Real Estate vs Bitcoin: The Truth No One Tells You

Hyperinflation is driven by central institutions, for example, by increasing the monetary supply. Hyperbitcoinization, however, is voluntary; people choose to use a better form of money. Over time, Bitcoin replaces all other existing forms of money.

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This episode, all right Leon Wu, my friend, welcome back to Bitcoin for Millennials.

Thank you. Thanks for having me again.

Good to see you.

Yeah, good to see you again. I think last time we really saw each other in real life was at the Amsterdam Bitcoin conference. For the people listening, that was episode number eight. So, in the first 10 episodes, Leon was already on, and we discussed how Bitcoin is digital real estate. Leon is a real estate developer, and I was thinking, man, now that you're here again, I'd like to go a bit deeper on the implications of Bitcoinization, the potential for Bitcoin to redefine store value, and perhaps take away a piece of what real estate is filling now, and how it might disrupt traditional financial systems. Next to being a real estate developer, you also have an economics background; you actually wrote your final thesis on Bitcoin. I think you're the perfect guy to talk to when it comes to the blending of real estate and Bitcoin. So I'm excited to chat again, man.

Yeah, thanks for having me. Like you said, in 2015 I wrote my master's thesis about Bitcoin. Back then, I had a very specific lens on Bitcoin because I was evaluating it as a new form of money. I had a very academic perspective, coming from a Keynesian background. I delved into Austrian economics with the thesis, but I looked at Bitcoin as money. Then I went into the world of real estate, and Bitcoin and real estate have been part of my life over the past 10 years. Last time we talked about real estate's monetary premium, but I think by now most Bitcoiners, and also a lot of non-coiners, understand that Bitcoin is a superior store of value. But then the question is, what happens next?

Yeah, what happens after?

Let's dive into that. Let's start with Bitcoinization. What is it, and how will it unfold? I think you have a good idea around that.

So, I think to take it to an extreme, we can talk about hyperbitcoinization, theoretically speaking. What is hyperbitcoinization? Hyperinflation is something that's driven by a central institution, for example, by increasing the monetary supply. But hyperbitcoinization is something that happens voluntarily because people choose to use a better form of money. Over time, that form of money, which is Bitcoin, replaces all other existing forms of money. But I think Bitcoinization is a better term because it looks like it's going to be a gradual process. There are also fiat substitutes, like Tether, for example, that are being used alongside Bitcoin. Mentally speaking, making the switch from fiat to Bitcoin is difficult for the individual.

Right, right.

Bitcoinization is the process we're living through right now—the adoption of Bitcoin as a form of money and Bitcoin absorbing the monetary premium in other asset classes. Referencing back to your episode with Jeff, he explains it very well. It's very difficult for people to imagine what deflation actually means because our point of reference is an inflationary system. That's been the case for our parents and grandparents; it's almost in our DNA to believe that an inflationary system is normal. So it's very hard for people to believe what deflation actually means. The natural progress of technology in a free market is to bring the prices of goods and services down to their marginal cost of production. But because money is being increased all the time, that doesn't happen, and things become more expensive. Housing is a very good example. You showed the increase in nominal value in real estate and housing in the Netherlands, and you also showed that, because Bitcoin is monetizing, it's actually falling in value in Bitcoin very rapidly.

Yeah.

That's a very good example of inflation versus deflation and the mispricing of goods and services. What's the secondary effect for the individual? A home is the very basis of living, and money that erodes the very basis of society creates fake price signals and mismanages resources. Bitcoinization will help allocate resources better, be more efficient, because the economic system we're living in today is all built on growth.

That's exactly what I wanted to say. And I think that's a big learning point for me: to keep the fiat money Ponzi basically alive. Why is it a Ponzi? You borrow from the future; you create money in the now, and therefore you devalue all the current existing money units people hold. You can only fix that, or obfuscate it, by making prices higher. For homes, "Oh, my home goes up, that's great," in nominal terms, maybe 20%, 30%, or whatever. That disguises the actual debasement of each money unit. People are tricked into thinking, "It's going very well," but it has to grow. Once there's no growth or deflation, all hell breaks loose. The value of things we invest in—the home, a prime asset for many people—has to continue to go up. The secondary effect is that no one can buy a house; no younger person can buy a home anymore. You see this narrative, or at least functionally, you already see it breaking. That will only become more and more clear as older people want to sell their homes and probably cannot find younger people that can actually pay the price, or the amount of fiat money units they want to get for it; otherwise, the sellers would be underwater. That's something no one wants. It's already interesting to see that system squeaking.

Yeah, yeah, it's already happening. You say Bitcoinization is slow; it's not hyper, not sudden. What are milestones we can look at?

I think when Bitcoin's market cap surpassed silver, that was a milestone. The next milestone is when we reach the market cap of gold. I expect that to happen in 2029, if not in 2033, four years later. Then, I think what will also be interesting, happening around the same time, is the parity of Bitcoin with the average US home. That will help people understand Bitcoin is not just a better store of value than precious metals. Culturally, precious metals aren't used that much. They're used in portfolio management to hedge against boom and bust cycles, but culturally, especially in the Western world, we don't really hold precious metals to store value; we do it in our homes. When Bitcoin reaches parity with the average US home, that will be another milestone. The recent events in the US—whatever you think about it—to have the largest economy in the world actively pushing policies that are not anti-Bitcoin, is interesting from a game theory perspective. It's true that at the same time, it looks like they're pushing anything they can and dumping on the population. But it looks like we're in the end stages of the fiat system. If money loses value, other things lose value, and we live in an immoral system anyway, because fiat, by design, is immoral and unethical. Having the largest economy in the world actively pushing pro-Bitcoin policies is great, and from a game theoretical perspective, it forces other politicians to do the same. Capitalistic and free jurisdictions will embrace pro-Bitcoin policies. Bitcoin custody is evolving, and while self-custody is important, it has its own risks and trade-offs. Onramp is pioneering a new standard, multi-institution custody, which eliminates single points of failure, adding fault tolerance and redundancy to your custody setup. 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That ties into the nature of the fiat system because, if you think about it, crypto is actually fiat—I'm not talking about cryptography, I'm talking about cryptocurrency other than Bitcoin. You can define it as fiat on steroids because it's much easier to create money. It's not a debt-based system; it's a hype-based system. There's a different dynamic in the supply and demand, but it resembles the fiat system. As Bitcoinization happens, over the next 8 to 12 years, we'll see some degenerate behavior—what I mean is, as inflation increases, the moral of society decreases. I always bring up the example of Germany's Weimar Republic (1918-1933). The Germans lost the war against France in 1871; they took gold from the French and created the Reichsbank. To take revenge after the French won World War I, they forced Germany to pay crazy reparations. Germany produced a lot of currency to pay back the reparations, and as a result, the economy collapsed and Germany fell into socialism. We see something similar; the collapse of society is happening much slower now, and I think it won't be as bad because Bitcoin, while society is deteriorating and inflation rates are increasing, is monetizing and rising in price. That can create a cushion that catches the free market because, after every war, after every crisis, the free market recovers, despite centralized policies that destroy the mechanism of the free market. With Bitcoin, the free market can protect itself against extortion and inflation. That's why we call Bitcoin a life raft—a way to not become a victim in the financial system. You can step out of the system and be protected. I agree; crypto investing or trading is financial nihilism. There's no other way to spend or save fiat money, so people try to get rich in this crazy Wild West casino. I don't think we can blame people; it's a natural result of future nihilism that fiat money invokes. Once you realize you cannot save anymore, and each time you go to the supermarket, month over month, you see the difference. It's not like Lebanon, where there's 100% inflation from one day to the other, but because we live in the Eurozone, it goes slower. The euro is still a strong currency, but all fiat money systems are the same. We're just lucky to live in one that's stronger than others, but there's no different outcome. The fact that Bitcoin exists gives you an opportunity to shield yourself from this natural decay of fiat money.

Absolutely. As money loses value, people fall into extreme political tendencies, making the problem worse. The US dollar will be weakened because the US government understands that Bitcoin is rising faster than fiat inflation rates, but they're not building a Bitcoin reserve; they're using Bitcoin as a hedge to inflate the dollar further. They're not doing it to strengthen the dollar; they're buying Bitcoin to weaken the dollar further. Bitcoin is helping the fiat system stay alive longer, but that's a good thing because, at the same time, Bitcoin is monetizing. When the fiat system collapses—a slow collapse—savings could be erased. But at that time, Bitcoin will be worth millions, and the private sector and free market will be so strong that a collapse can't take it down. I didn't expect this to happen when I got into Bitcoin, but we're living in a very interesting timeline.

I think that's a nice bridge to why people would go to this Bitcoin system. You mentioned a natural hurdle rate: once you understand that Bitcoin is the most scarce asset in the world, it's digital money, property you can own; once I send it to you, you own it. It's not in my possession anymore. It's a superior store of value asset and eventually superior money. Once you understand that storing your wealth in anything else is an inferior choice, Bitcoin becomes this natural hurdle rate. If I hold Bitcoin, what will I spend it for, or exchange it for? This natural hurdle rate will reshape the understanding of value creation and productivity. If I hold Bitcoin and you come to me with a proposal, I have to be convinced you deliver value on par with what I expect before I part ways with my Bitcoin. Once people see that, we'll have two prices—people pricing in euros and Bitcoin. I heard an example of the Eastern Caribbean dollar, where supermarkets have prices in dollars and Eastern Caribbean dollars. When you pay in dollars, you get Eastern Caribbean dollars back. Stores exchange weak money for strong money and give the weak money away as change. We'll see that with Bitcoin as well. At one point, if you have some sort of tender, who's going to build homes? If there are three offers, two in fiat and one in Bitcoin, the person who wants Bitcoin understands the value exchange. It's comparable to getting Bitcoin as a reward. That will increase competition between service providers.

How do you see that?

You said a lot of good things I want to comment on. I'll answer your question first. I think competition is great. Having high standards is good; Bitcoin is a monetary standard. There's no such thing as risk-free. Today, people consider something risk-free if the government pledges to pay, because modern monetary theory believes the government can continuously produce money. That's a fallacy because the risk of fiat currencies collapsing is so high and not taken into account. A risk-free rate would be Bitcoin in cold storage. The hurdle rate would be the yearly increase in purchasing power of Bitcoin plus a risk premium. If you lend out your Bitcoin, you'd ask for the yearly increase in purchasing power plus a risk premium because if you lose the Bitcoin, you lose the increase in purchasing power forever. There's huge risk with giving it out, so the risk premium would be high. Let's assume interest rates would be around 15%; people would really think about what they do. That's important. With cheap money, there's little risk and little responsibility. Without self-responsibility, society falls into a dark hole, and inflation represents irresponsible behavior. I'm not trying to judge it because I work in real estate and am a bitcoiner; I profit from both. I came into real estate as a young bitcoiner, and that helped me understand the fiat system and Bitcoin. We're all going through our own journeys. More and more people will voluntarily use Bitcoin to store value, make payments, or use it as collateral because people hoard good money because they understand it increases in purchasing power.

Sorry to interrupt, but just to make it clear, when you say Bitcoin is designed to increase in purchasing power, that sounds too good to be true. But any alternative you can use as money or store value is verifiably inferior. As more people understand that, they'll come to the conclusion that Bitcoin is the best way to store value, so they'll leave other monies and eventually pick the best money. Over time, compared to any other money, Bitcoin will buy you more of a product or service. Is that correct?

Yes, correct. Plus, technology by nature is deflationary. Bitcoin, as disinflationary money—money with less supply over time—reflects that reality because it increases in purchasing power. We have many fiat currencies being printed at the push of a button. Historically, every fiat currency went to zero, and Bitcoin is scarce. There's that dynamic between Bitcoin and fiat, which will exist for at least the next 50 years. Bitcoin will likely be an index for global productivity and global ingenuity. The smartest people in the world tap into the Bitcoin network; companies use it to store value; individuals use it to transact; and systems like the Lightning Network use Bitcoin to provide liquidity. As the use of Bitcoin increases, the price does as well. Some people call Bitcoin pristine collateral because there's no third-party risk attached to the Bitcoin protocol itself.

How would you explain pristine collateral? I think you're better at that.

I can try. Right now, I'm involved in lending. I would consider something good collateral if it increases in value in proportion to other outstanding monies over time and other outstanding goods and services. In an inflationary system, if you lend against it, it increases in value over time. Bitcoin exists alongside the inflationary fiat system. If you hold Bitcoin and take out a loan against it, the loan-to-value ratio decreases, meaning the risk decreases. There's high volatility in Bitcoin; that's why you need to over-collateralize loans. That creates resilience and forces people to think about their decisions. If you have your Bitcoin in self-custody, where are you keeping your Bitcoin seed words? For me, there's only one way: backing up my seed phrase with Stamp Seeds. It's a single durable plate with your words stamped into solid titanium, which is fire-resistant, water-resistant, and built to last. Unlike etching or engraving, Stamp Seeds provides the tools to deeply stamp every letter for permanent readability, making it easy to protect your generational wealth. Don't risk losing your seed phrase on paper; get a Stamp Seeds plate for unmatched protection. You can use code BRUM for 15% off at stampseeds.com.

It's interesting that Bitcoin introduces a social contract; it forces you to become responsible. Because fiat money is in a downward spiral, it doesn't matter if you spend it on something shitty. You're forced to spend it to keep the Ponzi going. If you're not conscious about what you're spending your money on, as the consumer or creator, the reward loses value. The incentive structure is negative, and that fuels into each other. Look at the quality of things. Old Duplo blocks are stronger than new ones. Over time, the quality of anything denominated or rewarded in fiat money goes down because the incentives become more negative. With Bitcoin, that flips; they become positive. I'll be conscious about what I spend my Bitcoin on and what I produce when I get Bitcoin as a reward. I love that contrast—a positive mirror to the negative fiat money system.

I like it as well. It gets me excited. Despite inflation, our life is getting better over time. People are getting older and healthier. There's a mental health crisis that ties into inflation because inflation makes life tough and creates stress. To be successful in the fiat system means dealing with stress. People respect people who go through stress, but I don't think that's a healthy attitude towards wealth or wellbeing. Despite that, things are getting better. Now imagine a limited money that reflects the reality of the market.

I love that you mentioned this because this is very true. Objectively, if you look at the entire world, people get older, fewer babies die—there is progress. You see that we're on that path, but I love the explainer in Lynn Alden's book, *Broken Money*, where she says, just as Jeff Booth says, our innate tendency is to be more productive and effective; that's why we innovate, and that is deflationary. But we price everything in inflationary money, and these things battle with each other. Although we slowly progress, bread is more expensive than 50 years ago. Which side is winning? We should be better at making bread in 50 years; everyone should have a bread machine. But we're not there yet. If we have scarce money, that will give us abundance eventually because everyone who exchanges value with this scarce money will be incentivized to deliver value, innovate, and do their best. You can't have assets anymore because people won't accept that level of value. I love thinking about how that would work conceptually. We would force each other to do everything to the best of our ability to create valuable things, whatever they are.

I think this is a big step we're taking. I see that it excites you. I think this is the same thing that excites me—the imagination of that future. Imagine how fast we could go if we valued things in better money. We would accelerate tremendously. Sometimes I think abundance is possible. If you go out in nature, it becomes clear because your point of reference changes. Our point of reference is tied to our environment, media, institutions, and society, which has been embedded in an inflationary system for so long. But when you step out of it, it's your personal choice what system you want to be a part of. Do you want to be part of a system that gives a solid foundation, sound money for a sound society? Or do you want to be part of a system that will fail and steal from you? It's hard to grok Bitcoin because accepting what you just said is a red pill. It wasn't a nice realization that I'm participating in a system where I'm not a player but a subject. I 100% agree with you. I think Bitcoin as a money system is a system of optimism about the future. It gives you time and space to explore who you are and why you're here. The fiat money system is a zero-sum game. I win, you lose. People are nihilistic about the future. That's why I started this podcast; I see our generation struggling to take the big steps in this phase of their lives. People are unsure if they want to have children. Our biological urge is worked against because humans made a flawed money system. That difference couldn't be any bigger in my mind. This is a good moment to emphasize why people say Bitcoin is hope; it makes you optimistic about the future. I would love to live towards the future and see what's going to happen—if it's really deflationary and we get the flying cars we were promised. What a crazy society that would be! The fiat money system's future is depressing.

It's very depressing; it's very anti-human. There is another option, though. Bitcoinization will affect money, finance, economics, and human action. Money is the essence of human interaction in modern civilization. Even with the Sumerians, their form of money was a ledger-based system, similar to the Bitcoin blockchain, where people recorded who owns what. That's essentially what Bitcoin is. Bitcoin is a ledger that records who owns what; that's what money is. If you look at the Sumerians, they had a lot of time, and because they had time, they progressed culturally, technologically, and spiritually on a level we don't even understand today. I believe it has to do with not constantly being stressed and having time.

I agree. I think those two are correlated. If you don't have time and space to think about what's going on, understand your place in the universe, and go on that journey, you need time. If you don't have time because you need more money to stay alive…

Is what eats away at, I'd say, the spiritual part of your life in general? Right then you're like totally captured in the physical world, and you're also distracted by the physical world, and all the bread and circus type stuff just keeps you away from going on that inner journey. That is something I've come to understand is a part of life, right? Like the integration of the duality, or well some people say the non-duality, as you know, that what we are is both outside and inside of our body. But that I found is one of the most rewarding things I've been doing in my life, and I'm happy that I've been able—and I know that I'm super privileged—that I've been able to create that time and space. I think it's more that we both wish that is something that anyone could experience.

Yeah, I'm very thankful actually for Bitcoin. Because whenever I was down in my life, Bitcoin actually came into my life when I was kind of in an existential crisis as a young adolescent, as a 21-year-old, and it kind of actually saved my life in that perspective. That might sound very, very, very extreme, but it did, and it did help me to find a new meaning in life and also become who I think I'm supposed to be, kind of like fulfill my destiny. Because if you do think about it, we're all on this Earth for a certain reason, and I think sometimes we can get distracted and we don't find that reason, and that also can lead to trauma and all the negative things in the world. So when we say "fix the money, fix the world," it sounds a bit extreme, but it is true that money is linked with so much. And when people say money is the root cause of all evil, that's actually not true, because what the Bible said was the greed for money is the root cause of all evil. And if we have a greedy monetary system, sure, it creates greed and negative consequences, but there's also a different possibility, and that is Bitcoin. Bitcoinization I think goes really, really deep into the very essence of what it means to be a human and the human experience. And I also think it's not a coincidence that AI and Bitcoin are developing so fast at the same time, because I think these technologies can really help to free up time and bring humanity on a new level of consciousness.

Yes, I could not agree more. You know what I also find interesting? That also through this podcast I realized that a lot of people that found Bitcoin have these thoughts, and I think that's a signal by itself. And what I also have experienced myself is when I think about if I wouldn't have Bitcoin, how would I feel right now? Super anxious, total future nihilist, right? Like honestly, like I don't—now that I understand how the money works, how messed up it is, that I'm a subject in a system that I don't understand—yeah, what should I do? You know, like that thought gives me a helpless feeling. And Bitcoin, for me, is an anchor, or that life raft that we talked about. That, and yes, it takes time to study and to integrate that and to challenge all the preconceptions you have, or all the beliefs or understanding, realizing that you did a masters in economics and realizing that you were never taught about money. You know, like it's stuff like that that, once you are able—and that is a little personal challenge—right, once you are able to accept that, then you—at least that's how it worked for me—it's easier to take the step and to think like, okay, I'm going to figure this shit out now, because you know I'm nobody's coming to save me, and I don't want to be a subject. Right? It's kind of like in *The Matrix*, the guy that knows the steak is fake but he still wants to eat the steak, you know that part? Like the guy that betrays Neo and the group. Yeah, you can do that, but spiritually that's a very, very, very bad choice because you know that what you're participating in is fake, and so you are part of the abusement in that fake and broken system, and you willingly choose to do so because you're too scared to go on the spiritual challenge that is laid out in front of you once you understand the system that you're in.

Yeah, no, for sure. To—I do believe though that, for example, I know it will take me another decade to maneuver out of the fear system, my entanglement within real estate development. Some of the projects, they will only be finished in 10 years, and the way that the system works, it's kind of rigged against you. So if you work in real estate, you don't take on debt, you don't go bankrupt, because with higher interest rates now, costs have also risen due to inflation. Construction costs are—have risen substantially, so you need to constantly refinance the projects, so you are participating in the system in a way. But I think the way—from both—it's actually interesting because we could talk about this from a spiritual, moral perspective, but also from the perspective of making a good investment, Bitcoin is the better choice, which actually I think is interesting because that doesn't really exist. Usually people say somebody that's wealthy took from somebody else.

Yes, yes, and it's kind of true within the realm of the Fiat system because of the Cantillon effect, where if you're close to the money printer, you receive new money first, you are able to build wealth faster. But Bitcoin, it's different. Bitcoin is—it's almost like a charitable system where if you are doing something that's good for yourself, everybody else benefits as well, because it's a system with a limited monetary supply where your productivity is also available for everybody else. And if you decrease the supply of Bitcoin, everybody else has an increased purchasing power.

Yeah, well said. And I think what you're saying, like maybe it takes a decade and I slowly get out of it—out of this—I think this is exactly what we're talking about. Like it's not that you should escape tomorrow. You know, some people can be radical and do that, but literally what you just said, like I have a certain point in the future where I'm working towards. I know this is a big part of my personal development, my knowledge, and all these things like that is what gives you enthusiasm for the future. Doesn't mean it's easy or something, right? But it's more like, okay, I have a path towards my future instead of not even having a path or just not even seeing where the future goes for you, right? So just having that perspective is already something that is really valuable. I think a common thing that I see is people do have a vision that they follow, like very individually, and Bitcoin also allows you to individually pick what you want to do because it does give you the economic empowerment to fulfill your dreams, whatever those dreams are.

Yes, yes, 100% agree. So it frees time and space for you to figure out why you're here, what you're good at, what you want to do, and that by itself is probably one of the most fulfilling journeys that you could go on. So I agree. I love that we touch upon this, man. This—this we took a nice detour, I think, of all the things that I wrote down, but I—this is core to what I want to share with this podcast is just, you know, I hope us sharing this personal reflection on our journey just inspires other people to do the same, right? Like you have to challenge yourself in that way to eventually also experience the freeing feeling that Bitcoin is giving us. Right? Like it gives us this positive path, positive outlook towards the future, even though the future is still uncertain, as with anyone. You know, maybe we're dead tomorrow, but that's okay, you know? Like that is just part of the natural anxiety towards the future, I'd say. All right, let's turn back. I'm thinking, I'm also looking at the time. I want to—I do want to touch upon—you know, we talked about this collateral part in the beginning, we talked about monetization of Bitcoin that is kind of threatening this monetary premium in real estate. Yeah, how are these things converging? What is the effect of the understanding that Bitcoin is a superior store of value asset versus how people look at real estate now, and what will be the effect when people start to—perhaps—selling homes, buying Bitcoin, or starting to buy Bitcoin to use as collateral versus buying real estate to use as collateral?

Yeah, so I do think that is already happening, from what I can tell. Individually, people are starting to understand that Bitcoin is a superior store of value. Initially, I thought it will really drain the monetary premium, sort of capital that is invested in real estate because it's used as a savings account. I thought initially that will flow into Bitcoin fast, but the conclusion I came to now is because I have understood that the fiat system will exist for longer than we might want to. The nominal value of real estate will continue to increase. So I do believe that—and the reason for that is actually globally real estate is the most important form of collateral. So the global financial system, next to bonds, is built on real estate. And you saw in '08, during the great financial crisis, once real estate values came down, the global financial system started to shake, right? So because real estate is such an important collateral, governments will not allow it to come down in nominal value. They will push liquidity into the market because governments, pension funds, and system-relevant companies and banks, they own real estate as well, and they collateralize their real estate and they lend against that to fund their own activities. So I think—it's just what I came to understand—is that real estate will continue to rise in nominal fiat terms, but if we understand that it's not necessarily real estate that's gone up in value, but it's the money it's measured in that has been debased, and we understand that Bitcoin is just a scarcer type of money, if you measure real estate in Bitcoin terms, it's losing value rapidly. So meaning if you hold Bitcoin, real estate will become very cheap for you. If you don't hold Bitcoin, you have a big problem. So I do believe that you need to hold Bitcoin. There's no other way to deal with the uncertainties of the existing system. If you want to save for yourself, if you want to build a future, if you want to be able to provide for your family, for yourself, for your loved ones, you need to hold Bitcoin because the big print is coming, right? Money will be funneled into the system. Interest rates right now are at 4%, but they will push them back down to 3%, 3.5%, 2%, 2.5%, 1.75%, and at that point real estate will just become unaffordable for the average Joe. And that also means you're not able to build a capital base that you can lend against. Think about it, you need that in the fiat system.

Yeah, that's a very good point. Right? So the value of a home, at least on paper, is something that you can use as collateral to borrow money and then invest further. But what happens when Bitcoin replaces real estate as collateral? Right? Let's say there's a person that is at a certain crossroads and they have to decide, okay, do I use Bitcoin or real estate as collateral? Also, by the way, because I think in parallel, for example in America, they're talking about changing a law, the SB—that rule that says banks cannot hold Bitcoin, etc. At one point there will be a point in time where I think banks would prefer for you to use Bitcoin as collateral because the—or maybe the combination, right, as you are also doing. So when you—maybe there will be like Bitcoin mortgages where you put up a little Bitcoin as collateral plus you buy a home with the mortgage, so there's like a double type of collateral, which will lower the LTV ratio, etc. But Bitcoin is better collateral. Like if you default on your mortgage, I can instantly sell my Bitcoin; it doesn't even matter who I sell it to, right? Like I can do that right now. I don't have to bring a home to auction and all that bullshit. You know, in that way Bitcoin is better collateral. Like what happens at that point in time with real estate? I think we have—so within the—I call it the Bitcoin system because we have two systems existing now alongside of each other, fiat and Bitcoin, and possibly Bitcoin replacing fiat at some point. But I think you have startups that are Bitcoin startups, they understand the role of Bitcoin as collateral and its advantages, and they will offer Bitcoin lending products. That's number one, but that will obviously not replace real estate. I think the moment Bitcoin is going to supplant real estate as collateral is when governments have an interest in that, right? Because governments decide where liquidity is being funneled to by giving out requirements for loans. And if you own real estate, for example, you can take out a loan considerably easily because there's an interest by governments for you to funnel that money into real estate, so it keeps the system afloat. So once Bitcoin is being adopted more aggressively by governments, I think they will have an interest for Bitcoin to stay afloat, right? For Bitcoin—obviously they can't control it—and I also believe the volatility of Bitcoin will shock some state players that are coming in now, but overall it will create more resilience. We have talked about the ability of Bitcoin to withstand these volatile price crashes where real estate cannot, and I think we see these boom and bust cycles that are getting worse and worse over time because real estate, by its nature, is actually not meant to be store of value. The reason why you can make money in real estate in the scope of the fiat system is because you can take on credit, so there's leverage. Let's say you put in $1 and the bank gives you $9, you have a leverage effect of 10, meaning for every $1 of equity you put in, you have actually $10 of asset value, right? And you also have tax reductions, and these tax reductions also exist because governments want you to put liquidity into real estate because it's a collateral within the system.

Yeah, but game theory I think suggests that tax laws should be favorable towards Bitcoin, and I believe that, you know, the US might be the first country to do so. If you really understand what Bitcoin is, it's money; you shouldn't tax it at all. Because if you tax money, how is money going to be used? There's no velocity in money. I don't agree with Keynes that the velocity of money needs to be constantly increased, but there needs to be a certain velocity of money for something to be usable as money, and you cannot tax the use of money. Because imagine I sell apples and you sell pears. If you buy an apple from me, right, and I have that money, and then a couple of days later I want pears, I come back to you, and the Bitcoin you gave me will have increased 5% in purchasing power in theory, I would need to be taxed on that 5%, and that doesn't allow me to use Bitcoin as money. So like in El Salvador, Bitcoin should actually be considered legal tender at some point, and then there should be that no taxes are to be paid on it, and that can be then really used as a store of value, and that also will, I think, enable it to be used as collateral more easily.

Yeah, I like that because that ties into what we previously talked about, like if Bitcoin is accepted as money, so legal tender, it's by law—I mean, eventually Bitcoin doesn't really need a law, like we can exchange in Bitcoin right now—but it would open up the opportunity in a country to actually get to this kind of flywheel that we talked about before, where there will be a competition of money. And because we know that Bitcoin is a superior money, and that anyone listening can verify that for themselves, right, by studying it, this competition will increase—the competition of money will increase the competition in suppliers of services and products as we talked about before, which eventually will lead to more innovation, deflation in prices, which makes people happier, and that would make any government—you would think—more happy, right? And that would also make your country in general more prosperous because people will be more productive and the things they produce will be of better quality, and that will give you a competitive advantage, you know, in your export or with the rest of the world. So I—I like that you touched upon this because if you treat Bitcoin as money, yes, you do give away certain control as a government. That's why I think it's kind of an interesting catch-22 for governments. Like you give away control over the fiat currency, right? The fiat—created by decree—the currency the people are forced to use, the money that the government can create, the central bank can create. But yeah, once you allow the competition of money, you will lose control over your ability to tax, basically.

Yeah, well, what is the biggest benefit for a government to be able to print money is that they can spend it on anything they want and, you know, conceptually keep the people happy with all the promises they make, etc. Like they can go into deficits, etc., because there is no limit to the amount of money that they could basically spend. But as we, I think, talked about now for an hour, the secondary effects are very bad. So I like this—when you think about, you know, El Salvador, of course it's a smaller country, you know, was really down at the bottom, but when you hear Bukele talk, yeah, he's building something from the ground up with a totally different way of looking at value and money and the freedom to transact and all these things. And you know, there's probably things that could be done better, but I think it's just a really interesting example of someone who is taking that opportunity, chance, maybe a risk, to do it in another way. Because we know that fiat money systems eventually crumble and you become dependent, perhaps even on another country, you know, as there are many countries where the US dollar is the main currency, which is not in America, basically, and that would be the worst thing for your citizens, I would suggest.

Yeah, I think you know, there are trade-offs; nothing's perfect; everything has a trade-off. And right now bureaucrats are not interested in supporting Bitcoin because they understand it undermines their power. But I think we should pay as much attention to their opinion as people should have done to the church when it forced people to pay money to not go into hell. It's basically a system of control, yes, and I like to compare it with that, I think, and—but people that actually love their country and they love their citizens or they love their community, they would allow Bitcoin to be used because, let's say we go through a scenario of inflation, it is actually good if you have a lot of Bitcoin in your jurisdiction because it gives some foundation for society not to collapse. Yes, so I think over time we see in society there's a duality between, let's say, good and evil; it sounds too simplistic, but there are different forces that are fighting with each other, but over time it seems that more positive forces win. So I think that over time jurisdictions that believe in freedom in capitalism, they will allow Bitcoin to be held as money, and we can see that already playing out. So the German Finance Minister has recently talked about Bitcoin, not because he understands it, in my opinion. He could also have talked about it while he was Finance Minister because what he did—and maybe you know it as well—he opposed the deficit.

No, that's why he was fired.

Exactly, exactly, which was actually something that I think he should have done because he's part of the—they're liberals, but they're actually not libertarians; they're their party that came from a libertarian background and over time they've also just—to the fiat system. But actually there—I think what he's done was good, and now there's—in February I think, or in March—there's people here voting in Germany again, so now he's starting to talk about Bitcoin. So you can see game theory playing out. Germany has a lot of problems, but it's still in the top five economies in the world. So seeing the finance minister of Germany actually talking about Bitcoin positively, yeah, shows actually that game theory is playing out.

Yeah, very interesting. Let's move on to the last subject.

Yeah, sure. Yeah, Bitcoin and AI, we mentioned it before. I also find it very interesting that there's this parallel development, but there's also this convergence of Bitcoin and AI. We mentioned housing as an example of the inflationary money system where prices are pushed artificially high and they decrease the living standards, and that is hard to see, but once we—you know—price in Bitcoin, it actually unveils itself to be a bad system because in—in—in Bitcoin the prices fall, as you said. I shared a little analysis on Twitter where the past 10 years it went from like, I don't know, 30,000 Bitcoin for an average home to six. And in Euros the price went up by 100% of a home, while double the value, so from like 230 to 460, and so in Bitcoin it dropped 99, 98% or something. So we can see that there, and what we talked about with deflation, that's what Jeff Booth talks about. A few episodes back I talked with Jeff about this specific thing, so I'd love to hear your thoughts because I know you've also read a lot of his stuff and talked with him about this. You know, AI will bring the biggest productivity boom and gains to ever exist, right? And any big technological advancement has always been like this compression of energy or information, from like steam engine to the printing press to internet, telephone, etc. Like all these things are basically an easier way to direct energy, to get something done, to be productive, and AI will be like the biggest boom. But as Jeff pointed out to me, and I like that idea, if we would measure the deflationary effects of this productivity boom that AI brings us in this increasingly inflationary fiat money, that might offset all the gains that we might get from this productivity boom of AI. And so he says the best way to measure the productivity gains are in Bitcoin, as Bitcoin is the best way to measure value; it's the most—it's like the best economic constant in the universe. And that's a long-winded intro to just ask you what are your thoughts around that. Does that make sense?

It does totally make sense. And if you look into AI, what we use right now are large—like LLMs, large language models—a lot, but also machine learning is part of AI. So at the point where machines will actually be able to perform humanlike behavior, that is already happening in robotics, and industrial plants are increasingly using AI, obviously, to increase the efficiency of production. And people always think—or people consider—that to be a bad thing, that's just like people considered it to be a bad thing that cars would replace horses, right? Because people, I think from their point of reference, cannot imagine what is the good that is supposed to come out of this. And AI is often seen as a threat, but I think the only threat of AI is if AI is centralized. And that was a threat that we were facing over the past four years, but that was now fought against, and now I think can flourish open and free. And it's one of the technologies that I think, together with Bitcoin, can really free humanity from the shackles of the fiat system in inflation, because of what you just said. So in a free market, over time prices fall to the marginal cost of production, but because of the increase in the monetary supply, we don't see that, like we don't really see it because things become more expensive because our unit of account, our point of reference, is being inflated. But with Bitcoin, what Bitcoin really does, it just mirrors the natural tendency of the market. And if you really think about how humanity has progressed over the last, let's say, 2,000 years, or let's say 5,000 years, because I think the last 5,000 years, in the last 6,000 years since the Sumerians, that's when we really progressed technologically, where we went from an agricultural society into a society with a ledger-based monetary system, through we went through two industrial revolutions, and now we arguably have the third one where we expand consciousness and we collectively use the internet as a way to communicate and connect with each other, and that creates a whole different playing field where we as humanity, we can progress collectively much, much faster. But because we have these different systems all over the world, at some point we have 196 different fiat currencies, these different systems all try to capture value within their respective round, and this really can be set free with Bitcoin as this global monetary base layer that everybody can use, everybody can store their productivity in, and everybody also can gain from productivity gains because now productivity gains are distributed towards those who take out loans, right? So if you want to profit within the system from productivity, you constantly have to incur debt and, for example, buy real estate as a scarce asset, so productivity gains sort of are funneled into real estate, but that makes a very exclusive system because not everybody's able to own real estate, right?

Yeah, so that means we can't progress collectively as fast. I think that's a nice way to tie in almost everything we talked about, I think, because when I think about Bitcoin, the whole idea of it being a non-sovereign asset, right? Non-sovereign, global, decentralized, trustless asset means that wherever you create any productivity gains, whether it's by AI or the enlightenment of your citizens, and so they would all do what they are best at, or whatever those efforts will be rewarded in the right proportion, I would say, right? Because right now someone doing—well—building a home in Germany versus building a home in Sri Lanka versus building a home in Singapore, if they would do the exact same thing, use the exact same materials, the exact same quality, they would be rewarded differently just because of their geographical location and the money that they are forced to accept for the work that they do. And AI brings about, I'd say, a decentralized productivity gain. Yes, maybe the tools are centralized, as in some companies are in America, some companies are in Asia, or whatever, but the fact that anyone has access to it, just like the internet, it opens up the playing field to take advantage of the possibility of being more productive. So in that sense I think it's a decentralization of productivity, and the only logical way to measure that is to do that with a decentralized way of money, because then we actually have an equal playing field, and anyone in Singapore can compete with someone in Sri Lanka, can compete with someone in Germany, and that will again, I'd say, invite anyone to do what you do to the best of your ability. And yeah, if you just think about that and push that towards the future, I don't know if there's any negative consequences to having people do that. I think there's—there's few; it's the opposite. I think there's a lot of positive secondary effects. And also, it's some large language models, so AI, if it has a programmed or pre-programmed bias, it might not want to use Bitcoin. Okay, but essentially AI is drilled to be efficient, and what is the most efficient settlement network? It's Bitcoin, yes, and the Lightning Network in AI, right? So I think the AI is going to use Bitcoin. You can already ask most of the AIs, the large language models that you use, whether it's Google or ChatGPT, ask if Bitcoin is a superior money to fiat currency. Sometimes they list the risk, but mostly they say yes, and it's interesting, right? So I think that as financial services become more automated, because one of the industries that invests the most in AI is the financial service industry, because the financial service is always interested to push down costs and to increase revenue; there are other industries as well, but the financial industry is one of the industries that invests the most because AI also helps to make decisions, and it can make decisions better than a human being because it can absorb more data, right? So I think as financial services will be influenced by AI, it will also increasingly use Bitcoin and the Lightning Network.

Love that. I think that's a good ender to this conversation. I always ask people, you know, what is a core belief that you will never let go of as my last question. People want to know yours; they can go back to episode 8. But yeah, thanks, man. Thanks again for this wonderful conversation. I think this was broad and deep, and I want to thank you for your time, man, and let's definitely do it again, and then a bit faster.

I'd be happy to. I'm also working on this book; it's going to—it's taking time, but I have to do it next to my regular business, and I only have a few hours a day I can allocate towards that, so I'll be very happy to discuss that with you once it's out as well. That's going to be called *Bitcoin is Digital Real Estate*. Right, *Digital Real Estate* is the working title for now.

Awesome. Well, if you want to follow Leon, I have all his links in the show notes, in the description below, so you can follow his journey too. And thanks again, brother.

Thank you. Thank you. Cheers. I hope you enjoyed this episode. If you did, you can click here to find more just like it, and click here to find all Bitcoin for Millennials podcast episodes. Also, please like this video if you want to help shine a light on the message of Bitcoin, and subscribe to my channel to stay connected. I hope to see you for a next episode. Bye.