The Nakamoto Paradox

Every passage, on the record.

1. 00:00Idea

   Today the episode is on the Nakamoto paradox, which in the early days of Bitcoin was the meme that eventually became everything is good for Bitcoin, which ended up with one of the best memes, at least in my mind, in the Bitcoin world, which was the extinction of the dinosaurs.

2. 00:00Analogy

   It says on the image that this is good for Bitcoin. And, you know, it became a meme and was used all the time and now is often joked about that everything is good for Bitcoin.

3. 00:35Claim

   Everything is good for Bitcoin now. Why is that? Well, it's because it can't be stopped, right? Bitcoin can't be turned off or it can't be killed. So everything that happens to Bitcoin makes it stronger. And how does it make it stronger? By reinforcing that Bitcoin will continue to do what it has been doing for the past 700,000 blocks.

4. 01:06Quote

   Not being able to be killed is a superpower and superpowers are good, especially the can't be killed kind of superpower, because it means that you are now a universal constant.

5. 01:42Claim

   One of the aspects that I was touching on that I enjoy about Bitcoin is the idea that energy and therefore Bitcoin will flow to the most efficient allocators of energy in the real world. That's how the Bitcoin protocol uses the physical world.

6. 01:42Claim

   The nearsighted view of that is that that's not actually the case. In fact, in the very short term, what is happening is that we are recreating the same fiat oligarchies that are out there now.

7. 02:20Claim

   The results of the Bitcoin protocol in the short term are much different than what emerges via Bitcoin in the long run.

8. 02:56Reference

   The best and the brightest that the extended order have to offer aren't the largest hodlers. And I think it's safe to say that the most valuable members of society or the extended order are probably not Bitcoiners at all, right?

9. 02:56Claim

   Less than 1% of the world's population has any material energy reserves allocated to Bitcoin.

10. 03:30Claim

    The earliest adopters of Bitcoin received the greatest return because they took the initial risk. And the system would not have existed without them.

11. 03:30Quote

    They are riding on Bitcoin's coattails, which is exactly what everyone should be doing.

12. 04:05Claim

    What they are doing is they are allocating their energy more efficiently without even knowing it, without even realizing it.

13. 04:36Open question

    Is that what is needed for the extended order to reach ultimate energy transformation in the long run? Is that what it is going to take? Does that mindset that Bitcoin rewards early on have the same approach to energy transformation that will carry the extended order to its most efficient point?

14. 05:09Claim

    Bitcoin has a very long time horizon to come up with a solution for finding the best allocators and rewarding them for their services. And even luckier is that we already know what that mechanism is going to look like, how that is going to operationally play out.

15. 05:48Quote

    You can be a complete fucking dunce and hold an enormous amount of Bitcoin, an ungodly amount of Bitcoin.

16. 05:48Claim

    The vast majority of current substantial Bitcoin holders aren't the best and the brightest. It's math, or more precisely, it's probabilities. You don't need to be great at energy allocation to gain a massive share in the control of the system.

17. 06:19Analogy

    Let's fast forward a generation from now and imagine the year is 2042, Bitcoin is in its eighth halving cycle, which means the block reward for correctly mining a block and adding it to the system is just under 0.2 Bitcoin, or as it will be known then, 20 million sats.

18. 06:53Prediction

    You can own that now with no counterparty risk over the duration of the allocation of that energy until 2042 for 3000 US dollars.

19. 07:33Claim

    Right now the current block reward is worth somewhere north of 105,000 US dollars. Median US income for 2021, 69,000. The block reward, 105,000. If we take the median salary in the US, 69,000, and divide it by the block reward, we get a figure near 65%.

20. 08:06Claim

    Right now, the US median income will get you somewhere near six minutes of running the Bitcoin network in terms of energy.

21. 08:37Prediction

    If we take official Fed policy inflation expectations and apply them across the board to wage increases, we see that in 2042 the 69,000 median income will be near $102,000.

22. 09:11Prediction

    20 million sats as a block reward in 2042, coupled with the median income representing 65% of that, has the median energy allocator being able to own 13 million sats in exchange for a year's worth of income. And that translates to a Bitcoin price somewhere in the range of $780,000.

23. 09:41Quote

    True efficiency felt by the extended order will come after people like you and I have flushed our well-timed allocations down the toilet.

24. 09:41Claim

    There will be an enormous gap between the haves and the have-nots between now and 2042, but even if the wealth gap is as large as I imagine it to be, it will still be better than the current regime for everyone, even on the lowest end.

25. 10:20Idea

    What is true about Bitcoin is that if you exchange Bitcoin and plug in less energy than you started with, you will never get the same percentage control over the TASOE again.

26. 10:59Quote

    You can't hoard Bitcoin and drain energy from the system at the same time.

27. 12:05Quote

    Perhaps overnight, gradually then suddenly, the hardest game in the world will be accumulating Bitcoin.

28. 13:09Claim

    The prerequisite for being able to launch these huge operations is being early to Bitcoin, which could boil down to a number of different things, all of which have nothing to do with being a truly masterful energy allocator.

29. 13:39Reference

    The first Bitcoiner who brought their energy wealth to Bitcoin has been Michael Saylor. It isn't a surprise he is one of the brightest minds in the space because he actually transformed massive amounts of energy in the real world pre-Bitcoin.

30. 13:39Claim

    His proof of work over his career makes me more confident he will continue to display the traits of a good energy allocator.

31. 14:12Quote

    Bitcoin was set to easy mode for the first decade of its life. But now it has to level up to reach its potential.

32. 14:12Claim

    The weak hands or weak minds have to be flushed from their Bitcoin holdings. The faster this happens, the better. This means the more violent the moves down, the better.

33. 14:43Prediction

    It will get harder and harder to acquire Bitcoin. Whole coiners will disappear. Ownership will continue to disperse.

34. 14:43Quote

    This is not dying. This is not going away. This is everything divided by 21 million.

35. 15:13Claim

    The only way to get Bitcoin will be to offer value, which is utility, or again, something of use, which will require energy transformation.

36. 15:13Prediction

    Hoarders' accounts will be drained as they are forced to draw down their Bitcoin reserves because people won't accept fiat for their goods and services.

37. 15:13Quote

    Risk takers who solve problems will be handsomely rewarded while rent-seeking practices are all but eliminated. The less you contribute, the less you will control.

38. 15:46Claim

    The dispersion of Bitcoin will happen naturally, especially when it becomes apparent that there is nothing else that you want to trade your energy reserves for in this world.

39. 16:21Reference

    That is when, again, the number go up technology takes over of Bitcoin not being dead. So people look into it.

40. 16:51Idea

    OK, so finally, the Nakamoto paradox, right? Everything is good for Bitcoin. Why? Because it can't be stopped, can't be killed, can't be turned off. So everything that happens makes Bitcoin stronger.

41. 16:51Reference

    We want the Lindy effect taking over and saying that this is not going to go away. This can't be stopped. It can't go away.

42. 17:27Reference

    It also has the Streisand effect. Now people want to know what this Bitcoin thing is that the government is trying to ban. They look into it. They see what it's actually a tool for.

43. 17:27Claim

    There's easy things like the government banning Bitcoin ownership. Again, I don't know how they would be able to enforce a ban on ownership. That would be a tough ask.

44. 17:57Event

    There's shutting down on and off ramps like, OK, we're going to go after the centralized entities like your exchanges, whoever might be holding it, like your banks, your Silvergate, things like that.

45. 17:57Reference

    Shutting down on and off ramps like your banks, your Silvergate, things like that. That might be bad for Bitcoin.

46. 18:28Claim

    The fault in the Bitcoin system is the human element. That is where it falls over time and time again. Bitcoin continues to operate exactly as it was intended to do so.

47. 19:03Event

    As private market actors are found out, that could be seen as a negative because you have exchanges go bust. Unfortunately, people that trust those exchanges also go bust and there's a lot of pain in the market.

48. 19:35Claim

    There's Bitcoin and there's crypto, and crypto is much more associated with fiat than with Bitcoin.

49. 19:35Claim

    A hole in the code, some sort of something that can be used against the system, that could be bad. Price tanking is obviously a very easy one for normies to fall back on.

50. 20:06Claim

    The result is what the price tanks, price tanks as fear spread. And can that kill Bitcoin? No. Well then, what must happen? Well, Bitcoin must live on.

51. 20:37Quote

    Bitcoin is yin and yang, right? It's constantly rebalancing itself to the current environment. It always works out for Bitcoin. It is the Jerry Seinfeld of systems.

52. 20:37Analogy

    It is the Jerry Seinfeld of systems.

53. 22:10Claim

    Psychos get more Bitcoin. So there will be even less available next run up because the psycho ownership percentage has increased, or a nicer way to say it is that stronger hands come in and scoop up all of the Bitcoin.

54. 22:40Claim

    Stronger hands are immune to all of the other things that we listed would be bad for Bitcoin in the first place because they're more knowledgeable, better educated and informed on the problem Bitcoin solves for.

55. 22:40Quote

    The Nakamoto paradox is real. Everything is good for Bitcoin.