“Bitcoin is not competing with Visa or MasterCard. Bitcoin is competing with the Federal Reserve and the U.S. dollar,” says Michael Goldstein, president of the Satoshi Nakamoto Institute and host of the Noded Bitcoin Podcast . His co-host and the institute’s treasurer, Pierre Rochard, talk with Nick Gillespie about the meteoric rise of bitcoin, how it can become a viable currency despite volatility, and how it may well spell doom for central banks and the gods of Keynesianism.
The Satoshi Nakamoto Institute is a group devoted to promoting bitcoin and working through many of the theoretical and practical challenges for the world’s best-known cryptocurrency. It’s named after Satoshi Nakamoto, the pseudonym of a programmer or programmers who launched bitcoin in 2009, in what Nakamoto called “a peer-to-peer electronic cash system.”
Bitcoin potentially offers at least two radical things to its users.
First is a non-state-based currency, and second is a fully peer-to-peer accounting system in which every actor can verify all transactions virtually instantaneously. The program resides on the computers and servers of its users, decentralized in a manner straight out of a science fiction novel. Inspired by Milton Friedman’s and other economists’ theories of a noninflationary currency, there is a fixed number of bitcoin that will be mined out over time into computer space, thus limiting the ability of people to inflate or deflate its value, at least in theory. Having said that, bitcoin is in the news now because of its massive spike in cost. Once trading at pennies, it recently neared $20,000 per bitcoin.
Whatever its price, Goldstein and Rochard say that bitcoin is here to stay and that what they call “hyper-bitcoinization” is already well underway.
Audio production by Ian Keyser.
Subscribe, rate, and review the Reason Podcast at iTunes .
Listen at SoundCloud below:
Don’t miss a single Reason podcast! (Archive here .)
Subscribe at iTunes.
Follow us at SoundCloud.
Subscribe at YouTube .
Like us on Facebook .
Follow us on Twitter.
This is a rush transcript. Check all quotes against the audio for accuracy.
Gillespie: This is the Reason podcast, and I’m your host, Nick Gillespie.
Please subscribe to us at iTunes and rate and review us while you’re there.
In January 2009, a pseudonymous programmer or set of programmers using the name Satoshi Nakamoto mined the first bitcoin, part of what he called a peer-to-peer electronic cash system, and creating the world’s first fully-realized cryptocurrency. Bitcoin potentially offers at least two radical things to its users.
First is a non-state-based currency, and second is a fully peer-to-peer accounting system in which every actor can verify all transactions virtually instantaneously. The program resides on the computers and servers of its users, decentralized in a manner straight out of a science fiction novel. Inspired by Milton Friedman’s and other economists’ theories of a noninflationary currency, there is a fixed number of Bitcoin that will be mined out over time into computer space, thus limiting the ability of people to inflate or deflate its value, at least in theory. Having said that, Bitcoin is in the news now because of its massive spike in cost.
Once trading at pennies per bitcoin, the basic unit, it recently hit around $19,000 per bitcoin. So to talk about Bitcoin, its perils, its promises and its reality, today I’m talking with Michael Goldstein and Pierre Rochard, the president and treasurer of the Satoshi Nakamoto Institute, a group devoted to promoting Bitcoin and working through many of the theoretical and practical challenges for the world’s best-known cryptocurrency. They also do a podcast called Noded, N-O-D-E-D, Noded. Go check it out at noded.org.
Guys, thanks for talking to the Reason podcast today.
Goldstein: Yeah, thank you so much. As a lifelong libertarian, it’s an honor to be here.
Gillespie: All right. Well, I hope you feel that way .
.. that’s Michael, right? I hope you feel that way when we’re done talking. Pierre, how are you?
Rochard: Great. Thanks for having us on, Nick.
Gillespie: Okay. So my first question to you, are either of you guys the creators of Bitcoin?
Goldstein: I can neither confirm nor deny it.
Rochard: I’m not, because I didn’t even know how to program back then.
Gillespie: And you guys are both … you met at University of Texas at Austin. Under what circumstances did you meet? And then how did that lead to creating the Satoshi Nakamoto Institute?
Goldstein: Yes. At the University of Texas there is a libertarian group called the Libertarian Longhorns, and as a spinoff we made the Mises Circle, which is dedicated to reading and discussing Austrian economics, so Mises and Hayek and Rothbard and Hoppe, Roberto, de Soto and others.
And that’s where Pierre and I met. And one of our friends, another co-founder of the Satoshi Nakamoto Institute, Daniel Krawisz, had been into Bitcoin as early as 2011.
So it was on our radar. But it was when Cody Wilson of Defense Distributed stopped by to give a talk on a project back in its early days before they even had anything, he sparked our interest in it in a way we couldn’t have imagined and introduced us to the ideas of crypto-anarchy and being able to send gold over the internet with Bitcoin.
And it was then we started getting interested, and the Mises Circle quickly became much more so the Bitcoin Circle. We were discussing all of the economics of Bitcoin. And later on, in late 2013, after joking with a friend that there’s the Ludwig von Mises Institute for Austrian Economics, we need a Satoshi Nakamoto Institute for Crypto-Anarchy.
Gillespie: All right, so you’re ruthless cosmopolites, like Ludwig von Mises himself, as long as we’re talking about money that not only can freely flow wherever people send it or pull it, but that state governments have no control over, right? In many ways, would you agree that from a libertarian perspective, anyway, that is kind of the real lure of Bitcoin?
Rochard: Absolutely.
And we use this word decentralized a lot. And we have to kind of look at why is it decentralized from a technical perspective, and it’s that we have a peer-to-peer network of nodes that are communicating to each other. And the node software, people voluntarily choose which version of the software they want to run, and that forms a consensus on the network as to what Bitcoin is. And that peer-to-peer nature and decentralized nature is what makes it impervious to tampering from governments.
Gillespie: We’ll get to that, because at a certain point when you want to ..
. I don’t disagree with you, but then Bitcoin can exist kind of in the ether of cyberspace or what Al Gore tragically once called ‘the information superhighway.’ But at some point when you emerge to pay for something, there might be places where the government could grab your hand as it comes up out of the grave. But first, you guys talk about bitcoinization, hyperbitcoinization, after fiat currency fails. What do you mean when you talk in those terms, and why is fiat currency bound to fail? And that is money that is not backed by any particular commodity or good, but is rather just printed up by various governments. Why is fiat currency going to fail? What evidence do we have that it will fail? And then how does hyperbitcoinizati.
