What are the key principles underlying Bitcoin? How should we think about changes to Bitcoin? Michael Saylor, Executive Chairman and Founder of MicroStrategy rejoins me on the show to discuss:
- Bitcoin Protocols
- Bitcoin Principles
- Bitcoin Dynamics
- Bitcoin Politics
- Bitcoin Philosophy
Links:
Twitter/X: @saylor
Prior Episode:
SLP213 Michael Saylor – Bitcoin Dematerializes Money
Sponsors:
- Swan.com (code LIVERA)
- CoinKite.com (code LIVERA)
- Mempool.space
Stephan Livera links:
- Follow me on X: @stephanlivera
- Subscribe to the podcast
Podcast Transcript:
Stephan (00:00.946)
Michael, welcome back to the show and congratulations on surviving the bear market.
Michael Saylor (00:06.678)
Yeah, thanks for having me. We all survived together.
Stephan (00:12.231)
Well, yeah, I think it’s great to see. Obviously a lot of people can very easily get shaken out and it was great to see that you’re huddled on and you’re stacking all the way through. So that’s great to see. And today we’re going to be chatting a little bit about this idea of Bitcoin principles. And so do you want to just set some of the context? Like, why are we talking about this now? And what are we hoping to achieve here?
Michael Saylor (00:39.51)
You know, I thought it was a pretty useful conversation to have because there’s always a lot of back and forth on X slash Twitter about is this good for Bitcoin? Is this bad for Bitcoin? There’s very colorful conversations about protocol proposals, about software proposals, about developer initiatives, about applications.
The latest is all the debate around ordinals, inscriptions, BRC-20 tokens, but you’ve always got covenants and drive chains. And if we look back, right, probably the most formative period in the history of Bitcoin was the block size wars. And that really did, it did define
the network and defined Bitcoin in a very strong fashion. But I think that if we look forward another decade or two or three, and certainly over the course of a hundred years, there are gonna be more and more of these issues that’ll pop up. There’ll be more constituents that will get involved in the discussion. And I don’t really think having a debate in 240 characters or less on Twitter.
is terribly constructive for a topic which requires a lot of nuance and subtlety. I also think that it’s important to be principles-based in the way we discuss these things. I think if we all focus upon what are our assumptions, what are our principles, then I think they’ll be less confrontational and less combative and more constructive.
right in the community. So I thought it’d be useful to have kind of a constructive dialogue about Bitcoin philosophy, Bitcoin principles, frameworks of analysis. So there’s a basis for whatever comes next.
Stephan (02:52.318)
Right. And as you point out, I think the block size wars of 2015, 16, 17, were sort of a battle for the soul of Bitcoin. And maybe some people have discussed about what really is Bitcoin? What are we doing here? And what kind of changes are acceptable? And I guess people can disagree on what kinds of changes there. Like as an example, some people might say,
it proved that the block size should never increase. And other people might say, no, actually, it’s more like not now, not in this way, and maybe in the future, you know, and that’s just one example on the block size. So let’s talk a little bit. I think we’ll bring it to this idea of, you know, Bitcoin as a protocol. And so do you wanna just spell out some of your thoughts there, like what, if we’re thinking about the Bitcoin protocol, and what are the pieces of that should remain, right? What are those fundamental pieces that must remain?
Michael Saylor (03:49.514)
Yeah, I mean, like, I would hate for someone to define me based upon one tweet response on one issue or six responses on six issues. I think that when we all start to understand each other’s principles and philosophies and how we think about these things, I think it lays the framework for us to come to agreement or at least a constructive, cheerful consensus. So
You know, starting with the basic on Bitcoin, and this is my, this is how I view it, right? Everybody has the ability and has the right to view Bitcoin through their own lens. And they have their own, their own view of what is it, what is it for and why are they attracted to it? So, so I, you know, I’m not here to tell everybody else, you know, what to think.
I’m here just to articulate one view of Bitcoin that I have, that I’ve formed over the course of my life. So I’d start with this observation. I’d say Bitcoin, it’s an asset circulating on a network governed by a protocol based on or rooted in an ideology. And
It provides humanity with a rational, scientifically sound economic foundation for the first time. So that’s what Bitcoin means to me. It is a rational foundation for economics for the human race. And Bitcoin with a small b is the asset.
And we’ve created a digital asset and we did it with a protocol. And the asset’s no value. It is of no value unless there’s a network for it to circulate on. So when I think about the protocol, this is the way I look at it. I think Bitcoin, it has three core protocols that are critical to the entire system working. The first protocol is
Michael Saylor (06:04.374)
The second protocol is a transaction protocol. And the third protocol is what I’m going to call a power protocol. It’s near-term, real-time security. It’s not security of the network over 100 years, but it’s security over the network over 100 days or 100 minutes. It’s the here and now. So that’s based on power. Who has the power over the network? So.
Michael Saylor (06:35.89)
When I think about Bitcoin in general, while there’s lots of Bitcoin nodes and Bitcoin applications, out to anybody can create a version of Bitcoin that runs on an iPhone, an Android phone, it runs on Linux, it runs on a different type of computer, et cetera. For them to be part of the network, they kind of have to share these three protocols. They’re going to differ in lots of other functions. There are other aspects of software. For example,
compatibility, is it compatible with this version of Unix? There’s usability, right? Does it run on the iOS and does it support like, touch or not? There’s compliance, the version of a Bitcoin wallet that runs in the United States, by a publicly traded company.
you know, will have KYC AML restrictions for the state of New York, which will be dictated by New York and by the US. So there’s differences in the software that have to do with compliance. There’s gonna be security differences and this is cybersecurity. So there’ll be lots of Bitcoin nodes and they will all be different in different countries and different jurisdictions for different platforms. But…
The thing they all have to share in common is this common monetary protocol, transaction protocol, and power protocol. So the monetary protocol is the asymptotically approaching 21 million. There will never be more than 21 million. And there’s been a lot of focus upon the blocks of 50, and then 25, and then 12 and 1 and 1 and 6.25, and the halvings, et cetera. But the truth is, I think that’s the way
I think about this not over the course of 10 years or the last 10 years. I’m not even sure the last 10 or 15 years matter. We’re approaching the 15-year anniversary. But for the sake of our discussion, let’s just say I accept Bitcoin as it is today, through all of its twists and turns, the block size wars, et cetera. And I look out over the next 100 years as my short timeframe. And a thousand years.
Michael Saylor (08:54.874)
is a reasonable timeframe. So I’m looking at this as, is this a rational, scientific, economic framework for the human race for the next many, many centuries? And when you look at it like that, it’s very clarifying and it’s simplifying. For example, once you look out a thousand years, you’re like, well, what is the monetary policy? It’s 21 million. It’s 21 million Bitcoin is the most it’s ever going to be.
and some of them will be lost. And that’s the only thing you really need to understand about that someone wants to create a software program or a node that has a different policy than 21 million, they’re breaking Bitcoin, right? They’ve corrupted the monetary protocol. And of course, you can have infinite monetary protocols. You could have 5% inflation a year, you could have five million Dogecoin a year, you could have all sorts of things if you wanted.
You can create a crypto asset or a digital commodity that has a monetary protocol, which is inflationary or inflationary for 100 years and stops, all sorts of things. But in this particular case, Bitcoin’s monetary protocol has gotten to be very simple. We’re around 19 and a half million Bitcoin, but we’re going to cap out at 21 million. So the truth is to debate all of the nuances of how you get to 21 million.
is almost like second or third order at this point. Maybe it was second order for the last four years. It’s becoming third order. It certainly is less than third order by 2035, when 99% of all the Bitcoin has been issued and you’ve got 1% to be issued over the next 100 plus years, you realize that 1% is divided by 100 years is pretty de minimis. So the monetary protocol
Michael Saylor (10:51.602)
scarcity. The transaction protocol is the four megabyte blocks every 10 minutes, which works out to, you know, max, you’re going to get to seven transactions a second or seven and a half, 4,500 transactions in a block is pretty packed. And so when you work back into it, you think, well, like a slow network is 100 million transactions a year and a fast full network is 200 million transactions a year.
And the bandwidth is scarce. And the transaction protocol changed a little bit more over the last 15 years than the monetary protocol. The monetary protocol is pretty much pristine since Satoshi defined it. The transaction protocol jerked a little bit or adjusted with Segwit.
and Taproot sort of adjust it because they changed the theoretical bandwidth and the theoretical nature of transactions. What kind of transactions will the network process and how much bandwidth can it process? The third protocol is the power protocol. And in this particular case, it’s not electrical power, it’s computing power, but what kind of computer power? Digital power.
You can define all sorts of power protocols to control a network. For example, democracy is a protocol. One person, one vote. Aristocracy, one rich family, one vote. Violence, one gun, one bullet, one vote. The world’s full of power protocols. The deer with the antlers have their power protocol. The power protocol for the Bitcoin network is SHA-256 hashing.
And it could have been any other, right? It could be a proof of stake protocol. It could be all sorts of other interesting power protocols. But the question is, who at the end of the day gets to create the block every 10 minutes? And what kind of power do they have to project in order to create the block? And if I had an algorithm which was a CPU-friendly algorithm, right?
Michael Saylor (13:14.398)
it’s a non-GPU, a non-ASIC friendly CPU, well, then you’re allowing any general purpose computer to participate and generate that computing power. If you had an algorithm that didn’t include computing power at all, it’s just electricity. But of course, electricity isn’t terribly scarce. And computing power isn’t terribly scarce. So the idea of SHA-256 hashing
creates a very unique digital power protocol. It’s something where you can create custom silicon. So you have custom ASICs that are generating lots of SHA-256 hashes. And now we just crossed 500X a hash. That’s a lot of power. But what’s really critical, I think, about the power protocol.
is that it allows you to construct a silicon machine with a massive mechanical advantage. Like a custom ASIC, custom silicon gives you a 1000X or 2000X advantage over a general purpose CPU. And what that means is that what we have here is that three interacting protocols which create four types of scarcity. The…
The first level of scarcity is asset scarcity. The second level of scarcity is bandwidth scarcity. There’s a third type of scarcity, which is power scarcity. SHA-256 hashes are a very scarce form of power, right? And they can only be created by Bitcoin mining equipment. And so there’s a fourth type of scarcity, which is technical.
scarcity, technology scarcity, the ability to design a high-performance semiconductor chip that does SHA-256 hashing, what Bitmain has as a core competency, if you can create that. So in order to guarantee the asset scarcity, you have to have bandwidth scarcity. And in order to guarantee the bandwidth scarcity, you have to have power scarcity.
Michael Saylor (15:37.31)
And in order to guarantee the power scarcity, you need technology scarcity. And so you’re really looking at like four harmonics or four types of scarcity. And they come together and they create a network that has integrity and efficiency. I need the efficiency that like, what’s efficient? Here’s an efficient.
power protocol. I have a gun. I’m in a room with 100 other people, one person with a gun that costs $300 has the ability to secure a billion dollars in a room of 100 other people. It’s a very efficient way to secure the money, right? Whoever has the gun, the gun, now take away the gun, put the billion dollars in the middle of the room, and now your new power protocol is your fist.
You can imagine now you’ve got 20 people punching 30 other people, right? Now, then the outcome becomes very ineffective. Another power protocol is I’m going to secure the billion dollars with a hundred million dollars of staked money. You can see that the issue with that is in a staked economy, I have to actually allocate 10 or 20% of the capital to protect the rest of the capital. That doesn’t scale very well.
So when you actually get to the point where you’re creating machines, whether it’s a construction crane or whether it’s a gun or whether it’s a semiconductor chip, you have inserted know-how in order to channel energy, in order to actually exert power. And when I talk about scarcity of power, well, the Bitcoin miners own all the
SHA-256 ASIC chips. So, on any given day, if every power company or electricity company in the world wakes up and decides to attack the Bitcoin network, they can’t really do it because the computing power, the digital power is scarce and they don’t have it. If any government wants to attack the network, they can’t do it because they don’t have the power. The actual silicon machine is in the hands of the network operators.
Michael Saylor (17:58.314)
So that creates a certain type of efficiency and stability. And you can’t really build a civilization without it. It’s the same kind of efficiency you get when you build a dam. You dam a lake, and all of a sudden, you’re generating hydropower. Or the same efficiency you get when you have a construction crane and a 150-pound person can lift 20 tons in the air, 1,000 feet. It’s clear you’re not going to do it without having a machine. So.
I look at the entire network and I think it’s a pretty beautiful set of integrated protocols because the power protocol protects the transactions every 10 minutes. And the transactional protocol is a market-driven protocol where people are bidding to put their transactions into the block space. So as the ecosystem grows…
the bid for transactions grows in a classic market economy fashion. And what you have is Austrian economics dictating which transactions will get implemented based upon subjective value of all the participants in the ecosystem. The miners, over the course of a thousand years, it’s quite obvious, right? The miners are paid by transaction fees. The block rewards were a bootstrap,
or an initial subsidy in the first 20 years of the network. But as far as I can see, by the year 2035, the block rewards just looked de minimis. So 1% of all the Bitcoin comes out over 100 years after that. So block rewards don’t really matter. They fall away over the long time toward infinity. What matters is transaction revenues. And over time, I think
we can expect the transaction revenues will grow to far outstrip the block rewards. And then if you look at Bitcoin miners, they’re really Bitcoin power producers or digital power centers that are defending the network. They’re the first line of defense in the network in the sense that anybody that wants to hack or interrupt the blocks in the next 10 minutes, they have to get through that hash wall.
Michael Saylor (20:18.83)
They’re also the second line of defense of the network because the Bitcoin miners all have invested millions or tens of millions or a hundred millions or billions of capital that they can’t recoup in less than four to eight years and perhaps longer in some cases. Because they have to recoup their capital investment, they form corporate entities in every single nation state and every jurisdiction.
And then they become active engaged lobbyists for pro Bitcoin policies everywhere in on earth where they operate. So so you really could think of the Bitcoin miners, you know, kind of as all of the citadels on the wall that are defending what is Bitcoin. And they are in essence the defense, the defense arm of Bitcoin.
in the short term and the midterm. So that being the case, once you accept the fact that you’ve got these three protocols, and then you ask yourself, well, how should I look at the network and proposals to change the protocols? Well, I think there are a lot of models you can adopt. One is the New York model. The New York model is New York City is sitting on top of granite for 200 million years.
So Bitcoin is the granite. Bitcoin is 21 million blocks of granite underneath New York City. Now, over the course of thousands of years, you’ve got different nation states. You had a hundred Indian tribes. Then you had the Dutch. Then you had the British. Then you had the New York colony. Then you had the United States. And a thousand years from now, you may have another nation state on Manhattan. But here’s what changes, right? The granite doesn’t change.
But the roads and the sewers and the city layout changes and the parks change and the buildings change and the people come and go and the politicians come and go and the rules and the political regimes come and go and the businesses come and go and customs and fads come and go and markets come and go. And those are all the things that you can build on the island of Manhattan because you have the granite.
Michael Saylor (22:44.03)
And so if you look at it that way, you start to think, well, Bitcoin is layer one. It’s the granite. What’s important is I know, I need to know it’s going to be here in a million years. That’s why, at the very least I build a building. I need to know it’s going to be here in a hundred years. But if you told someone, you know, my building’s good for a hundred years, well, 50 years from now, they’re not going to want to buy the building from you. You really want to know the building, the land that the building has built on is good for a thousand years.
If I forecast a sinkhole in the middle of an acre of Manhattan in 37 years, it wrecks havoc with the economy in that jurisdiction. It’s very important that you have that kind of outlook and stability. The layer 2s, the layer 3s, the layer 4s, and the layer 5s, and the layer 6s can all have very high frequency evolution. And there’s not that much to risk.
Whether Lightning and Open Permissionless Layer 2 will compete with other Open Permissionless Layer 2s. You can have competition. We don’t have to agree on which one is the right one. You can have Layer 3s. You can have Bitcoin moving from cash app to Coinbase, you know, across somebody else’s mobile app. And the Layer 3s can come and go. You can have Layer 4s and Layer 5s, applications and services and derivatives. You know, you can have this…
this ETF and it can be replaced by that ETF, they can come and go as well. And then there’ll be people that will actually create derivatives of derivatives. I’ve got an ETF, I trade options on it, and then I create an ETF to trade the options on the ETF. And you could think, well, these are stupid things, right? Maybe they are, right? Art in New York City will come and go. The art of 1700 is different than the art of 1000 BC is different than the art of 2000 AD.
I mean, they’ll change all these things. So if you look at Bitcoin, you know, all these things on the Bitcoin base layer, whether it’s art or property or applications or, or lightning channels and layer two, all of these things are going to change with what’s going to look like a very high frequency. If you were a creature and your lifespan was 10,000 years,
Michael Saylor (25:08.134)
Think about how you would perceive Bitcoin and all these things that people are doing on Twitter and talking about and developing. You would blink every 10 years and then another 10 years go by and your view would be very different. And in that particular case, you would have a good feeling of granite underneath Manhattan. Everything else would change. And then you would think these mere mortals are debating this and that. Like Gramercy Park.
the use of it. Yeah, that’s been significant for 100 years, but over 1000 years and significant. And so I think that the New York model is kind of helpful. I think that if you take another view of a protocol that’s helpful, you know, Bitcoin is our universal rational economic protocol. Well, English, math, fire, electricity and gold. Those are five other protocols.
English is a protocol that has been around about a thousand years. It’s changed a bit. You know, there’s a lot of debates, but for example, there are certain things you can’t say with the English language in certain countries, and yet we speak English. So your three-year-old probably can’t use the English language the way you use the English language, and if you were in a court, you wouldn’t use the English language the same way. And if you were in a foreign country, you might not use the language the same way. So…
Stephan (26:20.514)
Thank you.
Michael Saylor (26:36.118)
The protocol will be used many different ways, but at the end of the day, the threat to the protocol is to redefine the word good to be bad and redefine the word bad to be good. And that starts to create chaos, right? And I think, you know, if you look at math, it’s a similar thing. Like base 10 math is a very specific protocol. We didn’t always have it the way that we use math. And certainly base 10 math isn’t that old, but it’s used across nationalities.
Good people use it, evil people use it, people debate how to use it. Some people are really good at using it. Some people are awful at using it. And yet the protocol contributes something of value to the human race and civilization benefits from having that protocol. I think that fire is the same thing. I mean…
you’re not gonna let eight-year-olds use fire the way that you would let an aeronautical engineer use fire or the way you would let even your campfire instructor or your survival training instructor use fire. So they’re all different. And gold is a monetary protocol formed over thousands of years, and it was used across lots of different nations and lots of different cultures.
Some nations use it better than others, right? The Aztecs, the Incas didn’t use gold so much as a monetary protocol. The Spaniards did. They thought they were winning when they used it. They had lots of chaos in the way that they used it. There are people that have used the protocol effectively, but there are ways that the protocol has been twisted. I think the one takeaway from all of this though is
is these protocols are much more powerful to the extent that you believe they’ll maintain their integrity over long periods of time. And at the point that people start to lose faith in the protocol, if the number two means four and the number four means eight, think about the chaos. Think about how many machines and how many computer programs break if someone redefines four to be two.
Michael Saylor (28:57.118)
or plus to be minus or certain rules, right? And I think.
When Bitcoin is seen as that long-term protocol, we can create economic machines. And there’s this debate in the community, but most of the community debate is Bitcoin developers that actually want to change the core protocols. They have ideas for how to make it more functional and more performant. But really,
I think that Bitcoin has already offered us the ability to create a hundred trillion dollar economy without changing any of the protocol. And you have this interesting trade off, which is the more you screw with the underlying protocol, the more you interfere with the rest of the economy and all of, you know, layer two, layer three, layer four, layer five. So let me change subjects to one other point, which is.
I think there’s a lot of debate because of people’s vision of what Bitcoin should be. For example, cryptocurrency has saddled the entire industry with so much baggage. Because if you believe that Bitcoin is a digital currency, you immediately put yourself in opposition to nation states, banks, political currencies, governments, laws, et cetera, and you’re by necessity a rebel.
because to be able to use Bitcoin as a currency, you have to actively break laws or topple regimes. And that’s a very combative view of the world. If you actually conceptualize Bitcoin as property, or money, if money is collateral that backs the currency, then you actually have a very peaceful resolution to this problem. I’m going to hold my…
Michael Saylor (30:59.57)
my money is a store of wealth, and Bitcoin competes with property or gold as a store of wealth, or it competes with stock portfolio as a store of wealth. And I’m going to make that my savings account or my savings portfolio. And then my checking account, my medium of exchange is going to be the currency dictated by the regime where I live, whether it’s Venezuela or Argentina or the US or China or whatever. And when you just divide those two and you say Bitcoin is money.
but is not currency, then all of a sudden, you realize that you’re competing against other stores of value. And really, your crusade every day is to convince people to store their wealth in Bitcoin instead of art, real estate, gold, S&P, indexes, bond funds, et cetera. And you can have a completely neutral view toward tax law.
legal tender, political laws, customs, tariffs, capital controls, price controls, trade controls, wars, ideologies, religions, politicians, the entire work. So I definitely think it’s so much more constructive to think of it as property than currency. And I think the twist there is, if I take property and I make it fungible and liquid,
then it really is money and it’s capital, right? So if you think of Bitcoin as digital capital, digital money or digital property held for the longterm as collateral against a local currency. And then you say, as a citizen of the world, I’m gonna swap into whatever currency I need to spend wherever I am. Then you found a peaceful resolution to the question of, do we have, you know,
Do we have to be martyrs or can we be winners? And I’ve said a lot, I’d rather be a winner than a martyr. And instead of saying, we have to use Bitcoin as a currency and therefore you have to repeal all your tax laws and change your legal tender laws. Much easier to say, we’re gonna use it as money or as a property and then we will move peacefully and in a compliant fashion through every single regime. And then we’re going to convert
Michael Saylor (33:29.15)
every company, every government, every politician, every institution into Bitcoin supporters, because it’s not inconsistent with their worldview either. Everybody would like to store their value forever. I think, you know, the future, if you look at the future, the future contains property, art, money, currency, equity, and credit. All those things are going to exist.
There’ll be found, there’s currently a hundred million companies. As long as there are a hundred million companies, there’s going to be equity in the companies. Whether it’s Apple stock or Amazon stock, right? And, and they’re always going to be companies because if you look at economics, it’s always going to be more efficient for a certain group of people to do something for you than for you to do it yourself. You know, if you, if you roll the clock back to say, you know, 14th century Florence, you know,
in the textile industry, they need like 36 different specialists with 36 different machines just to weave a piece of cloth. So the good old days of we’re just going to do everything ourselves on a homestead, they never existed. I think that, I read the other day about finding a axe factory, a stone axe factory that’s more than a million years old.
You know, they find this like Neolithic, you know, paleolithic whatever, axe factory. And there’s hundreds of axes in the axe factory. And what that’s telling you is a million years ago, a bunch of human beings organized a society that was sophisticated enough that they could dedicate one group of the society to do nothing other than create stone axes and trade those stone axes for food, clothing, shelter.
services, et cetera. So there’s never been a time in human history when people weren’t specialized. We’re gonna have companies. And if you’re gonna have companies, you’re gonna have equity. The question is, do we monetize the equity or does the equity trade at its fair value based upon the cash flows that the corporation can generate? And credit’s not going away. You can not like bonds, but in the day…
Michael Saylor (35:50.582)
You know, you’re always gonna wanna be able to borrow some money from somebody. A company will wanna be able to borrow money. Governments will borrow money. And there will be creditors that will wanna loan the money. And the real issue is, will it be a fair cost of capital? Will I get a fair rate for the money or not? And you know, currencies will exist as long as there are governments, right? And when nation states break down and there’s anarchy…
Then you resort to Stone Age barter and maybe you barter gold and maybe you barter food and maybe you barter bullets or maybe you’ll barter Bitcoin as the most tradeable money in the future. But at the end of the day, you don’t really want to live in a war zone because if you study the history of war zones, the 30 years war in Germany, what it’s done, one third of the people are dead on the battlefield.
You know, and everybody has lost everything and civility has been ripped down to zero. It’s not, you know, a desirable situation. So human beings are generally gonna run from war zones. So you, you know, you’re not gonna make currencies go away as long as they’re governments. You’re not gonna make equities go away as long as they’re companies. You won’t make credit go away. And you won’t make art go away, right? The debate right now is over inscriptions good or bad or NFTs good or bad. Well.
You know, here’s a story for you. Velazquez, the greatest artist in the Spanish court who painted the Spanish kings, he, after a lifetime of service was spent on a, he was sent on a mission to Italy to acquire art for the King of Spain with the King of Spain’s, you know, checkbook, and it was a reward to him. So this is about 15, no, 1650. So he goes to Italy.
And he searches around and he can’t find any art because nobody wants to sell it. All the good stuff is not available for sale. Right. And the footnote in the history book is millionaires and post Renaissance Italy, we’re using art as a, as a hedge against inflation and a store of value.
Michael Saylor (38:06.402)
That’s 300 years ago, 400 years ago, hundreds of years. People have been doing this and at the same time, there have been rigged art auctions. The entire art business is its own insider game and people will establish one artist as being special and there’ll be collectors and there’s a massive debate about whether or not the art is worth what it’s worth. Well, that debate’s been going on for hundreds of years.
Today, that debate goes on not just with art, but it goes on with luxury cars, sports cars. It goes on with Rolex watches and luxury watches. It goes on with NFTs. It’ll go on with inscriptions and ordinals. It will just continue to go on. And when I hear that someone is a collector of rare whatever, fill in the blank, I’m like, well, I would never buy that.
I don’t want to store my money in someone’s $500,000 sports car, but somebody does it and it will continue. So if you think about this, again, New York, in the city of New York, you’ll have the art and you’ll have the businesses and you’ll have the credit and you’ll have the bankers and you’ll have the politicians. It’ll always go on. And what you’re going to want is the granite not to shift.
And if you were the granite and you just looked up, you would say all these silly human beings, they’re doing silly things. I would never put a bakery there. I would never buy that piece of art. What are they thinking? And maybe be right, maybe be wrong, but it is the human condition. And that’s the market economy. So if we actually humbly submit to the market economy,
And we say, we just want a protocol to allow humanity to pursue its million different aims with high frequency, every minute, hour, day, week, year, decade. Then it kind of gives us a really nice framework for thinking about Bitcoin. And I think when I look at it, I just say Bitcoin is a global dynamic cyber economy.
Michael Saylor (40:29.074)
And we want it to be open, transparent, permissionless, timeless, immutable, fair. And, uh,
And Satoshi got pretty damn close with the first iteration. And you could say there are some second order tweaks to it over the next 15 years through SegWit and Taproot. But at this point, it feels to me like we’ve achieved that. And on the margin, there have been hundreds of attempts that failed. You could almost argue not hundreds, but.
thousands, tens of thousands or hundreds of thousands of attempts that have failed. We have one that is succeeding. And it takes me to the next part of our discussion, which is under what circumstances should we entertain proposals to change the protocol?
Stephan (41:28.114)
Right, yeah. So let’s, yeah, so I think I can agree with a lot of what you’re saying there around the New York, the New York City analogy, this idea of a solid base that everybody can build up on top of, we can use it as our digital property, our store of value. And as you said, some of these things will still exist, obviously, equity will still exist, there’ll still be debt and credit. Now, maybe the form will be different. The artwork will still exist, but you know, the form may change.
But there’ll be people who are doing this because they’ve done it for thousands of years before and they’ll do it for thousands of years into the future. And so I think it might be useful then to talk a little bit about I think the purpose of Bitcoin because I think that’s where some of the disagreement lies. Now, I think I broadly, you know, when it comes to let’s say the controversy of the day, right, the ordinals, inscriptions, BRC20, etc. I think
Basically, it’s a matter of just wait it out, right? Like I’m not interested in that stuff, but I’m not really trying to, because if you look at what some of the protocol developers are saying, they’re saying fundamentally, you can’t really stop people finding ways to hack and store data on the chain per se, but they’re paying a price for that. And fundamentally, I believe that will be out-competed over time with high value monetary transactions.
high value, you know, people are trading for property or to sell a business or to open and close the lightning channels and all these kinds of things. Over time, those uses will get competed away. So bringing you back to the conversation around how should we think about changes to the protocol, I think it comes back to what people see as the purpose of Bitcoin. So as an example, there’s a big debate. I mean, this is kind of one of those things where people look at the white paper and they say, Oh, look, look at the white paper.
It’s Bitcoin, a peer-to-peer electronic cash system. And of course, that’s where some big cashier, big blocker types will say, oh, see, you can’t use it as cash anymore. And then maybe somebody else might counter to that and say, well, actually, what we mean by cash is final settlement. And by that, we’re thinking closer to this idea of, as you said, digital property, digital money. And so do you want to just spell out some of your ideas on Bitcoin principles as they relate to…
Stephan (43:53.062)
know, what the purpose of Bitcoin is and what sorts of changes, if any, should be considered.
Michael Saylor (43:59.986)
Yeah, I mean, I think that you’ve got to start by saying, you know, Bitcoin’s primary role is to serve as an economically sound, technically sound, ethically sound foundation for the future digital economy. It is in essence sound digital property or sound digital money.
I’ve described it as digital energy, but you could think of it as digital material. How do we manifest $100 trillion of real value in cyberspace? How do we do that and make that stable? Before Bitcoin, all financial transactions in cyberspace are based on credit.
There is no digital money. There’s only digital credit in the world before Bitcoin. So I send you a billion dollars or a million dollars. It’s a credit on Visa network or on a banking network. And if the analog real world institution chooses to honor the credit, then the money changes hands. But we’ve talked about the problem with that before. I want to send.
a million dollars 40 times. And every time I lose two and a half percent, and it takes one month. And so it takes four years to move the money 40 times. I lose all the money. In essence, after 40 vibrations of the money, it’s gone. So the world of credit money isn’t a foundation to build anything lasting or functional in cyberspace. So Bitcoin’s primary
role is to serve as a digital monetary foundation for the future of humanity. And if there’s $900 trillion worth of stuff circulating right now, 0.1% of that is digital money, as we understand it with Bitcoin. If we want to actually move into the 21st century, into the cyber economy,
Michael Saylor (46:16.478)
you could imagine that we should be getting to $100, $200, $300, $500 trillion worth of monetary value circulating digitally. So it’s the foundation in the same way that the granite is the foundation of Manhattan. But it’s not the applications, it’s not the buildings, it’s not the businesses, it’s not the political systems. And so…
So to think that it’s the currency is a mistake. It’s not meant to replace equity. It’s not meant to replace currency. It’s not meant to be a medium of exchange. It’s meant to be the underlying conservative foundation of the entire economy. Now, that being the case, I think that, yeah, it’s a…
people that they live for digital currency, they just waste all their time chasing after the wrong thing and debating the wrong thing. Currency is not even that valuable. I mean, if you look at the entire world economy and you ask what portion of the economy is in currency used as a medium of exchange, is that like one, two, 3%? Like…
what percentage of the wealth of any wealthy person would be currency they use as a medium of exchange? You’d be lucky to see it 1%. So only 1% of the economy is anything related to currency. To focus upon Bitcoin needing to be a currency to create value is missing 99% of the opportunity. The real value of Bitcoin is if I put
the other $900 trillion into the digital ecosystem, I could defeat inflation, which is decimating 10% of all the wealth in the world every year, right? That’s a big idea. Or I can move the money a million times a second instead of one time a month. So what we’re talking about is a high fidelity, high frequency.
Michael Saylor (48:30.334)
method, the ability to move money based on a computer program a million times faster, a million times cheaper, and the ability to manifest capital in digital form such that it’ll last a million times longer, right? That’s the breakthrough, right? A million times, a million times, a million, right? It’s a lot better, right? And so,
I think that the purpose of Bitcoin is that. It’s to basically manifest the economy in digital space. It’s the digital transformation of capital. If there’s $900 trillion of capital, what if half of it could be transformed digitally and you move $450 trillion into cyberspace? And while you would say, well, why would I want to do that? And the answer is, so it’ll last forever.
It’s immortal. So it’s indestructible, check number two. And so it moves at the speed of light, check number three. And so I can vibrate it at the speed of a computer. So if the computer thinks a billion times faster than you and is a billion times smarter than you, and I can move the capital a billion times faster and let the computer use it a billion times more intelligently.
And if it’s indestructible and immortal, then it’s the difference between relying upon animal power and electrical power to drive this civilization forward. You can heat your home with a bunch of donkeys in your living room, or you can heat your home with electricity, clean electricity. It’s tricky to find powerful enough metaphors. But
But that’s an example of a metaphor, right? Electricity versus donkey power in order to move the human race forward. So that being the case, then I guess somebody makes a suggestion, let’s change the protocol. I have a very simple checklist. Is it ethical? Is it good engineering? And is it economically sound?
Michael Saylor (50:53.29)
So is it technically sound? Is it ethically sound? Is it economically sound? And I think we could start with an observation before I go too much further, which is
Michael Saylor (51:10.326)
The Hippocratic oath starts with the phrase, do no harm. Generally, if you have a healthy human being, you wanna start by doing no harm. And so here are the principles I think apply with regard to Bitcoin. It’s already a healthy network. It’s already gone from nothing to $850 billion in economic energy. It’s on a course to 10X that and 10X that again, with no change to the protocol, as far as I can see.
seems quite evident to me that the next stop should be 100x where we are, with all of the innovation taking place on layers two through five. So when you come to me and you say, oh, I think there’s a problem with Bitcoin, right? It’s like, I just heard about Bitcoin. I’m here to fix it. That’s the meme. Everybody keeps coming up with this idea to fix Bitcoin. They’ve all been wrong generally so far. And there’ll be another 100,000.
Michael Saylor (52:09.77)
You only get to play God once, and Satoshi played God. And you could say, well, Satoshi got to do it, why can’t I? Well, the answer is Satoshi did it. The reason we’re talking about Satoshi is because the other 100,000 would-be Satoshis failed.
If you read the history of the world, work your way through 10,000 pages of Western history, there will be thousands and thousands and thousands of episodes of alpha male thinks he was put on this earth to change everything, full of hubris, and decides that he’s going to conquer his own country, then he’s got to conquer the next one, then he’s got to conquer everything in his way.
And then he’s, you know, he’s got to, he’s got to do more change more, et cetera. And that’s the story of Julius Caesar. That’s the story of Alexander the great. That’s the story of Genghis Khan. That’s the story of Napoleon, right? That’s the story of Hitler. That’s the story of every King, you know, and most leaders. I could give you 10,000 of them, but William the conqueror, but the story always ends the same way, which is.
They start the underdog, they get a few victories, then their head gets too big for them, then they decide to go conquer the next thing, and then pretty soon they’re losing their entire army in Egypt or in Russia or wherever. And if they manage to conquer everything, they die and the entire empire falls apart immediately, like with Alexander the Great, or they die and within one generation, the empire falls apart, which is what happened in Genghis Khan, or…
You know, they end up with no sons, so they murder everyone so they can have a son in their civil war, or they end up with 19 sons and the 19 sons murder each other and there’s a civil war. Or they have 100 sons and one of them murders the first 20 and there’s 100 civil wars. But at the end of the day, it’s always an example of someone that thinks that God told them it’s their manifest destiny to go and conquer something else. And…
Michael Saylor (54:25.144)
There’s this basic Stoic principle, I think, which is really important, which is…
Michael Saylor (54:32.742)
It’s, you may be able to acquire the thing, but it’s 10 times harder to maintain the thing. And it’s a hundred times harder to prosper or enjoy the thing. So in business, that means you can buy the business or launch the product, but can you make a profit? Probably not. But if you can make a profit, can you actually continuously grow the business forever such that you can compete for the next hundred years and prosper? That’s a hundred times harder.
So the world is full of people that think that they can start a business, but 99% of the time they fail because they underestimate the cost to compete and the cost to prosper. The world’s full of people that they thought they could acquire that thing, but they can’t afford to maintain it. And then they acquire too much and they realize that it’s dilutive and they can’t enjoy the things they’ve acquired. And history is riddled with examples of empires where empire builders, they…
they overextend and then they realize that they can’t maintain the empire. It all collapses in a catastrophe. And it’s highly predictable. It always happens. If I were to give you a hundred examples, I would have only given 1% of the examples because it just happens over and over and over and over again. So when you think about all this, you know,
Beware men with God complexes. You only get to play God once. And most medicine and most law is iatrogenic. It’s kind of amusing. There’s so many examples in history where the historian studies history. And this has been said in 500 BC and 100 AD.
in 700 AD and 1200 AD and 1500 AD, modern times, but that basically what’s said is, doctors multiply the ailments with their cures and the lawyers multiply the disagreements with their laws. The doctors want to prescribe and operate, the lawyers want to legislate and litigate. That’s what they do. And so when you think about Bitcoin’s protocol, Bitcoin core developers or protocol developers,
Michael Saylor (56:51.594)
they want to fix something or they want to make a contribution because it’s in their DNA, but developers are just the lawyers of cyberspace. When the lawyer shows up at the Capitol, they’ve got to make a law to save you from yourself. And the more laws they make, the more they cripple the economy until eventually there’s so many laws that the entire civilization collapses under its own weight.
And when developers show up and they’re invited to opine on the protocol, they want to actually introduce a piece of code to make it better. And each, you know, and it’s always, well, I can speculate a circumstance under which we might need this, or I can speculate, you know, if we don’t do this, we’re going to have a failure. But, you know, in the history of mankind, people that preach doomsday, that predicted the, you know, the end of humanity, they have a hundred percent failure rate. And yet.
Every single demagogue, every politician, every empire builder has always preached this, right? I got to start my own religion because you’re all going to hell and the world’s going to end. And it’s happened to say hundreds of times understatement, hundreds of thousands of times, most likely. It’s just that we only managed to record about 10 or 20,000 of the incidences, but it’s happened as many times as there are leaders born.
and it’s continually happening. So, I mean, think, you know, you have a propose or whatever it is. My first start is, if it’s not a global consensus to be a fatal defect, and if we all universally think it’s a fatal defect is gonna destroy the network, then I think we should carefully consider it. I’m not saying we should, we could all be wrong, by the way. Every time every civilization has concluded that the end is near, they’ve always been wrong.
right? In the history of the world, they’ve always been wrong. So if there was universal consensus of a fatal defect that’s going to destroy us all, we simply ought to talk about it. And maybe, maybe we should do something. But it doesn’t mean we should do something. We should really think hard about it. When I look at it as an engineer, and I spent my career in engineering,
Michael Saylor (59:12.782)
thousands and thousands of man years of engineering. Conclusion, code is a liability, not an asset. Just like laws are a liability, not an asset, right? The president of Argentina is looking to repeal 380,000 different rules.
Right? So complexity in the protocol creates new attack surfaces. Every time you introduce a new piece of code, it’s an attack surface. It’s something to break. Given the fact that we’re already winning and we’re on a path to winning, like, and this is where you’re an optimist or you’re a pessimist. For example, do you think the universe is going to work with or without human beings? If the universe is going to go on for another billion years, then,
needs you to f with the laws of physics? It’s going to work fine without you. So you have your little god complex, but probably you’ll be wrong. The universe will be right. So if you actually have some respect for natural law and if you have respect for Bitcoin and network, if you think it’s already working, then every piece of complexity introduces a way for it to break. Every complexity is a new failure mode, a new attack surface, a new maintenance obligation.
I created a new piece of code? Okay, well now we have to test it against every other piece of code every time we update any piece of the software. Okay, so 100,000 different permutations of things to worry about testing, and if one of them breaks, we’re doomed. And on the other hand, what’s the usefulness of the new feature, right? That a new feature encourages feature competition. So every time you add a new feature,
you encourage someone else to propose their feature. And then you create confusion. It’s like, okay, well, there’s a new feature. So now everybody in the world has to figure out how that affects everything that they’ve done or everything they’re gonna do. And that creates an arms race or a feature race and that creates uncertainty and that undermines trust. And ultimately, all of the confusion, uncertainty and undermining of the trust,
Michael Saylor (01:01:25.766)
undermines the efficiency of everybody else in the ecosystem. So all the layer two, layer three, layer four, layer five, and layer six. Let me say it this way. I’m playing God and I’m just going to routinely zap four acres of granite in New York City in the next 10 years and I’ll wipe them out and put a sinkhole underneath that goes down to the center of the earth because I feel like I need to do that to save the world. And you live in New York.
And you run a business in New York and you’re the mayor of New York. You see the chaos that creates. It’s like, do I have to pass a law to inspect every acre of New York every month for the next forever to figure out whether school kids will drop into the sinkhole? It’s like, yeah, you think you’re doing good. It’s like, well, I speculate that global warming will end the world. And so I got to do this. It’s like my speculation. So please let me do it. But
What you’re doing is creating an obscene amount of inefficiency in the rest of the economy. That you’re, we call this strategic incompetence. You’re blissfully ignorant and you’re so incompetent that you can’t imagine what kind of chaos you will create for all the other people not in the room with you right now. And that’s what gives you the confidence to go and mess with the world, right? Because you’ve got that big an ego. And…
I think if you have humility and you say, well, I know one human being worth his stuff, and there’s a hundred million other human beings that are affected, and maybe I don’t know the other 99 million human beings worth the stuff, then you would go much more carefully from an engineering point of view. The model I would give you here too is the 737 MAX.
Are you familiar with the 737 MAX and the debacle that introduced?
Stephan (01:03:22.522)
Yeah, I heard of this story but is that gone for the listeners?
Michael Saylor (01:03:25.026)
So I’m an aeronautical engineer. And so I know something about building aircraft. And the short of it is aeronautical engineering is a systems discipline. So when you change the payload of the aircraft and you change the wing of the aircraft or the fuselage of the aircraft or the mission of the aircraft or the specs of the aircraft or the furniture in the aircraft or the electronics in the aircraft, you have to consider whether or not you’ve broken anything.
you could introduce a new couch and destabilize the aircraft under certain circumstances and crash the thing and kill everybody. Which is why, you know, you’re careful about playing God on the aircraft. It’s not like shuffling the furniture in your living room. The 737 was designed in the 1960s. It’s one of the most successful aircraft designs in the history of the world. We were flying it in the 70s. We flew it in the 80s, the 90s.
For 50 years, we flew this aircraft and we made incremental adjustments to the airframe. We stretched it a little bit longer, but we didn’t change the shape of the fuselage and we kept most of the components. It was very successful and it was flown by pilots very successfully. And then along comes some well-to-do, well-meaning engineers that want to fix it or make it better. It wasn’t broken. It’s the most successful airliner in the history of the world.
someone always wants to make it better, probably someone that graduated from computer science program, and they learned about new techniques. And so they decided to upgrade the control systems and the autopilot system in the aircraft, in the cockpit. We have to migrate to electronic cockpit. And so when they did it, they introduced code into the autothrottles and into the control system.
there was supposed to be a fail safe to keep the plane from crashing. So it overrode the pilot under certain circumstances. And they introduced a bug into the code. And the way that the software interacted with the sensors on the aircraft in a systemic fashion was such that under certain circumstances, the software took over control of the cockpit.
Michael Saylor (01:05:48.638)
and stalled out the airplane and crashed it and killed everybody. And it just kept happening, you know, and if you’re the pilot in the airplane, you get murdered by the software and the software kills you and kills all the passengers and they were killed by the upgrade. And so as an example of if they had done nothing, we’d all be better off. Right. And, and it was a massive hubris because
there’s this arrogance of thinking that no matter what I do, I won’t make things worse. And I can introduce as much complexity as I want. And the answer is no, you can’t. You can’t introduce much complexity, right? Since you’re not God and you don’t understand all circumstances and all parts of the functional envelope, you can’t possibly see the full implications.
But what we do know is a bunch of very enthusiastic engineers made an upgrade to actually make the plane unsafe. And you always have to be concerned about that. And there tends to be lots of examples of that in the world. It’s happening all the time. And there are a lot of you go ahead.
Stephan (01:07:05.97)
Yeah, one question. Yeah. So one point I just want to bring up here just to get your response on this, because there is certainly, and I’m sure you recognize this also a role for maintenance, right? There’s, there’s always a need for maintenance. Bitcoin itself doesn’t exist in a vacuum, right? It has to connect to the internet and you know, there are other aspects of code or applications that Bitcoin has to connect with. So I presume then, you know, that’s, you would contrast that from
the role for maintenance of the protocol so that people can still use Bitcoin, wouldn’t you?
Michael Saylor (01:07:42.174)
Yeah, I think that one way to think about this is there’s a kernel. If you look at the database industry, there is the relational database kernel Oracle. And Oracle was ported to lots of different computer platforms. And so there would be the version of Oracle on a mainframe and the version of Oracle on an IBM PC and the version of Oracle on an Apple computer and the version of Oracle that might run on a mobile handset or an Android phone.
But the kernel stays the same, and the way it processes SQL and the way that the engine works and the protocol doesn’t change. The ports are various instances, right? It might very well be that they have different functionality, and they have to be maintained and upgraded with the operating systems as they change. And there’s a role for that. But good software engineering is such that
You would always want to have a situation where if the system crashes, it crashes on the client, but it doesn’t corrupt the data or corrupt the network. So you don’t want a client anywhere on the network that would corrupt the network or corrupt the underlying data. And so there’s a question of how does it crash? How does it fail? Does it fail gracefully? Or does it fail in such a way that it corrupts all of the data? Or the worst case would be.
it crashes and it crashes other people’s devices as well. So I think that there is a lot of software engineering to be done around Bitcoin. I mean, the engineering of the signing devices, the engineering of the node clients, the engineering of the mining rigs, the engineering of the mining pools, right? The engineering of the layer two of the wallets, the engineering of the layer three apps and the engineering of lightning.
channels, these are all parts of the ecosystem. But I would say philosophically, you want the majority of risk to sit with the, you want the risk to always be with the client. You want the risk on the edge of the network. You want the risk to be ideally with the application and the corporation. Right? Like if you’re a custodian, you’re going to lose something, you want the corporation to be on the hook for it.
Michael Saylor (01:10:04.618)
If you’re going to destroy an entity, you want to destroy the company or the individual or the client device or the individual miner, you don’t want a fatality of the network. Right. We can’t afford to have the protocol corrupted. Right. That’s that’s kind of like if you’re if you’re screwing with stuff in your factory, you’re not allowed to use planet busting nuclear fusion weapons, because if you mess that up, you blow up the planet.
Don’t let people burn down the entire city. Don’t let them burn down the entire network. With regard to everything else, Bitcoin can survive the failure of any layer three application or custodial application. It can survive the failure of any holder. And it can survive the failure even of a layer two protocol, a lightning protocol. The entire protocol could fail. Bitcoin will survive.
Right? And it can survive a failure of a lightning channel. Right? So there are a lot of components that it can survive, just like New York City can survive the collapse of any building, any business, any government, any mayor, any administration, and any culture. But it can’t survive, you know, 100 thermonuclear warheads that plow a one-mile crater.
over all of Manhattan such that the ocean covers it, right? And swallows it. You don’t want an Atlantis situation where the entire thing sinks under the Atlantic. So you got to consider the risk. And I think that…
There’s no point in trying to get involved in all of the software engineering of the layers above the foundation because they’re all high frequency, high complexity. My general view is if you’re a brilliant engineer, if you’re the Mark Zuckerberg type and you wanna create something that you think is worth hundreds of billions of dollars, create it as an application on Bitcoin and go take it public and raise capital and market it to the world and maybe you just created the next Facebook.
Michael Saylor (01:12:17.354)
or create the next Microsoft. And maybe, if you’re right, and if you’re wrong, your investors will go bankrupt and your code will be scrubbed off the network in time. History shows that 99.999% of the time you’re wrong. There’s only like a dozen people that were ever like Mark Zuckerberg, and there was a million people that wanted to be. So history suggests you’ll probably be wrong, but everybody has their right to take their shot.
And you should go ahead and risk your time, your capital, your code. And if you’re successful, maybe your cash app and you’ll have 50 million users on the network and you get to control how those 50 million people interact with Bitcoin. Right? And maybe you’ll have 500 million people on the network. Maybe you’ll be Microsoft and you’ll have a billion people on the network and you’ll get to control how your billion customers interact with Bitcoin. And maybe you’ll have a trillion dollars of Bitcoin in the network.
And that’s okay, but at the end of the day, you’re gonna be an attack surface. You’re gonna be a corporation. You’ll be subject to a subpoena. You’ll be centralized. And maybe you’ll be successful in the US, but maybe you’ll be like Apple. I mean, think about the problems that Apple, Google, and Facebook have in China right now, right? They all have very much political headaches. So all of these layer threes are gonna have political headaches, but you can’t belittle the ability to do good.
The truth is, Microsoft and Apple and Google have accomplished things in their own way that you could never accomplish with an open protocol or with a layer one protocol. And so it’s silly to try to do what they do in layer three and the layer one, but it’s silly for them to not take advantage of the layer one. So that’s what I think about general maintenance of different types.
Stephan (01:14:12.954)
Mm-hmm. One other area that I think some people may be interested to hear your view here when we’re talking about engineering, what of things like non consensus changes, right? So for example, the big ticket things that people talk about are typically the soft forks, right? So SegWit, Taproot and so on. But there are a whole host of other changes that are just happening as an example with new releases of Bitcoin Core. So for an example, the V2 transport protocol or other things that are
that they are changing, you know, as we speak, right? Every six months there’s a new, on average, there’s a new release. And so some of these changes are already occurring. So what are you, what are you saying in respect to those changes that are not these kind of big headline soft forks or consensus changes?
Michael Saylor (01:15:01.25)
Well, I think the core protocol, the monetary protocol, the transaction protocol, the power protocol, that’s the essence of Bitcoin. That needs to be defended in a very conservative fashion as the foundation of the entire Bitcoin economy. I think that when you look beyond it at various extensions of those protocols that are optional.
Soft forks, if you will, maybe backward compatible extensions that may or may not be adopted. I think that people can pursue whatever they want to pursue, and the market will decide. For example, if you came up with a Bitcoin node that ran on an iPhone, would I download it? Might you add some iPhone features? Would it be successful? Would it not be successful? People have different opinions about it.
Maybe it’s a good idea, maybe it’s not a good idea. I mean, people will make arguments about why it shouldn’t be part of the Apple Store, subject to Apple approval. And someone also say, why don’t we just let it go? I think everybody’s free to come up with their own software. It’s either layer two, I’ll characterize layer two as it’s consistent with the core protocol of Bitcoin, the layer one protocol, the foundational protocol.
But it’s optional and it’s open source. That’s like lightning. It could be a hundred flavors of lightning. And, you know, there’s Bitcoin core, but people can create a hundred competitors that are different ports to run on different devices. You know, my version has a different way to sync and it sinks in one minute, you know, on your Android phone or it sinks, you know, and it runs differently and people will debate it. They can debate it or not.
And maybe it’ll evolve, maybe it won’t evolve. I think that as long as it’s not screwing with the power protocol, the monetary protocol, the transaction protocol, then probably the market will work it out. And I think many of them morph into a layer three because there’s a custodian or there’s a company or a group of people, a centralized group. Most will, because if you wanna do something which is…
Michael Saylor (01:17:23.254)
got a lot of rich functionality or rich performance or anything different, any other bells and whistles. If you want to add usability, if you want to add compatibility, if you want to add compliance, you’re going to have to have generally an organized software engineering team to do it. I think that it’s obvious we need those. Right? If you want to, you know.
run Bitcoin in a certain regulatory environment and the politicians there say you have to comply with this rule or else it’s illegal, then someone will pop up to build that kind of compliance software and that’ll be a company and it’s almost certain that the company that does that won’t be compliant in other jurisdictions. And so I think that that’s just part of the vibrant economy, like a vibrant Bitcoin economy. And many, many ideas will be tried.
And some of them will be great ideas, but not economically viable. And some will be great ideas, but will be smashed by regulators. And some will be great ideas, but people just won’t care. Like you live long enough and you invent. I’ve said this before. It’s like, I, I invented a hundred things. Not many of them were commercially successful. It’s easy to, it’s easy to create the mobile app on the iPhone.
That happened 100,000 times, but you can count on two hands the number of mobile apps that got to a billion users on an iPhone. So there should be a vibrant economy and people should be always trying new things. And the real issue is, is it an open layer two type protocol or is it layer three or is it something different entirely? I tend to think every time an engineer has a good idea and they say, well, Bitcoin really needs this.
Stephan (01:19:06.485)
Yeah.
Michael Saylor (01:19:12.338)
I think, well, why don’t you implement it in your version of Bitcoin or in some kind of layer two fashion, implement a special lightning node that has that functionality and let’s see whether or not 100 million people adopt it because they like it there. And then after 100 million people use it, maybe there’ll be a view that it ought to be put back into the core base protocol because it’s…
useful. And then on the other end, maybe 100 million people will use it and will conclude, we don’t need to put in the base protocol because it’s already been successful. Why would you risk the genetic code of the entire human race when you don’t need to? So I guess, and coming back to the subject of just my filters, the first thing I always think is, well, what kind of engineering
Stephan (01:19:58.387)
Right.
Michael Saylor (01:20:10.146)
Given the fact that Bitcoin, I’m of the view that Bitcoin is already going to be 100x more successful than it is, you’ve got to show me something that makes it a million times better that has no risk before it becomes interesting on my radar. Otherwise, I just think 737 max. It’s like, great idea, lots of people are dead and you set back, you nearly bankrupted the entire company.
Stephan (01:20:31.902)
Right. Yeah.
Michael Saylor (01:20:40.142)
20, 30, $40 billion trying to do good, and you killed a lot of innocent people. So good for you, right? Maybe we don’t need to do that. I also look at, I think the economic constraints are really important. When you introduce new functionality in the base protocol, you undermine and impair all the application development on the above layers. So you’re, you know.
Stephan (01:20:49.566)
Right.
Michael Saylor (01:21:03.442)
you’re robbing the rest of the economy of the opportunity to do it in a layer two or layer three or a layer four because you want to shove it into layer one. So whatever your good idea was, why don’t you start a company to do it and make billions? And if you’re going to rob me of the ability to start a company and make billions, then how are you helping me? It’s an example of a government that wants to insert wage controls and price controls and nationalize every major part of the economy. It’s like…
Like when the Westerners go to Africa and we give away free medical care, and we bankrupt all the African doctors and the African hospitals. Like destroying the native farmers in Africa, destroying the native doctors in Africa because we want to give away food and give away medical care. And we think somehow that we’re morally superior. But what we really did was we wrecked the economy. And so I think that you got to be saying…
Am I going to wreck the economy of the rest of the layers by trying to introduce this in this base layer? I think performance undermines transaction fees and application development. So when you’re introducing performance improvements in the base protocol, you’re stealing from the miners. And when you’re introducing functionality improvements to the base protocol, you’re stealing from the application developers. You’re.
You know, you’re destroying their business, either you’re stealing, you’re destroying or stealing their existing property, or you’re stealing their future cash flows. And, and.
Stephan (01:22:40.15)
So on this point, I think there’s maybe some people may disagree on this point. And some of this has parallels even with the block size wars, because there was this idea of, oh, let’s get SegWit because we’re going to get Lightning. And then there was this question of, oh, but are the miners losing out? Because now they’re going to lose out on transaction fees in this example. And so there was some fighting about that. And some people would.
Michael Saylor (01:22:50.751)
Right.
Stephan (01:23:03.798)
coming back with the argument of, oh, well, see, we’re growing the overall ecosystem, the overall number of people who are going to be doing even Lightning Channel open and closed transactions on the base layer such that the miners are not going to lose out. But other people were saying, no, you’re taking from the miners. The famous saying from one individual, Jihan Wu, was that the transaction fees would be, quote unquote, unfairly cheap. So that’s perhaps an example of this kind of conflict that can arise when there are upgrades to Bitcoin.
Michael Saylor (01:23:34.886)
Yeah, I think if you look back at wars, a lot of evil is done in wars on both sides. And a lot of innocent people were hurt. And that’s the case of every war, the 30-year war, the civil war, every single war. And the block-sized war is a lot of people were hurt by the war. Now, I would start with my observation that we’re here right now. The war has been fought. I mean, I can’t undo what happened. I don’t condone warfare.
There are a lot of Bitcoin miners that are bankrupt today because of SegWit. And the transaction fees did go through the floor, and they would have been higher if the block space had been more scarce. And so you can say the network survived, and we are where we are. And I think that Bitcoin with Taproot and Bitcoin with Segmin is a healthy network, and we have enough functionality.
to 100X from here. But I do think every time, if you look forward, I mean, looking backwards, people were hurt, right? In the German Civil War, right? In the 30 years war, like one third of the people got murdered, okay? There’s no, you know, there’s no good guys. There wasn’t a good side, right? Both sides murdered millions of innocent people in the war. Every war is like that.
every single war in human history. The winners murdered a bunch of innocent people, the losers murdered a bunch of innocent people, war is hell. And so one should hope, maybe I’ll say it a different way. If you didn’t have to have a civil war, and if you could grow, if you were in charge of a nation and you had the choice, shall we engage in a civil war or shall we live peacefully together with the status quo?
I think the answer is we should live peacefully together with the status quo. And every time a strong willed leader comes along and says, God told me that the status quo will result in all of us plunging to hell and the end of the earth and therefore I have to murder 25% of the population. It’s like the Catholics versus the Huguenots in France.
Michael Saylor (01:25:54.77)
Like they started a war rent for like 35 or 40 years with Catholics murdering the Huguenots and the Huguenots murdering the Catholics. It wasn’t good for France. And eventually the leaders that we liked better were the leaders that, you know, after the Edict of Nantes said, okay, well, Calvinists and Huguenots and Catholics are both allowed to live in the country without us murdering each other. So if I look forward, you know, I
I don’t have a lot of patience or I don’t have a lot of sympathy for a developer that thinks we should have a civil war and destroy the property rights, economically murder the miners or economically murder an application developer or economically murder a Bitcoin holder just because they think God told them that the world would be better if they got their way. That’s an example of radical fundamentalism where…
you know, a minority wants to plunge the entire nation into a civil war just to get their way because they think God told them they’re right and they’re appointed. And I think economically, if you’re proposing to basically put functionality in the base layer, then you’re robbing, you’re impairing the assets and robbing the application layers above you. And if you’re proposing to expand the transaction bandwidth, you’re robbing…
the Bitcoin miners and you’re stealing their property from them, without due process. And all the upgrades that are proposed to the base layer, they’re imposing a cost on all the network participants, a cost on the miners, a cost on the node runners, a cost on the application in order to stay compliant and in order to avoid being at a disadvantage.
Michael Saylor (01:27:50.122)
When you, when you write code for the base layer, you’re just a lawyer showing up at the Capitol writing a new law. And the law is daylight savings time. We’ve decided that people shouldn’t work after four o’clock in the afternoon because there are shadows on the trees and we don’t think people should be able to do it. And if you do it, we’re putting you in jail and I’m doing it because God told me that we can’t have people working when there are shadows on the trees. Right. Or, you know, fill in the blank, right? There are a hundred.
thousand of those laws, some person with some moral or philosophical or religious argument makes it and then they write a law on the books and the law is a restraint of trade and the result is someone has their property rights devalued, right? And someone else benefits, right? I get rich because you have to use windmills and you can’t use nuclear power.
And it’s like the dude that doesn’t have the nuclear power plant gets rich and the person that owns the power plant gets poor. And I did it to save humanity with the law. And I think that there’s always going to be a never ending supply of them. The more of them you entertain, if one developer gets their way, the next one will want to have their way. And then you introduce this moral hazard because now, now an economic actor.
decides that it’s in their best interest to campaign for a change in the protocol that will help their business or help their interest. Either they wanna be famous or they wanna be rich or they wanna be powerful. And if I knew that I could show up in the Capitol and pay somebody $5,000 to get a law passed making it illegal to bake bread within city limits unless your last name is sailor.
then I would do that, right? I mean, the entire history of economic chaos is monopolies handed out by authoritarians to their cronies, always justified for the good of the people, right? And any code change to the protocol is some kind of benefit to one class, to the detriment of everybody else in the world and everybody that’s ever going to come in the future. So
Michael Saylor (01:30:11.03)
from now to the end of time, every human being that’s ever going to live is going to be impaired by some constraint that’s introduced by some enthusiastic political actor that thinks that they were, you know, given a mission from God to make the network better. And generally, they’re not right.
Stephan (01:30:29.57)
So one other area that I think, yeah, and so one other area I think people will wanna hear your answer on is, what about in the case of upgrades that are opt-in only? So as an example, if it was a particular opcode that an existing node runner doesn’t have to care about, and it’s only, if it could be, let’s say for the sake of argument, it could be shown that there’s no impact to existing users. You can just keep using Bitcoin exactly as it is, but there’s this new opt-in.
opcode as an example that people can opt into and only use that if they choose to. Do you have any view on that kind of idea?
Michael Saylor (01:31:09.938)
I generally think that if it’s marketed as an application by a corporation, like if when Block wants to create cache app functionality and build it into cache app and people get it and it’s otherwise compatible with the rest of the network, then I think that there’s not a lot of moral hazard there. But I think that…
When you get to the point where you have two warring camps with two different versions of a Bitcoin node, and one of them has different functionality than the other ones, right? Now you’re entering into a religious war, and if they’re incompatible, who knows? If one is a superset of the other one, right? Probably if it’s a superset of the other one, it’s probably less of a hazard.
when it becomes, when it introduces something which is incompatible becomes more of a hazard. I hesitate to give you a black and white answer because I’d have to see it, but I do think, I do think it’s a slippery slope and as a general rule, developers ought to focus, like, don’t F with the network.
Like, I just generally think people shouldn’t screw with the network, and they shouldn’t screw with the core protocol. It works fine. If you want to introduce 1,000 new ideas, introduce them in Lightning. For example, I don’t have a problem creating your own implementation of Lightning, which is a superset of somebody else’s implementation of Lightning. So I think you can create different implementations of things at layer 2 and at layer 3.
Michael Saylor (01:32:56.17)
different Bitcoin nodes with different functionality. I mean, obviously I don’t really have a big concern about like usability upgrades. If you wanna create a graphical user interface on top of Bitcoin, which is animated and beautiful, I mean, those don’t represent so much risk. I think that when you’re introducing changes to the underlying monetary protocol or transaction protocol,
If you introduce something which changes transactional bandwidth, which would have an impact on Bitcoin transaction fees, I think that that’s a problem. Anything that, if you change the transaction bandwidth, then you’re stealing, you’re robbing the miners of cash flow. And if you’re stealing revenues from the miners, you’re putting the mining network at risk over the long term. And that puts the power…
at risk. So you’re changing the power dynamics and that puts the stability of the entire network over the course of the long term at risk. So I think I’m fairly conservative. I’m not in favor of anybody deciding who can own Bitcoin. I don’t think you should muck with the asset with the monetary protocol. I don’t think you should muck with the transaction protocol. I don’t think you should muck with the power protocol.
Right? It works fine. Why break it? Right? If it’s not broke, don’t break it. Right? You could break it and plunge the entire world into a thousand years of the dark ages. Right? Good for you. Right? What’s worth that? What’s worth taking the risk of that? Right? So I would tend to be very conservative with regard to anything that affects the balance of power between the asset…
and the transaction bandwidth and the power scarcity. But just like someone would say, well, I think we should change SHA-256 to SHA-512. Okay, great. So you invalidate all the technology that every SHA-256 Bitcoin equipment manufacturers developed over the last decade. And then you introduce your own little piece of equipment and you basically obliterate or nuke $25 billion worth of capital investment by miners.
Stephan (01:34:55.734)
Gotcha. Yeah.
Michael Saylor (01:35:21.59)
You can see why it doesn’t make a lot of sense. All those things represent moral hazard and they create dysfunctional political incentive. Do you really want people to be continually campaigning to confuse Bitcoin operators? Why would you want to create a market and introducing fear, uncertainty, doubt?
and confusion into the bass layer.
Stephan (01:35:56.575)
Right.
Michael Saylor (01:35:58.376)
Like we’re back to this issue of, let’s take the New York model again. You have 10 acres of granite and you ask me, Mike, is it okay if I like, you know, put radioactive charges under my 10 acres of granite that will just kill anybody that wants to plant a palm tree for all of eternity? I’m like, I don’t think you should mess with the granite. You know? Like I…
What if I want to put an easement on the property for all of eternity that makes it impossible to use it for residential housing? I don’t think you should do that, right? I think it’s granted. If you’re going to actually build a funky building, that’s OK. We can tear down the building. But I don’t think you should write checks you can’t cash. So don’t build things.
that would potentially impair, destroy, or change the nature of a Bitcoin between now and 10,000 years from now, once you’re dead and once your company’s dead, right? Once you’re gone, don’t mess with the network, right? Leave the fundamentals alone. And it’s kind of simple. It’s like when a dude comes to a Manhattan and the guy says,
Hey, I have this idea, I’m gonna set off a thermonuclear warhead, but it’s only gonna go off for 20 blocks in every direction and I own the blocks. You know, don’t you think you’re just like, hey, just stop it? Like you don’t need to be messing with that, right? We don’t need that kind of behavior. So I don’t care how smart you are, right? You just don’t need to be messing with the quiet enjoyment of everybody else in the city. Like just leave the 21 million blocks alone. And…
And again, it’s like the moral hazard is if you encourage people to do this, then you’ll have 10,000 people lined up to do it. Then you’re going to have 10,000 companies that will, will basically invest a million dollars each to try to change the protocol. Okay. And now you’re just going to have war, right? And you don’t really want that kind of war at the protocol level because
Michael Saylor (01:38:10.354)
I guess fundamentally the issue is there’s nothing wrong with building a city on a bunch of granite blocks. There’s nothing wrong with it. And you’ve got plenty of room to innovate on layer two, layer three, layer four, layer five and layer six. What happens to Bitcoin when all of us spend all of our time debating a hundred different Bitcoin improvement proposals?
And each one requires a thousand hours. So now you’ve introduced like thousands, hundreds of thousands of hours of debate. You know, and can you think of an example where that happens? It’s like, yeah, the modern, modern political systems, right? Where pretty soon 20% of all the citizens in the country are lawyers fighting with each other.
And then, and I’m reminded of, is it Aristophanes and his play where he says, first thing we do is we kill all the lawyers? Might’ve been Shakespeare too, but who knows? It’s like, at some point, you know, the question really is, if you have the ability to create code, why don’t you create code on the network and not try to change the network?
Stephan (01:39:06.422)
Right.
Michael Saylor (01:39:34.275)
It’s much more constructive channeling of human endeavor.
Stephan (01:39:37.238)
So let’s bring it to… Yeah, so I guess we’ve covered then the Bitcoin principles aspect. Is there anything around Bitcoin dynamics that you’d like to discuss?
Michael Saylor (01:39:49.962)
Yeah, yeah, I mean, I think it’s worthwhile to touch on that, right? I mean, the real key with the network is that we want the network to be a basis of a cyber economy. We need to be interested in the natural harmonics of the network and the natural frequency of the network. Because the frequency of the network is key to the stability, the security and the success of the network.
If you’ve ever seen that picture of the Verisano-Nero’s bridge where they engineered the bridge with a natural frequency which resonated with the wind, the wind blew over the bridge and shook the bridge apart because it resonated on the wrong frequency and the bridge fell apart, literally destroyed the structure. So if you’re a good civil engineer, you have to ask the question, am I designing a structure that is not going to shake itself apart? So if you look at the
dynamics of the network. One of the reasons that Bitcoin is winning is because it has a very long natural frequency at its base layer. The transaction frequency is 10 minutes and in a growing network, right? We’ll process blocks nine minutes, 30 seconds, or nine minutes, 40 seconds or something, because you’re always biased to be growing.
In a contracting, a bear market, if you’re shutting down hash power, will process blocks a little bit slower. But generally you’ll be around 10 minutes, plus or minus a bit. And if you get way off, then after two weeks, the difficulty adjustment kicks in and you get basically tuned back to that 10 minute center. I think that’s, that’s an important part of the frequency of the network, but it’s, but it’s, um, probably not, not the thing that makes it most successful.
What’s more important is the mining dynamics and the machinery dynamics. So the question really is how long does it take to bring on a Bitcoin mining center? It’s like I put $100 million in front of you and you wanna invest it in Bitcoin. So it takes you six months to a year to acquire the equipment, another year to engineer the mining center. So it’s like a two or three year exercise to bring it online. And then the question then is, well, what’s the payback time?
Michael Saylor (01:42:05.258)
And that’s probably another two, three, four, five years. So when you’re a miner, you’re looking at making an investment and getting paid back six years after the initial decision, probably four years minimum at this stage. It could be as long as 10 years, four to 10 years. So the natural frequency of the miners is four to eight years. And that means that
If you’re not profitable, you’re not just going to shut down the mining operation in a month or two months or four months. You’ve actually got to stick it out for four to eight years. And one of the other dynamics here is because the miners are running digital power centers and the digital power is SHA-256 hashing. That means that
If a miner goes bankrupt, if you look at how the Bitcoin network fails, it fails very gracefully, if not at all. All of that hash power, the 500X hash, it is being run by a network of miners. And in hard times, when the price of Bitcoin falls and the transaction revenues fall, the first thing to fail is the equity.
And at some point, the equity holders will go bankrupt. At that point, the mining equipment is owned and run by the creditors. So then the junior creditors will fail, and then the senior creditors will own the equipment. Then when the senior creditors fail, the energy companies that actually provide the electricity will own the equipment. And when the energy company fail, the government or the nation state
that actually owns the power source will own the equipment. So it’s another way of saying that a Bitcoin mining rig is never getting turned off. It might temporarily get sold from one bankrupt entity to another. It might get idle for a moment, but at the end of the line here, there are nation states and there are…
Michael Saylor (01:44:18.082)
there are public energy providers and they have electricity which has a marginal cost of zero. They have energy that is zero cost or they have negative costing energy where actually they would pay you money to take it, a remediation situation or curtailment situation or I’ve got a natural gas field. I’ve got 10 billion dollars of natural gas fields.
And the regulator is going to make me write them off and shut them in if I don’t find a use of the natural gas. So I would lose money operating a Bitcoin mining rig to avoid taking a 10 billion dollar write off. I would lose money to remediate the methane. And then I’ve got the three gorgeous dam that’s got 10 gigawatts of extra power and it’s got a value of zero right now. And so.
If I’m the Chinese government and I see somebody’s Bitcoin mining operation, I just take the equipment, I plug it into my free electricity, and I generate billions of dollars a year of revenue by monetizing free electricity. What you can see there is the brilliance of the power protocol is it’s unique. Once you’ve actually taken $10 billion of capital, fungible capital, and converted it
into $10 billion worth of Bitcoin mining rigs. It’s a one-way transformation. You can’t transform the capital back. It’s sunk capital. The only thing you can do with it is power the Bitcoin network. And it doesn’t really matter whether any individual Bitcoin miner succeeds or fails. The Bitcoin network is going to remain powered. And that’s why with just a few exceptions,
you’re generally going to see hashrate just continue to move up. For that reason, that’s one very powerful ratchet. And the second powerful ratchet is the machinery dynamics, because the machinery dynamic is how much time and capital has a Bitcoin power rig, equipment manufacturer put into their semiconductor designs. So we look at Bitmain or What’s Miner or Canan.
Michael Saylor (01:46:36.21)
How much time have they spent? You might spend four years developing a design, and now you sell the rig and you sell ones that have 30 joules per tera hash, and then they get to 21 joules per tera hash, and you’re going for 15 joules per tera hash or whatever. You just keep creating more efficient rigs. The most efficient rig cost the $10,000 a machine.
And then in the bear market, in the bear market, it goes down to $1,500 a machine. And the question really is, at what price is the equipment manufacturer going to sell the equipment? And the answer is, they’re going to sell it at their variable cost plus a minor markup. And the question is, how much equipment are they going to sell? And the answer is, they’re going to sell as much as they possibly can. And that means that…
Michael Saylor (01:47:33.83)
When 80% of the revenue has been squeezed out of a Bitcoin mining operation, the mining will continue. And when 80% of the revenue has been squeezed out of the equipment business, the equipment business will still continue because you’re always going to have actors with sunk capital that are going to want to recover a return on their sunk capital.
And that is the reason why you can buy a 386 chip for a dollar. Right, that’s why semiconductors will continue to collapse and price performance forever, because they’re putting all of the money upfront and then they’re just selling the semiconductor for whatever the market will bear. And if that’s what you do, if you’re a Bitcoin equipment manufacturer, all you know how to do is,
sell Bitcoin mining equipment. So you’re going to continue it. So you could take all these things together, right? And you say, well, what’s happened? Well, really Bitcoin is a network with an eight to 12 year natural frequency. Like, if you were to say, Mike, what happens? When will the hash rate stop growing? After Bitcoin mining is no longer
profitable.
I would say it might very well be, it might keep going for a decade. I mean, for a decade after Bitcoin mining is no longer economically rational for a standalone miner, the hashrate will keep going up because there are plenty of actors that have negative cost electricity or free electricity, and it’ll be profitable for them. And you’ve got an equipment manufacturer that can sell the equipment at a 90% markdown. And at some point,
Michael Saylor (01:49:29.726)
It’s kind of like asking, you know, will nation states ever stop buying munitions? You notice how cheap a gun is? Like there, you can buy guns that’ll kill people for 50 bucks, a hundred dollars. Right. So it’s, so you’re like, well, it doesn’t seem like it’s a very profitable business. Why do people keep doing it? There are a lot of people that don’t really care, right? That whether the gun is profitable, right? They’re, they have another motive involved here.
And so I think the same is true with Bitcoin power equipment. Like, isn’t it quite possible that at some point, a nation state that has stranded energy or stranded capital requires the production of Bitcoin mining rigs at a loss or produces them at a loss just so they can run the network for other reasons. So, so I think, you know, the real important point here is
Michael Saylor (01:50:32.384)
A unique custom proof of work system, a Shaw 256 proof of work system ends up with $100 billion of sunk capital for security built into it. That’s one way that has a useful life of six to 10 years. People could say, well, it burns out after eight years.
That doesn’t matter because the machine that you bought for $9,500 that burned out after seven years will be replaced with a machine equally powerful for 1 20th, you know, for $500 instead of $10,000 in six years, right? So it’s like lamenting, will we ever run out of computing power? Well,
people can buy 38646 chips for like nothing, right? They’re putting computers into greeting cards to play songs for you that have all the power of the space shuttle. So Moore’s law is gonna continue to drive the security of the network. And that means that you have to contrast that to a proof of stake network, for example, you wanna understand how to make a protocol defective.
Here’s how I’d make it defective. I would say, well, it’s not gonna be ASIC friendly. I’m gonna actually force it. I’m gonna create some kind of shifting protocol that has to be run on a CPU. So that makes the power much less scarce and much more unstable. And then the other thing I would do is if I was using proof of stake and I was saying, why don’t you just go ahead and stake $10 billion of capital.
Well, the problem with 10 billion dollars of capital is I can convert the $10 billion of tokens into $10 billion of US dollars, into $10 billion of Apple stock, you know, and I can borrow the 10 billion. So capital is not scarce at all, and it’s not sunk. You know, and so how do I make it sunk capital? You know, it used to be you could like stake. You remember the Terra Luna meltdown? Well, people were staking their Luna to provide security.
Stephan (01:52:35.379)
Yeah.
Michael Saylor (01:52:39.87)
Okay, but you could withdraw the Luna in like a day or two days. So if you have a staking thing and you can withdraw your, your stake token in one day, then the price crashes in one day. And the second day, all the security leaves the network because everybody withdraws their tokens to sell their token. And then you’ve got no security. If you have a 30 day protocol. Okay. Well in 60 days, the security of the network evaporates, right?
Then, okay, so you’re gonna have a seven year protocol where you have to stake your capital for seven years. There’s two problems with that. One problem, you just created the textbook definition of a security, you’re regulated by the SEC because you’ve forced people to make an investment of money, right? Depended upon the efforts of others in pursuit of a profit, right? So it passes the Howey test, right? I mean, that, by the way, that’s the case even if you stake for a day for that matter.
Stephan (01:53:16.875)
Thanks for watching!
Michael Saylor (01:53:34.946)
But the second thing is you’ve created a centralized attack surface, and you’ve got like five developers that control the protocol. And you’re going to end up with all these massive questions about what’s the machine that controls the throttling of the capital flowing in and out of the network, and what happens if you hack the machines. And so you’ve created something which is thousands of times more complicated than using energy and the laws of physics.
You’re basically imposing computer science over physical science. And if it doesn’t break the regulatory guidelines and you basically created an equity token by doing it, then you’ve created an unstable virtual reality system that one single bug in one line of a million lines of code and your entire system goes unstable and you’ve got a Boeing 737 Max problem.
one line of code and it just wrecks the crashes the entire network. So the real beauty of Bitcoin is it is that natural frequency. And that’s what protects the network or provides the network security and what I’ll call a tactical sense.
On any given day, you have to go through that wall of digital power and you don’t have, and all the power is controlled by the network operators, not by you. So that’s a tactical, the tactical defense system for Bitcoin, the strategic security or the long-term security. And here I mean security over a hundred years, over a century.
The security that keeps Bitcoin from being banned or keeps a government from seizing all of the Bitcoin miners, et cetera, that comes from a combination of economic power, electrical power, computing power, and political power. So the Bitcoin miners, they’re channeling electrical power and computing power. So they’re the physical part, but…
Michael Saylor (01:55:49.75)
But the political power comes from the hundreds of millions of people that own something that’s a derivative of Bitcoin. Whether you own MicroStrategy stock or whether you own a Bitcoin spot ETF or whether you own stock in block or stock in Coinbase or whether you own the Bitcoin itself. I mean, all of these things, you know, put you into the political community and you’re going to use your political power to lobby. And then
The other thing that really secures Bitcoin is economic power. And I think that it’s worthwhile to point this out because this is an artifact of Satoshi’s brilliance. Satoshi created an immaculate conception and we had a fair launch. And those million Satoshi coins never moved and there was no pre-mine. And that means that the only way you have Bitcoin right now is you spend a huge amount of money on equipment and electricity to mine it and capital.
to create mining centers, or you bought it with real cash. And we can back calculate how much money has gone into mining, but I mean, I don’t think it’s unreasonable to suggest 20 to $40 billion has gone into the mining ecosystem. I mean, you can trace billions of dollars of capital just to individual companies like Marathon. So between 10 and 100 billion is how much has gone into mining. But if we look at how much fiat,
currency has gone into the other side of the equation, let’s take micro strategy. As of now, I personally am aware of having put more than $5 billion into the network and I’m not 1%. If you look at, there are a lot of other ways to get at it, but if you look at the four year simple moving average of Bitcoin and assume that was a reasonable surrogate, you can…
We kind of arrive at a conclusion that nearly $600 billion of real capital has been put into this network. So $600 billion of real capital from who? From Fidelity, from BlackRock, from every institutional investor in the US, from every institutional investor in Europe, from millions of individuals, from representing pension funds, retirement funds, et cetera. So
Michael Saylor (01:58:14.942)
you can trace a huge amount of capital that’s been put into this network. And ultimately the security of the network is gonna come from the actions of the people as voters and the actions of the economic actors at the capitalist. And then also from all the businesses, the application companies like Cash App or Coinbase have an impact and then the miners have an impact and they all have…
lawyers and CEOs and lobbyists and employees and they have nexus and they pay taxes and therefore they have supportive mayors, governors, senators, etc. Now
This is an interesting framework. I’d invite you, if you want to analyze any competing network, put any competing network, any other crypto network on the same framework and ask, how many dollars of real capital have been invested? And how much real electricity is running it? And how much digital power is behind it? And then how many people hold it?
You go to the next one, Ethereum, for example, right? You realize after the merge and the proof of stake conversion, no electricity is backing it, no digital powers behind it, right? So you pretty much took out two of the four legs, 500 exahash versus nothing, and 15 gigawatts versus de minimis nothing. And then the next question is, well, how much economic power?
Well, if 70% of ETH was pre-mined, name one person in the world that was meant to invest in $100 million in ETH. I’ve never heard of anybody. When I announced that I’d personally put $175 million into Bitcoin, there’s nobody in any crypto token for the next 5 million tokens. After Bitcoin, go to ETH and then go to every other token.
Michael Saylor (02:00:24.586)
You won’t find a single person, to my knowledge, that ever admitted to investing $100 million of cash in any of them, much less a billion, much less $5 billion. So if I had to guess how much real money’s been put into Ethereum, a few billion dollars?
Like the difference is 600 billion in Bitcoin. If you were to say 6 billion, I would say you might be stretching it, right? Like we’re talking about a factor of 100 difference. I don’t think you can really get to a number that’s more than a few billion, right? So I think that 99% of all the real capital has been put into this one network. So.
If all the economic capital is in one network, if all of the electricity is on one network, if all of the digital power is running one network, the only thing you’ve got left is political power. And the truth is there, I mean, there are a lot of crypto token holders, right? There are a lot of ETH holders. So really those networks are primarily secured by political power and the voice of the people, much more so than the actual.
know, physical power or economic power that’s behind Bitcoin. And I think that changes, it changes the long-term security outlook, but it also has an impact on natural frequencies and stability. When your natural frequency is a month, right, if you have a proof of stake network where you can unstake in a month, you just need a price crash for like six weeks or eight weeks, the network goes unstable, it becomes unsecure, right, topples over and collapses.
And you want to see examples of networks that just collapse. Look at what happened to FTT. Look at what happened to Luna. Look what happened to all these other tokens. Many of them, they had these staking frequencies of one hour, one day, one week, one month. And the truth is, if you’re designing a system to last, you really want to design a system where if I put a, first of all, you have to put
Michael Saylor (02:02:37.506)
billions of dollars into the network, and then it’s a one-way function, and you’re stuck with the capital and the network for a decade. And I guess then you’re invited to calculate if Bitcoin miners have invested somewhere between 20 and $50 billion in permanent capital for digital power, what percentage of all the digital power capital or digital capital
does that represent of all cryptos in the world? 95% would be probably the minimum number you could conclude. It’s a number between 95 and 99%, I think.
Right. Which is, which is why you come back to the conclusion that you have one thing, which is a digital property, a digital commodity, a digital monetary system and is, you know, is perfected for this. And then everything else is just a speculation.
Stephan (02:03:34.398)
Right. And one other area that might be interesting to hear your comment is even the Hodler dynamic, right? Like you look at the number of UTXOs, how many of them have not moved for 70, you know, how, you know, what, what’s the stat might be 70% or 80% of coins have not moved in more than one year. So that’s maybe another example where Bitcoin just has these extremely hardened Hodlers. And the mere fact that these people are willing to hold for that long,
It shows a certain level of conviction, economic power, political power as well.
Michael Saylor (02:04:10.326)
It’s a good point, and here’s the way I would say it. The difference between money and speculation is if it’s money, then the largest holders are buying more. And if it’s speculation, the largest holders are selling. So the real issue is, are the hodlers buying or are they selling?
I’ll give you an example of great asset classes that are money. Apple stock is money. Apple is buying more and a lot of people that own Apple stock will buy more. New York City real estate or London real estate or Palm Beach real estate, luxury real estate is money because if you look at wealthy people, they’re not selling. There’s no one bragging about how they sold all their nice places in Palm Beach, New York and London.
They’re buying more, right? If you’ve ever met a rich family that has real estate holdings, they don’t sit around saying, yeah, we’re gonna diversify and we’re gonna sell next year. We’re gonna get rid of the entire portfolio at a huge profit over 10 years. What they say is, I’m looking forward to the next deal where we’re gonna acquire this building, or we’re gonna buy this other thing, right? They buy and they hold. And they typically buy and hold to give to their children’s children.
The same is true with art. If it’s good art, collectors, Frick, Andrew Mellon, they didn’t buy art to flip the art. They’re not speculars. I bought a Picasso so I could sell the Picasso. They wanted to buy them all. That’s why they call them collectors. So if something is deemed to be really valuable, you bought a billion dollars of it.
and your goal is to buy another billion dollars of it. And so if you think about all these things, which thing in the crypto ecosystem is that? Bitcoin is that, right? I bought a bunch of Bitcoin, my goal is to buy more Bitcoin, right? It’s just a very simple acid test. Do you have an exit strategy or is that the exit strategy? Andrew Mellon’s exit strategy was
Michael Saylor (02:06:30.878)
I’m going to buy all the great art I can get my hands on. I’m gonna build a beautiful building in Washington, DC, and I’m gonna endow the National Gallery with the art as a gift to the people of the country. That was the exit strategy. And you get the idea. It wasn’t a speculation. So Bitcoin is the one thing that qualifies as money because it’s going to appreciate in value over time.
The world’s full of investments that are speculations or trades. Commodities, of course, are not money. Every single commodity other than Bitcoin is going to lose value over time, starting with gold, but certainly silver, soybeans, oil, natural gas. You can’t really invest in them. You can invest in property. You could buy all the mineral rights for 10,000 acres. That might be an investment that might go up in value, maybe. But.
But generally it’s super scarce desirable art, it’s desirable property, it’s Bitcoin, and maybe it’s like unregulated digital monopolies, the Magnificent Seven. But even then, your time horizon on that stuff is 10 years, it’s not 100 years. I can show you people that will say, I own some New York real estate that I hoped to hold for 100 years. I can find property people that would say, yeah, I got 100 year.
life on that. If I offered you all the mineral rights for the entire state of Pennsylvania, might you keep it in the family for a few hundred years? If I offered you the middle of Tokyo or the middle of London, might you keep it in the family for 300 years? Yeah, maybe if you can afford to pay the taxes. So I think that this Hodler dynamic is important, but it really is indicative
Michael Saylor (02:08:25.43)
Find every, you know, look at every crypto billionaire that holds something other than Bitcoin, and then check to see whether they bought a hundred million more worth of that stuff.
And when you find one, you might pay attention, but I haven’t seen one, right? I just don’t think you’re gonna see it because everything else is really a commodity losing value over time. Bitcoin is the money gaining value over time. I do think that does lead us maybe to the last interesting topic, which is just politics, the politics of the ecosystem. And you know,
If you only see the world as Bitcoin node holders, individuals and miners and developers and a couple of whales, if that’s your view of the universe, then you tend to get into these polarized debates about transaction fees or polarized debates over the protocol. But here’s a different way to see the world. There’s 8 billion people in the world. There’s millions and millions of corporations.
There’s thousands and thousands of material governments. There’s tens of thousands of applications. There’s thousands of ideologies. And Bitcoin’s a solution for everybody. And one day everyone’s gonna use this. And so if you see a network with millions of companies and billions of users and hundreds of countries and thousands and thousands of municipalities and governments.
right, and hundreds of religions and ideologies, and cultures, you have to allow that there’s going to be a great diversity in the way that Bitcoin is used. So I think that when you’re considering the network, the future of the network, you’ve got to consider the impact of this on all political constituencies. So
Michael Saylor (02:10:31.006)
I think of the HODLers or the holders, that’s one constituency, the miners are another constituency, there’s node runners, another group and developers, another group, but those are kind of technical definitions. Like for example, a node is not a node is not a node, Coinbase runs a node and Cash App runs a node. And if Cash App clears 100,000 Bitcoin transactions a day, their node is a little bit more important than my node.
I could run a node, but if I’m not approving and maybe more to the point, denying transactions, at the point where I basically take $100 million wired into my corporation, and then I refuse to deliver the Bitcoin because my node says it wasn’t a good transaction, I’m an important node. So not all miners are created equal. I mean, ones with more hash rate are more equal.
Stephan (02:11:06.454)
Correct.
Michael Saylor (02:11:27.058)
Not all nodes are created equal. If you have economic velocity, $100 million a day of economic velocity through your node, then that’s more equal than someone that clears one transaction for $20 once a year through their node. So you have to kind of consider the weightings. Not all hodlers are equal, right? Someone that’s holding a billion dollars of Bitcoin will probably hire 20 lawyers and go litigate.
over the issue of, is somebody Satoshi or not, right? Or Bitcoin positive things, whereas someone that has $100 of Bitcoin can’t afford to hire the lawyers and they’re not gonna litigate. And so they’re not gonna have the same amount of influence. Not all developers are equal. The developers that work for Coinbase can decide to put lightning into Coinbase or not, right?
The developers at Binance, the developers at Cash App, they have more influence to adopt certain protocol adjustments and do things at layer two, et cetera, introduce the universal monetary codes, et cetera. So you have to consider that. And I think that the political system of the future
You’re going to have Bitcoin energy companies, companies that provide electricity to power Bitcoin miners. They have an influence. You have Bitcoin banks, that is corporations that are moving layer one and layer two and layer three Bitcoin around high frequency, like Coinbase, like Cash App, like Fidelity. You’re going to have Bitcoin devices like the signing apps, the cold cards, right? The bit keys of the world, the ledgers of the world.
You’re going to have applications, right? And inscriptions and ordinals, they’re like the first of 1,000. There’ll be thousands of applications. And some will succeed and some will fail, and the market will decide. And you’re going to have derivatives. Like, you know, you’ve got 12 Bitcoin spot ETFs coming, but then you’ve got someone that wants to do an 80% Bitcoin, 20% ESG carbon credit derivative.
Michael Saylor (02:13:45.566)
Someone can create a derivative of a derivative. You can create something to sell volatility on top of the spot ETFs. Micro strategy holds Bitcoin, our stock, is a security backed by Bitcoin. To a certain degree, any company that owns Bitcoin in whatever way becomes another way to play it. Then you’ve got corporations and institutions that are aligned with Bitcoin.
they all have an interest, whether it’s a human rights foundation or whether it’s a nonprofit or whether at some point Google and Microsoft and Apple, I mean, Apple has an influence right now. I mean, right? If Apple basically denies wallet of Satoshi, certain privileges, right? They have an influence. And so corporations are gonna have influences. And then you’ve got Fiat banks and…
The banks are the bridge between the fiat currency and the Bitcoin ecosystem. And so they do have an impact, right? If they’re Silvergate or Signature and they’re shut down, you can see what happens. But on the other hand, what you see right now is more and more fiat banks are coming online. So when Banco Santander or Deutsche Bank or Swiss Bank or another bank gets involved, I don’t think it’s…
It’s not a cause for us to regret. We should welcome all of them because ultimately the countries and the fiat currencies aren’t going away. They benefit from joining the network. Bitcoiners benefit from them joining the network. They have constraints. There are certain things banks can’t do. Like the latest guidance was no more than 2% of your capital could be crypto related.
Okay, well there are laws, there are restrictions, they’ll have KYC, AML, banking laws. There are certain things corporations can’t do, right? That’s why a corporate custodian can’t give you certain Bitcoin transactions in New York City, or you can’t do a Bitcoin transaction without doing a KYC or AML authentication on certain apps. Well, corporations can’t do that in certain countries. In another country, they might be able to do that.
Michael Saylor (02:16:02.578)
Non-companies might be able to do that. Who knows? So they have their own constraints. They’ll be financial service providers, like Fidelity, like BlackRock. We shouldn’t fear them. We should welcome them. They will bring new levels of service, right? There’s a bunch of people, retirees, that they’ve got one relationship. They’ll pick up the phone, talk to the financial advisor and say,
get 5% of me into Bitcoin, or I want 1% of my assets to be Bitcoin. It’ll be a 15 second phone call. It’ll happen because there’s hundreds of thousands or millions of financial advisors doing business with BlackRock and Fidelity and Franklin Templeton. Those people can’t get it any other way. And so these financial service providers, they’ll be part of the ecosystem. They’ll be regulators, every type of regulator.
in every country, state regulators, city regulators, there’s treasury regulators, there’s security regulators, commodity regulators, there’s everything under the sun, right, tax regulators, they’re gonna change all the time. There’ll be politicians, some will have a positive opinion, some will have a negative opinion, they’re gonna continue to act, and then there’s so many different types of government agencies, you know, you couldn’t count them all, right? So.
What do I see? I see a world where, you know, if everybody’s not using Bitcoin, then let’s say half. You know, take half of 8 billion people, take half of 100 million companies, take half of thousands and thousands of ideologies, take half of a million politicians. So lots and lots of people are gonna get involved. They’re all gonna get involved in a different way. And…
When we think about Bitcoin, it’s better for us to say Bitcoin is a solution to everybody’s problem. Let us show, we’re the universal sweetener or the universal benefit. The question is, which nationality and which ideology benefits from mathematics? All of them. OK, which ones do you agree with? Some of them. Which companies benefit from mathematics? All of them. Which companies would you buy from? Some of them.
Michael Saylor (02:18:28.914)
We’re all going to disagree about everything else. We’re all going to disagree about ideology and religion and regulations. And that means that you’re going to see so many different implementations of Bitcoin. You’ll see as many implementations of Bitcoin as you will see books written in English. They’re all written in English, but they don’t all say the same thing.
Somebody writes Communist Manifesto in English and somebody writes in Defensive Capitalism in English, and they both used English. And it was beneficial to both of them to use English. And I don’t, that’s why we don’t want to be censors. It’s like, oh, I heard that some people in a place I don’t like are using my language. The truth is, it’s beneficial to, say, the Western world when our enemies use English. It’s beneficial to America when our enemies use dollars.
It’s beneficial to the human race when your enemy uses mathematics. Right. It’s, it’s beneficial to everybody in the Bitcoin ecosystem when everybody uses Bitcoin, whether they’re your enemy or your friend. And you’ll see crippled implementations, but they won’t all be crippled. And the most important point is, is that the layer twos can fail. The layer threes can fail. The layer fours can fail.
the ecosystem has to survive. We have to basically make Bitcoin successful. Even I may not be successful, my company may not be successful, my ideology may not be successful, but the world is a better place that Bitcoin is successful. So oftentimes I see a lot of people in the community and they kind of get this thing turned on its head. Like they feel like they have to topple a government
attack a politician or attack a policy in order for Bitcoin to succeed. But the truth is they could just say Bitcoin’s good. The likelihood that you’re going to win the other hundred debates, zero. The other hundred debates will continue. And all you’re going to do is make 100 different sets of enemies. And on the other hand, you could just say Bitcoin is like the universal money.
Michael Saylor (02:20:55.746)
to benefit everybody, the individual, the family, the small company, the midsize company, the big company, the regulated company, the monopoly, the city, the state, the country, the good countries, the bad countries, the good religions, the bad religions, the good people, the bad people, the everybody, right? There’s this, there really isn’t any circumstance where you don’t see a benefit. And now if we come back to security again, Bitcoin’s a lot more secure after
BlackRock rolls out a spot ETF. Like we shouldn’t say, oh yeah, they’re bad for Bitcoin. They’re great for Bitcoin. Now you’ve actually got, I don’t know, if you’ve noticed like all of a sudden the mainstream narrative is turned from Bitcoin bad to, well, maybe there’s some benefits to Bitcoin. All of these newspapers that start writing, they look and they say, well, if the SEC had…
25 meetings to review Bitcoin spot ETF approvals, then when you’re a journalist writing for the Financial Times or for the Wall Street Journal or the New York Times, and then when one person, one senator says, I think Bitcoin’s bad, or one executive says Bitcoin bad, you look at that and then you also look at the fact that the most important securities regulator has just devoted thousands of hours to approving this thing and they think it’s good. And then you say to yourself,
I’m going to be out of consensus if I criticize this because it’s pretty clear that a bunch of smart lawyers and smart regulators, smarter than me, that have more power than me, that have done this for their career, endorse this. And so at the end of the day, it’s easy come, easy go. It’s very difficult to get thousands of attorneys to spend.
thousands of lawyer years to figure out how to do these things. It’s very difficult. But once they do it, then all the mainstream politicians, mainstream investors, mainstream journalists, mainstream academics say, I guess it’s not tulip bulbs. You think the SEC is going to have 25 meetings to discuss an ETF backed by tulip bulbs? Not likely. So you…
Michael Saylor (02:23:16.586)
For example, may believe in self custody and hold your own keys and hodling. And you may think I will never ever buy the spot ETF. Good for you. Like that’s just fine. We need you. But these other people acting in a different way to create this other Bitcoin backed product, they’re also gonna help you. They’re not your enemy. They’re ultimately your friend because they’re going to drive up the scarcity of your asset.
Maybe they’ll store it in a custodial fashion in a way that you hate, but then in the day, they will be funneling billions and then tens of billions and then hundreds of billions of dollars of economic power to the network, which is going to drive up your asset, which will give you more economic power and more freedom. And then you can choose, you know, when your Bitcoin is worth 10 million of Bitcoin, you can set up your own Citadel and your own township and live the way you want and engineer your own rocket ship and go to your own planet.
know, and set up the government the way you want to set it up. But first get the money, right? First thing, if you look at how progress takes place in civilization, it takes place because you have economic actors with the economic power to do something. And I could give you hundreds of examples in history, but generally, whenever you see a revolution that was to the benefit of the people,
It wasn’t the poor plebs that did it. It was a wealthy person that actually supported the plebs. And the result was benefit to everybody, but there was always an economic actor involved to support it. So I think when you look at all these things, you wouldn’t wanna have a protocol change to discourage anybody from joining the network. And you kind of…
don’t want to pick battles unnecessarily that you don’t need to pick. Like maybe you hate banks. Maybe you think everybody should be their own bank, but you know, if Warren Buffett and Charlie Munger had decided, I mean, Berkshire Hathaway bought $30 billion with the Apple stock and it became worth 150 billion and they made $120 billion on the trade. And that was more profitable than everything Berkshire Hathaway did in the entire history of the company.
Michael Saylor (02:25:39.806)
And that was a decision made by someone that worked for Warren Buffett. And so when they decide to buy $30 billion of Bitcoin, and you don’t really like big corporations and when they custody it with JP Morgan, when Warren Buffett says to JP Morgan, I want $30 billion of Bitcoin, I want you to hold it. Jamie Dimon would say, okay, well, I guess maybe it isn’t just for criminals because Warren Buffett wants it or Bill Gates wants it.
And then he picks up the phone and calls someone in his bank, and they decide to open up a custody operation. And then the price of Bitcoin triples. And you’ll be sitting there saying, damn it, the stupid Berkshire Hathaway people, they just made $100 billion in like three months. It doesn’t seem fair. But on the other hand, everybody else in the Bitcoin ecosystem will make trillions and trillions of dollars at the same time. And so there’s a certain…
degree of fairness to it. I mean, a rising tide lifts all boats. And what you’ll, what you’ll say is, I guess all these people weren’t really against me after all. They just didn’t understand. Right. And, and if you look at it that way, if you say this is electricity, they’re afraid of something they don’t know. They grew up without it. They’re used to horse and buggies. They have steam, you know, they have steam power in the middle of their building, you know,
and they’re not really ready for this. If you just say that and you’re patient, then you’re like, I don’t have to define Bitcoin as being against anybody. When you actually have to repudiate someone personally or repudiate their business, then you just make it unnecessarily confrontational. Anybody says to me, well, what do you think about this comment? I say, well, they’re going to love it one day.
You know, if Warren Buffett doesn’t buy it, his part, the guy that bought Apple is going to buy $30 billion of Bitcoin and he’s going to make a hundred billion dollars, it just could take victory laps. And they’ll take credit for being brilliant. And it’s just going to happen. And it, and it won’t happen because of, you know, 10,000 hours of screaming. It’ll happen because there’ll be one guy that’ll look and say, okay, I guess I get it. I mean, if it’s good enough for BlackRock and Fidelity, I guess we should like have a little bit and they’ll make a little bit more. And then someone also say, whoa, I guess we should do it.
Michael Saylor (02:28:02.274)
And eventually it’ll be the same with all the banks. It’s gonna get rolled out just like electricity, just like steel in skyscrapers, just like automobiles running on gasoline, just like jet airplanes. Like we say, everybody’s against it before they’re for it. So right now, I think that…
If you take an expansive view of Bitcoin, the ecosystem, you say Bitcoin is for everybody, every type of organization. And there’s only two types of people in the world, those that understand the benefit of Bitcoin and are trying to get more integrated with it, and those that don’t understand it yet, but they will. I mean, that’s kind of the way the world divides. And maybe it takes 30 years or 40 years for everybody to go from a…
skeptic or ignorant to, I embrace the technology, but it will happen. And it’s beneficial for us just to be cheerful and constructive. And everybody you meet, if someone says I hate Bitcoin is for criminals, you say, you gotta smile and say, it’s just a protocol that can make your life better and make the life of your citizens better and make your shareholders happy and make your customers happy and delight everybody. I just need to show you how.
I apologize, I have not yet found a way to show you how you can benefit your family, your friends, your shareholders, your employees and your citizens. But I’m confident that once you understand it, you’ll see that this is a benefit to you and your constituents. Please be patient with us. We’re new, it’s novel. I tell you one funny, last funny anecdote on the subject.
For a thousand years, after Galen, people didn’t understand how blood flowed through the body. And it was Harvey that finally figured out that the heart pumps blood through the arteries and recirculates it back through the veins. And it was the biggest breakthrough in medicine in a thousand years. And when Harvey said, you know, the heart actually pumps the blood through the body, people couldn’t believe it. And Harvey’s famous statement is he said,
Michael Saylor (02:30:22.838)
You know, no doctor over the age of 40 will ever believe me.
Nobody over the age of 40 will ever believe that the heart pumps blood. You know, and, and that’s just, you got a paradigm shift, a new idea, and it takes people time. And I think that’s where we are with Bitcoin. I think, I think we’re first and foremost educators. So I guess coming back to the, the point of this podcast, talk about principles, I guess my big idea is, is.
Stephan (02:30:35.371)
Ha ha.
Michael Saylor (02:30:57.45)
this Bitcoin is successful because it represents scarcity of assets, scarcity of money, scarcity of bandwidth, scarcity of power, scarcity of technology. It represents the conservation of these things. It’s the ultimate conservative network. And because it’s conservative with regard to all these attributes, it conserves your life force. It conserves the energy and cyberspace.
we should approach it with a conservative mindset, which is it works. It’s a brilliant, beautiful living organism spreading in a viral fashion. Last I checked, it’s growing 45% compounded annual growth. In the 40 months that MicroStrategy has been in the Bitcoin business since August of 2020, Bitcoin’s up 45% compounded. That’s how fast it’s growing. And it’s growing 4 or 5x faster than anything else.
Right. And so you have something which is extraordinary successful. And we’re about to break into a year where it’s being embraced by the Wall Street establishment. And I said, I said the biggest, it’s the biggest development in 30 years. Right. The last time something big happened was in 1993, the S and P 500 index was, was converted into an ETF called SPY by state street.
and they allowed you to in one click buy 500 stocks in the S&P 500 index, that ETF has $440 billion of capital in it right now, just that one ticker. And of course, if you put them all together, there must be a trillion dollars or more of capital. So that was a big breakthrough. And we monetized corporate equity as money for the last 30 years. That’s how you save your money. And so 30 years have gone by.
We’re about to now have Bitcoin and ETFs available from all major providers. Major breakthrough. Bitcoin is winning. Bitcoin, you know, I’ve already established, right? It’s got the economic support. It’s got the political support. It’s got the technical support. It’s winning. It’s stable. It’s well engineered. There are a hundred thousand businesses that can be built on top of it. Right? That being the case, when we think about…
Michael Saylor (02:33:22.358)
uh, any changes to the base layer, we should be hyper, hyper conservative. We should, we should be the same way, you know, a doctor would be, you know, you’ve got a beautiful child, they’re healthy. You know, you don’t want the doctor doing elective surgeries on them to make them just 1% better by cutting them open because human, human biases, we always overestimate the benefit we’ll bring. And we always underestimate the unintended consequences.
And at some point, you’ve got some kind of medical cure that’s 99.9% effective against a hypothetical problem that happens one in a million times. And you mandate it to a million people. And what happens is you save one person, you kill 999 innocent people, and you waste the time of the other million people. And that’s what happens with excessive, enthusiastic intervention in a healthy.
economy or a healthy organic ecosystem. So I think we should just be very, very thoughtful and we should try to channel energy cheerfully and constructively at either building functionality in the layers above the base layer, because there’s lots of stuff to be built. Go get Apple and Google to build Bitcoin into their products, get Microsoft to build Bitcoin in their products, build something to compete with them.
I could give you 100,000 ideas of something to do. Every company on earth could basically flip their treasury to Bitcoin. Get every single company, millions of them, to convert to the Bitcoin standard, right? So that you can rework everything on the Sun. There’s a lot of stuff to do that’s constructive, that expands the ecosystem, that will improve our odds of success and improve the rate of adoption.
without putting the base layer at risk. And so I’d say focus upon that. And with regard to the community, the internal Bitcoin community, I don’t think we should fight amongst ourselves over trivial things. Like there’s a lot of fighting over, are you enough of a carnivore, right? Or are you enough of a whatever? And ultimately like Bitcoiner on Bitcoiner violence is-
Michael Saylor (02:35:49.606)
It is a waste of time because we agree on 99. It’s like we agree on 99.9% of the stuff in the world and someone disagrees about how to do multi-sig and what signing device that we hate each other. So I think that, uh, we should keep that, you know, it should be thought of in the context of it’s social, but, you know, we should back off on getting. Distracted. And I think that, um,
We shouldn’t really define Bitcoin as against the currency, against the nation, against the banking, against the status quo. We don’t need to topple the status quo. We would be better off just to say Bitcoin is digital property that can be, that can and will be integrated into everything on earth to the benefit of everybody. We’re here to bring you.
you know, something to make your life better, better living through Bitcoin, right? That’s the motto. Everybody’s good, right? We don’t have time to make more enemies, right? We should just evangelize and either make friends or we should show people that are indifferent why they should be our friend and, you know, work around people that are just hostile without giving them that much.
Airplay, right? Like, yeah, you can go and find the one person out of a million that disagrees with you and process in front of their house every day. Or you could just say, well, that person’s not going to adopt Bitcoin this decade. Let’s just go next door and knock on the next door, right? And and move forward. And and above all, like, don’t break the network. There’s only one real fatal error, right? Bitcoin’s winning right now if we do nothing.
The fatal error would be to get worked up into some kind of mass psychosis, where we all decided that Bitcoin was going to fail unless we change the base layer protocol radically. And then we basically depower the network. Look at the Ethereum had $20 billion worth of Ethereum miners that would have fought to the death to protect Ethereum. And they basically turned them off and they ran them all away.
Michael Saylor (02:38:11.742)
So what we don’t want to do is destroy something that’s working. You could destroy the power protocol. You could destroy the transaction protocol. It’s like, you know, you could destroy the monetary protocol, you know, with these, you know, with these brilliant ideas, you know, we like, we need to tail emissions to fund developers.
Like what happens if you have a budget for developers, you end up with a 10 year roadmap with the spurge, the purge, the verge, the surge, the something, and then you end up with a hundred more hard forks, right? And it’s like, the truth is the world’s full of people that need something to do. I would say the real key to wisdom, channel your energy constructively. If you’re gonna do something, improve lightning.
build an application, persuade someone to adopt Bitcoin as a reserve asset, educate someone. These are all constructive things. Destructive, dilutive, destructive things are fight with random people because they wanna fight with you. Attack the core network and make it confusing and introduce anxiety and confusion.
and fear, uncertainty and doubt into the base layer. Right, and then attempt to imprint your ego, on the base protocol. I gotta introduce this so that my name will go down in history forever. And I think that real humility, it’s like you remember all those people, but generally what they did is you remember them because they blew up the empire and murdered.
10 to 100 million people and they got assassinated. That’s why you remember them. And maybe some humility would suggest that you might just want all your friends and family and the people that love you to live happily ever after. And you don’t need to be remembered for having broke everything, you know, or stood the world on its head. So that’s the end of my monologue. Thank you for listening.
Stephan (02:40:22.442)
Right, yeah.
Stephan (02:40:28.966)
Yeah. Yeah, that’s that. Yeah. So I guess closing out then, is there anything else you want to discuss in terms of, you know, Bitcoin philosophy? Is there anything you want to add to that?
Michael Saylor (02:40:45.406)
I would just say my last points are Bitcoin represents, I said it was rooted in an ideology, right? It’s an asset on a network.
Michael Saylor (02:41:00.65)
or how do I say it? It’s like it’s an asset on a network based on a protocol rooted in an ideology. And the ideology is a choice of natural law versus human law. We prefer natural law over human law. We prefer physical sciences over computer sciences and a choice to favor the universe over the metaverse.
It’s like Elon Musk joked, he said, the laws of physics are non-negotiable, whereas the laws of man are suggestions. And Bitcoin is really that submission to natural law. There’s a humility to it. And most, if we look at Austrian economics, if we look at capitalism, if we look at
liberty and freedom and most of the more positive ideologies in the world, they’re all rooted in natural law and natural rights. And when you start to try to superimpose artificiality or artificial edicts, it’s like humans will come up with a hundred thousand laws that say you can’t bake bread and you have to go to sleep at a certain time and you know you can’t think this and you can’t say that and…
These things get taken to the extreme and what they do is they destroy the society. You know, it’s just too artificial. And in computer science, one of the things about Bitcoin is it’s not a big code base. Right. Satoshi didn’t set out to like impress people by writing as much code as possible. The whole idea was to make it the minimum amount of code. I mean, the real goal of great design, right, is…
is the least. Do you see that little video that circulates on YouTube where it shows the guy with the 10 can and has got eight different or six different templates and he’s got eight different types of blocks and he’s got a triangle block and he shows it goes into the square hole and he’s got a circular block and it goes in the square hole and he’s got a rectangular block that goes in the square hole and what he shows is people oftentimes they overthink and they overdesign.
Michael Saylor (02:43:20.35)
I wanna create eight different ways to do eight different things when in fact I can do everything one way. And great designers, they don’t come up with 187 buttons. This has got a lot of buttons on it, but the iPhone doesn’t have but like one button or zero buttons, right? It’s like the ideal interface is like simple, simple. And so…
In computer science, when you code all this stuff, you need millions and millions of lines of code to simulate. Think about how many lines of code you need to simulate the way water flows down a hill. I give you a simple hill. I drop a pot of water. I write a computer software. And it’s like, you’re going to write so much software to simulate that? Well, how much code does nature need to make the water flow the right way? Just the water just goes, right? It’s not hard for nature to do these things. So.
So what you want is something simple and elegant and subject to natural laws, the conservation of energy. There is a speed of light. There is a speed of sound. There are the laws of gravitation. There is conservation of energy. You can’t destroy matter. You can convert matter to energy, energy to matter. You can convert energy from light to heat.
to acoustic energy, to kinetic energy. But at the end of the day, the energy is conservative. It’s there. And so the philosophy of Bitcoin is rooted in physics and it’s rooted in engineering and it’s rooted in a humble submission to nature. And that is the same as the market logic of Austrian economics. It’s like, let the market decide, let the people do what they’re gonna do. Don’t…
attempt to tell everyone in the universe how to behave, right? Leave them alone. So I say, leave Bitcoin alone. It’s a living organic life form. Just leave it alone. Right. You happen to think that the world could benefit from X do it yourself on your own application, risk your own capital. Risk. You know, if you want to introduce a protocol and give it to the world.
Stephan (02:45:24.93)
Thanks for watching!
Michael Saylor (02:45:43.154)
That’s fine. You can introduce any number of open protocols. Linux is open protocol. HTTP is open protocol. You can have your own lightning protocol, create a competing lightning protocol. You can do all those things. But ultimately, respect nature and respect the fact that Satoshi managed to engineer this genetic life form.
Satoshi created a crypto life form, released it into cyberspace, and it lived. And everybody before created something and it died. And so after hundreds and hundreds of experiments, they all died and millions of things that died after it. Here’s the one thing that lived, and we should be in awe that thing lived. And we should, you know, our job is to help people adopt it,
grow and succeed. But you’re about as likely to improve the genetic code of Bitcoin as you are to improve the genetic code of a cockroach or a virus or a rabbit. Leave the things and let them reach their full potential because Bitcoin’s $850 billion right now. There’s no reason why we can’t reach $100 billion.
hundreds of trillions of dollars of an economy without changing, you know, any of the fundamental genetic protocols materially. They’re pretty good and they seem to work fine. So I think bottom line with the philosophy is, you know, the lesson of stoicism is just because you can do a thing doesn’t mean you should do a thing. And go forward with humility and grace.
When you’ve won the lottery, have the wisdom to know that you’ve won the lottery and don’t gamble it all, double or nothing 10 more times and lose it all. William the Conqueror won the lottery. He was a bastard orphan and everybody wanted to kill him and he managed to rise up and become the Duke of Normandy. And then he managed to get the perfect wife and four sons and that’s everything.
Michael Saylor (02:48:07.85)
He then proceeded to cross the English Channel, conquer the UK. His family fell apart. The nation fell into civil war and he died fighting with his own son. And after he was dead, his sons fought with each other. And that’s an example of snatching defeat from the jaws of victory. Napoleon did the same thing. Julia Caesar did the same thing. Alexander the great did the same thing. Like the world’s just full of these people that, yeah.
You’re the king of the entire nation and everybody’s happy and at peace with each other and they got to go and mess it up. Right. Somehow. And so Bitcoin is it’s the winner and it’s working out well and it’s growing 45% a year and there’s a million things that will grow from it. I think we’re just so fortunate to have this as an opportunity.
I would focus upon the 99% of the people that don’t fully understand it. I would educate them and I’d help them on board. And I wouldn’t spend a lot of time in fighting over whether or not, you know, you’re allowed to own an ETF versus self custody versus have Bitcoin with fidelity versus do business with a corporation. You know, it’s like, these are all second order things. And a hundred years from now.
We’ll still be disagreeing about politics and we’ll still be disagreeing about custody relationships and we’ll disagree about a lot of nuances. The real question is, does Bitcoin grow 40% a year or 20% a year or 10% a year or 5% a year? And I think we’re just better off to, this is why I say put the laser eyes on. The significance of laser eyes is
You’ve got the single most important thing you could do with your life that can make humanity better. And you’re not going to solve every problem of humanity, but you could like solve half of them, or you could provide a solution to everybody that makes their life better. So focus upon the thing that you can save. Focus upon the benefit you can bring to the world. Don’t let yourself get drawn into a hundred side.
Michael Saylor (02:50:29.574)
struggles and, you know, regional wars over things that people have been fighting over for hundreds of years. And they’ll be fighting about for another hundred years, because it’s like, we didn’t end political struggle after electricity, but we sure did make life a lot better for humans. Right. We didn’t end religious struggle, but, you know, two out of every five, you know, children died.
in childbirth, you know, in 1600. And, you know, a combination of good medical technology and electricity and light, you know, changed that number from 40% infant mortality to less than 1% infant mortality, some very, very low numbers. So I think we focus upon spreading the good cheer of technology, better living through Bitcoin and everything else. It’s like I used to joke, it’s like
All my good ideas were dilutive distractions. I will say this, like Bitcoin’s my best idea. And the only reason I was able to do anything with Bitcoin is I had a few other good ideas, but ultimately I never pursued a bad idea, Stephan. I never pursued a bad one. I pursued good ideas that I thought were great, but they ended up being distractions and dilutive to my success at the great idea. And so.
So I think that that’s how I would end this thing.
Do the right thing for Bitcoin.
Stephan (02:52:00.594)
Right. Well, yeah.
Right, yeah, I guess let’s see what everyone has to think about Bitcoin principles. It’s been an enlightening chat and thank you for joining me, Michael, and hope to chat again soon.
Michael Saylor (02:52:17.399)
Yeah, thanks for having me.