Trace Mayer is an Australian Economist, Bitcoin Expert and Venture Capitalist. In this video, he talks about Bitcoin in both technical and in laymans term for the audience. He also explains the future of Bitcoin and its effect in the industry and economy.
Transcript
Transcript generated by YouTube auto-captions. May contain errors.
[Music] Bitcoin has changed the the nature of the game it's changed the rules uh it's a fundamental Financial Innovation it's a technological innovation it's something like gunpowder or uh the Gutenberg Press or the airplane it I mean it changes the rules of the of the game that you're playing the the solution was gold you know buy your gold get in a bunker uh the like we got a major problem coming uh but now we we've actually got a solution with Bitcoin with distributed consensus with blockchain technology and we're building it out as fast as we can the world faces Peete gold according to Goldman Sachs but one geologist who's discovered more than 30 million ounces of gold says he knows where to find America's hidden gold deposits featured on the History Channels how the Earth was made this expert gold finder could be on the verge of a massive Gold Strike even a billion dooll gold giant has engaged the small market cap company to use their propri technology for the thrill of gold Discovery with a new Edge in Nevada visit Crush thestreet.com gold hello everyone and welcome into crush thestreet.com this is the first time I'm interviewing Trace May here at crush the street.com but I met him actually a few years ago and he personally told me and pounded the table when Bitcoin was at $10 a coin and and I watched it go to 30 and I saw him again at another conference and he was pounding the table again saying hey Bitcoin is a good buy and from there Bitcoin went to over a thousand the infrastructure has grown tremendously and he is a pioneer he's an entrepreneur within the Bitcoin Arena and his name is Trace may he holds uh degrees in accounting and law and has studied Austrian economics he started recommending Bitcoin around 25 cents and funded core blockchain infrastructures including Armory which provides the foundational security for Bitcoin wallets bitpay the largest Bitcoin Merchant processor and kren the largest Bitcoin euro exchange and a major worldwide liquidity provider he hosts the extremely popular Bitcoin knowledge podcast where he interviews the top people in the Bitcoin World Trace May thanks so much for joining me today oh thanks Kenneth uh glad to be here and uh glad to talk with you guys again absolutely like I said it's been some time now and man you you're just in the the the fire in terms of what is going on with Bitcoin so you know a lot of people are in the precious metal space and Bitcoin is very much has a lot of the qualities that people seeking out precious metals concerned about the economy want uh anonymity all these things that are very attractive to people who like precious metals and so I I wanted to have you on to give us an update on what is going on in the Bitcoin space yeah so first you know the world is in commotion uh like never before but Bitcoin it's in Forward Motion like never before we have just tremendous amounts of financial Innovation going on we have tremendous amounts of uh software getting written uh Services getting built utility being added and this is very exciting you know when I started my my blog run to Gold uh that was the that was the answer right you know post preeman Brothers pre uh be Sterns you looking at the system looking at the central banks looking at the the entire system the answer was gold right right uh but a year about a year after I started my blog Satoshi released Bitcoin and uh Bitcoin has changed the the nature of the game it's changed the rules uh it's a fundamental Financial Innovation it's a technological innovation it's something like gunpowder or uh the Gutenberg Press or the airplane it I mean it changes the rules of the of the game that you're playing and now what we're seeing is that it's getting built out to become a solution uh a solution to this intractable problem that really doesn't have a solution the the solution was gold you know buy your gold get in a bunker uh the like we got a major problem coming uh but now we we've actually got a solution with Bitcoin with distributed consensus with blockchain technology and we're building it out as fast as we can uh and and it's really getting exciting you know seeing seeing some of the stuff that's happening so what is happening and for people who are skeptical about Bitcoin I mean what is going on in the infrastructure that is solidifying Bitcoin as a viable solution yeah that that's uh that's the the hundred billion dollar question right like uh or the trillion and trillion dollar question what's happening is uh we've got we've got this new technology distributed consensus or blockchain technology uh using a distribut peer-to-peer Network that's censorship resistant that's immutable meaning you can't change it it's the first practical implementation of triple entry bookkeeping where you have a debit a credit and then this network confirms that that transaction actually happened uh it's allowing people to organize capital in entirely unique ways pretty much all the major banks are are totally on board with blockchain technology they they're still sniffing around Bitcoin and it's the first so they're you know they're kind of thinking like is it going to be Bitcoin is it going to be something else I would argue that it's going to be Bitcoin for the same reason that tcpip uh has taken root with with uh the internet the reason SMTP is taken root with email because what we're talking about is the ability to transfer value over a Communications Channel Bitcoin is really just an Internet Protocol it's another layer on the internet we currently have 50 to 60 protocols in seven different major major areas that form the internet as we use it and layers of the internet and Bitcoin is another layer uh of the internet and then we're going to build additional protocols within that layer and so when we look at the core protocol of Bitcoin that's getting built out we've had a the the the scale of of what's happened with something that's called segregated witness uh is just tremendous in terms of being able to increase the extensibility of Bitcoin being able to uh increase the rate of speed at which we develop new features in Bitcoin uh it's going live in in it's actually just went live last week in in testnet I interviewed Eric LOM broso for my podcast it's going to get published tomorrow uh where we talk a little bit about this but but that's what I'm talking about I'm talking about Bitcoin at its very core is financial Innovation you know we we had credit cards 80 years ago we had the ATM 40 years ago but otherwise like for the most part we haven't really had much Innovation when it comes to financial technology Bitcoin is leading the charge it is the tip of the spear when it comes to Financial in Innovation and last time I checked you know we don't really use Horseless carriages we use cars and now cars are getting innovated too with things like Tesla and self-driving cars uh and now we've got this drone that like flies people around like the ehang 184 whatever it is that's what's happening we're fundamentally changing the technology and the economics that underg our financial and monetary systems and we're hopefully creating it in a way that is going to provide a solution to this massive mess that the the the current system is completely f everything is just gone Haywire central banks have lost control of liquidity the central banks don't have the gold they claim to have they like China burned through 500 billion dollars of their Forex reserves uh trying to defend this the I mean it it's just done right the the current system is just completely done and we have to find a solution or a replacement to this uh and Bitcoin you know hopefully is going to be one of those Solutions or perhaps the solution and that's where it gets really interesting because then Bitcoins could be worth hundreds of thousands of dollars a piece or even millions of dollars a piece you know and having started at 25 cents uh 7 years ago and now being worth about $400 uh you know it would surprise people and and I've seen Bitcoin surprise people again and again and again you know I recommended it at a qu it ran to 30 bucks uh then it crashed to $2 uh then you know we Daniel and I you know we had an interview and talked about it it was uh like 10 bucks it ran to 266 bucks you know within a couple months and then it crashed down to 60 bucks and then it ran to 1,200 bucks uh so Bitcoin just keeps surprising people uh and it's very exciting because that means there's a lot of opportunity for wealth transfer because you know we have all this asymmetric knowledge and information regarding it Trace uh one of the things that money is supposed to be is a store of value and I I know that fiat currency is not that definition I mean we know that the dollar has lost what 99% of its purchasing power since the Federal Reserve so I'm not saying that that is you know the true form of money I I I don't believe that but um with the way Bitcoin trades is is it fair to say that it is a store of value or is it more of a speculative uh investment at this point until it actually reaches a point of price stability uh yeah I mean I I would I would agree with that I mean currently it's $6 billion dollar of of money supply basically um but what we're talking about is we're talking about something where only one application of it is as a store of value uh gold has has tons of different applications you know one of is one is a store value bars in the vault but you can put it in your teeth you can put it in electronics in your computer you got all these other different applications for gold besides just store value right it's the same with Bitcoin and so when we look at subjective value Theory and we look at like the marginal uh marginal value Theory uh and why people value one good over another good uh it's it's the same thing with Bitcoin and what we're talking about is you know something that can transferred where you can use it to transfer value over a Communications channel uh that's one of its primary uh value propositions I think another value proposition that's just the other side of the coin of that is the speculative demand because Bitcoins they're Limited in amount by their intrinsic characteristics of cryptography and math just like gold is is limited in amount by its intrinsic characteristics or chemical law and then uh we we also have this extensibility so Bitcoin are much more portable than gold could ever hope to be uh you know you can you they're pure number they're they're data themselves as opposed to something that's centralized at a point in space and time uh like gold is and so you have a lot of these different characteristics some people buy it because it's a store of value other people buy it for the transactional demand or for the actual things that they can do with it and and that's very interesting because the price elasticity of demand for that particular use case uh the the actual ual price of the Bitcoins themselves is completely irrelevant whether it's a nickel or $10,000 a Bitcoin you still have this transactional demand which is also at the edges where the prices is Set uh and so then it really just comes down when it when we're talking about price it just comes down to the speculative demand which is very fickle you know everybody likes to chase the rabbit they like to chase it up they like to chase it down uh but eventually you know we we we'll get the the the money flows the Forex the the volume the liquidity uh you mentioned Kraken in the intro uh you know that's real volume you know you want to sell a million dollars worth of bitcoin you can actually do it today you want to sell a$ hundred million of Bitcoin today no there's not really that much liquidity for it yet uh and that's where a big value proposition is with our Fiat currencies you know because you you can sell you can sell a hundred billion dollars of treasuries or or Euros or or Yen for Yuan or whatever right like the gold market is billions and billions of dollars traded every day uh for Fiat currencies uh that's a big value proposition having that liquidity because uh because people use these instruments for so many different reasons it's it's hard to say oh you only use it for that one reason you know people you use instruments for lots of different reasons let's talk about government and government regulations this is a a an issue if people are going to buy into Bitcoin uh can the government stop it and uh also maybe touch on how easy or hard is it for people to get into Bitcoin today compared to maybe a few years ago thanks to these government regulations and involvement in the industry yeah so first I do think it would technically be possible for them to stop it uh but it would be very costly um I don't know that the return on investment from trying to stop it would even be there or even be remotely close uh cuz at the end of the day we're talking about math we're talking about cryptography and last time I checked uh you can't really shoot a math problem with a gun like that's like that's not how you solve a math problem right like that's not how you compromise it or break it but the FED could print and they have the printing press well yeah but we're talking but but but we're we're we're talking about the actual Network itself so yeah you could use the printing press to like acquire lots of computer processing power things like that yeah I I I'd agree with that and and you could probably compromise Bitcoin in one way or another doing something like that but we would probably see some type of IM IM mutation from this uh blockchain technology that would be mutated in a way uh that would foreclose or protect against those types of attack services or attack vectors uh you know the market is very creative uh so you know I I I think the governments for the most part they kind of realize this they're like you know what we we we tried f in file sharing you know but bit torrent came out and that was the end of that and Bram Cohen by the way who came up with bit torrent he's now very heavily involved in look working on bitcoin related stuff he finds it incredibly fun uh which a lot of the brightest Minds uh do uh and so that intellectual combustion that comes from you know a lot of these people people like Dr Adam back who is cited in the tour white paper he's also cited in the Bitcoin white paper people like Bram Cohen Michael novag Gratz he's the CIO at Fortress 6055 billion hedge fund he said you know all the one of his friends from Princeton is working on bitcoin fulltime he's like and that guy was the smartest guy in the class he's like all the smartest people in the room they're working on bitcoin stuff so it does make you wonder like well what do they see in it why are they tinkering with it uh but the governments are really coming along for example the cftc is going to be holding a hearing later this month about using uh about Bitcoin and being able to use it with uh Financial derivatives contracts you know like forwards Futures puts calls stuff like that uh we we're also seeing things like the bit license which I think is a big piece of garbage but hey they they're recognizing it they're trying to figure out how to regulate it uh the Ia man on the other hand uh they they they've passed and signed into law the proceeds of crime Act and the designated businesses act which enable the use of blockchain technology in Bitcoin pretty much for any type of financial use whether whether it's trusts or insurance companies or Banks or whatever like they they've provided the regulatory frame framework for that to happen and so uh you know I think that you know I think we're we're going to see it getting more and more adopted because like one we uh we understand kind of what it does and two we're uh we're deciding hey you know what I think we should be a pro maath and a pro science Society uh so you know we're not going to make number we're not going to make more numbers illegal if you if you go to Wikipedia and look up illegal primes there are actually prime numbers that are illegal to possess um you know I think we're we're getting away from that because we just realize it's kind of silly to make things like the number zero illegal right like Islam did that for hundreds of years and it their civilization and their scientific Pursuit uh so you know it does raise some of these core questions about like what type of a society do we want to live in uh but the US Supreme Court they ruled in the mid90s that cryptography was protected under the First Amendment as freedom of speech uh so there's very strong legal protections for Bitcoin and at the end of the day Bitcoin is just a bunch of numbers literally like numbers and so like do we make numbers illegal um and H and how do you enforce it if you do I mean talk about the Third Reich would look like a very very nice and caring uh regime if compared to a regime that wants to make numbers illegal right no and I do remember you talking about that uh numbers versus like a value or calling it money and um and actually even some of the tax implications on that um yeah yeah because I mean we're we're literally dealing with a p like a number like control of the Bitcoins control of the private Keys that's literally a number and that's what our software Armory does it helps you create and store and secure that precious number you know just like gold is a precious metal or precious atoms uh Bitcoins are really just precious numbers and I mean what are we going to do like make numbers illegal I mean I don't think that's very feasible we have to use numbers in math for everything I mean our modern and complex world is ruled by math the algorithms The High Frequency trading uh like all the the entire way that we secure the internet amazon.com is not possible without using the same technology that you use with Bitcoin uh logging into your online banking all of this stuff uses the exact same cryptography asymmetric cryptography things like SSL uh EXA elliptical curv digital signature Authority I mean so when we're talking about oh we want to make this illegal I mean what does that really mean it means making numbers illegal and the US Supreme Court has already ruled that we're a pro- numbers pro- maath pro-science Pro cryptography society and that's protected under the under the First Amendment as freedom of speech so you know trying to make this stuff illegal it's going to be very very hard just to do that from a statutory or a legal perspective uh I mean you're going to have to like like pass some type of constitutional amendments in order to give the authority that to give that type of authority to the government and I just don't see that happening I mean how would you possibly get any public support to make math illegal I I just don't see that happening yeah well they wouldn't call it that of course they would call it hey we need to be able to T tax the the money that is being circulated we need I'm not saying I'm not saying they aren't going to try and tax the Jesus out of it like what Ronald Reagan say like if it moves tax it right if it keeps moving tax it some more so uh you know I mean like yeah they're going to and and and and the IRS has actually put out guidelines on on how we should treat Bitcoin for tax purposes and so is the the European Central Court actually ruled that it was uh not subject to vat which is a huge move uh and in the UK they tried to uh they they they implemented bad on it and then they they actually resined that like six months later because the industry squawked and the financial industry that you know they really want to have the financial in Innovation happen in London and so they said oh wait our bad it's not really subject to that and like I was giving a presentation at the British Consulate in New York City uh about Bitcoin and guess what London is London is coaching all of the all of the startups out of New York they're like hey bring all your startups to London we want to encourage the growth of this industry in London you know we got rid of the vat uh you know so that we don't have all these tax implications we don't have some stupid thing like the bit license like bring your businesses out of New York and bring them to London and guess what the companies are going the companies are leaving they are fleeing New York like all the Bitcoin companies are just fleeing New York they're running over to London they're running to San Francisco they're running to Austin Texas uh it's it's actually really kind of scary because the financial industry has lost how many hundreds of thousands of jobs over the last couple years where are the jobs being created they're being created in fintech what's the biggest brightest uh most active area of fintech it's Bitcoin and blockchain technology and New York passed legislation with this bit license that's running uh that's running all of the startups out of New York I mean it makes you wonder like whether New York's going to retain their importance in the financial uh industry not I mean they're all going to to London and if they're not going to London they're going to San Francisco or Texas and if they're not going there they're going to freaking Singapore because Singapore H has been very encouraging Singapore and Hong Kong have been very encouraging for Bitcoin technology uh and they're also going to Beijing and Shanghai uh over to China so I mean like and and this has precedent right because when the car got invented uh Britain they they they passed a law that somebody had to walk in front of the car with waving this big red flag like watch out for the dangerous Horseless Carriage right uh they passed that law and guess what where did all the cars get built they got built in America and guess what the UK still doesn't have a major car producer Jaguar I mean really like look where they look where the big car industry like footprint is it's in Germany with BMW Mercedes it's in the US with Ford and whatnot it's in Japan with Toyota it's not the UK isn't known for any car manufacturers right um and so is the US going to be known for any blockchain technology industry or is it all going to get driven away through regulation over to uh London and Singapore and Shanghai I mean it's a it's a good question you know it really is Trace um talking about bitcoin's viability and its long-term position is it too late for alternative cryptocurrencies to come along whether it's a copy of Bitcoin or something different to eventually uh catch up or and take over uh where Bitcoin is as in the currency digital currency sector or is Bitcoin essentially the gold standard for digital currencies now and forever because of the infrastructure that's being built out that's a very that's a very critical and important question to ask and so I'm going to try to unpack it in a fairly logical and rational way uh the conclusion would be I seriously doubt that any other protocol will be able to surmount the network effects that Bitcoin has acquired uh nevertheless it it is possible uh I just don't think it's very probable the reason is uh I've identified seven distinct Network effects that are all taking place at the same time and uh and also some of the some of the incumbents for example ble masters with digital asset Holdings she was asked the same question uh and she said you know we're blockchain agnostic but we think it's going to be Bitcoin so we're building everything for Bitcoin uh and then also on that panel was the CIO of NASDAQ and he had also been the CIO of eBay and he said you know I agree with ble we're blockchain agnostic we're building everything but but let me just you it's going to be Bitcoin and he said we saw this with PayPal you know and with PayPal and eBay and Yahoo spent millions and millions of dollars trying to come at us in the auction business and they lost uh and lots of other companies spent millions of dollars and they lost too and with with eBay there were only the two Network effects the merchants and the sellers and then PayPal as the payment method system and that proved insur insurmountable for anybody to challenge that dominant position so let's look at this as in this case with Bitcoin we're talking about an Internet Protocol seven distinct Network effects all taking root at the same time the first one is speculation people buying it you know because they want to make a quick Buck on it using it as a store of value whatever uh use particular utility being built out in there things like Armory which helped you secure your Bitcoins you got to secure them in order to speculate on them right uh exchanges so cracken B stamp bitfinex uh you need to be able to trade your Bitcoins for dollars Euros Yen whatever um and then uh so that speculation next would be Merchants Merchants are going to accept Bitcoin merely because speculators hold Bitcoin so this is a second Network effect second order Network effect uh bit pay is a good example of a payment processor uh we have major internet giants like Rutan uh Microsoft Dell Dish Network all these people accepting Bitcoin we have over a 100,000 Merchants that accept Bitcoin with bitay we have Integrations with things like Shopify which uh anybody who's got Shopify uh enabled web uh checkout and there are hundreds of thousands of merchants that have that they can instantly be able to accept Bitcoin pretty much uh so merchants accept Bitcoin because speculators hold it uh the next would be the third order Network effect that would be consumers using Bitcoin solely because merchants accept it an example of this would be purse.io uh purse.io you basically go and you make a wish list on Amazon and then you import the wish list to purse and then you set the amount of discount that you want to receive and you put your Bitcoins into escrow and then somebody comes along and they're like I want to buy those Bitcoins so they buy your Amazon cart have it shipped to you and after you receive your items and the Bitcoins get released from escro to those people well guess what the average discount on purse is 18% so because people choose to pay with Bitcoin instead of paying with dollars or paying with a credit card or paying with a gift card or whatever paying with Bitcoin they save 18% people using Bitcoin they Sav $500,000 in 2015 on purse buying stuff off Amazon uh like why would you use anything else to buy stuff off Amazon I mean you don't even have to like you can hate Bitcoin you don't even have to hold Bitcoin very long you know you just hold it enough to to get get the bid and you save you know 10 to 18% 35% in some cases I've saved 35% on some of my orders uh so that's a that's consumer using Bitcoin solely because merchants accept it the fourth Network effect is the miners or the security of the network uh we have we're approaching what's called One X aash uh it's it's just an unfathomable amount of processing power that secures the Bitcoin blockchain we're talking like tens and tens of thousands of times more processing power than the 500 largest supercomputers in the world combined uh you know everybody thinks like oh it's just real easy to start up one of these blockchains no it's not you can get squashed by computer processing power you have to be able to defend yourself against like Google or Microsoft or the NSA right well guess what Bitcoin has has so much processing power securing that blockchain uh I just don't see any other blockchain being able to be anywhere near as secure which leads to the fifth Network effect which are developers uh software developers they're going to build their applications and their utility and and all of this stuff they're going to build it on the most secure blockchain like why build it on a less secure blockchain right um so that's a that's a fifth Network effect that's developers having to spend all the time and the effort to get acquainted with a codebase because you can think of developing software it's kind of like playing Legos with words right and so what you have to do is you have to load like tens of thousands of lines of code into your head so that then so that you can then play Legos with it like that's how software gets developed um getting people familiar with a code base writing libraries uh so that people don't have to reinvent the wheel uh all of this stuff you know developers guess what they're all building on bitcoin they're not building on other blockchains because they're not as secure they don't have as many Merchants accepting it they don't have as many speculators holding it which all this stuff goes into the price of Bitcoin then we've got the sixth Network effect which uh I already mentioned earlier this cftc holding a meeting about using Bitcoin for futures and forwards and puts and calls and all that stuff well that that's the financialization network effect that's where Wall Street really comes in and starts building these these very creative very useful in a lot of ways uh financial instruments uh you know so that's the six Network effect we've already got uh regulated and approved uh swap execution facilities to write different uh derivative contracts for Bitcoin and then we get to the seventh Network effect and and and I haven't really seen any uh there there hasn't really been any growth in this network effect yet it's still very much a theoretical Network effect but what it is is it's it's the the world Reserve currency it's the settlement currency type Network effect it's where people instead of cashing out into dollars or cashing out into Euros they cash out into Bitcoin right uh instead of trading like an oil all the oil in an oil tanker for dollars you trade it for Bitcoin instead of trading your piece of real estate for Euros or Yen you're trading it for Bitcoin you're settling into Bitcoin and but we are seeing this within the Bitcoin industry and one of the largest uh software development houses blockstream uh they've released this uh thing called liquid and liquid connects all the Bitcoin exchanges and it enables the Bitcoin exchanges to move customer balances trustless and pretty much instantaneously among each other and the effect that that that is having is that in order to uh for these exchanges to settle amongst each other they settle using Bitcoin not using wire transfers W right so bit that that's the first kind of green shoots of the world Reserve settlement currency application is this liquid network uh among the Bitcoin exchanges so now each of the Bitcoin exchanges they hold they all hold dollars or Euros or whatever but when customer a wants to move their balance to to to exchange B uh they use the Bitcoin pipeline they use this liquid Network and instead of using wire transfers we were using wire transfers for five or six years right but we but Bitcoin has now supplanted wires and dollars and euros and all this stuff for that Network effect so you know we got seven Network effects all taking place at the same time people spent millions of dollars like trying to go after eBay and they failed and eBay only had two Network effects and you get this cumulative exponential uh entrenchment that comes from having network effects all taking place um so do I think some other project some other coin is going to be able ble to supplant these Network effects I think it's highly highly improbable and unlikely and if anybody has any idea of a project that does please please let me know because I will buy a lot of that right because it's probably highly undervalued UMC but but I mean I would love to know because hey look I'm blockchain agnostic at the end of the day I want to increase my purchasing power I want to be able to buy more stuff I want to right like um you know whether it's BMW or Mercedes or Tesla like at the end of the day I want the best car and I want the best return like I don't care whether I own Amazon stock or Google stock or uh or Ford stock or or whatever I want to own stock that's got the best return and the safest return and the best risk adjusted uh like proposition and you know so I think it's the same way with Bitcoin or any of these uh other projects but I just don't see any other project anywhere close to uh to Bitcoin in that sense I love the way you describ it the network effect TI up yeah I I love the way you described the the network effect and how Bitcoin is just you know it's got that Network effect and seven different aspects uh going for it so that that's amazing so Trace uh I wanted to ask you about um the block size increase debate uh can you just just give us a little bit of understanding of what this is and how urgent or or not urgent uh is this for the Bitcoin infrastructure yeah so like anybody not in the Bitcoin industry looking in it must just be like what is going on with this thing uh I think it's actually shaken a lot of confidence a lot of people have like not bought Bitcoin or not made VC Investments because of it uh me personally I don't think it's a very big issue at all I don't think it's very timely even uh like like we don't have to act particularly fast I've interviewed pretty much all the top people in Bitcoin and we talk we we've discussed this and talked about it uh I would reference specifically to uh I did an interview between Dr Adam back and Gavin Andre and it's 80 minutes and we go very thoroughly into in depth into this issue so you know anybody who wants to learn more like go listen to that uh uh but basically what we're talking about with with a computer protocol is it's a set of rules that uh the computers follow and within Bitcoin one of these rules is the size of the block and currently that rule is set to 1 Megabyte uh and that limits the throughput or the number of transactions that can be included in a block right and so if we want Bitcoin to be used by more people and it needs to have greater capacity we need to increase the size of that block well if we increase the size of the block then it increases the cost of all the different nodes and software uh validating the the transactions making sure that they they're they're actually valid it could impact the security that fourth Network effect so it's not as easy as just changing like a one to a two or even a one to an eight or something I mean there there's a lot that has to kind of be taken into consideration one of the reasons I don't think it's very urgent is the current ly uh the the block size is about one is 1 Megabyte we currently use about 2/3 of that so about 600 kilobytes of it um and out of that so so we're only using two-thirds of the block size currently and out of that something like 60% of the transactions that are actually sent on the Bitcoin Network are for a dollar or less and so it makes you wonder like do these transactions even have much real economic substance to them right okay and and really also what'll happen is even if the block size is reached you can pay more you can pay more transaction fee to get a higher priority to be included into the block so if you have a really like a really important use case you just pay more money and you get to the front of the the line right and then it becomes kind of like an O uh so I think that that's a good way the market the market is going to be able to sort out like who matters and who doesn't right for getting into the block size because who matters will be whoever pays more money to get in there so like even if the limit is reached uh I don't think it'll be catastrophic to Bitcoin in fact uh there have been some attacks on the Bitcoin Network where we've had a lot more transactions than can fit into the block and uh and the network ComEd along just fine and business carried on as usual and there wouldn't really any problems with it so I would you know we're currently using something like maybe 8 to 12% of of block siiz capacity with actual economically substantive transactions uh I think we have plenty of margin for for error and growth and what I want to see is I want to see the really hard computer science done and Game Theory and thinking all this stuff out and also being able to figure out how to use the block size more efficiently for example uh this segregated witness uh issue I just interviewed uh someone who put this Live Test net up uh with segregated witness and what segregated witness does is it you use the block size you have more efficiently so you're basically able to cram four times as much stuff into the same block and so you know that actually has kind of a much a much greater scaling effect um and then we've also got Technologies like lightning Network that are being developed where we would be able to do trillions and trillions of transactions in a trustless way and also instantaneously impr provably trustworthy uh that that would be superior so I don't really see the block size debate is being particularly imminent or important to get solved right now and I don't I I don't think it should really be impacting the price but I'm sure it does because it makes some people uncertain about it uh and they don't have enough knowledge about the the situation um but you know that's that's kind of My overall view on that and I don't like I don't think it's critical that we get it solved right now I think that we have lots of different potential Solutions uh like let's uh let's just keep moving forward building stuff building use cases uh and finding stuff that people will actually pay for you know uh I want to find features that people will actually pay for uh and those are the ones we should develop because people find them valuable because they'll pay for them things like confidential transactions that would make Bitcoin much more private than it currently is I think that would be a really cool feature which will be able to be done uh with this segregated witness in a very easy uh backwards Le compatible way Trace uh let's talk about uh being able to invest in Bitcoin and you know there's these Bitcoin ETFs that are popping up you got the gbtc um right now it's currently priced at a premium over the Bitcoin exchange prices um and then you got the the wink of loss Bitcoin ETF uh can you give us your thoughts on these vehicles for uh people regular people to be able to invest in Bitcoin technology yeah so this is a fascinating area I talk with some of my friends about it on a regular basis like the gbtc uh instrument for example that's run uh by grayscale and Barry silber's firm over there uh because it trades at this premium to nav it it trades it basically like $600 a Bitcoin and in spot price is like $450 a Bitcoin like why is that and at the end of the day I think uh we we have so many different things going on we've got tax implications uh because you can hold this gbtc in like your Roth IRA where you don't have the tax implications uh I mean there are just so many different ways that you can use Bitcoin uh to to plan uh for example you could buy mining equipment and deduct it and then you get this mining income uh stream like that and of course you claim it as in you should be claiming the the mining proceeds as income but uh you might buy the mining equipment in December and then you don't have to pay the taxes on your mining income until like the following uh April like 16 months later so you've got all these different moving pieces when it comes to investing in or buying Bitcoin I think the easiest and safest way is uh go buy some Bitcoin and move them into your Armory wallet where you hold those private Keys yourself like don't trust an ETF don't trust a a third party to hold your Bitcoins like figure out how to hold and secure your own Bitcoins because then you can you've got you've got the private Keys you know we we have this saying like he who has the gold makes the rules you know like you need to have the hold coin have the gold coin in your hand if you don't hold it you don't own it it's the same type of principle with Bitcoin um and then after you've kind of figured out how to secure your Bitcoins and do it in a safe way and you feel comfortable with that you know you do it with maybe $100 wor Bitcoins then you can start buying more Bitcoin and securing it yourself and then if you find a way like an like the ETF for example or you find that that'll work in a particular use case then perhaps venture out and take on more risk uh investing in it that way uh but I mean we've just seen so many problems in the Bitcoin space where custodians have uh stolen the Bitcoins like Mount goau they stole hundreds of millions of dollars of Bitcoins uh we've talked a little bit earlier about governments I think the prime way that governments are going to confiscate gold is not necessarily like going door too and taking it they're going to confiscate it through the tax system and the likely confiscate the wealth out of retirement accounts before they confiscate any wealth out of gold um and so likewise you know it's going to be uh the tax the ETF for example like a Bitcoin ETF or something so you know you you have to you have to look at like what's likely going to happen what do you what type of risk are you willing to take in your own personal situation and I I think we're in an we're in an environment where you need to reduce as many layers of risk as possible uh you know if you hold if you hold this gbtc in your IRA account well look at all these layers of risk you've got between you and your asset you've got the IRA you've got the IRA cust Ian you've got the IRA uh brokerage you know like if it's ER trade or something then ER and and then it's whether ER trade actually holds the gptc shares or not who knows how they're registered in street name or who knows whatever right uh but then even with the shares you've got you've got performance risk and counterparty risk with grayscale you know whether they'll actually honor and give you your Bitcoins not or give you your gold or not or you could just freaking buy the Bitcoins and hold themself you know and and now you don't you disintermediate and you are not subject to all of that risk right and we're talking about you you've got risk all over the place and a lot of it is return free risk you know like you got money in your bank account you're taking risk but you don't get any return it's not like you earn interest or anything so like why have dollars in the bank account not have dollars under your mattress or something well there's risk either way because you know just depends you could lose the under your mattress as well yeah or or rats could eat it or something which is actually probably a pretty pretty good you know rat rats like to eat everything and they eat a lot of Chinese Yuan right um and so I mean you've got you got risk everywhere and so how can you reduce risk how can you reduce the layers of complexity between you and your assets uh and Bitcoin man Bitcoin does that in a great way Bitcoin does that really adds a lot of utility and that sense because you know you use Armory you're able to back up your wallets very simply very easily it's cheap it's absolutely free Armory is completely free open source to use it's kind of my gift to the world you could say uh funding the development of it um yeah I mean it's free it's not like you got to pay monthly storage fees like when you're holding gold uh it's not like you got to pay insurance you know you back this thing up you you go bury it bury several copies of it throughout the world laminate it and like a little MTM storage box with GPS coordinates you know so you can go find it uh yeah I mean you like you you could you you can you can secure the protection over your wealth and over your assets for a much lower cost with Bitcoin relative to the other options out there wow and you don't need or FDIC insurance or any of this stuff right like if you hold the Bitcoins themselves yeah because you're not actually like lending it out and ah yeah which is which is where which is what's really th this is the big picture we are transitioning from the Industrial Age to the information age and we're transitioning from a debt-based monetary system and currency system and financial system to an equity-based monetary and financial and currency system and Bitcoin just like gold is an equity-based asset and it's an asset that you can hold the private Keys yourself as an individual and that's a big big big deal and there's trillions and trillions and trillions of dollars at stake and up for grabs during the these two gigantic transitions yeah wow uh that's incredible Trace um so closing thoughts uh just your your final thoughts on bitcoin you know people uh people's perspective what how they should see how you encourage people to see Bitcoin and uh you know I don't know if you want to uh talk about one of your websites or talk about Armory a little more just uh just your closing comments for uh this interview yeah so I suppose in the closing comments it would be you know a lot of people looked at those Horseless carriages and they're like you know where's the horse and and the person's like well you know look we don't need a horse it's an internal combustion engine we like have this oil and gasoline and like all this stuff and they explain kind of how it works and the person still thinks like but where's the horse right they just can't they can't change the Paradigm they can't even ask the right question uh that's what we're dealing with here we're transitioning into the information age you know how to send emails right you know how to browse on the internet you know how uh you know how to shop on Amazon Bitcoin is new technology at the very minimum learn how to use the new technology you know put in that effort put in that homework you know if it takes a couple hours it's kind of fun like learn how to use the new technology uh I think that's really what kind of a big deal is I think that's something that's very important for uh everybody to do and learn about the new technology if you're interested in it like my Bitcoin knowledge podcast I try to do interviews with all the top people they're all CEOs pretty much from all the Bitcoin companies working on their own little thing and I try to craft the interviews so that they're going to be relevant six months later or a year later or even two years later you know we don't talk about like the current news for example um so you know go listen to a lot of these old episodes uh there they're really actually very insightful and still relevant and practical today uh so if you want to learn about Bitcoin you know you got to get on the bike you can't just read about it you can't just learn about it you got to get on the bike and like try to Pedal around that's how you're going to learn it that's how you're going to learn the new technology and once you get more familiar and more used to the new technology then you can uh you know you can decide whether you want to allocate more Capital into it or not but what's you know what's really really painful for people is when they're ignorant right because then they don't have options yeah you know like if if you're ignorant of Bitcoin if you're ignorant of how to actually secure your your Bitcoins and stuff like that then the issue of whether you should buy any Bitcoins is not even righte like you can't even ask that question because you don't know how to secure it I mean it's it's really uh like ignorance is is really really expensive and and personally like I don't really have a lot of time to spend like trying to educate ignorant people because they choose to be ignorant you know we got all these free advice and all this free stuff about Bitcoin out there like all these podcast interviews all all this stuff so you know that's what I'd kind of recommend if people want to get started with Bitcoin uh a very good site for new users is weuse coins.com and then also uh bitcoin.org and then my podcast uh you can actually find it at www. bitcoin. K kind of like knowledge and you know go go and get yourself educated on it don't be ignorant give yourself options you know and then decide whether or not you actually want to buy some Bitcoins or not uh because and also you know when when people all start buying Bitcoins and and the price starts going up and like everybody's chasing the rabbit and then nobody has time to like spend with you oneon-one because everybody's trying to buy it at the same time right uh so you know try to get educated and try to figure out how to use it uh while it's not crazy and hectic is is another piece of advice because human capital uh knowing how to do a lot of these things the the time of being able to ask somebody who does know how to do these things like you know that that's all that's all a form of capital you know just human capital intellectual Capital that's just as much Capital as like a piece of real estate or a computer or a piece of property planting equipment so it's veloping that human capital it's developing yourself uh that you know that I think is the most important thing and it's a great hedge against inflation it's a great hedge against deflation nobody can take away from you what you are and what you know uh so you know that's always a great place to uh to allocate some capital and time wow wow Trace well there there was a lot of inspiration across the board and with what you said there and uh you know great inspiration for for people to to get involved understand Bitcoin and and not be ignorant so thanks so much for taking the time to share your wisdom uh with us today and it was really great to to talk to you again yeah great to talk with you too uh we'll do it again sometime later bitcoin price will probably be higher it'll be exciting that seems to be the case every time I talk to you so I wouldn't doubt it at all you aren't the only one