In der heutigen Folge sprechen Jan-Paul und Chris in einem englischsprachigen Interview mit der Analystin und Ingenieurin Lyn Alden über ihr neues Buch “Broken Money”, sowie dessen Thesen rund um das Thema Geld und natürlich auch Bitcoin. In den ersten 24 Minuten fassen Jan-Paul und Chris das Gespräch in Deutsch für euch zusammen. Direkt im Anschluss folgt das Interview mit Lyn in voller Länge auf Englisch.
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- Wences Cesares explains Bitcoin
- WiWo-Artikel von 2014 über Wences Cesares: Der Bitcoin-Banker von Südamerika
- Ankündigung zur deutschen Version von Apricot Media
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- Webseite zu Lyns Buch “Broken Money”
(00:00:21) Erläuterung des Formats
(00:02:57) Wie ist der Titel entstanden?
(00:06:27) Ist Geld nur Technologie?
(00:09:30) Waren- und Buchgeld
(00:14:59) Übersicht der Fragen
(00:15:41) Herausforderungen im Bitcoin Kontext
(00:20:45) Einschätzung der aktuellen Lage
(00:22:34) Infos über das Buch
(00:23:59) Start des Interviews in Englisch
(00:26:03) Warum ist die Definition von Geld wichtig?
(00:28:15) Geld als Technologie für Fortschritt
(00:30:46) Wie kam es zu dem Titel?
(00:33:53) Kredit- und Warengeld
(00:37:57) Hunderte Fiatwährung in der Welt
(00:41:48) Wird Fiatgeld von der Technologie outperformed?
(00:44:11) Ist Bitcoin die Lösung für kaputtes Geld?
(00:50:00) Der Gebührenmarkt in der Zukunft
(00:54:36) Nostr Post von Lyn
(00:57:16) Das Thema Privatsphäre
(00:1:09:20) Bitcoin ETF
(00:1:16:18) Einfluss von Kriegen auf den Finanzmarkt
(00:1:20:30) Letzte Worte und Outro
Welcome to Nodesignal, your Bitcoin frequency. Today in English. You will find out why in a second. I found two nodes on our network today, my friend Jan Paul. Hey Jan Paul!
And we are very honored to have found another very wonderful node in the network, Lin Alden. Hey Lin!
Lyn Alden (00:23.926)
Thanks for having me.
Cool, thanks that you accepted our invitation. Yeah, before we start, Lynn, do you have the block time?
Lyn Alden (00:34.201)
So the block height is 814-091.
Yes, I can confirm that. You too, young Paul?
No, I don’t have my block time. Yeah, but I guess it’s right. 2 can confirm the block height, so it’s good.
All right. Yeah. All right, the Note Signal podcast is a value for value podcast. If our content adds value to you, feel free to give us back some value and send us a lightning tip via our website, notesignal.space. Or listen to the podcast via a podcast 2.0 player to stream sets or send us a boost while listening. We share the revenue from each episode with our guests. But now back to the show.
Today we talk to Lynn Alden about her new book, Broken Money. I’m sure that everyone listening knows exactly who we have the honor to speaking to. However, if anyone doesn’t know yet, Lynn, what should listeners know about you?
Lyn Alden (01:34.425)
So my background is a blend of engineering and finance, specific medical engineering, but then I went into engineering management and running the finances of an engineering facility. These days, I focus on applying systems engineering analysis to financial markets, so the structure of monetary systems specifically. And I’m the author of Broken Money. I write at
Lyn Alden (02:02.741)
work with Eagle Death Capital to do Bitcoin focused venture work. And so both from an investing standpoint and a research and analysis and educational standpoint, I do a lot of work in the Bitcoin space as well as the broader macro space.
All right, thank you.
So the first question that we have is kind of a meta question because you wrote a book titled Broken Money. So it’s apparently a book about money. But the first chapter or first part in your book is the question, what is money? So why is that the first question that needs to be answered in a book about money?
Why did you take that approach?
Lyn Alden (03:13.793)
Because I think if we’re exploring why money is broken or if we’re making the argument that money is broken and explaining why, it helps to define what is money? What problems is money trying to solve? Because it’s hard to argue that something is deficient or broken if we can’t even articulate what it’s supposed to be doing or what it’s ideally supposed to be doing or why people use money in the first place. Why does this keep re-emerging around the world in different ways? Money’s a good that…
this kind of naturally keeps emerging over and over again. People use it to solve specific problems, to make trade easier to do, and it’s a type of signaling mechanism. And overall, in order to explore what makes a good money or why money’s broken, it helps have a foundation. And I also try to look at multiple schools of thought on money and kind of reconcile them, because what I try to do with my work in general, and this book specifically,
is speak to a wide audience. So not necessarily just speaking to people that already agree with everything I say, it’s basically going out to different camps out there and understanding how to speak their language so that I can then give them my thoughts. Because it’s hard to share something with someone if you’re not even fully aware of their argument or what they might do. So what I kind of do in the book is I say, okay, here’s like multiple ways of looking at it, here’s how I look at it, or here’s how I reconcile certain ideas.
So the book takes a very kind of high level view to start off with, it says, what is money? And then we go kind of in the history of how money developed, how banking developed, why, and it specifically focuses on the technology lens of money. So how did ever changing technologies change how we use money and what money we use in the first place? And so just having a theoretical foundation helped with those practical analysis.
Thank you, Lynn. That leads me to my next question. When I read the book, I couldn’t get one perspective that you supposedly followed out of my head. You describe money in its historical and current form as a technology. From my point of view, this perspective is what makes broken money so unique. Was it your goal to look at money as a technology and thus re-describe it from an engineer’s perspective?
Lyn Alden (05:36.461)
So I think it is somewhat organic. I mean, people approach things in ways that kind of make sense with their mental model. Maybe my engineering background predisposes me to that. But I feel like there’s a lot of literature that explores money from the political realm. So especially monetary history, they say, okay, here were major points in history where this political leader did this, or this central bank leader did this, and this was the…
outcome, it’s very kind of social and politically focused. Whereas my view is that politics and things like that change things temporarily and locally. But technology is what drives things forward globally and permanently. It’s like, why does the whole world kind of move in a general direction? It’s largely because technology has changed something so foundational that older ways of doing things become untenable or the incentive structures just no longer reinforce themselves.
and it’s a new world now. And you can kind of think of it like, if you’re talking about a country, for example, and you want to improve people’s quality of lives, one way is to have better politics, but another way is to invent something so useful that it just permanently improves everybody’s lives and then even spreads globally and improves their lives too. So for example, the people who discovered electricity and invented electrification and the light bulb and refrigeration and running water.
and basic medicines and basic surgery techniques and anesthesia. These has such tremendous impact on people’s lives in the global sense. And money kind of falls into that bucket as well. There are certain things that we take for granted, like the printing press or paper or the telegraph or of course Bitcoin. New technologies that come along that are basically either mediums
that allow for faster transaction speed and information speed, or different types of encryption, different techniques, including old school analog encryption, or just like printing presses and methods of securely transferring value. And these things are a very under-explored area of money.
It sounds a little bit like when I look at your title, you say it’s broken money. So is the technology broken? So my question basically is why did you go for that title? And maybe you can share with us, did you have any other titles in your mind while writing and why did you finally choose broken money?
Lyn Alden (08:14.233)
So one of the themes I explore in the book a lot is that money is like a ledger and different, as we use different ledgers, there’s different controllers of those ledgers. So one of the initial working titles was Money, a Story of Ledgers and Who Controls Them. But that just didn’t really have the punch to it. And so the title came later after the book was mostly fully formed. I felt like Broken Money had a more direct impact to it.
And what I really wanted to stress was the way I would describe it is not that technology is broken, but that we’re stuck in a local maximum for technology. So basically, a local maximum is something where you’ve reached a higher point than you’ve been at before, but you’re nowhere near the top. It’s like you’re stuck in something that seems like it’s working, and you might not even know how things could be better, but they could be way better.
Lyn Alden (09:12.485)
that we’ve been stuck in for about a century and a half is largely that transaction speeds are at the speed of light. So ever since the invention and specifically the adoption, the worldwide adoption of the telegraph, and then of course the radio, the telephone, the internet, all of these technologies, we can move information including transactions around at the speed of light, but physical gold settlements, physical money settlement can’t move that quickly. And it can’t be verified that quickly.
and it’s costly to do so. So we’ve basically bridged that gap through ever greater levels of centralization and abstraction. And so that’s the local maximum we’ve been stuck in. And what it enables is that you can have 160 plus different currency bubbles. So money’s supposed to be a unifying factor in trade, but when you have 160 plus different currencies, you’ve almost like recreated the barter system. You have 160 different local monopolies.
And they’re able to do that because banks and central banks basically have had a monopoly on fast long distance value transfer. And so if they can control their borders physically, then they can control how much cash or gold people can bring in or out of airports. And if they control the banks and what wires they can send or receive, then they basically have a complete lock on their financial borders, or at least a very tight lock on their financial borders.
Lyn Alden (10:39.917)
That’s been in place really ever since the second half of the 1800s, so the adoption of the telegraph all the way up to the invention of Bitcoin. And the era that we’re in now is we now potentially have tools to address the problems we’ve been in this local broken money kind of environment because now we finally have ways to have fast long distance value transfer that are not based on credit, that are instead based on the bear asset itself moving nearly at the speed of light.
Speaking of credit money and the theory behind money itself, there are two opposing theories of money and you unify them in your book. In many of the current Bitcoin or money books, a distinction is made between commodity and book or credit money when it comes to defining forms of money. Refreshingly, you do not share this definition. You describe it in such a way that ultimately both forms of money mentioned above are a ledger.
That’s it. Okay.
How do you come to this conclusion and how can this definition be applied in particular to so-called commodity monies such as gold?
Lyn Alden (11:48.309)
Yeah, I think the way to apply it to gold, so take a step back for a second, the two schools of money, credit money and commodity money, they really come down to the two ways that you avoid barter. Either, if you have a double quintuple wants, so you need extra spears and you need more spears but have extra furs, and I need more furs but I have extra spears, we can then do a trade, but that’s a very specific combination and there’s more ways that trade can fail. And so there’s…
Basically two main ways to solve that. Either we solve it through time deferment. So if one of us has what the other one needs, but the other one does not have what the other one needs, they can say, okay, well, you owe me that at a later date or informally, okay, here’s a gift, and if I ever have problems later, maybe you’ll be able to help me out. So either informally or formally, you can defer that through time as credit. And the other way is to basically, it just arises naturally.
that some commodities are so desirable and so useful as money. They’re portable, they’re divisible. You can never really have too much of them. They’re long lasting, they’re scarce, so they’re very hard to make more of. They naturally have these monetary aspects, and they can be used as one side of most transactions. They’re the most sellable good. They’re the good that when you don’t know what you really want, you can always just take more of that good. So I never have too many dollars or gold coins, for example.
Lyn Alden (13:13.773)
but I can have too many pieces of furniture. There’s too many chairs, I don’t need any more chairs, but I’ll never turn down an extra dollar or gold coin or Bitcoin, for example. There are certain goods like that. And so those are kind of the two ways to make trade easier to do. And so they’ve had competing theories on what is money. Now, there’s a number of people that point out that basically money is a ledger. And one of the original ones to mention that,
Lyn Alden (13:41.309)
And it’s funny because it’s not really in literature. Like you can’t really find books that mention this. But the one that really kind of spearheaded that idea was Ventus Casaris like a decade ago. He would just talk about that. He’s record on speeches of making that argument. But it’s not really in literature too much. And it wasn’t really presented as a way to unify these ideas. But I think that’s the best application for it.
Which is basically to say that whether you’re using credit money or commodity money, you’re relying on a ledger of some sort. There’s a certain number of units and a method of controlling who has stake in those units, who controls those units. With a credit ledger, it’s more obvious. It’s either written or orally administered. With a commodity money, basically nature is the administrator. If you can imagine a real-time strategy game or a God-level view of the area, there’s a certain number
of gold coins, gold bars, or if it’s hunter gatherers, maybe shell beads, whatever the money is for that environment, there’s a certain number of them. There’s a certain kind of process for how they can be made more of and they’re exchanged through physical possession. And so if you were omniscient and you could kind of see all the moving around, it’s essentially a ledger. It’s just that no one participant in that system can see the whole ledger.
even though that ledger is still basically there, it’s just being governed by nature. And so historically, nature has been the more reliable ledger, right? So we can’t cheat gold as easily as we can cheat credit monies. But basically, these are the two types of ledgers you rely on, either other humans controlling them or falling back to nature when humans let us down.
I have a follow-up question. You said that it sounded like the actually 160 currencies that we have worldwide. Sounds like an anomaly, right? It should tend, at least it sounded like this to me, it should tend to be less, maybe just one. Is that the optimum for money, to be just one money for everyone? Yeah.
Lyn Alden (15:58.769)
One would be ideal if a money had no shortcomings. Historically, it’s usually been two or more because no money has been perfectly able to meet all things. So for example, the reason that bi-metallic or even tri-metallic standards were common was because you’d have gold, which is in most cases the best money, but it’s not divisible enough for the middle class, the working class, like one small, the tiniest gold coin you can realistically make.
is worth more than many small or medium-sized transactions, worth more than many days of labor, for example. And so silver would be common as a second tier of money, and sometimes even copper. So actually, double money systems were common. You’d have, for example, grain and silver in Babylon. You’d have cocoa and copper in parts of South America. These kind of double systems were common.
And then what they generally share in common though is that when you present them to an external culture, they’re usually recognizable as valuable. If you give cocoa to someone and explain what chocolate is, it’s inherently a useful thing. They can give some value to it. If you have different empires that both use gold and silver, but maybe they denominate it differently, you can still figure out how to translate one into another and make trade.
in maybe a little bit more friction, but there’s a way to do it. Fiat currencies are anomaly in the sense that you have 160 different completely different currency bubbles and their sellability, their desirability rapidly falls away outside of their borders with the exception of the top two or three hegemons of the world whose currencies have more global reach. But outside of those…
there’s almost no use for that money outside of its own jurisdiction, which is, that is historically abnormal. And it’s a large part because we exist in this world where for the first time, speed matters. So up until they mentioned the telegraph, the harder money always won out. So silver beat grains and gold beat silver. Over time, we gravitated towards the precious metals and most other commodities. Our technology became too good. We got too good at making them for them to be useful as money.
Lyn Alden (18:22.965)
until we found gold and silver and that kind of settled everywhere. But with the telegraph and speed of commerce being as fast as it is, speed is now a variable and so the dollar has been able to kind of defeat gold in terms of market cap and just overall network effects, saleability, usefulness. And that’s large part because although the dollar is not as scarce as gold, it’s still
It still has a reasonable supply growth rate compared to many other things. And then it can be moved around quickly and efficiently. And so that’s what the world’s been based on. But of course it’s very imperfect. I mean, it’s, you know, the fact that it does inflate a lot more quickly than gold is a problem. The fact that it’s centralized is a problem. And then the fact that other countries replicate the same model, but theirs is far worse. So you can be stuck in…
any number of these other jurisdictions where you have like 25% annual money supply growth, and you’re just constantly getting diluted, both your savings and your wages. And it’s hard for you to get external monies, or at least until recently. And that’s in large part why money’s broken. It’s an anomaly.
I have a follow-up question to that. So you very nicely showed that commodity money has been outperformed by technology, by information technology, technology in particular. Do you think that fiat money as it is now, is being outperformed by technology again? Is it repeating itself in the other direction?
Lyn Alden (19:59.189)
I think we’re in the early stage of watching that happen. It took a while for fiat currencies to kind of, especially with government force, kind of outcompete gold. Right now, when you look at Bitcoin’s market cap compared to fiat currencies in general, it’s certainly the trajectory is great. So the rise in market cap, the rise in liquidity, the rise in people taking it seriously.
The number of currencies for which it has passed their money supply in terms of global market value is actually the majority of them now. In terms of global saleability, like if I bring an Egyptian pound with me to countries around the world versus if I bring a Bitcoin with me, which one will be easier to get off my hands at some reasonable market value? Usually now it’s Bitcoin.
unless I’m in Egypt or one of the bordering countries, for example. In terms of most metrics, Bitcoin is ascendant, but it’s still at a very small base compared to overall dollar, network effects, liquidity, saleability, even Euro, yen, some of these other big ones. But certainly the trend is now strongly in favor of fiat currencies being disrupted by Bitcoin.
Lyn Alden (21:23.021)
are getting disrupted by digital versions of stronger currencies. So stable coins give another vector for dollars to enter Argentina or enter Turkey or enter Lebanon, for example. And they break that. I talked about that monopoly of if the country controls its physical borders and its banks, they can basically determine what transactions go in or out. But if you can send some money over an email, if you can send some money with a QR code on a video call either Bitcoin or stablecoins, whatever the recipient wants or both, that breaks all that financial firewall is now more porous. And so now currencies compete with each other more directly in addition to Bitcoin competing with all of them.
Okay, let’s talk a little bit more about Bitcoin. What I find quite interesting is you say it very explicitly in the beginning of your book that your book is not a Bitcoin book. But if you look at the chapters, the Bitcoin chapter is not by far the longest. The chapter before on the entropy of fiat ledgers is a little bit shorter. But why is Bitcoin so dominant in your book?
Is it the fix for our broken money or was there an alternative?
Lyn Alden (22:44.685)
So, you know, originally the book was five parts and I eventually like the Senate like parts three and four were combined. So that was the biggest part, but eventually broke that into two. So what part ends up being the biggest is largely an organizational question. There was no particular reason to break the Bitcoin section up. And so that was standalone, the biggest part in the book, even though it’s a minority of the book as a whole. But but to your prior point, basically.
Because I do view Bitcoin as the most powerful solution for broken money, that it deserves a lot of focus. Basically, it’s one thing to focus a lot on the past, but then give no answers for the future. I’d rather use the past to then help us figure out what the future can look like. But I contrast that with other digital monies that are out there. So I contrast that with central bank digital currencies, which I don’t think are a good idea.
I contrast that with stablecoins, which I think are an intermediate term solution for many people. You know, it basically just the idea of stablecoins or just tokenized assets in general just basically creates more global competition for existing monies. So if an Argentinian wants dollars, it’s just another method for them to get dollars. So I think that that’s useful to the extent that it helps them in the intermediate term. But ultimately, they’re centralized. They’re controllable.
they’re ceding their power to another nation. They’re helping monetize that other country’s money, basically feeding the empire. So it’s one of those things where it can be individually useful, but clearly not a sustainable fix. And so Bitcoin gets a lot of attention because it’s what I view as the most powerful technology. And a kind of a meme I put on Nostr is that it’s not a Bitcoin book. It’s a book about monetary technology and Bitcoin is the best monetary technology. So it’s by extension, it’s kind of a Bitcoin book, but it’s not like set out to me.
Speaking of Bitcoin as a technology, what do you think are the challenges for Bitcoin as a technology and what challenges are there for Bitcoin outside the technology domain?
Lyn Alden (24:59.277)
So I think as part of the monetization process, it’s being challenged to see how solid it is. I mean, when I encountered it many years ago, I think like a lot of people I was, you know, I was never like anti Bitcoin, but I was kind of like, that’s cool. But like, what are the probabilities that’s actually gonna be successful? You know, someone’s gonna, it’s gonna either get diluted with a thousand other ones or it’s gonna get hacked or it’s gonna get centralized. You know, what’s the chance that just shrugs off any and all attacks for it? But after I went through enough cycles, I was like, okay, this thing’s actually not dead yet.
So it’s actually working. So as it goes through these various tests, it’s basically being challenged to see if it’s good enough, if it’s hard enough, if it can be corrupted or broken in any way. So one of them is just obviously the challenge of, you know, Bitcoin has had bugs in the past. It’s by design, it’s the simplest crypto out there. It’s the one that maximizes decentralization, security, simplicity, robustness, but it’s not been immune to technical challenges.
There’s debates around ossification versus having a handful more of soft forks to make it a little bit more efficient, more scalable, things like covenants or other more controversial ones. So that’s a challenge that has to just be kind of, we’ll see how that shapes out in the years ahead. There’s also challenges related to supply chain bottlenecks. So there’s only a couple of foundries in the world that can make chips, like high-end chips for Bitcoin mining.
So that’s a potential centralization point that I think is, you know, there are companies like Block Inc. that are working on further decentralizing that, but that’s actually a broader kind of challenge for semiconductors as a whole. It’s not a Bitcoin specific problem. Is it that there’s really only a few countries in the world that produce the high-end semiconductors for the rest of the world? And that just that happens to also potentially as a tail risk scenario affect Bitcoin. And then it’s just overall.
I think privacy is a really big challenge. So because it’s traceable and then there’s various ways to make it more private, but then those can be more targeted by legal methods to try to disincentivize them or make them harder to do or reduce the liquidity of those privacy methods. So any privacy method is kind of restricted by how liquid it is. And that even applies to other coins like privacy coins. They’re still restricted by how big they are and how many exit and entry points they have.
Lyn Alden (27:26.721)
So whether or not you’re talking Bitcoin or others or layers on top of Bitcoin, they’re restricted by their liquidity. And so what policymakers can do is target them to try to keep their liquidity smaller so that they’re less of an issue. So I think that’s a long battle ahead, I think, and it’s partially a social battle, basically convincing people that privacy is not the same as illegality, that privacy and money laundering are two different things. Rather than just to use the terms as though it’s the same thing and shift the goalpost for like, what is, you know, used to be privacy is the norm. Now privacy is not the norm and privacy is considered weird and to try to get that back. So I think that there are a number of challenges ahead so far. It’s almost 15 years of surviving these challenges, being anti-fragile, any kind of issues it comes up with, it usually gets stronger because of it.
No particular reason to see why that pattern wouldn’t hold, but you know, it’s people have to stay focused.
I have a follow-up question on the technology challenges. We just recently in our podcast had episodes or a deep dive on the block subsidy transition into a fee model on one hand, and on the other hand, we were talking about the fee market in the future and let’s say about small UTXOs not being able to be moved anymore. So there seems to be a corridor in between where…
Bitcoin moves safely. How do you see that? Are there challenges? Or is this just hysterical?
Lyn Alden (29:03.341)
Well, so I think there are challenges. I think they’re often used in overblown ways. So people think that they can model what Bitcoin’s gonna look like 20 years from now and suggest we have to do like emergency fixes right now and we have to tinker with it. That’s like a central banking mindset of like, okay, we have to keep tinkering the system. I mean, the way that I look at it is that right now, Bitcoin does about as many transactions per year as Fedwire. So the Federal Reserve’s like central clearing, but Fedwire does, and this is not a typo, it does one quadrillion dollars worth of gross settlement volume per year, which is about 100 times as much as Bitcoin. So Bitcoin has got like 1% of Fedwire. And we don’t know what fees are going to look like if Bitcoin is 10% as big as Fedwire or half as big as Fedwire or as big as Fedwire, or twice as big as Fedwire. It’s hard to, as this thing, if it continues to grow, it’s hard to say what fees will look like. In general…
If that’s the direction we go, I think that the base layer would primarily be used for settlement type of transactions and higher levels would be used for more transactional types including non-custodial and custodial, different types of ecosystems that are out there. And then that’s part of the ongoing ossification versus soft fork debate, which is if fees are high and the base layer is restrained, that means only a small percentage of the world can be using the base layer.
basically rich people. Another hand, if you try to tinker too much with it and sacrifice decentralization, you kind of break the whole model for why Bitcoin is valuable in the first place. I think that the market is going to sort this out pretty well. I think that there’s maybe small, low risk things that can be done to make it a little bit more scalable in the base layer. But I also think that the second and third layer is going to get more robust and decentralized and people can diversify across them. And so I think that…
people are going to choose their own level of involvement with the network. And I think that the fee concerns are overblown in the sense that, so far, when we had a big fee spike and then SegWit came, that was basically a block size increase. And then we’ve also had increased batching from exchanges, which is using block space more efficiently. We’ve also seen a drop in the use of…
using arbitrary code like opcodes to move other things. People used to pay a lot of fees for that. That’s gone to other chains generally. It’s kind of died down. We’ll see what happens with things like stable coins on Bitcoin. There’s been some technologies that might bring some of those back, but we’ll see. But basically, going forward, if the network gets another 5x or 10x more used to it, there’s not really any more offsets to be done without another soft fork. So we would expect more sustained fee pressure to eventually come to the network, which I think would be a good thing and a healthy thing up to a point. And whenever fees get too high, it naturally drives more incentive for people to offload onto other networks. So maybe for example, side chains that are not historically used get used more if fees are high for two years in a row, for example, and then it encourages people to build better side chains or build better things like that. And so I think that this is a, you know, a
This is a, this is a, not just one technology, it’s a whole ecosystem building out. So there’s Bitcoin, there’s lightning, there’s fediments, there’s, you know, liquid, there’s custodians and, you know, proof of reserves, and then there’s multi-sig, there’s multi-institutional custody, there’s all sorts of stuff building out on this, and that’s not like a short process, that’s like a generational process, um, and I think it’s, it’s well designed. And I think that, you know,
The risk is basically if for whatever reason Bitcoin were to stagnate and not be attractive to people, eventually, yes, the fee market could be an issue, but it’s not because of the fees. It’s because whatever other properties Bitcoin lacked that drew people to it, eventually it could become insecure. But I wouldn’t consider that a base case. And I think people that are too focused on that are thinking too much like central bankers.
You had a quite nice take on Nostr on that, to that some weeks ago where you said if Bitcoin doesn’t have, cannot be secured by fees, then it just doesn’t work. It’s a very Austrian point of view to see it. How’s your take on that?
Lyn Alden (36:53.068)
Yeah, basically it comes down to whether or not people want to have unsensible transactions or not. I mean, if there’s a world where Bitcoin can process a couple hundred million transactions a year and there’s a world of 8 billion people, and if they don’t want to pay for that block space in any way, either because the fiat currency system has kept them in it or because they just diffuse across a ton of other blockchains that are more centralized, if for whatever reason…
Bitcoin’s rather tight block space is unable to interest a small percentage of the world population to want to use it, then that opens up questions around its own market suitability. Now I think that it’s attractive. I want it to be attractive to people. I would like to see it bigger and healthy and to have kind of a sustained fee market, and I think it will. But I think there’s so much concern that people have on how can we make sure Bitcoin has a fee market? And my view is…
take a step back, I mean, it’s got 1% of the volume of Fedwire right now. What’s it going to look like at 5% or 10%? What’s it going to look like when it gets bigger, right? So like, let’s see what the demand for this is when we go through a couple more cycles before we start freaking out about whether or not it’s going to be able to pay for its own security. And then, and I see this a lot in macro, in macroeconomics, people are like, oh, all this debt is going to be deflationary. And it’s like, well,
until they print the money to offset it, right? People often don’t include the reaction functions that occur either from market forces or other things like that. And so if for whatever reason, Bitcoin fees get low for a long period of time and then someone uses that to capture the network, what would the response be? Would that be like another test of the network? Like when China banned Bitcoin mining, when multiple entities try to change the block size.
when Mt. Gox was hacked, had all those issues. Basically, if it gets censored, the question is, are people gonna be willing to pay to get their transactions uncensored and how will the network respond to it? And will miners see the market demand for this and go to jurisdictions where they can meet those needs? Or is the network a failure? And so I think the technology itself is well designed and I think there’s enough market forces to sort out the question of how valuable this block space is. And I think that I expect it to be very valuable in the future.
Hmm. Speaking of privacy and censorship, it is certainly quite new for a money book that in broken money there is a chapter on human rights and a sub-chapter on privacy. What connection is there between the common threat topic of technology and the terms just mentioned? You were touching that before briefly, but maybe we can dig a little deeper into that privacy and censorship topic.
Thanks for watching!
Lyn Alden (39:53.944)
So there are a couple reasons. One is that, I mean, Satoshi himself was private and wanted his money to be used for basically freedom, as far as we can tell, at least that was his public position. And so, I think that I wanted to kind of continue that ethos to some extent, but also in other parts of the book, I cover things like the long-term debt cycle. So what do governments do when they hit very high levels of sovereign debt? And the answer a lot of times is,
financial controls. They try to capture people into the cash market, the bond market, and then inflate it away, for example. And we see this in developed markets in the past, and we see it in emerging markets today on a regular basis using various capital controls. In addition, the public narrative you’ll see is that, oh, Bitcoin is for money launderers, it’s for illegal people. And it’s like…
I wanted to bring back the context of how far we’ve gone in this because money used to be naturally private and the rise of the telecommunication systems and the banking systems has kind of corralled everyone into these very surveilled walled gardens. And that has now become normal to a lot of people where they think if you don’t have that you must be crazy or you must be up to no good. Whereas what I try to do in that part of the book is to say, I’m basically trying to pre
Lyn Alden (41:20.016)
set the field for common objections to Bitcoin and to say, no, privacy itself is not a problem. Then I also present in that chapter or that part of the book, the Phil Zimmerman saga of whether or not encryption was legally allowed in the United States in an open source basis because people often say, well, if Bitcoin’s a threat, it’ll just be banned. I review some of the legal precedent or some of the historical precedent for similar technologies like encrypting information.
Lyn Alden (41:50.336)
and to see, okay, this is an era where the federal government did try to add frictions to it, and they lost. And so there’s hope there that something like this, even as large state actors try to resist it, you can use their own rule of law against them. You can, if you have public opinion on your side through things like making the case for why privacy is normal and good, then you can push back against these attacks. And so…
I think that Bitcoin and especially the private side of Bitcoin will be challenged in the future. I don’t think that many states are bothered by people having all their Bitcoin in an ETF, for example, or a big regulated custodian because they’re like, okay, it’s in a walled garden. We know where it is. We can control that. What they don’t really like is private Bitcoin, self-custodial Bitcoin. And that’s where I think they’re going to have their attacks. And so if I’m writing a book about the usefulness of Bitcoin…
or the probability that Bitcoin will be successful or the ethics of whether or not it should be successful, I feel like a book would be very incomplete without having that section on privacy, on human rights, on just the overall self-autonomy that I think people should have in choosing their own money. People often fear is a stronger emotion for a lot of people than opportunity. So when they can get caught up of the headline.
like this terrorist organization has some non-zero amount of crypto funding, therefore we got to shut this whole industry down kind of vibe. It’s like they just think of their own safety. And it’s like, well, any powerful technology can be used by good people or bad people. Luckily, there are more good people in the world than bad people. And so there were articles back in the 1980s when pages were like an uprising technology. And there are people literally saying, drug…
drug traffickers are using these pagers to signal to each other and avoid cops. Like how can we restrict access to this technology? And of course now it’s like a trivial level of technology for us. And when the internet came out, they’re like, oh, like bad people are going to use this. Like how can we make sure only the right people can access the internet? But there’s some things like the internet or money that good people, bad people use. And this is something where I think that the-
Lyn Alden (44:07.456)
we have to make sure that the Overton window does not shift in a direction where privacy is considered the same thing as being bad, that there can be privacy for good reasons and there can be kind of self-sovereign money for good reasons. One thing that I really helped try to push that in the book is that I’m not necessarily just talking to Americans or Germans. I’m saying, okay, take a global view. Imagine you’re in one of the half…
billions of people in the world, about half the world’s population that lives in what is outright classified as either authoritarian or semi-authoritarian. And what would you do in that situation? Would you want this self-sovereign money to exist or not? So don’t just think of the best case scenario. If you’re in a country, you like the country, you feel safe in your country. That’s not the biggest audience that I’m going for there. It’s saying, okay, what could that country become in the future?
What has it been in the past? And what are other countries like today? And that’s the ones you want this technology to avoid.
Is that the reason why you say that CBDCs are not a good idea? You said it very briefly a few minutes back. Maybe can you explain what’s your take or your stand on CBDCs?
Lyn Alden (45:23.968)
So in general, the financial sectors become more and more surveilled over time. And cash is the last area of privacy, and they already have quite a bit of restrictions on it. I mean, go and withdraw a very large amount of cash and see what the frictions are like, or try to deposit a very large amount of cash. Or I remember looking up, I think even if you buy, so in the United States, you buy above a certain amount of gold, you basically get KYC’d.
I read that Germany changed their laws back in 2020 where they lowered the threshold. It’s like anything basically over an ounce of gold and you get KYC. I don’t think that’s a sign of a healthy market. CBDC is what they try to do is close the last gap there. Cash and these small things are the last vestiges of privacy. I don’t think that they should be closed. I think I can see why governments want to close them.
Lyn Alden (46:21.376)
But I think people should be educated on the downsides of having those closed. And it’s not, you just have to picture, okay, what if, what, you know, what if you’re just picture your least favorite politician, they’re running your country now, uh, do you want them, you do want privacy to be outlawed, uh, in your country, assuming that they’re in charge, you know, and, and most people would, if they think of it in those terms, they think, well, maybe not actually, maybe that’s, maybe that’s not a good idea. Um, so I think that.
States are going to try to do CBDCs. Some of them have already done so. But if they do, they trend more towards that China model of just ubiquitous surveillance and control. And I think that people should embrace the open source versions instead and be more mindful of what these close silos mean. Part of the reason money is so broken is because people are trapped in all these different inflationary silos.
And CBDCs are just another way to kind of try to get a more complete lock on the people that they already have.
Okay, that’s a very good critique, I think, of CBDCs, but can you make an argument for CBDCs? Do they have maybe a purpose that you see?
Lyn Alden (47:34.2)
So the general purpose would be, one is that they would make the national security purpose, right? They say, okay, so in order to avoid terrorism, we can’t have privacy. I use an example in the book where Christine Lagarde points to a terrorist action from like 10 years ago in France as like why nobody can have privacy. And it’s like, well, 0.0001% of people in France have ever died of terrorism. And that’s where we’re going to base our entire money system around. But one of the go-to ones will be national security.
Another one is generally accessibility. So if people don’t have access, like in a lot of countries, people don’t have bank accounts in developing countries because it’s not a lot of overhead. Like if you have only $200 equivalent to your name, it’s not worth it for the bank to onboard you and to have that administrative cost of having your account. And so some will argue that the government can do that function, right? And so they can say, okay,
a certain degree of basic direct banking with a CBDC if the banking system is just, if there’s certain people that are below the profit threshold for where that makes sense. Right? So I think that’s some of the well-meaning arguments for it. And some will then argue, okay, we’re going to launch a CBDC, but we’re not going to phase out cash. You can have both. Right? So there’s no downside. But of course, if you look at the history of financial changes over time, usually you replace things piece by piece and you start phasing out the other one.
So you say, okay, well, you say, okay, CBDCs and cash coexist, but then you say, okay, your withdrawal limits for cash are lower now because, well, now you have CBDCs. Why would you need as much physical cash? And so you can start tightening the physical cash market more and more and shifting some percentage of that over to CBDCs. You further tighten the privacy thresholds that people have. But yeah, basically, the well-meaning pro-CBDC argument is basically, it either revolves
Lyn Alden (49:32.876)
financial inclusion or security in some way. And so those ideas have to be taken seriously, but then explain to people, okay, this comes with a host of downsides as well. And so be aware of what you’re wishing for.
I think it’s quite telling that you didn’t mention any economic opportunity coming with central digital currency or central bank digital currency. You just pointed out the security and financial inclusion, but is there no economical opportunity there? Like the digital payments, for example? That’s what I think Madame Lagarde is pointing out.
Lyn Alden (50:13.72)
kind of include that as a subset of the financial inclusion argument because you could argue that if more people that are not included in those get brought into those, that they can get brought into economic activity that they would otherwise be not included with. Now, in Europe, that’s less of an issue than most Europeans have access to various types of digital payments and things like that.
Lyn Alden (50:38.444)
They could also argue that it would lower fees. They say, okay, banks all charge their fees. If we just have some big common government run thing that’s free or nearly free, we can cut out the middle man and that can, basically those people can work on something more productive. We have this centralized system. So I think that you can either make that a separate point or just a sub point. Probably it’s worth breaking out and going into detail on. And I think a trend that I look at in the book is that
Lyn Alden (51:07.384)
For the past century and a half, almost all efficiency improvements in money have come at the cost of greater centralization. And with greater centralization comes corruption and other problems. And so those arguments for CBDCs, if they make it more inclusive, more secure, more efficient, more economic activity, you have to go back to history and say, well, but by further centralizing it, you’re putting all your eggs in one basket and then you don’t know
how that basket could be used against you. So there’s a cost to that. And so that’s why I think that what’s powerful about Bitcoin is it’s the first way to potentially make finance more efficient without centralization. It’s the first kind of monetary technology that kind of breaks that prior trend, which is I think why it’s so powerful.
Chris, you have another question before I go on? I had so many questions now.
You’re good. You’re good to go, Jan-Paul.
Okay, okay. All right. Okay. So let’s look at the current landscape. I think the ETF, the Bitcoin ETF, you mentioned it briefly, is on everyone’s mind. What’s your take on the Bitcoin ETF? Is it good for Bitcoin? Do you think?
Lyn Alden (52:26.792)
I think it’s inevitable. And so basically, if Bitcoin goes increasing levels of monetization, then eventually these big pools of capital are going to come. Either central banks are going to put out their balance sheet, sovereign wealth funds are going to put it in their holdings, or entities like BlackRock are going to wrap it in ETF and pull it into the established financial system. So to some extent, to the extent that Bitcoin is successful, these points of where we’re always going to happen.
I do think it’s good for Bitcoin, even though it’s not necessarily good for the people that use those ETFs, which is a difference. So what I mean by that is when Bitcoin had thousands of dollars worth of trading volume per day, you couldn’t just throw in a million dollars into it without moving the price. It was a very small market. And then when it had millions of dollars of trading volume, you couldn’t just throw in a billion dollars and buy a lot of Bitcoin. Now that it has billions of dollars of trading volume.
It’s still possible for large market participants to move the price, as we’ve seen in these past couple cycles. A couple sketchy exchanges can really influence the market. And so the bigger, more widely held, and more liquid it is, the better that is for the network as a whole. Basically, the less volatile it becomes, the more you can enter an accident without moving the price.
which is that’s a key definition of money. Basically, the idea that money is the most saleable good is a very Austrian point of view. And in that sense, saleability is closely associated with liquidity. So can you buy or sell large amounts of it without really moving the price? And so what I think these ETFs are gonna do is just there’s just another layer of liquidity coming in. There are pools of capital in the US and elsewhere that are in…
kind of taxable, like tax of retirement accounts or pension funds or things like that. It’s kind of locked in there and it’s a way for them to access Bitcoin and participate in Bitcoin price. But then it adds liquidity to the network and it adds awareness to the network and developer activity to the network. So then it allows people, even other countries, their Bitcoin holdings go up, their network liquidity goes up, their awareness of Bitcoin goes up.
Lyn Alden (54:49.344)
And I think that’s a good thing. Now, I think that there are reasonable concerns around BlackRock’s centralization, like how much of the network will they end up buying. I think it’s probably less than most people think, because as they buy it, it drives the price up. And so it’s hard for them to just scoop up all the Bitcoin. I think they’ll probably, kind of like Grayscale, I mean, Grayscale’s got a big chunk of the Bitcoin network, which is probably not great, but it’s still a small percentage overall.
We’ll see how that goes. But basically, I think it’s overall a net good, but more importantly, it’s an inevitability that if Bitcoin is going to reach certain levels of monetization, there are going to be large existing pools of capital. They’re going to go into it in their own form. And if someone’s like 70 and has an account somewhere, it can be reasonable to buy that ETF.
But for most people, I would recommend, you know, buy it, self-custody it, and use it kind of the way it was intended, like in the wild.
Willy Wu has a quite interesting contrarian take on that. He said Bitcoin lost its virginity in 2019 when the futures market started. By that point of time, the financialization or Wall Street became relevant for Bitcoin and you can now…
short Bitcoin with I don’t know how many million Bitcoins. What is your take on that? Is this a challenge or a danger for Bitcoin? This Wall Streetization? I don’t know how you would call it.
Lyn Alden (56:42.008)
I think it’s a challenge, but it’s again, one of those inevitable ones. And so a reason that gold ultimately failed is money. It’s still useful savings, but a key reason why it failed is money is that it had no useful ability to shrug off paper markets, the slow speed of it. Even in the book, I cover, I look at the 1875 book by Jevons, Money and the Mechanism of Exchange, and they’re talking about how paper instruments and now the telegraph are so efficient.
Money’s moving around all the time, but almost no gold ever changes hands. It’s like so inefficient to actually pull it out, verify it, kind of custody it, all the expense that comes with that. And so the problem was that you had this empire of claims built on top of a pretty small base of gold. It was leveraged like 20 to one. And so when it blows up, everybody wants to keep the claims and they just revalue the claims in gold. And so instead of those claims collapsing back down towards gold,
Lyn Alden (57:39.98)
people just redefined what money is. And so gold was just, it was inefficient enough that this fiat system could build around it and people just for its convenience stuck with the fiat system and gold got relegated to like a smaller niche savings asset. But there are two aspects of a money that help it shrug off paper markets. One is speed of withdrawal. So the easier it is to self-custody and the easier it is to verify and withdraw.
the less of a reason to ever risk it with paper markets. You either want to hold it yourself, or you want it in very high-confidence, full reserve environments. You don’t want it to be rehypothecated. And number two, the absolute scarcity of it. So gold, it still had like a 2% annual supply growth, roughly. So that allows the paper part to keep going for decades at a time.
Whereas Bitcoin has zero terminal supply growth. And so the combination of being easy to self-custody, easy to pull out, basically, I think that paper markets will be attempted to build on it. But the frequency with which those markets get wrecked is a lot quicker. Whereas with gold, it takes decades to get wrecked. Whereas with Bitcoin, it takes years to get wrecked. And we saw that it’s not just Wall Street, it was also FTX. I mean, they had paper Bitcoin. They had what was it?
$1.8 billion worth of Bitcoin that the customers thought they had by the end that wasn’t really there. And that’s an example. And so I think that will be tried that will eventually slow down certain cycles. That’s why this is a cyclical asset. Players that do that beyond a small amount will get wrecked. And that whole wreck cycle is just compressed compared to gold by probably about an order of magnitude.
All right, Lynn, before we let you go, I’ll have to ask. I mean, let me set the scene. So we have a new conflict. We knew there was an unreserved conflict in the Near East between Israel and Palestine, but I didn’t have a full-scale conflict, like a war, on my bingo card for 2023. So now we have two, I think,
global wars, but globally important wars ongoing. So Israel, Palestine, and Ukraine, Russia. The West is not formally involved. It’s not a NATO case. It’s not a NATO conflict, but still very engaged. So what’s your assessment of the global political landscape? I mean, you are quite regularly in Egypt. So I assume you’re somewhat close to the newest conflict there. So.
What do you think has changed now and how does it affect your financial thesis? Maybe.
Lyn Alden (01:00:34.424)
Yeah, I go to Egypt every year and my husband’s still there at the moment because he’s working on our property. So he’ll be back in like a month. And it’s funny, when I was there just like a month ago, I saw the Egyptian military planning their big 50th anniversary of the Yom Kippur War, the October 6th, 1973. And it didn’t occur to me that there might be people that use that date to, you know, basically attack.
which is basically what they did. They shifted it a couple of hours later to take advantage of strategic hours. But basically it’s the 50th anniversary of Yom Kippur War, which is something we probably should have had more on our radar, especially me, but it is what it is. A challenge in history is that sovereign debt crises tend to lead to war, and war tends to lead to sovereign debt crises. The feedback loop goes in both directions because…
Obviously, war is very expensive and that can contribute to a sovereign debt crisis in the first place. On the other hand, if established power has a lot of debt, the enemies can perceive that the gates are down and that this culture is now less interested in spending money abroad. They’re more focused domestically, they’re more polarized, they have more troubles at home. So, I think basically, the global order that’s been established since the 40s and then maybe
is now being challenged on multiple fronts and it’s increasing expensive to maintain the order that has been in place. I’ve been comparing the 2020s to the 1940s for almost four years now. I always kept saying that I hope it’s not kinetically similar. I was like, it’s very macro similar. Hopefully it’s not militarily similar. Unfortunately with Russia’s invasion of Ukraine.
And then with what’s going on now between Israel and Hamas, it’s looking more and more kinetic. And unfortunately, that’s kind of my base case is that we see a number of conflicts around the world that take advantage of the fact that the existing powers are indebted and that existing power structures are just reshaped. It’s always kind of a market test to see where does the power lie? Where does the…
Lyn Alden (01:02:58.656)
kind of assertiveness slide, like what are, not only can you defend, what do you want to defend? What do you want to go out and exert your will on in the world? And so it’s a terrible human rights issue, like a humanitarian issue that’s happening there. And I feel for like civilians all over the place that are just kind of caught up in this, that are just trying to live their lives. And there is, you know, there’s risk of escalation.
Lyn Alden (01:03:24.448)
Because for example, right now we’re obviously monitoring news to see is Israel going to do a ground invasion? If they do, I mean, US is getting assets in the region in case like Iran and their proxies attack more directly. And then what if the United States gets more physically involved? So right now it’s involved in terms of finance and supply chains and things like that. But I think that unfortunately sovereign debt crisis sees and…
Lyn Alden (01:03:52.356)
know, recapitalizations and monetary transitions tend to be very messy. And I think that we’re likely in the early signs of that playing out over a multi-year period.
Yeah, I hope. Yeah, we can only hope. Coming back to the book, Lin, I think Broken Money, for me, is one of the best books to suggest to newbies to the topic of money and Bitcoin, because it really provides the foundation on what Bitcoin has evolved on. And I have one question. When German translation?
Lyn Alden (01:04:35.448)
We’re actually working on that. So we do have a German one in the pipeline. Translations usually take six to 12 months. I mean, it’s not a quick process. But we are actively working on German translation, multiple other European translations, and some other markets as well. I would expect that the German one would be one of the earlier ones that comes out, at least at this stage from what I see so far.
Yeah, it’s a long book.
We will highly recommend it in the podcast. We will recommend it anyways, the English version, but once the German is there, we will recommend it.
Lyn Alden (01:05:10.669)
Yes. So also, I’m sorry. Just wanted to say thank you, Lynn, for the book. I really enjoyed reading it. I highly recommend it. So everyone should go and buy Lynn’s book.
Yeah, then thank you so much for taking the time to coming to Node Signal. We might see each other on Madeira next year, because Jan, Paul, and I are going to. And we’re looking very much forward to that. Is there anything else that you would like to say to our audience?
Lyn Alden (01:05:39.94)
Great. Looking forward to it.
Lyn Alden (01:05:48.552)
I think that’s, I mean, you know, these are crazy times. I think it’s important to, you know, just be open-minded, reach out to, you know, we all kind of exist in our little like online tribes now. We all kind of have our echo chambers. And I think this is, it’s more important than ever to reach out, understand other people, help other people understand you because as we talked about these, these kinds of financial
They’re dangerous times. A lot can change. Social structures can change. Military actions and maps can change. It can be very dangerous. And hysteria feeds on that. And that can make it harder for Bitcoiners too. I mean, if financial, if they focus so heavily on capital controls, for example, and it’s all about the war narrative or it’s all about the inflation narrative, then Bitcoiners can be blamed for things that they were just trying to fix in the first place. So I think basically it’s important to just try to do your best to go across group lines and just understand what other people are thinking and help them understand you.
Yeah, thank you so much. This is a very, very important advice. I think, especially in Bitcoin, we sometimes tend towards being very ideological. Speaking of Bitcoin maximalism, which I like a lot, and I would call myself a Bitcoin maxi as well, but it’s very, very important to stay open-minded and to see the things as they are, and not in an ideological way.
Lyn Alden (01:07:13.632)
Yeah, me too.
Lyn Alden (01:07:25.12)
I think any group has warriors and diplomats and both are important. And I think Bitcoin is the same way. There’s people that are like hardline and they help kind of like maintain certain things. And then there’s other people that try to say, okay, here, I see what you’re thinking. Here’s how let’s have a discussion around that and kind of maybe help bring Bitcoin to audiences that might have otherwise been turned off by it. I think there’s a role for both. But I think that basically even just outside of Bitcoin, just this is a challenging time and I think it’s important to have empathy.
Hmm. Yeah, nothing more to say. That’s the best words to close this session. Lin, thank you so much. To our listeners, if you want to provide a little value or give value back, then feel free to send us some sets. Yeah, Jan-Paul, focus on the signal…
not on the noise. bye bye, thank you.
Lyn Alden (01:08:33.92)
Focus on the signal, not on the noise.