Satoshi Nakamoto and the Vision of a Debtless Society

Satoshi's original vision for Bitcoin wasn't the idea of "Store of Value" like a lot of its proponents currently claim - it was a peer-to-peer payments system, and the idea of an economy that can run without any debt.

Another look at the history of Bitcoin and crypto, and the radicalism that was involved when it first launched. (And how that radicalism was lost in many ways in recent years.)

- Crypto systems inherently have no debt, which is a very radical idea that often gets overlooked.

- The 2008 crisis was primarily caused by bad loans (sub-prime mortgages) and CDOs (Collateralized Debt Obligations) which masked the toxicity behind borrowed money.

- Wall Street was bailed out, nobody went to jail, the industry learned nothing other than how to hide it better - now known as Bespoke Tranche Opportunities (BTOs)

- Bankers tried to introduce borrowing/debt-based financial instruments into crypto. They couldn't do it, so they went back to issuing credit *around* crypto assets instead. (ETFs, crypto investment funds, crypto futures, crypto exchange holdings, etc.)

- Crypto "borrowing" systems that require 100% collateral is useless and nobody will use them unless the lender is willing to shoulder at least some of the risk.

- The market corrections we see now is "resetting" the crypto markets by flushing out debt-based initiatives in the Web3 space that are unnecessary so that it can go back to its "First Principles".

---

teia.cafe | Decentralized Radio
teia.art | Arts Collective on Tezos
teia.art/ryangtanaka | Ryan's Music and Artworks


Sustainable Music Northwest (Seattle) | Public Music Concerts and Fair Wages for Musicians [https://www.sustainablemusicnw.org/]

*Episodes are also available on Spotify, Apple Podcasts, YouTube, iHeartRadio and most major podcasting platforms as well.

Transcript

SPEAKER_00: 0:00

Hello everyone, this is Ryan from Tea Cafe. This episode is number nine, and it's called Satoshi Nakamoto and the Vision of a Debtless Society. I'm a little sick uh today. Uh so I you may hear a little bit of coarseness in my voice or a little bit of coughing, but I'll try to edit out most of that. So but sorry in advance. But I wanted to kind of get this out there because um there's a lot going on in the crypto space right now and uh a lot of turbulence, you know. Um today's date is December 29th, and as of today, uh precious meadows like gold, silver, even copper have been going up. But uh very disappointing for a lot of the uh Bitcoin folks, especially because uh it was supposed to be a hedge, right, against uh fiat inflation, but it's turning out it's not really turning out that way. So the meadows have gone up, but crypto has gone down, at least uh over the course of this year. But I wanted to really talk about like uh right now the crypto industry is going through a pretty big correction at the moment. And the reason why it's happening now has a lot to do with uh kind of the reasons why crypto was invented to begin with. And I've been in the space for quite a while now, like since 2013. I wasn't there at the very, very beginning of Bitcoin, which is around 2010, 2011 or so, when it kind of went public. But I have been around, and a lot of the things that happened throughout the years, the priorities of the industry has changed a lot, and in a lot of ways, not in a good way. So I think what's happening right now is that the market is correcting itself and is going back to the first principles of like what crypto was originally intended to be, if that makes sense. So if you look at uh you can listen to the up other episodes if you want to know what those principles are, but I wanted to focus on one big one, one particular one, which has to do with debt and credit. So, as you know, um we live in now, you know, assuming that you are living in a sort of modern financial world where you would even be willing to listen to a podcast like this, you know. Um they uh we there's a lot of debt, right? And we use debt to finance a lot of things that we want but can't afford at the time. A lot of it includes, you know, auto loans, uh student loans, mortgages, right? Debt is everywhere. And uh it's just part of like how our monetary system works for better or worse, right? There's a reason why we have debt is because there can't be money everywhere all the time. So what we do is we you know generate these debts, also called credit sometimes, right? Just so we can get the money flowing. But uh has it gone too far, you know? And part of what makes Bitcoin interesting is that Satoshi really um started working on Bitcoin right around the same time as the 2008 crisis. So as as people know, like 2008 was the financial meltdown in Wall Street, uh caused by bad loans, subprime mortgages, and then another tool called collateralized debt, right? And CDOs, collateralized debt obligations, and these are basically like loans, like kind of collateralized, like the word says, and if it go they throw it into this big soup. Um, maybe watch the big short, they had pretty good metaphors about it. They uh basically throw all the debt into a big soup, and you don't because it's all mixed up with a ton of other stuff, you don't know quite what's in there anymore, you know. So basically, this was used as a way to hide the toxicity behind the bad debt that was growing bigger and bigger, you know, low credit scores, people who couldn't pay back their loans, and when enough people defaulted on those loans, it caused a huge financial crisis, right? And you have to keep in mind that when Satoshi started working on Bitcoin, this was the environment in which uh it was happening. So I do think that there is a pretty good chance that crypto, like Bitcoin, was designed in a way on purpose so that nobody can really go into debt, right? So that's kind of how crypto itself works. Because um, you know, when you have a crypto wallet, there's really no way you can't have a negative balance, right? Like you can have a negative balance in your bank account, and it shows up as a form of debt, right? You owe this much money, you have this much in savings, you have this much in income, uh, but you also have this much in debt as an obligation to have to pay pay at some point, right? It's a negative balance on your account that you have to pay off. You cannot do that with crypto. It is literally impossible because um you're not necessarily tied directly to your wallet, right? So I don't even know how you would have a negative account because for crypto to crypto systems to function at all, you need to have positive um balance. That is the fundamental layer of what runs everything in crypto and everything that comes after as well. There are no examples of debt really being a thing in crypto. So the thing about the 2008 crisis is that what happened at the end of that crisis, right? Basically, the government bailed out all the banks that uh were causing the issues. I think there was one guy that went to jail, but he was sort of like not the key player, right? They they just found a scapegoat and threw him in jail, and then uh yeah, everyone else got got away with it, you know. And so uh it's it's kind of hard to believe that they learned their lesson. Most of them got a slap on the wrist, and uh a lot of people are very, very upset about that, but at the same time, they got away with it. And uh there's a thing called BTOs, uh called Bespoke Trench Opportunities, which is basically the same thing as CDOs, they just rebranded it because uh you know CDOs had a bad reputation at that point, so they're still doing it, and they're still doing it now. And uh yeah, so gotta keep the debt thing going, right? So interesting thing is that over time, um, when crypto had a bull run right around 2016, 2017. I remember this very clearly because I was uh in it at the time. The uh that wave of things what was uh based on ICOs, so initial coin offerings is very similar to uh IPOs. Basically, everyone and their mom wanted to create a new coin, and they were using this new thing called a smart contract to turn everyday people into investors, and that's around the time a lot of uh crypto projects popped up and started uh the I would say like the second or third wave of uh crypto hype cycles. So bunch of stuff happened. I won't go into the details, you can kind of look it up yourself, but you know, a bunch of stuff happened and and the bubble popped eventually and it went back down, but it came back up again in 2021, and uh during that time a lot of uh crypto projects tried to figure out how to get debt, like how to introduce that idea of debt and credit into crypto, which has been so resistant to it up until then, right? There's no way you could borrow money on uh using a crypto wallet. But they tried because a lot of the uh people in the financial industry, the DeFi folks, right? That's kind of all they know, right? That's all like that's the easiest way to make money is through lending. But the technology itself really resisted it that so they had to come up with different ways. One uh one attempt at introducing loan systems into crypto was through uh collaterization, right? So when you borrow money from a bank, right, the bank is keeping tabs on you, and they're actually taking a risk assuming that you are gonna pay back the money eventually. If you borrow a bunch of money and then disappear and never heard of it again, that's their loss, you know. They can't get it back. They're gonna try, but but if you run away and you disappear without a trace, they lose that money. They're never never ever getting it back. So uh imagine doing trying to do that in um crypto, right? You can't, it's not really a smart idea unless you have collateral. So, what a lot of places do is they uh require you to have the same amount of collateral for the amount you're borrowing. So, say if you have if you want to borrow a hundred bucks, you have to give them hundred bucks or more and let them hold on to it over there while you use your hundred bucks. You know, it sounds weird and unintuitive, and that's because it is, because it's pretty much useless for for more if you already have the money, why would you borrow money, right? Like it doesn't it actually doesn't make any sense, at least to me. The only real use case for that is is that if you're just assuming that, oh, maybe you'll hold on to some bitcoins, and if Bitcoin goes up while you borrow Bitcoin, you can get twice the return, but that's not really a loan at that point, right? You're just kind of like speculating twice, right? If you if you lose, you lose twice the money, too, right? So I don't know, it's weird, but those uh coins still exist, and they're really, really trying hard to make uh crypto lending a thing, but it's not working. I don't uh nobody's really using it. I mean, and why would you, right? Logically, it doesn't make any sense. So what they did instead was, and uh exchanges had a lot to do with this because they were kind of the on and off ramp of dollars and fiat money coming in and out of crypto, right? They they are they're sort of like the uh middlemen between the two. So they created instruments where you could do you could use credit. Uh a lot of the money that goes into uh exchanges don't really um touch crypto. So you're basically giving them cash, they operate fairly similar to a regular bank, and they use that cash and uh invest on behalf of you, right? But because um the process is centralized, you don't have control over your own wallet in that case, right? You're trusting that the banks are operating uh in good faith, really. But that gives them room to create debt, you know. And so when when all of that that kind of happened in between the years of like between 2016 and then 2021, and 2021 is really when all that stuff really started to take off. We started to see not just crypto exchanges holding your cash, there's crypto futures, crypto ETFs, investment funds like MicroStrategy, who are you're just basically taking dollars on your behalf and investing Bitcoin for you, right? And they were using basically the dollar, the dollar's uh ability to generate credit, generate debt in order to like the crypto part was almost uh like an afterthought in a lot of ways. And if you think about it, like if you really, really want to invest in Bitcoin, like why would you go through this convoluted process of like you know, if you just want if you want if you be really really believe in Bitcoin, why would you bother going through a firm like MicroStrategy, right? Like why not just buy it directly, which you can do almost anywhere now. Like, you can go on any exchange, just give a few dollars and then buy some Bitcoin, put it in your wallet, and you're done. But why would you go through the trouble of going through a middleman just to do that, right? And a lot of it has to do with debt, because with debt and credit, you can buy more than what you own, right? That's kind of the biggest advantage of using um a credit as a buying opportunity, right? So a ton of people did this. People for a while there was sort of like this alliance between people who are broke, who don't have enough money, and uh, people who are super duper rich who have a ton of money that could afford to borrow uh money to like invest in the crypto game. You know, I say invest in a weird voice because it's kind of with quotes because of a lot of it was just really just gambling, right? They were really uh they're borrowing money to take a gamble on these things. And uh if you're wealthy enough, you can get access to these low interest loans, right? The whole zero interest loan thing really fueled it, and we saw kind of the height of that during COVID where yeah, they like all bets were off quite literally. They uncapped a lot of the limits, they uh you know the global re the reserve ratios kind of got um distorted because people declared an emergency, and it was just a really weird time where everyone was indoors and just like looking at the charts every day, right? Like what else is we're supposed to do, right? So uh all that just kind of like culminated into the hype uh crypto hype of 2021, and some people made a lot of money. A lot of people lot of lot lost a lot of money, but as soon as the sort of the trajectory of that is uh was over, yeah, that was it. And then and as you know, the since then the uh market has never quite recovered. And then people kind of moved on to AI, and a lot of investments went that way. And then the market has markets have been pretty slow ever since. I've been in the middle of all that stuff, you know, since then. Um and you know, uh it's not great for my wallet currently or my bank accounts, but uh I see the reasons why it happened that way, you know. So you could argue that the crypto industry has been in uh a bear market for a while now, you know, probab arguably since 2022. The the prices have never really gotten back up to that point, really, you know. And um the place is still sort of looking for its identity. And there are a couple of things that happened last few years, but most of it was like related to like pump pumps and dumps and meme coins, nothing, not no big news, you know, no big innovations, no right, nothing, nothing the industry could really like broadcast into the world and like hey, check it out, check it this really cool thing, right? NFTs was it at the time, and I I think it was in in many ways, like there were some earnest parts of the hype cycle that was worth talking about, but it kind of failed to deliver on its promises and people got disillusioned and it kind of just slowed down. Yeah, so what's happening now is that a lot of those things that happen, and a lot of it has to do with debt, you know, like crypto, like the ETS, crypto investment funds, futures, exchanges, all even exchanges. Like I'm skeptical if they're gonna be around for that much longer because like something like Coinbase, right? At the time when they first launched, it was a very essential service because it was the first time people were able to on and off ramp their documents. Into crypto and go back and forth. Because you can't really buy anything with crypto coins right now, right? There's some places where you know you can kind of do it as a novelty, but it's not you're not gonna be able to pay for things at a supermarket or a grocery store, at least not yet. But the tools to do those are there, and there are plenty of services out there right now that will easily convert your fiat money into crypto just through software. Like you don't need like a uh massive institution like like Coinbase to really like convert your cash. So I do think they're kind of like a holdover of a uh older era, and it's gonna sort of fade away soon as as people realize that hey, maybe it's not necessary. Like I said, if you if you just want to buy crypto, you can just buy the coin itself, you don't need that intermediary, and I do think uh we've given like exchanges way too much power by letting them hold our money for us, you know. But here's the thing a lot of people were able to get in to crypto because of the whole debt thing, right? The common wisdom is do not invest what you don't have, right? It's a bad idea, but a lot of people did it anyway and uh ended up wrecking themselves. And you don't hear about those stories in an environment where everybody's just trying to show or talk about the good times, but it is happening, it's happening every day, and uh it's slowing down even more because people are broke, they're hoping that they'll just like Bitcoin is gonna go up to a million dollars tomorrow, and then you know, oh that'll that'll fix everything, and we're gonna go, you know, like go to the moon, and but but that's like dangerous, like gambling addiction behavior, you know? And then I don't know, I hate to say it, but that's kind of what our industry has turned into. And people can see it, you know, they're not dumb. They they see all the damage that the industry has done to like everyday people, and they're not impressed, let's say. So what we have to do now is I do think a lot of those things, investment funds, like MicroStrategy is on its way out. It's not gonna it there's no way it can be solved. Bitcoin is not gonna go to a million dollars tomorrow, you know? And the longer time goes on, because they're running on debt, right? If it was if this was purely crypto, it wouldn't matter. None of this wouldn't even matter. But they have obligations, they have they have to pay people's salaries, they have you know, who knows? Like there's all that circular financing going on even in other parts of the tech industry, right? The AI, NVIDIA paying Microsoft to do this and then that, and like people passing my like that's all the stuff that Satoshi had wanted nothing to do with, you know. And I have a feeling that all of that is just gonna all collapse all on itself altogether. Like, that's why people are calling it the debt bubble. And even though I'm a big supporter of like Tezos and a lot of high-quality altcoins, uh Gridcoin's another good one I've been really into lately. I I do think that eventually all that fiat money, really like debt money, credit, is gonna get flushed out of the ecosystem. And what's only gonna be left is self-custodial wallets that have positive balances in them. Because that is what the true face of crypto looks like. People forgot about it, newer people probably never even seen it before because they never had a chance. The stuff that they see in the media is all credit and debt-based stuff that feels more familiar, right? Because that's what feels fiat. In in that's how the world works, right? Most of the world works. But I do think Satoshi was aiming for something different, and people doing the crypto thing in good faith are still holding on to that torch. And then maybe after all the other stuff goes away, we'll start to see like lights of you know, hope, rays of hope that the markets can eventually recover. But getting there is gonna be insane because it's not just crypto, there's a lot going on even in the general economy. And we don't really know how deep it goes. How much ties does Bitcoin have with traditional contracts? Because if they have too many ties, they're gonna have to sell. And if they have to sell, then the price goes down. So that's it. The projects that had nothing to do with any of all this, they'll probably be okay. But it'll be very hard to see because they probably did not go up at all in the first place. Gridcoin is a good example of that. It missed the 21 uh 2021 hype cycle altogether. It's not even on any of the exchanges. It they didn't bother because they didn't care, you know. They were a they were a scientific research project and they were supported through other means, through uh educational funding, and they just had no interest in joining the hype club. Tezos is uh interesting because they're they were similar in some ways, but at the same time, they they were not immune to the hype, like uh the FOMO, right? So I think they're one of the less exposed ones, but they are still have some exposure, and so it's going to go down as well. Hopefully, not as much. That's really the the hope. So what's gonna happen really in the next couple years is that we're gonna see a lot of uh uh crypto projects drop out just like uh it does in every cycle, and the ones left are the ones that are really representing what crypto was originally intended for. At least that is the hope. So I think that's it. Um hope you found it interesting, and yeah, I'll see you in the next one. Take care.