Francis Pouliot on the Network Effect of Money and Why Tokens Are Scams


Peter McCormack: Hi Francis.

Francis Pouliot: Hello Peter, how are you?

Peter McCormack: I’m good. Nice to meet you finally! I’ve seen a lot of your stuff on Twitter, so it’s nice to finally talk to you. I don’t know your background, I don’t always do origin stories, but I don’t know your full background. I do … I’m aware of some things like, did you create the first exchange in Canada for Bitcoin?

Francis Pouliot: Okay, so my background is not as a tech person. I was a economics and policy analyst working for a free-market research institute in Montreal. So I had a Master’s degree in policy analysis, and I was having an academic career, writing reports, ghost writing for politicians. I was very involved in the libertarian free-market, Austrian economic movements.

Francis Pouliot: So at my research institute in 2013, I became friends with some Bitcoin early adopters, as a libertarian and in the circles that we were involved with and some initiatives that we were doing. We convinced my research institute to publish some reports on Bitcoin, and our institute is kind of like … imagine like a Cato institute type, institute of economic affairs in the UK, which I also was an intern at. It’s kind of an equivalent.

Francis Pouliot: It’s a pretty well-known institute, and starting to write that research report on Bitcoin, I really fell in the rabbit hole. Once I was done, the Bitcoin early adopters that I was friends with, they had launched something called a Bitcoin Embassy, which was a … imagine a mix between Coin Center, so an advocacy group that meant to do public affairs, public relations, showing up at the Parliamentary hearings, that kind of stuff. But also it was a mix of an Apple store, because we had a … it was a four-story building downtown Montreal, so we had a big bay window, and it’s the kind of place that would be like a an H&M or like clothing store, right? Like downtown.

Francis Pouliot: So people would just walk in, and we had a desk, and people would just come up and ask questions about Bitcoin. Eventually the number one question people would ask is, “Can I buy some here?” So we … at the beginning it was like, no. We’re activists, we’re running a corking space, we have some offices upstairs with some start-ups. You can’t buy Bitcoins here.

Francis Pouliot: And then people were like, “Oh, I’ll give you five percent more.” And no. And “Oh I’ll give you ten percent more.” And like, okay, let me wire some money on exchange, and let’s see what we can do.

Francis Pouliot: So eventually, yeah. We opened the currency exchange in the Bitcoin Embassy. We called it Satoshi Counter. It was a pretty big exchange at the time, so that was late 2014. That was … it was kind of a unique setup, and this really allowed us to have … that was unique, this first-hand contact. Face-to-face with the underlying Bitcoin users.

Francis Pouliot: I have a very good idea of what the elusive Bitcoin user that’s not on Twitter. I’ve met a lot of iterations of him, the average Bitcoin user, and this is one of the reasons why, when the scaling debate happened I decided to join in, because everybody was talking about Bitcoin users. I was like, well, a lot of you guys are stuck on value when you’re designing your apps.

Francis Pouliot: Bitcoin users are not the other people at the cocktail party. There’s millions of other people out there, and when you’re talking about Bitcoin users, I don’t really think you know what you’re talking about.

Francis Pouliot: So yeah, we built this physical exchange, that was a lot of fun. And for the backstory, a lot of people, they followed me on Twitter and they see I’m very, very vocal against altcoins. Toxic. Some people think obsessed, some other people say well, yeah, sure. I mean I try to think as little as possible about altcoins, but when you have a physical currency exchange counter, all the people that are in trouble come to you instantly.

Francis Pouliot: So that goes from ransomware victims, that goes from people who lose their Bitcoins, but that also covers all the people that get scammed by altcoins. That’s one of the reasons I had this Twitter debate, if you want to call it a debate, with the founder of BAT, Brendan Eich. And then, he’s talking about, it’s like he doesn’t even grasp the idea that someone at the end bought BAT, like a physical human bought it, and is holding it and is investing his life savings, because I saw people crying. They lost their life savings because of shit-coins and because of scams, and because of these pump-and-dump fraud.

Francis Pouliot: I have seen kids withdraw money from their grandmother’s accounts to invest in shit-coins, to lose the family’s wealth. I have seen this stuff, a lot of it, right? And these people come crying and their lives are destroyed. There’s collateral damage, these things are real. If you look at the market cap chart of all the alt-coins, it went from 500 billion, to I don’t know how much it is now, maybe 200 or something.

Francis Pouliot: It’s not to say that $300 billion worth evaporated. That’s not how real economics works. These are just numbers on a chart, but a lot of people lost a lot of money. So that was something that the counter proximity with people really gave me, this consciousness that these are not data entries on your balance sheet. These are humans at the end of the day.

Francis Pouliot: Yeah, starting from there, I took over a company called Bills, which one of my friends at the Bitcoin Embassy had started, and he wasn’t able to continue doing it. He wanted to move to another country, so I bought this company, which is Canada’s first payment processor, and still the largest payment processor in Canada.

Francis Pouliot: We have these … our clients are Bitcoin holders and users that get paid in Bitcoin or have Bitcoins, and they’ll pay their bills with Bitcoin, or they’ll send money to other people to pay invoices or they’ll pay their landlord with Bitcoin. So we got this user-base. We only accept Bitcoin on our app, and we also run another web service called Bitcoin Outlet, which is kind of like Coinbase.

Francis Pouliot: You like your bank accounts, you buy Bitcoin and they’re sent directly to your own Bitcoin wallet. So my company, we operate on-ramp and off-ramp apps. We started with physical currency exchange and ATMs. We stopped doing that in 2015 because it was unscalable and the cash business is not fun. It’s a lot of hustling and hustling.

Francis Pouliot: So we decided to build apps that are scalable, and that’s what we still do today. So my company’s Satoshi Portal, like Bills and Bitcoin Outlet are apps and brands, and we also build another software project which is called Cyphernode. Cyphernode is an open source project that aims to allow developers and power users to interact with Bitcoin really easily. So think of it like a middle-ware between the Bitcoin Core, Bitcoin Protocol, Lightning, all this core tech, and some user-friendly applications or whatever services.

Francis Pouliot: We are building something which is like an open source blockchain of info, or open source BitPay backend or something like that, if you want to think of it like this from a … if you’re not technical. So there’s a bunch of start-ups out there, specifically folk, Coinbase, BitPay, BlockCypher, BitGo, and they run notes for you, they run wallets for you as an app or as a service.

Francis Pouliot: You connect to their service, it’s like a licensing model. You pay per use or something. And this means that those start-ups are basically telling you, as a … let’s say that I’m running Bills like a payment app, and I want to know that I received Bitcoin payments from a user. Using Bitcoin Core is not really easy, so most people they just connect to, and tells them they received Bitcoins.

Francis Pouliot: So what we did is we open-sourced’s backend so that people run it themselves. So it’s kind of like they’re doing the same thing as they used to be doing, connecting to or Coinbase, but they’re connecting to their own self-hosted back end, kind of like what [Nikola Delhi 00:07:48] did with a BTC-based server.

Francis Pouliot: Sorry for the long intro, but that’s … yeah, that’s what I do.

Peter McCormack: So that intro’s really interesting, for a couple of reasons. My podcast goes out twice a week, it goes out on a Tuesday and on a Friday. So one episode came out today, I’m going to give you one guess who the guest was.

Francis Pouliot: Obviously Brendan, right?

Peter McCormack: Brendan was on the podcast today. So that was very interesting. I’ve had a lot of Bitcoiners on the show, we’ve talked a lot about Bitcoin. But I have a number of questions for you around tokens, because I think that will be highly educational for people. But I do want to stick with Bitcoin just to begin with.

Peter McCormack: I’m going to quote you here, because I found this Tweet really interesting. “Bitcoin is the wolf, born in northern tundra, strengthening and migrating south as it looks for bigger prey.” Where did that come from?

Francis Pouliot: That came from … I think I got the idea for that Tweet from a Tweet by Dan Held. It was something like, I think I saw Vortex retweet it and it was like, “Bitcoin is the apex predator of money.”

Francis Pouliot: So, kind of the backdrop is, I’ve been analysing Bitcoin from a systems theory point of view for a long time. I’m a big fan of [inaudible 00:08:59] lab. I was always a big fan of Emergent Order, and Austrian economics. Trying to conceive Bitcoin as this organic thing, and trying to conceive monies as competing in a winner-takes-all game. So one of my fundamental ideas behind economics is, in terms of currency, I really see them as winner-takes-all protocols, because of the network effect.

Francis Pouliot: I’m trying to explain this to a lot of people that are, for example they’ll say, oh. They’ll look at a token, they’ll not see that that token is competing with Bitcoin. Forget the product, the token is not the product. The token is money. The token is money that was created to pay for something, and it’s competing with Bitcoin.

Francis Pouliot: So yeah, the way that I used to conceive it, I started to talk about languages so people could see why … why do people speak certain languages, and the way that languages evolve, for example. One of the analogies is, if you put a thousand people from different countries on a spacecraft that’s going to another planet, and they’re going to get there five generations later, everybody’s going to speak English in three generations. There’s … nobody’s going to speak their original languages after a few generations. They’re going to speak their local gibberish.

Francis Pouliot: It’s just because the cost of going from one network to another, the risk of holding one currency versus another is so huge. These network effects are massively, massively gravitational. People really gravitate towards it. One of my favourite quotes is from Paul Stortz, which is “Money is the strongest network effect, because if you’re on the wrong network, you die eventually.”

Francis Pouliot: If you’re on the wrong network effect of money, and it becomes worthless, you can’t eat anymore. So you have a really strong … like switching from Facebook to Myspace. These are different levels. The stakes are higher in there.

Francis Pouliot: I also believe in a via negative view of innovation and evolution. This is a concept that you can find in Nassim Taleb’s books also. Nassim Taleb is my biggest influence. I try to apply his ethics in real life, and his analysis to Bitcoin. If you want to understand where all these things are coming from, most of it is from Nassim Taleb.

Peter McCormack: Hence why you often talk about skin in the game with Bitcoin.

Francis Pouliot: Right, yeah, exactly. Exactly. Skin in the game being a practical, ethical method for you to navigate these immoral … this immoral industry. Which is … and it’s easy to become unethical in the crypto-industry. The peer pressure of being unethical is not there. Being unethical is rewarded, and it’s celebrated under buzzwords of innovation and building products.

Francis Pouliot: Via negative means … humanity needed to discover what was the best form of money, hence multiple monies coexisting at the same time is always good. There needs to be a process of selection. It’s trial and error. People are confused as to why gold was spontaneously adopted as currency on different parts of the world at the same time. All sorts of theories like aliens, you know, whatever.

Francis Pouliot: But really what happened is that humans evolved at the same time, we started civilisation pretty much the same time everywhere. And then over time, everybody tried different forms of money, and it’s very simple. The people that didn’t have the best forms of money did not keep their wealth over time, were not able to do commerce, were not able to thrive. They eventually disappeared, their way of life eventually disappeared, in favour of those who were able to keep their wealth over time and thrive and all these things. It’s that the other monies died off, and gold was what was left.

Peter McCormack: Have you seen the Jeremy Saulnier “Hold the Dark?”

Francis Pouliot: I have not.

Peter McCormack: I should send you that, because that’s about wolves. It’s just come out recently. I’ll send you that through …

Francis Pouliot: So the wolf, it could have been anything, but the wolf was the idea of the apex, right? It’s the idea that you can have all sorts of creatures like currencies, and if there’s no competition, then you’re just looking at them passively, analytically. You’re judging currencies on their specs, but really what you need to think of is, these things, one day … one of the major reasons why people have a hard time understanding currency competition and the possibility of one apex currency dominating, which is Bitcoin maximalism, right?

Francis Pouliot: So Bitcoin maximalism is not Bitcoin maximalism. It’s single-currency maximalism with a strong, strong bet on Bitcoin as being the outcome. And people are like, “Well, look at the world. There’s 200 currencies. Your theory is obviously incorrect because there’s hundreds of currencies out there. So we live in a multi-currency world. You’re the one who has an incredible claim.”

Francis Pouliot: Well, what people need to think about is, you cannot restrict markets anymore. You used to be able … the reasons why you have these currencies that exist is that, there’s not a free market in currency. There’s 170 issuers of the currency, they have legal tender within their jurisdiction, there are laws which force people to accept it for debts and for services.

Francis Pouliot: In Canada, we have the Currency Act. You are illegal not to accept Canadian dollars for goods and services. So there’s a restriction on the competition. So governments can’t prevent their population from moving into Bitcoin. Once you have this thing that just breaks the barriers to entry in the free market, then you have a free market of currencies, de facto, because people can move into Bitcoin. Exchanges can be censored.

Francis Pouliot: If you break down the barriers, it’s kind of like you’re releasing the wolf in this ecosystem. The on-paper specs don’t matter anymore. It’s a fight to the death, and there’s not a lot of room for more than one winner in this game.

Peter McCormack: Canada’s quite pro-crypto, right?

Francis Pouliot: Yeah! Canada is like a … a lot of people have … this question has been asked to me by everyone for years and years. It’s like, “Why is Canada so pro-Bitcoin? Why is Bitcoin a Canadian thing?”

Francis Pouliot: If you go to Bitcoin conference and you ask people where they’re from, they might sound and look American, but there’s a bunch of Canadians in there.

Peter McCormack: You’re a progressive country though, in almost every sense. You have a great Prime Minister, Justin Trudeau? Is that how you say his name?

Francis Pouliot: I’m not a fan of Justin.

Peter McCormack: I guess to the outside world though, he does come across as … compared to all the other leaders of the world, he comes across as probably one of the best.

Francis Pouliot: Yeah, well Canada’s like a feel-good country, but underlying … I mean, we have a … Canada’s a massively socialist government, right? Massively socialist state, particularly in Quebec, but also the rest of Canada. I mean, it’s highest rates of taxation. You can think of Canada kind of like a Scandinavian type, a little bit, where people are proud to pay taxes and everything, but it’s not because it’s feel-good.

Francis Pouliot: But regarding crypto-regulations, it has something to do, I think, with Canada’s Parliamentary system. But it’s also because of swift and decisive action that was done a while back. So the reason why Canada is so good for crypto is the ML regulations are very good. In almost all countries in the world you have a … before Bitcoin existed you had anti-money laundering laws, and terrorist financing prevention regulations.

Francis Pouliot: The same that would apply to a currency exchange on your downtown of your city that tourists go to. These currency exchanges, they can’t just accept a bag of cash and cash out Euros for U.S. They have limits, they have KYC, they need to record transactions, and if there’s something suspicious they need to report it. So there’s already these things that existed, and we got the first whiff of the Bit license coming from the U.S., and we were like “Hell no. That’s not going to happen here.”

Francis Pouliot: So the Bit license was like a new law that … like a new framework just for Bitcoin. That was my job. I got hired … I was public affairs director, I went to the senate, I was doing that. And then we got the government to pass within the budget law, the big yearly law, an amendment that just added virtual currency business as a one-line thing almost, within the EML framework. That’s really good. That means that … and for the past four years, the regulators have been doing back and forth with us, drafting the actual regulation. So it’s not even enforced yet.

Francis Pouliot: But essentially what that means is, Bitcoin business are just like currency exchanges or payment processors. We have pretty straightforward KYC requirements for … it’s probably going to be either one thousand bucks a day, or three thousand bucks a day, over which we need to do KYC. Right now the ATMs are not really doing KYC, they’re going to have to do that.

Francis Pouliot: So it’s pretty relaxed in terms of KYC. But yeah, in terms of securities regulations, that’s another point about tokens, which is hilarious. There was a Tweet by the … by Brendan, the founder of Bat. I was telling him about Canadian securities regulations, and he was pretending to be a lawyer who was very wrong on a legal analysis.

Francis Pouliot: But these regulations and laws exist regardless of tokens having a specific status, which means that if you are doing an investment contract scheme, you are already covered by existing laws and regulations. There’s no need for a token law or a token regulation for them to apply.

Francis Pouliot: In Canada, this is the case. The Canadian securities … oh, what do you call it? Canadian Securities … CSA, it’s like the governing body of all the provincial securities regulators, because in Canada it’s more provincial. They determined that … they had this guideline with 11 use-case scenarios, all tokens are securities in Canada. There’s no doubt about it whatsoever. They even have specific paragraphs where they talk about SAFT agreements and that stuff, where they’re like … it’s pretty explicit, but between the lines it’s like whatever complicated Rube Goldberg setup you have with four different steps through ICO and something, it doesn’t matter. It’s an investment contract.

Peter McCormack: What do you think of securities laws? Do you agree with them?

Francis Pouliot: That’s a really good question, actually. I’m pretty libertarian, so I actually don’t believe in securities laws. I’m a little bit conflicted, because I don’t believe in securities laws. I would believe in a stronger jurisdictional system, a stronger tribunal system. I would want it to be easier for private citizens to sue other people privately, instead of having overarching regulations. I believe in a stronger jurisdiction system than regulations, basically.

Francis Pouliot: Philosophically, I’m not a fan of securities laws. Certainly, if you look at crypto, even as a libertarian, I can’t help but think like … the collateral damage is pretty big. These people are their own fault, but at the same time, there’s such a huge cultural … the ICO hype is so insidious and big that there’s a lot of people that are victims of this thing. So it’s hard to reconcile.

Peter McCormack: I guess the question I have for you there, or the point I would make … and this isn’t meant in any way to trap you … but they could have been people who invested in Bitcoin say in January and lost an awful lot of money. I found one of the contradictions is that you tend to find Bitcoin maximalism, Bitcoiners who are libertarians, don’t tend to agree with securities or accreditation rules because its restrictive, right? It restricts people from investing, yet at the same time when they take issue with a token, they will then use the fact that it is a … they’ve created an unregistered security as an attack vector. Can you see the contradiction I see there?

Francis Pouliot: I don’t see the same contradiction. Maybe … it’s not in my head. Maybe for other people, but I don’t really use or want to use … I don’t wish the SEC to crack down on tokens. I think it’s definitely going to happen, and one of the things that I’ll tell them is like, your lawyer’s bullshit scheme to avoid it, it’s meaningless. I’m an advisor to the Ontario Securities Regulator, was commissioned for Fintech.

Francis Pouliot: These are just objective rallies, I’m just telling people what time it is. I don’t wish that upon them. However, there’s some things, like these people have zero skin in the game at all. Why am I so aggro on Twitter? It’s because there is no balance, there is no fairness in any of what they do, because if you look at the perfect example again, the BAT token which is, to me, the worst of the worst of ICOs.

Francis Pouliot: They sell this thing, I don’t know if you want to get into BAT now, but one of the reasons, for example, I’m on Twitter a lot is because generally they feel zero consequence. They have no downside, they only have upside. If their thing goes well, they’re billionaires. If their thing goes badly, well, it’s free market, competition, innovation. We tried this new model, it didn’t work out, blah blah blah. It’s not our money. Generally speaking, that’s also not how you create innovation, from a tech point of view.

Peter McCormack: Well that’s fine. Let’s get into that. So you actually retweeted this. So it’s Brave not Bat. You like Brave, you think it’s a good browser. I like Brave. I’m on Brave now. I guess you appreciate what they’re trying to do with ad blocking and change the model for advertising.

Peter McCormack: But the BAT token … I see two main issues as well. The first issue is how they ran the ICO, and the secondly is … well, it’s three issues. How they ran the ICO, a non-belief in tokens anyway, and thirdly the friction that token adds to the user experience within Bat.

Peter McCormack: So let’s go one by one. Let’s talk about the ICO. It is essentially an unregistered security. But more importantly, you actually called it a Ponzi scheme. So let’s talk about the ICO. What were your feelings on that?

Francis Pouliot: I think I would categorise it more as a pyramid scheme, because the … a Ponzi scheme implies that they’re getting back money by using other people’s money until it runs out. They’re not getting back any money. It’s just a pyramid scheme. I used Ponzi and pyramid interchangeably often, but this is definitely a pyramid scheme since no one is seeing any returns on this.

Francis Pouliot: The first thing that’s … so I didn’t want to focus on BAT at all, and this whole thing started by someone saying, I think it was Hassu who said something like “Oh, I really wish that some of these good products that did ICOs realised their mistake, kind of fix it, and then focus on building good products.”

Francis Pouliot: I was like, “Oh, please let it be Brave.” I think that was … yeah. That was my two … please let it be Brave. Because Brave was a great example of … when Brave was like, “Oh, we’re going to do a browser and we’re going to pay out advertisers in Bitcoin, people are going to have a wallet in the browser and people are going to send micropayments,” I was like wow, this is next level. It’s going to be awesome. The inventor of JavaScript is doing this. Wow, that’s great. I’m going to look into this. Oh it’s like an alternative to … oh, that’s great. I love Brave.

Francis Pouliot: And then when they did an ICO, I was like, “Oh it’s kind of like a telegram ICO. It’s like ah, it’s a bullshit ICO.” I was like “I hope they’re not going to make people use the token in the browser.” And obviously, when they announced it I read the white paper. I was like ugh, it’s like the worst thing. I just forgot about it.

Francis Pouliot: But then I started this argument with the founder of Brave, because I was genuinely saying “Oh, I really hope …” I was super genuine in the beginning, I was like, “You should really get into Lightning. Brave and Lightning is an obvious, obvious fit. You can be the first mover in Lightning, you can take Lightning mainstream. You would be super epic and you would be future-proof. Brave is great, don’t waste time on the token. The token was a fuck-up basically.” Kind of being nice, trying to … it’s not too late, you know. You can get back into Bitcoin.

Francis Pouliot: And then he just went full aggro on me. So I was like, I’ll look into the terms, I’ll look into this. I’ve done this many times before, to look at terms and conditions of these things. It was so bad, so very very bad that the legal … that is a scam, a massive scam. The first thing that I noticed was that, if you look at … so everything’s on their FAQ page. But the FAQ page is really hard to read and you need to click on each question to unscroll it, and it’s like nobody reads that.

Francis Pouliot: But it’s actually in the sales tax exemption. If you look at that paragraph, within it says … the GST implication, and it says, “Brave does not believe the voluntary contributions,” so that’s what it is, “are subject to GST on the basis that they represent pure donations and are not linked to any benefits being derived by the voluntary contribution.”

Francis Pouliot: It is legally a donation. You are donating your funds for nothing in return. That’s the legal setup. And they actually got 30 million in 30 seconds or something. That was like 35 million in 30 seconds. So it was like, are we supposed to believe that people donated $35 million in 30 seconds expecting nothing in return? Of course not!

Francis Pouliot: I had talked about this specific issue at the [inaudible 00:27:11] securities commission. One of our Fintech advisor committees, and then I called it the ICO wink. I told them about the ICO wink, wink wink, which is … it’s a ‘donation’ air quote, wink wink. Everybody knows the game, right? Everybody looks at the disclaimer on the white paper, and they’re like ah, they got to do some legal shenanigans, whatever.

Francis Pouliot: Everybody knows its bullshit. It’s not a donation. You’re buying in to sell it higher and make tons of money. Everybody knows that. And then, you have another section, okay. So what does BAT represent? I’m sending money as a donation, but I’m still getting something. There is a token that I’m getting, an ERC 20 that I’m getting. So what does it represent?

Francis Pouliot: They’re intended, the utility tokens, the first thing is they’re intended for use on the BAT platform. So their primary purpose is to be used on the BAT platform, to enable usage and interaction with the platform. So you need the token, that’s what the terms say. You need the token to use the platform. It’s a means to obtain, it says “The means to obtain the services and enable usage and interaction with the platform,” if successfully deployed obviously.

Francis Pouliot: And then the next phrase is “The tokens do not represent or confer any ownership right or stake, share, or security, or [inaudible 00:28:30] right, or any right to receive future revenue share or IP or any form of participation in relating to the BAT platform and Brave or its affiliates. They’re non-refundable, they’re not intended to be a digital currency, security, commodity, or any kind of financial instrument.”

Francis Pouliot: So that’s super weird.

Peter McCormack: So what are they?

Francis Pouliot: What are they? Well, I’ve classified them. I call it the … it’s a new thing, it’s amazing. It’s called a tokenised tradable donation receipt.

Peter McCormack: That’s pretty cool. Coinbase probably will have a list of those.

Francis Pouliot: TTDR. TTDR, I’m going to trademark it.

Francis Pouliot: So I give money to Bat, I get a token. The token is meant to be used in the platform, and as we saw from Brendan’s own mouth … I can’t believe he’s saying that on Twitter. But it’s not using the platform, and it makes no sense to use it. No one’s going to use it, and people just use an uphold wallet and it just … it’s just good fiat. They don’t use it at all.

Francis Pouliot: So it is a donation receipt. You donate to get the receipt, and then you have this receipt that does nothing, that gives you no right, it has no exposure to Brave whatsoever, you can’t really use it at all in the Brave platform. You need to have an uphold wallet and have your BAT in it. You can’t use the ERC 20, it’s just an internal ledger movement within the backend. Possibly there’s a way to use it without using a whole lot, I don’t think so right now.

Francis Pouliot: That thing, he sold it for 30 million, and these are really just … again, they’re donation receipts. They don’t give anything other than proof you donated. That is their legal … that is objective reality. The pool of these donation receipts was worth $800 million. How is that not a scam? It’s a massive scam, and it’s so big and so brazen, it’s a scale which is unbelievable.

Peter McCormack: Let’s give them a small benefit of doubt right now, and let’s say at the time, the ICO thing … I think people have become a bit more aware of how bad they are, the problems with them, since the rumblings at the end of last year in the wider community this year.

Peter McCormack: But let’s give them the benefit of the doubt, they thought at the time this is a good idea, it’s a way of creating some kind of monetary token that can operate within our browser similar to Bitcoin but it’s quicker and the fees are lighter. Let’s just give them the benefit of the doubt.

Peter McCormack: What could they do now? So if they were to reject BAT and say “We’re not going to use it anymore,” what would the implication be for everybody who is a holder of Bat? Because that would be quite detrimental, right? Not to say it isn’t the right thing to do, but it would be quite detrimental to anyone holding Bat.

Francis Pouliot: First thing, I don’t think we should give them the benefit of the doubt, because it’s not okay … it’s okay to be wrong, but it’s not okay to make decisions with other people’s livelihoods and not yourself be exposed to it. So even though they may have truly believed in making everyone rich and successful with that investment, they put themselves … they created a system in which they were isolated from the consequences of their own action. So that is wrong, even though they didn’t want to scam people.

Francis Pouliot: Being unethical is not being malicious, necessarily, right? So I don’t want to give them benefit of the doubt on that. But what could they do now? Which is to say that, from a general perspective, why do I call a lot of these people scammers as a heuristic, when they may be accidental scammers? When they may have not intended to become central banks and creating money out of thin air, selling vapourware as hopes and dreams. But they may have realised that later or they may have thought of the R&D first and foremost, and not really taking too much time to think about where the money’s coming from.

Francis Pouliot: But what can they do now? Well, the first thing they can do, and there are actually people who are specialising in this service, which is how to convert ICOs back into non-ICOs. There’s many things that it can do. I have actually suggested a few to them. I don’t really remember. I can name a few.

Francis Pouliot: First of all, you can … well, first thing you can do is, you can buy them back. You really want to just buy them back from … they’re not used in the platform. Just issue a refund, basically. You issued these tokens that are meant to be used in your platform, and no one’s going to use it. No one’s going to buy it, so you can buy them back.

Francis Pouliot: You can allow BAT holders to convert it into shares, which is really annoying for everyone and you need to be an accredited investor, but maybe some people will scoop them up on the market on the secondary exchanges for conversion in BAT shares. You can decide to issue dividends, basically. You can issue dividends on transactions in Bitcoin to BAT holders. You can say, whoever’s a BAT holder, you can use some crypto-scheme or whatever, we’ll send you Bitcoin to you, to your BAT addresses. We’ll give you some exposure.

Francis Pouliot: There’s a few things they can do. But it’s kind of like taxi medallions, right? Like cities have issued these taxi medallions, and now you have Uber, and they’re like “Oh shit, what do we do with it?” You buy them back, you make them useless, or you just go bankrupt or something. The BAT holders are not going to see anything, and Brave doesn’t owe anything to the BAT holders anyway. BAT holders just got completely screwed. They have nothing at all.

Francis Pouliot: I’m not even … what can Brave do? Well, I don’t know. Say sorry, try to pay people back, make amends, work really really hard, not use BAT in the platform, just make it something else.

Peter McCormack: Well let’s talk about that as well, because that … so I used to work in the digital advertising space, and I’m aware of the problems with the market, how it is completely, utterly broken. I admire what they’re trying to do, and I fully support it. I’ve had a play with Bat, I signed up, I’m a content creator, right?

Francis Pouliot: Mm-hmm (affirmative).

Peter McCormack: So maybe I can get some tokens issued to me. In using it, I have sympathised with part of what Brendan says and part of what you said. So the first thing I sympathise with Brendan is, whilst Bitcoin would be great, it would be awesome, the majority of the large publishers who may use the platform will not want Bitcoin, will not want that extra layer of friction.

Peter McCormack: But I do see how users on the front end may want it. So we have a website in the UK, it might be a global site actually, it’s something called Quidco. It’s a cashback website, so if you go on, you buy a holiday or book a hotel room, if they’re part of the cashback site, you get a little bit of money back. It’s quite funny. I recon I get around a thousand, a thousand five hundred pound a year back just by using it. Pays for a holiday once a year. And it’s great, and I just get this little total that keeps ticking over.

Peter McCormackSo I imagine me as a user wants advertising blocked, but would have an option to say “I will allow these kind of adverts using this data,” and have just a little thing in the browser that shows me an amount of money totalling up. But also that would be kind of cool if I could accept it in Bitcoin. One or the other, both totally work for me.

Peter McCormack: I think then, on the backend, most likely large publishers just want being paid in pounds. Which is … that or dollars, which is absolutely fine. Do you ever believe they should just do the whole thing in Bitcoin?

Francis Pouliot: One first thing I want to just say is, I agree with you that what Brave is trying to do is great. As a browser, as a company, as a platform. The first thing is, when we talk about these coins, it’s easy to get lost in talking about how good the platform is, and the features, and the problem that it’s trying to solve. Because these are two completely irrelevant and separate things.

Francis Pouliot: You can criticise the use of a token in a platform, and the platform can be absolutely great. The token can be a total and utter scam, and a fraud, and the platform can still be awesome. So one of the things that angers me is exactly this. Forget the fact that this is a massive scam, because they’re really disrupting industry and it’s really neat what they’re doing.

Francis Pouliot: A browser like Brave, the problem that they’re solving is micropayments. That’s the problem that they’re trying to solve. It doesn’t really … it’s not a huge fundamental difference whether the payment is between advertisers and content creators and users. Ultimately what they’re trying to do is to make people pay for content and/or get paid for certain things, and get paid for some exposure and track clicks or whatever. Track usage of the platform, track impressions on an ad, and pay people accordingly.

Francis Pouliot: So there’s two things they can do. The first thing is they can use Bitcoin directly of micropayments. That’s really neat. The second thing they can do is like pretty much any other app, it can just allow people to fund an e-wallet which is in the browser, and it can be denominated in Bitcoins, but it can also be denominated in dollars, right?

Francis Pouliot: So why not just have, for example, an e-wallet in BAT where, when you are user or someone and you’re getting paid to see some ads or you’re getting paid for whatever, you just accumulate a small USD balance. So $1, $2, $3, $4, $5.

Peter McCormackA bit like what does.

Francis Pouliot: Yeah, yeah, kind of. And then once you’re like, “All right, I have five bucks worth of Bitcoin, I’ll withdraw it.” You can withdraw and you just give your Bitcoin address, and they just convert it to Bitcoin and they send it to you. Or if you say, “You know what, I don’t mind holding it directly as a Bitcoin balance.” Well you have your own wallet in the browser, it can be a client-side wallet that’s in the browser. It’s unsynced but for small amounts, and then you withdraw it from your online wallet to Bitcoins.

Francis Pouliot: So they’re not using decentralised servers, they don’t need consensus algorithms, there’s no complicated things. All they needed to do was have a streamlined payment method within their system. The token doesn’t take care of tracking royalties or anything, that’s software. That’s business logic. You don’t need Ethereum to do that, you don’t need any blockchain technology to do that. The blockchain technology in this case is the payment. It’s the payment aspect, so just use Bitcoin.

Francis Pouliot: If you’re not going to use Bitcoin, just use a centralised kind of database system. It’s not hard. You got user … you got a Brave account, you got user balances. If you don’t want people to have accounts, as far as I’m concerned, you can use a fiat coin. Why not? I’m not a huge fiat … fan of fiat coins, I think it’s a lot easier to just have centralised balance sheets for that.

Francis Pouliot: But if you don’t want to have a centralised balance sheet, use a fiat coin wallet that’s pegged to U.S. dollar. I think the worst UX possible is to have this volatile penny stock as … nobody wants that. That just kills the user experience.

Peter McCormack: You did say they could be an advocate of, say, Lightning. But do you not believe that it’s probably a bit risky to start working with Lightning just yet? Because it is, essentially, still in beta, right?

Francis Pouliot: Well, if Ethereum is massively riskier. A lot of people say Lightning is not ready, and who’s using Iota? Who’s using EOS in production? Who’s using these things for real? None of these blockchains are production-ready things. The only production-ready thing in blockchain is Bitcoin. So Bitcoin is production-ready, Bitcoin works, doesn’t fail, it’s a good software, it’s a good system, it’s … it can sustain a trillion dollar economy.

Francis Pouliot: Lightning is as good as it gets in terms of blockchain, to be perfectly honest. You look at all the things that are using … well, no one’s using Ethereum. Everyone’s using Ethereum tokens. No one’s really … not a lot of projects are actually using … are built on Ethereum that have users. But if you look at Lightning network, it’s definitely much much much more production-ready than the Bats token, or the Ethereum token.

Francis Pouliot: So I don’t buy that argument whatsoever. These are supposed to be disrupting companies on the leading, bleeding edge. They’re like “Oh, well Lightning is not ready.” Well, you know what? Lightning becomes ready when companies like you integrate it and play around with it and figure out how they want to use it with their users. That’s how this thing works. It’s not like you’re just waiting for a shipment, like the Lightning in a box that you’re going to put in your business. If you’re going to be an innovator in this space, you build the systems that you need, that you want to use in your platform.

Francis Pouliot: It’s not an excuse. Lightning does work, people can use it now. Is it good? No, it’s not good. It’s hard. You need to have a Lightning node, you need to be online, the UX has to be developed. But that’s the same thing for all the other coins and all the other systems out there. So I don’t buy that argument.

Peter McCormack: So it sounds to me realistically, the best option for them right now would have been to just have people use their credit cards to make donations, similar to Patreon, really. That probably seems like a much more sensible route for them, and if they did want to do anything with crypto, then probably Bitcoin would have been the best option.

Francis Pouliot: Yeah, that’s what I would say. And it depends on what they want to do. One of the ways they could have done it is either they themselves are holding people’s balances, exactly like Patreon. They could have had browser plugins, where you have third party e-wallets that , if you have a Venmo account or Coinbase account or a PayPal account, you can link that to your browser to make those payments. They could have just gone the traditional route. Instead of competing with Google, they are competing with Google and Bitcoin at the same time. They’re tackling the giant of internet browsing, and the giant of new money at the same time.

Peter McCormack: The strange thing is, though, we seem to have … I say ‘we’. But the crypto-space I say, seems to have built this multi-billion dollar industry based on what is essentially a scam, which are all tokens are scams, they’re all completely and utterly useless, and there’s no reason to own any of them. Yet we seem to have a number of funds, quite prominent funds, who are investing in tokens, who are backed by quite prominent traditionally tech investment funds. And we’ve quite prominent people running those funds talking about them publicly, yet these people are going to have to rely on, likely, retail adoption of these tokens for them to be able to realise their investment. How do you think we’ve got to this point?

Francis Pouliot: That’s a really good question. I think you’re raising a big point about the moral hazard also here, because at this point, people have such heavy bags, have such a stake in this industry that they don’t really have an exit. The show has to go on in the crypto-industry, right? It’s not like everybody’s going to be like, “Okay, we just … we realise that we made a mistake.”

Francis Pouliot: People are holding a huge amount of institutional money, is holding these cryptocurrencies, and they’re desperately trying to find a way to unload it. The only way to unload it, if someone else buys it, and the only way that someone else is going to buy it is that they believe it’s going to be worth more. So that’s why we see these partnerships, these announcements, these integrations in those companies.

Francis Pouliot: Great example of that is today’s announcement of Stellar.

Peter McCormack: I saw that.

Francis Pouliot: just announced they were going to give away $125 million worth of Stellar. I mean, at this point I don’t even want to think about that. I’m just so disgusted by that. Why would they give $120 million worth of this rippled fork, that is completely useless? You look … Stellar is another one of these completely useless tokens.

Francis Pouliot: Clearly, for me, I see it all. It stimulates our retail economy so we can gradually offload our huge bags. That’s the only explanation. So how did we get here? That’s for a, probably a sociology Master’s degree or PhD thesis, but there’s many things. One of the first, I think, elements was the idea that blockchain is the technology behind Bitcoin. I trace a lot of these … of this hysteria and this, how do you want to call it? This bubble to this particular de-economist article, which had this … like a Bitcoin kind of wheel, and a chain like a bike setup, and it was like, “Blockchain, the technology behind Bitcoin.”

Francis Pouliot: Fundamentally, it’s such a catchy phrase that people instantly created a whole frame of thinking around it, which was Bitcoin is this thing, but there’s … under the Bitcoin thing that is not socially acceptable to discuss, and that I risk losing my job over if I integrated that in my company or something.

Francis Pouliot: There is this other thing, which is the core of Bitcoin, but which can be repurposed for something else, which is blockchain technology. The reality of blockchain is that it is Bitcoin that is the technology behind blockchain. I was a blockchain consultant for a year, a year and a half, in partnership with Grant Thornton.

Francis Pouliot: I did blockchain consulting for a long time and one of the things that I was trying to tell people is, the blockchain is not a technology. The blockchain is an actual thing. You download it on your computer, it’s a folder, and in the folder you have blocks, and it’s the output of something. It’s a physical, tangible things. It’s not a technology.

Francis Pouliot: How is the blockchain produced? Well, the blockchain is produced with gain theory, with proof of work, with the Nakamoto consensus, with this spontaneous order and emergence and this economic incentive. So these are the technologies behind the blockchain.

Francis Pouliot: So the first thing was, creating this idea that blockchain technology was a thing, and it’s not. Blockchain technology does not exist. It’s an abstract term, it’s just a collection of some pretty traditional crypto stuff that are whipped up in an open source project, using some kind of whatever, like consensus buzzword system. But they don’t … blockchain technology does not exist.

Francis Pouliot: The second thing is, I don’t know how they got so much influence. About three months ago, I read for the first time the fat protocol theory.

Peter McCormack: Oh, by Joel Monegro?

Francis Pouliot: I don’t know who wrote that.

Peter McCormack: Yeah, it was Joel Monegro and Union Square Ventures.

Francis Pouliot: Yeah, so I read that, and it was the most ridiculous thing I had ever read as a … and I was like, “Is this really what everyone thinks-” and I was asking around to other people that are interested and that are more … I don’t … I study the altcoin investments base. I don’t … I try to say as far away as I can, as possible, from altcoins in my actual trading life and stuff.

Francis Pouliot: So I was like, “Do people actually believe this theory?” And it was like oh yeah, this is the number one theory in the investment space right now. It’s the fat protocol theory, like a year and a half ago or something.

Peter McCormack: Yeah, I think it’s been debunked now, widely debunked now, because it was based on the model of you would have been better off investing in Bitcoin than in Coinbase. But I don’t think that extrapolates across the rest of the crypto-space. So I think that’s widely been debunked now as a thesis. But you know what, it did exist. We also had Chris Burniske’s book on token economics.

Peter McCormack: So there’s a lot of that stuff out there, and actually, I don’t blame Chris. I think he tried and honestly wrote a book which he believed had value. I do wonder … I would love to talk to him about it now and see how he feels about it. Interesting also, one tweet I put out myself recently is that, I believe a number of these funds can turn a profit while at the same time the projects they’ve invested in have failed.

Francis Pouliot: Yep, yeah, for sure. But these funds also … so when you say it’s been debunked, I mean, it’s been debunked within elite circles of thinkers that are studying this thing. It’s been debunked within a circle of maybe a few thousand people that are crypto-analysts or whatever, enthusiasts. Maybe ten thousand people. But a huge investment fund that takes a position in the top 30 cryptos, they can’t turn around, because that theory’s been debunked.

Francis Pouliot: And then once … that was one of the many theories, and I’m like these … a lot of these analysts … to be fair, I am doing the same thing with Bitcoin. It’s like nothing happens. Okay so we were wrong about fat protocols, which was essentially … and you’re correct in saying that they extrapolated Bitcoin unto something else, because that’s the best sales pitch you could ever do to sell your stuff. It’s like, it’s going to be like Bitcoin, right? It’s like Bitcoin, but this time you’re not missing out because you missed out on Bitcoin, but you’re not goanna miss out on this.

Francis Pouliot: The theory was that these protocols, unlike everything that we’ve ever seen in history in terms of protocols, the value is goanna be not in the apps and the businesses, but in the protocol itself. Like the protocol itself has the value. But Bitcoin, the protocol is a very very niche communications protocol for money, for currency, to be a unit of account and store a value.

Francis Pouliot: You’re not investing in a protocol when you’re investing in Bitcoin. You’re investing in sound money, like in a scarce digital asset. It’s not like HTTP or TCPIP, and the theory was okay, so these other protocols allow us to do decentralised computing or smart contracts, are going to be the same thing as Bitcoin. The value is within the protocol not the app. No!

Francis Pouliot: You’re investing in these things as if you’re investing in Bitcoin. But when you’re investing in Bitcoin, you’re investing in sound money. But when you’re investing in those other protocols, you’re investing in the utility of the apps that are going to be built on it. So it’s completely different, it makes no sense to extrapolate the fat protocol aspect of Bitcoin to these other things.

Francis Pouliot: And then when they were wrong about fat protocols, it became about utility tokens. Eventually it was like “Oh wow.” Altcoins are dead, now it’s the utility token time. That was probably the biggest brain fart ever, I think, of any moment in recent history where everybody was like, “So let’s go back to pre-civilisation where we have barter on a large scale, and where we … let’s go back to barter, and then let’s also sell those barter things.”

Francis Pouliot: The mental gymnastics required for people … I don’t know exactly how and why this came about. But it seemed to … because, I mean, realistically there’s a reason why people are creating money. It’s because raising funds is hard, and finding a business model is difficult. So why do people create money as a funding mechanism, is because the only other option is that they’re going to charge transaction fees in their system. There’s no other way.

Francis Pouliot: Either … if you want to create a decentralised system, and you need to bootstrap it. People need to get paid, and people need to get paid because someone else is paying. The money’s going from point A to point B. It doesn’t … you can’t just … when you’re creating money out of thin air, you’re not creating money for yourself. You’re getting Bitcoins. You’re selling air to someone. You are getting Bitcoins. You’re not creating money, you’re selling stuff and getting money, real money.

Peter McCormack: Do you know what the sad thing is, though, because you say … because people feel like they missed out on Bitcoin. I listened to Murad’s interview with Pomp the other day. Great interview, Bitcoin one, I’m not sure if you’ve … well, you might not have heard it but you need to listen to it.

Peter McCormack: The reality is with Bitcoin, it’s very unlikely that the value of Bitcoin will stay around where it is. It’s either going to go a lot lower because there are difficulties in rolling out and growing the big Bitcoin ecosystem across the world. Or it’s successful and therefore the price will go a lot higher. I just think the unit price kind of scares people off, but actually, I think it’s still a worthy investment as part of a portfolio over a long-term trajectory. Because in ten years it could be worth materially a lot more.

Francis Pouliot: Yeah, and people got it wrong. I think the most dangerous words in the crypto investing space is “Utility drives value.” I think this is totally a wrong way to look at these crypto assets and Bitcoin specifically. What drives the value of Bitcoin is its scarcity. Utility is merely a precondition to having value.

Francis Pouliot: It’s not … if you have a … if you have a palm tree, it has a lot of utility. You can do a lot of stuff with a palm tree. But it doesn’t have value because creating a palm tree is not hard. You just take the coconut on the ground and you plant it next to it, and you get another palm tree.

Francis Pouliot: The idea that utility drives value like Vinny Lingham with his civic token. I think it’s fundamentally wrong. So why is Bitcoin scarce? And that’s another topic. A lot of people will say oh, well Stellar is scarce, right, or EOS is scarce. There is a limited amount of it out there. There’s a monetary policy. But Bitcoin is not scarce because Satoshi put the limit at 21 million, and he created the inflation schedule. Bitcoin is scarce because the properties that make Bitcoin valuable are not from the code.

Francis Pouliot: So that’s what people don’t get with coins, and that’s why I … my analogy of the wolf and the Pokemon cards is like, people trade … they look at coins like they’re Pokemon cards. They have these specs on it and they compare these imaginary specs, and they trade on them. But the specs of a money, of a cryptocurrency, do not come from the code. If you look at what … Ethereum and Bitcoin are really good examples.

Francis Pouliot: What makes Bitcoin really, truly unique? I believe there are three main things that make Bitcoin unique. One is censorship resistance, which is because is decentralised and the infrastructure is set up in such a way that it is impossible to realistically stop Bitcoin from working, stop Bitcoin transactions from taking place, stop people from downloading and using Bitcoin core nodes and transacting and all that kind of stuff.

Francis Pouliot: Censorship resistance is not like a feature in the codes. It’s the way that … it’s a mentality of the people that built the tools, that build the tools that users are using. It’s the mentality of the people that are running the businesses and the influences out there. It’s the way that the system was designed, and it’s the cypherpunk ethos, and all of that.

Francis Pouliot: So Bitcoin resists censorship, and it’s the … realistically the only one. The closest one that’s decentralised is Ethereum, and as we’ve seen, it is not censorship resistant in a few ways, because if you want to use Ethereum, you have to go through consensus at this point. You have to go through inferior realistically to use Ethereum nodes, and through different companies.

Francis Pouliot: Bitcoin has trustless validation, which means that it is possible from end to end, for users to use it in real life and not trust any third party whatsoever, which is one of the prerequisites I guess for censorship resistance. So just like you cannot know that you received an Ethereum payment because you can’t run a Bitcoin … an Ethereum node, you can with Bitcoin and you can audit the whole trail from A to Z. It’s immutable as well, which is a core Bitcoin feature.

Francis Pouliot: There’s other features, like the system is anti-fragile. The system, if there’s a bug in Bitcoin, if there’s a big exchange that crashes the multi-sig and these hardware wallets become popular, it’s evolving. These are not code specs, so you cannot fork that. So where do they come from? Well, they come from emergent order, spontaneous order, grass roots, these overlapping and network effects that are bootstrapped over time. It comes from this level of adoption.

Francis Pouliot: It comes from having people with skin in the … why is Bitcoin immutable and censorship resistant? Why do people trust that the monetary policy or that the rules won’t be changed? It’s because of things like UASF. Things like Segwit2x. Because of participants direct action by people that are strongly, strongly committed to it, and that’s something that you can’t reproduce.

Francis Pouliot: So when you look at these, for example, Ripple. Why is Ripple worthless even though the technology is great? Well, because Ripple is an open source software project. The consensus that the security, all the features of Ripple is just a unique node list, which is sponsored by Ripple. If you want to create Ripple 2, you just fork Ripple, you create your new, unique node list, and you get the exact same properties, the exact same features.

Francis Pouliot: If you can reproduce the features of your coin at no cost, then it doesn’t matter if the limit of coins within one blockchain is scarce, because you can have multiple other blockchains that do the same thing. In Bitcoin, that’s the main difference, is that it’s scarce not because there’s 21 million. It’s because in order to get the same thing, you need to reproduce the entire history and work of Bitcoin. That’s why Dash has no value, that’s why BCash has no value.

Francis Pouliot: So utility doesn’t drive value. Utility is a mere prerequisite, because if it has value, people will want to create more. If people create more, they will drop the value and it will eventually tend toward zero. The reason why these coins are not going into zero right now is because no one’s actually using them. There’s no competition at all. These are just laboratory experiments that are hermetic.

Francis Pouliot: If there was an actual demand for Brave-like browsers with micropayments, you can be absolutely certain that the first one that would create a Brave clone which has fiat wallets and Bitcoin Lightning network transactions in it, exactly the same as Brave, would capture the market share. Because it would have one less friction than … the equivalent product would have one less friction, which is don’t need to switch through this BAT token and you don’t need to use uphold.

Francis Pouliot: So if there was actual competition, that extra friction would make it lose. That’s like the philosophy of these coins is, they’re not scarce. Whatever you are investing in is not scarce, anybody can reproduce it, it doesn’t have any upside. Ultimately, Bitcoin maximalism is a practical view of the world, but it also has an ethical component as well. If I can end my thoughts on coins and tokens on that versus Bitcoin, it is that … yeah, because I’ve been … I spent way too much time thinking about tokens today. I think I’m going to not talk … think about tokens for two weeks now. No, I’m joking.

Francis Pouliot: To kind of wrap it up, on the ethical side, why is Bitcoin not a pyramid scheme? Why is Bitcoin not a pyramid? I started to think about that, I think maybe after my BAT comments where I called it a pyramid, and then I start calling everything a pyramid, and then fiat’s also a pyramid.

Francis Pouliot: I had this one night I was walking home, and I was like, “Why is Bitcoin not a pyramid?” Because realistically, the regression theorem value theory of Bitcoin by Ludwig von Mises is like the value of money is … the value of a currency now is the expected purchasing power of the holder in the future, relative to its time preference.

Francis Pouliot: The reason why I value Bitcoin at a certain price today, because there’s no good. There’s no goods and service backing it, is because of the purchasing power that I’m expecting to have later in relation to how much I want the money now. So I would much rather have more purchasing power in the future, and I believe it will have more purchasing power in the future. So that’s why I value it.

Francis Pouliot: If you think about purchasing power, well, it only has value because I’m going to dump it on someone else? Am I not as bad as the other people? We know that BAT has no value other than the fact that you might sell it more for the future to someone else. It’s not the same thing with Bitcoin.

Francis Pouliot: That’s a question that I kind of … it kind of bugged me because I was like, “Wow. Do I have a logical inconsistency here?” My conclusion is kind of radical and weird. It is that, well, yes. As a 4X broker, I’m a professional 4X broker currency exchanger, that’s … I make money off of [inaudible 01:01:25] spreads. That’s what I do. It is an absolute zero-sum game. There is absolutely no value that is created from a 4X trade. There is only value that’s destroyed, because it is a zero-sum game, and there is rent extraction.

Francis Pouliot: Maybe I’ll just like … for the 30 second trading lesson, when someone sells a currency to someone else in a trade, someone’s losing. There is absolutely … it is an absolute zero-sum game. There is absolutely no way that this trade is going to be mutually beneficial in terms of purchasing power. Because if you’re, for example, selling Bitcoin for dollars and the price of Bitcoin goes up, one person loses on the purchasing power. If the other person is … same thing for the other person on the other side if something else happens.

Francis Pouliot: So it’s not like mutually beneficial trade. What I started to think about was, well these coins only have value when they’re … they’re actually sold for Bitcoin. People sell these altcoins for Bitcoin, or they sell these altcoins for fiat. They don’t dump … nobody buys gas right now, like ether. Nobody buys ether because they’re like “Oh, I’m probably going to want to spend like 150 gas a month in five years, when I’m running my … I don’t know, my smart car on Ethereum. So I’m going to pre-buy some Ethereum gas now so that when I need to use it in the future, I’ll be able to have … I’ll have bought gas cheaper.” Nobody thinks that, right?

Francis Pouliot: Everybody’s like “Oh, I’ll buy ether now so that someone else that’s using gas in the future will buy it off of me because it’s rare.” Whereas Bitcoin holders, they’re like “I’m going to buy Bitcoin now because I want to buy Bitcoin for myself in the future, and they’re cheaper now. Not because I’ll sell them necessarily for someone else higher in the future,” but a lot of Bitcoin holders will be like, well I’ll buy Bitcoins now because I’ll be able to get more Bitcoins for my dollar now than I’ll be able to hold Bitcoins in the future for money.

Francis Pouliot: I came to realise that, well yes, money exchanging … money is difficult to be ethical. It’s really hard to do ethical money. It’s like ethical money is a miracle. It’s really really hard, and if Bitcoin becomes the only currency that’s left, there is no zero-sum game trade from 4X. There is no person with moral hazard that’s making money from 4X trade and from issuing these currencies and selling them out of thin air, because you’re not dumping Bitcoins on someone else. You’re using your purchasing power, and that is within a transaction where both are getting some value.

Francis Pouliot: If you are buying … paying your rent with Bitcoin and the person’s taking Bitcoin, it is mutually beneficial because you value your apartment more than you value your Bitcoin and vice versa for him. That’s a mutual … that’s a good, ethical trade. So if there is only one currency and you can’t dump it on other people, then it is not a pyramid scheme. It stops becoming a pyramid scheme when there is only one. When you can’t dump it on a loser.

Francis Pouliot: So that’s where I see an ethical component to it, which is not only is it impractical to go back to pre-civilisation barter, but it’s also ethical, I think, to try to not resist the idea that a single currency will dominate because it has good effects. It removes these weird 4X market and money printing urges, you know what I mean? There’s this component of ethics that I think is not to be discounted.

Francis Pouliot: That’s why Bitcoin maximalism is not just an observation, and I think it’s also a prescription in the way that I see it. We should aim towards that and the way that I see natural selection and evolution, today we are protecting the weak with weak DNA, we’re caring for humans that, in the wild for example, like ten thousand years ago, would die really quickly, because we’ve already, as a species, reached our apex point. We don’t need the externalities, the collateral damage of evolution anymore, because we have medicine, so we can take care of the weak and it doesn’t matter if we have bad DNA and bad genes and the bad genes aren’t getting filtered out. It’s fine. We’ve reached this apex point.

Francis Pouliot: That’s the same reason why we should conserve animal species. So we now control the environment, we have the possibility, there’s no reason for the Dodo to be extinct. We don’t want bird species to evolve these climatic conditions that are changing. There’s no reason. We can conserve animals.

Francis Pouliot: With currencies it’s different. We’ve already figured it out with gold, that there are certain properties and that money’s a protocol and that eventually it all gravitates to one, and the one that people gravitate to is the one that’s the hardest to reproduce and it has some features in it, and it’s the one that’s most easy to trustlessly validate.

Francis Pouliot: So we’ve already figured out, in the concept of currency competition, I think historically that it leads to one and it has certain properties. I don’t see any reason why we should stand by with the collateral damage of currency competition, and just for the sake of experimentation having these currencies collide into battle to the death, and only one emerge. I don’t see that as necessary. So when I talk about altcoins, people are free to do whatever they want. I just think that we don’t need to go through this period of currency competition, which inevitably is going to anyway lead to one winner. But what people don’t see is the collateral damage.

Francis Pouliot: So yeah, I just don’t think that we need this collateral damage, and I would rather not see it and talk about it on Twitter. I have nothing against people who are into this industry, but it is objectively a huge negative for humanity to have to go through this huge period of people losing their wealth.

Peter McCormack: Wow, okay. Whilst that feels like a good ending point, I do have one last thing I want to talk to you about. My … December 16, I needed to buy some Bitcoin for something I needed to buy online for my mother. I found Coinbase. I didn’t know it before then. I thought it was a wonderful experience, I thought it was really good. Yes, it might have been a bit more expensive, yes it’s not local Bitcoins, but at the time for somebody like me with little experience, little tech experience, it was a great experience for buying the Bitcoin, making the transfer.

Peter McCormack: Yet, and I’ve always been a big proponent of Coinbase, I’ve always said to people get an account, try it out, buy 50 pounds worth, I used to say, just hold onto it. Yet recently, I’m becoming increasingly concerned with them as a business with some of the things they’re doing. Most recently today, Hassu, who by the way creates some of the best content I’ve read in the Bitcoin and crypto space, he noted that the trading pair for Bat, the only trading pair is USDC coin … I’m trying to remember the name. It’s the stable coin, you can’t actually … they haven’t got a trading pair with Bitcoin, and I’m starting to feel like these stable coins are an attack on Bitcoin, and that Coinbase and Brian Armstrong potentially are working against Bitcoin.

Peter McCormack: Do you have any thoughts on that?

Francis Pouliot: Yeah, I have a lot of thoughts on that. You know, this is … I am a particularly, I think, vocal person talking about Coinbase, BitPay, and which is the trio that I put in a similar basket, which are the original Bitcoin companies that kind of went sour over time.

Francis Pouliot: I think Coinbase used to be a really good product and company that a lot of us were proud to recommend. Same thing with BitPay. I think didn’t take a long time for a lot of people to realise that it was a bad product, probably around 2014 people had already realised that they were just a bad product for Bitcoin. But yeah, I’m not at all a fan of what they’re doing. I think they’re doing a lot of bad things, and I think the bad things that they’re doing don’t … I think the good things they did in the past don’t necessarily make up for the bad things that they’re doing.

Francis Pouliot: What they’re doing with BAT and listing these coins one after the other is … the way that I see it is kind of like boiler room, because they are pumping these coins. They’re not just listing them. Coinbase is the driving force between … behind the token economy, between … behind the ERC 20 economy, behind this idea of tokenise everything, of all these … the multi-coin ideologies like the Coinbase ideology.

Francis Pouliot: I don’t think that Coinbase initially started out necessarily as a Bitcoin company. I think they were more like a start-up, like a Fintech start-up that got into Bitcoin, that Bitcoin was like a great platform for them when they launched. But they’re not Bitcoiners. I don’t think Coinbase is a Bitcoin company. I think it’s a Fintech company that used Bitcoin to launch itself, like a lot of the others from Silicon Valley.

Francis Pouliot: No, I don’t think at all they have Bitcoin’s best interest at heart. For example, you look at what they did with BCash, and that might be just an asinine or some kind of forgotten thing, but they did some pretty bad stuff with BCash. They listed BCash at the top, you could buy and not sell it. They created a 20% BCash pump. The whole BCash listing and people offloading on it was really sketchy. It’s very very sketchy stuff.

Francis Pouliot: The fiat coin thing, I think Coinbase is just going to end up being Venmo. They are repackaging … they’re going to end up just repackaging fiat into a new, shinier package. I don’t trust them for one cent, I think they’re the new bank, essentially. They’re just a new bank, and they’re … yeah. They’re just repackaging fiat. It’s a shame, right? But it was … they don’t have … if you’re a company and you don’t have values and commitment, you’re not going to be able to stay on the right path.

Francis Pouliot: I don’t think they had any company values at all, and I think they’re just going with what makes the most money, and I think they’re going with the peer pressure, the Silicon Valley peer pressure that Bitcoin is toxic, Bitcoin is not good. What’s important is innovation and open community building. But at the same time they are raking $1 billion worth of profit at the same time.

Francis Pouliot: Not a fan at all, and not only that, but they almost destroyed Bitcoin. A lot of the reasons why I am particularly vocal against, Coinbase, and BitPay is that they actively conspired in closed-door meetings, some of which I was a part of, in pushing a new development team to replace Bitcoin core. So this was before your time, Peter, in Bitcoin. This was 2015, 2016, or earlier. And then with Segwit2X in 2017.

Francis Pouliot: So they tried to take over Bitcoin development. They tried to get the Bitcoin core team removed. They tried to put their own teams, they hired a BitPay guy, Jeff Garzik, with the backing of Coinbase to develop this fork of Bitcoin that they were going to list as being Bitcoin, which ultimately, if they had gotten their way, the only thing that prevented them from doing that was the Bitcoin cypherpunks that are now the crypto Twitter people.

Peter McCormack: Luke Dashjr?

Francis Pouliot: Yeah, Luke Dashjr, but pretty much a lot of what you see today as Bitcoin maximalists on Twitter, there’s a reason why we all know each other and we’re all friends and we all retweet each other is because we got together and met each other on Twitter, fighting Coinbase and fighting and fighting BitPay’s fork of Bitcoin. Which, if they had gotten their way, the actual software that they were promoting, actually failed.

Francis Pouliot: They didn’t get their fork past, we blocked it, but the actual software, when the fork timing happened, it failed. It broke. So Bitcoin would have broken, Bitcoin would have went down because of these guys. Just for that, whatever they do is now completely tinted with, for me, some kind of malice. I’m very very sceptical of them, and I think that they’ve lost the support of the Bitcoin community, so they’re going to go get support somewhere else.

Francis Pouliot: I am not sure what their plan is, but I think what they’re trying to do now is to loop Bitcoin with the altcoin economy. They’re trying to … they need to build up some plausible deniability, I think, legally for the pumps that they’ve been doing. The idea of promoting the multi-token economy as this world-changing technological movement that’s good for open finance, I think is a great narrative to protect themselves legally, to promote that.

Francis Pouliot: So yeah, I’m not a fan. I think that’s pretty obvious, and they have done something really really great with Bitcoin. They could have really became this infrastructure for a Bitcoin standard for a transition away from fiat, and now they’ve just really become just fiat 2.0.

Peter McCormack: Well you brought the fire as I expected you would.

Francis Pouliot: Yep. Well that’s the advantage of not having investors or a boss.

Peter McCormack: Yeah. This has been great. This has been really, really good and I think we could easily have had a long talk about Bitcoin. I think we have had a long talk about Bitcoin by talking about tokens.

Francis Pouliot: Absolutely.

Peter McCormack: By helping people understand tokens, you help people understand Bitcoin more, and you make people realise some of the risks involved in these investments. It’s not going to stop people, but I certainly feel like there’s a movement away from tokens, or there is enough concern around them that people are questioning whether they should be investing in these. I certainly am, I’ve been on a long, a very long journey Francis.

Peter McCormack: If you ever listen to some of my podcasts, I recommend just do one at the start and the middle, and near the end you’ll see a progression there. I think it just takes time, you know. One of the things I struggle with sometimes on maximalism, some of them, some of the hardcore maximalists can be … it can be intimidating, and it can … you’re required to understand a lot of new concepts very quickly.

Francis Pouliot: Yeah, for sure. You’re correct.

Peter McCormack: But something like this would be … is a welcoming way to try and explain to people what maximalism is. It’s not a cultist movement, it is about a hard and sound money and about protecting your wealth and your income and your investments. I think it’s been super useful.

Peter McCormack: Just to close out, can you let people know how to get in touch with you, the work you’re doing, where they can check it out, and who you would maybe like to hear from.

Francis Pouliot: Yeah, absolutely. Just for our viewers, in 2015, I have … I think 2014, I have this video on YouTube somewhere, I hope no one ever finds it, where one of my friends was doing and ICO for a music app, which was on Bitshares and I was super happy to promote it. When I first got into crypto, I was a fan. When Andreas Antonopoulos was saying that everybody was going to have a currency for his birthday party, and people are going to make currencies everywhere, yeah. I bought into it, it was cool.

Francis Pouliot: You’re absolutely correct Peter, into saying that a lot of the Bitcoin maximalists, they’re just exhausted and exasperated. They’re very bitter, they’re very dry in their arguments. It comes off really badly, it comes off … like if you’re a new person coming into this space, it comes off really condescending and arrogant. But really it’s … it is a factor of years and years and years and billions and billions of dollars being wasted everywhere. There’s a built-in frustration there from the early adopters.

Francis Pouliot: So absolutely, Bitcoin maximalists tend to be dry, but behind it, it’s definitely a long long long reflection. Some of the Bitcoin maximalists that are on Twitter, I’ve known them for years. Not to vouch for all the Bitcoin maximalists, but a lot of the ones that I know have been thinking about this pretty much constantly for years on end.

Francis Pouliot: So yeah. If you find yourself struggling to understand these things, it’s perfectly fine. Time and dedication to learning this stuff, everybody has to go through it. There’s no escaping it.

Peter McCormack: Maybe it’s time to hand the baton onto a second round of newer maximalists to take over the debate and help convince and explain to people these concepts.

Francis Pouliot: Yeah, absolutely. I think most maximalists are coming up into their fifth and sixth year in Bitcoin. Which is definitely, I think, one of the factors leading into these perceived toxicities, that people have been in this for a long time and it’s quite exhausting to be in Bitcoin. So I absolutely welcome … people that got into Bitcoin 2017, you have a lot of energy, you’re green. Go out there and preach Bitcoin, because some of the oldies, they need a sabbatical.

Francis Pouliot: So where can people find me? Well, I’m only pretty relevant to you if you’re in Canada. You can use my service to pay your bills. You can buy some Bitcoin using my app, My website is, so if you want to know the projects we’re involved in, you can go there. If you are a developer and you want to work on Bitcoin open source projects, we have, and we’re a few collaborators where we’re working on the open source code. It’s really fun, and we’re definitely trying to get a few people to build the actual core project, and also to build open source apps on top of it, like an open source app ecosystem. So definitely check that out. I have a Medium blog, so you can follow me on Medium if you use Medium. Obviously, I am always a Twitter addict. You can find me at @francispouliot_, and I have a Twitter-verified mark, so be careful for the giveaways.

Francis Pouliot: I am not giving away anything, unlike, I’m not making a hundred or a million coin giveaway on Twitter. So don’t fall for the giveaway scams, please.

Peter McCormack: This has been amazing. Thank you so much for coming on Francis, I’ve really, really enjoyed this and I look forward to seeing the response from people when it goes out Friday.

Francis Pouliot: All right, well it was a pleasure Peter, and I’ll definitely be watching all of your other podcasts. I really like this interview, so thank you so much for taking the time.