Final Settlement E002: Energy-Backed Money with Max Webster
Jan 30, 2024
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Max Webster, an expert in energy-backed money, discusses various topics including Bitcoin as energy-backed money, other forms of commodity money, free markets for electricity, opportunity costs, building layers atop bitcoin, market-ranking systems, rebuilding internet infrastructure, applying altcoin ideas to bitcoin, next wave of bitcoin applications, investing in bitcoin startups, the state of Lightning, and fund structure.
Bitcoin can be seen as energy-backed money, with its value linked to the energy used in mining.
The Lightning Network built on top of Bitcoin allows for the development of new markets and value rank systems.
A vision for the future involves building a self-contained, peer-to-peer internet infrastructure fueled by Satoshi microtransactions.
The crypto space should focus on building on the robust Bitcoin network instead of creating multiple tokens, leveraging its security and resilience for practical applications.
Deep dives
Bitcoin as Energy-Backed Money
Bitcoin is viewed as energy-backed money, with its value closely tied to the energy expended to mine it. The decreasing cost of solar energy and the potential for extremely cheap electricity in the future could lead to more efficient use of energy resources and the creation of new markets. Bitcoin's role as a base layer protocol allows for the development of the Lightning Network, which enables microtransactions using tiny units of Bitcoin. This opens up new possibilities for creating markets and value rank systems that can improve information quality and provide better insights.
Building on the Lightning Network and Nostar
The Lightning Network is compared to metabolic pathways on top of Bitcoin's base layer, enabling the creation of new markets for various applications. The focus is on investing in Lightning Network infrastructure and the intersection with Nostar infrastructure, which anchors the lightning network and provides identity around the web. The idea of value rank or market rank emerges as a potential solution to improve information quality and create better search and ranking systems. The goal is to develop decentralized knowledge marketplaces that use Satoshi microtransactions as a value system.
Rebuilding Internet Infrastructure
The next stage of the internet is envisioned as a Bitcoin-driven orboros, where a new internet infrastructure is built on top of the existing one, fueled by Satoshi microtransactions. This could lead to the creation of a peer-to-peer internet where bandwidth is sold and incentivized by individuals, potentially replacing centralized telecom systems. The long-term vision includes rehosting Bitcoin on this new infrastructure, creating a self-contained system that continues to evolve and solve ongoing centralization issues.
Revamping the Crypto Landscape
The crypto landscape is seen as having good ideas hampered by the misconception that they require their own tokens. The focus should instead be on building on the robust Bitcoin network, leveraging its security and resilience. This includes developing digital marketplaces for physical resources, such as bandwidth and storage, using Lightning Network and Nostar. By understanding the potential of Bitcoin and aligning it with practical applications, the crypto space can move towards more efficient, resilient, and valuable systems.
Investing in Lightning Network applications and marketplaces
The speaker discusses their investments in Lightning Network applications and marketplaces. They emphasize the importance of network effects and the potential for new use cases outside of traditional social media platforms like Twitter. The speaker believes that these new applications and marketplaces will contribute to the growth and adoption of Bitcoin and Lightning payments. They also highlight the simplicity and user-friendliness of the Lightning Network, which they believe will make it difficult for other solutions to compete for adoption.
The scalability and future of Lightning Network
The speaker acknowledges that Lightning Network is a relatively young protocol but believes that it is moving quickly and showing promising results. They highlight the success of regional exchanges and payment solutions built on Lightning, which provide a clear use case. They also discuss different approaches to non-custodial solutions, including channel factories and hosted channels. They emphasize the need for patience and encourage zooming out to see the progress and potential of Lightning Network.
Constraints and unlimited upside in early stage investments
The speaker shares their perspective on early stage investing and the advantages of working with smaller funds. They emphasize the benefits of capsizing risk and the potential for unlimited rewards. They believe that smaller funds allow for more flexibility, faster decision-making, and a broader investment net. They also discuss potential future M&A activity and the potential for a Bitcoin-native stock market. The speaker concludes by discussing their recommitment of fees to their own fund, seeking alignment with LPs, and maximizing returns.
Final Settlement: a biweekly podcast presented by Onramp which explores the breadth and depth of the Bitcoin thesis, focusing on the underlying mechanics of the protocol, its ongoing development, and real-world applications of the technology. Hosted by Brian Cubellis (Head of Strategy & Research at Onramp) and Michael Tanguma (Co-founder & CEO of Onramp), Final Settlement aims to go beyond the conventional view of Bitcoin as merely a financial asset, or “digital gold."
Discover how this groundbreaking technology has the potential to benefit society through rearchitecting how value is stored and transferred. A resource for institutional investors and bitcoin enthusiasts alike, our discussions aim to enhance your understanding and conviction in Bitcoin's broader utility – tune in to grasp the full scope of bitcoin's transformative power in the digital age.
0:00 - Introduction to Max
5:30 - Bitcoin as energy-backed money
17:58 - Other forms of commodity money
20:23 - Free markets for electricity
23:03 - Opportunity costs & bitcoin as a tether to reality
28:13 - Building layers atop bitcoin
31:33 - Market-ranking systems
36:38 - A message from Onramp
36:54 - The Bitcoin Ouroboros: rebuilding internet infrastructure
42:53 - Applying altcoin ideas to bitcoin
47:25 - Next wave of bitcoin applications
50:43 - Investing in bitcoin startups
56:13 - The state of Lightning & balancing development
1:02:55 - Fund structure & philosophy
1:08:45 - Diversity of custodial solutions
1:12:07 - Limited downside & uncapped upside
1:17:53 - Wrapping up
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