet set up, but also with Breez and with Muun Wallet and some of these other ones. But with Muun Wallet, it’s almost every time it’s an on chain transaction. So in that sense, you’re putting a lot of volume onto the chain when the whole idea with Lightning is that we’re taking volume off the chain for the efficiency. Right. But we’ll see where that evolves. And I know the Muun guys are trying to evolve their model as well. So we’ll see what happens there. But I think yeah, the takeaways, though, are basically if you want someone to be Lightning native, put them on Breez or Phoenix to start. And then later, of course, if they want to run their own Lightning node, go for it. But we’re talking here about how do we grow and build and get more people as part of the bitcoin economy. And so anything we can do to help grow that is a good thing. So, yeah. Do you want to, I guess, give us any other thoughts around running a bitcoin business or bitcoin organization? Are there any other tips or tricks that you can share for people out there who might be thinking about doing something similar?

Juraj – 01:06:42:

So if you’re really running it on bitcoin, that means that you actually keep the bitcoin. Then, of course, the key word that everyone will say is, no, it’s too volatile. You cannot do this. You will go bust. And we did not get bust in nine years, so we had to figure out how to do it. And we experienced real bear markets. For example, I started fundraising for Parallel polis in Bratislava, which is the capital of Slovakia. In 2017, we raised all the money, and when we were ready, like, okay, let’s build this thing. Now. It crashed from 20,000 over a few months down to 3000 per one bitcoin. So you actually need to deal with this problem. You cannot handle it away. Okay, volatile, but one bitcoin is one bitcoin. But if you are actually running a business and you need to pay a construction company to actually build something, then you have this problem. So the idea is that you can actually, without hedging, you can actually run business in some cases on bitcoin right now. And the idea how to do it, or the main thing is to do a mindset switch and ask yourself, okay, it is volatile. I accept it, I’m not handwriting it away. And if it is volatile, can we make an advantage of it and can we actually run a business in this way? So I will give you two strategies. I’ve read about this quite extensively in my book as well, which kind of condenses all the experience of running businesses and lives on Bitcoin. And you can also do it in personal life. So there are two strategies. So first strategy, you have operational expenses, you have to pay for coffee. If you run a cafeteria, you need to pay for the beans, you need to pay the employees, you need to pay rent and so on. Most people, especially in Eastern Europe, when they get an invoice that is due in 30 days, they pay it at day 30. That’s quite common. If you are running on volatile currency, you do it the first 2nd that you receive the invoice. So if you are buying coffee beans and people are paying you in bitcoin, it is better to cover the operational expenses as soon as you can. So in Bratislava, for example, the employees were getting their salary every day. So it’s up to them. If they want to hodl, they can keep the bitcoin. If they need to pay rent, they can exchange it. And it’s quite easy in a cafeteria where everyone is bitcoin positive, you can usually just yell in the cafeteria and someone will change it. But basically you are shortening your accounting intervals. So if you are paying everything that you have to pay as soon as possible, then the volatility is gone because in 1 hour the volatility is not so high, but in one month it can really kill you. Okay, so that’s dealing with the volatility, but how do you take advantage of it? So for capital expenses, what you can do is with all the strategies that we were using, we are not predicting future price. I think it’s impossible. So it has to work in a situation when the only thing you know is how much Bitcoin you have, what was the value when you got it. You know that each day has an exchange rate and you can assign the price and you know what’s the price today. So a strategy for these long term capital investments is, let’s say you want to buy a new coffee machine. You are giving away predictability in time because you don’t know what the future price will be. But you can say I want to make this capital investment at the time when the Bitcoins I have in this capital fund are worth, let’s say 30% more than my acquiring price. So to maybe explain it better, so every day someone pays you for coffee. Some of that is used to pay operational expenses, some of them you save in a fund for future capital investments. That’s how any business works. You remember that how much in fiat terms you put into the capital fund so you just add it up. Let’s say it’s $1,000. For the past few months you said, okay, this bitcoin cost me $1,000. And then you look at today’s price, and if the bitcoin that I have in the capital fund are worth $1,300, that’s the time when I make the capital investment, because I am getting a discount on capital. So basically all my capital investments are cheaper. I did not predict when this will happen, but when it happens, you make the investment. I’m saying it’s too complicated.

Stephan – 01:12:32:

Let me take a shot at this. So basically we can think of it like if you understand what your cost base is for those coins that you acquired, and you know that the current value of those bitcoins is $1,300, as you said, then that’s basically the point, right? What we’re trying to get at is this idea of what was your cost base for those coins versus what is the present value of those coins? And if in this example, 30% higher. You’re making that decision now, and you’re kind of in a way, because bitcoin is so volatile, you’re sort of making sure that you only spend it when you’re above your cost basis rather than below the cost basis for those same coins.

Juraj – 01:13:10:

Yes. So I will give another example. Many people do dollar cost averaging. So let’s combine these two, because it is in a way, a dollar cost averaging. So basically you want to go to a vacation in Thailand. It doesn’t matter to you when you go, you just ask for vacation days. So you don’t know when you’re going, but you want to get it 30% cheaper. So you create a new account in your hardware wallet, it’s called vacation saving, and you put $100 every month. If after twelve months you have 30% more than you put in, or 40, I don’t know what’s your goal can be double, it doesn’t matter. But if you said, okay, I want a 30% discount on this vacation. So when the value is 30% more than you put in, then you book the tickets and the hotels and you go for a vacation. So basically what this does is making use of the volatility in order to acquire capital goods or whatever consumption cheaper. You say the discount, but the discount that means. So what you give away is predictability on when it happens. You don’t know where you go to a vacation, you don’t know when you are buying the coffee machine or car, but you know it will be cheaper. So the only environment when this doesn’t work is if bitcoin steadily goes down.

Stephan – 01:14:50:

Right, for a long period of time.

Juraj – 01:14:51:

For a long period of time. If it is volatile as it is right now, it will always hit this threshold. So again, when people complain about volatility, my answer is, what are you talking about? Volatility is good. It allows you to go on cheap vacations and buy cheap capital goods. I prefer maybe that’s the Austrian economist thinking and praxeology. I prefer to look at what people are actually doing than to endlessly discuss about dreams. And if people talk about bitcoin, when volatility comes up, many people will say, oh, no, when it will be used more, then it will be less volatile and so on. And my approach is, okay, let’s turn this around. Forget maybe it will be less volatile, maybe not. We don’t know what will happen in the future, but today look at what people are doing and how they are actually using the bitcoin. And actually you can make use of the volatility. So if you include it in the strategy, if you accept it, if you’re not in denial, then you say, okay, I can actually make use of this in my life and it will make my life better. Maybe.

Stephan – 01:16:14:

Got you. Yeah. So I’ve got two comments. So we went through a lot there. Let me just summarize and just make sure everyone’s following along. So strategy number one is this idea of shortening the time between when you get paid in and when you pay out, right? So obviously that’s kind of the easy aspect of it to help you sort of minimize some of the volatility because you’re getting paid in and you’re paying it out. It kind of minimizes things. Now, the only downside there is if you have the kind of business or job where your income is lumpy, let’s say you only get paid once every six months, but you have to pay out every day. Well, then, okay, that’s kind of but in the cafe example, I think you’re right. Hedging.

Juraj – 01:16:52:

Of course you can hedge in this case.

Stephan – 01:16:53:

Right. Got you. Yeah. And you can hedge, of course. Now, basically that was strategy one is to kind of minimize the time between receiving and paying out. So that’s the first strategy. The second strategy, as you were saying, is think about your cost basis. And so basically you have to try to spend when your actual value is higher than what your cost basis is. Right. Maybe the high level way to think about it even is maybe this is not the best example, but as an example, spend during a bull cycle and not in a bear cycle sort of thing, right. As long as you’re regularly accumulating but you’ll spend any big expenses you do in a bull cycle, then it kind of minimizes the amount you’re spending in a way. Right.

Juraj – 01:17:31:

It works also on shorter terms because you can have a super short spike during one. It doesn’t have to be like a macro cycle. It will usually work, like even within a year, you can be in superbarre market. That means you acquired a lot of cheap coins and then it spikes one day and you can use it when it doesn’t have to continue.

Stephan – 01:17:54:

Yeah, I’ve got you. I’m with you. Yeah. I was trying to make it in a simple way, but yeah, you’re right, it can be done in like within a year. But then I guess the only challenge then is more. Maybe it’s an accounting one. Do you have any tools that you use to track the cost basis there or how do you try to how do you achieve that?

Juraj – 01:18:12:

Yes, I was not doing that personally, but there are people who are doing basically the crypto financial management and you can actually calculate it, but they were doing the accounting daily, so they know, okay, we put this fiat amount into the capital fund every day because they were doing the salaries and everything else. So, yeah, you need to do some kind of financial management. If you are doing the vacation example, then it’s easy because if your dollar cost averaging, then basically it’s just the monthly amount multiplied by number of months. And then you just look at the current price. So you can open the wallet and see the accounting is basically done for you by the wallet.

Stephan – 01:19:01:

Got you. So let’s think of it like this then. So if you are an individual or let’s say a very small business, you can sort of manually do some of this as an example. In the coffee a cafe example, let’s say there’s some coffee machine that you want to buy and it costs $2,000 or something like this, and you can just kind of budget out that way and say, okay, I’m going to save $200 a month or something like this. And after ten months or whatever, then you know, okay, my cost base is now. I’ve put in $2,000 worth of Fiat that I put into bitcoin, but now has bitcoin’s price risen such that that $2,000 I put in is actually now worth $2,600. And now I’ve got that 30% magical number. Now is the time to pull the trigger and buy that new coffee machine for my cafe. That’s an example, right? But I hope people are following the basic idea. So, yeah, I think that’s some interesting stuff and actually some practical tips on how people can build the bitcoin parallel economy and also live the bitcoin lifestyle. So, yeah, before you close up, any final thoughts and where can people find you online?

Juraj – 01:20:05:

Well, I think that people should consider this fun. Don’t be very stiff and kind of enjoy it. I don’t think you need to be too serious about it. You can find me at hackyourself.io. I have just published a book where I write about these strategies. It’s called Cryptocurrencies: Hack your way to a better life. So if you want, you can buy it for Lightning on my website or even on Amazon. I’m also on Twitter. J-U-R-B-E-D. So, first three letters of my first name and surname. And you can find my blogs on Juraj.Bednar.io. So, first name, last name, IO. I’m kind of an IO person, so great.

Stephan – 01:20:56:

Well, yeah, look, I’ll put all the links in the show notes and you’re right. Thank you for joining me.

Juraj – 01:21:00:

Thank you for having me.

Stephan – 01:21:01:

I hope you found that one informative. And I certainly thought the peer to peer group’s idea is really an interesting one, as well as this idea of being a vexlak. And perhaps there are some parallels there of what’s coming in the future with the Central Bank digital currencies and all of this. So certainly get out there and try to build out the peer to peer and the parallel economy.

Get the show notes at stefanlivera.com/436, and you can find the show notes in the description there, as well as transcripts, which I’m looking to get done on the website. So thanks for listening and I’ll see you in the Citadels.

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