Security vs. Commodity. And why #Bitcoin is the latter. Michael Saylor live @ BTC22 | with subtitles

welcome to innsbruck michael saylor thanks for having me in edgebrook happy to be there

i yeah you know i i can't give you softball questions right

now that you're on european grounds so um let's maybe let's maybe start with this

do you ever think about your role being a risk for bitcoin because

you're so influential and so big not only with your voice but only with your holdings

you know um i do think about i think anybody that believes in decentralization

has to keep in mind their role but i think that satoshi said a really good example and i think

uh we've we've seen lots of bitcoiners uh during the fork wars you know i think there were very

strong voices in the bitcoin community and um clearly i think that the uh that the message here

or the idea is everybody has to take their turn and they have to drive the network forward and

they have to do what they can to contribute to the asset class and there'll be a time when they'll

step off of stage and someone else is going to have to pick up uh and carry the torch forward

so you know i wouldn't be here if it weren't for the early cypherpunks and i wouldn't be here if

it weren't for all the heroic activity that took place during the block size wars and i

don't think i'd be here if it weren't for leadership at places like fidelity where

let's take abigail johnson championed bitcoin and fidelity and my first bitcoin was purchased uh

from fidelity um i wouldn't be here if it weren't for people like eric weiss who you know who orange

pilled me but um my view of my role is is um we needed to we needed to integrate bitcoin into the

public markets into institutional investors so i couldn't do what they did but what i could do

is i could uh show that bitcoin makes a good treasury asset for a public company i could

actually educate public investors an institutional investors i could work through the legal issues

the accounting issues the compliance issues that uh any any corporation faces if they want to

integrate into the system and uh so that needed to be done uh there'll come a time i i look forward

to the point when i'm irrelevant when there's a hundred other companies that are bigger than me

when apple computer buys 25 billion dollars of bitcoin and google buys 50 billion of bitcoin and

then people don't remember microstrategy and we can't keep up anymore and i will you know i'll be

like that surfer that surfs the wave and then the wave passes you and you just get back on the board

and you paddle behind the wave and people don't notice you're there anymore that'll be okay i mean

i think you know i expect bitcoin to go on for hundreds if not thousands of years each one of us

has two three five ten years we can contribute to it and then you know you could get out of the way

and let someone else carry the torch it's um it's nice that you don't not only have a suggestion for

apple or google to buy bitcoin but also have a sum in mind already so my question would be and

i don't know if you know this but there's like officially like what we know there's more bitcoin

nodes running in germany than anywhere else in the world the german people are notoriously bad

with inflation and now inflation is picking up the whole bitcoin scene is just exploding

so my question would be with your example why is there no german european company why is there no

other american company who's just following it so far well first of all i i've been doing

business in germany for nearly 30 years germans are great engineers and i love german minds and

i love german engineering and i i think the bitcoin of course is the first example of

of monetary engineering so it wouldn't surprise me that germans that study so much in the world of

engineering they're so fastidious in the way that they engineer their structures their cars their

engines their machines uh they'll look at bitcoin and they'll realize there's engineering beauty

there and so i think that's one of the reasons why there's a lot of passion for bitcoin and germany

uh with regard to companies i think the key to keep in mind here is that at every single stage

bitcoin needs something different and uh starting in the second quarter 2020 was uh was the error of

institutional adoption and for an institution to adopt bitcoin they have to solve the issue of uh

custody because they have all of these uh legal restrictions about how they can custody the assets

and they have to solve the the corporate governance issues like for us to buy it we

have to figure out how to disclose it and then and then um how to uh how to manage our shareholder

relations it was a it's a very intricate thing uh and then um and then there's an accounting issue

the accounting for bitcoin was set by uh fasbi when the largest holding of a publicly traded

company was maybe a million dollars when we started looking to buy bitcoin we did a search

and we found that maybe one company had had owned a couple of million dollars of

bitcoin once a few years ago oh overstock or something it was just it was a trivial thing

so fasb set the accounting treatment to be the most conservative you could imagine which is you

can never write it up you can only write it down and you have to write it down to the lowest bid

you can find from anybody anywhere in the world in the history of the ownership of the asset so

that's the same as if you bought something and you went to a party on saturday night and you

asked everybody in the party whether they would buy it from you and someone told you they'd give

you a dollar for it so you wrote it down to a dollar and then you held it at a dollar for the

next hundred years okay that is a prejudicial you know kind of hostile accounting it's toxic

for a public company with a gap uh a gap statement and so there's no reason for the accountants to

take any any other treatment because they were just being extremely conservative

now we're in a situation where there are billions and billions of dollars of bitcoin on publicly

traded balance sheets and fasbi has taken up the project and and there's a massive interest in in

reforming that accounting so um i i think that um if you're a publicly traded company

or a conservatively run company and the majority of your enterprise value

comes from selling cars or selling software or selling anything else you can't reasonably

hold a large amount of bitcoin on your balance sheet because the volatility of the accounting

uh it impairs the transparency of your p l and your balance sheet and therefore it's toxic

to you as a public company so a conservative cfo or ceo is not going to do it until you

get to the point where you could adopt fair value accounting where you could actually show the true

value of of the of the asset so you you might think that um if you're a consumer you might

think oh the regulators don't matter but there's a small number of people on a committee that set

accounting standards for all these publicly traded companies and they do matter and uh to the extent

that it is uh impossible to figure out how much the bitcoin is worth then that means that uh 10

000 entities with trillions and trillions of dollars we'll say we're just going to wait

we're going to wait and so i think that the reason uh you know if you look at european companies

they're more conservative than american companies the most aggressive entrepreneurs or like american

private companies you know like the ubers or the airbnbs are or you know fairly aggressive and then

sometimes publicly traded companies in america if they're run by founders they can take risks

but traditionally in europe it's uh businesses are more conservative they go a bit uh there they wait

for the american companies to take the risk and in some cases and they focus upon engineering so i

think that what will happen is the the accounting will matter and the accounting will be uh

will be one uh element and the other elements will be regulatory clarity from the sec and the cftc

and treasury though that will allow banks and publicly traded companies to start to handle

the asset then public investors will handle the asset and then uh i think you'll see european

companies look at that and they will be emboldened by that and they'll follow but you you know this

entire process will probably unfold over a decade from 2020 to 2030. you just you just talked about

regular regulatory clarity which is very important not only for the american side of course it's also

important for for the europeans so basically as long as the us is letting bitcoin proliferate

as long as it's not getting you know any bans or any problems nobody in the world can really do it

because the us has the deepest capital markets the largest economy etc so could you give us

uh your view of where do we stand ethereum just moved to proof of stake it's basically open

warfare out there between crypto and bitcoin at this point um and and and the day that they moved

to proof of stake gary gensler goes on the record saying well i thought it might be a security all

along um so where do we stand there and also one one added question are you involved with financing

or helping bitcoin only lobbying in washington because we know that lobbying is important

yeah so with regard to the regulatory issues first of all um i think that that if you go back and you

look at the classes gensler taught at mit in 2018 they're all on youtube and you can just

google gensler blockchain and money and you'll see them all i think he laid out clearly the theory

of digital property and digital commodities and digital currency and all the issues and

what he pointed out was there are permissioned blockchains and there are permissionless

blockchains and of course satoshi's uh brilliance was figuring out how to transfer

value and or manifest value without a trusted intermediary uh and the the idea is proof of work

but if you want to create a digital commodity you have to create something without an issuer

you can't have a small group of people to control the protocol because a group of people controlling

the protocol creates an investment contract and now you're making an investment of money relying

on the efforts of others so the idea here is you have to have um a digital commodity without an

issuer and then then you have to let it you have to let it defuse for a long enough period of time

without any protocol without any material change to the economics such that it's seasons right and

so bitcoin has a you know this 12 13 year history and the fact that the monetary protocol was set

the the fact that um that it traded without value from january 3rd 2009 until pizza day 500 years

without value is an immaculate conception that has never been reproduced the fact that

satoshi never moved a coin is another important fact the fact that it is proof of work is the

third important fact the fact that during the block size wars right the small blockers one is

an important another important fact the fact that you you know you've got an un varnished

string of soft forks as opposed to hard forks uh that those are all important facts and so

you put them all together you've got one thing that's universally acknowledged as a digital

commodity bitcoin it's the only thing that's ever been universally acknowledged it's the only

non-controversial you know decision now you've got um a bunch of other things uh that are interesting

the world has a big thirst for digital currency in the form of a stable usd coin like the world

wants a tether or a circle coin in fact the world probably wants 10 trillion dollars of it

um and the world's only got about 150 billion right now so there is a demand

for that but but then there's a big debate about who can issue it a bank a company

on a set of entrepreneurs right who and that will continue i think that um

with uh with regard to regulatory clarity i i think it was the theory was pretty clear in 20

2010 actually the theory was pretty clear in 2015 uh if you want to create a commodity it

must have energy and it must be without an issuer okay so if i take gold or oranges or oil or uh or

a bushel of grain and if i remove 99.95 of the energy you have an imaginary orange imaginary oil

you have a security if you remove the energy from a commodity you create a security

that's just common sense right um and if if a small group of programmers

can write a piece of software that makes all of the oil in asia not burn or makes

all of the oranges in florida not edible that's a security that's not a commodity so if you could

double the density of gold by writing a piece of software code it wouldn't be a commodity anymore

it would be a security right so this is kind of common sense i mean it's not even you don't even

need the law you just kind of need to think common sense if five programmers get to make all your

food not edible is the food a commodity anymore and answer is no it's a coupon or it's a security

so in this particular case gensler actually said when he was put in the sec that staking tokens if

if there's a stake and you generate yield that's an investment contract he said that a year ago

so um he's i think he's become more forceful in his articulation in the aftermath of the

crypto crash and um and and i think what he's saying is very straightforward if you want to

create a commodity it has to be without an issue or it has to flunk the howie test and if you've

got an issuer if you've got a small group of people if they have control over the protocol then

it's probably a security for common sense reasons i think that the regulators will move forward

on this there'll be some back and forth there's going to be political debates most of the crypto

industry has a vested interest in creep and keeping ambiguity right keeping this ambiguous

right and so so most of them you know they'll say well we haven't gotten clear guidance well

there is clear guidance you you know if you've got a company and you issue equity in the form of a

token it's a security there's clear guidance right if you created a company and you gave yourself the

stock and then you sold stock to investors and you sold the general public and then you keep changing

the code that controls what you can do with the stock it's a security so i think what

gensler said is just because you don't like the guidance doesn't mean you don't have it

right um so uh you know to that point i think that um we're going to actually see the industry mature

i think it's getting harder and harder to feign ignorance and for people to be oblivious to these

uh to these material differences um i think that uh i think that there are some crypto

organizations uh that are lobbying both sides of the fence right and uh you know i i think that's

frustrating but i also think there are some bitcoin only uh organizations that are doing

a good job of articulating uh the ethical benefits of proof-of-work uh i do support some of them and

you know and other people that i know support some of them and i would encourage anybody to

support the uh the bitcoin only organizations because they don't have a conflict of interest

i think you know to the point if we start from basic principles we wanted a treasury

reserve asset and we wanted a digital gold or a digital commodity without an issuer that could

be global and neutral and so we looked at all of the thousands and thousands of cryptos and

we concluded it needed to be a proof-of-work type asset and we looked at every proof-of-work

asset and bitcoin was the dominant and it was the one uh with the best monetary policy uh

with the clearest ideology and then we asked the question well will it be banned will it be copied

will it be hacked it hadn't been hacked hacked for a decade so i figured that was good uh will it be

banned no it was it was anointed as a as property by the irs and as a commodity and we knew it was

a commodity and i think that that is only those facts have only improved i think it's pretty clear

they're supporting the senate and congress and the sec and the cftc all through the world even across

many governments uh for bitcoin as a digital commodity there are there are a lot of regulators

that have concerns about when you use it as a currency because they see it might be threatening

uh to their local currencies like every country in the world has capital controls you know you can't

just move capital out of china you can't move capital out of argentina you can't move capital

out of lebanon or turkey um so so when it's used as currency there are a lot you get a lot of

a lot of capital control issues or kyc issues or or the like you know aml issues but

as property it's not controversial and it looks like even as cross-border payments it's not going

to be a lot of people are going to allow you to do cross-border payments so i think that in the

dimension of will it be banned no it's going the opposite direction it's not being banned and now

we're back to this issue of will be copied it got copied thousands of times but most of the times

the copies were imperfect because the people that copied it didn't understand uh the engineering

elegance it's like copying the wheel but making it an octagon or you know or making it a you know

a rectangle or something it's like they copied it wrong um it actually was extremely elegant

because the goal of bitcoin was to be able to support hundreds of trillions of dollars on

the base layer and let you build other layers like lightning and applications on top of it

and serve as the foundation so so they copied it wrong for the most part when you put all

the other touring complete functionality into the other copies they made a mistake what they should

have done is just copied it right but of course you can't really copy the immaculate conception

and and everybody that copied it wanted to make money and the point is if you if you really wanted

to copy it you need to create something more elegant and you need to not have any economic

interest in it and you need to give it as a gift to the world and you can't actually get make money

off it and you need to disappear so that's the way to copy it i think that the irony right now and

i'll i'll finish my comment is is people are very busy uncopying it right uh bitcoin was maybe 75

of proof of work networks before the merge and now it's 95 so in fact uh it's been uncopied because

people yeah i used to joke right if you have a brilliant engineering insight your competitor

may in fact look at it and say why would i want to do that thing

and so bitcoin is so brilliant that many of the competitors they they literally they're blinded by

their own personal self-interest and their own egos and so rather than appreciate the brilliance

of it they don't actually appreciate the fact that the whole point was to avoid having a company

uh or avoid having a counterparty or avoid having a set of programs you know some people think

i have to keep changing this the code i have to keep upgrading the software the brilliance

is not changing the software right what they don't realize is to be a commodity you can't

keep changing it but if you're a software engineer you want to keep changing stuff

so half of the crypto world wants to keep changing the code and what they don't realize is

if you can change the code of bitcoin you probably made it a security not a commodity and if you

remove the energy from bitcoin you probably made it security not a commodity so the idea that a

bunch of smart engineers are going to add a bunch of functionality change it every year and suck the

energy out of it is converting a digital commodity into a digital security they just don't have

enough grounding in all of the various disciplines to realize how horrific a mistake that is

this does perfectly lead me to my next question so bitcoin author that gigi he had a great threat

a couple of years ago a failure to understand proof of work is a failure to understand bitcoin

with regards to proof of work the the propaganda in the mainstream media right now against it is

relentless it's absolutely everywhere around the the ethereum emerge greenpeace is tweeting at the

bitcoin ceo 24 7 trying to quote unquote change the code why is it and who is working so hard

against proof of work and why is it that it seems that many people just don't want to understand

that it actually can help in many relation in many relations and maybe the second question

what's the situation of bitcoin mining in the u.s right now what what developments do you see

you know um as i get older i'm more of the opinion that many of these 501 c 3s many of these

non-profit charity organizations they start out they start out with a good idea and then they run

out of money and so then they go look around for someone to give them money and so i think like 40

or 50 years ago someone gave money to a greenpeace type organization to lobby against nuclear power

and probably it was the oil and gas industry they gave a lot of money to these charities to lobby

against nuclear power to shut down the nuclear power industry and then ironically another 30 or

40 years the solar and the wind lobby gives money to them to lobby against the oil and gas industry

and then when they run out of that you know other crypto promoters are giving money to all to these

environmental lobbyists they're just giving them huge amounts of money

to lobby against uh bitcoin it's like that it's not really bona fide environmental interest if

you're an environmentalist you would be focused upon saving the trees or saving the seals or

or or doing something in order to cultivate parks and the like but 99.92 percent of all

the carbon comes from something other than energy that fuels proof of work

so i actually think um it's it's the other crypto promoters that are fi that are generating all

of the attack points they're generating all the propaganda they're feeding it they're funneling

it through academics they're funneling it through politicians they're funneling it through

501c3s and and through environmental activists and so you have to just follow the money and uh

they're funneling it through their lobbyists and i think their agenda is

they're all promoting unregistered securities so all of all of these uh other cryptos or for

the most part unregistered securities and uh so you have to have a justification for promoting

a crypto token that doesn't use energy well if you understood securities law and if you thought about

physics you would realize that when you slurp the energy out of the commodity it becomes a security

and and when you convert the security to be programmatic when you create a virtual world

a virtual energy and use virtual machines to create virtual security to create a virtual token

you have created you've got a software company and that's equity in the software company

and you've created a security which you're then selling to the general public and if you're going

to sell equity to the general public you need to do it pursuant to fair and full disclosure

that's ongoing every quarter every year continuous because the general public deserves to know who's

going to actually change the definition of the token right who's running the company and uh so i

think that you have an entire crypto industry and a lot of crypto promoters that they've got this

kind of existential problem and there's no way to defend it i mean there really is no defense to uh

to creating a token giving it to yourself selling it to the general public and not disclosing and so

the best way to deal with it is change the subject so we change the subject to energy usage is bad

and the reason that you should you let us exist and the reason by our token is because bitcoin

is bad for the environment right well it's bad for the environment in the same way that oranges

and meat and buildings and cars are bad for the environment they all use energy in fact

hospitals use energy right so if i went to you and i said i'm going to eliminate your hospital and

i'm going to replace it with a virtual imaginary hospital that's going to actually lower the cost

of health care and i'm going to fix your avatar up whenever your avatar has a has an imaginary

heart attack i'll give you imaginary surgery and i'll make you imaginary healthy and you could pay

me an imaginary coins and then you'll go home imaginary happy right i mean sure you could do

it but it's ridiculous it's it's like uh meta money for the metaverse with meta meta energy

so maybe give us for the last question give us your outlook how is this going

to end are the other cryptos just going to be ruled securities and just going to basically

disappear and then people will flock into bitcoin this is going to hit bitcoin maybe

what if if the lobbyists are successful and ethereum becomes a digital commodity quote unquote

um bitcoin has also been used now on the state level or at least we see rumors about this

what are you seeing where are we going the next couple of years

i think that the market is going to become more and more educated and as the market gets

more educated uh it's going to see the virtues of bitcoin as the dominant digital commodity

and bitcoin is going to get stronger i think that uh that regulators as they focus on this

the more when you focus on it and you bring a lot of attention to bear i think they're gonna realize

that uh they need to segment the market into digital currencies uh digital securities digital

commodities and they're going to set precedence by their rulings where it's going to become

more clear it's already becoming clear to institutional investors and you can see for

example you're reading about the comments of the chair of the sec in the wall street journal

on the front page and you're reading about it in bloomberg if you roll the clock back two years i

don't think bloomberg and the wall street journal really understood the difference between 10 000

crypto tokens but i think today it's it's becoming critical for for multi-billion dollar

investors and big banks and and big regulators and politicians to understand the difference between

a us dollar stable coin and uh crypto property in the form of a bitcoin and a crypto token that's a

security and they you know there will be a lot of sound and fury for the next couple of years

while we sort it out but i have confidence that the world will eventually sort it out because

because um there are physics involved here and there's a lot of rationale involved here

so i think the first stage is sorting out uh the crypto segmentation and people realizing

the difference between a crypto commodity a cryptocurrency uh crypto security and a crypto

exchange and they're going to get regulated and 80 to 90 percent of the capital is going to sit in

the regulated world and then there'll be a great market that'll fester on for a while uh and and

that'll continue the second stage right i mean uh if you think about it first people need to

understand why bitcoin is a superior crypto asset to every other crypto asset for a long-term store

of value or for sovereignty that was the first thing microstrategy went through the second thing

they need to understand is why is bitcoin superior to gold as a bearer instrument or or a commodity

or precious metal store of ass value and so that's gonna that's gonna be the second uh stage and

the third stage is why is bitcoin is crypto property superior to other forms of property

right the cr the crypto crypto world has about a trillion dollars worth of money floating around

and we're trying to sort out which is the superior crypto asset right

and for what and the truth is i really believe the killer application is is a lightning wallet on

eight billion smartphones that has us dollars as a short-term medium exchange and payment network and

btc as a store of value and it runs on lightning and then it is secured by the underlying bitcoin

uh base chain base layer that's that is uh going to be the voice over ip moment or the web the the

netscape moment when you actually have the ability to download a lightning wallet in 30 seconds

and trade us dollars with all 8 billion people on the planet friction free when that happens that'll

go viral and hundreds and hundreds of millions of people will first grab that in the first year and

then billions of people will grab that so i think that technology is going to play a role here in

spreading things if you look at that but from the investor point of view there's a trillion dollars

that's being argued over in the crypto world there's 10 trillion dollars in the precious metals

world of gold there's more than 100 trillion dollars of property and then of course ultimately

there's 500 trillion dollars of other assets and so what we're going to go through is just a very

intense education process and there's going to be a lot of fighting because there's a lot of money

at stake right and if if you have that much money at stake you know no one's going to go easily and

there's going to be lots of lobbying and lots of positioning but ultimately you know ultimately

uh the market will be will decide and and the the thing that will cause bitcoin to win

is that everyone that understands proof of work is going to realize that bitcoin is the

best proof-of-work network and that's why it's 95 percent and then people that bind a proof of stake

they're going to be in a war to keep upgrading their proof-of-stake cryptos and they'll keep

hard forking and hard forking and hard forking and ultimately uh the competition between all of the

various proof-of-stake networks over who's got the most functionality who's got the most performance

will devolve into a technology competition of software companies and they will be recognized

as software companies and eventually they'll have to register as software companies and they

will centralize and they will they will deal with all the challenges of software companies

they'll have compliance issues you know there'll be certain things they can do or they can't do

and and the typical investor that wants to invest in a software company will

sift between the various ones but someone that wants to store their value for a hundred years

is not gonna trust a software company and a government is not gonna they're not gonna actually

invest their sovereign treasury in a software company stock there's no way that a government

the united states is not going to trust a chinese software company china is not going to trust an

american software company and so ultimately we'll get back to first principles which is

you're going to create something that runs when a billion people run a node right a a node right it

is in essence uh self-sovereignty when a billion people run a node and bitcoin miners are running

in every country on earth and no one can put their finger on on the network and nobody you

know the difference between me and some of these other uh advocates is i am quite sure i am not

responsible for bitcoin being as good as it is and i am not i'm sure that i can't change it and

if i disappear tomorrow it won't make a difference and and i have enough life experience to realize

that it doesn't need fixing right when a when a billion people are running a decentralized node

no one's going to be able to change it it is truly a digital commodity which makes it a basis of

sovereignty and freedom and property rights for the human race for the next thousand years

if not 10 000 years we might actually trace the singularity to january 1 2009 when humanity

finally had property rights that could not be seized and before 2009 we were living with

imperfect property rights and defective money and after 2009 we had property rights and we

had energy flowing into the digital realm and that might that might change humanity

for thousands and thousands of years so i i'm confident and optimistic that this is it's a

pretty important thing and i don't think i'm not lots of people i i i have confidence that other

objective people you know neutral observers they will come to the same conclusion the disinterested

parties will come the same conclusion and as they come to that conclusion the market will segment

and things will sort themselves out in a rational fashion for the good of humanity

michael saylor thank you so much there is nothing much i can add to a sentence that ends with for

the good of humanity you said it's going to be a wild ride we are all going to be here for

the world right i'd love to already invite you for the btc 23 next year maybe you can make it

or we chat again thank you for taking the time all the best i will look forward to it thank you

thank you innsbruck and thank you everyone that supports bitcoin keep up the good work