“A Tale of Two Systems” – BTC Prague 2025 Keynote

My goal today is to explain Bitcoin in a more clear, straightforward, and easy to understand way than it has ever been explained before. Hopefully, you can forward this presentation to people you know who need to understand Bitcoin for the very first time. All right. Why do we use money at all? We use money because it makes it easier to trade with each other. It is hard to trade eggs for a cow. It is hard to trade a cow for a house. It is hard to trade a house for eggs. But we can use bit uh money to sit in the middle. It makes it easier to trade with each other. But money is also a system. For example, the US dollar is money that you can exchange for things. But it is also a system we call a monetary system. And that system with the US dollar is composed of banks. It is composed of a central bank we call the Federal Reserve. It is composed of the government in all different ways and of course taxes all through the system. And a money system which we call a monetary system has to do two very important things. It has to keep track of who who has what money and the total amount of money that is in that system. So, think of a money system as a spreadsheet. And we're going to look at the US dollar money system. All right. So, this is the world's simplest spreadsheet. And this is all most people think about when they think about money, which is how much money do I have? But there's another number that is just as important as how much money you have. And it's this number, which is how many dollars are there in the system? Because your purchasing power on any given day is your money divided by how many dollars there are in the system. So for example, if you have $100 and there are $1,000 in the system, you can buy 10% of all of the things that dollars could buy at that time in that system. But if somebody increases it to $2,000, your purchasing power drops from 10% to 5%. At any given time, there is a direct correlation between the amount of dollars in the system and the amount of stuff you can buy in that system. And those prices are a correlation. You can add extra money to the system going from a,000 to $10,000, but the price of everything just goes up. It doesn't make more stuff in the system. If it helps, think about that as a as an island where all the stuff and all the money is on an island. You can add more money to that system, but it's not going to make more stuff. It just makes the stuff go up in price. So, how many dollars are there in the US dollar system? Well, at the moment, there are well, it really matters because it affects your purchasing power. And there are $22 trillion of US dollars in the system. So $100, for example, could buy you a 1 g set of gold earrings just as a sort of size price comparison there. So has the US dollar system always had $22 trillion? And has a $100 always bought you that much? Uh the answer is no. Shockingly, if you go back to the 1960s, we had only $286 billion in the system, and the US has printed out of thin air about 7% more dollars every single year on average, which means 286 billion has increased by a factor of 75x to the present, resulting in the 22 trillion we have today. So, back in the 1960s when the Beatles were popular, uh, you could buy an 88 g of gold for the same $100 that buys you one gram of gold earrings today. So, when that number goes up, when the number of dollars in the system goes up, the purchasing power of those dollars in the system goes down, which is why you see prices rising. For example, the price of a Big Mac is up by a factor of 12 since 1968. The price of the same Campbell soup is up by a factor of 10 since 1968. And in general, all the things we need and all the things we own cost about 10 times as much as they did back in 1960. Everything's rising. Now, you may be wondering, but hasn't this number also gone up, too? Hasn't the amount of dollars that are earned gone up? And the answer is yes, but only about half as much as the prices have risen for everything people need to buy. So a typical hour of work buys you about half as many Big Macs and about half as much Campbell Soup and about half as much of anything as the same hour of work bought you in 1975. Okay, so what is going on here? If this seems crazy, it is. Who manages this system anyway? So, the answer is each bank in the system keeps track of who owns what money. There is a central bank uh that makes sure two people don't own the same money. And the question is, how are the dollars in the system determined? Well, for the US dollar system, there is a central bank called the Federal Reserve with a chairman called Jerome Powell. And when they want to increase the dollars in the system, they meet and they effectively doubleclick that number and they make the number go up. Now, they have a bunch of fancy words that mean they're going to print money out of thin air. But all of these fancy words mean at the end of the day the total dollars in the system go up, your purchasing power goes down. And all of that is basically one big spreadsheet that they're changing the numbers on. Technically called a database, but it's a big spreadsheet running on big computers. That is why the number of dollars in the system is on a tear. The dollar system runs on politics and the politicians that run that system are supposed to limit their spending and they never do because the politicians have a bunch of reasons which are really excuses why they want more free money to spend and the central banks are always happy to oblige. And again, as that number of dollars goes up, your purchasing power goes down. In the last 90 years, the purchasing power of the US dollar is down by 95%. 95% just in the last 90 years. So, what about gold? Sometimes in these conversations, people say, "Let's go back to the gold standard. What if politicians couldn't print the money out of thin air because we tied the number of dollars in the system to gold?" Well, we tried that. Paper money used to represent gold. And if you zoomed in on a piece of paper dollar, you could actually see that on there it said, "This certifies that there have been deposited in the treasury $10 in gold coin payable to the bearer on demand." What could go wrong? What could go wrong? Every time the gold standard has ever been tried, the government prints too much money and breaks the promise. And in 1971, the US government broke that promise for good. and they said and they actually changed the words on the dollar to say Federal Reserve note. They deleted all the words about how it was redeemable in gold. Okay. So, what about other governments? Are other governments better at managing a money system than the US government? Well, sadly, every country prints money and most are much worse than the US dollar. So whereas the US dollar has lost 25% of its value or more just in the last 10 years, other currencies are down much more. So for example, in this upper lefthand corner, the Venezuelan bolivar is down an additional 99.9% on top of how much the US dollar is down. The Argentinian peso, the Turkish lera down 92 and 98% in addition to how much the US dollar is down. And even major currencies like the British pound, the Indian rupee, the Canadian dollar, and the euro are down an additional 20 to 25% on top of the 25% of value that the US dollar has lost. So you might be thinking, are there any other options to this insanity? And I'm thankful to say yes. Now there is. Bitcoin is a better system that results in better money. Let's talk about it. Okay. So, first of all, what exactly is Bitcoin? Bitcoin is a money system we call the monetary system that runs on software. And Bitcoin is software that works like a spreadsheet. And that spreadsheet manages my Bitcoin. It manages your Bitcoin. And most importantly, it makes sure that the total amount of Bitcoin in the system does not exceed 21 million. And that Bitcoin software runs on computers. Those computers connect to each other and make exact copies of who owns how much Bitcoin until there are mo more than 100,000 Bitcoin computers worldwide, all with the same numbers. Those are called Bitcoin nodes. And the Bitcoin software has hard-coded rules about who owns what and the enforcement of that 21 million Bitcoin limit. So, first, who owns what? If I have the private key of a Bitcoin, it's protected at a security level unheard of in the rest of the world. It would take more than a billion trillion years to crack one Bitcoin private key. And if you have a Bitcoin private key, or if that key is managed by you by Coinbase or Binance or someone else, then you can send or spend your Bitcoin in the real world. And those numbers of who owns what are replicated across every computer in the Bitcoin system. And every one of those computers is making sure that there will never be more than 21 million. This is a direct quote out of the Wall Street Journal. The computer code behind Bitcoin is hardcoded with a hard cap of 21 million coins. And straight from the White House of the United States when they established a strategic Bitcoin reserve, the protocol limits the total supply to 21 million coins. So 21 million is all there is. There will never be more Bitcoin. And the Bitcoin software that runs on Bitcoin nodes is hardcoded to disconnect anyone who tries. So if you change the software to be more than 21 million, you are rejected from the network and kicked off. Bitcoin is ultimately your money divided by 21 million and no one can change that. Which is why Bitcoin is going up in value over time. The US dollar is your money divided by infinity because they will never stop printing dollars, which is why the dollar is perpetually down. And now you have the ability to make that choice. And the first question people have when they make that choice is often, okay, it's better money, it's a better system, but what about volatility? The dollar is more stable but going down. Bitcoin is more volatile but going up. Why is Bitcoin volatile? Well, news flash, the world is volatile and prices of everything in the world respond to what the world is doing. And we are still very early in the adoption cycle of Bitcoin, similar to the very early days of social media, online banking, and the internet. And when you're that early and Bitcoin represents such a small percentage of the assets that are owned, then Bitcoin is like a small boat in a big ocean. It goes up and down with the waves of every little thing. As more people adopt Bitcoin, Bitcoin gets bigger and eventually it will be like a big ship on a big ocean without the volatility. In the meantime, the volatility is your friend and it's in your favor. Over time, it goes up. And if you zoom out to even three years, on a rolling three-year basis, any three-year time period is almost 100% up. It is a better money. It is a better system.