The Success of Bitcoin

Every passage, on the record.

1. 00:00Claim

   I thought it would be a good idea to take an episode and dissect what the success of Bitcoin actually says about the physical world, because in Bitcoin the map is the territory. What we can infer from the success of Bitcoin has to have happened in the real world.

2. 00:00Reference

   because in Bitcoin the map is the territory

3. 00:00Quote

   essentially the thesis is that Bitcoin winning is life winning

4. 00:00Idea

   now we know that life's purpose is to lower entropy in the world around it, to transform energy that is inaccessible into accessible energy reserves to continue to evolve and increase efficiency at that energy transformation to ensure survival

5. 00:39Claim · condensed

   Life is attempting to survive in an unknown and unpredictable universe, and life has a fairly strong track record at evolving and becoming more efficient in the energy transformation process. That is really what the thesis rests upon.

6. 01:13Claim

   If you think that that is going to continue, then Bitcoin is the bet. Bitcoin is where the returns will come from because it will outcompete the legacy system.

7. 01:45Claim

   All that Bitcoin needs to continue to survive is it has to receive enough energy to continue to produce blocks. Miners will continue to plug in energy if they see a return, and all they need to do that is power, chips and resources to hash away and try and solve for the blocks.

8. 02:16Claim

   They don't need transactions on those blocks, outside of the Coinbase transaction. There's lots of blocks that can be mined empty. That used to be an attack vector on mining, on being able to overtake the network, if a certain group of miners just decided that they were only going to mine empty blocks. You don't hear about that too much more.

9. 02:47Claim

   As demand for Bitcoin increases by non-mining entities, that will drive up the price of the Bitcoin that you are able to make your own property by solving for the block, and that explains the reward. The other mechanism is that miners will drop off because price falls, which means a higher rate of return for those that end up staying on.

10. 03:22Idea

    the mechanism that is Bitcoin, the decentralized clock, does not need transactions to be functional. Bitcoin functions with power to do the calculations necessary to solve for blocks. So transaction info is really just a sidecar to the clock.

11. 04:01Quote

    So the ledger is good for the extended order, not for Bitcoin.

12. 04:01Claim

    Bitcoin itself, the system, it doesn't care about the transactions. It doesn't care about the UTXOs. It doesn't need those to continue to produce blocks. It is beneficial for the extended order to attach a moneyness to those UTXOs because of everything that emerges from this decentralized clock that is immutable, that cannot be tampered with or manipulated, and that is immune from inflation.

13. 04:41Idea

    Those powers emerge, and that is what the extended order is taking advantage of by employing Bitcoin as a means of energy transfer.

14. 05:15Prediction

    Adoption grows as word spreads about the properties of Bitcoin that make it useful: decentralized, permissionless, immutable, absolute scarcity, inflation proof, more efficient, faster than the legacy system. This word begins to spread as these efficiencies allow people that use Bitcoin now to become more successful, which means they outcompete the competition around them. That idea spreads. People can't ignore it. They see their neighbors going from strength to strength because they are employing Bitcoin.

15. 06:53Claim

    Now, just because they have excess energy doesn't mean that they were the actual they were the ones that actually transformed it, but they had to have done something to acquire that energy. Even in a hyper Bitcoinized world, you can get Bitcoin, you can hold the keys to any amount of Bitcoin without having transformed energy yourself, it's just about the leverage that you apply to that transformation.

16. 07:25Claim

    You can imagine shitcoiners: they have to actually transform energy in order to rug pull you to steal your Bitcoin. They got Joe retail to do the hard part, which is transforming energy in massive amounts, and they essentially just stole it, but they still had to transform energy in that process of stealing it. They just get to take advantage of the leverage of digital goods more than others.

17. 07:57Prediction

    Governments will have to steal the easy way to acquire Bitcoin, or they will have to ask, which is significantly harder, since your ability to get Bitcoin by asking for it through taxes is going to be more challenging. Bitcoin is incredibly difficult to confiscate, and if we look out into the future, they're going to do their best to try and steal it. Either way, they have to expend energy to get it.

18. 08:28Claim · condensed

    If we build on top of this idea that they have to have excess energy in the first place, we can then look at it through a dollar worldview of what happens to hodlers if the Bitcoin price goes up, and we need a very specific stereotypical hodler to make the incentives, and therefore the predictable patterns, visible.

19. 09:06Claim

    For our purposes here, a hodler is just someone who buys Bitcoin as an alternative to spending dollars on either capital or consumer goods.

20. 09:41Idea

    We've talked about the TASOE in many podcasts before, but the total accessible supply of energy is what the 21 million units represents. It has nothing to do with the actual number, 21 million. One Bitcoin could work just as well as 21 million Bitcoin. That part doesn't actually matter because it is digital, because it can continue to be divided into smaller and smaller units.

21. 09:41Quote

    They get Bitcoin, which does nothing. It doesn't do anything. Right? It's just a sidecar to a decentralized clock in exchange for their energy, which does everything.

22. 10:14Quote

    So they're giving up everything for nothing, except that nothing represents the total accessible supply of energy. So they get a fixed percentage, which no one can dilute or lay claim to outside of them, as long as they have the control of the keys of the total pie of Bitcoin.

23. 10:46Claim

    The rules of the game are agreed on by anyone who decides to join the network, and you join simply by plugging in energy and following the rules. If you change the rules, but if everyone doesn't agree with you, then you are playing alone because you aren't playing Bitcoin anymore. So the HODLer exchanges energy for future claims on the total accessible supply of energy.

24. 11:22Claim

    To fully grasp this idea, we have to reiterate here that each transformation of energy that is done voluntarily in the free market unlocks previously inaccessible energy, because in that voluntary free market, the exchange that occurs is mutually beneficial, or else that exchange would not occur.

25. 12:26Claim

    Because the HODLer made the energy available to the entire system, the most efficient way of allocating energy around the world that has ever been known, the HODLer has a claim over all of the reserves that are transformed, because they chose not to consume, because they chose to share with the network. Without the original transformation, none of the multiplications down the line would have been possible.

26. 13:04Analogy

    This is why I have likened purchasing and holding Bitcoin to Warren Buffett's broad-based ETF fund on steroids. It's the same thing that Warren Buffett has done: made enormous energy returns because he has been good at allocating energy to where it is most needed.

27. 13:04Reference

    Warren Buffett is a famous investor who has made enormous energy returns because he has been good at allocating energy to where it is most needed.

28. 13:04Quote

    again, if you're listening to this in the future, hundreds of years from now, and this is the only record you have of this time in history

29. 13:34Claim

    He has said that if you do not have the time or energy to specialize like he himself has, the easiest thing to do is to take your excess energy reserves and put them in S&P 500 broad-based index funds, because people are so specialized in whatever they transform that they don't have the excess energy to accumulate the expertise needed to efficiently allocate those reserves better than a diversified bet on everything.

30. 13:34Reference

    something like the Vanguard S&P 500 index fund

31. 14:48Claim · condensed

    Broad-based index funds have become so popular because the extended order incentivizes individuals to pursue the transformation of energy in the most efficient way possible, and life is constantly innovating, which means it is becoming more efficient in that process. That is why the thesis is that the market always goes up over time.

32. 15:53Claim

    It really is the ultimate Lindy effect in action: life has continually gone up and to the right in energy transformation, and it has been a very proven and lucrative position to be in, betting on human innovation and life innovating to become more efficient.

33. 16:25Claim

    The number one thing you should identify right off the bat is it's certainly not permissionless. You're going to need identification, you're going to have to get that energy over fiat rails to the actual fund, pay the fund managers, pay exchange managers, be in a favorable jurisdiction, and meet the energy minimums required to contribute.

34. 17:28Claim

    This eliminates a number of friction points, which then eliminates the vast majority of the extended order. This is much bigger than just high level participants in the US economy; the world is much bigger than that. So simply by listing four or five different friction points, we have eliminated a good majority of the earth's population of potential energy contributors inside of the extended order.

35. 18:41Claim

    The companies in this index are solving some of the main inefficiencies by size, not by volume. To get in the S&P 500, you have to be of a certain size, which makes you slow and less fluid, less adaptable. You can't solve micro inefficiencies because the return doesn't allow for it, so you have to focus on the biggest issues.

36. 19:11Claim

    We don't know the size of that smaller energy market because allocators have never had access to it. The technology of energy lending has never allowed for it to be viable, because the transactional costs have been higher than the returns would have been.

37. 19:48Claim

    The broad-based index fund shares in the top 500 U.S. companies innovating on massive issues in a very limited arena, encircled in red tape and bureaucracy. Bitcoin says that life will continue to innovate on any and all scales, and you can share in all of it: no minimums, no time limits, no geographic locations or limitations, nothing.

38. 20:20Idea

    As a Bitcoin holder, you get a percentage of any share in energy transformation by all users while you continue to make that original energy contribution available to leverage. So this is what gives rise to the idea of the Bitcoin monks. The incentive structure creates the perfect storm for those willing to sacrifice: you transform excess and you share with those you have never and probably will never meet.

39. 20:53Analogy

    Think of the classic Bitcoiner meme: somebody that doesn't even own chairs, because if you have a chair, you aren't bullish enough. The air chair is probably more comfortable, but you don't need it to survive. If you have chairs and you're bullish on Bitcoin, you're not bullish enough, because if you were, you'd get rid of it because it wasn't a necessity.

40. 20:53Quote

    if you have a chair, you aren't bullish enough

41. 20:53Reference

    Is it better to sit in a Herman Miller air chair or on the ground?

42. 21:23Claim

    If you give up the chair in the future, guess what? You will be rewarded with astronomical sums, because hardcore Bitcoiners realize how inefficient the world is and how much they stand to gain by making it more efficient.

43. 22:25Prediction

    In the shift between an inflationary and a fixed monetary system, it will appear initially as though efficiency gains are being left on the table. Absolutely. Unemployment will go up as funds dry up. Businesses will go under as the market is cleansed of non-essentials. But what will actually be happening is the extended order is recalibrating to those transformational activities that are actually valued.

44. 22:25Quote

    In Bitcoin, the better the world is, the better off Bitcoiners are.

45. 22:57Claim

    True value will emerge. We will begin for the very first time to be able to view prices without manipulation. Energy will be focused on only those activities that lead to prosperity for the most number of participants, so distractions will be eliminated based on true value preferences of all.

46. 23:27Analogy

    Imagine giving away every penny you ever had, to anyone who needed it, without caring where they were or what they did. You would be hailed as the next coming of the Messiah, the Buddha of the modern world. That is Bitcoin. But with one small addition: if you so choose, you can get it all back and more anytime you want.

47. 24:02Claim

    If I have control over the keys to a certain amount of Bitcoin, I am not consuming. That is the definition of the ability to have control over a number of Bitcoin: simply not consuming. You have to not consume in order to control those keys.

48. 24:38Analogy

    You are the government that regulates companies. Do what they do to make their jurisdictions attractive, to production, and to energy.

49. 24:38Quote

    You are the government that regulates companies.

50. 25:11Claim

    That is what changes in people's mindsets when they understand that they themselves, as an energy allocator deciding to share with those around them, can make everyone as efficient as possible, because by making everyone else around them more efficient, they enrich themselves at the same time. You have to be open, pro-freedom, and allow for competition and exchange on the individual level.

51. 26:23Claim

    If you are going to sacrifice your personal consumption of the excess energy reserves that you have transformed, you are going to want those around you to be as responsible with that energy as possible, using it in the most efficient manner.

52. 26:59Prediction

    Everything that we do toward increasing efficiency for the whole is going to be beneficial to all holders inside the network. This means that in the future, if Bitcoin is a success, life is a success. If Bitcoin continues to flourish, life will continue to flourish. The adoption of Bitcoin can be seen as the adoption of efficiency increases, the adoption of a better life.

53. 26:59Quote

    This means that in the future, if Bitcoin is a success, life is a success. If Bitcoin continues to flourish, life will continue to flourish.