thanks for joining us we're going to
talk about Bitcoin rationalism so my
name is Stephan Livera I host the Stephan
Livera podcast. I'll just ask my
panelists to just take a minute and
introduce yourselves. I'm sure hi
everyone my name is Lily. I most recently
had a company called or calmness face
I'm sold that a little over a year ago
to Coinbase and I've been doing
you know the crypto thing for a number
of years now. Prior to that
polar-opposite build a hospital in China, worked at KKR, worked at McKinsey,
so you know traveled the spectrum here
but yeah it's great to be here. Hey guys,
I'm Arjun former engineer investor in
the space, kind of a long time over the
last you know four or five years I've
written and and researched extensively
in the space. Mostly focusing on
governance and kind of security now I'm
an investor at a venture capital firm in
San Francisco called Paradigm and that's
me. Fantastic thank you. All right so
we're talking about Bitcoin rationalism
and I believe Lily you may have been
either the one to coin the term or
perhaps popularized the term. So let's
have from both of you starting with you
Lily obviously. What is Bitcoin
rationalism? Well to me it was just a
very simple way of trying to articulate
why Bitcoin? I found myself
speaking with a number of people who
were perhaps new to the crypto space and
obviously, there are a lot of things that
were happening. A lot of attention that
the whole space was getting and a number of people really you know tried to ask me
why Bitcoin, right? And I think you
know for me there's a fairly sort of
straightforward and pretty convincing
kind of reason of why Bitcoin. And you
know why this is likely to be sort of
the most valuable asset in you know this
asset class. If you consider it an asset
class and you know really articulating
sort of the idea that money is something
that has a massive network effect but
it's extremely sticky that network
effects crosses borders crosses,
generations, and as you know in many ways for the
stickiest social network out there and
it's very likely to sort of actually
accrue those ironically sort of
centralizing tendencies around value
creation over time, right? And I find
myself you know sort of telling that to
a number of folks and realizing that you
know some of the some of the popular
terms memes kind of culture around Bitcoin and crypto was actually not very
accessible to a number of people who are
curious about it. And so that's you know
why I thought of the term Bitcoin rationalism. It was really sort of thinking more
objectively about why Bitcoin and
articulating that to a lot of people who
are interested.
Arjun?
I think you know I
would +1 almost everything that Lilly
said I think in addition to that you
know the you know one of the really
interesting things about watching the
development of Bitcoin over the last
several years has actually been a lot of
the positive externalities that have
come out of it. You know namely in
research into you know other areas of
cryptography. You know a lot of research
that's and resources that's gone into
focusing on privacy. I think coming out
of this has actually been a number of
you know almost adjacencies that are
really interesting, and of you know of
generative value to Bitcoin you know
including you know kind of decentralized
markets in kind of a non you know Bitcoin
resources and prediction markets
probably I think are very compelling. New
ways of you know capital formation or
like corporate organization I think are
really interesting as well. and you know
one of the one of the things that you
know you tend to see with a lot of the
sort of really insiders sort of speak in
the Bitcoin community is that you know
there's there's a lot of focus on
Bitcoin to the exclusion of a lot of
this other interesting these other kind
of interesting developments. So I think
that one way that I think about it is
that it's reframing of
you know what maintaining the
descriptive view that you know
non-sovereign money potentially has. The
largest possible market in anything that
people are working on in crypto as a
broad category, but that you know a
number of other developments could be
value creative to Bitcoin as well.
right
It might be interesting then to maybe
distinguished therebetween monetary
versus technology, and I think you might
both have interesting comments on that
because what has perhaps happened in
the industry over the years is people
that perhaps have confused the two.
What's your view?
well you know the term you hear a lot is programmable money
and
and I think it's important to sort of
really even just think about the parts
of speech in that term right but down
here is money and the modifier the
adjective is programmable. And so you
know fundamentally so the many
principles and sort of the rules of
money really apply and you know the
technology sort of distributed larger in
this case the Bitcoin blockchain is is
the new technology which actually gives
you new use cases makes it sort of newly
accessible there's also sort of really
new and really interesting things that
you can do with money now right. But
first and foremost this is about money.
Which means things like you know number
one price really matters, and you know I
think if you give in to just sort of see the
energy and the sort of and the sentiment
that's changed dramatically when Bitcoin
was three thousand versus ten thousand I
think price is incredibly relevant. And
that you know number two, things like you
know having a sort of stable money.
Supply is really important and just
because you know if there is 2,000 tokens
that all sort of print a stable supply
of money individually, but there's 2,000
sort of competing for privacy then
you're just not going to be able to have
price ability much less to have an
appreciation right. So you know I think
First and foremost this what's going to
be valuable in this ecosystem has to do
with money based applications and new
ways of using money.
I think that a lot of the ideas around
sort of you know a lot of the R&D that's
gone to some are contracting platforms.
As a user I'm universally thrilled about
because previously that's the type of
work that was being funded
you know let's say an NSF grant 500k for
five years and was sort of you know in a
corner of the ivory tower. And now at the
very least we sort of found a way as a
society as community to sort of put a
lot more resource into doing really
important R&D, right. So as a user I'm
universally thrilled about it. As an
investor I think it's you know much less
clear if and how that's going to be
valuable, and so therefore I think it's
just I think it's pretty important to
sort of distinguish between the money
parts of this right, and the
technology side of this.
I think that the
the sort of broad you know is it
money or is it technology bifurcation
when it comes to crypto. I actually you
know don't find super useful I think
that you know if you take Bitcoin.
Bitcoin is both Bitcoin is sort of this
hybrid you know monetary technology
where the technological aspects of the
system are inseparable from the thing
that makes it valuable right. So you know
Bitcoin has monetary status you know in
a global macro context, but at the same
time you know it's bitcoins price itself
is very important you know to its
security model. And so you know broadly
when I think people try to use this sort
of like binary you know sort of sort of
bifurcation with money and
technology I think that they use it to
try to delineate a difference between
say Bitcoin and everything else right. So
I think you know one common one you know
common discussion that's been going on I
think for the last you know 18 to 24
months is you know is ether money?
For example, you know is it it's really
different from Bitcoin? You know in
that it's kind of less useful
token or is it
kind of like some sort of you know very
similar system maybe like a superset of
the system. I think that you know these
these framings are really difficult you
know because they are really
different, but at the core of it you know
ultimately all of these tokens that are sort of unpegged tokens I think
our competitive money's in some form and
the fact that their value you know isn't
zero. Means that the market has
recognized across some set of trade offs
that they have that they find it you
know valuable in some way. I think that
you know in the context of you know
something like at the Etherium I think that
you know there's 
different trade-offs to be made about
you know with the potential utility of
the system or the trade-off about having
a different security model. I think that
there's a lot of people that you know
and empirically if you look at the the
market the side the relative sizes of
the market cap I think that there's a
lot of people who would disagree with
this set of trade-offs but ultimately. I
think that the kind of hero's
journey for all you know sort of these
hybrid technology money systems.
I think the hero's journey in the the
sort of pathing to the end goal which is
you know trying to build a very very
secure you know base layer money system
that could be you know global reserve
currency. I think that that pathing looks
virtually identical for you know all
cryptocurrencies. You know
regardless of the kinds of trade-offs
that they're making insofar as that's
true I actually don't find the you know
the focus on money or the focus of you
know monetary policy or security of the
monetary policy versus you know the
utility that the system provides. I
actually, don't find that that's like a
useful you know sort of like binary
categorization but I do think that you
know it's useful to consider that the
end pathing is similar for all of these
systems. But you know the what we
consider plausible or what we consider
valuable might depend on individual
perception of the trade-offs that each
system is made
I feel like there there's certainly a
lot of innovation a lot of really
brilliant kind of work which is being
done in the space but sometimes I just
wonder you know when you think about
who's gonna win in the space or which
kind of chain if you will which project
is gonna win in the space I actually
wonder a little bit how much of that
incremental technological innovation is
actually going to impact that outcome
because I think what is sort of an
overwhelming force in this industry
right now because this is about money
which is like sort of this universally
appealing obviously very large market
you know I just feel like Bitcoin is
imperfect and you know many ways
technologically speaking fine but it's
got sort of the it's got the brand it's
got the regulatory blessing and for what
it seeks to do it is technologically
sufficient and as sort of head and
shoulders above on all of those other
dimensions right so what do you think
invented in that perspective it's it's
hard to see how you know something else
is going to be able to compete with that
from you know just perspective of
gaining share or gaining market share
and that's you know really to me why
again the money and the markets
perspective on this in many ways kind of
is the primary and in many in many
circumstances is can dominate any sort
of technological superiority innovation
whatever it also might be because just
like sort of the tailwind when you're
thinking about a money that is you know
the the leader to sort of de nominate
the digital world right is something
once it gains adoption then it becomes
borderless very quickly and sort of
cross generation which is even stronger
than you know social networks which have
been incredibly successful so when I
look at all of that that to me is kind
of the biggest story around and it's a
very simple story as well which means it
can be a very big story because it's
something millions if not billions of
people can really get behind right yes
sir fascinating comments a
are doing around competitive money's and
some of the characteristics I think an
interesting question as well and that's
this is a common point of contention or
debate
some people consider is money a belief
system or is it more like it's
subjectively perceived but it's not
arbitrary that some you know monies have
better characteristics what's your
perspective on that I mean there's some
basic characteristics that have to exist
right so you know you can have number of
people believe in our money but if that
money supply is being doubled or tripled
on a daily basis which is happening in
some parts of the world then it's pretty
hard to sort of maintain that belief
over time and so there's kind of like a
basic set of features that have to exist
but then you know what what really is
the most important thing to make sort of
money actually useful is that you can
use it right so you can actually use it
to get something that you really want in
the other direction and so that's you
know what this makes this makes a
network effect itself or reinforcing in
a very very strong way so so I don't
know whether that makes it
there's certainly aspects of of the
community that we're all in that have
you know a very strong component of
belief and faith that's absolutely true
and I think that's one of the things
that's been you know really magical for
the space and has gotten us to you know
where we are now ten years later but I
think that what's going to get you from
you know the hundred cage million the 50
million the hundred million or like
several billion is not faith right it's
actually sort of aligning people's
self-interest because that's really the
only thing that can scale very quickly
to four billion people right trying to
maintain a system if faith requires a
lot of sort of hearts and minds
onboarding and a high degree of mutual
trust and that's almost impossible to
sort of build in such a large community
in a short period of time because it's
basically you know a function of trust
and I think that at least for me is one
most interesting things in in Bitcoin
that it basically you know recognizes
that trust is a function of time and
therefore skills relatively linearly and
so if you do away with that as a
necessary component of organizing
communities then you can scale really
quickly right and instead of use
incentives or money as a way of sort of
coordinating large and potentially
anonymous or pseudonymous groups of
people and that to me is like one of the
one of the greatest insights that you
should just accept that people are
inherently sort of self-interested and
that's okay no hundred yeah I tend to
agree with the view that you know at the
core of this is you know sort of this
collective perception and that you know
the you know the sort of the relative
values of large cryptocurrencies
generally will reflect everybody's
confidence in this kind of like shared
delusion I think that there you know I
think potentially like more useful to
read to explore which a lot of people
have been you know trying to explore for
the last several years is you know what
makes kind of good money in this context
and sort of what the you know how we
should think about the criteria for you
know what we consider you know the best
possible contender for a global money
system I think that you know in the life
cycle of that I think we're actually
still very very early and so and when we
the the ideals that we hold you know
true to what we consider valuable I
think it's still evolving over time I
think one of the things that you know a
lot of people I think especially in the
you know in the world a Bitcoin consider
kind of at the the top of the list is
security of the system and more
specifically you know security of the
monetary policy I think that you know
there there are a lot of decisions about
you know how bitcoins security model you
know works the ethos of the system of
no verification over trust I think that
the that and the sort of
conservativeness the relative
conservativeness I should say of the
core development team I think a lot of
these things reflect what the you know
community holds very true to heart about
what makes for a good monetary system I
think that with you know other
competitors there's there's other
potential trade-offs that have been
considered I think it remains to be seen
which of these will contribute most
effective effectively to the shared
delusion you know I think that
consistent with what we've seen I think
that you know security and and you know
the sanctity of the monetary policy I
think will be what would definitely be
high up on the list excellent answer how
about now technologies and businesses
ideas that you know they're not
necessarily competing with Bitcoin
they're building on top of Bitcoin or
they're using Bitcoin in some way how do
you where do you view the stage that
we're at right now
and you know what are you sort of
looking forward to there so folks who
are building so for example lightning
and the yeah it's being developed on
that I think it's fantastic for for
Bitcoin or for the community
I I don't think it's actually it helps
it helps Bitcoin become more valuable
but Bitcoin is very likely to become
more valuable irrespective of how much
is actually being built on top of
Bitcoin or not because it has this sort
of vaunted position and sort of mutual
believe that it is something like
digital gold we're simply having it and
holding it is sufficient right and so I
think it's great that folks are building
upon it and finding ways to sort of to
actually create sort of more live
economies around it I think one of the
challenges is simply that no one wants
to be the ten thousand Bitcoin piece of
person right
and you know those so those types of
things to me you know store value and me
in exchange at this point in time this
could be very different to ten years
from now but at this point in time are a
little bit of competing priorities
because I would say that there is a
shared belief that that bitcoin is gonna
appreciate pretty dramatically over time
so on one hand I think it's fantastic
infrastructure is being built I wonder
if the market is really ready to use it
simply because I think people are gonna
want to hold onto their coins and spend
other things yeah I think that they you
know again here's I think there's a
useful you know delineation that can be
made between you know businesses that
use Bitcoin right for example you know
they there might be a business that uses
Bitcoin for payments because they you
know are kind of uniquely disadvantaged
by the existing payment or banking rails
and so you know here you see you know
mostly I think most of the the sort of
businesses that have traction here are
all you know in kind of an illicit
category you know whether it's you know
online you know pornography or you know
online gambling or things like that and
businesses that are attempting to offer
businesses or projects that are
attempting to offer a kind of a novel
you know type of offering that's
uniquely enabled by the Bitcoin
infrastructure I think in the former
camp were actually you know pretty far
ahead in so far insofar as you know
people generally don't want to spend
their Bitcoin I think we're pretty far
ahead in terms of the businesses where
and you know people need Bitcoin in
order to access it you know in some of
the categories that I described I think
a latter category we're still in like
the very very early innings
you know namely because historically
with there hasn't been you know a ton of
expressiveness
in terms of the sort of primitives that
Bitcoin gives you to work with via
script I think we're starting to get
there because you know lightning has
launched you know lightning is a year
you know into a year plus into its
development and we're starting to see a
lot of the you know the early tooling
that
you know developers need to build
applications with lightning come to
market and there's a lot of really you
know promising proof of concepts there I
think that you know they're we're going
to see I think increasingly more
sophisticated applications because you
know what we have at the core of it you
know which is a highly predictable
highly secure base layer protocol I
think is an extremely compelling stack
for developers to work with so I think
that you know we're there in terms of
applications that are uniquely enabled
by Bitcoin I think we're still very very
early on in the lifecycle but it's
something that I think all signs show is
very promising
excellent how about this idea of
building a parallel financial system on
top of Bitcoin how do you view that this
is trying to make the existing financial
system come along with us for the ride I
mean to build a parallel financial
system means different things to
different people for some folks that
means you know a purely you know fully
decentralized lending model bar you know
derivatives kind of exchange and those
sorts of things whereas to others a
parallel financial model could mean it's
something as kind of simple in ferment
'el is digital wallets rather than
having a treasurer of the bank and deal
with cash right and then there's many
other definitions in between I think it
goes without saying that you know sort
of the the friction between essentially
sort of a country based monetary system
is something that you know creates a
number of costs and inefficiencies both
in terms of time and money that
ultimately sort of fall on the shoulders
of folks who are trying to sort of make
it the most right so so I think that
there's a number of different ways
that you know crypto broadly defined us
making inroads into that you know
facilitating both b2c c to c c to be see
those various forms of payments
remittance is kind of on one end and
then there's sort of the more
avant-garde form of it which is you know
these purely sort of peer-to-peer
decentralized financial systems and then
there is you know something a little bit
in the middle which is you know is
simple and easy than anyone who can do
which is you know let's say buying and
holding a big point or another crypto
asset yeah hundred yeah i think that the
you know i think that a lot of the
tooling in in the sort of like
quote-unquote parallel financial system
that you could built I didn't go there's
a lot of activity there but historically
I think it's gone a little bit of flack
you know from bitcoiners because it's
mostly been centered on you know other
public block chains but I think that you
know SOI we're starting to see a lot of
activity there you know whether it's in
synthetics products you know one of my
colleagues Dan Robinson wrote a paper
earlier this year outlining how
synthetics could be issued on you know
violating channels you know whether it's
it's those types of products or in
prediction markets or capital formation
I think that a lot of these products are
now being explore and I think a very
integral part of you know whatever
system we end up you know whatever
system state we end up reaching in the
future just because a lot of these
products are you know essential to you
know to making the entire financial
experience more accessible to consumers
fantastic well look that I think that's
pretty much all we've got time for so
please put your hands together for our
panelists Lily and Arjun
