FFS 094 - Preston Pysh

[00:00:00]

Intro

Preston: there's 21 million Bitcoin. Okay. Think of each one of those Bitcoin as a vote, , Let's just say million of them, or whatever the number is, are being held by deeply convicted people that actually understand what they, what they own. how many votes do you think Michael Saylor has? just with MicroStrategy alone.

 1 percent of the vote of not putting those coins back into the market to, to drive the price. , what's going to drive a hyperbitcoinization scenario, it's going to be once a majority of these coins are in people with deep conviction.

where we get to that tipping point, we, we, we, we, Hey, we might be there. I don't know.

This is the Freedom Footprint Show, a Bitcoin philosophy show with Knut Svanholm and me, Luke de Wolf and we love to expand our freedom footprint. We hope you do too. The best way to do that is of course to emit as much freedom dioxide as possible. The best tool we have for doing that is of course Bitcoin.

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Welcoming Preston Pysh

Knut: Preston, welcome to the Freedom Footprint Show.

Preston: Hey, thrilled to be here,

Knut: Welcome.

Preston: Look at this place, huh?

Knut: Yeah,

welcome to Madeira.

Preston: I mean, it's phenomenal.

Knut: Absolutely, yeah.

Preston: You can't, I've been taking pictures and sending them back and it's like, you know that this picture, like, Does no justice to what this actually looks like in real life. It's [00:02:00] crazy. Yeah.

Knut: And this was your first time, right?

Preston: Oh yeah. That's my, but it won't be my last.

Knut: And I bet, uh, Greg and Jeff told you about the thing, uh, about the island before you came?

Preston: No. What's that?

Knut: no, no, like Greg

Voss and Jeff Booth

and

these people that they told

you about

Preston: they said it was gorgeous and I was like, yeah, yeah. Okay. Of course it is. And I looked at the pictures online and I was like, Oh, this is pretty cool. Come in here. And then I landed and it was like, Wow. This is, this is breathtaking. No, we were talking about that just before here, how awesome it is when Bitcoiners move to a certain place. The way I view it, like you get, you get sort of a Metcalfe's law effect,

Knut: so that

the value of the network, just locally on the island as well, is equal to the square of the number of participants.

Because the more Bitcoiners you have, the more The problems go away.

Preston: True. True. [00:03:00] Yes.

Knut: all the monetary problems just disappear because someone has fiat, someone has bitcoins, another place starts accepting just easier and easier.

Preston: The thing that I can tell you is so much contrast in my, in my personal life, right? So people know I had, I went into the military right out of college. And it was like, when I was working for the, deeply working for the Fiat machine through military service, right. I was ending up in just the worst locations.

Like the geography was matching my contributions to society, I guess. Right. And like, here I am in a war torn, like just literally a combat zone, like fending for my life. And then I become a bitcoiner and like I am constantly being whisked away to places like this where it's just like absolute paradise and everything's safe and like you walk the streets and everybody's friendly and saying hi to you and it's just like the contrast [00:04:00] It's almost like the, the, the geographic, you know, backdrop of where I find myself is like shifting.

It's crazy. I don't even know how to describe it, but

Knut: That's such an interesting perspective. It reminds me of like, uh, An official government building we went into in Spain,

that looked

like the, straight out of Orwell.

So it's a grey

concrete building, and every, and there are desks scattered around with piles of paper on them, and people who look like they want to kill themselves, sitting there just, Churning away in some bureaucracy bullshit, you know,

doing, doing

unnecessary things that no one asked for.

yeah,

so that's where you end up if you lean into that,

and

if you lean into the Bitcoin of life, you, you end up in some beautiful place

instead. And I don't want to say that because I mean, a lot of people are just so ingrained into what it is that they're doing. So the person [00:05:00] sitting there, you know, performing that job, it's like, well, what skill set do I have to step away from this? And I've got kids in school and they have like all these anchors that have like pulled them into that position.

Preston: And just saying, Oh, yep, I'm done. I'm changing all this on a dime. It's so hard. And like, I, I know you and I mean, we have a deep respect for that person and what that choice, how difficult that choice is, but yeah.

Knut: I, I think that, like, the way, the way to do the transition for most people, I think, if you're a normie and you're, you know, You're stacking, you understand Bitcoin, so you're stacking,

and you're

hodling, you'll probably need to wait for at least five, probably ten years before

you can actually

jump off the cliff and see if your wings,

you know, will,

Preston: that transition if you continue to do it long yeah,

Knut: yeah, but you probably

need the hodl phase before you can just,

unless you

have, unless you're extremely [00:06:00] talented and you have something to offer

the world that you're

able to sell.

Never Selling Your Bitcoin?

Luke: This actually gets into a topic that we discussed with Erik Weiss when, uh, uh, yesterday here and, and the, the the mindset of never sell your Bitcoin, period. Right?

But, got, I've got opinions on that.

Knut: well,

please go ahead

then. Yeah.

Preston: I, I mean, I will sell my Bitcoin. But it's going to be to own some type of operational asset that is providing productive value to society at the right math, right? And that's where a lot of people get confused because they're just like, Oh, well, Bitcoin's going to go up forever.

And this is what they don't say in fiat terms. Okay, but what they're not saying is Bitcoin won't always go up when measured against real productive equity that adds value to society. So like this football stadium here, there's probably still going to be football on the other side of this [00:07:00] Bitcoinization.

And I think Michael was very right yesterday when he said we got about a 10 year window of a Bitcoin gold rush that just started. That is really going to accelerate into the next 10 years. So he's saying, he thinks that a lot of that transition is going to happen in the coming 10 years. And then after that, we're in a very Bitcoinized society where Bitcoin's dominating.

So let's just say that that's, that's true, right? And you know, everybody's got an opinion on what that timeline is, but let's just say it's 10 years. So this is a business. People still want to come here. They're being, they're paying for entertainment, right? If this club is only accepting Bitcoin, by the way, I paid for a coffee coming into the stadium today with Bitcoin on my Primal app.

It just went straight through and I was like, this, this future's coming pretty dang fast. Um, but these, let's say the, the stadium gets filled up, people are paying with Bitcoin. So this business is denominating all of its top line, clear down to the bottom line in Bitcoin, and [00:08:00] let's just say that it's a pretty steady flow of free cash, they're making money, and let's just say it's 10 percent of their top line, so, you know, let's say, and these numbers are just made up, let's say it's 100 Bitcoin a year, Right?

I don't know what the numbers are. I would have to go do some math and figure out what these numbers are. They bring in a hundred Bitcoin a year. If they're netting 10%, they're netting 10 Bitcoin a year. These numbers are probably high in a Hyperbitcoinized world, but let's just use them because they're nice and round.

Knut: Very high.

Preston: So if, if the net income is 10 Bitcoin per year for this stadium, what are you willing to, to pay to own a free cashflow of 10 Bitcoin a year? Right? And the answer I think is going to be a multiple early on. I think the multiple will be a five or a 10. It's somewhere in that range. And, and when the, when the flip really happens, I think it could get as low as a five on, on the net income.[00:09:00]

So like this club could be valued at, call it 50 Bitcoin. Okay. The risk is it takes you five years to get that free cashflow back.

Right?

So Bitcoiners will spend their Bitcoin to own productive assets that have the A competitive moat, you're on an island, where else are you going to go watch a tier, now they're tier 2, but it used to be tier 1 team, so that's not going away, right?

So it comes down to the valuations, now, if you were looking at the value of this stadium today, through free cash flows and what it brings in and all that kind of stuff, like, you're using multiples that aren't a 5. So we were saying 10, it brings in 10 Bitcoin a year, and I valued it at 50 Bitcoin because it was a PE of 5.

The way things are valued today, it's, it's valued at a PE of 35, right? So instead of it being 50 350 Bitcoin.

Knut: Yeah,

Preston: [00:10:00] Things are not going to be valued because think about your return, how, it takes you 35 years. To get your, your investment back. If I paid 350 Bitcoin for this team, right. And they only make 10 a year.

It takes me 35 years to get those Bitcoin back. There's too much risk in Bitcoin is too good of a store of value to pay such a high multiple for it.

Businesses After Hyperbitcoinization

Knut: Okay. Here's, uh, there's so much to unpack here.

Uh, Yeah. first of all, you, you can only watch tier two football here probably, but

you can watch tier one Bitcoiners. They're all here. So, and the other thing is like, I love to do this thought experiment and extrapolate as far into the, off into the future as I can.

Yeah.

So,

if we fast forward to the year 2140,

Preston: mhm, yeah,

Knut: all the bitcoins have been mined, it is everywhere, we are hyperbitcoinized,

so it's the

preferred, like that's what people use, or that's what people measure their lives by.

Preston: yeah,

Knut: [00:11:00] That means that most businesses cannot, cannot have black numbers. In Bitcoin terms, they will need to have red numbers.

Like every hodler will need to have red numbers because you have to live like, and if a

Bitcoin is everything, the only thing everyone accepts, that means most stacks go down in Bitcoin terms,

but not

in purchasing power terms. And this is where the real mind bend

is,

Because that means you could actually start, uh, a business not to change the actual income curve, but to change the, the, the, the curvature of the curve.

Like you could start a business to, in order for your numbers to be a little less red

you know, and

the stack to diminish slower.

And,

and, and this is such a different world to what we live in now, and it's. It's so hard to wrap your head around.

So like, but, but I see, like, of course you get this gold rush period of 10 years. But [00:12:00] after that, if everyone on earth is on a Bitcoin standard, Bitcoins are going to get lost a lot faster.

So, so

like,

people are going to lose their SAT. yes,

So

this, the finite supply thing, it's getting even harsher on people.

Knut: And at the same time, you have like 8 billion people of demand and all

the money in

the world of demand. So Uh, and you have a global free market sound money economy that is very well oiled compared to what we got now.

So, so the productivity of the human race can still be, if it's 5 percent per year in average GDP or whatever you measure by. number will be way higher post hyperbitcoinization. So the gold rush will end, but still the productivity after the gold rush is over is still higher than what it is now.

Like, so the, the purchasing power per, or the, the, the, growth rate of the total global economy is pretty high. It's faster than, than [00:13:00] it is now. So what's your thought on that? That's a lot to

Deflation vs Inflation

Preston: Well, so, so I, first thing I want to kind of address is this idea of, of you have a deflationary scenario instead of an inflationary scenario that everybody's been accustomed to. So let's say that, that the Bitcoin itself is deflationary because of lost coins. So you'd have to kind of watch the prices of everyday items to kind of, just like we do right now with all these inflation gauges, right?

But it would be this global thing where everybody's dealing with the same, deflationary rate together. And I think it would be a little bit easier to, to kind of use a gauge to figure out what that is like, Oh, the price of a steak just got this much cheaper than it was. Last year, right? and so there's those metrics.

Let's just say that that metric is, and I'm going to use round numbers because it just makes it easier. Let's say it's aggressive and let's say it's 5%. Okay. I don't think it's going to be, well, maybe it would be that high. I don't know. but let's just say it's [00:14:00] 5 percent or 3 percent or 1%. Those are your rates.

Those go into your economic calculation of owning operational businesses, right? So if my money's becoming more valuable by 5%, I know that if I invest in a football club that at a PE of 5 is giving me 20%, right? That I'm outperforming that, that deflationary rate by 15%. Or no, would it be the other way? It would be, um, yeah, because my club is becoming more valuable too.

So it's actually additive to, that's so weird by the way. That is really weird. Um, so it'd be a 25 percent return, which is a kicker, is actually a kicker to the PE. So the five might actually, maybe it is a little bit higher because of that kicker. Yeah.

This is really, this is really interesting because I never, I never even thought about that being additive.

I would have just immediately thought it was subtractive [00:15:00] because of how, yeah, but that would be a 25 percent return if you include it. Yeah.

Knut: Uh, that's why I think, like, it's, it's, it's like phenomena like that, and when you really think them through, it's like, this is changing the world so much more than we can even imagine. Like,

it's, it's

so weird.

Preston: But people with math are going to figure it out really Well,

Knut: it's

not math,

because, uh, uh, an economy, it's never math, it's human action, right? So you, so you're thinking that it's, is it linear?

Is it

exponential? No,

it's even

Preston: well, I would disagree with that. I would say that, uh, from, from a standpoint of really savvy investors and people that are capital allocators, it's, it's. I mean, this is how I think of the world. I think of it very mathematical. Like if you want me to depart with my Bitcoin, sure, I'll do it. If, if I can look at a club and I can say, if I can get my return back in four years, cause that's what the numbers would have been on those valuations that we were just talking about, assuming the 5 percent deflationary rate and all that.

I would get my money back, um, my [00:16:00] Bitcoin money back in four years by owning this club. That my risk would be that if this club would catch on fire in year three, then it was a bad investment and I lost money. But if I was able to hold it for four years, I got all the Bitcoin that I invested back, and then every year after that, I'm making Bitcoin on that Yeah.

Knut: Yeah. Yeah.

Preston: So you're going to have really savvy economic thinkers, people that can perform economic calculations despite a deflationary rate. And, um, what happens is, is. Is the market sorts out what is truly value added activities. And that's the difference. That's the big difference because when I'm, when I look at this thing that just keeps going up in value and I'm not, I'm not politically maneuvering myself to have access to it, it's just everybody equally is getting this deflationary rate, which you have is this.

This battle, because if this would only [00:17:00] give me, let's say that after I did the math, this would give me, cause we were saying 25%, let's just say it was 5%. Okay. I could own this and it's giving me a 5 percent return, which would have just been the deflationary rate. I would just keep the money and I wouldn't have bought the club.

Versus a business, let's say the hospital down there was giving me the 25 as a capital allocator. I'm going to the hospital, I'm investing in that, and I'm not, I'm not going to own this thing. It's just math.

Knut: Yeah, yeah.

Preston: Cause I'm just looking at it from a return, relative return basis of everything that's happening on this island, right?

From what's the, what's my return profile? What am I expecting to get back?

Knut: So, so here's another, uh, slightly different angle. So, uh, if you make an investment instead of just hodling your Bitcoin and you expect it to, like, you expect an equal amount of Bitcoin and over infinity, like say, say, say, So it doesn't really matter if you hodl the bitcoin or if you make the investment. The investment might still be sounder from another [00:18:00] perspective because hodling bitcoin, there is a risk there. Like, you could get dementia, you could,

you know, bump

your head into something, forget the location of your seed phrase

Preston: I love where The business is still there. So,

Knut: so it's,

Preston: don't have custody no, no,

Knut: exactly.

So how

much of my, Uh, total net worth, would I want to be abstract and intangible and how much would I be

tangible?

I

think that's the real trade off you're making in the future when you're deciding whether to hodl or whether to invest.

Preston: that totally gets built into the math, right? What's the custody risk? Okay. Well, it's deflationary. Let's use the round numbers. It's deflationary at 5%. The custody risk, I'll put 20 bips on that, right? Cause

Knut: Hard to

Preston: because of that, well, if you were an insurance agent, you would know exactly what that is. Um, we'd say, you know, and that's why I'm saying 20 bips or whatever, the insurance person would have the stats on a macro level of what that might be, and you would assign that and then you would take that off of [00:19:00] your, you know, um, so, but you bring up a great point and some people, they could care less that they're making 1 percent more by owning this or that I'm super passionate about soccer and I

Knut: like

Peter

Preston: it'd be like Peter, right?

I'm super passionate about soccer. Yeah, I get it, Preston. The return isn't, this is exactly what he would say to me. It's like, I get it. The return might be better to go own this thing, but I love soccer and that's what I want to spend my time doing. And so that you're going to have that taking place.

Quince, coincidence of wants really from a ownership of equity standpoint.

Knut: I, I have a very personal, uh, example of exact

exactly.

This experience, and it's the wine I made this, uh, this fall.

So they made

six, 600 bottles of wine,

like, and. Selling them like an exclusive thing. Um, but I had to sell some Bitcoin to pay for the wine.

Uh, and that's, this was at the end of the summer. So Bitcoin is around 20, 25, 000 something, and I'm probably never getting the money back.

Like,

[00:20:00] but, but it doesn't matter

because I wanted

to do the thing.

And,

uh, I, this is a fun little project. I think the wine is fantastically tasty. So like, I

want people to try it. And, uh, you know. But, but you should know whenever, every time you make an investment using your Bitcoin that you're probably not getting them back.

Like

the, the likelihood

of you not getting them back is way higher than they would be in the fiat world.

Preston: The thing that I think's lost on most that are really locked into the fiat world right now is this idea that capital is not being allocated efficiently at all. Like deeply, disturbingly inefficient. And it comes down to just, if, if you are politically tied to the, to the printer, you get first access and then you can just apply it wherever the hell you want.

I mean, they're still doing, they're still performing economic calculation. I'm not, I'm not saying that, but I am saying that there's so many zombie [00:21:00] companies around the world that if you had sound money that was equally distributed to all. You would, these, these zombies would just get annihilated, annihilated, like really fast.

And so what that, what that does is it clears out, it's a, it's a brush fire, right? It's a forest fire, makes way for the productive and really high quality gene, uh, you know, plants to, to build and to make it more efficient, more efficiently run, more energy efficient, the way that it's reconstructed.

Knut: Yes. Speaking of that, like I think that people don't understand the trade offs. The, the example I love to use is, uh, an apple tree farmer. So he has one apple tree, sells the apples. Uh, for, and the profit is enough for him to buy a second apple tree.

So the second year he can sell the double amount,

therefore satisfying the double amount of customers. Third year, he can buy four apple trees, fourth year, eight apple trees and so [00:22:00] on. So what you're missing out on, if you're taxing him 50 percent per year

in inflation

and taxes, is that he never gets to the second tree.

So you're missing

the second order effects. You're missing the exponential growth that could have been there.

So I think

the resource misallocation that Fiat, uh, mixes into the system

is,

it's so underrated how much damage it's actually doing

just because of this

loss of this exponential effects that could have been there.

Preston: So if you pull it, if you, if you pull the thread really hard and you say, Hey, so Bitcoin's got a lot of whales in it today, and let's say they, they don't distribute these coins and whatnot. And this, this deflationary rate, and I'm not saying this is, this is what would happen longterm. I'm just, I guess, throwing it out as a thought experiment to hear your point of view.

Let's say, uh, let's say that deflationary rate maybe slowly ticks up and picks up steam and actually becomes accelerative [00:23:00] just because coins are being lost. What would you be incentivizing within the economy if the deflationary rate picked up to 10 or 15 percent or whatever, right? It would get really interesting because you would only be working on vital things because everybody would be incentivized to, to kind of sit on their hands, I think,

Number of Transactions Going Down

Knut: Or you get

this effect of people, and this is, this is sort of controversial thing to say among other bitcoiners, but it might actually be a good thing that people start using other things than bitcoin as a medium of exchange, and you have the bitcoin as your store of value, And that is, and you have it as, as capital and that is what enables all the other

Preston: The bartering

Knut: but,

but borrowing and, and just using your reputational capital,

this is

one of the effects I see is like, and it's already happening now,

like I trust

you more than I trust the, a lot of other people

[00:24:00] because I know your history in Bitcoin, I know your history

online. Like, I know that other Bitcoiners are trustworthy,

uh,

and that's your reputational capital is one of these currencies that might be

used instead of your capital. So I see a very weird, like, and and this is a metric I'm trying to wrap around my head if it's actually true or not. And that's, uh, will the total number of transactions In society go down on a Bitcoin standard

because we,

we get rid of consumerism,

like these

micropayments,

uh,

um, you know, like paying a Euro to go to the toilet in the central station or

Preston: yeah, yeah,

Knut: they are very fiaty to me, like just paying for everything and nothing, just, you know, Like, when you had a bet on a gold standard, like you didn't have to pay for your tapas in Spain, they just came when you ordered a drink, like,

I think there

are fewer transactions in a sounder economy.

Preston: Yeah.

Knut: But I don't know, what do you think

Preston: Well, yeah, I, I [00:25:00] don't have a real strong take on it. I think that it's a fun thought experiment, right? But definitely not something we need to be worrying about today.

Knut: I'm not

worried,

I

think it's a good

Preston: Yeah. Maybe, and, and maybe, maybe it's a good thing. I don't really know, but I, I guess it would be, it would be the opposite pole of what we're experiencing with fiat today.

And since what we're experiencing today is just horrific. I don't know if, if, I guess I don't really know what to

think of that.

Knut: everything because this idea of velocity of money,

it

comes from Keynes.

And like

that, that you add value every time a bill is exchanged between two people, then you add that much value to society. But it's

not really

true if the thing is inflationary because the valuable thing is, is miscalculated to a

certain percent. Yeah, the inflation rate is the percentage of miscalculation in the transaction, so

it's

If there's

Preston: Deep in, [00:26:00] yeah, it's deep today. It's deeply inefficient and incentivizes deep consumerism. So the opposite pole of that is.

Preston: Is, yeah, deep efficiency and

Knut: If

you have 10 percent

inflation, that's

10 percent

miscalculation,

so that

you buy 10 percent more shit,

or, like,

plastic stuff out of a container from China that

no one needs,

instead of just doing the sound things and,

well,

will we all be Buddhist monks who are shit rich

Preston: Yeah, that's crave anything, like

FFS94KnutLuke: You

Spending Bitcoin to Escape Fiat

Luke: Well, and actually this is, this is sort of another angle because you mentioned time a little bit, like the, the time that people will save.

And this is another angle right now. And this might be one of these phenomena that actually is only applicable to this, this bull rush time. And in the future after hyperbitcoinization, this might not necessarily be the thing, but people are escaping the fiat system because their stacks go up in value so much that [00:27:00] eventually they can stop doing the fiat thing.

But

then they

have to take the risk. And spend from their stacks until they find some other method of, of, uh, replacing that capital, something like that.

But, but

this is a,

Preston: this

is a, but I think, a lot of them, uh, I think a lot of people, once their stack is big enough, they can say, this is what I really want to work on, because you have to do something, you can't just like sit there, like, at least I can't sit there like a Buddhist monk and I don't, I don't even know what a Buddhist monk does, but, um, um, have my suspicions. that was funny.

Um, I think for a lot of people, they'd say my whole life, this is, this is thing over here is what I've dreamt of doing. And so now they have that opportunity to go educate themself on whatever that specialization is, and then.

They

might be an amateur at it and they might be midlife, right? And that's, and that's fine.

They, they can go do what they [00:28:00] finally want to go do. And then they're going to actually start generating, if they're adding productive value to society, doing that thing, which they most likely will, they'll find a way to do it. They're then going to be able to earn an income and not even have to pull from their stack, I guess.

Right?

Knut: is, this is exactly what's happening, to me personally,

like we bought a new house recently, and there's all these decisions that need to be made, like are we re renovating the kitchen for instance? Ah! I can wait,

Preston: I know. Yes. let's

Knut: just keep the stack, go to these

conferences, do The stuff, like yeah,

yeah, so, so, and even my wife has started to think this way, which, which is something that, like, it took longer for her than for me,

Preston: Yeah.

Knut: but she's thinking in these terms,

and it's beautiful

to see, like, maybe we don't need to, you know,

be, be in this rat

race with the neighbors that we were in, in,

during our Fiat days, like,

why are we

doing this?

Yeah. It's madness. And it's so [00:29:00] liberating because you're just kind of like, Oh yeah, like I don't need a new car. Like. I have a, I have a F 150 of 2017, right? Like, I could easily go out and buy a brand new car. I don't need a new car. I love the truck. It's

This is the

irony, because we will actually be, uh, own nothing and be happy.

Preston: yeah, yeah, yeah,

Knut: from a totally different perspective. It's like that dog in hell, you know, this is fine. And we

Preston: It's very Buddhist.

Knut: yeah,

yeah. Nothing would be But,

but it isn't own nothing and be happy, it's own just, just enough. Oh, it's owe nothing and be happy, and

Preston: There you go. that's the difference.

Knut: You just

change one letter, you will owe nothing and be happy.

Michael Saylor's Strategy

Knut: Well, unless you're doing the, the fun credit stuff to, to get more bitcoin. Oh yeah, yeah, the

Weimar

Republic slash sailor stuff, like it just. Is that probably just best left to Michael or what?

Preston: well, I think, I think people deeply understand, deeply [00:30:00] misunderstand what Michael's doing from, uh, you know, from a financial engineering standpoint, he's probably the most brilliant person on, on the planet with what he's doing. And so people will look at, look at it and it was so funny this last cycle, you have people that are looking at his company as if it's a hedge fund.

And like thinking that, Oh, he's going to be, he's going to be liquidated this and that. And it's like, you don't understand, like, this is a, this is a business. This is an operational business that makes 75 to a hundred million a year. Uh, in fiat terms, obviously, and when you do that, you can, you can do things that are way different than a hedge fund.

In fact, Buffett, okay, going to Warren Buffett, the reason he shut down his hedge fund is because he could not take advantage of the system like he could as a business owner. And that's why he plowed all of his efforts into saving Berkshire, which was, he'll [00:31:00] he'll tell you was one of the biggest mistakes of his life was Berkshire Hathaway, buying Berkshire Hathaway when he bought it, which is a whole nother topic.

But once he, once he was controlling the, his investments as non operational subsidiaries on the balance sheet of Berkshire Hathaway. He was able to take advantage of market behavior as opposed to being a victim of market behavior, which is what you have as in a hedge fund because people will give you money at the exact wrong time.

And then when you're trying to buy stuff at discounted prices, they all want to take the money away from you, which is literally the, it's, uh, it's incongruent with the cycle, right? But when you're a business owner and you can, you're like, Oh, I'm deeply overvalued right now. And the market is giving, is valuing me in excess.

You can take advantage of that because it's all being the non operational subsidiaries sit inside of the public entity. So when you look at Michael, [00:32:00] the thing you would say is, well, like, what's his debt to equity? Like today, what's his debt to equity? I. I don't know what the number is, but I would guess it's like 0.

2. And if you look at the S& P 500, like what's normal for debt to equity on a, and we're talking about leverage ratios, like how levered is he? I would say on average, you're 0. 5, which the average is twice as high as what he is, twice as levered as he is, and twice as dangerous as,

Knut: Like, like like meaning,

uh, the, they have 50% of their, their equity

is, is then in

debt.

Preston: the, the total debt of the company versus the total equity value, the, you know, you take the assets minus the liabilities, you get the equity. So you take that debt load and you compare it to the equity, the re the retainings of the company. And I, I would guess, I don't know, and I should know the number, but, uh, if I'm saying this, but I would guess it's like 0.

2 or something. So 20 percent of the debt versus, you know, his entire [00:33:00] equity load.

Knut: Yeah. So, so on a, in a hyperized world or a, on a hyper, on a Bitcoin standard or whatever term you may choose to use, uh, I guess interest levels will come to their natural, like what they should be, which is probably way higher. Then, then what it is now.

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Hedge Funds in the Bitcoin Future

Knut: the question in here somewhere that's a bit far fetched, but is there such a thing as a hedge fund on a Bitcoin Bitcoin standard?

Preston: I think you'll, I think you'll always have people that are viewed as just being financial geniuses or financial gurus and people just want to, you know, provide capital for them to, to place into the market because they just don't want to be bothered with it. I think you're, I suspect you always have that.

Knut: Aren't those old fiat phenomena though,

that like that, that you can get, uh, yeah, uh, lower interest rates, the bigger your company is and stuff like this. And the more [00:35:00] politically connected you are and ESG scores and whatnot. Like,

isn't that, yeah, that last one for sure.

things or screwing things up and

not giving us

a clear signal?

Preston: I think what I'm, what I'm confident in saying is I think the trend is going to drastically shift to everybody doesn't have, I'm a, I've got my hedge fund, I've got this or whatever, right? I think that that pole is, is swinging as hard as it can right now.

And it's about to start swinging the opposite direction. And I think the trend is going to be way less of what you see today. But as far as you like nominally, where does that end up? I don't know. But, um, I would say, I think they'll, they'll always be some people that are viewed as, as being just really great capital allocators and people are going to want to give them money to, to place it in the market, but at what level, I don't know.

Knut: I love this, uh, I think it was Seyfedine who framed like what a government bond is as, uh, a promise from the government to steal even more from your [00:36:00] children than they stole from you, that they,

and, and it's well phrased.

exchange that for the privilege to print money even faster and devaluate your currency so it would be even harder for your children to pay it back.

And a

government bond is viewed as like the most risk free thing in the world,

when it's

really just a, a guarantee

that there

will be more risk in the future.

And Bitcoin

is like the opposite of that. It's, it's the actual risk free thing that, that ensures that there will be a free market system in the future,

as

a counterpoint to these government things,

like,

Bitcoin and the Future of Debt

Knut: So, uh, and I think this, this is the shift we're seeing the next 10 years is just from

viewing

Bitcoin as the risky asset to viewing it as the least risky asset.

So

what do you think?

Preston: I agree with you. I think, uh, debt loads, um, I think are going to be, uh, you know, if I was going to guess a number, 10 percent of what you [00:37:00] see today in debt around the world, it might be 10 or 5 percent of that in, in a, um, Bitcoinized world, um, where I think that would still serve a purpose is mostly on, uh, on the venture capital side, uh, or startups.

So if you have a business that is just, you, you invented something, you, you created something that the market is just going wild over, it's going global, whatever it is, right. That, that revenue that's just exploding up and they're, they're becoming profitable, a business like that does not have to debase their shares and create more equity and the market is like, I want to own that, right?

And so what they might do is convertible debt. That's where the purpose of debt would still be used. It would be. Okay. Uh, because as the, as the V or as the entrepreneur of that business that you created, that's just going parabolic, you would, you would go to the market and you'd be [00:38:00] like, I need some money because I need money to scale the production of this thing or just to scale the servers or whatever it might be.

And, um, but I don't want to debase my common stock and I know I'm profitable, but these, the profits that I've retained so far won't put my production line on. So I have to borrow some money to do that, borrow some Bitcoin. So that person would go out into the market. They'd say, this is a debt offering. I don't want to debase my shares.

It may be convertible with this, if certain criteria are met, which would benefit you to lend me this. If, if I'm wrong, but if I'm not, then it's just, I'm going to settle the debt and pay you back. I got my production stood up. And so that it's going to be like a combination of. Option to convert into the common stock, but it's a debt instrument because the, in that scenario that I'm describing, the entrepreneur has the upper hand because of the growth rate and the projections, right?

And so because they have that upper hand, they would, they would be [00:39:00] incentivized to make it a debt issuance with, uh, you know, the optionality to convert it. But that's, that's one of the only rare scenarios that I can see. Why you would want to use debt in this future world, the, the treasury bond, like all that kind of stuff, like that really melts away and that gets like way lower than, I mean, today the numbers are so massive and just unimaginable, like all that gets just, it becomes toast.

MicroStrategy

Knut: is that in relation to what MicroStrategy is doing? Because by accumulating, taking on more debt and accumulating more bitcoin, they are increasing the number of sats per share, Yeah,

Preston: well, so he was doing this early on. He was doing convertible debt issuance. I think his first one was at 75 bips. He did the next one, I think at 25. And then, what he started doing is just issuing common stock and then [00:40:00] converting it into Bitcoin because there was this, there was this shareholder premium above his treasury value in a per share basis.

And that, that adds more Bitcoin to the balance sheet. So a lot of the, the moves that you've seen recently where he's like, I bought another 10, 000 or I bought another, however many Bitcoin. He's not issuing debt with this. And I think there's people he did initially. And I think people are confusing what he was doing initially with what he's been doing more recently.

and if, if I was going to say something else that I think is somewhat mind blowing because he did these convertible debt issuances early on, it created this, Enormous amount of liquidity because there was all these derivatives that were stood up on, which is out of his control. This is just wall street being wall street.

Preston: They stood up all these derivatives over those debt instruments, which made the volume of shares for micro strategy. The very deeply traded, like the volume on micro strategy. If you look it up [00:41:00] is Like absurdly high compared to any other stock out in the market. Like I would argue maybe is, and this might sound crazy and people need to look up the numbers.

I would say is as high as maybe like Exxon Mobil or like large companies, like, like really like top of the S& P companies, he has the same volume of trade. On a daily basis is some of the, some of these companies. And when you look at his market cap size, which I think they're like 10 billion or something, which is really low compared to the companies that he's matching their trading volume, that deep liquidity on micro strategy is enhancing his ability to capture the spread between what the market's value and his common stock at versus the, uh, the, the treasury value of the Bitcoin.

He can put the, he. In short, he can put that trade on even harder because he has so much volume and so much [00:42:00] liquidity on his common stock, which was a function of, now I don't know if this speaks to his genius of financial, financial genius of Michael Saylor, right? I don't know that his common stock, like whether he did that on purpose or whether it was by accident, but holy hell, it's, it's crazy.

It's crazy.

Knut: Yeah, and like, the thing about this is, the, with the price action these days, I mean, literally when we're just coming into, into Madeira here, we're, we're seeing one of the craziest It pumps pre halving ever. I think in nominal terms, it's, it's the highest, uh, basically. And MicroStrategy riding this all the way up, right? Like one day MicroStrategy is going to be the most valuable company on the planet, just from being the largest holder of Bitcoin

Luke: on the planet, basically. Right. And,

and then, and then, and then the wonder is like, what, what are they going to do with that? And I think, I think Michael has talked about a few things that he, that he wants to [00:43:00] do initiatives and things like that.

But

Luke: maybe taking this out of the micro strategy realm a little bit though, like the, the dynamics that we're seeing right now, completely different, a supply shock and everything is, is completely riding it up because of these, these ETFs. How are you seeing, uh, maybe the, the short term, the next year or two, the, Uh, the next phase of this

Knut: cycle.

Preston: But on the first point with, uh, micro strategy and what, what he's going to do with the treasury, I don't know what he's going to do with the treasury. I think he would probably tell you that he doesn't know what he's going to do with the treasury. I suspect, But this is, this is one thing that I've just like as an observer of him, he is insanely efficient in the way he thinks, in the way that he allocates capital.

And so whatever businesses on the other side of all of this are still adding productive value, you better believe he's going to come in and snatch it up and purchase it. Holy or non [00:44:00] operationally and stick it on his balance sheet at micro strategy, similar to Berkshire Hathaway, right? He, he has, um, you know, Buffett has 75 businesses or so that are fully owned operational subsidiaries inside of Berkshire Hathaway.

I would imagine that micro strategy is going to be a very similar situation on the other side of. 10 years from now, he will own just gobs of equity, whether it's operationally fully owned or, or, you know, uh, a subsidiary, but, um, non operationally owned. So that's the answer to that, um, because he's just going to perform economic calculation like we were talking about at the beginning of the show.

The Coming Year - ETFs and More

Preston: When I think about the coming year, I think that dude, this is going to get wild. Um, I think, I think the thing that I think the volatility is going to get wild. Um, if, if micro strategy is a, is a, any indicator. Of what's going to happen with these ETFs and what's going to [00:45:00] occur, because they haven't even stood up derivatives on top of these things yet.

And let me tell you, once they do, like, we know how relentless Bitcoin can do for anybody that's trying to speculate on it. When you put derivatives on top of that, and let me tell you, Wall Street is, that is their forte. Is trading quick money, like all that type of stuff, right? They're going to slap derivatives.

It's probably going to take about a year, but they're going to put derivatives on top of this thing. And if, if there's any foul play, holy hell, watch out if you're from wall street and you think you can, you can manipulate this thing, Good luck. You're going to die, but they're going to be, the quick money on wall street is going to look at this thing and they are going to lose their minds over it.

They're going to, they're going to be wanting to play in this space harder than anybody and Bitcoin will welcome them. Come on, come on in. Let's see how, let's see how well you can play, right? [00:46:00] But what that's going to do for the price and the, and the volatility, especially if you're looking at it in terms of today's value, You're going to see swings.

You're going to see candles that you think are unimaginable. And all it's doing is accelerating Bitcoin's ability to find its true value. Right. So it's, it's an accelerative.

Knut: So you are getting at though, that there's going to be some big drops as well as the

Luke: big increases most likely. yeah.

Knut: Yes. So, so I, I remember this, um, when when we were speaking, like the same way we're talking about Omega candles or God candles today, where it's like the definition is like 10 K in a day or something.

And

we had 10 K over two days now, which is like the closest we've got. Yeah. We were talking in the same terms about 100 moves,

like, imagine, or 10 moves even, but since I've been in this, like, imagine if Bitcoin goes up by 100 in one day,

and it was the

same thing at 1,

000, and it's gonna

be the same at [00:47:00] 10, 000, and the same at

100, 000, and the same at

1,

Like, it's

just gonna keep

on think you're joking right now and, and you are not. And I am not those numbers that you're saying are because it's a fractal. It is just a fractal that's playing out until it literally takes over. And, and any number you say in fiat terms literally becomes meaningless.

Preston: Right? That's where this is going. So, buckle up, Wall Street. Uh, play ball. Welcome to the team.

Knut: Have you seen that curve, like, when you see the fractal patterns, there's still like, if you do exponentials, you'll see this, uh, that the curve is like, bending off, like this.

But

there are some people that have the theory that it'll be inverse,

Preston: That's exactly how I think it's going to, the stock to yes, and some of the smartest

Knut: people I know in the space think that, the

stock to former thing.

Because at some point fiat is just meaningless

Knut: and that's where it goes.

Preston: I've always said stock to flow is going to fail to the upside.

Knut: Yeah, exactly.

Preston: It's not going to fail to the downside [00:48:00] and it, and once it starts to run and all trust is locked, cause that, what that is symbolizing is all trust has been lost in fiat

Knut: yeah.

and

we

have to

remember that

these things, we have seen them before.

People told

us we were crazy when we talked about 10 Bitcoin moves to 100 Bitcoin moves and 1, 000 Bitcoin moves. And right now Bitcoin is not any longer at 0.05 million per Bitcoin,

it's at

0.06

Preston: Yeah. Yeah. Yeah. that's the reality of it. everybody's got to participate in this meme. That's the only way to list it. Then somebody was saying, just call them American pesos. Don't say in dollars, just say American pesos.

Knut: Then, and then you have like the other fun terms, uh, the, the, the, the Moose shackle for the, for the Canadian dollar and things like that. Just, I don't

Luke: know, making,

making fun of the fiat currencies is so much

Knut: fun. They're

shit coins.

They're shitcoins. Right now you see the same thing with the dollar versus every other currency.

It looks like bitcoin versus all the cryptos. Like,

all

the others are going down in [00:49:00] terms of the dollar, but the dollar in terms of bitcoin is doing the same fucking thing. It's

just dropping. Yeah.

And

Timing for Hyperbitcoinization

Luke: the question is, is it this cycle necessarily that things are going to go to the upside? That probably is a bit too soon, right? Or

Knut: do we have any wouldn't bet against it, but, uh, Yeah, I don't know. It's the thing that I tell myself is all these other fractals had the same, same speculators that stepped in.

Preston: They don't even understand what they own. They just know that it went up a whole bunch and they're going to try to clog profits away because they haven't matched their intellectual knowledge of what they own with the position size.

And so they sell, and then it creates this reinforcement wave. Like when I think of physical reality, Everything's a wave, right? Everything's moving in a wave. And so like, why would this fractal be any different than the previous ones? Am I, am I assuming that these people actually understand what they own?

That would be my argument for why it wouldn't. Um, with that said, [00:50:00] I'm looking at the inbounds coming from these ETFs and I'm looking at the supply scarcity, and this is really important. I am looking at the people who hold the majority of the coins. They are the ones that are truly determining some of this.

Okay. And, and what I mean by that is people might think, oh, well now we have this many millions of people that are using Bitcoin, right? And each one of those people have a vote and they don't. Okay.

Preston: Think of there's 20, there's going to be 21 million Bitcoin. Okay. Think of each one of those Bitcoin as a vote, okay?

19 million of them have, have, are already out there, okay? Let's just say 15 million of them, or 14 million of them, or whatever the number is, are being held by deeply convicted people that actually [00:51:00] understand what they, what they own. And so, how many votes do you think Michael Saylor has? He has a 193, 000 votes just with MicroStrategy alone.

Okay, he's got one, that, that person with that conviction has 1 percent of the vote of not putting those coins back into the market to, to drive the price. So when you're thinking of like, well, what's going to drive a hyperbitcoinization scenario, it's going to be once a majority of these coins are in people with deep conviction.

And that's, that's not number of participants on the network. It's, it could be just a few people on the network that are controlling a lot of the vote of, of how much gets put back into the market. That's what's going to drive it. So where, where we get to that tipping point, we, we, Hey, we might be there. I don't know.

We could be there this cycle, next cycle. I don't know, but it's. It's coming. It's definitely coming.

Knut: Yeah. So we don't know if we're, uh, in the last cycle or

if it's

a couple of cycles left, [00:52:00] but the, the, the, the way I like to frame the last cycle is when NGU technology converts into NGAB technology, which is number go absolutely bonkers

Preston: hmm. Mm. Yeah. and just

Knut: changes everything.

[00:53:00]

Ordinals and Mining

Knut: one thing I wanted to pick your brain about before, before we wrap this up is, um, This whole thing, um, Schrodinger's JPEGs, like these, these things that you can only own until someone else looks at them.

Uh, the, the

clogging of the, of the chain and

the centralization

of, of, uh, mining pools and how miners are not really miners, but hashers.

And

how ocean mining is coming in and trying to fix this problem.

Like

how [00:54:00] big of a problem do you think these, uh, shitty things are?

Preston: on the, on the mining side of the house, the thing that really excites me is, is somebody is trying to, with Ocean, um, The pools were getting pretty centralized and people that were providing hash rate really didn't know like how much was being mined versus what they were being paid and talk to anybody in mining, they'll, they'll all tell you that, uh, where ocean is, it's, it's, it's so upfront.

What was actually captured, what was actually paid out. It's like all there to see open kimono. You can agree or disagree with Luke on some of the filtering stuff, but I think that that's a distraction from, and I think it's a purpose, just purposely distractive for people to kind of focus on that as opposed to.

It's very clear for me as a person providing hash rate that this is what was actually earned in the pool, and this is what was paid out in the pool. And hopefully, that is something that, uh, the larger [00:55:00] miners can maybe lean into, and, um, even if there's more pools beyond ocean that are trying to implement something similar,

Knut: there are.

Preston: they need to, and I think that that's a good thing.

And as long as we have some doing that, I think that things are fairly healthy. If we had nobody doing it, I would be much more concerned with respect to the, um, people mining or, uh, the, the JPEGs and stuff like that. So, um, I think that you're going to find people that are trying to put data into the blockchain that could be used for productive ways as far as, uh, identity or something like that, maybe.

I think that nothing that I've seen has been built that looks like it's got utility. Like

Knut: It's a big maybe.

Preston: it's a big maybe. I know MicroStrategy has said that they're working on something in that particular area, which I think is really exciting. but let's, let's just look at it from a, [00:56:00] from what most of it is. It is, it is noise.

It's a distraction. It's a rug pull. Um, because what's the product or service? Some, some monkey picture that literally, literally you could have an AI generate and then like it has 40 different hats and then it has 50 different eyes and it's, and then you're, you're selling these things because you handed them out to a bunch of celebrities.

Right? Then it's getting a bunch of noise, and then that celebrity that had it given to them for zero then sells it, it's valuable, right? I'm, I never look at it and say, shame on you, you can't do that. This is a free and open market, you can do whatever the hell you want. If we're real Bitcoiners, we want a free and open market to exist, but that doesn't mean that I can personally, like, I'm looking at you and I'm saying you're a freaking scammer and, uh, and I, I think that you [00:57:00] are parasitic to society.

Right? Like I can have that opinion about you, but I, but I can also hold the same opinion that I think you should have the right to do whatever you want. Right? That doesn't mean I like it.

Knut: it's the, um, paraphrasing that Giacomo did of, uh, uh, this Voltaire thing. Like, I don't care what you pay, what, but I will fight to the death for your right to pay it.

Yeah.

Luke: Now there is another angle to this though, is that

some of the, the ways that the data is being inscribed are, are using what can pretty reasonably be termed as bugs, uh, things that are in the protocol that they didn't foresee. That someone will be able to figure out how to, for example, put data into the UTXO set in a way that increases the resources needed to run a node. Costlier to run a node.

Costlier,

exactly. And the other dynamic that goes along with it is something like, if there wasn't this data being put into the chain, some percentage of each block.

I mean, you can look at this right now on mempool, they've got a [00:58:00] filter that shows Which transactions have data.

Preston: Yes. you can, you

Luke: can just see that it's, it's, it's sometimes it's 10 percent of a block. Sometimes it's 90 percent of the block. Sometimes you get marathon that puts an entire block and gives it to, uh, uh, a coin project, uh, to be nice. and so in those cases, that is block space that isn't able to go to this adoption wave. So I wonder, is there an element of that that's actually suppressing the ability for. This thing to actually do what we're hoping it will, which is

Knut: get adoption.

Preston: So when I'm looking at the size of each block that comes through every 10 minutes, it's about two megabytes, right? Um, that's, that is not going to, um, That's not going to inhibit my ability to run a node. And I think that you're still going to have a ton of people, especially as this price continues to run and you're getting more people into it, more people are going to run nodes.

I find [00:59:00] it amazing these recent Satoshi release where he was thinking it'd be maybe a hundred, wasn't it a hundred thousand nodes? Like the, he said that like at the beginning was mind blowing to me that, that he would have that much foresight because That looks like maybe where the number would be, right?

Um, so the resource constraining argument, I think that, uh, I think it's an interesting argument for somebody to say, but it's not something that concerns me. Um, I look, I would look at it like this. let's say a person could just figure out a hack to physical reality and like they could just fly around instead of walking, but they, they wouldn't tell you like what it is that they figured out to enable themselves to do this.

Everybody might look at that person and just be like, That's wrong. You got to stop flying around. You got to walk on the ground. Like all of us, he's like, I'm just, I'm just obeying the rules of the physical universe. I figured out something that you haven't figured out and I'm not going to tell you [01:00:00] what it is, but I'm, I'm going to do it.

Is that person wrong for being able to just fly around and the rest of us have to walk? My answer is, No, they're just, they're harnessing their environment better than I can do it. And I'm, and, and that's an example where the person is flying, right? And, and what we're talking about is something that is detriment to the.

Knut: No, we're, we're talking about someone taking advantage

of a floor. Yeah.

Preston: so let's say that person is flying around and because they're able to fly around, they're making life worse for everybody else, right? By some, you know, mechanic. And so you almost have a situation that we're dealing with is they are, they are, they are obeying the rules. That all of us have agreed to.

Okay. Just like the person who's flying around in physical reality and we can't understand why or how or what they're doing. And so where I go is what lever do you [01:01:00] actually control? If you don't like that, so if there was a button that we could, that we could push that would stop that person from flying around and harming everybody, should we collectively push that button and more importantly, can we push that button is the

Knut: Yeah.

Preston: And I just don't know that I don't know that we can get consensus. And here's, here's another little thought experiment on that, that kind of, I think, plays to what we're talking about. If we push that button, do we destroy or maybe break this, the, this, System that we have, because we're trying to stop this person that's flying around.

Knut: Okay. So, so this is the analogy here. If you look at the mixer board that Luke, uh, Luke has over here, there, there are mute buttons on

it, but we could

also use the lever and just try to lower the amount of noise.

And

I think that is way preferable to pressing the mute button, which is

[01:02:00] the button.

So, so the way, the way we see it and the ways we see what we. can do to help this thing is to just bully those people who call themselves miners when they're actually just hash salesmen.

Preston: Yeah.

Knut: because, are you a miner? Well, mining is not just connecting to a pool and selling your hash rate.

Mining

requires you to actually know what kind of a block you're mining.

Preston: You're in, in that scenario, you're controlling a lever that's going to impact some, but not the whole thing.

Knut: No, but it's, it's, it's the extent to which we can help.

Preston: Oh, I agree with that. And so the last thing I'm trying to say is I want more of that type of activity. Cause it's, that's not what I want. I guess I just look at, I look at every situation as it's like, what do I actually control? To be able to holistically solve that problem. And I don't think that you, I don't know that you necessarily can without everybody coming to some type of consensus that [01:03:00] this is truly an attack and it's, and it's actually going to be effective.

The attack is going to be effective, so we've got to do something. And I would say right now, is it an attack? Maybe, um, do I, do I like what they're doing? Absolutely not. but, uh, when I'm looking at it, I'm saying, I don't think that this is going to destroy Bitcoin or slow down Bitcoin, but it's something that needs to be discussed that needs, it needs to be, people need to think about what could we come to a consensus on.

I don't know. I don't have the solution. That's for dang sure. Uh, but hopefully smart engineers and people, we continue to talk about it. I think it needs to be discussed. Unfortunately, I don't have any creative solutions, right? So I'm kind of useless in the, in the whole thing.

Knut: No, just,

just the discussion. I guess, is yeah.

Luke: No, and I think part of it is just getting your, your take on the situation. So

Yeah.

nice to hear your views. And, and I think, uh, I wasn't totally clear in, in my original question. It's, it's, it's less about the resource constraints. It's [01:04:00] that it creates a price floor basically by, by having this competition, because the way some of these things work is they, they do these open mints where everyone has to compete to get into the next block so that they get their part of their token or their JPEG or something.

And so it. First of all, in the short term, it creates this massive fee spiking, right?

And if

you have a person wanting to randomly just make a Bitcoin transaction for any reason at that time, they might have to pay way more to get into the next

block or the next

hour's worth of blocks, something like that.

Right.

Preston: which is frustrating because we want people that don't have a real high net worth to be able to be operating. I get it.

Luke: Well, and, and will big institutions actually be happy paying some higher percentage just because of the dynamics on the

chain? I don't know.

And, and, and now there's nothing to say that the competition isn't, isn't the, the thing, right?

 But it is one of those cases where by enabling these dynamics that [01:05:00] the fees, that's the

real issue

I'm looking at.

So I don't know if you have any further thoughts, but I do like that, uh, maybe you've, uh, your approach at the moment, it sounds like it's something like nothing we can really do, but we will, uh, see all this other stuff happening as the money keeps flowing in,

right? Is that the conversation around it. I, I just don't have solutions to offer. I'm, I'm literally useless in that department. So I've got to state that up front. Um, the second thing that I would just say is, um, I, I I'm very cautious and more concerned of doing a hasty fix. Then to let's sit here and if it takes us four years to figure it out or, you know, whatever, then it takes us that amount of time to figure it out.

Preston: If, if at all, um, I think if we didn't even address it, I think that Bitcoin is going to continue to do some miraculous things. Am I saying that we just harden right here and never do anything? I'm not saying that [01:06:00] either, right? I'm, I'm just not the technical expert that can, that can say, here's, here's what I think the best path is to solve this, you know, other, other leaders in the space, I'm sure have some, some really thoughtful takes on that.

Yeah.

Knut: I mean, we're not technical experts by any means either, but we're, um, what this reminds me of is like the, uh, the fork wars in 2017.

it does. because it's the same

dynamic. You

have like this long discussion and Bitcoin does this. It takes. You know, no, the rules without the rulers means it takes a long time for people to agree

on something.

But when we finally do agree,

then

we define what a good idea is by what happened in Bitcoin,

right? If you

need total consensus, that means that Bitcoin can only get better.

It cannot

get worse by the very definition of how we define better.

Knut: So, so I'm not worried in that sense, like not in the long run. I just

think it's

important we take this fight and we talk [01:07:00] about this stuff.

Forking Bitcoin

Preston: one of the things in, in very early when I was buying it 2015, 2016 timeframe, I was really deathly scared of a fork. And then I realized in 2017, there's absolutely nothing to be scared of when it comes to a fork and the, the reason why, or at least for me in, in that scenario was I got both coins.

Knut: yeah.

Preston: The fork occurred, whatever position size you have prior to the, the, the fork happening, fork happens, you get both coins and let's just say, let's say you were split 50 50 in your brain and you're like, I just don't know which one's going to be the one that becomes dominant. Right. Well then just sit there and don't do anything.

And one's going to peter off and like go to nothing, and the other one's going to, and you're going to be right where you were before the fork.

Knut: Yeah, and this

is So,

so good, because like, the narratives were the same, like, the wrong side to be on in any of these wars is [01:08:00] the side that wants Bitcoin to be more than just sound money,

like, and that's what the Bitcoin Cash people wanted back then, and that's what Like the, whatever, JPEG people, it's wrong to call them that, they're worse than that, but, uh, so, but still it's the same dynamic, and with, I remember vividly where I was when this fork happened, I had the two coins, I had to figure out Okay, in order to actually sell one for the other, I need to hold my own keys.

And

That's the stage

I

was at, like, how do

you really do

this? And so,

in doing that, I wrote an article about how to take control of your own keys.

Just

to make it easy for people to do that, because it's slightly complicated.

And that's the first article of mine that sort of

took off.

So,

I

did sell my Bitcoin Cash at, I think, 0.

2 Bitcoin per

So,

really, the first

day or something.[01:09:00]

And, and I got the article that took off and

like,

so it was a very good day. I told my wife, you have to leave me alone now for a couple of hours. And I did all this stuff and yeah, it was good.

Preston: Yeah. Yeah. The, the bigger blocks never, never made any sense to me. So yeah. Yeah.

Knut: At least we're not in a, having that discussion exactly again, but hey, maybe to, to just, uh, yeah, wrap this up. Cause it's already been a good, a good hour here.

Bitcoin Atlantis and Madeira

Luke: Uh, any last thoughts and feelings about this incredible conference and, uh,

everything awesome

that's going on right now?

Preston: If you can come here, if you have the financial means and the time to get away and come to this conference, this was, this was amazing. One of my favorite conferences I've ever been to. Um, Madeira is very, I mean, from a Bitcoin standpoint, I think this place is going to attract a lot of Bitcoiners to this island and, uh, for good reason.

But. Yeah, huge shout out to the people that organized this because they did a [01:10:00] tremendous job with it. Yeah,

Wrapping Up

Knut: Yeah. Preston, this has been a wonderful

Preston: thank you, Thank you so much. Finally, long overdue.

Knut: and enjoy the rest of the conference. Enjoy Madeira. Uh, where can we find you online?

Preston: Uh, I'm active on Twitter or X or whatever you want to call it these days. Um, I'm active on Nostr. Primal. I use Primal all the time. Yeah. And then I have a show. If you go on the podcast and type in, we study billionaires, it needs to be, uh, Satoshi denominated in Satoshi is obviously we're not talking about dollars anymore, but, uh, Satoshi billionaires, uh, 10, 10 Bitcoin.

You're there.

Luke: Preston, thank you so

much for joining

1. This has been the Freedom Footprint Show. Don't forget to like, subscribe, and brush your teeth. Thank you again, Preston.

Preston: Thank you guys.

[01:11:00]