00:01 Hi everyone. Someone sent me five
00:04 questions that I thought were especially
00:06 insightful and especially indicated that
00:08 they were really thinking through how
00:10 does Bitcoin work? How do the pieces fit
00:12 together? How does it all fit together?
00:14 And I just thought they were
00:15 fantastically good. These are from like
00:18 a week or two or more ago and I am
00:20 finally finally finally getting a chance
00:22 to addressing each one. So, I pasted all
00:25 of the questions in the uh description
00:28 of this video. And as I drive here, I
00:30 will attempt to simultaneously drive. Uh
00:33 for logistics reasons, I am not driving
00:34 my Tesla at the moment, which means I
00:36 actually have to drive. Um I am driving
00:39 the family Honda Pilot, which does not
00:42 drive itself, sadly, and it means I got
00:44 to try to drive and read Q&A at the same
00:46 time. But I thought these were really
00:48 good. So, here we go. All right. First
00:50 question. Question number one. Is all 21
00:52 million Bitcoin owned by someone at this
00:55 time? The answer is no. Because the
00:58 issuance schedule for Bitcoin, the rate
01:01 at which Bitcoin miners mine, uh, is
01:04 such that all of the Bitcoin is slowly
01:07 mined between the year 2009 and the year
01:10 2140,
01:12 which isundu
01:14 115 years in the future, 115, long after
01:17 we’re all betting on. Um, but all of
01:20 that was front-loaded. So 95% 95 95%
01:25 1920ths of all the Bitcoin that will
01:28 ever exist in the universe has already
01:30 been mined. So 95% of all the Bitcoin is
01:34 owned by someone. It is just the last 5%
01:37 that is yet to be mined. Now because
01:40 it’s frontloaded,
01:42 four of those remaining 5% will be mined
01:44 between now and 20 uh 2034. So in the
01:49 year 2034 the Bitcoin network will be
01:52 down to the last 1%. We’re already back
01:54 we’re already down to the last 5%. In
01:57 the next 9 years uh the issuance
01:59 schedule which keeps dropping in half
02:01 which is called the having happens every
02:03 four years. Uh because that keeps
02:05 happening and the issuance schedule
02:06 keeps going down over time. uh it will
02:08 be down to just the last one percent of
02:11 the Bitcoin that will be mined in the
02:14 final uh in the final basically however
02:17 105 years 106 years. So the last 1%
02:21 takes 106 years uh the next 4% takes 9
02:25 years and 95% of the Bitcoin has already
02:27 been mined. So next question in the
02:30 beginning this is question number two.
02:33 In the beginning, did Satoshi Nakamoto,
02:35 the creator of Bitcoin, start out owning
02:37 all of the Bitcoin? The answer is no.
02:40 So, Satoshi Nakamoto wanted the Bitcoin
02:42 to be distributed to the world in a
02:45 completely fair way where nobody had an
02:48 advantage and nobody got sort of free
02:50 access. And so, the way the Bitcoin
02:52 mining works is you have to expend
02:55 electricity and computational power.
02:58 Satoshi Nakamoto announced Bitcoin to
03:01 the world on September 3rd, 2009. And he
03:05 embedded in the Genesis block, which is
03:07 the very first block of the blockchain.
03:09 He embedded a message that said, uh,
03:12 Times of London 2009, Chancellor on the
03:14 brink of second bailout, which was the
03:16 headline of the Times of London of that
03:18 day. He did that to prove that he had
03:21 not been mining Bitcoin prior to that
03:23 day. And when he released Bitcoin to the
03:26 world, everybody had an equal shot of
03:28 mining Bitcoin at the same time. So for
03:31 example, uh the actual mining and the
03:33 launch of the network happened on
03:35 January 9 night, January 9 of 2009. Um
03:39 and Hell Finny, the first person who
03:41 publicly posted that they were mining
03:44 Bitcoin was on January 10th of 2009. So
03:47 all of those people were mining Bitcoin
03:49 at the same time. anyone in the entire
03:52 world at the launch of the Bitcoin
03:54 network could have opened their
03:56 computer, downloaded the software, and
03:58 told it to mine Bitcoin. Now, you can’t
04:00 do that anymore because you it requires
04:02 specialized computers to do that now.
04:04 But right now, anybody can buy a $200
04:07 Bitax Bitcoin miner and mine like anyone
04:10 else. Uh the Bitcoin miner I run, I have
04:13 two of them. They’re never going to find
04:14 a Bitcoin. It’s going to they’re like
04:16 going to find that one Bitcoin block
04:18 every 115,000 years. It’s like buying a
04:21 single lottery ticket for the Power Ball
04:23 and expecting to win every time or
04:25 something like that. You’re just not
04:25 going to win. Statistically, that’s
04:28 basically impossible to win with a
04:29 single Bedax miner, which means if you
04:32 want to actually find it and mine a
04:33 block, you have to have thousands of
04:34 them. But I got the same shot as
04:36 everybody. I might win just like every
04:39 other Bitcoin miner might win. I just
04:41 only have one of them. And if you want
04:43 to win mine a block once every year, you
04:45 need 15,000 miners. If you have one
04:48 minor, you’re going to win a block every
04:50 15,000 years, which is not going to do
04:52 me any good because I’m statistically
04:54 not going to be alive. So, uh, anyway,
04:56 but Satoshi did not give himself any
04:58 special Bitcoin. So 100% of the Bitcoin
05:01 that is mined by anyone in the world and
05:04 100% of the Bitcoin that will ever be
05:06 mined was mined fair and square by
05:09 someone expending computing power and
05:12 computational resources and electricity
05:14 to get that Bitcoin. And in the early
05:16 days of Bitcoin, it cost just about as
05:18 much to mine Bitcoin. It’s always cost
05:22 about as much to mine Bitcoin as the
05:24 actual price of Bitcoin. It’s it’s
05:26 slightly less otherwise people wouldn’t
05:28 mind.
05:29 It’s not like a big money maker. Even in
05:31 the early days of the Bitcoin, you know,
05:33 you were expending, you know, 30 cents
05:34 of extra electricity to mine Bitcoin in
05:37 a day, for example, and you might get
05:39 some Bitcoin, but the Bitcoin in the
05:40 early days had zero value. So, you’re
05:42 expending money on electricity and
05:44 getting Bitcoin that had the zero value
05:46 because it had not even acquired a price
05:49 yet. Uh, which did not happen until the
05:51 middle of 2010 when the very first
05:53 person bought two Papa John’s pizzas for
05:55 10,000 Bitcoin. Um, but anyway, um, so
05:60 all that to say, uh, nobody got a,
06:02 sorry, people are calling me and texting
06:04 me and I’m, you know, my phone is AI
06:06 generating summaries as fast as I’m
06:07 talking here. Um, but it’s not
06:09 important. So, nobody got, so all of the
06:12 Bitcoin started by being mined by
06:14 someone and then it became owned by
06:17 someone else when they
06:20 Hold on. Hey kids, I’m recording a
06:21 video. um they uh the bitcoin became m
06:25 became owned by someone else when the
06:27 bitcoin miner sold it to someone else.
06:29 So when a bitcoin miner mines a bitcoin
06:32 they have to expend electricity and
06:33 computational power which is which costs
06:35 money. So it costs I’m going to pick a
06:38 number. It costs like 90% of the price
06:40 of a bitcoin to mine a bitcoin. And so
06:42 they have to turn around and sell that
06:43 bitcoin to people like you and me.
06:45 Otherwise they could not pay for their
06:47 electricity costs. Now that’s a very
06:49 small percentage right now. you know, in
06:51 a year, the Bitcoin network generates
06:53 about 75% more Bitcoin, less than one
06:57 less than one, you know, less than 3/4
06:59 of 1% more Bitcoin to the Bitcoin
07:01 miners. And again, that gets smaller and
07:03 smaller and smaller as a percent by each
07:05 passing year, uh, due to the Bitcoin
07:07 having. But anyway, all that to say,
07:09 everyone, every Bitcoin that has ever
07:11 been acquired by anyone was either mined
07:14 fair and square by a Bitcoin miner
07:17 expending computational power
07:20 and electricity or it was bought by
07:23 someone from a Bitcoin miner who
07:25 expended computational power and
07:27 electricity. Nobody got a free lunch.
07:29 Nobody got a free ride. Nobody started
07:31 owning all the Bitcoin. Uh it’s just
07:33 similar to gold, which is why people
07:35 call Bitcoin digital gold. Who owns the
07:37 original gold in the world? The answer
07:39 is nobody. It’s underground. Who gets
07:41 the original gold in the world? Well,
07:42 whoever digs it up first. Who owns the
07:45 fish in the ocean? Nobody. Who who owns
07:48 them? Well, whoever catches one, that’s
07:51 who owns it. So, Bitcoin works the same
07:53 way, just like digital gold. Um, the
07:56 person who digs it and digs it out of
07:57 the ground first owns it. And if
07:59 somebody else wants to own it, you got
08:00 to buy gold from somebody who dug it out
08:02 of the ground first. And Bitcoin works
08:04 the same way. It’s completely fair for
08:05 everyone. All right. So, question number
08:07 three. One second.
08:11 Question number three. Who owned all the
08:13 bit Bitcoin to begin with? So, this is
08:16 one, you know, tailored to uh of
08:18 question number two. So, the answer is
08:19 nobody. Nobody owned all the Bitcoin to
08:21 to uh begin with. It was basically
08:23 sitting out there all 21 million waiting
08:26 to be mined over the course of 131
08:29 years. Between 2009 and the year 2140 is
08:33 131 years. And in that 131 years and it
08:36 just mathematically the way the Bitcoin
08:37 protocol works, it takes 131 years for
08:40 all of the havingings to happen and for
08:43 the ultimate new issuance of Bitcoin to
08:45 reach zero at which point instead of uh
08:47 right now the Bitcoin network is ramping
08:49 up. Initially the Bitcoin miners were
08:51 paid entirely by uh block rewards which
08:55 is the the mined Bitcoin because there
08:56 was no transaction fees. Over time that
08:59 has shifted and is shifting and uh over
09:02 time continues to shift to transaction
09:04 fees. And so in the year 2140 there will
09:07 not be a block block reward. You will
09:09 not be mining new bitcoin. The Bitcoin
09:12 miners uh who secure and audit the
09:13 network in the year 2140 will be paid
09:16 entirely by transaction fees which are
09:18 anticipated to be vastly higher uh in
09:21 total value due to the value of the
09:23 Bitcoin network than the combined total
09:25 of transaction fees and block rewards
09:27 right now. So in short, the Bitcoin
09:29 miners are likely to be paid way more in
09:32 the year 2140 than they are today. Even
09:34 though there’s no new Bitcoin to mine in
09:36 the year 2140, it’s all transaction
09:38 fees, but the Bitcoin network at that
09:39 point will be so valuable that the
09:41 transaction fees alone will be more
09:43 valuable than uh than current uh that
09:46 they than I should say in the year 2140,
09:50 the Bitcoin um the total transaction
09:52 fees will be valued at more than the
09:53 block reward and the transaction fees
09:55 combined today. Okay. So, nobody starts
09:58 owning Bitcoin just like nobody owns the
09:60 fish in the ocean before somebody goes
10:02 fishing. Just like nobody owns gold
10:04 underground before it gets mined. It’s
10:07 just, you know, I guess there’s
10:08 something, you know, called mineral
10:09 rights. But we’re we’re looking at this
10:11 like the uh you know, again, like all
10:13 the gold’s at the center of the earth
10:14 and anyone can dig for it anywhere and
10:16 whoever gets there first gets whatever
10:18 they can mine. That’s the way Bitcoin
10:19 works. And where did all the cash come
10:22 from that was used to purchase newly
10:25 mined Bitcoin and where did it go? Okay.
10:28 So, newly So, as with anything, a
10:32 Bitcoin miner, just like let’s talk
10:34 about a gold miner. A gold miner uses
10:37 money to dig gold out of the ground and
10:39 then they sell that gold for a profit to
10:42 someone who wants gold for jewelry or
10:44 industrial uses or to sit on it for its
10:47 monetary value because obviously gold
10:49 the the vast majority of the value of
10:51 gold is its monetary properties.
10:54 Gold had value for monetary reasons long
10:57 before it had any industrial uses and
11:01 its decorative uses have always been a
11:02 relatively small percentage of gold
11:04 value. Its monetary attributes are what
11:07 give gold the vast majority of its
11:09 value. Okay. So the question here again
11:13 I’m doing a video here and while I’m
11:15 doing a video I’ve gotten like 26
11:17 messages on Signal, text message,
11:19 Facebook Messenger, multiple phone
11:21 calls. Forgive me. I should I should
11:23 have set my phone to do not disturb
11:25 before I even started this. So, where
11:27 did the cash come from? Well, just like
11:29 where did the cash come from uh on
11:32 digital on the yellow rock is somebody
11:35 put up the investment dollars to start
11:37 digging. They put up the investment
11:39 dollars to start digging. The gold got
11:41 dug out of the ground. Hold on. Let me
11:43 see if I can silence.
11:47 going do not disturb does not mess you
11:50 up if I do that live in the middle of a
11:52 video. Let’s hope for fewer
11:53 interruptions. Um, all right. So, just
11:56 like with gold mining, a group of
11:58 investors puts up the money to buy the
11:60 equipment to dig the gold out of the
12:01 ground. When they’re done doing that,
12:03 they sell the gold to people who want
12:05 gold in order to pay for the mining
12:07 equipment, the land that they’re mining
12:09 on, the electricity to purify the gold,
12:11 all of that. So, Bitcoin works the same
12:13 way. uh the original money that is used
12:16 to get the Bitcoin in the first place is
12:18 put up by investors. Investors buy
12:20 Bitcoin mining equipment and they pay
12:22 for electricity. Eventually, their
12:24 Bitcoin miners mine new Bitcoin because
12:27 it’s so expensive to buy Bitcoin. They
12:29 sell their Bitcoin at a profit, but
12:31 often not a huge profit. It’s often a
12:33 relatively small profit. They sell their
12:35 Bitcoin into the marketplace and someone
12:37 who wants Bitcoin for its monetary
12:39 properties buys it from a Bitcoin miner.
12:41 Same with gold. uh investors put up
12:44 money to buy gold. The gold is dug out
12:46 of the ground. They pay back the people
12:48 for the equipment and the electricity
12:50 and the labor and all of that and which
12:52 leaves a small profit. Uh and the money
12:54 that it is used to pay for the gold that
12:56 got dug out of the ground comes out of
12:58 the hands of people who want the gold
12:60 that came out of the ground. Same with
13:01 Bitcoin. the the the money that pays the
13:03 Bitcoin miners to go get it, plus the
13:06 profit they have to pay to the Bitcoin
13:07 miners comes from people who value
13:11 Bitcoin because of its monetary
13:12 properties and want to own Bitcoin
13:14 because it has it is a better store of
13:16 value than stocks, bonds, real estate or
13:19 anything else. So because of Bitcoin’s
13:21 monetary property and because it stores
13:23 value due to its scarcity, its scarcity,
13:26 fun, fungeability, durability,
13:28 verifiability,
13:30 um, divisibility, all of the attributes
13:33 of money, of which there are between
13:35 five and eight, depending on who you
13:37 ask, of primary attributes of what makes
13:39 a good money. Bitcoin is does a better
13:42 job on those between five and eight
13:44 attributes, depending on how you count
13:45 them, than anything else in the world.
13:47 Therefore, people want it because it
13:49 stores value. They can exchange it for
13:50 stuff in the future. They can carry it
13:52 across borders. All of the things that
13:54 make Bitcoin amazing. People want
13:56 Bitcoin for all of those reasons. And
13:58 so, they’re willing to pay for it. And
13:60 so, they buy it from Bitcoin miners who
14:02 sell it, you know, into the marketplace
14:04 for a fraction of a penny less than you
14:06 could get that same Bitcoin from someone
14:07 who already owns it. Now, how do I know
14:09 that Bitcoin miners are selling it at
14:12 the same price or less than everyone
14:13 else in the world? Well, because nobody
14:15 would buy it from a Bitcoin miner unless
14:18 they could get it at the same price or
14:19 cheaper than they could get it from
14:21 someone who already had Bitcoin. And so
14:22 that’s the way markets work. Everyone,
14:24 everyone for any commodity, it doesn’t
14:26 matter if it’s gold, silver, soybeans,
14:29 rice, you know, corn, Bitcoin, every
14:34 commodity, everybody wants it for a
14:36 price that’s equal to or less than they
14:38 can get it from anyone else in the
14:40 world. So that’s how I know the Bitcoin
14:41 miners are selling it for the same price
14:43 or less than anyone else is selling
14:45 Bitcoin anywhere in the world because
14:46 otherwise me and everyone else who is
14:49 accumulating as much Bitcoin as they
14:50 possibly can would buy it from someone
14:52 who already has it instead of from a
14:54 Bitcoin miner. So where does the money
14:56 come from? It comes from investors who
14:57 mine the Bitcoin or after it’s been
14:59 mined, it comes from people holding US
15:02 dollars like me. It well I don’t own any
15:05 Bitcoin, you know, any US dollars
15:07 anymore, but I used to. It comes from
15:09 people like me who used to own Bitcoin
15:11 dollars or sorry used to own US dollars
15:14 and determined that that was a bad place
15:16 to keep wealth and therefore converted
15:18 it to Bitcoin and then I sold my stocks
15:20 and bonds and converted those to Bitcoin
15:22 and any real estate I could ever get my
15:24 hands on I sold and converted that to
15:26 Bitcoin and it’s just that simple. So
15:29 that’s where the dollars came from. Next
15:32 up um the last of the five questions
15:34 number five out of five.
15:36 Where does all the cash come from that
15:38 is used to purchase the newly mined
15:39 Bitcoin? And where does that cash go?
15:42 And what is it that gives that Bitcoin
15:45 value without being owned ever by anyone
15:48 yet? Okay, so let me get a drink and
15:51 I’ll answer.
15:55 Okay, so the answer is
16:00 I need to stop here at a gas station.
16:02 I’m not sure if this is the one. Um,
16:05 we’re going to find out. Anyway, so the
16:09 answer is okay. So, money comes from
16:10 people who wants Bitcoin and that um let
16:14 me see what the specific Oh, and what
16:16 gives Bitcoin value? What gives Bitcoin
16:17 value is its monetary properties. It is
16:20 it has better monetary properties than
16:22 anything else that exists anywhere in
16:23 the world because it’s more durable,
16:25 more funible, more scarce, more
16:27 divisible, more authenticable, more
16:30 verifiable, more uh all the things.
16:34 Scarce, mainly scarce, like scarce is by
16:37 far the number one thing. It is it does
16:40 a better job than anything else of those
16:43 things. Therefore, it is valuable.
16:45 Therefore, people are willing to uh to
16:48 it for those reasons. And again, with
16:50 the Bitcoin miners, uh the way that
16:52 works is people are willing to Okay, it
16:56 looks like I did not miss my exit after
16:58 all. Okay. Um so, bit people are willing
17:01 to pay Bitcoin miners for their Bitcoin
17:04 because their Bitcoin is just as good as
17:06 anyone else’s Bitcoin. All the Bitcoin
17:08 in the world is equal. It’s all durable,
17:11 fungeible, divisible, verifiable,
17:13 authenticable, and scarce. It’s all all
17:16 of the Bitcoin, just like all of the
17:18 gold, is uniform. And therefore, Bitcoin
17:22 uh that has been freshly mined is just
17:24 as valuable as Bitcoin that was mined
17:26 back in 2009. It’s all the same. And
17:29 because it’s all the same, it’s valuable
17:31 for the exact same reasons the existing
17:33 stock of Bitcoin is valuable. So,
17:36 anytime someone mines new Bitcoin,
17:39 someone like me or like you or like
17:41 someone in the world is willing to pay
17:43 them for that Bitcoin because of its
17:45 monetary properties. The exact same
17:47 reason they would buy Bitcoin from
17:49 anyone for its monetary properties. Um,
17:52 and again, as long as the Bitcoin miner
17:54 is selling their Bitcoin for the same or
17:57 one penny less than anyone else in the
17:58 world is is is uh is selling it for,
18:01 they will sell the Bitcoin. or the
18:03 Bitcoin miner can choose to sit on the
18:04 Bitcoin if they can afford to sit on the
18:06 Bitcoin after they have already paid for
18:09 all their electric bills, their labor
18:10 costs, the Bitcoin mining equipment, the
18:13 return on investor to their investors
18:15 after all of that is done if they still
18:17 have Bitcoin left over that they don’t
18:20 have to sell to uh pay off all those
18:23 people. Well, then of course they can
18:24 keep it and that is their profit that
18:26 they can keep on their balance sheet.
18:27 And a lot of Bitcoin mining companies
18:29 have kept some Bitcoin, but typically
18:31 it’s a pretty small percentage of what
18:32 they mine because they have all these
18:34 costs they have to pay for. So, um,
18:36 anyway, let me make sure I answered that
18:38 one. So, where does all the cash go?
18:40 And where did Oh, and where does the
18:42 cash go? Anytime you’re buying Bitcoin,
18:44 it goes into the hands of whoever’s
18:45 selling the Bitcoin. So, uh, if you, you
18:48 know, buy Bitcoin from a Bitcoin miner,
18:50 which they’re always going to sell it
18:51 through Coinbase or River or something
18:52 like that, so you’re never buying it.
18:53 You might be buying it directly from a
18:55 Bitcoin miner, but you would never know
18:57 that because they’re just selling it on
18:58 exchanges like just like you and I can
19:00 sell Bitcoin on exchanges. Um, so where
19:03 does the cash go? Like whoever’s selling
19:04 the Bitcoin. It might be a Bitcoin
19:06 miner. It might be somebody like me or
19:08 you who wants to go on a nice vacation
19:10 and is sitting on a bunch of Bitcoin
19:12 that’s massively appreciated and just
19:14 decided that a nice vacation is worth
19:16 more than 0.001 Bitcoin or however much.
19:20 Um, and it could be but someone who
19:22 needs to pay off a medical bill. It
19:23 could be someone who has a down payment
19:25 on a house, but someone somewhere is
19:28 willing to to give up Bitcoin right now
19:30 at $108,000 per coin. Someone somewhere
19:33 is willing to sell the Bitcoin because
19:34 they need US dollars or their local
19:37 currency for something to improve the
19:39 life of them or their family. Or it’s a
19:41 Bitcoin miner who needs to pay for their
19:43 mining equipment. They need to pay their
19:44 investors. They need to pay for
19:45 electricity. And again, just like with
19:47 gold, it’s like where does the where
19:49 does the money go that pays for the gold
19:50 that comes out of the ground? Well, it
19:52 goes to the gold miner. Well, where does
19:53 it go if you buy gold from a a uh a
19:56 bullion dealer, which is people who sell
19:58 like gold by the ounce or by the, you
20:01 know, gram or whatever. And the answer
20:03 is, well, it goes to them and back to
20:06 someone somewhere along the chain who
20:08 decided they were willing to part with
20:09 gold for $3,400 an ounce or whatever it
20:12 is. Anyway, hope all that makes sense. A
20:14 lot of moving part. Fantastic questions.
20:17 Uh, and again, the last part of that is
20:19 what gives it value if it’s never been
20:21 owned by anyone. The answer is because
20:23 it has all the monetary attributes of
20:25 every Bitcoin that’s ever been mined
20:27 before and all the Bitcoin that’s ever
20:29 been owned by anyone before. And because
20:31 Bitcoin is so amazing, it has all these
20:33 incredible attributes that make it super
20:34 valuable. And that’s how that works. So,
20:37 uh, I especially appreciated these
20:39 questions because I thought they were
20:41 especially insightful and indicated that
20:44 the person who asked these questions was
20:46 really doing the mental hard work, the
20:48 proof of work, really doing the mental
20:50 hard work to link together. Okay, but
20:53 why this, but why this and where this
20:54 and how did that happen and why does
20:56 this have value? I just I thought this
20:58 was uh a group of some of the best
21:01 questions I’ve been asked in a very long
21:02 time. And I deeply appreciated those
21:04 questions and I’m glad I finally had a
21:06 chance to do a video answering those
21:08 questions. If you have any follow-up
21:10 questions, stick them in the comments
21:11 and I’ll take my best shot. Thanks
21:12 everyone.
