Štěpán Kovář interviews podcaster and educator Stephan Livera about Bitcoin’s implications for economic and societal freedom, and why the revolution can’t be rushed.
Stephan Livera hosts one of the leading Bitcoin podcasts, the Stephan Livera Podcast, and is also Managing Director of Swan Bitcoin International. He regularly posts on Twitter: @stephanlivera
Štěpán Kovář: Thanks for taking the time to speak with us, Stephan. Let’s start at the beginning: why should we care about Bitcoin in the first place?
Stephan Livera: It is, in my view, the best chance to reduce the size of the state. So, if you’re a libertarian, or a classical liberal, and you believe in either limited or zero government, Bitcoin should be right at the top of your list of priorities, because it is fundamentally what is going to downsize the state in terms of funding.
At the end of the day, there has been all this effort and time spent by libertarians on trying to vote for more freedom. And it hasn’t been successful. Where we are today, governments have managed to just continually grow because they have access to cheap credit, and what drives that is fiat currency. To fix that, we need a long-term strategy, and Bitcoin is an important part of that.
There are a range of methods, of course: Bitcoin, things like home-schooling, running your own business, all these kinds of things, plus Free Private Cities, flag theory, etc. These are all important, but I think Bitcoin is the most important one in terms of driving a liberty outcome.
ŠK: And what about other cryptocurrencies?
SL: As Michael Saylor says, there is no second best. And let me explain it this way: I don’t think that altcoins check all the right boxes in the way Bitcoin does. There are certain boxes that you need to check: it needs to be scarce; it needs to be decentralized; it needs to be robust, verifiable, scalable; it has to have all of these factors in its favor. And unfortunately, basically every altcoin falls short.
Generally, they are not scarce, they are not verifiable, they’re not decentralized: they’ll have some kind of foundation driving the development or paying for the development of that coin; they often have a pre-mine; there are all kinds of ways in which they are centralized.
And what you see often is that when something goes wrong with an altcoin, they pause it; they pause the chain, and they fix it. Or they often hard fork, which is another indicator of centralization. And so that’s why I think Bitcoin is uniquely placed to actually do what libertarians and classical liberals want, which is to separate money from the state, and to ideally reduce the size of the state.
Now, you know, I personally believe in the idea of anarcho-capitalism. But I also acknowledge that our best chance is to try to gradually reduce the size of the state. So, every little step in that direction that we can do is a good thing. Now, to be clear, I don’t view Bitcoin as get-rich-quick. I don’t view Bitcoin as something that’s necessarily going to fix everything soon. We have to be patient; we have to play the long game. And we have to just keep steadily making progress in terms of separating money from the state so that we can actually achieve a more libertarian society.
ŠK: One of the main criticisms that Bitcoin receives is about the large energy consumption of Bitcoin mining. How do you respond to that criticism?
SL: The short version of it is Bitcoin’s proof of work is an irreplaceable part of the system, and it is key to how the system is secure. Because proof of work is the way that you tie the physical world into, let’s say, the digital realm with Bitcoin, and there is no other way to do this without introducing some points of centralization or a tendency towards centralization.
And so, it’s only with Bitcoin and proof of work that we can achieve this. I understand that some people, often those of a more progressive persuasion, may be more in favor of net zero or other (in my view) climate hysteria. I think that, unfortunately for those people, they are best off realizing that Bitcoin is such a net good to the world, that it’s worth it.
Because here’s the thing: we have to compare Bitcoin against comparative monetary standards, right? It’s not enough to just say, oh, Bitcoin uses all this energy. It’s more important to compare that against the energy usage of, let’s say, a gold standard, or against a fiat currency standard. And on the fiat currency standard, guess what? There’s a lot of warfare and a lot of guns and a lot of government required to sustain that fiat currency standard. And so really, when you compare standard versus standard versus standard, I think it’s very clear that a Bitcoin standard would actually be cheaper, if you really zoom out and think about it from that perspective.
It’s an important point to understand because a lot of people confuse things – especially people in the “crypto world.” As an example, people will say, ‘Oh, look, Ethereum moved to proof of stake. Why doesn’t Bitcoin do that?’ Well, there’s a reason: it’s that proof of work is required to keep Bitcoin secure and decentralized. I think that is the bottom line. And so, when people say this kind of thing, it’s like they’re saying, ‘Oh, don’t fly on a plane, just ride the bicycle there.’ Well, they’re not doing the same thing. Fundamentally, Bitcoin is doing a different thing. And in order to do that thing, it needs this proof of work system.
ŠK: It is also often assumed that the volatility of the price will decrease over time as Bitcoin grows. But isn’t there an internal flaw in how Bitcoin can grow so much, if individuals will not be motivated to start using precisely because of volatility? So, what’s the motivation for people to start using it in the first place?
SL: It’s a common criticism I hear from people who are newer to Bitcoin. I think the short answer for most people is that they can size their position based on how much risk tolerance they have. So, for example, at nakamotoportfolio.com, one of my friends over at Swan, he’s the Head of Research and CIO, he’s written up and shown models where even if you include just a small fraction of Bitcoin, you can reduce the risk in your portfolio and increase the return. And so, it belongs in more and more portfolios. I think that’s a quick and easy way to explain it for a lot of people, and then zooming out to the longer term, I think the answer then is that it will make more sense for people to directly trade Bitcoin only when more people directly hold some Bitcoin as part of their cash balance. So that’s how I’m seeing it, it’s that it will necessarily be volatile, because the upside is so big.
And because we are so early in the overall adoption – and I understand that sounds kind of weird, because Bitcoin is now 14 years old, right? But there’s probably something like 0.5% to 1% of the world’s population who are actually using Bitcoin. So, it’s still extremely early. But that’s why I believe it is volatile right now. And it will remain volatile, until we have much more adoption.
ŠK: You said that Bitcoin is a potential competitor to state fed money. But doesn’t it have a design problem when it comes to its lack of anonymity?
SL: Bitcoin can be used privately if you are using it in a specific way. So, for example, if you use privacy techniques, if you acquire coins without KYC – and certainly I think you can do that: there are tools out there such as Sparrow Wallet, or Samourai Wallet, or JoinMarket, that allow you to use Bitcoin more privately.
But I think the simple answer is that a lot of people are not willing to pay that price in terms of additional complexity, or there’s some reduced convenience with that. And so most people are adopting Bitcoin as a long-term savings technology. They’re happy to just HODL for the longer term and figure out privacy aspects later because they’re not directly spending today. Now, I personally am regularly earning and spending Bitcoin, but I understand that most people are not in that category today.
I believe there is a future where more people will be directly earning and spending Bitcoin. And, of course, I’d love to see that – the sooner the better. But I’m also being realistic about the world I want to see and the world that I think is realistic, at least in the short term.
So my answer is: you can use Bitcoin privately. But a lot of people, they’re not that interested in using it privately. Watch what people do, not what they say, right? Because sometimes people will say, ‘yeah, I care about privacy.’ But they’re not interested in paying that additional price or having reduced convenience. And so I think it’s like a story of revealed preference for many people. I’m not trying to judge them. I’m just saying, I think that’s the reality for most people out there.
ŠK: Should we try to make Bitcoin more anonymous in the future?
SL: There are certainly efforts being made in this direction: as I mentioned, there are application tools that help you use Bitcoin privately, there are protocol level improvements coming to Bitcoin’s Lightning Network that will make it more private. But I think there’s a limit to how much those things can do. Just given the nature of the size of the state, the level of the surveillance state’s resources, the NSA etc – they can pretty much track anyone, right? It’s almost impossible to avoid. Because even if you or I, personally, were so great about our own privacy and operational security, the reality is you might have family and friends, and as soon as you meet them or talk to them, boom, now, now you’re doxxed.
I don’t want to paint an overly negative picture; I think there are things you can do to be more private. But the bigger win is about reducing the size of the state, and therefore taking away the budget of some of these large three letter agencies. And then we can live in a world with free market privacy tools that you can use to improve your privacy in certain ways. And we wouldn’t all be subject to the mass surveillance machine that we all live inside today.
ŠK: Do you see any other challenges that might occur when it comes to adoption of Bitcoin?
SL: One key point is getting people to understand the importance of self-custody. A lot of people, when they first come in, see it like it’s a stock on their brokerage terminal. They just think, ‘Oh, I’ve purchased it on this platform’ – maybe they’ve gone to Swan.com or some other platform, and they’ve purchased it, but they leave it there.
Now, of course, at Swan, we’re very active and proactive about teaching people to self-custody. But I think that’s something that is potentially a challenge in the future. Because if people leave their coins with a custodian, then it sort of increases the risk that a government could capture them. And if you think back to what happened with the gold standard, when the US government seized gold from various vaults with Executive Order 6102, the analogy is quite clear, right?
So obviously, the more people are self-custody-ing with their Bitcoin, the better. So put it this way: if there was one metric that I could grow, it would be the number of people who are Bitcoin hodlers or stackers, and who are self-custody-ing.
So I see it from that perspective. I’m obviously bullish on the future for a Bitcoin denominated future and living on a Bitcoin standard. I try to earn and spend Bitcoin. When I fly somewhere, I try to actually spend Bitcoin and receive Bitcoin. So, I think it’s a matter of growing the base of Bitcoin hodlers, stackers, Bitcoin users. And I believe, over time, that this will naturally shift the incentives such that governments cannot afford to stay so large and that they will have to go smaller, and I think that will result in libertarian outcomes.
