July 24, 2021
Bitcoin as a Tool for Economic Empowerment | Cathie Wood, Jack Dorsey, and Elon Musk
Watch the full interview on YouTube
Key Takeaways
- Bitcoin is the native currency of the internet. It’s a far superior form of monetary network compared to the existing, archaic banking system
- Its open decentralized ledger guards the network against errors, fraud, and interventions.
- In traditional finance, an entrepreneur has to address each country separately. Whereas Bitcoin is open to everyone globally from day one.
- Bitcoin is a hedge against wealth confiscation, including inflation. It’s also a hedge against the counterparty risk associated with deflation
- Bitcoin base layer can’t expand to suit a global monetary system; scaling is possible on second layers (e.g. Lightning Network)
- Keep in mind, individuals have sole control over their bitcoin private keys is essential to decentralized finance
- Tesla holds bitcoin on its balance sheet, and may soon resume accepting bitcoin payments as bitcoin mining shifts towards renewables
- Bitcoin mining can even utilize waste flare gas; the question is how to do this at scale?
- “Government is a corporation on the limit, it’s the biggest corporation of all and it has a monopoly on violence” – Elon Musk
- The essence of Bitcoin is to have sound money separate from the state, yet verifiable by anyone
- On a foundational level: Fix the money, fix the world. “My hope is that it [Bitcoin] creates world peace” – Jack Dorsey
Intro
- Jack Dorsey (@Jack) is the CEO and Cofounder of Twitter and Square
- Elon Musk (@elonmusk) is the founder of Tesla, SpaceX, Neuralink, and The Boring Company
- Cathie Wood (@CathieDWood) is the founder, CEO, and CIO of Ark Invest
- Host: Steve Lee (@moneyball) is Square Crypto Lead
Views on Crypto
- To Cathie, crypto represents the innovation that was missing from the internet, namely native payments
- Bitcoin is an open monetary system that is rules-based, a much needed innovation in today’s world
- Elon thought about money since the PayPal days. He saw it as an information system for resource allocation.
- Money currently exists in heterogeneous databases on mainframe computers, making for a slow, error-prone, and insecure networks
- For instance, using a credit card is akin to handing your user name and password to a stranger, and final settlement takes weeks.
- Bitcoin is a candidate for a superior form of monetary network. Its open decentralized ledger makes the network less prone to errors, fraud, and interventions
- That said, Bitcoin’s transaction volume is limited and cost is high. Its usability for average people is still lacking, and proof of work consumes too much energy
- Money currently exists in heterogeneous databases on mainframe computers, making for a slow, error-prone, and insecure networks
- Jack is fascinated by the resilience and principles of Bitcoin and its community, and it reminds him of the early days of the Internet
- PayPal and Square attempt to make the financial predatory system usable for everyone, whereas Bitcoin is a chance to replace the foundation.
- Bitcoin is the native currency of the internet, as opposed to the existing, archaic banking system
Bitcoin Changes Everything
- Money and monetary policy affect our experience in life and can cause distractions from what matters in life
- Bitcoin is an open system that people can own and verify themselves, with no trust required.
- Unlike in any other surviving network, Bitcoin’s participants, miners, and developers all constantly debate the road forward.
- The US monetary base currently stands at $8 trillion and will continue expanding against Bitcoin’s fixed supply
- Bitcoin is a hedge against wealth confiscation, including inflation. It’s also a hedge against the counterparty risk associated with deflation
Applications of an Internet Native Currency
- The Internet and Bitcoin enable people to build businesses globally. Most businesses today depend on the advertising model, bitcoin opens up new possibilities
- In traditional finance, an entrepreneur has to address each country separately. Whereas Bitcoin is open to everyone globally now.
- We should focus on building wallets and solutions that make bitcoin more accessible, a wallet example is the Muun wallet
- Many developing countries face 10-30% in international remittance fees. Bitcoin solves this problem now.
Scaling Bitcoin
- Bitcoin base layer can’t expand to suit a global monetary system; scaling is possible on second layers (e.g. Lightning Network)
- Elon argues that Internet bandwidth improvements allow for increasing Blocksize without sacrificing decentralization
- Starlink team considered using a bitcoin miner as a space heater for satellites.
- Elon argues that Internet bandwidth improvements allow for increasing Blocksize without sacrificing decentralization
- A global internet currency should be fun, while also being resilient.
On Dogecoin
- Elon likes a hypothetical theory that the most ironic and entertaining outcome is the most likely one. That is, a currency that started as a joke becomes the world currency
- Elon personally owns bitcoin, in addition to a small amount of Ethereum and Doge.
- “I might pump, but I don’t dump” – Elon Musk
- Elon personally owns bitcoin, in addition to a small amount of Ethereum and Doge.
Bitcoin and energy
- Tesla’s Bitcoin announcements came amidst Bitcoin’s increasing price and energy consumption. Thus, they paused Bitcoin payments but still hold the asset
- That said, bitcoin mining is shifting towards renewables, and Tesla may soon resume accepting payments.
- Long-term, renewable sources will be the cheapest form of energy, but it won’t happen overnight
- That said, bitcoin mining is shifting towards renewables, and Tesla may soon resume accepting payments.
- Bitcoin mining can be a part of the utility ecosystem, providing base demand for power and enabling the proliferation of renewables
- More so with stable renewable sources such as geothermal, hydro, and nuclear.
- Contrary to popular thought, modern nuclear fission reactors are safe
- That said, renewables like solar and wind offer variable power and may not be suitable for running hashing rigs 24/7, making batteries more suitable for load balancing
- On that note, cell production is the limiting factor for Tesla battery production, which has to be ethical and environmentally friendly
- More so with stable renewable sources such as geothermal, hydro, and nuclear.
- Companies like Great American Mining use flare waste gas to mine bitcoin, using waste energy to power a sound global monetary system. The question is how do this at scale?
Environmental Social Governance (ESG)
- Bitcoin corporations are increasingly adopting ESG guidelines, Cathie explains:
- Environmental: Bitcoin operations will be much more environmentally friendly compared to gold and traditional finance.
- Socially, Bitcoin is a globally accessible payment and savings technology. Protecting billions of humans from inflation and authoritarian regimes is a noble social goal
- Bitcoin governance is helped by its complete transparency. Additionally, many core developers have a deep understanding of economic history and consider Bitcoin their noble mission.
Bitcoin Ethos and Corporate Role
- Ark Invest focuses on democratization and transparency. To that end, they publish their research to support education
- In line with Bitcoin’s open-source and transparent nature, Square is creating an open-source hardware wallet.
- Jack stresses contributing to the community without disrupting it in a negative way
- Additionally, Jack is focusing on BlueSky, a decentralized social media protocol.
- Rather than letting advertisers pay in Bitcoin, Jack aims to create a model that doesn’t rely on advertising
- “Government is a corporation on the limit, it’s the biggest corporation of all and it has a monopoly on violence” – Elon Musk
- Individuals have sole control over their bitcoin private keys is essential to decentralized finance
- If an exchange doesn’t give you the private keys, then you don’t own anything. Your coins are subject to exchange hacks, seizure, etc.
- Individuals have sole control over their bitcoin private keys is essential to decentralized finance
A Future with Bitcoin
- Removing friction to doing business globally and increasing the efficiency of money will result in explosive growth and innovation
- Innovation leads to healthy deflation. Whereas bad deflation is caused by corporations that pile debt instead of investing in technology
- “It’s quite annoying to see your bank balance drop live in Europe because they have negative interest rates” – Elon Musk
- “The bitcoin network is beautifully designed in how the protocol works” – Jack Dorsey
- The essence of Bitcoin is to have sound money separate from the state, yet verifiable by anyone
- On a foundational level: Fix the money, fix the world.
- “My hope is that it [Bitcoin] creates world peace” – Jack Dorsey
