David Veksler on Crypto

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Today we're interviewing David Veksler, who is

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a partner in Vellum Capital and also

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creator of the Bitcoin consultancy.

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David, how are you?

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I am great, thanks, Blair.

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Well, you're welcome.

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Both Martin and I are interested in this Bitcoin

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phenomenon and we thought we'd have you on to

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kind of flesh out some of the history of

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it and tell us what actually what is cryptocurrency?

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Sure.

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Please go ahead.

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Where can I start?

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I think if you remember one thing

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about this conversation, it is the why.

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Why do we need an alternative to Fiat money?

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And the story of money is a long story because

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as long as we've had civilization, we have had money.

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And of course, there are many kinds of money.

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Some places cattle are still uses money.

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In some places seashells, in some places it's

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been big rocks that are like family heirlooms.

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But sometime a few thousand years ago, we

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found that gold was a very good money

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because it was scarce and shiny and durable.

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And so gold has been money for all of human

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history and pretty much every human civilization until 1913, which

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is when the Federal Reserve Bank was created.

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And at that point, pretty much every other government in

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the world followed and moved to a Fiat money.

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And so before we talk about what Bitcoin is, let's

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talk about what the problem with Fiat money is.

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Yes, let's do that.

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The basic problem is that the reason that Fiat

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money was created to replace gold as the global

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money was to give governments more power.

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So before Fiat money, if you wanted to have a war,

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you have to pay the soldiers salary and you have to

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pay for the cannons and the ships and so on.

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And you have to do that through two ways.

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You either raise taxes or you borrowed money.

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And then I gave you the gold and you use the

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gold to buy whatever you need to run the war.

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But with Fiat money to do that, because everybody's using

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your money, and all you have to do is print

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more money and you can use that money to redirect

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the entire economy to the pursuit of the war.

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And so that's a big reason why we had

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a world war shortly after the central banks moved

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up to gold standard 1913, because now they could

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redirect the total economic output of the state of

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all States to the pursuit of the war.

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You could arbitrarily redirect industry

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just by printing more money.

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And that's exactly what they did and doing more bonds

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and use that to reject the entire civilization to war.

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And of course, there have been many other

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goals that governments have pursued Besides war.

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War is just one of the most destructive ones.

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But when you have the Great Depression and likewise,

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government had major new programs that were paid for

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through printing money instead of raising taxes.

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And so the ability to have Fiat money

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basically allows governments enormous power over society.

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That is kind of hidden.

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So whereas the taxes, taxes are, you pay

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taxes, it's visible, you know, how much of

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your wealth is being redirected to the government.

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But with money, with Fiat money, through inflation,

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governments can, in a hidden way, redirect society

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and capital markets to whatever they want.

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And they've been doing that.

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And one major motivation that politicians have, because the world

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is now mostly run by democracies is to make the

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economic numbers go up, make the GDP numbers go up.

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So when elections are coming up, there's

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a strong motivation for politicians to print

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more money and lower the interest rates.

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They lower the interest rates to create more

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investments, to loan money to give to the

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people, and that makes them more popular.

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The problem is that when you lower the

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interest rates, we direct capital to new spending,

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but you don't have the corresponding savings.

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So I'm sorry for the kind of lesson

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here, but it is important to understand that

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all human progress depends on savings.

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So when you have the caveman fisherman who caught fish

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with his bare hands and he wanted to be more

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productive, he would have to set aside some fish, catch

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some extra fish and not eat it.

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You would have to save some fish to

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build some fish hooks or build a net.

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And so you take the savings and

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invest that time in increasing its capital.

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And so that's how all savings work.

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We set aside some consumption to invest in

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increasing our capital for a better future.

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And that's how human progress has been happening

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for thousands of years until if you have

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money, the governments are manipulating the interest rates.

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So when you lower the interest rate, you create

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a lot more investment, but you actually decrease savings.

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So that's what happens is suddenly you

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have all these new ventures happening that

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are not backed by corresponding savings.

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And so all these ventures are malnourishment.

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They start failing because they

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don't have the corresponding savings.

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You don't have the factories and the web developers

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and the resources, the oil to funnel the investment.

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And so it fails.

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And that's how you get business cycles.

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So the 20th century and now the 21st century

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has been a story of one business cycle after

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another because governments are manipulating interest rates, political gain,

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and that is made possible by having that money.

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And so this person, Satoshi Nakamoto, he was quite explicit

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when he created Bitcoin one day in August 2008.

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This is the problem he solving.

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He said, you cannot trust the central

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banks, to be honest with the money.

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It's causing all this economic instability.

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And I have an idea to fix it.

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And I'm going to call it Bitcoin.

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So it was very clearly libertarian

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who wanted to fix the money.

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And he said that Bitcoin is going to

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have a hard cap of 21 million.

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If you remember one thing about Bitcoin, it's this.

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There's only ever going to be 21 million Bitcoin.

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And as of two days ago, 90% of all

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Bitcoin that will ever exist has already been mined.

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The other 10% will be mined by the year 21, 40.

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And so it's a scarce asset.

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If you take all the gold in the world, it

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will not quite fill two Olympic size swimming pools.

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It's also scarce because when the price of

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gold goes up, you can mine more gold.

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But when the price of Bitcoin goes

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up, you cannot mine more Bitcoin.

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Bitcoin is designed to situate the supply

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of Bitcoin is constant, independent of how

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much resources is dedicated to Bitcoin mining.

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Let me ask you this, and again, I'm a

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novice, but I'm not afraid to ask dumb questions.

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Let's say in the stock market going to take my dollars

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and I'm going to buy a share or 100 shares of

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stock in hopes that that stock will increase in value.

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So I do that now, since there is a limited

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supply of Bitcoin, how is Bitcoin increasing in value?

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And it's only that limited supply?

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Let's say I had ten bitcoins and I bought them

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at $100 each and now they're what, $60,000 each?

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Now 50 ish.

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So how did that get to be 50 ish?

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Think of it as real estate.

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If you have a plot of land and some number

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of houses, the demand for that land keeps going up.

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But there's only some fixed quantity of land.

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And so if you have some foresight and you bought

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up ten plots of land, demand keeps going up.

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And so you can sell it for

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more than what you paid for it.

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Or with gold, it's a scarce asset.

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Demand keeps going up, but the quantity is the same.

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Like any scarce asset with a fixed quantity,

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the value of each unit will increase. Okay.

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I know there seems to be

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a plethora of cryptos out there.

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Amazon is going to create their own,

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I think, and Facebook is the same.

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But I know that Bitcoin and Ethereum seem to

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be the two best or two leading ones.

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Is that correct?

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That is correct.

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So I will start by saying that

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Bitcoin is unique in the space.

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It was the first is the only

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one with a 13 year track record. Okay.

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And what's most important about Bitcoin is this

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commitment to a hard cap of 21 million.

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So compare that to Ethereum, which

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has a completely arbitrary supply schedule.

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So the creation of Ethereum

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basically changes year to year.

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According to the Ethereum leadership team in the community,

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Bitcoin has the hardest commitment to fix supply.

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And so I think Bitcoin is going to capture the

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vast majority, maybe 95% of the value of the space.

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But you should know that each asset is

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a different business model for Bitcoin is money.

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Ethereum is a smart contract platform.

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They solve different problems.

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Okay, now, you mentioned the term mining a moment ago.

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So Bitcoin is it actually a coin or what is it?

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Is it a digital asset? What is it? Digital gold?

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It's a scarce asset.

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And the way that the asset has

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been created is through solving hardback problems.

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And we call that mining just as an analogy.

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But essentially Bitcoin is created by people completing

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the miners competing to solve difficult math problems.

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And the first person to solve that math

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problem gets each new chunk of Bitcoin.

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And so the supply of Bitcoin that we have

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is basically those miners selling the Bitcoin they mined

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by solving those problems to the Bitcoin community.

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I noticed lately I've been listening to

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some other Bitcoin specific podcasts, and they

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use the term Hodel and defy.

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I think Hodl means hang on for

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dear life or something like that.

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Can you describe what that actually means?

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I'll start by saying that many people

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in the space are novice investors.

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They're really being exposed to financial

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markets for the first time.

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So it's easy to get in trouble

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and get emotional and lose your shirt.

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And so Huddle is a typo, which was

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background to hang on for your life.

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But it basically means think long term,

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don't try to make short term gains.

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It's really just that concept.

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So it's like buy and hold.

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Buy and hold.

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Yes, that's all it is. Okay.

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And DeFi.

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What is the DeFi? I'm sorry.

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So the origin of literally some guy was

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drunk and he was typing that I can't

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make smart decisions while I'm drunk.

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So I'm going to hold on.

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And he meant to say hold.

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That is the whole thing. I see.

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All right, so Bitcoin is money, but

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there's many other digital tokens or digital

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assets that solve different problems.

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And so defy is an attempt to create

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an alternative to the traditional financial system.

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So now we have this.

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What's the word for it?

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Becoming a CFI?

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Cfi is centralized finance.

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In other words, all the financial

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stuff that we have before.

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Whereas DeFi is decentralized, it

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has no official organization.

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It has nobody officially behind it.

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It has no legal entity.

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It is all a network of autonomous smart

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contracts that are providing financial services, whether it's

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financial markets or autonomous corporations or property deeds.

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D Five is decentralized finance, where no person or

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station can control the financial entity through lead.

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Also term Web three or Web 3.0 or something like that.

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So Web three is a clever bit of marketing to

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say that this is the feature of the web, but

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Web three is simply a set of tools that we

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use to interact with the smart contracts on the blockchain.

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Okay.

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I think the chief aspect of Bitcoin, what has

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me interested is that what we've already talked about,

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but I don't think we can be emphasized enough.

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Is the decentralization of it.

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The separation of state and economics, if

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you will, because that's what the secular

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Foxhole we're chiefly for the separation of

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state, religion, state and economic state.

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And thought you get the

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government as small as possible.

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Bitcoin is a separation of the state and money.

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Bitcoin has no CEO, it has no leader.

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It has no company behind it.

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It is a community where anybody can contribute to

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it, and all decisions are made by consensus.

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What do you think of things like Coinbase

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or dozens and dozens of other, I guess,

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entry platforms for people to look at?

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Are some of them, as you said

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earlier, are they scams or offhand?

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Let's talk about two different things.

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There's the infrastructure, the ecosystem, providing

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services to interact with crypto. Okay.

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So if you want to buy Bitcoin, you have to buy

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it from somebody who ultimately the chain goes to a minor.

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But miners don't sell directly to consumers.

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So you need some kind of

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coordinator to buy Bitcoin from.

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And right now, that's mostly centralized entities.

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So Coinbase is just a marketplace

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where you can think of it.

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Miners make the Bitcoin available for sale and

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then consumers can go and buy it.

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It's perfectly legitimate right now.

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We need to have the coordination. Okay.

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So how could it be easier as

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we are newbies and novices in this?

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We talked in the green room, something called

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Podcasting 2.0 applications, and how you could stream

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parts of Bitcoin called Satoshi's by listening to

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a podcast using these new applications.

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But at this time, I think it's maybe a

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couple of thousand podcasters using this in total, it

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could be a 4 million podcast out there, but

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probably active podcast or could be an estimate guest

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like 500,000 or something like that.

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So how do you see that it would be easier to buy and

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sell, but at the same time be safe and not be scammed.

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And I will come back to

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that question also about scam coins.

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Well, let me answer one question, which is,

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so if you want to get into crypto

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and own Bitcoin, this is what you do.

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You sign up for a Bitcoin exchange.

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I recommend gemini.com.

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A Coinbase is another good one.

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In different countries, there

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are different options available.

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I think Coinbase is many

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countries, Gemini's in many countries.

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So for a fee of 1% or less, you can buy some Bitcoin.

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And here's the important part.

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You take possession of it.

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So when you buy Bitcoin in

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exchange, you don't own Bitcoin.

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All you own is a claim on Bitcoin.

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So when you take possession of it, you would

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draw the Bitcoin from an exchange to your wallet.

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And what I have is a hardware wallet, which is a

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little physical device, and it stores the keys to my Bitcoin.

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And that is why I secure it. Okay. Yeah.

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My next question would be what is a hot

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wallet and a cold wallet and so on? Go ahead.

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Hot wallet is basically one that

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is connected to the Internet.

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So if you have a wallet on your phone or

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your computer, those devices are connected to the Internet.

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Be stored at an exchange.

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Those are hot wallets.

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Somebody could potentially hack into that and steal it.

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And I work with a lot of people, literally thousands,

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that have had their Bitcoin stolen or decrypted stolen.

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The cold wallet is not connected to the Internet.

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There's a few kinds.

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One is a little hardware device.

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There's a few vendors making them treasure

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ledger, keep key, our old vendors.

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And they are devices.

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Basically, they only work when they're plugged in and all

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they do is they store Bitcoin and sign transactions.

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What you should do is, Besides that, write down your

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Bitcoin seed words that generate your wallet on a paper.

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What I recommend is you get a steel plate,

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they can buy them for $40, and you either

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etch the seed on the steel plate, or they

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have little leather cards that you slide in there.

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And so that allows your seat

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to be waterproof, fire proof.

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Your entire home can burn down.

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And that hardened steel is fine.

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Oh, wow.

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I've never heard of that one. That's interesting.

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Now, was your background in finance before

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you, I guess, switched over to Bitcoin.

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So in 2013, I was living in Shanghai, I lived

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in China for five years, and I was asked to

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build a Bitcoin exchange just as a technologist.

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And so I did.

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And that was my introduction to the space.

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And that's when I started.

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That's when I was sold on the mission.

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I've been active and a student

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of Austrian economics since 2003.

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I was an intern at the Mises Institute in 2004.

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And so that was the connection that

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told me that Bitcoin is important.

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And it took a few years, but ultimately

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I decided 2013 to invest in it.

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And yeah, I've been active in the space since then.

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Finance. It came much later.

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Around 2018, I started the hedge fund.

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Okay.

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And David, you have an interesting mission there regarding

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how to say clean up the space in a

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way and help people have lost keys and others,

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but also all the scams out there.

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So one thing is if you go through the list

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with legit cryptocurrencies and to learn which to pick.

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And now we are told about some safe ones in a way.

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But for example, I don't know if we should tell

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about names, but I know here in Europe heard about

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horror stories or how people have been fooled by that.

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They are not really cryptocurrency.

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It's more made up and people can lose money off that.

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And people continue with this.

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Could you tell a bit about this project?

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How many entries have you gotten and

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could you see some picture of it?

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Regarding scams, yes.

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So Bitcoin is software and anybody can go

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and make a copy of that software.

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And many people have there's

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now over 20,000 different cryptocurrencies.

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Again, it's just as simple as copy paste software.

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Change a few parameters, launch your own cryptocurrency

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and people see the trillion dollar value of

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Bitcoin and they want to make some money.

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Not to say that everybody wants to do that.

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There are some well meaning projects, but the

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vast majority are just get rich quick schemes.

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And so that's why I always say, if

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you're a beginner, just buy and hold Bitcoin.

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Just focus on Bitcoin.

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Don't buy anything else.

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Don't be lured by stories of 1000

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export 100,000 extra returns last year.

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Just focus on Bitcoin.

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It's the only crypto with a hard

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cap, with a twelve year track record.

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So each different crypto is a

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different proposition, different business model.

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They are trying to do different things.

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Bitcoin is just pure money.

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Many others are trying to do something very different.

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And if you want to evaluate it, you have

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to look at whether the business model makes sense.

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Like there's one token, which is a coin

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for dentist offices to pay for dental procedures.

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It makes no sense whatsoever why you need

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a separate money to pay your dentist.

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It's ridiculous.

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And there's literally thousands, tens of thousands of

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projects that don't make any business sense whatsoever.

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There's the gambling ones and there's hot ones and

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there's all kinds of projects that make no sense.

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So if you're needless space, just buy some

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Bitcoin, store it on your wallet, don't invest

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it, don't fall for trading schemes. Really.

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The scams out there are not nothing new.

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As long as they've been money, they've been scams.

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And the same advice applies.

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Keep your money safe, investorly, if

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you can invest it at all. I agree. Thank you for that.

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El Salvador has been in the press the

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last week or two about apparently the President

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or Chancellor of El Salvador has created a

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Bitcoin sector or something to that effect.

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Or is this whole country going to Bitcoin?

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I'm not sure.

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Do you know anything about that? Yes.

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So 20 years ago, El Salvador admitted they

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screwed up their own currency and they dollarized.

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They said, we are not responsible

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enough to have our own money.

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We're just going to use a dollar.

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And for 20 years they've been doing that until 2020,

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when the President said that we no longer want to

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put all our eggs in a dollar basket.

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We don't trust the dollar.

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And the President Buckley said that we're going

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to add a second legal tender to the

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dollar and that's going to be Bitcoin.

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So now they have two legal

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tender, currencies Bitcoin and the dollar.

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And they're building a whole ecosystem

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because it is legal tender.

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You don't pay capital gains tax when you sell it.

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There's all kinds of legal implications

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of it being legal tender.

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And so that's attracting a lot of business to salad

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or I have no idea if it will be successful.

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It's not exactly a free market economy, it's a

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tiny little country in South America, so I have

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no idea if it's going to work.

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But that is the premise behind it.

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Does every person there use Bitcoin, for example,

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when they go to the supermarket or whatnot

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we had here in the links here that

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Blair found article called Crypto and the Global

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Financial System on a newsletter talking about how

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to practical use cryptocurrency in your daily life.

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So the government of El Salvador trying

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to make it easy for any business.

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Actually, I think they passed a law that

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legal tender means you must accept it for

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payment of all debts, private and public.

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That is the definition of legal tender.

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All businesses must accept Bitcoin.

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The government is trying to provide the infrastructure.

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So it's not exactly a free market

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movement because legal tender means the government

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is forcing you to accept us money.

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I don't support legal tender laws

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of any kind, including for Bitcoin.

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But regardless, it seems that they have managed to

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enable every business to accept Bitcoin as payments and

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then convert it to dollars that they choose.

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I'm sorry. Go ahead, Martin. Yeah.

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You recently wrote a blog post about cryptocurrency

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and Bitcoin versus gold and you talked about

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the great introduction to economics and history.

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Have you seen any examples?

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For example, remember, I don't know if that's the

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case, but a company like Gold Money or other

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have you seen any experiment with that, linking real

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money like gold and silver to cryptocurrencies?

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So you can already buy a crypto

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token which is linked to gold bullionian?

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I just heard about a new project which

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allows you to take delivery of gold bullion,

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basically buying and redeeming crypto tokens.

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So that is already possible.

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I think if you want to buy gold, buy gold.

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You don't need a separate digital token for that.

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But if you enter that, that's already an option.

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There's someone in the Austrian school who they

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dismiss at the Bitcoin and they say there's

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staunch gold and silver is what we need.

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And they look at Bitcoin as fad.

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Obviously, I think you disagree with that.

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So I have a podcast coming up where I'm going to

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go deep into Austrian theory and talk about why that's wrong.

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I mean, I was in nut school.

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I bought gold bullion back in 2008.

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It was around for a while and I was

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accumulating gold, but obviously changed my mind on that.

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There's technical reasons why some Austrians are skeptical of

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Bitcoin that I won't go into right now. Sure.

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But I think it's mostly for traditionalism gold has

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a history going back to all of human history.

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Bitcoin is very new, and so they dismiss it.

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I think if you learn more, understand what it

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is, you'll be a lot more open to it.

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What are some of the books you've read

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or authors that you know that you'd recommend

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to our listeners and to us?

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If you read one book about Bitcoin, it's

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called The Bitcoin Standard by Saifedean Ammous.

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The Bitcoin standard.

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And it will tell you the why of Bitcoin.

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It's not technical at all.

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It will tell you why money is bad and

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we need to have a sound hard money system.

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Ammous just wrote a second book called The Fiat Standard.

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So the first one is the Bitcoin Standard

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which talks about why we had Bitcoin.

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And the second book is The Fiat Standard which

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talks about why Fiat money is so bad.

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So he's a little how can I put it all

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dramatic sometimes my taste, he blames Fiat money for bad

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art and that food and war and everything.

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But in any case, it's still a great book.

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The second book that I like is Bitcoin Hard Money.

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You can't with I don't know if you like

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to curse on the show, but that is the

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title of the book and it's very good.

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That's great.

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Thanks for tips about that.

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And maybe we could talk about that like a new

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thing also have been popping up in Twitter feed and

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others like about who is the real Satoshi.

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And it was recently a guy in Australia and

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it was some court case and also what's NTF

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because I've seen a very NFC actually.

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So the important thing about Satoshi and we don't know if

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it's a person or a team, we really have no idea.

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It does not matter who it is.

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So there are some fraudsters who claim to be Satoshi.

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The truth is if Satoshi wanted to come out publicly, he

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could do so with certainty because he has the keys to

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the first Bitcoin that he might, he might at this point

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a few tens of billions of dollars worth of Bitcoin.

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He has the keys to the Bitcoin and it'd be

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trivial for the founder to prove that he's a Toshi.

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But the point of thing is that doesn't matter.

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There's no Bitcoin CEO, there's no leader, there's

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nobody that has any unique power of Bitcoin.

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So Satoshi will very likely never come out

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publicly because they would only hurt Bitcoin.

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He intentionally was anonymous and it

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will stay that way now. Nfts.

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So money is plungible.

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The word pungeable means interchangeable.

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One dollars as good as any other dollar.

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One atom of gold is good as any other atom.

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Bitcoin is also mainly fungible.

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One Bitcoin is the same as any other Bitcoin.

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But NFT's are non fungible tokens.

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So for example, a property deed is not fungible.

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Your house is not interchangeable

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with someone else's house.

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Your car is unique as well.

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And so NFTs are digital assets that are unique.

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Currently the NFTs that we have are for art.

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This year was an open up project

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where I produced NFTs for music royalties.

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So when you buy the NFT, you get writes

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to the income stream from people listening to music

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that was featured by Billboard and Rolling Stone magazine.

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That's not the NFT, but mostly today's NFTs are art.

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I think it's kind of a fad, but I've

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been wrong about a lot of things before.

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But they are selling individual

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NFTs for 300, 400, $500,000.

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So it's definitely very popular right I know that Tom

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Brady is probably bringing out his own NFT line up.

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If I were an artist I would be selling enough

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teas because people have a lot of money to spare

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apparently buying them but I'm not an artist.

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Well, David I've enjoyed talking to you and I've learned

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quite a bit and I appreciate this very much.

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Where can we find you on the web so if you

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want to get some of the Bitcoin please check my website

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the bitcoinconsulting.com I have a newsletter you can follow if you

Speaker: 00:28:32

can hire me to teach you exactly how to buy and

Speaker: 00:28:35

hold Bitcoin if you run into trouble with your Bitcoin and

Speaker: 00:28:39

need some help wallet recovery info and I will help you

Speaker: 00:28:42

out and if you're looking for a managed investment fund in

Speaker: 00:28:47

Bitcoin that's vellum capital very good. Very good.

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Thanks, David we've been chatting with

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David Vixler of the Bitcoin consultancy.

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David, thanks for Manning the foxhole with us

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today, Blair Martin it's been a pleasure.