On decentralization, geo-politics, and power
Vijay Boyapati was born and raised in Australia and moved to the United States to do a PhD in Computer Science. He never started the PhD, but took a job offer instead and ended up at a small startup called Google. After leaving the much bigger Google, in 2007, Vijay spent a year campaigning in the 2008 Presidential election, helping to raise millions of dollars for Ron Paul.
After becoming disillusioned by the political process, Vijay decided to continue to seek change through technology. Discovering Bitcoin in 2011, Vijay quickly went down the Bitcoin rabbit hole. With a background in Austrian economics he spent years thinking about the economic framework within which Bitcoin's value proposition could be understood. His thinking on the economics of Bitcoin culminated in an article, and now book called the Bullish Case for Bitcoin which is one of the most read articles on Bitcoin after Satoshi Nakamoto's Whitepaper and it has been translated into 20 different languages. The article is often cited as the most useful resource to give to newcomers who are attempting to understand Bitcoin.
Vijay Boyapati
[TRANSCRIPT IS AUTO-GENERATED]
[00:00:00] Alex: Vijay Boyapati was born and raised in Australia and moved to the United States to do a PhD in computer science. He never started the PhD, but took a job offer instead and ended up at a small startup called Google. After leaving the much bigger Google in 2007, Vijay spent a year campaigning in the 2008 presidential election helping to raise millions of dollars for Ron Paul.
After becoming disillusioned by the political process, Vijay decided to continue to seek change through technology. Discovering Bitcoin in 2011, Vijay quickly went down the Bitcoin rabbit hole. With a background in Austrian economics, he spent years thinking about the economic framework within which Bitcoin's value proposition could be understood.
His thinking on the economics of Bitcoin culminated in an article, and now a book, called the bullish case for Bitcoin, which is one of the most read articles on Bitcoin after Satoshi Nakamoto's whitepaper and has been translated into 20 different languages. The article is often cited as the most useful resource to give to newcomers who are attempting to understand Bitcoin.
Today, we talked about decentralization, geopolitics, and power.
[00:01:03] Alex: By the way, Bitcoin hit an all time high for the first time in a while today. So it's a cool day to get to chat.
It's nice that it worked out like this.
[00:01:10] Vijay: Yeah, it's an exciting day for sure. You know, all eyes are on Bitcoin right now. I think, you know that whenever this is something I've written about. I wrote about in my book is that when you get an all time high in Bitcoin after prolonged bear market you just get this frenzy of media interest because the way the media works is they're looking for significant events, you know, whether someone's dying or some geopolitical event to whatever it is, and they have.
Often they have stories written prior to the event happening so they can just sort of get the story out immediately. So what you have is that a lot of people are paying attention as Bitcoin gets to the all-time high. And then the media sort of floods the population with this information. So it's like this double sort of psychological hit to a popular population.
Like, wow, this thing is going up, just made an all time high. Maybe I should get interested. And then everyone in the media is writing about it as well, which reinforces that as well. And so it tends to cause this feeding frenzy. So it's definitely an interesting day to, to be looking at because
[00:02:22] Alex: totally.
So Vijay I think it, it makes the most sense to start with some history on you. You found yourself writing a book on Bitcoin with endorsements, from Michael Saylor and Jack Dorsey, like bit of a weird path. What's the rundown. How did it all come about?
[00:02:38] Vijay: Yeah. So I'm a computer scientist by trade. And I went to the Australian national university in Australia and did my bachelor of science about 21 years ago, finished my bachelor of science. With a major in computer science and a minor in mathematics. And I came to the U S to do a PhD in computer science. But I got a job offer and I eventually, I ended up at a startup called Google.
It was, it was a startup at the time Mo much, much smaller than it is today. So I never even ended up starting my PhD because that path, that career path. Ended up seeming more attractive. And I, I ended up doing a lot of the things you do in a page is to got to publish papers at conferences.
And I got to build software as well, which is something I've always loved doing since I learned how to program, when I think I was eight or nine years old. So I worked at Google for. You know, five years or so. And that's when I got exposed to economics, actually a particular school of economics called Austrian economics.
And it's interesting, you know, most people don't think about this, but economics isn't really like other fields of science. It's not like physics or chemistry or biology, where there are different schools of physics there isn't like a Chicago school and physics and then Austrian school of physics. But that the Austrian school of economics really puts an emphasis on understanding economic phenomenon based on the actions of the individual and then building economic models based on the actions of the individual.
And then some fantastic economists some of them Nobel prize winners, like Friedrich Hayak who are Austrian economists. And so I got into them when I was at Google. I had met a bunch of people at Google who were. Libertarians. And who exposed me to this stuff in the early mid two thousands. And I just went down the rabbit hole.
I was so fascinated by this because. This is a tool for understanding the world and as a student of economics yourself, you know, I'm sure you recognize that it's a powerful tool for understanding how markets work, how, you know, nations work, our trade works. So it's a, it's a fantastic subject, but it's also a subject that's very I'd say politically captured in a sense, because it has.
Broad implications for policy for government policy, but there's a strong tendency for colonists to be drawn to saying things that are friendly to the government. And so you get this sort of branching off of different schools of thought in economics that Keynesian school it's very friendly to.
Governments says that, you know, when the. When there's a crisis, the government is what we need. The government needs to step in and provide fiscal stimulus. The Chicago schools, you know, similar almost, you know what, even though it's thought of as a free market school of economics, they have a sort of similar thing with monetary policy, but in case of.
You know, monetary crises such as the great depression. When you have a collapsing, the money supply in the United States, the federal reserve should step in and protect the money supply and try and keep the money supply steady rather than collapsing. And the Austrian school essentially says you need to let the market work.
These interventions have unintended consequences and unintended consequences often. Then the thing that's trying to be fixed. So yeah, that's, you know, kind of, long-winded way of giving you my background and how I got interested in economics. And I spent several years trying to understand economics and doing a lot of self study, published a couple papers And you know, I, I left Google and I went to campaign for Ron Paul in 2008 election.
And it didn't work out and it kind of, you know, made me feel well dejected about the political process. And I, and I felt that way for a few years, but then 2011 came around and I, I found out about Bitcoin and. I thought it was absolutely fascinating. I recognized it from my study of economics.
Almost immediately as a monetary phenomenon. This is a monetary good. And the idea Austrian economics help understand a monetary phenomenal work. I thought applied to Bitcoin. And so it's become this passionate of mine to try and figure out Bitcoin, like, what is this new thing? Why is it valuable? What is an economic framework for thinking about why it's about.
Not only that it is valuable, but that its value is increasing very, very rapidly. I mean, Bitcoin is now. A trillion dollar asset, which is astounding. If this is something that didn't exist essentially a decade ago, and now it's a trillion dollar asset. So how has, how was that possible? And so I've spent the last decade thinking about that.
And I ended up writing a an article in 2018 to provide an economic framework for how to understand Bitcoin and more recently. This year I expanded and updated the article and turned it into a book.
[00:07:50] Alex: Awesome. So I don't want this to become a Bitcoin 101 talk. Cause I know you've done a lot of those, but I'm still of the mindset that it helps to start simply. So why does decentralization matter in the first place? Like when it comes to debasement and lowering people's time horizons, like is solving the Byzantine General's problem, that big of a deal.
[00:08:11] Vijay: Yeah, it's, it's a huge deal. It's it's it is actually a fundamental breakthrough in computer science. It allows something that has never been possible in the history of the world, which is the transfer of value from one person to another person anywhere else. As easily as sending an email without needing anyone's permission, you don't need the permission of a bank.
You don't need the permission of the government that has profound implications for a world trade for how people save all sorts of economic issues, because money is really the foundation for all trades and savings. So if you have. Big innovation in that base layer of any economy. It's very, very important change.
So that's kind of the significance of it. So you mentioned decentralization.
That's the point that I wanted to get to. The reason decentralization is important is that. No one controls Bitcoin. And the fact that no one controls it and it has this property of de-centralization is what gives credibility to its monetary policy. If it were the case that there was some entity that had significant amount of control over Bitcoin, then your trust in the monetary policy would come down to your trust in that entity.
And, you know, the federal reserve waxed to say they want to control inflation and keeping it, keeping it at a certain level, but you really have to trust them. And Satoshi Nakamoto talked about this is the problem with the current status quo financial system is that it relies on trust, trust in these institutions that have really failed us over and over again.
Now the institutions like the federal reserve in the United States. They're failures. Haven't been so gargantuan that the district. You know, the country, like in countries where they've had central banks, which caused hyperinflations, they're literally destroying the entire country. When you have a currency that hyperinflated, you're essentially going back to a barter economy, which is a very primitive state for any economy to be in the federal reserve.
Hasn't done anything that catastrophic yet, but it certainly will lead to some major, major failures. In our economy of the last 20 years, the financial crisis you know, some people like to blame it on banks and stuff, but ultimately the financial crisis was caused by the federal reserve, holding interest rates too low for a prolonged period of time and spring.
This speculative fervor in the housing. By giving people a very, very strong incentive to gamble on houses you know, back in the early two thousands, mid two thousands, you can buy a half million or million dollar house on minimum wage. And why could you do that? It's because the federal reserve was pumping this economic stimulus into the economy, and people saw that houses were a good way to bet on that and it just fed on itself and it got crazier and crazier.
Until it popped as all bubbles do. When they're, when they're built on credit and easier easy money and credit provided by a central bank. So yeah, I, you know, I think that's the problem with our system. It's built on trust and big Bitcoin's decentralization is providing an alternative system, which you don't need to trust.
[00:11:27] Alex: You know, I think most would agree that Bitcoin. Crypto in general, really that, but Queen's biggest existential threat is regulation. I think a point that Albert Wenger, I think he's a venture capitalist brought up when I spoke with him last week, was that people drawing comparisons to the internet in the late nineties, probably isn't fair regulatorily because you know, the internet was very much welcomed by legislators as well.
Bitcoin poses, more of an existential threat. So I'm curious, how do you think that's going to pan out?
[00:11:57] Vijay: Yeah, I think that's a good point. I wouldn't say it's completely true. What you're saying that the regulators were completely friendly towards the internet. Certainly there was a big battle in the early nineties around cryptography.
It used to be for cryptography, used to be thought of as sort of a military grade technology and, and exporting cryptography. Was this almost considered treason and cryptography is really the foundation for the modern internet. You know, when, when you do, when you get charged your credit card, it's going to.
Cryptographically encrypted channel so that no one can see what's happening. And there was a big free speech battle in the, in the early nineties where folks were trying to say that, look, these cryptographic functions is just computer programs. And like, I can print out the computer program.
They're not that complicated and print out on a t-shirt that's a free speech issue. You saying I can't print these letters on my t-shirt and by printing the letters on the t-shirt you're announcing, Hey here. Function, which lets you encrypt information and keep it secret from anyone including governments.
So it became a free speech issue that ultimately the folks who were arguing that aside one so that's the part that I would disagree with that it was entirely regulatorily welcomed by Congress. Now I think it is, it is correct in the sense that. Money is something that governments really, really want to control.
The transfer of value is something that governments always wanted to keep it very tight control. And so big Bitcoin up ending the monetary system is getting a lot of people. Concerned that the current concern from regulators is more along the lines of consumer protection. As they call it, they want to protect the consumer from, you know, products that might lose the money or the volatility or whatever.
But ultimately the concern of regulators is going to be that the financial system is going to be upended by something new that they don't control. I don't think the establishment has kind of fully awoken to this threat. But at, at a certain point when Bitcoin's price gets to say. 500,000 or a million dollars per Bitcoin, then you have so much of the world's savings held in Bitcoin that central banks will lose control of monetary policy because monetary policy is essentially a tool for manipulating the pool of savings in a kind of.
When they lower interest rates, what they're doing is saying you don't want to keep your savings in cash because you're losing value on that cash. So you, they're trying to force you to go out and spend and invest, or they're punishing you for savings. But if you have this alternative system where you can keep your savings in a way that can't be manipulated by the federal rules of.
They lose the power of monetary policy to manipulate the economy. And I think that is going to be in the future. The big, big concern for regulators. The thing is, do they have the power to stop? That's the question. This is a decentralized system. It's almost like saying if they didn't like something that happened on the internet, could they shut the internet down?
Probably not because the internet has become so embedded into society. And so dependent all by so many people. That there'll be such a huge political backlash, at least in democratic nations. If you're an authoritarian country like China, maybe you could bend something like Bitcoin, at least temporarily.
But in the United States, it seems very unlikely to me because at some point the number of people who own Bitcoin is so significant, the bank Bitcoin is kind of like banning 401ks or retirement funds. If you tried to ban 401k program, You know, riots on the streets, you'd have a revolution. So it's just, it's not a political.
And eventually you have enough people who own Bitcoin, that the people in Congress become friendly towards just because their constituents are. And we're already seeing this. We're seeing Congress congressmen. We even have a seven and now it's very openly probate coin and she advocates for friendly regulation to be called.
I think over the next four years, you're gonna see a major, major shift as, as The majority of the population in the U S has exposure to Bitcoin or has some significant amount of savings in Bitcoin.
[00:16:20] Alex: Okay. So taking another step back now, fast forwarding to maybe a reality where the largest nation states have Bitcoin on their balance sheet.
What does that mean? Geopolitically like the U S dollars have the luxury of being the world's reserve currency for a while now. Don't they have the most to lose by adopting.
[00:16:37] Vijay: Absolutely right. Yeah. The us has the world's reserve currency, the dollar and Charles de Gaulle. The former president of France called the still exorbitant privilege that the us had and he called it an exorbitant privilege because the us was able to export the inflationary policies of central bank around the world.
And I had the privilege of be able to create money out of thin air. And then. Debased money in trade with other countries. So it was something that he saw and was really upset about. And at the time the us was on a kind of pseudo gold standard. And what France did is I said, look, these dollars we have that you've given us.
We don't believe. Really backed by enough gold to give us our callback. And that that's the point at which the us had to get off the gold standard because people no longer believed in the U S dollar sorry, not people, but nation states stopped believing in the U S dollar being backed by gold. What it's going to mean?
I think ultimately is that nations are going to have to I act on a level playing field with each other. The us is not going to be in this kind of privileged position anymore. Where has the reserve currency? And it can use that position. To intimidate other countries. When the us has a problem with the country, it uses its financial power.
And the fact that like it has a reserve currency, it provides the, the financial rails for the, the world financial system to intimidate countries. Like if Iran or Venezuela or the completely cut off from the international. Financial system because the us doesn't like them. Ultimately the U S is going to lose that power for better or worse, you know, you know, there may be some benefits to that.
But another thing that I think is really important is that historically central banks were created to fund a warfare. The first central banks were created to fund the British government's war with France. And when you have a monetary base, that's not controlled by government. It's much, much harder to fund warfare.
And this isn't actually an issue that I'm pretty passionate about because being against the U S intervention in other countries is something I think. I think it's an American value. It's sort of a value that goes back to the founding fathers, having a monetary system where the government can't inflate the money supply to fund these foreign adventures.
As the founders would have said, it's going to pull back on governments. So what it means is that the funding mechanism for governments is going to have to. From inflation, where they create money out of thin air to taxation and, you know, whatever you think about the role of the government. I think taxation is a much more honest system of funding than inflation because governments have to go into people's pockets and truly take the money out and people know how much is being taken out.
And they have to justify to the population we're taking this much money out because we want to fund these programs. Do you want us to fund these programs? Yes or no. And yet you sort of see what's happening with inflation. Most people don't understand that they don't see that it's happening. They just see prices rising and they don't connect it to the fact that the federal reserve has created trillions of dollars.
So I think one of the great consequences of moving to a Bitcoin standard what, which is not controlled by central banks, is it government to get, have to move to a means of funding? That's much more honest than it is today.
[00:20:14] Alex: So what's your like, just to sort of wrap up a bit more high-level. On your take on your centralized power. So, you know, a big tech, for instance, you know, hardcore Bitcoiners, Bitcoin, Maxis, whatever you want to call them, they tend to fall into more libertarian or anarchies camps ideologically.
So I'm wondering where you lie on that spectrum. When it comes to what I'd say is the biggest concentration of power today.
[00:20:40] Vijay: Yeah. So I, I definitely identify as a libertarian, but I think the point you're making is a really great one The sort of boiler plate libertarian response to. The actions of companies like Facebook and Google is like, oh, they're private companies.
They should be able to do whatever they want. I actually kind of disagree with that. I think these companies have gotten such a massive concentration of power in their hands, and they're stepping into the realm of politics. They are regulating speech. They are having a profound impact on free speech in society.
When they get to decide what. Viewpoints allowable on their platform and they've become the de facto platform in our now digital world for controlling. You know, the distribution of information, whether you like it or not, they have a monopolies essential monopolies on the distribution of information, Like no one's going to come along and, you know, create Alex book or something like that, which is going to supersede Facebook or the Alex search engine.
That's just not, not going to happen. They have such powerful positions. And then making political decisions for entire populations. And what I think is really troubling is they're exporting the values of a very small part of the country, Silicon valley, to the entire world. They're saying our values need to be your values.
And I think that's just wrong. I think that's really unhealthy. I think it's, it's ironically completely against multiculturalism because it's, it's creating a monoculture In the online world where, you know, you say what Facebook thinks is okay, or what Google thinks is, okay. Otherwise you're deplatformed and your voice is silenced and your ability to explain to other people why your point of view is important is completely removed.
So I. I am deeply concerned about these companies. I worked at Google for a long time, but I'm deeply concerned about the power that it's gotten itself. You know, someone with very strong, libertarian sympathies. I hesitate to say this has got to be fixed or regulated by the government, but it's something that.
Overall, we need to think about, is there a way to provide a decentralized solution with technology? It would disrupt these companies or is it regulation that needs to come in and say, you guys should not have the power to decide who gets to say something who doesn't that's that's a political power and you should not have it.
So it's a very difficult issue. And I think the boiler plate libertarian answer is a little bit naive in this area. Awesome
[00:23:24] Alex: VJ. I think that's the the time we got, I appreciate you doing this. This has been awesome.
[00:23:30] Vijay: Yeah, of course. That's an awesome talking Alex, and keep up the great work.
[00:23:34] Alex: Thank you so much.