Let’s talk Bitcoin
Robert Kiyosaki has an exciting conversation about Bitcoin with Saifedean
Ammous, author of The Bitcoin Standard: The Decentralized Alternatives to
Central Banking. The book is a groundbreaking study of the economics of
Bitcoin.
Robert is clear; he has Bitcoin, but his trust is in Gold and Silver,
something he began when he was as young as sixteen. “I don’t trust the
banks, just pure and simple…”
I don’t know if you follow American Politics…
…but Joe Biden has decided on Janet Yellen, former Chair of the Federal
Reserve, to hold the office of Secretary of Treasury. In Kiyosaki’s words,
“that’s Communism, that’s hardcore communism, that’s centralized
government.”
In this way, Robert feels Biden’s choice validates the value of gold,
silver and Bitcoin. Saifedean’s book, and his views on the value of
Bitcoin, help to nail down the point of a currency that can function
outside of a centralized government.
Saifedean uses Gosbank, the central and singular bank of the now broken up
Soviet Union, as a prime example. Gosbank was “the beating heart of the
communist…” says Saifedean. He believes the U.S. and other countries are heading in the same
direction; towards centralized banking. He doesn’t believe Biden’s
presidential victory is what is “necessarily taking us there”, though it
may be accelerating the process; a process he insinuates has been in the
making for some time.
So, what does Bitcoin have to do with it?
According to Saifedean, Bitcoin is the ONLY alternative to the process of
centralized banking.
“…Whether you like Bitcoin or not, you have to admit that it is the only
working alternative that exists today for (sic) central banking…”
—Saifedean
Why? Because centralized banking has a monopoly on providing the currency,
and on transferring the currency, internationally. Those two things must be
done through central banking, until Bitcoin came along and offered the one
and only alternative.
“Wait, wait, wait, hang on…”
Robert finds fault with the term ‘only’ and asks, “so you would dump all
the gold and silver and real estate…” Robert is referring to what amounts
to an on-going back and forth between ‘bitcoin’ people and ‘gold/silver’
people. What Robert calls a “pissing match”. There’s the idea that bitcoin
is the only alternative, the only international currency that can operate
outside a central banking process, and the idea that gold and silver could
be or IS just as ‘decentralized’ as the digital coin.
Saifedean assures Robert he isn’t ‘dumping’ on gold and silver. But he
makes clear that while they (gold and silver) are substitutes for the
‘monetary function’, the are not a substitute for international banking.
“There’s no gold banking…You can't use your gold to pay international. You
can't ship gold, and there's no gold settlement and clearance system”, he
says.
“You think gold and silver is the enemy when it’s communism.”
Robert makes the point that he has age and experience on his side,
especially when it comes to the topic of gold and silver. Saifedean breaks
it down: “You can’t make a payment (with gold), you can’t buy something
online…You can use it yourself. You can store it. You can buy it and sell
it. You can gift it.”
In his book, Saifedean tells us he writes multiple chapters all about gold,
and that at heart, he still loves investing in it.
The problem with gold…
“The problem with gold is that you can't make an international banking
payment system work around gold since 1914, because the Bank of England and
the Central Bank of the United States have essentially monopolized that
trade, and Bitcoin gets around it.
It's been a century of people trying to build a payment system around gold
and failing, and it gets captured by government. And that's really… the
point of my book is that Bitcoin improves on gold's monetary policy. But
more importantly, Bitcoin improves on gold in the fact that it's much
harder for governments to capture it and co-opt it.”
Why do you think Bitcoin is going to the moon?
Saifedean answers with the fact that the software and hardware, and the
equipment that can run Bitcoin, is relatively cheap, in the couple hundred
dollar range. But why? As Saifedean puts it, “There’s communism coming…you
don’t want to explore the other options that are out there?”
Robert discloses that indeed, he does own Bitcoin, but he has more in gold
and silver. But Saifedean believes that Bitcoin appreciates more than
silver. So owning all of the above, Bitcoin becomes the amplifier to those
value of precious metals, in his opinion.
“You're going to get your ass stomped on…”
For Robert, years of experience in gold and silver, specifically the mining
he continues to do, makes Saifedean’s belief in the role of Bitcoin versus
gold and silver questionable.
Robert tells him, “You sit there with that arrogant young man's cocky
attitude. You're going to get your ass stomped on because I've had my ass
stomped on because I had the same stupid attitude. I'm just trying to say
this. I'm asking this question, which nobody's ever answered me. Nobody
has. The reason I like gold and silver, I've started gold mines and silver
mines.”
Robert started a goldmine out of Toronto, Canada, on the Toronto Stock
Exchange, and the Chinese Government took it from him, leading to his
dislike of doing business with the Chinese. But an Argentina silver mine is
currently doing very well, and not just for the production, but with sales
of stock shares as well.
What Robert really wants to know…
If the equipment is so cheap, why doesn’t everyone just make their own
Bitcoin? And really it’s just CODE, right? It’s not a material item. It’s a
currency made of tech. This is the question Robert wants an answer to.
Saifedean breaks it down:
They can, but it won’t be traded or valued on the Bitcoin Network. It’s not
material, it is code and tech but it’s valuable because WE give value to
currency. Saifedean digs in deeper:
“If you think about economics, economics is in the minds of people. If you
study the Austrian school, value is subjective. We give things value. So we
decide that this yellow, shiny metal is very valuable. We decide that the
silver shiny metal is a little less valuable, but also quite valuable. And
we also can decide that digital tokens that can clear payments and clear
messages with payments on a network that has a wide acceptability around
the world, that has high level of reliability in the fidelity of its
transactions, we can also decide to give that value. There's no difference.
It doesn't have to be material. We got a lot of things that are immaterial
that have value.”
What’s more interesting is that the Bitcoin Network has grown ‘since day
one, almost independently’. It has grown and continued to grow, according
to Saifedean, without control, and according to the rules of the protocol.
It’s grown without the man who created it; he disappeared.
Okay. But Why can’t I just make my own with my Apple Computer?
You can. But you can’t start it and NOT be in charge of it. “How do you
start one that you don’t control?” Saifedean drives the point further.
“Bitcoin had a lucky set of circumstances where the guy who made it
disappeared, for whatever reason. And then it continued to operate without
anybody in charge. And the protocol continued to grow. And all the people
who tried to take control of it have failed repeatedly, which suggests that
there's a lot of inertia, and a lot of sclerosis (sic) in the network,
which means that the main consensus parameters of the network should be
around for a while.”
What about the coins? Why can’t I mine for them myself, the way I do gold
or silver?
Saifedean tells us that you can, but you’d be wasting your time and energy.
The result would be very, very few coins. It’s simply not efficient.
Can we talk about Shitcoins, now?
Surprisingly, the term Shitcoin is now in the Congressional Record.
Representative Warren Davidson used the term last year in Congress,
Saifedean tells us. The definition of the term, according to Saifedean, is
this:
“a shitcoin is a form of money that has somebody at the top
of it who can just make more of it at their will.”
There are five or six thousand digital shitcoins now that try to copy
Bitcoin code, and in some ways, do the same thing Bitcoin does. The
difference, Saifedean makes sure to point out, is that they ALL have
people, groups or individuals, controlling the software, controlling the
digital ‘currency’ where they can change the supply at any time. This makes
them…Shitcoins.
On the flip-side, Robert points out that as Bitcoin’s value went up, the
volume of Bitcoin went down. Robert continues, “whereas a US dollar, by
your definition, is shitcoin because the value of the dollar comes down as
volume goes up. They print more of it.”
Saifedean agrees; that is exactly his point in his book. The first seven
chapters point out the most important thing in money is the stock to flow
ratio. To clarify, Saifedean says;
“It's the ratio of the existing stockpile, of the existing supply, to the
flow, to the new production. And things that have a high stock to flow have
always historically been money. And historically, the thing that has had
the highest stock to flow is gold. And second place is silver. Bitcoin is
different because its stock to flow now is going to overtake gold's stock
to flow. It's going to become higher than gold over the next few years.”
Which is exactly why Robert owns Bitcoin.
What about ICO’s, Initial Coin Offerings?
Those are shitcoins too. Any digital coin, including ICO’s, that is not
bitcoin, is essentially useless, according to Saifedean. The reason is
because all of them, without fail, have someone controlling them. They can
change the supply.
With Bitcoin, that is very difficult to do. A concentrated group of big
businesses in Bitcoin, along with Bitcoin developers has tried to change
just one small parameter of the code behind Bitcoin, and failed. No other
digital coin has that, Saifedean says. “Not even the U.S. dollar.” He
believes not just the U.S. dollar, but all national currencies are
effectively, shitcoins. Because someone can change the supply.
So, you’re saying it’s impossible for someone to duplicate Bitcoins code or
write their own?
No, it’s possible, says Saifedean. But it’s useless. Because it won’t get
the market value of Bitcoin. A good example, he tells us, is “if the
Zimbabwe and Central Bank prints more dollars, that's not going to devalue
the US dollars. People can tell the difference. Just because they're both
called dollars, that's different.”
If you look at all the other digital coins out there and watch their
charts, they flatline against Bitcoin. Their value tends toward zero, until
there is zero liquidity.
“I think the U.S. dollar is criminal!”
“What they're doing, the centralized bank, the Fed, and the Treasury. They
just keep printing more of it to solve our problems,” Robert asserts. This
is one of the reasons Robert likes Bitcoin, along with gold and silver
options.
But What if the Feds produce a Centralized Coin, their own digital
currency?
Robert questions what happens when/if the government produces a digital
coin, one that will be controlled by the Feds. Saifedean explains that to
him, it’s more of an advertisement of what is really valuable; Bitcoin.
It’s not a competition. If the Feds create a coin, it comes with the
knowledge that they can control the supply of the currency.
Saifedean says it’s like this;
“Take our currency where the supply is up to us. We determine it at any
point in time. And we can always give anybody as many as we want. And you
get no say in the supply, and you can't even know how many there are. And
also, we get to figure out all the transactions done by you. And if we
don't like your Facebook posts, you don't get to eat for a month.”
If the government produces a digital centralized coin, it won’t be any
different than the currency now, he states. It will still be centralized
and controlled.
"I think they can produce a shitcoin, but they cannot produce something
that competes with bitcoin.”
They can’t compete with Bitcoin, Saifedean says, because the whole point of
a Central Bank is to control the money supply and payment clearance. These
are two things that Bitcoin takes away from Government and puts those
actions into CODE; the very software coding behind Bitcoin.
In 2017, Bitcoin crashed from 20,000 to 3,000, reminds Robert. But, he
notes that speaking with Raol Pal, the answer was that there was no money
behind Bitcoin then. Now, in 2020, there’s “a WALL” of money behind
Bitcoin.
Further, Saifedean breaks down the supply history of Bitcoin.
“The bitcoin supply, the mining of bitcoin, currently happens at a rate of
900 coins a day. Up until May this year, it used to happen at 1800 coins a
day. Four years before that, it was 3,600. And then the four years before
that was 7,200. So every four years, the new supply of bitcoin drops by
half.”
How does 21 Million Bitcoins supply the world with money?
The supply of money doesn’t matter, says Saifedean. What matters is
purchasing power. And you can fit infinite purchase power into each
Bitcoin. Here’s how he explains the breakdown:
“So each bitcoin is divisible into 100 million Satoshis… and the way that
Bitcoin solves this problem (of volume or supply) is the same way that
Bitcoin scales, the same way that bitcoin can take on more value. It's what
we like to call the ‘Number Go Up’ technology. As the price of Bitcoin
rises, the volume of Bitcoin trades rises, and the amount of money that
Bitcoin holds rises, and the value of each Satoshi rises, and it becomes a
bigger market. You don't need more money. You don't need inflation. You
don't need the supply to increase.”
How can a $15 per hour worker afford a $100k Bitcoin?
Robert points out that Bitcoin is expected to hit $100,000 next week. If
that’s the case, he asks Saifedean, how does an average worker, or middle
class family afford Bitcoin in that range?
They don’t, says Saifedean. They purchase Satoshis, or smaller portions of
Bitcoin.
“You don't need a whole Bitcoin. There's only 21 million. The vast majority
of people would never get to own one whole bitcoin.”
Where a dollar can be sliced down to 100 pennies, a bitcoin can be sliced
down to 100 million Satoshis.
“In several years, it's just going to be unheard of for most people to
think about owning a whole bitcoin… Think about the 400-ounce gold bar.
That's what one bitcoin is like. So you don't have to own a whole one in
order to use gold. You can buy a tiny little gold coin.”
Saifedean shares that he is writing a new book, the sequel to his first
novel, called The Fiat Standard. Fiat (or fake) food, money, family, and
the impacts on the world because of it. Fiat Money creates a Fiat (fake)
world around it, allowing “…the people who create new money from nowhere to
bestow economic value on things that are worthless, and that just disturbs
the entire process of economic calculation and economic planning for
everybody else.”
Gold and Silver ETF’s—They’re Fake
Robert’s feeling on gold and silver ETF’s-Exchange Traded Funds- are that
they are fake; he doesn’t really know if there is gold or silver behind it.
He doesn’t trust it. But there’s word that Bitcoin will start trading in
ETF’s, and the question is that is this ‘fake’ Bitcoin?
Saifedean gives us this: “I don't know of any particulars, so I can't
really say it is happening…however, Bitcoin really is a verification
technology…it’s just a process of meticulous, astoundingly complicated
verification, where everybody's verifying everything.”
The verification process is the basis of joining the Bitcoin Network. “You
verify what everybody else is doing. Every 10 minutes, everyone checks
everybody else's balances, and everybody checks to make sure that all the
coins are in order and that the ownership is with the person or the address
that should have them. So you're constantly verifying the supply. Anytime
you go on the Bitcoin network, you can check exactly how many coins there
are, and you can find out where and how they're distributed.”
The answer, it seems, from Saifedean, is that if there is an ETF on
Bitcoin, it’s going to go through repeated and constant verification.
If it's not your keys, it's not your Bitcoin
Most Bitcoiner’s will tell you if you don’t own your own Bitcoin, and
instead opt for other purchase options, you don’t really own bitcoin at
all. You own a claim on those bitcoins. Saifedean doesn’t recommend other
optional purchasing of bitcoins, such as those involving selling bitcoin
for interest payments.
“If you own your private keys, then you have your own Bitcoins on the
network, and that is the equivalent of holding your own physical bars of
gold with your own hands.”
Saifedean believes that we’ll see the dollar-based economy shrink as
Bitcoin becomes a bigger piece of the economic pie. Those with Bitcoin
money will see appreciation, and those who don’t will see their money
depreciate in value. Right now, Bitcoin makes up 0.2-0.3% of the global
money supply. This, Saifedean believes, will continue to grow.
Please visit
saifedean.com
to check out his book, The Bitcoin Standard: The Decentralized Alternative
To Centralized Banking and for future access to his upcoming book, The Fiat
Standard.