Michael Saylor: Your Money Is 'Dying' As Banks Fail; Can Bitcoin Survive CBDCs? (Pt. 1/2)

if you lose confidence in the currency

the banks then you lose confidence and

fiat currency as money and therefore the

money is dying it's obviously dying in

Venezuela it's obviously dying in

Argentina but it's dying everywhere in

the world even in the United States and

in Western Europe

so

when you lose confidence in the money

then you start thinking about commodity

Monies

Michael Saylor joins us today he is an

entrepreneur inventor author

philanthropist and the executive

chairman of Michael's strategy which he

co-founded in 1989. we'll be talking

about Michael strategy's recent purchase

of more Bitcoins the company's long-term

Vision Bitcoin ordinals and transaction

costs the future of Bitcoin and the

future of money and in part two of the

conversation we'll be talking about the

future of humanity itself AI technology

and education Michael an honor to host

you on the David Lynn report welcome to

the show thank you for supporting the

channel happy to be here David I'm going

to start with a fun exercise here I

asked Chad gbt and I'm just gonna share

my screen with you here can you see my

screen yeah I see it I asked chat jbt

why should someone own Bitcoin I'd like

you to please evaluate its response

there are several reasons why someone

might choose to own Bitcoin or other

cryptocurrencies it listed four

decentralization Bitcoin is

decentralized meaning that it is not

controlled by any Central Authority or

government number two potential for high

returns Bitcoin has been known to

experience significant price

fluctuations which can result in higher

returns for investors who buy low and

sell High I guess easier said than done

but in theory that makes sense number

three security Bitcoin transactions are

secure through cryptographic algorithms

making them difficult to counterfeit or

manipulate and number four privacy

Bitcoin transactions are pseudonymous

meaning that they are not directly tied

to a person's identity

all right uh agree or disagree with uh

what it said so far it's not bad

no chat GPT is pretty intelligent and

you know if you ask it why does the

world need Bitcoin it hits all the the

the key points if you ask it what is

bitcoin better than gold it's pretty

good at answering that if if you ask it

uh how does Bitcoin compare to other

Investments it's it's not bad I think uh

I think uh decentralization security

privacy and and potential for high

returns they're all very reasonable

things so what would you add to it

um

the thing I would add to it is

um the reason on bitcoin is because

it's either a good for the world it's an

ethical imperative or it's uh be

essential for the world right so it's

ethical and it's an imperative if you

want to give freedom and property rights

and hope to eight billion people you're

not going to do it by day trading random

stocks or investing in the you know the

corner Delicatessen or or trading

options right if you're just a simple

investor that's not going to actually

make the world a better place for eight

billion people so Bitcoin is much more

ethical than a hundred thousand other

investment ideas

and um and I think

the ability to give uh digital property

or digital scarcity to eight billion

people on a mobile phone is sort of a

once in the history of the human race

development it's a paradigm shift

and so the reason to invest in Bitcoin

is the same reason you ought to support

running water

or electricity or if I said

would you like to teach everybody uh you

know on the continent how to master fire

why should I do that the answer is

because life is cold short and brutal

Without fire so so it left out that part

which is actually the most important

part you ought to do it because it's the

right thing to do if you happen to like

Humanity or believe in the future of the

human race

you mentioned to me Offline that money

is dying were your words can you comment

on that

I think what we see is um is an

avalanche of banking failures

internationally the extreme examples in

in Africa and South America and Asia

where the banks literally sealed their

doors freeze your funds and don't give

them back to you and I think we see an

avalanche of currency failures all

around the world the extreme examples of

Venezuela Argentina and Nigeria

Etc Sri Lanka but uh the Lesser example

is even in the U.S the world's most uh

most solid strongest fiat currency in

the world today reports uh what what is

it like a 4.9 percent CPI number in that

range and that means that the actual

monetary inflation in the dollar is more

than five percent it's probably you know

it's much more than that the CPI is the

lowest uh the lowest inflation number

the government's not going going to

actually endorse not the highest

inflation in places like Argentina's 105

percent uh inflation everywhere in the

world in the in the world's strongest

currency the monetary inflation must be

running 10 percent in the weaker

currencies 20 to 30 percent and the

weakest currencies 50 to 100 percent so

we have a crisis of confidence in

currencies we have a crisis of

confidence in Banks

and

everywhere else in the world if you want

to actually access the strong currency

the dollar you have to do it through a

bank but you can't trust the bank and so

there's a crisis of currency in the

governments that control the banks and

the thought that maybe they're not all

being run in a fair Equitable fashion

for the people of the world

um we could talk about that for a long

time but let's just start with the

acknowledgment that the consensus is all

of those things are are losing support

of the population so if you lose

confidence in the currency the banks

then you lose confidence in fiat

currency as money and therefore the

money is dying it's obviously dying in

Venezuela it's obviously dying in

Argentina but it's dying everywhere in

the world even in the United States and

in Western Europe

so

when you lose confidence in the money

then you start thinking about commodity

monies if I don't if I can't trust the

bank if I can't move the money

cross-border and if the currency is

losing value every year or every month

then I start thinking about commodity

monies and so the thing everybody's been

talking about is what are the commodity

monies is it gold are we going to trade

oil are we going to move Timber soybeans

well what are your choices if you want

to move 10 million dollars in gold

that's 350 pounds

so when it when it comes time to

actually trade 10 million dollars of

gold it's going to cost you a quarter

million dollars in insurance and

shipping fees to move 350 pounds of gold

if I wanted to move 10 million dollars

of oil

that's 125 000 barrels of oil that's 400

000 to ship the oil from New York to

London okay that doesn't make any sense

not to mention the fact the average

person doesn't have space for 125 000

barrels of oil

you want to move you know property uh 10

million dollars of properties and

apartment building

how do I move an apartment building from

Africa to South America to North America

that's not happening at all right so

what about a painting okay well a

painting is pretty efficient a 10

million dollar painting the problem is

it's physical it's fragile it's

non-fungible which means that it might

burn it might get soaked it might get

lost it might get stolen but if it

doesn't get any of those things and you

want to trade it to the rich

counterparty in London you're paying

anywhere from 500 000 to 2 million

dollars in auction fees just to trade 10

million dollars of of money in the form

of a painting so you know what do we

have left right I mean Securities you

can't move 10 million dollars of of

stocks across a border because they're

trapped by the counterparty holding 10

million dollars of an ETF

at 50 to 100 basis points a year is

going to cost you 500 000 to a million

dollars to store your money in

Securities so

now you see uh well what's 10 million

dollars of Bitcoin 300 Bitcoin

so I can have 300 Bitcoin on a hardware

wallet I could in theory just remember

it with a 12 word seed phrase I can move

it cross-border anywhere in the world

you know by the way comparing 300

Bitcoin as money versus a yacht a 10

million yacht is 125 feet long cost 2

million dollars a year to maintain and

cost you two hundred thousand dollars to

move from America to Europe and about

four weeks or three weeks so you can see

all the other forms of commodity money

they're not fast they're they're

expensive to maintain their physical

they're fragile they're non-fungible the

fees are exorbitant so if the world's

struggling for a solution to commodity

money Bitcoin is the king commodity it's

it's it's better than every other

physical commodity because it's digital

which means you know I can I can carry

it in the palm of my hand try carrying

125 000 barrels of oil in the palm of

your hand it's better than that and it's

also better than every other commodity

because it's scarce it's a scarcity

if the price of oil goes up by a factor

of 10 if the price of gold goes up by a

factor of a 10 if the price of anything

goes up by a factor of 10 people the the

collective intelligence of 8 billion

people produce more of it but Bitcoin is

the one thing you can't produce more of

so Bitcoins the Apex money because it's

scarcity and it's digital and of course

it's the dominant crypto Network in the

world it's the one that everybody trusts

it's the one that's truly decentralized

it's the one that's acknowledged as an

asset without an issuer

so I so I think the Meltdown to Banks

and the Meltdown of currencies is

driving a stampede of smart money

to bitcoin

so on the topic of acquiring Bitcoins I

like to ask you about microstrategy's

recent acquisition of more Bitcoins and

according to a recent AK filing the

period between March 24th and April 4th

2023 the company acquired an additional

1045 Bitcoins at an average cost of 28

000 for PTC for approximately 29 million

dollars in cash that brings your

aggregate Holdings of BTC to 140

000 worth approximately four billion

dollars on your balance sheet with an

average purchase price of 29 000 per

Bitcoin can you comment on why you're

continuing to add Bitcoins to your

already large reserves of Bitcoin

especially given that I believe

microstrategy is already

um among the publicly traded companies

the company with the largest amount of

Bitcoins on your balance sheet

sure

um well let's start with a base a first

observation and starting in August of

2020 if you track the performance of

every major asset class

that uh over the next two and a half to

three years

what you'll and I tweeted this uh over

the weekend bitcoin's up 147 percent

the s p is up 23 the nasdaq's up 12

Gold's up one percent silver is down

nine percent bonds are down 16 percent

okay so why is that well because Bitcoin

is the Apex property of the human race

it's it's without counterparty risk you

don't have all of the all of the

dilutive effects of running a company

you don't have people people are

creating more silver they're issuing

more bonds they're issuing they're

creating more gold right you've got

regulation you know tariff risk trade

risk there are a lot of reasons why the

other assets don't perform as well so

let's say that I went back in time to

the summer of 2020 and you actually knew

what was going to happen for the next

three years if you had perfect

predestination you could see the future

in that case the issue is how do you

outperform Bitcoin

so when microstrategy started we bought

250 million dollars of Bitcoin and

Bitcoin represented 25 of our market cap

what happened next is uh Bitcoin

performed if we just stopped there if we

had stopped with that then we would have

actually probably outperformed the s p

but if you actually look at

microstrategy stock microstrategy stock

and that time period outperform Bitcoin

we actually did more than 147 percent so

how am I going to actually keep up with

and by the way I wasn't trying to

outperform I was just trying to keep up

or or you might even say not lose I was

holding bonds right all those banks that

went bankrupt they're bankrupt because

they were holding the bonds and the

bonds traded down and I just didn't want

to lose slowly or go poor slowly so when

we bought uh Bitcoin we were 25 of our

market cap what we did next is we

actually issued a convertible Bond and

so we took on some debt to buy more

Bitcoin 650 million dollars of it and we

only paid 75 basis points in interest so

that was cheap money

the next thing we did is we issued a

billion dollar Bond at zero percent

interest zero coupon and we bought more

Bitcoin cheap money

then we actually issued a junk bond uh

no equity conversion right so a six

percent a bit more than six percent

yield uh at that time it's it seemed

expensive but as you know today it's

five percent to hold uh the treasury

bill for three months right so it's

actually pretty cheap now

then we issued some Equity a billion

dollars of equity we throughout the

entire time period we rolled our cash

flows into Bitcoin the long story short

we ended up acquiring more than four

billion dollars of Bitcoin today we've

got more than four billion dollars of

Bitcoin on our balance sheet we've got

about 90 million dollars of cash

so we're about 98

Bitcoin two percent cash exposure

and if you look at our market cap we

have uh Bitcoin Holdings in excess of 90

of our market cap and you know that

number fluctuates it could be 90 it

could be 95 percent

but but

um by Levering the balance sheet

intelligently you know with a mixture of

equity and and debt at different time

periods and cash flows we're able to in

essence run our enterprise software

company which is a cash cow and a stable

business and a source of of Revenue and

cash and earnings and then we're able to

use that to support our debt and our

debt service and then we're also able to

construct

um a balance sheet that's uh that's

exposed to bitcoin

and the um you know if you calculate our

Enterprise Value David our Enterprise

value of the business went from 600

million

to six

billion plus in less than three years

so we jacked up the Enterprise Value the

company by a factor of 10

now why would I keep buying Bitcoin

because Bitcoin on average is going up

50 a year for the past three years

right and the s p is going up six

percent or eight percent and the NASDAQ

is going up four percent and so what I'm

doing is I'm I'm basically acquiring a

high growth digital

monetary Network which is the dominant

digital Network and it's it's like

if you ran a a stable Cash Cow company

that was growing just a couple of

percent a year and you had the ability

uh to raise capital and buy a company

growing fifty percent a year that was

the dominant Monopoly in its space

that's a transformational financial

transaction why wouldn't you do that I

have a question about the timing of the

acquisition do you have a fixed

acquisition schedule of Bitcoins or do

you just sort of buy it when you see

when you think the price is reaching a

pivotal moment

you could think of us as dollar cost

averaging okay we we are we are content

you know like we're continually buying

Bitcoin

um we uh we do it in the most accretive

way possible so sometimes it's a

creative it's all it's always a creative

to buy with cash sometimes it's creative

to do it with Equity sometimes it's a

creative to do it with convertible

Equity sometimes with debt it really

depends from time to time

um our view is uh you know Bitcoin is

going to go up forever there will be

volatility

if you want a long-term metric David I

think if you look at the four-year

simple moving average of Bitcoin then

when Bitcoin is trading at multiples of

that then it's getting a bit rich but

when Bitcoin is trading you know around

that or at a discount to that is

obviously you know cheap and so I mean

that's sort of a secondary thing to look

at

but my advice to anybody would be

it you know if you have expenses to pay

in the next 12 weeks you have the local

currency to pay them in the peso if you

have expenses for the next you know 12

months to 24 months you hold the world

Reserve currency which is the dollar if

you can put it in a Bank Trust don't put

it in a bank that's going to steal your

money but if you can actually get put in

a bank you trust then yes hold the

dollar and if you have money that you

want to hold for anywhere from three

years to 30 years like long-term

investment Capital then Bitcoin is the

right thing to do because there will be

volatility but but statistically if you

look at the sharp ratio and if you look

at the return it's the winner and it's

it's not even close right it's

destroying every other competitor and

every other competing asset class you

are right the sharp something that

people should consider that the sharp

ratio of Bitcoin is significantly higher

than both the s p and gold

um I'll put a chart on the screen for

the audience

um this next statement I I suppose you I

have a feeling you might disagree with

but I'll ask you anyway so so when back

when I was in college I studied Finance

one of our finance professors told us

that generally speaking investors prefer

publicly traded companies to not use

their Capital to purchase uh Financial

assets or investable assets or be

involved in the capital markets and the

reason is that investors can do that

themselves which is to say that

investors can buy Bitcoin themselves

investors would probably prefer a

company use their cash to invest in

their core operations which unless

you're a hedge fund she argued should

not be in the management of financial

assets or Securities uh how would you

respond to that

um I I think as a as a general

high-level rule it's not unreasonable

but uh as with all rules you have to

consider uh the particulars here for

example

if microstrategy was buying a billion

dollars of the s p index

that we would be buying a security if we

were buying Apple stock or Amazon stock

or Microsoft stock if we were buying a

portfolio of Securities then uh first of

all SEC requirements keep that from

being more than 40 percent of our

balance sheet if we had more than 40

percent of our balance sheet invested in

Securities then we would be in SEC 40 uh

reporting company you know we look more

like a mutual fund or like an ETF or

something and that is a totally

different jurisdiction so obviously the

exception to that rule is there's an

entire class of SEC 40 companies you

know Arc you know all the ETFs that's

what they do that's how they add value

so

um we don't want to be one of those but

Bitcoin is commodity it is not a

security and so for that that's why for

example probably doesn't make sense for

us to buy a billion dollars a grayscale

right because you're correct if our

public company investors can hold

Securities they have a charter to hold

Securities and and they ideally want

Securities to trade on the NASDAQ

operating company securities but let's

make the point here

most people misunderstand Bitcoin

Bitcoin is a commodity so if you had a

publicly traded company that owned a

portfolio of four billion dollars worth

of buildings

or four billion dollars worth of

Timberland or four billion dollars worth

of natural gas rights

or four billion dollars worth of oil

fields right you know four billion

dollars worth of warehouses that that

actually is a very legitimate Mission

and a very legitimate uh

Charter or strategy for a publicly

traded company because the average

investor doesn't want to acquire

warehouses or millions of Acres of

mineral rights right they can't do that

they want to buy the security so we are

a security but we're backed by a

commodity so that's the first

observation uh that that um is the

reason why this is not the case the

second is

there are hundreds of billions of

dollars of capital uh that would like to

invest in Bitcoin or invest in any

commodity and they don't have the right

by Charter to invest in the underlying

commodity so that they can't buy the

Bitcoin either by Charter it's against

their Charter it's against their

investor mandate the second reason is

there are only a handful of exchanges

where you might buy Bitcoin on that

would be acceptable it would take six

months to a year to kyc AML and certify

and vet those exchanges so most of those

hedge funds don't have the physical

technical ability to buy the Bitcoin

even if they wanted to hold it as the

asset commodity the third is if you

notice there's nowhere in the world

where you can borrow against Bitcoin

anymore silvergate was the last credible

institution so if you have 10 million

dollars of Bitcoin it's very difficult

to get a margin loan against it to

pledge it as collateral but in fact uh

there the infrastructure for pet for

pledging NASDAQ publicly traded stocks

as collateral with your Prime broker is

quite elaborate that that infrastructure

for for trading accounting collateral

borrowing is 30 years old

so that means if you're a hedge fund

with billion dollars and you wanted to

get one percent exposure to bitcoin

you could buy microstrategy stock in 30

seconds by 10 million dollars of it and

it's part of your collateral package and

you can borrow money at sofa plus 50

basis points

and it doesn't bust your investor

mandate and you don't need another

relationship and Morgan Stanley will

execute the trade now if you decide if

you read that literal you know academic

observation you say well you know

investors don't want to invest through a

public company it's like okay well you

can go back and change your investor

mandate rewrite all of your rules take

you know spend millions of dollars

lawyering and get consensus over the

course of 24 months spend another 12

months trying to figure out what

exchange to buy it on then spend another

12 months vetting the custodian and

after about five years and spending

millions of dollars then you'll find

you're capped out at 10 percent of your

Capital being a commodity for tax

reasons so you can see there are a lot

of technical accounting and and very

practical reasons why you might not want

to hold the underlying commodity and

then of course the last observation is

microstrategy solved the problem for you

do you know how to borrow a billion

dollars at zero percent interest

if you can do that have at it right and

you go and borrow a billion dollars it's

zero percent interest and buy Bitcoin we

did right uh do you know how to custody

it so we've solved uh the custody

problem the accounting problem we've

solved the you know uh the issue do you

know how to borrow money against your

Bitcoin

no you can't

we solved it for you right so so

microstrategy is providing an

Institutional gateway to uh to a public

company investor that makes it much much

easier to get Bitcoin exposure and own

it in the same way that hey if I was

running a Reit and I owned a bunch of

apartment buildings in Miami Beach and

you said to me hey why don't you just

let the public company investors invest

in their own apartment buildings in

Miami Beach I mean the answer is they

don't want to go and run apartment

buildings in Miami Beach it's a pain in

the ass and they don't know which ones

to own and they're worried about you

know the inspections the insurance the

tax Etc the key here I think what you

brought up in the beginning of your

statement is that it is a commodity and

not a security uh Gary Gensler has said

that everything besides Bitcoin in the

crypto sphere is the security and not a

is a security and not a commodity with

Bitcoin being the exception do you my

question is do you think that will

change

um the regulatory landscape such that

Bitcoin will one day have to be

classified as a security and then you'll

have to reposition

no I think that when we made this

decision originally back in the summer

of 2020 we scanned all 10 000 cryptos at

the time and and one of the questions

was which one is the asset without the

issuer which one is the commodity which

one is the most decentralized and our

conclusion at that point was Bitcoin is

a commodity so so

legally the legal sophisticated opinion

three years ago was Bitcoin is the

obvious commodity everything else is a

question mark what's happened since then

in the next 34 months or or such since

we started this journey is uh consensus

has formed that that and indeed is the

case so since since we made that

determination with our attorneys we've

had Janet Yellen endorse Bitcoin as an

innovation we've had Christina Lagarde

say it's an asset we've had Jerome palsy

it's an asset we've had Gary Gensler the

head of the SEC and multiple

Congressional testimonies and documents

and interviews assert it is a commodity

we've had the head of the cftc assert

it's a commodity so I you know and we've

also had members on both sides of the

aisle in the con in Congress and in the

senate make the same observation so if

anything Bitcoin status as a commodity

is is much more certain today than it

was 36 months ago no I don't expect that

to change the real the real key here

David to being a commodity is for no one

to control it and no one have the power

to change it so so as long as as Bitcoin

is so decentralized that no one can

change it and as long as the people that

hold it are adamantly against anybody

else controlling it then I think you

cement its commodity status and and if

there's any one crypto asset that has

that conservative uh Community view that

it should not be changed it's Bitcoin so

it it is the most secure asset in the

crypto Universe with regard to its uh

legal status I like to point to an

apparent Paradox which is gresham's law

so uh the theory states that bad money

drives out the good it references a time

in Tudor England when the monarchy

reduced reduce the amount of actual

silver used in coinage and so people

when people notice this they started

hoarding the old coins that had more

metallic value had more silver

because they anticipated the newer coins

to have less actual silver and less

actual value so what happened was the

good money the the money with the

coinage with the actual silver was

driven out of circulation going back to

today if people agree with you Michael

that Bitcoin is a superior form of money

wouldn't people just store the Bitcoin

and not use it for transactions and then

transact with inferior forms of money

like Fiat and so the bad money Fiat will

drive out Bitcoin from circulation and

so it will never be Mass adopted as a

medium exchange well bitcoin's market

cap is about 500 billion right now and

uh the value of these financial

instruments that I've talked about all

the other currencies the Securities you

know the properties Etc it's 500

trillion or more so Bitcoin is is not

one percent it's point one percent so

Bitcoin can uh can increase by a factor

of 10

and it's you know it's going to be a a

one percenter and it can increase by a

factor of a hundred

and it's and by that time there'll be a

lot more of the other stuff and so when

it when Bitcoin goes up by a factor of

100 it'll probably be a three four

percent of the entire Financial universe

the the bad money that's get crowded out

David to be clear

bonds that's why they're crashing silver

that's why it's down nine percent in

three years gold the reason that gold

isn't returning in a year why it's up

one percent and 36 months of rampant

hyperinflation around the world is gold

is now the glass money or the shell

beads money or the stone coin money it's

just the gold bugs haven't quite got it

through their head that is Antiquated

shiny rocks all these things that are

underperforming Bitcoin they're the bad

money in addition look at the peso the

peso uh used to trade one peso to the

dollar

and um and today the peso is like 480

pesos to the dollar so in 20 years the

peso has lost 99.8 percent of its value

in Argentina but in the past 12 months

it's collapsed by a factor of two and

just last week the Argentine Central

Bank closed the doors and and they said

you know you can no longer convert your

Pesos into Bitcoin on an exchange

because they realized according to

gresham's law that people are going to

be trading their pesos to bitcoin as

fast as they can you see this going on

with the Niara you see that going on all

through Africa you'll see it going on

everywhere in the world

what's going to happen is is a stampede

from weak monies but there's so many of

them right I mean bad stocks bad

Commodities you know overvalued Fiat

currencies people are going to Stampede

from those to strong Monies

but of course if you're one of seven

billion people and you don't have a

brokerage account with a wall a big

bulge bracket Wall Street firm you can't

just buy the S P 500 Index and try to

custody 10 million dollars of the s p

index on an Android phone in Africa on

Saturday right you can't custody it and

that means you can't trust your counter

parties so what we're going to see is a

a steady non-stop stream of monetary

energy trickling from the weak monies

and the weak assets to the strong assets

and Bitcoin just happens to be the

strongest asset class in the world

poorly understood still still not well

understood but uh it's a lot better

understood when you're about when your

bank freezes and they seize all your

money and you're about to become

bankrupt and or uh impoverished then

it's easy to understand it's harder to

understand if you're a blue blood

limousine you know

uh

trust fund baby living in Upper upper

east side and you've got a portfolio of

NASDAQ or s p stocks and then you think

it's just an oddity well maybe unless

they like Michael's strategy stock right

that would be the exception then it

wouldn't be an oddity

um we're tearing the flag on the NASDAQ

we're bringing Bitcoin to the NASDAQ and

microstrategies viewers is we want to be

an Institutional Gateway or at least one

way for for the traditional financial

industry to discover and appreciate

Bitcoin I like to talk about

um transaction costs a lot of people in

the Bitcoin community and the crypto

Community want to know what's going on

with ordinals and transaction costs so

just a bit of context for our audience

uh the ordinals protocol was launched

early January this year in 2023 it

allows you to transcribe any file on

chain on the Bitcoin base layer uh which

is to say that you'll get a fully

Unchained Bitcoin nft you can go all the

way down to us to a to a Satoshi which

is the lowest denomination of a Bitcoin

and coincidentally in the last week the

Bitcoin average transaction fee has

jumped to I'm looking at it right now

it's at the highest point since 2021. uh

so what is going on Michael is there a

relationship here between the the use of

ordinals and the transaction costs some

people have speculated Bitcoin is under

attack what do you think

I I think that um

what we're seeing is

um a migration of developer activity

from the rest of the crypto ecosystem uh

to the Bitcoin base layer so there's

been there's been a lot of a lot of

stuff done with nfts and smart contracts

and and other ideas on all the other

cryptos what you're seeing is Bitcoin is

emerging as the winner and people

realize it's the low risk Network when

when all your Banks fail when all your

other cryptos get shut down if it turns

out that your cryptocurrency is is

um is regulated if your crypto security

is regulated if your crypto network is

regulated

Bitcoin is going to be the last Network

operating and so people are starting to

renew their interest in Bitcoin a lot of

capital is migrating into the Bitcoin

Network

um

the combination of segwit and Tap Root

laid the foundation for people to build

more intricate and more interesting

applications on on the Bitcoin network

but for a number of years uh the

developer Community was focused upon all

the other cryptos and that's because

they could issue tokens in order to

finance their development and so it was

like it was a it was a fast money Easy

Money shortcut and they you know they

were being boosted by the ftxs of the

world

you know because FTX had infinite money

now I think people are starting to ask

the question what's the ethically sound

technically sound economically sound

path forward okay and that's a that's a

slower path

um it took lightning for example

um many many years to gestate and get to

the point where people are starting to

build material applications on it

because lightning was supported by

venture capital in a conventional

fashion there was never a lightning

token issued that could be wash traded

by FTX in order to pump it to the Moon

so with regard to ordinals and

inscriptions I think people are starting

to ask the question uh and in addition

to moving money on the network what else

can I do on a on a crypto network if

what I wanted was uh was to

um

burn a transaction that is immutable

share it on a ledger to the entire world

and know that it will last forever

right what sort of things do I want to

be immutable for the next hundred years

and what what Bitcoin represents is it

represents the the most powerful Cyber

Network or the most powerful computer

network in the world

if I gave you a hundred billion dollars

and control of a nation-state and I gave

you four years and said attack the

Bitcoin Network you could try to buy up

all the shaw 256 mining rigs in the

world and then try to power them up and

if you succeeded after four years you

might be able to slow the network down

but you couldn't stop it right so it's

very difficult to either stop the

network to to undermine the network and

and or to block a message so

that being the case what's the what's

the killer app well an obvious killer

app is for me to send a billion dollars

from me to you and know that no nation

state can block it but the next set of

applications are are to embed any file

or any any message if I just wanted to

send a message worth a billion dollars

right like there are messages worth a

billion dollars that aren't the money

but they're the message right the the

example I used the other day is what if

I just burned my will on you know and

and encrypted and inscribe my will onto

Bitcoin

right and it was going to convey a

billion dollars from one person to the

other that's a pretty valuable document

and you probably wouldn't want it to be

tampered with by your Law Firm or by a

nation-state or by a corporation so the

ordinals and the inscriptions they they

created a burst of activity and they

created a bubble in transaction fees I

mean transaction fees went all the way

up to be equal to the entire block

reward for a while this weekend and now

they're cooling off a bit but I I think

you know we uh we had a period when you

could do transactions for one two three

SATs per V byte I don't think we're

going to see those days again I think

we're going to actually see transaction

fees that are 10x 100x that and then I

think over time you're going to see an

avalanche of applications that will be

built where the application needs uh to

cryptographically sign and certify a

piece of data that you want to last for

all eternity and you either you either

wanted burn it because you don't want

anybody to tamper with it in 30 years or

you want to burn it because you don't

want to be to block the message from

going from country a to Country B you

know even though someone might want to

censor it or block it are you if I may

generalize Michael are you saying that

in the future Bitcoin base layer

bitcoin's base layer will be so

expensive that it will be almost

unusable without layer 2 and threes

I'm saying this is going to definitely

catalyze the development of Layer Two

and threes no doubt for example

if you wanted to move a hundred dollars

right now there's no way you should be

doing on a Bitcoin base layer anybody

that wants to move a hundred dollars

fifty dollars buy a cup of coffee twenty

five dollars even 250 you should be

doing that with lightning right and and

I and we just had a conference last week

lightning for corporations you're going

to see an explosion of lightning

activity lightning would allow you to

move money at the speed of light for a

30th of a penny right why would you want

to wait 30 minutes and pay even a dollar

or much less ten dollars or Twenty so so

I think that this catalyzes the adoption

of lightning you know the exchanges like

coinbase and binance were slow to adopt

lightning but you noticed that in the

past few weeks coinbase has announced

they're going to support it this weekend

binance announced they're going to

support it so I I think this is going to

catalyze every legitimate Bitcoin

company

to support lightning you you can't

really have a respectable Bitcoin

offering

if you don't have lightning on ramps and

off ramps so yeah I think that's going

to explode I think that usage of layer

three

like you know cash app cash tag to cash

tag there's nothing wrong with that

right if you why not eight billion

people and they're moving money on layer

threes at a billion times an hour and

then yeah the way I see it is

if um it's inevitable that Bitcoin will

be embedded in Apple pay and Google pay

and Facebook apps and Microsoft apps and

you know there's 50 million people using

cash app right now that have Bitcoin

transactions built into them so so it's

inevitable that billions and billions of

people will do their daily transactions

on those kind of application networks

the significance of lightning

is lightning as the open permissionless

protocol that's going to be used to

integrate a hundred thousand companies

with each other so when cash app wants

to interoperate with apple Google

Facebook Amazon and Microsoft across a

hundred countries across twenty thousand

retailers they're going to use lightning

because that's going to be like the

money over IP protocol

Bitcoin

is the base settlement layer so let's go

back uh to my example people say well

the transaction fees are too high okay

what is the transaction fee to transfer

10 million dollars of an apartment in

New York City from me to you

right now without considering tax it's

six hundred thousand dollars David it's

six hundred thousand six percent right

is that stable yeah there's a 300

trillion dollar real estate market that

that where the transaction fee is is one

two three four five six percent to

convey real estate what's the

transaction fee to move gold 10 million

dollars of gold from New York to Tokyo

it's two hundred fifty thousand dollars

it's two and a half percent the

transaction fee to if I wanted to ship a

yacht from the Caribbean to the

Mediterranean it's two hundred fifty

thousand dollars have you heard Michael

No One's Gonna own physical Yachts

anymore they're all going to be nfts but

please continue you know the transaction

fee to move 10 million dollars in the

form of a painting from me to you it's

gonna be a million dollars that's the

auction fee so

so people think oh the transaction fees

are high what what they don't understand

of course is the value of the

transaction is it you can burn a

transaction once in a hundred years and

what's the value of actually having a 10

million dollar asset for 10 years

if you buy 10 million dollars of an ETF

the average ETF fee is 50 to 90 basis

points so to have 10 million dollars in

an ETF it costs you anywhere from 500

000 to 900 000 over a decade

so if you think of it that way you begin

to realize that if I actually did a 10

million dollar transaction on the

Bitcoin Network for 20 bucks or thirty

dollars the alternative was three

hundred thousand dollars to ship the oil

in a container ship so and by the way if

you wanted to ship the oil and store it

for 10 years it's a lot more than three

hundred thousand dollars it's probably

going to consume all the value of the

oil so I think that over time you'll see

Bitcoin transaction the base layer

they'll go from three dollars to ten

dollars to thirty dollars to three

hundred dollars to three thousand

dollars to thirty thousand dollars to

three hundred thousand dollars

there's no reason why you can't pay

three hundred thousand dollars to move a

billion dollars from point A to point B

I'm by the way I'm I'm not just moving

it

when a big company sends a billion

dollars another big company that's the

same as holding a billion dollars of

property for a decade

okay so what's the what's the

maintenance cost of a billion dollars of

property for a decade you see it's

it's off the chart so we've we're not

just moving uh monetary energy around

and final settlement we're manifesting

it in cyberspace maintenance free

forever so as you can see I'm bullish on

transaction fees on the base layer it's

not a problem because when the

transaction fees spiked this weekend

there was a massive outcry binance shut

down their uh redemptions everybody went

crazy and then binance realizes they had

to pay a higher fee for redemptions and

then they realize this is expensive and

then they realize gosh I guess this

lightning thing that we ignored for

years

maybe we can't ignore it anymore and

then within hours binance announced

they're going to support lightning so

lightning adoption and you know and then

the next people the next thing that

happened was people said oh what if your

lightning channel gets shut down that's

going to be expensive so you're going to

see a burst of activity and investment