WBD636 Audio Transcription
The Economics of Privacy with Max Hillebrand
Release date: Friday 24th March
Note: the following is a transcription of my interview with Max Hillebrand. 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.
Max Hillebrand is an economist and open-source entrepreneur who runs Agora Towards Liberty. In this interview, we discuss fiat money’s fundamental weaknesses, the teachings of Austrian Economics, the importance of privacy, and how nano cameras mean privacy technology will need to keep evolving.
“That meatspace layer between the computer and your brain is unencrypted…if this last mile is not encrypted, then all of the securities that we can gain in cyberspace are null and void. Now, because you type in your 24 words, and the camera picks it up, all of a sudden, your super awesome anonymous money is no longer anonymous nor secure. And that’s a really, really big issue.”
— Max Hillebrand
Interview Transcription
Peter McCormack: Good afternoon, Max, how you are doing?
Max Hillebrand: I'm very good, Peter, how are you?
Peter McCormack: Yeah, I'm all right, a little bit of a hangover this morning.
Max Hillebrand: What might that be about?
Peter McCormack: It might be about those full-fat Old Fashioneds we were having last night!
Max Hillebrand: But they were good, man, the infused butter?
Peter McCormack: Yeah.
Max Hillebrand: That was something, seriously.
Peter McCormack: So, if you've not been to a Hawksmoor in London, you need to go, anyone listening, and by the way I'm fully off the wagon now. I don't know if you know, I had a bet with Michael Malice. So I interviewed him at the start of the year, I was like, "Yeah, I've stopped drinking, I think I'm going to do the whole year". He was like, "No you're not!" I was like, "No I am, I bet you"; initially we were going to bet a whole Bitcoin and he was like, "No, I'm not doing that", and Danny was like, "Do it, Pete will definitely not do the whole year", and he was like, "No, we'll do a dinner", and I did 44 days.
Max Hillebrand: You see, well that's something, but you made the year without the vaping, that was good.
Peter McCormack: No, I completely failed on that as well!
Max Hillebrand: Oh, really?
Peter McCormack: Yeah. Max, I fail on everything!
Max Hillebrand: Really? I thought you managed that for the year.
Peter McCormack: No, I completely failed.
Max Hillebrand: Well, that's some high time preference shit then.
Peter McCormack: I know, I know, don't keep telling me that, honestly. You didn't see me sneaking it at the table last night? I was sneaking it, but it was a good dinner, man, I enjoyed it.
Max Hillebrand: Yeah. London is a cool town, man, it's my first time here.
Peter McCormack: What?
Max Hillebrand: Yeah, but my first time in the UK was visiting you in Bedford, and now my first time in London is visiting you again.
Peter McCormack: What?!
Max Hillebrand: I know!
Peter McCormack: I can't believe this is your first time in London!
Max Hillebrand: Yeah.
Peter McCormack: Hold on, you've lived in Europe for your whole life?
Max Hillebrand: Yeah.
Peter McCormack: And you've never come to London?
Max Hillebrand: No.
Peter McCormack: Why not?
Max Hillebrand: I don't know, bad weather, bad food?
Peter McCormack: Shut up, man, the food's good, some of it.
Max Hillebrand: That's what I heard, but then that bone broth yesterday, that was like, you know, so…
Peter McCormack: So, what have you done in London then; have you been to Buckingham Palace?
Max Hillebrand: No, nothing. I got from the airport to the Advancing Bitcoin Conference and then from the conference to here; that's my London trip so far.
Peter McCormack: Oh man, and you're not staying?
Max Hillebrand: No, heading out tonight.
Peter McCormack: How was the conference?
Max Hillebrand: It was great, really; nice to have some dense gathering of technical people to talk and brainstorm about things, very productive, lots of new insights.
Peter McCormack: So, it was a nerd conference?
Max Hillebrand: Total nerd conference, yeah.
Peter McCormack: Who was speaking?
Max Hillebrand: A bunch of people were speaking; Ruben Somsen was there, Stick, Eric Sirion, a whole bunch of a people really about the Lightning Network improvements and some privacy stuff; yeah, it was a nice deep dive.
Peter McCormack: Stick's coming to the football this weekend.
Max Hillebrand: That's cool.
Peter McCormack: Yeah, we've got him in on the football. I'm not going to talk too much about football, I got complaints last time, "Stop talking about football". Was my boy, Conor Okus, there?
Max Hillebrand: Yes, indeed; he's playing for you, right?
Peter McCormack: No, he played last season, a couple of games.
Max Hillebrand: But he's no more?
Peter McCormack: No, he's retired, he's too old for it now, he's lost it, he's lost his touch; he's going to kill me for saying that! Well, listen, look, you know my boy, Ben Prentice?
Max Hillebrand: He's great.
Peter McCormack: Yeah.
Max Hillebrand: And that episode with him, stellar, man; I'm proud of him.
Peter McCormack: Yeah, look, I love Ben but he said the number one person to talk to about Austrian Economics is Max, that's your guy. He was like, "You've got to talk to Max". He's like, "I am just a mere student of Max, Max is the guy", and so Danny's like, "When you talk to Max, you've got to grill him, you've got to grill him on Austrian Economics".
Max Hillebrand: Grill me hard.
Peter McCormack: What's your background in it?
Max Hillebrand: I was always interested in economics and entrepreneurship; I started pretty young just hustling, handing out newspapers, working in kitchens, etc, to earn some money. So, I was always interested in the entrepreneurial spirit, let's say, and I wanted to get some theoretical understanding to get better at it. So, I picked up some Keynesian Economics books, some of the mainstream stuff.
Peter McCormack: Urgh!
Max Hillebrand: Exactly, that was my reaction too, "Either I'm completely stupid or this just doesn't make sense at all". Then, I looked for alternatives and ultimately found the Austrian School and just did a big deep dive into Mises, Rothbard, Hoppe and it was just a hobby for me pre-Bitcoin.
Also, I had a good understanding of the horrible poison that fiat money is and how beautiful gold is as an alternative, but of course in the 21st century, gold just doesn't cut it anymore, we're living in cyberspace now, and so meatspace money just is no good. That made me pretty depressed because you see how bad fiat is and that gold won't fix it, and what do you do then? Until you discover Bitcoin and you're like, "Oh, now, that's something, this is actually a digital money that's as good as gold, arguably even better, and it can really be used to end the fiat empire".
Peter McCormack: So, you were a gold bug first?
Max Hillebrand: Yeah, definitely.
Peter McCormack: So, when the Bitcoin thing came along, did it instantly make sense, you're like, "Yeah, I get it, that's it?"
Max Hillebrand: No, surprisingly not. The first time I heard about it I didn't have anything major against it but it didn't really spark my interest, which is actually super-weird because I had the economics, and to some extent a bit of a technical background, at least interest, in free and open-source software, and somehow it didn't instantly gather my enthusiasm. It took a couple of approaches, a couple of touchpoints, and then eventually it clicked.
Peter McCormack: Well, we've got someone we can orange pill right now because Danny's not here.
Max Hillebrand: Yeah.
Peter McCormack: Because we tried to fit this in, Danny had to go back to Australia; the poor guy's been working so hard. So, we have an onsite producer in today who doesn't know much about Bitcoin and so I think, through me, let's try and orange pill her and we'll see what happens afterwards. So, you talked about how bad fiat money is. Through me, tell our onsite producer today why it's so bad.
Max Hillebrand: Yeah. Well, there are multiple reasons. For one, you don't make the rules, in fact some unelected board of people and bureaucrats come up with the rules of that monetary system and including the most important rule of how much money is there, and in fact these guys don't even know exactly about the money that is in circular.
Peter McCormack: It's a bit like ETH then?!
Max Hillebrand: Basically, yeah! So, if you don't make the rules, you cannot verify the rules, which basically means these people can just print a bunch of money and increase the money supply and put it in their own pockets or the pockets of their friends. Inflation, the increase of the money supply, kicks off the Cantillon effect, which basically means that we move capital or wealth to those people who received the newly printed money first, they get all the capital from those people who received the newly created money later. That's that wealth transfer that happens whenever you print a single piece of currency, and it's an economic law there and there's no way around it.
The crazy thing is this is somewhat like a never-ending chain of theft, right. So, the higher up you are in the flow of newly created money, then from the more people you steal. If you're at the very top, you get all the capital, nobody's stealing from you, and you get some of the capital from everyone else. But then that person whom the first guy gives the money to, he's in that second position now; he already got stolen from, from the person who received the money first. So, it's bad if you're not at the very top, you get stolen from, which means basically everyone's being stolen from.
The really, really shitty part is, you know you living in the UK or somewhere in Europe or America, sure, you're not the very first to receive the money, but you're also not the very last. There are millions, billions of people who want to get that money that was just printed and who will eventually, after years, decades of the trickledown effect, ultimately receive it. So, this is means that you and me, for every day, we get paid in fiat currency where we receive this newly created money, we were being stolen from, from a bunch of people, but we're stealing from even more people in the past.
The real treachery of fiat is that it turns the everyday Joe, just when you want to earn money and spend it, it tricks you into being a thief, and that's what makes this entire system corrupt and evil to the core.
Peter McCormack: Right, I'm going to hazard a guess that might have gone straight over your head a little bit so I'm going to make you work a little bit harder on this one, Max, I'm going to make you work a little bit harder to explain this. So just so you know, fiat money is pounds, dollars, euros, so you know what that is, but I can imagine somebody who's listening to this the first time is thinking, "What are you on about? My bank account has got the same money in as last week; I'm not being stolen from, what do you mean?" Can you like, in the most simple terms possible, explain to me how my pounds are being stolen from me?
Max Hillebrand: Yeah, it's all about the relative ratio of the total money supply to how much you have.
Peter McCormack: Okay.
Max Hillebrand: Think of it, there's a big cake on the table and you have a slice of it, and let's say that slice is 10% of the total cake, you have 10% of the money supply let's say, and that's great. However, let's increase the money supply, someone prints a bunch of money and you're not the one getting it; the guy who printed the money gets it first.
Peter McCormack: Who's printing; what are you on about printing money?
Max Hillebrand: Well, whoever's doing that.
Peter McCormack: You're on about the government?
Max Hillebrand: The central banks and governments, yes, it's a kind of intricate system of how exactly they print the money, but ultimately they just print the money, meaning let's say the size of the cake gets bigger but your slice stays the nominal same amount; you had £100 before, you have £100 after. It didn't seem like anything changed much, right, but the cake got bigger and you have a much smaller percentage point of that now; instead of let's say 10% you only have 5%.
Peter McCormack: But I've been going for 44 years, Max, I've not really noticed the difference.
Max Hillebrand: I don't know, I think you do. There's this concept of the seen and the unseen, and sure we could think, "Hey, look we have all these magic microphones, cameras, all these new cool technologies, this is great, we're super wealthy", well, yeah, sure, but how wealthy would we have been if we wouldn't have stolen from each other all the time; how much more capital could we have amassed; how many more technologies could we have built if we just wouldn't steal from each other all the time?
Peter McCormack: Well, I did notice this morning, after I got up this morning, I wanted a coffee. I went into this bakery and they had these nice-looking cookies and she's like, "Do you want a box of cookies?" I was like, "Yeah, I'm going to take these back to my kids and back to my dad", so I bought a box of cookies, it was £25 for a box of six fucking cookies! So, things are getting more expensive, and that's more of a flippant joke, but what it was reported this week is that growth through inflation in the UK hit 17.1%. Now, listen, there are multiple factors that come into this, there is a war and we do know there are issues with transportation of certain food stocks, we know there are certain issues with the energy sector and the cost of producing food in the UK. We can't put that all on the money printing, right?
Max Hillebrand: Well, I think the money printing is definitely that root cause that we can clearly identify. So, once you print money, again we shift capital from some people, or from the vast majority of people, to those people who receive the newly created money first. Now, those people that received the money are a lot richer, meaning they're going to invest into more things now; if you have more money, you're going to do more with it.
Peter McCormack: All right, let's go back a step, let's make this even easier to understand, this is the Cantillon effect you're talking about; okay, how do you mean? Literally talk me through the steps of the people printing the money that goes to the richer people; how does that happen? Firstly, why is the government printing the money and how is it getting into the hands of the richest first?
Max Hillebrand: Well, how they're printing the money is literally like a printer, you know the physical bills that you have?
Peter McCormack: Yeah.
Max Hillebrand: That's the base money, that's the ultimate money, like on the Bitcoin blockchain, like physical gold, that's kind of the same thing. The base money has two components, so it's the physical cash that's literally been printed, and then you have the central bank reserves, and this is basically a promise of the central bank that they will print the cash in the future. And this promise to print the cash is as good as the cash. Both of these things are part of the base money supply of the fiat system. So, not just do they inflate by actually printing more, they also inflate by promising more that they're going to print more in the future, and that's especially been during COVID. Sure, the physical base money supply has increased, but the digital component, that promise to print more, that has just skyrocketed like crazy.
Then, to whom does this go to? Of course, first of all, the government, that's how the government finances all of its debt, is just by receiving that literally newly printed money as well as, for example, huge corporates; that's what bailouts are ultimately, the Fed or the central bank prints a bunch of money and then gives the bailout to the banks who are in a bad shape for example, or it can also go to the individual person living -- I think, here in the UK, you got from the government some subsidy for the gas, right?
Peter McCormack: Depending on who you are.
Max Hillebrand: Yeah.
Peter McCormack: They're doing them actually for companies right now; I think they just announced today they're going to have to extend it because the gas and electricity prices are so high that a lot of companies, like I talked about a bakery, bakeries or cafes may have to close down because they can't afford to heat their property. I told you last night, I'm in the process of buying a bar right now, and I've seen the management accounts but I've also seen the most recent gas and electricity bills; they've gone up 300% in the last few months. These are big cost increases for certain companies.
Max Hillebrand: Yeah, so let's dive deeper on why that actually happened. So first, they printed a bunch of money, so a lot of capital got moved from everyone to those who received the money first, that's the first kind of wealth redistribution, and that's already bad, because all of a sudden now you're poor, which means you'll have to struggle more to do your things. However then, these people who just received all of the money, they're going to start investing it now much more than they otherwise would have.
So, we invest in projects that get worse and worse and worse because the first time you receive money you're going to invest it in the best project that you get, the highest return on your investment, you're going to put your money there. The next unit of money that you have, well, naturally, you can no longer put it into the best because you've just done that, you've already invested in that one project. So, naturally, you will have to invest in the second best, and then the third best, and with every additional dollar, you're going to invest in marginally worse investment goods.
So, we're basically investing in things that we don't really need that much, so to say. Instead of just focusing our limited capital on just the crème de la crème of investments, we spray it everywhere, everyone's investing in everything. This basically means we use up a lot of resources to build up these production stages, and we tend to make these production stages even more round about. And instead of having a very simple process to produce something, because we're so rich, we can make it fancy, we can introduce robots and lasers, etc, to make the production a bit more complex. Sure, we get something out of it, it's --
Peter McCormack: Hold on, surely you invest in robots and lasers to become more efficient, to become more productive, to deliver a better return on your investment?
Max Hillebrand: Yes, exactly, but it just means that more capital is tied up in this specific process. So, let's say you could produce a cookie or something by hand, and that takes an hour of your time or something, or you could build a robot with a bunch of rare metals and silicon and software and all that and that takes a long time to produce the robot, who then in 30 minutes can produce the cookie instead of --
Peter McCormack: But what's wrong with that?
Max Hillebrand: Well, I'm not saying that it's wrong, I'm just saying that we needed to invest a lot more capital in order to first build the robot, so that we then can do the cookie, and here it just means that more capital is being tied up, and all the capital that we spent on building that robot is gone now, we cannot use it for something else, to build a car, or whatever. So, that's the first stage, we have malinvestment, we build projects we don't really need and we spend way more capital on them than we otherwise would have, let's say it like that.
The second thing is overconsumption. So, because all of a sudden you have a bunch of new money, now you're going to buy a box of six cookies.
Peter McCormack: Not six boxes of cookies! Yeah, I've overconsumed for the last few years.
Max Hillebrand: Yeah, and so this basically means we have a limited amount of resources, but because we think that we're super-rich because I just got new money printed to me, I'm rich, so I can now consume all this stuff that I otherwise would not have consumed. Now, you see this comes from two levels: for one, we invest much more capital into investments, so a lot of capital goes there; and simultaneously, we consume a lot more which means we reduce the capital that we have, we eat the food and then it's gone, and this is a mismatch.
We spend a bunch of money on investing new things which means we think that in the future, we're going to get that capital back, but right now, it's gone. We've pushed that capital, allocated it now, hoping that we get more back in the future. But simultaneously, we don't want to wait until the future to consume, we want to consume right now and we're overconsuming right now. So, not just that we lock up capital in these investments, we're also decreasing our capital stock right now instead of waiting for the profit that we have in the future, and that's a level of poverty and that's why you see prices go up ultimately, becasue the resources that we want to have, we've already invested them somewhere else and we've already consumed most of them, so there's literally not enough fuel left to heat the country.
Peter McCormack: So, are you against any idea of a central bank then?
Max Hillebrand: I'm against any idea of theft, and I think that you could probably build a central bank that doesn't steal and that doesn't inflate, it's just very, I guess, unlikely because once you have the power to inflate, you're probably going to use it, and if we define the central bank as that entity that can inflate the money legally, most likely you're going to do it.
Peter McCormack: So, how do things change with Austrian Economics? If somebody's listening for the first time like, "What are you on about, this Austrian Economics? I've never been to Austria; what the hell's this all about?"
Max Hillebrand: Well, you know in the late 1800s, 1900s, a couple of really smart people were in Austria, in Vienna, and there was a big somewhat divide across multiple disciplines, roughly saying between collectivism and individualism, so to say. So there was, in terms of psychology, there was a camp that was about the collective psyche and the zeitgeist, etc, and then there was Carl Jung and Sigmund Freud who focused on the psyche of the individual, and that was a huge clash in Vienna that happened between these two ideas of how to think about psychology.
Simultaneously, the same battle was happening in economics about collectivist economics, things like Marx, for example, and communism came out of that idea as well then the individualistically-focused economics, which is basically what we now know as the Austrian School of Economics, or praxeology, where we analyse the consequences of human action, and we can deduce things like what happens when we increase the money supply; what happens when we put a maximum limit on the wages or a minimum price for certain goods; what are the consequences of this, economically speaking?
Peter McCormack: See, you would have thought, if you were making economic decisions for a country of 70 million people that this would be something you would just naturally do, like you should just be studying the consequences of these decisions.
Max Hillebrand: Yeah.
Peter McCormack: But there's no incentive to do it because the answers you come to would be that this is fucking nonsense, what are we doing here?
Max Hillebrand: Yeah, basically.
Peter McCormack: So, why do you think Austrian Economics hasn't really become a mainstream school of economics? I think that's an unfair thing to say, it is a mainstream school, I'm aware of it, there are a lot of people who are aware of it, but why isn't this a standard of economics that has really been understood outside of these niche circles of maybe gold bugs or bitcoiners or libertarians, because it shouldn't be seen as radical, right?
Max Hillebrand: No, it's pretty common sense, to be honest.
Peter McCormack: Yeah.
Max Hillebrand: It's not common, unfortunately, but it should be.
Peter McCormack: But it is common sense.
Max Hillebrand: Yeah. Well, it's a really good question and I think to some extent, it was just about academia and people being tossed out of their positions if they were thinking along these lines. There were a lot of people or universities that, when you would put some Austrian Economics into your curriculum, you would just not get the job next year basically.
Peter McCormack: Why though?
Max Hillebrand: It's a good question. I think a lot of the current academia is there to defend the status quo, to defend what is there. Again in Vienna, there was House of Hohenzollern, if you were rich, extremely wealthy, like you're royalty family for a long time in Europe, and they had a group of academics that they called the intellectual bodyguard of the House of Hohenzollern. So, they really wanted to make sure that their prime position as being close to the centre of power will be defended on an ideological basis, that people think it's not just okay but it's actually desirable to have people at central points of control in the economy.
Peter McCormack: So, now you've been around Bitcoin for a quite a bit of time now, is there an absolute natural fit between Bitcoin and Austrian Economics or is there any misalignment?
Max Hillebrand: No, I think it's spot on.
Peter McCormack: It's perfect?
Max Hillebrand: Yeah. Satoshi is like the greatest living applied, I'm not sure if he's living, but the greatest applied economist because he obviously, and very deeply, understood the Austrian reasoning from all of his writings and the importance of the fixed money supply, the importance of individual verification of the rules; all of this is deeply, deeply, deeply Austrian.
I think that a lot of the cypherpunks were very much influenced by the likes of Murray Rothbard and others, so there's definitely a strong correlation here. Like, for example, Hal Finney, one of his early comments was about Bitcoin banks and the aspect of fractional reserves, etc, with Bitcoin banks; that's like one of the root causes of debates in Austrian Economics, is banking and fractional reserve, etc. So, it was definitely in the minds of the people working on Bitcoin very, very early.
Peter McCormack: So, what is that rooted debate with regard to banks and fractional reserves; there's a disagreement whether it can or can't work, should work; what's the basis of the arguments?
Max Hillebrand: Yeah, so it depends a lot on what we're actually talking about. For example, there's this concept of a money warehouse, it's the very basics of a bank so to say; I have a gold coin, give that gold coin to you because you have a big metal box where you can lock it in and a big guy with a guy in front of it to defend it, and now I'm hiring you as my money warehouse, you store my money, and in exchange, you give me this little paper certificate that says, "Hey, Max owns one gold coin in my vault", for example.
So, this could be written on my name specifically, that only I can come to you to get back that gold coin, or it can be whoever has this piece of paper has to write to get that one gold coin back. So, I can take this piece of paper and give it to someone else, and then that person comes to you and you will give him the gold back.
Peter McCormack: Because the note is a promise.
Max Hillebrand: Exactly, the note is basically a promise to withdrawal or a demand deposit it's often called, but of course, the physical piece of paper's not the same thing as the physical piece of gold.
Peter McCormack: Of course.
Max Hillebrand: So, the question is what's the price difference between the gold and the paper? If you're an extremely reputable money warehouse with high security standards and lots of ethics and you're never going to steal from anyone, then there's a high chance that the paper and the gold coin trade at par, meaning that whenever I say I want to get a gram of gold and someone gives me a gram of gold promised from your money warehouse, I'll be happy and I won't charge anything extra just because it's the piece of paper.
So, then what happens if let's say you have 100 grams of gold in your vault but you issue, instead of 100 paper certificates, 200? Now, all of a sudden, there are 200 claims on the gold out there but there are only 100 pieces of gold.
Peter McCormack: And who would know?
Max Hillebrand: And who would know, exactly, because very often, sure, maybe once a day someone comes and picks up a gram of gold, but almost never does someone come and pick up 100 grams of gold, everything.
Peter McCormack: Yeah.
Max Hillebrand: So, if you just handled more paper receipts, then every day, 2 grams of gold gets withdrawn let's say, but that's still not 100, so you can fractional reserve, so to say, without it being noticed.
Peter McCormack: I'm going to read a quote, Danny read this to me this morning, you've got to talk to me about Jörg Guido Hülsmann.
Max Hillebrand: Jörg Guido Hülsmann.
Peter McCormack: I got close! Jörg Guido Hülsmann. Is that a German name?
Max Hillebrand: He's German, and I think his wife is French and he's living in France.
Peter McCormack: Ich heiβe Jörg Guido Hülsmann.
Max Hillebrand: Sehr gut!
Peter McCormack: Right, okay, so he wrote The Ethics of Money Production.
Max Hillebrand: Beautiful.
Peter McCormack: I've actually never read it; I've got it at home but I've just never got round to it.
Max Hillebrand: It's so good, and the crazy thing is, he published that in 2007 which I think is definitive proof that Hülsmann is in fact Satoshi.
Peter McCormack: That's what I said to Danny this morning, I was like, "Is this guy Satoshi?" All right, listen, I'm going to read this quote, okay, "An economic good that is defined entirely in terms of bits and bytes is unlikely ever to be produced spontaneously on a free market, and despite the dedicated efforts of various individuals and associations, no such money has in fact ever been produced since the creation of the internet made electronic payments possible. At present, only government money has been produced in electronic form. These new electronic techniques of dealing with money are very efficient and beneficial but they must not be confused with the creation of electronic money".
So, let's just say that first bit again, "An economic good that is defined entirely in terms of bits and bytes", so it's a fascinating thing for him to say, and the fact that he wrote this and the book came out in 2008 --
Max Hillebrand: And he was right at that point.
Peter McCormack: He was absolutely right. Was he at all wrapped up in the kind of cypherpunk scene or anything like that?
Max Hillebrand: I don't think so to be honest.
Peter McCormack: No?
Max Hillebrand: No, he was definitely very much involved in the Austrian rabbit hole for sure, and yes, there was some overlap, but if he ever read the cypherpunk mailing list or wrote there, I'm not sure. It would be interesting to check if he ever got quoted on the cypherpunk mailing list, that would be quite interesting.
Peter McCormack: But you've met him, right, you've orange pilled him?
Max Hillebrand: Yes.
Peter McCormack: Okay.
Max Hillebrand: In fact, he was orange pilled before I met him.
Peter McCormack: Was he?
Max Hillebrand: Yeah, that's just yet another sign that he's in fact Satoshi!
Peter McCormack: Okay. So, in terms therefore, when he talks about an economic good that is defined entirely of bits and bytes --
Max Hillebrand: What's an economic good? That's the first question.
Peter McCormack: Well, yes, okay.
Max Hillebrand: So, the economic good is a scarce and rivalrous resource. So, what does "scarce" mean? Scarce means there's a potential of conflict over who can utilise this resource. So, the piece of paper in front of me, either you hold it or I hold it, there's no way that we could both, at the same time, hold and use the same piece of paper for different reasons or for different uses, that just doesn't work. This unit is scarce; either you use it or I use it.
Then the other thing is, is it super abundant; is there a lot of it? Think of it like the air in this room, there's a lot of it here, however air is still a scarce resource, and you realise that when you go under water and you have a bottle of pressurised air with you, either I breath it or you. If there's not enough air molecules in this bottle for both of us, then we have a conflict over who can use the scarce resource that is limited in quantity, whether the supply that we have is less or not enough to satisfy all of the needs that we have. So, we can have super abundant scarce resources, like air in this case, but ultimately it's still scarce.
Then the next part, what are bits and bytes? Bits and bytes are numbers, ones and zeros, it's information. Information is not scarce fundamentally; if I say the word "zero" that doesn't hinder you from using the word zero or the number zero in your maths. When we can share information, we can copy it, and I can't copy this piece of paper but I can copy the words that are on top of it, and that is a big, big, big fundamental difference because this means now, regardless of how much the demand is for this piece of knowledge, well, I can copy it and satisfy any demand ad infinitum.
So, that means that information is not scarce and therefore it cannot be rivalrous and therefore it is not an economic good. So, what he's basically saying is that a money has to be scarce, a money has to be rivalrous, a single coin of money must only be used by one person at one time for one task; you cannot use the same gold coin and pay two different people with it.
Peter McCormack: No.
Max Hillebrand: You know what Satoshi called this? The double-spending problem.
Peter McCormack: The double-spend problem.
Max Hillebrand: Exactly, that's exactly what Hülsmann is saying here, the double-spending problem has not been solved unless we add or we introduce the government. What we can say is, "Okay, well here's the government", and that government says, "Which transaction came first?" basically, and that central party that we all trust and that has full control and that we cannot verify, they say, "Okay, this is the real coin and this copy of the coin is fake", so to say, which of course sucks because now we have to trust this third party with doing this.
What Satoshi found out is that we can in fact use software and speech in order to establish or in order to solve the double-spending to establish scarcity, rivalrousness in cyberspace without relying on a single trusted third party. Every one of us can create new units of Bitcoin, it's not just limited to the government that only they can create the units of money, which is what they do with digital fiat currencies; but with Bitcoin, everyone can do it because we all have a system of rules that we define, verify and enforce on our individual computers as Bitcoin full nodes.
So, every full node is the issuer, so to say, of the rules and the monetary tokens, and we have a clear set of rules on who gets to spend the token first: the miners, those who find the block, and then whoever is at the tip of the chain of signatures that transfer the coins to the next person.
Peter McCormack: You're going to laugh when I tell you why that took so long. If there's anyone listening, I just went to get coffee because I'm tired.
Max Hillebrand: Am I boring you with this conversation?!
Peter McCormack: No, Max kept me out drinking late! No, the payment wouldn't work.
Max Hillebrand: There you go.
Peter McCormack: Payment wouldn't work.
Max Hillebrand: So, did they take Bitcoin?
Peter McCormack: No, of course they didn't fucking take Bitcoin! Do you know what, my BlueWallet's empty of sats, I need to load that up.
Max Hillebrand: Oh yeah, public service announcement, BlueWallet is shutting down their Lightning wallet.
Peter McCormack: What?!
Max Hillebrand: Yes, so get your money out, I think you have enough couple of weeks.
Peter McCormack: Are you releasing that exclusively?
Max Hillebrand: No, they announced it a couple of days ago.
Peter McCormack: Why are they doing that?
Max Hillebrand: Because the technology that they use, LNDHub, is kind of a piece of crap and they kind of scaled too much; BlueWallet has a shit ton of users and it's kind of overwhelming.
Peter McCormack: So, it's been too good for them?
Max Hillebrand: Yeah, they're too successful basically, plus it's this custodial thing which was always kind of a hack. BlueWallet started as a non-custodial wallet for on-chain and multisig, and what they're working on now is to work on a non-custodial Lightning implementation with LDK. So, in BlueWallet, you'll have noncustodial Lightning soon; I'm guessing they're going to, as soon as they shut down their custodial offering, they're doing to do the non-custodial one.
Peter McCormack: Do you think they're ready to go with it?
Max Hillebrand: I think so, I think it's been working for a while actually.
Peter McCormack: Actually, what am I on about? I'm an absolute liar, I have got sats on here; do you know why, because of Nostr.
Max Hillebrand: People keep zapping you?
Peter McCormack: Yeah, it's amazing. So, I talk shit on there all the time, but I got Wallet of Satoshi, people are like, "Put your thing in, let me zap you". Right, I had 178,000 sats sent to me on it.
Max Hillebrand: There you go.
Peter McCormack: Yeah. So, you don't own any Bitcoin? Right, I'll tell you what we're going to do, I'm going to give you all the Bitcoin I've been given on Nostr; I'm going to give $40 of Bitcoin but you have to download a Bitcoin wallet. You're just going to get free money, there's no reason to say no to this. What wallet would you recommend?
Max Hillebrand: It's a good question. So, the question is, do you want to do it properly or not? You can go to a money warehouse, like Wallet of Satoshi, or you can actually hold the money yourself.
Peter McCormack: This is our friend, Sophia's first venture into the world of Bitcoin.
Max Hillebrand: And that's why it should be a proper start to get things going.
Peter McCormack: All right.
Max Hillebrand: Do you have iOS?
Sophia: Yeah.
Max Hillebrand: Then Phoenix.
Peter McCormack: The Phoenix Wallet? Right, if you download the Phoenix wallet, at the end of this interview, I'm giving you all the Bitcoin I've been generously donated via Nostr. Do you like Nostr?
Max Hillebrand: I love it, it's really cool.
Peter McCormack: Yeah. Do you know what's really interesting about it, sorry because we're deviating now, I'm all over the place, but I go on Twitter and I feel dirty, I feel shit, I'll post something, it might be an interesting point and it's just like, "Fuck you!" like all people just being absolute bellends. Then I'll go on Nostr and post something, and yeah there's the odd pushy dickhead, but it's great conversation. You get more answers quicker and better, and so for its niche, it's totally working. What I hope they do is they scale that niche to other niches so other people come in because it'll be sad if Nostr is just a Bitcoin chatroom, that would be sad, although I noticed Zerohedge is on there.
Max Hillebrand: Yeah, lots of people are on there, seriously, and it's not just Bitcoin stuff either, and not even just English-speaking stuff; there's a bunch of Chinese notes being written there.
Peter McCormack: Can it scale?
Max Hillebrand: It probably has the best shot of scaling for anything that we've seen so far because it's a very simple system and you can run Nostr in many different ways. So, Nostr has a client which generates a private key and writes a message and then signs that message with the private key, and now you have that signed message and now you send it to a relay, a server basically. So, you send your signed message to a server and now anyone else in this world can say, "Hey, dear server, the relay, please give me all the messages that were signed by this private key or this public key so to say".
Now you've just transferred via a single centralised server, you've transferred the message, but because it's a signed message, you can just duplicate it, the information is non-scarce, copy it ad infinitum, blast your message on 500 different relay servers and then they all hopefully store your data. Maybe a relay will only store your data if you pay for them, which makes sense too.
Peter McCormack: Why would you pay for one?
Max Hillebrand: Because that's a reliable service. The problem is, as soon as something is free, well, the spammers are just going to come and send millions of messages to you per second and eventually your entire disc is full and what do you do then? You just have to start deleting stuff.
Peter McCormack: Right, okay. Are you going to Nostrica?
Max Hillebrand: No, unfortunately not, I wish though.
Peter McCormack: I'm thinking about it, I said to them I want to go; I've got some football clash that I've got to figure out. All right, look, listen, let's go back to Jörg, your hero, one of your heroes, okay, so give people the TL;DR on the book. It's pretty obvious because it's called The Ethics of Money Production, but what does he actually get into; how does he explain it?
Max Hillebrand: Yeah, I mean the result is, inflating the money supply is evil and he really takes praxeology or Austrian Economics as a first principled axiom-based science. So, we start with axioms, those are assumptions, so to say, things that we just assume to be true. In the case of economics, basically action is purposeful behaviour; humans act, that's our starting point, that's the only thing that we assume. From thereon out, we deduce a lot of things, like humans have problems, humans use their scarce means in order to satisfy their ends in order to solve their problems, etc. Humans have a time preference, so satisfaction of your end sooner is preferred to satisfaction of your ends later, all these types of things.
What is exchange? I have a good, you have a good, I value your good more than I value mine, and you value my good more than I value yours, and so there's a mismatch of our valuations; that's why we trade, because I like your stuff more than mine, and when we exchange, we're both happier.
Peter McCormack: You want this?
Max Hillebrand: Then, once we have exchange, then there are entrepreneurs who solve problems for people, so to say, and entrepreneurs help you to achieve your ends, to achieve your goals, and they will do so only if you trade with them, if you pay them with something. The question is what do you have to give the entrepreneur so that he does the service for you? Then, money is that good in the economy which basically every entrepreneur wants to get paid with.
Peter McCormack: Okay.
Max Hillebrand: So, regardless who's the entrepreneur, he's going to want to have that specific thing, that piece of gold, that piece of paper, that piece of Bitcoin, and then that's the money. So, Hülsmann works from the axiom all the way through to the definitions of money and then analyses the consequences of increasing and decreasing the money supply and how that affects interest rates, and interest rates, just the price of time so to say, the price of money, and how all of this is effected, and then concludes things like unemployment will go up, poverty will go up, etc, people will starve and such.
Peter McCormack: So, it's pretty bleak.
Max Hillebrand: It's pretty bleak, yeah; stealing from people leads to pretty shitty outcomes.
Peter McCormack: Well, look, we're seeing it, we see it across the country here.
Max Hillebrand: Everywhere, yeah.
Peter McCormack: Yeah, I have to use my own country as a way to observe it, but we've got shops closing down, we've got higher poverty levels. We're meant to be richer than we ever are, everyone's got iPhones and iPads and electric cars, but we've got higher poverty levels than we've ever had in this country and we've got an abundance of food banks where people are going because they cannot afford to feed their family.
I made this film actually, here in the UK, about inflation, and I went to this one food bank, I was chatting to the guy, and he said, "We've now got people being referred to us who are nurses". So, their job, they go in day in day out to the National Health Service, they work themselves to the bone doing these long 12-hour shifts to keep people healthy, to look after people; it's a tough job, my mum did it.
Now these people are going to food banks because the money they earn there is not enough to be able to feed their family. They're even talking about now like these warm banks, places to go where people just stay warm because it's just so cold they can't afford to heat their homes. So, we're richer than we ever were, but it feels like there is a bigger divide between the rich and the poor, which I guess you would say is a natural occurrence from theft.
Max Hillebrand: Yeah, exactly. If we institutionalise theft and especially the money printing, then yeah, the vast majority of people get really poor, and then those few who are early at the money spigot, they're going to get extremely rich. Like look at the last couple of years, the likes of the Pfizer company that received a shit ton of newly created money; this was all the new vaccines and stuff, all the masks, etc.
Peter McCormack: Yeah.
Max Hillebrand: Who bought that? Well, the government. And with what money? Well, the one that they printed. So, which capital did they use? Not theirs, the capital of everyone else, and that went to Pfizer and a bunch of others, of course. So, yeah, they got rich, a lot.
Peter McCormack: So, what was it like meeting Jörg?
Max Hillebrand: It was amazing. That was actually in Auburn, Alabama at the Mises Institute.
Peter McCormack: Oh, wow!
Max Hillebrand: The Mises Institute, they founded it like 1980 or something like this, and they have this building next to the Auburn University with a gigantic library. Man, the library there, they have the entire personal library of Murray Rothbard, his personal books with his handwritten notes. I held in my hands, from Karl Marx, Das Kapital where Murray Rothbard made his edits in the margin.
Peter McCormack: What did he say?
Max Hillebrand: It was hilarious, like, "Fucking ridiculous, he has no idea what he's talking about", entire paragraphs crossed through like, "Bullshit!" Hilarious.
Peter McCormack: Yeah, I don't see an alignment with Das Kapital and the Austrian economists. What an experience to go through, somebody like you to go and see that.
Max Hillebrand: It really was transformative. So, it was an entire week-long event where a bunch of incredibly smart professors gave lectures to young students, and yeah, I thought before that, "Sure, I know a bunch about Austrian Economics, I'm going to breeze through the seminar". Hell no, it was super-difficult. Then at the end, there was a quiz, I was like, "I'm going to ace it, come best of the class, sure"; I barely passed it because the questions, they were tough, really tough.
Peter McCormack: Do you remember what kind of things?
Max Hillebrand: Yeah, like causal relations between money printing and anti-inflation rate, or how does an expansion of the credit system, how does that affect the wheat trades, etc? I don't know the exact phrasing of the questions any more, but the entire scene of Austrian Economics is very broad, there are just a lot of different topics that are being touched there, including some really deep philosophical epistemological, like what is thinking actually; how do we think about things? Very fundamental deep questions.
Peter McCormack: What kind of deep questions do you ask yourself; what do you wrestle with?
Max Hillebrand: That's a really good question. Well, I think just the entire concept of what is Bitcoin? That's a deep question that you've got to wrestle with for a while, and I still don't think that I'm done, but that's a big one.
Peter McCormack: What do you mean; do you mean what is it almost in the context of considering how people are talking about ordinals recently; is it an information system; is it a money system; is it that kind of question?
Max Hillebrand: Yeah, exactly. I guess, as Hülsmann pointed out in this one paragraph that you read, it's a non-scarce software system that establishes scarcity in cyberspace, but does it really; are UTXOs really scarce? They're still just written on software and replicated across all full nodes, etc. Yeah, and then what are the consequences of Bitcoin too; or are the attributes of Bitcoin good in the sense of limited money supply, which by the way, that's not even something that Austrians contemplated before, a fixed, previously known and agreed-upon money supply, that didn't cross anyone's mind?
Peter McCormack: Well, I guess because one had never existed.
Max Hillebrand: Yeah.
Peter McCormack: They'd had sound money in the form of gold, which they knew there was an abundant supply. But it's difficult to get to and its price in the market would influence how much is being mined, so it was just something that required some proof of work, it had a proof of work attached to it, unlike the money printing that just lopped a zero onto the central bank reserves, because how else could you produce it apart from digitally? You could not produce something like this.
Max Hillebrand: Yeah, exactly, and then of course you get into technical nuances of Bitcoin as well, there's so much to wonder about and to break your head about.
Peter McCormack: Are you wrestling hard with anything right now?
Max Hillebrand: Do you mean right now in this conversation?
Peter McCormack: No, generally.
Max Hillebrand: Yeah, right now, I think just that question, if it's good or if it's better that a monetary system is anonymous, and what does anonymity mean; what is privacy; is this a good thing; is it a bad thing; and, how does it tie into Bitcoin specifically? If we considered that having an anonymous monetary system is important, then how do we get Bitcoin to be anonymous? Those are really, really big questions.
Peter McCormack: So, that's a philosophical one that leads to a technical one.
Max Hillebrand: Yeah, I think a lot of this is like I'm rooted in the philosophy of it, which brings me to the economics of it, and then the technicals of it.
Peter McCormack: So, I would be intrigued to know, if you're wrestling with the concept of an entirely private Bitcoin, what downsides are you wrestling with in having that?
Max Hillebrand: Well, that when someone is anonymous, you cannot stop him from doing anything basically because you don't know that he exists or what exactly he's doing.
Peter McCormack: So, nefarious characters?
Max Hillebrand: Yeah, exactly, there's a bunch of people that just do really nasty things, and what happens when they have extremely powerful tools? That's a big question, and what happens also when, for example, let's say those anonymous tools exist but they're freakishly expensive to use, so only the rich can afford to be perfectly anonymous versus the average Joe cannot. So, there's asymmetry of power, what does that relate to?
Peter McCormack: When you turned up, I was on the phone, I was talking to a journalist about the UK legal system; there's an asymmetry there with being rich and you get power in the legal system and you can crush smaller peasants who don't have maybe the capital to be able to continue lawsuits year after year.
Max Hillebrand: Yeah.
Peter McCormack: Those asymmetries exist with money, well money is power so it always exists. On the technical side of things, do you think we will get to a natively private Bitcoin?
Max Hillebrand: The big question of what's natively here?
Peter McCormack: So idiots like me have got it without even thinking about it!
Max Hillebrand: So, one big question, do we need to change the Bitcoin consensus rules in order for it to be private?
Peter McCormack: Good luck!
Max Hillebrand: First of all, good luck; second of all, even though I'm sure we could change the rules in some ways that would make it more private, ultimately I don't think we need to. I believe that, when we get smarter about how to use the exiting protocol, that we can improve the system substantially. Things like the Lightning Network, things like CoinJoin, these things are just us getting smarter about how to use this crazy system that we discovered, and the consequences of that are I think quite great. I'm extremely confident about having a cheap and effortless and easy to use anonymous money system; to some extent, we have it already now.
Peter McCormack: Well, you built part of it that enables us to have that.
Max Hillebrand: Yeah.
Peter McCormack: We're talking about Wasabi if you don't know. I've got a couple of questions on that but one main question really, we've covered it a lot in the past, and full transparency, Max and Wasabi are a sponsor of my show but also go and check it out because they built the McCormack-friendly version of Wasabi. Now, people are able to recognise if somebody has run their coins through Wasabi, that is something they can do.
Max Hillebrand: Yeah.
Peter McCormack: Will you ever be able to get to the point where they won't be able to do that?
Max Hillebrand: Yes and no. There are ways that you can improve your privacy without telling others that you are, in fact, using privacy-preserving technology; this type of thinking is called steganographic privacy, so you hide in plain sight. There are things, like for example, PayJoin which does that. So PayJoin is when I want to pay you for pizza, however you add a coin that you received in the past to the input side of that transaction where I'm paying you. So it's literally a CoinJoin, the sender and the receiver both put coins into that transaction on the input side, and that improves privacy in some subtle ways, but an outside observer, when they see this transaction, it's not obvious that this is in fact a PayJoin; it's looks just like a regular payment from one guy to another guy.
So that's, for example, one thing, or another really, really interesting protocol by Adam Gibson is CoinJoin XT; that's like a multi-transaction ceremony with multiple people, it's like ten people, where each of these individual transactions has like two inputs, two outputs, so they don't look suspicious at all, but you can coordinate this network of transactions in advance, so, "Among all of this group of ten people, we agree this is the first transaction, this is the second, etc". We pre-sign all of this so we have this huge network or coordinated transactions that we then afterwards, one by one, publish to the Bitcoin Network. So, again, we use the system smartly, we prepare transactions off-chain, so to say, and then slowly go on-chain to actually settle this entire thing, and this is steganographic as well.
Coin swaps is another thing where I have a coin here, and in one transaction basically, I give you that coin in exchange, we have a coin over here, and you make a transaction there and we kind of swap coins, so I get your transaction history, you get my transaction history, so to say, but an outside observer doesn't know that this is going on at all.
So, these are I think the three, and even to some extent the Lightning Network arguably is a steganographic, or can be a steganographic privacy-preserving system. The thing though is they give little privacy, it's difficult to compare, but they give little privacy and they're quite expensive, especially CoinJoin XT, this network of predetermined transactions. Many transactions require a lot of block space, lots of size, high mining fee.
So, the beauty of a CoinJoin, as we know it in Wasabi, is that it's ridiculously cheap, incredibly cheap compared to anything else out there, and the actual verifiable privacy guarantees of it are quite substantial. So, it's very different to things like PayJoin or CoinJoin TX and it's kind of difficult to compare the two, but ultimately I think a mix of both is going to be what we'll end up using.
Peter McCormack: Why have you made privacy your thing; what is this is so important to you?
Max Hillebrand: It's a really good question, I don't know.
Peter McCormack: It's my job, man, to ask a question! Look, you, as a character, I've got to know you a little bit more over the last year, we spent a couple of times together, we've hung out and I can tell, as a person, that you have real issues with the money system and government and theft and the influence they have over us, but you don't act like a radical anarchist. You could have gone and built anything, and I don't believe you're running Wasabi just because you just spotted an opportunity, this feels like privacy is something that is a mission as well as opportunity.
Max Hillebrand: Yeah, definitely. Ultimately, I'm not a privacy maximalist per se and I'm not a Bitcoin maximalist per se either.
Peter McCormack: Really?
Max Hillebrand: I'm a freedom maximalist.
Peter McCormack: Freedom to shitcoin.
Max Hillebrand: Yeah, freedom to shitcoin too, definitely, and freedom in the sense of not being stolen from, to be able to choose how to allocate your own resources and to be able to choose how to selectively reveal yourself; that's the definition of privacy, to selectively reveal yourself to the world, that you have a choice of the words that you say to the other person or the way that you act in front of someone else and which sensitive information you reveal to them.
For me, privacy is about human freedom, and freedom in the sense of the opposite of slavery. If you do not have privacy, you're not a free man, you are a slave, and someone else decides over you on how you can act, about what you can say and what you cannot say; this is no longer your choice and ability as a beautiful human being, but now it's being dictated to you at the point of the gun and that's just not all right.
Peter McCormack: Yeah, and it freaks people out though, when you talk about absolute free speech. We know it's important in certain scenarios, like you have very oppressive regimes where, if you can just be critical of government, you can find yourself in jail or murdered. Then you have jurisdictions like the UK where you can find yourself in a lawsuit for saying things that you believe are true but somebody will challenge you on it and consider you've libelled them and take action against you. Then you've got certain things that you can't say because of, for example, it's considered a hate crime to say certain things.
Trying to communicate the trade-off between the moral question about certain things people might say, it might be racist or homophobic, but saying what you lose by having these, it's a hard trade-off for people to accept. I think, generally, people want people to be arrested for hate crimes, they want a hate crime to be a crime where people are to be punished for it. They don't understand the consequences of lack of free speech, what that could mean for them at some point in the future, and it's a really tricky thing trying to explain these concepts, it's like trying to explain Bitcoin to people, it's like trying to explain privacy to people.
I think people have got so accustomed to seeing government, and it's a big thing for me to say this, but the government as the people who, how do I put this, no longer are they the people we elect to do a job for us, we are the people who work for them; do you see what I'm saying?
Max Hillebrand: Yeah.
Peter McCormack: So, getting these concepts, it's like trying to turn a tanker around, it's kind of like saying, "Hold on, the government is purely meant to represent the electorate", but we've lost that.
Max Hillebrand: Yeah, we've lost that quite substantially.
Peter McCormack: Yeah.
Max Hillebrand: It's a big issue, but that's again where economics helped me so much, it provided me with a lot of clear ways of thinking about this and articulating it and seeing the importance of it. So, I think that's why economic science is so fascinating to me.
Peter McCormack: How bad can this get? Danny said to me you've got some pretty dystopian views of where this might end up.
Max Hillebrand: It's going to get pretty bad.
Peter McCormack: You're not saying it could, you're saying it is?
Max Hillebrand: It is, yeah, and there's unfortunately no way around it. So, what are the consequences of money printing again, right? We malinvest, we prolong our investment or production stages, we overconsume. This means we start projects where we think we have the resources to finish them, but because we've already consumed all of our resources, there's literally not enough stone, metal, concrete to finish building the house. But the big problem is, right now we're just still in full swing of building the house, everything's awesome, everyone has work, and we're just working on building the house, great; this is the boom period, we think everyone's rich, we're having a lot of fun.
The bust comes when you realise that, "Oh shit, I do not have enough resources to finish building this house". And the sad thing is, it's not just the bad projects that will not have enough resources to finish, it's also the good projects because the good projects cannot finish because the resources that it would have needed are now invested in the bad projects and the marginally worse projects. So, the bust period is inevitable, in fact the bust period is what cleans this entire mess up.
We've made mistakes in the past by printing too much money and malinvesting and overconsuming, and the only way of out that is to reallocate those resources away from those that are bad, so to say, the marginally worse projects, into those marginally higher projects; that's an extremely painful thing because you lose your job, you lose your roof over your, etc, and that hurts, but there's no way around it. The mistakes were made in the past and the consequences are basically unavoidable, which is super depressing, and again, that was me pre-Bitcoin saying the same thing.
Bitcoin somewhat changes this, because with Bitcoin, finally we have a monetary alternative that actually works, hopefully works at scale. So, this means that now we have a sound monetary technology which we can use to help us in the reallocation process. We need money to allocate resources. Money gives us prices; with old money, there is no price. Without prices, there is no profitability calculation. Without profit or without the ability to calculate profit, you're just floating in the dark, no idea in which direction you're going, if you're actually trending up or trending down.
So, the ability that we have now in a monetary system that is true in its total money supply, with the lowest barriers of entry, for anyone to be able to use that, that now helps entrepreneurs to start with their economic calculation all over again. Plus, when people leave fiat currencies and sell that for Bitcoin, that means that fiat currencies hyperinflate much sooner; they will have to print more money a lot quicker because there is now a drain where the capital is leaving out of the fiat system into the Bitcoin system. So, that hyperinflation is going to come much sooner than it otherwise would have been.
Peter McCormack: And you think that's coming from Europe, coming for the US?
Max Hillebrand: It's coming for everywhere, yeah. That's like the crazy thing, in the past, we have hyperinflation in Weimar Republic, Venezuela.
Peter McCormack: Yeah, Zimbabwe.
Max Hillebrand: Small places, right?
Peter McCormack: Yeah.
Max Hillebrand: Nobody cares about them, and the thing is, even when you have a hyperinflating economy in Weimar Republic, at least you have a sound economy outside with sound price signals where even entrepreneurs in the Weimar Republic can use that outside information to do at least a partial resource allocation.
Peter McCormack: Yeah.
Max Hillebrand: It won't be as good as if the money in the Weimar Republic would actually be great, but at least there is something. The big problem is now we've hyperinflated every single fiat currency on every single piece of this planet, there is no outside measuring system that we can use. Even in the Soviet Union, in the Soviet Union, they didn't have private property, therefore no exchange, therefore no prices, therefore no profitability, so they had no idea what the fuck they were doing, so they sent spies into the West to see what the prices for goods are so that they can actually allocate, like, "Well, where shall we spend out stuff?"
Well, now we're in a situation where, because we've hyperinflated everywhere, our pricing is messed up everywhere, and that's a huge, huge, huge problem, and Bitcoin finally provides us that kind of escape hatch.
Peter McCormack: Yeah.
Max Hillebrand: There's this parallel economy where we can do proper economic calculation and this will accelerate the collapse of the fiat system, however it will lead to a better future in the long run, like the sooner we stop stealing, the better; the best time to stop stealing is 40 years ago, the second best time is now.
Peter McCormack: Yeah. All right, the last thing I want to talk to you about before we go, this was the thing I really wanted to talk to you about, Danny was telling me about it; microscopic cameras.
Max Hillebrand: Yeah.
Peter McCormack: Nano cameras, could they be in here now and we don't even know? This is wild; you wait for this one, this is fucking wild. Danny was like, "Oh yeah, by the way, your private key might never be private". I was like, "What?! You just woke me up!" Nanotech microscopic flying fucking cameras or whatever, what is this all about?
Max Hillebrand: Yeah, I was asking myself, so having anonymous money in my opinion is important. I believe, especially with Wasabi Wallet, we've solved it, and now I'm thinking, "Okay, what's next; do I still need to continue working on the money even if Bitcoin is now anonymous?" It's kind of great, right? So, what's next?
Peter McCormack: You did it, Max; we can go home now! Well done, Max!
Max Hillebrand: Yeah, right, the party's over!
Peter McCormack: Let's get a beer, money's solved, right, what's the next problem we're going to get on with?!
Max Hillebrand: Yeah, exactly. So, the next problem is, is the money actually solved though?
Peter McCormack: Okay.
Max Hillebrand: So, Bitcoin is money of cyberspace. In order to enter cyberspace, you need to be in meatspace, you need to have a physical environment where your body is and where your computer is.
Peter McCormack: Well, we do, but AI doesn't.
Max Hillebrand: No, even the AI has to be on a computer.
Peter McCormack: Does it?
Max Hillebrand: So, every non-scarce digital resource has to be ultimately anchored in physical hardware, at least what we know currently.
Peter McCormack: Distributed?
Max Hillebrand: It doesn't matter, even if it's distributed, there's still a bunch of different physical computers. And now the really shitty thing is like, if we do not have a secure meatspace, we cannot have a secure cyberspace.
Peter McCormack: Okay, I'm with you.
Max Hillebrand: When your hardware wallet's on the table, this room is not secure, I come and grab it, now your computer has gone, what do you do? Your Bitcoin are no longer accessible to you. It's not just about your own physical body and the computer that someone could physically steal, it's also that meatspace layer between the computer and your brain is unencrypted and that's a big, big no-no, because as you say, there can be micro-cameras everywhere, there are microphones everywhere.
If this last mile is not encrypted, then all of the securities that we can gain in cyberspace are null and void because you type in your 24 words and the camera picks it up. All of a sudden, your super-awesome anonymous money is no longer anonymous nor secure, and that's a really, really big issue.
Peter McCormack: How do you solve that?
Max Hillebrand: Well, ultimately, I'm not sure.
Peter McCormack: "But I'm working on it!"
Max Hillebrand: I'm not even working on it yet.
Peter McCormack: Wasabi 3.0.
Max Hillebrand: Yeah, I think the main thing is to encrypt the last mile. Everything else is great, from your computer to any other computer, perfect, encrypted, and that's great; that last mile is where it's at. So, either we reduce that distance, let's say if I have a contact lens or something with a screen, then the camera could no longer peer in between, so that's one example; or then to literally have an implant into your brain that handles encryption in your brain so that your brain can encrypt and decrypt the messages that you send to your computer.
Peter McCormack: Max, what if they hack that chip in our brain?
Max Hillebrand: Sure, what if they hack your hardware wallet? That's why we need free and open-source hardware and software to be able to verify the things that you run on your computer.
Peter McCormack: I just want to go back to a simple life.
Max Hillebrand: Yeah, there's no going back now.
Peter McCormack: Just give me a log cabin by a lake with some books. I think I'm getting too old for this now, there's too much going on. A microchip in my head to protect my Bitcoin?!
Max Hillebrand: Yeah, that's the thing, it's not just about your Bitcoin though, it's about the communications with your loved ones as well, it's about your business, it's about your friends and everything.
Peter McCormack: I think businesses care even less about privacy than individuals unless they've got some shit to hide.
Max Hillebrand: I'm not so sure about that. For example, you have a bunch of employees, do you tell each of them what the other person earns?
Peter McCormack: Yeah, and I make them mock each other! No, of course I don't.
Max Hillebrand: See.
Peter McCormack: Of course I don't because there's a reason for it, people earn different amounts, (1) role, (2) experience, (3) ability, (4) short-term performance; nobody ever sees that, they see whole numbers.
Max Hillebrand: Yeah, exactly, so there's a bunch of reasons. In the past, you advertised your revenue from the podcast and you stopped doing that, why?
Peter McCormack: Well, I was with Jason Williams and American HODL and we were in America and they're like, "What the fuck are you doing?!" I was like, "I'm trying to be transparent, I want to show everyone how this works, I don't want to get any accusations, any accusations that I've been taking wrongful money, it's all there, all out there in the open". And they're like, "Yeah, but you're also telling people what you're earning and you're putting a honeypot and fuck those guys", and I was like, "Okay, yeah, good point", so I got rid of it. But also, look, when I first did it, I was making like a $1,000 a month, I never thought it would make much more than that and it did and the game changed, Max.
Max Hillebrand: The game changed, yeah, but the cool thing is both of the things that you did are privacy preserving because a private person or a private company can choose to reveal information.
Peter McCormack: Yeah.
Max Hillebrand: Like me sitting here in front of a camera doesn't mean that I'm not valuing my privacy. Right now, I'm not valuing my secrecy about the specific words that I'm speaking, I still have a bunch of things in my head that I'm not saying. So, transparency and secrecy are two sides of the same coin that is privacy, and the ability though that you can choose that, "Hey, I want to be transparent, I want my people to know the revenue", that's great. Then, at a later point, you're saying, "Hey, no actually this is too risky, it puts not just me but also my employees at risk. I no longer want to share this information"; that is at the very core of privacy and I believe it's very much important for companies as well.
Peter McCormack: Okay, that's fair. Well, listen, Max, it's always a pleasure to talk to you.
Max Hillebrand: Indeed.
Peter McCormack: I appreciate you being a sponsor. I think the latest incarnation of Wasabi is amazing; anyone listening, if you haven't checked it out, just please go and check it out, it is brilliant what they've done, and I wish you all the best. Do you want to send anyone to anywhere else?
Max Hillebrand: No, thanks a bunch for having me, it was really cool. Thanks for taking the sponsorship, it's just nice that you're spreading the word, not just about Wasabi but Bitcoin and all the freedom tech. It's really good to have proper journalists, I'm not sure of journalists, proper podcasters, people spreading the gospel, shouting it from the mountain tops, super-important, so thanks for doing it.
Peter McCormack: Thank you.
Max Hillebrand: Yeah, and just check out wasabiwallet.io; there's a bunch of a documentation about it, hopefully you don't need much documentation any more. Keep your wallet up to date because we're improving it a lot. Oh yeah, actually, if you have a Trezor wallet and Trezor Suite, you can now do CoinJoin as well, same with BTCPay Server. So, we've started to work on getting other wallets to do their on-chain transactions in a CoinJoin as well.
Peter McCormack: Interesting.
Max Hillebrand: So now these three wallets, and hopefully more in the future, are making gigantic Bitcoin transactions together, and hopefully in the long run, we'll have many different wallets participating in a gigantic transaction, fills up the entire block let's say.
Peter McCormack: Love it.
Max Hillebrand: At that point, we're pretty good.
Peter McCormack: Well, listen, keep doing it, keep crushing it. We're going to have a chat with Sophia in a minute, our resident producer for the day, see if we orange pilled her, but look, keep going, man. People love having you on the show; let's try and do it again before the year's out.
Max Hillebrand: Let's do that, that will be fine.
Peter McCormack: All right, man.
Max Hillebrand: Thanks a bunch, good luck for the team.
Peter McCormack: We're nearly there, man, fingers crossed.
