Preston Pysh (07:30):
So, before reading your article, I would toy with this question so much. How can this person, this person is so smart I can explain this to them in excruciating detail, and at the end of it, they’re just like, “Yeah, I just don’t see that happening. I understand everything you said. I just don’t see it happening.” When I think about that person and I think about that simple matrix of their trust in the existing system, it nails it every single time. I absolutely love to read. We’re obviously going to have a link to it in the show notes so people can read and develop their own opinion on what’s happening, but, yeah, any other highlights on that article or things that you would maybe adjust or add to it since writing it?

Croesus (08:09):
I feel like I was in the right zone, in the right place to write that article. I’ve been surprised at how much it resonated with other people, people with similar backgrounds.

Preston Pysh (08:23):
What has any of them come around since then?

Croesus (08:27):
Good question. So, begrudgingly, half I’d say of my MBA friends, my close friend group from business school, have a Bitcoin position and I’d say, yeah, they’re, for the most part, wholecoiners. Just barely got them to that point.

Preston Pysh (08:47):
What drove it? Is it because they’re seeing the squares and the Teslas?

Croesus (08:51):
Yeah. Square was a big one, and the expected competitive response from Venmo I think motivated them to try to get some per year.

Preston Pysh (09:01):
Now, PayPal, yeah.

Croesus (09:03):
Yeah, but NYDIG was a big one for them, too, because the extent to which that it makes it a serious asset class and calls attention to the fact that here you have this company that’s facilitating institutions and insurance companies and pension funds to take positions in Bitcoin. That’s what they do. That’s their business model, and they’re getting engagement from the top-tier insurance companies like the CEO of New York Life. For the first time in that company’s 150-plus-year history, the sitting C of that company has joined an external board, and that is the board of NYDIG. That doesn’t happen, and that means something. Then now in the last week, we have Ray Dalio’s CFO leaving to join NYDIG, a Bitcoin company.

Croesus (09:55):
The people who have done their due diligence on Wall Street, the people who have got around to that have taken positions, and that arrow goes in one direction. The more you learn about Bitcoin, the more you add to your allocation. I think that my business school friends see enough of that happening that they’re like, “I should probably have a hedge,” and I think that’s where their heads are at right now.

Preston Pysh (10:17):
Yeah. A lot of the NYDIG stuff is crazy. There was something that I was reading where they were projecting that 300 banks were going to have or enable access for their clients to start buying Bitcoin by the end of this year was the estimate.

Croesus (10:33):
So, I don’t know if you remember last summer the OCC came out with a guidance letter to banks saying that they were allowed to have cryptocurrency custody products. That, to me, was this signal that banks are actively petitioning to this regulatory body that they want in on this, and they want to be able to offer a Bitcoin savings account next to your dollar savings account and collect all the fees that they can collect on that for retail consumers. So, that was nine months ago that that guidance came out. Now, the next step of that appears to be happening. It’s rolling out to retail banking customers.

Preston Pysh (11:21):
I want to talk about another article that you published, and this was called Am I Too Late for Bitcoin? There are tons of people that are out there that are looking at Bitcoin that don’t know anything about finance in general, and they’re looking at it and saying, “Well, I clearly can’t buy that,” and they’re saying, “I missed that boat, but Dogecoin is 30 cents. So, I should probably buy a little bit of Doge.” Talk to us about your article, and then frame this up for that person who’s saying that to themselves right now.

Croesus (11:55):
So, I spent my 20s as a management consultant, and what I was trained to do on approaching problems is to kick the tires, look at it from different angles, and run some numbers for yourself to size things. So, that was my instinct when I went down the Bitcoin rabbit hole, and one of the exercises I went through was trying to figure out where we were in terms of the tech adoption curve.

Croesus (12:24):
So, if I believe that Bitcoin is the best savings vehicle in the history of the world because of its monetary properties, which we can get into and we should get into, but if it is the best savings technology, the best vehicle for savings out there today, then it’s a tech-enabled disruption of how savings is done, then you’d expect it to follow the classic tech adoption curve that we see with the internet or with television when it first came out or with social media, any new product in that S curve that starts off slow and then speeds up once you hit the middle of the bell curve of technology adopters, and then tails off at a plateau.

Croesus (13:11):
So, in that S curve, where are we? To figure that out, you have to take sock of what’s the total number of people who will eventually adopt this technology, and to do that, if it is the best savings technology, then anybody who has wealth to save is your target market. There are 2.2 billion people in the world with $10,000 or more of net worth. So, those are the people that Bitcoin is targeting.

Croesus (13:40):
Then at the same time, we can also look at on-chain data to see how many addresses have a meaningful amount of Bitcoin in them. This is a thing that people get caught up on, where it’s hard to draw a line about what constitutes meaningful adoption of Bitcoin. I’ve heard numbers like there are 180 million people who have some amount of cryptocurrency, but that includes everybody, any tiny fractional amount that somebody forgot about play theme money that $5 here and Dogecoin. I wouldn’t call that meaningful at option.

Croesus (14:17):
Today, Newsweek said there are 46 million Americans with … I forget if it’s Bitcoin or crypto, but it’s a big number. I think it’s not representative of the meaningful option. I think that constitutes Americans that have thrown 20 bucks at Bitcoin in Robin Hood.

Preston Pysh (14:36):
10 bucks, yeah.

Croesus (14:36):
They haven’t adopted it as an actual savings vehicle. So, what would be a reasonable threshold for a meaningful amount of savings in Bitcoin? I just called it 0.1 Bitcoin, which is now $5,000. So, that’s a meaningful amount of savings. Anything more than that is certainly meaningful. You can see on-chain there are three million addresses with 0.1 Bitcoin in them. Of course, it’s not quite apples to apples because a person can have multiple addresses above that threshold, but the bigger issue is that a lot of people just leave their Bitcoin on exchanges.

Croesus (15:14):
So, how many people are leaving a meaningful amount of Bitcoin on exchanges and not taking self-custody? Probably a lot. Let’s round that three million up to 10 million. So, if we have 10 million meaningful adopters of Bitcoin and there’s 2.2 billion that will eventually adopt this savings technology, that puts us at half a percent penetration, half a percent into the technology S curve. That’s really early.

Croesus (15:42):
The innovators stage in the classic bell curve, you got your innovators, your early adopters and your mainstream. The innovators is the first 2.5%, I think, or 2%. The early stages of the innovators stage still. It’s crazy, really.

Preston Pysh (15:59):
We’re talking standard deviations. What would that be in the bell curve? In your article, you were saying that it was around 2.6 standard deviations on the left side of the bell curve. It’s crazy.

Croesus (16:11):
Yeah. It’s crazy early. If you’re 2.6 standard deviations from the mean in anything, you’re doing great or you’re doing really poorly, one of the other. Yeah. So, it’s crazy early still. The other way to look at that is by assessing how cheap it is to get one human’s worth of Bitcoin still. The way to run those numbers is Bitcoin is for the whole world, and there’s only going to be 21 million of them ever. So, eight billion in population. 21 million divided by eight billion, you get I think it’s around 250,000 sats. So, 0.0025 Bitcoin. That is currently what you can buy for $150.

Croesus (17:02):
If Bitcoin becomes the preferred store value asset for the digital future, which we think it’s on track to become, then one human’s worth of it can be secured by anybody for $150 today, which means it’s so early that you could feasibly set up a dollar cost averaging plan for yourself to stack one human’s worth of Bitcoin every month or even every week if you wanted to still. That’s how early it is.

Preston Pysh (17:35):
Talk to us about the valuation process that you use. I really like how you laid this out. In your article, you go into a lot of the adoption process. You say that there are two different ways to really know where we’re at. The one was the adoption process, which you just described there, and then you also get into this valuation process, and you go through all these different stores of value and the total addressable market from a market cap size.

Croesus (17:58):
Yeah. So, this was part of the consultant’s approach to sizing this problem. I went through and I tried to find good solid numbers for all of the different store value buckets that exist in the world. Humans have found a variety of assets that are in differing ways scarce and because of their scarcity, they are good stores of value because they’re assets that other people desire and there’s a limited amount of them, whether that is real estate or equities.

Croesus (18:38):
The tricky thing about equities is that it is scarce. You can create a new company and that company has new shares and all that, but what is scarce is the ownership percentage of a certain market, that portion of the economy. That’s scarce.

Croesus (18:56):
So, owning equities is scarce. Owning art is scarce. Collectibles, some of them have value and retain value over time. All of those buckets add up to something like $400 trillion and, of course, the massive bucket of bonds, and there’s 200 plus trillion in bonds, and 20 trillion in negative yielding bonds, which means that whoever is holding those bonds has no better idea or plan of what else to hold, and that’s the only reason they’re willing to take that hit, basically.

Croesus (19:29):
So, ostensively, as people learn about the properties of Bitcoin and how its increasing scarcity over time causes its value to increase over time, there will be an exodus, a shift away from holding assets like negative yielding bonds or even low yielding bonds, which is the rest of the 200 trillion, and towards shifting from those assets and into something that appreciates reliably, predictably over time because of its monetary properties that are built into it.

Croesus (20:03):
So, I went through that exercise of trying to assess what’s a reasonable amount of this store value bucket that Bitcoin with its superior store value properties could reasonably capture. Summing those up, 30% here, 50% there, 10% here, I got to a number of 200 trillion, which would mean capturing about half of the store value total market in the world.

Croesus (20:32):
That isn’t even addressing the currency value, which I think there’s $100 trillion in currency in the world and three-level currency, and Bitcoin would capture a large portion, if not the bulk of that as well.

Croesus (20:47):
So, yeah, you get to a $200 trillion total full potential with Bitcoin in today’s dollars and, of course, those nominal values will balloon as inflation drives money printing, and money printing then drives inflation, and that comes out to $10 million per Bitcoin, which is-

Preston Pysh (21:05):
As we now define power today.

Croesus (21:07):
You’re right. That number, I still feel uncomfortable talking about that number.

Preston Pysh (21:13):
I think most people do.

Croesus (21:15):
Yeah. It’s hard to take that seriously because that sounds like wishful thinking. It sounds like the thing that I am excited about is going to take over the world and that sounds a little delusional, but that’s the result of kicking the tires on this thing for thousands of hours and running the numbers.

Preston Pysh (21:34):
You see Michael Saylor throwing around the same numbers. That doesn’t make it right. I’m just saying that there are other people that aren’t looking at maybe your math and they’re coming up with very similar figures.

Croesus (21:46):
To be fair, a year ago when I was talking to my MBA friends in our Zoom happy hour saying that this thing is going to 100,000 next year-

Preston Pysh (21:55):
You were nuts.

Croesus (21:56):
… that was laughable, right? Yeah.

Preston Pysh (21:59):
Yeah, it’s wild. Let’s cover this other idea that you have talked about. You’re saying that the digital revolution has two parts. You talk about information and value. Explain what you mean by this.

Croesus (22:14):
So, I like to think about the really zoomed out view of how Bitcoin fits into monetary history and what it means for human progress. Part of that is to take stock of what we are living through right now in human history. It’s a very special and crazy time because we are living through the digital revolution. For the most part, we think of that as the internet. That’s what comes to mind.

Croesus (22:46):
What is the internet? The internet is the digitization of information and information exchange, and so that meant we took the default of how we exchange and access information went from physical with libraries and magazine subscriptions and newspapers to digital with the internet, and that process has been going on for the last 20 plus years. We’re far up the S curve on that process. We’re arguably coming towards the plateau of that process.

Croesus (23:24):
The world’s information has been digitized for the most part at this point, but it hasn’t been possible to digitize value because, on the internet, everything can be copied, and you can’t do that with value because then it loses its value, then it can be stolen. That’s what Bitcoin represents is this invention of digital scarcity, the invention of a system that allows for value to not be copied, be impossible to copy in the digital realm.

Croesus (23:55):
That is this parallel stream to the internet and TCP/IP and the protocols of the internet enabling information exchange through that ecosystem. Now, we have a new protocol, a new set of rules for the secure storage and exchange of value in the digital space. What we’re watching with Bitcoin is this bootstrapping from nothingness into the digital store of value of the world, digital value protocol of the world, and that means a second internet of sorts that this is the internet of value to complement the existing internet of information.

Croesus (24:44):
In that S curve, we’re still at the very beginning stages, right? So, I think that it’s something that we don’t talk enough about, the zoomed out view of what is happening in the world right now and what Bitcoin means in terms of this grand sweeping reality of in our lifetimes going from physical value, which is what the world has known for all of human history to digital value in the same way that the internet took us from physical information to digital information over the course of a few decades.

Preston Pysh (25:18):
You have a chart that is really cool that shows the application layer that’s being built on top of the existing protocols of the internet today, and then how that’s going to potentially look in the future and how this value layer is going to work itself into the protocol stack. Can you describe what’s going on there for folks that might not be intimately familiar with how the internet works and what this all means for businesses, incentive structures moving forward? I have an interest in what that might mean for social media. What are some of your thoughts on that?

Croesus (25:54):
Yeah. So, how does the internet work? I’m not the most technical person, but I have the high-level grasp of this. There are a series of protocols like TCP/IP, which is just rules for how servers can exchange packets of information, and have that be represented as meaningful through browsers and whatever other portals. That’s how the internet is constructed, but that base layer, that protocol layer cannot be owned because it’s just code, it’s just rules for how to exchange information. There’s no ownership layer at the protocol layer, but what you can own are the businesses that are built on top of those protocols, so Amazon, Netflix, Facebook, these entities, these businesses that are fundamentally built on top of those protocols and their whole business model is based on being internet businesses.

Croesus (26:54):
You can own those individual pieces, those parts of the internet economy, but you can’t own the internet itself. So, the best you can do is if you’re a VC, you can invest in the next wave of a bunch of different promising internet companies and hope that one of them becomes a big win and a big part of the next generation of the internet.

Croesus (27:16):
Similarly, if you’re investing in equities, you can own an index like the Nasdaq. That can be your portfolio on how you get exposure to the overall internet, but in doing that, you’re owning small pieces of a bunch of the different businesses built on top of the protocol. That’s very different from how Bitcoin is designed because, by definition, this is a value protocol. There’s a value layer that someone has to own. It’s required for this thing to work.

Croesus (27:48):
So, this protocol, the Bitcoin network, which is a set of rules for how the nodes and users on the Bitcoin network can send and receive and store their Bitcoin, and you can’t own that. You can’t own the network itself, but there’s a unit, a unit of account, a transactional unit, the symbol of who owns what on this network, which you can own. In this case, that means that you can take an ownership slice of the overall pie, the whole internet of value simply by owning a piece of the underlying unit that makes the whole thing run.

Croesus (28:30):
So, what we’re starting to see on top of this protocol are the businesses that are growing and popping up and the ecosystem that’s developing, for-profit businesses built on top of this ecosystem, on top of this protocol. So, that includes exchanges like Coinbase. That is based on making a business out of getting a cut of transactions happening on the Bitcoin network and other networks, too. It also includes companies like Fold or Strike, which are these new generation of consumer-facing, user-empowering Bitcoin services that are using the protocol underneath it to create some new product that has real value to the consumer based on the advantages of Bitcoin as digital value over traditional financial products.

Preston Pysh (29:26):
Let’s talk about this term that’s used a lot in the community, which is the speculative attack on fiat currency. I think Pierre Rochard was the first one or is it Michael Goldstein? One of those two was using this. Pierre-

Croesus (29:41):
Pierre wrote this in 2014.

Preston Pysh (29:43):
So, you put quite a bit of meat on the bone for this idea in an article, which we’ll have in the show notes. You get into the DNA of an asset. Talk to us about what that is and then talk to us about what this speculative attack really represents as far as your concern.

Croesus (30:01):
Yeah. So, I guess what I’m trying to do on Twitter is to put out educational content that simplifies what I’ve come to understand or believe about Bitcoin and convey that educational message, and because of my background as a consultant, as an MBA and someone who took a lot of accounting classes, I have this view about how different assets perform over time, and that is that the best thing you can do historically over recent history for your net worth is to invest in assets like stocks and real estate because they appreciate over time because they’re generating some kind of return, and they’re either growing or they’re, in the case of stocks, they’re growing or they might be generating dividends. Similar dynamics with property you own and appreciate some value, can generate rent.

Croesus (30:59):
So, that’s an exponential curve up into the right if you have an asset that performs. So, in a logarithmic scale, that means a straight line up into the right. That’s the nature of those investible assets like stocks and real estate. Their DNA is such that they appreciate over time if you invest in good ones.

Croesus (31:24):
On the flip side, on the downside, there are other things you can do with your money. You can consume it. You can buy clothing and whatever and immediately the value of that clothing after you buy it drops dramatically to nothingness. You could invest in a car, which is not an investment at all. It’s a form of consumption because you’re purchasing a depreciating asset. The way that assets depreciate is an exponential curve down into the right. If you put that on a logarithmic scale, that means a straight line down into the right.

Croesus (32:00):
So, we have this landscape of different assets, and they perform differently over time based on their DNA, what the asset is. To add to this picture, you have to also include dollars, fiat currency. It is by design that the root idea of the dollar system is that we’re going to print 2% more of it on average every year, and that means it’s an exponential decay of function, and so that means that it may not depreciate as fast as a car or lose its purchasing power as fast as storing value in a car, but it does on a logarithmic. It is a straight line down into the right.

Croesus (32:46):
Then contrasting with that is this new kind of currency, this new digital currency of Bitcoin whose design is increasing the scarcity. To me, that’s the root of what Bitcoin is or why it’s an attractive asset to hold is because of the halvings, because of the supply issuance schedule. They’re making less of it. It’s the only asset in the world they’re making less and less of over time, which means that if you hold some today, you are buying in at a time when they’re making more of it than they will be making of it four years from now because of that supply issuance schedule.

Croesus (33:26):
So, that increasing scarcity over time, because of the supply-demand balance of today, there’s 900 Bitcoin being mined every day, and that’s going out into the market to meet net inflowing demand, and we’re in the process of finding some new equilibrium based on that amount of supply issuance per day because a year ago, just over a year ago, it was 1,800 Bitcoin per day, and that got cut in half. So, now, we’re in this price discovery mode of trying to find the right equilibrium for this new era of Bitcoin, and then three years from now, that will be cut in half again and we’ll be producing 450 Bitcoin per day, and that increasing scarcity means that there won’t be enough supply to meet the demand at the equilibrium point we established during this current reward era, which means the price will have to drift upwards.

Preston Pysh (34:29):
I got a question on that because there was a question that came from Twitter from Eddie, and he’s curious whether we’re going to start to see these halvings priced in to the current price. So, I think at this point there’s been much debate leading up to the halving events. People have made the case of why it can’t be priced and why it is already priced, but having seen this multiple times now, I think it’s become fool me once, all right, shame on you, fool me twice, fool me the third time. Are we going to get a chance for Wall Street to sit on the sidelines and we go through a whole another four-year cycle waiting for the halving to happen or are we going to start to see that get priced into the curve?

Croesus (35:22):
That’s a great question. I don’t really know.

Preston Pysh (35:25):
If you had to place a bet, one way or the other, what would you say?

Croesus (35:28):
My bet is that Wall Street is in disbelief and can’t comprehend the implications of the imminent halving.

Preston Pysh (35:38):
Let’s say it goes to 200,000 in this year we’re at right now, in 2021. Let’s say by the end of the year this thing goes to 200,000 or even higher. What does Wall Street do at that point as they’re looking at this thing and saying, “My God! This is going to happen again in a few years”?

Croesus (35:58):
So, I think that like the stock-to-flow model has it pegged to go to a million dollars in the next cycle and that’s going to give everybody in traditional finance, they’re going to bulk at that, I think. You talking about a total valuation twice that of gold in 15 years of Bitcoin’s existence.

Preston Pysh (36:21):
At the same time, they’re looking at miners that keep coming online and they’re looking at something that has a difficulty adjustment that is adjusting itself to ensure that some portion of those miners remain profitable. Now that we’re getting their attention, nothing gets their attention like an imaginary coin that’s over $100,000 in valuation, right? So, they’re going to start digging in. They’re going to start realizing that you can’t pull the supply curve to the left. You can’t pull the production from the future further to the left by quadrupling the number of miners. It can’t happen, at least not in any type of meaningful timeframe, right? They can do it for a week, but that’s it.

Preston Pysh (37:06):
So, they’re going to start to understand what that means, especially when you compare it to what would that mean if gold, if we look at the gold market and no matter how many people you bring to mine that gold, you’re not going to pull more ounces out of the ground than a certain rate that you’re currently in as far as an epoch goes.

Preston Pysh (37:26):
Then magically in four years, you’re just going to find half as much gold in the earth’s crust. People can start to do that analysis and say, “Whoa! Maybe this is a million dollars. Maybe I need to start front running that.”

Preston Pysh (37:41):
I don’t know. I just think that at this point there’s so much that’s been written about this and you’re getting so much attention, and I don’t mean to push back on your point of view. I guess I’m trying to challenge that point of view for you.

Croesus (37:54):
I think you have more faith in the capacity of Wall Street to imagine a changed world four years in the future or even a year after a halving. I think that you’re right, though, that there will be some portion, some larger slice of the finance community that for the next halving says, “I’m going to get ahead of this. I’m going to front run it. I’m going to buy it in the six months, nine months before,” and that should happen. There should be some pricing in of the halving, but I think that what we keep seeing is disbelief at how fast the status quo changes with Bitcoin.

Croesus (38:37):
People aren’t prepared to accept it as what it is today, let alone what it is going to be four years from now or if you’re right before the halving, a year from now. A larger portion of the world will wrap their heads around that, but I think that as humans we’re good at optimizing for conditions as they are today, and as a collective organism, we find equilibrium with how things are today, and we struggle to project forward how things might change. I think that’s particularly true when the way in which something is going to change is outside of how everything else changes, which is to say that it’s inelastic to our reaction to it. You can’t increase Bitcoin mining, and that’s different from every other commodity in the world.

Croesus (39:31):
So, I think Wall Street and humans, generally, will continue to underestimate how different Bitcoin is going to be four years from now just because we have no basis for comparison. We have no other examples of a pre-programmed supply schedule that is completely indifferent to how much we would like to increase supply.

Preston Pysh (39:57):
Yeah, and what I’m thinking about, let’s say you buy into the stock-to-flow model. Let’s say that on this current epoch that we’re in the price settles in at $100,000 or $200,000, and you’re looking at a price four years later of a million. When you do a compound annual growth rate of what growth rate am I getting if I’m going from 100,000 to a million over a four-year period of time, and where else on the market can I find that kind of return? Nowhere, right? You’re like, “Maybe I should keep holding this. Maybe I shouldn’t realize my capital gains and play the trading game here. Maybe I should just do what intelligent investors do when they know that they’ve got a winner.”

Preston Pysh (40:41):
If for whatever reason something fundamentally changes with the hash rate and miners and all that kind of stuff and you’re seeing it fundamentally fall apart between the cycles, well, sure, maybe you need to change.

Croesus (40:52):
Yeah. This is actually how I became a Bitcoin maximus was the stock-to-flow model came out in 2019 and before that, I had been in Altcoiner. I started with Ethereum and was into that whole ecosystem, and then the stock-to-flow model comes out in 2019, and it sounds so crazy, but it has this, I don’t know, I suppose familiar analytical rigor around it that is the signpost to me that the person who made this is very smart, and I should pay attention to or at least kick the tires on this.

Croesus (41:26):
So, I spent the next couple of months trying to figure out why it couldn’t be true and ran my own numbers that basically said that this is totally plausible if we follow the classic tech adoption S curve, and we are aware. We talked about earlier at the very beginning of that S curve, demand is going to rapidly ramp up for Bitcoin, and at the same time, we have half as much being produced every halving era.

Croesus (41:58):
When you smash those two datasets together, that comes out to a 10x increase in adoption adjusted scarcity, if you want to call it that every four years for the next 20-25 years, which is crazy, and that’s what the stock-to-flow model is suggesting also is a 10x increase every halving.

Croesus (42:21):
It’s hard to pin down exactly why is it working. I think it’s somehow capturing our human nature of valuing scarcity and this osmotic flow of value from that which is not scarce to that which is more scarce, the constant relevel setting of these different store value buckets.

Croesus (42:50):
I’m using this osmosis idea of if you have two water containers that have an osmotic membrane between them and you add salt to one of them, water is going to flow into the one that has salt because that’s osmotic pressure goes in that direction. It seems like that’s what is built into us humans is an appreciation for scarcity and a desire to own that which is scarce as a scoreboard in our culture.

Croesus (43:23):
Actually, to zoom out all the way, this is fundamental to our species that I think in, yeah, shelling out Szabo includes this amazing little anecdote that he doesn’t really expand upon, but shell money goes back 75,000 years. There’s evidence of it in cave sites going back 75,000 years, but that’s for Homo sapiens, our subspecies. Homo sapiens, Neanderthals, Neanderthalensis, their cave sites don’t have any evidence of shell money.

Croesus (44:00):
What’s interesting about that is that the population, can’t really paint any notable differences between Neanderthals and Homo sapiens besides the tools that Homo sapiens were using were slightly better and this notable difference of there doesn’t appear to be money in the Neanderthal sites.

Croesus (44:22):
The result of that is that the population density of the human, the Homo sapiens, sapiens’ caves appears to be 10 times as great. So, having this appreciation, this species level appreciation for scarcity, which makes money possible and facilitates trade and allows you to support a larger population density and emergent civilization level behavior appears to be the difference that our species, the advantage that our species had over other early human groups, which is to say that appreciating scarcity is what makes us human, and valuing scarcity is what makes us human. Therefore, it’s in our DNA to gravitate towards that which is scarce.

Croesus (45:11):
So, if you put Bitcoin in this long timeline of human history, it is this perfection of that which makes us human that we are now witnessing this creation of something which is absolutely scarce and slowly moving towards absolute scarcity, and the whole world is slowly processing this reality and the economic reality that this invention imposes upon the world cannot be escaped.

Preston Pysh (45:44):
When you look at Adam Smith’s main thesis, which is the division of labor, and the ability that it allows humans to collaborate in a meaningful way, where I perform a task that’s very skilled and the person next to me performs another task that’s completely different than mine that’s very skilled and we’re able to exchange those units of work in a meaningful way, you can see how if you can optimize that system without there being blemishes or manipulation entering itself into the system and the protocol that’s beings used to manage the labor data is how I would like to describe it.

Croesus (46:25):
The price signaling of labor.

Preston Pysh (46:26):
The pricing, yes. You can just see how vital it is. If I was going to be a real optimist here, it’s pretty exciting to think about what the implications of such a sound majoring system would be on a global scale and what that might mean.

Croesus (46:45):
What a strange time to live through. It’s hard to believe that this is part of our own history.

Preston Pysh (46:53):
Happening in our lives. Yeah. Happening in our lifetimes. I know. I think about that often. I agree with you. I think it’s humbling to think that we’re living through this period at this transition. It’s crazy.

Croesus (47:03):
Yeah. For all of human history, we’ve had physical stores of value and this is the zero to one moment of going from analog to digital. It’s right now.

Preston Pysh (47:18):
Talk to us about you’re saying early on you were really interested in Ethereum and then you found your way to Bitcoin. Talk to us about what was the original thing that drove you there or that enticed you to look into that, and then talk about your transition over to Bitcoin.

Croesus (47:35):
I guess I characterize this in hindsight, for me, there are two stages, two major stages to the rabbit hole, and I think everybody is going down the rabbit hole and they’re at different stages. The first stage is recognizing that digital value has a place today and into the future. I think that that’s where Ethereum people are. That’s where Altcoiners are is you recognize that we live in a digital world, we live on the internet. I grew up on the internet, and this makes sense to me. Digital value, being able to exchange value and store value in a digital format makes sense. Of course, this is going to be thing.

Croesus (48:20):
Then the second stage of the rabbit hole is realizing why Bitcoin has already won, and what it really deeply means, which is to say that this is not about technology. It’s about money and where does Bitcoin fit in into the landscape, the history of money, how does it improve upon the prior iterations of money, how does it improve upon gold, why is it better than fiat, and importantly, why is it going to win out over those things, understanding that the network effects of money and shelling point reality of money and the significance of absolute scarcity.

Croesus (49:04):
So, yeah. I started, I dipped my head into the rabbit hole and I saw this party going on in Altcoins and thought, “This is great. This is totally the thing,” and that’s because I was steeped and we all have been steeped in this ethos of internet, how the internet worked, how internet adoption, how internet businesses and internet ecosystem developed, and that was driven by innovation, new companies popping up trying something new, move fast and break things, the whole Silicon Valley ethos.

Croesus (49:35):
Our approach to investing in technology has been shaped by the cumulative experience of how the internet developed, meaning that we all take a venture capitalist approach to investing in tech stocks, investing in internet companies because that was the best way to do it because you couldn’t own the protocol itself.

Croesus (49:58):
So, when I arrived in crypto scene, I looked around and thought, “All right. What’s innovation? Where are upstart protocols challenging incumbents?” Ethereum was the first one in 2016 that seemed like it was falling that narrative, and then I got into other Altcoins. Then I got crushed in the bear market, 2018-2019, and that, plus the stock-to-flow model forced me to dig deeper and realized. You only realize then that, “Oh, wait. This rabbit hole, this first layer of the rabbit hole isn’t the whole thing. There’s actually little back corner where if you dig a little deeper you discover that there’s a whole another chamber below, and it’s more glorious because it’s a very different vibe in there. It’s not a party. It’s a beacon of hope and sunshine for the future of humanity.”

Croesus (50:56):
I think most people, our worldview has been shaped by recent history and the learned wisdom of the internet revolution. So, we think that innovation is what matters. That’s why everybody is caught by Ethereum, and I think that it fits our worldview, the status quo worldview better, the Ethereum narrative, but the truth is is that Bitcoin is an economic reality that will continue to play out and overpower any narrative. The sooner you dig down below that first level of the rabbit hole to understand why this is true, the better off you are.

Preston Pysh (51:39):
Croesus, man, this was fun. I really enjoyed chatting with you. Keep pumping out this awesome content for people that were listening to this that maybe want to digest this in a more graphic kind of way. He has awesome graphics that go with the articles. I’ll have the show notes with all these articles in there. Is there anything else that you want to provide a handoff to?

Croesus (52:01):
A lot of stuff, a lot of educational content that I try to put out. I’m trying to do my part to communicate the value that can be have from stacking sats and the benefit that can create for people and their families. A lot of that educational content is best seen with your own eyes and the graphics convey the message a little bit better. So, check out my Twitter, I guess, which is @Croesus_btc.

Preston Pysh (52:31):
All right. Hey, thanks for joining us.

Croesus (52:33):
This is a great time.

Preston Pysh (52:35):
Hey, so thanks for everybody listening to this show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you’re using. We really appreciate that, and if you have time, leave us a review. So, thanks for joining us this week, and we’ll catch you next Wednesday.

Outro (52:50):
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