LIVING THE FUTURE – An Interview with Stephan Livera
Stephan Livera needs no introduction due to his well known, self-titled Stephan Livera Podcast, focusing on Bitcoin and Austrian Economics. But next to that he’s also co-founder of Ministry of Nodes and partner with Bitcoiner Ventures.
Stephan explains how he’s onboarding people onto Bitcoin and how he’s using it himself as a savings technology and for day-to-day payments. Further we look ahead when a true Bitcoin Circular Economy might be a reality.
Poly: Hi Stephan, welcome to Polylunar – great to have you! The focus of this interview series is to find out how it is to live in the Bitcoin Circular Economy today and what we can do to make it an even more feasible way of living in the future. I’m very much looking forward to hearing your experiences and insights on the topic.
So Stephan, although most readers will be familiar with you, tell us a bit about yourself and what got you into Bitcoin.
Stephan: I’m most known for my Bitcoin podcast, which is one of the leading shows for Bitcoiners. I’ve been a long time Austrian Economics enthusiast, and so I first came to Bitcoin because I’m opposed to fiat money and central banking. Once I had Bitcoin explained to me the right way, I was hooked because of the incredible potential of a hard capped, totally free market money and the world it would enable.
Poly: Nice, thanks for that. Now, I know you’re not all-in on Bitcoin as some of my other interviewees but are holding a significant portion of your net worth in it. While I understand diversification of investments, what are the main reasons to still hold AUD over BTC?
Stephan: Mainly because I keep a fiat cash buffer to avoid spending down bitcoin during bear markets, should they occur, and also because my income and expenses are mostly in fiat.
Poly: Very reasonable, I think most Bitcoiners follow that approach as of today. I’m trying to understand how the Bitcoin Circular Economy can be brought upon. Do you think it can be established if Bitcoiners continue to hold fiat or should we gradually rotate out of it?
“We can’t get too far ahead of ourselves as we’re still extremely early.”
Stephan: I see this as a gradual process and if anything, I’d say we can’t get too far ahead of ourselves as we’re still extremely early. So for many people, it simply won’t make sense for them to spend their bitcoin until enough other people also hold bitcoin. For many of these people, they will preferentially spend their fiat, or their fiat income rather than directly spending bitcoin.
Of course, for people who are all in bitcoin, or who only earn bitcoin, or those who need it for privacy or censorship resistance will have sufficient reason to spend bitcoin today. But we have to be realistic and understand that this is only a small proportion of bitcoin holders today. During the bull part of the cycle, all numbers go up and you will see more people willing to spend some sats then. Gradually though, it will shift until we hit a point where there are far more bitcoin-native people. The ‘circular economy’ will be relatively small until then. This will require patience.
Poly: I always wonder what the inflection point will be, the moment where “all of a sudden” everyone will want to earn in Bitcoin instead of fiat, but we’ll come to that later. How are you personally using Bitcoin? Mainly as a store of value or are you aiming to use it as a medium of exchange as well?
Stephan: I mostly use it as a store of value and ‘savings technology’ as my friend Pierre Rochard would say. I do occasionally spend small amounts for demonstration purposes, or while I’m at bitcoin focused events and conferences.
Poly: Can you share any experiences where using Bitcoin was advantageous to using fiat?
Stephan: For me, I’ve treated it as a ‘savings technology’ or speculation, to be more objective. Though if you want to make a more private purchase that isn’t tied to your identity, then it also makes sense in these situations too, e.g. paying for VPN service.
Poly: Indeed, I think VPN and ProtonMail purchases are the main reasons over the years for people to spend their first Sats. So then, how do you encourage clients, friends or family to use Bitcoin to support merchants and producers accepting it?
Stephan: I first see what the newcoiner is interested in and determine based on that. If they’re more interested in the investment/speculation side of it, then I’ll usually teach them about hardware wallets. If they’re interested in convenient day to day spends and commerce, then lightning. If they’re interested in privacy, then I’ll show them coinjoin and Samourai Wallet etc.
Poly: I know from your Podcast and company Ministry of Nodes that you’re familiar with all kinds of Bitcoin storage options. What setup (hot/cold storage, full node etc.) would you advise for someone who wants to be Living on Bitcoin? Meaning he/she invests in Bitcoin but also wants to use it regularly as a payment method and to receive income in.
Stephan: I’d typically be showing them how to use a hardware wallet with their own node. E.g. Coldcard with Electrum, connected to their own electrum rust server on a packaged node such as myNode or similar. Specter-Desktop is a promising option also.
If the person has enough to justify it, then holding their bitcoins using multi-signature with a provider is a good idea. It’s also good to consider if the level of security would be enough if we were to hit another bull run.
If they want to be fully living on Bitcoin and taking payment with it, then usually BTCPay Server is a good option here to be able to take payments or donations from customers. For day to day spends, I’d usually show them a lightning wallet. Perhaps Zeus for Android paired with their BTCPay Server lightning node, or perhaps Zap paired with their home node. If they’re just doing small amounts back and forth on their phone and they’re less savvy, then it’ll be Phoenix or Breez.
Poly: Those are some great options depending on the amounts involved and technical capabilities of the user. Related, privacy is important to me and hopefully becomes default for more people in the future, what advice would you give regarding KYC, CoinJoins etc.?
“If you’re interested in Bitcoin for privacy reasons then try and acquire some coins without KYC.”
Stephan: I’d say if you’re interested in bitcoin for privacy reasons then try and acquire some coins without KYC. I think Samourai Wallet has the best overall suite of privacy tools, so I would suggest running your own Dojo (e.g. nodl, Ronin Dojo, myNode or vanilla Dojo) and pairing your phone app so it uses your own backing server.
If you want to be private in how you spend bitcoin, then use Samourai Whirlpool coinjoin, get a few remixes, and then once you want to spend, use the post-mix tools (e.g. STONEWALL or x2). It does take some work to learn though, so I would recommend listening to some of the Samourai Wallet and privacy podcasts I’ve done to give you ideas on what to learn or think about.
Poly: I’ll link some of your pods at the end so readers can check them out. Would the Lightning Network then also be part of your setup or do you consider it still too experimental? Could it be the future payment rail of Bitcoin?
Stephan: Yes, I really like using Lightning Network for convenient day to day spend/receive if my counter party also has it. I think wallets like Phoenix or Breez are great for a beginner to get started with lightning, and they’re very slick in terms of ease of use and overall user experience. I think it’s pretty much ready and easy enough for the ‘tech savvy’ type of user, but not quite ready for the masses yet (as I write this in September 2020).
In terms of being the future payment rail, I’m bullish overall on Lightning, however I think the main driver to spur lightning use will be high on-chain fees. So it may have to wait until the next bull run and high chain fees to properly spur companies and people to adopt Lightning.
Poly: The real breakthroughs always come from needs not wants, indeed. Let’s assume the future of day-to-day payments will be settled on Layer 2, how about the other end of the spectrum? Assuming you have your liquid assets in Bitcoin and want to buy a car or a house, how would you go about financing that outside the legacy finance system?
Stephan: The ideal scenario would be if the counterparty is willing to take Bitcoin directly! I’ve heard of people buying houses and cars with Bitcoin so it is definitely possible. Also there is the possibility of using Bitcoin collateralised loans to ‘unlock’ the value of the HODLer’s bitcoin in a more tax efficient way – with some risk involved though, and the requirement of having income to repay the loan with. Otherwise, the HODLer can sell some bitcoin on an exchange for fiat to pay for the purchase.
Longer term, it will get easier as bitcoin becomes more normalised into society.
Poly: I wonder, with all your experience in Bitcoin, do you consider it your unit of account or are you thinking in AUD?
“I consider my net worth in both Bitcoin and AUD terms. Obviously the longer term one is Bitcoin.”
Stephan: I consider my net worth in both Bitcoin and AUD terms. Obviously the longer term one I care more about is Bitcoin.
Poly: And if you’re open to it, would you tell us whether you demand to be paid in Bitcoin by your clients?
Stephan: I ask for Bitcoin payment as first choice, but will take fiat payment if it’s not feasible. I don’t believe in ‘checkout activism’ and trying to force it on them. Let the switchover naturally occur.
Poly: Interesting, in my interview with Brian Harrington he took the other side of that argument, saying that we need more entrepreneurs demanding Bitcoin only as apps like Strike would still allow clients to spend their fiat. I think for many aiming to build the Bitcoin Circular Economy getting paid in Bitcoin is the goal, do you have any tips on how to convince a client or employer to pay you in Bitcoin?
Stephan: Well the typical thing you can do is offer a discount if they pay you in bitcoin. But at the end of the day, it’s not feasible for everyone.
Poly: I’ve seen that happen, yes. With your many years in the industry, what do we need to build to make life in the future Bitcoin economy easier than it is now? What have you discovered that’s not working well, that needs optimising? What services do you feel are missing?
Stephan: Maybe just making some of the current tools easier to use e.g. BTCPay Server, or running your own node and multi-sig. These all can be done now but they’re a bit harder in terms of technical ability required. Over time they’ll get easier and more accessible.
Poly: Funny you mentioned BTCPay here as I talked to Nicolas Dorier and he was excited about working on Pull payments for Bitcoin and LN – interesting stuff. Looking ahead, what’s your guess when we’ll be able to say we’ve established a successful Bitcoin Circular Economy and what metrics would constitute that for you?
“My guess is in the late 2020’s for it [Bitcoin Circular Economy] to be relatively common. Maybe in the next 4-5 years it becomes a ‘well known niche’ thing”
Stephan: My guess is in the late 2020’s for it to be relatively common. Maybe in the next 4-5 years it becomes a ‘well known niche’ thing. We’re still extremely early.
I can’t think of any good metrics, but maybe if we see much higher levels of bitcoin acceptance for services, we could proxy off that.
Poly: Late 2020’s would be great, maybe I should have my interviewees agree on some metrics and bet on a date that, would raise the stakes. Ok, jokes aside, under what circumstances would you recommend others to fully embrace Bitcoin and start “Living the Future” now?
Stephan: It takes work and continual learning, but it’s also very rewarding. Dip your toe in the water and see if it works for you. Doing your first coinjoin spend or lightning payment feels magical. Let’s recapture some of that fun.
Poly: Oh yeah, the magic is real indeed. Stephan, this was great, tell us how readers can find you.
Stephan: Find the Stephan Livera Podcast in your podcatcher, find me at stephanlivera.com and follow me on Twitter @stephanlivera.
Poly: Nice, thanks again for your insights, Stephan! Appreciate it and who knows, maybe some readers will heed some of your advice and soon join us in the Bitcoin Circular Economy.
For further reading/listening, check out these two of Stephan’s podcast episodes with the Samourai team:
SLP150 – SAMOURAI WALLET – MAKE EVERY BITCOIN SPEND A COINJOIN
SLP209 – SAMOURAI WALLET – BITCOIN CULTURE & NEW PRIVACY FEATURES
SLP215 – MICHAEL FLAXMAN – 10X YOUR BITCOIN SECURITY WITH MULTISIG
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Another month gone by, let’s have a look at the Bitcoin grants provided in September 2020.
In last month’s roundup I mentioned a growth in Bitcoin design focused grants and this trend continued in September with a grant to Daniel Nordh. Daniel will bring structure to the Bitcoin Design Guide and will focus on contributing a private key management section.
The other noteworthy trend overall in Bitcoin funding is that everyone loves BTCPay Server, so much that Square Crypto renewed their grant over $100,000 for another year. BTCPay is by far the best funded project over the past years. If you’re keen to know more about BTCPay and it’s founder Nicolas Dornier, check out my extensive interview with him.
Grants and amounts committed
Since we only have one grant with an amount specified this month, the comparison to August is not very insightful. In August 7 grants were sponsored with a total of $140,000 while in September we total 3 grants with $100,000 given to BTCPay Server – definitely a quieter month. The main reason for this being that OKCoin and BitMEX had communicated that funding for the year was used up, so this will likely impact the remainder of the year if no new companies step in.
List of September 2020 grants
Here is the list of all grants announced in September 2020, for more details like grant amounts and development focus visit my Bitcoin Grants Tracker.
Pierre Rochard’s BitcoinACKs now allows anyone to pay for individual Bitcoin changes and code reviews on Github, which was covered by Coindesk.
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LIVING THE FUTURE – An Interview with Max Hillebrand
Max Hillebrand has been “all-in on Bitcoin” since September 2019 and is a prime example of Living the Future. He is a free software entrepreneur who’s building Bitcoin weapons at WasabiWallet.
Max and I talked about his motivations to leave the Fiat world behind, the practicalities of solely living on Bitcoin and how he’s spreading the word on using Bitcoin one merchant and producer at a time.
Poly: Hi Max, welcome and thanks for taking part in this series on Polylunar – great to have you.
I’m fascinated by people who’ve gone all in on Bitcoin and are now part of the Bitcoin Circular Economy. I hope the series will open up this lifestyle to more people and lead to fruitful discussions on what is already working well and which parts could be optimized to make the Bitcoin economy a reality for more people.
Max: Thanks for the invitation Poly – I’m looking forward to our conversation!
Poly: So Max, I still remember your tweet from Sep 2019 when you announced that you’re getting rid of your bank card and going all in on Bitcoin. Tell us a bit about what’s your background and what led to that decision.
Max: I have been an entrepreneur providing goods and services to my customers since early childhood. However, despite earning money and paying suppliers on a regular schedule, I did not have a bank account at all, my cashflow was managed mainly in fiat cash and precious metals.
My passion for accumulating knowledge and understanding how to increase my business productivity led me to educate myself in the realms of economics. At first the mainstream Keynesian approach, which was so confusing that I thought either I’m too stupid to understand it, or that it is pure nonsense in a model with broken assumptions. On a quest for finding the actual truth of economic reasoning, I discovered the great masters of Austrian Economics, Mises, Rothbard, Hoppe and co. In the exhaustive archive of knowledge at mises.org I found the important pieces needed to build a fundamental and holistic praxeological understanding.
With my exhaustive background in economics and especially monetary theory I swiftly understood the incredible scam that fiat shitcoins are – and the vitally important strategy to opt-out into a free alternative system. My prime goal is to defend my property rights and to allocate them efficiently – this is simply impossible under the fiat empire – but this is precisely what Bitcoin was created for.
“I ventured in the belly of the beast, with a know-thy-enemy mindset, and discovered awe inspiring levels of monetary warfare.”
In order to gain first-hand experience of the fiat regime, I decided to do my bachelor’s studies of economics in collaboration with Deutsche Bank, meaning that I would be part time in university, and part time in an internship at Europe’s largest bank. I ventured in the belly of the beast, with a know-thy-enemy mindset, and discovered awe inspiring levels of monetary warfare. During my three years study was the only point in time that I had a fiat bank account, used to receive my salary, and immediately withdraw in cash to buy bitcoin P2P. But right after graduation, in September 2019, I received my last ever fiat income, and I immediately closed my account. Ever since then, I have fully opted-out of fiat, and now live as a free man with my property out of the reach of the looters and thugs.
Poly: Thanks for the background, I didn’t know about your Deutsche Bank experience, destroying the enemy from within is a nice approach. Would you say that there was a seminal event that led you to finally taking the plunge to go all in on Bitcoin?
Max: I don’t think I can pin-point a single event at which I committed to focus my full attention on building Bitcoin weapons to dismantle the fiat tyranny. However, there are three milestones worth mentioning: The moment when I saw the first glimpse of the power of Bitcoin, was watching Andreas Antonopolous ‘The bubble boy and the sewer rat’. The moment I understood the extent of the level of defense an individual can gain by running his full node, that was the double-punch of UASF and NO2X. And finally, the moment when for the last time I earned fiat, with a strong resolve to exclusively demand to be paid in bitcoin, right after my graduation and closing of the bank account.
Poly: Absolutely, I think the first two resonate well with any Bitcoiner, the third one is a step most still have ahead of them. Once the decision was made, what were the next days like? Did you take immediate action or still let it simmer a little to decide on the exact steps to move forward?
“The entire process of discovering the first glimpse of Bitcoin until fully opting-out of fiat took about one halving.”
Max: The entire process of discovering the first glimpse of Bitcoin until fully opting-out of fiat took about one halving. The rabbit hole is deep, and I first wanted to truly understand a vast part of the ecosystem, before I was comfortable enough to rely on Bitcoin as my primary means of defense.
Your question is great, as you highlight the importance of taking action. Before I discovered Bitcoin, in a time where I already understood Praxeology and economics, I was absolutely devastated, as the fiat empire was so all encompassing, and there was seemingly no way for me to act on my individual preferences to dismantle the empire. I understood the root of the problem, as well as a fundamental solution to it, however, I did not have the means at my disposal to act and defend myself.
Bitcoin fixes this. Bitcoin is a powerful weapon that can be utilized freely by any individual who is courageous enough to stand up and defend his life, his property, and his loved ones. Bitcoin is fundamentally built on-top of sound Austrian monetary theory, yet is so much more than just another text-book on how money ought to function properly. Bitcoin is free software that *actually* manifests sound money into existence, and there is nobody and nothing that can stop a dedicated individual to use it right now. This is what makes Bitcoin so enticing for me, an enabler of action.
Poly: I love that, the “Bitcoin fixes this” meme is so true but it only works when individuals make it work. Bitcoin in itself doesn’t do anything, it just is but individuals using it, makes it impactful. I wonder, how did and does it feel to live on Bitcoin? Excited? Anxious? I imagine a decision like this to have a real impact emotionally.
Max: I feel free. And this is the most exhilarating, courageous and wild state of being. When earning and holding bitcoin, I know precisely the quantity of resources that I own and am able to use for my purposes. There is only me, nobody else, who has the power to allocate my resources. Knowing the means at my disposal is vitally important to evaluate which end goals I ought to pursue. I enjoy a neutral unit of account to organize my individual preferences according to my highest satisfaction, and with this I can clearly make an entrepreneurial judgement which potential project is most profitable to focus my attention.
I do not know my future preferences, the desires I want to satisfy at some later point. Thus, I keep my capital in a censorship resistant and sound money – Bitcoin. Knowing that I have a reserve of wealth that I can use to exchange for whatever good and service is an incredible removal of uneasiness in my life. Holding sound money is a great hedge against a dark and uncertain future.
“I do not kneel down in front of the fiat empire. I removed the shackles of fiat banking and monetary tyranny.”
I do not kneel down in front of the fiat empire. I removed the shackles of fiat banking and monetary tyranny. I no longer justify myself for earning money. I no longer am susceptible to theft of my savings. I no longer ask for permission to make a payment. The fiat regime might continue for a long time. But I am no longer a part of it. This is how my freedom feels like.
Poly: Sounds very empowering, I can sympathize, it starts a little when taking ownership of your Bitcoin, then strengthens when you run your own node and validate your transactions. Continuing on the personal note, how did your friends and family react? I’m already being looked at strangely when just talking about Bitcoin. There must be some funny stories from going all in.
Max: My friends know me for my rational argumentation based on first principles. This is the core of a sound praxeological analysis, and thus is shaping my mindset and world view. Going all-in Bitcoin and rejecting fiat is true to my first principles. Knowing that my loved ones respect this consistency and strong moral compass as a part of myself is a powerful foundation to build upon.
Poly: I can see that, coming from sound economic and moral thinking helps. Mind sharing a little how you established that basis? You mentioned earlier that you were exposed to the Austrian School early on, was that actually taught in school or something you picked up on personally?
Max: Oh no, of course the Prussian outcome-based education system does not teach a rational logical approach of truth discovery that Austrian Economics is based on. I was very often discouraged from my professors to stop reading and articulating such materials. Such valuable knowledge is not found in state education institutions. I first read a book by Friedmann, where he referenced both Mises and Hayek in the footnotes. I found the mentioned books at mises.org, together with such an astonishing amount of fascinating books. The Austrian Economics rabbit hole is [almost] as intense as the Bitcoin one!
Poly: I still have to find anyone telling me that they learned Austrian Economics in school, to be honest. So we now know you got rid of your Fiat and your bank account. Any interesting interactions with your bank? Did they try to convince you otherwise?
Max: My former colleagues at Deutsche Bank very quickly figured out that I am a Bitcoiner, and that my general outlook on economics and ethics was not mainstream at all. There were a plethora of interesting conversations, where they provided arguments in favor of fiat banking, while I gave my reasoning for the benefits of freedom and Bitcoin. Though in general, the individuals working in the incumbent fiat industries have good intentions and a polite respectful attitude. It really was a very interesting time, I learned a lot, and am happy to have gathered the experience.
Poly: Must’ve been a few heated discussions there but now you’ve moved on, maybe tell us a little about how a normal day of Max living on Bitcoin looks like. How do you buy groceries? How do you pay for dinner and split the bill with friends?
Max: First and foremost, I am fully immersed in a sound monetary economy, and thus my time-preference manifests rather low. There are not many goods and services that are more valuable than holding bitcoin. Thus, instead of spending and decreasing my capital stock, I maintain a high savings rate, and strive to consume high quality, low quantity necessities.
“In my experience, family operated businesses and small entrepreneurs quickly understand the value proposition of Bitcoin.”
One of the goods that I regularly purchase is obviously food, and here I engage local farmers directly, offering to pay for their goods with bitcoin or gold. In my experience, family operated businesses and small entrepreneurs quickly understand the value proposition of Bitcoin.
I also pay contractors who provide services for me, both in cyberspace and meatspace. Here again I first look for individuals who are demanding to be paid in bitcoin, and I usually offer them a generous price, higher than fiat competitors. I want to reward these courageous business men who venture out into new opportunities. This is a virtuous character trade, and I’m happy to support pioneers in their future progress.
Poly: How do you find these merchants, is there a community where such information is exchanged? I do not recall coming across a forum or anything for that.
Max: One big benefit that I have is that I am often at Bitcoin tribe gatherings, and that I know plenty of Bitcoiners. Thus I know entrepreneurs who specialize in different areas, who are also interested in getting paid in bitcoin, though a DuckDuckGo search for finding local businesses is always worth a try.
Poly: Understand, so you’re aiming to pay in Bitcoin where possible but what if that option is not available? Maybe you’re in some small town travelling and they just don’t know how to accept Bitcoin.
Max: Often I would meet with the business owner directly and educate him about the benefits of Bitcoin. However, this is of course a large investment of my time, and in many cases, especially with larger corporations, it is a futile and not profitable effort.
In order to reduce my cost and allocate my time more efficiently, I still use fiat shitcoins in their cash paper form. This is the most censorship resistant and private option, and it is actual base money supply, not the leveraged and diluted shit they keep in bank accounts. I usually exchange some small amount of bitcoin for the local fiat shitcoin, and I consider this as spending my bitcoin on a gift card, or casino chips. I will exchange these fun coupons for goods and services that I cannot buy with bitcoin. But I would never consider these shitcoins to be money or part of my savings. My goal is to reduce the number of seconds that I hold fiat. Every additional second is an additional theft on my productivity, and I do not tolerate this.
Poly: Let’s hope one day there’ll be no need anymore to exchange into Fiat and Bitcoin is ubiquitous enough everywhere. On these travels, what’s the nicest experience you had paying with Bitcoin?
Max: I am absolutely in awe with the pseudonymity that Bitcoin enables. On a regular basis, I pay contractors whom I don’t care to know their government issued identity, their residency, or their academic degree. If they have provided me with a meaningful and useful service, then I want to reward them with precious bitcoin. No other information than their Bitcoin address is required.
Poly: Indeed, pseudonymity is a great advantage of Bitcoin that drew me in as well. Us Bitcoiners often talk about Bitcoin being primarily a store of value, I wonder whether Bitcoin has become a unit of account for you yet or do you still sometimes think in USD/EUR?
“Bitcoin is my unit of account […] I always keep in mind the percentage of the total money supply that I control.”
Max: Bitcoin is my unit of account. I strive to increase the quantity of bitcoin that I hold. I exclusively demand to be paid in bitcoin, and my prices are denominated in bitcoin. Whenever I desire to purchase something, I realize how much bitcoin this costs me, and I make a judgement whether it is a profitable trade. Whenever I travel into a new shitcoin territory, I buy some of the local cash for bitcoin, and then when seeing local prices, I convert back to the quantity of sats that it costs.
Further, I always keep in mind the percentage of the total money supply that I control. This helps me to see the relation of the goods that I’m purchasing now, compared to the total purchasing power of my bitcoin in relation to the total supply. This is how entrepreneurial calculation ought to function in a sound monetary economy, and I am in awe with the productivity and efficiency gain.
Poly: That is impressive, especially that you regularly consider the total supply, I’ll make a more active attempt of doing that too, thanks. Understanding you think in Bitcoin, do heavy retraces in price affect you at all?
Max: What price? The fiat shitcoin exchange rate? I rarely buy fiat, and hold only a tiny amount. I care more about the exchange rate of bitcoin for meat and diesel. Again, I want to own more bitcoin, I don’t care how much each one of them buys, more bitcoin buys more stuff.
Poly: But matter-of-factly the world is denominated in Fiat and a Bitcoin bear market will let you buy less for a Bitcoin than in the bull market. What do you say to people seeing it as financially irresponsible to go all in on an asset like Bitcoin?
Max: It’s a question of time preference. I am happy to hold a rather large quantity of bitcoin now, and not invest or consume today. This shows that I have a rather low time preference, I’m willing to accumulate capital, rather than depreciate it. If entrepreneurs charge more bitcoin for their services, then in general, I will purchase less of their goods, rather save my bitcoin. Further, as my clients are willing to pay me more bitcoin for my services, I increase my prices and thus stack more sats. I love it when the exchange rate of bitcoin drops, because I will get more bitcoin! I don’t buy the dip. I earn the dip.
Poly: One last question on your lifestyle, has it changed in any way since you switched? I see some Bitcoiners become more nomadic, travelling a lot, while others try to stay put and huddle down to build their citadels. Where do you fit on that scale?
Max: Why not both? My travels have increased a lot, to the point where I am fully nomadic, waking up in new places, and rarely staying for longer than a couple days. However, I also build citadels, and in this I include any secure and defendable dwelling place. My goal is to travel from citadel to citadel, living a free life along the peers who do meaningful work.
Poly: That is a nice view, any places that you found to make good citadels already or are on their way to be soon?
Max: There are multiple Bitcoiners building secure dwelling places in every region. Though most are, for obvious reasons, choosing a private approach and not share much information about the nuances of their progress.
Poly: Maybe we switch gears a little. I know you’re working on Wasabi Wallet and assume they’re paying you in Bitcoin. Is that a full time gig for you or do you have other streams of income?
“I do the same thing as I did years ago as a voluntary contributor to free software, but now, I regularly earn Bitcoin.”
Max: I don’t really know what “full time” mean, for sure it’s not a 9-to-5 job in the office! I would say that I am “full time” Bitcoin, but this is more of a constant contemplation and expanding of my understanding. One of the projects that has earned my deepest respect and a vast majority of my focus and attention is Wasabi Wallet. I was one of the first users, back when it was still called Hidden Wallet, and have contributed where I can ever since.
Wasabi is free and open source software, and this tool obviously doesn’t pay me bitcoin directly. However, there is a company called zkSNACKs, which is dedicated to building privacy tools with zero-knowledge of its clients. zkSCNACKs was founded by the inventor of zero-link and Wasabi, Adam Ficsor, and by now it sponsors multiple developers, researchers, designers and reviewers who contribute to Wasabi. I am an independent contractor for the company, and enjoy an incredibly free collaboration model! Basically, I do the same thing as I did years ago as a voluntary contributor to free software, but now, I regularly earn bitcoin in exchange – beautiful!
Poly: That’s great and I think shows nicely how contributing to open source can lead to other opportunities further down the road, low time preference again. Do you have any tips on how to convince a client or employer to pay you in Bitcoin? The price fluctuations are tricky and I know some negotiate a USD price/salary and pay at exchange rate on pay day. How do you handle it?
Max: For me it was a multi-step process. Initially, my prices were denominated in fiat, and I accepted both fiat and bitcoin at the equivalent rate. Soon I realized that there are numerous costs and risks involved in using the fiat infrastructure, and I demand a higher payment in exchange for doing the shitcoin disposal services. Thus, if my clients insisted on paying me in fiat, then they paid 50% more than if they would have paid me in bitcoin. Then I increased this extra fee to double, then triple of the bitcoin denominated price. When I closed my bank account, I also changed this approach, and now if a client insists to pay me in fiat, and he is not willing to pay me in bitcoin, then I am not at all going to work with him. This means that now all my clients pay me in bitcoin, and I have no fiat income at all. Again, I don’t care about the shitcoin exchange rate, so that volatility isn’t noteworthy for me.
Poly: Wow, that’s a clear incentive for clients to use Bitcoin, indeed. How about securing those hard-earned Bitcoin, I assume you have several levels of Bitcoin security, how do you handle the technicalities of that? What kind of setup can you recommend?
Max: This is a very broad question… In general, security parameters always depend on the threat model. The question is, who is trying to steal your bitcoin? When the attacker is known, then the security strategy and defenses can be aligned. In many cases, the biggest potential attacker is the user himself making uneducated mistakes. So be careful when generating private keys and making secure backups. This requires both a well defended meatspace and cyberspace.
Poly: True, it’s an individual decision depending on many factors, still any tools you’d recommend?
“Multi signatures are a beautiful private property contract that Bitcoin enables.”
Max: I love Wasabi Wallet, especially it’s workflow together with ColdCard, it’s a very powerful combination. Multi signatures are a beautiful private property contract that Bitcoin enables, and Electrum Wallet, Specter or Caravan are interesting tools for this. Though as always, do your own due diligence for each of these projects.
In general, it’s good to have backups of your secrets. These can be securely encrypted on a usb stick, written down on paper, or even stamped onto metal. Keep these backups in a secure meatspace location, preferably locked up in a hidden safe.
Poly: How about the Lightning Network, are you using it? Do you consider Layer 2 the future payment rail of Bitcoin?
Max: Lightning Network is a concept ACK, but implementation NACK for me. The idea of trading ownership of bitcoin without constantly using the time-stamping consensus of the first layer is genius. It really shows the power of Bitcoin as a tool to define, verify and enforce property rights contracts. I’ve been using LN since the early #reckless days, and the contributors to the projects have done a monumental work so far already. However, there is still so so so so much more work to do, specifically in the area of privacy, in order to have a secure, efficient and private option to send bitcoin.
Poly: Since privacy is important to you but any Bitcoiner really, do you have any best practices you’d like to share?
Max: In general, get educated about how Bitcoin actually works, specifically the transaction structure and graph relation among coins. With an intuitive understanding of inputs and outputs, many privacy best practices come natural. Privacy in Bitcoin is about keeping the many pseudonymous identities [the Bitcoin addresses] of one user separate. This makes it difficult to cluster all user transactions and find out how much money he has. Very important here is to never re-use the same address for multiple transactions, as this is an obvious clustering of all coins of the same user.
It’s a good habit to keep a record of who knows that an address is actually yours. Further, avoid consolidating many coins in one transaction, as this suggests common input ownership. CoinJoin is a powerful technique which breaks the link between your pseudonymous identities, when your identity is linked to a specific address, after doing a coinjoin, you receive bitcoin on an address that is no longer tied to this identity. Of course, don’t leak your extended public key to a third party server, as this clusters all your past, present and future transactions. Connect to Bitcoin related services only through the Tor network.
Although all of this might sound overwhelming, Wasabi Wallet is a beautiful tool that implements all of these privacy best practices intuitively.
Poly: Address reuse is definitely still an issue but I think the tools are getting better to avoid it and similarly to break the KYC/AML links from buying on exchanges etc. I wonder, do you even have any contact with the traditional finance system any more? Did you manage to get out of any KYC/AML services?
Max: I no longer have any meaningful/relevant contact to the fiat empire. I do not owe any debt, everything that I use I have purchased with my own capital. This is another conscious choice to decrease my risk in the future, and reduce the number of entities who have a potential claim on my property, as creditors do.
Poly: Understand, I know we’ve covered quite some ground already but we want to move the space forward and it would be interesting to know which parts of the ecosystem need more work in your point of view to make your lifestyle easier for others to follow.
“For me, the core use-case of Bitcoin is for entrepreneurs to get paid by their clients.”
Max: For me, the core use-case of Bitcoin is for entrepreneurs to get paid by their clients. Thus any tool that improves this aspect is super useful, like for example BTCPay server. Of course earning bitcoin leads to holding bitcoin, and thus secure storage and management with good wallets is essential, I like the combination of the ColdCard hardware wallet and Wasabi wallet. Privacy is a great strategy to reduce the threat models of attackers, and thus privacy focused Bitcoin projects like JoinMarket and Wasabi are worthy of support! And of course, Bitcoin the protocol deserves a lot of care and attention, thus any contribution to the Core infrastructure is nice.
Poly: All these are great projects, I agree. Additionally, I find onramps important to get into the Bitcoin Circular Economy with minimal KYC/AML, hence I like to see more of the likes of Bisq, HodlHodl and P2P exchanges. Now, last but not least, would you do it all again and would you recommend it to others?
Max: Those who are ready for living a free life are not waiting for my recommendation. I cannot say if I would do it again – the past is the past – but I am acting free in this very moment right now.
Poly: You really do, it’s inspiring! Max, this was great, how can readers find you if they want to know more about you and your lifestyle?
Max: My website is towardsliberty.com, and you shall find me under the name Max Hillebrand on social media like GitHub and Twitter. My PGP key is E900 5F66 A86B B816 BD7D 967E BEDC D95C 42AC 3C57
Poly: Awesome, thanks so much Max, it has been fun and insightful! I’m keen to see how many readers this inspires to follow you to go all-in on Bitcoin and leave the fiat world behind.
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Living the Future – An Interview with Nicolas Dorier
Nicolas is the founder of everyone’s favourite Bitcoin payment processor – BTCPay Server. He’s an open-source developer working for DG Lab in Japan and is adamant on making rent-seeking finance companies obsolete via Bitcoin.
Nicolas discusses with me the difficulties of using Bitcoin in Japan, the tight tax regulations in place restricting Bitcoin adoption and innovation, and how pull payments could solve the Mental Transaction Costs problem in Bitcoin.
Poly: Hi Nicolas, awesome to have you share your story of living on Bitcoin in Japan. The story of how BTCPay Server was born is still one of the most savage things I’ve witnessed in this space and I’m keen to learn what tools and systems you think we need to build to make it more feasible to fully use Bitcoin as one’s primary savings and payment account.
So to get us started, tell us a little about yourself, your background and how you got into Bitcoin.
Nicolas: I’m a French living in Japan, working at DG Lab (Japan) and Metaco (Switzerland). Most of my time is spent working on BTCPay Server.
DG Lab is a research lab focused on finding use of Bitcoin that businesses sponsoring us can later develop into business. BTCPay Server was created when I was working there and they let me focus on that since then. Metaco develops custodial solutions for banks. I am the co-founder of the company and I work mainly on Bitcoin or Bitcoin-based altcoins integration to our products.
I didn’t pay any attention to Bitcoin until Mt Gox crashed. I thought Bitcoin was dead because the issuer (which I thought was Mt Gox) was shut down. I started learning more about Bitcoin to answer the question “If it is dead, why are people still using it?”. I understood why it is not dead by understanding the technical foundation, then the next question was “why satoshi created it?”. Which brought me to read the libertarian and Austrian Economics books. Down the rabbit hole since then.
Poly: Funny how that works, the Mt Gox bankruptcy in 2014 brought you into Bitcoin. You told me you were living fully on Bitcoin in Japan, what led to the decision to do that? Was there a seminal event that led to you taking the plunge?
Nicolas: Living in Japan but being from France, I was scared my bank would freeze my credit card if I used it. Banks routinely freeze credit cards when you use it “in a suspicious manner” which usually happens the moment you need it the most. Hence I was committed to not using my card in Japan but I would still use it to buy online, where it is generally safe from being frozen. Also, by using credit cards I would be losing money due to the spread of the bank, which I could not properly quantify. With Bitcoin I could even sometimes earn a spread of up to 2% by being a market maker with no risk of getting my card blocked.
So while in Japan I lived on Bitcoin but I wasn’t all in, I was dollar cost averaging in. I was also not buying things with Bitcoin in that sense, I was exchanging Bitcoin for cash, as I needed it to pay my bills.
Poly: That’s a great example for using Bitcoin, bank/credit card fees can be exorbitantly high, especially when abroad, plus the risk of them being frozen is real. How about the emotional impact of the decision, others have told me they never felt freer, some continued to worry at the beginning, what were your feelings?
“I was finally convinced that Bitcoin was a superior form of money.”
Nicolas: I was finally convinced that Bitcoin was a superior form of money. You can take it anywhere and live from it. This is not as convenient as cash, which I don’t expect Bitcoin to displace. But if you own Bitcoin, you can always find a way to convert it to cash if you need it. This is one thing to hand wave those facts, another to having actually lived them. Living through it convinced me it was indeed true.
Poly: Fully agree on that. Continuing on the personal note, how did your friends and family react? Any funny stories from going all-in? Parents thinking you’ve lost your mind or such?
Nicolas: My family has been supportive and was not upset with me talking about Bitcoin every day. Some of them bought or traded at one point or another. I never fell victim to a scam and I am not an addicted gambler.
Poly: That’s always good, how about the practicalities of making the switch, what’s the actual process been like? You mentioned you were DCA’ing into Bitcoin.
Nicolas: Yes, a staggered approach, I averaged into Bitcoin with my Euros from France. And since you only need cash when you actually need to spend it, holding any more than needed is wasteful. In Japan I was acting as a market maker on LocalBitcoins. From time to time people contacted me and I could make a small spread on the sale (2%). The flow was enough to keep enough cash for living. I was also very frugal, and never made a trade of more than the equivalent of 2000 USD at once. Since then regulations in Japan have become stricter so I don’t know if it is still possible.
Poly: In the end, did you actually close your bank account?
Nicolas: I didn’t close my bank account. Sometimes you still need it to send money to relatives. Though I slowly drain all my money from it into Bitcoin.
“[Japan] regulation now is horrible and has affected the Bitcoin businesses and exchanges harshly.”
Poly: Understand. Japan is known as a high-tax country, how did taxation affect your life on Bitcoin? Do you have to pay taxes for every conversion from Bitcoin to Fiat or how does it affect you?
Nicolas: When I was living on Bitcoin the regulation was not properly set. Their regulation now is horrible and has affected the Bitcoin businesses and exchanges harshly. Every time you sell (or convert to another altcoin), you need to pay on the profit of your weighted average holding. Calculating the weighted average is impossible if you did not keep records of when you got your Bitcoin. And even if you do, calculating it for every sale is too difficult. Also all exchanges in Japan have address reuse.
For those two reasons I never sell, I never trade, I only buy from Japanese exchanges. If one day their regulation becomes more reasonable and I want to make a big Fiat purchase, I may sell, but until then I hodl. Bad regulation is a big reason for hodling, so we need to thank them to pump up the price.
The regulation hurt exchanges a lot. If we compare it to the 2017 bubble, the volume has decreased a lot. Japan is not a good place for trading anymore.
Poly: It really doesn’t sound like a welcoming place for Bitcoin businesses and traders. I expected Japan to be rather open to Bitcoin as it’s generally a technologically very advanced country. You said you go cash-only for expenses but are there places/merchants that accept Bitcoin?
“Bitcoin is almost never accepted in retail…[but] gift cards can get you all you need.”
Nicolas: Not really. The only places I saw Bitcoin accepted were the Two Dogs bar in Roppongi and Bic Camera, a big retailer in Japan which charges outrageous spread (through bitFlyer). Bitcoin is almost never accepted in retail. I think nowadays gift cards can get you all you need though and those are easy to get with Bitcoin.
Poly: Understand, the Two Dogs bar goes on my to-visit list. What about Lightning could that help Bitcoin getting more acceptance? Do you consider Layer 2 the future payment rail of Bitcoin or are skeptic?
Nicolas: I don’t use Lightning that much, as it is in general more expensive than on chain. I am not a skeptic, I think it may come a day where it becomes the standard, but it’s not for now. I feel it is also focusing on push payments like bitcoin, where Lightning would be more suited for pull payments on micro transactions.
Poly: Pull payments are an interesting topic, let’s come back to that a bit later. Would you say your lifestyle has changed in any way since you switched? I see some Bitcoiners become more nomadic, travelling a lot, while others try to stay put and huddle down to build their citadels. Where do you fit on that scale?
Nicolas: I was nomadic at the time, now I am settled in Japan with my wife and kid, so the lifestyle changed and I don’t use Bitcoin for my daily life as much as I was doing before. If I build a citadel one day, it is when I will discover a country as safe as Japan, but without the terrible tax regulations.
Poly: You’re always welcome here in Singapore, it fits your requirements perfectly. Us Bitcoiners often talk about Bitcoin being primarily a store of value, has Bitcoin actually become a unit of account for you or do you still go back to EUR/JPY?
“If the USD itself goes into hyperinflation, maybe it will become BTC.”
Nicolas: I use JPY. I think you can’t beat fiat as a unit of account, as it is designed to keep price stable. This can reverse in case of hyperinflation of course. But if it happens, people will likely price in USD. If the USD itself goes into hyperinflation, maybe it will become BTC. Unsure if it will happen in my lifetime.
Poly: Yes, I think that’s the big question, will we see hyperinflation and see the USD lose its status as the world reserve currency? Indeed only time will tell. So do (heavy) retraces in price still affect you?
Nicolas: Well given I can’t sell, the price only affects me when it drops because I want to buy before it goes up again. But that happens only if there is a 20 or 30% drop.
Poly: Nice, always have to buy the dip. Maybe we switch gears a little. You founded BTCPay Server as an open-source tool for merchants to easily accept Bitcoin without having to pay fees to other companies. Being fully open-source, are you being paid directly in Bitcoin? How about the other team members and participants? I think earning Bitcoin is an important step in developing a Circular Bitcoin Economy so this is very interesting.
Nicolas: I am not paid in Bitcoin. Japan regulation makes it hard. For the BTCPayServer Foundation, I did not want to hold BTC because it is hard to keep track of the weighted average profit. I ended up reversing the decision. The reason is that Japan is very bad for making international transfer. Only two contributors get wire transfer, and making two wire transfers takes a total of between 1 and 3 hours of time. For this reason, we accepted Kraken’s grant via BTC and hodl it. There are approximately 10 contributors receiving money every month, 2 international wire transfers, 1 domestic wire transfer and 7 via BTC.
This may be more painful for the accountant, but if I needed to make 9 international wire transfers it would take more than a whole day at the bank branch to send the money, which is not a good use of my time.
Poly: Wow, wire transfers being such a burden is insane, that’s why we Bitcoin. Many would like to be paid in Bitcoin, so great to see 7 employees/contributors to BTCPay Server being able to. Do you have any tips on how to convince a client or employer to pay you in Bitcoin? The price fluctuations are tricky and I know some negotiate a Fiat salary that pays in Bitcoin at exchange rate on pay day.
Nicolas: I think it really depends on regulation. My advice is: Put yourself in the shoes of your employer, and do the research about how he can stay clear of problems should he choose to pay you in Bitcoin. How should he account it? Is it even legal? How does he need to report the profit? What does he need for KYC? You need to do his research, and provide him with the relevant links he can check. The main problem is, that while paying somebody in Bitcoin between two individuals is easy, doing so between a business and an individual is hard. The processes are hard and the legal and tax implications are hard.
Poly: So basically, help your employer help yourself – always a good approach. Living on Bitcoin and thereby being your own bank comes with additional risks, can you share some best practices on how you handle security? I’m always keen to learn best practices to optimise my setup and am sure readers feel the same.
“The best is to keep it simple. For long term storage, use a hardware wallet. For short term storage, use a hot wallet.”
Nicolas: The best is to keep it simple. For long term storage, use a hardware wallet. For short term storage, use a hot wallet. The challenge of hardware wallet is: How do you keep it safe even if your house is burning, or if something happens to you, how do you let your heirs retrieve them? I think part of the solution requires a good old notary or bank safe. I can’t advise on specifics on this, I think somebody wrote a book in the community about this.
Poly: Yes, Pamela Morgan wrote the book “Cryptoasset Inheritance Planning” on this topic. What’s your stance on privacy in Bitcoin? When people are acquiring and transacting in Bitcoin, do you recommend CoinJoin, Non-KYC etc. or what do you propose to do to avoid privacy issues?
Nicolas: The best way to avoid privacy issues is to not give your Bitcoin to centralised payment processors. For example, I don’t use bitcoin if the merchant uses Bitpay to accept Bitcoin. Those centralised payment processors won’t go to jail to protect your money or their customer.
I recommend coinjoin, I recommend staying away from exchanges as much as you realistically can. If you absolutely need an exchange, but that you conjoined your coins, do it small and spread over time, never a big lump sum at once. Adapt depending on the response of the exchange. The goal is, if they decide to freeze your coin, you should be able to sleep at night.
Poly: Good point on exchanges blacklisting coinjoined addresses, it’s definitely something we still need to overcome. I wonder, do you even have any contact with the traditional finance system any more? Did you manage to get out of any KYC/AML services?
Nicolas: Japan is a cash oriented society, so in theory you can pay for everything with cash. If you need Amazon, you can buy gift cards at the convenience store and use that. I would say you don’t need a bank account, but because the world is using bank accounts, it is a major pain in the ass to not have one. In theory DG Lab could pay me in BTC or cash. In practice their processes are not adapted to it and it’s unlikely they would adapt it for a single person.
Poly: OK. So, we covered how well one can live (or not) on Bitcoin for everyday items but what would you do if you want to buy bigger items, say a car or a house? How would you go about financing that outside of legacy finance, any experience?
Nicolas: Renting instead of owning solves this problem. If you absolutely want to own, then be prepared to pay a tax lawyer and a tax accountant when you buy fiat. Even if you think you did everything by the rules, you probably didn’t and you will need to report in a very specific way.
Poly: Strict Japanese rules strike again. I know we’ve covered quite some ground already but we want to move the space forward and it would be interesting to know which parts of the ecosystem need more work to make living on Bitcoin easier for others to follow.
Nicolas: I think the lack of pull payment is a big UX problem that credit cards solve, but Bitcoin not. I feel that most of the problems nowadays are more related to UX and education than purely technical.
Poly: Can you elaborate on the lack of pull payments and how this could be solved?
“[Pull payments] solve the problem of mental transaction cost highlighted by Nick Szabo.”
Nicolas: It is meant to solve the problem of mental transaction cost highlighted by Nick Szabo. The basic problem it solves is that making a payment involves a mental cost to the user sending it. This user needs to unlock his phone, run the app, scan the QR and send the money. If he is paying a subscription, he also needs to remember doing those steps, shall he forget, the subscription would be cancelled.
The mental cost is even more expensive when you are a company, as all payments in a company need proper accounting on top of it and invoice needs to be issued. This mental transaction cost makes micro payments impractical. As the mental transaction cost may well be way more expensive than the payment’s value, people instead prefer to aggregate all their payment at once at the end of the month instead of paying as you go. Or use prepaid account, where the payer sends money up front.
For example, if you consume a streaming service and wish to pay by the minute, it is impractical for a user to pull his wallet from his pocket, send a lightning payment and continue watching every few minutes. The downside of a prepaid account is of course that the merchant can’t give you the money back, and any unspent fund in the account is lost. You also don’t have a proper way, as a payer, to remember all the prepaid accounts you sent funds to. Another way is to give your credit card to a party and let him draw money; if you ever used Amazon, you did it.
Truth is, if you are not a big company, customers will not trust you with their credit card. This is why Bitcoiners use Patreon to get recurrent funding instead of using bitcoin. The patrons trust Patreon.
Pull payments are a solution to this problem. The idea is that you allow a party to pull the money from you, upon certain limits. As the payer, you don’t have to think about sending money, but you still are in control to stop money flows, unlike credit cards.
Poly: Very interesting and highly contentious topic for Bitcoin, it’ll be interesting where your development leads to. Now, last but not least, under what circumstances would you recommend others to fully live on Bitcoin, taking into consideration the different life situations people might be in? Would you do it again?
“The more unsafe the place [you live in] is, the more attractive Bitcoin is”
Nicolas: If you are a nomad, you should live on Bitcoin, this will make your life easier. If you are not a nomad and have savings, you can use Bitcoin to protect your funds against inflation. I would still say that you should have one or two years of saving in cash before considering saving in Bitcoin. You still might want to dip a toe though to get a feeling on how Bitcoin works. I think Bitcoin or gold are both great for this. Just keep in mind that when you buy Gold, you also invest indirectly on how safe the place you store it will be, because you can’t easily move the gold somewhere else. The more unsafe the place is, the more attractive Bitcoin is.
Poly: The definite advantage of Bitcoin over Gold. Awesome, Nicolas this was great! Tell us, how can readers find you and please go ahead if you want to share anything else with my readers.
Poly: Nice, this was very insightful and fun! Thanks for sharing your experience of living and using Bitcoin in Japan. Keep up the great work at BTCPay Server and maybe give Singapore a look as your future home base.
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Living the Future – An Interview with Brian Harrington
Brian is a Marketing Consultant, Project Manager and Film Producer, but first of all a true Bitcoiner. He is producing videos for BitcoinIs_ ,educating viewers on the importance of the Bitcoin Circular Economy and how to join it.
Brian discusses with me how he became passionate about Bitcoin, why the Circular Bitcoin Economy is so desperately needed, and the tools available for anyone to join it today.
Poly: Hi Brian, good to have you on Polylunar, I’m looking forward to discussing how to make the Bitcoin Circular Economy a reality. So, to get us started, why don’t you tell us a little about yourself, your background and how you got into Bitcoin.
Brian: I’m a marketing consultant and freedom fighter from Anaheim, CA. All of the work I do is freelance based and up until Bitcoin I was heavily focused on political campaigns and film producing. I graduated from Azusa Pacific University in 2013 and have been living in Orange County, CA for the majority of that time since then. I’ve been married to my wife Sherin for 3 years and we’re raising a kitty named Pishi. The first time I bought Bitcoin was in 2015, the first time I really started watching Youtube on it was 2016 and 2017, and then in 2019 is when I got involved with the Orange County Bitcoin Network.
Poly: Nice, I think Orange County is making a comeback these days thanks to you. Previously you told me that this year fully made you realise that we need a Bitcoin circular economy. What does that mean to you and what led to that insight?
“The reason for this is that I really don’t appreciate the way the ruling class is treating normal citizens right now.”
Brian: So the Coronavirus lockdowns are actually what led me to start taking the Bitcoin circular economy seriously and start to figure out what that means to myself. The reason for this is that I really don’t appreciate the way the ruling class is treating normal citizens right now – in any country. I don’t appreciate that our freedoms to move about are not being taken seriously. That’s what made me start to ask why are we paying these people? Why do we pay taxes if we aren’t receiving services and are receiving bigger and bigger headaches from having to deal with the ruling class decision making.
A simple definition is a Bitcoin circular economy designs out government fiat currencies and allows economic actors to earn, save, and spend Bitcoin with no interaction with the legacy financial world.
Poly: I like that definition, “designing out fiat currencies” is a good way of putting it. What did this lightbulb moment to more actively promote a circular Bitcoin economy mean to you personally?
Brian: It personally means I’m converting my fiat paying clients over to paying me with Bitcoin. The lightbulb moment has led to real world rubber on the road conversations where I’m letting people know who have paid me to work for them for several years that I will no longer be accepting checks. I tell them the apps they can download and show them how to pay the QR code invoices on my website.
Poly: How about friends and family, did you convince everyone of Bitcoin’s benefits? How do they see your activism?
Brian: My friends and family largely love it. A lot of the political class in Orange County has now heard me off and on mention Bitcoin and I look forward to having more and more conversations about it as I get sworn in to my seat on the Orange County Republican Party Central Committee Board in January 2021.
The only pushback I get is from those people that still view Bitcoin as just a stock and a way to make more dollars. I’m slowly working on those people and letting them know that I understand they don’t need more stock picks; they need a way to protect their wealth from government confiscation.
Poly: I didn’t know about your political activism and I don’t recall many Bitcoin proponents advocating through political channels. Could you elaborate why you chose that route instead of advocating outside the political system?
“To me politics, and life, and Bitcoin is all kind of the same thing.”
Brian: To me politics, and life, and Bitcoin is all kind of the same thing, Bitcoin is inherently political and politics is inherently about influence. It all goes back to the classic book “How to Win Friends and Influence People” by Dale Carnegie. I had influence with this group of people before getting into Bitcoin and now I’m going to leverage the influence to help people be free in any way I can.
Don’t get it confused with bowing to the system, I let the legacy world power brokers know everyday that their time at the top of the hill is limited because Bitcoin is a brand new paradigm. Politics is all about negotiation and Bitcoiners are going to win because we hold the cards now.
Poly: In your Citadel21 article you wrote that “People don’t need freedom in the future, they need freedom in the present”, can you elaborate on how getting into Bitcoin will help people achieve more freedom?
Brian: Yeah, it’s just a reminder to myself and to everyone that Bitcoin isn’t happening in the future, it’s happening right now today as you’re reading this. Getting into Bitcoin helps you start to realise how much your day to day existence really is controlled by a government currency that is slowly ripping you off. Not being ripped off anymore is a very freeing feeling.
Poly: Full ACK, whenever I’m stacking some sats I still get excited, especially when I see the transaction coming in on my own node. Some other interviewees with similar views have gone all-in on Bitcoin, if you don’t mind sharing, does that apply to you too? Why or why not?
Brian: So I’m all in on Bitcoin as far as every ounce of influence and professional reputation I have is dedicated to Bitcoin being the biggest overarching paradigm shift happening in the world today.
Financially my liquid savings is about 50/50 between USD/BTC. My earning and spending potential is currently 5 to 10% in BTC and 90% still in USD.
These are just my current numbers and I’m not ashamed of them, I’m honestly really excited about them and I’m having active conversations everyday to keep upping that earning and spending in BTC percentage.
Poly: I understand the arguments why some people go all-in and why others stay allocated in Fiat, as so often it’s a personal decision with everyone having a different life situation and risk profile. I’m further interested in what way you are using Bitcoin? Do you use it to buy groceries and daily necessities or do you still use Fiat for that?
Brian: My wife and I try to make it a point to buy at least one meal or one grocery haul per week in Bitcoin. That goal keeps me active to make the earning Bitcoin side go up so that we’re always stacking sats and never going down week over week.
Poly: Of course, have to replenish the stash. How about Bitcoin as a unit of account? Do you think in Sats/Bitcoin or still mentally calculate to USD?
Brian: For savings the unit of account is for sure sats, my wife and I have clearly defined savings goals denominated in sats. On the spending/earning side I actually don’t think it’s bad to still think in USD. We have a mortgage in USD and it’s easiest for me to onboard clients to pay in BTC if I tell them it’s X amount in USD per month paid in Bitcoin.
Poly: Good point, one has to consider the other side of the exchange which usually is thinking in USD. OK, Brian, I’ve seen some of your videos on Youtube where you explain why the Bitcoin circular economy is important and how to get into it by starting to earn and spend Bitcoin. Tell us a bit about what you’re trying to achieve with your channel and BitcoinIs_.
“BitcoinIs_ is all about normalising Bitcoin for everyday life so that people can see it’s the solution to humanity’s biggest problems.”
Brian: I really like watching Meet Kevin, George Gammon, and Whiteboard Finance on Youtube. I’m trying to follow their style in making videos about how to budget and use Bitcoin day to day to make your life better. BitcoinIs_ similarly is all about normalising Bitcoin for everyday life so that people can see it’s the solution to humanity’s biggest problems. I’ve been really thankful to George Mekhail and Russell Okung for letting me help them grow out the Monday Night Bitcoin show for that channel.
Poly: Good stuff. You mentioned you’re earning partially in Bitcoin, which I think is an important step in developing a circular Bitcoin economy. Do you have any examples and tips on how you earn in Bitcoin and how to convince a client or employer to pay you in Bitcoin? The price fluctuations are tricky and I know some negotiate a Fiat salary that pays in Bitcoin at exchange rate on pay day.
Brian: If people want to checkout brianharrington.org/xpub they can see a demo of how I charge $2 per beer paid in Bitcoin at my garage bar named X Pub. You can see a demo of BTC Pay Server and of Open Node on that screen. And then in the footer of the website you can see the pay in Bitcoin button that my consulting clients use.
I think fiat prices and salaries paid in Bitcoin is a great place to start. We’re all navigating this transition together. Through talking with a lot of different people about it that way has been the easiest and most fair.
The best tip is to just ask, I think if someone has been paying you for a long time and they like your work they should be willing to work with you. Offer a test run and say can we try this with half my payment or a quarter of my payment for one month, just to test out the apps and the flow.
Poly: I wonder, when you tell people to get into Bitcoin, what do you tell them about the expected but potentially heavy retraces in price? This is still something that keeps people from investing into Bitcoin and making it their primary unit of account, especially if they don’t have savings and a low time preference.
Brian: Recently I’ve noticed my whole pitch is honestly centered on the collapsing legacy world. The legacy world has no solutions, whatever frustrations you may have about Bitcoin are nothing compared to the frustrations of the legacy world. I stick on that alot and get people to realize how broken the current system is.
Poly: Basically explaining that staying in Fiat is riskier long-term than allocating to Bitcoin. Let’s have a look at Bitcoin setups, being your own bank comes with additional risks, can you share some best practices on how you handle security? I’m always keen to learn best practices to optimise my setup and am sure readers feel the same.
Brian: 100% recommend multi sig. I’m a happy Casa customer at their Gold level subscription. I’ve never really enjoyed keeping balances on a single hardware key.
Poly: How about Lightning, do you consider Layer 2 the future payment rail of Bitcoin? With higher Bitcoin prices and fees, I’m leaning towards showing friends Lightning wallets first for small amounts.
“I think the Strike App has been a game changer for the Bitcoin circular economy.”
Brian: For sure, I don’t think that’s bad at all. I think the Strike App has been a game changer for the Bitcoin circular economy. Managing lightning channels is the learning curve that I am on right now but I definitely believe lightning is important.
Poly: And what’s your stance on privacy in Bitcoin? When people are acquiring and transacting in Bitcoin, do you recommend CoinJoin, Non-KYC etc. or what do you propose to do to avoid privacy issues?
Brian: I wrote a different piece for my own site on how I think the simplest privacy wallet and coinjoin setup is Samourai Wallet on a dedicated pixel phone.
Poly: I know we’ve covered quite some ground already but we want to move the space forward and it would be interesting to know which parts of the ecosystem, in your point of view, need more work to make living on Bitcoin practicable?
“The eco system needs more entrepreneurs demanding Bitcoin and not accepting other payment methods.”
Brian: To make living on Bitcoin have more saturation, the number one thing I think we need is just more people talking about it. There are people living on Bitcoin today that do it way better than I do but I think are a little afraid to share their secrets.
I’m all about just ripping that band aid off and telling people: “yeah I work for Bitcoin”. This is a revolution. I’m dumping the tea in the harbor. I work for Bitcoin and buy stuff in Bitcoin from other entrepreneurs and I’m sorry if a few bureaucrats are cut out of the process. The world is demanding solutions and Bitcoiners have the solution.
All the tools are available for us today, different ones will cater to different people differently but all the tools to increasingly drop dollars and convert clients to Bitcoin are available today.
The number one thing we need to make it more widely known is for entrepreneurs to start demanding Bitcoin for their time, goods, and services.
To sum it up in one sentence the eco system needs more entrepreneurs demanding Bitcoin and not accepting other payment methods.
Poly: Love it, I promise you, if I ever ask for compensation on Polylunar it’ll be Bitcoin-only! Last but not least, under what circumstances would you recommend others to fully embrace Bitcoin now? Or what would need to happen for that to be the case?
Poly: Awesome, Brian this was great! Tell us, how readers can find you and please share any final thoughts you want my readers to know.
Brian: My DM’s are open on Twitter @brainharrington, that’s the easiest way to reach me. If you are doing anything with meet-ups or circular economy I will retweet you, send it to me.
Poly: Nice, thanks again Brian, this was very insightful and fun! I think readers will take away valuable information from your experience and maybe one or the other will soon join us in Living the Future.
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With the next Bitcoin bull heating up a lot of important information gets drowned in the daily news grind and so I’m introducing a new section on Polylunar – the Monthly Bitcoin Funding Roundup.
My plan is to highlight the months donors and grantees, look at trends on which topics get funding and track the amounts granted. It will ideally serve as a one-stop shop to find out about all the funding efforts that happened in the reviewed month, complementing the Bitcoin Grants Tracker.
So let’s dive into what August 2020 had in store, three things stand out:
Square Crypto continues its focus on Bitcoin design
OKCoin led August in terms of funding committed (>$100,000)
The Human Rights Foundation (HRF) emerged as another regular donor following up its initial grant to Chris Belcher by distributing additional three smaller grants
Focus on design
August showed that more Bitcoin projects are being funded that focus on designing good user experiences. Square Crypto provided their third design grant to Johns Beharry to design better pull and push payment workflows for Bitcoin and Lightning Network. Further the HRF provided grants to openoms to work on a graphical user interface for JoinMarket and Evan Kaloudis to continue his work on the user-friendly, mobile Zeus Lightning wallet.
I think this is an indication that the groundwork of Bitcoin and the Lightning Network is being addressed sufficiently by other funders and companies but there’s a need to make the usage of these tools easier for the average user. This does not mean that there’s no more work to be done on the base layer but rather that an additional area of focus has been identified by and is tried to be addressed by these grants. With Bitcoin moving ever more into the mainstream I concur that good UI and UX is essential to onboard the next group of users and welcome these developments.
Grants and amounts committed
In all of August 2020 we’ve seen a total of seven grants being awarded by four donors, totalling more than $140,000 committed:
Donor
Grants funded
Amounts committed
HRF
3
n/a
Square Crypto
2
n/a
OKCoin
1
>$100,000
BitMEX / 100x Group
1
$40,000
Compared to July 2020 that is 2 grants more dispersed and over $90,000 more committed, which is a welcome development.
Additionally I like that the HRF is emerging as a return funder that plans to continue its rolling Bitcoin fundraising efforts to support more Bitcoin technologies that allow people to privately secure and transact their wealth.
Individual developer funding
Although this one came in on 30 July it’s a nice effort and worth a mention in the inaugural monthly Bitcoin funding review. The Bitcoin Dev List by Matt Odell and Dennis Reimann allows you to find people working on Bitcoin and funding them directly, either via Bitcoin donations, Patreon or Github sponsorships. So head on over there to find your favourite dev and send him/her a few sats per month.
List of August 2020 grants
Here is the list of all grants announced in August 2020, for more details visit my Bitcoin Grants Tracker.
Tony Toro published a little piece about yours truly‘s Bitcoin Grants Tracker over at beincrypto.
This concludes the first of hopefully many editions of the Monthly Bitcoin Funding Roundup. Follow me @Polylunar_ or subscribe to the Polylunar Dispatch to stay updated on Bitcoin funding related news and more. To find out more about the specific grants, funders and grantees, visit the Bitcoin Grants Tracker which contains all the relevant information and links to the original announcements, grantees and further information about the work they’re doing.
Yesterday was a landmark moment for Bitcoin and its adoption as a reserve asset, MicroStrategy, a NASDAQ-listed company, bought 21,454 Bitcoin at a total of $250 million.
After the quick takes on Twitter have been made and the dust has settled, we want to have a close look at the press release to find out what really made MicroStrategy choose Bitcoin as a reserve. From there we might just be able to deduct how impactful this fact really could be for the future of Bitcoin.
Their press release starts as follows (bold highlights by me).
TYSONS CORNER, Va.–(BUSINESS WIRE)–Aug. 11, 2020– MicroStrategy® Incorporated (Nasdaq: MSTR), the largest independent publicly-traded business intelligence company, today announced that it has purchased 21,454 bitcoins at an aggregate purchase price of $250 million, inclusive of fees and expenses. The purchase of Bitcoin cryptocurrency was made pursuant to the two-pronged capital allocation strategy previously announced by the company when it released its second quarter 2020 financial results on July 28, 2020.
The main point in this paragraph are the 21,454 Bitcoin purchased at a total of $250 million. Disregarding that fees are included, 21,454 Bitcoin at $250 million comes down to an average price of $11,652.84 per Bitcoin.
This relatively high price, given that Bitcoin only recently reached back up to $12,000 and traded as low as in the 3 thousands in March allows for two possibilities.
The first is that MicroStrategy made a wholesale purchase, potentially OTC, over the last few days and did not average into the position over the past couple of months.
The second option would be that they have considerable cost allocated to the purchase effort and custody of their Bitcoin, and those costs raise the average buy-in price accordingly.
For now we don’t know the answer to this as they have not released how and with whom they custody or when they made their purchase. Yet, we can take a cue from their Q2/2020 results in which they announced their plan on how to invest the $250 million on 28 July 2020. Unnoticed by seemingly everyone, MicroStrategy actually mentioned that they’re considering to invest in “one or more alternative investments…such as bitcoin”.
So I assume they had their minds set pretty straight on Bitcoin already at the time of the announcement and bought their share shortly after at prices over $11,000 and custody costs etc. only play a minor part in the average cost per Bitcoin.
They continue with general information referring to their Q2 results again until explaining why they invested in Bitcoin.
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders,” said Michael J. Saylor, CEO, MicroStrategy Incorporated. “This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.”
Here MicroStrategy is saying one thing and implicitly stating another too. They’ve identified that holding cash, meaning US dollars, is a worse investment for them than buying Bitcoin. Additionally, what they’re not saying but implying is that Bitcoin is a better investment for them, not only than cash but also than "stocks, bonds, commodities such as gold". As, again, per their Q2 results they were considering investments in all these but settled on Bitcoin as the most viable option.
The second statement to note is the conscious decision to call Bitcoin “a dependable store of value”. This aligns fully with the current view of Bitcoin’s main value proposition and main driver until a broader adoption has taken place.
Mr. Saylor continued, “MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”
This section highlights the risks associated with unmitigated government spending that many macroeconomic thinkers, Austrian economists and Bitcoiners have pointed out over the past months and shows that corporate leaders agree with the sentiment that the end of fiat currencies is a real identified risk.
In considering various asset classes for potential investment, MicroStrategy observed distinctive properties of Bitcoin that led it to believe investing in the cryptocurrency would provide not only a reasonable hedge against inflation, but also the prospect of earning a higher return than other investments. Mr. Saylor articulated the opinion, “We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fuelled the rise of so many category killers in the modern era.”
This paragraph shows that MicroStrategy has done its homework on what makes Bitcoin valuable – a few things stand out.
They mention the architectural resilience which in my view is pointing to the network security of Bitcoin and how a higher price and rising hash rate leads to a more secure network that makes double spend financially irresponsible to attempt. This is important for companies to understand if they consider Bitcoin as an investment.
Next is the community ethos of Bitcoin. This could mean several things but I don’t think it’s our little community of Bitcoin Twitter but rather the ethos of the community to understand the value of a hard cap of 21 million Bitcoin and the shared understanding that this cap will not be removed.
Last but not least, the network effect. This is what many people outside of tech have still issues with understanding but is essential. Bitcoin was the first of its kind and has grown tremendously over time. The effort, work and time put into developing the system, the community, the hardware, the understanding is so important to Bitcoin and gives it a network effort much bigger than any other cryptocurrency. These qualities cannot be taken away and extend Bitcoin’s reach ever more. And although there are a myriad of other coins out there, money will always accrue to the best money and has been identified correctly by MicroStrategy.
So what does MicroStrategy’s move mean for the future of Bitcoin?
For one, it broke the glass ceiling of Bitcoin not being a viable reserve assett for corporations, mainly due to its fluctuating valuations.
As Andy Yee put nicely, “Paul Tudor Jones removed career risk for hedge fund managers from investing in Bitcoin. MicroStrategy removed career risk for CFOs from putting company treasury into Bitcoin”.
This cannot be overstated as it sets a precedent allowing companies to realistically consider Bitcoin as an asset to invest in and profit of its appreciation. With this step taken, many companies will have to evaluate their risk profile and review whether their previous assessments of gold, cash and other assets need revisiting.
Consider for a moment how many companies there are in the world and then take note of the fact postulated by Michael Goldstein that “no more than 860 individuals or companies can have 21,454 bitcoins right now” because that is the total amount of Bitcoin in existence today.
So price appreciation will be one big result of more companies dipping their toes into Bitcoin but it’ll also mean less investment into traditional assets that currently would get that investment, leading to them depreciating.
On the time perspective we have to consider the decision making processes and time needed for education. MicroStrategy seemingly has made a call end of July 2020 and invested a big amount on short notice but based on their press release they clearly had done their research on Bitcoin’s value proposition and that is something every company will need to do in their own time horizon.
Entertainingly, MicroStrategy’s CEO, Michael Saylor, tweeted in 2013 that “Bitcoin days are numbered” just to seven years later consider it the best option to invest in for his company, so education takes time but CEO’s and CFO’s will get there, but surely not at the same prices as MicroStrategy did.
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To the Bitcoin class of 2020, on this important day, I salute you!
This week you graduated from one of the toughest learning experiences of your life – be proud of that.
When you joined Bitcoin in the summer of 2017 most of you were green. Some thought Bitcoin was magical internet money, some hoped it would make you rich, and some of you, a very few, had at least heard of a little coin with a Shiba Inu as a logo. The barriers of entry to Bitcoin were low, and remain so for good reason, everyone is welcome. Yet the learning curve is steep, and you’re living proof of that.
After three tedious years you’re graduating from Bitcoin school a different person than than the one that entered. You’ve suffered and struggled, and are now being let out into the world to enjoy the spoils you deserve. But before we look ahead, let us take a look back at what you have achieved.
This class started at the end of a bloody civil war that ended on this day in 2017. An important victory was won for the decentralization of Bitcoin against coordinated forces with big pockets. But most of you had no awareness of that and it was simply the beginning of the the hype phase for you – Bitcoin knew only one way: up!
You thought that’s just how this is, a new, digital world, untied from the burdens of the physical realm, making you rich beyond your wildest dreams – it wasn’t, it didn’t.
Advice given by parents was not heeded, you didn’t need to understand to make a profit, you’d follow the whisperers on Twitter and they’d guide your way. Yet, life doesn’t work that way. The whisperers turned out to be no better than the pied-piper of Hamelin. They told you that Bitcoin was old and slow and had too high fees. They told you of newer, faster, better networks. Ethereum and Thor would allow scripting on the blockchain, whatever that meant. Ripple would build an international remittance system, also faster and better than today’s, and the banks would love it. Every day another coin made the headlines, ICO’s left, right and center and each again better than the other. Bitcoin was legacy, ERC-20 the future. Everything on the blockchain, everything on Ethereum, everyone would be rich.
On top of that there were remnants of war in Bitcoin but you still couldn’t make sense of it. Who’s on what side? What was it even about? Why did it even matter? It’s just legacy tech, kept around for sentimental reasons. Who cares whether it’s BTC or BCH or later BSV if it’s obsolete anyway.
But then, all of sudden, as fast as it began for you, it was all over. Everyone was getting rich one moment and then everyone was getting poor, including you. This is were it ended for a lot of your fellows, the parties were over, the money was gone, the yachts were taken back by Wall Street.
It was time to reassess where it all went wrong. Luckily, you had discovered the old writings from the Satoshi Nakamoto Institute and Michael Goldstein had told you in no unclear way that everyone’s a scammer. It was a lesson to be learnt, an expensive one, but necessary.
You felt duped, dumb for falling for narrative instead of substance but you sensed a lifeline. Some of you sold your Tokens for Sats, some kept around a few bags because another rally might redeem them. Not everyone made it through to today, think of your fallen friends but don’t forget why you succeeded where they failed.
Yet, the bear market of 2018 was brutal, your studies so far came at a high cost. You had to go back to making a living, like your parents did. Some of you surely got closer to your parents than ever before, living in their basement and all that.
You spent long nights reading forum posts by people way older, way smarter than you, talking about technologies you couldn’t comprehend. Cypherpunks and gold bugs, it all didn’t make sense.
Why is the old world order suddenly at stake? Why do you need to rid yourselves from the shackles of the federal reserve? Why would the government not have your best interest at heart?
But on your way to work, in your old Toyota Corolla, you found support. You’d listen to Marty and Matt, guys like you that rambled over Whiskey and told you Tales from the Crypt, your personal support group, they told it like it is.
Things started to fall into place and you felt the excitement come back. Maybe there is something to this old tech after all. And then, in a two punch like you’ve only ever seen Tyson deliver, it hit you. In March ’18 a guy you’d never heard of before, Vijay Boyapati, published an article that made it all click, “The Bullish Case for Bitcoin”.
Bitcoin is like Gold!
But on the internet!
It’s Digital Gold!
That was something you could understand, Gold is worth something because it is scarce. And Bitcoin has the same characteristics but is even better because it’s more difficult to confiscate – boom!
And then, in April, the second punch, stronger, without mercy, Saifedean Ammous dropped The Bitcoin Standard.
It was over for you, there was no going back now, you felt converted, it was weird and beautiful at once. How can simple truths be so difficult to uncover, you wondered. But now you saw and you could not unsee.
Over the year there’d be more speakers expanding your horizon to different topics. You couldn’t watch enough of Andreas’videos and discovered Austrian Economics and Libertarianism from Stephan Livera. You’d even read up on Mises and Rothbard but preferred Hayek, who’s a bit more accessible. On this one there’s no shame, you’ve already reached an understanding of economics far above most mainstream pundits, let alone a certain New York Times quacker.
And when you had studied enough, read enough, you started to tinker. Pierre Rochard helped you launch your first node while Rodolfo Novak made sure your few Sats were stored safely. The marvel that are OpenDimes still fascinates you to this day. But there was more to discover, it was time to meddle with a Raspberry Pi and for the first time sync the full Bitcoin blockchain. You were now able to validate your own transactions and a sense of freedom, of independence, overcame you – something changed and it felt good.
1.5 years into your journey had grown, your old friends and family didn’t recognize you anymore. They couldn’t follow your thinking and frankly, they became likely a bit worried too – people that step out of line scare others. You couldn’t understand this because you now knew something was wrong in the world and you had an idea how to fix it. You wished they’d understand but you knew they’d need to find out at their own time. Marty had taught you well, you planned to stay humble and stack Sats and help everyone who really wanted to know.
So what was next? Where could Bitcoin go from here? In March 2019 you learned what might lie ahead, when the then unknown Nym PlanB released his Bitcoin Stock-to-flow model. An eye-opener in terms of Bitcoin valuation models and a guideline as to how Bitcoin works in predictable regularity of four-year rhythms. How beautifully it mixed with what Saif taught you a year ago, was baffling, so much more to learn, ever deeper the rabbit hole goes.
You loved the model, everyone loved it, but only time will prove it – or not. For the remainder of 2019 you dug in further, confident in having discovered basic truths but still in doubt whether this truth will ever come to be in a world pretty much ignorant of it.
When 2020 rolled around you were ready, looking forward to your first halving. The halving, this incredible instrument reducing Bitcoin’s block subsidy by half every 210,000 blocks. But we all know how 2020 turned out to be and all and everyone got blindsided by the pandemic. You had to put your studies aside to care for loved ones but the halving happened nonetheless on 11th of May, 2020 – as much an event as it was a non-event, predictable yet exciting.
So now we’re here, in the midst of 2020, on the day of UASF, the day SegWit got activated and now you know what that meant.
Three years after you began your studies, you are graduating and you deserve it, you made it.
It wasn’t easy and it isn’t supposed to be easy, your parents knew that, your grandparents knew that, you know that now. Don’t neglect that struggle, you have taken a long way, learned a lot, made a lot of mistakes but now you’re here and you understand what Bitcoin is.
And as with Bitcoin itself, that is enough.
Take pride in what you went through and derive strength from it.
Because as much as I’d like to tell you what the future holds, and I know I promised to do so, I cannot, nor can anyone else. You know this now too, you know you shouldn’t listen to anyone blindly. You can hope to trust, but always verify. Find your own truth and walk with it. Have conviction in what you believe but be able to adapt, “strong opinions loosely held” can get you a good way. And if ever in doubt, think of the few simple truths you know for sure.
Bitcoin will be there, chugging along, tick tock, like clockwork, tick tock tick tock, block by block.
Bitcoin is open, it is for everyone to join and make of it as they wish.
And now, you, and the class of 2020, are part of Bitcoin and Bitcoin of you!
You’ve earned it, revel in it – salute!
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Over the past week Open AI has opened up its private beta access to its latest natural language processing (NLP) model, Generative Pretrained Transformer 3, or GPT-3 for short.
It immediately captivated the Twittersphere with a viral tweet by Sharif Shameem showing the impressive capabilities this optimized version has due to being trained on a way larger dataset of 175 billion parameters compared to his predecessor GPT-2, an increase of two magnitudes. A lot of interesting applications for GPT-3 followed and I was intrigued (as is evident from my tweets on GPT-3) to look into it in more detail to understand what it really could be capable off and how it could impact Bitcoin.
So let’s have a look at:
what GPT-3 is
what it is capable off and what not
why it is important to understand it and its implications
What is GPT-3?
GPT-3 is a neural network for natural language processing and creation. This means that GPT-3 is capable of understanding human language (primarily in English but allegedly capable of understanding eleven languages at point of writing) and reacting to it with text generated by itself that is totally unique, not a regurgitation of pre-scripted sentences.
The API provided by Open AI allows to give GPT-3 inputs in form of words and sentences up to ten paragraphs and it will react with an output based on its 175 billion parameters that it was trained on. This huge set of parameters includes information available on the internet up to October 2019 and therefore does not only contain text but also mathematical formulas and code.
Since it’s a limited beta it’s currently not possible to train the model on a specific set of data as it was possible with its predecessor GPT-2 but that might change in the future. At this point GPT-3 is already far more advanced than any other model available and will be considered the de-facto standard for the time being on the road of development to a General Artificial Intelligence (GAI).
What is GPT-3 capable off and what not?
Since the release of the beta access we’ve seen myriads of use cases tested already and it seems the limits are more limited by human creativity than GPT-3’s limitations. This doesn’t mean that GPT-3 can be considered intelligent but it certainly reached the level of successfully tricking people in believing it to be so when the examples published were chosen carefully.
Some of the most extensive testing of GPT-3 regarding its creative use cases has been done by Gwern, as he did before with GPT-2. Additionally Max Woolf has done a lot of work on GPT-2 and now also put GPT-3 through the motions. Here’s a list of impressive results that were achieved by/with GPT-3:
There were many more interesting examples where GPT-3 was able to create SQL and React code, create Figma designs and translate difficult legalese or academic text into understandable explanations for non-experts, all highlighting the fascinating capabilities of the model but also surfacing its limitations.
The creative use cases have shown that GPT-3 became repetitive when creating longer texts, had difficulties rhyming properly and would get into trouble when being asked nonsensical questions. So while very impressive and clearly best in class, GPT-3 is not intelligent and will unlikely be in the near future. A GAI is not realistic yet but it is easily foreseeable that next iterations of GPT will blur the lines between human created works and machine created ones irrevocably.
Why it is important to understand GPT-3 and its implications?
To know where AI and machine learning (ML) is headed, we need to understand where we are. GPT-3 is impressive but even Sam Altman, co-founder of Open AI, is cautioning the hype. So we now have a machine that was able to read and understand a data set of 175 billion parameters – at least to a certain degree. Based on this understanding GPT-3 is able to learn new inputs and try to understand what is asked of it. One example would be that it was able to read 3 rows of Excel data with two populated columns and on the fourth row predict the missing data field based on the first one and how the two columns related to another in the previous rows.
With Moore’s law still intact we can expect the quantity of data a machine can learn and understand to increase exponentially. This exponential expansion makes it difficult to predict for the long- or even mid-term. As Bitcoiners we have a better understanding of exponential growth than many who cannot fathom such increases, but what an ever more knowledgeable machine will be able to do long-term is anyone’s best guess and better located in the world of science fiction.
So short-term, what might be next? I think we can expect GPT-4/5 to be able to communicate like a human so most of us will not be able to identify what is created by a human and what by a machine. This will have far-reaching implications in itself but likely even more in second and third order effects.
Texts created by a machine will be translated into other mediums almost without problems. We will see books, audio plays, even movies based on machine generated content. We will have Twitter and Reddit bots filling and leading conversations online, emails will be written between machines; GPT-3 can already write emails based on minimal human input. So the lines will blur online as well as offline – but it will not end at text creation.
Pattern recognition is already strong in GPT-3 and the applications for this are immense. Pattern recognition is one of the most important, innate human capabilities and machines will be so much better at it. We will see constant iteration and continuous improvement on everything from product design, code creation, automation to levels unimaginable today, efficiencies in all disciplines will rise. Even art will not be “spared", the next GPT version might be so good at identifying valuable art and creating new pieces based on existing ones at unhindered speed, ever-creating.
Now we could say that these things will be limited to the digital realm but I wouldn’t be too sure about this. 3D-printing is already picking up speed and moving towards mainstream adoption with smaller and cheaper printers available each year (see also Jeff Booth’s excellent “Price of Tomorrow” on this). It might have a big part to play in this future of constant iteration and optimization by GPT-based machines.
And last but not least there are the financial markets which are already heavily automated and based on neural networks, consuming huge amounts of data to make nanosecond decision to get an edge above the competition. One can only speculate what an openly available (for a price) model like GPT could mean for active trading, it certainly will lead a lot of experimentation.
So where does all this leave us? Some have already wondered whether GPT-3 the "next big thing after Bitcoin” but I wouldn’t go so far just yet. Bitcoin stands on its own and will change the way humanity approaches money all by itself, thereby Bitcoin is still the current and next big thing. So GPT-3 is not the next big thing, GPT-4 might just be.
I certainly noticed a leap being taken with the release of GPT-3 and a substantial change in terms of General AI might not be too far out, until then I plan to push Bitcoin adoption along and experiment with the possibilities that GPT-3 opened up.
These are exciting times and I’m keen to see where these technological advances lead to next.
Onward and upwards!
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Bitcoin is open-source and open-source funding is hard. The Bitcoin community needs to work together to make funding Bitcoin development better.
One week ago I announced the release of my Bitcoin Grants Tracker and posted a short thread on Twitter. I did so out of personal interest in Bitcoin, its development process and how development is being funded. I didn’t expect the tracker to attract much attention but wanted to share it with the Bitcoin community in case others were interested in this too. The amount of feedback I’ve received ― on Twitter, via email and even by Marty on the Sat Standard ‒ makes it obvious that Bitcoiners are seeking more transparency and insights into the Bitcoin funding process.
What can we do?
There are many things that could be done but it is important to spend our time on things that can have an impact. In my opinion, the following three things need to be focused on if we want Bitcoin to succeed in the long run:
Better and easier ways to fund developers and projects
More organizations and companies funding Bitcoin development
More Bitcoin developers
These are broad goals and I’ll break them down into more granular goals and actionable tasks in upcoming posts. For now I’ll add another table to the tracker, focusing on all the great Bitcoin companies employing developers to work on Bitcoin Core, Lightning etc. – Blockstream, Chaincode and Lightning Labs come to mind. I also plan to write more about the funding process in general, dive into some statistics on grants distribution and discuss how interested developers can get their start into Bitcoin.
Education is key, and helping potential funders and developers navigate their way through this beautiful maze that is Bitcoin is something I’ll gladly try to do. My humble page might not be able do too much about it but I’ll try to move the needle a little bit.
If you have any other ideas of what can be done to move the needle, please reach out via DM and email. There are many Bitcoiners out there willing to help, we just need to reach out.
