Choosing a Monetary System

Every passage, on the record.

1. 00:00Claim

   How are you going to store the energy reserves that you will call upon in times of need. That's what we are doing when we choose a monetary system, and there are a number of different monetary systems in constant competition that you are free to choose depending on where you are.

2. 00:34Claim

   If we know that life is essentially the fight against entropy, we are always trying to create more energy reserves, and the denser those reserves are, the better off we are going to be.

3. 00:34Quote

   If we know that life is essentially the fight against entropy, we are always trying to create more energy reserves. The denser those reserves are, the better off we are going to be.

4. 01:06Claim

   The more energy reserves we have at our fingertips, the more we are able to deal with the uncertainties thrown at us by the physical universe.

5. 01:48Analogy

   If in Bitcoin, the map is the territory, what is it saying about the territory? What is the map saying about the territory? What is occurring in the outside world that we can infer just by looking at what is happening with the price?

6. 02:51Claim

   To get started with Bitcoin for the first time, you have to transform energy in the physical world and trade it with someone who already has a claim on the 21 million units of Bitcoin, which represents the total accessible supply of energy in the world.

7. 03:23Claim

   The 21 million units of Bitcoin represent the total accessible supply of energy in the Bitcoin economy, in the Bitcoin network, at any one time, and you need to find someone with a claim over a percentage of it that they can freely trade with you.

8. 03:56Idea

   A dollar is simply the ultimate form of energy optionality. With that dollar, you can turn it into any form of energy that you wish. You can turn it into caloric energy. You can turn it into chemical energy. You can turn it into whatever energy you desire, whether you want it to power your car or to heat your house.

9. 04:59Claim · condensed

   The seller originally accessed their Bitcoin by transforming energy from inaccessible into a usable form, either through mining directly or through trading with someone who had already done that mining, so the checks and balances of energy are at play from the very base of the system.

10. 06:36Claim · condensed

    The only reason you would participate in a monetary system where resources are pooled together is that you have excess energy beyond what you can personally use, and you want the claims on the work and energy transformation other people do with it.

11. 07:07Claim · condensed

    If the borrower is successful at transforming more energy than they started with, they can't consume all of it either, so they need to store the surplus somewhere safe, easy to access, and liquid.

12. 07:37Quote

    You want to be as ready to overcome whatever the challenge is that is in front of you.

13. 08:15Claim · condensed

    The successful borrower then needs to find whoever is most desperate for now energy, because they want the max percentage of the total supply of Bitcoin possible, meaning the most sats per unit of energy they give up.

14. 09:22Claim · condensed

    Because Bitcoin is open, permissionless and decentralized, there is no asymmetry of information: whoever is bidding the highest for energy has the highest need for it, and that is immediately viewable by all participants.

15. 11:29Claim · condensed

    Absolute scarcity, the fact that the 21 million is infinitely divisible and transferable, that no one can change it, and that everyone knows and plays by the same rules, is the most important concept for understanding Bitcoin's value.

16. 11:29Quote

    This is, at least in my mind, the most important concept in Bitcoin understanding its value and why it's the best place to store your energy reserves. And it comes down to absolute scarcity.

17. 12:00Claim

    Bitcoin is an open, transparent ledger, meaning everyone can see the transactions, and that transparency is key to understanding the incentives and how to use the system to your advantage.

18. 12:31Quote

    So you aren't actually storing energy in Bitcoin. Often this is where people get a little bit confused. Bitcoin is the network that passes the energy to the most willing participants. So you are storing the energy. Essentially, you're doing it. You're showing it in other people and in their future gains or losses.

19. 12:31Claim · condensed

    You don't actually store energy in Bitcoin; Bitcoin is the network that passes energy to the most willing participants, so what you are storing is a claim on other people's future gains or losses.

20. 13:05Claim · condensed

    As the total amount of energy in the system increases through efficiency gains, your ownership percentage stays constant while the pie it applies to grows larger, so you control more in absolute terms without your share ever changing.

21. 13:39Claim · condensed

    You are rewarded for the sacrifice of working, contributing, and asking for nothing in the near term beyond a future percentage claim on accessible energy, while making your surplus available to whoever is most willing to try to transform it.

22. 14:17Claim · condensed

    The larger the market of people who think they can transform more energy in the future, the stiffer the competition, and the more the most promising projects and individuals get rewarded for risking the most.

23. 14:17Reference

    This is why, again, in past podcasts, I have argued that this is why Bitcoin is actually better than your standard Vanguard S&P 500 ETF strategy.

24. 14:47Claim · condensed

    Pooling into Bitcoin lets you bet on every single actor inside the economy, because anyone can access the network, instead of limiting your exposure the way a standard equity strategy does.

25. 15:29Claim · condensed

    Because Bitcoin is not yet the global reserve asset, there is a transfer window where energy reserves inside the system can actually decrease, and that should be read as a very strong signal that something is wrong.

26. 16:01Claim

    If more energy is exiting the pooled system than being contributed, it tells us people are discounting future returns because they have an immediate need for energy for survival, and the quicker the system knows that, the better.

27. 16:01Analogy

    It's like diagnosing the patient with cancer. The sooner that we see it, the better that we can make plans and act accordingly.

28. 16:34Claim · condensed

    If price manipulation hides the truth about reserves being depleted, we act on bad signals, and that only leads to less efficiency in the system.

29. 17:05Quote

    Because we want Bitcoin reacting violently to truth.

30. 17:43Quote

    All we need to do is look at the price to see what is happening in the world. And that's really why the map is the territory.

31. 23:13Idea

    This magic shed... could keep track of who contributed what. And this software could not be tampered with, and it wasn't controlled by anyone inside of the group. No one at all could tamper with this software, and essentially what that would mean is that if the software says that you'd contributed, then you had.

32. 18:55Analogy

    Let's say in this fictional world that you are a simple farmer, and in this fictitious world, the only crop that you can farm is wheat. As this individual farmer, you've got two choices: farm the wheat, consume what you need, and store those reserves in your very own barn, going full personal sovereignty; or farm the wheat, consume what you need, share with the family, and pool the reserves with a small group of other families.

33. 19:56Claim · condensed

    Solo farming means if you have a bad year there is no backup and you die, and being successful means you must spend time guarding the barn instead of making more wheat, and wheat itself only lasts a season so overproduction is disincentivized.

34. 22:05Claim · condensed

    Pooling reserves with other families limits the risk of a bad crop because the risk is spread and decentralized, and it takes only one barn to guard instead of many, but it introduces the problem of trusting and tracking who contributed what.

35. 24:52Claim · condensed

    None of the wheat is actually stored inside the shed; the shed is only representative of how many reserves exist in the system in general, and you get access to reserves by swapping your percentage ownership for them.

36. 25:59Claim · condensed

    When someone sells their percentage claim for wheat, the buyer has to consume it immediately, which gets around wheat's poor shelf life by storing it in the person who consumes it rather than in the shed.

37. 26:30Claim · condensed

    Drawing down your claim on the shed doesn't shrink the shed itself, because nothing physical was ever stored there; someone else has to actually farm new wheat reserves to meet the demand of whoever is selling.

38. 27:34Claim · condensed

    As a family draws down more and more of its reserves, it hands over a larger percentage of ownership in the pool, and that percentage flows to the most successful producers, who gain greater control over future reserves.

39. 29:44Claim · condensed

    In good times you have to offer a lot of wheat to earn the ability to save through the pool, and in bad times you get greater future savings precisely by sharing what you have now.

40. 30:17Quote

    The whole point of incentives is to get the wrong people to do the right things.

41. 31:33Claim · condensed

    The reason you are rewarded in Bitcoin is that you do the most unselfish thing possible: you transform energy and choose not to consume it, and that original sacrifice is what forms the bottom layer that everything else leverages and builds on.

42. 32:16Event

    As you see these price drawdowns, as we're still in this transformational period where we're not pricing things in Bitcoin and people are not directly exchanging energy for Bitcoin, there is this intermediate step of going through fiat denominations. When you see price decline in US dollar terms, that is signaling that people using the Bitcoin network to store their energy are under severe pressure to remove the ability to provide for themselves in the future because they need to provide for themselves right now.

43. 33:21Quote

    The Bitcoin is fantastic now because it is this leading indicator because there is no filtration on it. There's no one manipulating things behind the scenes. It is just the raw unfiltered data that we then turn into information and act upon.

44. 33:53Quote

    That is data to information to intelligence is the ability to act on that.