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A few years ago, I started getting interested in cryptocurrencies. So, I studied dozens of them. I went to a lot of websites. I read a lot of white papers. And there was one coin I was really interested in. So, I decided to meet the team in person. I drove 5 hours through a snowstorm to look at their code and to hear about their vision. I was impressed. And after meeting with the team for several hours, I decided to invest $20,000, which for me was a lot of money back then. As the months went by, the price of the coin slowly climbed


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higher and higher. Then after a couple of years, something happened with the price of the coin. It crashed. It crashed so quickly, I couldn't understand what was happening. I went to Twitter and other social media channels to try to figure out why the price was crashing, and I couldn't figure it out. But before I could make any move with my coins, the price had dropped 99.9% from when I had first bought it. So, my $20,000 investment was only worth $20. Nicola Tesla once said, "If you want to


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understand the secrets of the universe, think in terms of energy, frequency, and vibration." I think he's right. And if we want to understand money, currency, and value, we have to think through the lens of physics. And that's what we're going to do in this episode. [Music] We've talked about how money is able to store value because of its 12 properties. In truth, each of those properties is a different way of accomplishing its one solitary objective. But to understand what that


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objective is, first we have to look at the nature of value itself. Consider all the things that we find valuable in our life. We go to the barber who cuts our hair. We hire a landscaper to cut our lawn. A doctor cures us of illness. A teacher guides a student towards knowledge. An entrepreneur creates a valuable product or service from raw materials. What do each of these valuable activities have in common? Every single one of them creates order from chaos. Each of these activities attempts to create a more structured,


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ordered, deliberate arrangement of energy. And what we say in the language of physics is that reduces the entropy of the system. So all valuable work reduces the entropy of a system. [Music] So what is entropy? Entropy is a measure of how spread out the energy is in a system. You can think of it like chaos, disorder, randomness, but it's really just a measure of how spread out the energy is. And when energy is spread out, it's not very useful to us. Entropy is kind of like a golf score. Lower is


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better. Now the problem with entropy is that the entropy of the universe is always increasing. In fact, that's one of the laws of thermodynamics. So the natural way for any system to move is for the entropy to increase over time. What that means is that energy spreads out. It dissipates and it becomes less useful to us. So our hair grows longer and becomes disheveled. Our lawns grow weeds and become unkempt. Our businesses without intervention will become chaotic, disorderly and the employees will waste their time on


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unproductive tasks. So the natural way for any system to move is for the entropy to increase. And every type of work that we find valuable is to reduce the entropy of a system. And that brings us back to money. Money's primary objective is to keep entropy low. We've said that the natural way for any system to move is for entropy to increase over time. And what we find valuable is stopping that increase or even reversing it. So all the valuable work that we pay for reduces the entropy of a system. And the


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reason we hold money is to keep entropy of a system low. And so when you're trying to store your value, you acquire money because it keeps your entropy in place and resists the natural increase of entropy that the rest of the universe experiences. So my $20,000 investment was only worth $20. Finally, I figured out what happened. It turns out one of the members of the founding team had a medical emergency with a family member. It was totally unexpected and it was a very rare condition that required specialized


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treatment. So, that founder had sold millions of dollars worth of the coin and that's what caused the price of the token to crash. For me, that was a valuable lesson in how any centralized company, which is all companies, are prone to increasing entropy. Sure, there are many risks that you can anticipate, but there are many risks that you cannot. And it's only a decentralized asset that intends to be a store of value like gold, silver, or bitcoin that intentionally keeps entropy low. So if you want to get rich, what you can


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do is try to lower the entropy of systems around you. In other words, you want to create order from chaos. The more you do that, the more value you will create. And if you want to keep your value, you need to seek out money. Something that keeps entropy low like gold, silver, or bitcoin. [Music] So, for example, if we weren't able to quantify our money and we just had to pay a pile or a heap of dollars or coins, well, we would lose a lot of energy, either the buyer or the seller. First of all, we would argue that that


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pile of dollars isn't big enough or that heap of coins is too small. And that would take a lot of energy to haggle. But then also, you wouldn't be sure if you're getting a fair price. So you'd waste energy in that regard as well. So that's why it's so important that we have quantifiable money and that's why it's so important that money has these other 12 properties as well. Each one of them reduces entropy and prevents us from wasting our energy. [Music] So, if money is designed to keep entropy


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low, then what about currency? What is it designed for? Well, we've said before that currency is designed to move. And anytime something moves, it encounters one thing, friction. And so, any good currency is designed to minimize friction. Currencies like the US dollar, airline miles, hotel points, Chuck-E-Cheese tokens. Each of these currencies is designed to move quickly. No friction. It's click a button, tap to pay, something very quick, and you're done. If we wanted to list the 12


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properties of currency, they would look a lot like our 12 properties of money, except we could eliminate two of the entropy minimizing properties, arduous and decentralized. There's no reason for a currency to be arduous or decentralized. In fact, if it's centralized and actually very easy to produce, that's going to increase the likelihood of reducing friction. So, the 12 properties of currency would probably have 10 out of 12 the same, but instead of arduous, it would be conjurable or


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easy to create. And instead of decentralized, it would be centralized. And those 12 properties would allow it to minimize friction. [Music] To be clear, the purpose of money is to store value. In order to do that, we minimize entropy. The purpose of currency is to be a medium of exchange. It's to move value. And in order to do that effectively, we minimize friction. So, money minimizes entropy. Currency minimizes friction. Hopefully, it's clear that we need both money and currency in society. They both


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perform a specialized purpose. Money is a store of value. Currency is not. It's a medium of exchange. The three assets that I believe are the best stores of value are gold, silver, and Bitcoin. In the next episode, we'll try to design the perfect money, something that's even better than gold, silver, or Bitcoin. and you'll see that we're going to encounter some important design trade-offs along the way. >> I want to thank you for watching and remind you that the best investment you


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can make is your own financial education. And goldsilver.com is filled with free research and ways to help you protect your future. We'll see you there.