Divide & Conquer
Bitcoin's decisive edge over rival monies is divisibility. It already divides to the satoshi, can be made more divisible by consensus later without diluting supply, and with Lightning it opens a micropayment economy that has never existed before.
The one-minute version
The assumption that Bitcoin's 21 million cap limits its divisibility, that adding precision would dilute supply, and that a whole bitcoin is too expensive to buy into.
Money is a competition, and we are searching for the money that will be the most efficient, and the most efficient will gain all of the traction.02:34
We don't know what we don't know.18:54
It has to be orders of magnitude better. And that's exactly what Bitcoin is.24:50
Every passage, on the record.
- 00:00Claim
Every single transaction is a competition for the money that is going to be used, and if you fulfill the qualities of good money more efficiently than your competition, Bitcoin will eventually win out.
- 00:38Claim · condensed
Divisibility is often the most misunderstood part of Bitcoin: it isn't necessarily the hardest thing for new people to grasp, but it's certainly the last thing they grasp.
- 01:09Claim · condensed
It's imperative that anything used as money be easily divided and then aggregated back together.
- 01:44Idea
A good money is the ultimate optionality on energy. It needs to be able to measure the largest things in the economy, all the way down to the smallest thing in the economy, so that everyone is on the same page.
- 02:34Claim · condensed
Money is a winner-take-all competition: there is no second-best money, it naturally gravitates toward a monopoly of whatever the best version is, as seen historically with gold and the US dollar, and now Bitcoin.
- 02:34Quote
Money is a competition, and we are searching for the money that will be the most efficient, and the most efficient will gain all of the traction.
- 03:26Claim · condensed
Because of the wide range of goods and services in a modern economy, there is incredible and growing weight on good money to be highly divisible; a small economy with few transactions needs divisibility less.
- 04:01Claim
As technology evolves and humans unlock more energy, divisibility becomes more and more important, and the demand for an ever more divisible money is increasing exponentially to keep pace with technology.
- 04:33Claim · condensed
Combining the historical trend of ever-more goods on the market with the deflationary nature of technology and innovation, pointed out by Jeff Booth in The Price of Tomorrow, we should expect the economy to become more efficient at an accelerating pace, which increases the pressure on money to divide further.
- 04:33Reference
We combine this thought with the idea of the deflationary nature of technology and innovation, as pointed out by people like Jeff Booth, the author of The Price of Tomorrow.
- 04:33Reference
As pointed out by people like Jeff Booth, the author of The Price of Tomorrow, then we can assume that we will become more efficient over time at an ever accelerating pace.
- 05:08Claim · condensed
"It might not be the tech, it might not be the innovation, it might be the money that is keeping us from reaching our full potential" if the money can't divide fast enough to keep up with deflation.
- 06:23Claim · condensed
The 21 million hard cap is Bitcoin's number one selling point and usually the first thing people learn, but that's also a marketing problem, because people conflate the cap with a low unit count rather than realizing it refers to 2.1 quadrillion satoshis.
- 06:57Idea
It shows whenever you're trying to orange pill anyone into the Bitcoin system, every single time, it's the same response: the most common retort to any person that I'm trying to onboard is 'I can't afford a whole Bitcoin.'
- 07:28Claim · condensed
Educators may have slept on this, or the problem is the naming structure that grew out of calling a Bitcoin the base unit of the system, when it can actually be divided into a hundred million satoshis, far more divisible than gold or fiat.
- 07:58Claim · condensed
There are 2.1 quadrillion satoshis in Bitcoin, each Bitcoin divides into a hundred million satoshis, and that isn't even the end of the line: the code can augment divisibility by moving the decimal place further if it proves necessary.
- 09:09Claim · condensed
Raising Bitcoin's divisibility, if the consensus agrees it's needed, doesn't dilute the supply: we aren't making more Bitcoin, we're just making it more divisible.
- 09:09Analogy
If you slice a pizza ten times rather than eight, you're still on the same amount of pizza. It's just available in smaller individual portions.
- 09:09Quote
Again, we aren't making more Bitcoin, we're just making it more divisible.
- 10:12Idea
We know that money is energy, that dollar represents energy that can be turned into anything. It's the ultimate optionality... because we don't know the denominator, we do not know out of how much fiat there is, that makes our calculation and our decision making inefficient.
- 10:12Claim · condensed
Because Bitcoin has a constant, known denominator of 21 million, you can calculate how expensive something is relative to all other potential energy in the world; fiat's unknown total supply makes that same calculation inefficient.
- 11:24Claim · condensed
Extreme divisibility, being able to send something like 0.00000000001 of a Bitcoin, opens up a micro economy that has never been possible before.
- 11:24Analogy · condensed
In the US dollar the minimum value you can currently exchange in physical cash is a penny; that floor is what defines the minimum-value economy in the legacy system.
- 12:25Claim · condensed
Eliminating physical cash is a huge bonus for governments because it lets them track every transaction, while businesses favor eliminating it for convenience; those two incentives are pushing cash out even though not everyone wants that.
- 12:25Event
Especially during the time now when there's all of the COVID craziness, this has been an opportunity for businesses to say they don't want to deal with the physicality of cash.
- 13:31Claim · condensed
Legacy payment intermediaries, the banks, Visa, PayPal, set the floor on transaction size because they charge for using their network; that's rent-seeking on a payments monopoly you have to go through to participate in the economy, and Bitcoin removes these minimums.
- 14:03Claim · condensed
On-chain block space is limited, so main-chain transactions can be expensive, but there is no limit on how much value can be pushed through that limited block space; it will mainly carry large settlements between major players.
- 14:03Open question
We're not going to go into a whole block space thing here.
- 15:39Claim · condensed
Lightning operates on top of Bitcoin, reduces transaction fees to almost zero, and settles near the speed of light, as fast as or faster than the legacy Visa network.
- 16:19Quote
Lightning is Bitcoin scalability on steroids.
- 16:19Claim · condensed
Lightning is what takes Bitcoin out of pure store-of-value and into the world of medium of exchange and unit of account.
- 16:49Prediction · condensed
Combining Lightning with Bitcoin's divisibility means micropayments will change the way that we live, even though it hasn't happened yet and we're only just seeing the first applications.
- 16:49Event
Right now, as it stands, 2021, today is July 27th, Bitcoin hovering just under $40,000.
- 17:20Reference
Through apps like Breeze, where you can directly fund podcasts by streaming satoshis as you listen.
- 17:20Analogy · condensed
With Breeze you settle how many satoshis to stream per minute as you listen to a podcast, and it's handed straight to the podcaster with no middleman, no gatekeeper, and no profit-sharing with a larger company.
- 18:54Claim · condensed
Like the early internet, where nobody foresaw Twitter, Facebook, or Netflix, we can't calculate in advance the efficiency gains that will come from removing middlemen and gatekeepers through Bitcoin's divisibility.
- 18:54Quote
We don't know what we don't know.
- 18:54Open question
So to try and calculate the efficiency increases that are going to happen through no middlemen, through no gatekeepers, that is all made possible by the divisibility of Bitcoin.
- 19:33Claim · condensed
If humans keep innovating, goods and energy keep getting cheaper, which means in a deflationary system like Bitcoin we need a way to keep pricing things accordingly as that continues.
- 19:33Reference
The Lindy effect of Bitcoin is banking, that humans are going to continue to innovate.
- 20:04Analogy · condensed
Gold can be divided down to the atomic level, but the practicality of storing, tracking, and exchanging a single atom of gold is where that theoretical divisibility falls over.
- 20:43Claim · condensed
No money wins on every single axis, but Bitcoin's whole system beats its nearest competitor overall, and once people are exposed to a more competent money it doesn't take long for them to intuitively recognize the benefit.
- 21:13Analogy · condensed
People don't have to see the benefit in their own transactions; they can see it in someone else's. "What is Bob doing that I'm not doing? How is Bob able to act so much more efficiently than I am acting?"
- 21:46Claim · condensed
Currencies that are more divisible are more useful; more useful means more demand, and more demand is a reflection of value, so a more divisible Bitcoin is more useful, and therefore more valuable, than fiat currencies.
- 22:47Claim · condensed
The common rebuttal, that Bitcoin's hard cap means it can't last because no new Bitcoin will ever enter the market, is a terrible argument: people can't separate the hard cap from Bitcoin's divisibility.
- 23:18Prediction · condensed
Bitcoin's divisibility is not set in stone; the protocol can and will be altered if necessary as technology advances on an exponential, accelerating curve, potentially over a horizon of centuries.
- 23:49Claim · condensed
To let benefits from an innovation in one sector ripple across the whole economy as fast as possible, we need money velocity to be high, which means the money has to be very divisible.
- 24:20Analogy
In order to see those benefits ripple across the entire economy and rise all the boats, the tide has to lift everybody to get that as quick as we can.
- 24:20Quote
The tide has to lift everybody to get that as quick as we can.
- 24:50Claim · condensed
A new money can't just be slightly better than the incumbent, because the inconvenience of learning and switching is real; it has to be orders of magnitude better, and that's exactly what Bitcoin is.
- 24:50Quote
It has to be orders of magnitude better. And that's exactly what Bitcoin is.