Talks & Presentations

[This transcript was generated automatically from the recording and lightly edited for readability. Video clips played during the talk are described in brackets.]

Michael: Let's get into it. So just to introduce myself again. I'm Michael Wright. I'm an Investment Manager. I run a concentrated microcap portfolio for a small firm that I started called Kehlet Capital Management. I've been a CFA charterholder since 2016. Studied for my MBA at the University of Texas, Austin, where I concentrated in Investment Management. And studied Mechanical Engineering at Michigan State University and worked as an Engineer for six years out of undergrad.

My Bitcoin background. So I first heard about Bitcoin in about 2017 when I think it went from less than $1,000 up to something like $20,000. It was all over the news. But like most people I dismissed it as just a bubble that would go away. Didn't think much about it after that.

But then when I started my firm, I got a lot of questions from clients, potential clients about Bitcoin and crypto and started really digging into it some more. Eventually changed my mind, and I've been invested in it since 2020. I now run a Bitcoin node. I've written several newsletters about Bitcoin for my business, and I've put in hundreds, if not thousands of hours of research into the topic.

That's a little bit about me. So why are we here? Well, Bitcoin's been around for about 16 years, and there's still a lot of confusion around it. So I think this video kind of sums it up pretty well.

[Video clip: a short comedy sketch in which one person explains Bitcoin to another in dense technical jargon.]

Michael: So needless to say, Bitcoin is a complex subject. It's like comedian John Oliver said, "Bitcoin is everything you don't understand about money combined with everything you don't understand about computers." So that said, my goal today is not to convince you to buy Bitcoin.

It's really to untangle the complexity and just try to make it a little bit clearer and easier to understand. But to do that we need to go down the rabbit hole a little bit. So we're gonna talk about ... We're gonna start with what is money? Why do we have it? What makes for good money and bad money?

Then we'll talk about the problem that Bitcoin's trying to solve, which is the problem of broken money. And then once we've talked about that, we can then get into Bitcoin, what it is, how does it work, how do you use it, and then I'll wrap up with some final thoughts. But before we start, I tried to structure this as more of an interactive discussion and less of me just getting up here and talking.

So if you have any questions or comments at any time please feel free to chime in. All right, so what is money? So most people don't really think about the money that they use, other than maybe how to get more of it. It's just something that kinda works in the background of our daily lives. But it's critically important.

Without it society can't function. But it's also an abstract concept. So I wanna start today with a little thought experiment, okay? So you and 20 other people are shipwrecked on a deserted island. Everybody has been assigned roles. So one person's a home builder, one person's a farmer, one person's a fisherman, but that means you have to trade between each other now.

So now you have to choose what your money is going to be. There's five options for you to choose from, okay? So I want you to think about this. The first one is large stones. So there's five of these on the island. Each weighs 500 pounds. You can choose seashells. There's a couple hundred on the island.

More wash up every day, but only a few at a time. Goats. Each person has two goats. Bananas. There's 10 banana trees on the island. The island can't support any more than 10 banana trees. Or sand. The island has an endless amount of it. It can never run out of sand. Okay, so which one would you choose?

Audience member: Seashells. Seashells. Large stones.

Michael: Stones. Okay, what else? Goats. Goats. Goats. How about let's go through it one by one. Let's do ... Let's take a vote. All right, so who says stones? One, two, three, four, five. Five people say stones. Okay. Five. All right. Seashells? One, two, three, four, five, six, seven, eight, nine, ten. Okay. All right. Goats? Nobody wants to use goats? Zero. Okay. Bananas? One bananas. Okay. Sand? Anybody sand? No? No sand. One sand? Okay. One sand. Okay. All right. For you Bitcoiners, I'm gonna end with the stones. I'm not gonna start with that one 'cause you guys are getting ahead of me.

All right. Seashells. Why did you guys choose seashells? Who chose seashells and why?

Audience member: Finite set.

Michael: Okay.

Audience member: An upper bound, so you can trade granular amounts. But more come out every day. Yeah. That's okay, but I mean, if, if

Michael: Low, low, low supply. Low inflation ... okay. So low, low inflation rate. What, what else did you say?

Audience member: Comparatively, bananas go bad. Goats die. There's not enough of them and they're not divisible.

Michael: Durable.

Audience member: Large stones you can't carry. And sand has no value because it's ubiquitous.

Michael: Okay.

Audience member: You can't really use them for something else either. Like bananas you wanna eat.

Michael: No use case. Okay. So you like that there's no use case? Okay. All right, and what are the, what are the cons? Anybody who didn't pick seashells, why not? What did you not like about seashells?

Audience member: Not an absolutely fixed supply.

Michael: Not a fixed supply. Okay, not fixed. They break. They break, yeah. What else?

Audience member: Different types.

Michael: Different types. Yeah, they're not uniform. So what if you have a big seashell and I have a little seashell and we wanna trade? Okay.

Audience member: They have other use cases. You can wear them as jewelry.

Michael: All right. How about... So nobody chose goats. Why didn't anybody want goats? What was wrong with goats? They die. They could die, okay. Gotta feed them. Feed them. There's a cost to them.

Audience member: Yeah. I mean, they're divisible, but once.

Michael: They're divisible. Yeah, yeah, once and then, yeah. They multiply. So not divisible. Okay. Anything else?

Audience member: They reproduce.

Michael: They reproduce. That's bad?

Audience member: Are these male-

Michael: Is that, is that bad or good? Is that a pro or a con?

Audience member: It's both.

Michael: Huh? Con.

Audience member: Con? Not a fixed supply.

Michael: Okay. Okay. Bananas, what was wrong? Who chose bananas? Why did you like bananas?

Audience member: I thought about the supply side, that it kind of comes online pretty infrequently.

Michael: Okay.

Audience member: Controlled.

Michael: Controlled. Yep. Okay. But now you're sort of thinking maybe that's-

Audience member: It's like the cigarettes in prison ...

Michael: So not durable, yeah.

Audience member: They're uniform.

Michael: They're uniform. They're uniform, yeah. Sand. Who chose sand? You chose sand. Why did you like sand?

Audience member: Well, I was gonna make stuff out of it.

Michael: Make stuff. So it has use case. Use case. Use case, okay. Anything else? Okay, why did, who, who didn't like sand? Why didn't you like sand?

Audience member: I mean, sand's very divisible.

Michael: Infinite supply. Infinite supply. Yeah, infinite supply, okay. So most of you guys are... This is a smart crowd. I'm guessing you guys have already gotten the hint of the most of this stuff. All right, stones, why did you choose stones? Fixed supply, yeah. Absolutely fixed.

Audience member: For a con, I mean, you can't, you can't move them.

Michael: You can't move them, yeah. It's not portable. Okay.

Audience member: Can you chip off pieces to-

Michael: No. Not in, not in this scenario, no, you cannot. Okay. Anything else against the stones other than that you can't move them?

Audience member: If somebody comes over and, like, builds you a house how do you pay them in, in, in one lump of a stone?

Michael: Not divisible, yeah. Okay.

Okay. Yeah. All right, we can, we'll, we can stop there. I think that's a good point. So the point of this whole thing is really none of these are perfect examples, although I will argue the stones could potentially be.

But here's what we, here's what we come away with. Good money is portable, which the stones weren't portable. That's what we didn't like about them. It's uniform, which the seashells were not uniform. It's divisible. The goats were not divisible except for Rob, who's merciless.

Audience member: He'll pay you in a goat leg.

Michael: Bananas are not durable. And it's scarce. So the sand wasn't scarce. So these were the five takeaways for good money. But I wanna dig into why should our money have these characteristics, right? So the first three characteristics, you want portable, uniform, and divisible because you wanna be able to take your money anywhere you go and know that it's gonna be accepted, and you can trade it, and you can find the right amount of it to trade.

The second two make it usable any time. You wanna know that if I have my money in sand or bananas or whatever, if I wanna spend it in a week, a month, or a year, it's still gonna have the same value. It's gonna store its value. So essentially, the takeaway is the best money is usable over space and time.

There's a few other properties but for simplicity's sake, these are the main five properties of good money. So now I wanna take the thought experiment a little further. So let's say you're walking down the beach one day, you're on this deserted island, and you come across a small cave.

You go inside, you discover a new type of metal, which you decide to call Coinium. After some analysis and experimentation, you realize that Coinium has several interesting properties. It's small and lightweight. It's indestructible. Each piece is exactly the same as the other. There's only 1,000 pieces of them on the island.

There's no way to make any more, and it has absolutely no use case whatsoever that you can think of. So you decide, "Hey, I'm gonna go to the other islanders and suggest, should we use this as money?" So I wanna take a vote. Who would use this as money? If compared to your other five options, would you prefer Coinium or one of these?

Let's take a vote. Who prefers Coinium? One, two, three, four. Does anybody not prefer Coinium? No. Okay. All right. Good. That's the correct answer.

Audience member: Actually, you said there's only 1,000, right?

Michael: Yeah.

Audience member: How long are you gonna be on this island?

Michael: 'Til you die.

Audience member: Until you die or like other generations? 'Cause, 'cause, the one thing I-

Michael: The future's unpredictable.

Audience member: Eventually, like you're gonna lose one occasionally, right?

Michael: Okay. Yeah.

Audience member: And if you lose all 1,000, you're kinda hosed.

Michael: Yeah. But would you rather have one of those, then?

Audience member: I think the goats are still-

Michael: You like the goats better? Do you have something against goats?

Audience member: Are you gonna distribute them equally to all the islanders?

Michael: Yes. We'll make sure it's equitable. Okay. Yeah. Yeah.

All right. So the takeaway is that money is an accounting system. It is a physical manifestation of an accounting ledger. It's just a way to track IOUs. It says, "I put in this much energy and work into producing things for the economy. Society owes me that much energy or work in return." Anything can be money, and in fact, anything has been money throughout history. Salt, livestock, beads, even those large stones that you saw have been used for money.

Those are the Rai stones of Yap Island, which were used for many, many years successfully as money. Intrinsic value is not required. In fact, I would argue that lack of intrinsic value is actually a good thing when it comes to money. You don't want your money competing with its use case as money. Bananas, someone said you don't wanna be eating bananas if that's what you're using as money.

So lastly, not all forms of money are created equal. So they exist on a spectrum. There's good forms of money, there's bad forms of money, and there's things in between. So now that we kinda understand that background, let's see what happens when money is broken. So we're gonna play a little game. We've chosen Coinium for our money on the island.

Now, we wanna accumulate wealth. So I need five players, five volunteers. Before we do the volunteers, I'll tell you the rules. Each person is gonna start with 100 Coinium and 20 resources. Don't worry about what resources are just logs, oil, whatever you want, doesn't matter. Each round, the economy of the island is gonna produce some resources that will be auctioned off to the highest bidder.

Whoever collects the most wealth at the end, the combination of resources and Coinium, wins the game. So let's get it started. Okay. All right, so the first round, 10 resources are produced. I'm gonna start the bidding at 10 Coinium. Who wants to buy 10 resources for 10 Coinium? 10 Coinium. 12. 12? Going once.

Audience member: I'll do 25.

Michael: 25. Going once. Going twice. Sold.

So it turns out that we were wrong, that Coinium is not limited to a thousand. We found some more. So I'm gonna give each person 25 more Coinium. But you know what? The good news is the economy is more efficient, so I'm gonna auction off 11 resources in this round because we got more productive at what we do. So 11 resources.

I'm gonna start the bidding off at 15 Coinium for 11 resources. Who wants it? Yeah. Okay. Can you beat 15? 20. 20.

Audience member: 30.

Michael: 50. 50 going once. Going twice. Sold to Ike. Turns out we did find some more Coinium hidden, tucked away in the corner, so I'm gonna give everybody 35 more Coinium. All right. The economy's more efficient-

Audience member: My value keeps going up.

Michael: So we're gonna auction off 13 resources. I'll start the bidding at 50 Coinium for 13 resources.

Audience member: 100.

Michael: 100? 100 Coinium for 50. Okay. Anyone wanna beat 100?

Audience member: Yeah, 125.

Michael: 125. Who is it? Andrew, was that you? Yeah, 125, okay. Going once, going twice, sold. We found more Coinium. We're giving you all 75 more Coinium. All right, but the economy's more efficient. 15 resources. I'll start the bidding at a 100 Coinium, 15 resources. Who? Anybody.

Audience member: I'll bid whatever I have.

Michael: Ike's gonna bet his whole bank, which is-

Audience member: 185. Andrew always has five more than us. I think I got five more, so I'll go 190.

Audience member: 195.

Michael: 195 to Pietro. Going once, going twice, sold to Pietro. And I'll end it there. The game is over.

All right, so who won? Andrew, you won? Okay. Why did Andrew win? What was his strategy that worked?

Audience member: Just buy.

Michael: Yeah. Just buy.

Audience member: Buy a lot.

Michael: Buy as quickly as possible for as much as you can. What happened to the price of resources and why did it happen? So Louis, what was the, what was the price of the resources?

Audience member: It was 2.5 Coinium.

Michael: Okay.

Audience member: Round two, it was 4.5 Coinium. Round three, it was 9.17 Coinium. Round four, it was 9.61 Coinium. Okay. Then we had a recession, then it was 8.93 Coinium.

Michael: Oh.

Audience member: Then it finished strong at 13.

Michael: 13, okay. So the price went from two and a half to 13 Coinium over six rounds. Why did it do that?

Audience member: The amount of money. Coinium went up faster than the resources.

Michael: Exactly, yeah. The amount of money in the economy went up faster than the actual productivity of the economy.

Audience member: By the way, he's now stuck on an island where everyone hates him.

Michael: Yeah.

Audience member: He's one order of communism away from ... Did he really win?

Michael: Yeah. Now he needs guns and ammo to protect it all. Yeah. And so what is the incentive that is created in an environment like that? Spend-

Audience member: Well, buy resources.

Michael: Buy, yeah, spend money. All right, so takeaway: inflation occurs when the amount of money grows faster than the amount of stuff in the economy.

If you think about money like a battery that stores the value of your labor, inflation is the rate at which that battery drains. It's a particularly insidious disease in my opinion. At two percent inflation you barely notice it, but at six or seven percent it gets really difficult, and I think we saw that during COVID when inflation peaked and prices went up fast and everything got really difficult.

Inflation incentivizes short-term thinking. So spending over saving, consuming over conserving, borrowing over saving. It's the YOLO mindset, right? You only live once, so why wait? Why save? But you know, living like there's no tomorrow can be fun until tomorrow comes.

So taken to the extreme, hyperinflation destroys economies. So it happened to the Roman Empire when Nero started coin clipping. He would melt down the coins and then mint them into new coins that had less gold and silver, which led to inflation and ultimately a lot would argue, the fall of Rome.

It happened in Weimar, Germany after World War I when their debts from the war were so great that they printed money to try and pay it off, which led to hyperinflation, which led to chaos and the rise of Hitler to power. So as Munger has said, inflation is a very serious subject. You can argue it's the way democracies die.

So with that said, now that we understand inflation let's go back and look at the properties of good money. So you can make the case that scarcity is the most important aspect of all of them, and the reason is that societies don't fail because money isn't portable, divisible, uniform, or durable.

Those are physical properties of money that make it more convenient to use. But they do fail when your money isn't scarce, because scarcity is a function of supply and demand that allows your money to hold its value. If money doesn't hold its value, then the incentive to earn it disappears. It's like, why work hard for a money that's losing value more quickly than you can even accumulate it?

Economic activity grinds to a halt, and so a truly scarce currency minimizes inflation and holds the value of your labor over time. All right. So now we understand the importance of scarcity. But on the island we have Coinium. So we don't have to worry about inflation, right? So let's think about this again.

So the island's prospering, but there's one problem. Rob brought it up. It can be lost or stolen. So never fear, I graciously offer to handle all the money for the island. I'll handle all the Coinium. I'll put it all in my vault. I'll give everyone paper IOUs that you guys can use anytime, anywhere you want.

I'll personally keep track of each person's balance in the vault, and I'll even make loans to boost the economy. So everybody wins, right? There's just one catch. You can never convert your IOUs back into Coinium. So do you accept my offer? No. What, what do you think? No? Why not? Yeah. Thanks, brother. Anyone disagree? Anyone think that-

So yeah, I think, you know, I agree that even if the money is good, centralized control of it is a very, very bad idea.

It's like giving someone an unlimited credit card that never needs to be paid back. Essentially, it gives them the power to direct unlimited resources to whatever they want: forever wars, pandemic vaccines, climate change. It doesn't matter, Republican, Democrat, if you have an unlimited credit card, you're gonna use it.

I think comedian Dave Smith probably put it the best at a Bitcoin conference.

[Video clip: comedian Dave Smith, speaking at a Bitcoin conference, argues that government control of the money supply is what makes long wars possible, using the 20-year war in Afghanistan as his example.]

Michael: It inevitably leads to hyperinflation because the temptation to use that credit card is just too great.

But, I think some people think of, well, hyperinflation, it's a historical phenomenon. It's not. I used examples of Rome and Weimar Germany, but there's been more than 60 instances of hyperinflation around the world just in the past hundred years. So just some examples, 2008, Zimbabwe's inflation reached over 79 billion percent a month.

This was actually a bill that they-

Audience member: I have one of those.

Michael: ... they printed out. Yeah.

Venezuela, 2018, hit 233% per month. Not year. Per month. 2022, Turkey hit 86% annually. That's technically not hyperinflation, but still really, really bad.

Audience member: What's hyper, 100%?

Michael: Hyper is defined as 50% a month or more over at least 12 months.

2024, Argentina, 292% annually. And then today, Iran is experiencing 49% annual inflation. But the US dollar is safe, right? And if you look at the CPI, inflation's averaged about three to four percent over the last forty or so years. You can kinda see the COVID spike, but we've got things back under control.

The problem is that inflation is backwards-looking. So it doesn't tell you anything about what's gonna happen in the future. So you need to look at the forward looking indicators, and that's debt. Federal debt is forward-looking because if growth in the money supply is what drives inflation, federal debt is what drives the money supply.

You gotta print money to pay off your debt. So this is the federal debt since 1980. We're up to $36 trillion and you can see it's kind of on a parabolic arc. But obviously the economy has grown since then. So is it really, is it really as bad as it looks? Well, it is pretty bad.

So this is the federal debt as a percentage of receipts. So all the income that the government takes in, whether it's tariffs or taxes or what have you, they have about 650% debt to income ratio. So that'd be equivalent to a person making $100,000 a year has about $650,000 in debt.

But if we wanna go back even further, what drives the debt? It's the spending. And so here's the federal deficit as a percentage of what we're taking in. So our deficit right now is currently around 40%. So for a person making $100,000, we're spending $140,000 a year, and we have $650,000 in debt.

It's a problem. We're not in a good spot. We're not at a breaking point yet. But it is a big, big problem. And even Jerome Powell, the man in charge of printing all the money, is concerned.

[Video clip: Federal Reserve Chair Jerome Powell, in an interview, says the U.S. federal government is on an unsustainable fiscal path and that the debt is growing faster than the economy.]

Michael: So in my opinion, I think a lot of people are desensitized to the debt problem. We've, we've heard about it for a long time. People like Ron Paul have been warning about it for decades. But just because they were early doesn't mean that they were wrong. I think they saw the train coming before anyone else, and in my opinion, now it's at our front door.

We can try to do things like DOGE, Department of Government Efficiency, to try and reduce the spending and reduce the debt. But as my favorite economist, Lyn Alden, likes to say, "Nothing stops this train." We're past the point of no return when it comes to the debt. All right, so final thoughts. If this situation doesn't concern you, that's fine. Reasonable people can disagree. But if there's a leak in your boat, it's probably best to find another boat. That's the foundation. Any questions?

Audience member: Well, you said that we're past the point of no return.

Michael: Yeah.

Audience member: So when does this end? And then how long does that take?

Michael: I don't, I don't have a model for that. I think there's just too many variables to really... if I knew that, I'd probably be in charge.

But, you just look at the interest payments as a percentage of our budget, and I think it's at 20% with rates at historical lows. So if you kinda do the math we were at 15% interest rates in the '80s, or late '70s, early '80s. If we went to even 10%, the interest would be something like 70% or 80% of our entire budget.

And so, how do you pay down the debt when you're spending all of your income just to pay the interest rate down? So I don't know. I mean, Ron Paul's been warning about it for decades, and we've been able to kick the can down the road for a long time.

Audience member: The incentives to produce more are really high, right? The 21 million cap. And so, like we could all say we don't trust the government 'cause they just print more, right? So who controls the 21 million hard cap? Like, who, who are you entrusting your value with?

Michael: Yeah.

Audience member: Would be my question.

Michael: Yeah. So I have a Bitcoin node on my laptop right now. I downloaded it for this presentation to do a demo.

You can go on the Bitcoin website, download the Bitcoin software, and you now have a vote in the Bitcoin network. And so you can choose, if someone creates a new version of the software that has 22 million Bitcoin instead of 21, you can choose whether or not to upgrade to that. And if people don't upgrade to it, then it stays 21 million.

And sort of game theory sorta says, why would people agree to increase the cap when it doesn't benefit them? There's no reason why. There's about 25,000 nodes or computers right now that are running the Bitcoin software.

Those are the ones that we can see. Those are the public ones. There's estimates that it might be as much as 80,000 total nodes spaced throughout the globe that can be run anytime, anywhere. You could download one right now. All of us could download, and you just added 15 new nodes. So it's decentralized because of its, limited transaction volume, its limited data that it requires, and that's designed into the system.

All right. So, we set the foundation about Bitcoin. So now what is it, right? It's both an asset and a network. We obviously know what the asset is. That's the digital currency that we've seen, we've talked about. It's used to operate the Bitcoin monetary network.

So the network is the web of tens of thousands of computers that are running the Bitcoin software in order to transact in Bitcoin. The key point is that the two go hand in hand. One does not work without the other. So, if we go back to the properties of money that we talked about, I made the argument that scarcity was the most important, and we've talked a lot about this, but Bitcoin is the scarcest, even more scarce than gold.

Capped at twenty-one million. There will never, ever be any more than twenty-one million. Even gold has an inflation rate of about one point eight percent, and we've talked about U.S. dollars. Crypto varies, but most cryptos, in my opinion, are centralized and can increase their supply at whatever rate they want.

So the main takeaway is that scarcity is the key. It is what makes Bitcoin special. But I also wanna talk about portability because that's a really big deal as well. The fact that Bitcoin is digital, it's effortless to move, right? It's not like gold where you're trying-- try shipping a pallet of gold overseas.

The cost to send Bitcoin is completely uncorrelated to the amount that you send. All that matters is the amount of data that's in that transaction. And so you can send, fifty million, a hundred million dollars for very, very, very minimal fees over very long distances. Cash is great, but it's not the best.

It's slow to settle. So if you buy something at a store, you pay right away, but the merchant doesn't necessarily get paid right away. So it's a pretty big deal because it makes Bitcoin cheaper and faster for large cross-border transactions. So if you think about like remittances, immigrants coming into the country, sending money back home, Bitcoin and crypto are a great solution. It's much better than cash.

Bitcoin is literally freedom money. No one can take it from you. There was a story I read about. In Afghanistan women aren't allowed to have bank accounts. If they earn any money, it has to go to a man, husband, brother, father, uncle, whatever.

And so they have very little financial freedom, economic freedom. And so there was one woman who started writing blogs online, and she started getting paid in Bitcoin, and used it to buy a new laptop, and that, gave her some financial independence. But it's literally the first currency of value that you can carry in your head.

So if you can memorize 12 words, you can carry your wealth and all the wealth of your previous generations that have been accumulated, you can carry that in your head anywhere you go.

I thought that was interesting because I don't think a lot of people think about Bitcoin as... They think about the scarcity and the value of it, but there's also the third world use cases that are important as well.

So, this is Phong Le, CEO of Strategy.

[Video clip: Phong Le, CEO of Strategy, describes how, after North Vietnam took over South Vietnam, money in South Vietnamese banks was written to zero, cash was exchanged for about $10 per person no matter how much someone had, and gold was made illegal.]

Michael: The key point is that Bitcoin isn't just better for Americans, it's better for the world. And if we go down the list of the other characteristics that we talked about, Bitcoin wins in all of them, except for one. I'm gonna add one that we didn't talk about, and that's acceptability, right?

So you wanna know that your money's gonna be accepted wherever you go. Right now, the US dollar has the lead on that one for sure, but Bitcoin is catching up. All right, so that's the asset. Bitcoin, the network, just a couple quick key points on that. It's an opt-in network.

So unlike fiat, which you mentioned, it's mandated by the government, right? As long as you pay taxes. You don't have to be a part of the Bitcoin network, but if you want to operate with better money or a better store of value, you use Bitcoin. As Andrew mentioned, it benefits from network effects, so the more people opt into the network, the more useful it is for everyone else.

And this is a couple charts here of the network. On the left is the number of Bitcoin nodes or computers that are running the software. And if you look at 2016, it was about 5,000, and today we're at almost 25,000. So, a big increase. And then even if you look at Bitcoin addresses since 2016, a straight vertical line.

There's a little cutoff there at the end. I think that's when the ETFs started. I think that trend still continues to this day, even despite the ETFs. The ETFs are just kind of consolidating some of that.

So, takeaways. Bitcoin is objectively better money, which brings people into the network. People join the network, the asset becomes more widely accepted. As it becomes more accepted, more people come to the network, and it's sort of a virtuous network effect.

I wanted to do a quick Lightning Network transaction. Did anybody download a Lightning wallet that I sent?

Audience member: I did.

Michael: You did? You got it? Okay. You don't have to stick, you don't have to stick for this. If you have a Lightning wallet I'll send you some Bitcoin. You lost horribly. Which app did you use?

Audience member: Strike.

Michael: Strike? Perfect. Okay. Yeah. So that's on the Lightning Network, which we can talk about if you want. Okay, so Bitcoin only settles every 10 minutes.

So it's really good for these long distance high dollar transactions, but it's not really great for everyday stuff. So I make the argument that because of Bitcoin's scarcity, it is a really good option for a long-term store of value.

But if Bitcoin's ever gonna make the jump to a medium of exchange, it's gotta get better at handling more transactions, and so that's what we did, was the Lightning Network. So the Lightning Network is a second layer. It sits on top of the blockchain. Let me kinda explain how it works.

So it's essentially you're creating payment channels between two Bitcoin nodes. So think of it as like a bar tab. You don't swipe your card every time you order a drink. You just tally it up between the two of you, and at the end, you settle on the Bitcoin blockchain. So Rob and I could open a channel to each other.

We could keep the channel open for five years, do thousands of transactions, but it only shows up twice on the Bitcoin blockchain. It's getting better and better. And that's the last point I wanna make about the network, is that though it's in its infancy, the Lightning Network has only been around since 2016, I think. It's becoming way more widespread.

So just in November of last year, Cash App began allowing users to pay in Bitcoin using the Lightning Network. And at the same time, Square, which is owned by the same company, they enabled their four million merchants that use their point-of-sale systems to accept Bitcoin at checkout using the Lightning Network.

So if you go on to Cash App right now, you can see, it'll show you a map of all the merchants that accept Bitcoin in your area. And it's becoming more and more of a thing. It's not as widely accepted obviously as the US dollar, but it's growing. Any other questions?

Audience member: I guess, what's your- 'cause I understand the case for. What's your strongest case against?

Michael: I think the biggest risk in my opinion is that the US dollar, the US government gets their act together.

It's a little bit bittersweet, 'cause when I see stuff like DOGE. It's like if the reserve currency of the world becomes responsible, then the competition just got better, right?

We don't need hyperinflation for Bitcoin to succeed. But the better the US dollar is, and the more responsible they are, and the less they inflate and debase, then the less need there is.

I think there's still use cases for it. I don't think it'll ever go away because there are things that it does that the US dollar doesn't do. But it won't necessarily overtake the $400 trillion of low-yielding assets.

Audience member: 'Cause we will have another major financial crisis. If I go back to 2007, 2008, and I think about a world where Bitcoin had existed then, Bitcoin goes to zero.

Michael: I think it's exact opposite. I think absolutely in the short run, no doubt about it, correlations go to one, Bitcoin will crash. I don't think it goes to zero.

You can make the argument that if we experience another financial crisis like that, what's the solution? It's obvious. We print. We print our way out, like we always do. There's no other way around it. And if you're going to print, you're debasing the currency, which is exactly what Bitcoin was designed not to do.

So if all of a sudden the currency that you're using you know for a fact they're gonna debase it, we've done it before, where do you go?