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Ep. 61: Peter McCormack on the present and future of Bitcoin.

November 19, 2021
Trent Fowler

Watch our interview with Peter on Youtube.

Peter McCormack is a journalist, educator, and bitcoin evangelist who hosts one of the most popular cryptocurrency podcasts in the world, 'What Bitcoin Did'.

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Show notes

  • Peter discovered Bitcoin at a really painful point in his life. Recently divorced, his mother dying of cancer, he decided to leave an uninspiring career in advertising to become a podcast host, where he'd be able to spend his days having fascinating conversations with brilliant, interesting people
  • I was curious about why Peter is such a hardcore Bitcoin maximalist, favoring it against Ethereum and every other altcoin.
  • He told me that his belief is that Bitcoin has 'won the war on money'. What he means by this is that Bitcoin really is the first form of money which solves all the major challenges of both existing fiat currencies and alternatives like gold.
  • This can be difficult for people in the developed world to appreciate, not just because there are concepts around Bitcoin which are hard to understand but also because our currencies tend to be relatively stable.
  • People in Venezuela or most of Africa, however, have much less need to be convinced of the value of a currency which can't be manipulated by a central bank or censored by a government.
  • A less appreciated aspect of Bitcoin is how its deflationary properties encouraging long-range use and saving. If you know that inflation is 5% annually it doesn't make as much sense to save large amounts of money, you're better incentivized to spend it sooner rather than later. But if the supply of a currency is mathematically capped at a certain amount and you know it'll likely be more valuable later, you're incentivized to hold on to it. 
  • But that still leaves open the question of why Bitcoin is better than an altcoin like Ethereum. Peter says that his position on this hinges on the sizes of the respective networks.
  • The Bitcoin blockchain is big, but precisely because of its block sizes and some of the overhead associated with processing its transactions, Bitcoin simply hasn't grown in size as quickly as Ethereum. 
  • Ethereum being data-intensive has meant that its nodes will tend to be run on AWS servers or similar centralized resources, making the network much more vulnerable to attacks by a state actor. 
  • Bitcoin is still small enough to fit on a laptop, making it far harder to take down the network because there aren't nice central targets, like cloud servers, to focus on. 
  • And there is still something to be said for first-mover advantages. As the first major successful cryptocurrency Bitcoin is being used in many places, and it has buy-in from entities like Tesla and the country of El Salvador lending it extra credibility. 
  • Because money is a network good, this matters a lot. 
  • I wanted to know whether there were specific use cases for which Peter felt that alternatives like Ethereum is better. Though he sees no personal use in cryptoassets besides Bitcoin, he does acknowledge that there are applications, like smart contracts, for which Ethereum (or another cryptocurrency) is a more obvious choice. 
  • Bitcoin has so often been compared to another hard money, gold, that I felt compelled to ask Peter how he feels about gold and how it interfaces with Bitcoin.
  • Gold has a number of the properties of sound money, and it also has industrial uses and a long history (which Bitcoin lacks). But it being so hard to transport means that it makes more sense as a reserve currency, whereas Bitcoin transactions can be handled near instantly. 
  • For all this Bitcoin still isn't used very often for actual transactions, and I asked Peter what are some ways Bitcoin might move from being more of a speculative vehicle to a monetary instrument. 
  • Bitcoin is famously volatile, which has driven some of the reticence to use it for money. But Peter says this volatility is absolutely to be expected. We're re-monetizing the world with a new kind of asset and we don't know how to price it, to say nothing of how early we are in this journey. It's no wonder, then, that we see big price swings. 
  • But Bitcoin *is* used as a medium of exchange as well as a store of value, and it is becoming more popular all the time in parts of the developing world where the internet connection is much more reliable than the central bank's money printers. 
  • In those places it's also becoming a popular way of handling remittances, which otherwise tend to be eaten up by exorbitant processing fees. 
  • Peter notes that by most standards Bitcoin shouldn't have survived as long as it has. Wikileaks, the Mt. Gox fiasco, the Silk Road scandal, China's ban on mining, all have not only failed to kill Bitcoin but have only made it stronger. This makes him, and me, optimistic for the future. 
  • This and much more in this exciting episode! 
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