I had to deviate some from our normal topics for this week’s episode as current financial events unfolded. We have had a lot of my friends and colleagues talking about the recent bank failures, and what to do to protect their personal and practice financial asset structures. My guest this week is Sae’Von Springer, author of “The Blockchain Blueprint: A practical Guide to Crypto in an Impractical Age of Fiat”, who is an expert in cryptocurrencies and the blockchain technologies. You want to miss this one! Time to get out of fiat?
Sae’Von Springer is the author of “The Blockchain Blueprint” and is the founder and managing partner of Native Assets, a blockchain firm specializing in empowering clients with the knowledge and tools required to secure their assets, preserve their purchasing power, and compound their wealth via conscious implementation of blockchain technologies and strategically leveraged digital asset markets.
03:46 Sae’Von explains blockchain technology
Blockchains are a type of a ledger.
What does a blockchain really do? They are a triple entry accounting system versus a double entry system. A triple entry accounting system means that everybody is involved in the transaction, and a third party is also privy to all aspects of the information around those transactions.
There's a delineation between permissioned and permission less blockchains.
08:37 Dr. Barrett: what about decentralization and nodes?
09:02 Sae’Von delineates nodes and how they communicate.
10:07 Sae’Von explains how the blockchains cannot really be manipulated?
13:00 A disruptive technology
13:18 Sae’Von: discusses disintermediation and the obsolescence of middlemen with the technology.
Blockchains facilitate the ability to go direct, peer to peer, and whatever it is you're trying to do. And that is a lot of where the power of these networks come from is that they are peer to peer networks and you don't have to get held up with somebody in the middle, either rent seeking or trying to put arbitrary controls over what you can or can't do without the person on the other side of that equation. When you buy bitcoin, you actually take immediate possession of that Bitcoin assuming that you withdraw it to self-custody. It could be $5 It can be $500 million. The funny thing is, we call them dollars, but what you actually have is 500 million US bills. And they're called bills because they are representations of debt owed technically. That's why they're called bills, but they used to be called notes. And then they called them bills, because you have a power bill, you have a car bill, you have a home bill, because that's money you owe. And so that is not a bearer asset. When you get that 500 million or that $500, whatever it is, you're not actually taking custody of anything of actual value, you're taking custody of an IOU, a promise to pay you in something that should be worth some value down the road. US dollars are all Fiat. And one must ask themselves, what is truly the value what makes this dollar worth anything. It used to be pegged to an actual asset, it used to be tied to gold. And that came out of the Bretton Woods agreement.
16:47 Dr. Barrett
17:23 Sae’Von Is Bitcoin an Energy Storage Device?
OPEC, petrodollars, and bitcoin
20:05 Sae’Von
Every single fiat currency that has ever been created in history has eventually collapsed to zero, every single one and the US dollar has lost over 95% of its purchasing power, purchasing power in the last 100 years alone.
20:21 Dr. Barrett: Thomas Jefferson and gold
21:12 Sae’Von
The way to create a mental model around the value of Bitcoin, is to look at the amount of energy that is required to actually produce a single Bitcoin. Bitcoin in of itself is a packaging of the energy that went into producing it. And so same way that people value a barrel of oil, because that oil, one, the work that goes into actually acquiring the oil is quite intensive, but then what you do with that oil, how necessary oil is to function in society? From a commodity sort of lens, that's one way to think about Bitcoin having value now, is that value, does that mean that one coin is worth $30,000? That it should be worth 60? That should be worth a million? I can't say that, right. But there is an intrinsic value to a watt of energy, and how many watts of energy went into creating a single Bitcoin?
22:10 Dr. Barrett: Bitcoin is Finite
You just can't print more Bitcoin! Satoshi had, what 21 million Bitcoins or something like that.
22:34 Sae’Von Is Bitcoin the most perfect monetary system ever?
And so that's the second way and that's the most common way for people to value bitcoin is looking at it as what many have been the most perfect monetary system that has ever been created in modern history. And the reason they call it perfect, fundamentally to, we must acknowledge that there are generally two schools of thought on economics, you have Keynesian economics, you have Austrian economics, what we see a play in a Fiat world is Keynesian economics. Guys, people who went to Harvard, they went to these Ivy League schools, they teach them all about Keynesian economics, which preaches that, you know, quantitative easing, and quantitative tightening monetary policy, that these are things that should be leveraged, leveraged as tools to control the economy. And then on the opposite side, you have Austrian economics, which is much less popular, but used to be more popular back in the pre-World War era, around that timeframe, and that has a lot more to do with supply demand economics, as like the principle of all economics supply demand. And that really complicated get to much more over that. When you look at it from that lens, knowing that fiat currency is not backed by anything, and that's why it's hard to call it money, because money usually actually is tied to something. But Fiat is not backed by anything, we have entered this era of endless quantitative easing, which means they're going to print more money. And as they print more money, it devalues the existing monetary supply, which is why we see these massive bubbles seem to get bigger and bigger, because assets tend to accrue most of the value that comes from inflation, when the inflation is generated through the quantitative easing, but anybody that doesn't hold assets, vague, continually priced out, because the money that they were simply holding loses more and more of its value. The gap between the haves and have nots, it continues to get larger and larger and larger. But when you look at something like Bitcoin, the supply is finite, right? The supply cannot be changed. Only thing that can happen with the supply is that it goes down, not because anybody wants it to go down. But if somebody ever loses their Bitcoin, they're not coming back into the market at a later point. And then if you look at that one level below that it is absolutely finite. And it is digitally native.
24:59 Sae’Von: What is digitally native? Just make more of it!
When we think about the era that we live in, everything is done digitally, first and foremost, even the money, your credit card, online bill payments, direct deposits. Most people do not receive, nor do they spend cash. And as a result, the people using their iPhones, PayPal, Apple Pay. Money is really a digital phenomenon at this point. And because it's a digital phenomenon, it makes it even easier for the Federal Reserve the central banks of the world to produce more money out of thin air, because literally all they have to do, I'm grossly simplifying it. But what they're doing is going into their database. And remember, if this was on a blockchain, there might be some rules about not creating more money. That would have to be the case. But it could be the case, they go into database, they add some zeros. They hit enter, and all of a sudden, there's more money. All right, we've talked about why that's an issue. And so Bitcoin being digitally native, it does not, it is not controlled by any single entity. There was no government, there was no central bank. There was no Corporation, the Federal Reserve, as a corporation has strong partnership with the US government, but the government is a corporation, that's a whole other story. Nobody has control over Bitcoin. Nobody, okay. It makes it where it cannot be used as a political lever the same way that fiat currency can. Even the fact that we have nations entire countries, regardless of what the regime may have done, we have entire countries that are kicked out of the banking system, because the US doesn't like them. Our allies don't like them. Forget the people who may have done wrong, what about the average everyday woman, man child in those countries, right? This hurts them far more than it hurts the people in power. But that's only possible because of the World Bank, the IMF, and basically the banking mafia and the systems that they control, which allowed them to flip switches and say, No, you cannot transfer money to these parties, you can't transfer money to these accounts, this then the third. And Bitcoin being digitally native, it being something that cryptographically is verifiable, you can look at it, you can see exactly what the issuance schedule is going to be, you can basically estimate down to the minute when the new Bitcoin will be mined or created. And there are literally it's designed for you as the individual to take full custody of that asset at scale. And the other thing, particularly about gold, because gold is not bad. But gold has limitations. And one of those limitations is its physical nature. Because if someone buys gold in their fidelity account, or their Charles Schwab, right, you're not buying gold, you are buying a claim that they hope you don't actually ask for down the road. Right? So what people call that we call that paper gold, just like some people buy paper, Bitcoin. And so that being the case, let's say, sometimes dramatic situations illustrate things better. Let's say you're a billionaire. And you decide you want to renounce your US citizenship, and you want to go somewhere else, maybe not even renouncing US citizenship, you just want to move from one state to another state to better align with your life view. Okay. If you want to take a large chunk of your net worth with you, you're going to have several issues. One, they're not going to let you pull it out of your bank, physically. And if you had $100 million, which not everybody has it, but they're dozens and dozens, not hundreds of people who have hundreds of millions of dollars, you're gonna have a very hard time keeping up with $100 million. It can get wet and catch fire, you can lose, all right, if you try to wire it, they will take you literally freeze your whole account. They can drop you as a client, they can de bank you, they can borrow your access to it. So cool. Let's just say that you wound up over time putting a lot of that in physical gold. Well, 100 million dollars in physical gold is pretty, pretty bulky. Pretty heavy. How are you going to transport it? How are you going to keep it private? You got $100 million worth of gold. Everybody is going to know you have that gold.
30:14 Dr. Barrett: Crypto is driving the controlling government crazy!
I believe that was FDR that people had to turn their gold in at a certain price, because you could physically go to jail if you held gold. I think that's why Bitcoin is just driving the governments in the world banking people absolutely bonkers right now, because they have no control. And they've had control and they want control, and they're not ever going to feel comfortable unless they have absolute control.
30:45 Sae’Von: Self-custody, private keys, and digital wallets
If you take self-custody of your Bitcoin, that means that you can put it where it is encrypted as such, that the only way you can access it is with information. You can't guess it, it's impossible to hack it, you literally have to have an it's called you your seed phrase or your when your private keys is technically what it is. But if you set up a hardware wallet, and you put your Bitcoin on there, then you're going to have one the private key to your Bitcoin, which you should also always keep private. But the second thing is you actually need the cryptographic keys to get access to that wallet that is holding the Bitcoin. You basically have two layers of security, the private key to the actual Bitcoin itself, and then the seed phrase, of your hardware wallet. And so that in stark contrast to the fact that if you have a physical asset, whether it be Fiat or it be an actual commodity of value, if somebody wants it, they go up to you, they relieve you of that asset. Now, there's a lot of ways that can do that. We don't got to get too extreme, but they can relieve you of that asset against your will it right, when it is information that they have to relieve you of. And you're the only one with the information. It's a different proposition, you're able to have plausible deniability that you don't have access to it. There's no way to prove that you do. And privacy if I want to get on a plane, go to another state. Right? If I try to take $10,000 to the airport, they're gonna look at me funny and detain me right now. 100k 1,000,010 million 100 million, I could literally put something smaller than this cell phone in my pocket. With a billion dollars on it, literally, there's no limit. They wouldn't know.
35:19 Sae’Von: Bitcoin is the OG
Bitcoin is the OG, okay, it is the OG. All right, and part of that comes down to is a few things. But fundamentally, it has to do with that network. It is the most distributed, most resilient, when I say resilient, I mean, secure network computer networks on Earth in existence, okay, and it only gets stronger every day. That's not hyperbole every day, it gets more resilient. Every additional node that starts running, and mining or validating the chain, it gets more resilient. And so that combined with the fact that the code is so ossified, okay, that it provides people with assurances and a confidence about its monetary policies. Because things like Ethereum, I think of Ethereum more as a technology platform, the same way that cloud computing or servers or the Internet is a technology platform, right? Bitcoin is a technology platform as well, you can build applications on top of it. It's not as efficient as Ethereum. But it is more secure than it is it's just harder to build on it for several reasons. We don't really relate to this conversation. But that is why most people make that delineation between Bitcoin and everything else being a shit coin, but, but also to I think that that's when people are trying to when they're assuming that all crypto is intended to be the money of the future, to be the currency of the future. And that's not 99% of crypto was not trying to be the money of the future.
37:12 Sae’Von: Bitcoin the invention
Bitcoin is an invention that understood that one of the greatest challenges facing humanity was fiat currency, and central banks, right, and the control of money. And when it was created, it was done in such a way that that was the main problem in mind, when creating Bitcoin, that if it didn't, nothing else, but was able to correct some of the issues we're seeing with central banking with VR currency than it would have fulfilled its original, most primitive vision. Okay? It just so happens to be that the way it was architected, allow some flexibility for it to become more than simply internet made of value. All right. But if it can only be one thing, and the narrative has changed over time, when it first came out, some people were saying it was digital cash. And then you know, it became Oh, it's digital gold. And then last cycle, no, this is a hedge against inflation.
38:38 Dr. Barrett: does anyone know who Satoshi is?
38:48 Sae’Von:
No, technically, no. But there was a lot of speculation and the speculation is quite interesting. Some people think that it was a conglomerate of tech companies that created it. And that like the Satoshi Nakamoto was a combination of the corporate names: Samsung, the Toshi being Toshiba. Nakamoto, the Moto being Motorola, basically the being this anagram for like a bunch of different tech companies being involved in creating it. I think that's kind of compelling. But then one must have to ask themselves, why would they create it? What's the point? Right? Are they just outrageous to each you know, had information from the separate companies, the other theory is that it was actually created by I don't want to say the CIA, but some sort of three letter adjacent agency, or power arm as a part of a bigger scheme to kind of create, you know, good versus evil. And this whole transition to a digital economy, where ultimately the goal is to get everybody underneath a central bank, digital currency that has a lot more control and controls around it. And then the third, and what I think is most interesting, most compelling is the idea that it was actually created by artificial intelligence in the future, and it was sent to us, I will send back in the past, to us experiencing good now.
40:49 Sae’Von:
I have a theory that the movie Tennant is actually about Bitcoin.
40:55 Dr. Barrett: did the CIA let the genie out of the bottle?
41:16 Sae’Von:
No, however, some people, I can't say I'm fully in this camp. But you know, things remain to be seen sometimes. What really is happening is so grand and so complex that it's really hard to see in real time. But some have speculated that basically, the plan is to create Bitcoin, get people ideologically over time, when you create a divide, which is also rationally helpful if you want to conquer people. But then you get so many people, you're going to have people who immediately opt in to the centralized version of this all, which is a CBDC, which still is very different from Bitcoin. It's just more of a blockchain based version of central bank policy. And then you have people who were in the Bitcoin, let's call it a lifeboat. And then eventually, because you've created the Bitcoin lifeboat, you can then destroy it, once it has enough people captured by it, and then that's like its own travesty and devastation. And then those people ultimately will have to join into the centralized banks version of digital assets or digital currency. So I'm a bit skeptical about that. But history has shown us that, you know, false flags are often very, very instrumental in moving a government or regime for the Gulf of Tonkin is one of the best examples of a false flag event. And that's basically where a government or power a body of power, conduct some sort of operation, some degree of subterfuge or destruction, and then they obfuscate their involvement in the redirect and say it was someone else who did it.
43:04 Dr. Barrett: What is holding bitcoin back?
43:51 Sae’Von: Fungibility and the Matrix
We can actually talk about literal fungibility, if you would like, which is basically whether or not one thing is one bitcoin equals one Bitcoin. So as far as it not being used daily, I think that for most people who have long term conviction in Bitcoin, that is a very deliberate conscious, strategic choice, because there's this meme that has gone around for years that basically, if some people know the mean, where you have Neo, and then he's, he's on the rooftop, and Morpheus is telling him about, you know, flying and Neos, like you mean one day, I'll be able to boom a woman and Neil's like no or Morpheus, I'm telling you that when the time comes, you won't have to, sort of thing. And the mean goes that basically, this idea of hyper Bitcoin isolation, that eventually where this all leads is that things are no longer priced in US dollars. They're priced in Bitcoin, because it's the last thing standing, every other fiat currency collapses. And then people don't have any choice really, but to back it with something that they No is guaranteed. And the issue with gold is one all of the paper gold in existence, the actual labor in the logistics of moving gold around, you know, if our current followed by money is backed by gold, and I'm transacting with someone on the other side of the country on a different country, how do we actually settle that gold arriving in another country? Like that's a whole issue, and then the fact that gold continues to inflate Now, some people say, Oh, we've, you know, we've calculated the inflation rate of gold, but it's like, okay, and if we come across another deposit, if they find another planet with gold, like there's a lot of things that could come out the woodwork and affect the value proposition of gold based on its scarcity model. People not spinning bitcoin is more of a delayed gratification that says, hey, the whole purpose of me holding bitcoin is so that I don't get caught up losing my shirt, ran the US dollar, not if you're and I don't like talking about negative things is guaranteed to happen. But if you don't understand this, you might lose your shirt. But when the US dollar crashes to zero, maybe that's in a year, maybe that's in 100 years, but it will go to zero, unless the whole mechanism of the US dollar changes and it becomes backed by something. Right? And so that is why I always say people don't spend Bitcoin, it's because they want to hold on to it, or they want to accumulate as much of it as possible. And eventually, everything's going to be priced in Bitcoin anyway. Now, if you do want to spend it, and actually a shockingly easy, there are a, there's several networks of payment processors that actually specialize in being able to use and spin crypto on a daily basis. So let me actually find, boom, here we go. This is a bit pay card. Okay, it runs on the MasterCard network. And I actually bought my car with Ethereum. Okay, in 2021, and I could have bought it in Bitcoin, but I wanted to hold on to the Bitcoin, I was cool with some of the theory. And what this allows you to do is literally you can conduct payroll, in crypto and Bitcoin, you can get direct deposit, convert it over to Bitcoin. And you can go and you can spend it just like you would a debit card. But it's your Bitcoin, it's your Ethereum, it's your Litecoin, you know, now does not support every single cryptocurrency because it needs to have a certain amount of liquidity and volume. But all of the major ones are supported. And I've been using that thing for years, I can literally go to my ATM, put it in, say how much money I want to pull out. And it'll sell that amount of bitcoin or crypto asset for me on the back end, and then I'm able to just access the Fiat version of it. So that's one option. There's also a company called strike that is built natively on top of bitcoins lightning layer, which is kind of like an L-2 that allows the transactions to happen faster. And it's allowing people to do micro payments with Bitcoin, as well, natively.
47:58 Dr. Barrett: Where can they get the bitcoin card? Bitpay
48:55
Yeah. You have an account. That account is also backed by a seed phrase sand cryptography, and then are sent you know, cryptographically secured, you sinned, you deposit your crypto assets to your account. And then you choose how much of those assets you want to load onto your car. And it's when you load those assets that they are sold. And if you bought something and it's up, double or triple, and you decide you want to sell some of it, then boom, you could go ahead into your Bitpay account, say how much of it you want to load. You put in $100, it's now worth 300, you want to put 200 of that onto the card, then you just hit Load and then it will take it sell it on the back end. And then it will take that equivalent amount of Fiat and put it on the card in very similar fashion as someone who might have used like an ADP card or a any sort of prepaid MasterCard or something like that. But you have the ability to go to your ATM and do all that sort of stuff.
50:04 Sae’Von: Is crypto private?
One of the things I think is a big misunderstanding about crypto is that it is private. The damn opposite of private, it is as public as public can get. That is why people use the phrase of trustless. You don't have to trust anything, because you can audit everything. Okay? What crypto is pseudo anonymous. Okay. If I don't know who owns the wallet, I can't directly connect it to Stephen, you can't directly connected to Sae’Von. I can say this wallet has purchased or has sent, you know, a million dollars’ worth of bitcoin over time. But beyond on a shadow of a doubt, to prove or guarantee whose wallet on unless they've left a trail of crumbs, meaning they deposited their Fiat to Coinbase. And they bought Bitcoin. And then they use their wallet to buy something. And those are the only transaction that's ever happened. That's the only Bitcoin that's ever hit that wallet, then it's pretty easy to deduce who's wallet it is. Now this whole companies that do this chain analysis is one of them. They're like forensics for crypto payments. But yeah, that is the trade-off. Once you start using this, then it's basically like you using your bank account. But from a convenience standpoint, you know, some people prefer it and other ways you can still keep it a bit more private.
52:28 Dr. Barrett: fungibility of bitcoin
So I think once people understand the fungibility, which I didn't really until you just explained this to me, I think that once that understanding becomes more ubiquitous, you're going to see more utilization, more utilization is going to mean probably increase in value, right? I mean, you would think that this is demand. And if you believe in the supply and demand theory of economics, then you would think that it would that it would go up in value. One of the things I couldn't quite figure out and this is a little bit tangential, but it comes back to to Bitcoin is that, you know, sometimes when the stock market gets hit really hard, the Bitcoin will go up, and then other times the market gets hit pretty hard, and it goes down. It's almost like it's schizophrenic.
53:20 Sae’Von: Correlation of Bitcoin to the Markets—short term and long term
Bitcoin, until the last few weeks till all these banks start failing, bitcoin is tightly correlated with the performance of the stock market in the short term, okay, over the long term, it is highly uncorrelated with the stock market, because Bitcoin has done nothing, nothing but go up exponentially since it was created. And so I think what people have to keep in mind is that Bitcoin is still viewed primarily as a risk asset. And on the risk assets spectrum, it is like on the furthest end of risk, and so in the traditional world, you would call that like an exotic investment.
55:12 Sae’Von: Silicon Valley Bank
In bull markets, they outperform in bear markets, they underperform. And so that's why in the short term, you tend to see that if the stock market drops, Bitcoin will drop, because people are still trading it like a risk asset. And that's why when interest rates started going up and crashed, because cool risk, interest rates go up, the cost of capital is more expensive, meaning that people want to fly to safety, because they're not worried about growing their money. They're worried about preserving their money. They begin to sell off the riskiest assets first. And as things get worse, they sell off the less risky assets until eventually they sit holding bonds. That's what got Silicon Valley Bank in trouble. Like, yes, fractional reserve lending is a *******. But it was really the fact that they were trying to hedge against the interest rates and the arrival of the inflationary environment. And generally speaking, government issued bonds and Treasuries are the safest assets to invest in, because the government is saying, Hey, we will guarantee this return, right. But when you have interest rates get increased, you know, 14x, within 12 months, right? That's not something people are used to. And then your bonds are underwater, if you mark them to market, which is basically saying, hey, let's not worry about the value of these bonds, when they're at maturity, the value of them today is taking. You don't have that money. And that's what made them more susceptible to the bank.
56:56 Dr. Barrett: what about derivatives and the 2008 crisis?
Remember, 2008? Because it seems like it's the same thing.
57:38 Sae’Von discusses leverage
Leverage definitely plays into it and it follows the same sort of market cycles as the market goes up. Very few people are comfortable taking on leverage and the market is going down, because that means that you're shorting or you're, you know, making put options and things like that, that are more advanced instruments that most people just aren't familiar with or comfortable using. But when markets are going up, leverage is as simple as maxing out your credit cards to buy more, it's as simple as calling and trying to, you know, refinance your home and take out a second mortgage, so you can access that home equity line of credit, right, and most people do know how to do that, or most people don't know how to short the market, or put on options trades, or things like that carry trades. So that's why there's a lot less leverage on the down trend of the market relative to the uptrend, because retail doesn't usually participate in the down market.
58:53 Dr. Barrett: the GameStop short squeeze story
You live by the sword you die by the sword.
Leverage is simply borrowing money to speculate, right? Right or not, it's as simple as it is
1:01:26 How to get in touch with Sae’Von:
