Bitcoin Q&A – Questions and observations from a friend, answered by me! (Part 1 of 2)

00:01 Hey everyone, I got some great questions
00:03 and observations from a friend about
00:05 Bitcoin. So, I want you to read you some
00:07 of what he I want to read you some of
00:09 what he sent me and then my responses
00:11 and my own thoughts and observations uh
00:14 based on that. Okay. So, first of all,
00:16 he says, “I am intrigued by Bitcoin
00:18 enough to hold the Bitcoin I bought 8
00:20 years ago, but not necessarily buy
00:22 more.” Um, and so he’s saying basically
00:24 he just doesn’t have the conviction uh
00:27 to buy more. And I presume the
00:30 observations below are the reason for
00:32 that. So I am going to answer his
00:34 observations below to the best of my
00:36 ability. Okay. So he says my position
00:39 meaning Joel’s position Joel’s positions
00:41 assumes several things. Number one,
00:44 people will continue to collectively
00:46 agree that Bitcoin can be a store of
00:49 value in some sort of unwritten social
00:51 agreement. Uh and then he says all money
00:54 generally is this way. So Bitcoin is
00:56 dependent on this remaining true. What
00:58 happens if uh people decide another
01:00 crypto is better? Well, actually, let me
01:02 address it piece by piece. So, one um
01:05 anything that is used as money is
01:06 dependent on people believing that it
01:09 will store its value over time. Gold
01:10 works that way. The US dollar works that
01:12 way. Everything works that way. And what
01:15 matters is the credibility of its
01:17 monetary properties. So all of these um
01:20 things, you know, people’s objections
01:22 often miss something that is answered in
01:25 three words, which is credibility of
01:28 monetary properties. And I’ll talk more
01:30 about what that is. So yes, um all of
01:34 money assumes that people have decided
01:37 that the credibility of the monetary
01:39 properties is good enough to use it as
01:41 money. So the dollar has no inherent
01:43 value. Um it’s it’s a piece of paper.
01:46 It’s literally a piece of paper and you
01:48 have to use it to pay your taxes, but
01:49 you can literally get US dollars 5
01:51 minutes before you pay your taxes. So,
01:52 it’s not like you actually have to hold
01:54 US dollars to pay your taxes. You just
01:56 have to have them at the point at which
01:58 you actually need to pay the taxes. Um,
02:00 and of course, the US military, people
02:02 say, “Yeah, but the US has a military.”
02:04 Well, so did every other country where
02:06 the dollar, you know, their currency
02:07 went to zero. Every country where the
02:10 currency went to zero also had a
02:11 military and they couldn’t stop it. So
02:13 what matters is the credibility of the
02:15 monetary properties. So the reason
02:17 people use the US dollar is they believe
02:20 that although the US government prints
02:21 about 7% more money per year that they
02:24 won’t print more than 7% more per year
02:27 and that that will only show up in
02:28 inflation of between maybe 4 to 9% per
02:31 year. And most people don’t think
02:33 there’s a better alternative because
02:34 they don’t understand Bitcoin. And so
02:36 those the the credibility of those
02:40 monetary properties of the dollar is
02:41 good enough for them. Now, I don’t think
02:43 it should be because if you understand
02:44 Bitcoin, you realize that the
02:46 credibility of those monetary properties
02:48 of the US dollar completely suck. Like
02:50 they make no sense. It makes absolutely
02:52 no sense to hold US dollars if you can
02:54 hold Bitcoin instead. But a lot of
02:57 people again don’t understand Bitcoin.
02:58 But gold works the same way. The
02:60 credibility of gold’s monetary
03:02 properties works the same way. So, um he
03:05 talks about sort of the social contract
03:06 that we all just it has value because we
03:08 agree it has value. That’s actually not
03:10 the way it works. It has value due to
03:13 the credibility of its monetary
03:14 properties. So once something has
03:17 credible monetary properties, then it
03:20 becomes value because of the credibility
03:22 of those monetary properties. And after
03:25 that uh process happens, you can trust
03:28 that it will retain its value to the
03:30 degree that it retains the credibility
03:32 of those monetary properties. So it’s
03:34 not sort of some weird accident that
03:37 gold is valuable. Gold has better
03:39 monetary properties than any other
03:41 metal. And that was discovered thousands
03:43 of years ago. Humans figured out that
03:45 gold was the scarcest metal on the
03:48 periodic table that had uh the other,
03:51 you know, requirements of being a good
03:53 money. It was divisible. It was durable.
03:54 It was portable. It was authenticable,
03:56 verifiable, all of those things. Gold
03:58 met those requirements better than any
03:60 other metal. And it wasn’t like some
04:02 grand, you know, round table decided
04:04 that. People tried lots of different
04:07 metals and it kept coming up that gold
04:09 was more scarce, more divisible, more
04:11 portable, more durable, more
04:12 authenticatable. So they kept coming
04:14 back to gold. And so as more people used
04:16 gold, more people use gold. And as soon
04:18 as everybody was using gold, everybody
04:19 was using gold because everybody was
04:20 using gold. So again, it was not some
04:22 sort of weird, you know, social
04:24 contract. It was the credibility of
04:26 gold’s monetary properties. That is
04:28 entirely the reason gold has the value
04:30 it has, which is now more than $20
04:32 trillion. is the most valuable asset in
04:35 the entire world. Um, and Bitcoin is
04:38 about 2 trillion. So, Bitcoin is less
04:40 than 10% of gold, which is something
04:42 like 22 trillion and Bitcoin’s 2
04:44 trillion. Um, so anyway, so it comes
04:47 down to the credibility of the monetary
04:48 properties and that is an objective
04:50 thing. So if you went back to the
04:52 beginning of time and you understood the
04:54 periodic table and you understood, you
04:56 know, how rare each of the elements was
04:59 in the world, you could have predicted
05:01 in advance that Bitcoin would emerge as
05:04 the monetary metal for, you know,
05:06 history until the advent of uh the
05:09 telegraph and basically electronic
05:11 communications which made gold hard to
05:13 use uh because gold is not electronic in
05:15 nature. So prior to the invention of the
05:17 telegraph, you could have predicted
05:19 prior to that point that gold would be
05:21 the money that everybody would land on
05:23 and you could have done that far in
05:24 advance. It wasn’t s sort of some it was
05:27 not a social contract that everybody
05:28 just decided. It was based on the
05:30 credibility of gold’s monetary
05:31 properties. And gold had those
05:33 credibility of those monetary properties
05:35 from the very moment the earth came into
05:37 existence based on how much gold there
05:39 was compared to other metals and the uh
05:42 properties the uh the monetary
05:45 properties of gold. Um, so anyway, so
05:47 Bitcoin, it’s it’s easy to see how
05:50 Bitcoin has become the dominant
05:52 cryptocurrency and the fastest growing
05:55 most used sort of new form of money
05:58 because and again it’s not because a
06:00 bunch of people got together and said
06:01 let’s just use Bitcoin. It’s because the
06:03 credibility of Bitcoin’s monetary
06:05 properties is are far better than the
06:09 credibility of the monetary properties
06:10 of any other electronic uh currency. And
06:14 I’ll go into more details on that. So
06:15 again, it’s not a social contract. It’s
06:17 based on the credibility of the monetary
06:19 properties. Those three words extremely
06:20 important. Credibility of the monetary
06:23 properties. Okay. So what happens if
06:25 people decide another cryptocurrency is
06:27 better? The answer is they’re not going
06:29 to because the design of Bitcoin uh hits
06:33 a very specific target. And so uh it
06:37 turns out in retrospect Bitcoin hit the
06:39 exact bullseye for what you want in an
06:41 electronic currency. and more than
06:44 20,000 other cryptocurrencies exist by
06:47 people trying to change something about
06:49 Bitcoin. And every single attempt
06:51 they’ve made has made it worse. So at
06:54 this point, Bitcoin has 16 years of
06:56 history, one six. It has uh what’s
06:59 called hash power, which is the the the
07:01 Bitcoin miner securing and auditing the
07:03 network. That is, you know, many dozens
07:07 of times larger than the next closest uh
07:11 cryptocurrency. And I’m not even sure
07:12 what’s even second on that list cuz
07:14 nothing’s even remotely close. Uh so
07:16 Bitcoin is just absolutely dominant. And
07:19 in order for something to take the place
07:20 of Bitcoin, it would need to have better
07:23 monetary properties. The problem is it
07:26 can’t have better monetary properties
07:28 because it’s never going to be able to
07:29 compete with the uh security
07:31 architecture of gold, sorry, of Bitcoin
07:34 as it relates to the Bitcoin miners and
07:36 all of that. Sorry, give me one second
07:38 here.
07:40 So uh the Bitcoin mining network is so
07:43 dominant that nothing is even remotely
07:46 secure as compared to Bitcoin and the
07:49 security is a key part of the certainty
07:52 and credibility of the monetary
07:54 properties. So um you can’t make another
07:56 cryptocurrency that’s more you can make
07:59 it that’s more divisible, durable,
08:01 authenticable, portable, blah blah blah.
08:03 Um but that’s the problem is again not
08:06 the monetary properties. It is the
08:07 credibility of those monetary
08:09 properties. The level of certainty with
08:12 which people in the world can be
08:14 absolutely certain that that will not
08:16 change. So people are only going to
08:17 decide another cryptocurrency is better
08:19 if the credibility of those monetary
08:21 properties is higher. And Bitcoin is the
08:23 original, the most distributed, the most
08:25 decentralized, the most secure, the most
08:28 ABC XYZ, every conceivable thing you’d
08:30 want in a cryptocurrency. Bitcoin
08:33 already has it. And there’s no
08:35 compelling would uh would take the
08:37 mantle from Bitcoin. And if that were
08:38 even possible, it would have already
08:40 happened in the last 16 years. Um so
08:42 something really has to be radically
08:45 better in some profound way to be better
08:48 than Bitcoin. And I just don’t see, you
08:50 know, neither me nor numerous other
08:52 people have researched this don’t just
08:53 don’t see how that’s even possible.
08:55 Okay. So it’s not going to be another
08:56 cryptocurrency. And you can uh if you
08:58 want to watch the videos I’ve done
08:60 specifically about why nothing will out
09:02 compete Bitcoin and why there will not
09:03 be a bit. So, um, the the the again, if
09:08 you want to if you want to understand
09:09 why nothing will out compete Bitcoin, do
09:11 a search for the word out compete, O U T
09:14 O M P, out compete on my website,
09:16 joelomgar.com in the resource section or
09:19 on my Facebook page, uh, or the the
09:21 keyword search MySpace
09:23 M, which talks about why Bitcoin will
09:26 not be just just the way Facebook
09:28 replaced MySpace, why that will not
09:30 happen to Bitcoin. I’ve got got a lot of
09:32 good resources about there uh about that
09:35 out there. All right. So then uh he goes
09:37 on to say or maybe the government
09:38 decides we’re going to make our own
09:40 blockchain crypto and there will only be
09:42 15 million instead of 21 million like
09:44 bitcoins and it’s backed by a precious
09:46 metal. Um I would say well that’s
09:48 already happened. The US dollar was a
09:50 currency backed by the by precious metal
09:52 which was gold and then they broke the
09:54 promise. And the problem is every
09:55 government currency they always break
09:57 the promise. um the government uh
10:00 promises to be responsible. They tie it
10:02 to precious metals. Then they 100% of
10:06 the time throughout all of human history
10:07 have always printed more of the currency
10:10 than they had precious metal to back it
10:12 and it has devalued the currency and
10:14 eventually the currency has collapsed.
10:16 That has what is what what has happened
10:18 with every government managed money
10:20 throughout all all time. Um, so the
10:22 government’s already done that. And if
10:23 they make it a cryptocurrency or a
10:25 central bank digital currency, CBDC, it
10:28 doesn’t matter. Again, we’re looking at
10:29 the credibility of the monetary
10:31 properties. Governments have no ability
10:34 to be credible with the monetary
10:36 properties because everybody knows
10:37 they’re going to debase the currency.
10:39 Debbasing the currency meaning means uh
10:41 inflate it away or um change the basis
10:45 of it. Um so instead of in the case of
10:47 Bitcoin, there’s 21 million. There will
10:49 never be more. Uh in the case of the US
10:51 dollars, there’s 22 trillion and they’re
10:53 just printing more 7% more a year. So
10:55 within a year or two, there will be $23
10:57 trillion in circulation and there’s just
10:59 no end in sight. They’ll never stop
11:01 doing that. Okay. So then it goes on to
11:04 say the original Bitcoin will only ever
11:07 be
11:08 uh 21 million, but you can make an exact
11:11 copy of the blockchain and call it
11:12 Bitcoin 2.0. So instead of the
11:14 government printing money, is there a
11:15 risk that other coders will write new
11:17 cryptos? And how does Bitcoin retain
11:19 retain its value if someone makes
11:20 another one exactly like it with only 10
11:23 tokens? So, it’s even more scarce
11:24 because there’s only 10 tokens instead
11:26 of 21 million or 10 million instead of
11:28 21 million. Again, what matters is the
11:30 credibility of the monetary properties.
11:33 So, if I come out and say, “Hey, here’s
11:34 Joelcoin and there’s only 10 of them.
11:36 It’s super scarce.” The problem is,
11:38 yeah, but it’s not decentralized. I you
11:41 have no way of knowing it’s going to
11:42 only stay at 10. In the case of Bitcoin,
11:44 there’s more than 100,000 people running
11:47 Bitcoin nodes, every one of which has a
11:49 veto over changes to that 21 million
11:52 supply. If I roll out Joelcoin and I’m
11:55 the only one who has a node that
11:58 supports Joelcoin, you don’t have any
11:60 way of believing or knowing that they’re
12:02 that I’m not going to change the rules
12:03 on you. And so it just it makes no sense
12:06 to pursue some other crypto because you
12:09 just have no way of knowing that it’s
12:11 going to have a fixed supply. In the
12:13 case of Bitcoin, it’s distributed
12:14 worldwide. There’s more than 100,000
12:16 nodes. They’re running on satellites.
12:18 They’re running on p personal computers.
12:20 I’ve got two Bitcoin nodes running at my
12:22 house. All of those have a veto over
12:24 changes to the network. No other
12:26 cryptocurrencies like even remotely even
12:29 remotely close to that, which means you
12:31 just can’t trust that it won’t change.
12:33 And other cryptocurrencies are
12:35 constantly changing. They’re changing
12:36 how much there are. They’re changing who
12:38 gets it. They’re changing how it works.
12:40 And um you just can’t trust that
12:42 somebody’s not going to pull the rug out
12:43 from under you. Uh same with the
12:45 government. Obviously, you can’t trust a
12:46 government not to pull the rug out from
12:47 under you. Um he also asks, “How does
12:51 the distribution of Bitcoin eventually
12:52 happen?” Meaning, how does it become the
12:55 means people start to buy uh a house or
12:58 a business? Is that the goal? So yeah,
12:59 eventually every uh currency strong
13:02 currencies out compete weak currencies.
13:05 So, as more people hold a strong
13:07 currency and spend a weak currency, uh,
13:09 which is what people are doing, they’re
13:11 holding Bitcoin, spending US dollars.
13:13 And as that happens, they end up with a
13:15 higher and higher percentage of their
13:17 net worth in Bitcoin. So, eventually,
13:19 you get to the place where I am, where
13:22 I’ve got virtually 100% other than very,
13:24 very low bank account balances to just
13:26 make sure a a check doesn’t bounce to a
13:28 babysitter or something like that who
13:30 doesn’t take Bitcoin. um I I have you
13:33 know 100% of my liquid assets in
13:35 Bitcoin. So as that happens more and
13:37 more people transact with more and more
13:40 people exclusively in Bitcoin and I
13:42 already transact exclusively in Bitcoin
13:44 with anyone who will take Bitcoin and
13:46 that number of people keeps going up. So
13:48 as that number of people keeps going up
13:51 a larger and larger percent of the
13:53 economy is people swapping Bitcoin
13:55 instead of US dollars. So if you want to
13:57 see this uh work in real time with other
13:59 currencies, look at the US dollar in
14:02 Venezuela. So almost nobody’s trying to
14:05 store value in the Venezuelan Bolivar
14:07 because it hyperinflated to basically
14:09 zero. And so what everybody’s doing is
14:11 they might buy a you know they might get
14:13 paid in Bolivian uh sorry Venezuelan
14:15 Bolivar and then 5 minutes later they go
14:18 buy some groceries but they’re not
14:20 holding on to that currency for longer
14:21 than minutes or days at the most. So
14:24 more and more of the economy is
14:25 transacting US dollars. Well, US dollars
14:28 are not the official currency, but
14:30 people are doing exactly what they’re
14:31 doing with Bitcoin. They’re uh holding
14:34 the US dollars and spending the
14:36 Venezuelan bolivar. And as more and that
14:38 happens, the US dollar is a better store
14:41 of value and the Venezuelan bolivar
14:44 slowly goes to zero and a larger and
14:46 larger percentage of the economy ends up
14:48 just US dollars. So the same thing is
14:50 happening with Bitcoin. It’s just much
14:51 earlier in the adoption cycle. It’s a
14:53 lot easier for people to switch from one
14:55 paper currency to another because they
14:56 understand it. With Bitcoin, there’s a
14:58 high learning curve. So, it takes a lot
15:00 longer for people to get it. But that is
15:02 already happening with Bitcoin. And as
15:04 that happens, people are buying things.
15:06 They’re buying cars. They’re starting
15:07 businesses. They’re like a lot of that’s
15:10 already happening. It’s just happening
15:12 uh on a small and growing scale. So,
15:15 it’s sort of not on the radar for most
15:16 people. Okay.
15:18 Then next series of questions related to
15:21 here says uh the value will at some
15:23 point in some unforeseeable way be able
15:25 be or how will the value at some point
15:27 in the future be able to be determined
15:29 without knowing the value of the dollar
15:31 meaning what if the dollar collapses how
15:32 do we value Bitcoin? Uh isn’t it always
15:35 based on the US dollar as in um so the
15:38 answer is no. The value is not based on
15:41 the US dollar. And I’m going to do a
15:43 separate video. So I’ll turn this into
15:44 two parts. Uh because I’m afraid because
15:46 it’s raining so hard right now that I’m
15:48 going to lose this video. So, I’m going
15:49 to go ahead and upload this video and I
15:51 will start a second one momentarily
15:52 where I answer that