[S3E9] Layered Money with Nik Bhatia

Welcome to Business Books and Company. Every month we read great business books and explore how they can help us navigate our careers. Read along with us so you can become a stronger leader within your company or a more adept entrepreneur. This month. We read layered money. From Gold Golden Dollars to Bitcoin and Central Bank Digital Currencies by Nick Bhatia. Layered Money begins with a history of monetary systems. This sets the stage for a dive into the world of bitcoin, including what makes it special and how it differs from the currencies that preceded it. Finally, Layered Money takes the reader through current developments in the bitcoin world and how central banks will likely respond to it with their own digital currencies. We are pleased to be joined by the author of Layered Money, Nick Bats. But before we get to Nick, let's introduce ourselves.

Hi, I'm David Short. I'm a product manager.

I'm Kevin Hoodak, chief research officer for commercial real estate research and advisory firm.

And I'm David Copack. I'm an associate professor of computer science at a teaching college. Let's introduce our guest. Nick Botsia is a financial researcher, CFA charter holder, and adjunct professor at USC. He recently launched The Bitcoin Layer, a markets research newsletter centered on bitcoin. But most importantly for our discussion, nick is the author of Layered Money, one of the most popular books in the world of bitcoin. Nick, thanks so much for joining us on the show. I'm wondering if we can go back to your origin story. So if you could give us a bit of your background, how you first got interested in the world of bitcoin and how that led you down the path to your involvement with bitcoin today.

Sure. So my background is in traditional finance. I went to school to study economics and then finance, and I have my CFA charter, and I worked in the fixed income asset management industry for several years. So that is my professional background. My time on a trading desk was really spent trading money markets and US Treasuries and eventually the whole interest rate spectrum. So my professional expertise really comes into the US treasury sector and interest rates and global macroeconomics. Now, when I was on the trading desk, I had seen the word bitcoin across my desk for years, but really had just ignored it as maybe something that was a fad and would go away. Eventually, I realized that that was not the case. This was in 2016, and I started for the first time reading equity research reports coming from the street that were coming across my desk about blockchain based companies, and then started to learn a little bit about bitcoin and what is bitcoin. Bought my first couple of books on bitcoin, specifically Nathaniel Poppers Digital Gold and Andreas Antonopolis Mastering Bitcoin, which is more of a computer science textbook. But after reading both of those books in 2016, it was very clear to me that Bitcoin was something that was going to be around for a very long time, potentially even impact my career as a fixed income market. Participant and was something that I had to dedicate intellectual capacity to that transformed into starting to write about Bitcoin two years later, in 2018. And eventually I got to the point where I thought I could write full time for a living about both global macro and bitcoin and the future of finance as my chosen career. And that's really what happened. So 2019 is when I transitioned away from a trading desk and more into a role of a researcher. And I really don't like to consider myself a bitcoin only researcher. My company is called the Bitcoin Layer, and our tagline is researching bitcoin through a global macro lens. And so there's both aspects to it. There's bitcoin and then there's global macro. And I'm very passionate about both.

So, Nick, could you tell us a.

Little bit about why you wrote Layered Money, the path you took to get there?

Yes. So for me, transitioning away from the desk and into a career of writing, I knew that in order for people to take me and my thesis seriously, it needed to be a book. It couldn't be just a blog or social media. It had to be a book. And so what book did I want to write? I wanted to write a book that explained why bitcoin, why did I quit a life on a trading desk, trading the most liquid asset in the world, us treasuries, to go to something that appears to be a startup and maybe even Beanie Babies, if I could use that analogy to others, I really wanted to explain it. And so the book was meant to be an explanation of why bitcoin, which morphed into a history of money. Because in order what I believed, in order to explain why bitcoin, I had to explain money from the beginning and introduce bitcoin as something that fits into this narrative of what money is to our species, anthropologically speaking. So that's why I went back 1000 years at a very minimum. But my research went back several thousand years to try to tell this story appropriately. So this was my one shot at my eight mile moment trying to find the right narrative to set up the rest of my career as a researcher of both bitcoin and global macro.

Excellent. And when it comes down to it.

Nick, I thought that the way that.

You deconstructed those various monetary systems throughout history into layers after the name of the book, layered Money, was super important. And the illustrations that you provided at different points were really helpful as well. I thought it was a key strength of the book. And I was just wondering if you could explain to us and our listeners the basic concept of layered money. Why is thinking about money in layers such a powerful lens?

Yes. So I'll start, if you'll allow me to start way at the beginning of the story, which is once I took the plunge and transitioned off the desk, my first immediate opportunity, the reason why I actually made the decision was that I was offered a position at USC Marshall School of Business. USD is my Almata here in Southern California. I was offered a position to teach interest rates in the bond market at USC. And that was really quite an honor and a life changing moment for me to be offered that sort of position. And it set the platform for me to transition my career away from being a trader, a practitioner, and more into a writer, academic and researcher. So, yes, it's a part time role. It wasn't a full time professorship. It's an adjunct professorship so reserved for working individuals. But I decided to take that position and dive fully into that role, into that career path. So when I was designing my first curriculum, which was about call it a few months into this transition, the first time I taught the course, I taught the grandfathered curriculum, the second time I taught the course, I taught my own. And in building the curriculum for that second semester, which was my first time teaching my own way of teaching the bond market, I had to set up for my students an explanation for what is money, especially the idea that the dollar system is a credit money system. It has to be understood in order to understand fixed income properly, because you have to understand the difference between owning a US treasury security and owning a bank deposit. And that relationship between a treasury security and a bank deposit was like my first quest as a curriculum builder. So I read books, papers across the spectrum, and I stumbled upon in late 2019 a paper written in 2012 by a professor named Perry Merling. He has quite the cult following in finance and interest rates, and Perry Merling, who's written a lot, and he just released a new book. He has a book on the financial crisis of eight as well. This 2012 paper was called The Inherent Hierarchy of Money, and it's the foundation for a lot of his work. And when I read that paper, all the light bulbs went off in terms of now I know that I have to use Terry Merlin's Hierarchy of Money lens to explain money to my students. Forget bitcoin completely just us treasuries themselves and how to teach the Fed's balance sheet and central banking and QE, all of those concepts that are hot in fixed income. You have to have some basis for it. And as a new professor, I needed to find that material. I found it with Professor Perry Merlin. And the inherent hierarchy of money was the inspiration for layered money. Because I took that pyramid approach from Perry Merlin. I acknowledge that early and often in the book, and I give full credit to professor merling for setting up this framework. Now, when I read the paper, I said, this is perfect. And I taught it to my students. But then I started to think, okay, it's time to write this book about bitcoin. I have to explain bitcoin all the way from the hierarchy lens. And in order to do that, I actually have to tell us a history of the hierarchy of money, which Professor Merlin had not done. He had set up a theoretical construct in which gold currency and deposits were on a three tiered hierarchy. But he admitted that it was theoretical because gold isn't part of our financial system anymore. And he wrote the paper in 2012. So he wrote it in this highly theoretical way. And I said, this is an opportunity to tell the history of the hierarchy of money and then introduce bitcoin. And through time, I wrote the book, chaptered it out, ended up writing 75% of the book. My wife helped me name it Layered Money after a long couple of weeks of trying to name the book and failing day after day after day. And then she's like, what is this book about? It's about layered money. She's like, that's the name. But the pyramids themselves were already formulated in my mind. I had already sketched them out in my notebook. The hierarchy lens was already there for the whole book itself. So Layered Money the title and then the word layer had already been written 100 times in the book. So Layered Money ended up being the perfect name. And I do want to give credit, full credit, where it's due to Perry Merling that the hierarchy concept is his. But that's what research is all about. You build on previous research. And that was the goal with Layered Money.

Absolutely. And sometimes concepts get buried in academic papers and somebody needs to popularize them and build on them. And I think you've done an amazing job of that in the book. Speaking about something you've mentioned already, which is that a lot of the book covers the history of monetary systems. In fact, I think when I was reading it, it was about half the book at least is about the history of monetary systems. I'm wondering if for your readers, that's been a bit of a surprise because people probably go into the book thinking it's a book about bitcoin and it's going to go straight into bitcoin, but we don't actually get to bitcoin until about halfway through the book. So has that been a challenge for you in terms of positioning the book for readers? And can you just give a quick sales pitch to readers of why it's so important that you do go through all that history before you get to bitcoin?

Sure. So in terms of the marketing of layered Money, I had, let's call it five to ten podcasts lined up from for myself upon publishing. I had that opportunity because I had written articles over the past or the previous couple of years, and I had appeared on a few media outlets. So I knew when I was writing the book that I would have the opportunity to promote this book to the first couple of thousand people. And I even had confidence that based off of my own social media and my own email list, that I knew I could sell the first thousand books. And so it was a huge motivation for me because I knew that I can sell the first thousand, but it has to be amazing for it to have legs, and if it's not, I'll never sell more than that. 1st so writing the book as a history of money and not even using the word bitcoin until the last one third of the book was very deliberate, because I had to explain the history of money and the history of credit money to explain why bitcoin is different. And bitcoin's only legitimate comparison in the history of money is gold. Even though gold today has 20 times the market value of bitcoin, at one point in 2021, that number had fallen to call it six or seven, where gold was only six or seven times the market cap of bitcoin, which was a really rapid ascent in that brief period of time. But in reality, there is no other way to explain bitcoin properly from historical perspective other than to tell a story of gold. So that is why I had to go back centuries, because we've actually been without gold as money for 50 years as a globe entirely, and then partially for closer to 100 years. 1933 was when FDR issued the executive order to seize retail holdings of gold. And so I'm sorry that I'm having some brain fog whether it was 1931 or 1933 at this moment, but it was one of those it was in that window. So we've had we've been without gold for quite a long time.

61 two was 1933.

Thank you. And so we've had a century without gold and then millennia with it. And we have this new thing called bitcoin, which if you read satoshi nakamoto, the anonymous creator of bitcoin's work, he, she, or they often cited gold as part of the inspiration and the security model for bitcoin itself, as well as a lot of the previous. For example, Nick sabo, a famous cryptographer, invented bitgold a few years prior, which had a very similar construct to bitcoin. It's why some people think that satoshi is nick sabo. I have no strong opinion here or there, but the inspiration for bitcoin was largely gold, so I found it imperative to explain that to the reader. And this was meant to be an intro to bitcoin, but also an intro to money. And that is also why bitcoin is not in the name of the book. It's called layered money. Bitcoin is in the subtitle of the book from gold and dollars to bitcoin and central bank digital currencies. I wanted to show the reader that they were about to get gold, dollars, bitcoin and cbdc knowledge from this writing. And so that was my pursuit. Yes.

And as Dave kopeck and Dave short will tell you, I often relate the structure of an author's book to the premise and purpose of it as well. And I do feel like the entire structure that you put forth was a layering in and of itself. And feel free to correct me if I'm wrong, but I thought it was super effective.

Yes. Thank you for that. And in order to really I knew when I set out writing the book that part of the height of the climax of the story was how complicated the current monetary pyramid is. How complex are the layers today? Well, the answer is very. And how complex were they a thousand years ago? Not very. So I did have to layer the story to show how the layers went from very vanilla, which is in the preface, kind of a gold coin and a gold certificate toward the end of chapter six, and the money market crisis of 2007, and then the great financial crisis of 2008, 2009, the system and today even itself. It's a very complex, layered situation in which the federal reserve post seven has had to completely backstop. That's why I've characterized the fed as the lender of only resort. Switching up the name from lender of last resort. I do that in the book. And it really does set up a lot of the reasoning to bitcoin as a neutral, apolitical, non government currency, that it doesn't have that exposure to a lender of last resort, for better and for worse. It's also why it's part of what I'm writing about a lot these days at the bitcoin layer, my publication, why bitcoin and the dollar will coexist for decades to come, why bitcoin isn't here to replace the dollar and even comparing it to the dollar is, I feel, a poor juxtaposition due to the credit money system. The credit money nature of the dollar system and the commodity nature of bitcoin. They're quite different in their existence, actually. And so the two will coexist as they do today.

That's really interesting, and I think we may go deeper on that a little bit later, but for some of our listeners who may not have read the book, and I'm sure they've heard of bitcoin but maybe don't understand it, would you mind just explaining what is bitcoin? Explain like I'm five or to grandma. What should our listeners know about bitcoin?

Sure. Bitcoin is a digital or a virtual or a numerical commodity. It's a commodity because it's something that you can hold in your hand, except that the thing that you hold in your hand is a number. So you can store it in a written form or in a computer form. That number represents a key to a piece of property on this network called the bitcoin network. So bitcoin really refers to two things actually. Bitcoin is a network, a software, it's a software network, and the money within that software is also called bitcoin. So when you hear the price of bitcoin is at $20,000, that's the price of the unit of bitcoin in the software, which is also called bitcoin. So bitcoin is a software and a money within that software. And part of bitcoin's characteristic is that the introduction of the supply of it is known from now until its last day. And that's something that's very unique, that takes a little bit more of it explain it more than explain it. Like I'm five version how that comes to be. But bitcoin is a numerical commodity. Yeah.

And one of the key contentions that you make, Nick, or more of a fact that you cite, is that governments can rarely resist the temptation to devalue and print more money. And I was wondering, in the context of bitcoin, can you explain that a little more, talk about some of the key weaknesses of earlier monetary systems and maybe how bitcoin improves on those weaknesses?

Sure. So more and more these days, I'm starting to describe bitcoin as more of a check on the current central banking system. It exists to have a price that is a reflection perhaps of the world's opinion of the soundness of the central bank currency. Gold has been described as that over the last 50 years as well, where gold is an inverse of the trust in the government currency. I feel that bitcoin is in part gaining demand from that same place. That's why a lot of gold advocates have become bitcoin advocates, for example, or a lot of gold advocates are also starting to realize that bitcoin fits their narrative perfectly because it's a referendum on the idea that governments can't resist the temptation to print money for themselves.

And you use the term antifragile as well. And I thought that was interesting, that bitcoin only becomes more resilient as there's more strife and strife and conflict in international and global monetary systems.

Yes, and I know that there's a lot of now derivatives and market manipulation in the bitcoin futures market and just manipulation simply from the perspective of large leverage players that wouldn't be able to affect the price otherwise if there wasn't a derivatives market. But bitcoin is really this wild west of a market where the price of bitcoin, it's become so resilient to really everything that it's gone from this pretend money to a trillion dollar network in just a few years. And that really has come from its anti fragility. Every time it's been attacked, it gets stronger. And even the introduction of alternative cryptocurrencies in later years have caused bitcoin to seek updates to the network that make the network itself more usable and scalable, which has happened as well. So bitcoin really is it exhibits this anti fragility and to bridge it. Back to your other question about governments. Governments can't resist the temptation to print money for themselves for two reasons. One would be the straight corruption and theft of government, which has happened across centuries and across continents, but also the elasticity to be countercyclical. Which means when the economy slows, the government tries to do fiscal stimulus and the central bank tries to do monetary stimulus to act as a counterbalance to a slowing economy. And both of those exist today, right? We have corrupt leaders that are stealing, and we have governments and central banks that are acting in a counter cyclical way. Bitcoin cannot be expanded in its supply. It does not have the elasticity. It doesn't have any discretionary actors either like politicians or central bankers that could make that decision for it. And that's why it is gaining this popularity as the alternative to government currency, because it can't be devalued. The supply is known. And I do think that that's enough to warrant the demand for bitcoin from people across the world for many generations to come. Just that simple use case as an alternative store of value to government money and the government money system, and even a hedge on that system being able to sustain itself. So if you'll allow me to just talk about the Federal reserve right now, the Fed has raised rates. In a couple of weeks, it'll be from zero to 4% in just a matter of six months or eight months. And as it's doing that, it's the opposite of printing money. It's the opposite of monetary profligacy. Quantitative tightening is also the rundown of the fed's balance sheet. It's the opposite of printing money. It's the vacuuming of money or the destroying of it. So governments also and central banks also go through cycles. Is it possible that bitcoins rise from 2009 to 2021 is over forever because the central banks will never print money again? I mean, I pose that question not to be dramatic or to take either side, but the point is here that bitcoin exists as a check on the government printing and spending money forever. But as we have the last eight months of evidence, it's not always the case that the governments are printing money. Sometimes they're destroying money and making liquidity less available. Now we'll see how that tide turns over the next twelve months. But bitcoin will, and the bitcoin price will act in accordance, I believe, with how investors look at the other side, which is the traditional system. And all of this stuff is what I'm writing at the bitcoin layer. It's really fascinating stuff and I enjoy doing it.

Thanks, Nick. And we're definitely going to put a link to the newsletter in the show. Notes. I want to ask you another meta question about the book. I noticed in the book you didn't spend a lot of time on the concept of blockchain. It's definitely defined in the book, and there's some paragraphs going through it, but I think it's fair to say that there's not a deep dive into blockchain. Was this for space reasons? Was this because you didn't feel a deep knowledge of it is necessary for the average reader? Or is it because it would have gotten too technical?

Yes, that's a good question. So I did address the word blockchain in the book and define it as a chain of blocks. And I defined chain and I defined blocks, and I did that because the word blockchain comes from a chain of blocks, and a block is a data set of bitcoin transactions and the chain is how blocks are connected together through time via the bitcoin mining process. So the word blockchain is a highly bitcoin focused word. It is used today to describe more distributed databases. But I don't like the word blockchain to describe that. The better word to describe that is distributed ledger technology or DLT, which is how central banks are using the word. Now, they're not using the word blockchain to describe their innovations or their derivatives. Those things are distributed ledgers. They're shared spreadsheets, glorified shared spreadsheets. They have a use in this world. I believe that a lot of things, including security, settlement and even supply chain sort of infrastructure can be taken to a more distributed database, distributed ledger type of environment. But that doesn't make it a blockchain because the word chain comes from bitcoin mining. Bitcoin mining is a proof of work exercise that requires a lot of computational energy and a number crunching process that is bitcoin mining and system of chance as well. And none of those things are present in a distributed database. A distributed database does not take an outsized amount of energy to operate and it also doesn't have any computational lottery system. It has cryptography. Right? It would have cryptography involved, but that doesn't make it a blockchain. So I did define the word blockchain as a bitcoin word, and I didn't even acknowledge I do believe that I said that blockchain isn't has been used to describe something that I believe is better called distributed ledger technology. So that would be my semantic answer to your question, if that's okay.

Yeah, that's great, thank you.

In the book, you propose that bitcoin could be the base layer of global monetary system in the future. Could you talk a little bit about that and perhaps what are things that individuals or businesses could do to prepare for a reality like that?

Yes, and the reason I believe in that thesis is based off a multipolar world in which bitcoin is the only neutral asset that is recognized across political spectrums and across continents. I believe it's already exhibiting that at the retail level. It has not exhibited that at the corporate or the national state level. So my belief is that bitcoin establishing this trust across the world from regular people. And this is backed up by, for example, the university of cambridge conducts an annual study on number of bitcoin users or holders. It actually classifies it as a crypto asset study there. But what we're seeing is that now the growth has gone from 100 to 200 million people across the world that are using this technology in some way. And governments are slower than people to get to this trend, but I believe that they will eventually get there, which bitcoin starts as a minor but existing position on balance sheets as a reserve asset. Just as central banks all around the world own gold today, even though gold isn't a formal part of the monetary system, central banks own it and they own plenty of it. And actually Russia and China have muscled their way into much larger gold stocks today versus 15 years ago when the financial crisis started. And so that's evidence to me that bitcoin will find its way into that gold narrative. And that's really the idea here, is that not that we're going back to a world in which every government currency is pegged to bitcoin like it was pegged to gold. No, I don't believe we're going all the way back there, but bitcoin finding its way onto the reserve side, the asset side of the balance sheet of governments, companies, and banks and then issuing liabilities against that gold. Whether it's loosely bitcoin denominated or domestic currency denominated, the bitcoin exists where it exists on the asset side of the balance sheet. And in that way it's base layer money. It's not issued as credit as dollars are. And I know you wanted to discuss alternative cryptocurrencies. What other cryptocurrency is going to make its way on the asset side of the balance sheet of a central bank? I believe none other than bitcoin. And it might take many years for this thesis to play out, but I'm okay with that. And I wrote layered money to give readers an idea of what that might look like in the future. What would it look like if a central bank owned bitcoin on its balance sheet? It would also probably own government bonds of the country that issued its charter, and it would probably be only issuing liabilities in that currency and not in bitcoin, but simply its existence on the asset side. And companies will duplicate this. We saw tesla dip its toes into the water and then sell 75% of its position when it got, you know, a little bit unpopular to hold that right. Tesla is not tesla's in the business of making cars and battery packs, not predicting the future of the monetary system. So shareholders probably had a problem with that. But the expression of it will be repeated. And I might be very early to this thesis, but it is mine. Yeah.

And almost a twist on dave short's question in terms of preparations being reactive versus proactive, you spend a chapter or so talking about central bank digital currencies. I was wondering one. How do they relate to Bitcoin? Are these examples of central banks being reactive? Are they being proactive? And what are some of the key holdups with Cbdcs?

Yes. So I can start in the United States. The Federal Reserve wants to do this, but it's going to have to be legislated by Congress. And we all know how long something like that can take. So we might not get one in the US for many years because of politics. I know that the Fed wants to do one now. They've written a bunch of papers about it. They believe that it can improve the functioning of the financial system. And one of my predictions is that it can also give the Fed and Congress an easier way to enact stimulus in this hybrid monetary and fiscal stimulus sort of way that I describe in my book, which is the idea of digital helicopter money coming straight from the bank, starts straight from the central bank to the populace. I believe that the Fed wants to do all these things. It wants to do so so that it doesn't disrupt commercial banking. Because if everyone has access to Fed coin, why would they need their checking account? So you fire your commercial bank. The Fed wants to avoid this as well. So those are some of the issues to a Fed coin. But I feel that we'll see it in Europe pretty soon. And by pretty soon I mean within a few years here. So we'll see a digital euro, and I've already written about this, how Europe has already acknowledged that there will be caps for the amount of digital euro one can hold so as to not replace the function of commercial banks in Europe. Europe is also conscious of this idea that a central bank digital currency can lead to a family firing their commercial bank for not needing it. What if they get paid in digital euro by their employer and their landlord and their grocer take digital euro as payment and they're not active borrowers. Then they won't need anything other than digital euro. If they want to go buy a home and take out a mortgage, they'll need a commercial bank to do that. The central bank is unlikely to issue them a mortgage in the form of digital euro. These are some of the issues around Cbdc right now. China already has one, but China is a unilateral decision maker that's less so the case in Europe and much less so the case in the United States. Eventually we're going that way in Europe and the US might be late to the party because of politics. I really would be loathe to predict when politically it might be fit for the government to do so. But a crisis is always the impetus. So maybe the next huge fiscal stimulus, the acting government will be able to squeeze in a Fed coin authorization. So it's something I'll be watching closely. And right now there's not a lot of activity as the global economy is in contraction and interest rates are causing all sorts of disruptions in asset prices and even the banking system itself. So you notice that nobody's talking about Cbdc right now and haven't really all year as markets turn to turmoil. But when markets calm down, then the conversation will come back and I'll be here to watch it as well.

Thanks for that, Nick. As we get close to the end of our conversation, I know there's some listeners who are going to be thinking, what about all of the other cryptocurrencies? And you've touched on this already a little bit. And I think it's fair to say in the book you pose a somewhat skeptical attitude towards other existing cryptocurrencies and tell me if that's not fair. I don't want to do a deep dive on this, but I'm wondering if you could tell us a bit about why alternative cryptocurrencies today aren't as important as bitcoin. And maybe to go with that, if you could briefly tell us the difference between the number one alternative contender, I guess you could say Aetherium, which is my understanding is it's proof of stake instead of proof of work, which might have some implications for people who are worried about the environment?

Yes. So I'll separate the answer into a couple of parts. First of all, as I look at my screen, the market cap of bitcoin is $366,000,000,000 and ethereum is $157,000,000,000. The next down the list, that's not an exchange coin or a stable coin, is 24 billion in market cap, and the next one is twelve. So when you go from 366 to 157 down to 24, what we're talking about is a drop off from two to three. That actually makes three on down, not even worth entering the conversation. So I would throw out every other cryptocurrency besides ethereum for the purpose of this conversation because they don't even warrant the market value. And we've had ten years of alternative cryptocurrencies. Why hasn't one even come close to the number two spot? There's a reason for that. So let's throw out everything else, if you'll allow me to, and then just compare bitcoin and ethereum. Now, I don't mention the word ethereum in the book because I didn't feel that it empirically deserves to be in there, that I never captured the number one spot and never really seriously challenged bitcoin. But as a global macro researcher, I do cover ethereum now in my publication in terms of its price versus bitcoin, not necessarily its fundamentals, but how it trades versus bitcoin. And because at approximately 50% of bitcoin's market cap, that's empirically unwise too, or not even unwise, it would be a non fiduciary of me to ignore that this thing exists that is challenging bitcoin in some way. So I do want to acknowledge that as well before I talk about ethereum. Now, ethereum, it is very different from bitcoin because it does appear that Ethereum has a center, meaning that it has a group of decision makers and even a foundation. And the issuance of it was issued to insiders in a way that to me, it really does have a central point of control. That doesn't make it a commodity to me. And then it falls out of that asset class in terms of comparability now that it's proof of stake and not proof of work. Yes, people that are more environmentally conscious might like this switch, but it only makes Ethereum closer to a traditional payment system that has central points of control and failure. And so we already see that as a result of Ethereum users having to use third party platforms, some addresses were blocked because of certain donations and the people weren't able to send Ethereum to each other because it does have these central gates. And that's kind of the nature of the network. Now, proof of stake also removes the security mechanism that keeps bitcoin decentralized, which is this guessing process of mining. And the only way to guess is to have fast miners. The only way to have fast miners is to have the power and humming. And so, yes, bitcoin consumes a lot of energy. Not as much as washer dryers across the world, may I add, but it does consume a lot of energy. And that energy to bitcoin users and investors is worth it because it protects bitcoin from having a central actor. So bitcoin is very different than Ethereum and they don't really belong in the same asset class to me. And that's why I don't do any fundamental research on Ethereum, because I don't view it as a global macro commodity. I view it as maybe a tech company. And people might want to own that tech company because of its potential, but it falls out of my research wheelhouse because it really does resemble a tech company, a software company, and I don't cover any Nasdaq companies and I don't cover Ethereum. And I think it's kind of for the same reason. I hope that's a satisfactory answer on that topic.

No, Nick, that was a really apt comparison, I think, and I've never thought about it that way before in terms of comparing bitcoin and Ethereum. You know, one thing I mentioned in our pre interview conversation is I actually unwisely missed out on a roommate's offer to do some bitcoin mining in our shared apartment back in 2014 2015. I've never been a bitcoin denier or anti bitcoin, but I've also never been an evangelist. And I was wondering if you put on your not denier hat for a second, but just wondering what do you see as the number one argument against bitcoin or a longer term risk? I know you mentioned the environmental impact, but what do you see as the number one argument against bitcoin and then how would you dispute that?

So I see bitcoin existing far into the future under any circumstance probably the biggest hurdle to bitcoin would be a market value that doesn't continue to rise. And in that way it will never get off the ground as really this global reserve asset and it will remain this more fringe investment. That's probably the biggest risk to me. You definitely have regulatory risk, but regulatory risk to me is not the same thing as a danger to the price. Because if some regulatory regimes are very strict, let's call it the United States, the biggest potential regulator on it, let's say the regulators come down on bitcoin very hard. That doesn't necessarily mean that bitcoin will not have success. It actually means that it might have it might travel to other countries where it sees even more success, and because of jurisdictional arbitrage, receives favorable regulation. So I do think that a non rise in bitcoin's market value is probably its biggest risk.

Thanks for that, Nick, and thanks for everything today. I'm wondering if there's anything we didn't talk about that you'd like to mention. Of course, we're going to put links to your newsletter, to the book in our show notes, and also how can our listeners follow you on social media. And one final question, I'm making like kind of three questions in one here, but who should read your book? Is there anyone who would read your book and be like, you know what, this wasn't what I expected. Who's the target audience?

Yes. Anybody who likes history and anybody who's remotely interested in why bitcoin has become popular and anybody who's interested in understanding why markets are behaving the way that they are. A little bit of history will help. Now, reading layered money won't explain to you why interest rates have gone up 4% in eight months, but it will give you context for what is the central bank, what is monetary policy, why does bitcoin exist, and some of those basics. So I really think it is a book for people that are curious, where can people find me? They can find everything that I'm doing right now at the bitcoinlayer.com. And my book is called layered money. You can find it on Amazon, audible as well. But at the bitcoinlayer.com, you can subscribe to our newsletter, our substation. You can also subscribe to our YouTube channel and subscribe to our podcast. So what we're doing right now is we're putting out a lot of global macro and bitcoin content four to five times a week. We also have a new daily market show that's 1 minute long, a 1 minute highlight show for you every morning. You can find all of that at the bitcoinlayer.com. And people can find me on social media, on Twitter at time value of BTC. Awesome.

We'll put a link to that in our show notes too. Thank you so much, Nick.

Thank you guys for having me. I appreciate it.

Okay, next month we're going to be reading team of teams new rules of engagement for a Complex World by General Stanley McCRYSTAL. Kevin, this was your pick. Can you tell us a bit about the book?

Sure.

So Team of Teams was written by General Stanley McCRYSTAL and some of his mentees and colleagues. They show how their experiences leading in Iraq can apply to challenges in business, nonprofits, and really organizations of all types. They share best practices that scale wide and fast, that encourage experimentation and stress testing, that facilitate sharing and transparency, and support the best right and the fastest decisions. It's all about combining the power of large organizations with the flexibility and agility of small teams and small organizations to transform teams. I hope our listeners will read along great.

Thanks for that, Kevin. Okay, is there anything that the two of you want to plug and how can our listeners get in touch with you?

You can follow me on Twitter at.

David Gshore, and I can be found on Twitter at hudaxbasement H-U-D-A-K-S basement.

And you can find me on Twitter at Dave Kopeck D-A-V-E-K-O-P-E-C-I want to thank everyone for listening. I want to welcome all of our new listeners from the last few months. The pod has really been growing. Want to remind you to subscribe to us on Spotify or your podcast player of choice and we'll see you next month.