El Salvador On The Ground & Free Private Cities

Hi and welcome to Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today for episode three hundred and forty, my guest is Peter Young, and he works for various organizations, but in this one we speak mostly around his efforts with the Free Private City Foundation. And so we're talking about El Salvador on the ground, as well as free private cities. We cover a lot of A little bit about Bitcoin and Lightning in the real world, what it really costs to do merchant processing, as well as discussing what's going on with Free Private Cities, some of the Honduras Zetas, as well as the Liberty in Our Lifetime conference. This show is brought to you by Swan Bitcoin, the easy way to purchase and learn about Bitcoin. Now with Swan, if you are a high net worth individual or you are acting with an entity like a business or a trust, you can look into Swan Private. Swan Private gives you unlimited Access to experts and seasoned hands. Swan Private has full support for trust, business and other entity accounts, and you will also receive expert guidance on choosing the right custody option for your assets, and you also get exclusive access to the Swan Private Insight monthly research report. So if you're interested to sign up, go and check out swanprivate dot com. Brains are a Bitcoin mining company through and through, and they offer various products and services. They've got Brains OS Plus, this is custom firmware you can install on your ASIC machine. To stack more Sats, it's got auto-tuning which optimizes the miner performance so you get more hash rate for your electricity bill. And Brainz is happy to announce that BrainzOS Plus now supports Bitmain Antminer models S19, S19 Pro, T19 and S19J, and Antminer S19J and Whatsminer models are next in the development pipeline. Also, you are supporting Stratum v2, which is the next generation Bitcoin mining protocol. You are improving your privacy and protecting yourself against Against hash rate hijacking with end-to-end encryption and you are reducing the bandwidth loads for miners in remote locations. So for that website, go to brains dot com, that's brains with two eyes. And if you wanna get started with Bitcoin mining, Compass Mining are making it easy for you to do this. So if you're in the US, you can order an ASIC machine to your home and you can mine at home and use the various guides and resources that the Compass Mining team are making available for you. Another option, if you don't want to mine on your residential electricity- Electricity rates, you can use a facility that has been vetted by the Compass team. So your Bitcoin mining machine will be sent to that facility, you can then have that machine plugged in, you obviously pay for the hosting fees, and you select the mining pool to point your hash rate towards, and then you are now receiving KYC free Sats. So this is a great way to get started without technical knowledge. So Compassmining dot io, they've got all sorts of options there. Some of them are new machines, some are second hand machines which may come online faster, and they've also got Newsletter, so you can subscribe to get updates. That's compassmining dot io. And now onto the show with Peter Young. Peter, welcome to the show. Great to be here. Stefan, thanks for having me. So, Peter, I know you've, been doing a bunch of things in, this whole Bitcoin and citadels space, free private cities, of course, that you're working with, and of course, I had the pleasure of meeting you in El Salvador about a month or two ago, and, I wanted to get your views, from on

Discuss a little bit about what's happening in the free private cities world. so for any listeners who don't know you, just give us a little bit of a background on yourself and where you're at with Bitcoin and of course Austrian economics.

Thanks, Stefan. So I'm a Bitcoin consultant and I mainly work for three clients. the first of them is the Free Private Cities Foundation, which is an organization dedicated to creating voluntary cities and hopefully eventually a more voluntary society. I also work for Satoshi Numoos, the author of the Bitcoin Standard, and he's quite big in the kind of Bitcoin maximalist, Bitcoin only, space. And then I carry out work also economic analysis and writing for a wealth management firm based in Liechtenstein and Austria called Incrementum. And I've been traveling in, Latin America for the last couple of months. I've been really interested in what's going on in El Salvador and Honduras, the Free Private Cities Foundation, my main client, has, some relationships with some projects there. And, I guess in terms of the background question, I've actually spent most of my career living and working in China, working in trade and investment, but I started to get really into Bitcoin and Austrian economics specifically, from around 2017, and that interest developed into- something that I wanted to pursue as a career. So, since last year, I've been working, full time in the Bitcoin space, and, it's been quite an adventure, quite a journey, and, I'm really glad to be chatting to you about it today.

So, Peter, there's been a lot of talk in various directions about what's going on with El Salvador. We've got the Bitcoin law, the legal tender, we have the Chivo wallet, we have various people using Bitcoin, and Accepting it for payment, but on the other hand, we also have those who are detractors who are saying, "Well, you know, the wallet's not working that well," or this, that, and the other various, arguments that have been made. What's your perspective from the time you spent on the ground in El Salvador?

Bitcoin adoption in El Salvador is really exciting. When I heard the news that the country was gonna be adopting Bitcoin as legal tender, I was really keen to get over there, and luckily I had this opportunity, as you did, to come over and take Really exciting to go out there and see, because I was arriving, a couple of months after the legal tender law was introduced in early September, that there were many places where you could easily buy and sell, sorry, buy and sell, buy things with, with Bitcoin. And as someone who's been, you know, who isn't a super OG, but who's someone who's been, quite involved in the space for a few years, that was really exciting and, people are using Bitcoin in El Salvador, especially the big businesses that have- have a more, international customer base. They're using it and they've implemented some great technologies for, managing the payment system. But in general, it's still very early days, I'd say, in El Salvador. But if we think back to how long it's taken for other financial innovations to really become large, globally, you know, like credit cards for example, then- I think actually the pace that things are moving forward is pretty quick, and there have certainly been some issues, some problems with Bitcoin adoption in El Salvador, which we can go into. But when we're looking at a more medium term to long term timescale, I think I'm very bullish about what's going on there and excited about the pace of

development. Now, some might be thinking, "Well, what about the fluctuation in the exchange rate? So how does it work then when a supplier or a merchant, rather, in El- El Salvador wants to take payment for Bitcoin.

So the vast majority of merchants in El Salvador that are using Bitcoin are using the Chivo wallet. the latest stats I heard was something like sixty percent of transactions going over the Lightning network are taking place via Chivo. Chivo is the government wallet that was set up in preparation for the announcement of Bitcoin as legal tender and The, the main reason why Chivo is so widespread is because the government launched Bitcoin by giving every Salvadoran citizen thirty US dollars via this Chivo app. So there was a large incentive for large swathes of the population to download this app so they could claim their thirty dollars. And what that means is that they're able to-- they all have the app and they're also able to use it to transact with each other. And another key feature of the Chivo app, because- The, one of the currencies that El Salvador uses is the US dollar, as the dominant currency, and there's a lot of remittances from, particularly the United States, but also Canada and Europe, coming in from El Salvador in dollars. The Chivo wallet allows for free exchange between US dollars and Bitcoin, and that's a really key feature because it means that people from, El Salvador can s-interface with the US dollar system reasonably seamlessly, and they can also, trade- Back and forth. In terms of the question though of how they manage volatility, basically people need to be aware that Bitcoin's price in US dollars goes up and down, and what the Chivo app allows them to do is to just accept Bitcoin but hold a balance in US dollars. So if they don't wanna be exposed to that volatility, they can just keep the US dollar balance, and they can convert it to Bitcoin whenever they want, so they can take advantage of the upside volatility, volatility of Bitcoin, but also the down, the downside is a risk that they would have to bear if they're holding in, in Bitcoin. but, people have the option to do that through Chivo, and I think it's a learning process. People, as you will have observed from your time there, people are still not really understanding And what Bitcoin actually is and what a wallet is versus what the Bitcoin network is. So there are certainly people that don't quite get this and are a bit annoyed when their balance goes down in US dollar terms. But again, there are options for people that want to avoid this, this volatility and have specific USD-denominated payment obligations they need to make.

I see. And of course, they are able to use the cheaper- ATM network as well, because Chivo is also an application, a smartphone application, but it is also the ATM network that allows people to go back and forth between Bitcoin and US dollar physical cash. And so I suppose for many Salvadorans, they may be using that also just to sort of go back and forth in some cases where if they are Still purchasing things for cash as a cash-based economy, then maybe that's also an important factor there. I'm also curious as well your thoughts on this idea. I'm sure you're familiar with the work of, say, someone like Vijay Bohra Party who talk-- who speaks about this idea that Bitcoin should be, or is most likely to be adopted first, as like a reserve asset or as like a savings, as a collectible, and then a wealth store of we-wealth before it's then used in a day-to-day context. Do you have any thoughts on that idea? Do you see that? That part is what's going to happen first, or do you actually see it more like there will be this kind of day to day receiving Bitcoin and spending Bitcoin for Salvadorans or people in El Salvador?

Great question, and yeah, I'm a huge fan of Vijay and his ideas. I would tend to agree with what you said there, and the reason for that is that I think the key value proposition of Bitcoin really is that it's non-inflationary, non-centralized money. And when you have a system where people are already able to transact fairly seamlessly with fiat currency, because the problem with fiat currency isn't a transaction usability problem, the problem with fiat currency is that it's inflatable, and that has profound societal impacts. So What people, I think, tend to, tend to think about when they think about money is how we solve the payments problem, but the payments problem with money is relatively trivial to solve. We all know how easy it is to pay with things on our debit cards. It doesn't work hundred percent of the time, but it's the way the vast, the vast majority of people in developed countries, transact these days. And we can look at countries like China, where they have centralized payment processing solutions like WeChat and Alipay, that have been in use for the best part of a decade And they just work seamlessly, they're used absolutely everywhere, they're used across all demographics, of society in China, and it was, wasn't that difficult. I mean, obviously, it wasn't trivial, but there are lots of examples where payment solutions that work seamlessly have been created. So people tend to think of that as the problem that Bitcoin solves, but I would tend to agree that, that actually- The store of value and the uncensorability and the uncontrollability of the Bitcoin network is its key value proposition, and when you're talking about stores of value and inflation, it takes time for that difference to become apparent. So for people in El Salvador that are losing, depending on your metric for inflation, between two percent and, say, twenty-five percent of the value of their savings in US dollars every year, that doesn't, that difference doesn't manifest itself immediately, and when you have volatility in the, in the US dollar price, people can think in the short term, "Oh, I've, When you start looking at a period of years, that's when people that have held Bitcoin start to see, "Wow, like, I have actually been able to protect my savings. " And so I think it's to be expected that actually when you look at how Bitcoin's being used in El Salvador, like, I, I think there is, there is some use in, in, transactions. I would estimate somewhere like one percent of Salvadorans are regularly using Bitcoin for transactions, and there's some statistics, that support that. That, that figure as well. but it's already taken something like five percent, of the overall remittance market in El Salvador, which is huge, and it's already being used quite widely as, well, the Chivo wallet in particular has already been used, being used to trade back and forth with Bitcoin, which suggests a more kind of like understanding of this asset as something that is, you know, has, has uses as a, as an investment slash savings vehicle. So we're seeing that, and I think that's to be expected. And I think over time we'll move towards that stage where it really does become a, a medium of exchange, but that will take a larger market cap so that we have less volatility and pricing as a unit of account is more feasible.

Yeah. Now, I broadly agree with you, but I think there's one other point, counterpoint that people might be thinking or might have heard, they might have heard some rhetoric or some arguments around this idea that, look, think how many people are totally unbanked in El Salvador, and this is actually part of what President Bukele's argument was around saying, Downloaded the Chivo wallet, we have more people using the Chivo wallet than all these people who have bank accounts. That actually there are all these people who previously weren't able to access bank accounts and financial, products like you and I can with our debit cards and credit cards and, and the like. That, that there's an argument around the access part there also. So I guess to sort of summarize that, or how, like, would you summarize that as saying, "Well, there are some people who've gotten access to financial services in a sense now with Bitcoin, but still the more important part is the savings part"? Or how would you, how are you thinking of that?

I think that overall, it's the long-term thing that excites me about Bitcoin is the economic change it stands to bring about through the removal of inflation and through taking- Money out of the hands of centralized power. But in the short term, there are issues which are incredibly important to the people of countries like El Salvador, and you raise a really important one, which is the financial access one. And as President Becerra's pointed out, only thirty percent of the population of El Salvador has a bank account, so that means that the rest are operating largely in a cash economy. But we're in a country where there are one point six smartphones per head of population, and actually this is true virtually anywhere. Where in the world that you go. Like the problem of owning smartphones, there's really not anywhere where it's really, really difficult to get a smartphone if you want one, if you're set on doing that. there are obviously elderly people and there are some like very remote parts of the world where this isn't possible, but really, like smartphones are everywhere in the world right now, and they're, they're everywhere in El Salvador. And if you're an elderly person who's not particularly tech savvy, there'll be someone in your family who will be able to help you with those kinds of things. So what Bitcoin has done is it has given financial access for people that are willing to try and use the Chivo app or other Bitcoin wallets to really anyone in the population that wants to, that wants to use it. And that's incredibly powerful because I'll give you an example, I was talking to some people down in El Zonte, where the Bitcoin Beach project, has, was la-launched a couple of years ago, and they were saying that they had some problems regarding paying suppliers for a small business, and they used to have to go and actually hand physical cash to their suppliers once a week, and because of the having access to the Bitcoin Chivo wallet, they were able to just send the money to their supplier and get back that time for spending with their family or for doing more work or whatever they wanted to do. So there are actually real, Financial access problems. I think one of the tendencies people sometimes have when we're there in Western countries is to kind of look on and say, "Oh, well, look how far behind El Salvador is. Really, the problem is they need to catch up with us. And, like there would be benefit to there being more financial access in El, El Salvador, but for me, the overall story with Bitcoin adoption is way, way bigger than that And that's the thing that excites me, and that's the thing that I, I, I tend to focus my thinking around.

Of

course.

And with the Chivo wallet Were you seeing any perception in Salvadorans who you were speaking with that they, did they see Chivo as Bitcoin, or did they also understand that Bitcoin is this open source network and that there are many, many wallets and services and providers?

So my perception is that there's not a very deep level of understanding amongst the general population in El Salvador regarding what Bitcoin actually is, and that's understandable because Bitcoin, in a way, it's very simple, but to actually understand how it works and the layers to it and some of these distinctions between, you know, wallet, what a wallet is, what the Bitcoin network is, what a Bitcoin is, these things do take a bit of sitting down and, and looking at to understand. And so because the vast majority of transactions are done on Chivo, and because this is the government wallet, and because people tend to defer a bit more to government in El Salvador than they might do in other places, people are, I'd say, tending to equate Bitcoin and Chivo, and if there's a problem with the Chivo wallet, which- And there have been a few problems we could talk more about, like people tend to associate that as being a problem with Bitcoin and be a bit put off by that. And so I'd say that's a big issue, but there are, on the other hand, organizations, like My First Bitcoin, which are doing outreach work with communities across El Salvador, and they're trying to educate people about differences between Chivo and other wallets and Bitcoin and, and, the Bitcoin network and all these different things. And I was talking yesterday, to a friend, who works for the IVEX payment system, and he was saying that, you know, the thing to bear in mind about El Salvador is that there's a new Bitcoin born every day in El Salvador, like, created every day in El Salvador through what's happening. And the great thing about Bitcoin is that once you learn it, you've kind of learnt it, and I think it's very rare for people who are orange-pilled to then- Become un-orange pilled again, because once you start going down the rabbit hole and really do understand what Bitcoin is, then the story, the potential, the utility to you as a business or an individual becomes pretty apparent, and the more that grows, like I don't think that, you know, that is gonna reverse. So it's, it's exciting to see how, How people are adopting it, but yeah, at the moment there are certainly those che- teething issues and there are certainly issues regarding perception of what Chivo is doing, and how that relates to Bitcoin.

Speaking of issues, teething issues, problems around access, what kinds of things were you seeing at the last time you were in El Salvador? Of course, it seems like things are improving, but at least at the time you were there, what, what was the

state of play? There were, issues at the time, That I was in El Salvador in October, and the real issues, now. so one of the main issues that I thought, "Wow, this is a really big issue, "was the problems with compatibility between the Chivo wallet and outside wallets. Because when people are paying in Bitcoin, they're normally doing Chivo to Chivo, they're basically using a centralized payment system like Alipay or WeChat Pay, and so they have no problem, they scan a simple QR code, money goes from one account to another account, but they're not actually using Bitcoin. They're just operating on a centralized server, and so they can feel like it's working, but for people like me that aren't Salvadoran citizens, we don't have the Chivo wallet 'cause you need a government ID in order to register for one, or an address, I think, in El Salvador to register for one. So I wanted to interact, with the Bitcoin network using my, my default wallet, which is the Blue Wallet, and what I found was that on-chain payments to, to Chivo wallet were no problem, but when you wanted to do Lightning payments, it was fine when Sending it to the personal version of the Jivo Wallet, but when you were using the merchant version, the first thing was that there are a number of steps that weren't particularly, user friendly. The UX of the, of the product, it wasn't particularly well designed, so I'd have to work there with the merchant and kind of talk them through about four steps they needed to go through to accept my Lightning payment. S- and that, that was the first issue, but the major issue was that actually there were techni- technical problems whereby Lightning payments were actually registered as leaving. An outside wallet account, and then they weren't being received by the Chivo wallet. And, you know, for a few dollars, for me it was like, okay, well, this is, this is annoying, but like, this isn't something that can be happening regularly in El Salvador. Like, if someone in El Salvador, where the vast majority of people like can't, like, it's a really big deal if they lose some, some money on a transaction. this can't be happening. And unfortunately, this is a problem with, the Chivo wallet. It's a technical issue that can totally be solved. And if you use other wallets, you'll realize how incredibly user friendly the Lightning Network can be. And, but I think the issue with Chivo, the reason why it's got these teething issues, is it's because it's trying to have this seamless interface with the US dollar, which is something that I think it is needed for El Salvador. But what- That means is that sometimes you have these compatibility issues and, I'd add to this, Stefan, that it-- around Christmas there was an important update to the Chivo wallet. so I wasn't actually in the country for this, but I've heard through some of my contacts there, that this has taken place. And what this meant was that the, The personal wallet side of Chivo has improved quite a lot and now that's pretty seamless, but there are still like these issue with the merchant, merchant wallets on Chivo. And so it's kind of annoying in a way. I, I don't wanna be too critical of Chivo because they're pioneers, they're trying to do something that's really new and they're trying to solve a difficult problem. But I guess the solution that, people like me and organizations like my first Bitcoin try to promote is like, where you can operate on the Bitcoin network, understand that you can have your own wallet, it doesn't have to have anything to do with the government, and if you opt for these solutions, you can have an incredibly seamless experience using things, with Bitcoin. And of course, like Shivo is hugely important, and I really hope Shivo does well, but I'm worried to a certain extent in the short term the technical issues that people- Having a chivo, will put some people off and delay their adoption of Bitcoin a little bit.

And there are alternative payment processes, though, correct, right? OpenNode or eBEX Mercado also offer payment processing, but I suppose those aren't free like the government one or free, sub-government

subsidized. Correct. Yes. So if you're using eBEX You're paying, depending on what you do, you're paying between, you know, naught point seven and say, maybe up to two, three percent, in, on every transaction that you do. the, the main cost with, with something like iVEX comes when you start to interface again with US dollars, and so there's a conversion fee on that, which I think is something like one point five percent, and when you process a payment in Bitcoin, you're paying, I think it's naught point seven percent just as a standard fee, plus what you pay on the

Now of course, that is something that, is much lower than what you'd pay on Visa or Mastercard, where you're looking at three, four, five percent per transaction. And Most people, I think in Western countries, don't realize how expensive it is to do a Visa, Mastercard transaction, because in Western countries, these costs are taken on by the merchant. But I'm here in Mexico at the moment in Tulum, and here, and also other parts of Mexico, the standard practice is actually to have the customer take on this extra fee for processing a card payment. And so here, it's really like, in your face all the time. Like, oh, if I pay on card, I've got to pay an extra four, four to five percent. And you start to realize, hey, this is a really big problem, like four to five percent is a lot to pay per-- if you're doing this for every credit card transaction. And so- When I was in El Salvador and I was paying directly in Bitcoin, I was paying people naught point three percent. I was paying people a tenth of what was being paid, what's being paid over here when we use Visa or Mastercard. And that's what we can get to if we get to a, a point where economies are just functioning on Bitcoin. Like with the technology we have today, we can get that down to naught point three percent, and that's huge in terms of like costs and time, saved by merchants and, and, and customers. So there are these payment solutions that do make it easier, they're way better than Visa and Mastercard, they work seamlessly, like OpenNode, Ibis, you mentioned them, but yeah, if, if we get to a fully Bitcoinized economy, we can go way further and make that process even more seamless.

Back to the show in a moment. If you're looking for a Bitcoin hardware wallet, I would suggest looking at the Coldcard by CoinKite dot com. Now, the Coldcard, it looks like a little calculator, and basically, it can be used in very versatile ways. So you can set it up as a single signature hardware wallet, and you can directly plug it into your computer using the USB cable to micro USB. That's if you're a beginner, and then if you're intermediate or advanced, you can use the SD card to airgap your hardware wallet. Also, you can use it as As part of a multi-signature setup, and you can use it easily with wallets like Electrum or Specter Desktop or Sparrow. Go to CoinKite dot com, use the code Livera to get a discount, and don't forget they also offer SeedPlate and other products also. Unchained Capital are making it easy to use multi-signature as part of a collaborative custody setup. What does this mean? Well, you hold two keys in different locations, and they can hold the third key for you, and they can countersign if necessary. So instead of leaving your coins on an exchange or with You can take that into your own hands, and so they can guide you through this process. They've got a concierge onboarding program, so you can go there, purchase the, the service, they'll ship you the hardware wallets, they'll do a video call with you and teach you how to do the hardware wallets and how to set that up, the vault, and then ship some Bitcoin into that vault, and so you're getting started, you're being handheld along the way. So if you're interested in this, go to Unchained dot com, select the concierge onboarding program, and Lend at HodlHodl is a peer-to-peer Bitcoin-backed lending platform so you can lend or borrow stablecoins globally and anonymously. Sign up in just thirty seconds and borrow stablecoins without any verification, deal directly with other people, and together you control that collateral throughout the whole deal with all the interest paid at the end. Now on the other hand, if you have stablecoins, you can earn extra by lending them at the highest returns. You are issuing overcollateralized loans with the full interest guaranteed. Lend at HodlHodl, lend and- and borrow stablecoins on your terms at your desired interest rates. No hidden fees, the terms and conditions are transparent, and users control the keys in the deal in escrow. Go and check it out, it's lend dot h o d l h o d l dot com. And now back to the show. Yeah, right. And so as things mature, we'll see more and more people use Bitcoin and Lightning more natively, but it is a fair warning or reminder to people that these things aren't free. Somebody still has to run that Lightning node, somebody still has to manage the Lightning channels, somebody still has to-- there will still be on-chain open and close fees associated with that, routing fees associated with that, and so probably as we speak today, as you say, it's probably something like point three percent, point four percent around that, around that range. but when you consider that against the alternative of paying three, four, five percent, which is actually what credit card companies pay, and really what you're paying for there is often like a fraud aspect of it, because they have to deal with the fraud risk or chargebacks and so on, and basically by the time you've dealt with all of that and the regulatory aspects of it, that's where the three, four, five percent comes in. So it remains to be seen what happens in, let's say, if we were to go down the track five years, ten years from now, and everyone And ending fee really gonna be, and also the important part, as you point, as you correctly say, is it a customer born fee or is it a merchant born fee? And so that will be obviously change things a little bit in terms of the perception, because a customer thinks, "Oh, I don't have to pay a fee," but really it's just built into the price by the merchant. Exactly. Yeah. Yeah, so that's interesting to see about how that's happened. Were you seeing any benefits for Salvadorans? Was, what kind of benefits were they seeing? Was it increased business? Was it a better user experience for the customer? What kinds of things were, were you seeing?

When I was in El Salvador, I made a visit to San Miguel, which is the largest major city near to the site where- Bitcoin City is, going to be built, the new announced project by Nabeel Bukheli in, November. And I went there because I was really curious about this project. you mentioned my association with Free Private Cities in the, in the introduction, and I just wanted to go and, find out what the perceptions of people were on the ground in, i-in the area near to, to this site. And so I went around and I interviewed a lot of people about how they've been using Bitcoin. I started looking out for the- Bitcoin or the Chivo signs on businesses, and it was stuff like the, the answers people gave me were things like it's in help to increase sales because I think partly there's a very practical side in the fact that suddenly everyone in El Salvador had thirty US dollars that they could spend through this app. And the merchants that were more savvy and caught on to that quickly did increase their sales, 'cause people were like, "Hey, I can use my cheapo dollars here and I can buy something." There's definitely an aspect of that. there's also the supplies issue, payment supplies, which I mentioned earlier in the interview. I talked to someone in Conchaua, a, she was, like, a young, mobile phone saleswoman, and she was saying that, this kind of using electronic payments in general as opposed to cash was more hygienic And that was the reason that she preferred to use Chivo. And then there were people that were telling me about the use of, Bitcoin to save, and they liked the fact that they could save it when, the price went up, and they could, sorry, when they could spend it when the price went, went up in US dollars, and they could save it when it went down, and they said that they kind of understood that it was going up and down and pro-probably up in the long term. So these were all, positive things that were said to And, and it's great to have like this, these list of examples, at such an early stage, you know? And I think the, the store of value thing will start to become bigger and bigger as time goes on, and also the, the kind of permissionless aspect of it will start to become bigger, because as I'm sure you and lots of people in your audience will be aware, actually getting payments to properly go through, with our current system is A problem, much more than it is when you're just purely operating on the Bitcoin or the Lightning network. I much more frequently get problems, transacting with the fiat monetary system, than I do when I'm just using Bitcoin. You know, when I'm just operating with Bitcoin, sure, you can have issues when it's like a specific- Like Chivo has a problem, but with fiat money, I mean, as I say, I'm here in Mexico, I'm meeting people, we're like sharing bills and things, and there's not-- there are a few applications, but it's not trivial for me to split a bill with an American sitting around a table. Like, we have to both have apps and we-- it takes a bit of time, whereas with Bitcoin, that's a trivial thing to do, and there are these kinds of advantages. like another example is the other day I was trying to book a flight, the payment been refunded for it more than a month later, and then the money's just sort of sitting there in the banking system. You've got no idea where it is. You're just at the mercy of call centers which can hold you on the line for an hour or more or whatever. And with Bitcoin, you know exactly where the funds are, whether they're in the mempool, whether they haven't left the account, whether they've been received. And so you can just go and look at these things yourself if you've got the technical know-how, I guess, and you can work out where the payment is, or you can, like, people can provide that service for you. So there are also the permission aspects of Bitcoin, which I expect to become more and more important as people start to say, "You know, like, there are these things to prevent, prevent fraud, et cetera, et cetera, but these things could develop on the market, like, wallet providers could, could potentially, provide services like this, Bitcoin on top of Bitcoin if they're, they are truly valued. But my suspicion really is that lots of these things, these fraud prevention, these regulatory things are really just, you know, ways of protecting vested interests and protecting the legacy system and, pushing people towards it rather than because they're really valued as highly, As the price would suggest on the market.

Yeah. Yeah. Really interesting and valuable insights there in terms of how things are on the ground, and of course, I'm sure things will develop and become better and better over time as, more and more people learn about the benefits of using Bitcoin, the interoperable open system, as opposed to everyone trying to get into the same walled garden so they can transact with each other more easily, if, so that's, the hope longer term certainly. I wanted to also chat about your visit to Honduras. I know you are, as you said, you're working with the Free Private Cities, organization, and I just find that very interesting. Obviously, I'm a big fan of citadels as an idea, and, I wanted to, yeah, get your views on that also. So, perhaps you could just tell us a little bit about what you're doing with Free Private Cities and what's the association with Honduras

then? Sure. The reason I became passionate about Bitcoin, and there are people that are- I'm passionate about Bitcoin for a number of reasons, because it's such a multifaceted technology and its implications, if you fully understand them, and if it continues to do what it's already doing into the future, I think are pretty profound. People get into it from the technical side, people get into it from the transaction side, the merchant side, but for me, from my teenage years, I was-- I've always been interested in kind of moral, social, economic questions. I got really into philosophy, I did it at A-level and had some really inspiring teachers, and I went on to study that as part of my university degree. So I'm more interested in these kind of bigger social, economic kind of questions. And the big aha moment for me with Bitcoin was understanding how it could, you know, transform society. And so the reason that I'm kind of interested in free private cities is because I'm interested in how society functions today and how society could be better. And I see Bitcoin as a really practical existing technology through which people that disagree with some of the ways in which the existing financial political system works can peacefully opt out and peacefully start to cooperate with other people that also share their ideas. But at the same time, the reality is that we live in a physical world, and we still need to have organizations that protect physical, rivalrous, property within the economy. And so whilst Bitcoin is helping to change many aspects of the world, I think there's also a need for innovation in the realm of governance, and that's the focus of the Free Private Cities Foundation. Free private cities are contract-based societies that are based on purely voluntary interactions between the people that are living in them and the people that operate them. So they're run like companies, that's why the word "private" is in the title. And what they are essentially is- The way that they would work is that, a operating company buys a piece of land and offers a contract. So we're not talking like Jean-Jacques Rousseau's hypothetical social contract, we're talking about a real business contract, like the contracts that exist in the real world for services like, you know, house rental, if we go to a hotel, there might be a contract. If we have some kind of mobile phone carrier, we might have a contract with them. There is a real written contract saying these are the rules of our city, our community. This is what it costs to pay for protecting this community and giving you the basic access and services that you might need to run it, such as maintaining the basic infrastructure and maintaining the security. This is what it costs every month. If you want this service, you can come and pay for it. If you don't want this service, you're free to go elsewhere, and of course, you're free to leave anytime you want, as long as your contractual obligations that you agreed to are, are fulfilled. So this is the model that we have, and it's a model that was- Invented by Tita Skabel, who is a German, entrepreneur, and he's written a book, Free Private Cities: Making Governments Compete for You, which I would really recommend to your listeners. and this is-- so this is a theoretical model, but there are already, some projects that are starting to implement, parts of this model. And that's one of the reasons that I was in Honduras, last month, because I wanted to go and visit for myself, some of the projects that are implementing free private cities type principles, and I found that to be a really interesting and, experience and as something that I've certainly learned a lot from.

So going further into the Honduras example, what's going on there? What kind of, projects are there that are operating in this fashion?

So in Honduras, a new law was passed in twenty twelve that allowed for the creation of something called Zones for Economic Development and Employment, the shorthand for that is ZDES. And this was quite a unique piece of, legislation to be passed within Honduras, 'cause it allowed for the creation of special zones within the country of Honduras that don't, that not only operate like the free trade zones that are so common around the world, places like- Like Schengen, where the governments have a high degree of autonomy and can exercise their own fiscal decisions, and they can lower taxes for their businesses, and they can change their own labor laws for their businesses, but in addition, change their own labor policies rather than labor laws, but in addition to that kind of, administrative freedom, what the Honduran law allowed for is a high degree of legal freedom as well. So this is probably the most, I guess in a libertarian sense, the most forward-thinking piece of legislation that's been adopted in terms of what it would, in theory, allow to happen with city or community autonomy. So when this happened, there were a number of people who are more aligned to the idea of voluntary communities who took notice of this, and I was chatting to some people yesterday actually who have come up with a concept for a ZEDE called Mariposa, and they kind of undertook this epic journey overland from Canada down to, down to Honduras in order to try and implement a project, because people started to notice, okay, this actually does mean that we can create- Something that is more aligned to the libertarian, voluntarist, mindset. And at the moment, there are three projects that own land within Honduras that are set up under the ZA, legislation, and those are at different stages of development. They're called Prospera, Modazan, and Orchidia. And there are another of, of additional kind of concepts whereby there's a framework for setting up a ZA like Mariposa that I just mentioned, but haven't yet been implemented in practice, for a number of practical reasons, which, I could talk a More about if that's of interest. So when I went to Honduras, I visited two of these projects, Morazan first, and, Prospera, and these are very different kinds of project, but what was great about them was the fact that I was seeing, hey, this idea that I've read about in Tita Scales' book and- find very attractive is actually being implemented to a large extent, and I was able to learn what was going well there, what the challenges were, and, come away with some fresh perspectives about, about the idea of free private cities.

Yeah, so then as there are projects going on, how much autonomy do they really get? Because sometimes it's like the government might say a certain, you know, you've got this much freedom, but then what's it like in practice? Like, do they really have that much freedom in terms of what the laws are, what they can do, and what kind of- Agreements they can set up.

Yeah, it's a good question. So the key thing that they've been able to do so far is the stuff that's more on the traditional SEZ side, Special Economic Zone side. So for example, they've been able to change their pricing structure, like in Modozan, for example. the-the-this isn't a purely libertarian model. There are certain restrictions that you, you have to, that these SEZs have, like they have to have some kind of income tax, for example, but within Modozan, they've lowered that to, I think it's like five percent income tax for the business, so it's incredibly low, and they're also able to, hire people and, operate their business in a way that's much more cost effective. So what we're seeing at this stage is the more traditional liberal kind of economic side of, of the change coming in. but then again, that's, that's part of the reason that the investment is coming into these places is because of the expectation that they can do more, and there is also a realization of the practical side of So it might be possible, if you're a libertarian, you might think that, you know, anything goes as long as it's not harming other people directly, as long as you're not infringing on the rights of other people. But of course, there are more controversial things that you, that you could do, which aren't normally allowable in society, which you probably don't wanna do if you're just starting out, because you don't wanna attract too much attention to yourself, and you don't want negative publicity, and you might not even want those kinds of things going on in your

So, so far there have been these things implemented, and the one that I'd say is the most developed in its thinking around what is gonna be possible within the ZLAW is Prospera on the island of Ra'atán. They've dedicated a lot of time and resource to developing a very extensive legal framework for how all kinds of- Interactions will operate. Prospera is a very interesting place to visit, and they've got a great team, they've got some great buildings, they've got great plans for the future, they've just made, acquisition, an acquisition of a very, nice hotel complex called, Pristine Bay. but again, they are kind of an early stage, and they've, they've done a lot of thinking, but, the extent to which they can actually implement these things is still pretty early.

I see. A-and so the idea would be, hey, look, it's low tax zone, it might attract capital, it may attract workers, maybe local or people who are in either in that country or in nearby neighboring countries, because, hey, I could get a job here, that kind of thing. So are we seeing that kind of, the beginnings of that sort of thing, like workers coming in and businesses coming in to set up?

Yeah, and that's a really encouraging aspect of the whole setup. and just before I answer that, another thing I would add as well, Stephan, is that people often look at things like low tax and they think, "Oh, this business is gonna move there 'cause it can pay like twenty-one versus like twenty-three percent." attacks and therefore that's economically viable. But one of the other key advantages with these ZAs is that actually for a lot of people, the whole process of having to go through all of your accounts and r-reveal them to some uninvolved third party and have to commission expensive lawyers and accountants to make sure everything is, is kind of kosher within your, your business, like that whole process is something that can be really simplified or potentially even abandoned completely with the free private cities model and potentially with the Z model, and that's something as well that I think is, is just a key thing to point out that we do live in this kind of crazy system, whereby there's a huge amount of resource society that goes into just accounting and working out what tax you have to pay, and that's a great dead weight loss, I, I would say. but on the job side, yeah, it's early days and it's small scale, but when I went to Morazan, I was able to meet a lady who Who had, called Rosa, who had initially set up a small shack near to the initial construction site of Morazan, and she's quite a low income worker within, within that area on Choloma, which is not particularly affluent area, area near to San Pedro Sula over in the, northwest of Honduras, and so she had a very basic setup. A corrugated iron kind of hut that she was using, no electrical equipment, but she was kind of entrepreneurial and she saw, oh look, there's some stuff going on there, I'm gonna go over there and sell some food to the workers there. And so she started to do that, and then the, the people that were running Morozan said, hey, we noticed that you're selling stuff near to our, property, would you be interested in becoming a resident? of our, of our city. And, of course, this comes with, some fees. Like, they, they offered a, like, a very, very low fee for this, 'cause they want-- they wanted to have her, but they also like wanted to make it clear that this is a place where we offer you a service and you pay something for it, and in return you can do business here. And so she was-- she said, "Yes, I'd love to become, a resident of this place." And I was able to visit her In November, and I saw pictures of her like corrugated iron shack, and now she's got her own standalone business space that she's renting. She's got a restaurant, she's employing staff, she's got electrical equipment like a fridge, that she can use for selling ice creams to people. She's-- and she's got like this air of confidence, it's like, "Yeah, like, I've done this in the last six months, and it's me. Like, no one has come in, no one from the government has come and said, 'Hey, here's a I want to be an entrepreneur. Here's some like money to help you get started. It's like she's done that all by herself by just interacting purely voluntarily with people. that's just one small example, Stefan, but I, I like to use that because it's, it's not about- You know, the wealthy international section of Honduras who went and studied in the US and has come back and now they've got a great job, you know, working as on, in, on something like big that they might be doing in America, but they're doing it in, in Honduras. This is like simple low level bottom up economic development, and it's really cool to see this happening. I could also give you examples like higher level stuff, which is going on within the village, which is also really exciting and cool, like Prosper employing like, It's not those people, but it's like tens of people. I think they've got seventy to eighty people employed there now, and these are like really good high-end jobs as well, so they are providing those high-end jobs. but yeah, like it's cool to see the Zetas have been providing jobs like across the entire socioeconomic spectrum.

What about this idea of infrastructure provision? So I suppose obviously as these are early projects, now obviously as an Austrian, you understand the concept of capital accumulation, and these are societies who- Might not have had enough time to really build up a big capital stock. What does it look like in terms of infrastructure and things like, okay, internet, you know, hot water and all these other aspects around those, zedes? What's that? What's the story there so far?

So there's definitely an argument to be made, for there being services which are managed in a more centralized way within a purely property rights based system, and that's what they have at the moment really in places like in, in Modazan and in Prospera. when you go into Prospera, sorry, when you go into Morazan, there's a, there's a very nice road that you, the gates will open, there's a company managing the security, so this is one of the most secure parts of, you know, Honduras or certainly this area, Chalma, the city that neighbors Morazan, is notorious for having very bad violent crime. And one of the key things that workers find attractive about working in Morazan is that they've got a private company that manages the security. So when you show your pass, you go in and there's this, a nice road that takes you to the, to the, to the center of the activity, which is in very stark contrast to the area outside, where the roads are just potholed dirt tracks. There's, there's really not a lot going on there. so part of what the fees go to, when businesses are there is mainta- maintaining those roads. And the same, like when you're in, Prospera, you can see around that it's a very nice area, but also there are challenges public areas which aren't owned by Prospera, there's really like bad infrastructure. So those kinds of things are provided, but where possible, they're just using the private approach. So I believe that, like, Wi-Fi in Moderson, for example, that's provided purely privately, and they had a private company come in to provide Wi-Fi to the residents that wanted it, and, They're, they're people that are practical, business minded. They want market solutions, they've got limited time. Of course, they don't wanna have to manage like people's WiFi if there's a private solution for it. So, that tends to be what's happening. But I do think that when you've got people living together in an area, there is a case to, to be made for like a, a private property owner within a voluntary system managing things like rice and wheat, and that's what's, that's what's happening at the moment in those two projects.

Excellent Also, the question around security, you touched on this early, that there's essentially private security operating. What's the story there in terms of if there were to be more serious security threats there? Like, is-- has that something that's been explored, spoken about? What's the planning there as if, if the idea is that this is gonna grow and become bigger?

I think in practical terms, it hasn't really been a big problem maintaining the security. One of the issues that they do have, the existing ZAs, is that they are politically controversial, and I think as we're having this discussion, it is important to mention that there have been some political changes in Honduras. A socialist leader, Chamara Castro, was elected in, in November, and is due to take office towards the end of this year. This month, and one of the key pledges she made was to shut down the ZAs, or to at least limit the ZAs in some, in some way. And so this has been one of the key topics in the minds of the, people that are running them, in, in the past couple of months, because one of the reasons that the-- one of the things that the foundation tries to do, and that Tipolis, a commercial kind of associated organization, attempts to do, is to set up legal structures that allow for these- new kinds of economic zone to, to be protected as far as possible within the existing system. So basically it acknowledges that we live in the real world, there are, there are We live in the real world where there are dominant powers that back their claims to property through violence, and that's the reality of the world in which we live. So we have to operate within a legal system, and there are ways in which the legal system can be used in order to create protections. In the case of the Zetas, there's a constitutional protection that sits behind the basic rules, which means that technically there's supposed to be a two-thirds majority in parliament to overturn the Zeta legislation, which, Hamas Castro's government isn't gonna, quite have, but that's a theoretical legal argument. There's also an international treaty, which with the country of Kuwait, which, which backs some of the protections in the ZAs for investment reasons, human investment reasons. But that's the theoretical way it should work. And obviously, when you have got a country like Honduras, where rule of law is perceived and is, is less strong than in, than in Western countries, say, there is a practical reality that you have a- President now, who is hostile to ZAs and who can make it very difficult for these projects to operate successfully if she wants to. And the thing is. Although the story to me of what they've achieved so far is really inspiring, they're still small and there have been very large movements in Honduras unfortunately, Stefan, that have spread a huge amount of- Just really malicious misinformation about the Zetas and what they do, like claims that they're expropriating land from people, all kinds of claims about the, their founders and the unethical activities that they're doing. Like there were even some claims that I was hearing about that, you know, oh, the, the, the Zeta owners want to set up these Zetas so that they can harvest organs and sell them internationally through like some pretend hospital they're gonna create there. Just really like out there crazy stuff. And there's been this campaign And there is a small but enthusiastic movement with in Honduras that is really like trying to just throw mud at the Zetas and say, "Well, this is undermining Honduran sovereignty, and this is, you know, not something that our-- This is neo-colonialism or whatever, you know? There are all these kinds of claims being made, about the Zetas. And so this is the political reality, you know, this is the world in which we live, and setting up free communities and doing things that are running parallel and- And, and posing a kind of competitive challenge, I guess, to the existing system isn't ne-is never gonna be something that's easy to do, and I say it is the case that, within, Honduras there are those challenges, there are those concerns, but this kind of stuff is to be expected and it's part of the reason why we all need to keep making the, making the case, for why these kinds of things are, Great for everyone across the socioeconomic spectrum, because, you know, ultimately, you know, people, people's minds will need to change in the system, in order for, these things not to be kind of overthrown or, impeded in, in some way. But, but I think that can happen, probably most practically, through the practical demonstration of the benefits they bring, such as, such as jobs to these communities. So essentially, it's about

winning hearts and minds to help ha-have some level of defense or some level of not being, aggressed on by the government of the country. I'm also curious as well, is there any, is what's the story in terms of Bitcoin usage in the ZEDS? Is there, are there people using it or not really?

So within Prospera, they have accepted some payments in Bitcoin and they are open to, to doing that for various- Things. And this is more to do with the actual operation of the, of, of the, the kind of company itself. And there are some companies that have some transactions happening in Bitcoin, within Prospera. I was speaking to the, the founder of the project, Eric Bremen, while I was there, and he was saying, "Actually, you know, El Salvador has all this noise about El Salvador adopting Bitcoin, but actually we adopted Bitcoin first, in Honduras here through the Zenith." And, I suppose that's technically true because within the Zha system, they are able to accept any international currency and use it as a kind of tender, and so that's something that the guys in Prosper were keen to say, "Hey, this is allowed here, and we're setting up some frameworks through which this could, this could function." So, that's ha-- that did happen in Prosper, kind of on that small scale. it's not being used, as far as I'm aware in-- I, I don't know a lot about Orkidea yet, which is one of the other projects. I, I'm-- it's not really being used in, in Morazan, but, I did talk to them about it and I said, "You know, you could, I'm here, I'd like to pay for my, my meal. I didn't have Honduran limpieras at this point. I had US dollars, and I was like, " And I was kind of in the mindset that, yeah, everything's easy 'cause I've always got my smartphone, so I can just pay in Bitcoin, like, you know, or, or what, or US dollars, whatever's easiest. So there was a little discussion around, you know, why don't the businesses here just set up a Bitcoin wallet, then they can accept Bitcoin from people like me that might come and visit? And, I think in general people are pretty open to that, but it's like low down their priority list when you're talking about someone that's running a small, Yeah, the big story with Bitcoin is, is certainly El Salvador.

Yeah, sure, sure. in terms of people who wanna go to some of these zetas, what's the story in terms of You know, residents, d- is it just basically that you need to be able to get an entry right into Honduras because it's inside Honduras, and that's really what it is? And then if you actually wanted to live inside one of these, you would need to get some kind of PR there, or how, how does that work?

Yeah, it's basically determined by Honduran immigration law, and if you wanted to become a resident there, it would be pretty similar to becoming a resident somewhere else, but you would just have a, a contract that you signed with the, ZA Operator and that would set out the terms of what you, what you can and can't do while you're, while you're in the, while you're in the ZA. And it's, it's really simple stuff. One of the things that Titas Gabel emphasizes in his writing is that we look at the current legal system that we have and we see that it's really, really complicated and we have people that dedicate their entire lives, like large swathes of the population, that dedicate their entire lives to interpreting the law. And so we assume this has to be the norm when New societies of function. But one of the things that Tita says a lot and I agree with is that actually reasonable people don't need thousands, hundreds of laws even to interact with each other. There are pretty basic common sense principles about how you shouldn't shouldn't interact with other people, like you should respect other people's property, you shouldn't infringe on their, their rights to do as they please as long as they're not causing harm to you. And in the Z's, this is basically how it's working in practice. And there's not a Like for example, when I was, when I was in the Morazan, they were telling me about problems with litter. Like, this is again with like Rosa, like outside her shop, people were leaving litter lying around, and they said, "Hey, like, this is a public area, according to your contract, it says that you're not allowed to-- you have to maintain the res- and respect public areas within Morazan, so we need a solution to this. " And obviously the solution she was like, "Okay, right, there's litter, I need to Emptying that and I'm telling people like, "Please don't throw litter on the floor, there's a bin, " etcetera. Like, super simple solution, but they didn't come in and say, "Hey, we need a bin here, " as the operator of the city. They just said, "In your contract, Rosa, there's this problem, there's this clause around, like, littering public areas, so you need to come up with a solution. " And she came up with a simple solution. That's basically the way that it's operating at this scale. When Market, according to my view, and there's great work being done by Rothbard outlining how that can work. Peter's Gable's done a lot of work on this. There's loads of people that have written about free market, solutions for, for legal, for legal problems. And so, yeah, once we get to the larger scales, that's what I would hope, and expect that we will start to see.

Yeah. And so, are there any other projects elsewhere around the world that the Free Private Cities Foundation is looking at at this point, or is it mostly the The Honduran one.

So there are, there are various projects in, Honduras. we also have some relationships with projects in, North America, which are more like intentional communities, so people, coming together in order to, live in a more, like, libertarian way within the, within the existing frameworks of, of those countries' legal systems. And, if you like, I can post a link to the Liberty in Our Lifetime conference in your show notes, which has got a list of a few projects that appeared, at our, at our conference which took place in Mulhouse, Switzerland back in October, and that'll give people a, a few examples of projects which aren't legally quite as, quite as, Able to go as far as the conjuring zedas, but also have like strong freedom minded, voluntarist, libertarian elements, which, which are, are being implemented to varying degrees in North America, Europe, Middle East, et cetera.

Fantastic. Well, I think that's probably a good spot to wrap up there. Peter, where can people find you and, your organization

online? So the, they can find me on Twitter. That's probably the, the best place in terms of the content I post about economics Private Cities in Bitcoin, and my handle there is peter m i, the letters MI Young. I'm-- We also have the Free Private Cities website, www.freeprivatescities.com. another thing I'd like to flag, Stefan, is that I mentioned there the Liberty in Our Lifetime conference that we held in Moolhan last year. we're planning on holding a, bigger and better conference in Prague, this October. And so if people are interested in finding out more about that That conference is gonna be a place where people that wanna find out more about voluntary communities and this free private cities idea can come together and they can interact, they can learn more about all of the projects I mentioned today and what the future projects are. I would say, follow us and follow the, the Free Private Cities Foundation, which is at free private city on Twitter, and we'll be posting information in the next few weeks about that conference. we're looking for sponsors for that conference, we had some great sponsors last year, and we want to find- And more people from the, libertarian community who might wanna sponsor that. we're looking for attendees. We're probably gonna have about three to four hundred people there in Prague. It'd be great if you could come along as well, Stephan. and, yeah, that's, that's the key thing that I would say, like, follow us on Twitter, check out our website, we've got some great articles, but also keep out, keep an eye out for our LibTerra, our lifetime conference, which we're gonna be hosting,

Maybe this time, maybe this year. So, yeah. So, look, thanks very much, Peter, for joining me today.

Stefan, it's been an absolute pleasure. really appreciate you inviting me on. As I've said to you before, I've been a big fan of your show for years, and it's one of the shows that I used to listen to when I was just getting into Bitcoin. So, it's a huge honor to be invited on and have this opportunity to chat to you today, and, I really enjoyed it.

If you're enjoying the See you in the citadels.