Bitcoin (BTC): Michael Saylor offers the best explanation ever given

Here is an almost complete transcription of the interview of the CEO of Microstrategy Michael Saylor by Tucker Carlson (Fox News). This is probably the best explanation ever given of why bitcoin exists. A remarkable ITW to share with all your loved ones who do not yet know what to think of bitcoin.

Tucker – If you're like most people, you're well aware that there's something called bitcoin that just happens to be a cryptocurrency. You may have been skeptical of him, even dismissive of him, but it becomes clear to everyone that he is not going away any time soon. Is this a good thing? Is this a bad thing? Can you take advantage of it? And besides, what is it exactly? You may be afraid to ask this question. After 5 years of research, we have found someone who can answer all these questions in a credible and intelligible way for everyone. This is Michael Saylor. please explain to us what bitcoin is.

Mr. Saylor – Bitcoin is the very first monetary system created by engineers. Period. Now that we have said that, the first question to ask is: what is money? The second question: what is the problem? And the third question is: what is the solution?

Bitcoin is the solution. That is said.

Now, back to the original question: what is money? An economy is made up of goods, services and properties. I want this product, I want you to do something for me, I want this house, I want this land. That's half the economy.

Now let's say I sell you 37 horsepower. The question is how do we keep the accounts balanced? We need money. Money is social economic energy. Money is monetary energy that we use to trade. If I can sell you 10 bushels of corn and you can give me an amount of money equal to 10 bushels of corn, then we can trade together.

In the history of the world, human beings have tried different currencies. We used shells, the giant stones of the Yap people, tobacco balls, copper coins, silver coins, gold coins or glass beads in Africa.

Gold is a slow currency. How to move 10 tons of gold from here to there? Ultimately, people used ledgers. Records issued by a merchant, mayor or emperor. We have found 5000 year old Sumerian clay tablets in which 37 bushels of oats are engraved in exchange for something.

So money is this shared register of who owes what to whom. Often the money takes the form of a token, like a glass bead. This was the case for certain regions of Africa until the Europeans arrived with the technology to create glass beads at a lower cost.

The Europeans injected millions of glass beads and redeemed everything. Africans have lost their homes, their livestock and all their wealth. Same story in a Pacific island that used stone coins. Europeans arrived and realized that stone coins were rare on this island, but there were plenty on another. So they sailed to the other island, picked up the stones, and brought them back to the first island where they were able to enslave everyone.

The problem with money is how do you keep track of a fair distribution of who owns what?

If there is a hundred million dollars of capital in the economy (commodities, property, factories, businesses and the like), you must have a hundred million dollars of money.

But if I start inflating the currency and issue another $10 million, it's like taking 10% of the economy. This is the inflation rate. If I continue to inflate the currency, if I double the amount of money, but the amount of goods in the economy remains constant, then the price of everything that is scarce and desirable doubles.

The price of things that aren't rare or desirable won't go up, but if there are a hundred things and there's 10 times as much money, it makes sense that overall that hundred stuff costs 10 times more.

So money is economic energy and the problem is inflation. When the Romans created gold coins, they started with a certain amount of gold before depreciating the currency by reducing the amount of gold or the amount of silver in the coins. Once the amount of gold was reduced to a trickle, no one accepted these coins. All of a sudden, the mercenaries don't want any more. And if the emperor cannot pay the mercenaries, the empire collapses.

It’s the same with paper money. If I triple the amount of paper, the currency will eventually collapse. So the problem with currencies in history is trust in the issuer of the currency. You have to trust a banker like JP Morgan, or a family like the Rothschilds, or a king, a mayor, a government.

Now, if we look at the modern era, economists like Saifedean, who wrote the Bitcoin Standard, estimate that the modern era inflation rate is 14% per year. Now, that happens to be roughly the rate at which the S&P 500 index has risen each year on average for the past 10 years (before the pandemic began).

What's the problem? Well, what is inflation? It's not really well understood. Some think it is the Consumer Price Index, i.e. the inflation rate of a basket of consumer goods. Except that it is the government that chooses the basket. If I choose things like Domino's pizza and Netflix, there will be no inflation. It is possible to adjust the basket so that you choose things that do not increase in price.

And on the other hand we have the Case Shiller house price index which is up 27% year over year. The price of an average home has increased by 27% in one year in the United States. Homes in Canada increased by 15%. The S&P500 index is up 34% this year.

The inflation rate depends on what I buy. If I want to be rich, I have to buy rare and desirable assets. So my inflation rate is that of Picassos, Leonardo da Vinci paintings, stocks and land near New York.

If I want to live in my parents' basement, eat Domino's pizza, take Ubers, and watch Netflix all day, the inflation rate will be very low. This will be the rate of consumer price inflation.

In practice, the best rate of inflation for an investor or anyone wanting to stay or get rich, or anyone simply concerned with maintaining purchasing power, is the monetary inflation rate, i.e. say the rate at which the money supply increases.

The money supply grew by 10% per year for a decade before the pandemic. The S&P500 has risen 10% per year. Since the start of the pandemic, the money supply has increased by 30%. The S&P rose 34%. The FED ran the printing press, as did the European Central Bank.

In the Western world, the money supply is growing by 20-25% or more per year. The currency is collapsing. It loses its value by being devalued. In less solid countries like Argentina, the official inflation rate is 45%. The unofficial inflation rate is 85%. In Venezuela, the currency has collapsed 98% in one year. In Lebanon, 90% in one year.

The world is experiencing an inflationary collapse of currencies. Inflation is not just consumer prices (CPI). Some even use the PCE which is an index of things not including food and energy. In which universe can you live without food and energy?

You have to use common sense and not believe that inflation is only 2% or 5% when houses cost 20% or 15% more. If you talk to any manufacturer, they will tell you that prices have gone up 20% or 25% year over year.

So how can I buy a Google share if it increases by 34% in one year while my salary is only increased by 2 or 5% per year?

The people responsible for calculating inflation are lying. Reducing headline inflation to a single digit (the consumer price index) is too simplistic arithmetic to describe an economy. You cannot describe the economy and model it with simple arithmetic. Nor can you describe fluid dynamics or aerodynamics with simple arithmetic. The fluid flows around the wing, you need multidimensional algebra and vector calculus to describe a complicated phenomenon. Economics is a complicated phenomenon. In other words, all prices vary everywhere, all the time, at different speeds. The price per square meter in the Hamptons (around NY) is increasing at a different rate than in Kansas. The price per m² in a certain jurisdiction, for a certain use, subject to certain regulations, will increase at a different rate than in another jurisdiction.

In short, inflation occurs when a government authority prints more money. And why does it print more money? Because if I want to pay a trillion dollar bill, I either have to tax you a trillion dollars or print another trillion dollars. But it is much easier to print money than to tax people.

So it’s either inflation or taxation. Throughout the history of the world, all monetary systems without exception have collapsed due to inflation. If you look at the history of the Sumerian states, the Persian states, the Greek states, the Roman states, the Italian renaissance states or the kings of England, you will find that each of their currencies was originally issued with a certain amount of gold which ends up being reduced before being joined by pieces of silver, copper, brass or nickel.

Do you remember when we still had silver coins in the United States? We no longer have them because the silver metal contained in the coins was worth more than their face value. For what ? Because we devalue the currency.

Tucker – So the problem is inflation. And inflation, to be clear, is caused by the expansion of the money supply.

Mr. Saylor- Yes. If you live in a town where there are a hundred nice houses, and let's say there's a million dollars circulating in that town, if the mayor decides to print a second million dollars and distribute them to citizens, what will house prices do?

Tucker – And so you say that inflation is always the cause of the collapse of currency, and that the collapse of currency is the cause of the collapse of civilizations.

Mr. Saylor - Yes, because how long does a war last? During World War I, every nation abandoned the gold standard within a week of the declaration of war. The Germans, French, British and Americans printed money. Money depreciated, inflation soared, and eventually one side surrendered.

Moral of the story, you can print money for four years before the currency collapses. The Germans asked for an armistice because they had no more money. Second World War ? No more money either. Vietnam, you know, we paid for it with inflation. Result ? Nixon had to abandon the gold standard because they had printed so much money that the United States risked losing all of its gold. The United States defaulted in 1971.

[Michael Saylor most likely knows this, but let's also point out that the United States reached its peak of conventional oil in 1971, when the gold standard was abandoned.]

It's always the same story. Put yourself in the place of the Roman emperor or the mayor of a city who has the monopoly of the currency and who must pay his army. You can either go to everyone in your nation and take their goods, or craft twice as many coins.

Tucker - But I thought the idea behind modern monetary theory was that as long as you have the global reserve currency, inflation is not a threat to you?

Mr. Saylor - How can you say that? If there is a certain amount of goods, services and capital in the economy, and you continue to print money, you are not creating more capital in the economy, you are not creating more products, you don't create more buildings, you don't create more services. All you do is double or triple the amount of money. If I gave all Americans a billion dollars and everyone was going to buy a Ferrari, would there be a Ferrari for everyone? You can give somebody a trillion dollar bill, it won't create more stuff.

It is possible to export inflation to other countries to some extent. But if you are not creating anything more, what you are ultimately doing is redistributing wealth. For example, if there is ten billion dollars in the economy and there are so many things, and I give you a billion dollars, you can now buy 10% of those things, which means that everyone lost 10% of these things.

When I inflate the amount of money, I redistribute the wealth of those who let their money sit in a bank account. If you had a million dollars in the bank 12 months ago, that million today would buy you 34% fewer shares of the S&P500 than a year ago. If you want to buy land in the Hamptons, you'll buy 40% less land than you did a year ago.

If you put that million dollars in the stock market a year ago, today you would have $1.34 million.

If you are a wealthy investor, all of your assets are in real estate, businesses, collectibles, sports franchises, etc. If you are middle class, working class, you have cash in the bank. The dollar is currently losing 20% ​​of its purchasing power each year. The purchasing power of your salary decreases by 20% per year. It does not decrease at the rate of CPI consumer price inflation, but at the rate of monetary inflation.

Serfdom is working exponentially harder for a currency that becomes exponentially weaker. If you are a dentist who manages to increase your income by 5% per year for a decade, and at the same time the money supply has inflated by 20% per year. If you have saved every penny, after 10 years you will only be able to buy a quarter of what you could have bought at the time. Because housing prices have increased by 20% per year and you will never be able to catch up. The only way to keep your head above water is to grow your income faster than the rate of monetary inflation.

I think the best monetary inflation index is the S&P500 index. It represents a real basket of desirable and rare products.

So money is energy. The problem is inflation. If inflation is 10% per year… You have 10 liters of blood in your body. If you're going to donate blood, you get half a liter of it. When I remove half a liter of blood from your body, you lose the red platelets. Any sane person knows that if you run the Boston Marathon the next day, you're in trouble. It takes about four to six weeks to replace the red pads. Now imagine if I took half a liter of your blood away from you every month, never stopping. It's inflation.

And let me tell you, Venezuela is not at 10% inflation. Neither does Zimbabwe. An Argentine peso was worth a dollar twenty years ago. Today, it tends towards 200 pesos for a dollar. These currencies have lost 95 98 99% of their value. You don't lose 10% of your economic value per year, you lose 20-25%. Even 30% to 40%. It's like I send a guy to bleed you every week and at some point I send someone to bleed you every day, that's the Weimar Republic. It's hyperinflation.

Another metaphor: money is to the economy what your blood is to your body. And economic energy (money) is to money what oxygen is to your blood. If I drain the room of oxygen, you'll either suffocate or freeze to death. And if I continue to suck the economic energy out of money, the economy collapses. You are taken back to the Stone Age. When money no longer works, I have to exchange cigarettes for bullets for example. The economy becomes a million times less efficient.

How many countries in the world have a collapsed currency? 66 are dollarized [collapsed currency in the language of Mr. Saylor]. All are weaker than the dollar with a few exceptions. The US dollar is the world's reserve currency and its money supply has been growing at 10% per year for a decade. It is now increasing by 14% per year. It has increased by 34% over the last 12 months. The dollar is weakening. It is as if the air is being sucked out of the room. So, Tucker, if I told you the air is being sucked out of the room and there's an oxygen mask falling from the ceiling over there, what would you do? You would run over it. Bitcoin is the oxygen mask.

Tucker – So you're saying, just to be sure, for everyone to follow, that the purpose of bitcoin is to escape the whirlwind of inflation that has consumed all past empires.

Mr. Saylor – Yes, inflation is the reason empires crumble. It collapses economies. It is not just a problem for an individual or a family. It is a problem for all institutions, all businesses, municipalities, governments and all civilizations. And you can usually trace the problem back to wars that you couldn't afford to fight with money you didn't have.

If you declare war on covid, you have a war. It's like declaring war on Vietnam. All of history is filled with wars. If these wars were to be paid for with direct taxes, then the people would end up saying enough is enough. If I finance the war by inflating the quantity of money, then I have a few years, two, three, four years in front of me before people realize it...

Money is essential to civilization. The problem is inflation. Why does it occur? It is human nature. The temptation to inflate the money supply by a centralized authority is omnipresent and inescapable. Every civilization suffers from it sooner or later.

What is bitcoin? Bitcoin is the first monetary system designed by engineers. Anonymous engineers had a vision of horror following the rescue of banks during the subprime crisis. They then had the idea of ​​creating an immutable ledger of accounts similar to a bank in cyberspace.

They said to themselves, "We don't trust the government. We do not trust any company. We don't even trust a single computer. So we create a program that keeps track of 21 million units, each divisible by one hundred million (this subunit is called a satoshi in honor of its inventor). So 2.1 billion satoshis. Well, that doesn't matter much to you. All you need to know is that there are 21 million units and there will never be one more. These engineers wanted to create money that they could send to each other, from anywhere, and that this money could remain stored for a thousand years, 10,000 years, a million years, forever, without have to trust no one.

The first safeguard of the bitcoin network is therefore the Node (thousands of nodes). The latter keep an always up-to-date copy of the ledger. It is the most secure database in the world. It is a database containing an immutable truth. This is the ledger of money.

The second safeguard is the SHA256 algorithm. In other words, the " minors ". These people use mining machines to generate hash functions to protect the network. Millions of mining machines are all competing with each other to build the next block (containing the transactions of the last ten minutes). It is as if the 2 million miners offered a lottery ticket. With each block, one of the two million has the right to build a block and is paid for it. Currently, one block is worth $300,000.

The miners are therefore a wall of encrypted energy. They convert electricity into hashes. And inside this wall of electricity (energy) is the ledger of bitcoin which is distributed in a decentralized way.

We also have to talk about the Lightning Network. It is a decentralized system forming a second layer on top of bitcoin. It allows small amounts of bitcoins to be moved at the speed of light almost for free.

Bitcoin is an incorruptible software-run bank that offers a global, affordable, simple, and secure savings account to anyone who can't afford or want to run their own hedge fund. You have money, you have savings, you don't want to lose them, you want to put them in a bank? Bitcoin is that bank in cyberspace.

The most important of the engineers was Satoshi. We don't know who he is. Satoshi wrote the white paper, created the first version of bitcoin before entrusting it to others. Initially there was no money in the network, they just ran it for a year as a hobby. Then, over time, there was a famous transaction where someone bought a pizza for 10,000 bitcoins. This was the very first transaction.

Tucker - Shouldn't we be nervous not knowing the identity of the founder?

Mr. Saylor- No. We should be happy because to work bitcoin has to be the people's money. It should not be controlled by an individual. It must not be under the control of a powerful founder, corporation or owner.

The most important thing Satoshi (or the group of people behind Satoshi) has done is disappear after giving this gift to the world. Satoshi mined around one million BTC. But they were never spent. Never. Satoshi never reappeared. The bitcoin network then became in essence a community development all around the world. The network went from a million dollars, to 10 million, then 100 million, a billion, 10 billion, 100 billion. In March 2020, we were at $180 billion and that's when I got involved. I was late, but I know this is digital gold sitting on a decentralized and free big tech monetary network. I told myself that it was an economic imperative in that it solves the problem of inflation for a society with cash. A company like mine, Microstrategy.

Thinking lately of how to go deeper into the NFTs that I've collected on @hicetnunc2000 . the thrill of collecting i… https://t.co/eQXCsJReRL

— Sky Goodman Mon Jul 26 01:06:37 +0000 2021

I had a lot of cash and I anticipated that I would lose everything if I didn't invest in something. I also thought at the time that it is a moral imperative to own bitcoin. It is a technology that gives property rights to 8 billion people who do not have them. Bitcoin is the highest form of property mankind has ever invented and I'll explain why in a second.

2 billion people do not have a bank. You can give everyone on the planet a bank and a right of ownership that cannot be corrupted, depreciated or confiscated. Just download a free app on Android. If you have a $50 phone and you can download an app, then you can have your own bank, your own property rights, your own economic freedom, and your own economic autonomy. It is therefore a moral imperative as well as a technical imperative.

In essence, if the economy has $500 trillion worth of goods, companies, real estate, and other things, then the entire stock of money is worth that much. That's half of everything, isn't it? Until now, we have never figured out how to digitally transform money or capital. And you know, the secret to the success of Google, Amazon, Apple and Facebook is the digital transformation of entertainment, education and communications. So think what it means to digitally transform $10 trillion in gold or $100 trillion in real estate or $100 trillion in currencies…

Bitcoin was designed to be digital gold without the flaws of gold. 21 million units, not one more. The problem with physical gold is that gold miners inflate the supply, not to mention bankers who inflate the supply of paper gold via the derivatives market.

Whatever the asset, house, gold, silver, commodity, stock or bond, when the price increases, the supply increases. If the price of a share is multiplied by 10, the company in question will immediately issue more shares. If I increase the price of gold by a factor of 10, the miners will extract more and therefore increase the supply. Bitcoin is the only thing in the world whose supply is price inelastic. The price of bitcoin may triple, but you won't be able to manufacture more. The same if the price is multiplied by 1 million.

Now let me give you another insight from an engineering perspective. In engineering, there is something called conservation of energy. The main point of conservation of energy is that energy can either be made or destroyed, but there must be conservation of energy. The mathematical metaphor, the mathematical analogy with that, is good calculation. 10 plus 10 equals 20. 2 plus 2 equals 4. If 10 plus 10 starts to equal 18, you have a problem.

If you have a bathtub and there is a leak, or an electrical system with a short circuit, if there is a leak in your engineered system, nothing works. Nothing works unless it follows the principle of conservation of energy. The problem with inflation is that it does not respect the conservation of energy. It's a leak in the system. Money does not conserve energy. So if you say you want a conservative money supply, there would have to be $10 billion in the economy and nobody could print more of it. This is the Austrian economic principle of "sound money".

Bitcoin is a conservative monetary system. It is the first monetary system that respects the laws of thermodynamics, physics and mathematics. Bitcoin is synonymous with truth, purity. He has integrity. It is an enduring system upon which you can build a family, a life, a business, or a civilization.

Steel is concentrated energy in metallic form. Have you ever visited a steelworks? You will see all the energy that goes into making steel. It is concentrated energy. The history of civilization is tied to channeling energy more and more efficiently. Steel trumps iron, iron trumps bronze, bronze trumps stones, bow and arrow trumps guy with spear, guy with spear l trumps the guy with the knife, if you have air power you trump land power, sea power trumps military and nuclear power trumps everyone else.

So if I have steel, I have concentrated metallic energy. I can create a 100 story skyscraper in New York. How long will it last? 100 years. How long will a steel boat last? Longer than you. Wooden boats do not last. They rot. Do you want to build a building that will withstand gravity for 100 years? You need focused energy.

If you want to build a trust fund that will last 100 years, how are you going to save $100,000 for 100 years to give to your great-grandchildren? If you invest in the US dollar, you will lose 99% of your economic energy. In gold? The supply of gold doubles every 30 years and bankers create paper gold. You will lose 90% of your economic energy.

How do I preserve my property, which is economic energy, which is capital, which is money? How to preserve this property? I need something more durable than all that. I need steel. I need economical steel. Steel is concentrated metallic energy. Bitcoin is concentrated digital energy. It is energy in digital form. It's vacuum-packed food. It is something that is in orbit.

What is the half-life of energy? Let's say I give you a million dollars worth of electricity. How long can you keep it in a battery? You will lose 2% per month. You can't keep it for very long. How to send millions of dollars of electricity from New York to Tokyo? You can not. After traveling 800 km on a power line, 6% of the electricity is dissipated as heat. Multiply the distance by 10 and you'll lose about 60%.

Convert this energy into digital energy with bitcoin and you can send it anywhere for next to nothing.

Bitcoin has been growing 170% per year for the past decade. The S&P 500 index has been rising 14% per year on average for a decade. Gold is flat, it's not going anywhere, it's being demonetized, it's a dead stone. You can't put gold on an iPhone and it's manipulated by bankers.

Bitcoin is simply pure economic energy. Satoshi and all his compatriots have created a monetary asset on an open, "permissionless" network in which anyone can participate, any country, any society, any individual. You don't need a bank and you don't need to ask permission to transfer money. It is the ultimate egalitarian system. If you want to empower everyone in Africa and South America, even in the face of a hostile regime, you can do it with a $50 Android phone and a simple download.

One more metaphor. If you can't store property, if you don't have property rights, that means you can't store economic energy. In the western world, we are privileged to have stocks rising 34% per year. This helps protect against inflation. Without stocks, we are at the mercy of inflation because we keep our money in cash. And the dollar is not the worst currency, the dollar is the best currency! It is much worse in Zimbabwe. If you are in Argentina, you have lost 40-60% of your purchasing power this year. If you are in Venezuela, you have lost everything.

Not having hard currency is like being a type 1 diabetic. A type 1 diabetic cannot form the insulin needed to convert excess nutritional energy into fat. Fat is an organic battery. Fat will keep you alive for 90 days without food. If you can't form fat, you can eat continuously without stopping and you'll still starve. Diabetes was a death sentence before the invention of insulin. If you live in a country with a crashing currency, you are an economic diabetic. Within two weeks of losing your job, you can't feed your family, you can't feed yourself, you can't plan for the future.

We come back to the basis of civilization, and the basis of virtue in a society. You must be able to plan for the future. You need to be able to look ahead 10 years and think you can support your family. What's the point of investing in something if you think everything will go downhill in 5 or 10 years?

How did I get into bitcoin? I had a business with $500 million in cash that was earning me 0% interest. I've heard bankers say they don't even think about raising interest rates. Everyone on Wall Street earned 34% more doing nothing while everyone else had to work 34% more to stay alive. This was the observation last year.

If you're on Wall Street with a billion dollars, you end the year with a billion and $340 million more. Otherwise, if you are a trader, you had to increase your prices by 34%. And this to simply maintain your pre-crisis purchasing power. My company was going to lose over $100 million in value. It's like running on a treadmill that goes faster than you. It is as if we were in a boat with the headwind. No matter how much you row, you still go backwards. This is the monetary inflation rate. When it is at 10%, the wind is hard. When it's at 25%? Who can increase their income by 25% every year? No one but a monopoly. A digital tech monopoly can, but no one else. Dentists cannot. Doctors can't. Normal people cannot. A normal business cannot.

If the wind starts to blow hard from the front, you are not going to cross the Atlantic while rowing. You are going to die on this boat. So what are you doing? You turn around. You are going with the wind. That's what I did. My company, Microstrategy, is worth a billion dollars. We create software. The company is worth $500 million and has $500 million in cash in the bank. We generate $50-75 million in revenue per year. In short, this cash will lose 20% to 30% of its value. So I'm going to lose the equivalent of $100 million a year if I don't do anything. So what to do?

You have to buy something and I bought bitcoins worth $250 million. I offered to buy back $250 million worth of stock from shareholders who didn't like the idea. After the redemption, I still had $175 million left with which I bought more bitcoins. We had $425 million worth of bitcoins. The stock was at $120. Subsequently, bitcoin appreciated and we doubled our initial investment. The stock continued to rise. I then borrowed money to buy bitcoins. I borrowed $650 million at 0.75% on the capital market. Then I issued a convertible bond and bought bitcoins at $19,000. Microstrategy's stock rose in tandem with bitcoin. We have won billions.

Why not borrow at 0% if the money supply increases by 25% per year? All you have to do is buy something that is rarer. We ended up borrowing $2.2 billion at 1.5% interest to buy bitcoin. We now have about seven and a half billion dollars worth of bitcoin. We made about $4 billion in profit on that investment. The stock fell from $120 to $850. We generated approximately $8 billion in shareholder value in 12 months. Now we're a $500 million software company generating maybe $80-100 million in revenue a year, growing 0-10% a year, and cash flow of $7.5-8 billion. dollars which is increasing by 170% per year.

Tucker - Bitcoin cannot be hacked?

Mr. Saylor – At the beginning of this adventure, we were looking for gold that could be moved at the speed of light and programmed on a computer. The theoretical answer to this is a secure crypto asset available in fixed quantity. But there are 10,000 cryptocurrencies. So we had to look, is it bitcoin, is it bitcoin cash, Doge coin? We have therefore put a selection grid on these currencies. It is a three-part test. First, will it be banned. Will it be hacked? Can it be copied?

If you can duplicate it 18,000 times, then it's neither rare nor unique. If it is prohibited, it is not good for us. And the same if it is hacked. How to answer these questions? You can't if the year is 2009 or 2010. Not sure if it will be prohibited copied or pirated. There is a lot of uncertainty. In 2020, we had 12 years of hindsight. And what did we see? That no one has ever managed to hack it.

Bitcoin is the most secure database in the world thanks to how it works. You have to run SHA256 miners which are very special computers. This computer does only one thing: it protects bitcoin. That's all he can do. It cannot stream video. This computer is millions of times more efficient at generating hashes than normal computers. This is called Proof of Work. It involves putting a lot of energy into an encryption algorithm. The combination of these two things, along with the bitcoin protocol, means that the dominant proof-of-work network will always be the most secure. It is a brute force wall of encrypted energy. If you want to attack the network by simply trying to interfere in a block, you have to invest 10 billion dollars in equipment. It would take you two to four years to be ready.

Tucker – Only a government could do that. Why would governments allow bitcoin when it could threaten their sovereign power to coin money?

Mr. Saylor – People often call bitcoin a currency, but it is not a currency. It's an asset, it's a crypto asset. You are right Tucker. If the government thought it was a currency and that it competed with the US dollar or another currency, they would take offense and suppress it. But if it is considered an asset in competition with gold, index funds, bonds, property or real estate. If it is considered a store of value, the government will simply want to collect taxes on the capital gain you make by reselling it.

If you want to transfer a property worth a hundred million dollars to someone else, chances are that person wants you to declare it. It is possible to buy bitcoin anonymously, but if you want to acquire large sums of it, you will have to go through approved exchanges. It is allowed everywhere except in China. So you buy it through a registered exchange and then when you transfer it, you have to pay capital gains tax.

The Treasury, SEC, CFTC, Congress, and Senate have engaged in an enthusiastic dialogue about the regulations that will be applied to the transfer and use of cryptoassets. Chances are they'll say that if you issue a Mickey coin, and keep half of it before releasing the rest, it's more like a stock or stock. In other words, it will fall under the jurisdiction of the SEC.

There are also cryptoassets called "stablecoins". These look like US dollars. The President's Task Force suggested a week ago that only FDIC-approved banks will be able to issue stablecoins. So there is regulation coming and I think altcoins will be under pressure. Stablecoins will be treated as currencies operating in cyberspace. The IRS declared bitcoin property in 2014.

Currency is a medium of exchange that you can transmit without paying tax. If I give you a million dollars and you keep it for a year, there will be no tax to pay when you give that million dollars to someone else.

On the other hand, let's say I give you $1 million in bitcoin and you keep it for a year. Bitcoin has since appreciated by 100%. Then you will have to pay capital gains tax to send it to someone else ($1 million capital gain in this case).

Tucker - Not that I'm a criminal or anything, but is it possible to transfer this bitcoin to someone else without the government knowing?

Mr. Saylor – I think right now in the US, at all the institutional custodians that I know of, if you go over $10,000, which is the upper limit for most banks, they have to disclose it. [implied, you can't deposit more than $10,000 if the exchange doesn't know where those funds came from].

It is impossible to buy and sell bitcoins outside of regulated exchanges. Obviously, the big question is whether banks can accept money from the sale of such bitcoins. This varies by jurisdiction. This will be regulated differently in different jurisdictions. Do you have to justify the origin of the funds above $10,000, $600?…

If you are a family, an institutional investor, a corporation, and you see inflation, you buy land, you buy stocks, you buy gold or you buy bitcoins. Why buy bitcoins? Because you want the best asset. You don't want gold. You don't want gold dilution, you don't want stock dilution, you don't want property tax, you don't want the hassle of maintaining your building . All other forms of property can be depreciated, confiscated. Do you have rental properties in New York? You cannot evict your tenants, there is a property tax, you have to maintain it and it is difficult to sell a building. Bitcoin is digital property, it's digital gold, it's digital money, it's digital energy. It's something better than gold because it moves at the speed of light for free and I can keep it in my head. There are no maintenance costs and no one can take it from you unless you torture yourself.

If you have jewelry, a house, a car, and I put a gun to your head, you're gonna give it all to me. There is nothing in this world that cannot be taken by force, except bitcoin. If you buy a million dollars worth of BTC, you can own them by keeping the keys (the password) in your head. I can still shoot you in the head, but I don't get the bitcoins.

It's the only thing in human history that you can take to the grave. The pharaohs created pyramids to bury themselves with their gold, but the gravediggers ended up getting it. It is important. Jews in 1930s Nazi Germany left with 10% of their wealth, tops. They couldn't move their house or their gold. Diamonds maybe, but that's not a very good store of value. With bitcoin, they would have gone with 100%. This is the story of all the diasporas. You know, when the Jews were expelled from Spain and elsewhere in 1500, during the inquisition, it was to steal their property and resell it. Ownership is the right to own things that no one can take from you.

I had a million dollars in a bank in Argentina 20 years ago. The Argentine government has sent a memo to banks ordering them to convert all dollars to pesos before devaluing it. I woke up the next morning with a hundred thousand dollars instead of a million dollars. They stole 90% of all the currency in the whole country in one night on a fax machine, without law, without army. It would be hard to arrest 60 million people and sweat them in jail for 90 days to hand over their bitcoins. How to arrest 60 million people and put them in jail for 90 days?

Bitcoin is the ultimate property right. This is an important economic reinforcement. It is a protection of individual freedoms. This is John Locke's dream. Life, liberty and property. People came to America because if you were Catholic in Northern Europe, they took away your land and your property rights. Same if you were Protestant in Southern Europe. If you were Jewish, they took your land and your property everywhere. Everyone went to America to be free to own property that no one would confiscate.

Bitcoin moves your assets into cyberspace where they are protected by an encrypted wall of energy. It is the hardest thing to tax, steal and confiscate. It is the last thing in the world that will be attacked.

If I put a 2% tax on bitcoin in this state, bitcoins will move to Wyoming. If I put a 2% tax in Wyoming they will move to any state in the union that hasn't taxed them and when the whole country taxes it it moves to Monaco and if everyone in Monaco taxes it, I can sell it to someone in China. I can't do that with a building.

We had to wait 12 years. People tried to copy it 10,000 times. They all failed. It has not been hacked and will not be banned. Here's what happened in the last 12 months Tucker. The IRS said it was property. It is important that it is a property and not a currency. Currency is the preserve of the government. Every powerful government will have a currency. Every weak government will lose its currency. 66 countries are dollarizing. Probably 100 countries will end up losing their monetary privileges. In the end, you will have the CNY, the dollar and some powerful second level currencies. Tell me a currency in Africa or South America that you would prefer to have instead of the dollar. There are not any.

Why hasn't the dollar spread to all iPhones and Android phones? People in countries where the currency is crashing are waiting for the crypto rails. They are waiting for the moment when it will be possible to download a mobile application and have access to all the currencies of the world. They will all crash against the US dollar, assuming the US adopts it.

Why did China ban bitcoin? Because China controls capital. They don't want capital to flow freely. A Chinese citizen cannot take a million dollars out of China. Even Google is blocked in China. If there was a free flow of capital, all current capital would leave China. They would have a problem. They have their system whereas in the west the system is to allow Google and Twitter. The western system is based on the English language, western values, western law, the dollar and bitcoin. The United States adopted bitcoin last year, the Chinese rejected it.

Jerome Powell said it's an asset. It's not a currency, it's an asset. SEC boss Gary Gensler says it's an asset. It is a speculative asset. Of course that is speculative. Bitcoin would already weigh 100 times more if it were not speculative. Christine Lagarde says it's an asset. Bitcoin does not need to be a medium of exchange. It does not have to replace the US dollar in the western world. What you need is to give people a real savings account. I want to hold a month of my dollar salary and all my savings in an asset that is growing in value.

The government is in favor of bitcoin. Bitcoin is consensus in Congress. Cynthia Lumis stood up in the Senate and said, "Thank God for bitcoin." Who wouldn't want to empower everyone? There is broad support in the Senate, bipartisan support. Similar to the House of Representatives. People were a little confused that it could be a currency replacing the dollar. And if so, it's an existential problem. Bitcoin is actually not a problem for the dollar.

We will replace the foundations of the economy that currently rests on imperfect and inefficient assets. The first thing that will collapse is gold. It has been collapsing for a decade. It fell by 4% in the most inflationary year in history! Bitcoin has increased by 340%!

Tucker - Last question, what price do you think bitcoin will be in five years?

Mr. Saylor – Bitcoin won't stop appreciating. The reason being that there will never be more than 21 million units. It will go up as long as there is inflation. The supply of dollars will increase, which in turn will drive up bitcoin. It will be appreciated thanks to its technical utility. It will integrate with iPhones/Androids, Twitter, Square, PayPal. Adoption is what will make bitcoin appreciate. More and more people will bring their money. When Rupert Murdoch showed up on Facebook, he didn't bring a billion friends. When a billionaire joins a monetary network, he brings in a billion dollars. So when a hundred billionaires show up, they bring in hundreds of billions of dollars. When companies, institutional investors come forward, they bring in massive amounts of capital. So bitcoin will continue to rise as adoption and inflation continue.

It will eventually replace gold, which is a $10 trillion asset. Bitcoin will certainly replace gold within three to five years. Then it will replace stock and bond indices. It will demonetize fixed income and equity indices that are currently used as a store of value. People who want to save their money will use bitcoin. Gradually, it will also demonetize real estate. In Canada, there is a shortage of housing because foreigners are massively buying houses there. As a result, the locals cannot afford a house.

If money is printed endlessly, everyone is going to want to buy something tangible to protect against the devaluation of money. The problem is that the new generations can no longer afford to buy a house. Do not monetize useful things. If you monetize food, everyone starves. If you monetize the houses, everyone is on the street. If bitcoin disappeared, then other assets would monetize a bit more.

Bitcoin is 1 trillion out of 500 trillion dollars. It represents far less than 1% of all the money in the world. Why hasn't gold appreciated by 34%? Gold has underperformed the S&P500 index as we have had massive inflation this year. The worst year for 40 years. For what ? Because those looking for a non-sovereign store of value grabbed crypto gold. Gold and bitcoin are in the same niche.

But gold can be depreciated by gold miners and traders. Not bitcoin. It cannot be corrupted this way, because the number of bitcoins that can be mined is fixed in advance. Bitcoin gradually demonetizes all other assets. The idea is to restore gold to its rationality. The idea is to make things more rational.

If people start buying bitcoin instead of buying a second real estate investment, the price of real estate will go down for people who want a first home. If people buy bitcoin instead of debt securities, the price of debt will go down and the yield will go up. Before, $1 million would get you a bond that would pay you $50,000 a year. Now you need $20 million or $10 million to get the same thing.

The general idea is that the average American, the average wage earner, is obliged to gamble his savings on the stock market in order not to lose them. My 83-year-old father has to guess which stock will go up this week and whether Exxon is better than British Petroleum, or better than Apple, or worse than Google, so as not to lose his savings. Because otherwise, by leaving them in the bank, he will receive 0.1% interest. Which means he loses 25% (inflation).

People are not stupid and know that prices are rising faster than 2% per year, 4% per year or 5% per year. We are therefore pushing a whole generation to, at best, invest in stocks, at worst, play with stocks or even dogecoins because no one has a savings account.

Bitcoin is a bank in cyberspace that offers this savings account. You're not betting on Apple or Google's next product release, or Amazon's unionization, or building that pipeline. If we put all your money in the S&P500, CEOs will print more stocks and dilute our money. Better to buy monetary energy that will last 10,000 years.

Tucker – You convinced me. I will sell all my 7.62×51mm ammo pallets and convert them to bitcoin.

Mr. Saylor – The subject is fascinating. I think you'd love it, because it's economics, more technology, more political theory, more philosophy. There are people like Jack Dorsey who see it as economic empowerment for billions of people. Others see it as economic power for billions of people. Others are economists of the Austrian school. Others are freedom fighters, property rights advocates, libertarians, and engineers who just like the idea of ​​possessing a stable, unalterable store of value.

Everyone is looking for a solid foundation on which to build their life. It is better to build on granite with steel. Bitcoin is cryptographic steel. That's the idea. We had never had that before. What causes so much passion, what makes people willing to do anything to make it work, is this idea that we have finally found something real, beautiful and that gives us control back of our lives in a world where we feel we have lost control to politicians. Everyone is looking for something to believe in that is truly theirs.

Journalist / Bitcoin, geopolitics, economy, energy, climate