hi everybody this is Charles hoskinson broadcasting live from warm sunny Colorado always warm Always Sunny sometimes Colorado I wanted to make one more video a double header and I think this is one that's really going to piss off the Bitcoin people but that's okay because team Orange from time to time does uh have a lot of fun with us so um you'll hear a lot about Bitcoin being digital gold and actually it may surprise you guys but I I do agree with that I think Bitcoin is not only digital gold but I think that it does have real use and utility but there's one thing I wanted to point out and this is about wrap Bitcoin and it's a small thing but I I thought it was a cool video to make you know just something that we could uh briefly talk about so I'm gonna do another Whiteboard video so you get a two for one today and we'll have some fun with it okay so let me go ahead and share the screen all right so Bitcoin came out in 2009 and one of the core Innovations of Bitcoin is that it cost something to make Bitcoins so early on we had critics like Peter Schiff uh come around and say oh well anybody can just make Bitcoin out of thin air and we're like no you have these Miners and the miners have to invest a huge amount of resources big set of them terawatts of power xobots of power to make a block and then that block basically pays them some Bitcoin reward but if you think about it each Bitcoin each one in circulation if you think of them as atomic units is connected to an energy cost okay so there's a cost of production in this respect and that's variable based upon when it was mined if we thought of them as physical units but with the utxo model they kind of get mixed up and so forth but you could kind of sum it up and you could think about the some total energy cost to make all the Bitcoin now here's a different way of thinking about Bitcoin and this actually the inspiration for this video and I think it's going to really scare some people but uh it may it may actually be productive let's see okay so you have gold and you have a gold mine now does gold need the gold mine to be valuable after the Gold has been extracted and the goal is in circulation just the knowledge of where it came from its cost of production and these other things is generally speaking where the price comes from also connected to the overall demand of the good now let's say at the thought experiment all the gold mines in the world got shut down there's no more gold extraction would this mean that the price of gold oops would this mean that the price of gold goes to zero well of course not actually the price of gold would probably go up why because we know there's not going to be any more of it and so it's more scarce resource but the utility behind it the demand behind it the economy behind it is still functioning so you have the Bitcoin Network and what the Bitcoin network has done is it has created a chain of proofs for resource consumption from the data within looking at the hash rate and some historical Notions you'll know at any given time the cost to replicate in other words that cost of extraction for those gold mines so what if we were just simply going to shut down Bitcoin tomorrow shut the Network down and what we did is we moved all the Bitcoin off of the Bitcoin Network and basically created wrapped Bitcoin on other block chains okay so you have wrapped e t h BTC wrapped cardano VTC but then the sum of all of the wrapped equals obviously the total Bitcoin in circulation what if we did that now the question is would these wrapped Bitcoin trade at the same dollar value as regular Bitcoin well let's take a look at the experiment so if we go to coin market cap we can go down here it goes oh rap Bitcoin okay that's uh I believe rapid coins on ethereum nineteen thousand five hundred thirty one dollars nineteen thousand five hundred fifty eight dollars so a slight Bridge risk Arbitrage okay but you know you could remove that with proof of burn basically there's already 4.7 billion dollars worth of this rap Bitcoin about 244 000 Bitcoin have left the gold mine they no longer live on it so we have most of the Bitcoin that we care about already mined if you look at it about 19 million of the total supply of 21 million have been mined out it's getting exponentially harder to produce them but what if for a thought experiment that people just stopped mining Bitcoin the entire network shut down and all the Bitcoin left and became wrapped Bitcoin would you need proof of work anymore no because proof of work was the mining process it was the extraction process to get all of the Bitcoin out of the uh through the Bitcoin Network so it was the digging to actually make the tokens okay that's what made the gold and wrap Bitcoin is basically the gold in circulation in the broader cryptocurrency ecosystem so let's just cognitively think about what we're talking about here we're basically saying that now that the extraction is done at about 19 out of 21 million has been taken so we have small Reserves for that the vast majority of Bitcoin in circulation is already in circularization there's never going to be any more there's only 2 million left of mine so effectively tomorrow the entire network is shut down and they could all leave become wrapped and we've seen with real Market data over 227 000 in circulation on ethereum that rep Bitcoin will probably trade at the same value as Bitcoin and basically become like a digital gold so that effectively means that the entire transaction network of Bitcoin that effectively means the entire proof of work component of Bitcoin from this perspective is unnecessary you don't need it you can send it to other places centralized ledgers decentralized ledgers other proof of work ledgers proof of stake ledgers and it can become wrapped now why is this relevant well let's say your country like El Salvador and they're adopting Bitcoin as their Sovereign currency and that's a great store of value gold is a great store of value gold back money great huzzah but what about the other two properties of money the means of Exchange and the unit of account well the issue there is that bitcoin's not so good at that because it's so volatile it's hard to price things in it and people tend not to want to transact in real life using it they just want to store it well what if you could use Bitcoin to create a stable coin ah you can that's actually why we constructed something like Jed algorithmic stable coin that is collateralized with Bitcoin well you can't do that on the Bitcoin Network and it's never going to allow you to do that but you could take wrapped Bitcoin on cardano or ethereum or some other smart contract Network and then create something that is dollar pegged or Euro pegged or you want pegged or a basket Peg and actually have a second currency that is a means of Exchange in the unit of account okay so your Value store is Bitcoin doesn't need to be on the Bitcoin main network still has all the properties because there's only ever going to be 21 million of them theoretically you've already paid the cost to produce them through the proof of work mechanism and there's a proof chain that's been produced from the Bitcoin blockchain to demonstrate that that can be verified in any network so that gold has real value because it's been constructed you can't replicate it you can't create Bitcoin unless you're willing to repay the cost of replication between all those coins and you can actually sum that up and calculate that and so forth and we have real Market data that the main Bitcoin network is no longer useful and you have nation states that have to make hard decisions how do they get into a system that can be a completely blockchain based payment system that is super high TPS and it has all these other capabilities Bitcoin is only optimized at the moment to be the gold mine that's what it's optimized for it's not optimized to be a payment Network it's not optimized to do complex transactions it's not optimized to allow you to run dapps it's not optimized to allow you to issue assets you can sure as hell try to bolt stuff on top of it and team Orange has been trying to do that since before ethereum existed how's color coins and mastercoin working out for you it's been a long road and not a lot of progress because the network was never designed for that it was designed to create digital gold and it did 19 million of them floating around and what people realized is that you can get rid of the gold mine but keep the gold which is why wrapped Bitcoin exists and it's trading now so could you imagine in a five-year time Horizon a mass Exodus where all the Bitcoin leaves Bitcoin and starts floating around like gold floats around in the global economy it's left the mind and now it lives on different chains and it's operated on from different chains as well it's just an interesting thought experiment and it's something I I just wanted to share real quickly I was going to make a video last week about it but I didn't have the time and uh these are the kinds of thought experiments that I think are very helpful for people understand the differences between assets I've always believed there's a huge real value in Bitcoin as a gold mine it's the way of constructing a digital gold and you know what Satoshi achieved it mission accomplished it's done the problem is to ask the Bitcoin Network to become like ethereum or become like cardano it really does harm the gold mine mentality that the adopters of Team orange have really pushed so the only way I think we have our cake and eat it too is to have this wrapped Bitcoin notion and honestly that's the value there now a lot of these Bitcoin Maxis will say well you know you need this proof of work it's the only way you're going to have a decentralized network and so forth and that's where the religion part of Bitcoin comes from so I think there will always be a value so will the network shut down no because religions keep things alive but we live in a world of science we live in a world of Quantified reality and you have these huge networks more than half of the value of the cryptocurrency space is now floating around in them and they operate a scale of tens of millions of people and governments can't shut them down believe me they've tried as hard as they can so the reality is that the real utility of doing these things is moving away but that doesn't necessarily have to mean that the Bitcoin Network excuse me Bitcoin itself is going to move away I actually think if I had to make a prediction that in five years there'll probably be more Bitcoin outside of the Bitcoin main chain than there is within the Bitcoin main chain and that Bitcoin will be used in all kinds of adapts and smart contracts and potentially could even be used by nation states to create a means of Exchange in a unit of account to actually have a a stable currency that they can use for daily transactions inside their ecosystem with a sound monetary policy it's important to understand that whether it be Bitcoin living on the Bitcoin Network or Bitcoin living on another Network it still is Bitcoin that's another thing team orange doesn't seem to get rap Bitcoin is Bitcoin the whole point of a conserved monetary policy is that everything produced has an energy cost behind it a cost of production behind it okay and you can follow the chain from the Bitcoin core Network to wrap and back and you can see that chain of cost for those assets that are produced and now it's a question of where do we want to put them and what do we want to do so why would we want to shut down the gold mine because this mine consumes about point four percent of the world power it's a humongous number it's a very expensive mine to operate and we're getting some diminishing returns in that respect leaving the mine on for another hundred years and all the energy that it's going to consume to do that just to get an additional 2 million Bitcoin is that really a good investment of energy when you already have 19 million that are in circulation and they're wrapped 2 million Bitcoin have probably been lost to be honest with you so their only argument the religion team Orange has of Bitcoin is you need to leave that mine on because it's also a payment system a world financial operating system the source of Truth the counterbalanced all the central banks and so forth okay well the vast majority of Bitcoin that's in circulation are being held by custodial accounts that's a fact it's a dirty reality of our space and they're being put in regulated products and there's kyc and AML on them and so forth though and practice the users of the system are already putting it into the Legacy Financial system at least by wrapping them on cryptocurrencies you have self-custody and smart contract based custody and all these other things so it's vastly superior to the way it's currently being used with the infrastructure there so I know this won't break through to anybody in Bitcoin land but for the rest of the cryptocurrency space it is something to think about of creation of a store of value and then using that store value and you don't need to leave the gold mine on for gold to be valuable and my prediction is that in five years time the majority of Bitcoin will not be on the Bitcoin network but rather actually wrapped floating in other networks and we'll see what happens with that thanks for listening everybody and as Paul Harvey used to say that's the rest of the story
