SLP313 Gigi – USD is going down to 1 sat & Bitcoin is Time

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Gigi, author, developer, and speaker in the Bitcoin space joins me to talk about why Bitcoin is Time, and why the USD is going down to 1 sat. We chat: 

  • The pieces that had to be pulled together for Bitcoin to work
  • Tokens are timeless, ledgers are not
  • Why USD is going to 1 sat
  • UX and how it will be solved over time
  • Operating in the bitcoin space as a nym

Gigi links:

Sponsors: 

Stephan Livera links:

Podcast Transcript:

PoStephan Livera:

Gigi, welcome back to the show.

Gigi:

Hey Stephan! Thanks so much for having me again.

Stephan Livera:

I love your work, man. You’ve been doing so much awesome stuff. The way you write and speak in the space, it’s unmatched I have to say. You’ve done some really cool pieces of work over the year, and I just wanted to get you on and talk a little bit about it. And of course, there’s going to be lots of crazy things happening in the Bitcoin world right now. I’m actually in Dubai right now for Tone Vays’ conference, so that’s in a day or so. I’m just getting a few things around ready for that. But yeah, let’s start with where’s your head at with Bitcoin these days?

Gigi:

Yeah, I think you’re absolutely right. It’s going to get crazier and crazier and it’s almost impossible already to keep up. There was a time where it was possible to attend every conference and also keep up to date with all the developments. And I think this time is coming to an end now so you kind of have to specialize, I feel like. A lot of people are specializing on Lightning, others on mining, others on the pure energy side of mining. There’s so much stuff going on. It’s very hard to keep up. I try to keep up, I try to have an overview of what’s going on, but I also want to drill down into some topics more deeply. And currently to me, Lightning is one of the most exciting things. I mean there are many exciting things going on, but I think Lightning is awesome. It’s awesome that it works, it’s awesome that it’s used, it’s awesome that it scales and yeah, I feel like we are at a tipping point where Bitcoin is ready for the next step.

Stephan Livera:

Yeah, that’s awesome to hear. So what’s the latest on your 21 Ways, which is the follow-up to 21 Lessons—for listeners who haven’t already, make sure you check out Gigi’s book 21 Lessons—but what’s the latest on that?

Gigi:

Yeah, I’m still working on it. I actually started sitting down again seriously and writing more. So I ‘m back to trying to write every day. I’m trying to do other work during the day and writing either very early in the morning or late at night. It’s coming along. I would say it’s approximately 40% to 50% done. I have some chapters that I’m polishing off and I intend to publish soon. Most people probably have read Bitcoin is Time, which is one of the chapters. If a chapter can stand alone then I want to publish it even before the book is published. And again, my plan is to do it very similar like I did with 21 Lessons, just release everything out in the open and release it under a permissive license. In the end I hope a book will pop out. I was aiming for end of 2021 but that’s probably way too optimistic now, but I’ll say early next year might be a good time to see everything come together. But I also know the last 5% of a big project is always the most difficult one. So I have no illusions that it’s going to be done soon or go easily.

Stephan Livera:

Yeah. As you mentioned, Bitcoin is Time is one of the chapters from that book, which is a great post and that’s available on your website, dergigi.com and also on the Swanbitcoin.com website. Can you tell us a little bit about that article? I thought it was really fascinating in terms of reframing a few things and putting things in an interesting light—and obviously in preparation for my discussion with you I went back over that article—but tell us a little bit about that.

Gigi:

Yeah. I think reframing is the right word because I think we are all still people that work in and with Bitcoin and just discuss [it] a lot. We’re all trying to figure out what Bitcoin is. And that’s also what 21 Ways is going to be about. I try to look at Bitcoin in 21 different ways. And one of the ways you can look at Bitcoin is just purely using the time aspect to make sense of it, because one of the things that Bitcoin does is that it decentralizes time itself. So one of the unsolved problems in a digital cash system in doing money on the Internet was a digital timestamping because you need to tell the time in order to make sense of the events that are happening in a network. So you need an arrow of time to be able to tell A came before B. And for money that is terribly important, because if you mix up the events, you either create money out of thin air, or you’re suddenly able to double-spend money. So Satoshi’s main insight was that we have to decentralize the timestamping server as well, and we have to decentralize time in a way. That’s what proof of work actually does. That’s what miners are actually doing. Miners are offering a new timestamp to the network that you can’t cheat because it’s rooted in proof of work. You have to do it this way—like there are very deep reasons why you have to do it this way—because in our relativistic universe there is no absolute time in the first place. So you could not have an absolute time in a decentralized network in the first place. I tried to explore all these things in Bitcoin is Time and I try to go through all the relevant literature that also Satoshi referenced in the white paper. Five out of eight references were about timestamping, so it’s a very important topic. And I think not a lot of people looked at Bitcoin in that way and I think that’s why it resonated so well.

Stephan Livera:

Yeah. I think that you’re right there. And one thing that I have seen online—and perhaps this is amongst people who are maybe newer to bitcoin or first learning about it—they think of it in a different way. They’re thinking of it like, when they mentioned time, they’re thinking of it like, Oh, it’s stored time. When you work, you go and store away some time—I see that as wrong. That’s not precise. Money is the most—

Gigi:

That’s also true, but that’s not what the piece was about. Like it’s a fair point that money is stored time and stored energy in a sense. But my main insight was that there’s two ways to do money—and this has been true historically, always—(1) you can either use physical artifacts like cowrie shells or gold coins or silver coins or something that you can pass around. Something that truly has a physical instantiation in the real world. Something that you can give to someone or something that you can hand over. And this money works really well because it keeps track of itself. Whoever possesses the gold coins has the money, period. And this has downsides, of course: you can steal it, you can forcefully take it away, you can lose it and so on and so forth. The benefit is that you don’t need a centralized authority to keep track of who owes what to whom. The coins keep track of themselves, or the shells. (2) The second way to do money is lists. Then you will always have a list-keeper, and then you immediately run into the problem of timekeeping because you need to make sense of the order that is kept in the list. Every ledger records what happened in the real world. And this is exactly the problem, that you have a recording of what happened in the real world, and you have the real world. And if you use tokens or if you use gold coins, then the coins they keep track of themselves. The physical artifacts keep track of themselves. And once you create a record of things, the record and the real world—they are inherently disonnected. And I had a thread that blew up and I also gave a talk in Germany about this topic: that in general, the map is not the territory. Like if you create a map of something, it is disconnected from the territory itself. And if the territory changes, you have to update the map. The map does not automatically update itself magically. And this is also true for money. If you are using a list as your source of truth as your money—which is what we are doing—central banks have lists of all the entries, and banks in general. This is how money works. And if you go back thousands of years, those are the two forms of money that we have. We even have physical artifacts in terms of shells or coins, or we have lists. And if we have lists, someone has to take care of the lists. Usually a centralized authority takes care of the list. And if you have a list, you also have a single source of time. And this is a huge problem. In the digital realm, you can only have lists. Like, you cannot have tokens in the digital realm. You cannot have something that actually moves from A to B—this is the root of the double-spend problem because you’re dealing with information. So to move information, you always have to read it, copy it, and delete the original. This is the whole problem.

Stephan Livera:

Exactly. That even comes to digitally when you’re trying to have this idea of digital property. Well, on the internet, anyone can copy things. And so this also comes into a more deeper way of thinking about what even is a property right. So people like Stephan Kinsella who have done very well on the intellectual property aspect of it, if you talk to him the way he might explain property rights is to say, Look, you can only have property rights in things that are scarce. And so in that sense, I guess he would argue that you can’t actually own a Bitcoin, but I guess we would say, really, you can be the unique controller of that Bitcoin. Maybe that’s another way to think of it. So just for listeners who aren’t familiar, when you hold Bitcoin, really it’s like you’re holding the private key for those coins. And so that private key, it’s actually like a huge, huge— imagine just like a massive, massive number—and really what our Bitcoin wallets and our Bitcoin nodes are doing, the software will take that number and then kind of derive out, Oh, okay, here’s the private key. Here’s the public key. And then from that, here’s an address. Okay, Gigi, now you can pay me to this address, to which I control those coins or that unspent output, right?

Gigi:

Yeah. I think that’s a great point, and I love Stephan Kinsella’s work. We had a brief exchange on Twitter. I don’t think he read Bitcoin is Time yet because he had some questions that are actually answered in the piece. I think he did not do the work here and actually read up on it and try to understand it in a deep way. But he is right that ownership is difficult when it comes to information. This is also why I use open-source licenses and very permissive licenses for everything I do online, because I think bits and bytes should not be owned. Something like DRMs or something like paywalls, it just doesn’t work. You can copy it. The reason why it doesn’t work is exactly to his point: because it is not scarce. You can copy information at zero marginal cost. It doesn’t cost anything to copy and paste. That’s just how information works. If you can make sense of the information, if you can read it, then you can also copy it. That’s why every anti-copying mechanism will always be broken. You have to go through insane lengths to stop people from copying digital information, and it never works. But anyway, to your point about ownership and control, Max Hillebrand wrote about it very nicely where he says it’s about simulating ownership, so to speak. And you simulate ownership by [being] the only person that has knowledge about this information. Because when it comes down to it, as you said, a private key is a number, and it’s a philosophical argument that doesn’t really hold up if you say you can own a number. Like, “I own the number three”—this is nonsensical to say. And the argument doesn’t really change if the number is so large that no one else will ever come up with the number—you still don’t own it. Because you could have collisions as well. Like I could theoretically guess your private key, for example. I could come up with the same number. This is why ownership in Bitcoin is so tricky, because this is not a theoretical point. You can Tweet out your private key and then the question, “Who owns these Bitcoin?” becomes very difficult because it’s a lot of people that suddenly have access to your Bitcoin and can move it and have the power to control it. Ownership always comes down to control in a sense, because in the end, what do you own? You own your body, hopefully. I think this is one of the base axioms, even though it seems that this axiom is currently under attack. And if you own property, it is about [whether] you can do with this property what you please. You can buy something and you can throw it away the next day. And if you own a house you are in charge of what happens with this house. But it’s always about control because if a highway is built and your house is in the way, you’re not owning your house anymore because you don’t have control of what happens. It won’t be your house any longer. So I think ownership and control, they are two sides of the same coin, if you will. If you own something you have complete control over it, usually. And in the information realm, ownership is knowledge. So you’re the only one who knows about this number.

Stephan Livera:

Yeah. Speaking of time and the way Bitcoin works as this sort of decentralized timekeeping in a sense, because we have to keep track of the order of the transactions—that’s a very important part in Bitcoin. Now, there are different ways to talk about this. For example, Peter Todd explains it very simply: a blockchain is a chain of blocks. So it’s about what is that order of blocks and the transactions that get included into each of those blocks. There’s a certain sense of causality in that chain. You explained this in the article around how Bitcoin as a system creates that chain, and we actually have to rely on some level of unpredictability in order to get that.

Gigi:

Yeah, absolutely. I think Peter’s comment about the blockchain being a chain of blocks, he came up with this saying when everyone was talking about “blockchain” everything, like ’16, ’17 around those times where the whole world tried to blockchainize everything and the word lost its meaning. And he just tried to point out that it’s a very simple data structure that also existed before! It’s not a new idea to chain things together, so to speak. Even outside of computer science, this idea exists. Like there are some folklore songs, for example, that always refer back to the previous verse and you have to include what you said before in what you’re saying now. Or there’s this children’s game where I’m going to holiday and I’m packing this and that and that in my suitcase and the next child has to say everything again what the previous child said and add one more. That’s the same idea basically because it makes rewriting history very expensive. That’s what it’s about. The problem with rewriting history for computers is like even if you chain everything together, a computer can trivially rewrite history. And this is the problem with proof of stake, by the way. Proof of stake, because it has no anchor in the physical world, I can take my computer and generate a valid proof of stake chain that is as valid from an outsider’s perspective without any additional information as the “correct” chain. And what Bitcoin does so beautifully is it takes a physical anchor via proof of work. It takes real physical energy and embeds it in the data and this builds up over time. People use metaphors like amber, like if you build something up over time. I also like to think of a stalactites or a large tree and you have the rings of the tree that build up over time. This is how Bitcoin works. It takes time and energy to build up the timechain, and that’s why Bitcoiners are switching to the terminology of the timechain and refuse to say blockchain because it became meaningless over the years. If someone comes to you and tries to explain to you how the blockchain will revolutionize everything, the chances that they understand Bitcoin is very low, you know? This is a proper reaction to just give up the term and switch to something else that might be more appropriate. And yeah, you need a source of unpredictability to build up time in the first place. If you could predict it, it wouldn’t be a good arrow of time because you could say what’s going to happen in the future, and so you need a source of unpredictability. In Bitcoin, of course, this is the proof of work puzzle. But it’s not only that, it’s also the transactions that will be included and that are broadcast. So you have multiple sources of unpredictability in Bitcoin. And once the block is mined and once it’s a valid block and it gets added to the chain of blocks, then it’s embedded in time. So I view, for example, the mempool—the transactions that are in the mempool—as timeless, and as soon as they are embedded in the timechain, they have a time assigned to them. So in a sense, Bitcoin slows down time and it has to do that. Otherwise things are too chaotic. You cannot synchronize anything without slowing down time because of relativity and other effects. It’s absolutely impossible. So it slows down the ticks of the clock so that it ticks every 10 minutes on average, but it still needs an anchor to the real world—to our human time—that’s absolutely essential. And this is actually one of the problems that Nick Szabo was not able to figure out because the problem with digital cash was [that] computers get faster and faster and faster all the time. So if you mine something with proof of work and you use those reusable proof of works and all those systems that came before, you always had to see when were the coins mined, because if the computers get faster and faster and faster—and then are like 10 trillion times faster than they were 20 years ago—then I make all your past coins worthless by just being able to produce so much more. This is very important also for issuance and issuing coins fairly because you want to spread out the issuance over long periods of time. And if you would not have the difficulty adjustment and if we were not able to keep a constant 10-minute block time then all the Bitcoin would be mined already! As soon as this thing has any value, some people that are in charge of supercomputers just kick in the door and mine everything and then the party’s over. So the difficulty adjustment is the magic sauce that makes everything work. The important thing about the difficulty adjustment is that it’s keeping a constant to the time—not to energy, not to hashrate, not to anything else. If you want to build the soundest money on earth you have to link it to time because time is the ultimate resource. Time is the only thing we can’t make more of. If you would link it to energy, for example, people would build cold fusion reactors or something and then again you could make Bitcoins for free, basically. So you have to link it to time. There are other reasons as well, but just the scarcity aspect of it I think is a very important one.

Stephan Livera:

Yeah. Excellent explanation around the difficulty adjustment. It is such a crucial thing. And so an interesting point for listeners is that many of the pieces existed, it was actually that Satoshi found a way to combine them in a novel way and add the difficulty adjustment in this way that made it feasible and possible where other projects had failed and other attempts had failed.

Gigi:

Yeah, absolutely. And it’s very hard to see at first what is the innovation in Bitcoin, because as you were saying, everything kind of existed before! He just took existing puzzle pieces and glued them together in this weird game theoretical, very esoteric way. And most people didn’t think that it would work at first. That’s the first reaction to Bitcoin is basically, This will never work—it can probably be gamed or broken. But it turns out that it works beautifully. By a combination of genius insight and also luck, he was able to come up with consensus parameters that actually do work. Because there is no reason why it’s like a hundred-million sats in a Bitcoin and 21 million Bitcoin and a 10-minute block time and so on and so forth. Even the block size: everything was like, Let’s guess what kind of parameters we should pick and let’s see if it works. In the very early days I think that was the approach. It turns out that it absolutely works and I think what most technologists miss is that the most important thing about Bitcoin is the promise of the unchanging system and the promise of the scarcity. You have this scarcity promise that is embedded in the promise that the consensus rules will not change. And this is why the history of Bitcoin is also so important. No other project has this history where it was attacked [and] a lot of people who have a lot of influence tried to change it. I urge all your listeners to read The Blocksize War and just look into this period of history of Bitcoin which was insanely important. And I think this is why the confidence in the system grew so dramatically after this period, because Bitcoin was actually able to fight it off. And we see how resilient the system is now with the China mining exodus and things like that, that Bitcoin is just able to shrug it off and chug along. This is what a sound money needs to do. It has to be rock-solid.

Stephan Livera:

Yeah. Very interesting. That’s also keying back to what Mises explained about sound money. He mentioned it in two ways: one is that it’s freely chosen by the market, and two, that it’s not interrupted by government intervention. So Bitcoin’s ability to resist government intervention is actually part of the system. It’s part of the deal, and it’s part of how we’re actually going to make sound money again, rather than—unfortunately—the goldbugs who seem to think that asking the government nicely is going to work when clearly it hasn’t. It’s never going to. Even if we did go back to a government gold standard, who’s to say in another 5 or 10 years when there’s a crisis, they’ll say, Oh, it’s an emergency—we need to end the gold standard again. Oh, don’t worry, this is just a temporary suspension of your ability to redeem in specie—meaning your ability to actually change your fiat coins or fiat tokens back for the real gold, which back in the old system that was the promise. Unfortunately the fiat system simply can never make the promises that the Bitcoin system can.

Gigi:

Yeah, absolutely. And I have a lot of sympathy for people that have trouble wrapping their head around it because you have to understand how the fiat system operates. You have to understand gold in a deep way. You have to understand the evolution of money. You have to understand the history of money and everything that went wrong. And you have to understand Bitcoin to make sense of it all, to see the promise of Bitcoin and to see how powerful it is. It’s also very hard to parse apart Bitcoin in a way, because it is this—I think the most apt metaphor for Bitcoin is that it has to be seen as its own biological organism. It is its own kind of thing. Like I can take you apart, Stephan, but you would not be happy about it. If I take out your arms and your heart and your liver and just inspect how everything operates, you will stop operating. The same is true for Bitcoin. It is like two parts math, one part physics, one part biology—because in the end it’s users that run the nodes. And in the end you have a rough consensus around, for example, soft forks, before the consensus is written into code and before the code becomes active and the consensus rules are adopted by nodes and the network upgrades and so on and so forth. So you have this biological-social aspect as well. And I like to think about the different types of monies as a vector along multiple dimensions. And fiat money, for example, is purely political. Political sounds [too] positive—it has the force of violence behind it. You have to force people to use it, otherwise no one would use it. And that’s your point about, Sound money has to emerge on the free market. Austrian economists take this as a given because the best money will emerge without the use of coercion, without the use of force. If you look at gold, for example, gold is not mathematical. Gold is purely physical. But gold also has the property of allowing for individual sovereignty. You can go out and mine gold. You can create your own gold coins. You can store them under your mattress. You don’t have to ask anyone for permission. I mean in this day and age, it’s very hard to do this at scale. But I think Bitcoin combines the best of multiple worlds. It is purely mathematical in a sense, and it is also physical—it puts the individual at the center. That’s one of the hardest things to explain about Bitcoin: You are in charge of Bitcoin. You definitely are Bitcoin. You are the Bitcoin network. You are who is running it. If you use Bitcoin properly—a lot of people speak about Bitcoin like it’s this democratic thing, for example, but Bitcoin has nothing to do with democracy—Bitcoin is like a group of kings and you are the king. That’s what’s going on. If you use Bitcoin properly—if you run your own node and if you hold your own keys—that’s what’s going on. No one can interfere with your idea of Bitcoin. No one can force anything upon you. So Bitcoin scores very well on the individual sovereignty dimension and on the math dimension and on the physics dimension, and it scores very badly on the politics dimension. It’s not political money in the sense that someone else dictates what it is. I mean, Satoshi kind of did in version 0.1, but that’s it. Like, that’s what we have from it. That’s why 21 million is non-negotiable. And I’m not saying this to the world—I’m saying this to myself. If you want to change Bitcoin, be my guest. But I’m going to keep using my [version of] Bitcoin.

Stephan Livera:

Yeah. And on this whole idea of time, it’s an interesting one. I see a lot of Bitcoin people use block time as a marker. I see even in some of your articles or on your website, you might mention, Okay, here was the block height, this is the block height of the network. Meaning: this was the chain tip at the time that my article was published. Or other people do things like, The block height at the time their child was born or the time they got married or different things like this. And actually you mentioned Max Hillebrand—he’s a bit of a block time maximalist himself. So do you think we are going to move into a world where block time becomes taken more seriously, Gigi?

Gigi:

Oh, I’m definitely already living in this world. I helped launch a German podcast called Einundzwanzig. If anyone speaks German just check it out. It’s just the number 21 written not as a number but as the word. And we start every episode by reading out block time. And we started adding Moscow time and if you go back and you listen to the block times and the Moscow times, it’s very funny. But the past of Bitcoin doesn’t change. Like if you go a few blocks down, it’s a very nice record-keeping device. There are no time zones in Bitcoin, which is also very nice. For example on my site, everything I publish, the block [at the time] I press publish is the time this thing was published and you are free to look up this block and figure out for yourself what the time was in your time zone. I don’t have to figure it out for you—it’s very easy. It’s a way cleaner system. The problem with block time is that it’s very hard to define events in the future. So if you’re saying like, We want to meet at block time 800,000, you might be waiting for a week or two. So you’ll never know when the next block is coming in, but on average it’s gonna be 10 minutes. But of course depends.

Stephan Livera:

Let’s say you and I are going to meet at the steak house to eat some steak. And I’m like, Oh, Gigi, I’m late. And you’re like, Well, how late will you be? I’ll be like, Oh, I’m one block away!

Gigi:

Yeah. So it’s very good time in some sense, but for human affairs I think we’re stuck with our regular clocks for the foreseeable future.

Stephan Livera:

Yeah. So actually, while we’re on this, you mentioned the topic of Moscow time. So what’s Moscow time for people who weren’t following that?

Gigi:

So for people who are not aware this was born out of—I’m not even sure who it was. It might’ve been some journalist or just some regular guy on Twitter. And Jack Dorsey was appearing on TV and he had his BlockClock behind him. And the BlockClock was displaying the satoshis per dollar—how many satoshis you will get if you buy one US dollar worth of Bitcoin. I think it was at 1800 something or so, and this guy was going 4D chess in his head and coming up with all kinds of conspiracy theories—how Russia is involved. Like, This is the time in Moscow right now—he’s trying to tell us something! And all the Bitcoiners of course knew that this was not what was going on. It was very hilarious. It was a hilarious evening on Twitter and this is how Moscow time was born. So when Bitcoiners speak about Moscow time now, what they mean is how many satoshis you get for one US dollar. And I think currently in the 1700s already, like 1770 or something. I only know it because it’s the only clock I have.

Stephan Livera:

You live your life by Moscow time!

Gigi:

Exactly. Because I used to be a complete timechain maximalist and only had the block height displayed. But now because it was so funny and it’s also a nice way to keep track of the horrible price of the US dollar—it’s switching between block height and Moscow time.

Stephan Livera:

Yeah. And so recently, Gigi, you commented that the US dollar is going to one sat, implying a $100 million price per Bitcoin. So explain yourself.

Gigi:

I mean, I think it’s kind of obvious. I mean I don’t say this lightly, and people also have to put this into context. I mean Twitter—there is no nuance on Twitter. So you just have to say outrageous things and put some oil into the fire. But what I mean is that all fiat monies trend to zero. That has been true historically, always. So, because it is made up and you can produce it at zero marginal cost, there is no real cost to producing fiat money. It will always trend towards zero because the urge to print money is too hard to resist. There will always be some emergency [to print more money]. We see this over and over again in history. And so governments and central banks tend to inflate the money supply. Everyone should have this visualization of the US dollar in their head where you just see how it devalued, how the purchasing power of the dollar declined over time. And it’s just a graph that goes down and down and down. It’s like the Bitcoin graph but inverted. It’s like the opposite. It just goes down, down, down, down. And it goes down exponentially. And it’s kind of wild to see how much purchasing power the US dollar lost over a hundred years. And also: make no mistake, the average lifespan of fiat currencies is like 30 years or something. It’s ridiculous. The dollar is overdue. Like it’s a very old girl now and she’s taking her last breaths. If you agree with the historical fact that fiat trends to zero, and if you agree with the proposition that Bitcoiners make that Bitcoin is the hardest money we ever had—and so the purchasing power as Bitcoin monetizes is bound to rise—you have those two curves. And I think they are about to intersect, like you have the parabolic rise of Bitcoin and you have the exponential decline of the US dollar and other fiat currencies. And there will be a point where Bitcoin takes over. There will also be a point where the US dollar is worthless, just like the German Reichsmark is worthless. You know, you can only find it in museums—I mean, it has some value still as like a collector’s item. But all other paper currencies, everything becomes worthless if it’s just paper. And that’s what fiat is. That’s why the logical conclusion is there will be a point in time where one single satoshi buys you $1. That’s just the way it is. And if Bitcoin truly finds global adoption—which I think it will, I think it will be the reserve currency of the world—then the purchasing power of one satoshi will be larger than most people think. We see this already with the Lightning network, for example, like the base units on Lightning is the millisatoshi, which is one thousandths of a satoshi. And so there is no issue with having 1 satoshi being worth a lot. You can still break it down on higher layers. But for global settlement—which is I think Bitcoin’s final stage—we are still using gold bars for global settlements. Gold bars and warships. And so Bitcoin is just an evolution of money in this sense. That’s how I see Bitcoin reaching dollar/sat parity.

Stephan Livera:

Yeah. That’s a very bullish prediction there. And look, I mean I basically agree with you. I don’t really disagree with you. I think it’s just interesting to see that go. And it’s also funny because if you’re looking at it in sats per dollar, as an example, 2000 sats per dollar implies a Bitcoin price of $50k. 1000 sats per dollar implies a price of $100k. And then each time it’s like a halving on one is a doubling on the other, right?

Gigi:

I think not many people made the switch yet, so I think reframing it in sats per dollar and by default telling everyone that the US dollar is the shitcoin here, you know? I think it’s refreshing for a lot of people that haven’t thought about these things deeply. Because you have to break your fiat reference-frame, otherwise you will never be able to make sense of Bitcoin. If you always use the US dollar as your base and the base depreciates massively—I mean just in the last 18 months I think the US expanded the money supply by like 30% or something ridiculous—so every [economic] model you built in the last 18 months is wrong by at least 30% if you used US dollars as your denomination. It’s absolutely ridiculous. It’s also why when Plan B came up with his Stock to Flow model, my first reaction was like, This model will completely break to the upside because the US dollar will be worthless quite soon. I mean imagine if the Eurozone collapses and some other geopolitical waves are made and the US dollar just devalues massively—then this model doesn’t make sense. You have to use something else as an anchor. And the problem is: if there is nothing else for an anchor, then you’re in deep trouble because you have a hard time modeling this and making sense of the numbers. If only Bitcoin is the anchor and you try to put the price on Bitcoin, it’s like this self-referential loop that doesn’t make sense. And I’m saying this because—I mean, I know he later did it with gold and so on—but I think Bitcoin will [also] devalue gold. So you have the same problem, just like silver got devalued. Silver was money for thousands of years, and now it isn’t anymore. Cowrie shells were money for 5,000 years. So I don’t buy the “gold will always be money” argument because at one point in history, cowrie shells were always money. As far as you look back, cowrie shells were always money. It’s a 5,000 year history, like, “What the hell? Cowrie shells will not devalue! We will always use cowrie shells!” Yeah, no. No, we won’t.

Stephan Livera:

And I’m sure at that time, people would’ve said, Oh, look, families will value this and they’ll use it for dowries or heirlooms. I mean, obviously in the gold context people say that, like, It’s jewelry and family heirlooms and things like that—but things will change. It really is like people expect that just because humans used horses to get around for hundreds of thousands of years that they’re not going to use cars when cars become available. Well, sorry. You’ve got another thing coming!

Gigi:

Yeah, absolutely. And I think most people are not prepared for this mentally. Like I’m completely fine with most people thinking that I’m an insane crazy person, but it doesn’t change the fact that there are other dynamics at play. Very much like the Internet, it ate up everything because everything you can transform into information will be eaten up by the Internet. There is a reason why we did not step on a plane and we are now speaking virtually and why you don’t buy newspapers anymore. You know, this was an absolutely outrageous thought that people will stop buying newspapers, and yet here we are. Outrageous things are happening all the time in this day and age.. And I think it’s not outrageous to say that gold—just like silver before—will lose most of its monetary premium. I mean, you can always keep it as an absolutely doomsday scenario hedge, but even if this doomsday scenario comes, guns and food will be way more important than gold coins. So you might just want to sell your gold and build a bunker and get some guns.

Stephan Livera:

Yeah. That’s a great point that while we might look and sound like the crazy ones now, if you thought back to the mid or late nineties, can you imagine someone then saying, Oh, hey, you’re going to have this little device in your pocket and it can connect to the Internet. And you can instantly call and talk to people for almost free—you can buy things online for free. And I remember when it used to be [that] people used to feel really afraid about typing in their credit card details for any online website. It was like, Whoa, I’m not putting my credit card details. Now it’s just like, Hey, we’ll just—

Gigi:

Rightfully so, to be honest! I mean, it was terrible. Credit card fraud is I think a high percentage still. And you know, we did not have HTTPS and SSL by default so most of the stuff online was plaintext. So people, whether they knew it or not, they were rightly concerned. But I think that the smartphone point is such an excellent one because it’s just the default now. Everyone is used to smartphones and it’s like, you tap on a button on your smartphone and 20 seconds later a car appears magically that brings you everywhere you want to go. Like, you can order food and it just appears an hour later or whatever. You can step into virtual reality. It’s a mapping device that will bring you anywhere in the world. You have the Library of Alexandria at your fingertips and all of that is normal. It’s completely outrageous that this works. And it’s also, I think, completely outrageous that everyone takes it for granted. And I think that’s why also Bitcoin will be taken for granted completely and no one will think about it just like no-one thinks about TCP/IP and everything that makes the Internet work. There’s so much magic and engineering going on underneath—very much like in Bitcoin. There is a lot of magic and engineering going on underneath, but you don’t have to think about it. It just works. And I think the same will be true in Bitcoin, and we see this emerge now already. I expected this to happen. I still feel like I’m not bullish enough most of the time because I get surprised all the time how fast things develop. And now people are building—on Lightning—stuff that we are already using everyday, stuff like Apple Pay and Google Pay, and you just tap your card and you pay at the grocery store and you don’t have to think about anything and you don’t have to do anything. And this will work on Bitcoin, period. It’s an absolute no-brainer, and people are already working on it. And we see now thanks to LNURL and other technologies built on Lightning that this already works. And I feel it myself, like I got a small NFC chip and put an LNURL on it and you can enable NFC on your phone and you tap it and Breez will open up and you just hit Yeah—Poof!—and that’s it, you’ve paid. And that’s the future we are heading to. Most people will not realize the switch because financial services and banks and payment providers—they will have to make the switch. They will have to change. Just like telephone and telecommunication companies, they had to use the Internet otherwise they would die. They had to switch to voice over IP. They have to use the Internet infrastructure to do their telephone stuff and everything else. You absolutely have to or you will die in the marketplace. And the same will be true for money. Banks and payment providers and everyone else will have to make the switch. But I think that companies like Strike and Bitcoin-native companies will be the first and they will have an advantage and they will pass on this advantage to their customers so it will be cheaper to use, it will be lower fees, more cashback in sats—everything that we are seeing develop already. And very soon, you’re just going to tap your mobile phone and you’re going to pay with Strike or whatever and you have a satoshi balance. You don’t have a US dollar balance. And I think this switch will take a while because it takes a while to drop whatever fiat shitcoin you’re using and just think in satoshis and not in Dollars or Euros or Yen or whatever anymore. But it’s an absolute no-brainer to me that this will come. We are already halfway there.

Stephan Livera:

Absolutely. I think a lot of people will get caught blindsided because they won’t have realized how quickly things will change. And obviously people like you and me and listeners to my show probably, we already are thinking about Bitcoin more seriously. But even for us right now, it’s kind of difficult to price everything in sats unless you’ve got like a computer app that does it. And occasionally I might do a quick comparison, but it’s just difficult to do that because of how quickly the price moves and things. But over time it will change, and I think the user experience around these things will change as well. Even wallets are getting easier and easier to set up and use. Do you have any thoughts around where you think things are going in terms of wallets and the infrastructure that we use to pay things or to receive in Bitcoin and Lightning?

Gigi:

Yeah, that’s a good question. I think it will go in the direction [of] stuff that we’re already using. I think a year ago or so I wrote about the state of the user experience in Bitcoin and how absolutely terrible it is, but it is also to be expected. Like it was absolutely terrible to build up a computer network in the early nineties or what have you. Making computers work is not easy. And so not too long ago, we were at this point in Bitcoin where everything was very involved and you had to know what an xpub was, for example, and stuff like that. Everything now—I think we are already past it. The xpub discussion is over. This is abstracted away. Users don’t have to really care about it. I mean, there are disaster scenarios where you have to care about it, but that’s very similar to how your car breaks down and then you suddenly have to care about how a motor works. That’s just the way things work. In terms of wallets, I think we will see very similar things emerge [that] we had previously, because it just makes sense. For example, you will have a vault, however this looks. It might be multisig, it might be collaborative custody, it might be time-locked. And this are like your family funds. The inheritance for your kids and stuff like that. This is the stuff that you do not touch unless you want to buy land, or a house, or something really bad happens. And I think we will see spending wallets, like money in your pockets, and they will work on Lightning. And you will have to make different trade-offs for these different kinds of wallets. You might have a desktop wallet or a more properly secured wallet to receive your salary and to make larger purchases or make recurring purchases and stuff like that. Because you don’t want to lose your phone and someone else [now] has a lot of [your] purchasing power. I want to be able to lose my phone and the stuff I have in my wallet shouldn’t be like 100x what [my phone is worth]. It all comes back to: you’re going to have money in your pockets for daily spending, you’re going to have one account for weekly and monthly spending, and you’re going to have one vault where things are run a little bit differently where it’s really hard to get money out even for yourself—and this is where most of your sats will end up.

Stephan Livera:

Yeah. And so breaking down to maybe one more level is things like teaching people the difference between a Bitcoin on-chain transaction and a Lightning transaction. So as an example, you’re buying something at a store and maybe that user doesn’t understand, Oh, I’ve got a Lightning wallet—I need to use the Bitcoin swap-out functionality. Or maybe the store [is] using BTCpay server and at the top, you need to configure it manually, or you need to say, Oh, this is an on-chain payment? I would like to pay with Lightning. And there’s little things like this where today it’s like, I’m out here trying to teach someone who’s new and they don’t know these things! So what do you think that looks like over time?

Gigi:

Yeah, I think most of this will be abstracted away, but I also think that there are some things that we must be very careful to not abstract away. There are some things that are insanely important to the main idea and the main benefit of Bitcoin, which is for example: running your own node, holding your own keys. You should not abstract away too much to coddle the mind of the user and just become a neobank that is built on Bitcoin and you have the gold and warehouse problem all over again. And then we will have fractional reserve from the banks and so on. So I think we will need to strike a balance to allow the user to be self-sovereign but also make it easy enough for everyone to understand. I think it’s definitely possible. I also feel like we’re heading in that direction, but it will also be different for different types of users. Most people just probably won’t care or they will have to burn their fingers a little bit until they realize what’s going on. And until they understand that, unfortunately, I really like the saying—I think I heard it first from Aleks Svetski—and he was like, There’s two ways that people learn, it’s either through curiosity or through pain. And unfortunately I think the curious population is not the majority. It’s like most people are not curious about money or Bitcoin and they will have to learn the hard way. But I also think that people are definitely able to learn and understand this. If you’re getting de-platformed, for example, it’s very easy to understand what’s going on. Like if your bank account gets frozen, it’s very easy to understand what’s going on. Very similar to the Arab Spring. If the internet gets shut down by the government, it’s very easy to figure out what kind of DNS changes you have to make and how to connect to TOR and other things like that because you have to. Your survival depends on it. So you are going to learn. And I think the same will be true for Bitcoin, that people will learn the nitty-gritty details and the importance of holding their own keys and the importance of multisig, for example, once they see someone else suffering the pain or they suffer the pain themselves.

Stephan Livera:

Yeah. Very prescient comments. I think a lot of people will unfortunately have to learn the hard way. Also wanted to touch on your thoughts on operating in this Bitcoin space as a nym. So I suppose there has been some challenges for you, but also some opportunities for you, obviously, as you’re operating under a nym, people don’t know what your real face looks like, at least online they don’t. What has that been like for you? And would you recommend that for other people?

Gigi:

I definitely do not recommend the full body suit, like that was a mistake. But now I’m stuck with it. It gets very hot, but you know, life is suffering. So I just bite the bullet and I’m going to stick with it. But regarding the opsec or the privacy issue, I think it’s a very tricky subject for people to wrap their heads around because it’s not immediately obvious what you are giving up if you’re giving up your privacy. And I think in the age of Google and Facebook a lot of people are saying that privacy is dead anyway. And I don’t believe that and that’s my main motivation behind acting as a nym. And to be fair, I’m not an Edward Snowden, like I could be way more careful. If I would be someone who is actually afraid of doxxing themselves or something like that, I wouldn’t go to conferences. I wouldn’t show my face ever. I would not speak. There are ways to do something with your voice where you can guess how your face looks like. So you have to be way more careful than I am if you are in serious danger, which I am obviously not. So for me, it’s more like, I want to show that you don’t have to dox yourself all the time to everyone. I think privacy is about selectively revealing yourself. And I choose to selectively reveal myself to friends and to people I work with and to select individuals that I trust, but I just want to [demonstrate]: everyone should realize how fast things can change. Like if it’s super easy to find out everything about you with two minutes of Googling, then that’s not a good situation to be in. It’s not that I’m truly afraid or anything like that. I just think it’s not a good state for a society to be in because with the Ledger leak and other data leaks, for example, you know, I can figure out, Okay, those million people probably all of them own some Bitcoin or some shitcoins. Some of them, they are five minutes away from me and I know their name and I know their exact address, including the door I need to knock on. And this is not the situation you want to be in. So you should be careful about your privacy. And I think in general, more people should be more careful about their privacy or at least take steps to reduce their online footprint. And there are great tools to do that. You can use a VPN, you can use better browsers, you can use better operating systems. You can just like not use your real name and your face for everything all the time. It’s deeply embedded in the Bitcoin culture that identity is not required. You can use your identity if you want, but it’s not required. It’s also not required in the Bitcoin system. Bitcoin only requires a valid signature. Who generated the signature doesn’t matter. It could be a dog, it could be a computer program. It can be any person, it can be a group of people. And so identity should not matter for those kinds of things, and I think also for discussing ideas and stuff like that, I also think it should not matter. I’m a huge fan of pen names and just people throwing out ideas and discussing them and not focusing so much on the people.

Stephan Livera:

Yeah. And that’s interesting advice for people out there who might want to start writing in this space, or maybe they want to get hired in this space and maybe they’re thinking, how do they build up a profile? Well, I think you’ve done that as an example, that you’ve got a name and a profile within this space despite not doxxing your real name and real face out to the world. So that’s an example that other people can look at. And even things like if you go to a Bitcoin meetup, you can make sure you don’t tell your real name, or you might have a nickname that you go by that you’re known as. Someone like, say, openoms.

Gigi:

It’s also the old tricks, just put on a hat and put on sunglasses and no one will recognize you. It actually works. So I think people underestimate the facial recognition software that humans are running. Speaking of that point: we are living in a world now where we have superhuman facial recognition software, and also speech recognition—all of it. So I think all of this should be taken into consideration if you’re just thinking about doing something online. Because for example, I can take your face, take a screenshot and put it into a reverse image search engine. And there are special engines that do reverse facial recognition search. And I will find your profiles and your LinkedIn profile and everything. Like, this already works. And people should just be aware of it and then do with that information what they want and make their own decisions.

Stephan Livera:

Yeah. Very good tips there. All right. So as we finish up then, what’s your outlook over the next year or so? Do you have any thoughts about what’s coming to Bitcoin or what you’d like to see?

Gigi:

Huh, that’s a good question. I think Bitcoiners will continue to be right. I think that’s my summary. I think more money will come in, definitely. I think once we truly soar past the all-time highs, more and more people will realize, Okay Bitcoin is not dead—again. I think every individual needs like two or three touch points with Bitcoin and then it really clicks—sometimes. Some people need four or five, or just go the opposite direction and still think it’s stupid. But it’s very hard to get Bitcoin at the first point. And I think culturally as a global society, a lot of people will have their third touch point with Bitcoin. Like there was Mt. Gox, there was 2017, and I think the next one is coming. And I think for a lot of people it will click and I think for a lot of people with a lot of money and a lot of power it will click as well and they will make big moves just like Michael Saylor did, for example. I did not expect nation states coming in so quickly, like I’m still very surprised that this happened so early. I was having this on my calendar for like 2024-2025, something like that. And here we are a couple of years early and El Salvador made Bitcoin legal tender and you can go to the McDonald’s and pay your cheeseburger with Lightning and all of it. I think it’s both exciting and a little bit frightening because my biggest worry in Bitcoin is that things are happening too quickly because it will need some time for a shared understanding to emerge—for sensible legislation, for example, to emerge—for people to know what they are doing, for just the liquidity to flow into the system and also [for] the volatility to decline and so on and so forth. And I think also Lightning and higher layers just need time to develop and grow and be battle-tested. There is a lot of value on Lightning already and it feels to me like it was yesterday when the Lightning white paper came out. So everything happened insanely quickly. In terms of wallets and user experiences—again, I think it will get easier to use. For example, setting up your own multisig, it’s already way, way, way easier than it was one and a half years ago. People will actually be able to do this. I’m still surprised that we don’t see a lot of time-locks yet. I expect this to happen as well, where you have a child and you time-lock a few sats away for like 14 years and then again for 18 years and again for 21 years. I think that would be a very nice thing to do, but of course, all of this comes with certain risks. I’m most excited about Lightning and stuff built on Lightning. A lot of experiments were already built like Sphinxchat and other things you’ve discussed a lot on your show where you just have encrypted communication built on top of the Lightning Network, which is a very censorship-resistant network. So I think this will be very important for a free society to have these kinds of tools. And I’m super bullish for example on new monetization models that are currently emerging, like the Value for Value model championed by Adam Curry and just Podcasting 2.0 where you can stream sats. You can boost if you like something which is like clapping with your sats, and you can send small little messages, like [inaudible] that you can just set the satoshi amount you want to stream per minute and you can support creators directly. And I think this will completely destroy the advertising model, or at least change it in a very meaningful way. And I see this not only for podcasts but happening across all media. So for articles as well it will be very easy to integrate Lightning in all those platforms. And I think more and more platforms will integrate Lightning just like we saw Twitter integrate Lightning tipping natively. Not in a perfect way, like Bitcoiners are up in arms that it’s not perfect on the first day, but I think it will get perfected over time and I think more and more platforms will integrate that. And yeah that’s where I see things heading.

Stephan Livera:

Fantastic. Well, big changes coming to all of our lives. So listeners, go and find Gigi online. It’s dergigi.com or follow him on Twitter. Same handle @dergigi. Thanks very much, Gigi. It was great to chat with you.

Gigi:

Thanks for having me again, Stephan.

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