DEBATE: BTC vs ETH | Justin Drake, Dennis Porter, & Muneeb Ali

hey bankless nation today we are having a special episode a debate about bitcoin and ether the infamous debate which one is money what is sound money which one is more sound money and joining me co-moderating this debate is dennis porter who i've actually done one of these debates with before so this is actually round two of a uh eth versus bitcoin ultra sound money debate dennis are you ready to get started with this yeah i'm ready thank you for having me on david i really appreciate it i had a really great time last debate that we

went back and forth it was mostly civil for the most part so it was a good back and forth we were able to discuss our points it was more of a general bitcoin versus ethereum type of uh conversation but this one looks like we're going to be focusing a lot on sound money aspect of bitcoin versus ethereum so i'm looking forward to having it we'll be joined by a couple of great ones as well absolutely yeah and so where as last debate it was just me versus dennis and then eventually we tapped in some people from the audience we are bringing in uh some technical people as well so i'm tapping in justin

drake and then dennis you want to intro who you are have brought along for your teammate yeah i brought along manip ali he's the founder of stax uh he's building on bitcoin is uh what they're working on trying to bring smart contracts nfts uh you name it all the fun stuff that you ethereum folks say can only be done on ethereum he's trying to bridge that gap with stacks so really interested to have him on but also the reason why i bought him on mostly for his technical skills technical savvy similar to drake really understands the

you know the framework of how these technologies work all right well without further ado i think we should go ahead and get right into the conversation about bitcoin versus ether which is more money and so we'll get right there after a moment to talk about some of these fantastic sponsors that make the show possible arbitrary is an ethereum scaling solution that is going to completely change how we use defy if you've been using ethereum for the past 12 months you've probably noticed the high gas fees and the slow confirmation times that have been plaguing defy too many people want to use ethereum and it doesn't have enough capacity for all of

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ledger.com grab a ledger download ledger live and get all of your defy apps all in one space alright guys and we are back to get into this conversation about bitcoin and ether what is more money uh so we have two new guests on the show today you guys just met dennis but we are also joined by muneeb ali and justin drake uh munib you want to tell us a little bit about yourself and your background and who you are of course thanks for having me uh so i'm a neb uh

my background is mostly distributed systems um i did a phd in computer science at princeton and then got into bitcoin in around 2013 and uh many of you might know me mostly from the bitcoin community but a little known fact that i was actually part of the genesis sale of ethereum and i have been involved in the ethereum community uh for example was part of the siege round of open c and a bunch of other things like that fantastic thanks for that that color munib uh if you are a frequent bankless listener you probably know who justin

drake is but if you are new to bankless justin uh tell us a little bit about yourself who you are where you come from and what you do in the world of crypto sure so um i'm justin drake from the afm foundation i mostly work on a set of upgrades to ethereum which we used to call ethereum 2.0 and that includes proof of stake and sharding i guess my background is technology i studied mathematics i was a fpga programmer in the past live um pyramid space so i know a thing or two about about bitcoin as well and dennis i know we talked a little bit

about you in the intro but also want to tell us a little bit about yourself and your background and how you came to be in the world of bitcoin yeah i jumped into the world of bitcoin 2017 tried to go all in on mining uh but that was a lost endeavor eventually i decided to kind of hunker down for a couple years do my due diligence study this asset study this market uh i'm a bitcoin only kind of guy some would call me a maximalist i prefer to go by bitcoin only but uh now i've jumped fully all in on the world of content creation so i started a podcast called smart people and i also do another

show called the update where i regularly update my listeners on what's going on on the space also a very uh avid and consistent contributor to twitter spaces where you do some of the better rooms also involved politically as well so helping candidates like erica rhodes in california's 30th district try to take down the most anti-bitcoin uh congressman in office right now fantastic thank you for that dennis and for anyone tuning in to bankless for the first time i'm david hoffman co-host of bank list where we are big proponents as ether as money decentralized finance and

overall living a bankless life and promoting tools that helps one live a bankless life and with that out of the way gentlemen i think we need to start this conversation by uh setting some foundations and the whole point of that this conversation is figuring out which one of these assets is more money but first we need to figure out what money is and importantly what is sound money so dennis in your opinion what do you think sound money is i'll keep it real brief and short and simple here i let's start with what

money is money is a tool we discovered it 10 000 years ago it's what helped us form societies we use it for storing value transferring value and measuring value for me sound money is money that is not prone to sudden changes appreciation or depreciation and purchasing power over the long term so pretty short and sweet has three uses storing transferring um and uh measuring value and then as sound money uh it maintains its value doesn't

go up or down appreciation or depreciation rapidly in the short term or long term obviously we'll get a little bit more into that as we continue but just keep it simple for now justin how about your definition of money and sound money what is sound money to you right so for me money is basically an asset which has monetary premium monetary premium being this this magic meme energy economic energy that provides this asset more value than the base utility and the classic example in

my mind is gold right gold has this industrial utility it's using every single iphone but if we were to try and value gold purely on utilitarian terms it would be worth maybe you know a trillion dollars but it turns out that it's worth it more like 10 trillion dollars and so this this extra value is monetary premium um partly because it's used as money and so it gains this premium in terms of what is sound money um for me it's kind of the the ability to simply to accrue and maintain this

this monetary premium and so basically there's a there's a space component and a time component this the space component is how how much monetary premium can it accrue how big can it become and the time component is how well can it retain this monetary premium over time i love that answer as well muneeb tell us about your opinions of money and sound money what what properties are required to produce sound money yeah i think in my mind uh money uh

differs from sound money quite drastically like in the sense that money would focus more on the medium of exchange part like anything that you can use on a day-to-day basis like for example if you're traveling you land in a new country you pick up the local currency there and then you spend it right like you don't you don't think about that currency as like a long-term store of value the minute you were to think about that currency as a long-term store of value you would actually evaluate it very differently so i think in terms of as soon as you start talking about sound money i think

you start looking more into the long-term store of value and potentially the unit of account right so if i'm if i'm holding sound money for over let's say a very long time like a decade or something uh then i i want to make sure that you know how will other things get priced against this asset so that's that's kind of like the difference in my mind so one concept that i use internally to not have this confusion about money and

sound money is i i use the term currency instead of money right because what is currency comes from the word current is basically money that flows and so really i think it's it's important to distinguish maybe for this conversation currency and you even said the word currency money and money which i guess for this conversation will be sound money so i don't think either of us either two parties the bitcoin or the eth party is interested in their money being currency i think we both are okay with it being currency but really what we're going

after here is the sound money property uh and ultimately this is basically like which assets number is going to go up the most uh more or less over time is if you kind of really bake down the things like which which one holds its value and accrues and captures its value over time the most does anyone have any problems with that differentiation i mean just to be clear there though sound money when you are looking at the definition of it uh it doesn't necessarily have to go up in value over time it can also go down in value over time as long as it's very

slow and incremental over time so if you're looking at the actual definition um yes we would all want our sound money to go up over time obviously but the true definition uh is a stable money not necessarily a money that always goes up in value okay all right so i think that's a very historical definition and i think the notion of money is is all around shelling points and these selling points change as technology progresses over time and so what might have been you know a reasonable definition of sound money in

the past you know you can list a bunch of properties if you know you are able to innovate and come up with properties that transcend these old properties now then suddenly you've redefined the notion of money and part of the reason is because there's this comparative dynamic or even competitive dynamic um and you know you can look at it for example with with with gold and bitcoin right um it's possible that bitcoin will defraune gold and gold will no longer be considered sound money you know maybe

because it doesn't have properties such as being digital um and so really it's important to look at these shelling points and properties in the context of time and innovation i think so differently there's a gresham's law in economics where called bad money drives out good and i think that's what justin drake is saying where well bitcoin and gold they have really similar properties but like what one do you think is going to drive out the other and i think maybe gresham's law is basically saying well money collapses

converges down to sound money over time i think it's important to know this there too that um it doesn't make it not sound money any longer i think just that in over history humans coalesce around the soundest money so gold didn't stop being sound money it's just that bitcoin is much sounder than gold and just like how gold store stole monetary premium away from silver bitcoin will still monetary premium away from gold so um just a little bit of nuance there i don't think we

necessarily disagree yeah i'll share my mental model here like uh in terms of when you mention the numbers going up far like i think interestingly uh like currency the solved problem right so like it like there's nothing kind of like new there we already have currencies and we use them on a daily basis but sound money interestingly is not a solved problem in today's world and uh whichever solution you look at you know look at bitcoin or eth i think both are in their discovery phase right now and in the discovery phase you're

likely going to go up in value because their market sizes are potentially much larger than the market market size today right and once once you actually reach a stable point then it will be interesting to see that the the sound money aspect does it retain value go up in value or actually slowly lose value from overtime okay i feel like that is now adequately defined so unless anyone wants any final statements about the definition of sound money i think we can go ahead and get into the differences of monetary properties of bitcoin and ether sound good all right so since uh bitcoin came first

in history i think bitcoiners get to go first on this one uh dennis munib what about the properties of bitcoin make it the most sound money meaning you want to go or me i think you can go first okay yeah for me the attributes that make bitcoin sound money that protect its ability to be sound money are the fact that its issuance is extremely stable and highly predictable

bitcoin has a hard supply cap so that's that cap is set in stone at 21 million can never go up can never go down obviously people could burn their bitcoin make it even more scarce uh it's also very extremely difficult to create it requires a large amount of energy labor theory of value kind of kicks in here in this place but most important to me the reason why i believe that bitcoin is the most sound money is

not just because it is extremely stable very difficult or nearly impossible theoretically to corrupt or manipulate by governments or those in power but because these components themselves cannot be changed so it's very stable highly predictable can't be changed bitcoin has a hard supply cap can't be changed it's very difficult to create and that actually goes up in difficulty over time which increases its value and makes it more sound so the

biggest part for me when you're looking at sound money is does it have the attributes that you and i will probably agree on but the one thing that i think is the most important is removing human control or the human ability to manipulate the issuance or the supply cap of that money at any at in any given time money before uh i bring in justin here do you want to add anything on to that yeah see my my lens is a little bit more technical like in the sense that

uh for me the the the fact that there's proof of work uh i'm like involved here actually adds to the fact that uh it is it is sound money like in the sense that uh you know back in the day people would actually do some work to dig up gold and that actually adds an element of scarcity here right uh and i think i think that that is a fundamental component of the the proof of work and i would say uh secondly uh when it's easy to define you know some sort of new cryptocurrency and

basically say that it has a hard uh cap i think that's relatively simple to do i think what's what's like much more interesting here is uh the community that has emerged over the last decade around bitcoin and how they have uh basically inherited this this value and they're kind of like the defendants of the the 21 million cap and it i think i think it's the uh it's the value added by the users of the network and the community of the network and the last part there would be that

bitcoin as a network was really designed from day one uh to be a global network uh where meaning that anyone around the world with you know a normal laptop computer could actually open up their laptop and independently verify that this is the correct state and i have the right number of balances so i think it's a combination of these things like proof of work with global access along with a community that is going to basically die on the hill of flight you would never be able to change

the change supply i think that's interesting beneath that you're adding in the community behind uh one of bitcoin's defense layers because uh i've frequently got into bait about like whether or not bitcoin has a social contract or not and many many bitcoiners uh will say that bitcoin doesn't rely on humans at all it actually relies on math and math alone that's one of the properties about bitcoin but are are you saying that there's actually a community human involvement that also puts up a

shield around bitcoin and makes it immutable i think basically what i've noticed is bitcoin makes it extremely hard to make changes at the consensus level uh so the threshold making any changes to the consensus level is extremely high like the number of miners required the number of scrutiny required for any even small changes and that that sometimes gets gets criticized as well that bitcoin doesn't evolve doesn't change that rapidly and i think the community uh where they play a role and i think this was very apparent in the uh and kind of like the block size wars uh

where the community was basically it was at one point even the big companies and exchanges were on one side uh but it was the average users who basically said we were not going to let this change pass through we just outright reject it so i i don't think that they have the property of coming together to define a change but they're just very very good at rejecting changes and basically saying that we will always fall back to the base case to make no change here justin has anything that dennis or muneeb said

raise a flag in your mind about the soundness of money yes um so i think the main red flag is basically the the security aspect of bitcoin um i i just don't see the long-term security aspect of bitcoin i think it's it's a broken design to be completely honest um i think part of the reason i think it's a completely broken design from a security standpoint is because it's lin it's security lindy resets every four years so every four years

um you know we're we're asking the question can bitcoin be secured on smaller issuance and in that sense you can kind of think of satoshi as kind of this uh this degen blockchain designer kind of trying to see how far he can push down the security of bitcoin until eventually it kind of breaks um and so it's kind of like slowly boiling the frog um over several decades um and kind of seeing uh if and when it

breaks um i guess the the answer that bitcoiners would put forward here is that uh bitcoin will be secured by by transaction fees um i mean we were to discuss that you know transaction fees is kind of grade b fuel for a number of reasons one of them is that it's very volatile it's also can be stolen but even if we remove kind of these issues if we just look at the quantitative aspect of transaction fees today transaction fees on bitcoin are about two percent

um of of the issue and so like 50 times less and if you compare it to other systems like ethereum it's also 50 times less and basically you can ask yourself why is that and i think the answer is basically that bitcoin provides very little transactional utility the utility of bitcoin is in the huddling is in the not moving you buy bitcoin you put in a cold wallet you hold it for two decades and then you know you sell it and so that's two transactions over over two to

two decades um and so basically bitcoin has in a way cannibalized its security you know plan by not adopting you know a virtual machine that allows for for for programmability and but then you know a bitcoin such as media might come in and say hey i i have stacks and i will provide programmability and i will provide you know scalability you know through this this sidechain but the problem with side chains is that they leach transaction fees um so if you

have a transaction on stacks that transactional utility is going to be captured by the stacks network it's not going to be captured by by bitcoin but then you might say hey hold on in order to have transactions on stacks we need to have you know deposits and withdrawals to and from stacks um and you know those would go through bitcoin and so you'd be tr you know paying fees on bitcoin but that's that's also not the case in the long term if you have a very successful side chain all the deposits and withdrawals and all

the bridging will happen natively with that blockchain like one very easy example is an exchange right an exchange can just hold a lot of of wrapped bitcoin on on on stacks and basically when someone buys bitcoin stacks it just goes directly to that user internally to the stacks and so um really the the model of scalability and programmability for bitcoin is inconsistent with it with its security and then once you don't have security you've lost you've lost everything you know and one of the things that you've

lost in particular um most likely is is your scarcity like the whole you know meme and narrative of having this 21 million cap is is an illusion right it might hold true in the short term but really what bitcoin is are doing is that they're trading off short short-term predictability um so they're trading off long long term predictively for short-term predictability so in the short term we can understand this this monetary schedule very very well but at some point it becomes unsustainable and

something must change in the long term i want to get neeb to jump in on the stack stuff but there was one thing at the very beginning that uh you had said that i thought was interesting that i'd like to address but maniebel i think addressed the majority of what you just said but in the very beginning you were talking about issuance and supply issuance um well the difference between i think really ethereum and bitcoin which is a very important distinction here is issuance versus a supply schedule there's no issuance rate on bitcoin it's purely just a

supply schedule and in 2140 when it is finished there will be no more supply issued with ethereum the problem i see when you decide to say well we need to have an issuance rate that we can manipulate or change you that's when you introduce the question of how much is enough how much issuance is enough for minimum viable security and unfortunately when you start asking that question the only person who can answer it is a human being and then thus being a human being coming into the situation it requires

human control and human manipulation over the monetary supply over the monetary schedule and so that's why i prefer a supply schedule um when you know when you say that uh it's only dependent on fees yeah that that is the future that bitcoiners see i'm so bullish on the price of bitcoin that i do believe that fees and they have over time if you look at it there's charts out there you can look up i can't post any here like i normally do on twitter spaces i can post some charts up top if you send me a link i can trim yeah there are charts that show the uh the fees are over time predicted to become the

dominant reward when mining but i would love for um obviously justin i'm sure you probably had something to say back to that but i think manip should address the stacks yeah i think that's a that's a that's a very uh well-known type of criticism for uh bitcoin's supply uh and like how would how would the incentives work once the bitcoins run out right and i think the way the way to think about this is that first of all let's separate out proof of work uh from the incentives form uh so proof of work will

keep functioning right like that thing is there as long as there are incentives for miners to mine they will keep doing the work and at some difficulty level and they will they will still secure that uh interestingly i think you can look at the phase during which the based rewards are coming out as almost like a bootstrapping phase for bitcoin right and i think the biggest difference between you know my mental view and justin's mental mental model here is that i actually don't look at bitcoin as a transaction network at all so it doesn't matter to me how many

transactions bitcoin is doing i look at bitcoin as a settlement layer right and that's that's literally how stacks is uh defined as well so it's actually not not a side chain like we call it a layer 1.5 and it has cross layer consensus between bitcoin and stacks meaning that the consensus transactions are literally happening with bitcoin so the stacks miners are heavily incentivized to pay very high transaction fees because they want to mine a block so if the incentives on stacks go up incentives on the bitcoin side also go

up and those incentives are not coinbase reports they are actually transaction fees so these people like if stax is valuable stacks has a you know 3.5 billion dollar market gap right now very small and then the grand scheme of things but if stax is successful and there are more incentives there that actually directly results in more transaction fees very high transaction fees because these people are heavily competing with each other and that's the settlement use case and i see uh bitcoin as mostly as a settlement player and i think that given the limited block space of bitcoin people will be willing to pay

insanely higher transaction fees to put any data on on the chain and so so i'm actually like not worried about uh the incentive mechanism for for work in the long term justin you have anything you want to say to that yeah i mean i i think the most interesting point is on the the settlement layer but i'm happy to also reply to dennis but um i mean i'm i'm very curious to to to know basically um how much is stax paying like the way the way that uh in in the firm land we have shared security

is basically through roll-ups where basically these these roll-ups pay for putting data on on the shards on the fm blockchain and this is exactly the words you use pay for putting data on the blockchain now my understanding is that bitcoin is not roll-up friendly so you can't have um you can't have this model instead you might have a a a different model and my question to you is basically um if you have twice as many transactions

on stacks does it mean that you bring twice as much data on the bitcoin blockchain my guess is that you're going to say the answer is no like there's going to be every single block you know there's at most a constant amount of block space that's going to be consumed and that's going to be orthogonal to the transactional utility that that stack is providing yeah so that's that's that's not not how it works and basically let me clarify that roll up quite a little bit so i think the only difference between roll-ups uh on the

ethereum side and roll-ups roll-up type systems on the bitcoin side is the computational power right so bitcoin does not have a full tiering complete programming language but it does have bitcoin script and you could do limited type of computations there we don't even do that right so we mostly are automatically publishing hashes on the bitcoin site but this is actually cross consensus meaning that uh part of the part of your application is literally running on the bitcoin site i'll give you an example of a bitcoin lending

application so the bitcoin lending application has your bitcoin on the bitcoin main chain if you're lending your bitcoin you're actually paying a bitcoin transaction fee to send out your bitcoin your collateral in in a stable coin could be in a smart contract on the stack side right so you i think the fundamental disagreement again between the bitcoin ethereum camps is this idea that you need a full tiering complete language at the base layer uh in our world we're like you don't need the full theorem complete language at the base layer you can still build applications without having the full tiering complete

language okay so i mean the keyword that you said here was hash right and not data and there's a very different distinction between a hash of the data and the data right hash is constant size yes but ever it depends on it it does depend on the it's the order of applications not order of something else so it's order of usage how many users how many applications are but let's even forget about hashes at the at the end of the day we're talking about a very scarce resource which is the block space i

think you and i would agree that the block space can't grow infinitely so the block space in ethereum is is scarce block space and bitcoin is scarce and at some point the transaction fees is really how much are people willing to pay to write anything doesn't matter if it's a hash doesn't matter if it's something else if they're willing to pay to write to a scarce resource and that's where the value of the transaction fee is coming from it does matter because if you're making one single checkpoint every single block for example then you're putting you just need you know one transaction per block