The Power to Mint Money

Bankless Nation, welcome to another episode of State of the Nation. At least that's the format we're trying to keep here. But the guest today is just you and I, David. And we are the guests. Just you, actually, because I'm going to be uh walking through a concept that you really wanted the Bankless Nation to understand. You think this is very powerful. The title of this episode and the theme is The Power to Mint Money. The Power to Mint Money. And I think, David, as I'm looking through what you've got prepared for us, kind of this this agenda, um, you've identified some patterns that have been found in every single bull market to date.

2013, 2017, 2021, and 2022, how they've grown and also how they've fallen. And you're using that as a predictor,

a way to sort of understand the future, the next bull market, and how this cryptocurrency industry is going to evolve. So I think it's a powerful model that you're using and this uh this repeating uh you know pattern. But you tell us, what are we in store for in this episode?

We're in store for a lot of things. Uh I I think this hopefully uh turns into uh a kind of episode that I think only bankless can really produce, and which is why I'm really, really excited about this. This is one part, a history lesson about the history of the crypto industry thus far. What was the 2013 bull market like? What was the 2017 bull market like? And of course, what was the most recent bull market like, and what are the common denominators between all of those things? So if you only came in, bankless listener, for the 2020 to 2021 bull market, this might be really useful to just take a snapshot in history about the bull markets that happened before your arrival. Uh Ryan and I can speak very uh very well about the 2017 bull market. Uh the 2013 bull market was before both before our times. However, it was, of course, much more simple to understand because of how early it was. Um, but understanding these things, and then also understanding at very first principles what this whole crypto industry is based on, can we can extend this forward into again what is the next bull market going to look like, but also just what does this mean for humans? And I'll give a little teaser here. Every single bull market is noted, is marked by a Cambrian explosion of assets. Because what is this industry based off of, Ryan? The free and open and permissionless ability for humans to mint assets, which is previously a superpower that was gated by

Uh governments, monarchies, any sort of social elite. It's the 1%, if you will. Bankers. Bankers. Yeah. Well, this also goes back to Roman times, where the concept of uh coinage was even pr produced in the first place, and leaders, like government leaders of the Roman Empire, would start to dilute uh the value of their coin by adding in fake metals into gold to dilute them. So like the concept of seniorage and dilution of fiat of currency has been something baked into humans forever, but only the elites had this power. And for the first time in human history, humans have this power to mint new monies. And every time we express this power in the crypto industry Rhine.

bull markets happen. Twenty thirteen, twenty seventeen, twenty twenty one, and I'm predicting twenty twenty five ish, whenever the next bull market arises, you can bet that another Cambrian explosion of assets and asset minting will arrive, and we will go through this story and unpack every single nuance along the way.

There it is. It's always been about tokens. Tokens all the way down. Every single time. Every single time we've had a bull run, it's because of one thing. We've invented some new way to issue tokens. I think that's what you're saying here, David. Guys, uh we're gonna explore that. Um but before we do, gotta shout out our friends and sponsors over at Um Alright, David, uh give us the last tease.

Comment in the sh in the YouTube I need to read it, Ryan. Uh uh Sticks intern asks, can't an AI like Ryan just do taxes automatically?

This is not for AIs, alright? This is for all the regular humans listening to this.

It's not for robots. We have other powers. I mean robots have other powers. Um

why we so w why did you decide to put this together? Other than David um

Having a sick

list that had to

to get a gas guest ha catch the flu this morning and and cancel last minute. Um and then we're like, you know,

who should we bring on as another guest? And we're like, hey, I'm throwing my hand up. I want to be the guest because I've got something to say.

be a

Um why is this so important to you? And what what should listeners really look out for in this uh this Professor David episode as we get into it?

classroom time with bank lists. Yeah, uh again, like I said, this is I think uh an episode that I think you and I are particularly good suited for for uh producing. It's talking about the crypto as the the details of it, the the details of this these last bull markets, but also going down to base principles of crypto is like what does crypto really unlock for humans? But we'll end with the of course the great line with great power comes great responsibility. And this related to some of the uh securities conversations that we also had at the beginning of this year, where like I got in trouble with the apes because I said everything, all apes are securities, implying that everything is a security, which

Exactly, yeah. Uh but then bringing up the broader conversation as like, guys, we want our assets to be bullish, and that is what securities laws are. And so we have this newfound ability called being able to mint a token, mint an NFT, mint an ERC20 token. And that power has previously been restricted and gatekeeped and controlled by the elites. Now we all have it. But we also need to understand that now that we have this power, with great cap power comes great responsibility. So, how as humans, as humanity, are we going to contend with the fact that we have this superpower that can be very destructive as well as very constructive? Uh, so some philosophy, some history, some crypto alpha, it's all baked into one, which is why I wanted to do this episode.

Fun fact by the way, did you know that David's uh nickname in high school was Toby McGuire? Spider-Man movies. Great power comes great responsibility. I learned that about uh 18 months ago about you, David, and I don't think I'll forget it. But guys, you're in for a special episode. We get you in the classroom today. Talk about all of these things, talk about the power to mint money, what that means for the opportunities in crypto as well. Before we get into the episode, we want you to uh stay tuned because we're going to talk about the sponsors that made this episode possible. In particular All right, David, let's dig into this. I I think the first question we have to establish and set the context for is this question of money.

What is money?

I think uh if you've been a longtime bankless listener, you've probably heard Ryan and I talk about this. But if people think like, oh, money, it's the cash in your wallet, right? It's the number in your bank account. Uh but we really like to get deep here on bankless, of course. Uh and so I'm gonna pull out a quote from Yval Noah Harari, who's uh uh the author of the book Sapiens, which uh is I know Ryan is one of yours my favorite books. Uh the quote goes The story of money is more important to the evolution of society than religion, corporations, and a host of other human imagined institutions. Money is probably the most successful story ever told. It has no objective value, but then you have these master storytellers, the big bankers, the finance ministers, and they come and tell you a very convincing story. Look at this piece of paper. It's actually worth 10 bananas. And that story works. Try telling that story to a chimpanzee, it won't work.

When why when I so I say end of that quote wh wh when I say that quote, Ryan, what triggers in your brain?

I I love it for so many reasons. Uh first of all I think this quote comes from the book Sapiens where uh

You've all know uh Harari paints humanity as a storytelling uh species. He says that storytelling and our ability to work collectively, cooperatively, that is the thing that makes humans special, humanity as a a systemic uh single entity. And it it's crazy to me that how well he identifies that and just kind of lays it bare. He calls it the story of money.

Mm-hmm.

Mm-hmm.

Right? And that another word for story that we might use is um

In in crypto is meme. The meme of money. The narrative of money. Because what actually is uh what actually is money other than a story, other than a meme, other than some shared belief that we all collectively reach consensus on that this particular piece of paper or these digits in a bank account somewhere has value.

The reason this is so fundamentally important to me is because like um I think that for most of my life prior to crypto I never gave a thought to what money actually is. Right? I just kind of take it for granted. I've never I I never kind of considered that um it takes a collective group of humans all thinking the same thing about money for a money to actually manifest. And if suddenly we all stop viewing a certain piece of paper or a certain denominated uh digit as money, then it ceases to be money. It's so weird this ability to kind of manufacture something from nothing through shared uh cooperation and shared coordination, but that's exactly what we do with things like money. There are other institutions like this, of course, like you know, he talks about the the LLC, the corporation. These are also shared stories, figments of our imagination. But money is perhaps the most powerful because it is underneath all of the other things. So uh that's what I think of when I hear this quote.

Yeah, and I think that's really great context. And we're gonna start to apply some of these thoughts about storytelling behind money, because it's not constrained to just money, actually. Like think about Tesla stock. Great story behind Tesla stock, and perhaps that's why the valuation on Tesla has been so high. And so this is really a uh the story goes beyond money, and it's really just finance, right? There's a there's a market capitalization to a lot of assets, and the how valuable these assets are are a large part about the story of the fundamentals being told. And so it's one thing to have fundamentals, but it's the story around fundamentals that really creates that market price in the secondary markets. We just got out done with our podcast with Chris Bernsky, and the theme of that episode was really about how markets are just psyche. And when there is a story told about something, that is the world of finance. Finance is about the difference, the elevation of the value of assets above and beyond their fundamentals to bake in future growth. And if you can tell a good story, you can tell a good story about future growth, you end up ultimately impacting the valuations of these assets. And so

I I wanna pause there too, right? On this idea of like somebody's I know somebody's thinking they're back of their mind is gonna throw their hands up at this point in time and they'll say, But David, I went to business school, okay? I uh yeah, I got my MBA and uh they told us how to value companies.

Right? It's discounted cash uh the net present value of discounted future cash flows, right? So it's DCF model discounted cash flows. You model that over time and you get the value. Just because uh things trade off of their fundamental value, you know, um doesn't mean that like they have fundamental value. The fundamental value is driven by, as I was taught in business school, discounted um net present value of discounted future cash flows, basically, right?

Even that, though, pause and think for a second. Even that model itself

discounted value of future cash flow. That is a story.

Right.

It's just a story that we all r you know uh reached consensus on sometime between like the 1940s and 1970s. And it's a story that became so popular, it was put into business school textbooks and how to value a company and baked into our psyche. But it's still a story.

Right. And it's a good story, and it's perhaps the correct story, as in it is the correct way to value an asset, but it's a it is a story nonetheless. You can never escape it being a story.

It's only correct if we all agree it's correct. Right.

We could all decide to say, no, actually, you know, profit doesn't matter anymore. It's all about growth. It's all about revenue. And you kind of change the, you know, the way you fundamentally value you just change the story and then you change the valuation of every company. In fact, I think some somewhat that that's what sort of happened with stocks and other assets over the last 10 years. So just even when you think there's not a story is the point, there's still a story behind uh the value.

That is the story, yeah. Uh-huh. And so this brings us to the question: all right, what is crypto doing? It's doing a lot of things, uh, distributed systems, solving the Byzantine generals uh problem. I think in the context of this episode, I'll make the claim that crypto is shattering the current story of money. And the current story of money is a paradigm of fiat currencies and largely just the US dollar. If you look at the market cap of all fiat currencies, the story of fiat currencies is really the story of the US dollar, especially when a lot of fiat currencies are just based around the Fed, basically. And so what is crypto doing? It's shattering this story. Uh, and so I'm gonna share my screen here real quick and share uh what I think really breaks the fourth wall of money, which is the one trillion dollar coin. We are looking at a coin that is worth one trillion dollars. I don't think this thing ever got minted, but like the thought experiment itself is the point. Where like to me, the the idea of the one trillion dollar coin like goes full circle about the farce of fiat money. That's it starts to like break through and puncture the fabric of reality for so many people. When they see a one trillion dollar coin, it really begs the question alright, what's money? And so

Crypto obviously didn't produce the one trillion dollar coin, but at the same time that crypto is arriving on the scene, the fiat money system starts to fall apart. And so we are starting to puncture through one story as another story arrives on the scene. And this new story is crypto money, right? Is is

But but the one trillion dollar coin, th this is not just a um a fabrication, this is actually a serious proposal, right? Is this

serious proposal, yes. Which is then treated by a as a farce by the crypto industry because we get it.

Well, I I recall it like uh originally emerging during the um you know the debt ceiling crisis

Mm,

way back in you know the early twenty tens as uh you know something that was um a serious proposal by Congress at the time. And then I recall recall it uh emerged. Do you remember in March uh twenty twenty two, the beginning of uh COVID, Rashida Taleb in was an advocate of this too.

mm-hmm.

Uh and uh she was talking about this this could be a good measure to take uh in response to sort of some of the

debt cycle type issues involved with COVID. So these are actually serious proposals by our government bodies and our legislators and those in in power. So the one trillion dollar coin is not just a thought experiment, it's like an actual proposal.

Mm-hmm. Yes, it's an actual proposal from the people who are still inside of this story of fiat money. And then the crypto people who have like really deeply thought about what is money understand that this is a farce from our perspective because we were kind of like quote unquote enlightened to this concept of money, like we understand the concept of money. And so this is to me, this is what really crypto is doing. It's shattering the current story of money, and it's taking the power around storytelling, around money, and it's giving it to everyone, right? Like mint, make a new blockchain, make a new token. Uh, this ability, I've I've minted an ERC20 token, I've minted a handful. I have the power to mint new tokens, and if I wanted to, I could engage in a storytelling campaign about my tokens, right? Except, so I want to make a clear difference is that crypto is shattering the illusion of the dollar, but in its place, it's not giving us another new money, it's giving us a new ability. It's not Indiana Jonesing where it's taking away one money and replacing it with another, although the Bitcoiners would love to tell you that that's what it's their Bitcoin is doing. Instead, it's crypto shattering one story of money and giving us the ability to tell any story about money. So we're not getting a new crypto money to replace dollars, we're getting a new ability. Does that difference make sense?

It it does make sense. And I think that the maybe the link here with the story of the one trillion dollar coin is what made that so audacious is that the US government was essentially saying we can mint a trillion dollars at any point in time.

Right. Mm-hmm.

They're basically saying, like, uh yeah, all of that point system that's out in the economy, um, we control it and we can inflate the number of points at any point in time, and we get to control that, right? And what you're saying, I think that is um, well, crypto gives that power into the hands of the people, right? Into the hands of communities, and it sort of lays bare that um this is always what people do.

Right.

Right, is is basically like it's it's all about a shared story and a narrative, and somebody has the ability to mint. Every money system that was ever invented, and generally a small group had the power to mint. Right. Now this is democratizing that ability, the power, the power to mint. Uh and what you're saying though is that it's a broader story, it's more about kind of the verb of being able to mint rather than a specific coin kind of knocking out all of the previous versions of of minted coins.

Because if crypto just came in and said, like, oh, the dollar's out, here's the new money, it's kind of like old boss, same as the new boss. It's really much more powerful if crypto gives us the power to make any money. That is the and that and that's also in line with the progress of the internet, right? Before we had before the internet, we had like, I don't know, like six, five, a handful of telecommunications news broadcasting services. And then the internet came and then we had like 10,000 bloggers, right? And so new technology comes and it enables a thousand of what was previously centralized and controlled and elite to be democratized to the masses. And so this is what crypto is doing with money. We have a few fiat currencies, mainly the dollar, also the euro, Japanese yen. And instead of just like replacing it with a new better word version, it's just opening up the ability to make any of these things up to everyone, to the free market, right? So it's it's replaced the dollar with the ability for any money to come into existence. And so that is really what what is crypto here to do? It's here to democratize the power to mint new assets and let the money, what what money becomes adopted as a result of that, up to the free market, rather than any sort of like top down and controlled authority.

And David, let me ask you, when you're saying money, you're using that as shorthand for any asset that is valuable. Am I right in that?

Uh yes, any asset. I'm not including NFTs. Any asset that has a premium to it.

So you're not just saying, let me let's be clear about this. You're not just saying when you say when we're using the term money in this episode, we're not just saying saying things that are a store value, medium of exchange, unit of account, things like the dollar or the euro or the yen or like you know nation state currencies. We're also saying like the stock, for instance, the additional value um that you know you might store in in stock. That would be a type of money, a type of asset we're talking about powered and mint stock.