Kitco News special coverage of Bitcoin 2022 is brought to you by CoinPayments. Crypto payments

made easy. We're back at Bitcoin Miami and joining us right now is Paul Sztorc. He is a self-proclaimed

Bitcoin maximalist and independent Bitcoiner. Welcome to the show, Paul. Hey, thanks for having

me. Thanks for being on Kitco. Paul, I read your bio with great interest. What does it mean really

to be a Bitcoin maximalist? I've heard that term used a lot. I've spoken to people who claim to

be Bitcoin maximalists. Everybody seems to have a little bit of a difference when it comes to

their thesis on Bitcoin. What's yours? Well, I think Bitcoin maximalism is the idea that it's

better to focus all of your energy on Bitcoin and not these competing attempts at constructing an

internet cryptocurrency. This thesis has gone through a lot of transformations, but it began

a long time ago when people would make, for example, Litecoin. The effort it took to create

Bitcoin from a blank piece of paper, like what Satoshi Nakamoto was able to achieve,

that was an enormous amount of effort. Litecoin just copied and pasted that and changed one or

two things, and then it purported to be this new thing. That was, of course, probably the beginning

of the cultural movement to suppress the competitors. With money, you only have one.

If you go to Japan, you mainly use yen. You don't use U.S. dollars there. In any given place,

there's usually one currency. That's the maximalist broad strokes.

Let's go a little bit deeper and maybe clarify for the audience. I'm just going to give you a

series of true and false statements. If it's false, tell me why I'm wrong. A Bitcoin maximalist

thinks that Bitcoin has better potential as an investment than any other altcoin.

Yeah, I think that's true. That's also what most Bitcoin maximalists would say.

Okay. BTC, Bitcoin is the only crypto that has the potential to be a store of value.

I think most Bitcoin maximalists would say that. It's true. I think I would also say it's true.

Nothing is 100% certain, but yeah, I think that's basically true.

Finally, Bitcoin is the only coin with the potential to be a widely adopted currency.

Yeah, I think that's also true. It's not guaranteed.

So you don't see Ethereum, Solana, anything else potentially taking up the mantle?

Well, I'm a proponent of this idea called the sidechain, which is this idea where you have

a second piece of software that is basically emulating Ethereum or whatever. It's like

BitEthereum, and it does everything Ethereum can do. You take coins from Bitcoin Core,

where there's already these 21 million coins, 19 million coins, and you move your coins over

into the Ethereum world, and you can do whatever you like over there. And then that way, you

replace all the technical features of the rival piece of software. So you get all the different

pieces of software you like, Solana, Ethereum, whatever, and you can do whatever. Any idea you

like, good or bad, you copy. The sidechain is an altcoin without its own coin. Instead,

it uses the 21 million Bitcoin. Let me just posit a counter argument,

not necessarily my own view, and feel free to challenge me on this. So when you're talking

about the utility of Bitcoin as a peer-to-peer form of payment, some would argue that's failed

because there's other coins that are better as a peer-to-peer system. When you're talking about

Bitcoin as a form of payment, there's other coins, payment coins, that are better in terms of their

transaction speeds, transaction costs. When you're talking about Bitcoin as a store of value, there's

things like stable coins that provide a more stable value. You can also stake stable coins

for a yield. So there's a lot more utility in the altcoin space for whatever you need

than Bitcoin, hence making other coins potentially more viable as a form of investment,

depending on what you want to use it for. How would you respond to that?

Being able to use the altcoin for some purpose, like I said with the sidechain point,

does not necessarily mean that in the long run the investment will succeed. Because you could

introduce something new. This is like what Microsoft used to do all the time, where

someone would come up with something new and Microsoft would look at it and just sort of copy

it. I think it was called, I don't remember exactly what it's called, people are going to

Google it, and it was something like embrace, extend, extinguish or something. But just because

something has a new feature doesn't mean that the underlying investment will prevail. sidechains

is directly, a lot of my maximalism does hinge on the sidechains concept. So in my view, the ways

in which these alternative pieces of software have achieved more transaction throughput,

sometimes more privacy, that is something that could be copied and emulated by Bitcoin.

Do Bitcoin maximalists have a fair value for the price of Bitcoin?

Well I think the real way to do the valuation is just to, and this was done a long time ago by

Hal Finney and then done in various other degrees by people in various levels of specificity,

but what people really just do is they say what's the value of all the money in the entire world

and we'll divide that by the 21 million coins and that would be the purchasing power equivalent.

Even though there would be no U.S. dollars in that scenario, but that would be how much stuff

you could buy with. And that's something like, estimates vary, but that's like between 10 and

20 million dollars per coin. But then you say that's assuming that it prevails and destroys

everything, which of course is not certain. Even one million dollar a coin, assuming 21 million

bitcoins, that implies a value of 21 trillion dollars, which is roughly equivalent to the U.S.

GDP right now. Obviously by the time it reaches that, the U.S. GDP will be even higher, but

I mean that's a large number. When people bring up GDP, of course it's hard because numbers are

so big there's no context for anything. But GDP is something that has to do with time,

so it has to do with a year. It's the value of everything produced in the United States in a

year. So what's so special about a year, right? You could make it so that it would be 10 minutes

and then Bitcoin's current market capitalization would be higher than the gross world product in

10 minutes or you could make it 100 years and it would be different. But I agree with the number

is so big that you have no context. The only thing you have is the price per coin, I think.

Do you think Bitcoin is a replacement for the U.S. dollar? People are talking about

the U.S. dollar's value being eroded away by inflation amongst other variables,

maybe the decline of the U.S. empire, some people would argue. And so people are talking about a

replacement for the dollar as a global reserve currency. Some people have speculated the Yuan,

some people have speculated Bitcoin. What's your thought?

Well, I definitely think that it's in the cards. I think that there's a long way to go,

but I think you're designed for success, right? So in order for Bitcoin to succeed,

it would have to be able to accommodate the transaction needs of everyone on the planet.

And that would include the desire of people not to pay inflation taxes, the desire of people to

not have their accounts frozen, the desire of people to have control and privacy over their own

income, and things like that. So what gets it for me is I don't understand

how the United States plans to run its long-run fiscal situation, really. We have this national

debt that increases every year, and it accelerates every year. And in general, the pace of the

acceleration also accelerates every year. And the political will to do anything about it seems to

just have shrunk over my entire lifetime. I mean, I remember when it was a Republican primary debate

topic, like how are we going to balance the budget or whatever. People used to talk about it,

but no one talks about it now. Have you heard anyone talk about that? Today, it's the problem

that everyone is afraid. It's the elephant in the room. So I don't understand where that road is.

There's a lot of other people at the conference that think that Bitcoin is the solution to the

economic problems that we're facing right now. I don't know if you share that view, but let's just

back up a minute and talk about some of the economic problems that we're facing as a nation.

Can you list a few that bothers you the most? Well, I mean, I don't know if I have the right

specialization to answer a question like that. I do think, though, that as a citizen, I'm owed

some kind of explanation for how what eventually with the national debt, it's the thing that

everyone refuses to talk about. It's a mathematical fact that eventually the interest payments on the

national debt will just, if the trend continues, will exceed the GDP of the entire country.

Yeah. So what exactly is the plan when that happens?

Fair question. I think that's a fair question. What's the answer to that question?

Then the answer is going to be something like, we'll cut spending, but that doesn't seem like

that's in the cards. Or we'll raise taxes, which also seems dubious. And then it'll be like,

maybe economic growth will pick up. These all seem very difficult.

I've wondered this myself. With the advent of cryptocurrencies, people in general, the economy,

we're essentially creating more money supply. How would that impact inflation? Let's say,

all of a sudden, on top of US dollars, I'm also transacting in Bitcoin or Ethereum or any other

coin. One of the purposes of the cryptocurrency is to just, you could say, avoid paying the inflation

tax or whatever. The inflation tax is borne by all the people who hold dollars. If you have dollars

in your back pocket, or if you have a job where you get paid a fixed amount of dollars per year

or whatever, then you're paying the inflation tax. Why pay something if you don't have to?

When the treasury spends money it doesn't have, that increases the money supply, that increases

the rate of inflation. Paul, I know you're not a trader, but can you comment on the state of

the price action we've been seeing? Some people are speculating that we're in another crypto

winter. Recall that in 2017, we had a price high in December. It came back down. Bitcoin was trading

around $4,000. It traded range-bound for quite some time before it finally found new momentum in

2020, late 2020. Are we seeing that now? Are we seeing a stalling in the price growth for the

next couple of years? Well, who knows? I believe in the efficient markets hypothesis. I think that

you take your fundamental value. There's enormous potential of Bitcoin if it goes the whole,

if it completes this project of being better money for everyone, which

it's not certain that it will, and it's not certain that it will anytime soon.

That's how I view these things. I have been around for a little while. You can never really

tell. The crypto winter is only two or three announcements of good news away from ending.

When the price goes up, it tends to keep going up in Bitcoin because

there's a lot of people on the fence or people who are confused. Then when the price goes up,

they think, oh, I was right. This really was a good idea. Then they pile in or something.

There's much more momentum in Bitcoin than in anything else I've ever seen.

That's a fair point. Do you think that the rise of altcoins in other areas like NFTs,

with the rise of the metaverse, for example, Web3, a lot more utility in other places,

do you think some of that will take momentum out of Bitcoin in terms of investment flows,

capital flows, interest and whatnot? Yeah, I think that is the unfortunate

state of affairs is that Bitcoin had all these things long, long, long before Ethereum ever

existed. There was MasterCoin, Omni, colored coins. There were all these things that were

very, very old. Those were like NFTs on Bitcoin before Ethereum ever existed, like 2012, 2013,

2014, Counterparty. Bitcoin had a lot of things. There has been a decline in what you might call

assertiveness. People have become very conservative in Bitcoin.

Well, Paul, finally, you're making a series of presentations here at the Bitcoin Miami

Conference, the largest crypto conference in the world. Tell us about some of the topics you're

talking about. You already talked about sidechains. I will be talking on Friday. I have a panel on

sidechains. Then tomorrow, on Thursday, I'm talking about the soft fork, which is how the

Bitcoin protocol moves from version to version. We upgrade the protocol through this technical

technique, but it has a lot of curious features. I'm doing a panel on that.

A couple of months ago, Bitcoin had the taproot upgrade.

Yes, that was a soft fork.

Yeah, that was a soft fork. Now, are you an advocate of soft forks, or do you think that

Bitcoin should be left alone and just Layer 2 is built on top of that?

Yeah, well, because of the institution of the sidechain, I think sidechains should replace

soft forks. We should soft fork to add sidechains and then not do anything anymore. I think it

would be better if Bitcoin stopped changing at all so that it could just be exactly what it is

and people could just write books about it and they could write whatever. There's one version

of the software and it's just like what long division is or something. It's like long division

is just what it is. I think that would be good because the sidechain can actually replace all

soft forks and also all hard forks, which hard fork is even seen as not even possible in Bitcoin,

but both of those are under the umbrella of the sidechain.

Development challenges of the sidechain, what are they?

Well, it's very easy to add the port into Bitcoin, like the kind of interoperability

feature into base Layer 1 Bitcoin is, I think, very easy, actually. It's then the development

moves to the side. Most of the work, the code work, is moved up into the Layer 2 sidechain

piece of software. But we have a template that does all that for everyone already,

so the ideal thing is that either you fork this template, which is taking care of all

the coins moving back and forth between pieces of software, you take that template and you just

add whatever you want into there. And we have a different template that is sort of like a bridge

where you take an altcoin like Ethereum, you can run it in a kind of like a test mode,

like a reg test mode, and this software will take that software and kind of bridge between

Bitcoin Core and that and it will kind of be like a sort of zombie version of the altcoin.

So it converts altcoin into a sidechain. So there's a lot of technical issues. I don't know

how well anyone will understand what they are, but I think it's actually quite easy to turn an

altcoin into a sidechain. Okay, well, excellent thoughts. Paul, I appreciate your time.

Okay, thank you. Thanks so much.

It'll survive. It's got through worse. Thank you for watching Kitco News. I'm David Lin.

Stay tuned for more in Miami.

Kitco News special coverage of Bitcoin 2022 is brought to you by CoinPayments.

Crypto payments made easy.