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Episode 60: Understanding Bitcoin with Phillip Ramsey and Bryan Dewhurst
157 Plays5 years ago
Are you curious about Bitcoin and cryptocurrency in general? Want to understand more about it?
Well, Bryan is the man you want to talk to! This episode is a duocast, but mainly it is Phillip interviewing Bryan about the promise and potential pitfalls of cryptocurrency, specifically Bitcoin.
Some background is necessary to understand this episode better: Bitcoin is banking. Bitcoin can bank without intermediaries. That’s what makes it so powerful. Bitcoin uses peer-to-peer technology to operate with no central authority. Managing transactions and the issuing of bitcoins is carried out collectively by the network. Transactions are verified and recorded in a public distributed ledger called a blockchain.
Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.
This is some serious geekery, but we are convinced Bitcoin and other cryptocurrencies are not going anywhere. You will do well to understand it and potentially dip a toe into cryptocurrency to see if it is an investment that makes sense for you.
what you will learn in this episode:- What Bitcoin is and is not
- The history of Bitcoin and why it was developed
- How blockchain creates triple-ledger accounting
- Understanding Bitcoin mining
- How to buy Bitcoin and other cryptocurrencies
- How cryptocurrency stacks up against the current banking system
- What to consider when thinking about investing in Bitcoin
- How “stable coins” fit into the cryptocurrency universe
Recommended
Transcript
Introduction to Uncommon Life Project
00:00:02
Speaker
Everyone dreams about living an uncommon life, but how we define that dream is very different for each of us. And for most, it's a lifelong pursuit. Welcome to the Uncommon Life Project podcast. We're going to introduce you to people who are living that life or enjoying the journey to get there. We're going to also give you some tools, tricks, and tips for starting or accelerating your own efforts to live an uncommon life.
00:00:27
Speaker
A life worth celebrating and savoring. Please welcome your hosts, Brian Dewhurst and Philip Ramsey. Hello and welcome everybody to another episode of The Uncommon Life Project. I'm your host, Philip Ramsey. And I am Brian Dewhurst.
00:00:43
Speaker
Thank you so much for tuning in to yet another episode. This one is gonna be a good one.
Exploring Bitcoin and Its Foundations
00:00:49
Speaker
It's gonna be Brian and I, but I would say this is more Brian's expertise. So first and foremost, you're probably gonna be hearing me ask more questions than anything, but it's an episode that I've been, I don't know if reluctant is the word, but we are gonna be talking all about Bitcoin today. Brian loves it.
00:01:09
Speaker
Brian cannot wait to be unhaltered and just jump on this topic like white on rye. So we're gonna just, I give you the ins and outs, the highs and lows, the what ifs, the who's, what's, where's and why's of Bitcoin, why it was created, what the whole story is behind it, why Brian is so excited about it. And really I'm in for the ride as well. So Brian, first off, how is your day?
00:01:36
Speaker
Oh, it's gorgeous outside. We're still in the middle of the Corona COVID-19. It is May 1st. I think it's important to date this episode as well. Yeah, that's probably wise. We're shooting this on May 5th, 2020. Yeah.
00:01:53
Speaker
So, I don't know if Brian even felt my reluctance of shooting a podcast about Bitcoin. He probably has and just hasn't voiced it. But I do think this is a really interesting topic. And this is a gift I want to give Brian because a lot of people ask him about Bitcoin. He's done a ton of research. He loves to talk about it. He loves what's going on in the Bitcoin world.
00:02:20
Speaker
So let's just jump right into it. Let's get it on. Where do we start? All right. What I want to do to start this is I actually want to go to Bitcoin.org and just read what Bitcoin is. And then I'm going to go to like Wikipedia and read what Bitcoin is because a lot of people describe it differently.
00:02:40
Speaker
And it's a lot of things to a lot of people. So I'm just going to read exactly what Bitcoin.org says. I love this tactic. I love this approach. Totally signing off on this. Go ahead. OK, so this is from Bitcoin.org. I'm reading it right off their website. Bitcoin uses peer to peer technology. That's basically like code, computer code, to operate with no central authority or banks.
00:03:03
Speaker
Managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open source, its design is public, nobody owns or controls Bitcoin, and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
00:03:27
Speaker
I want to read one more. Bitcoin is a cryptocurrency. This is from Bitcoin's Wikipedia page. Bitcoin is a cryptocurrency. It is decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries, which is a huge component of this.
00:03:48
Speaker
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented in 2008 by an unknown person or group going by the name of Satoshi Nakamoto and officially started in 2009 when its source code was released publicly on the internet.
00:04:11
Speaker
Bitcoins are created as a reward for a process known as mining. And they can be exchanged for other currencies, products, and services. And I'll just stop there. So basically, in my layman's terms, Bitcoin is a peer-to-peer financial network. There's no CEO to it. The Satoshi Nakamoto guy basically released this code and hasn't claimed it to this day.
00:04:39
Speaker
And it facilitates financial transactions. And I think the other thing that a lot of people don't realize, to me, like the three most important discoveries that have influenced business and economy, would those three things to be accounting, oil, and fractional reserve banking. Fractional reserve banking and accounting are very interwoven in the Bitcoin blockchain.
00:05:09
Speaker
Bitcoin to me is really triple ledger accounting. And when you look at accounting backwards when it was first invented, accounting was like double ledger accounting or double ledger book entry accounting. I'm more of an economics guy than I am an accounting guy, but
00:05:31
Speaker
Bitcoin is basically a trust accounting ledger that everybody can see. And that's what makes it so powerful is like, it doesn't have to be controlled by one company to work. And so I'll stop there.
00:05:49
Speaker
Yeah, that's good. And I'm just going to pull out cause I didn't fall asleep and I might not have been on the verge, but could have been there, but okay. So let's talk about fractional reserve banking. We've done a podcast on this before. And that was a very revolutionary thing, uh, to I'd say history and where we're at currently.
00:06:09
Speaker
And that's why I think that you really like this. This is almost taking us back to how influential that part was to the whole economy.
Historical Context of Currency and Gold
00:06:21
Speaker
Yeah. I'm going to go on a tangent here and I hope I'll bring it all back around, but I have no promises because this is a large topic.
00:06:29
Speaker
You know, basically, if you believe in God, God designed gold as money. He gave us gold in Genesis 1.2 and gold has been valued by every basic social group for all of recorded history. So the Egyptians, the Russians, people in South America, every culture has valued gold as a preservation of wealth and or currency for all documented history.
00:06:59
Speaker
And gold is the most unique metal and we cover that in our podcast on gold that makes it really, really good for currency.
00:07:08
Speaker
In that, when you look at our country being founded by our forefathers, they were very clear that gold was the only legal tender for the currency. And that was controlled and operated by the Congress, not the banks. The banks subverted that through legislation approved in 1913 to get the federal reserve system that we have now.
00:07:32
Speaker
And they tried that for, you know, if you kind of get into the subculture of history or the conspiracy theories, if you will, not to go too deep here, but the British and the banking elites from Europe were trying to subvert our banking system
00:07:48
Speaker
from the very beginning. And there were several attempts to set up a central banking formation within Washington DC to take over the printing of the American currency from the beginning of the foundation and formation of our country. But it took them till 1913 to get it legislatively passed. So.
00:08:11
Speaker
I don't know if I fully answered your question there, but Bitcoin to me is an evolution of the limitations of having a commodity-based currency. And so one of the downsides to having a goldback currency, because in the United States we had a fixed currency where a $20 bill was worth one ounce of gold or one ounce of gold equal to $20 bill.
00:08:38
Speaker
It was largely that way for a long time. And then in the thirties, in the Great Depression, the government confiscated the gold from the people, the Americans, and then devalued the gold. So instead of one ounce equaling $20, it was now $35. Well, if you think about it, that's a 67% devaluation to the American people instantly. Yeah.
00:09:01
Speaker
And so when the banks control our currency, they control our country, which is what you're seeing right now in COVID-19, the federal reserve and Washington are operating in lockstep and they've created, I mean, I don't know where it is right now, but let's just take six to $10 trillion in 30 days. We're basically just over 30 days into this.
00:09:26
Speaker
I think it was like mid-march when it all kinda started. So let's just say we're 45 days into this and they have literally created six to 10 trillion new dollars. And the other thing that people don't, I think appreciate is the reason our dollars are called notes is because every dollar is debt. And so our money supply has to increase because every dollar is debt because we need more money to pay the interest.
00:09:54
Speaker
I'm going to say something quick. And just when you're saying note made me think of something that's like Philip's terms, but, uh, dumb and dumber when he has all those million dollars and he has all those sticky notes. Yeah. Similar. Okay. Similar. Yeah. And so the fed and the, in the U S like we're in such a strong position globally because
00:10:17
Speaker
You know, and a lot of that we're getting a lot from people of just asking about hyperinflation and, you know, how can the US keep doing this? Well, our US dollar is like gold overseas. And the other thing I don't think a lot of people realize is that we're very sheltered in America when it comes to banking and currency.
00:10:37
Speaker
Now, if you think about it, in 1913, when the Federal Reserve Act was passed, $20 is worth one ounce of gold. Right now, one ounce of gold is almost $1,700 an ounce. So our dollar has lost almost 99, I think it's like 99% of its value.
00:10:54
Speaker
over the last 100 and X, whatever years that is, 107 years, it's lost 99% of its value, but it's been the, it's like boiling a frog, you know, it's been the slow fade.
US Dollar Devaluation and Comparison to Bitcoin
00:11:04
Speaker
You know, we used to go, I would say like when you used to ride your bike to, you know, we had a 7-Eleven, now it's like come and go, but you know, you ride your bike to 7-Eleven, what did the candy bar cost? You know, when I was a kid, it was like 45 cents. Now I take my kids to a gas station, it's like $1.30, you know, and it's a smaller candy bar. It's not even the same size.
00:11:24
Speaker
So that's where Bitcoin and the reason why Bitcoin was found, and if you read the white paper that was produced by the Satoshi Nakamoto, it was in response to the financial crisis. Another thing that I was thinking about, I saw a tweet on this, but
00:11:40
Speaker
You know, this guy basically, his name is David Einhorn. He's battling with Elon Musk right now and basically calling Elon Musk a complete fraud, accounting wise, which I believe is true. Which is just tickling your heart. Right. But he basically called Lehman Brothers in 08-09 that it would go bankrupt and questions its financial solvency.
00:12:01
Speaker
remind you that the only person that went to jail in the 08-09 crisis was, I can't think of his name, the hedge fund guy that was doing the Ponzi scheme made off. He made off with all the money, right? Probably the most successful Ponzi scheme ever to that point. And so anyways, this guy, this hedge fund manager, David Ironhorn, he's basically saying, he was saying then, Lehman's a big fraud. Like this thing's gonna go bankrupt and it did. Their CEO absconded with $500 million bonus
00:12:31
Speaker
and they went bankrupt. And I mean, they were a bank and they were a financial institution. And so the banking system is so corrupt. It is so corrupt and it corrupts absolutely. And so the money, like the currency is the way for the people to retain power of their country. When our currency was backed by gold, things were very, you know, everyone had a fair chance because the money was backed by an asset.
00:13:01
Speaker
when the money became backed by debt and controlled by the banks, you had just the most massive accumulation of wealth in the history of the world. And a lot of that was the industrial revolution with like Carnegie, Rockefeller, and all those guys, but a lot of that was done pre the banking system, but just the formation of those resources within our country. But our country was free and we had a very
00:13:27
Speaker
We had the best democratic process in the world and we had the best banking system in the world because our money was backed by gold. Now you look at the income gap and people talk about the income gap and all this stuff, the rich get richer and all that. Well, it's true because interest rates are at zero for the rich, but for most people on Main Street, they're paying 18 to 28% on a credit card to survive.
00:13:49
Speaker
And so returning the stability of the currency to an asset backed system is, you know, it's just imperative if there's going to be economic equality and there will never be true economic equality, you know, just because there's smart people and there's not so smart people, right? There's people that are disciplined and there's people that aren't so disciplined. Um, there's people that are healthy and there's people that are sick, right? And then it's like, we can't cure everything.
00:14:16
Speaker
but we can make it an even playing field so that everyone has a similar opportunity. And I think that's what people want. And I think Bitcoin is an effort to restore that landscape. So, okay. I'm going to keep you on track here. Yeah. Did you feel like it looped around or were you like, I felt good about that. Yeah. Okay. All right. Uh, so I think there's a couple of things that you said. I want to point out, uh, blockchain is what, uh, I think we need to go to next. What is the blockchain?
00:14:42
Speaker
Yeah, a blockchain is just a digital record of all the transactions. It's an open public record of what's happening transactionally through this computer code that is Bitcoin.
00:14:57
Speaker
And so that's kind of what I said, like it's triple edger accounting. So like double edger accounting is, you know, if you take $50,000 from cash and you buy something, you know, you've got a debit cash on your balance sheet and, or on your accounting books, and then you've got a, you know, credit assets. Cause you bought a vehicle or something like that, right?
00:15:18
Speaker
So there's always two transactions. Well, Bitcoin is really three transactions of like, well, where did that 50,000 go? Like who got the 50,000 when you got that truck? There was a third party involved in that transaction, right? You had two entries on your books because you debited cash and then you credited your assets. Ah, gotcha.
00:15:41
Speaker
who got the money? Well, that person who got the money doesn't show up on the bound or the record of the company that bought that or whatever, right? What blockchain shows is not only that the $50,000 left that person's Bitcoin wallet, it also shows where it went. And that's public. And so you can tell like, oh, that wallet moved 50,000 to that wallet.
00:16:12
Speaker
Now, the wallets are anonymous. The FBI does have access to be able to figure out who owns what wallet. And on a side note, a lot of the cryptocurrency world, in terms of these businesses that are trying to profit from cryptocurrency and trying to set it up, basically a new financial system,
00:16:31
Speaker
they're getting regulated very similar to the way our business is regulated with know your customer rules that type of thing so it's very it's the fbi have solved and track down multiple people that have committed fraud through bitcoin through the digital ledger because they were able to figure out who they were so
00:16:52
Speaker
I just want to make that clear, but that's really what a blockchain is, is it's basically triple ledger accounting that's open for people to look at.
Bitcoin's Technological Framework: Blockchain and Mining
00:17:00
Speaker
Gotcha. Okay, so in my bank account, I have a credit and debit system. When I get credits, right, like I get money, when I debit, I go to Target and I buy stuff. That's telling where the money's coming in, the money's there, it goes out, and it's telling me where it's going.
00:17:22
Speaker
What's the difference between that and the blockchain? Yeah, really nothing. Except it's public? Except yeah, it's public. And then, you know, and that's really where I think you're going to have the need for, you know, because a corporation like Amazon doesn't want, you know, doesn't want it publicly known like where it's spending money, right? So I think there is legitimate business reasons why you wouldn't want that information on a blockchain.
00:17:50
Speaker
And so, you know, from that standpoint, it's not like, well, you bought head and shoulders, you know, shampoo or whatever you wouldn't, you know, you bought a love seat at Target, like that wouldn't go on the blockchain necessarily. Now Target could install a blockchain, which is really just a database, if you think about it, that accesses that information.
00:18:14
Speaker
But at the end of the day, in this financial world, it's allowing people to transmit and trust financial transactions because they're using the same language. And that's where those nodes come in. If you kind of go back to what I read about that second explanation of the Bitcoin network is the nodes, these computers,
00:18:36
Speaker
basically confirm these transactions. And typically, I don't want to remember how many it is, but let's just say there's like 10 different independent computers globally that are verifying, hey, this block of transactions, they all match. All 10 of us agree. We're going to publish that to the blockchain and those transactions are approved.
00:18:55
Speaker
And then there's a fee to transact business on the Bitcoin network to pay those nodes or those computers for verifying those transactions. And then those transactions are batched and approved and then they go through and the money moves.
00:19:07
Speaker
So I think the next section we need to go to is mining because I think you just explained it. Right. Yeah. So Bitcoin is really, it's the blockchain. It's this database of digital transactions, but it's also, there's an algorithm that creates and governs how new Bitcoin are created. And there's two basic systems to cryptocurrency. There's proof of work.
00:19:34
Speaker
And there's proof of stake, proof of work. Think of it very much like a gold mine. You got these huge trucks. They're mining huge amounts of ore, rocks, minerals, and sediment, all this stuff. They're washing it through a plant and trying to get the gold out. Actually trying to mine gold is very difficult. If you've ever tried to go pan for gold or anything like that, it's very difficult to get. And that's one of the main reasons that makes it money because it's hard. You can't just create it.
00:20:04
Speaker
You can't just create six to $10 trillion in a week like our government can. Bitcoin is the same way because this algorithm, this algorithm operates how new Bitcoin are created and that has never been hacked. Now you do have people that have copied the code and started new coins and that kind of makes it confusing, but the actual Bitcoin itself has never been hacked.
00:20:28
Speaker
And so those Bitcoins are created in that algorithm. Basically, as of right now, May 1st, 2020, over 80% of all the Bitcoin that will ever be created are created right now. So we've hit the tipping point from the Pareto principle, if you think about it that way, 80-20 rule.
00:20:44
Speaker
And now here in about 15 days, so mid-May, 2020, the code is gonna have. So each day, new Bitcoin are released through this algorithm and these big mining centers, these computers that are basically solving complex mathematical equations to get rewarded for supporting and increasing the benefit of the Bitcoin network are rewarded with new Bitcoin.
00:21:13
Speaker
that algorithm cuts in half in 15 days. So instead of 12 and a half new Bitcoin being created a day, it's gonna be 6.25.
00:21:23
Speaker
that happens every four years. So this will be the third time that the algorithm cuts in half, slowing down the amount of new Bitcoin that are created. And that slowly dissipates into, I believe, like 2040 or it really starts to slow down now, basically, like most of the Bitcoin are created. And so there is no ability to just create six to $10 trillion in Bitcoin overnight because the code doesn't allow that.
00:21:51
Speaker
and then the miners that are doing and solving these complex transactions and processing the block transactions as people move and conduct business with Bitcoin, they are rewarded with Bitcoin for supporting the network. Okay, a lot going on here. Okay, so we figured out when it was created, 2009, who it was created by, why do you think it was created? Have we really, like,
00:22:19
Speaker
If you read the white paper, it was largely in response to, and we've kind of scratched the surface of this my earlier rant, but it was largely in response to how corrupt the banking system is and how corrupt our monetary system is. And so again, our government had the responsibility to print and issue new coin.
00:22:40
Speaker
Because of the way our constitution was written and in 1913 they gave up that right to the federal reserve bank through the federal reserve act that was signed into law on I believe it was christmas eve and think about christmas eve in 1913 not christmas eve now when you're you could still be on twitter christmas eve 1913 nothing's happening nothing's happening and uh
00:23:06
Speaker
Yeah, it was passed into law at the same time as the income tax law. So we got the income tax in the Federal Reserve Act on Christmas Eve of 1913 and they've never gone away. And the inequality and the injustice and the corruption and the outright fraud and manipulation that occurs because of our banking system and through our banking system
00:23:27
Speaker
Satoshi Nakamoto in the white paper calls forth a new financial network that evens the playing field for everyone in the world to have an equal right and ability to organize their economic capital, do work, get paid, make transactions through this currency. And this currency is now essentially an asset-based currency system.
00:23:53
Speaker
facilitated by the blockchain and the code that makes new Bitcoin. Gotcha. Okay. So let's move on to kind of the next phase of this. Unless you have anything else too that we missed. No, I think that's good. Okay. Okay. How do you buy it?
00:24:12
Speaker
How do you want it? We'll get into that. I think I want to hit one more point that I think is the bridge to that.
Financial Ecosystem and Bitcoin's Role
00:24:18
Speaker
Okay. So when you look at our financial construct or economic financial construct as United States and largely now the world, but mainly the United States, you have three legs to the stool. You have banking, you have investments like kind of like wall street, and you have insurance.
00:24:40
Speaker
you have to have really those three legs to the stool to have a fully functioning economic ecosystem that corporations can be involved in.
00:24:50
Speaker
If you don't have insurance, corporations will not come to the table. And largely, Main Street won't come to the table either. The guise of FDIC insurance in our banking system, which is really the taxpayer guaranteeing their own money if you think about it. Anytime you use the word government, use the word taxpayer because we are the ones that actually fund and elect our government.
00:25:12
Speaker
So, we're basically guaranteeing our own money, if you think about it, through the FDIC. Banks pay fees to the FDIC insurance, which is bankrupt. They've spent all the money, by the way. Spoiler alert. Basically, it's backed by that belief system.
00:25:31
Speaker
So that's the insurance I speak of. There's also reinsurance at the corporate level beyond FDIC insurance. So companies like the Intercontinental Exchange, which owns the New York Stock Exchange,
00:25:47
Speaker
Well, corporations that hold billions of dollars in cash like Apple, the FDIC insurance isn't enough. So companies insure and then there's reinsurance companies, which is kind of like what Warren Buffett's companies do. There's reinsurance. And so I'm talking about massive pools of insurance to protect trillions of dollars.
00:26:10
Speaker
That largely, that insurance part has largely been missing the last 10 years as the Bitcoin standard, the Bitcoin network has been built out.
00:26:22
Speaker
That now is starting to be put in place. We had banking. Bitcoin is banking. Bitcoin can bank without intermediaries. That's what makes it so powerful. And I'll touch on that at the end. And then we had kind of the investment side. There's all these brokerages that you can buy and sell your Bitcoin and that type of thing. So we largely had the first two.
00:26:44
Speaker
What we were really missing was the third one, which is the insurance space where corporations could get involved and store massive amounts of money. I think this is a really important point because think about Starbucks. I think they're one of the best companies to look at in terms of this. Starbucks operates in 110 countries. Think about how hard it is to move your banking money just from one bank to another bank, the forums, setting up like a wire,
00:27:11
Speaker
all that stuff. Now think about that in 110 countries across dozens of currencies, how hard it would be for them to aggregate their cash on a monthly quarterly basis. You're talking about billions of dollars. Now think about that on the Bitcoin standard where they could do that in 10 minutes. It's absolutely powerful. But
00:27:34
Speaker
Starbucks isn't going to take cryptocurrency, not mainly because it's volatile, mainly because if somebody walked off with it, there's no way for them to get their money back. Starbucks doesn't want to get on a quarterly conference call with investors and say, oh, yeah, we lost a billion dollars in cash because it was in Bitcoin and we didn't have it insured.
00:27:51
Speaker
No company of that size is even going to get involved in that until there's insurance. Well, now there's major institutional insurance coverages to help cover those types of balances and that type of risk. So it's going to allow companies to really get involved now with cryptocurrency and that really just gotten put in place in the last 12 months.
00:28:13
Speaker
How do you buy cryptocurrency? There's several different ways you can do it. I largely, to most people, I just say Coinbase is the 800 pound gorilla in the United States. They largely have, you know, they have Bitcoin, they have several others, but we're really just focusing on Bitcoin for today. And you set up your bank or credit card and you can convert your dollars into Bitcoin and you can buy them.
00:28:41
Speaker
there's literally thousands of different ways to buy or acquire Bitcoin. Um, but largely I would just say Coinbase is a safe, trustworthy place to go and get your Bitcoin, but they do charge fees and it is somewhat expensive, but that's kind of largely the way, the way I've done it. Okay. What coin, how many coins are there that you can buy and invest in right now?
00:29:07
Speaker
There's thousands of coins or different cryptocurrency projects, just like there's thousands of stocks. And so kind of the thing that I talk about with people when we talk about it, because it's confusing. And I alluded to this earlier, but I think it's an important point. If you travel overseas, most of the rest of the world is used to operating in multiple currencies.
00:29:32
Speaker
So, you know, we spoke to a gentleman. His dad is from Israel. He's a businessman in Israel. He's like, yeah, my dad holds yen. He holds dollars. He holds euros. He holds, I think, British pounds. And there was something else. Because he's doing business all over the world. And depending on where he's doing business, he's gonna need different currencies. That's normal behavior in the rest of the world.
00:30:00
Speaker
And that's why I talk about the fact that as Americans, we're so insulated because we have had the most sound banking system, even though we've lost 99% of our purchasing power. We've had the most sound banking system in the history of the world.
00:30:15
Speaker
And so it's weird for us to think about holding different currencies, yet we hold multiple investments, right? We hold stocks and bonds and all these different things, but the idea of a different currency is foreign to us because we largely haven't needed it. But if you live in another part of the world that's directly next to another country or your currency is unstable, it's largely normal to hold multiple currencies.
00:30:40
Speaker
And I think we're moving into that reality with this COVID-19, you know, candidly, we've never had, I've been following Bitcoin really since 2016, almost five years. I've never seen the interest as I have before in Bitcoin after what the Fed and the government have done over the last 45 days. People are really starting to wake up to the fact of like, whoa, I mean, they just increased the federal balance sheet at the Fed like 50% in a month.
00:31:09
Speaker
Our national debt is going to go from 22 to 23 trillion to probably 30 trillion in 18 months. What is that going to do to the value of my dollar over the next 10 to 25 years now that we have to pay interest on nearly $30 trillion as a country?
00:31:25
Speaker
So I think it's really, we're getting to that reality where, man, I might need to hold some of my cash in Bitcoin or some of my cash in gold or all three, right? And so I think that's just a new paradigm for most Americans to think about.
00:31:43
Speaker
No, I think that's true. And the thing that I think I break down is when Target could have their own coin and then Walmart can have their own coin and then Amazon can have their own coin. I'm like, what in the world? You know, like how do you keep, obviously there's a way to be transferring fairly quickly in between each, I would say cryptocurrency, but can you explain that exactly?
00:32:08
Speaker
Yeah, so I think I want you to picture a straight line or a spectrum. And on one end of the spectrum, you have company stocks, like Starbucks, Target, the companies you just referenced are all publicly traded. And then on the other side of that spectrum, you have currencies. So think dollar, euro, yen, Chinese, the Russian ruble,
00:32:31
Speaker
All these different currencies. I think there's over 110 or 125 currencies. It's like 195 countries and a bunch of them use the Euro. So anyways, there's some 125 currencies and then there's globally publicly traded companies. I think it's somewhere around 6,500 to 8,500 publicly traded companies.
00:32:53
Speaker
So really, if you think about it from an investment standpoint between foreign currencies and stocks, there's 10,000 places to put your money, kind of overwhelming.
The Future of Money: Cryptocurrency and Adoption
00:33:03
Speaker
In that, I think you are going to see the convergence of stocks and currencies starting to move to the middle and creating a cryptocurrency in the midpoint of a true stock. I'm a shareholder of this company. I may or may not get to share in the profits through dividends.
00:33:23
Speaker
And then on the other side, a currency has been largely denominated by a country. And now you have Facebook that's really taking the lead role in putting something in between those two sides of that spectrum.
00:33:37
Speaker
where they're creating the Libra project, the Libra coin, which could operate on Facebook's network. Facebook also owns Instagram and WhatsApp, which between all three of those platforms totals over 3 billion people, almost half of the globe. And so I think you're gonna see a convergence to the middle. Some publicly traded companies will just stay publicly traded companies. Some currencies, obviously the US is gonna have a currency.
00:34:04
Speaker
and you're going to see things start to operate in the mid-zone of those. And so I think that's where Bitcoin lives. Bitcoin is unique because it's not owned by anybody. There's no CEO. It's an open source project that enough people believe in. I think this is one of the last points I want to make as it relates to the federal government.
00:34:25
Speaker
because so often we look at the federal government as like, well, they need to come up with something and then we do it as the people. But in terms of economic value, that is backwards.
00:34:37
Speaker
man and humans have always dictated what's valuable to the government. And then the government adjusts and creates rules and then regulates it. So Bitcoin creating from the people and finding value and hitting on a vein of people who are fed up with just all these bailouts and all these trillions of dollars and all these backroom handshake deals that just largely exclude Main Street.
00:35:04
Speaker
I mean, COVID-19, not to get on a soapbox, they're going to give people $1,200, which barely buys you your groceries and a mortgage payment. And these banks are getting trillions of dollars of liquidity and hedge funds so they can prop up the stock market, which 60% of the United States doesn't own, by the way. So, I mean, it's just so backwards of what's happening in our country. And I really wish more people would start talking about it. But do you feel like Bitcoin is a conspiracy theorist's dream come true?
00:35:35
Speaker
Well, it's modern age warfare, right? Instead of picking up your gun and picketing on Capitol Hill, people are just saying,
00:35:45
Speaker
I find this to be valuable. And that's what's happened throughout history is people are like, oh, I find value in that too. And then what does the government say? Oh man, a lot of people are using this. We better tax it so we can control it. And then we can regulate it. And then now we get to profit from it as a government. And so that's where this is all backwards where people are looking to the government to approve Bitcoin and that is no,
00:36:12
Speaker
people are approving Bitcoin because it's valuable. And this, this to me is the value proposition of Bitcoin that if you take away one thing from the show, take this away, what I'm about to say, I want you to think about this and like really think about this.
00:36:28
Speaker
Bitcoin can be purchased by anyone in the world in any currency at any time with one dollar or one yen or one ruble or one euro from a cell phone and sent to anyone else in the world almost instantaneously without an intermediary. Besides food, water, and shelter, what is more valuable than that?
00:36:56
Speaker
I mean, just to send money on like Venmo takes three to five days. Bitcoin takes less than 10 minutes. And so from an economic standpoint, yeah, you could buy gold anywhere in the world, but you know, I have a lot of people ask us, how do I buy gold? It's actually kind of complicated. And then what are you going to do with it? Bitcoin can be sent anywhere in the world in 10 minutes.
00:37:21
Speaker
with, I don't need a visa. I don't need Wells Fargo. I don't need any of these companies to do that. That is revolutionary. And if you don't think that's valuable, like you're missing it entirely because the current banking and financial system is a nightmare compared to that. Okay. I'm going to ask this question and you can probably deduce the answer. Is Bitcoin something you should invest in?
00:37:47
Speaker
I think so and I'm going to caveat that with an analogy because I think this is the position I've always taken. We all remember 1994 to 1997 when we got that huge box
00:38:07
Speaker
We all went into the store or we were with our parents. You know, I was like 14, 15 at that time. You're talking about a computer. Yeah. You walk into the store, you know, and you got your first computer and you brought it home and it largely didn't do much. You might do some form letters. You, you could maybe load a webpage in five minutes. And then by the time you wanted to click on a new webpage and wait another five minutes.
00:38:32
Speaker
It didn't largely do anything or add that much value to your life, right? But now I think the average statistic I saw is the average American in the United States checks their phone 150 times a day. So the other thing to think about is so crazy. Only 55% of the world has the internet right now.
00:38:54
Speaker
That is staggering to think about. So Bitcoin is 10 years old. I think it is the future of money. Every central bank in the world has already started looking at it and already said they're moving towards it. It is the future, just like the internet was the future. You may not think it largely is going to impact your life right now, but in 10 to 20 years, you won't know a difference.
00:39:19
Speaker
So my feeling is you should start playing with it, just like you played with the internet in 1995, you know, and largely those computers were, you know, 800 to $2,000. And I think if you have the means, you should start playing with it on your scale. If that's $10, you can do that. If it's $1,000, you can do that. But I think it starts, it makes sense in terms of financial literacy and financial awareness. And if you're interested in building wealth,
00:39:49
Speaker
This is something you should start paying attention to. Perfect. Do we buy Bitcoin for people? We do not. Okay. So I think that's something interesting to say just before everybody listens to this, it reaches out like help me buy Bitcoin. So we do not help people buy Bitcoin and give you the Coinbase and it's kind of on you. So, okay. Then, um, I, I think here's my last two questions. What coins should people invest in if they're going to do that?
00:40:18
Speaker
Yeah, I think largely Bitcoin, which is the symbol BTC. There's a lot of coins out there that share the Bitcoin name. They copied the code and changed one or two things. So there's lots of different variations of Bitcoin where Bitcoin is in the name and then it's something else. Bitcoin BTC is the original OG. It's the original coin white paper from Satoshi Nakamoto. So that to me is where you start.
00:40:46
Speaker
in that if you're not comfortable with the perceived volatility of Bitcoin. The other thing I want to talk about is the perceived volatility of Bitcoin is so misconstrued because yeah, it has been volatile, but it's been largely up. You know, I saw a thing as a chart of the top investments from 2010 to 2020 for 10 years, and Bitcoin was number one as a 60,000% return. And the next closest thing I believe was Domino's Pizza, by the way.
00:41:14
Speaker
or no, I think it's actually Ethereum, which is the second kind of a coin. We could talk about that, but, uh, and then it was Domino's pizza. So, okay. So what are the cons? This is what I do all the time to you. Like, okay, sounds great. What are the cons? What are the reasons? Oh, so I want to go back to that previous question, then I'll do the cons. So there are what we call stable coins and they're coins that are backed. Um, a lot of them are backed by like us treasuries or us dollars.
00:41:41
Speaker
Think of it like a money market account in your brokerage account or like, um, just cash. It's just, uh, it's just like a cash account. It doesn't, it's not designed to go up or down, but it is digital cryptocurrency. Uh, and those trade at like, they don't have a volatility, but there are crypto banks, banking institutions that facilitate cryptocurrency holdings that are paying upwards of 7%, 8% on these stable coins.
00:42:11
Speaker
So you can convert some of your cash, earning nothing at your traditional bank into a stable coin and then put it on deposit with a crypto bank and you could earn six, seven, 8% interest, you know, without the volatility, perceived volatility of Bitcoin. Sure. And that would be like 2.0.
00:42:29
Speaker
If you buy and sell or buy and hold, it'd be Bitcoin. There's another way to get into this, a little bit less volatility. And there's just a lot of people, I mean, who wouldn't take 7% interest on cash right now? A lot of people.
00:42:45
Speaker
And that's a big reason why our uncommon banking platform is so powerful because people will see that all the banks are never going to pay us interest again. Japan's had 0% interest rates for 30 years. We're going on almost 20 if you think about it. They've gone up and down a little bit, but largely they've been near zero for nearly two decades.
00:43:04
Speaker
So earning the savings or earning interest on your savings has been a powerful concept for thousands of years in terms of financial awareness and building your net worth and economic engine. The cons to cryptocurrency are it's really confusing. It's really convoluted. If you haven't gotten that from this podcast, maybe there's one thing you can
00:43:29
Speaker
It's really complicated, right? I mean, it's like, it's kind of like nerd central with computer code and mining in like, it seems almost like a, I can't think of the term, what's comic book? It almost seems like, you know, financial nerd comics is what this is.
00:43:46
Speaker
So it's largely confusing to most people because it's confusing. I mean, it is an analogy in our businesses. People want to see the watch. And then there's other types of people like engineers that want to know how the watch is made. Well, largely to this point in the first 10 years to be involved with cryptocurrency and Bitcoin, you've had to know how the watch is made to participate. You just go open a banking account and you write a check and the money's in your thing. You don't understand how all that works behind the scenes at the bank.
00:44:15
Speaker
But largely you've had to if you've wanted to have a meaningful relationship with Bitcoin in the last 10 years. All of that is going to change over the next 10 years as people develop products and companies that make understanding and onboarding to cryptocurrency more palatable and more simple. So I think all of that is coming. But that's been a huge roadblock to more people getting into cryptocurrency.
00:44:38
Speaker
Two, what I talked about is that if someone comes up and steals your phone or something like that, they could largely steal your cryptocurrency and there's really no way to get it back. So from that standpoint, it's very risky in the sense that largely people could have stolen your Bitcoin or shaken you down or whatever, and there's really no way to get it back.
00:44:59
Speaker
Again, as I talked about with insurance and reinsurance and stuff, a lot of financial institutions are trying to mitigate that because they see that as a huge barrier to the adoption of cryptocurrency. So a lot of that is being worked on as well at the institutional level. There's really no way to get out of that at the blockchain level.
00:45:19
Speaker
And so it's really important where you understand who owns your Bitcoin. And if you do, if you have your own wallet, or if you're using somebody else's wallet, like Coinbase, like if your money's on Coinbase, you largely don't own your money, you can't control it. So if something went wrong at Coinbase, they could lose your money and it's gone.
00:45:39
Speaker
And that largely happened with several other entities along the way as Bitcoin was getting going, which hampered adoption. So it's confusing. Theft was rampant. And then what I would just say is the biggest one to me is that largely it was against the grain. The government was coming out and saying, oh, this is a scam.
00:46:03
Speaker
What's his name? Jamie Dimon, the CEO of JP Morgan Bank, was coming out saying Bitcoin is a scam and all this stuff. And we do way more money than Bitcoin. This is a joke. And then 18 months later, after Bitcoin crashed, JP Morgan's coming out with their own blockchain cryptocurrency.
00:46:20
Speaker
So that's really what to me has been the limiting factor of Bitcoin is that largely it's been the misinformation against Bitcoin that's primarily come from the banking establishment trying to stunt its growth. And I think that's going to change dramatically here.
00:46:39
Speaker
out of COVID-19, millennial adoption of cryptocurrency is really high. And I think you're going to start to see a change as more and more people wake up to just how corrupt our banking system truly is and how inevitable it is for
00:46:59
Speaker
the US dollar and the government with $30 trillion in debt, this is going to be more and more of a problem moving forward. Think about the next bailout, because there's going to be another one. There's one in 2009. There's going to be another one. We're in 2020.
00:47:15
Speaker
What's the next one? How big is that going to have to be to bail out where we're at now? 30 trillion in national debt to maybe 40 to 50 trillion in national debt. What's the word after trillion? I'd love to know. Right. I think it's quadrillion, but. Could be. Isn't that scary? That's something that I used to say in the playground. Totally. You'd be like, kazillion, bazillion.
00:47:38
Speaker
Yeah. Where we're at. And I think the last point I would make is that there largely are changes even to the dollar-based system in the United States. We've had pretty big change to our banking construct every 40 years. If you think about it, like I said, there was two Federal Reserve banks that were tried prior to 1913 that were shut down by the presidents.
00:48:03
Speaker
We had income tax change during the Civil War that was quickly taken away after the war. In 1933, I alluded to the fact that gold was confiscated and then they debased basically the American public moving the exchange rate from $20 an ounce to $35 an ounce.
00:48:22
Speaker
There was a lot done in, I think, the 1890s in regards to silver coinage and things like that. They took silver out of the coins in the 1960s, I believe, 63. All silver was pulled out of the quarters and all that stuff.
00:48:39
Speaker
So if you have a quarter from 1963, it contains 90% silver and it's worth probably four or five bucks, not 25 cents. Well, you can't find them because they got pulled out. People pulled them out of the financial system.
00:48:54
Speaker
Brinks the currency company actually pulled most of those quarters out because they realized the value and the hair it was silver and So and then in the 70s we went off the gold standard You know and now there's no currency in the world backed by gold and every bit every currency in the world is on the central banking system Except for North Korea, and I think that guy just died. So yeah
00:49:20
Speaker
That's a whole different podcast. Guys, this has been, I hope this has been insightful to you if you've ever even thought about Bitcoin or wanted to know more of it. We hope that this has been an episode that you can even just start hearing more of the language and the keywords, the verbiage around it. And yeah, I mean, there's so much stuff out there for research for you. Where would you say, if somebody was listening to the podcast and they wanted to know more about it,
00:49:49
Speaker
What would be a good resource for them to go out to? I follow it mainly on Twitter. I've read several books. I always forget his first name, but his last name is Antonopoulos. These are Anton Antonopoulos or like Anthony Antonopoulos. Anyways, he's considered one of the godfathers of Bitcoin and just cryptocurrency and like a global ambassador to blockchain. His books are, I feel like unbiased and it's just kind of like, this is what it is. He has several books.
00:50:16
Speaker
that we could link to in the show notes that kind of lay out Bitcoin. Bitcoin.org is a place you could go to and just start asking us questions. Coinbase, they have a lot of resources and educational stuff on cryptocurrency. But yeah, just start talking about it. And I think that's like my point is like, if the banking system changes or currency changes every 40 years and you're looking at retirement,
00:50:45
Speaker
I was like, could you go 30 years without feeling like anything's going to change? That largely hasn't been the case, technology, anything. And so as things evolve, I just think this is one of those things we've got to start talking about as we talk about financial literacy, wealth building, all those different things.
00:51:03
Speaker
Nice. Well, thanks for your time, man. Thanks for listening. You've been listening to the Uncommon Life Project. I've been your host, Phillip Ramsey. And I am Brian Dewhurst. Don't hesitate to reach out. Have a great day. Thanks, everybody. Bye-bye.
00:51:17
Speaker
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