Freedom Money - Yan Pritzker - Swan Bitcoin

Freedom Money - Yan Pritzker - Swan Bitcoin

. 36 min read

About this episode

Does money need to be just? Or is it just a tool of man? Yan Pritzker joins this episode with host Samuel McCulloch to discuss growing up in the Soviet Union, Bitcoin as freedom, and how it can be used as a get out of "troubled" country hedge.

Yan Pritzker is the co-founder and CTO of Swan Bitcoin, the best place to buy Bitcoin with your bank account using automated daily, weekly, and monthly savings plan. Yan is the former co-founder and CTO at Reverb, which was sold to Etsy for $275M.

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What to listen for

  • Why Yan’s experiences of growing up in the Soviet Union influenced his thinking around Bitcoin and how he came into the space.
  • Why we need a society where people have freedom with their money and without capital controls.
  • Why there are always tradeoffs between freedom and surveillance in any society.
  • What the difference is between people who prefer safety over freedom and people who prefer freedom over safety; and why this matters now more than ever.
  • Why we need to look beyond the US narrative around ‘Axis of Evil’ countries and our empire perspective to understand the causes of terrorism.
  • Why money and US financial systems are at the root of most of the conflicts in the world.
  • Why the US dollar system may be broken and why Bitcoin is a hedge against this future outcome.
  • Why the lack of short-term volatility is a tradeoff with systemic instability and why volatility always comes back in the long-term.
  • Why centralized systems create more opportunities for criminals to steal your data because the information is fully public and easily hacked.
  • Why Yan thinks perfect privacy does not exist and is impossible to achieve if you interact with any centralized system.
  • Why everyone should be saving a little Bitcoin every month nd how SwanBitcoin helps you do this.


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Show Transcription

Samuel: Hello, and welcome to the end of the chain. I’m your host, Samuel McCullough. And I want to welcome you to this very special episode where I am joined by Yan Pritzker from Swan Bitcoin. Now, I think it’s very important to speak with people who are Bitcoin maximalists and who have a different point of view than I do when it comes to the development of cryptocurrencies and how they’re used in the wider world. This turned out to be a lively debate. I want to thank Yan for coming on. I think we talked about some really great points and really got into some deeper aspects of using cryptocurrencies that I don’t think Yan may have explored before. So I want to thank him for coming on to the episode. As always make sure to subscribe to this podcast, share it with your mothers, brothers, sisters, mothers, and anyone else who you think would enjoy listening to the end of the chain. All right. That wraps it up. Let’s hop into the episode.

Welcome to the podcast. Yan, I’m actually really excited to have you on because, two months ago, my wife and I, we just moved from Russia back in February actually. And yeah, so I had been living there for six years. I moved there in 2013. my wife is from Tuman in Siberia. And, but we met in Moscow and we had lived, we got married a couple years back, three years back and, then just moved here to Florida, for a new job just a while back. In my research, you’re also Russian as well too, and you, like my wife, lived in the Soviet Union as well. When exactly did you immigrate to the United States?

Yan: Yeah, so I came over in 1989. I was seven years old at the time and came over with my parents and my sister. But yeah, I grew up in Russia, in Soviet Russia, which was a very interesting experience for sure.

Samuel: I think a lot of people in the West, it’s really lost on them. Even people that grew up in the United States, the views that they were getting were not really t actual life of living over there. The more time that I’ve spent there, and more so even getting out of Moscow as well too, like living in more rural places, you start to see the differences and kind of cultured people, and it’s a great place. I love Russian culture. I love Russian food.

Yan: Oh yeah.

Yan: We still eat lots of Russian food all the time now.

Samuel: Yeah, I know. It’s great. And, but at the same time, I think I still see a lot of problems there.

Yan: Yeah. Plus or minus.

Samuel: Out of communism. And, I think reading about it and listening to a lot of stories from that time, the growing pains of moving from a completely centrally controlled economy to a less centrally controlled economy has been difficult, and I know that’s one of the reasons that kind of brought you into Bitcoin as well too.

Yan: Yeah. I mean, it’s interesting because I had got into Bitcoin, unrelated to being from the Soviet Union, but then after I sort of studied it for a while, I circled back and started understanding what the actual purpose of Bitcoin was. Because, you know, as somebody who grew up doing technology stuff, I’ve been doing startups for 20 years.

So when I first heard about Bitcoin, I really thought about it as a technology. Is it really interesting distributed systems problem that had been solved? How to get a whole bunch of computers to coordinate that didn’t trust each other, and there was a lot of brilliance there. When I first got into Bitcoin, I spent a lot of time studying decentralised and distributed networks in general, kind of the whole blockchain space, you know, theory and all these other kinds of distributed projects, and then probably six or eight months after doing that, and I circled back to Bitcoin.

Just trying to understand the underlying, like where did this all come from? And I almost, by accident stumbled upon this talk by Andreas Antonopoulos called Currency Wars, where he started talking about why Bitcoin was important and how he had misread it, right? He said that he originally thought of it as a remittance technology that it would maybe compete with Western Union and then over time, he started seeing this pattern in the world where all these governments were essentially playing games with their currencies, and we see that today, right? We see Trump tweeting at Jay Powell, like, we need to lower interest rates to be competitive with the rest of the world.

We need to stimulate our economy and so what they’re really talking about there is currency debasements and capital controls, which is something that’s happening all over the world. Andrea spoke a lot about that and saying how people weren’t able to access money out of their HTMS, and there were bank runs, people weren’t allowed to leave the country with a certain amount of money. When I understood all of that, I started understanding Bitcoin as a money for freedom for defeating capital controls and for allowing people to have real ownership over their money. That’s when I started asking my parents because you know I’d never thought about what the Soviet life was like. I was seven years old when I came over here. We grew up very poor in America. We quickly got back on our feet because my parents were thankfully well-educated. They were engineers and teachers. It took them a while to get back on their feet, but we did. Initially, we were very poor, and I never thought about like why is that the case?

You know, I kind of assumed we just left, the Soviet Union with what we had. But as it turns out, when we left, our parents were able to exchange only $100 per person to leave the country with. So we left the country with $400 in our pocket and the reason for that was capital controls because the Soviet Union did not want; they had a fake exchange rate, just like most countries do when they have broken currency or when they have a centrally planned economy.  The government has one exchange rate. It might be, say, 10 rubles, so dollar, and then on the street it’s really like a hundred rubles. Nobody actually wants that currency. Because of that, they have capital controls where they will only exchange a certain amount when you’re leaving the country. That’s when I finally started tying together why Bitcoin was really important for the world. It wasn’t because it was this really interesting technology or payment system. It was because it was a new type of money that you could actually carry out with you from a country like the Soviet Union and that’s kind of when it all came together for me.

Samuel: It acts as like a digital Swiss bank account that can’t be seized.

Yan: Yeah, I think of it that way. Or digital gold, right? It’s something, unlike those things. I mean Swiss bank account, only can’t be seized in quotes, right? Given enough government intervention, all kinds of things are possible, and same thing with gold. If you’re in the Soviet Union or something, you try to walk out of the country with gold in your pockets while you’re not going to leave very far. Bitcoin is interesting in the way that it’s scarce. You know, it’s digital, and it’s portable. You can put it in your head, and you can just memorise, say 24 words, which represent your private keys. And you can just walk out of a country like that. And, you know, you have your money, you have your wealth, and that’s very compelling for people living in those kinds of regimes.

Samuel: One thing that happened in Russia and probably in the rest of the outer Soviet union countries is that from the time of the collapse in like 1991, up until maybe the mid-2010s, there had been a huge process of offshorisation of capital fleeing the country. There were all the dark markets who would use their positions of power, essentially acting as a mafia, right? Changing from essentially a mafia boss legitimately by the government standards, at least like a legitimate business owner who would control vast sums of capital and assets that were legally through the government structure, but like in real life, illegally seized and then use to enrich themselves, beyond the scope of what anybody could think of.

Yan: Yeah, and I think a lot of these people had ties to the prior government, right? Like when people were in the PO in communist Russia, when everybody was supposed to be equal. I mean, that really wasn’t the case. People had special access to capital, to business, and there were bribes everywhere that were obviously in any tightly controlled economy, there’s a thriving black market because the reality is things still have to happen. I think a lot of these folks had access to these markets when everyday people didn’t and were able to rise up

Samuel: Over this time period, you know, it’s estimated that 50% of all of Russia’s wealth has gone offshore and is now in different jurisdictions outside of the scope of the Russian government. This is one thing that led to their big push in the middle of 2000 tens for the offshorisation to try to limit the amount of money that could flee offshore outside of the country. Do you think that the Russian government should be able to go if it wants to and seize these offshore funds?

Yan: It’s a tricky thing, right? Because it’s like a double-edged sword, right? You either have freedom, or you don’t have freedom. So you know, if you have the freedom you have cash and cash is to some degree anonymous, you know, and you’re free to move it around while you’re going to have criminals doing that, right? You’re also going to have everyday people doing that. Now if we say there are two possible futures from this point on. One is that all money is going digital. I don’t think that’s probably not a contentious point. Money is becoming digital very rapidly, and whether that happens, tomorrow or in two generations, it’s going to happen at some point.  The vast majority of payments over, you know, in the world are starting to become digital anyway. When money goes fully digital, what kind of world do we want? One answer to that is we want to have a world where every payment is tracked, traced, surveillance, right? That’s what banks and governments want.  They push for that. We have papers coming out of the IMF and other baking entities that say when we get to digital money, and especially central bank digital money where we have no intermediaries we can trace everything and that’s really great. We can stop terrorism and drugs and child porn and all that kind of stuff.

Offshoring of oligarch money, right? But what does that mean for the average person? Because we have to remember that criminals are a very small proportion of the general population. So what we’re saying is in order to stop these ten guys who have offshored millions of dollars, we’re going to check and surveil everybody’s payments, and that really leads to very totalitarian regimes. We already see examples of that. Look at China, where they have a social credit system where they’re monitoring what people are doing. Then they can push them out of the system and say, okay, now you can’t buy train tickets cause you smoked on a train.

Is that really the society we want, or do we want a society where people have freedom with their money? It does mean that there will be criminals that are also free of that money, but criminals are also free with the internet. There have always been criminals throughout history.

We’ve always stopped some of them, not all of them. It’s just a question of tradeoffs. For me saying that all money should be surveilled and tracked and we should have the option to press a button and cut a person out of the system or cut an entire country out of the system, that is a bad tradeoff to make because we’re really just saying we’re going to take everybody’s freedom away.

Just look at the Soviet Union, people were just not able to leave because they couldn’t take their money with them and that’s what that means. When you have capital controls, and you have surveillance, and you give the state so much power, you’re really saying people should be stuck in wherever country, whatever country they’re stuck in, and they can’t leave cause they can’t take their money and they can’t buy the things that they need to because those things are illegal because their government has decided that I don’t like that society at all, and that’s not the tradeoff that I would make.

Yan: I’m actually from Ukraine. I am from Kyiv, but I have not followed modern Ukrainian history, really, other than what I’ve heard on the news with, you know, things going down. I don’t really have any ties to the country anymore. There’s nobody, no family there for me.

Samuel: Covich, that’s the guy.

Yan: Putin’s guy, right?

Samuel: I mean, all these things are a very grey area, right? Because to say that somebody is pro-European, pro-Russian, it really comes down to the geopolitics of how the natural gas and oil is passing through Ukraine and who’s benefiting from that because it really doesn’t matter. It really didn’t matter who was in place. It just matters more about who is on top to be able to reap the profits.

From the industry and benefit their friends, in these types of governments, it’s wrong for Americans to think that the Russian government, or maybe not the Russian government, but that the Ukrainian government or the Russian government or any of these former Soviet States work in the same way that the American government does, and that it has the same trend level of transparency and the same level of, ability to protest.

There was this really amazing scene where people from Kyiv walked over to his residence. And this was his dacha that was outside of the city. And nobody actually knew that he lived there. It wasn’t on the government records that, that he lived there.

It was completely surrounded by a giant fence. And this, hundreds of millions of dollar residents was unknown to the people, who actually lived in this city. And the reason was, is that he was able to obscure the ownership records of his dacha by having a British shell company that was owned by a trust or some sort of other structure.

The shell company was able to purchase this piece of property and then own the dacha as a foreign investor. So, the Ukrainian president was able to funnel hundreds of millions of dollars through these types of shell companies and into building residences like these without anyone in the government knowing.

Yan: Yeah. So funny you call it a dacha because, for me, that word means like a cabin that we built by hand out of one.

Samuel: So, no one knew this. And the only reason that anyone found out about his ownership of this at his house and also his offshore ownership records was that when he had to leave in quite a hurry when the revolution happened, and during that time period, he did not have time to burn all of his records inside the Lake where all of his records and they just were laying there in the water. I mean, there were wet. Only through this luck of finding these records in the Lake where they able to find his full ownership records outside of Ukraine, and then through international courts, seize those assets and then bring them back into ownership by either the government or other people within the state.

This function of justice, of seizure, would not be possible with somebody who controlled their own private keys. If he had had a private key, unless they’d been discovered through somebody finding it in a Lake, let’s say he had a billion dollars in Bitcoin, right? It legally belonged to the Ukrainian populace. There’s no way to seize that. Right? And so while you call it a benefit, you don’t think that is an inability of democracy to function.

Yan: There’s that again it’s tradeoffs, right? I’m not claiming that Bitcoin is perfect. The question is, what’s the tradeoff? The guy stole, you know, a billion dollars from the nation in whatever way, but are we willing to trade off like the entire nation’s freedom for that?

Cause that’s what you’re saying, right? You’re saying governments that are able to stop transactions with a click of a button. They’re the ones that are abusing their people’s freedom, their people’s freedom, their citizens. Do you want it to live in a Chinese type of environment? Now, some people do, right? Some people think China’s a great example of a functioning state. I mean, I don’t personally, but they’ve been able to accomplish great things, right? Totalitarian governments, authoritarian governments accomplish great things because they don’t have any checks and balances. They can abuse their populace. They can lock up millions of people in the concentration camp, and that’s fine, but they can build great things. So to me, that’s a bad tradeoff. I would rather have this guy get away with stealing a billion dollars and have people have their freedom. Then lock up everybody else because we have to trace these criminals.

We’ve had criminals since the beginning of time, right? I mean, there’s, there’s always been criminals and processed the crime, right? What did he do? Did he kill somebody? Put them in jail? Did he steal something? Put them in jail. You process the guy as far as seizing money. Money is money, right? Governments print money left and right. Money is nothing to them. I’d rather have people be safe and have their freedom than have this fully digital world where anybody can just pray or take you out of the financial system and with a click of a button. That’s just very scary.

Samuel: I think it’s a common misconception that governments print money, right? But most money is printed through the private banking structure in the form of loans and other debt instruments.

Yan: Yes, banks create money through the creation of credit, of course, but to governments also, or central banks manipulate the price of money.

Samuel: What I’m saying is that in a democratic society, I’m just going to take the United States as an example. We have the best system. We are able to come to agree upon through hundreds of years of a functioning democratic process. Would you agree with that?

Yan: I think it’s pretty good. I think it could be better. Obviously, it’s better than the Soviet Union. I think one of the reasons that we’re so good is because of the checks and balances in our system, right? We have an inefficient system of government compared to a third-year authoritarian government or a monarchy or something like that.  Things don’t get done. We have Congress and good luck all the time. That’s why our system is actually resistant to tyranny.

Samuel: Exactly. I mean, that’s how the system was designed is so that things would be slow and it would take a long time, and it would have to go through many different committees and things just wouldn’t be passed in one day.

Yan: Yeah. It’s a system that actually requires consensus building, rather than, you know, tyrannical kind of top-down command, right?

Samuel: Right. We have a pretty well functioning democratic society, and from that democratic society, we’ve had a money system that has evolved through hundreds of years from relying on gold to essentially turning into a credit-based system. That’s all been the product of evolution through the democratic process. It may not be the best, right? But it is something that we’ve come to a democratic agreement on where we’ve had broad consensus among voters who are putting politicians into positions of power to make these decisions about how the money structures should be created.

Yan: Yeah. Although I think the system has been changing rapidly under our feet without necessarily overseeing every single thing that the governments or the banks do. For example, the digitisation of money has happened almost naturally, not because we voted it in and we didn’t all say, okay, we’re going to digitise all of our money is just happening through convenience. We’re all using visa and PayPal and Apple pay, not because we voted those things in is because they’re convenient and we started using them. As a result, our system has become almost entirely digital, which presents a new set of problems, which weren’t things that we designed for. It’s just things that evolved.

Samuel: One of the parts of having a free and open democratic process where anybody can come and put their ideas forward, is that we have also had a strong set of rules where if someone steals money from me I can (as long as they don’t steal Bitcoin from me), it’s really relatively easy for me to go and have that money returned, I just go file a police report. The police go through the banks, they can see all the transactions. And then after a judge rules that that money should be returned to me.  The banks remove the money from the person’s account, or their assets are seized. I’m returned my funds. That aspect of justice is something that doesn’t exist within Bitcoin.

Yan: Well, we also have rampant civil asset forfeiture abuse because of those things. There are tradeoffs to every system, right? Yes, you can have a system like that, and yes, it can be also abused. I don’t understand why Bitcoin isn’t compatible with that. I mean, if a judge wants to say you owe a hundred million dollars back or you’re going to jail. Well, if you don’t produce it in Bitcoin or otherwise, you’re going to jail, right? You can still enforce laws by jailing people, which is what governments do, and they’re really good at that.

Of course, it’s tradeoffs, right? We can’t design a perfect system. So here’s the question, right? Like before 9/11happened, we didn’t really have the TSA. Everybody could walk up to the terminal. We didn’t have any of that. Now, everybody goes through Pat downs, takes off their shoes, all of this other stuff. We’ve added this, let’s call it a freedom tax. We’ve added a freedom tax to go into the airport in order to stop a certain percentage of terrorist acts. Oh, I don’t know if people who are 18 years old today don’t remember a world without the TSA. They don’t even know why they take their shoes off.  They don’t know about the shoe bomber, none of this stuff, right? It just enters into our culture. So now going to the airport requires you to go through a full-body search, and then eventually it gets worse and worse, right? We’ve given up a certain amount of freedom to have protection from these terrorist acts.

So here’s the question: Is that the right thing to have done? Is it okay to give up that freedom because we want to be protected from a one in a million occurrence? And some people will say yes, and this is the difference between people who I would say prefer safety over freedom and people who prefer freedom over safety.

For me, I would rather not have the TSA. I would rather not be petted down. I’d rather not have people going through that. You know, I think that the TSA is a minor infringement on our rights, whereas something like a Chinese social credit system is a very major infringement on our rights. You have to balance those things with what are you trying to stop.

There are tradeoffs, I’m not going to pretend that Bitcoin is a solution to all the world’s problems, but let’s just take a step back and zoom out and say. Where all these problems actually coming from?

Where’s terrorism actually coming from? Right? You might want to zoom out and say, okay, terrorism might be a problem of these “liberal democracies” oppressing other people and bombing the shit out of them all the time, which might be causing the terrorism, right?

Why are they doing that? Why are they waging war? Is it because they need to have control over the oil supply? Is it because they need to have control over their money? Is it because they’re taking entire countries out of the system using sanctions? Like what is the root cause of all of this? And if you zoom out far enough, money is the root cause of all of these problems.  Having no freedom with your money is the root cause of a lot of these problems. The root cause of poverty, right? That like I’ve just started reading the book called debt the first 5,000 years. Why are all these societies impoverished? It’s because they’re in debt to countries like the United States.

All of this stuff comes from money. If you zoom out far enough and you see that that’s a solution to all these problems. I’m not suggesting tomorrow we replace all our entire financial system with Bitcoin and everything’s just going to be fine. Of course, it’s not. But two people are living in circumstances where they have actual oppression, actual lack of freedom, the ability to start saving a small pot of Bitcoin on the side in order to escape that oppression is a huge deal. I don’t think States are going away anytime soon. I don’t think any of this enforcement’s going away is giving people another option that’s in parallel to that.

Samuel: I have a slightly different view on Bitcoin. I mean, I like it. I hold it. My belief is that Satoshi was going down a different rabbit hole than he should have at the time in 2008 and the problem in 2008 and it’s still a problem now, is that there’s a large portion of the world which doesn’t have good access to dollars. Because of this dollar shortage that exists in countries like Russia and Venezuela and other places where you have a local currency, which is losing value against the dollar year on year, on year. There’s just not enough offshore dollars to meet the demand of these international countries. I think Bitcoin was in a naive way for people to be able to access some sort of dollarisation in the beginning to act as a hedge or just to access this international capital. I think this probably view existed for a long time, but one thing that’s really kind of changed my thoughts on all of this over the past, since 2018 really is the growth and the just sheer demand for the stable coin markets.

Yan: I would agree that’s a problem today. I would dispute that that should be the way that the world works. I don’t think the United States should be the bank of the world. I don’t think the US dollar, why do we get a special privilege of basically dollars our goal today, right? If you really look at it. Dollars are actually the only scarce currency in the world. Every other currency is to some degree traded against it or peg to it or whatever, right? Everybody wants dollars, and you’re right, there’s a dollar shortage across the world. But why? Why this is all a historical accident. It was all because of world war II. It’s all because of Bretton Woods. You know, why did we put this one country in charge of the world’s money supply. That’s really messed up. It really requires a lot of faith in the United States not to screw that system up. I don’t have that faith, honestly. I mean, look at what’s happening today. If you still have faith in how our central banks work after all of this. People will dispute what’s actually going on, right? The Coronavirus caused massive deflation or did we create a massive asset bubble since 2008 because of the liquidity injections that we did back then? There are different views on that, but why should one room of people in the United States control the entire world’s money supply? You have countries asking this already.

Samuel: But the Fed doesn’t. The Eurodollar system is a much bigger system than the dollar. And that exists in completely outside of the control of the US Federal Reserve.

Yan: I understand that, but again, that’s all to some degree, dollar-based, right? So I mean, it’s nominated in dollars. At the end of the day, if somebody wants physical cash, it has to come from the United States from the treasury, unless it all goes digital.

Samuel: Right? But I guess my question would be if you’re switching out in zero of dollars into Bitcoin, right? But you still have a credit-based system of banking on top, what exactly changes?

Yan: I’m not suggesting, so I’m not suggesting replacing the worlds dollar supply with Bitcoin. I look at Bitcoin as something that people can opt into so perhaps the dollar remains the world’s currency until, you know, the American empire collapses, and maybe that doesn’t happen for the next 500 years. People should have the option to take their wealth out of their country, and that’s what it comes down to for me. That’s where I look at Bitcoin as a supplement to whatever else you have going on if you live in a country where your currency is completely unusable.

Then you have two options. Either you try to get dollars whether those are digital dollars and some stable coin type fashion, you hope that those stable coins are still not regulated enough that you can move them around. It’s not like if you’re in Iran that you can be shut out of the entire stable coin system by the US government. But if you need to move out of those regimes, then you should have Bitcoin. That’s what it’s for, right? It’s for the feeding capital controls. That’s how I see it. I don’t necessarily see it replacing the entire world’s money supply, although I would say that going back to our conversation about why should the United States control the entire world; you already have this problem. The United States cuts out an entire country from the banking system, and it will just say Iran, you guys are bad guys. Sorry. No more access to dollars. Venezuela. No more access to dollars until we have your oil. Like whatever, right? We can just set the terms however we want.

When we do those things, and we already see this, all these other countries, which let’s call them Axis of evil countries, if you want to be political about it, but Iran’s and Venezuela’s and China’s and Russia’s of the world, they don’t want to have anything to do with the US dollar. They want to have their own system, and they’re already looking at how to settle trades between each other, and you have stories every day coming out; now they’re shipping nine tons of gold to each other. That’s what they’re going back to, shipping nine tons of gold instead of clicking a button and sending Bitcoin.

At some point, these countries, they can’t trust each other and can’t trust the United States. They’re going to have to come up with some other way of settling trades. Bitcoin’s just not there yet; today it’s not big enough for them. But, at the point where it is big enough, that could be a viable option for them. Perhaps if they can fix their trade and not be as reliant on the US dollar anymore, maybe they won’t be quite as so evil anymore. Right. I mean, again, zoom out. What is the root cause of all of this strife in the world? We forget where we live. We live in an empire. We are the dominant empire of the world, and everybody else is suffering under this empire. They don’t like it as much.

Samuel: Having just spent six years living in Russia, I mean, I much preferred living in the United States.

Yan: Right. Of course. I’m sure Romans loved living in the Roman empire too. We’re in a bubble, right? I love America. I would rather not live anywhere else. I agree with you. But look at it from the perspective of Iran who got shut out of our system. Looking at a perspective of a country that has been sanctioned by the United States, because the government might be “evil”, but the people there aren’t; they’re regular people are trying to live their lives and shutting them out of the dollar system, that’s really horrible. That’s what I’m talking about. We’re taking people’s freedom away when we do that.

Samuel: My kind of general thoughts is that Bitcoin and all the other cryptos exist as a means of gap finance. People in Iran and other places that aren’t able to access European or US banking systems, we’re starting to see this with the emergence of DeFi: the ability to access a functioning dollar financial systems outside of the United States and not under the control of the United States. One thing that’s really been catalysed into me from the growth of DeFi and seeing the use case of DeFi on Ethereum is that maybe Bitcoin isn’t supposed to be used as a payment tool in itself for daily transactions, but rather it’s supposed to be the electricity or the oil that creates the functioning, decentralised economy on top of it, through the creation of a synthetic dollar. This is coming to Bitcoin at some point where people will be able to create dollars, from their BTC as a collateralised loan, but it makes much more sense to have a low volatility form of payment. It’s used for cross-border transactions, for trade, for paying salaries rather than depending on a highly volatile currency or highly volatile cryptocurrency.

Yan: Yes, in that the dollar is less volatile than the coin, obviously. Remember that the lack of that volatility, lack of short-term volatility is traded off by systemic instability like the current crash of this current bubble. You can’t suppress volatility. You can hide it in the short term, but then it comes out in the long-term. How long does this system last? In the short term, I completely agree with you. People would rather have dollars than the coin. For the most part, people who really need Bitcoin are people who look at what these stable coins are. If you are in Iran, how do you get out of Iran? How do you, how do you, interact with the teller system? I don’t know the answer to that. Maybe they can.

Samuel: There are OTC places.

Yan: When the government sanction Iran and they say they can’t access these entities are not allowed to use. Let me rephrase my question. My question would be, you know, as long as you’re Tether and it’s this kind of digital thing, and you’re passing it around, everything seems fine. What happens when you need to access actual dollars from that other liquidity and how long is the government going to allow people to pass around synthetic dollars, between terrorist entities? You know, that’s the question

Samuel: That’s a really good question. I mean, I’d like to know that as well too.

Yan: I think as long as it’s small, they don’t care. It’s just too small to care right now. Once we have, you know, trillions of dollars moving through together, people might start to wake up to it.

Samuel: I mean, $10 billion is a lot already,

Yan: Not in the financial world. I mean, $10 billion is nothing

Again, I have no issue with any of this stuff, and I agree with you that in the short term, you know, people want dollars. I guess my bigger question, is that the right system for the world long-term? Should people have access to something that’s entirely outside of the financial system that isn’t under anybody’s control?

Samuel: I mean Tethers outside the financial system, right?

Yan: Well, but Tether is a company, so it is under tethers corporations control, and it is to some degree, not to some degree, but it’s entirely based on the trust that they have some kind of dollars in their bank account backing those synthetic dollars.

Samuel: Well, let’s just take a step back. So like other than Tether, you have DAI, right? And so a DAI equivalent is eventually going to come to Bitcoin.

Yan: It is possible. DAI has its own set of problems in that it is based on a theory which has its own set of problems.

Samuel: It is more about the general idea of having a crypto/digital asset that you use to take a synthetic dollar-based collateralised loan. It doesn’t have to be even dollar base. It could be a Euro-based, or it could be a basket of currency based, but you have a more volatile digital asset that they’re using to generate a less volatile stable asset.

Yan: But we agreed that there’s no magic in the stability of the dollar, the dollar is stable because of the United States, and because it’s widely used in commerce. It’s not like it’s magically stable because it’s the dollar.

Samuel: But it’s the most stable. I don’t know what’s going to happen over the next 50 years. There could be one that replaces it, or it could be some other type of things. Who knows? When people talk about moving their money away from risky assets into less risky assets, they’re talking about moving away into like dollars and treasury bonds.

Yan: I think that’s accurate. Again, I would agree with you in the short term. I would disagree in the long-term. What are we actually protecting against, when we buy Bitcoin? We are protecting against the dollar itself being broken in the future. As long as you think the dollar is not broken and it’s fine, and you know it’s stable, then you should absolutely get dollars in whatever form you can.

If synthetic dollars work for you, it helps you get out of your situation and an oppressive regime. I don’t have any strong opinion on that. I guess my opinion is really on Bitcoin for the long-term when I accumulate Bitcoin, and it’s not for myself. It’s for my children’s children, my grandchildren.

It’s for the possibility that the US dollar is actually broken, and we just don’t know it yet. It’s for the possibility that the world financial system is broken and we just don’t know it yet. As for the possibility that America will one day decide not to let people leave and implement some type of capital controls because the dollar will become broken, just like has happened in lots of countries all over the world.

Maybe America is immune to that. Maybe it is. I pray every day that we are completely immune to all the insanity that went down in the Soviet Union, Venezuela, Iran, and Argentina. You name it. I mean, I hope that I’m wrong. Bitcoin is a nice little thing to have on the side just in case those things come true.

Samuel: I hope the dollar stays strong forever.

Yan: Yeah. I hope the American empire lasts for the next 2000 years, but do I know that that’s the case? No, I don’t.

Samuel: When things fall, there’s a lot of calamity and chaos. People suffer.

Yan: It’s very bad.

Samuel: I really pray that we, like our system, is able to stay functioning and healthy.

Yan: One thing that gives me pause and concern is, you know, we talked about America. Why is America so good? It’s because our government is decentralised. It’s actually the decentralisation and the three branch, you know, checks and balances system that makes American government good, right? But I would argue that those checks and balances are the less effective if the state has strong control over money. Cannabis is legal here in Illinois. Now, can I go there to the cannabis shop and use my visa card or Apple Pay?  Now I can’t because they’re digital systems and cannabis is still federally illegal, right?

That’s a small way that the government controls my freedom. If I can’t spend my money in the way that I want, then I don’t have that voice, right? The question is if the government is decentralised to some degree, but they still have very tight control over the money, and when it comes down to it and when scary things happen in the world, like Coronavirus or terrorism or whatever, then we all run back to Uncle Sam, and we asked them to fix the problem, right? Give us more money. Give us more stimulus payments, give us this and that. And they have the button. Despite that, there’s credit creation. That’s how money gets created for the most part. Well, there’s also 3 trillion borrowed by Congress in order to pay out stimulus payments. Right? Those things are also how money gets created. As long as we let governments have control of our money, then it’s not really fully decentralised.

I would argue that the strength of the American government being decentralised in the way that it is, could be even stronger if money’s also decentralised if they don’t have control of the money. If money was more like gold when we had a fully functioning government with a gold standard. For millennia we had governments and we had gold. Occasionally we had bouts of Fiat usually to finance Wars. But most of the time, we had a functioning system of money where the government didn’t control the money, so they weren’t able to arbitrarily create more of it.

Samuel: So this is this pandemic, right? I’m talking about the actual event, right? This where you have an entire reduction in global aggregate demand at the same time at pretty much every country on earth is going into some lockdown for several months where industries are being shut down. I mean, these are not normal events, right?

Yan: I would agree. They’re not normal. I don’t know if they’re one time. I mean, why wouldn’t this happen again?

Samuel: Like another pandemic.

Yan: Why wouldn’t we have another pandemic, you know, 20 years from now?

Samuel: Well, we would be more prepared for it.

Yan: And we will do what? Shut down the economy again?

Samuel: No, it’s just there would be, there would be a better response. I think China had ample time to respond to the virus to prevent it from spreading.

Yan: Yeah, part of the reason is that they have a highly totalitarian government and they were able to implement like soldiers on the street walking around with guns, right? So that could be one way we respond to future pandemics to make it really effective to stop them.

Samuel: Right.

Yan: That’s what we want and the way we want it to go.

Samuel: At the next outbreak, don’t you think people overreact? I think for the next virus outbreaks that have happened in the next 30 to 50 years, you’ll see huge overreactions as people do not want to another 2020 happening again.

Yan: Potentially, right.

[00:47:04] Samuel: [00:47:04] all, all these things, I mean, what’s scary to me? I was in the Marines and I worked as a Russian linguist. Since there was no Russians in Iraq at the time, I got transferred into being a signals intelligence analyst. And primarily what we did is we looked at metadata to build analytical cases against people. We look at all the information that you’re generating the thousands of metadata. Now we generate billions of points of metadata every single day that tell our entire life story and for me the growth that thing that really worries me is the growth of the surveillance industry with our own consent, and, and not just from the government side, but also on the corporate side as well to where every single device that we use program that we use is really designed to track users and to track our attention, and to track us so that they can have better statistics on how they can market products to us or design better things.

Yan: Yeah, it’s somewhat scary. I mean, I don’t know if you have you watched Westworld on HBO?

Samuel: No.

Yan: You should absolutely check out the series, it really plays out where this goes. It’s very dystopian sci-fi obviously, but it plays out kind of where the society is going. It’s close to home.

]amuel: One thing that we had was like full access to these top-secret databases that had billions of points of metadata on individuals. A lot of this information was released in the Snowdon files in 2008. It was like a year or two after I got out.

When I came into Bitcoin for the first time when it was like five bucks, the thing that was so interesting to me was that how you could have a huge public database with all this metadata just out there waiting for someone else, so whether it’s a government or whether it’s a private company or anything else to take that metadata and then pair it with identifying information to build an analytic report in this case to be a financial analytical report on the person being targeted. I’ve asked this question to a couple of people that have come on the show before, but do you think that with all the advances that we’ve seen since the publishing of the Bitcoin white papers, so the development of like ZSnarks and some of the other privacy-preserving features, do you think that if Satoshi had access to these privacy features and advances in 2020 versus 2008 when he created Bitcoin, that he would have included a greater level of transaction privacy into Bitcoin itself?

Yan: I’m not sure it’s hard to say. I mean, obviously, I don’t know his motivations, but one thing we do know is the messaging embedded into the first block was related to the bailouts of 2008. It wasn’t really about privacy or anything else. It seems to me like he was talking about the sanctity of money as a scarce good as a something, he was very much into this whole idea of digital scarcity.

I think what was more important to him was having sound money, auditable money supply and things like that. Again, I’m just guessing there’s no way, this is speculation. Obviously, there’s no way to know what he wanted. With a lot of these privacy technologies, there’s a certain tradeoff with audibility. That said, Bitcoin, if the base layer is scarce, then other things could be more private. So, for example, lightning network payments could be more private. You could do transactions on a liquid side chain with constant confidential transactions there. There were other second layers that could be more private if needed.

The other thing I would say is that even on the base layer and when you’re transacting, we’re seeing, you know, the rise of coin join, which is people essentially mixing their coins with other transactions. There’s something called Payjoin, which just came out from a BTC pay server. If you pay somebody who’s running a shop, a BTC pay server, your coins are mixed together with the merchant.

As these things started becoming more and more popular, they kind of create a certain amount of herd immunity because most transactions start to look kind of messy and hard to trace and that would also say that Bitcoin is totally public and transparent, but it’s also pseudonymous.

In that sense, it’s way better than using PayPal or Apple pay or something like that, where there definitely is a tie between your identity and the transaction you made versus PayPal where that tie could probably be uncovered if you dig far enough and subpoena records from my IP address and all this kind of stuff, you could probably get to the identity, but it’s a lot harder than your typical current electronic money.

Samuel: I mean in the future, right? Or maybe even now is that the US government and all the other EU governments or whoever’s on the SATF, rules or like whoever’s involved with FETs. They are essentially demanding from any on-ramp that they should have full access to the person’s KYC information, their deposits, their withdrawals, and all of this information needs to be shared between all exchanges. If you kind of extrapolate into the future, any on-ramp that will exist in any capacity in the future will be sharing information with governments.

Yan: Of course. Yeah, of course. Once the coins come off of the exchange, you can mix them. You can do whatever you want with them, and you have plausible deniability. I mean, it’s pretty tough to say that you haven’t lost those keys in a boating accident. So yes, they’re identifying information. There’s also peer to peer exchanges now. This is a phrase I really liked from Andreas Antonopoulos, who again was kind of my on-ramp into Bitcoin, that these efforts, the KYC and AML, they catch the innocent and the idiots, for the most part, criminals are good enough to walk around this stuff as needed.  Most people are just trying to get their business done.

Samuel: Coming from an intelligence background, it is impossible for you to be completely secure with your information.

Yan: Of course, I agree with you. I do not disagree with that. I’m just saying what’s better? Is it better to have some amount of anonymity or is it better to have things like Equifax where everybody’s information is stored, and then a hacker gets 140 million people’s worth of identity information in one go?

To me, the world where things are slightly more obscured is better. I don’t think perfect privacy exists; it is almost damn near impossible. I agree with you to have a trail that’s totally clean, to have coins that have never touched KYC, you know, that have been mixed properly, you never logged into any centralised place. Yeah, you got to mine them yourself. You have to mix them. You have to be on a VPN all your life on tour. I don’t know what, and maybe never even associate your name with Bitcoin as I have online. Right. I get that. Of course. I prefer the world where you get to transact and not leave a trace in terms of your name and stuff like that in a centralised databases. We see every day, people’s identity data be stolen and used for nefarious purposes. Everything we do and decide has a tradeoff. Using these centralised systems, it has a tradeoff that your identity information is fully public.

That’s why I actually think the KYC and everything else on the exchanges are horrible. You’re just leaving giant honeypot for hackers. And that’s where people’s money will actually get stolen and where people’s lives will actually get destroyed because of the KYC. I think it’s a very lopsided system that tries to stop crime at the expense of actually creating more opportunities for crime.

Samuel: Yeah. Well, I think it’s probably a good point to wrap upon. You want to talk about Swan, and then we can wrap up.

Yan: This has been a very lively debate. We are at, and we are a Bitcoin on-ramp. We help you buy Bitcoin directly from your bank account. And we do it on a recurring basis because we believe that everybody should be building a small pot of Bitcoin on a recurring basis, just like they save for their house, for their mortgage, for their 401k. We want the coin to be that third bucket. You save a little bit for your house, a little bit for their 401k and a little bit for your Bitcoin stash. We make that easy with recurring purchases. We also have automated withdrawals to your Bitcoin wallet, so you can either leave it in custody with a licensed and regulated custodian and yes, we do KYC. We do have to identify our customers, begrudgingly, but after that, you can withdraw to your own, wallet. We also have a team of educators and podcasts, so we’ve created lots of content to help people new to Bitcoin understand why they should be saving some and how to use it.