SLP408 Jeff Booth Bitcoin’s Signal in the Noise

Jeff Booth, tech entrepreneur, author and bitcoin advocate rejoins me on the show to chat:

His latest article, Finding Signal in a Noisy World
Prior biases and his experiences with technology disruption
Why Bitcoin adoption will be more bottom up
Investing in the space with Ego Death Capital
Helping people zoom out and see the bigger picture

Links:

Sponsors:

Stephan Livera links:

Podcast Transcript:

Stephan Livera – 00:00:08:

Hi and welcome to Stephan Livera podcast, a show about bitcoin and Austrian economics. This show is brought to you by Swan Bitcoin. Swan is the place to go and buy bitcoin as well as learn about bitcoin. Swan has a lot of projects coming up that will be released soon. But most importantly right now there’s the Pacific Bitcoin Conference that’s coming up in November on the 10th and the 11th in LA, California. This is going to be an all new west coast event, deeply dedicated to bitcoin and bitcoiners. So, as you can come to expect with Swan, it’s bitcoin only, there’ll be a fantastic experience with excellent bitcoiners. There education, workshops, all kinds of fun. So make sure you’ve got your tickets. And if you have any family or friends who are newcoiners or precoiners and you think they need some exposure to that bitcoin culture, you know you’ll find it here at Pacific Bitcoin. There’s an excellent line up of speakers. I’ll be one of the hosts. You can be sure that if you bring someone to this event, they will come out orange pill. So go to Pacificbitcoin.com and use the code Livera to get a discount on your tickets. When it comes to bitcoin hardware security, my favorite is the Cold Card by Coin Kite.com.

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So today for episode 408, my guest is Jeff Booth. He rejoins me. He’s a tech entrepreneur, author, and bitcoin advocate. So he rejoins me to chat about his latest article, Finding Signal in a Noisy World, as well as prior biases and experiences with technology disruption. Why bitcoin adoption will be more bottom up, as well as some of his thoughts in investing in the space with Ego Death Capital. I think the key message is helping people zoom out and see the bigger picture. So on to the show with Jeff.

Stephan Livera – 00:03:11:

Jeff, welcome back to the show.

Jeff Booth – 00:03:13:

Hey, buddy, thanks for having me.

Stephan Livera – 00:03:15:

So, Jeff, what’s going on in the space? We’ve got plenty to chat about. And I know you did a blog post recently, which was excellent, by the way. So, listeners, I’ll make sure we have that in the show notes for you. But yeah, Jeff, I guess just high level. What’s on your mind recently in the world of bitcoin?

Jeff Booth – 00:03:32:

I think the thesis is only being more and more confirmed all the time. So regardless of price, what’s happening in bitcoin and the adoption of bitcoin, and I’m talking not just bitcoin, bitcoin the asset, I’m talking bitcoin, the ecosystem, the layered technology, what’s happening is just unbelievable. And I can’t believe I get to play in this space that’s emerging like this. And going back to my book, everything that I wrote about is playing out at an accelerated pace in the world today. I’m not surprised by all of the events in the world. I just have a different view, I have a different viewpoint. It’s similar to many of the bitcoiners where this moves to and what transitions from one system that cannot functionally work in the world to another system that can and works better for humanity.

Stephan Livera – 00:04:25:

In the world today, it seems there’s a lot of confusion, and we see that even in the bitcoin understanding, that a lot of people, maybe not people who are really deep into the bitcoin world, but people who are, let’s say, newer to bitcoin or maybe outside of bitcoin, a little bit. And I think part of that, I think your article has all touched on this as well. So the article is titled Finding Signal in a Noisy World. So I think that was a really interesting one because one of the themes I saw was this idea that people are misunderstanding the value creation delivered to society. So do you want to just explain? What are you getting out there?

Jeff Booth – 00:04:56:

Yeah. So let’s start at a different place, if you don’t mind.

Stephan Livera – 00:05:00:

Sure.

Jeff Booth – 00:05:01:

Let’s start. When you’re in bitcoin, as deep as you are, as I am, and you understand it at a first principles level and why the system is the system is corrupt and it cannot function to where technology is taking us. Your first thing you do is, even though you never understood it when you first looked at bitcoin, the first thing you do is wonder why everybody else can’t see it. And you have a bias that they can’t see it because they’re manipulating, they’re hurting people and everything else because there’s no way they can’t see something like this. And so I would say that there’s a whole bunch of people, even in Bitcoin, that would how can’t my parents see this? How can’t this it’s so important, why can’t they see it? And so you spend your time with other Bitcoiners. You go deeper and deeper and deeper and you get matter and matter at the system because it’s so corrupt and you want to lash out at anybody in the system who is adding to that corruption. So both I totally understand that. I totally understand that. But I live in a world where a whole bunch of my friends are in that existing system. And I’m around them all the time and they’re still my friends. And a bunch of my friends and some of my friends have been to World Economic Forum and their belief is they are actually helping. They’re there because they think they’re going to help. Now, I categorically disagree with them, but what I’m getting at is they don’t see it. They don’t see it like I do. And so what some Bitcoiners would look at as those terrible people I don’t look at it as those terrible people. I look at it as some people that just don’t they haven’t looked down the rabbit hole as far as I have. And as a result, they’re living in this world that they can think they can solve it a different way. And I disagree with it can’t be solved a different way. I think it can only be solved with Bitcoin. So we have a disagreement on the way it’s going to be solved. But they’re not bad people. And so with that, that’s actually why I wrote that article, because what would a world what would a world look like that was driven by technology that was that things should be getting cheaper and cheaper and cheaper. But you lived in a corrupt system, that everything you measured was from that corrupt system, and that must make prices more and more expensive. So what would that world look like? And why would it be so confusing for people within that world? And as they moved to fear or protection or whatever, thinking that they lived in the same world, they grew up in the same things, what would they naturally do in something that was so hard to understand, like a protocol level technology like Bitcoin, which is going to form a new peer to peer internet for the world. So, again, what I see from the space I’m in and this is talking to governments, this is talking to really respected individuals that just aren’t there yet, I see just a massive confusion. But the confusion is completely understandable because they live in a paradigm and they’re measuring that paradigm. From that paradigm, they’re measuring the system from the system, thinking that there’s a way out from that system. So I understand their confusion.

Stephan Livera – 00:08:33:

And when it comes to teaching people about bitcoin, sometimes you come up to people who are just simply not ready to hear that message. And in other cases, there are people who you give them that first pitch and then they’re ready. Or in other cases, maybe it’s seeing is believing. You show them a Lightning transaction. Or in other cases, maybe it’s like a long time friend of yours who, let’s say over time seeing, oh, hey, you’re doing really well and you’re into all this bitcoin stuff. Why don’t you teach me a bit about that? What’s been effective in your time in terms of being an advocate and educator of bitcoin, at least amongst the friends and the people you know?

Jeff Booth – 00:09:11:

Well, I think one of the things that I wrote about, that I wrote about in the book was a missing piece for a bunch of bitcoin people in bitcoin generally, and brought a whole bunch more people on. Just from a very simple concept, does technology produce productivity and is that productivity deflationary, really simple concept? The answer is there isn’t one person who can argue that that’s not true. In other words, prices should be coming down in the world and we should be gaining time as prices come down. Why isn’t that happening? And it forces people to say, wait, why isn’t it happening? And explore why it isn’t happening. And as they explore why that isn’t happening, then they have to come up with it should or shouldn’t happen, and then why should it or shouldn’t happen? But they cannot argue the fact because it’s in their face. Every day they see it in their face. And so what they end up facing from that first principle question is a conflict in a whole bunch of their understanding of the world. And that conflict of, wait, if prices have to go up, and who gets to control prices going up, which is when it’s against the netfree market. And that question that they have to force into then has them explore, wait, if I live in a democracy but I don’t have a vote in inflation, does my vote count at all? Is democracy and communism the same model under printed money? And so a whole bunch of these ideas that weren’t in conflict in their minds before become in conflict. Just from a simple question, is technology deflationary? And it’s amazing how many people can say, yes, technology is deflationary, and then go back to the old system. I’ll tell you, one of my friends and one of the things that he was a contributor to the article only because I couldn’t break through to him. I was so frustrated by him that I couldn’t break through to him. And one of the things I asked him on my deck, drinking beers is because he totally believes the institutions and laws protect you. And I said if that were the case where money is most broken you’d have the best laws. Money supersedes laws because the power of money ends up setting the laws and those types of things in that one specifically. It kind of broke his brain because he wants to believe that because it’s worked for him as all his life and just asking a different question forced him to see that. So when you ask how do people get there? I think every single person gets there in their own way. And what is the thing that actually causes that conflict to move from a system that is so profound in every other decision they make but they believe in it to a new system or to see hope in a new system. It’s different for every single person.

Stephan Livera – 00:12:34:

And as you rightly pose that question is technology deflationary? And of course I’m with you. But let’s say the average person out there, they may be defaulting back to preconceived view or something that they believe. So whether they are on the left or the right or a moderate, let’s say if there’s someone from the left they may say oh look, it’s those greedy corporations. If it’s someone on the right or look it’s those evil immigrants or they may have some kind of preconceived idea that they then spit back at you. And I understand as you’re part of what you’re trying to do and I think what many bitcoins are trying to do is say look there’s actually a bigger cause here, there’s a bigger answer here. How do you approach that? When you get that kind of as I’m sure you do, how do you approach that kind of pushback?

Jeff Booth – 00:13:17:

Yes again, that’s deflecting the question I just go back to. The question I just go back to is technology deflationary? And they have to answer yes. So you could say it’s not greedy corporations, it’s not immigrants, it’s not anything else. It’s technology which is unambiguous. It’s not a person driving that. It’s a process. And it’s the things that we come up with in our minds that are better than the old things that get better and better. So it’s our innovation, our ideas that if they meet, if they meet the market and the market decides they’re better we use them. So it’s us deciding. And that means that unless we do the same mistakes over and over and over again or build more cost and build worse processes, I suspect we wouldn’t use they come back to okay, I’ll grant you technology is deflationary. Okay. But now you can’t move the ball because that question presupposes is okay, I’m not going to answer your question, I’m going to move the ball to a different thing, right? Let’s deal with first principles. Is this true? Because if this is true and it’s going and technology is speeding up because our ideas are speeding up, we build on top of other ideas. If that’s speeding up in the world, then how does the existing system deal with that?

Stephan Livera – 00:14:52:

And I think it forces them to think about it totally.

Jeff Booth – 00:14:55:

So I just keep bringing them back to that question because what people want to do is deflect the question because it’s too hard to deal with. Because if you deal with that question, then it forces there has to be a change in operating systems for our world. There has to be. And then it forces the existing system, because it’s based on credit, can’t allow a deflationary collapse. So what would you do? How would you change the existing system from the system? You can’t and now it opens up. What possible alternatives that are outside of the control of the existing system could change the system and offer hope, abundance to society? And then you only come to Bitcoin.

Stephan Livera – 00:15:40:

And so are you also seeing that people are uncomfortable having to think about some of these ideas? Because maybe it’s like this idea of people are used to thinking in a certain rut, right? You’re used to walking in a certain rut. And now this Bitcoiner or the person who is advocating Bitcoin or educating about Bitcoin is trying to tell them, hey, actually, maybe you’ve got a prior bias here. Maybe there’s something else. You could genuinely give it the time of day.

Jeff Booth – 00:16:06:

Yeah, and that’s what I don’t mention names here, but it’s working. And it’s working at a level that surprises me sometimes, because those articles or what ends up happening with me being asked to speak to hedge funds or private equity funds or governments or the level that it’s surprising because I’m just some entrepreneur that wrote a book that’s how I think about that cares about kind of the future of humanity, where we go. So I don’t think about myself as, okay, this person, but when you get this feedback and everybody wants to talk to you and then a major, major capital provider. Major capital provider who has been investing in all of the nonsense, ethereal, all of those, and made a lot of money there recently called and said we always knew Bitcoin was it, but we couldn’t invest on top of that. There was no the timing was wrong. So we invested on things that could make money. And we’re disappointed with what that looks like. And I’ve been following your work for a long. Long time. And now I can see what you mean with and maybe that article was one of those things that broke out now that it’s early still with Lightning tarot everything. And it’s coming. But now there’s a time where there can be massive wall of money coming into businesses that are building on top of a stable and secure and decentralized foundation. And so we’re early in that process. But what I would say is, had I not written the article had I just or not started the VC fund or not been involved in this ecosystem and actually kind of trying to make a difference in this ecosystem, I would never got that call. So I wouldn’t have seen it. And had I not been involved in this ecosystem and seeing all the incredible entrepreneurs that are building on top of this decentralized, secure foundation even though it’s early, had I not seen all of what’s coming, I might be way out here as one of my friends might be thinking, oh, this is just a Ponzi scheme.

Stephan Livera – 00:18:28:

Yeah. And I think another theme that came through from the article to me was this focus as many bitcoins have on this idea that adoption is going to be bottom up. So what are your views there? Why do you think it’s going to.

Be more bottom up?

Jeff Booth – 00:18:42:

All technology is bottom up, adoption or most technology is bottom up adoption. And whether that is money or technology broadly, what ends up happening is the technology breaks the rules for the existing monopoly, and it breaks the rules and it offers better value to society. The people closest to the monopoly reinforced the monopoly because it doesn’t provide better value to them, because they get the most access to the existing monopoly. But the value, because it offers so much value to people who don’t have that access, it moves from the bottom up, and there’s simply more people at the bottom than there are at the top. And so once you do that, the technology just technology explodes and advantage moves to the new. Now and this is a bunch of the premises in my book, too, because if you understand how capital moves, if you understand how a free market moves to be able to make more money, the natural incentives, then the natural incentives move to where people can make more money. And that moves on top of where people are transacting. And so we’re early in that process within bitcoin. But so first an example. Kodak invented the digital camera, but their monopoly, selling film and selling cameras was hurt by the invention of the digital camera. And Steve Sasson, who created that, actually went twice to executives at Kodak trying to get them to understand that a different change in their business was inevitable and it was going to happen anyways. But they blocked access because all of their money was coming from selling film. And then there’s a whole bunch of people using that film and taking a very limited amount of pictures and a whole bunch of other people that couldn’t even access photos. So it stands to reason now that if you have a lower cost technology, a massively lower cost technology that brings abundance, we take trillions of photos today versus a very small number 20 years ago, and they’re free. You can totally imagine why Apple other phone companies said. Wait. I’m going to just integrate that into my device and offer it for free because now it creates a moat around my business because I’m giving people something that they’ve never had before. Free cameras and then editing software and everything else that’s also free because a lot of this stuff ends up being a line of code and the marginal cost of production falls to zero of delivering that. So now you have a competition of phone companies or another using the exact same technology to be able to monetize their business. So that’s in film, same thing happened in BlockBuster, same thing happened in countless other businesses by believing that people wouldn’t change their mind to the new value. But when that value provides more value to society, it moves really quickly. And so what’s happening today, if you just said, look at bitcoin as an asset class, so bitcoin, it’s the number one asset class over the last 13 years. So it’s provided a lot of value to those people. And then now bitcoin is Lightning Network and a payment rail. What you’re seeing is why Lightning is growing so fast. Is it’s providing massive value. So you have two network effects reinforcing on themselves, providing more and more value, which is driving more and more entrepreneurs into that, more and more governments, nations thinking, wow, what’s coming is going to be unstoppable and it’s going to provide value to society. And the monopoly in this case is a monopoly over money. And those closest to the monopoly over money, including kind of first world nations as a byproduct, they would be Kodak. They wouldn’t see it because their money hasn’t devalued like it has in Zimbabwe, in El Salvador. And what nations that are dealing with the negative, what’s really happening is those nations are the periphery to our core. And to protect the core, we sacrifice the periphery. And sacrificing the periphery means they have nation building or dictators or whatever that you put into this. IMF comes in and gives them loans that end up hurting their population to protect the core. And then the same loan denominated in US dollars, then the US tightens, US dollars, get more expensive, and the population can’t pay for that loan. And so you run this over and over and over again, this ponzi game around the world. And those nations and those citizens in those nations are the unfortunate victim of protecting the core. So in other words, they’re furthest away from the monopoly. So what do you think is going to happen when you give those nations, those people and those nations a way to escape the monopoly? And as that grows, it changes everything.

Stephan Livera – 00:24:45:

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Stephan Livera – 00:27:29:

Yeah, I mean, as you gave the example with Nigeria, as I understand, they have one of the most highly adopting in terms of bitcoin population. I think it’s lost. I saw the status. something like 40% of the country has some bitcoin. And this is not a small country. I think the population is maybe 150 or 200 million something like we’re talking massive, a big country. And so it’s really interesting to see. And I think this bottomup dynamic as well. And very much this reminds me of the classic. Most people in the business world, they’ve read the book the Innovative Dilemma by his name, Clay Christensen. Right. And so it’s exactly that. It’s exactly this. And so, as I recall from that book, it’s that certain businesses, whether they are Kodak or Blockbuster, they have this competitive mode in a certain way, and then they see this alternative option that almost cuts against and undermines themselves. And it’s just too difficult to disrupt themselves. And now, of course, many business people. I’m sure everyone’s been to some kind of business talk or whatever, where they say, yeah, you’ve got to disrupt yourself. But the reality is it’s much easier said than done. And so I think that’s probably the challenge.

Jeff Booth – 00:28:40:

I’ve done that in a number of businesses myself. And I actually failed in one of my businesses because I tried to change from the business that was 375 people to a new business, which was way better from the existing business. And what I didn’t realize is we were right in the transition to the new business, but everybody had to go away, and everybody in the team believed we were right as we moved to the new business. But then you had to almost increase your team to be able to build the technology to get to the new business. And then everybody in the business would go back to their desks and work on the old business. Because what else would they do? And I misunderstood the inertia of a business that a business has because everybody in that business is doing a different job than the new business. So how do you just cut over to the new business? Because the jobs are totally different. So I cofounded a company in Thailand similarly and it’s the second largest company. It was run by the second largest company in Thailand. And I spoke to the board and I said, you can’t do this. You can’t build what you want to from your existing business, but I’ll help you build a bnew one outside of that with new team and everything else so that you can port the best of this business over to the new once It’s once it’s ready. And that’s a really successful model, by the way. That’s what Steve Jobs always did. He put a secret group together that were insulated from the rest of the business that wouldn’t get overwhelmed by the existing business. But now, if you think about the business of money and the business of what this looks like, why people are confused is because this very same thing is happening and it’s never happened. At money, right? It’s never happened at decentralized insecurity together on money. We’ve never had that. So we had to trust institutions to protect and the rule of law to protect citizens. But money supersedes law and so we’ve never had decentralization and security together. So it’s bound to be a really big head scratcher for a lot of the population that is simply living in that world, measuring everything they have from that world.

Stephan Livera – 00:30:58:

And I think the other aspect of it, as we’re talking about people who are, let’s say, confused, we’ve got this world where it is quite challenging from a macro perspective, right? Inflation CPI, to be clear, is rising in a lot of countries and not just in the poorer countries. Even in the UK, we had the recent stat, 10.1% in July was the CPI number for the UK. And you would think people should be all running to bitcoin, but unfortunately it seems that there’s still that barrier for understanding for people because maybe they’re seeing bitcoin, it’s a gamble or it’s too far. What’s your perspective on that? Do you think more people should be running to bitcoin because of these macro conditions we’re in?

Jeff Booth – 00:31:44:

They will anyways. It’s just the timing that they’ll get it, they’ll find it in their own time. Just remember, every single economic decision today, the existing world that you live in is four orders of magnitude bigger than bitcoin. So if twelve people decide not to print money for a month or two, then that’s going to have a massive impact on every single remember, we have a deflationary market. There’s no question we have a deflationary market. The only thing that is driving all decisions is when twelve people are going to print. And just maybe not twelve people, because all over the world there’s going to be china just eased as well, but when central banks are going to ease more. So essentially the thing that’s driving all of your economic value, everything in the every decision is really coming down to when people are going to print and when people are going to destroy the value of your time and money. But you’re living in that system. So if you’re living in that system and they don’t for a while and you have a rollover and start to get credit collapse and joblessness spikes, you have layoffs and then those layoffs trickle into people not being able to pay their mortgages. And then house prices start falling and then the banks start failing as a result of that, as that counterparty risk around the world explodes. You could think bitcoin would fall too, right? Because in that case, the only thing of value, if you just kept playing that forward, the only thing of value would be bitcoin. It would price everything, it would reset around bitcoin in that event. But on the way there, bitcoin could fall in price a lot because the entire forwarders of magnitude market was experiencing a credit contingent. And so as that’s happening, there’s going to need to be a staggering amount of liquidity destroying the value of your money into the system. And what you’re seeing today is you can’t print energy. Energy supersedes all of these conversations because if you print it just keeps on going up higher. So as that ends up happening, it drives inflation rate. People can’t eat, people can’t feed their families, people can’t run their businesses because the energy cost is too high and they start failing in a different way. And those global supply chains, Germany is going to have to choose do we heat homes or do we turn off critical supply chains to the world in the winter, this winter. And so those start to travel around the economy and people get more and more confused because the base level of everything that they’re making decisions in is being manipulated. It’s carrying misinformation and it must create greater and greater misinformation in society. Will bitcoin if you just play that out, forget CPI, everything else, forget it all. Technology is deflationary. Prices should be following. The only reason they’re not is because money is being manipulated. And if it’s not manipulated to a greater extent, an exponential extent, you’re going to have a credit collapse and a reset of a different means. If it’s manipulated through more and more easing, you’re going to have increasing war, internal dynamics, every nation for myself and this accelerating. So it’s going to unfortunately get really bad from the existing system. So what can you do? You can either give that existing system more energy, yell at it, get mad at it, but it’s not going to change it. It’s a structural system and nothing, no person in that existing system can solve the inevitability of what’s coming. No one. It has to be solved by a new system. And so what I’ve decided to do is spend more of my time because it feels better. Because not only can I make a bunch of money, but that’s not really why I’m doing it. I don’t need more money. It actually just feels a lot better realizing where this is going and trying to build a bridge to the new system as fast as I can so more people can walk across the bridge. So when I meet entrepreneurs that are building that new system, wow, is it exciting in what I just said, all of the nonsense that we spend our time on, why won’t they see it? We’re actually making that existing system stronger. Just a waste of, total waste of your time and energy. Spend the time building the future you want to see. Spend your intention building the future you want to see. And you’ll be surprised at how much actually you have an ability to influence the future you want.

Stephan Livera – 00:37:02:

I think that’s a great advice for everyone. And I think what is a common thing we see is this people have this idea of if we could only get the right person in charge, then it would be fixed. And I think, as you rightly say, that’s not going to solve things. The problems we have are fundamentally just structural. And of course, there are different ways that people conceive or explain that. Like, let’s say a right wing person might say, oh, look, see, it’s the swamp and there’s all that, you know? And the person on the left might say something, say, in a different way, they may say, oh, look at certain corporate, greedy, fat cats. And fundamentally, it’s just a structural issue that is just going to be there no matter which side of the aisle you’re coming from. There’s just structural problems and that there’s a need to build something new and something better. And so I think that’s really where Bitcoin comes in. And of course, I know you’re investing in the space, so perhaps you want to tell us a little bit about that. So you’ve got Ego Death Capital. What is it and why Ego Death Capital?

Jeff Booth – 00:38:04:

So it came from even the name came from Nico and Andy, who are my partners in that. And Nico is a longtime friend who over time wanted to do something in business with me and overtime came to the conclusion that I had on Bitcoin. And maybe it was me, maybe it was him, whatever. But over time, he gained conviction. And in gaining conviction, he also looked at all the alternatives and so did Andy. And so when they came to me and said, would you start this fund with us? I was in a position where I wanted to spend more of my time in this ecosystem with the builders of this ecosystem, but I didn’t have enough bandwidth to do it all because you’d get 100 emails a day and you couldn’t keep up, you couldn’t do service to those. So this fund gave me a structure where they could carry the load and do a bunch of a bunch of the work in vetting and meeting entrepreneurs and everything else. And I could lean in and help where I could. And so it solved a whole bunch of and opportunities for me, where I get to spend my time with really, really great entrepreneurs, building this ecosystem, and work with just incredible people in Nico and Andy to be able to help highlight which ones I should spend more time with and which ones we should invest in. So it’s been, I’ll tell you, we’ve only announced our first lead investment, which was Fedi and Obi, just a star. And I think a lot about what that technology can do. But we have three other terms or two other terms sheets firm that we haven’t announced yet, and some of what’s happening in the space and then a bunch of others in behind there. We’ve seen 260 companies and some of the innovation and what’s happening in this space and what’s going to happen on layer two and three, and everything else that’s coming is just like, wow, I can’t believe I get to do it. And it goes back to that thing I said before. Spend your time building the world you want to see, rather than complaining about the world you see, and you’ll be amazed at what ends up happening.

Stephan Livera – 00:40:38:

And when it comes to investing in the Bitcoin ecosystem, are there any particular priorities you have? So, for example, self custody, privacy scaling, financial products, what kinds of things are interesting for you in terms of investing in bitcoin companies?

Jeff Booth – 00:40:56:

So one of the things that I like so let’s use Fedi as an example. That’s a commercial entity on top of Fediment, and Fediment is open source technology that anybody could build on and create a better application than Fedi. So the same kind of technology underpinning that means is it’s going to be decentralized by nature and a whole bunch if you look at Lightning. There’s a whole bunch of instances of Lightning that are decentralized by nature and then companies forming to say. My value is better on top of this. And the only way they can win is if they provide more long term value to society. So I love the approach. You have a decentralized, secure protocol layer that the next layers must interact with that layer and the next layers on top interact. So you have protocol design that keeps this thing decentralized and secure forever. And then you have company formation that can only work if it delivers value to society. And I suspect that the value to society is going to be overwhelming and that’s that’s what we’re investing in. We’re investing in people that are. And so all of the above that you just said, we’re looking at, how do you make on ramps easier, how do you make custody better, how do you make non custodial wallets integrate better so that it preserves the decentralization and security and delivers value on top of that to society? And there’s just a million use cases and more and more coming all the time with things like Taro and Fediment and so things that we don’t even know even what I’m talking about. We don’t even know how Lightning, Taro, Fedimint that will come together and form a different use case that I can’t even predict right now. But I know they’re coming similar to what happened with essentially TCP/IP. The foundation layer of the Internet and Https later on. Which was a layer four solution that built the World Wide Web. But you wouldn’t know if you were talking about TCP/IP in the late 1960s when DARPA created it. That HTPs would connect all of those websites and form the World Wide Web because you weren’t looking at it in layers.

Stephan Livera – 00:43:31:

And I think that’s really the importance of thinking about this scaling in layers approach that I think the bitcoin community, at least today, understands that quite well. Of course, in the fork wars of 2015, 16, 17. That was part of the fight inside the bitcoin community. And I think obviously. Leaders in the space. People like Greg Maxwell and others who wrote some of those seminal posts about this idea. And I think he’s got this famous one of like a rocket ship going. You know. You’re going on a rocket ship to space and you’re doing it in layers. And as the rocket goes up. There are layers that are peeling off and so on. And so that was like a seminal post for a lot of people who maybe were not so tech savvy. Maybe they were into bitcoin, but they hadn’t quite grasped all the different technical components of it, or maybe they didn’t quite analogize with the internet in the same way, this idea of layered scaling. And so I think it’s fascinating to see. I think the other aspect is perhaps in some ways we’re impatient. People are expecting Lightning to be built today. You know what I mean? So it’s kind of like Lightning. The white paper came out in someone correct me if I’m wrong, but I think it was around 2015 or 16. But the actual Lightning Network didn’t come out into the wild until I believe it was like late 17 or early 2018. And so basically it was mostly reliant on having SegWit. Otherwise without having segued, it would have been severely handicapped. So we had SegWit and then Lightning started, and I think it’s only now really starting to hit some stride, whereas I think in years gone by, I think, and even maybe even I was impatient with where things were at. I’m curious, do you have any thoughts on that? Sometimes you have a vision for the future, but let’s say we’re impatient.

Jeff Booth – 00:45:20:

So once you’re in bitcoin, you think, okay, why isn’t this happening yesterday? This whole thing should happen yesterday. And you’re looking at this and you’re looking at a transition that’s happening from an existing system to a new system. And it takes time. Remember DARPA 60s, late 60s, worldwide web, call it 89, couldn’t launch until 89 because there was no way to interconnect that on layers. And what would you have said in 1990 about the internet? Most of the value of the internet didn’t happen until kind of after 2000. Google wasn’t invented until 2000. It wasn’t a company in 99, and then Facebook was 2008. And so iPhone, which is used as all of the same underlying technology, wasn’t until 2005. So all of these things we take for granted today were built on top of a slowly developing protocol that as it got hardened and stronger and stronger, built all these other use cases. And that slowly developing protocol. Bitcoin being decentralized and secure. And the only thing that is decentralized and secure provably if you go through that article and the only thing that can be, nothing else can be, you can see why it’s forming the base layer of the new internet. And now governments around the world are going to have to choose, am I going to shut off the Internet and all of the value that comes from it to try to stop Bitcoin? Am I going to give that value and all of the people that are going to build on top of it, am I going to stop them from coming to my country and send them to another country where they can build that innovation? Because I can’t stop it. I can only stop it from my citizens. And so now you’re not dealing with Bitcoin just as money, right, that we need to protect the existing system. You’re dealing with it as a protocol layer technology that looks like the Internet. And so if you try to stop that, you can see what’s going to happen to your society. And the people in your country are just going to have to get poorer as others get wealthier and the innovation moves to the free market. That’s actually why these things are way bigger choices today. And it’s part of the reason I wrote the article, because what I realized in government, which is just when we say government, we think about this big structure of government, but all it is is a bunch of people making a bunch of mistakes. If we see the same mistakes throughout society, then we should expect the government to have just as much more just people. So I wanted to give a path to what this looks like. And shutting off the Internet would be you could be North Korea and shut off the internet, but what does that do to your citizens?

Stephan Livera – 00:48:14:

Of course. And I think something else that is interesting that we’ve seen, obviously, as I’m sure you’ve been watching over the last few months in the quote unquote crypto world, over the last few months, we’ve seen a lot of lenders operators in the space either go bankrupt, need a bailout, stop withdrawals, and in many cases, these were kind of quasi banks who were offering yield. And it seems there were a lot of entities actually caught up in all of this. Even I recall, maybe you correct me if I’m getting this wrong, but I believe there was some Canadian pension entity who had put money into Celsius and so it was around the world, like all kinds of government entities and pension entities, and you were surprised when you found out who had put money in with Celsius. And I think it’s just part of this whole yield chasing, yield farming. And of course, maybe that’s a little bit of a fiat mentality, but I’m curious on your view on that, how are you explaining that to your friends who are precoiners new coiners, people who are maybe still trying to find their feet in this space and understand what’s really going on? Where’s the signal? Where’s the noise?

Jeff Booth – 00:49:20:

Yeah. And again, why I wrote the article, I could not believe, even as the whole thing was growing, I couldn’t believe people who were getting caught in it. And when I say I couldn’t believe from a market standpoint because most people won’t do the research, they just trust somebody else, I could believe it. And from the same way a bank builds leverage into a system, a new market participant that builds leverage on top of something that has no counterparty risk and doesn’t offer a return, you have to ask where is that return coming from? So the first company comes out and says, I’m going to give 2% return, and maybe they are better traders for a short while than somebody else, right? But to be better traders forever over something at zero, nobody wins in the market that far. But so again you have to ask, where is the yield come from now? Okay, then you’d have to presuppose this company can be better than everybody else, better than the market, to be able to give me that yield. And as soon as they do that, let’s just imagine a 2% yield then, and a bunch of market moves in because they make more money than just leaving Bitcoin parked. Broader market moves in. Then another entrepreneur, another company says, I can make 4% yield, and then somebody says 6%. And the market just chases this Ponzi scheme because they think it has no risk, but it’s just a market function and all of these things have massive risk. Now, keep in mind that some of the leverage that took Bitcoin up was the same thing happening, driving up. So you have a wall of money coming in saying free returns and pension funds too, saying, wow, this thing is great, I make free returns. Again, when we talk about this and you think other people are smarter than you that just did this, realize they’re not. Just realize they’re not. They do the same thing. Fear and greed drives in and they will in a hot market, people pile money in because they think somebody else has done the work. And that drives fear and greed in the market. Bitcoin rises as a result of that. Fear, greed. And then it gets liquidated and it starts getting liquidated at 20% Luna and it just falls down the channel and everything is liquidated. And what do all those companies have to do? They have to sell Bitcoin on the way down to and Bitcoin just because it’s an open protocol technology, no counterparty risk, tick tock next block. And it keeps going because the people that aren’t pricing Bitcoin from the system thinking that it’s and it’s a huge mistake, it’s a huge error code in what they’re doing. They’re thinking I’m getting wealthier in fiat dollars by price in Bitcoin instead of what’s actually happening is bitcoin is going to reprice everything. If what I just said is true, and bitcoin is going to reprice everything as a result of this. Why would you ever sell your bitcoin? Why would you ever lever your bitcoin to try to get more yield and take that risk? So when I explain what I just explained, my friends light bulbs go on. But before I explain that, they think, oh, bitcoin just fell. It’s just it’s not working. They don’t understand kind of the fear and greed that is normal in all of us and normal in markets. And if you had something that could lever to bitcoin and promise something else, then it would create a natural market cycle that people would abuse.

Stephan Livera – 00:53:27:

And also at the end of the day, there are just cycles in this thing and in many things. And I think for me, having been around since 2013, there are times when bitcoin is the hottest thing in town. And there are times when everyone hates bitcoin or maybe even more. There are times when people are just indifferent to bitcoin. They’re just kind of whatever it’s doing its own little thing. And then eventually the cycle comes back. And then we sort of rinse and repeat. And then in the next bull cycle, people make all the same mistakes or maybe in a way that rhymes similar mistakes. And then we sort of rinse and repeat. And we’re probably going to see a few more of these play out until the hyperbitcoinization is a moment or the fully pricing in sats.

Jeff Booth – 00:54:10:

But actually, look at the long term trend on holders like people that have been holding for a long term, right? And what you see through all these cycles is there’s more holders, there’s more holders, there’s more holders that realize everything I just said is true for every cycle. And it keeps on being and it keeps on happening. And every time that brings on a whole bunch more people who understand why this is critical and they hold it through those cycles and it brings on a whole bunch more people. Remember, the existing market that we live in is way bigger than the tiny market bitcoin. So it has to do that as each cycle brings on a whole bunch more people, and those people get unfortunately, that’s the way I wrote the article is those people get scammed into a whole bunch of other whole bunch of other things. It has to and then they come out the other side or a bunch of them come out the other side and say, I got it. It’s only bitcoin.

Stephan Livera – 00:55:06:

Well, there you go. I think that’s a fantastic spot to finish up there. So listeners, make sure you follow Jeff on Twitter. You can find him @jeffbooth and I’ll link to the article. And Jeff, where can people find ego deathcut if they want to find you there?

Jeff Booth – 00:55:19:

It’s just Ego Death Capital.

Jeff Booth – 00:55:21:

Fantastic. Well, Jeff, I really enjoyed chatting with you and hope to well, I’m going to see you next week at BitBlockBoom.

Jeff Booth – 00:55:28:

Awesome. Look forward to it.

Stephan Livera – 00:55:30:

I enjoyed the chat with Jeff and I think it was definitely useful to Zoom out a little bit amongst all of what’s going on in the space. It’s important for us to zoom out and remember the big picture that we are educating and advocating for. So if you think this episode is useful, make sure you share it with your family and friends so they can also learn. The website is stephanlivera.com/408. Thanks for listening and I’ll see you in the citadel.

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