Robert Breedlove is a decentralized finance entrepreneur, philosopher, and podcaster. Please support this podcast by checking out our sponsors:
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OUTLINE:
0:00 - Introduction
2:37 - Sovereignty
9:42 - Territorial imperative
14:19 - Property
20:24 - Anarchism
23:03 - Inflation is theft
27:26 - Volatility is truth
32:05 - Taleb and Bitcoin
36:13 - Life is information propogating through flesh
47:12 - Intelligence
51:25 - Space and time
58:07 - Pragmatic truth
1:09:05 - Creative destruction
1:12:54 - Capitalism vs Communism
1:25:38 - Jordan Peterson on religion
1:29:54 - Inflation
1:33:45 - What is money?
1:47:21 - What is Bitcoin?
1:58:27 - Bitcoin vs other cryptocurrencies
2:06:38 - Can governments ban Bitcoin?
2:19:20 - Bitcoin toxicity is tough love
2:32:39 - Crypto scammers
2:41:50 - Eric Weinstein and Bitcoin
2:48:12 - Satoshi Nakamoto
2:52:42 - Money is energy
2:59:56 - Proof of stake vs proof of work
3:02:36 - Morality
3:17:21 - Collapse of the Soviet Union
3:20:51 - Jordan Peterson and Bitcoin
3:33:20 - Book recommendations
3:52:40 - Advice for young people
3:56:11 - Love

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To always choose the money with the deepest liquidity and the most network effects.

This is why money has tended to be a winner take all market because it's essentially a single purpose tool.

It is a tool for, if we consider that tools are time-saving devices, the shovel lets you dig more holes per man hour than you can with your bare hands, money is a tool, there's yet another definition of money, that lets us calculate, negotiate, and execute trades more quickly.

So that function tends to coalesce towards 1 solution.

And so, the short answer would be that for the same reasons, quantifiable reasons, like inflation resistance and liquidity and network effects, that we have 1 analog gold, we're only likely to have 1 digital gold.

And I think the Bitcoin cash fork proves that out empirically.

Once it was accepted, the network effects, the winner take all took over.

And here's a fundamentally different kind of like analog versus digital is a leap in technologies.

And you're suggesting that there may not be, there's unlikely to be other leaps of that kind into a whole nother kind of space of technologies.

I would argue that Bitcoin, it's kind of like the ideological synthesis of gold, taking the monetary properties of gold and combining them with the internet itself.

And in doing so, it has essentially perfected the properties of money.

You can't get more divisible, durable, recognizable, portable, or scarce than Bitcoin.

So Satoshi has kind of left no design space for a superior technology to intercede and outcompete Bitcoin at this point, now that it's established liquidity in the network.

Yeah, but it's a combination of the tech itself and the social layer that is coalesced to it.

They're all connected, and then the political as well.

But the portability, for example, that's another way to phrase that is the, what is it, the scaling.

So the number of transactions, that's a limitation for Bitcoin that many argues a feature, many argues a bug.

You have a bunch of cryptocurrency technologies that are able to achieve much higher, much faster frequency of transactions, much more transactions, all that kind of stuff.

The low level of transactions that's possible with Bitcoin, Do you think that's a feature?

And even these other crypto assets that settle more quickly, they settle with less assurance of finality.

So Nick Carter has a great piece on this actually called, it's the settlement assurance is stupid.

Where the gist of it is that there is more work being done in each block of Bitcoin that it can't, it is less vulnerable to reversion.

So it's giving you higher degrees of assurance that your settlement or your trade has occurred with finality, whereas other blockchains are much more vulnerable.

And Again, with Bitcoin, the evolutionary path of money with gold is that it was first used as a collectible.

After it had stored enough value, it began to be used as a medium of exchange.

And then finally, when it was used widely enough as a medium of exchange, it becomes a unit of account.

Today, I would argue it's a store of value, 1 of the most effective store of value we've ever seen.

So that evolutionary path that Bitcoin's following is similar to gold.

First a collectible, today a store of value.

To be an effective store of value, it has to optimize for supply cap.

That has to be the first, and this is all Bitcoin really needs to do to be successful, by the way.

Exactly what it's been doing for 12 years, virtually flawlessly, which is keep creating a block every 10 minutes and keep enforcing a supply cap of 21 million.

As long as those 2 things hold, it is sound money, the ultimate sound money, the most inflation resistant money there's ever been.

We know with perfect certainty what Bitcoin supply will ever be.

For it to be used more broadly as a medium of exchange, it can't make trade-offs at the base layer to increase its portability, for instance.

Even though portability is maybe a misnomer because Bitcoin has extremely high portability, just doesn't have extremely high transaction throughput.

So we could say you can move it pretty quickly anywhere in the world as long as you're willing to bid up for the block space, but you can't satisfy all the world's economic volume.

You can't do 300 million transactions per second like you can on a centralized database like Visa.

But Bitcoin needs to be this, it has to be a store value first before it can be a medium of exchange.

So it has to protect the supply cap first before making any trade-offs for that.

And I would argue that that's why Bitcoin is so rigid, is that it's optimized for survivability and optimized for that supply cap.

And it's pushing experimentation and other features that would increase its transaction throughput to higher layers.

So I think Lightning Network is something that's very interesting.

It's still early, but there's a lot of throughput already being used on the Lightning Network.

And it makes some slight trade-offs in terms of the trust minimization of Bitcoin.

You end up trusting these smart contracts instead to move the Bitcoin, but you pick up nearly unlimited transaction throughput.

So I think Bitcoin, You can sort of conceive of it as the latest layer to the internet.

And it's 1 that preserves this store value property better than any asset we've ever had.

Let me ask sort of a critical question of if you're wrong about your statements about Bitcoin, you find out years from now that you were wrong, what would that look like?

What would be the things that make you realize you were wrong?

Because you speak very confidently about Bitcoin.

And 1 of the things, let me put it this way, I think certainty, I feel like that's like a stoic statement, certainty leads to ruin or something like that.

Like certainty, I think, is an antithesis to progress often.

And especially in your writing, but this is true for the Bitcoin community, There's a certainty about the Bitcoin.

And that makes me very skeptical, no matter how good the ideas are.

Whenever things are good, this might be the Russian in me, I think like, what are the ways this is going to go wrong?

So what do you think are the ways this might go wrong or you're wrong in your conception of what Bitcoin is?

evolves via negativa, Meaning that we're not proving hypotheses and that's what becomes the body of science.

Science is whatever is left over as we disprove hypotheses.

Whatever we can empirically through experimentation disprove gets discarded and whatever remains, whatever theory remains that hasn't been disproven is science effectively.

This process is similar to market actors zeroing in on a store value, right?

They're experimenting with different forms of storing wealth across time.

Some do better than others, and eventually everyone ends up on the 1 that is best.

In terms of understanding Bitcoin, I look at it as a similar approach.

That is the main question I'm asking myself is, how do you stop this thing?

If you're a nation state, particularly, who has the most to lose in this transition, what is the attack vector by which they neutralize Bitcoin?

I've spent 5 years thinking about this thing very deeply.

I've read everything on monetary history I can get my hands on.

The general thought of how it has stopped, and this is the snag point that a lot of people get to in their explorations down the rabbit hole is they just say the government will never allow it.

It's like, all right, Bitcoin's interesting, it's superior money, blah, blah, blah, but the government will never allow it.

And they say- Was Ray Dalio, did he say that?

So Ray Dalio said that Bitcoin seems to be too promising.

If it is, in fact, as promising as it looks, governments are going to, I don't forget what the exact quote is, but not allow it.

So how do you get Ray Dalio unstuck from your perspective?

And how do you get unstuck from that idea that governments will governments, How do you prevent governments from stopping a thing that threatens centralized power?

So governments that are really good at fighting centralized threats to their power, right?

Whether that's a currency counterfeiter or a competing nation state or business they don't like or an individual they don't like.

You know, they can kill them, they can throw them in jail, They can use any number of coercive or violent tactics to suppress it.

And that's, you know, there's some anecdotal history here where there's the PGP case, which in the United States, the court was trying to classify it as munitions.

When we were shipping this pretty good privacy software overseas, government wanted to classify it as munitions and restrict that exportation.

When the PGP attorneys actually printed out the source code on paper and presented it as evidence in the court, all of a sudden it became protected under freedom of speech.

And that it's just code is speech, code is language.

And therefore, at least in the United States, it's protected under the First Amendment.

I think a government ban would be largely unenforceable, frankly, on Bitcoin.

Being that it's pure information, if you suppress market actors from using it in 1 jurisdiction, you're just creating incentives for them to go elsewhere.

And you're actually increasing the incentive for other jurisdictions to be favorable towards it, because then they can create, they get to benefit from the tax revenue and the businesses and the innovation that's occurring in and around Bitcoin as a result.

So you don't think if a particular central bank, like in Europe or United States, bans it, not maybe using those terms, but in some kind of way,

you think that provides a really strong incentive for the other big players to enable it.

That's right and That they're more likely by the sense and governments know this by the way to the other thing that causes the government to shoot itself in the foot is that if they ban something, they draw a lot of attention to it.

So that's typically be the last arrow in their quiver.

They may try to ban it if Bitcoin really starts to monetize very quickly and the power structures that they impose today start to dissolve faster than others might think they will, then they might try and ban it.

But I think that ban will be largely unenforceable.

They're more likely to tax it, which they already do tax it.

They're likely to increase taxation of it.

They're likely to try and make it more white market by actually tracing Bitcoin, seeing who has it, attaching identities to Bitcoin ownership, and making sure that they're getting their pound of flesh on all the transactions it results in.

But I don't think, the other thing about this is, so we saw the internet outcompete intranets.

And that the we'd say that open source networks tend to outcompete closed source networks.

And there's a really good reason for this.

And it's Because in a closed source network, there are costs associated with defending the network itself.

So you have to, the network owners, the owners of the closed source network have to expend resources protecting it from competitors, and they have to expend resources imposing its rules.

Because people, they're not voluntarily adopted rules, so you actually have to impose these rule sets.

Whereas an open source network, which is something much more akin to capitalism in its pure sense, These are voluntarily adopted rules.

So all market participants have agreed and consented to this rule set.

So there's no enforcement cost and there's no turf protection because anyone can freely enter or exit the open network.

For that energetic reason, I think open networks outcompete closed networks typically.

And in the digital age, that's why I think that's why internet outcompetes intranet and that's why open source networks are going to eat closed source networks.

So what Bitcoin would be in that lens is the ultimate open source monetary network devouring closed source central bank monetary networks.

And I just don't see how there's no possibility of unilaterally stopping Bitcoin or destroying it.

So then they're more likely to regulate or tax it.

And again, the other fallacy here is that a lot of people tend to think of governments as these singular indivisible entities that just move under 1 plan, but in reality, it's a lot of people, right?

A lot of people with loosely coupled interests and agendas and whatnot.

Regulators and others, when they're wearing their citizen hat, They're going to see this thing monetizing.

They're going to be on the front lines of trying to regulate it, trying to control it.

And I think what's likely to happen is they're going to start to adopt it, to buy some of it even as an individual or possibly even ultimately at a central bank or sovereign wealth fund level as an insurance policy against its success.

Once you start to acquire something and then you have a vested economic interest in its monetization, I think it kind of dissolves any of the power structures that are arrayed against it from the inside.

So I've written a lot about this in a new series called Sovereignism, which is based loosely on a book called The Sovereign Individual.

And that's the general thesis, is that microprocessing technology would devour our organizational models, the most important of which is the nation state.

So I think we're going into this world where coercion and violence is just much less rewarding.

The economics of violence are declining because of the low cost of protecting property.

You can now protect your monetary property in Bitcoin at orders of magnitude less cost than is necessary to run a banking network.

So it changes the way we organize ourselves.

And again, zooming back to gold as the original governor to governments, where if they manipulated the money, gold would leave their country.

That's why governments have taken relatively concerted action to go off of the gold standard.

There's a great book on this called The Gold Wars that outlines how governments have been waging a cold war against gold for the past 50 years.

Bitcoin sort of renews hope for that free market governor of governments, and that is this digital gold that governments cannot stop or co-opt.

So I think it's something, that's why I think it's such a big deal is that it is changing.

It's a new useful fiction, you might say.

A useful fiction that's superordinate to the mythology of the nation state and government as the dominant institution in the world.

Well, I hope you're right that all forms of centralized power start breaking apart naturally.

So governments, the more and more power is given to the individual, whatever the technology is.

And Bitcoin seems to be a promising technology that empowers that, enables that.

And that's a promising trend, at least from a perspective of somebody who values this particular biological meat bag that's full of consciousness.

I think Bitcoin is exposing the greatest scam in human history, which is political authority.

Who gives anyone the right to have political authority over anyone else?

People should be free to adopt the rules and systems and tools that best suit their needs.

That arc of history we covered earlier where as socioeconomic systems have become more favorable towards individual sovereignty, the more wealthy we have become.

The more we have given the individual, we've maximized individual choice, the more wealth that society has created and the more it has out-competed the systems that have come before it.

The latest would be, you know, capitalism triumphing over socialism.

Before maybe we eat, you are in Texas, you brought over some brisket.

Before we maybe indulge in that, let me bring up 1 quick topic And then we'll take a break.

And the topic of what some may term the toxicity of the Bitcoin community, that you've written that Bitcoin toxicity is tough love.

Do you want to break that apart a little bit, sort of the idea, the philosophy of the toxicity that seems to be present in part in the Bitcoin community.

Yeah, we were talking about this a little bit before we recorded and I've been through the gauntlet with Bitcoin toxicity as well.

I came into this space professionally in 2017.

I was originally running a multi-strategy crypto asset hedge fund.

And my initial investment thesis on the world was that Bitcoin was a big deal, but there were all these other exciting coins and projects and ways the technology was going to be used.

And That view of reality met this immune, I guess you could say as an ideological immune system, this Bitcoin toxicity, and that it's a filter that's trying to catch bad or useless or even scamming ideas that this space is very well known for.

As we've touched on today, Bitcoin, in my opinion, is this world-shattering innovation, but it's in a sea of the most scammy stuff ever.

So you can go and launch 1 immediately online and you can throw up a website, an advisor page, post a white paper talking about how great your technology is going to be and how it's going to change the world.

And you can raise $30 million in Bitcoin or Ethereum in 30 seconds kind of thing.

So it's drawn in a lot of this scam artistry, you might say.

And I think people living through that, because there is this natural predilection for people.

When they first come into Bitcoin, you're excited about it.

Then you get lost in the shitcoin universe.

And then just looking at the market success of Bitcoin versus, and when I use the word shitcoin, I'm just- You say with all the love in the world.

I guess you could call me a toxic maximalist in some ways.

Although I consider myself a freedom maximalist, not a Bitcoin maximalist.

Bitcoin, tracking the market success of Bitcoin versus alternative crypto assets, the signal is very clear that Bitcoin has out-competed all of them.

So I think that Bitcoin cultural toxicity has evolved as an immune response to those bad ideas, which is actually, if you think about it, kind of is a tough love, right?

You don't want new entrants to the space to get lost in shitcoin jungle and learn the hard way, the way many Bitcoin maximalists have that the real innovation is Bitcoin.

But like an immune system, I think it can also go too far.

I think it's useful when it is defending the space from false narratives, we might say, but it becomes detrimental when it's attacking people that are inquiring about Bitcoin or people that are approaching Bitcoin with a good spirit and good intention and a desire to learn.

Because then at that point, it's actually impeding the free flow of ideas, which the example in your clip that was totally taken out of context and then you're literally just saying, I'm here to learn and contribute.

Like, that doesn't make any fucking sense.

So you're attacking someone who's approaching it in a good spirit and asking questions.

Yeah, and I think sometimes talking about it, the toxicity in the Bitcoin community as an immune response has a negative effect of giving it a pass because like it almost says, look, it equates it with the human immune system, which seems to do a really good job.

And so you could say that the toxicity has a lot of features in the sea of fraudulent projects that steal money from people.

It's really useful to make sure that you give people the harsh truth about who is and isn't a scammer.

You have to take it apart, take it away from that metaphor of the immune system and look at basic human nature.

And human nature can go to some dark places, which is, it's sad to say that some people, maybe many of us can enjoy for its own sake, the toxicity, the mockery, the derision.

And you stop being part of the immune system that makes a successful idea propagate and start being a sort of a destructive virus yourself.

And that's something I think about because I am new to this particular immune system, but I've explored other immune systems.

And the, I think you understand this world much better than me, but I tend to prefer sort of love as a mechanism for spreading ideas, to err on the side of love and kindness and almost like an open-mindedness in a way where you're constantly lowering yourself in the face of other ideas, constantly questioning yourself.

But I think I understand that that might be more applicable in certain contexts, like maybe in the space of science or something like that.

But in the space of Bitcoin as it currently stands, there's so many people that are trying to scam others out of their money that the kind of harshness required is different.

Nevertheless, I do want to put it on people like yourself and others who I know you wouldn't consider yourself this, but you're 1 of the faces or leaders in this space to call people out a little bit, to inspire them to be more loving, I suppose.

But it's difficult because you want to walk that line carefully.

It is subtle and it's nuanced and it is difficult to walk.

And I think that, that's why I try to say tough love because When we're young, we may have certain ideas about the way we want our life to go, but then maybe our parents are not letting us do certain things.

I know when I was a kid, when I was in fifth grade, I wanted to get my ear pierced.

And then 2 years later, I'm like, thank you, mom, for not letting me get my ear pierced.

I think it comes from a place of good intention, that they are actually, they have asked themselves that question, right?

That They've been inquiring in why not this crypto asset or this crypto asset and they've done the exploration.

They keep coming back to Bitcoin and they've seen people being taken advantage of.

But to your point, it's like this tough love can become detrimental just like the immune system can become detrimental.

It can overreact and it can actually harm the human body.

I would say that it's such a tricky and nuanced topic that even biology hasn't figured it out.

A lot of people have autoimmune diseases.

Then there's the other thing that we have this natural—I agree with you about love.

That's a whole other philosophical thing, but we're biologically programmed to pay more attention to things that are adversarial or harmful.

That's part of us protecting the meat suit, so to speak.

There is some maybe better delivery method by being a little bit toxic to really get the point across like, hey, don't get lost over here, these things can hurt you.

Really try to focus on Bitcoin, but the toxicity of that message, I guess it increases its ability to penetrate the individual, but it can also go too far.

So it is- It's interesting, but I, almost to push back a little bit, toxicity is a funny word.

I think maybe another way to say it is, I brought up like Christopher Hitchens and somebody who like, okay, you might say is toxic or something like that.

Cause he's basically a intellectual powerhouse who's also a troll.

So he's constantly, It's like guerrilla warfare in the space of ideas.

He's very harsh in his disagreements and criticisms, but it's done with incredible grace and skill and poetry.

So toxicity just like, these are just words, they can mean a lot of different things, but disagreement doesn't have to be done with love, but it should be done with skill if it's to be effective.

So there's a lot of ways to be effective in guerrilla warfare, but you want to learn how to shoot or whatever the weapon you're using and to do it well.

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Robert Breedlove: Philosophy of Bitcoin from First Principles | Lex Fridman Podcast #176