Lessons - Understanding Bitcoin and "Shitcoins" | Samson Mow - CEO of Pixelmatic and JAN3

In this lessons episode, discover the essence of Bitcoin and its role as decentralized money. Learn about hyper Bitcoinization, the differences between Bitcoin and all coins like Ethereum and the criticism surrounding their centralization. Unpack the challenges of smart contracts, DeFi and governance tokens and understand their impact on the future of blockchain technology. You mentioned that one of the outcomes of this particular battle could render Bitcoin quote unquote meaningless. But I would like to understand because I don't know if there is a across the board. I'm sure you have a very defined meaning for Bitcoin, but across the board, it doesn't seem like there is a universal understanding of what it should or should not be. So what is Bitcoin's meaning? Is it something supposed to be transactional? Is something supposed to be a store of value, more symbolic of gold or something like that? And then I'm also curious about if you are very bullish on Bitcoin, and I only know enough to be dangerous. So if I'm speaking, you tell me. But I'm not as into it as some people are. But if you are very bullish on Bitcoin, and I also want to understand the place that Ethereum and blockchains from my understanding operate like an OS or an operating system and you build things on them. So that's just sort of where I'm curious about because I want to unpack that. But first, let's describe what Bitcoin is, how it has meaning versus what is a meaningless version of Bitcoin in your in your interpretation. So I guess I'll go with the easy answer first. And is that the question is, am I bullish on Bitcoin? I'm very bullish on Bitcoin. I see Bitcoin as the ultimate end state. And that is what you're asking about earlier. What is hyper Bitcoinization? Hyper Bitcoinization is the point at which we don't convert back to fee at money, similar to how you don't convert dollars to seashells anymore. You might buy a seashell for a decorative thing or a necklace, but you're not going to buy seashells and hoard them to store value, right? But the other part is what is Bitcoin? And the answer is very simple. Bitcoin is simply money. So it is all of those things that you mentioned. It is a store of value. It's a medium exchange. And eventually, it will be a unit of account. And on some levels, it's ready a unit of account. But what is a useless version of Bitcoin? I would say that is Ethereum. Ethereum is centralized. It's basically a central bank digital currency at this point, because it's just big institutions running the chain. So it's kind of defeated the purpose already. You don't have- Is it not a money ripple? Excuse me, just to understand, is that similar to ripple in terms of- It's centralization. It's similar to ripple. It's similar to FTT. It's similar to everything. So you have Bitcoin on one side of the spectrum, which is decentralized, permissionless, immutable. And then you have everything else on varying levels of uselessness, right? So I think there are some cryptocurrencies that you could say are relatively decentralized. But for the most part, 99% of them, they're all masquerading as decentralized. They stood up with Swiss Foundation somewhere and they say we're decentralized. But it's really vitalic and his buddy is deciding monetary policy. So you effectively have replaced the Federal Reserve with a bunch of guys on a Zoom call that know nothing about money, deciding what money is. And right now, I mean, they're on a kick to make Ethereum sound money. So they're trying to implement monetary policy and make it more valuable, right? Like reducing the supply, burning fees, locking things up so that people can't withdraw from stake pools or whatever. But that can change. Like if you can change in one direction, you can change in the other direction, right? So when Ethereum prices high, they can say, well, we need some inflation. We're going to print some more. And this is totally within their power to do. And this is why a lot of Bitcoinists call Ethereum a shitcoin because it's so malleable. They can change anything they want. It was hacked. There was a Dow hack. They rolled it back on the chain. And I believe that was the inflection point for them to just fail. They could have also, I think that was the first like SEC investigation into anything crypto from not mistaken, wasn't it? Perhaps. But I mean, Ethereum is really an unregistered security. And a lot of these things are unregistered securities, FTT included, but pretty much every crypto is an unregistered security. And this is why Bitcoin is trying to distance ourselves from all those things because they are trying to affinity scam and say, we're like Bitcoin. We're the same thing. And they want Bitcoin to be a subset of crypto, but it's actually very different. Very interesting. And I'm super curious because actually grabbing for this interview, I saw you actually did a podcast with Vitalik and I didn't realize now I understand whoever the host was. I can't remember his name, but now I understand why he got you both on that call. Yeah. So if I didn't listen to the whole thing and now I probably will after this section, I should have. I didn't realize it was such like a contentious podcast, but if you were going to say this to Vitalik, what would what's Vitalik's argument? Because that's a pretty, it's a pretty bold claim. I've never heard this claim before that Ethereum is a shit coin. I've heard a lot of shit coins are shit coins, but not Ethereum. Well, things every shit coin likes to call other things shit coins and they think they're not, but they are. So I remember that all. Dolecoin was like laughing at other things and saying, oh, they're all shit coins and they're going to fail. We know how that ended up. Yeah, you know how that ended up. But Ethereum, it's just malleable. If you look at some of their early recordings of their meetups and things they're talking about their ICO, that in itself is an indicator that it's a security. It's an effort by a group of people to make money and attract investment into their project. It's just that they don't have a company. But if you look at everything that Ethereum does, it's basically a company. A DAO is basically a board of directors. You're just saying it's a tokenized thing and therefore it's not under the existing framework, but I think regulators and the CFTC and the SEC, they're starting to understand that a lot of that's just bullshit. It's really a security's offering that you're trying to pretend is decentralized. And I think the time is running out for these guys. Now, then that sort of, this is a great way to sort of dive into the thing that I alluded to earlier, which is smart like smart contracts built on Ethereum. I've never in my life heard of a smart contract, which is again, if Ethereum's EOS and you're saying it's a centralized OS and the points you're making are very valid, then you have all these programs built on all these smart contracts and all these other things that we've now, you know, it's blown up into everything from DeFi and NFTs to whatever, I don't know if they're all built on Ethereum, I don't think they are, but a lot of shit has been built on Ethereum. So I haven't seen much built on Bitcoin. So why has there not been more of an explosion in smart contracts and the understanding that Bitcoin can be an underlying OS for all these applications? Well, you don't really need an underlying OS. The world doesn't need some sort of OS and if it did have an OS, it should be decentralized, but you there are things built on Bitcoin, but they're not the same scale as Ethereum simply because the Silicon Valley money machine is not investing in companies building on top of sound money. Silicon Valley itself does not understand sound money. They don't even understand gold barely. What they're interested in is a quick turnaround and a quick gain on their investment. If you watch the all-in podcast where you have Chamath and David Saxon, those guys, they're all talking about Salana and pumping their bags, right? But what the VCs want is super fast liquidity and turnaround on their investment and they can achieve that through investing in these token projects that have no real purpose or utility. It's just an easy way to dump on retail investors. So they don't need to wait seven to ten years for a company to go public. They buy Salana in the pre sale and discount and sell it to retail investors and then they're good, right? So this is why there's such a big, big push for all of these projects in smart contracts, right? At the end of the day, you're building smart contracts which are not necessarily immutable or unchangeable because they build back doors into them. If you Google smart contract back door, you'll see a lot of these smart contracts. They say, you know, code is law and they've written their rule set in here, but then there's like an access point where they can shut it off. And just like a five-minute Google will show you there's so many of these cases and all of them are very insecure. If you Google DeFi hacks, you'll find pages and pages of hacks every week. There's a DeFi hack because they're just building JavaScript constructs that are unsecure and have back doors and centralized. So this is why none of this is really meaningful. Even a smart contract itself needs some sort of input. It's not like a smart contract will just run on it, run on its own. If you go back to the simple example of buying real estate, there has to be some proof that the transaction happens and then the funds are transferred, right? So there's always some input into these things, but the bigger problem is your building smart contracts and DeFi stuff that is just relying on trading governance tokens or worthless tokens like fruit, dog tokens for other dog tokens and other governance tokens. So it's really a house of cars where you're staking some governance token to get another governance token to trade some other governance token. At the end of the day, none of the governance tokens even are meaningful because decentralized and it's a small group of people that's going to decide regardless of the governance tokens direction. Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.