In today’s seminar Saifedean talks to regular seminar attendees about the Bitcoin Mining Council: a recently formed group of North American bitcoin miners that aims to “promote energy usage transparency [and] accelerate sustainability initiatives worldwide.” They discuss why centralized attempts to alter bitcoin are unlikely to succeed without broad community consensus, what we can learn from the proposed SegWit2x software upgrade of 2017, and why the claims of some popular green energy initiatives are dubious.
Article on establishment of Bitcoin Mining Council: https://www.newsbytesapp.com/news/business/musk-s-bitcoin-mining-council-promises-sustainability/story
The Blocksize War by Jonathan Bier: https://blog.bitmex.com/the-blocksize-war-chapter-1-first-strike/
Enjoyed this episode? You can take part in podcast seminars, access Saifedean’s courses and read chapters of his forthcoming books by becoming a Saifedean.com member. Find out more here.
THE BITCOIN STANDARD TOOLKIT/SPONSORS
[00:03:39] Saifedean Ammous: Hello, and welcome to another episode of the Bitcoin standard podcasts seminar. In today's seminar, we're going to be discussing the Bitcoin mining council, a consortium of mining companies in north America that got together and issued a statement committing to revealing the energy mix that they use in their mining.
So I thought this was pretty notable and worth discussing today. First of all, it's I think worth notable because it is to a very large extent, to a creepy extent exactly what I was discussing in the episode on the Fiat Rockefeller, on Elon Musk. In that episode, I mentioned how what I see Elon Musk doing is trying to bring in the business model of Tesla, which is trading on subsidies and renewable energy credits and propagating the idea that some sources of energy are clean and good and nice and dandy while others are dirty and bad and evil.
And if you use the clean and good and nice and dandy energies, then you should get paid by [00:04:39] the evil baddies who use the bad energy. Based on that I think this has been an enormous boost for Tesla's profit. Arguably I would say Tesla wouldn't operate without it. And I think the entirety of the electric car industry, I can't see it being as big as it is, or anywhere near as big as it is to be more accurate, where it's not for government subsidies and mandates and regulations and all kinds of demands that are placed on car producers that make electric cars become less uneconomical than they otherwise would be on the free market. And so instead of using hard fuels like hydrocarbons for making cars, which is, I think the cheaper, more economical way, a lot of car makers end up having to move toward electric cars.
And that's because of all these interventions in the market. So it's very fascinating for me that Elon Musk wades into the Bitcoin and shitcoin arena, and also starts talking about all of this energy stuff. The impact of this was that as soon as he started [00:05:39] talking about Bitcoin not being green and not being acceptable to the church of Elon Musk for environmental greenness or whatever the hell they call it these days, once Bitcoin fell foul of the Silicon valley media empire's definition of good and bad and evil and green and yellow and pink or whatever it is, then it became an issue and the price of Bitcoin crashed.
And obviously there were many other things that have to do with the price, but it's highly likely that the impact of Tesla buying into Bitcoin significantly affected the price upward. And likewise, the other way around. When Elon Musk started making noises about, oh, it's not environmentally sustainable and it hurts our emotional and environmental feelings then the price of business started dropping as well. And so, as a result of this Michael Saylor and a bunch of Bitcoin miners met with Elon Musk and committed to releasing data on the energy mix that they use. And the idea here is [00:06:39] that Bitcoin miners are predominantly using renewable and green energy. And that because of that, Bitcoin shouldn't be getting the bad reputation that gets for being a carbon emitter and for being a pollutant. And so Elon Musk then tweets about this, saying something along the lines that he met with a bunch of miners and they committed to releasing data on their emissions.
And this is potentially promising. And I think a lot of people in Bitcoin and the Bitcoin space were pretty hostile to the idea of a council of miners meeting together. If you've been in Bitcoin for a while, you've got posttraumatic stress disorder from hearing the word Bitcoin and council mentioned in the same paragraph. We remember Segwit2X and we remember all kinds of official sounding groups where people would get together and say, we want Bitcoin to do this. And we are going to change Bitcoin in that sense. And generally these things have not gone down well, in fact, they've universally been met [00:07:39] with devastating and complete failure at achieving their goals.
Most important of which is the Segwit2X hard fork in November 2017. And I think this is a really landmark moment in Bitcoin's history. It was happening as I was finishing the Bitcoin standard and so I could include it in the discussion in the Bitcoin standard at the last minute, which I think was an excellent addition because it was a direct illustration of the point that I was making in the book about Bitcoin being immutable and people not being able to change it easily.
So I think that episode is an enormously important one. It carries a lot of lessons for today and for the future about Bitcoin and in particular, of course, also about the difference between Bitcoin and other digital currencies, or I should say between Bitcoin and shitcoins to use the technical term.
The difference fundamentally is that with every digital currency, other than Bitcoin, there can be a group of people who can get together and they can [00:08:39] change things in the currency. They can change the supply, they can change the protocol, consensus parameters, and they can affect a lot of different things in the network.
But with Bitcoin, we saw with November 2017, we had the majority of mining hash power. We had the majority of mining equipment producers. We had the majority of Bitcoin businesses. And arguably we had the majority of Bitcoin addresses. And when you think about all of the businesses that were allied in the attempt to hard fork Bitcoin, they arguably controlled so many of the Bitcoin addresses.
A majority, arguably, as well as a majority of the coins, most likely. Between them, these companies and their coins that they held for themselves as well as for their clients were probably almost certainly, I would say a majority of Bitcoin's coins. And with that we had a massive attack effectively on Bitcoins consensus parameters. There were all of these people got together and said, the only way to make Bitcoin grow is [00:09:39] to double the block size, increase the block size, increase the number of transactions, and then Bitcoin will be able to scale better.
But we saw, and I discussed some details in my book, The Bitcoin Standard, and also there's a new book that was released about this. I have not read it yet, but a lot of people I know have read it and recommend it very highly. It's called The Block Size War. I think Peter has read the book. Peter, can you confirm?
Peter Young: Yeah, I have read the book. It's a really fascinating read and it goes through a lot of detail regarding all different players that they were on both sides of the block size war from 2015 to 2017. Gavin Andresen, Craig Wright, all these characters and the guy who does BitMEX research gives quite impartial accounts of what happens.
He's very fair to both sides. I think he explains the rationale for wanting to increase Bitcoin's block size, but by the end of the book, it becomes very clear that the take home message is, as you [00:10:39] say, that it's ultimately the users of Bitcoin who control Bitcoin.
Saifedean Ammous: Yeah. So in case the audio wasn't very clear, Peter was saying the main conclusion of the book is that Bitcoin is controlled by its users and the users are the ones who are able to dictate changes to the protocol, but most likely dictate no changes to the protocol and that groups of Bitcoin service providers or groups of Bitcoin industry can't impose these things on users.
And I think that was the lesson from November 2017, that ultimately even with all of this money, all of the resources, all the bitcoins, all the Bitcoin addresses, all the Bitcoin nodes that they were running, they could not force the network to upgrade. And effectively what the attempt to hard fork Segwit2X came down to was: they knew that they couldn't just implement this thing and like a regular upgrade.
You know, it isn't like PayPal or the federal reserve [00:11:39] upgrading their payment system. It's not something that they can just do unilaterally and then force their users to accept and then have to watch whether the users leave or stay and possibly potentially have a monopoly. It's not like a central bank. In the case of Bitcoin, really, I think a big part of it came down to trying to gaslight Bitcoiners into believing that if all of these important people and all of these big wallets and big whales and all of these Bitcoin personalities, all of these people that are associated with Bitcoin, the people who led you into Bitcoin, the people you first heard about Bitcoin from. Some of the very important early influences were on board with this hard fork.
And if all of those people are on board, then maybe everybody else will just jump on board and it'll take off. Ultimately, they couldn't just pull that off. Ultimately Bitcoin users called their bluff by essentially doing nothing. By refusing their upgrade and they had to not launch it. And then eventually it was launched as a shitcoin, which has continued to [00:12:39] decline in value against Bitcoin since then.
I mean, initially it had a bunch of pumps where it went up and we had to suffer for a few months with a lot of delusional people telling us that this Bcash thing is going to be the real Bitcoin. But within a few months, I think it became entirely clear that this thing is going nowhere. It's going to keep dropping in Bitcoin terms. And that it's acts almost like an IQ test for Bitcoin, so that it prevents the least intelligent people from getting into Bitcoin, because if you come into Bitcoin and you realize that, okay, well, you know what Bitcoin needs is a centralized big block blockchain where only a few people are able to run nodes and then these people have centralized nodes.
Well, then you deserve to be in a shitcoin like Bcash. And you're gonna see how that works. So I think it worked out very well for Bitcoin. I think this was potentially the best thing that ever happened to Bitcoin since it's operation. After getting created, [00:13:39] perhaps the most important thing that happened to Bitcoin was the fact that, well, maybe the number one thing was that somebody exchanged it for real economic value at some point.
But possibly number two was November 2017 when we had an astonishingly strong coalition of a lot of people get together, try and change the Bitcoin protocol and fail. And I don't think we'll, you know, Bitcoin has grown a lot since then. And I don't think we'll get to another point where we can get such a strong extent of collusion between businesses and influencers and miners, all getting together and wanting to change the protocol rules.
I think it's not going to happen for two reasons. Number one, Bitcoin's much bigger. So now it's just much harder to herd all the cats from all over the world. And secondly, because of November 2017, the idea of Bitcoin being immutable remaining important, I think everybody has been at least exposed to it.
It might be that maybe not everybody [00:14:39] agrees with it entirely, but everybody gets it. Everybody gets that a lot of Bitcoiners care about Bitcoin not changing because on their mind, Bitcoin changes for one thing, then it'll change for anything. And then if it can change for anything, then that can change the monetary policy.
So I highly doubt that we'll get anything anywhere near as big as Segwit2X hard fork attempt anytime soon. But having said that, we do get this Bitcoin mining council, which seems like a coalition of industry groups getting together. But I think to illustrate the point that I was making, this is nowhere near as big a threat to Bitcoin as the Segwit2X hard fork.
I think this is just not comparable. And the main reason is that it is the miners. And it's something that I've said once in an interview and it went viral and a lot of people keep quoting it all the time. The idea is Bitcoin miners are Bitcoin slaves. They're not Bitcoins masters. The intuitive idea and this is how I thought about it. Initially, when I first started reading and learning about [00:15:39] Bitcoin, in my mind you think of the miners as being the people who run the protocol, people who control, the people who call the shots, you know, they have all that money, all these machines, all that electricity that they're spending.
Clearly, those people must be in charge and clearly, if they turn off those machines, then Bitcoin will die and will have no chance, but to yield to them. And in general, whenever you hear somebody who's misinformed about Bitcoin, try and explain why they are anti Bitcoin or why they think Bitcoin won't work, generally, this is the summit of Mount stupid. If you want, you know, there's that graph I've seen somewhere where as your knowledge increases your appreciation of your knowledge increases. And then eventually you get to a point where you realize, oh, wait, as you start learning more, you start becoming less and less confident in what you know, after a lot more work and a lot more humility, your confidence begins to recover.
And then you reach a point where you know a lot. And also you think you [00:16:39] know a little bit more, but not as much as you thought at the summit of Mount stupid. Because the summit of Mount stupid really is the pinnacle of the disconnect between what you actually know and what you think you know. And this is like the precise point, the case of Bitcoin is you start learning about Bitcoin, you read a couple of articles and you watch a few YouTube videos and you get the idea that the miners are securing the network. And then the first brain fart that comes to your mind is aha, so the miners can just switch off their machines or the government will just take over the miners and then the miners will change the rules.
And then Bitcoin, won't mine. And I've been trying my best in many years, but it really only sunk in for everybody, I think after 2017. And that's when it's been more popular to try and spread this because it became clear that it's the miners don't decide the rules, the miners can't control what happens in the protocol.
And if you want to really understand it in economic terms, if you want to abstract away [00:17:39] from the technical details of how Bitcoin works, how the proof of work happens, and when the miners doing all of that. Ultimately in the grand scheme, the big picture is that Bitcoin miners produce a search for proof of work blocks. They expend enormous amount of investment in order to get into the mining industry.
They buy mining gear and they spend electricity to operate that mining gear and they connect to the internet. All of that involves costs upfront. And so you do that. And once they've incurred all of those costs, they try and find bitcoin proof of work solutions. So, they have to spend the money first and hope that they get the correct answer for the proof of work.
And then if they get the correct answer for the proof of work, they can then sell it to the Bitcoin nodes. And the Bitcoin nodes will happily buy blocks from miners, as long as the blocks adhere to the Bitcoin consensus [00:18:39] parameters. And this is really the point I think that people miss about miners, miners don't decide consensus parameters, miners have to sell their blocks according to consensus parameters, or they end up with a lot of worthless equipment and a lot of wasted electricity.
And that's really the assymetry that people miss, that miners have to make their expenditures upfront in order to hopefully get repaid from the network. And so once they've made that expenditure, they are in no position to impose terms on the network. They've already spent all their money and the network doesn't owe them shit.
They are free to come and sell their blocks to the network. If the blocks adhere to the consensus parameters, but the network won't change the consensus parameters in order to accept their blocks. Simply because mining is an open market. [00:19:39] Mining is competitive. It's not a central bank, it's not the primitive monetary system where only one authority is able to decide who can mine new coins.
It's open to anybody anywhere in the world. You don't have to even register anywhere and you don't have to include your identity or your name. You just need a satellite internet connection and you can hook up any amount of miners to anything that produces electricity and you're in business, you're out there and you're selling Bitcoin blocks.
And so the notion that miners can just dictate consensus parameters implies that they have some sort of monopoly on the production of blocks. That miners have a monopoly on the production of blocks. And if they stop, it's like, it's just this one small cabal of people who control the production of blocks.
And if they stop selling us blocks, they're going to keep the blocks for themselves. And then the Bitcoin network won't have blocks anymore. And then Bitcoin dies. That's not how it works. That's not how they economic reality of the model is. In reality, their investment is [00:20:39] only valuable if they're able to monetize it by selling the correct proof of work solutions with the correct consensus rules for the network. If they can do that, then they can monetize the electricity and the equipment that they have utilized, and that makes their investment profitable. But if they go by other consensus parameters, they can't force the network to take the blocks. And all that happens is that the network will buy the blocks from somebody else.
So here, the question becomes, well, what happens if the miners all collude together and you know, here, we've got a few north American miners. It's not entirely out of the realm of possibility that all of the major mining companies in the U S and the world, the miners themselves, and the hash rate manufacturers, if they all got together and said, all right, we're not going to mine anything, except when the consensus rules are changed for this or that thing, the SegWit2X people had the idea because they also [00:21:39] had a lot of money, hashing power at that time.
And they are the idea that if the miners all agreed to not mine Bitcoin, well then nobody will produce Bitcoin blocks and everybody will go to the chain that the miners are mining. And then everybody's going to move to the new hard fork. And then the old Bitcoin dies and the new Bitcoin lives.
That was the idea. But, what ended up happening is that as those minors announced that they would stop producing a Bitcoin blocks, what happened? Bitcoin continued to operate. How did Bitcoin continue to operate? Well, once those miners take their hash rate off the Bitcoin network and move it to some shitcoin network, what happens now is that the amount of hash rates on the network is extremely low.
You know, it drops, let's say, let's assume it was 95% of mining hash rate that decided to migrate out of the network. So 95% of the mining hash rate leaves the network you're left with [00:22:39] only 5%. So with that you would expect that the blocks would come roughly in 20 times as much time as it took.
So instead of 10 minutes it would take like 200 minutes, with that kind of hashing power to get the block reward. But, that didn't happen. We didn't see that in Bitcoin. We had some interruptions. We had Bitcoin blocks slow down a little bit, but nothing all that out of the ordinary by Bitcoin standards, you know, slow downs and block production do happen here and there.
But what ended up happening was that the hashing rate just didn't actually migrate out of Bitcoin because as you remember the example that I mentioned, if it was 95% left, well, that 5%, okay, it's going to take them longer time to mine the blocks. But when they mine the blocks, they're getting a much bigger share.
All of these people are getting much bigger share of the coin rewards that are being distributed. So when all of these miners decide to stop [00:23:39] mining Bitcoin and move toward mining a shitcoin what they're doing is that they're making mining extremely profitable for everybody else who's mining Bitcoin.
And that just guarantees that the hash rate is going to come back one way or the other. By hook or crook, whether it's new hash rate coming on or the old hash rate repenting and realizing, you know, this isn't going to work for us, the hash rate is going to return. And that's why we see, you know, Bitcoin's hash rate is many hundreds of times larger than the hash rate behind Bcash or any of these other Bitcoin forks.
So even though the miners said that they wanted to stop mining Bitcoin, that's ridiculous. They can't say that. It's an empty threat. It's the definition of an empty threat. And I think the key to Bitcoin winning in 2017 was that enough Bitcoiners, toxic Bitcoiners realized and understood that this was an empty threat, that this is a bluff [00:24:39] that they can't pull this off.
That the only way that they can pull this off is if they manage to convince everybody in Bitcoin, every single person in Bitcoin is convinced that they can pull it off. Because otherwise there's no way they can pull it off. If everybody changes the consensus parameters, because they think, oh, no, the miners are going to attack the network and that's going to ruin the network.
And then that's going to give us bad headlines and that's going to make our coins dump. Then let's just go along with them. If they manage to get that idea out there and people didn't doubt it and people believed it then yeah. They might have succeeded in pulling this off, but there was enough of a critical mass of Bitcoiners who didn't give a shit and didn't buy into this because they understood that nope, you can't dictate the terms for the network. You can only sell blocks to the network. And if you decide that you want to go and mine a shitcoin instead of mining Bitcoin, you're [00:25:39] perfectly free to do that, but you're just going to be sending a lot of hash rates to a shitcoin that gives very little reward.
And so you're going to be mining at a loss. Whereas you're leaving behind a highly profitable Bitcoin that is offering you very high rewards. So you could be mining at a huge profit by being on Bitcoin. And you're deciding to shoot yourself in the foot by switching to Bcash or whatever. So it's an empty threat because it's a threat that involves self-destruction and these are businesses.
And I think, at some point we always get these weird egos that are hurt in Bitcoin, and then they start taking this personally, and then they start really doing very stupid, very bad business decisions in order to just protect their ego from the slight that they experienced when Bitcoiners told them to basically stuff it, because we're not going to change Bitcoin for you.
Some of them did do this. So for instance, Bitmain, which was, I [00:26:39] think around at that time, it was probably producing something like 80% of the Bitcoin hashing power. It was almost a monopoly at that time, it was making the most efficient Bitcoin miners and they were giving them out to a lot of people all over the world.
So they had a lot of connections with the mining companies. And they had an enormous advantage in the Bitcoin mining market and they were on the verge of IPO-ing, and then they chose to play the stupid Bcash game. And basically they got burned as a company. They got burned, the CEO then got fired and it was a very, very, very stupid lesson of a very stupid mistake.
The only thing that they got out of it was a very, very expensive lesson, but, you know, for all the rest of us, it was very good because it was a stress test of Bitcoin's ability to resist control. And it was a demonstration of the weakness of miners. Even the biggest mining company that produces the hash [00:27:39] rate produces maybe 80% of the hash rate.
I'm not sure on the number of 80%, but I'm sure for a fact that must be over 50%. And yet they couldn't force the network to mine their shitcoin because ultimately, you know, this is a very important, fundamental point in Austrian economics, which is that value is in the mind of the beholder. Value is not generated through the work of the producer. And this is, if you remember in my ECO11 class, which is available on saifedean.com. If you sign up as a member, you'll be able to access all of the material for the course. In the first lecture, we discussed the concept of subjective value.
That value is subjective in economics, and this is ultimately the most important distinction or the fundamental starting distinction between Austrian economists and other brands of economists. Economic value in general is in the mind of men, it's a subjective phenomenon, only exists in our minds. If we see value in something, it becomes valuable.
We [00:28:39] don't impart value on things by working on them, we produce things and then we hope that others value them, but our labor, our ability to produce and the amount of production that we put into things does not make them valuable in and of itself. And so the best example for this, and really the best refutation of the labor theory of value, which is the starting point of all Marxist confusion on economics is the concept of the mud pie. You could spend 10 hours baking a mud pie and then how much is that mud pie worth?
It doesn't matter. It doesn't matter how much ingredients, how much money you spent on the ingredients. And it doesn't matter how much time you spend on it, unless you can find somebody who's willing to pay you money for the mud pie as somebody who is willing to pay money for the honor of eating mud in a pie, that pie has no price on the market and nobody's going to pay for it.
So you don't give mud value by putting it in a pie [00:29:39] because people don't want that. And so what gives mud value is if you manage to put it in something that people want to use. So if you build something out of mud or if you make some pottery out of it, then somebody might value it at a certain price.
And if you did your job well, that price should be higher than the cost that you've incurred in producing it. But just because you spent your time on producing something does not give it value. And I wish more of these SegWit2X people would have spent some time reading and studying Austrian economics, because that would have really saved them a lot of agony. Well, let's be honest. It would have saved them agony. It would have deprived us of this amazing lesson. So if they'd read the Austrian economics they'd realized that actually just because we make Bcash blocks instead of Bitcoin blocks does not mean that the market is just going to go and value Bcash blocks more than Bitcoin blocks. That was really the key concept that [00:30:39] they missed. And I think it's something that a lot of people in computer science and in mainstream economics and media, when they talk about Bitcoin, they miss this aspect of it. Because if you think about it from a computer security perspective, this is an attack vector on Bitcoin.
You could do this, you could change Bitcoin by getting all the miners to agree to start mining another chain. And then that makes the old chain unusable. And then everybody has to upgrade or else their Bitcoin doesn't work. If you think about it as a computer scientist, this kind of makes sense. It seems like it could work. But if you think about it as an economist, as an Austrian economist in particular, you would think of it the other way around. You would see that no, what gives those Bitcoin blocks value is the fact that people buy Bitcoin on the network.
And when it gives the Bcash blocks value is that people buy Bcash on the network. And then it's the subjective valuation of the purchasers of these coins [00:31:39] that determines the value. And that determines the market value of the reward that goes to the miners. So the miners don't get to decide the market value of the reward that they get.
They get to work hard at producing the thing that other people want. And then if those people want it, they'll pay them for it. That's I think how Austrian economics helps us understand the Bitcoin block size war. And I think how it can help us understand any kind of mining coalition in terms of the limitations that are placed on them.
Ultimately, the fact that miners have a lot of money invested in Bitcoin is not a threat to Bitcoin. It's a threat to them. It's a liability for them. They've invested tens or hundreds of millions of dollars in equipment and in electricity. And in order for that to pay off for them and for their investors, they need bitcoin to continue to have value and they need Bitcoiners to continue to value Bitcoin so that [00:32:39] can they continue to buy it so that they can sell their own Bitcoins, the Bitcoins that they mined so that they can sell them on the market to cover their costs or else they wouldn't be miners. So value comes from the market. Value is assigned by individuals.
It's not imparted on the blocks because of work done. The miners all decide to shift to Bcash tomorrow that doesn't make Bcash more valuable. It just makes Bcash less profitable to mine because now everybody is focused around Bcash. And so that becomes much less profitable to mine compared to Bitcoin.
And so the people who are mining Bitcoin will be much more profitable than the people who are mining Bcash. All of which brings us to the Bitcoin mining council. The conclusion from the analysis of Block Size War is that fears of a hostile takeover by the Bitcoin mining council, I think are widely exaggerated.
And I don't think they have anywhere near the capability of doing something like this, [00:33:39] regardless of whether we trust the intentions of the people involved. I think it's just the way that Bitcoin works is that miners can't really control Bitcoin. For that on its own from the perspective of, is it a threat to Bitcoin?
I think the answer is as it stands so far, it's a real threat to Bitcoin, regardless of who the people involved are and whether we like them or not. I can't really see it being much of a threat because it is miners. Now in this one particular case, you know, it's not like there are miners who are hostile to Bitcoin who are trying to do something drastic to Bitcoin, like the case in 2017, where their express purpose was that they wanted to change consensus rules. But nobody here is proposing anything about consensus rules, nobody's proposing any upgrades to the software, none of these miners or the statement issued by the mining council was not suggesting that we should change the Bitcoin protocol anyway. They didn't submit any Bitcoin improvement protocols.
They're not [00:34:39] trying to change anything in the Bitcoin network. They're just out there so far, at least, it's pretty clear that the intention is to just virtue signal about climate change. And that's really what all public discussion of climate change ultimately is. It's a bunch of virtue signalling.
And of course, I think what is the problem with it just because they're not going to succeed in destroying Bitcoin and they're not attacking and destroying Bitcoin, doesn't mean that it's a great idea. I think the problem here is that Bitcoin miners are essentially bringing in Elon Musk into the industry in a way that is going to possibly hurt Bitcoin miners themselves. I think in particular in North America, I think this is the really concerning thing about it, which is that it's not an attack on Bitcoin. It's an attack on North American Bitcoin miners. If you remember the discussion we had a couple of weeks ago on Elon Musk.
I think what he's angling toward is some kind of renewable energy credit system that gets imposed on [00:35:39] Bitcoin mining, whereby miners who mine with green technology get credits. Whereas miners who mine with ugly technology have to pay some taxes. A lot of people, even a lot of Bitcoiners who usually are better at detecting bullshit will tell you, well, you know, this is a small price to pay.
If we have to do this. And of course, from a political perspective, it is a small price to pay. Like if you have to pay some taxes to operate, you pay the taxes. But I think in this case, Bitcoin is far more competitive than anything else. So if you want to open a power plant or a shopping mall or the car factory somewhere, there are a lot of factors that go into determining what makes this place good or bad.
As a location and taxation is only one of them. In the case of Bitcoin mining, it's really just the cost of electricity and then taxation. So Bitcoin miners are extremely mobile so they can move anywhere. And [00:36:39] places that end up imposing taxes are just essentially donating satoshis to places that don't, because you're just going to decrease the efficiency of miners by punishing the ones that are able to mine most efficiently and rewarding the ones that are able to mine less efficiently. And effectively, you're costing people in your or country satoshis. That's really what it comes down to. If you're going to be imposing some of these things. In the same way that Chrysler cars today, cheaper Chrysler cars are more expensive today because their owners have to pay a part of the money to go to finance Tesla cars, because Chrysler pays for the renewable energy credits that go to Tesla.
That's been billions of dollars over the last few years. In the same way I think, what the green narrative in Bitcoin is going to bring about is something similar in terms of mining, where we're going to see less efficient, but well politically connected miners run mining operations whose main purpose is to [00:37:39] virtue signal.
And get green points from regulatory authorities. And these are going to be subsidized while competitive miners are going to be taxed. Of course here, it's very important to emphasize that the actual reality of what these energy sources have to do with the environment and the climate and the weather and this ocean acidification and the ocean sea level rise and all of that, all of that is completely fictitious fantasy bullshit, completely irrelevant.
This is all politically connected. It's all politically determined. The idea that there's any kind of a coherent science that says why Chrysler drivers should pay Tesla drivers is just complete garbage. And the only way that you can arrive at this kind of garbage science is through carrying out extremely invalid, really methodologically bunk analysis that tries to calculate all of the costs.
And basically the problem with this, this is how I became an Austrian [00:38:39] economist. This is how I got to hear about Austrian economics, because I was studying this for my PhD. So I never like to use my PhD as a authority because it doesn't give me any authority, but I think here it's relevant to bring it up, which is that I bumped my head against this question for quite a few years of trying to figure out what are the cummulative emission effects of this thing or that energy use.
And the short answer is that you can't calculate something like this because of the economic calculation problem. It's not possible to calculate what the world would look like if we use this versus a world would look like if we use that because you can't express the result of any such calculation in anything objective. The result of any such calculation is ultimately subjective.
And subjective to the billions of people that are involved. So you don't get to say that this is good, or that is bad because it is good or bad for you, or because it's good or bad according to the metrics that you say, ultimately, [00:39:39] every single person gets to decide about what they want to do and their preferences are what determine how the world ends up looking.
And they act every moment to try and make the world better for themselves. We can't perform central calculation. We can't just go and make a central plan where we calculate everybody's potential decisions, all the things that they could possibly do in order to consume energy in one way or the other. We can't go over all of these possibilities in an extremely complex system and figure out what the net benefit is to every individual and what the net cost is to every individual.
And it's just mathematically intractable as a problem. First, because of the complexity, because of the number of elements involved in this question, each individual is a gigantic equation of many, many variables. But secondly, because ultimately there are no constants in human action. You're looking at human beings acting.
There's no constant with which to measure things with, because the unit of analysis is the individual [00:40:39] themselves. And we can't aggregate all individuals into one individual. And so, thinking hard about this question and trying to figure out whether if biofuels in particular were good or bad for the environment made me, the more you think about it, the more critically you think about it, you realize that there are no right and wrong answers to those questions because you're discussing an entirely different hypothetical question, which you will never be able to calculate.
What would the world look like if we had 10% more biofuels? Who knows. We can't even predict how things will go in any of this. What's going to happen to the production, how much CO2 is going to come from the deforestation that happens in order to grow the biofuels. But how much CO2 do we say from the fossil fuel production? Think about all the knock-on effects of the supply chain. And it clearly becomes intractable for anybody who wants to be honest about it. However, nobody in this entire industry is honest about the way it works, the way it works is purely political. So they're going to calculate things in the way [00:41:39] that makes sense for the people who are pushing for those things. And so I think where this is relevant in the case of Bitcoin, is that for instance, there are a lot of miners who mine on fossil fuel fields. And what they do is that they mine on methane gas, on flared methane gas.
And we had an interview with Steve Barbour in one of the earlier podcasts, I urge you to check it out. We had a discussion with Steve Barbour whose company Upstream Inc, they do this as a business model where they give you a data center that you would install on your oil field. And instead of flaring methane, which is what oil companies or oil wells have to do, usually have to do, because it's very expensive to move methane.
Methane is pretty cheap and it's too expensive to move it around. And if you want it to transport it from isolated wells it becomes uneconomical. So it makes more sense to just burn it, take out the oil and burn the methane. Well instead of burning the methane, you can run the Bitcoin miners on it, and then that's reducing the amount of methane emissions into the atmosphere.
So some Bitcoin miners might be thinking, oh, well, you know, we're running [00:42:39] our miners on methane, spare methane. So clearly that's going to count as being sustainable and we're going to get green credit points for this. I'm fairly certain that won't be the case. I don't think you're going to be getting in reality.
Actually, if you care about emissions, what these data centers do is enormous in terms of the reduction of the emissions that they are able to bring about, but you're not going to be getting it because the people that are going to be pushing it are going to be pushing it for themselves.
They're not going to be pushing it for the oil industry and they hate the oil industry because they are illiterate and not very bright people who think the world that they live in is possible without oil. And also we've discussed that extensively here, we had Alex Epstein talking about the moral case for fossil fuels.
And I've also had a couple of episodes on the energy consumption of Bitcoin. Ultimately fossil fuels, hydrocarbons are the reason we have the modern world. The ability to utilize this highly mobile energy is [00:43:39] what has given us the industrial revolution. Without them we go back to pre-industrial age, we go back to barely surviving winter.
We go back to subsistence agriculture. We go back to misery and lack of education. We lose the printing press more or less at the scale that we have today. We're highly dependent on those oils. And I think the dangerous thing about the Bitcoin mining council is the legitimation of this narrative of the green huckster narrative.
It's the same narrative that priests have always tried to popularize in primitive societies, which is that the weather is changing. The weather is bad, the storm is gonna come and it's all because of you. You are the reason that the bad weather happens. And the only way you can fix this as if you give me money. And this is how it used to be done in most societies. In modern societies is done on industrial scale where, hucksters like Elon Musk and [00:44:39] Al Gore and other professionals of this industry will a virtual signal about the dangers of carbon dioxide rising. Incidentally for those who are new to this here carbon dioxide concentration in the atmosphere is 280 parts per million.
So out of every 1 million particulates in the atmosphere, 280 are CO2, well, 280 was the concentration 200 years ago before the industrial revolution. And now it's at 400 or 410 parts per million. So we're talking about an enormously infinitely, tiny number of CO2 molecules in the atmosphere.
It's not like we're going to suffocate. We're still less than I think about a 20 fold, we need to up the CO2 something like 20 fold before the atmosphere becomes uncomfortable for human beings. We still got an enormous, enormous way to go. And as far as we know, the only effect of increasing CO2 concentrations, the only one for which [00:45:39] solid evidence exists, there are a lot of people that talk about, well, CO2 is causing this and causing that. The only one for which we have solid convincing evidence is that it accelerates plant growth. Some people say it causes warming, perhaps, perhaps not. It's highly questionable as an idea. And the data behind it is completely Fiat type data. And I discussed this in the Fiat standard, but what we know is that more CO2 leads to more plant growth. And what we know is that our modern life, our modern technology, electricity and everything that it enables would not be possible without hydrocarbons and without emitting CO2.
So the really devious and idiotic thing about the green hysteria scam is that these people have absolutely nothing to demonstrate why exactly CO2 is going to be a disaster for the earth. So there's all these scare stories and all these stupid movies that are done for dimwits about, you know, well, [00:46:39] the oceans are going to rise and then, the ice caps are gonna melt and we're all going to die.
And then, you know, we'll only be able to survive on 10% of the earth surface will remain over water. There's all these amazing stories about what's going to happen, but there's absolutely nothing that you can see with clear evidence, with anything close to scientific proof. And the reason for that is we've had 20 years of people stoking the flames of this hysteria. Well, more 30 years or something, but 20 years of really hardcore, flames stoking. Things really went into overdrive when Al Gore lost the presidential election. And this was basically his consolation prize. He became a billionaire basically by pumping all these green scams. So it's been 20 years now, you know, 20 years, we've had a lot of people making a lot of money on all of these things.
And a lot of scare stories about temperatures rising, but nothing, nothing with falsifiable predictions that have been validated over time. If you're trying to tell us that the earth [00:47:39] temperature is going to rise by three Celsius by the end of the century or whatever, then how about you show me an accurate record for what happens between 2001 and 2021. We have millions of papers being turned out by Fiat academia, making all kinds of different predictions. None of them are able to make; it's all modeling. They make models about the future, but they never go back to revisit their models and check their track records, because it's all Fiat science and there's no need for any kind of intellectual honesty.
As long as you tick the boxes of the people who finance you, then you get along with it. So we don't see any kind of convincing evidence that shows us in a substantive way what is going to happen. Formulate it in a scientific statement, formulated as a hypothesis. If carbon dioxide emissions over the next year go up by this much, then we would expect temperatures to increase by that much.
And we'd expect sea levels to rise by this much, or the ocean to acidify or whatever; the spotted deer of the Himalaya's goes extinct. Make [00:48:39] falsifiable predictions, and then come back to us five years later and show us these things happening and show us the trends in these things and how they're going to continue.
And then maybe we'll talk. But as long as you're just showing us projections and models, you'd have to accuse the incredulity. The devious thing here is that we're supposed to take the damages of CO2 as if they are real to the world and devastating.
And it's the end of the world. And we should apply this idiotic precautionary principle to the concept of CO2 damage because CO2 is uniquely evil. And yet we can't for a second think about the costs of suspending CO2 production. Because if you start thinking about what it would take to stop producing CO2, you quickly realize this is essentially suicide.
You produce CO2 every minute you're alive by breathing in and out. That's just what living things do. Living things are machines for making CO2 basically. You consume oxygen and you produce CO2. Plants [00:49:39] consume CO2 as well. And that's what allows them to grow. So CO2 is part of a natural cycle.
It's an essential compound in all living things. It has existed in the atmosphere throughout history. We think we have much bigger variations in CO2 level throughout history, and much bigger variations in earth temperature throughout history, without humans being involved in any sense whatsoever. We know that the river Thames in London used to freeze over in the winter and now it doesn't anymore.
So there are changes in the weather happening, but that's the idea that it is being driven by CO2, I think is extremely lacking in any kind of evidence. And it's absolutely insane that we're supposed to not question that. Or question the idea that we can just suspend the consumption of fossil fuels. That we can just go and skip fossil fuels and replace them with wind and solar and other fake virtue signaling bullshit.
And then we can still maintain the standard of living that we have. If we work to get rid of hydrocarbons, if we stopped [00:50:39] burning hydrocarbons, we would literally, trigger a mass die-off event. The world would come crashing down. There are so many cities that only exist because of the modern energy infrastructure that is allowed by hydrocarbons.
And these would start to fall apart and people in them would start to starve. Food production would collapse without a hydrocarbons. Transportation would collapse. The idea that we have an alternative choice in all of those things is complete fantasy. It's Fiat fantasy, people think, all right, we should just quit fossil fuels and then things will be fine.
It's childish fantasy promoted by childish figures like Elon Musk, because it works on the kind of childish people who like these kinds of authority figures that don't think about things and just do what feels right. So it feels like it would be, let's upgrade our iPhone in from having the black cover to having the golden cover or having the silver cover.
Because now it's going to look [00:51:39] nicer. This is what people think about it. Let's get rid of this infrastructure that we have that is dependent on hydrocarbons and instead replace it with something else as if it's like a cosmetic feature rather than the fundamental engineering, the fundamental engineering breakthrough that makes modern society possible.
You're taking out the fundamental engine of a car and saying, let's replace the engine with an ice cream maker because ice cream makers are green energy or ice cream makers are purple energy. It's exactly as nonsensical as this. You know, if you don't watch TV regularly, this is what it sounds like. It's like a child looking at a car and saying, you know what daddy, there's this big engine in the car. I don't know what it's doing there. I don't do anything with it. I don't like that engine. Why don't we remove that engine and put an ice cream cart in there. And then when we're driving, we'll always have ice cream in the car.
This is exactly what it sounds like. If you have the slightest understanding of how [00:52:39] engineering works. If you think that the car is going to run on an ice cream machine, you're not gonna make it, maybe you could do that as a getaway with it, if you're under six or seven, but if you're an adult who thinks in these terms, your vision of the world is highly incongruent with reality. Ice cream machines can't run cars. And if you want to be in a car, it has to have an engine and you may not understand why, but you need to understand, you know, you don't have to deal with it, but if you take the engine out of, it's not going to be a car, it's going to be a very ugly ice cream machine.
If you keep the engine in, the car is going to run. And so really this is the healthy way of understanding the green hysteria people that what they're asking for is not, they think of it as if let's just change the iPhone cover from pink to white or whatever. Let's just make this small cosmetics change to our civilization.
But what that actually asking for is the insane replacement of the technology that [00:53:39] makes their life possible with something as ridiculous and as unworkable as an ice cream machine. And that's what solar energy and wind energy being used to generate electricity is the equivalent of. I mean, you can put an ice cream machine in the car, but it's only going to be there if there's an engine that's able to operate it. And that's what the cases with all of these supposedly sustainable energy sources, you can't run a grid on solar or wind. You can't even build solar or wind without fossil fuels. You just need them. You need to have fossil fuels producing full capacity anyway, because there will be times in which both wind and solar are producing zero. So you need the entire fossil fuel. You need the entire car engine, your ice cream machine doesn't replace the car engine. It's just a very stupid indulgence that you're engaging in. So, some people were making the joke that this is a Trojan horse that, you know, this is Bitcoin's Trojan horse of getting into the investment community.
I think there's some truth to that, that we could virtue signal about this stuff [00:54:39] and get into the good graces of the politically correct investors. And the regulations that govern how investors control their money and investment. But I think there's also the other way around.
There's another Trojan horse going the other way around, which is that it starts off with voluntary declarations, where this is how much energy we're consuming. And then soon enough you've established some kind of regulatory authority that's going to have the power to tax and impose trading of renewable energy credits.
And this thing is going to be entirely corrupt obviously. And it's going to only serve to enrich the people who are behind it. So I don't see this as an existential threat to Bitcoin, but as I said, I think I see it as a threat to north American Bitcoin miners, because I don't see, I don't see any kind of positive contribution that Elon Musk is going to make to this space other than pumping stupid shitcoins, and then finding a way to keep his renewable energy grifts going essentially. Having said that I reject the entire premise of the idea that some [00:55:39] energy is good or some energy is bad based on whether CO2 comes out of it, because a lot of CO2 goes into the production process of the energy.
You need to emit a lot of CO2 in order to make these enormous, gigantic monstrosity windmills, and in order to make the solar panels. So we don't know which one actually produces more CO2. And anybody who tells you they know is just going by idiotic, Fiat science. That makes zero sense and cannot really be defended.
We can't really know what produces how much emissions. I mean, we can't know with precision how much, but I think in reality, however, we can know that the kind of energy that is going to be mining on Bitcoin is going to be predominantly, I think in my mind, hydroelectric energy, some nuclear energy, some methane flaring energy, spare oil field energy, and then spare capacity from power plants. So if there is significant mining in fossil fuels the basics of understanding how the difficulty adjustment works in Bitcoin. And also one of the [00:56:39] earliest seminars we had that was on the difficulty adjustment.
And in that we see, you know, we discuss how difficulty adjustment affects Bitcoin mining. And the conclusion you arrive at is that Bitcoin mining has to be done at very cheap rates. People who have expensive rates, all that electricity will get wrecked at a certain point, the difficulty will rise or the price will crash.
And people who are able to get electricity at prices that are common everywhere, you know, over five, six, seven, 8 cents per kilowatt hour are most likely going to be operating at a loss. And many of them will shut down. The only way to remain sustainably open is if you can secure electricity, I think at less than five or 6 cents per kilowatt hour, that's how you can remain profitable.
That's how you can have significant mining capacity that can remain profitable for significant periods. And, if you go beyond that, then you probably can't. So, because of that, I think it's important to identify, even if it includes accepting their frame of reference, there's just not going to be [00:57:39] significant amounts of mining done on any form of energy that has a high opportunity cost.
If your form of energy is available to consumers who will buy it, consumers will pay over 6 cents per kilowatt hour for electricity. And so will industrial producers and so will commercial producers. People will pay for electricity over that rate because the average rates for electricity around the world is around 14 cents per kilowatt hour.
So if you can give somebody 7 cents per kilowatt hour, you'll be able to sell it almost anywhere. The only times you won't be able to sell it is if you have an excess amount of production that is isolated geographically away from other places. And so therefore difficult to connect and therefore expensive to connect, so you have surplus energy. That's what's going to be mining Bitcoin. And so the notion that we need to virtue signal about Bitcoin being green, I think is completely missing the point about why Bitcoin really matters or why [00:58:39] Bitcoin is so important, which is that in terms of energy, it's not competing with anybody in energy.
It's only taking all of the cheapest energy in the world that is most isolated. That is the most separate from population centers and from industrial use, it's taking all of that energy and sucking it up and using it in order to make magical internet coins. That's how Bitcoin ultimately is working.
And so. It's not taking away energy that would otherwise have been used for schools and children and hospitals because schools and children or hospitals, they're always paying a higher price than the Bitcoin network. Because the Bitcoin network, because of the difficulty adjustment, it's always screwing over anybody who mines at the prices that can be available for children and hospitals and all the emotional things that they like to emotional blackmail us with.
So it's not like Bitcoin is wasting electricity. Bitcoin is eating waste electricity. Bitcoin is utilizing waste electricity. We're able to build an entirely new global monetary [00:59:39] system by eating up waste electricity from all over the world. And about a third of the world's energy production is wasted because this is really the thing that flies in the face of all the fantasies of the greens.
It's the idea that they think energy can just be conserved and stored and moved around cheaply. And they think that this is a simple solution that Elon Musk is going to solve in the next few weeks once he's done pumping Dogecoin and laughing at the establishment on Twitter, as he likes to think of it. In reality, no, this is not something that Elon Musk is going to fix. Restoring energy into battery, and then discharging it is always highly inefficient process when compared to carrying the gas and then just burning the gas itself or the fuel. So because of the high cost of moving energy around and storing it, because of that we end up in a world in which we have a huge mismatch between the amount of energy that we produce and the amount that we consume. We consume about two thirds of all the energy that we produce and the rest has to be wasted.
[01:00:39] Not because we are just extremely wasteful, just because it's going to have to be not utilized at the time that it is needed. We have a lot of energy that goes to waste because we are unable to use it at the right time and at the right place. And so it ends up not being used. An example of that is the methane that is flared on earth.
Other examples of that are grids that have spare capacity and an enormous amount of energy is lost in transmission. And because of that, Bitcoin can grow by eating into that energy. And so it doesn't have to justify itself to anybody because it can grow by eating into that energy. And of course the real justification and the real point why Bitcoin has nothing to answer to anybody is that people choose to pay for Bitcoin.
It's not wasting any electricity and it's not wasting anybody's resources because everybody involved is doing so voluntarily. Nobody has been forced into using Bitcoin. Everybody is voluntarily in the system. And so when the price of Bitcoin goes up and the rewards for miners go up, it's because [01:01:39] people voluntarily choose to value Bitcoin and rewards higher.
So why that is the case? Well, you know, in my mind, I think the best way to think about why Bitcoin is valuable is to think about the opportunity cost. If we didn't have Bitcoin, we'd have Fiat money. And well, we do have, we still have fat money, unfortunately, but think about how much people benefit when they move from Fiat to Bitcoin.
If you want to understand why it's worth all of that power consumption. Well, it is worth all of that power consumption because fiat is built to devalue. It's constantly being devalued. It's constantly losing its value and it's constantly robbing its owner. You know, if you own Fiat, your money is constantly stealing from you.
10% is a good estimate of the supply increase on average over the last few decades, probably all over the world. If you would take it as an average, it was probably something like that. The better currencies were appreciating at less than 10% in terms of supply, perhaps, but the majority were over 10%.
So probably 10% is a good average for how much the supply is being increased every year. So your money is losing [01:02:39] 10% because of the supply is increasing by 10% every year. And so if you look at the entire planet, the entire planet has about $360 trillion worth of wealth. $90 trillion of that is in the form of national currencies.
So there's $90 trillion of money around the world and that's being devalued at around 10% per year. So we're losing around $9 trillion every year in market value of national currencies. That's the cost of Fiat. Think about how much waste that is and think about how much economic value is being destroyed from $9 trillion every year, being burned in order to finance governments and government spending with seigniorage.
That's the key point that I think Bitcoin miners should be stressing. Bitcoin is not a waste because running the Bitcoin network costs something like $20 billion a year. It secures about a trillion dollars of assets [01:03:39] and people who use it are being protected from the inflation that is eating the world at around $9 trillion a year of value. So it sounds like an incredible bargain, you know, you're able to secure a trillion dollars of value currently for only 20 billion. And it's an enormously efficient system. And it's going to be arguably more efficient over time as the supply growth begins to decline and the market becomes more and more mature.
I think it's going to become more and more efficient. And if it does become a global currency that reduces the need for people to hold on to their national currencies, that can save the world a lot of those $9 trillion. And I think that's what Bitcoiners should be focusing on. And this is what I discuss in my Fiat standard chapter, which I've just finished right now, which we'll be getting in a couple of weeks.
If you really want to measure the cost benefit analysis of Bitcoin, you need to think about what Bitcoin replaces and what Bitcoin replaces are forms of money [01:04:39] that are devalued at 10% per year, roughly. And that's why it's worth it. That's why it's worth all of that energy consumption. That's why people willingly pay for all of that energy consumption.
And that's why ultimately your only option, if you don't like it is to try and mine on your own with other less reliable forms of energy and see if you can out-compete the Bitcoin miners who are using these forms of energy. Unfortunately, now there is another option of seems available to somebody like Elon Musk, which is: set up a racket where you force Bitcoin miners to give you some of their Bitcoin, because you are the Pope of greenness or whatever it is. Somehow it's actually amazing how marketing works that this guy has managed to convince the world that he is the kind of authority on the green transition.
When all that he's done for it is basically get a lot of money to fly rockets that consume and burn so much carbon dioxide. And they produce an enormous amount of emissions, but of course, that kind of emission is okay. [01:05:39] Because of the mental gymnastics involved. Because the entire charade of trying to think about the connection between energy production on the one hand and the change in the weather around the world on another hand, I think is an enormous pseudo-scientific fantasy. And so it can be twisted in whatever way you want to give you whatever results you want.
Attendee: What about the malleability doesn't bother me. I agree with you on that. I think that's just a tough road to hoe. What about fungibility? How much of a threat, how much of an attack vector is that? Trying to label this piece of Bitcoin is green or not only green, but where was politically developed?
Like this O'Leary guy. I'm not real familiar with him, but he kind of used that as a fig leaf to come out and say he was buying Bitcoin again, because he's just buying green Bitcoins. How much of an attack vector do they really have?
Saifedean Ammous: This is an attack [01:06:39] vector, but it's an attack vector on individual Bitcoiners rather than on Bitcoin itself.
And in the same sense it's ultimately very similar to the shitcoin hard fork attack on Bitcoin in that you present a new Bitcoin as if it is a better Bitcoin and you hope everybody buys your bluff and you hope they all join you in your new Bitcoin. But if they don't, you've just invented the shitcoin number 10,523 as just another one that's going to be added to the long list. So ultimately I think what it really comes down to, and this is the point where Bitcoin breaks Fiat people's brains, Bitcoin's clearance happens on the Bitcoin blockchain on an international global ledger that is open for anyone. And mining is open. It's a free market and sending transactions is open and it's a free market and anybody can send transactions.
And anybody can mine transactions on the Bitcoin [01:07:39] blockchain, irrespective of political authority and irrespective of judicial authority and irrespective of international trade treaties and monetary agreements and all of that stuff. The blocks clear halfway around the world. And there's nothing anybody can do about it.
So anybody can get on the Bitcoin blockchain and settle these trades and keep the system running. And so therefore when you try and pass something off like this, when you say all right, we're only going to accept green Bitcoins. In your mind, in the statist mind, we are the government, we have the big guns, then all of the value is going to flow into the coins that we ascribe value to.
It's very similar to the discussion we were having with the miners, you know, we are the miners, we mined those coins. And so when we tell people, this is the coin that we mined, people are just going to follow along. It's very similar, and this is what I had the point that I used to make back then, it's very similar to imagine gold miners going and saying, you know what?
We aren't able to find more [01:08:39] gold. Gold is really hard to find. From now on, we're going to just mine copper, paint it yellow and sell it to people as gold, and that's going to be in gold. And so from now on, we're going to be making gold at a fixed price of $1,600 an ounce. And it's going to be made out of copper and that's your gold. Can a cabal of gold miners get away with this?
Like can a bunch of gold miners get together and agree on doing this? They can. And you know, if they find enough suckers who will happily pay for their ounces of copper, who'll happily pay the price of gold for the ounces of copper, they can keep the game going for a while. But ultimately, I mean, it hasn't never happened in the history of gold and I can't see it happening in the history of Bitcoin.
Well, it kind of didn't happen in the history of gold, actually with Fiat and the fiat backed gold. You can't force the market to accept value in a certain way. Value is ascribed by the market and you either accept it as it is, or you live in denial. So what [01:09:39] will end up happening in this case, I would imagine is that you end up with a small pool of Bitcoin that are supposedly green compliant, according to the green Sharia. Compliant and it's clean for these institutions. But I would imagine that, this limited pool would have less liquidity than the larger pool of coins, which is the one that is available for anybody. Because, that's part of Bitcoin's value proposition that people don't want it to be controlled by others.
And if your Bitcoin is dependent on a group certifying its value, that's highly unlikely to appeal to a very large number of Bitcoiners I think. I think a very small percentage of coins is going to want to be certified in this way. I could be wrong. Maybe corporate America will jump in and they'll want green coins.
And then they manage to impose some kind of regulation on this that ends up capturing an enormous chunk of the coins, perhaps. But I would imagine such an arrangement would lead to the money seeping out of the [01:10:39] jurisdiction that imposes it and going elsewhere. This is how I would see it. Just because ultimately, you need final settlement on chain in order to know that these coins are yours.
And in order to do that, in order to have final settlement on chain in Bitcoin is not complicated. So you can take your coins off your green compliant exchange and then they're yours. So I can't really see the managing to impose a significant premium. I think the real test of something like this would be if you manage to get to a point where the green coins have a premium over the other coins. That would be success. But I'm not sure it's destructive of Bitcoin because they could get away with something like this. So that let's say your green coin is usable on all major Bitcoin platforms. You can sell it at any point because you can send it to an exchange and you can use it for payments.
You can put it on your balance sheet. You can declare it for tax purposes. All of these things are only available on your green [01:11:39] coin. If that were the case and green coin develop significant network effects, then perhaps you could see it developing a premium over just regular, plain, old, dirty Bitcoin.
I can't really see it happening. I think if we do end up with something like this, I think it will be the other way around. You're not locking the world out. You're locking yourself in, I think.
Attendee: Don't you get mired in, it's a rhetorical question, but what's the definition of a green Bitcoin? Who decides that?
And where does that get decided and on and on and on... it just seems to have no legs at all.
Saifedean Ammous: Well, I think like everything in this green world, if you think that there is some kind of rigorous, scientific definition for any of this stuff, I think the only reason is that you haven't looked into it deeply enough. When you look deeply enough into it you'll see that it's just so wishy-washy, it's such Fiat [01:12:39] science and it's highly unworkable in any meaningful sense. And so it's politicized, it's done in a way where, if you're on the right team politically, you get to basically be called green and you get green Goldie stars and brownie points.
That's basically how it works. It's an entirely political thing. And the notion that there is something deeply profound and true and scientific and helpful about what's going on, I think is nonsense. So I think if they were going to bring something like this into Bitcoin, I imagine somebody like Musk would want to try and make it so that exchanges can only accept green coins and green coins have to be mined from the mining authorities that are part of the renewable mining coalition.
And to be part of that coalition, you have to be paying money to Musk. Effectively what Elon Musk did by pumping and dumping the Bitcoin and crypto shitcoin market is to [01:13:39] basically present his credentials in terms of the ability to pump the market. And then try and get people to bend over backwards, to get him to have his special scam going in terms of operating the renewable energy credits things.
And then based on the promise that he'll then pump our bags forever if we just give him his green virtue signaling stuff. So I don't think it's rigorous or it's meant to be very rigorous. It's rigorous for the purposes of promoting the interests of the people who are involved.
Attendee: It also seems like it's an attempt to attack Bitcoin, but you can't so attack the miners instead.
Saifedean Ammous: Yeah, I think so. And I think you're correct Nathan, in that this is an angle of attack on Bitcoin, that if you can get enough pressure on the miners to start listing coins, it could make if we have green lists and blacklisted coins, you can see how it can slow down people's adoption. It [01:14:39] could be the angle of attack that they follow in order to try and slow down Bitcoin adoption.
I doubt this is the objective of this so far, I think it's just green virtue signaling. But I think once you've got an authority, once you've got a central body, then you've got a place from which people who want to attack Bitcoin have, they can put the nose into the tent as they say, you can just begin to slowly boil the frog of trying to get more restrictions and more constraints on Bitcoin market.
Attendee: One last quick one, I heard Andreas last week mention that he questioned who is a north American Bitcoin miner because these pools mine all over the world. So this list that Saylor came up with. How accurate is that list, even?
Saifedean Ammous: No, it's not accurate. We have no idea who is a Bitcoin miner. We have no idea who's mining and where in north America or anywhere else outside the world.
But we have a very good idea about who are the [01:15:39] miners that are in the Fiat system. And these are the companies that are publicly listed or that are trying to get publicly listed. And these ones are the ones that have to be publicly audited. And we have a pretty good idea about their coins and their operations and their energy consumption.
So, yeah, I mean, I agree, obviously, that it's Bitcoin, so you could be mining, for all we know 20% of hash power could be hidden somewhere in north America. Nobody even knows about it. But I think the angle of attack, as I was saying earlier, it's an angle specifically, it's not just an angle of attack on north American miners.
I should be more precise and saying north American publicly listed companies and companies that are trying to get publicly listed, because this is just a way to get them to have to spend a lot of time involved in all kinds of time-wasting shenanigans whose only beneficiary will be green hysteria peddlers.
Again, that's one of the drawbacks of being in the Fiat system that you can't speak [01:16:39] your mind and that you have to go along with motor signaling exercises and self-flagellation and all of these things. And yeah, if you don't want to take public money, then who knows, but still actually, even if you're not listed and not trying to take public money, if you're a large enough miner, the political jurisdiction will likely find out. You can't just have several megawatts operating somewhere and nobody finds out about it. Well, I mean, you can depends on who you know, and where you do it, but it's also highly likely that people will find out at some point.
All right. Well, thank you very much guys for joining for today.
And I will see you in the next seminar. So thank you. And I'll see you later. Take care.