WBD576 Audio Transcription
Bitcoin Can’t Lose with Parker Lewis
Release date: Friday 4th November
Note: the following is a transcription of my interview with Parker Lewis. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
Parker Lewis is Head of Business Development at Unchained Capital. In this interview, we discuss the failure of currencies, the collapse of the economic engine and Bitcoin being the largest tidal wave that's ever existed.
“The only way for that system to subsist into the future is for them to print more and more money, and in either scenario, whether they print money or they don’t, the economic engine collapses.”
— Parker Lewis
Interview Transcription
Peter McCormack: Parker, how are you doing, man?
Parker Lewis: Good to have you back in Austin.
Peter McCormack: You always say that. I love coming back though, I love it here, man. What's this, like the 50th trip or something?
Parker Lewis: I'm not counting.
Peter McCormack: It's like a second home.
Parker Lewis: Yeah, I feel like you just should move here, but maybe you've chosen Miami, I don't know.
Peter McCormack: No, definitely not Miami.
Parker Lewis: Okay.
Peter McCormack: We go there for some interviews. This is our home from home; Danny likes it here.
Danny Knowles: I like it.
Peter McCormack: You get it now, don't you?
Danny Knowles: I like Austin a lot, yeah.
Peter McCormack: We didn't have Danny on the mic last time.
Parker Lewis: Danny, do you like Austin more than Miami?
Danny Knowles: Oh yeah, more than Miami, for sure.
Parker Lewis: For sure.
Danny Knowles: I like Nashville a lot; I think Nashville might be my favourite.
Parker Lewis: Yeah, Nashville's a close-ish second.
Peter McCormack: Nashville's the competition.
Parker Lewis: Yeah, it's the friendly competition.
Peter McCormack: Friendly competition.
Parker Lewis: Yeah, we're friends with all those guys; we want every city to be a Bitcoin city, including Bedford.
Peter McCormack: Yeah, well Bedford isn't a city.
Parker Lewis: Is it not; it's a town?
Peter McCormack: It's a town. I don't know what defines it; it has to have a cathedral?
Danny Knowles: I think it's a cathedral, yeah.
Peter McCormack: Yeah, so it has to have a cathedral to be a city.
Parker Lewis: I think we're a little bit looser with our definitions here in Texas.
Peter McCormack: It's a British quirk.
Parker Lewis: We do have towns but nobody knows the difference.
Peter McCormack: What's the population here?
Parker Lewis: In Austin?
Peter McCormack: Yeah.
Parker Lewis: I think about 2 million, the MSA is 2 million, I think the city, the proper city limits is closer to a million.
Peter McCormack: Yeah, so we're 174,000 in Bedford, and we have one bitcoiner there, which is me, but we're trying to spread the --
Parker Lewis: You told me just earlier, when we watching the game, that 30 bitcoiners came out to the meet-up.
Peter McCormack: Yeah, they're not from Bedford; they came from all over the country. But we're trying to Bedford pill, and we're trying to Bedford pill people in America, and we're trying to orange pill people in Bedford.
Parker Lewis: Orange British people pill…!
Peter McCormack: You know what I'm saying! We're trying to do that. No, were are, we're building a community there. What was super-interesting, the first meetup, we had 30 locals come who know nothing about Bitcoin. We had Conor Okus teaching them about Bitcoin, and we were giving out Bitcoin on the Lightning Network, we got people to download, was it Muun wallet?
Danny Knowles: Yeah, Muun.
Peter McCormack: Muun wallet, and we were giving everyone Bitcoin; it was cool. People were understanding it, and you build a little community like that, then it grows and grows and grows, and a handful of those people are now coming back with questions. I mentioned earlier, maybe it was to you or to Will, I got a message from my cousin who came and he's now saying to me, "What do I do about custody because I've got it in a hot wallet; should I get a hardware wallet?" So, those questions are starting to happen and you know what it's like, those 30 people might become 60 people, and 100 people, and before you know it, we're the El Zonte of England.
Parker Lewis: Yeah, we do orange pill one by one, and one of the beautiful things I think you were talking about earlier is there's something very low time preference about that project in the tenth division each year; hopefully your team will win, move up a division, more people will be exposed to not just the team but the brand, and more people will learn about Bitcoin when they see that you're doing.
Peter McCormack: Yeah, that is my trojan horse essentially, it's my trojan horse to bitcoiners to orange pill as many people in the UK as possible. We have a Bitcoin logo on the shirt, we have it in the badge, and our project, ultimately, is to try and get a team from the bottom to the Premier League, which everyone in the UK thinks I'm ridiculous and I'm an idiot and it can't be done; I say it can be done but it might take two decades, it might be a case that's it's a project carried on after I die by somebody else, but its creating that trajectory that gets us there. It is a low time preference thing, it is one game at a time, one season at a time, one person at a time, fingers crossed.
Parker Lewis: Well, they won today, 2-0.
Peter McCormack: 2-0.
Parker Lewis: You got a bar in Austin to play the game and to have the audio on while there were two Champions League games going on at the same time, so…
Peter McCormack: There were more Real Bedford fans than Liverpool fans there.
Parker Lewis: There were.
Peter McCormack: What did that finish; did that finish 2-0?
Danny Knowles: I didn't even see.
Peter McCormack: Yeah.
Parker Lewis: It's because it's a Bitcoin city.
Peter McCormack: It is a Bitcoin city.
Parker Lewis: A lot of bitcoiners.
Peter McCormack: Yeah, man, it's a Bitcoin city. Okay, I want to talk to you about something today, I'm in my third bear market, my second real bear market; the first time I just gave up and ignored Bitcoin and forgot about it. But this is my second one where I'm living through it and surviving it, well it's like you survive a bear market. But as Bitcoin grows, we get more and more people coming in every time; we know that because we see the increase in downloads, there's that acceleration in growth each time. But that also says to me there's an acceleration of the number of people who are going through this for the first time and I feel like it's a good time to try and get back and explain to people what the mission is, why we're doing this, remind them where we're going with Bitcoin.
Me and Danny talked about, if we're going to do this with somebody, Parker Lewis is probably the best person to do it because I think you're one of the most level-headed people explaining Bitcoin. You're not on this rollercoaster of, "Burn the state down and create --" you're just a businessman creating a Bitcoin business who has 100% conviction behind it; would you accept that description?
Parker Lewis: I would accept that as generally accurate. I think this would be my considered second bear market; I really got into Bitcoin in 2016. I don't even know if what we experienced last year was kind of an extension of the last cycle but regardless, when I got into Bitcoin, it took me while; I didn't immediately jump in, it didn't immediately click.
I did the work to understand why Bitcoin had value, and I think that realistically, Bitcoin is adopted as knowledge distributes, and understanding Bitcoin is something that is difficult to do and that it's a lot easier to adopt Bitcoin when the price is increasing because people are effectively following people previously who had done the work and are following the herd. But throughout the cycles, the value proposition of Bitcoin does not change. When you ask the question, "What is our mission here?" I do think that it's important to qualify that each person looks at Bitcoin and thinks about Bitcoin and uses Bitcoin for their own reasons.
Peter McCormack: I literally just wrote, "Understanding of Bitcoin is personal".
Parker Lewis: Yes, and I think everyone's journey to Bitcoin is also personal because in order to understand Bitcoin, you have to have some context of some fundamental questions about what money is, have some range of introspection to be able to question assumptions about what money is, and then understand how that relates to Bitcoin; all of that then applies to everyone's own personal experiences, their personal work experience, their education, how they grew up, where they grew up. So, it is a very personal journey.
While people might use Bitcoin for different reasons, and I do think that it's important to qualify that our, or we, I really speak with my own voice but I've spent a lot of time educating about Bitcoin, is anchoring back to why Bitcoin exists and why it is valuable. In the ups and downs of Bitcoin, I like to think about Bitcoin's price more as purchasing power, but whether Bitcoin's going from $20,000 to $3,000, or $3,000 to $70,000, or $70,000 to $20,000, Bitcoin was designed to be a better form of money.
It might act or move on a day-to-day basis, or be used on a day-to-day basis like other currencies that people are more commonly used to, but it's designed to be a better form of money, and the way that it delivers that mechanism, principally, is affording a form of money that simply can't be printed. If we're reanchoring to the mission, it is we're living in a world where inflation is rampant, central banks are diverging in their approaches to solving the problem of inflation, ultimately my view is they've created the problem of inflation and they cannot solve it, the only thing that can is Bitcoin, that is why it exists.
When I simplify it for people, it is there are multiple currencies in the world, only one has removed the need for trust and only one has afforded people an option to opt in voluntarily to a form of money that can't be printed and that is controlled by no one; that is the "why" of why Bitcoin exists, it's also why Bitcoin is valuable, and I always anchor to that. Bitcoin's going up or down and people always ask me the question, like, "I thought Bitcoin was supposed to be an inflation hedge; why is it going down when there's a lot of inflation?" but I always have to root people in all fundamental value, in my view, is derived from the fact that there will only ever be 21 million Bitcoin.
Now, it also so happens that that is only possible so long as Bitcoin is permissionless, that anyone can join the network, it is resistant to censorship, that 21 million is tied to that concept of it's also permissionless to send Bitcoin to anyone from anyone, and that censorship at the protocol level's not possible, those things go hand in hand in my mind. But that fixed supply, being able to opt into a form of money that can't be printed, is the fundamental value proposition; that is hard for people to understand.
So, it doesn't matter what the Fed is doing, or what the ECB is doing, or the BoJ is doing, it really doesn't matter what is happening in the fundamental inflation mechanics of those currencies that have been printed in significant form because Bitcoin adoption happens as people learn and understand Bitcoin; those two things are often attached, sometimes they collide. When the Fed printed $3 trillion in 3 months in 2020, a lot of people figured out Bitcoin then, so they are related, but they are also not perfectly correlated.
Peter McCormack: Okay, so why can't they solve the problem of inflation; is it the incentive models of those who make the decisions; is it the political cycle?
Parker Lewis: I would say they can't solve the problem of inflation because they are the source of inflation. When I say "they" I'm talking specifically about global central banks that control the supply. That is one fundamental distinction when I talk about the distinction between Bitcoin being a form of money that can't be printed and a form of money that can, the central bank fiat currencies not just are printed but are printed persistently, chronically, however you want to describe it.
The other key distinction between it is it is a trustless system in Bitcoin versus a trusted system, that there is a central group of people that control the supply of dollars, euros, yen, and what they have shown, empirically, is that they have no other mechanism to manage the economy other than create more money and then, for periods of time, subtract the amount of money in the system. In my view, that trust has already been broken.
When we think about food being 10% to 15% more expensive, if not higher, gasoline prices 25% higher than a year ago, all of that is related to the fact that central banks printed trillions of dollars over the course of the last three years. But extending back to the Great Financial Crisis, all inflation of monetary means comes from the fact that, historically, a lot more dollars, a lot more euros, a lot more pounds, a lot more yen, have been printed.
Now, to the question of why that has to persist, it is because their entire systems, the Fed's, the EBC, the Bank of Japan, the Bank of England, their entire system is based on a debt-fuelled bubble. Their whole system is credit-based, and the underlying currency that they produce digitally has to be printed otherwise their entire system collapses on itself because functionally, for four decades, over the course of early 1970 to the Great Financial Crisis, they slowly introduced more money in order to allow existing debt levels in their credit systems to be maintained rather than to be restructured. That created a massive and unsustainable credit bubble, and the only way for that system to subsist into the future is for them to print more and more money.
In either scenario, whether they print money or they don't, the economic engine collapses; it either collapses because they print too much money or, as we're seeing now with the Fed, as they're trying to rein it in, it's basically like the difference between pulling on a thread and trying to push the thread back in the hole.
Peter McCormack: Yeah, and do you see a scenario where we're about to see another significant print because there are divergent opinions on this. Who was it who was saying the other day…?
Danny Knowles: There are a lot of people who are in the camp of a print coming soon, but people like Jeff Snider, I don't think he thinks there is.
Peter McCormack: He doesn't, but Greg Foss does, doesn't he?
Danny Knowles: Yeah.
Peter McCormack: Do you have a belief that we have another print coming; is it inevitable?
Parker Lewis: It is inevitable, and that's also how I think about reanchoring. The price of Bitcoin, purchasing power of Bitcoin, is increasing, decreasing; the thing that is inevitable is that there will only ever be 21 million Bitcoin and that is enforced on a trustless basis only because it's decentralised, and continues to become more decentralised over time. As a certainty, whether it's a week from now, a month from now, six months from now, a year from now, potentially a little bit longer but probably not beyond that, but inevitable certainly, is that the Fed and all central banks are going to have to print more money, and that dynamic is governed by the fact, and I always like to anchor people in hard numbers that aren't difficult to calculate, I usually focus on the Fed because I'm based in the United States, I'm more familiar with them, but today, approximately $90 million in dollar-denominated debt exists and about $9 trillion exists in the banking system.
Now, what that equation looked like during the Great Financial Crisis, there were $52 trillion of dollar-denominated debt and only about $350 billion in the banking system; there was about $1 trillion total. So, the base money supply, which is the one that matters the most, it is the money supply that allows for credit expansion, that is increased by nine times. But if we fast-forward today and there are $90 trillion of dollar-dominated debt in the world and that is very vanilla, fixed maturity, fixed liability debt, like your mortgage, your student loans, corporate debt, state, local, federal, not derivatives, not un-funded pension liabilities, $90 trillion to $9 trillion. When the Fed starts to raise interest rates, everyone that is in this leveraged short-dollar position, while the dollar is becoming more and more abundant and its value is going zero because of that, it is still relatively scarce.
The United States, the world as a whole, they're short dollars because that debt to dollars dynamic. That is the same thing that guarantees or dictates that they will have to print more dollars because what happens is, as the Fed "tightens" or raises interest rates, the world figures out that they are far more than just a dollar short and they start to scramble around to find dollars to pay dollar-denominated liabilities. Now, not every dollar-denominated liability is due tomorrow, or the next day, or in a week, or in a month, or in a year, but they're due, and as that financing condition becomes tighter, everyone starts to scramble, and as they do that, they're effectively causing the credit system to start to collapse on itself.
Then what has to happen, from the Fed's perspective, this is what happened in 2009, it's the same thing that happened in 2020, and it will be the same thing whether it's later this year, or next, or the next, is that as that credit system begins to collapse, they will have to supply it will more dollars otherwise it's sure extinction. If they print more dollars, it has the potential to kick the can down the road but it's damned if you do, damned if they don't; they created basically this unrecoverable system and it's something that is not repairable, you can't repair the legacy system.
What Bitcoin is doing is it's saying that system is broken, somebody or some group of people thought of Bitcoin, executed it, people started to learn about it, contribute to it, adopt it, but what it is functionally doing is replacing a system that is irreparably broken.
Peter McCormack: But do we know how it breaks if they didn't print; what is the scenario; how does it play out; how does it break?
Parker Lewis: Well, the way that it breaks if they do not print, think about the equation of $90 trillion of dollar-denominated debt and $9 trillion.
Peter McCormack: Default.
Parker Lewis: If they do not print, as the world figures out that these debts can't be repaid, there aren't just defaults but there are waves and waterfall effects of defaults, that one default functionally causes the next, that causes functionally a bank run, banks become insolvent. In this world that the Fed and central bankers and Keynesian academics have created, the banking system went from just another sector of the economy that freely competed for monetary capital alongside every other industry, to being the lifeblood of their system; everything has to go in and out of the banking system, every financial transaction functionally such that if business after business starts to default and the banks become insolvent themselves, then the coordination engine of the currency itself fails.
That means goods and services not being delivered to market, gasoline not getting to gas stations, not necessarily holistically but the impairment of that ability, less food on the shelves at grocery stores. So, as there's more and more money that's actually more abundant, and the delivery of goods and services becomes more and more impaired, you have more money competing for fewer goods and services, and there are certain things in an economy that are inelastic.
When I talk about inelastic, I'm talking about food at the grocery market, it doesn't matter if you have a job or not, you need to eat to survive; it doesn't matter if you have a job or not, you need gasoline to get to a doctor, to wherever you're going in a day; if you want clean water at your house and you want plumbing, you need power. Those goods are inelastic, and as that function breaks down, the ability to get those services becomes harder and harder while the same amount, if not more money, exists.
So, it's that function of the credit system collapsing, the ability of those companies that maybe come insolvent to deliver services become impaired, that has knock-on effects, creates a run on the bank because the banks and their solvency becomes a question, they're the ones who have issued all these loans that run on the bank. Then ultimately, the whole coordination engine just collapses and the dollar hyperinflates in that scenario. So, if they print, they likely kick the can down the road; if they don't the system collapses far faster.
Peter McCormack: So, kicking the can down the road, do you see it as a period of controlled inflation until it breaks the other way? Is it something whereby, yes, we're having 10%, 15% inflation, real numbers, then perhaps that gets under control and we get down to maybe 5% but they have to print again; or do you see either scenario we're going to end up, at some point, with the currency collapsing either way?
Parker Lewis: The currency collapsing's inevitable.
Peter McCormack: Okay, but could that be something decades away?
Parker Lewis: It could be; it's impossible to predict, and that's why, when I think about a framework of the future of Bitcoin, of what's going to happen with fiat currencies, the collapse is inevitable and Bitcoin emerging as the currency that facilitates not just the vast majority, but practically speaking all of the world's commerce, to me at this point is inevitable. We can talk a little bit about how I think about that, but the legacy system is broken to a point that it can't be repaired and the root of it, like if you anchor to something that is a fundamental fact that cannot be altered in this world, it is that the cost to produce a dollar is zero; the cost to produce $100 million is zero; the cost to produce $1 trillion is zero; the cost to produce $5 trillion is zero.
It's the same equation for the bolivar, cost the Venezuelan Government zero to print trillions of dollars, functionally or marginally, same for the ECB, same for the BoJ. That is the fundamental fact, that the cost to produce money, the control is in the hands of a very few number of people and they've already done it to such an extent that the Pandora's box was opened and it put themselves in a situation where it allowed this unsustainable debt bubble to metastasise or to become a bubble in the first place and then metastasise from there. And at the same time that that exists, because the two things are related, there is competition now meaningfully for the first time since fiat currencies emerged.
There is, for the first time in Bitcoin, a meaningful alternative to, if you were sitting there in the world and you recognised that it costs zero to print $5 trillion, and not just that that is true but that they do it and that they have to do it and, "Oh, here's this thing, Bitcoin", it is trust versus trustlessness, it is printing trillions of dollars for zero cost versus a fixed supply that cannot be printed but are issued based on a consensus set of rules and by proof of work; A versus B. It's A versus B for all 8 billion people in the world, and when someone opts out of the legacy currency, a fiat currency like the dollar, and decides to start to store wealth in Bitcoin, that is part of the currency collapsing.
Peter McCormack: So have you found yourself, when you're explaining Bitcoin to people, whether it's a potential new customer, your family, your friend, that the way you are explaining it has changed, because I have? I find, especially right now, it becomes a lot easier to explain why Bitcoin has value by explaining what is going wrong in the current system, especially when you can't help but miss what's going on in the UK at the moment. We've got high inflation, rising interest rates, we nearly had the pensions' collapse, the Government's suddenly found £60 billion; when they can't even pay for some social services, they found £60 billion to rescue the pension funds. We've got a massively growing debt-to-GDP ratio, we've got both a government and a currency that I think is in crisis.
That becomes a lot easier to explain when somebody turns around to me and says, "Why should I care about Bitcoin? Explain Bitcoin to me", actually, I just start explaining what the problems are with the current system; whereas I used to explain what Bitcoin is. I used to say, "It's censorship-resistant money", but now I just explain the problems with the current system. Is that something you're finding you're doing?
Parker Lewis: So, the way that I came to understand Bitcoin in 2016 really revolved around this whole thing.
Peter McCormack: Okay, it's not changed?
Parker Lewis: I figured out that, at that point in time, the Fed was in the process of at least starting to signal to the market about how they were going to unwind post-Financial Crisis quantitative easing, and I realised that that would never be possible, that they would never be able to get out, they would never be able to unwind. Even if they pursued a path over 2017 to 2019 to take some portion of that money that they had put in from 2009 to 2014, they would never be able to sustain that and they would have to put in far more money.
Peter McCormack: Sorry, just to interrupt, is that because you can't close the gap between dollar-denominated debt and dollars available that have been issued; you cannot close that?
Parker Lewis: The only way to close that is by printing money. I mean, functionally, there are technically two ways; you could either let the debt collapse or you could -- really there are two frameworks. You have a debt problem, 2008/09, I think most people, even at this point who didn't understand what happened at the time, recognised that we had an instable and unsustainable debt problem. In that scenario, you can either allow debt to be restructured to basically be written off or you can print more money to be able to repay those obligations. So, the way I think about it is that, with an individual company, when it can't pay its obligations, it restructures, potentially, it restructures and continues forward or it goes away.
Peter McCormack: The same with a mortgage, you can restructure your mortgage.
Parker Lewis: Yeah, but you're basically writing debt down. Same with an industry, maybe there's a secular shift and we move away from an industry; those companies either restructure or they go away. But when it comes to the system as a whole, the debt levels create this scenario where, functionally speaking, over the course of many decades, the Fed responded by rather than taking a debt problem and allowing a system to be restructured and to allow debt systemwide to be written down and written off, they allowed an unstable debt problem to persist and to be exacerbated by introducing more dollars to allow credit to actually expand.
Danny Knowles: So, for every new debt, there's a future demand for dollars, and so to meet that future demand, they have to print?
Parker Lewis: Correct, because they basically got themselves into this quagmire of every time this predicament happened, over the course of the 1970s, 1980s, 1990s on par into the 2000s, when that business cycle would contract, they would introduce more money to basically manage the "business cycle".
Peter McCormack: But if they allowed the contraction, it's that Ray Dalio video that we keep talking about where he talks about the economic cycles, that you have the credit booms and then you have the contractions; if they'd allowed that then that would have been fine, we would have just gone through those periods, but they've eliminated the booms and busts.
Parker Lewis: They basically supressed volatility and then the ultimate outcome of that was to defer, not just defer volatility but to exacerbate it.
Peter McCormack: It's like the widening in wealth gap, how does that widening gap between credit and actual dollars happen; is it the bond market; is it pensions?
Parker Lewis: Well, it's just easy to talk in real terms, so kind of snapshot 2008, 2009, there was $52 trillion-ish of dollar-denominated debt and about $350 billion in the banking system, about $1 trillion systemwide. From 2009 to 2014, the Fed introduced $3.6 trillion new dollars, so depending on whether you look at it as cash in the banking system, they increased the cash in the banking system by 10X, or as a system in the whole, they increased the cash total by about 3.5X. What those dollars did was allow those existing debt obligations to be sustained functionally to stop the bank run, to allow more dollars to service the existing debt burden, but what it also did was introduce new dollars to allow for credit expansion.
So, by introducing $3.6 trillion of new dollars, of base money, over the period from 2009 to 2017, the amount of dollar-denominated debt expanded by $30 trillion approximately, from $52 trillion to $82 trillion, approximately $80 trillion. So, new dollars being introduced in the order of magnitude of $3.6 trillion to new debt being produced of $30 trillion, that each dollar that is introduced -- say I lend you money for 30 years to go buy a house, now somebody has new deposits in the banking system, they might invest those in loans, they might issue another loan, so it basically compounds.
Everyone, when they figure out that the system is unsustainable, then the reverse course of action takes place and there are knock-on effects. So, for each dollar that is introduced in the system, many multiples of debt can be produced because of how it's recycled in the system.
Peter McCormack: Right, okay. So, I do then therefore think one of the biggest jobs we have is educating people about the current system.
Parker Lewis: Right, well that's one of the things. Bitcoin's hard to understand, money's hard to understand, but the legacy system is hard to understand, right?
Peter McCormack: Yeah.
Parker Lewis: Trying to help them understand this. The way that I, and coming back to your question of how maybe explaining Bitcoin to people has changed, I've always gone down that consistent thread of the Fed has to print money, helping them understand why, helping them understand these debt to dollar dynamics; because what is really important to people is simply that fact of, you've experienced historically the fact that your government has printed money, whether it's government, central bank, even though they're independent from each other they're functionally the same, they're tied at the hip, inseparable; you know empirically that they have a track record of doing that; you might not understand why they do it but you know that they do it.
Then if can help people understand this is why it is inevitable that they have to do it again, that there is actually a mechanism that forces their hand, that connects dots for them. Then, when they understand that this thing, Bitcoin, is not blockchain tech, it's not the next tech wave, it's the solution to that problem, that makes it fundamentally easier for them to understand. What I have found in the last six to nine months, and I've to change some of how I've explained this, is I like to think about Bitcoin as it's not an inflation hedge.
Peter McCormack: Yeah, I was about to say, it's a hedge against collapse.
Parker Lewis: Well, I look at it as it's not a hedge against inflation, it's actually the solution to inflation.
Peter McCormack: Okay, yeah.
Parker Lewis: It's taking the fly out of the ointment. Inflation is a function of people printing money, central banks, 12 people sitting around a table in New York or DC or wherever they meet, and the equivalent in the UK or Tokyo, and Bitcoin fixes that. If you can't print money, we will not see monetary inflation; monetary inflation is a function of that.
Now, what is difficult for people to understand is, at the same time, when CPI inflation in the United States is 8% to 10% and real inflation, which everyone experiences at the grocery store or the gas station, is higher than that, they think of and they've been told a story that Bitcoin is an inflation hedge; or that simply if I go tell somebody, "Hey, the government printed $3 trillion between March of 2020 and May of 2020, Bitcoin is the solution to that", that makes sense. But then what doesn't make sense is, "Hey, why when there's more inflation is the price of Bitcoin not going up?" So, what I've had to do is help people understand how those two things are entirely consistent with each other.
Peter McCormack: We've collectively, and I say collectively not saying we're all at fault, but collectively that was a narrative that we took through Bitcoin. We said it's an inflation hedge, giving people the anticipation that, when we see high inflation, more people will be buying Bitcoin to hedge against it, which just hasn't happened. But I see what you're saying now, it's the solution but it's a work in progress, it requires more adoption.
Parker Lewis: Calling Bitcoin a hedge to inflation I think it's an attempt to meet people maybe where they are because they've thought about other things as hedges to inflation without questioning the fundamental cause of inflation and what the potential solution to that would be. So, I kind of view it as like the description of it's a hedge to inflation as always having been kind of somewhat lazy, or if it wasn't lazy, it also wasn't accurate because it's really competing at that monetary level, that Bitcoin will replace the dollar, or replace the euro, or replace the yen, and that will fundamentally fix this problem that we all persist in which is monetary inflation or the function of central banks printing trillions of dollars.
But what I try to help people understand on that point is that Bitcoin -- because the explanation for that, even if you say, "Let's forget that we said that it was a hedge to inflation, if Bitcoin is a solution to governments printing money, why in this environment where the symptoms of what all these bitcoiners have been talking about are playing out, why is Bitcoin not going up in that period of time?"
I simplify it for people in these two ways; one is to recognise that while significant and material to the world, Bitcoin today, even though it's working to replace the dollar, this dollar, at least, is still my unit of account and is most people's in the United States, maybe most people in the world, at least in terms of financial markets, the entire Bitcoin universe, the purchasing power is between $350 billion and $400 billion dollars. The global financial system, the value of global financial assets is $400 trillion.
The dollar is the 800-pound gorilla in the room such that when the Fed is taking measures to tighten financial conditions, dollar financial conditions and dollar financing conditions, everything else gets dragged along, as we're seeing. The euro; the pound; the yen; the stock market; the S&P; the Dow; the Nasdaq; everything becomes correlated to the dollar because the dollar is the funding currency of the world and everyone is short dollars, everyone is scrambling to source those dollars.
So, while Bitcoin is the solution to the problem of the Fed inevitably having to print more dollars to prop up the credit system, when you think about that relative size, when the global financial market, the market for financial assets goes down by 1%, $4 trillion of paper wealth gets eliminated; Bitcoin, as a total, is $350 billion to $400 billion. When that market goes down by 5%, that's $20 trillion of wealth being evaporated.
So, despite the fact that the dollar will continue to be printed over time, what's happening right now is actually the dollar supply is becoming restricted. So that's one half of it, that Bitcoin can be the solution to dollar inflation, at the same time that the dollar economy and what the Fed is doing by tightening conditions, is creating a run on dollars and all liquid assets get sold when dollar financial conditions get tighter. The second piece of this is Bitcoin is adopted as a function of knowledge distribution. Bitcoin can't be "a safe haven", or it can't be something that people rush to unless people understand why it exists. If we accept the fact that, yes, in certain periods of time, like when the Fed rips a Band-Aid off and prints $3 trillion over 3 months, that episode teaches people about Bitcoin, but that also is only very topical.
Figuring out why Bitcoin is fundamental value, picking up a book and reading it, listening to hours of your podcast, that is how people accessing Bitcoin, setting up a wallet, sending a Bitcoin transaction, understanding the mechanisms that enforce Bitcoin's 21 million fixed supply credibly without the need for trust, that is how people actually adopt Bitcoin; that requires proof of work itself.
Fed printing money might key in for people, "I need to listen to these people that are talking about Bitcoin", but you can only adopt Bitcoin as a function of knowledge distribution, and that requires work. So, at the same time, when CPI is 8% to 10% and the Fed's tightening financial conditions, it doesn't necessarily mean people understand Bitcoin better, they do as a function of time, but those things can be completely detached from each other over a year, two years. But what happens certainly are two things on either side of those equations; they will print trillions more dollars and more people will read books, more people will listen to podcasts, more people will learn about Bitcoin, Bitcoin's knowledge distribution accelerates over time. It does happen in waves and as it does, more people adopt, and if it's a fixed resource, then they have to force the price higher in order to accumulate it.
Peter McCormack: If we talk in terms of real experience of using Bitcoin as money, or considering Bitcoin as a store of value, you are obviously 100% right that it can't be debased, there will only be 21 million, and it is the solution to inflation, but the real world of experience is, when somebody experiences inflation, their purchasing power drops. When the price of Bitcoin drops heavily, their purchasing power drops in terms of the relative exchange rate of Bitcoin to dollars. I think a lot of people want to avoid that, a lot of people can't take that risk especially at a time like now, because budgets are tights, belts are tightening.
So, whilst you say that Bitcoin is a solution to inflation, I agree, how do we get to the point where inflation is solved? Does it require the collapse of the currencies and full adoption of Bitcoin; how do we get to that point because for some people to adopt Bitcoin, they don't need the tech, they don't need it just technically solved, they need the real world experience solved?
Parker Lewis: So, to start, where I would anchor to there is that, yes, when the purchasing price of Bitcoin goes down, that functionally has the same effect as a currency inflated, but people have to anchor to why does Bitcoin have fundamental value in the first place? While the entire world is going to be forced today, I'm going to say forced, today it's an option, anybody can adopt Bitcoin on a voluntary basis, but if the rest of the world decides that Bitcoin is going to be the money that they demand for their goods and services, if you want to buy goods and services from those people, you're going to have to somehow have acquired Bitcoin.
Once we cross over a critical mass of a wider and wider consensus aggregated around Bitcoin being that long-term solution, then at that point, a lot of other people are going to be dragged along and are going to have to adopt it as a currency. But in this interim period, when we're in this period that I would refer to as Bitcoin's monetisation event or when Bitcoin is being globally adopted to that point of full adoption, it is volatile.
While my good friend, Sahil, might like to live on zero, he knows a lot about Bitcoin and can tolerate the swings and manage his life a certain way, if people do not understand Bitcoin well -- because when I talk about Bitcoin being adopted as a function of knowledge distribution, and that is literally picking up a book and reading it, the Bitcoin Standard, Inventing Bitcoin, Mastering Bitcoin, Bitcoin Money for Kids, Grokking Bitcoin; listening to your podcasts; listening to TFTC; listening to Stephan, that all requires time and work, there's no avoiding that.
The time when you first buy Bitcoin, your understanding of Bitcoin is necessarily limited because Bitcoin, part of the understanding of it is actually experiencing it over time; seeing Bitcoin work; actually interacting with the Bitcoin network; not everyone has to run a node, running a node helps to build a knowledge base; sending Bitcoin transactions where you actually have a wallet, that functionally does; helping people hold their own private keys, they actually learn about Bitcoin. When they live through a halvening, I refer to it as halvening not halving, they learn something about Bitcoin, they experience it for themselves as a Bitcoin holder that, "Hey, the rate of issuance just cut in half and no central party got together to determine that that was going to happen; how does that happen?" they learn more.
That is to make the point that, from the first time that someone buys Bitcoin, and then you start stacking up days, weeks, months, years, their knowledge and understanding of Bitcoin grows actually part of that process of having experienced it. So, in that equation, if somebody does not understand Bitcoin very well and they allocate 80% of their savings to Bitcoin, that's a really bad idea because their level of adoption, on a personal level, got way out of the skis of their own understanding of it, their own ability to tolerate the volatility.
My recommendation is that you cannot fake proof of work in the context of Bitcoin or in your own understanding of it; you have to match your exposure to Bitcoin, the percentage of your overall assets relative to your knowledge and your understanding of it. And as a function of time, as you start to understand it more, you just don't hear the term, the fact that there will be 21 million Bitcoin, but you understanding two things: (1) how it's enforced, why it's credible, why it is trustless; and (2) that all this other noise of -- people like to say, "I think most cryptocurrencies are useless but there are a few that will win", it's like, "No, 100% of all other cryptocurrencies will fail because we only need one form of money".
As you pair that knowledge base with the understanding of why Bitcoin is not hackable or why it can't be undermined, why it's fixed supply can't be undermined, why exactly and how exactly it is trustless and why that fixed supply is credible, you will increase your exposure and you will also increase your tolerance for volatility. But none of that changes the fact that you've got to understand where you're at in the spectrum, and if you get out ahead of your skis, Bitcoin is ruthless, you will have your purchasing power decline and then you will likely sell your Bitcoin and some other stronger hand that has more knowledge -- think about all the people right now in October of 2022 that are selling Bitcoin at a price of $20,000, someone's going to start buying and someone with more information. It's easier to acquire Bitcoin or to adopt Bitcoin when the price is going higher, when you're following the herd than it is when the tide's going out. The people that have more information, over time, step in and take Bitcoin off of people that have less information.
Peter McCormack: Do you think there's another thing as well the longer you do this, because you've talked about understanding Bitcoin, understanding how it works, understanding 21 million, understanding how financial markets work, understanding why central banks print money, all these things about understanding Bitcoin. But I also feel like, with time, with spending years on this with the proof of work that you do, you get this second-order effect from Bitcoin in that you don't just understand Bitcoin, you understand yourself a bit better; you understand the world a bit better; you understand business a bit better; you understand proof of work; you understand every part of your life.
Like, I'm overweight, if I want to lose weight, I've got to put the work in; I've not done it. I understand that thought a different lens now because of Bitcoin. Do you think that's another thing that becomes part of this? The reason I ask that it's because for me, it's not just about surviving a bear market so my purchasing power and my Bitcoin goes up, it's actually becoming part of the mission of what we think Bitcoin will deliver to the world.
Parker Lewis: Again, to qualify that everyone thinks about it differently --
Peter McCormack: What about you though; can you emphasise with that?
Parker Lewis: Yeah, absolutely, and I think many people do. I think that one of the ways that I would explain that is, in my own personal context, I like to think of myself as someone who's perfectly predisposed to not understand Bitcoin, classical Keynesian Economics degree, went and worked in New York for an investment bank to start my career and then worked in financial restructuring, just perfectly set up to reject it; many people that follow that path have and are similarly disadvantaged.
Peter McCormack: But you did reject it at first, I remember you telling me this story.
Parker Lewis: I would say that I was sceptical, never dismissive.
Peter McCormack: Okay.
Parker Lewis: Probably that was because the people that were in my ear telling me about it and told me things in the past that turned out to be true, one of them being Will Cole who you had on recently, or in the last few months. But even still, it was like once I developed a framework to understand it, understand Bitcoin, understand the problems, because part of that process was understanding the problems inherent and those problems not being repairable or fixable, it made so many other things make sense. Solving that one equation of that really fundamental question of what is money; what gives money value; what function, what problem does money solve; what are the implications of having good money; what are the implications of having bad money; what happens when monies fail? Once you go from seeing the world entirely flipped over…
I think another analogy is it slows everything else down, provides you an anchor point not just as a source of truth, I think that's too intangible a concept, but you see a lot of the negative incentives, not just that there's a problem with the legacy system but you see a lot of the negative incentives and then you see the outcomes, the symptoms of those. And while it might not be perfectly explained by the negative incentives of a form of money that is constantly debased, you see at a root level that it contributes to it and probably in a material way or in a way that's largely explainable by that fact.
Then, when you've figured out, "Hey, I hear this thing, Bitcoin, is the solution to that problem", yeah, in a weird way, at least in my own personal experiences, it tangibly helps you focus on a different set of values and a lot of things you might want to do differently in terms of, most directly, certain individual economic decisions; but then more broadly, I think that in the second derivative, third derivative, start to be around a group of people that have more aligned incentives.
I do think that there is something, in order to come to Bitcoin, in order to understand and adopt Bitcoin as money, I think you have to approach it with high degrees of humility. Well, there's another thing that is you're basically wilfully opting into a system where no one is in control, including yourself. Once you opt into that, once you have the humility not just to say, "Hey, let me understand this, I'm going to do the work, maybe there's something here", but then you're like, "Yes, and this is the solution", well the group of people, the other people in the world that have come to those same conclusions for those similar reasons, they share a value set. Then you start to be around those groups of people, you start thinking about the types of companies you want to build, which are not all Bitcoin-infrastructure companies, they might leverage Bitcoin, what The Beef Initiative is doing to leverage Bitcoin; it's not a Bitcoin company but it's leveraging Bitcoin, it's leveraging the Bitcoin community.
So, I do think that there are many derivative effects all starting from that point of, "I now have a better form of a money; I now am keying in on the world's greatest secret; I am now going to question every financial transaction that I make with a much closer eye and with much more scrutiny, and I'm probably going to be around people that are similarly more focused than they otherwise would towards the long term, more focused on improving, seeing a problem in the world, seeing a solution and then wanting to work and be a small part of contributing to that solution".
Peter McCormack: Well, this is why we end with this kind of decentralised friends group around the world. Like, we can come down here and make shows and do a show with you but we're going to go out and have dinner afterwards and hang out, and sometimes we don't make a show and we're going to hang out. We've got that the same everywhere we go, whether we go to LA or to London or even our little sprint in Bedford, you have this peer group that you've built around you who've got those shared values. We don't always all agree on everything, culturally there are some differences, certainly between Bedford and Austin, but there is this similar set of values that anchors us together.
In terms of running a business, obviously congratulations on Unchained, I've had the pleasure of knowing you for a few years now and seeing the growth of that company is incredible, so congratulations; but as also running and building a company within the Bitcoin space, has that changed or evolved your understanding of Bitcoin in any way specifically because it does come with different challenges? Everything is a derivative of Bitcoin, we have challenges running a podcast which is Bitcoin-based, we are part-paid in Bitcoin, which we hold in Bitcoin, which comes with challenges. So, I've got a different understanding of Bitcoin because of that, but what has your experience been, because we're six people, you're a lot more?
Parker Lewis: Yeah, I think that when you're building a Bitcoin company, at least one like ours, but I would expect -- I'm friends with a lot of people that build other companies, they're focused exclusively on Bitcoin because the world where you have grift that's building things on crypto and NTFs and DeFi and that whole nonsense, all that is worthless; it's like lighting money on fire. So, when I talk about building a Bitcoin company, it is about building infrastructure that is valuable for Bitcoin.
In our world, and when I look at our peers out there as well, similarly focused on Bitcoin, there are a lot of bitcoiners who work at our company, most actually, not all but most, and so you're interacting in a day-to-day basis with people that have similarly stumbled upon or done the proof of work to figure out this thing, Bitcoin. And on a day-to-day basis, when you're spending eight to ten hours around those people, or interacting with those people, that has a positive effect in itself. In addition to then the kind of extensions of those, like the local community here in Austin, or whatever city you go to where there's a Bitcoin meetup popping up, I don't think it necessarily -- again, this is the first company I've been a part of building, historically I worked in the traditional financial services, it makes it easier, I would expect, to tolerate the volatility. Even though it's challenging, the volatility presents real challenges to our business from a planning perspective, the volatility itself.
On a personal level and, despite the tide going out and coming in, the ability to stand firm and not waiver, it's always coming back to that understanding of Bitcoin. That understanding of Bitcoin, for me, building a Bitcoin company, is reinforced by working with my peers that see the world and also similarly are standing shoulder-to-shoulder working, think about how difficult it would be to build infrastructure for Bitcoin, like we are, when most of the world's turned the TV off.
It would be impossible to build infrastructure through cycles, adoption cycles that is, adoption waves and corrections, if you did not have some anchor point in the world that allowed you to understand and explain that. And specifically building a Bitcoin company is reinforcing that because you're around a bunch of bitcoiners, but then also my process of my writing, which was semi-related to my business but also independent, that writing process distilled it down; I have a reason to go out and talk Bitcoin to people.
In the energy industry, and any industrial functionally, energy and Bitcoin happen to have a very tight strategic relationship around proof of work, but that, in itself, that process of writing, the process of thinking about products, the interaction with peers, the interaction with clients, all of that I think makes it easier for people in this world to not get distracted by the cycles; versus if you were on the periphery and you weren't zeroed in on all the infrastructure being built, seeing the quality of people, seeing the communities locally build up, it might be a lot harder to hold firm in this times. So, yes, it does present challenges, but it also makes being a bitcoiner a lot easier at the same time.
Peter McCormack: Does it give companies a natural culture?
Parker Lewis: Yes.
Peter McCormack: It does?
Parker Lewis: Yeah.
Peter McCormack: Building culture's hard, and if you're having to ride through different times, the tide going out, if you have that natural culture that everyone understands, I guess it collectively brings you together.
Parker Lewis: It does, and I can describe this from my own personal experience. Some people, who maybe started becoming our clients in 2020 or 2021 or adopted Bitcoin for the first time in 2020 and are familiar with Unchained, they might not know that when I joined Unchained, we supported Ethereum. Now, I was always a proponent for dropping Ethereum; before I even joined, I'd formed a view as to why Bitcoin was the solution to money and why it was going to be adopted globally and why, functionally, any other token or fiat currency would have its price trend to zero because the world would adopt Bitcoin as a preferential standard. Unchained wasn't always a Bitcoin company; we made a decision to drop Ethereum, to focus on Bitcoin, to focus on people holding their own private keys, empowering people to do that, individuals and businesses. As we did that, we started to attract talent, we started to attract more clients, we started to attract talent and individuals that wanted to work on Bitcoin.
As we did that, our culture shifted with, truthfully, for one that I would call undefined to one around Bitcoin. Even if each individual, even within our company, approaches Bitcoin or thinks about Bitcoin in a different way, there are common value sets that exist there; there's the alignment behind Bitcoin, there's a common vision behind it being adopted ubiquitously, but then those things that I talked about before, everyone who is there and that I would describe as a bitcoiner, has done the proof of work.
There is also this common recognition that Bitcoin is hard to see, it is hard to understand. When you look out at your peers and eight out of ten, nine out of ten, having figured this out and having decided to devote themselves to a mission such as working on Bitcoin, building infrastructure for Bitcoin, specifically helping people hold their own private keys, there are multiple layers of that culture alignment, but it all centres around Bitcoin.
Bitcoin is one of our company values, and that wasn't something that was forced, it naturally became a description rather than something we put on a mantel and tried to appeal to.
Peter McCormack: Yeah, and I can imagine the scenario of, like the size of the business you are now, you're going to be recruiting people who aren't bitcoiners, that's natural I can imagine, and I can imagine the onboarding process for somebody who is a bitcoiner versus someone who isn't a bitcoiner is slightly different. There's a period of doing the work for the new people coming in, understanding Bitcoin, whereas I imagine if you bring somebody in who's already a bitcoiner, they will naturally slot straight into the business.
Parker Lewis: Yeah, I think so, and that doesn't mean that we don't have team members that work in certain functions where that Bitcoin knowledge base isn't as critical, but generally what we've experienced is those people that fit that description, that have excelled, have decided that they're here for a reason and they go down that rabbit hole. But also, certain functions are different, like we have certain client-facing functions where they have to be more technical, and it's very rare that you would find someone that's highly technical about Bitcoin, that understands how private keys work. We have our concierge service where our team actually onboards people to holding their own private keys for the first time; it's very unlikely that that person wants to do that with eight hours of their day or would be capable of it and have a passion for it if they weren't a bitcoiner.
Now, a lot of our accountants are also bitcoiners, but that role and that need to be a bitcoiner is less important to that individual role. But by and large, the people that want to work on Bitcoin -- because think about it, imagine you were working at a company and you had no conception of Bitcoin and its price went from $70,000 to $20,000, you're like, "I made a mistake"; a hardened bitcoiner looks at that and is like, "Cheap Bitcoin", like the mission is the mission. It would be impossible to focus and to not waiver in that mission if a large majority, if not an overwhelming majority of people, were not phased because they have this deeper understanding, they understand the 21 million, they understand the problem that Bitcoin is solving, otherwise I don't know how you could would focus, you know, on a daily basis, on a weekly basis, weathering storms. But that is also a critical advantage, it widens the gap between the field through these markets.
I like to think oftentimes about the guys like, "Oh, there should be an app for that", when Bitcoin's ripping, some guys are like, "I should build a Bitcoin business", and then Bitcoin crashes, six months later, it corrects, and they're like, "Maybe I'm going to go back to my fiat job; that wasn't a good idea". The bitcoiners, it's what allows people to build infrastructure through cycles. I don't think that would be possible in a meaningful way for a Bitcoin company if not for that.
Peter McCormack: How far do you think we've come infrastructure-wise, the maturity of the market, the maturity of understanding, general acceptance and adoption? In the time you've been doing this, how far do you think we've come?
Parker Lewis: It feels like an eternity. There's this interesting dynamic where it feels both like yesterday and an eternity at the same time. A couple of days ago, it was the fourth year anniversary for me being at Unchained, and that both feels like a different world as well as I can't believe it's already been four years.
So, I think from a company standpoint, if I think about ourselves, the company that I joined versus where we're at today and the team, it's fundamentally in a different place. I think the access to multisig and to be on the front lines with Casa, Sparrow, Specter, I'm sure I'm leaving others out, that really in this past four- to five-year period, the commercialisation of multisig for adoption directly by individuals and businesses is night and day where it's been.
I also think in that 2017 period is where SegWit was introduced and the Lightning Network was enabled and the development, like still very early, but again a night and day comparison. Again, whether it's Lightning or some other construction of payment channels to be able to scale Bitcoin payments, that didn't exist in 2017; that exists today. Even though there might only be between 4,000 and 5,000 Bitcoin on the Lightning Network, that Lightning Network can enable many multiples of that actual value. But the fact that that development, and what I'm seeing today in terms of the companies being funded, and now I would say in the last 12 to 24 months, for the first time, meaningful infrastructure investments being made and making payments easier, invoicing, accepting, receiving, that wasn't happening in 2017.
So, it's easy to probably look at it and be like, "Oh man, how far have we actually come?" but at least on our side of the fence of helping people hold their own private keys, payments, investments starting to be made, I think you're starting to see more and more Bitcoin-exclusively focused companies being funded and still with only a fraction of the capital that's being sloshed around and lit on fire in the crypto world more generally.
Peter McCormack: Then, when you think ahead, I mean we've looked in the past, so when you think ahead about if you and I are going to be sat here in another four years' time, hopefully we will be, we're having this conversation, what do you think are the important next significant shifts we need to see in the world of Bitcoin? Is it infrastructure; is it to do with user experience? What are the things you're thinking about over the next kind of four years?
Parker Lewis: Yeah, I think it is actually the same thing that we're doing right now. That is one of the things when I talk about the fact of Bitcoin's inevitable global adoption by everybody in the world, and that actually is inevitable, is that Bitcoin from a network perspective functionally doesn't have to change.
Peter McCormack: Yeah, it actually works now.
Parker Lewis: Yeah, it works now and realistically, in order to be able to facilitate all the world's transactions, there do have to be advancements to the Bitcoin Network, but the core function, the core value proposition, the settling for final settlement, a currency transaction on the Bitcoin blockchain, now versus five years from now or ten years from now, will be functionally the same, technically and functionally the same. Whether payment channels are opened via the Lightning Network or other implementations that sit on top, again there will be a Bitcoin transaction and there are certain consensus rules that determine what is and isn't a Bitcoin, those are not going to change.
So, I think about everything, all infrastructure that's being developed on Bitcoin, is just figuring out how to leverage this rock that is a foundation, that is there will only ever be 21 million Bitcoin, and if you want to transfer that, there are certain rules, they are consensus rules, they cannot be changed; they can't be changed because of the fact that not because there's a benevolent dictator, but that the network is decentralised, and it's becoming more and more decentralised as it becomes larger, how do we better utilise this resource that exists today?
Those three things, focusing on more and more secure custody, companies like ourselves and Casa and Specter and Sparrow and River and Swan or anybody contributing to Bitcoin custody, developing more and more secure solutions, that ease of use is part of it, it's delivering secure custody solutions in a way that isn't necessarily trading off the ease of use versus the security. That doesn't mean everybody has to hold their own private keys, but it does mean people have to be able to hold Bitcoin without losing it.
If I talk about Bitcoin being the store of value and all of its value deriving from the fact that there will only be 21 million and that Bitcoin has fundamental value to the world because it is finitely scarce and has a foundation for the world's new money, that scarcity is not a value to you if you do not understand it or if it was possible for you to lose.
Imagine you had one Bitcoin and two years from now you lost it and Bitcoin quintupled in purchasing power, did it store value for you? No. So, the continued advancement and development of custody, also the continued advancement of knowledge distribution, more podcasts, more books, better books, more meetups, that same thing that is happening today that, again if Bitcoin is a fundamental value for that finite scarcity, that 21 million fixed supply, if you do not understand it and you buy it and it whipsaws around and you sell it and then it quintuples in value, did Bitcoin store value for you? No; Bitcoin might have increased in purchasing power but did you benefit from it?
So, the focus on custody, the focus on knowledge distribution, that is the only way that the world will inevitably adopt Bitcoin but it's happening every day. I like to think about it as each day somebody does read that book, they do learn that podcast, something happens in the world, people are censored in Canada, Russia's cut off from the rest of the world, the Fed prints $3 trillion, there are real-world experiences that help people understand Bitcoin in addition to just reading books and listening to podcasts; and then the third thing being payments infrastructure, those are the three core elements.
There are other things that exist but those are functionally all derivatives of what is the fundamental value proposition of Bitcoin? As a form of money, storing value over time, and ultimately intermediating a series of transactions. I buy Bitcoin today, I'm going to hold it for a period for time, that might be an hour, a day, five years, at some point in time I'm going to transact with that Bitcoin in the future, whether I'm converting back into dollars or I'm buying steaks from Cole Bolton two miles away in East Austin; what is that about? It's about custody and facilitating transactions and being able to facilitate payments.
So, I really think it's those three things: content, which is the education and knowledge base; making sure that people can custody Bitcoin, again whether they're holding their own keys or not, in a way that ensures that they do not lose it; and being able to provide direct access to transactions. If those three things continue to be developed, everything else is a derivative. So, we're working on it today, but it will attract more capital. As we attract more capital, the acceleration and the development of all three of those things will happen as a direct result.
Peter McCormack: Is there anyone who's got any more conviction than Parker Lewis in terms of the inevitability of Bitcoin?
Danny Knowles: I don't know.
Peter McCormack: Every single time!
Danny Knowles: You literally explained my journey with that proof-of-work thing. I got in in 2016, did all the shitcoin, all that kind of stuff, and in 2018, I remember sitting there, being so excited about this for the last 18 months or whatever, "I need to either give up or figure it out". Then, through that period, you do the work, you learn it and that's what completely changes you, and I think it does. It's changed my relationship with money entirely.
Peter McCormack: Yes, and we've had all those conversations like discussing mortgages and what's the best way to structure a mortgage based on the fact you want to hold as much Bitcoin as possible? Do you use the mortgage as a way to leverage money? Lots of things, we've talked about that.
Parker Lewis: Or like a Starbucks coffee costs $6, and that's some thousands amount of sats. Do I buy that or do I stack sats instead? When you start to understand Bitcoin, and even if its price has declined over the last six months or nine months, but you understand fundamentally why its purchasing power will go up over time and why 8 billion people in the world need it, and what that equates to is the purchasing power of my money is going to increase over time rather than decrease, every economic decision is altered in a positive way from that fact and, as you were talking about, Danny, that understanding of Bitcoin.
One other way that I try to conceptualise it for people is there's no way to understand it otherwise, it's kind of common sense, you've got read, you've got to understand, you've got to question what is money, that's proof of work, you've got to experience Bitcoin on a direct basis. I think that sending a Bitcoin transaction and starting to see like, "I just sent that and everybody else in the world is doing this. All the money's getting in the same place and there's no one in control of this thing", that's a mind-opening experience in itself.
Peter McCormack: Well, that's why at the meet-up, I was like, "Anyone who comes along, I'm going to give you £5 of Bitcoin. Just come along; I want you to see this", and for each person, we would do the transaction on the Lightning Network, we would do the send, they would receive the Bitcoin, and I would sit there and explain to them and say, "That's happened without any centralised database that somebody's in control of; no one's done anything". And I would say, "If I send a transaction from bank to bank, it's a ledger updated here, a ledger updated here, but they could fuck with this. You now have that; no one can take that from you".
Parker Lewis: Right. So, here there is this system that I might not understand but thousands, if not tens of thousands, if not millions of people are sending transactions originating from all over the world, going different parts of the world, all the money's getting to the right places, only being able to be spent by the people who it's supposed to be able to be spent by and no one's in control of this orchestration. Like, how did that happen?! Then, if I say, "All value in Bitcoin is derived from the fact there will only be 21 million", I say that repeatedly to drive it in to somebody, so like when somebody walks away from this podcast, they're going to be like, "He said that, count the times that he said that; he said that like 75 times".
Peter McCormack: Right, the next time we do a podcast we're going to have a --
Danny Knowles: Have a counter on the screen.
Peter McCormack: Yeah, and have a drink, and you have to a have a drink every time Parker says, "All the value is derived from 21 million".
Parker Lewis: We'll have a little clicker.
Peter McCormack: No, we'll have a drink, we'll have whiskey.
Parker Lewis: Yeah, we're going to be fucked up!
Peter McCormack: We'll see if you can say it by the end of it!
Parker Lewis: Yeah.
Peter McCormack: You'll be like, "All the value's derived in 26 minutes!"
Parker Lewis: Right. When somebody starts to understand the asymmetry of that, say they do not understand anything about Bitcoin, they just hear it, that is why Bitcoin is a fundamental value and it can't exist at the same time when people buy Bitcoin and don't understand that.
Yes, people speculate, yes, very few people understand that fact, but if they key in on it and they're like, "Okay, if this is about there's a form of money that can't be printed and I know the governments are printing trillions of dollars, what would be the consequence if the entire world did adopt that?" They key in on this is massively asymmetric like, "This knowledge, if the rest of the world's going to come behind me to adopt this as a form of money", Danny, like you were talking, you go down that rabbit hole; Michael Saylor's talked about this too.
I've probably spent a lot more than this, for sure, but you could spend 100 hours, and that seems like a lot, but even if there's a very small chance, which there's not, but when someone's hearing this for the first time, someone listening to this episode is thinking, "Okay, I, with my limited knowledge, might weight this outcome as very low, but even if there's a small percentage chance probability, if someone's telling me that I can invest 100 hours of my time, which seems like a lot but it's not, to learn and understand the world's greatest secret, the most asymmetric thing that has ever existed, the adoption of a new form of money that will happen very rapidly", and very rapidly meaning over years and decades, not centuries…
If wanted to become a neurosurgeon, it would take me ten years, or if I wanted to develop any skill of material value, it's going to take years, not 100 hours. So, when someone is sitting there thinking, like, "Fuck, you're telling me I have to do 100 hours of work? That sounds like a lot", that's the fiat world. But then, when they start to think about this framework, like, "Hey, if I spend 100 hours, you're telling me that I'm going to be able to potentially grasp this entire thing and then use that asymmetric information to my benefit?" then it starts to be like, "Hey, even if it's a low probability, or I'm weighting it as a low probability going in, I have to do that work. I have to spend the 100 hours because there's nothing in the world that I could possibly benefit from, from an economic perspective, in a similar way by devoting 100 hours to it".
100 hours of anything, being a golfer, a soccer player, a podcaster, you're not going to be a craftsman at whatever you do by devoting 100 hours. Devoting 100 hours to Bitcoin puts you in a massive asymmetric information advantage, or position of that advantage, over everybody else in the world, and that's why I reinforce it; it's like it is about knowledge, it is accessible. I think a lot of the people that I've met that haven't gone down that path, there's this defence mechanism that says, "If I go down that path, if I spend that 100 hours, I don't think I'm going to be able to understand it", and then they shut down and decide not to. What I encourage people is like, "This is the most asymmetric use of your time. If you've heard a few people that you don't necessarily think are crazy that are telling you to do this, go do it".
Even if you come out with a conclusion that, "No, I don't think that there's air there", it was still worth the investment if you start to understand opportunity costs, asymmetry and probability of weighting. What will happen if you do spend 100 hours reading books, podcasts, you will come out on the other side as someone who adopts Bitcoin or at least buys it for the first time, it will harden your understanding. Then, from there, from that point of buying Bitcoin for the first time, or realistically going down the rabbit hole for the first time, then you start to really experience Bitcoin; you start to notice things happening in the world that don't add up, you start to see how the things that bitcoiners have been saying for a while are actually solved by this thing, Bitcoin. You're able to allocate more towards to it because the more you understand Bitcoin, the more you understand its volatility, you understand that it's just phases of adoption and ebbs and flows.
But you have to be in that position when the tide goes out on the old economy to be holding a form of money that other people will accept, and the reason why they will do that is because everyone will opt for a form of money that can't be printed. It really is a simple as that.
Peter McCormack: Yeah, I'm going to finish on a little anecdote that you might find kind of interesting. So, we get a lot of emails in from people listening to the show. One of the most interesting trends I've seen over the last year is the amount of people writing to me and saying, "Do you have a job? Can we work on the show, or do you know any companies who are employing?" It's almost like this is one of the final steps of going down the rabbit hole, it's like, "Okay, I've discovered it, I've learnt about it, I've bought it, I've held it, now I want to work in it", and they're like, "How do we get involved?"
Sometimes it may be a case of, "Okay, you can't get a job", but they'll go and start a podcast or they'll start writing or they'll start a blog or they'll start a meetup, but that is a massive trend I've seen over this last year; just email after email of people asking me this, and I find that a particularly cool thing.
Parker Lewis: Yeah, I think that it's a perfect extension of, if you're done that proof of work, if you've spent that time, and I think 100 hours is probably an opening salvo, once you get there you're probably going to keep reading and learning about more shit. Once that lightbulb has been turned on, I kind of like think about it as phases of you go from a zero state where, "This is crazy and maybe I'm still going to buy a little Bitcoin in case I'm wrong, at least I have something", you go from zero state, not being able to see anything, not being able to understand Bitcoin on any level and thinking that all these other people are crazy, to some amount of work, and connecting that with some experience, or some thought process that you have, you turn on and say, "Maybe, maybe there's something here; maybe these people aren't all crazy".
Then, once you get to that point of maybe, your path to inevitability, to being a bitcoiner, to seeing it as money, to understanding the mechanisms why it holds together, why it is a fundamental value, to me it's inevitable. Once something clicks in your head that says, "Maybe", where again, it's something that triggers that and then you have to consistently get back there on a rational, logical basis, then your interest fundamentally changes. You're like, "Okay, if the world is going to adopt this thing, Bitcoin, as its new form of money, and not in a niche way but in an entire way", you're like, "not only will my day to day will be better if I'm actually working on that thing because it is fascinating but I'm going to getting in front of the largest tidal wave that's ever existed". So, there's some economic incentive but then there's a non-economic incentive, what we talked about before, getting to work day-by-day, side-by-side with bitcoiners; that is more enjoyable than sitting at your fiat job hating your life, it is.
Now, what I do also not necessarily caution but what I do recommend to people is working on Bitcoin or contributing to Bitcoin is not confined to having a Bitcoin podcast or writing about Bitcoin or building a company like Unchained. Texas Slim and The Beef Initiative, Cole Bolton, they've incorporated Bitcoin into their businesses and they're working on decentralising and localising market access to food, and it's one great example of how you think differently. When these guys figured out Bitcoin, it was decentralised, they knew that there was a problem with the centralisation of the food supply in the United States. They were like, "Hey, the group of people that's going to respect and value this are bitcoiners; let's go talk to them". But functionally, the only part of their business that is Bitcoin is accepting it as a form of payment.
So, you could incorporate Bitcoin into your business without having to go "work on Bitcoin", and there will be similar benefits to your network, your business. One of the things I've experienced in many different places is that bitcoiners will change their behaviour. We're going to go eat dinner tonight at a steakhouse, and we were talking about going to Steakhouse A or Steakhouse B, and I was like, "Steakhouse A has a bitcoiner running it; we're going to Steakhouse A". We, literally, Will and I --
Peter McCormack: Shall we give them a little shout out? Brian Kelley?
Parker Lewis: Yeah, III Forks? Yeah.
Peter McCormack: Yeah, Brian Kelley, thank you for giving us a table.
Parker Lewis: Yeah, we were talking about going to Bob's, and Will was like, "Yeah, let's go to Bob's", and I was like, "No, there's a bitcoiner".
Peter McCormack: Yeah.
Parker Lewis: So, we're changing our economic decisions. And again, not everyone's going to do that, there has to be an incentive; the steak's damn good.
Peter McCormack: Yeah.
Parker Lewis: If it was a shit steak, Brian, sorry.
Peter McCormack: But there are a lot of good steaks in Austin.
Parker Lewis: There are, but my point is that there are economic incentives and there are non-economic incentives, they are related to each other, but people working on Bitcoin or contributing to Bitcoin, anybody that's storing their wealth in Bitcoin is contributing to Bitcoin in my book.
Peter McCormack: But it works the other way round, right? Like Brian said to us that other time, he was like, "Oh, here, take my number, any time you want to get a table I'll sort a table out for you", we knew it was full, we dropped Brian a text, he lets us in because he has it the other way round.
Parker Lewis: It's a two-way street.
Peter McCormack: Yeah, he wants bitcoiners there as well, and we have that relationship with him and it's a beautiful thing.
Parker Lewis: Yeah. I'm not sure if I actually met these guys, maybe we've communicated with them online, the Tahini's guys.
Peter McCormack: Yes.
Parker Lewis: Imagine you're sitting there, you've figured out Bitcoin and you work in the food industry, coming and working for Unchained probably isn't how you're going to contribute the most value; well, maybe go work for a restaurant like that, maybe go work for Brian. There are more ways to contributing and building on Bitcoin because a lot of the ways that we build tools is talking to our clients, whether they're Bitcoin miners, "What tools do you guys need?"; if it's a restaurant, "Hey, you need to have a connection between a Lightning wallet and a multisig vault", you're contributing to Bitcoin.
Not only are you storing your wealth in it, not only are you accepting payment and making that available to a community or to a client base, but then you're also going to track bitcoiners. I think that is something that we will increasingly see; businesses getting on the Bitcoin standard and then bitcoiners not feeling like they have to 100% go work for a Bitcoin company but going and creating value for other founders and other business lines that are incorporating Bitcoin onto their balance sheet into their payment rails. There's a lot of work to do there, and Bitcoin only exists as a medium to free us form persistence debasement.
But in order to do that, and money is only good to go buy other things in the economy, and we need food and oil and gas and healthcare and all these other businesses that deliver real world value, you need to incorporate Bitcoin. Working on that side of the fence and incorporating Bitcoin from delivery of real goods and services is just as valuable, in my eyes, as working at Unchained and helping people hold their own private keys.
Peter McCormack: Yeah, all right, looking at the clock, we're going to have to get an Uber in a minute, go and have the steak. Do you want close out and tell people a bit about Unchained, what you're doing, how to find out more?
Parker Lewis: Yeah, so what we fundamentally do at Unchained, probably the most core part of our mission beyond Bitcoin is helping people hold their own private keys, enabling more people to do that, and not just do it but to do it more accessibly and more securely. So, we fundamentally help people go to that point of zero to one. We also help people go from a state of being on a single key and wanting to graduate to a multisig arrangement or just valuing and benefiting from having a partner. So, that is what we're working on.
We have concierge services to help people get set up, to hold people's hands through that. And then we deliver financial services, so we help people buy and sell Bitcoin, we lend against Bitcoin; people should do that very conservatively and understand the risks. We help people with retirement accounts. But really what we think about ourselves is a financial institution that empowers people to hold their own private keys, and for people that value our approach to custody, then we want to take care of everything else they do, so that's what we do.
People can find us at unchained.com; they can find me on Twitter, @parkeralewis; I've got a blog that we're working on turning into a collection of essays.
Peter McCormack: Or a book.
Parker Lewis: Or a book in paperback form, but that's also linked on our website; it's called Gradually, Then Suddenly.
Peter McCormack: We made a series about that.
Parker Lewis: We did make a series about it.
Peter McCormack: Three shows; we'll put those in the show notes.
Parker Lewis: Yeah, definitely put those in the show notes and then the online versions are on our website if you go to resources on our website at unchained.com, and there's a section called the GTS series for Gradually, Then Suddenly.
Peter McCormack: We will put that out there. Always great, Parker, thank you, always like making a show, always like going out for steak with you, which we're going to do now. So, thank you for coming in, thanks for doing this, and again, just congratulations on everything you've done with Unchained; watching it grow has been incredible. Yeah, just keep crushing. Let's do this again next year, in four years, maybe not ten years.
Parker Lewis: We're not going to wait four years, but no, it's always good to have you in Austin. We love this being your home away from home, which we know it is.
Peter McCormack: Yeah.
Parker Lewis: Here in the Bitcoin capital of the world. Let's go get some steaks.
Peter McCormack: I fucking coined that term first, didn't I?
Danny Knowles: For Bedford? Yeah.
Peter McCormack: Yeah, I coined Bedford as the Bitcoin capital of world first.
Danny Knowles: More ironically though!
Peter McCormack: I can prove it as well.
Parker Lewis: Just like if someone says, "X is the real Bitcoin", or whatever, it doesn't matter what you say, what matters is the actual reality and what the consensus is.
Peter McCormack: I knew you were going to say consensus! All right, let's go and eat. Good man, see you soon.
Parker Lewis: Thanks.
