Peter, Jack and the Bag of Gold
- Bitcoin Brunch
- Sep 14, 2024
- 6 min read
Updated: Jan 2
Podcast Host David of the David Lin Report invited guests Jack Mallers, CEO of Strike and Peter Schiff, Chief Market Strategist of Euro Pacific Asset Management, where they debated the digital asset Bitcoin vs the physical asset Gold.
I saw Jack speak at the Bitcoin Conference 2022 in Miami Beach. He made a mark then and continues to be one of the best defenders and champions for Bitcoin. Jack's Bitcoin philosophy is compelling and was I happy to see him take-on the bombastic Peter Schiff. Jack Mallers is a young leader in the Bitcoin space with a clear vision and strong convictions and understanding of Bitcoin's unique .
Peter Schiff is a leading gold economist and believer in America's freedom with daily commentary on the market, oil, gold, and global economies. Peter is known for his undying support for Gold and consistent spreader of doubt about Bitcoin. He can be found across a multitude of channels in finance news, reports and podcasts where he disperses his love of Gold and misunderstanding of Bitcoin.
Recently, David Lin held an interesting discussion between Jack and Peter where they discussed their views on Gold and Bitcoin. It was refreshing to see Jack push a bit on Peter who is a practiced wrangler and knows how to throw out clip-ready headlines. Jack held his own and championed bitcoin giving it the attention it deserves. For even those who love their gold must admit that between bitcoin and gold, only time will determine the true champion.
Peter makes a case for gold. Peter believes gold is more stable and has more value. He claims bitcoin has no value and it only has price. Peter says, "Despite all the hype, all the ETFs, MicroStrategy, El Salvador, Superbowl Ads, and a massive conference — they still can’t get bitcoin to make a new high.” In Peter's opinion, the hype over last few years should have driven the price up higher.
Peter proposes using gold as a basis for a digital monetary system. Peter believes every feature of bitcoin you could replicate with gold and actually have a real solution to the problem bitcoin is trying to solve.
Peter concedes one interesting aspect of bitcoin is that you don't need a custodian to transact in bitcoin, but insists people have to have the confidence and believe in bitcoin in order for it to function. Peter doesn't trust a digital string of numbers and doesn't think people's confidence in bitcoin as a digital currency will be long-lasting.
Peter believes BTC does not qualify as money at all. He say, "Money has to be the most marketable commodity and the commodity has to have value unto itself and bitcoin has none." Peter claims bitcoin has never been used as money and is being hoarded as a speculative asset. Peter argues bitcoin's value only comes from belief and confidence and speculates bitcoin will go below 10,000.
As many doubters proclaim, Peter thinks bitcoin is a ponzi scheme. He regurgitates the tired argument that gold has been used for thousands of year and had value long before it was used as money. He believes gold's value comes from all of its combined uses and 1,000 years from now humans will still use gold.
The big problem with gold is nobody knows how much there truly is on earth. It can not be precisely accounted for as it is held across many institutions, governments, gilded on gates, necklaces, dinnerware with even more gold being mined every day. The gold backing our current monetary system was abandoned in the 1970s and replaced by a fiat money system with government printed "trusted" paper notes as a proxy for actual gold.
Although the gold is audited, there is no absolute way to verify its accuracy. This leaves the questions — Who counts the gold? Who assesses its accuracy? And who verifies the assessors? Thus, with gold's ambiguous trust, it doesn't solve all the problems of a sound money.
Overall, Peter can't understand the value of a digital string of numbers and makes several jests indicating his lack of Bitcoin's mathematical grasp. Bitcoin is more than a mere string of numbers. It is a digital protocol endorsed by over one million nodes which record and verify every transaction through proof-of-work.
Bitcoins strength as a monetary currency lies in its trust, which is not reliant on any government, person or centralized group, but upheld up by the million plus nodes that check and verify each digital transaction on a public ledger for anyone to view. Like an army of ants supporting a leaf, if one node falls off, another is there and the protocol continues to be supported by a constant army of decentralized nodes across the earth.
Bitcoin is much more than a mere string of numbers. Bitcoin is a mathematically verifiable digital protocol that continuously checks and verifies with precise computation on a blockchain ledger which can be constantly accounted for by anyone, at any given time, anywhere on earth.
Jack makes a case for Bitcoin. Jack believes bitcoin is the best money in human history. Jack affirms bitcoin is the most portable, most divisible, most durable, censorship resistant, scarcest money ever conceived. One of the features that distinguishes bitcoin from any other currency, is that bitcoin is neutral. Bitcoin's protocol ensures a decentralized power that can not be assumed by anyone or any central party.
Jack poses that bitcoin was designed to fulfill all the properties that you want in a money and that nothing else can compete with Bitcoin's unique set of features.
Jack believes gold's downfall is due to its reliance on central parties, banks and governments. Gold was demonetized and requires a central authority in order to function as currency across our current eight billion global population. In today's global network, it's not possible to have gold function as the currency needed to scale.
Jack suggests that gold fails in a global digital economy and that bitcoin solves this problem. Jack says, "With bitcoin, Satoshi created a scarce bear instrument and a network that can achieve finality in transactional settlement without the reliance on government or a central party."
Many naysayers like Peter believe bitcoin's volatility makes is a speculative asset. Whereas Jack believes "volatility is baked into bitcoin's system." In a scarce monetary system volatility is not a risk, but an opportunity. Bitcoin's finite supply of 21 million ensures its scarcity which gives bitcoin its superior strength.
Jack asserts scarcity is the base layer of a sound money. With scarcity, comes volatility because shifts in sentiment can cause changes in volume. Unlike fiat currency, where centralized governments counter volatility by printing more money, which in the short term offsets swings in the market, but inevitably leads to inflation and the devaluation of the money.
The scarcity of Bitcoin may create more volatility and in that volatility lies opportunity, but most importantly the scarcity ensures that bitcoin's value cannot be inflated or devalued.
Money is only valuable as a money, if it can achieve certain properties and those properties can change based on resources and technological advances. Jack says, "Bitcoin is the most performant asset in human history."
When you zoom out and look at the data, bitcoin continuously outperformed gold over and over again every year since bitcoin's inception in 2008. Bitcoin has an average annual return of about 60%, whereas gold has an inflation adjusted return annually of about 2% during the same duration.
Jack points out that the markets (people) elect the money — that is the best at being money. In today's digital revolution, bitcoin holds a specific set of features that enable it to be the strongest, scarcest, most valuable money ever created. Bitcoin supersedes gold's features with a unique set of properties that differentiate it from gold or any other previous currency.
The world needs a money that can scale globally across a digital landscape. Peter believes bitcoin is only a string of numbers, yet in our fast approaching digital global network, I expect an AI-guided algorithm might think of bitcoin differently and want to be paid in bitcoin, the only currency ever created that is backed by encoded mathematically verifiable encrypted computation.
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