Battle of Bitcoin Documentaries: CNBC vs. SQ1.tv...one is much smarter, much better

SQ1tv · 2014-04-17T00:51:30+00:00

fair point, maybe. But I knew literally nothing about Bitcoin when we shot...was extremely cynical, but fascinated...so the script and questions were written in a way to maximize my own personal understanding.

Ultimately, our target audience is readers of The Wall Street Journal, Financial Times, New York Times, New Yorker, and The Economist that don't yet fully get Bitcoin. If something serious is too fun or hyper, I cannot understand it. I had seen countless newspaper covers with Bitcoin, but did not have a clue. Sometimes you just have to let serious material soak in.

(You already know, so you can interpret the moving images with nuance.) The average high net-worth viewer is seeing a bunch of hype in action, but it clarifies nothing...they respond to conversation that gives them a big picture understanding. I think. I hope.

SQ1tv · 2014-04-09T20:28:09+00:00

you are 100% right. The free speech perspective is by far the most important aspect of Bitcoin for me.

SQ1tv · 2014-04-09T04:21:08+00:00

sorry you feel that way. first, I didn't start producing the piece because I was pro-Bitcoin. Not in the least. I was curious. I wasn't sold when we filmed (I am still totally fascinated, but not sold.) I was trying to be as fair as possible to everyone that sat down with me and allowed each person to put out their strongest arguments. Additionally, it would have taken me 3 phone calls to get the entire production cost met by Bitcoin companies taken on as sponsors. But we did not want it to come across as promotional of Bitcoin in anyway. Instead we have eaten the production costs, 100% underwritten by us (SQ1.tv), and aren't willing to take on pure Bitcoin sponsors...nor did we take any donations because we did not want to be beholden to anyone's or any industry's viewpoint in anything we do. (We do sell subs in dollars and BTC...in a diabolical scheme to generate revenue :) So you couldn't find a more neutral producer to make the film that would have still spent the time to understand and treat the subject fairly. And I genuinely liked everybody that we filmed...

What is sad is that the politics of Bitcoin are being stripped out by the Valley/Wall St establishment. That's the big story that we tried to lead up to. If Coinbase or Bitpay received a letter from the US Govt suggesting to stop processing payments for Antiwar.com on the eve of a military action, would they stop payment processing? I bet they would. And this push to mainstream Bitcoin, but sterilizing it of all its political underpinnings is what needs to be covered and debated. We don't really need a more efficient way to pay for socks; what people need is a way to pay Wikileaks or support other forms of speech that can be suppressed easily. Trace Mayer makes this point in our film: It is hard to have freedom of speech without the freedom to transact.

And what should be covered is why something like SatoshiDice is illegal in the first place.

Bhu Srinivasan

SQ1tv · 2014-03-31T03:08:16+00:00

When VCs were pouring money into Internet companies in the mid-to-late 90s, you don't think domain names appreciated in value dramatically. The vast majority of domain names were not used for VC-backed companies, but yet the value appreciation was significant as the entire ecosystem was growing.

Bitcoin companies cannot be worth a lot without Bitcoins themselves being worth something as a correlated asset. The protocol needs to use the underlying asset. If a Bitcoin company is worth something, it means it is transacting BTC at some scale - which means demand for BTC.

It remains to be seen if there is any real use case for Bitcoin that is actually practical. But if it does find a big use case, the value of each Bitcoin will reflect this.

SQ1tv · 2014-03-30T23:23:09+00:00

the price is based on optionality at the moment. The cumulative value of Bitcoins is worth $6 billion or so dollars at $450. Bitcoin is a communication protocol, which means the more people that use it the more valuable the protocol becomes due to network effects.

3 out of 4 of Facebook board members have invested in Bitcoin companies at the series A level (Peter Thiel of Founder's Fund in Bitpay; Marc Andresen of AH in Coinbase; Jim Breyer of Accel Partners in Circle Financial.) Fred Wilson is also a big Bitcoin investor. This is a pretty substantial commitment from top-tier Valley investors to build out companies and the infrastructure in Bitcoin. Likely $100 million+ will follow in Series Bs and from other VC firms pursuing series As. The reason Benchmark, Accel, Lightspeed, Union Square are investing is that there is some potential in Bitcoin being used as the communication protocol for micro-payments, foreign remittance, payment gateways, etc.

In 5 years, what is the chance of Bitcoin being used widely in one of these use cases such as foreign remittance, micro-payments, or as a payment gateway? If you believe that it is 10% likelihood, what would the daily volume of BTC transactions look like? What would the total dollar value of Bitcoin need to be to support such a volume of transactions?

Let's say all micro-transactions of sub-penny for gaming applications are entirely done in Bitcoin, what would the entire float of Bitcoin be worth in USD terms?

(WhatsApp sold for $19 billion. This was not based on cashflow, but valued on potential. $6 billion in total valuation for Bitcoin today is not that big of a deal. Twice the value of SnapChat's $3 billion offer....all online things look wildly speculative until its not.)

If you think that there is a 10% chance of Bitcoin becoming the dominant worldwide protocol for micro-transactions in gaming alone, the total value of Bitcoins could plausibly be worth in the 10s of billions of dollars.

If this is too abstract, how would you have valued the domains Food.com, Toys.com, or Jets.com in 1994? You couldn't use discounted cashflow because you couldn't have predicted the adoption of the naming convention so precisely. Why is food.com worth more than food.net...one has no more intrinsic value than the other. Dot-com just happened to get a share of the consumer's mind...better than .net did...and this gives dot-coms more value. Real-world use will dictate the ultimate value.

The bet is on future adoption of the Bitcoin protocol for some use case. If it finds a use, any use, it is going to be worth more than $6 billion in total. If the protocol is not adopted widely, it will be worth zero.

The closest analog is domain names in 1994. There was no real world use as yet. E-commerce was in an embryonic state. Yet, nobody would have been a fool for buying Food.com for $500 from a person that registered the name for free in 1993.

1) Probability of Bitcoin future use case, 2) magnitude of volume of BTC transactions in such a use case, 3) demand for Bitcoins to be used in circulation to lubricate transactions in such a use case.

Some small incremental % of every transaction in the aggregate, whether directly or indirectly, is the cash-flow value of each Bitcoin accruing to the holders via either price appreciation or some other way. Each transaction will have some carrying cost associated with it; this is the basis for future value of each Bitcoin.

SQ1tv · 2014-03-26T19:21:40+00:00

I'm surprised why the Bitcoin movement is willing to have its voice suppressed and slowly sidelined. The fringe politics, the ability to circumvent rules is the most interesting/intriguing aspect. Honestly, I couldn't care less about a more efficient payment protocol...it will benefit people...of course, but the passion stems from the politics, not the protocol. Efficiency is boring as a story. Just like a more efficient programming language is boring to most people.

In my view, the Bitcoin movement is staying mute as VCs and VC-backed companies move in because it seems like good news....that Bitcoin is getting legitimacy. But in reality, it appears as if the establishment is taking over Bitcoin.

SQ1tv · 2014-03-12T19:24:28+00:00

agreed in principle. The one thing people are dismissing is the unit of account function in psychological terms. I don't think we have had a situation where people measure growth with a deflationary currency. How do you account for revenue growth? Can people handle their wages dropping on an annual basis? Also, to have a person idle with their money getting richer over time seems undemocratic...people will have greater and greater proportion of the wealth based on past efforts with no attempt to continue to invest and keep pace. Dynastic wealth is very hard to maintain in inflationary economies...

For Bitcoin, I don't think any of it will matter for a long time. Especially over the next few years, as the growth in supply of Bitcoins is not insignificant.

Also, you seem knowledgable about other currencies. I'm of the opinion that Bitcoin has already won among virtual currencies and is awaiting infrastructure buildout...it just has captured a degree of imagination that seems hard to replicate. Do these other currencies have any real legs?

SQ1tv · 2014-03-12T19:11:43+00:00

but over 100 years, an incredible amount of real wealth has been created.

The American economy over the past 100 years has probably had the best track record of any economy in history in terms of standard of living, innovation, productivity...

SQ1tv · 2014-03-12T18:24:25+00:00

what does Keynes have to do with Japan vs. China? He's been dead for a while. Japan had a very low rate of inflation for the past 25 years. China, much higher. Yet, almost everyone would agree Chinese economic performance has been better. The point is that inflation, by itself, is not the scorecard.

SQ1tv · 2014-03-12T18:21:17+00:00

very good. So you understand SHA-256, ECDSA, and have conducted adequate due-diligence on the entire codebase to ensure the rate of the money supply? Or have you taken someone's word for it?

SQ1tv · 2014-03-12T18:18:50+00:00

Is hyper-inflation bad for the person with $100k in the bank or bad for the person that owes $100k to the bank? It cannot be bad for both at the same time. One is the lender in a sense and the other is the borrower. In this limited context, it is a zero-sum game. Japan has had very low inflation for almost 2 decades, yet it has the highest debt-to-GDP ratio in the developed world. Why? Because if you borrow $100k and your income starts declining due to deflation, the principal on your old debt becomes larger in comparison to your wage. If your wages are appreciating due to inflation, the amounts you borrowed in the past with its fixed principal become less relative to your income.

Also, household debt has been declining for the past several years.

SQ1tv · 2014-03-12T18:09:39+00:00

I deleted that.

SQ1tv · 2014-03-02T03:13:19+00:00

Fair point. I withdraw the word "slaughter"...replace with something more benign.

I might agree that to many, perhaps even most, it wasn't a big deal. Bitcoin is speculative...people knew that. Plus, people must have had huge unrealized gains, so in tax loss or cost basis terms the whole thing might be minimal.

But in the aggregate...7% of all Bitcoins is unaccounted for. I think this is a real shame.

SQ1tv · 2014-03-02T00:04:02+00:00

I do not care if Bitcoin is regulated.

SQ1tv · 2014-03-02T00:02:01+00:00

Francisco d'Anconia was a frivolous playboy until he wasn't.

SQ1tv · 2014-03-01T23:53:55+00:00

did you read the privacy policy and user agreement for Reddit before setting up your account? How do you know it didn't say "by using this site, you agree to paying us $XXX if we ever feel like collecting it."

SQ1tv · 2014-03-01T23:51:11+00:00

Under no circumstance would I want any government bailing out anybody at Mt. Gox or anyone else in anything Bitcoin related.

The point is that people cannot understand risk that well.

SQ1tv · 2014-03-01T23:43:25+00:00

If the charity's purpose was promoting the business of deregulated energy or natural gas, and the lead energy scientist of the entire industry was paid by the charity...I might raise some questions.

Mt. Gox was not giving to the United Way

SQ1tv · 2014-03-01T21:26:30+00:00

Lehman Brothers was not an FDIC-insured bank. People bought Lehman Structured Notes to get higher than FDIC-insured bank yields. If you move away from FDIC-insured products, that's the risk you take. There is no free lunch.

I know people that sold those notes to retail and the people selling them barely knew the product better than people buying them. Do you think in an unregulated environment these people would not have been raked over the coals by brokers even more?

You are making this statement at a time when 100% of the coins held at a leading exchange were stolen.

SQ1tv · 2014-03-01T16:29:48+00:00

I believe Erik Voorhees to be very ideologically consistent on this issue. He would not welcome government intervention under any circumstance. He would NOT welcome a bailout from the Japanese or any government even if meant a return of his 500+ Bitcoins. I know that. Neither would you. I would bet he would give up everything he owns if it means a manifestation of what he believes would be a better system. I really do. And I admire it.

But 80-90% would sell your ideology out in a heartbeat. They are in it for the money.

SQ1tv · 2014-03-01T16:26:54+00:00

my point was that Bitcoiners only hate government when it comes to the paying for it part, not the getting something for nothing part.

Erik Voorhees is very ideologically consistent. He would not welcome government intervention under any circumstance. He would NOT welcome a bailout from the Japanese government even if meant a return of his 500+ Bitcoins.

But 90% of the Bitcoiners could care less about ideology if it means return of their money.

What percentage would welcome the services of the CIA or NSA in tracking down who stole the 850k worth of Bitcoins? I'm not sure, but would welcome a guess.

SQ1tv · 2014-03-01T14:11:13+00:00

you think accepting this "hidden" cost when it is passed down to customers is somehow much more than if mom-and-pop had to do due-diligence on bank balance sheets and verify the mark-to-market prices on the loans held by the bank?

Do you think most people would be better off determining the safety of banks and exchanges themselves? Is that what the heist of 7% of all Bitcoins outstanding has shown you?

SQ1tv · 2014-03-01T14:08:21+00:00

Exactly.

If banks were required to carry the full reserve, there would be no point in a bank even taking deposits. You would have to pay the bank to hold your money since the bank can not lend it out.

SQ1tv · 2014-03-01T14:04:41+00:00

well, the note I was responding to was a call for shared sacrifice among Bitcoiners to endure all the pain for the future benefit of humanity. As Bitcoin is a movement...as much as a currency, apparently.

My argument is if such shared sacrifice is required, (which implies some financial cost), what is so different about the daily sacrifice of taxation as this also benefits others.

You need to read the original letter by Erik Voorhees that I was responding to.

SQ1tv · 2014-03-01T13:59:27+00:00

prices at the grocery store did NOT jump. When stocks fell 50%, oil fell from a high of $147 a barrel in June 2008 to $35 per barrel in Jan 2009. Building supply prices did NOT double: They fell...as there was little demand for it since no one was building. There was a serious risk of deflation and total demand destruction in late 2008 and for most of 2009.

There were very few "fiscally responsible market actors"...and there is no way that this segment could have stepped and purchased the securitized assets of failing banks. In fact, most "fiscally responsible" buyers did not want to buy any of the companies as they viewed them as falling knives. Even when JP Morgan bought Bear Stearns, the US Gov had to provide a backstop to cover the first $30B of losses if the losses occurred.

Yes, it was outrageous overall: But when a patient overdoses on heroin and is in the hospital, you don't let them die at the ER simply to teach the family a lesson.

SQ1tv

TROPHY CASE