Trace Mayer: Bitcoin "Is A Geopolitical Weapon... Can Become Reserve Asset"

Authored by Valentin Schmid via The Epoch Times,

Early bitcoin investor makes the case for reserve currency status

After the spectacular run-up in bitcoin in 2017, there are many people who claim to be “early” bitcoin investors — early meaning 2013, or even as late as 2016.

But bitcoin has been around since 2009, and there are few people who have been following the space since then, let alone investing in the volatile cryptocurrency. Trace Mayer, host of the Bitcoin Knowledge Podcast is one of them. He has invested in bitcoin since 2010, and started publicly promoting it in 2011.

Even more impressive than the number of bitcoin he holds from the early years is the knowledge he accumulated in the eight years since he has been following bitcoin.

The Epoch Times spoke to Trace Mayer about bitcoin’s value proposition, its geopolitical significance, and the idea of monetary sovereignty.

The Epoch Times: How did you get into bitcoin so early?

Trace Mayer: I came across sound money in gold and silver. I was taking an American legal history class, and I had to write a paper, so I chose the topic “History of Money and Currency in American Law.”

Gold and silver aren’t barbarous commodities, but essential checks and balances in the political machinery. They are the guarantees of our monetary sovereignty. They enable us to be free humans, especially when it comes to the value we create.

When I finally came across bitcoin in its very early days. I connected all of the dots between the technology, sound money, and the game theory behind it.

I was already a fairly popular blogger in the gold niche, so I shifted the focus on bitcoin to my target audience, which was the libertarians. It was off and running from there. I started the Bitcoin Knowledge Podcast where I interview top people in the bitcoin world.

Bitcoin’s Value

Epoch Times: What is bitcoin’s value proposition?

Mr. Mayer: It’s about the network effects.

The first network effect is speculation. People have been collecting and speculating in gold and silver and sodium bicarbonate for centuries.

The second network effect is going to be merchants accepting bitcoin because people are holding it speculatively. Then merchants are going to start using it as payment themselves because they accept it.

Because all these people are demanding bitcoin and are giving value to it, it becomes lucrative for miners to provide security to the blockchain.

All the network effects are exponentially reinforcing each other. The more secure the blockchain is, the more developers are going to want to work on that blockchain.

There are also reasons at the protocol level and in companies around it. You want to build your company on the most secure blockchain. Why? Because it will still be around in the future.

Veteran bitcoin expert Trace Mayer has been involved in bitcoin since 2010 and is also a major investor in many related startups. (Courtesy of Trace Mayer)

The sixth network effect is financialization, like the CME futures or ETFs. This enables bitcoin to interact with our current monetary and financial system.

The seventh network effect is going to be world reserve currency status. That’s when bitcoin becomes a reserve asset much like gold or the dollar.

Gold is sound money and limited in supply but it doesn’t move well. The dollar moves well but is not limited in supply. Bitcoin moves well and is limited in supply which is why it has been outcompeting both since its creation in 2009.

The Epoch Times: Do you have a valuation target?

Mr. Mayer: There is $90.4 trillion in broad money supply and $200 trillion plus in the bond markets. If you tried to move some of that volume into bitcoin the market cap of bitcoin would go much much higher because there is not that much of it saleable.

You hear Wall Street talk about this all the time: “Bitcoin is strictly limited in supply.”

Yes, that’s a feature, not a bug. The number of whole bitcoins is limited but there is enough for everyone; it’s just a function of price. We can divide it and make it every extensible with second layer solutions like the lightning network.

Bitcoin can become like a black hole on the world’s balance sheet and suck in all this fiat and fractionally reserved banking money and really give us an equity-based monetary system on the other side.

Currently, we are in the midst of the largest human migration the world has ever seen. There are 360,000 people born every day and we are adding at least one million accounts each day in the bitcoin ecosystem.

Whether they know it or not, people are declaring their monetary sovereignty and their independence from the bonds that tie them to the social structures through the world because they are choosing a new money, a sound money.

A banker asked me whether I had any concerns about bitcoin. And I said: “No. I don’t have any concerns about bitcoin.”

There are concerns about the old system as its being displaced. Just as newspapers were displaced by blogs, just as movies were displaced by BitTorrent, just like radio was displaced by podcasts and mp3s. The world is changing and we have a new technology.


The Epoch Times: Another important feature giving value to bitcoin is decentralization; how does it stand out in this regard?

Mr. Mayer: We have come to a distributed consensus. We are running software that is fully validating the blockchain to make sure all the transactions and everything in it conform to the rules of the protocol, one of them being the hard limit of bitcoin at 21 million.

Everyone who is running a full node is performing a full validation of the blockchain. They are exerting monetary sovereignty. They are not relying on any third party to tell them whether the blockchain is valid or not.

That’s what adds a lot of the decentralization of the bitcoin network. Everybody can run the software and validate it themselves.

But getting the historic immutability is absolutely critical. There are no shredders that can destroy evidence like Worldcom and Enron to cover fraud.

You don’t get to do that with bitcoin. You can’t freeze, you can’t confiscate, you can’t chargeback, you can’t do a lot of the things that our current financial system has introduced.

It’s nice to chargeback money to the credit card when there is fraud involved, but that makes the money very soft. It makes it unreliable.

With bitcoin we have the principle of immutability; but not all blockchains are immutable, and not all are secure.

The Epoch Times: Let’s talk about security for a moment. What makes bitcoin secure?

Mr. Mayer: When we talk about the Bitcoin Core software, core is much more of a process than anything else. It’s a form of science, if you think about it. Everybody is getting together and they are discussing different ideas. When there is a consensus among the technical team, then that makes it into the software.

But even if it makes it into the software, everybody who is using bitcoin has the option of using that software or not. You can’t force anything in that software because someone may download the software and take out the part you forced in there.

It has to be open source because the review of all this development is so critical. The testing and the review that is going on behind the bitcoin core software is unparalleled in the industry.

An example on the negative side would be the Parity wallets on the ethereum blockchain. There wasn’t adequate code review, people were using the wallet with $170 million worth of ether in them.

And somebody who could not even access the wallets at all issued a kill command to the network and that $170 million got completely frozen, never to be recovered.

This is one of the reasons why the bitcoin scripting language is very restrictive. We try to build modules like the base layer blockchain and the lightning network at layer two. Like this we can contain the risk.

Is there any other internet protocol out there that poses any threat to bitcoin? I don’t see it. Email is vastly inferior to other protocols but hasn’t been challenged in 30 years because it has the network effects.

The Epoch Times: Why, according to you, do the best programmers work on the bitcoin protocol?

Mr. Mayer: Why are the best people working on the bitcoin protocol? They fit the creative genius profile that Austrian economist Ludwig von Mises talks about in “Human Action,” and they do the work not to make money but because it’s internally fulfilling.

They are doing it because it’s the highest mountain to climb. It’s the hardest and most fulfilling challenge to accomplish. That’s why I think bitcoin attracts the very best of the best developers.

Even the founder of ethereum, Vitalik Buterin, has called the Ethereum community a playground, which is great because they are working on the edges and the best of the smart contracts.

But if you want to work on a censorship resistant, decentralized, immutable, world reserve currency asset internet protocol, there is no margin for error.

It’s got to be really serious, it can’t be a playground. That’s why bitcoin draws the best of the developers, and if you can’t compete over there, then you would go over to some of the other projects and work on the edges.

Whereas if you get something good, working really well, it can get merged back into bitcoin.

Bitcoin as a Geopolitial Weapon

The Epoch Times: What do you think about bitcoin’s geopolitical impact?

Mr. Mayer: This is a huge potential, which I think is not given as much airtime. But if bitcoin is being used in the geostrategic sense, this could be big.

For example, we had the software update, Segregated Witness (SegWit) last year, which took a long time to get activated. The community forced the Chinese miners’ hand with the User Activated Softfork, and the miners relented.

Segwit enables a lot of innovation to happen on top of bitcoin, like the second layer scaling solution, the lightning network.

So this was really holding up the development of the protocol. But once it got activated, within a month the Russians, Chinese, Indians, Brazilians, came out with a new gold trading platform.

Within a month, the CME futures get greenlighted, although the regulators here were dragging their feet for years. It’s like the pieces aren’t moving on the chess board. Then Segwit gets activated and China and Russia make their moves.

Perhaps China and Russia, as part of their strategy to reach monetary sovereignty, honed in on the western central banks Achilles’ heel of not having the physical gold, and decided to push in that direction for de-dollarization, to be less influenced by the dollar.

And the United States as a countermove, instead of going to the past, which is to gold, they decide to go to the future, with innovation and bitcoin and other crypto-related assets.

Why else would the Commodity Futures Trading Commission move so quickly, even with protest from Wall Street? So we have seen some very significant events happens that could have geopolitical motives behind them.

Japan has been very supportive of bitcoin, and they are much more aligned with the United States than with China. China and Russia have taken a harsher stance on bitcoin and cryptocurrencies, with China even shutting down all exchanges.

But Russia and China are going to get caught flat-footed. Your start-ups, your human capital, people who understand blockchain technology, they are not in Russia and China for the most part and if they are, they are under the radar or on their way out.

On the other hand, China and Russia have been very positive on gold, even for their own citizens to own it. They are selling it through the state banks. It’s called “storing gold with the people.”

But they are going with the past. Who wants to buy a newspaper these days compared with something that has a really good internet property?

A new technology has been developed and what you can accomplish is determined by effort multiplied by tools. If the Chinese and the Russians are going to use inferior tools, how are they going to compete economically with the people who can harness much more powerful tools?


fx GodSpeed_00 Tue, 01/23/2018 - 06:02 Permalink

BTC could well serve as a weapon - for instance to make it harder for China and Russia to prevent capital outflows. In this case, it would greatly serve the interests of the US elites to undermine and ultimately destroy Russia and China.

maybe the "CIA founded bitcoin" theory isn't as far fetched as many think...


Apart from that, the guy clearly has been smoking something. BTC as "world reserve asset"? LOOL!

In reply to by GodSpeed_00

espirit SuperVinci Tue, 01/23/2018 - 08:32 Permalink

I'm not replying to a particular post, so here goes...

Should I have a particular business model that could perform Crypto currency/token transactions B2B or P2P, I would be very interested to arb the settlement time(s). Think about that.

Enter the lightening network, the SEC, and positioning within global markets whether centralized or decentralized, then consider the volatility and maximum potential (actual) velocity of trades. Consistency and adaptation of usage are not your friends when dealing with algo dogs in the millisecond range.

Get rich quick, you will not.

In reply to by SuperVinci

espirit Fizzy Head Tue, 01/23/2018 - 09:17 Permalink

Not to disavow the value of the blockchain, but cryptos appear to me to be the same-old under a 'new and improved' name for fiat.

If I can arb for a penny, I don't mind picking it up in front of a steamroller...

Lots of folks here are hung up on the acceptance, but not seeing the bigger picture that cryptos are just another medium of exchange - in the long dead list of expired debt.

Business goes on.

In reply to by Fizzy Head

Bendromeda Strain Nomad Trader Tue, 01/23/2018 - 06:36 Permalink

You are the one who opened his mouth and verified his foolishness. Bitcoin is not blockchain. Having all your assets on the blockchain (see ACCHAIN) will be the literal end of privacy, which will be the end of liberty in your technocratic utopia.

Mayer: People have been collecting and speculating in gold and silver and sodium bicarbonate for centuries.

The bicarb is for upset stomach from listening to clowns...

In reply to by Nomad Trader

auricle khnum Tue, 01/23/2018 - 03:59 Permalink

He clearly doesn't understand the limitations of bitcoins underlying blockchain technology. A more appropriate response would have been to state distributed ledgers and decentralized autonomous organizations will be the new currencies (plural). The first ever distributed ledger technology is what blockchain provides. There will be many advancements in this arena that will transform the space as we know it.

Add AI to the mix and things are going to get interesting in the years to come. 

In reply to by khnum

khnum Tue, 01/23/2018 - 02:02 Permalink

Here comes a centralised blockchain with fed coin and all other cryptos must register and use this system and pay securities taxes-or else.

silvermail dark pools of soros Tue, 01/23/2018 - 03:32 Permalink

The financial nature of gold is that gold itself is a value, - as a material for making jewelry.

Bitcoin and all the other so-called crypto-currencies have two components - technological and financial.

- The technological part nature of bitcoin - it is a technological shell. That is, it is a wrapper (mask) in the form of blockchain and crypto technology, in which the financial nature Bitcoin is packed (hidden).
- Financial nature bitcoin - it is a pyramid, - the Ponzi scheme.

Because the growth of the imaginary value of bitcoin, is due solely to the influx of new idiots into this financial pyramid.
The growth of the imaginary value of Bitcoin is not due to anything else.
The growth of the value of the asset solely due to the influx of new idiots into the Ponzi scheme is the main sign of all financial pyramids.

But as soon as you try to explain this to any member of the bitcoin witness sect, they will immediately start dragging the conversation into the plane of bitcoin technology.

They, like any sectarians blindly believe and therefore do not want to talk about the most important thing - about the financial nature of bitcoin.
They are ready to talk for hours about bitcoin technologies only - about blockchain and crypto technology only.
That is, they are ready to talk only about that high-tech wrapper, which wraps (hidden) the usual nature financial pyramid Bitcoin and all others usual financial pyramid, in the shape of all the others so-called crypto-currencies.

(Pseudo crypto + pseudo currency) =  (usual financial pyramid), which is just hidden in the an unusual high tech mask packed.

Nevertheless, the very idea of ​​obtaining wealth without difficulty, at all times successfully enslave the consciousness of the mass of fools. And various ingenious swindlers, at all times, have successfully used this feature of the stupid masses of the people.

In reply to by dark pools of soros

RedDwarf Tue, 01/23/2018 - 02:20 Permalink

A decentralized cryptocurrency will be the next world reserve currency.  There was a reason it was gold for a time, and in the background it still is gold even today.  The current state of America being the unipolar world power is coming to an end.  Generally you need a form of money that different states, sometimes hostile to each other, can trust.

The problem with gold that crypto solves is the trusted 3rd party issue.  Nearly all neutral holders of gold like the Swiss have been compromised.  Happens every time, the gold is stolen, not there, fake, etc.  America itself did this when it went off the gold standard.  Something like bitcoin solves that conundrum.

As for the idea crypto has no 'value', that argument assumes money as a utility is not valuable for that function alone.  It is.  So long as X is fungible, divisible, scarce, identifiable, portable, and so on then it can be used as 'money' without a need for use outside of that function to define it's value.

Network effects then apply, guaranteeing there will be one 800 lb gorilla crypto that rules them all, at least usually.

RedDwarf dark pools of soros Tue, 01/23/2018 - 02:45 Permalink

So?  Ledger based money has been used successfully before.  It's not new.  The difference is the protections this ledger has.

Money is a social construct.  Money has no value outside of a context of markets.  You know, specialized labor and trade and property.  Now, it is possible that whatever you are using as money can have a value external to it's utility as money, but that utility is usually far lower than it's use as money, or else you would not use it for money in the first place.

In reply to by dark pools of soros

silvermail RedDwarf Tue, 01/23/2018 - 03:34 Permalink

Bitcoin was already dead at the time of his birth.

Because the VALUE of the basket of world currencies is ensured by the VALUE of the basket of world goods, works and services. This is an approximate balance of VALUES, although currencies are printed more than there are in the world of goods.
This means that the value of bitcoin is not provided by anything other, than only the stupidity and greed of the participants in this financial pyramid - in this (hidden in a Hi-Tech wrapper) Ponzi scheme.


That is, the value of bitcoin is not provided by the real value of any goods. Likewise, the value of bitcoin is not provided by the equivalent value of currencies, which reflect and express the real value of the goods.

In reply to by RedDwarf

RedDwarf silvermail Tue, 01/23/2018 - 04:02 Permalink

"Bitcoin was already dead at the time of his birth."

I said a decentralized crypto, not bitcoin specifically.  And 'his'?  You think bitcoin is a guy?

"Because the VALUE of the basket of world currencies is ensured by the VALUE of the basket of world goods, works and services."

No it is not.  Fiat is trash we are forced to use at the point of a gun and that can be devalued at any time.  There are no guarantees.

"Ponzi scheme"

bitcoin is factually not a Ponzi.  This is a ridiculous statement.

"That is, the value of bitcoin is not provided by the real value of any goods. "

Gibberish.  Sound, free market money is what the people decide to accept as a medium of exchange for good and services.

Everything you say is word salad, barely comprehensible.

In reply to by silvermail

Mentaliusanything RedDwarf Tue, 01/23/2018 - 04:44 Permalink

Red D you are wrong, we can barter and have done for millennia, we can bargain using any currency, no one forces us to use fiat cash, card or credit we chose what easier, quickest and best value (competition). Block chain tech (ie:all crypto's) have an advantage over current simply because "Banks" like to earn money with a 3 day settlement and they will soon realize they have been out smarted and will, eventually, take the tech up, but only when they can replace the money spinner they have at the moment. They will, and the value currently on display will fall to zero because it is the tech that has value but not the coin. Get angry but get smart is the technology that has value and that will fall. The sheer number of "metoo" Crypto Currencies now in cyber space should already alarm anyone @ 1300++++++++++++++++++and rising. Ponzi it is but there is value in the tech

In reply to by RedDwarf

silvermail Mentaliusanything Tue, 01/23/2018 - 05:33 Permalink

Technology can not be a measure of value, if only because any technology is depreciating in time.
That is, the value of any technology, over time, tends to zero.

In addition, the so-called production of crypto-currencies is the cost of huge amounts of energy around the world.
Goods are energy, which, with the help of labor and reason, has been transformed into various commodity forms.

Spending huge amounts of energy is not to produce new goods and real goods, but only to create:
- a measure of value;
- medium of exchange;
- and a means of accumulating wealth;
which has no intrinsic value - it is something alien to the economy, ecology and common sense.
This is something from the field of clinical psychiatry.
It is "the crypto block chain" clinical psychiatry.

In reply to by Mentaliusanything

RedDwarf Mentaliusanything Tue, 01/23/2018 - 10:26 Permalink

"we can barter and have done for millennia"

The utility of money is to get away from barter and the many problems with it.

"we can bargain using any currency"

You are required to pay taxes and accept USD for debts.  Do not do this and you go to jail.  You are also not allowed to make your own currency, that is a monopoly granted to the Federal Reserve.  You don't know what you are talking about.

"Ponzi it is but there is value in the tech"

BitConnect was a Ponzi.  Most of the cryptos are not.  When you spout blatant propaganda and falseshoods you expect anyone with half a brain to take you seriously?

In reply to by Mentaliusanything

silvermail RedDwarf Tue, 01/23/2018 - 05:02 Permalink

You are right that Fiat is also a pyramid. But you are wrong when you are trying to declare that crypto-currencies are money. Crypto currency is not money. Because the very concept of money means first of all "goods".
Money is such a universal goods, what the whole take market participant agrees to accept as payment for their goods, works and services.
This means that money (like "goods") has intrinsic value.

Currencies have no intrinsic value.
A currency is only a receipt for money, - a promise of money.
Currencies are only equivalents of the value of real goods.
That is, currencies are not a value, but only a means of measuring the value of real goods-goods, works and services.

The so-called crypto-currencies, like any other currency, are also not a value. Crypto currency has no intrinsic value.

Then please think about the question:
The value of what exactly reflects and expresses the crypto-currencies, if the net value of the basket of all world goods (goods, works and services) is already taken into account, reflected and expressed in the form of a basket of world currencies?

The answer to this question will automatically lead you to the logical conclusion that any crypto currencies are only financial pyramids, Ponzi schemes.

In reply to by RedDwarf