BTC026: Bitcoin Mastermind W/ Lyn Alden & Jeff Booth

Preston Pysh (00:00:03):
Hey everyone, welcome to our   Wednesday release of the podcast, where we’re 
talking about Bitcoin. Boy, things could not be   getting more high adventure than what we’re seeing 
in this space right now with the price action.   In the middle of April, we saw an all-time 
high in Bitcoin of nearly $65,000. And as we’re   releasing this in the middle of May, the price 
has experienced a major correction clear down to   40,000. For the people not accustomed to an asset 
with this much volatility, I’ve tried to bring on   two of the best guests to assist through the 
chaos, And that’s Jeff Booth and Lyn Alden. Preston Pysh (00:00:36):
During the show, we address   many hot topics currently in the news, from 
energy concerns, centralization concerns,   speed of payment concerns, the altcoin season 
that we’re currently seeing, how corporate   boards might be viewing the volatility, and much, 
much more.

I’m super thankful to Lyn and Jeff to   record this discussion with nearly no advanced 
notice, and I hope you guys enjoy the chat. Intro (00:01:04):
You are listening to   Bitcoin Fundamentals by The Investor’s Podcast 
Network. Now, for your host, Preston Pysh. Preston Pysh (00:01:22):
All right. Here we are. Like   we said in the introduction, I’m 
here with Lyn Alden, Jeff Booth.   Guys, just so excited to have you 
here to have this chat because,   man, it’s getting crazy out there. 
It’s getting a little insane.   So I want to just open it up to you guys, how are 
you guys seeing things right now? Because to me,   it felt like this thing was on a rocket ship and 
then somebody shot the wing off over the weekend,   and now it’s just chaos and FUD and fear 
and people were going crazy.

So I just   want to capture some of your thoughts 
initially, and then we’ll go from there. Lyn Alden (00:02:07):
The way I’m looking at it is that   we can use different on-chain indicators and 
basic sentiment analysis to see how it’s going.   And for a while, it was on the track where the 
bull market looked a lot like the 2017 post having   bull market. And so now it’s starting to look a 
little bit more like the 2013 bull market where it   had a longer correction in the middle there.

They 
had a six-month pretty significant correction,   but it’s interesting so far because it’s 
a hybrid. And so in terms of percent loss,   so far it doesn’t really deviate from 
the 2017 bull market at all. Some of   those corrections were down in the high 
30% range, close to 40% in some cases.   None of them lasted this three-month period that 
we’re seeing now, and so in that way its looking   a little more like the 2013 period. And so I’m 
analyzing it like I do any other asset classes. Lyn Alden (00:03:00):
For example, in my research service,   I cover multiple different asset classes.

And 
generally what you see is that if everybody   within an industry gets super bullish at the 
same time, that’s when you’re likely to have   pullbacks and corrections and things like 
that. So I think now we’re seeing that. I   saw a similar thing with gold last year where 
after the initial CARES Act Fiscal Stimulus,   we saw of course the big front up in gold. 
But then when it got to late summer of 2020,   it started to get real rates rising a little 
bit off of their lows. It started to get a   rollover and gold sentiment, and so you were 
in a long-term gold eight-month correction. Lyn Alden (00:03:42):
And just when everybody   thought it was dead, that’s of course when it 
bottoms a little bit and shows some life. And so   we see some of the things with Bitcoin 
where they’re on different clocks.

So,   while gold was cracking that time, being 
harmed by that rising real rate phenomenon,   Bitcoin was doing better. And so now it’s rolling 
over a little bit. We have some of the people   that, for example, have been avoiding it this 
whole time now doing victory laps, because it   went down 37%, ignoring the fact that it went 
up hundreds of percent high in the cycle. Lyn Alden (00:04:16):
And so it’s hard to say whether or not   this has been the bottom, or if we’re going to see 
a deeper correction later, but so far, the overall   network effects just are still in place. It’s 
just that if you look across the board sentiment,   you had pretty strong sentiment in Bitcoin, 
and then you had really bubbly sentiment in the   crypto space where you had Ethereum Classic 
outperforming Ethereum, you had Dogecoin   going to the moon, people were inventing new coins 
called CumRocket and things like that.

And so,   when you get to that phase, you start to 
get a really dilutive effect in an industry   where a lot of the enthusiasm that might 
otherwise be for Bitcoin starts spreading out   and we started to get this temporary 
issue where Bitcoin scarcity stops   mattering because everyone can just issue more 
coins and people can pile into more coins. Lyn Alden (00:05:08):
It’s a similar thing you   see at the top of equity bull markets, 
or at least local tops, I should say,   where if there’s a crazy demand for equities, 
all sorts of crappy companies can issue equity   and give as much equity as people want. And 
it’s not until you clear some of that out   that you see which companies actually, 
their equity is really worth something. Preston Pysh (00:05:27):
Considering we still have   many altcoins outperforming Bitcoin, is your 
opinion that there’s still more selling to go   from where we’re at right now? Just for people, I 
think we’re around 44,000 right now, but based on   what you’re saying, it sounds to me like you think 
that there’s a little bit more selling to happen.

Lyn Alden (00:05:46):
I don’t have a strong opinion either   way. We haven’t seen some crazy capitulation, like 
a death spike, but we’ve seen a pretty prolonged   down move. And so I’m at the point now where I’m 
not getting very clear intermediate-term price   signals. I try to do the thing where if I have 
conviction about something, I’ll say it. And if   I don’t know something, I’ll say I don’t know. 
And so in terms of the next three months or so,   I don’t have a firm opinion either way 
about Bitcoin’s move. I remain basically   strategically bullish while being pretty agnostic 
about near-term price action at this time. Preston Pysh (00:06:21):
Jeff? Jeff Booth (00:06:22):
I think that just was a really great   way to say it. Nothing has changed, nothing on 
the structural, why Bitcoin? And the game that’s   going to be played for a long time, ups and downs 
on the way through. You have a network effect…   One thing I think a lot of people are making 
a mistake on Bitcoin in comparing the other   altcoins is they’re comparing it to, let’s 
say in the technology world, Google or Yahoo.   This is a protocol.

It’s like investing 
in the internet with a network effect.   And so the other things on top aren’t that. Jeff Booth (00:06:58):
But to Lyn’s point,   let’s look at ’99, 2000 in the internet boom. You 
had a whole bunch of companies in a short-term   doing better than Amazon because they started 
at a low, and they could say, “balls.com.”   Crazy things because you could write a business 
plan and put it on a napkin, and anybody would   finance it hoping to catch the magic of Amazon 
and others. And it creates a whole bunch of extra   races in the market, trying to get rich quick 
schemes. And so when you see a bunch of the   altcoins and everything else, that’s what I 
see. I see a really bubbly type of market. Jeff Booth (00:07:52):
What I worry about a little bit   is that it’s going to hurt some 
people. They’re going to miss   the really important aspects of why Bitcoin is 
important, really critical. And they’re going   to lump all the cryptocurrencies into the same 
game.

But if you fast forward what happened in   the .com bust, a whole bunch of premium 
names also fell. And then after that   nothing changed on the fundamentals. They 
reinforced and grew and grew and grew. Preston Pysh (00:08:29):
We have Elon Musk, goes out,   buys a billion dollars plus, puts it on his 
balance sheet a couple of months back. I think   his cost basis is still lower than where we’re 
at right now at $44,000 a Bitcoin. Jack Dorsey   talked about how Bitcoin creates this massive 
incentive structure for renewable energy,   Elon replies to Jack Dorsey saying he agrees.

And 
then out of nowhere, this past weekend, I think it   was before the weekend started, Elon comes out 
and says that he thinks that there are energy   concerns with Bitcoin, he says that he’s working 
with Dogecoin developers to make DOGE better.   He’s watching something that, as of last night, 
he said he still has all of it on his balance   sheet except for that 10% that he sold. He 
still has it sitting on his balance sheet,   but all of his comments are 
causing the price of Bitcoin   to plummet even though it’s sitting on his 
balance sheet, the price of Tesla is plummeting. Preston Pysh (00:09:48):
I’m trying to wrap my head around why?   I’m just asking myself, why would somebody go out 
and do this? Even if you did believe this stuff,   you’d think you’d be quiet about it as you do 
more research. We all know Elon is not your   typical person, especially while on Twitter. 
But talk us through how you’re interpreting   all these mixed signals.

It’s so strange to me. 
But Lyn, take it away. What are your thoughts? Lyn Alden (00:10:23):
If you look at his history with Bitcoin,   even before he bought it, he was flirting 
with Bitcoin while talking about Dogecoin.   And back in December, he tweeted… I think he 
phrased it as, “Bitcoin is almost as BS as fiat.”   And I remember because one of my friends 
highlighted that and he’s like, “Oh,   he’s going to the Bitcoiners angry.” And so I 
just put a meme out there that was basically how…   Basically that We Need to Poo meme where he looks 
slumpy and then he’s in a toxin. So I wrote,   “Slumpy versions being long, Bitcoin and 
Tesla,” and the more sophisticated version are,   “Long, Bitcoin; short, Tesla.” For a while, 
there’s been a lot of pro-Tesla, pro-Elon   feelings in the Bitcoin community for a while, 
and I’ve always been somewhat out of consensus   in the sense that maybe it’s because I come from 
a little bit more of a value investing background. Preston Pysh (00:11:23):
You and me both, Lynam. Lyn Alden (00:11:24):
Exactly. Preston Pysh (00:11:25):
I’m laughing because I’ve always   had the same opinion.

I never got Tesla, but I 
was a Bitcoiner, and I felt like such an oddball. Lyn Alden (00:11:33):
Yes. I was always critical of Tesla. And   it’s not one of those things… There’s 
obviously good engineering happening at Tesla,   but it’s more about the fact that he tends to   over promise and under deliver, and slower than 
his initial forecast. If you go back and look   at his timeline for when automatic driving 
would be here and things like that, right? Preston Pysh (00:11:57):
Yeah. Lyn Alden (00:11:58):
Basically, he’s inherently   a marketer at heart and he seems all over 
the place, especially on Twitter. And so   I think it’s one of those things where it’s 
really important, I think, for the Bitcoin   community not to get caught up with hero figures. 
I actually think Peter McCormack phrased it best,   basically single-person worship is like 
centralization. However he rephrased it,   you’re basically relying on the opinion of one 
man, that’s when you’re going to run into issues.

Lyn Alden (00:12:29):
And so overall, there’s a lot of theorizing   about why he changed his opinion. One is just his 
opinion changes a lot on a lot of things, and so   I wouldn’t necessarily say there’s a reason for 
it. If there is a reason for it, it’s possible   that, for example, because Tesla’s involved in 
renewable energy credits, that he got a tap on the   shoulder from someone, for example, or the company 
did; the adults in the room, I guess you could   say, and that they had to change something up and 
change their opinion of the energy environment.   It’s really hard to say because we’re not 
necessarily working with the standard CEO here.

Jeff Booth (00:13:06):
Here’s a different way to look at it. This is   actually the best thing on the planet for Bitcoin. 
It is proving why decentralization matters. So   if you look at Satoshi white paper and everything 
else, the root problem with conventional currency   is that trust is required to make it work. And 
central governments have to erode that trust. And   so as somebody gains more and more power over 
you, or over your finances or anything else,   the rest of society is up to women fancy of that 
person. And even if that person is… We’re all   trying to read in what he’s thinking. I personally 
believe that he did get a tap on ESG and it   became, “Okay, I have to softly backpedal, I won’t 
totally go out, but I have to softly backpedal to   be able to protect credits and everything else.” 
That’s what I believe.

I could be totally wrong. Jeff Booth (00:14:07):
It could be he’s just learning,   and you know how people learn and then they go 
into altcoins and they’re all over the map because   they don’t really understand it. So he could be 
just a very powerful person learning publicly, and   crazy markets all the way through. It actually 
doesn’t matter on each of those standards. What   matters is, it’s proving the thesis on why 
decentralization is the most important gift   to humanity, because it pushes the power to 
individuals rather than centralizing power. Preston Pysh (00:14:48):  So, he had… And I’m assuming, 
Lyn. Do you agree with it there? Lyn Alden (00:14:52):
Yeah, I agree. And I think   it’s a shame that… It’s interesting because 
we’re seeing a lot of interesting news get   overshadowed by the Elon thing. For example, 
I’ve been covering the fact that NYDIG has had   a number of interesting announcements lately where 
they brought over the executive from Bridgewater,   they’ve announced partnerships with banks 
basically to bring Bitcoin to banking. That’s   more signal to noise stuff where, for example, 
the network effect continues to strengthen.   Obviously, for people following Taproot, 
that’s obviously making advancements as well.

Lyn Alden (00:15:32):
And so you actually see   the underlying technology getting better, 
you see the network effects getting better,   but then on top of that, we see we have the crazy 
price action and the charismatic personalities   and then the Twitter wars, that’s the stuff 
that’s getting, of course, 90% attention. Lyn Alden (00:15:46):
And that’s fine because that’s what’s   going to dictate people clicking on articles. Of 
course, that’s going to get written about a lot,   and that’s what’s going to cause people to freak 
out because that’s what the price action’s doing.   But I think for people that are looking at 
this as more than a tactical trade, it’s   really about monitoring the fundamentals, just 
like I would with any other type of investment.

Preston Pysh (00:16:07):
Two other things that he brought   up that I think is important for us to address 
because we probably have a ton of people that are   listening to this that have just got into space in 
the last 90 days or a hundred days, and they might   not even be ahead in their position based on how 
much it’s gone sideways lately. The one thing that   Elon brought up is he was talking about miners 
in China and how this is a centralized thing. So,   Lyn, I’m sure you can crank this one out of 
the ballpark as to addressing how this is FUD. Lyn Alden (00:16:39):
Yeah, there’s a couple… One is   the energy FUD and one is the centralization FUD, 
and they’re two different ones. And so basically   with the centralization, we saw from 2017… the 
differences of opinion there between different   parts of the community as the ways Bitcoin’s 
designed is that really the nodes have the power.   And so the partial centralization of hash 
rate is not really the key factor there;   it’s really about, is there a central 
development team that can override   miners and nodes? No.

Is there a cabal of 
miners that can push changes through? No. Lyn Alden (00:17:16):
It’s really about the decentralized   node network itself. And that’s also why the 
Bitcoin community is so adamant about keeping   nodes simple to run so that the average person 
can verify the entire blockchain and basically be   involved in the consensus over time. And so miners 
of course have a large role, but just because   one country has majority of hash rate doesn’t 
necessarily give them control over the blockchain. Lyn Alden (00:17:42):
And then the second one is the energy FUD.   There are pros and cons there; there are parts of 
things that are merit. So there is a big mining   area in China. Some of it is the hydroelectric 
overcapacity where they go there, that’s basically   the cleanest, freest energy you’re going 
to get because they’re really tapping into   renewable energy, but otherwise be wasted because 
overbuilt in certain areas, especially during the   wet season.

But the other factor is you do have 
provinces in China that are more coal-heavy,   and so that is a fact, but then over time, 
especially because China has actually moved   in some ways to try to discourage mining 
in those jurisdictions, a lot of Bitcoin   proponents are in favor of trying to do actions 
to decentralize the mining a little bit more,   bring them more towards North America, bring 
it to cleaner resources where possible. Lyn Alden (00:18:34):
But overall, it’s one of   those things where the way it currently works… 
I think there’s a couple of issues. One is,   people assume that the energy consumption is 
going to be as exponential as the price increases,   but the way that the block subsidy halving 
works, that’s not how it goes in practice   where the energy scales better than the price 
action over time. So there’s that. And then two,   just the fact that even though you have individual 
cases where, say a bunch of coal mines Bitcoin,   the overall structure of how Bitcoin 
works is it’s really optimized to go   around the world and soak up wasted 
energy and basically overbuilt energy.   And so the overall big structure of the type of 
energy that Bitcoin uses is really a net positive.

Lyn Alden (00:19:21):
And it’s the fact that a lot   of people criticizing Bitcoin’s energy use, they 
start with the axiom that Bitcoin is useless and;   therefore, energy spent on it is a waste, 
whereas, for example, we don’t really question   energy spent on wash machines or Christmas 
lights. Whatever the case may be because we   know that there are varying degrees of use 
for them. And so people that really know how   Bitcoin works and know why it’s valuable, they 
know that one, the energy spend is worthwhile,   and two, basically that over the long run, the 
basic, the incentive structure is actually pretty   attractive for energy, rather than this giant 
exponential increasing environmental dream. Preston Pysh (00:20:02):
There was one other… I’m   sorry to interrupt you, Jeff. Go ahead. Jeff Booth (00:20:09):
What Lyn said is all true, but here’s the thing;   I actually think Bitcoiners don’t do themselves 
enough favor with that argument because it’s   hard to understand.

You’re fighting the wrong 
battle; you’re comparing what uses more energy   and Christmas lights or this and everything else. 
Or it helps promote renewable, which is true. But   on top of that, ask anybody, does it explain 
how climate is solved through an inflationary   monetary system? So, you have to have growth 
forever, and you’ll debase your currencies to   get that growth forever, so it’s not real growth. 
And so you keep growing.

How is that aligned with   finite resources on a finite planet? It isn’t. 
So if you start there, where Bitcoin by forcing… Jeff Booth (00:21:10):
What’s happening is, as we move to more   and more things becoming in the cloud or digits 
or information, really simple examples if you take   music, we used to buy CDs and we had limited music 
where you drove to the record store to buy the CDs   and everything else. And there were a 
whole production schedule and distribution   choosers, who, out of the musicians, could 
be able to supply us music. So a whole bunch   of people was blocked by access to even find 
us because of the high cost of distribution. Jeff Booth (00:21:44):
Now we have unlimited music for $10 a month.   And we don’t buy things.

So GDP is a bad measure 
because as more things become information,   we get more for less, and that’s declining 
GDP as we get more for less. But if you have   a system that requires higher and higher GDP 
to pay back the debt that you can’t pay back,   you have to keep on manipulating the system. And 
it’s not just a little bit of manipulation. People   think, “Okay, after this, manipulation will be 
over.” Just like they thought in 2008, after that   manipulation, it’ll be over. Everything’s 
good again. Because one system is totally   opposite to the other system, it requires ever 
more manipulation forever to be able to do it. Jeff Booth (00:22:36):
And the negative consequences of that action,   quite simply, to say, should the lumber prices be 
what they are? Should oil prices be what they are   in COVID? They are a result of money printing. 
They’re not a result of the natural supply and   demand market, they’re results of creating more 
demand out of money printing.

And the by-product   of that, if it’s people storing value in their 
houses to buy more lumber and everything else,   which is net positive for a growth 
economy, but it’s not congruent to… Jeff Booth (00:23:17):
By the way, I don’t   know if I love the answer of what I’m 
saying, but I would love anybody just   to ask Elon, how are you going to fix the 
climate through an inflationary monetary system? Preston Pysh (00:23:32):
Hey,   one other thing that I wanted to highlight beyond 
the two points that Lyn brought up, which was the   energy and then the centralization argument, the 
other thing that I think Elon was bringing up with   his recommendation of how he was going to amend 
Dogecoin with the developer tweet, he was talking   about making the clearing times faster for the 
transaction so you don’t have to wait 10 minutes. Preston Pysh (00:23:57):
I’ll say my comments and see…   I’m assuming you guys agree. A, we already have 
The Lightning Network, which clears immediately;   Bitcoin Lightning Network, the fees associated 
with the Lightning Network are near meaningless,   and yet he’s out there talking about this 
technical solution with Dogecoin.

I was   just confused. It was like, “There’s no way that 
he doesn’t know this,” right? Or I’m not sure. Jeff Booth (00:24:32):
I think you might give too much credit. I think   there’s a whole bunch of Bitcoin communities that… 
And I get it, on, “He’s doing this to manipulate   stock, he’s doing this for control of Dogecoin,” 
and everything else. That might be right. Or,   “He’s doing it to gain more power or influence.” 
That might be right, too. But I don’t think…   It just might be he doesn’t know. 
He’s busy with so many other things   and you’re asking him to be an expert without… Preston Pysh (00:25:10):
Yeah. For sure. Jeff Booth (00:25:10):
And he hasn’t gone down to the sand on   all of this stuff, and he’s promoting… 
And he sure doesn’t look like an expert   on any of these things.

And that’s the thing 
with Bitcoin; there are so many smart people in   the space that want real answers, want the truth. 
And so if you put something out there that flies   in the face of it, you’ll be attacked. We’re 
going to need to be careful about that. We need   to be careful of everything being price action 
because the importance of the network is far   greater than price action. I understand how 
price action is a part of it, but the real   importance for where we’re going as a species 
is way more important than the price action.

Lyn Alden (00:26:02):
I’ll second all of that.   And what I was going to say with your initial 
question that I think that Elon should look   into The Lightning Network because there has 
been a ton of development on that over the   past couple of years. Obviously, we have a lot 
of apps coming out that are making use of it,   but then also there’s the work that Lightning 
Labs does to basically provide a lot of those apps   but the technology allows it to function. 
We’re getting more and more network effects   and usability in that network over time. 
And it’s one of those things where…   My base case is that Elon just doesn’t know and 
that I think people give him too much credit,   assume he is a genius anything he touches, 
whereas I will say, using myself as an example,   I cover multiple asset classes.

I cover multiple 
stocks within the equity universe, let alone what   multiple commodities are doing, what central banks 
are doing, what different countries are doing. Lyn Alden (00:26:53):
And so studying Bitcoin   over the past couple of years has been a large 
project to spin up on and to be able to contribute   and basically educate other people on it and make 
sure that I’m not saying stuff that I don’t know.   That’s basically involved a very, very 
large chunk of my time to really go down   that rabbit hole and understand it. And while 
I’m doing that, I’m still balancing all these   other asset classes that I’m monitoring 
for literally thousands of readers and   maintaining awareness of that. And so for me, 
when I got into Bitcoin, Lightning was one of   the things that I was aware of. Basically, I 
knew it solved certain problems, but I never… Lyn Alden (00:27:33):
That was one of the later things that I   dove into after getting the base layer figured 
out.

So, if he’s keeping track of what’s happening   at SpaceX, what’s happening at Tesla and whatever 
happens in his personal life. And then he’s   getting into cryptocurrencies and Bitcoin and 
Dogecoin, because now he’s distracted Dogecoin,   so what degree of research has he done, for 
example on Lightning? And also, has he spun up   on the fact that he’s basically presenting certain 
arguments about block size and things like that   that have basically been debated for five 
years now by people that are deep into this   industry? And basically just seems to lack a 
knowledge of history about where some of the   decision points were made, how we got to this, 
how some of the different forks turned out. Lyn Alden (00:28:21):  My base case is that he just hasn’t 
really spun up on that particular area   in a way that maybe he should have before making 
that billion investment in the asset class. Jeff Booth (00:28:30):
True. Preston Pysh (00:28:30):
You do all those things,   Lyn, but you also write in an encyclopedia on 
inflation on a Tuesday morning and blast it out. Lyn Alden (00:28:40):
Well, that’s an example of something   that it took two weeks of writing, and then 
it comes out on a Tuesday [crosstalk 00:28:45] Preston Pysh (00:28:44):
That was a Tuesday morning.   Don’t give me two weeks.

I don’t believe it. Jeff Booth (00:28:50):
But to just build on Lyn’s point and go to other   people, not as deep in the Bitcoin community, who 
have some of the same mistakes as they go through   their journey. I would say it’s most, including me 
going through it in the beginning. Michael Saylor,   look at his tweets on Bitcoin before he gained 
conviction. So part of the thing as you start to   go down into the sand, you get smarter 
and smarter and smarter. He’s just doing   that publicly and everybody thinks he is 
already a genius and knows all the answers. Preston Pysh (00:29:25):
Jeff, what are the board conversations going to   sound like after all this Elon stuff? Do you see 
it changing? Do you see people putting a lot of   credence in some of that FUD that’s been 
put out there? Or is it just like, “Okay,   well, that’s that guy’s opinion. Let’s have 
the conversation we were intended to have?” Jeff Booth (00:29:45):
I would say almost zero.   It hasn’t changed at all.

In fact, this 
conversation is accelerating. Actually,   even Elon on this forces the truth to come out 
and more and more questioning on it. And there’s   been a lot of this from really smart Bitcoiners 
that have come out, and it deserves an answer.   How does an inflationary monetary policy 
handle climate? Deserves an answer. If you   don’t have an answer, and you’re just, 
“Oh, look over here. I’m selling cars,”   tell me how, and if you don’t have an 
answer, and that’s how I think about it, then   I’m a long Bitcoiner until I see 
something different that has… Jeff Booth (00:30:36):
And then here’s another… I was asked this question   recently on why Bitcoin and why not Ethereum, or 
why anything else? When we go into the protocol   and what this is, I think there’s a unique set of 
circumstances that built Bitcoin to this point.   And so, let’s take a look at a whole bunch of the 
other coins, which I don’t really look at all. Why   am I a maximalist? Not that I couldn’t make money 
on some of the other coins in the short-term,   but I need to know enough about them to be able 
to make money, and I don’t know enough about them.

Jeff Booth (00:31:19):
But why am I maximalist on Bitcoin?   It’s because of two things; one, that the network 
effect on Bitcoin and where it is. And I do not   think a smaller coin could ever get passed 
and brought enough adoption out of government   before it was shut down if it was gaining enough 
adoption. So we have a point in time that Bitcoin   is big enough and has been flown under the radar 
for long enough, that could actually bring power- Preston Pysh (00:32:01):
That still has decentralization. Jeff Booth (00:32:03):
… Exactly. That has decentralization.   And I think if it didn’t win, and that’s actually 
why I’m against a whole bunch of other coins,   if it didn’t win, then things 
will be centralized. And so- Preston Pysh (00:32:20):
And then you’re back to   square one, because then [crosstalk 00:32:22] Jeff Booth (00:32:23):
… Then you’re back to square one. And   in the world we’re moving into, so it’s not 
the world we came from, centralization in   the world we’re moving into, if essentially you 
can control… Centralization means it ultimately   eventually is on a paradigm of dictatorship 
because if technology is deflationary,   and exponentially more so, and more and more, 
and you run an inflationary policy against that,   what it means is you’re aggregating more and more 
power in the state.

Over time, that turns into… Jeff Booth (00:33:09):
I often ask myself, why in Russia   doesn’t everybody just revolt? Why doesn’t 
everybody stand up and say, “I’m done with this.   We’re going to have free and open elections and 
everything else?” And what ends up happening is   a very small minority will, but most people 
won’t. They’ll go to the short-term safety   for their family, they’ll make the case 
that, “I’m just going to stay quiet.” Jeff Booth (00:33:41):
Now think about that scenario with   centralization, with robotics and AI, and 
think about how different that power is.   So if people won’t stand up in a system where 
you can still find anonymity and find a way to   stand up, rally enough people around you to stand 
up, people won’t do that now, or they historically   won’t, or not enough people to overthrow a 
government, how would that look with where   we’re going with technology? So, decentralization 
and putting this power into empowering individuals   and where we’re going, I think is critical 
for humanity. I think it is that big a deal.

Jeff Booth (00:34:31):
And that’s actually why…   The truth is, I don’t think anything’s going to 
stop Bitcoin no matter what where we are right   now. But when I see a bunch of FUD or altcoins 
are trying to… everything else that could hurt   people as a result of this big innovation and why 
it’s so important, that’s why I’m only Bitcoin.   That’s why I would defend that network because it 
matters that much. I don’t need it for my wealth. Preston Pysh (00:35:08):
Lyn, what are your thoughts on that? Lyn Alden (00:35:09):
I think it’s one of those things   where… People always often criticize Bitcoiners 
as being all or nothing. And it’s like an immune   response system where it’s one of those things 
where it normally it’s a good thing.

Sometimes in   individual cases, it’s a bit much here and there, 
but overall, that’s an important part of what’s   kept Bitcoin going for as long as it has, and that 
hardcore focus on keeping Bitcoin decentralized,   maintaining the network effect, that’s an 
important thing to play out. So I do think that   overall, education is a really important thing 
to keep doing for people.

And it’s one of those   things where it’s important not to take for 
granted the idea that Bitcoin will succeed.   It’s going to succeed based on the development of 
the community and the network effect over time,   and that involves people calling out FUD where 
they see it, sharing education where they see it. Lyn Alden (00:36:06):
I try to do my part by tackling   different subjects and writing about them for 
both the retail and institutional audience.   And so, for example, I think that… One of my views 
is that… One of the more significant risks for   Bitcoin is the ESG narrative.

And I think that’s 
because… People often talk about state attacks,   but state attacks can come wrapped in other 
types of attacks, you can have a state attack   that’s wrapped in an ESG concern. So, it 
is true, for example, that we see a lot of   companies around the world are shifting 
more towards trying to emphasize their   ESG abilities. And like anyone else, I’m in 
favor of trying to make the world as clean   a place as possible, who is trying to have the 
best governance as possible, social concerns. Lyn Alden (00:36:54):
But sometimes those   can be… The things they optimize for are 
not… You can have a thing of greenwashing   rather than being truly green, for example. So I’m 
certainly in favor of cleaner energy but I’m not   in favor of things that are greenwashed; things 
that make you feel good, but don’t actually move   the needle. And so I think that’s one of those 
things that can apply to Bitcoin where if people   don’t… make sure people are familiar with the 
details of how Bitcoin uses energy, that people   can get carried away with that sort of FUD.


think it’s good to keep educating people on it. Preston Pysh (00:37:27):
What you’re really saying   is you think that there could be a coordinated 
effort amongst policymakers to ban proof of work   and proof of stake is the only thing that that 
is allowable? Is that what you’re getting at? Lyn Alden (00:37:44):
That’s one of the things that’s possible, but   you can have less extreme versions of that. You 
can basically make it so that if you have Bitcoin   on your balance sheet, that’s damaging to your ESG 
score or that basically, you’re on the wrong side   of renewable energy credits, for example. Things 
like that. Whereas for example when you have   research being put out by ARC, for example, there 
are areas where I’d agree or disagree with ARC   on different subjects. But one of the things 
they, I think, are great on is putting out   open research about different topics.

And they’ve 
put out research about Bitcoin’s energy usage and   Bitcoin’s energy efficiency. And so I think 
it’s one of those things where you can have   soft or hard attacks where you use one 
narrative to push another narrative. Lyn Alden (00:38:27):
I was asked the question before in an interview,   do I think Bitcoin’s energy concerns 
are a problem? And I said, no,   but that I think the narrative around Bitcoin’s 
energy concerns could be a problem. And that was   actually shortly before Elon’s turn on this. In 
this, I end up being an oddly specific example   of how the narratives around that can 
be a concern even though the underlying   technology and energy use, in my 
view, does make a lot of sense. Jeff Booth (00:38:56):
That is exactly, I think, what’s happening.   If I talked to a lot of… I’m involved in some of 
the ESG companies, but here’s the difference today   in some of them; they’re hitting a point of 
inflection where they’re cost-competitive to   existing and better cost.

That’s when ESG 
moves. And again, it reinforces the cycle.   And so I come back to the principle thing, you 
would argue that that’s good for the environment;   a winning technology that is both clean, green 
and it’s cheaper than their existing alternative.   But that, I think, is more deflation. 
And so I keep coming back to, so   you’re going to print a whole bunch of money 
to be able to make prices go down more,   to be able to print a bunch of money? 
So the system itself, to Lyn’s point,   I do agree with that.

The attack vector becomes 
a lot of people believe that Bitcoin is a problem   for energy, is a problem for the environment. 
And that becomes the attack factor on Bitcoin. Preston Pysh (00:40:13):
Lyn, what are your thoughts… If you   were going to break it down simply for people that 
are listening to this, they hear us say the proof   of work, proof of stake, they’re new to space, 
can you summarize the difference between the two,   and then talk about how these ESG 
concerns pop up between the two different   methods of implementing the 
protocols, validation, and security? Lyn Alden (00:40:39):
Sure. Now, basically, the   way the blockchains work is that you have to put 
up something of value to verify the blockchain,   to have your vote matter, in a way of speaking. 
And with proof of stake, you’re basically using   your existing units of that blockchain, in some 
cases, you’re risking them, in order to select   which version of the blockchain is valid. And 
with proof of work, you’re contributing energy,   you’re basically taking electricity and you’re 
solving hash functions.

And then you’re voting   on which blocks are valid blocks. And if 
you end up choosing a block that ends up   not being the longest chain, you’ve wasted that 
work. And so there’s an incentive to make sure   you’re voting for the correct… that you think 
is going to be the longest and most valid chain. Lyn Alden (00:41:28):
There are different consensus mechanisms,   and I think the argument against proof of stake 
is essential that the existing system is proof   of stake. Not necessarily in a little sense of 
blockchain, but in the sense that basically,   if you own chunks of the system, you have 
more say over the functioning of the system,   whereas proof of work is more… What gives 
gold value over the long-term is that it’s   essentially proof of work.

Basically, someone 
dug through literally tons and tons and tons of   rock in order to basically collect one ounce of 
gold. And basically, you’ve taken a ton of energy   and condensed it into one ounce of rare 
metal. That’s the original proof of work. Lyn Alden (00:42:09):
Bitcoin is the digital proof of work.   And so overall, there are two different 
systems. In general, proof of work systems   goes in to use more energy, whereas proof of 
stake system, say you take Ethereum’s case   where it starts with proof of work, but then 
they’re trying to become proof of stake,   so it’s more self-referential.

And so technically, 
that can be a lighter functioning system,   but you’re giving up some of the benefits of 
decentralization and all these other things   that are the key part of why these 
blockchains are useful technology. Lyn Alden (00:42:48):
Because as soon as you   have a non-centralized blockchain, what you 
essentially have is a decentralization theater,   you have a really expensive database, more 
or less. There’s basically a less efficient   version of a fully centralized database. 
And so when it comes to decentralization,   it’s almost all or nothing; either 
you have sufficient decentralization,   where it’s believably decentralized, or you 
have varying shades of inefficient databases.

Preston Pysh (00:43:18):
And if you move into a proof   of stake after a proof of work has mined a 
meaningful amount of the overall supply and   you’re moving towards a proof of stake, and 
you don’t have full nodes that can be run by   anybody at a very cheap cost, the issues that 
you’re describing comparing it to the existing   system that we have today, where the people 
that hold all the wealth are the ones that   get to make up the rules, I think it only 
amplifies itself in that type of scenario   that I just described where you have a few 
people that are literally running data centers,   call it 10 years from now, because the block 
size is so large that somebody can’t just take   $200 and run a full node at their house.

I think 
it becomes even more concerning. And I’m assuming. Lyn Alden (00:44:13):
Exactly. I think a really good example   is 2017 Bitcoin. When debates were being had by 
expanding the block size, originally you had a   lot of big players on board with expanding the 
block size. You had a lot of the big mining pools   and you had a lot of the big exchanges. 
And if that was a proof of stake system,   that change would have had a higher 
probability of going through and being made,   even if it was against the majority of users. 
With Bitcoin design, the nodes really have   the final say on a lot of things.

Despite the 
fact that you started with a pretty significant   consensus of some of the power players, they 
were not able to push those changes through. Lyn Alden (00:45:00):
That’s, in my view, one of the big tests   of decentralization and proof of work and why 
there’s a big importance of running a full node   accessible and making that a widely distributed 
thing, because otherwise what you’re basically   building is a PayPal. We already have that. And 
so that’s how some people are thinking about it.   Whereas if your starting point is you want 
to make a decentralized base sediment layer,   a truly decentralized one, then Bitcoin pretty 
much nails that, and all these other ones in many   ways are missing the point and they’re replicating 
these decentralized things that we already have.

Jeff Booth (00:45:38):
Lyn, that point, if you’re   trying to compete against Bitcoin and you’re an 
entrepreneur that wants to do something else and   so you see Bitcoin success, you spin up as 
something else that looks different, that uses   different energy, that you’ve convinced people 
that this is a better mousetrap. That’s actually   the exact point. That’s what you would do as an 
entrepreneur, that’s what all the entrepreneurs   in that are doing, but the problem is it’s 
all centralized. It all becomes centralized. Lyn Alden (00:46:08):
Yep. Preston Pysh (00:46:11):  Hey guys, what were your thoughts… Stanley 
Druckenmiller had a massive CNBC interview   last week. I think most have forgotten 
about it because of all the Elon stuff,   but this was a massive interview and the stuff 
that he was saying… Joe Kernen on Squawk Box,   he stopped. He’s like, “Are you really saying 
what I think you just said?” And he was like,   “Yeah, I am.” I’m curious to hear 
some of your thoughts on that one.

Lyn Alden (00:46:39):
For people that are familiar with   Stanley Druckenmiller, because he’s not as much 
of a household name as, say, Warren Buffet is, but   for anybody in macro, Stanley Druckenmiller is the 
Tom Brady of the macro. He’s the GOAT of macro,   he’s the guy with the 30-year track record of no 
down years, just this insane macro forecasting.   And he’s really good with… Currencies and bonds 
are his main forte, but he dabbles across multiple   asset classes.

And the reason he’s got such 
a strong reputation is he can trade multiple   types of markets: bull markets, bear markets, 
different currency regimes, all sorts of stuff. Lyn Alden (00:47:19):
As an older investor now,   he’s not one of the people that, let’s 
say, been on Bitcoin from the beginning,   but he was like Paul Tudor Jones, one of the macro 
people that were open enough to have a non-zero   allocation of Bitcoin, fairly early for someone 
with billions of dollars of asset to manage,   where once became big enough to be on his radar 
where he could buy a little bit without moving   the price too much. And actually, even when 
he bought into it, he still found that… He   basically said he was still moving the price and 
so that actually limited how much he could do. Lyn Alden (00:47:52):
But overall, he gave a really good interview   where he talked about the changing of 
the dollars reserve currency status,   he talked a lot about the fiscal issues that we’re 
facing right out of the Luke Groman playbook,   coming from Stanley Druckenmiller on a bigger 
stage.

And also, he gave an interesting comment   about Bitcoin’s network effect compared to some of 
the other tokens in the sense that he’s undecided   about which blockchains will win some of these 
smart contract or payment platform things that   are happening. And he thinks there’s a good chance 
that some of the current leaders get displaced by   newer entrants at some point. But he was 
also from that he thinks as a store value,   that it’s really, really hard to unseat Bitcoin. 
And I think he’s done pretty good research on   Bitcoin’s network effect in that area compared 
to the whole array of all coins out there.

Preston Pysh (00:48:51):
How about his comments on the dollar, Lyn? Lyn Alden (00:48:55):
It’s one of those things where…   I certainly like it because it’s stuff I’ve 
been talking about for the past few years now,   which is essentially that with the 
current fiscal situation of the U.S.   and the fact that they don’t really have much 
of a choice other than to maintain negative real   interest rates on their debt under the current 
structure of how much debt is in the economy and   how default works and things like that, well, 
they’re trapped in that system. He’s inclined   towards thinking that we’re in a major dollar bear 
market.

He sees a somewhat inflationary outcome   and he thinks that as we look out 15 years or 
so, the current reserve structure… Basically,   the foundation of our monetary system 
is going to shift away from the dollar   to the sense that it’s not really the epicenter 
of the system that it currently is now. Lyn Alden (00:49:48):
And I think there’s nuances   where him and I might see things a little bit 
differently, but overall, he’s on that dollar   bear somewhat inflationary outcome, which is the 
way I’ve been seeing things for a while. He gave   an interview a little while ago, I think it was 
two months ago, and I included some of his quotes   in my… I think it was my February newsletter or 
March newsletter, because I think he’s been doing   really good commentary on some of the things we’re 
seeing in terms of fiscal policy, monetary policy,   broad money supply growth, the 
inflation versus deflation debate.   I think he’s been pretty sharp on 
that in the past six months or so.

Preston Pysh (00:50:27):
Guys, Caitlin Long,   I don’t know if you guys saw the post that she had   recently on Tether. Do you guys have any 
thoughts on some of her comments there? Jeff Booth (00:50:37):
Didn’t see that one, Preston. Preston Pysh (00:50:40):
Lyn, did you happen to see it? Lyn Alden (00:50:43):
I think I saw part of it,   but I had so many things on my plate. One of the 
concerns with Tether is they released documents   about its backing and it’s still rather 
opaque and unclear backing, you could say.   And so it’s one of those things where… I’ve used 
stable coins, but I personally don’t use Tether,   just I prefer some of the other stable coins, 
the more regulated stable coins for periods   of time where I use stable coins.

I put out a 
tweet that just… It kind of referenced Tether,   where I pointed out that if you deposit 
money in the U.S. banking system,   it is 46% backed by treasuries and 
cash, and then the other 54% is of a   variety of loans and things like that. That’s 
basically how the U.S. banking system works. Lyn Alden (00:51:39):
And that’s actually above average. Over the past   several decades, the average cash and treasury 
backing was more like 30% and the rest was a   variety of more risky loans, because that’s what 
banks do. And so things can always be phrased or   framed in negative ways where you make something 
sounds scary. In Tether’s case, I’ve never been   on the board.

I fully trust what they’re doing 
over there, but at the same time I think it’s… Lyn Alden (00:52:06):
Some of the concerns are overblown in   the sense that what has really structurally-moved 
markets is big pools of capital buying Bitcoin,   moving it off exchanges into cold storage and 
just causing a supply constraint, whereas Tether   is heavily used in the day-to-day trading of 
it as a unit of account. And so basically,   if we were to see a problem with Tether, I think 
it would turn out a lot like this Elon event   where you’d have these periods of volatility and 
periods of big problems and structures markets,   but it doesn’t change the underlying technology 
and network effect of Bitcoin itself.

Jeff Booth (00:52:48):
I totally agree with that. Lyn Alden (00:52:50):
Here’s a question for you, Jeff.   This is from Lloyd Robinson. He asked, “I 
heard Jeff on SALT Talks a few months ago.   He was asked several times how Bitcoin 
fixes are inflationary monetary system.   I don’t think the interviewer got a 
satisfactory answer and neither did I.   I would love to understand how Bitcoin 
fixes this so I can explain it to others.” Jeff Booth (00:53:12):
Again, technology provides   efficiency, and in a normal world, that would 
be deflationary. So a free market and technology   would equal deflation. The only reason that 
doesn’t equal deflation is because we have a   monetary policy that won’t allow it to. And 
that’s actually in this inflation-deflation   debate all the time. We live in a macro… Overall 
macro backdrop is exponentially deflationary.   And so when people ask, well, when is it going 
to be inflationary? When’s it going to be…   Because that’s not what they experience, 
because they experience the system that   is printing more money, that’s making prices 
go up. Bitcoin isn’t deflationary in itself,   it allows for the free market to work, which 
would allow deflation.

And as it allows deflation… Jeff Booth (00:54:19):
If there were growth, if there were more   real jobs, if there were more growth of things 
without monetary policy, then you would grow.   That would expand. But if more things went 
to technology essentially saving our time,   that would naturally be broadly shared 
with humanity instead of concentrated.   So the same thing why Google and Facebook, Amazon, 
Apple, everything else are able to concentrate the   gains as much as they are, besides the network 
effect, or the concentrate is the same reason   that the billionaires concentrate out of the 
printing of the money.

And so what’s happening is   if I simply said, a free market, as long 
as you’re not continuing making mistakes,   unless you’re growing huge new industries 
that are replacing more jobs than are lost,   then that free market must… Essentially 
if you said human innovation is getting   better all the time and you’re adding more, 
then that must equal deflation over time. Jeff Booth (00:55:37):
We don’t see it normally because we never   lived in a world that’s moved as fast as it’s 
moving today. And so you could hide inflation,   and the policy response to what we’re talking 
about didn’t have to be as big. Today,   the policy response on where we are on this 
train has to… And that’s what I talked about   in my book. It has to grow exponentially 
to offset what’s happening with technology. Jeff Booth (00:56:13):
One more thing. When we used to measure   economists’ models and everything else when 
they’d say deflation is made up, and it is true;   of demographics, that would be a big part.

There’s 
deflationary [inaudible 00:56:27] pressures, or   that when you off shore all your production to 
China. And so all of these things matter in the   overall, but they matter less and less compared 
to technology. As technology is exponentially   increasing its impact on our world and more and 
more of the base layer is moving to technology,   that base layer requires a natively digital 
currency that won’t allow for manipulation,   because otherwise, the manipulation equals more 
centralized control, centrally planned to market. Preston Pysh (00:57:08):
Lyn, you came out with your article   on Ethereum, and it had a lot of readership. 
I think you laid out some amazing things in   there that would take… We could cover 
that for an hour and a half. In fact,   I reached out to Vitalik to come on and have 
the discussion.

We didn’t hear anything back   from him. And maybe we need to just do a 
whole episode on your Ethereum article.   I’ll have it in the show notes for people 
to look at and read, because it is amazing. Preston Pysh (00:57:36):
But with all that said,   when we look at the price action of Ethereum 
compared to Bitcoin over the last, I’d say two   months, it has aggressively outperformed 
Bitcoin. What do you think’s going on?   And do you see a situation where even though 
you’re making all these fundamental arguments,   which I completely agree with, do you see this 
having the capacity to achieve a higher market   cap in the coming six months or a year moving 
forward? I’m curious to hear if any of your   analysis have changed based on how the market’s 
valuing it and just some of your thoughts.

Lyn Alden (00:58:21):
That’s a really good set of questions.   For people that aren’t aware of it, I basically 
analyzed Ethereum. It was somewhat of a critical   analysis. So it wasn’t super favorable towards 
Ethereum. There’s a couple of points where…   I try to be fair as possible, so if it’s doing 
something interesting, I say, “Okay, this part’s   interesting.” But the net overall case was rather 
critical on why I prefer Bitcoin as an investment.   And it really comes down to decentralization, that 
I ultimately view Ethereum more like an equity   where in a sense, people that are buying into it 
are betting on the development team being able to   push out updates and structure to how they want 
to basically make the system that they envision   rather than a decentralized digitally native 
form of money, which is what Bitcoin is. Lyn Alden (00:59:14):
Historically, whenever we have these alt seasons   happen… Generally, there’s one big alt season per 
Bitcoin halving cycle.

And you started to get this   inverse relationship between quality and price 
action, where literally the worst coins do the   best, the best coins do the worst. And so the 
funny thing is you can characterize this Ethereum   bull run as though it’s… Basically, some people 
are saying, “Does that mean it’s fundamentally   improving?” And it’s one of those things where 
even though Ethereum outperformed Bitcoin,   if you go down the quality spectrum, you have even 
smaller coins outperforming Ethereum. So the fact   that Ethereum Classic outperformed Ethereum 
year-to-date, does that mean that Ethereum   Classic’s network effect is gaining on Ethereum’s 
network effect? I would say probably not.   Those technical details, they never perfect 
this on Ethereum, not Ethereum Classic. Lyn Alden (01:00:06):
You have Dogecoin, right?   Dogecoin has certainly had a surge in popularity, 
but for anyone who knows the… People that have   shared their experiences of running a full node 
for Dogecoin or how that actual network functions,   or what kind of development crickets have 
taken place over the past couple of years,   basically what we’ve had is 
an inverse correlation between   price action and quality year-to-date.

And 
that’s happened in previous bull markets.   And it’s one of those things where after I wrote 
my Ethereum article… I even wrote in the article   that I wouldn’t be surprised to see it outperform 
Bitcoin on the bull leg of the market. I’d be more   concerned about how it does along with other alt 
coins on the bear market portion of the cycle. Lyn Alden (01:00:52):
And because I have a   research service… I cover Bitcoin frequently, 
but I’ve occasionally touched on Ethereum for   a broader picture. And I keep reiterating for a 
while now that… I was like, “Okay, if it breaks   over this level, that’s very bullish for the 
price action.” Then a couple of weeks later,   I’d give another update and say, “Yep, it 
still looks bullish with price action.” Lyn Alden (01:01:11):
And I kept reiterating why,   personally, I think Bitcoin is the 
more structurally sound protocol,   but that you can separate fundamentals from price 
action and say, “For people that follow Ethereum,   here’s what the price actually looks like; it’s 
bullish.

But just if you want to go that route,   be really careful because there’s…” I kept 
reiterating that I have concerns about   decentralization and the underlying use case 
or the reason for existence of the protocol   compared to Bitcoin, which I 
view as a more sound investment. Jeff Booth (01:01:45):[inaudible 
01:01:45]. Can I build onto that?   Because I think there’s an important part. Preston Pysh (01:01:50):
Yeah. Jeff Booth (01:01:51):
Today, a network effect is   when the value to each user gets stronger and 
stronger from a network effect. There are a   lot of people in the late ’90s to early 2000s that 
mistook network effects for eyeballs. So they were   buying more eyeballs thinking it was a network 
effect and that growth would always be there.

But   if it’s not making that network better for all 
users, then the network effect doesn’t exist. Jeff Booth (01:02:16):
So now, let’s look at a time period and say,   “Lightning wasn’t there five years ago and 
Ethereum was there.” And then the whole NFTE   craze came on. Actually, there is value, and if 
people think there’s value on Ethereum because   NFTE is driving a whole bunch of more people on 
it.

Let’s examine that for what it is. I totally   agree with Lyn, by the way, on it could outperform 
in the short-term, but not in the long-term. Jeff Booth (01:02:53):  Now let’s look at the NFTEs, which is driving 
a whole bunch of their rate of growth on   Ethereum. I look at the NFTE market like I would 
look at Groupon from a business. Remember Groupon? Preston Pysh (01:03:07):
Mm-hmm (affirmative). Jeff Booth (01:03:08):
Groupon created an incredible business   by getting everybody to buy the one thing. And 
so they had one great deal that everybody bought.   But the only way to scale that 
business was to add more things.   And as they scaled, it just became more and 
more noise.

And then nobody cared about the   one thing anymore, because it was noise. And 
then there was so many other competitors that   did the exact same thing. When I look at 
NFTEs on top of the primary source of value   in the growth rate today of Ethereum, that’s 
what I look. So I discount that growth because   it’s not a stable business over time. I’m 
not questioning that NFTEs can’t have value,   I’m questioning how much value 
compared to what they will have   if everything is digitized and I get to 
buy something that I get to say it’s mine. Jeff Booth (01:04:05):
And so today, there’s a whole bunch of people   thinking, “Wow, that’s going to be a staggering 
business.” And I think they’re overvaluing it like   they overvalued Groupon then fell to the floor. 
And apart from that, and this is where [Druck   Miller 01:04:20] and I agree, that technology 
might just be built on to Lightning Network   on the base port protocol or something 
else based on it.

It didn’t exist before,   but now it’s starting to emerge. And so what’s 
being built on top of Bitcoin on the network   is just in its infancy. And we’re going to see a 
whole realm of things tied into the base protocol. Lyn Alden (01:04:50):
One thing I was going to say is the example of   stable coins, and that’s something I have covered 
a little bit in my Ethereum article and elsewhere,   which is that some of the earlier stable 
coins were tied to the Bitcoin network.   And then when you had Ethereum, you started 
to have them move over to Ethereum because it   was cheaper and it made for that sort of thing. 
And then now, as Ethereum’s got more expensive,   you’ve had stable coin usage spill over onto TRON,   of all things.

And so the problem with utility 
protocols is that when you start sacrificing   certain variables, basically you’re making 
things more efficient in exchange for   centralization. Then another protocol come 
around and make things even more efficient,   but with more centralization where basically… 
until it just approximates the database. Lyn Alden (01:05:40):
That’s what we’re seeing in the stable coin space,   where it started out with the smaller 
transactions, they have a more incentive to   move to cheaper chain, because if you’re doing 
a hundred dollar transaction, you can’t pay   $50 for a transaction, but if you’re doing a 
$10,000 transaction, then you can. But as the   fees get higher and higher, a bigger chunk of the 
uses spills over onto that other protocol. And   same thing’s happening with Binance. It’s 
another kind of a decently-sized network   effect that is coming into that space. And 
this was outlined in John Pfeffer’s paper   several years ago where utility protocols 
essentially have to compete on price.

And so   the network effects are not going to be as strong 
there as they will be for something like Bitcoin. Lyn Alden (01:06:30):
I’ve spoken with John before and he’s   paying pretty close attention to this industry. I 
think he has really, really good points on that.   And I generally agree with that paper where 
even if you do get some degree of network effect   in the utility protocol space, which for 
example, Ethereum has for a number of years,   that doesn’t necessarily translate into long-term 
token appreciation because your reason for   existing is going to be constantly threatened 
by cheaper, more centralized competitors.

Lyn Alden (01:07:06):
And whereas Bitcoin doesn’t really have that   problem because the entire point is to just be a 
decentralized store of value, then you can build   other things on top of it to make it a better 
and better payment network and a smart contract   network or whatever the case may be if people 
want to add those features. So, for example,   The Lightning Network is obviously a really good 
use case there that basically strengthens Bitcoin,   but that the underlying protocol has a 
lot more defenses against competitors   compared to those utility protocols. Preston Pysh (01:07:36):  In your article, you were talking about 
Infura with your Ethereum article,   and on the website for Infura, this was the 
quote that you put in the article. It said,   “It can get expensive to store the full Eth 
blockchain, and these costs will scale as you   add more nodes to expand your infrastructure. 
As your infrastructure becomes more complex,   you may need full-time site reliability engineers, 
and dev op teams to help you maintain it.”   And that’s today.

Those statements are being 
made today, and that’s why they’re saying   that a person should outsource that to them 
to manage. And I’m just thinking to myself,   “How is that something that in the 
long-term is going to remain decentralized?”   And [crosstalk 01:08:26] Go ahead, Lyn. Lyn Alden (01:08:27):
Well, especially as you move over to Ethereum 2.0,   because they’re running into scaling just like 
Bitcoin would without Lightning, for example,   where they can only handle so many transactions, 
fees get very high on Ethereum. But unlike   Bitcoin… Bitcoin, the average transaction size is 
pretty big, so it can withstand pretty high fees.   And when you need a smaller transaction, smaller 
fees, that’s what Lighting Network’s for.   In Ethereum, you’re doing more 
complex transactions.

For example,   if you’re doing different swaps and 
things like that, you’re paying very,   very high fees. And so there’s a strong 
incentive to spill over onto cheaper chains.   So theorem 2.0 is trying to scale, it’s 
trying to do more on the base layer. Lyn Alden (01:09:13):
So, they’ve changed the roadmap a number of times,   but basically you can have different types 
of nodes and different types of… Basically,   almost like an army of different nodes where 
certain things are validating certain parts of   the blockchain because nothing is big enough 
to validate the entire blockchain unless   you’re running a data center. And so that just… 
Again, it becomes a rather centralized entity.   When it comes to blockchains, there’s two 
types of centralization to worry about;   one is the technical decentralization which is 
what you get for example if Infura goes down,   you’ve run into blockchain wide issues, for 
example. That’s a technical centralization issue. Lyn Alden (01:09:55):
And then, two, would be developer   centralization where, say one foundation or one 
team has the capability to push through changes   more easily and change monetary policy or change 
designs.

Whereas if you have something that’s   more inherently decentralized, it requires true 
consensus to support. They overlap, certainly.   There’s two types of centralization, but they 
are slightly different in the risks involved. Preston Pysh (01:10:26):
Guys, that’s all I have for tonight. And I know we   went late. Lyn, Jeff, both you guys, I reached out 
to you today to record this and you both said yes,   and I can’t thank you enough. Give people a 
handoff to where they can learn more about you and   some of the links and all that stuff we’ll have in 
the show notes. But Lyn, go ahead and fire away.

Lyn Alden (01:10:48):
I’m at lynalden.com. I’m also   active on Twitter @lynaldencontact. And a lot of 
my work is public, so people can check that out.   And I cover Bitcoin, I cover a bunch of other 
asset classes. I cover macro in general.   So basically, whatever asset class you’re 
into, hopefully, my work can help people out. Jeff Booth (01:11:06):
My best place for me is @jeffbooth on Twitter. Preston Pysh (01:11:11):
And Jeff has an amazing book,   The Price of Tomorrow. We’ll have a 
link for that in the show notes as well.   Guys, thanks so much for making time. Jeff Booth (01:11:20):
Thanks a bunch. Lyn Alden (01:11:21):
Thanks for having us. Preston Pysh (01:11:23):
Hey, thanks for everybody   listening to the show.

If you enjoyed the 
conversation, be sure to subscribe to the show   on whatever podcast app you’re using. We 
really appreciate that. And if you have time,   leave us a review. Thanks for joining us 
this week and we’ll catch you next Wednesday. Outro (01:11:37):
Thank you for listening   to TIP. To access our show notes, courses 
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