Rich Clarke traces his shift from Ron Paul's 2008 campaign to Bitcoin after disillusionment with political action, explaining how fractional reserve banking and the 1913 Federal Reserve decoupled currency from gold. He details the 1971 end of the gold standard, Satoshi Nakamoto's 2009 Genesis block, and the halving mechanism capping supply at 21 million coins. Clarke critiques the War on Drugs, citing Ross Ulbricht's Silk Road arrest and prison labor as modern slavery, while advocating for self-custody to avoid exchange risks like Mt. Gox's 2014 collapse. Ultimately, he positions Bitcoin as an essential hedge against stealth taxation and inflation-driven global conflict. [Automatically generated summary]
Transcriber: CohereLabs/cohere-transcribe-03-2026, WAV2VEC2_ASR_BASE_960H, sat-12l-sm, script v26.04.01, and large-v3-turbo
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Hello, world.
Our guest today is Rich Clark.
Rich is an expert in cryptocurrency and Austrian economic theory.
He's also an organizer of the Bitcoin Atlanta Meetup.
In 2012, Rich became one of the three insurgent delegates from Georgia for Ron Paul at the Republican National Convention.
This experience of seeing the sausage be made in politics made him lose faith in the idea that political action was a viable solution to advance human freedom.
It was at this point Rich began to focus on Bitcoin as a possible tool for human liberation.
In the following seven years, Rich became an expert in economic philosophies and the landscape of the cryptocurrency world.
This podcast really opened my eyes to how money works in this country.
And where we're headed economically.
I hope you all enjoyed as much as I did.
Without further ado, please welcome the wise and wonderful Rich Clark.
Thank you for coming on the show and talking to us about cryptocurrency and Bitcoin.
My extreme pleasure.
The Internet of Money, is that what it's called?
Something like that, yeah.
So, how did you get into this whole realm, this whole world of Bitcoin and cryptocurrency and doing what you do?
You run an organization in Atlanta.
So, yeah, I run the Bitcoin Atlanta Meetup.
It's the oldest cryptocurrency meetup in the metro area, and, well, probably in Georgia.
How I Got Into Bitcoin00:04:18
And,.
I've run it since it started, it was started by somebody else before me, but I've run it since about 2014.
But it's been going since about 2013.
So, um, the way I got into it is I don't know a little bit of a long story, but if you want it, I can give it.
I got time.
Uh, so I, uh, I was just kind of a normal guy back, I went to school, I got a degree, I got a degree in physics actually, really.
And then I, uh, but I didn't really do much with it.
I became a rock band in college, so I did.
I was doing that and I was an audio engineer around the Southeast.
I'd do festivals and lots of pickup gigs and sound for bands and stuff like that.
And some bigger shows too.
But all around the Southeast, that's what I was kind of doing after college.
And then one of the guys that I ran sound with, Michael Gaster's name from Savannah, Georgia, he started talking about Ron Paul, who he was running for president in 2007 for the 2008 presidential race.
And Ron Paul, so I started looking at Ron Paul.
I watched like a debate or something.
Before that, politically, I was just like, I just waffled around, didn't know anything about political philosophy or anything like that.
They don't really teach that much in school.
And so I watched one of the debates and I was like, this guy's really interesting.
And so he kind of took me down a long rabbit hole that led me to study what's called Austrian economic theory.
Austrian economic theory?
Austrian economic theory, yeah.
Okay.
So it's basically as close to the economic theory that underpins Bitcoin, basically.
And so I was really, I got really into that.
They talk a lot about sound money, like gold and silver being money, and the problems with our current monetary system, which we can go into later if you want.
And, and, So that's kind of how it started.
And then it was just down the rabbit hole for that.
And it leads you to all kinds of interesting places.
And then in 2012, Ron Paul ran for president again.
And so I worked, I volunteered for his campaign.
And I became one of the insurgent delegates, I guess, to the Republican National Convention here in Tampa in 2012.
I don't know if you remember that.
No, I don't.
I wasn't paying any attention to politics in 2012.
You weren't missing much.
So, yeah, I.
I came down here for that, and it was an interesting experience, both leading up to doing that.
It took a lot of maneuvering to become a delegate at all because they didn't want anybody who wasn't supporting the candidate at the time, which was Romney, Mitt Romney, down there voting for anybody other than Mitt Romney.
But the three of us managed to get in, three Ron Paul supporters managed to get out of like 76 or something like that.
So we go down, we voted for Ron Paul on the floor of the convention, and it was a fun big deal, I guess.
But the whole thing, you kind of see how the sausage is made, you know, when you see like the inner guts of politics and you even when you're working on like the local level and then you work up to the state level and then you go to the national convention.
I kind of got disillusioned with political action as a way to kind of advance human freedom, which is what I was kind of all about.
And so I started looking for alternatives, things that made sense that I could act on.
And Bitcoin is the thing that I. Very shortly thereafter, I knew I'd known about Bitcoin for a couple years, but I was like, ah, what is this?
I was a gold bug.
So I was like, what is this, you know, internet scam money?
I don't want anything to do with that.
And, but around 2012, yeah, so August 2012, I started really looking into it, digging into it.
And then I really hit the ground running early 2013.
And I started, you know, mining Bitcoin and doing all kinds of other things.
Mining Bitcoin in 201300:15:14
We can talk about that too later.
You were mining it.
Mining it.
So you had computers that were.
Building blockchains and stuff.
Something like that.
Something like that.
Something along the line.
I had a loose understanding of it.
Right.
So, and really the rest is kind of history after that.
So that's sort of the path, the arc of me getting into it.
I really wanted Bitcoin to change the world, and it may still.
I'm very hopeful that, you know, I think the technology is out there, and I think that it has a, it's definitely going to make an impact on the world in the future right, so give me, we were talking on the phone last and you were explaining to me sort of like the way our current, like the current currency that we have now, differs from bitcoin.
When you're trying to explain to me the fundamentals of bitcoin right, and you're trying to explain like, the difference between how like, inflation works and how, like the original banks, they would take, take money and they would they use that money to make money on loans, etc etc.
Can you just like, can we just start from like The ground and sort of like build up this sort of idea that you were explaining to me?
Yeah, sure.
So, if you want to look into, not many people know really how our monetary system works today.
It's all magic.
And we know buzzwords like the prime rate of the Fed sends the prime rate and the Federal Reserve Board chairman, they go before Congress and talk every now and then.
But nobody really knows how, very few people know how, like, How our monetary system came to be and what it is today.
So basically, if you want to go way back, if you want to talk about what is money.
Screw that mic a little bit closer to your mouth.
You're kind of a quiet talker, so I want to make sure that we get that crispy audio.
You know what I mean?
So the first question you ask is what is money, right?
Right.
And the definition is it's a medium of exchange.
So it's, you know, in the early days of.
Economic activity, you'd have barter.
So you want to trade, you have eggs, but you want some shoes.
So you got to find a shoe smith, a cobbler, whatever you call him, that wants eggs.
And so he'll make you some shoes and you give him some eggs and you're good to go.
You make eggs, he makes shoes.
But what if you can't find one that makes eggs or that makes shoes that wants eggs?
And so that's when this whole idea of a common medium of exchange that.
People could buy things with came forth, and zillions of things have been used as money over the eons.
So, cows, seashells, you name it.
Of course, the most predominant one in sort of the modern era, well, the ancient world and the modern era, was gold, gold and silver.
And the reasons that gold became such good money weren't because somebody decreed, hey, this is good money, let's use it.
It's because gold has some emergent qualities that the market discovered made it a very good medium of exchange.
And the sort of fundamental thing, there's emergent qualities that people talk about, like monetary theorists talk about, are things like portability.
How portable is it?
So, you know, you can use cows for trade, but if you want to trade your cows for something, you have to get them, you know, from here to there.
It's not easy to move a cow around.
So, portability, durability.
So, a cow also.
You know, well, you know, they live for a while.
They won't live for hundreds of years or whatever.
And if they can get hurt and die and get sick, so they're not quite as durable.
You know, dry goods like grain and rice have been used as currency too in the ancient world.
Those also maybe have a shelf life of a certain amount of time.
So they're not as durable as something like gold, which gold is, you know, you can just sit in a vault for a thousand years and it'll still be there.
Right.
So we've got portability, durability.
There's this divisibility.
So, another thing like a cow, like, you know, hey, I want to buy this thing from you.
How much is it?
You know, half a cow.
So, it's like, well, you can't.
It's a little bit difficult.
Yeah.
Half a cow, right?
So, but you can take a gold piece and you can cut it in half or give them, you know, and so divisibility is a big thing that makes, you know, something good money.
There's something called fungibility, which we'll probably come back to later.
It's kind of a weird word, but what it basically means is one is like the other.
So, if you take an ounce of gold, one ounce of gold, it's like any other ounce of gold, you know.
Whereas, you know, different cows can be worth widely huge difference of money, amounts of money, because they can have different qualities that make them different.
Age of them or whatever.
Yeah.
I mean, there's size breeders that do all kinds of things, you know, different things and make different cows worth all kinds of different amounts of money for different purposes.
So, but, you know, an ounce of gold, um, And there's another thing, uniformity of the money.
So, uniformity, fungibility, it's kind of the same thing, but yeah, one is like the other.
So, if you deposit an ounce of gold, you know, at a bank or something, then you're not going to get that exact ounce of gold back.
You know, they're going to put it in the vault, and then when you come say, hey, I want an ounce of gold, you're going to get, you know, a different ounce of gold, but it's the same value, so you don't care.
You're like, okay, yeah, it's one like the other.
So, yeah, portability, divisibility, or.
Portability, durability, fungibility.
Let's see, what was another one?
Divisibility?
Was that one?
Divisibility, that's one.
So you can divide it up.
Right.
And then there's another one that they talk about, which is kind of like intrinsic value.
That's an interesting one with Bitcoin.
But basically, that means that one of the, like with the market money, like gold, it has some value.
Like people use it for something, like jewelry, or in our modern world, you can use it for electronics.
It has some like intrinsic value to it.
Okay.
And Bitcoin does have intrinsic value, but it's not in the sense that we traditionally would talk about.
So, going way back, that's why gold emerged as money.
Oh, scarcity is another one.
Scarcity, right.
Yeah.
So, and that's kind of like you have to find a middle ground because some things are too scarce, like platinum and stuff like that.
And so nobody can really get their hands on it.
So it's not good money.
And then if things are too plentiful, it doesn't have enough value to make large purchases.
You know, you have to get a wheelbarrow full of clamshells or corn or whatever.
Right.
So gold has historically kind of hit that medium place where it's scarce enough, but it's.
But it's not so scarce that people can't get it, you know?
So, those are the big ones that make for sound money.
So, that's how gold kind of emerged as the standard money throughout the world, really.
Basically, from the biblical times till pretty recently.
Now, how is our money now, like currently, like how is our.
The dollar bills that we buy stuff with, how is that related or tied at all to gold?
Well, it's not so at all.
So, the and the path to that is pretty, but wasn't it supposed to be originally?
It was originally.
Okay.
So, back in the, I guess to go back to what we were kind of talking about with like the goldsmiths and whatnot, the origins of banking as we know it today started with you know, you'd have gold and you'd want to own gold to buy things, but you'd have to store it and keep it safe.
Mm hmm.
And sometimes that was a problem.
And so, what they would do is the goldsmiths who, you know, would make things out of gold, like jewelry and stuff, they would already have like 24 7 armed guards or something at their place and a vault or something to keep them safe.
So, people would say, okay, you know what?
This guy is really good at keeping gold safe.
So, I'm going to see if he'll keep my gold safe for me.
And for a fee.
And the goldsmiths were like, yeah, this sounds like a great idea.
I already have the vault, it's got plenty of room.
So, I'll.
I'll just add yours to it.
Yeah, you pay me a fee.
And what they would get in return would be like a receipt basically that says, hey, you own this much gold at my vault.
And you can come in and claim it anytime.
Like a monetary note.
Yeah.
So over time, what ended up happening is those notes, instead of somebody saying, oh, I really want this, let me run down to the goldsmith, get my gold, and I'll be back and I'll pay you.
What sort of ended up happening over.
Period of time is people would.
They would allow you to sign your rights to the gold way.
It's kind of like the precursor of what we'd know as like a checkbook today.
You could sign the note, endorse the note and say okay, I'm endorsing this over to this guy and so if he comes to you and wants gold he can get it.
So then you pay him with the note instead of the gold.
You pay.
You pay whoever you're buying.
Whatever you buy back then, a horse, a horse yeah, some some armor, a sword, I don't know, So, you do that, and then he could go reclaim it.
And then eventually, what happened is they were just bearer notes, meaning whoever's holding this, they don't need to sign anything.
They just show up and they present it, and they can redeem it.
And so these started to circulate throughout the economy, and there'd be different goldsmiths who would have different notes.
But basically, they started, they acted as money because they were redeemable for gold, but they were more portable and easier to store because they were just paper.
So the goldsmiths kind of figured out that only, you know, there's only, you know, once they became like a big part of their business, only like 15% or 10% of their patrons would come in on any given week or month to withdraw their gold.
So they had all this gold that just kind of sat there.
Why not make money with it while it's sitting there?
And so at first it started where they would have an agreement with the gold holder.
Like if somebody had a lot of gold there, they'd say, hey, how about we loan this gold out and we can earn interest?
And then we'll split the interest, you know.
And the guy would say, Yeah, that sounds great.
And so they'd do that.
And, but then eventually the banksters, even, you know, especially for like small depositors, they would cut out that portion of it.
They would just say, Okay, you can leave it here.
And maybe they don't have a fee for you leaving it there.
Maybe they'll do it for free, but they're going to be loaning it out and making interest on it.
So that's how.
So they started, in addition to their storage fees, they were maybe in.
In place of their storage fees, they'd start loaning the gold out.
Or loaning the notes out for the gold.
Or they weren't loaning the actual gold.
So, no, they would loan notes for the gold, right?
So, they'd leave the gold safe in the vault and they'd issue notes because the notes were circulating like currency.
So, that allowed them to make money on the reserves in their vaults.
What then came next was a pretty brilliant idea, which is hey, you know, again, nobody comes in for all of this at once, and who's to really know?
If we put more notes out there, then we actually have gold in our vaults.
So let's say if they had 100 ounces of gold in their vaults, maybe they'd give a loan and instead of, you know, so then they'd say they have 85% of their gold they're leaving.
So 85 ounces of gold they're leaving for loans.
So say if they've already loaned out those 85 ounces of gold or the paper backing it, but somebody comes to them and they still want a loan too.
They say, well, you know what?
Nobody's going to notice if there's 10 more ounces of gold.
Paper receipts floating out there.
So I'm going to loan this guy these receipts and he'll pay me back interest.
And so that's called fractional reserve banking.
Fractional reserve banking.
So basically, the amount of notes you have out there, so liabilities, right?
The amount of notes you have to repay outweighs what you actually have in the bank.
As long as everybody doesn't show up at once, it's not a problem and you can make money.
On the notes that have nothing back in them.
And so this kind of became a pretty addictive sort of drug because you can literally just make money out of nothing.
You can make interest on holdings you don't even have.
So at first it started, you're using other people's money to make money, right?
Other people's deposits to make money, which was great.
But then it just kind of went to this next level where you can, based on your reputation and your notes circulating in the economy, you can just.
Push them out there and people will still circulate them.
And so, you know, bankers could have in the past inflated, you know, to double or triple the amount of notes they'd have on the bank.
Based on the gold they would have in the bank.
Yeah.
And what would happen is they then you'd get what's called bank runs, which people may have heard of.
Bank runs?
Bank runs.
So basically, if the word gets out that there's not that they have that they're a dishonest banker or whatever.
And they've put out way more notes, way more paper than they have backing it.
What are people going to do?
They're going to go and they're going to be like, well, I'm not going to be, I'm not going to get left holding the bag if they don't have the gold.
I'm going to go get mine right now.
And they show up and they want the gold.
And then eventually they run out.
And then you still have a line out the door of people with receipts and they collapse and fail.
Right.
Right.
Which is kind of a good thing because it was a sort of free market way to keep these guys from going crazy with this whole scheme.
So there's always this threat of bank runs.
Gold Flowing Out of the US00:15:10
What we have now is like that system on crazy steroids, like bigger than Arnold was at his peak.
So the Federal Reserve, during the history of the United States, like when the United States was formed as the Articles of Confederation, so it was just like separate states in this loose confederation.
And it was like that for about 10 years after the Revolutionary War.
So each state kind of, you know, the history of how governments learned to issue paper currency and stuff is a little convoluted too, but the sort of moral of the story is that the states, there was hyperinflation in a lot of the states because when, and we can talk about that a little bit later, inflation and how it affects us, but what they kind of learned, the founders learned through experience, was that.
Really, this whole government printing money thing didn't really work that well.
And so, in the US Constitution, it's actually in there that only gold and silver shall be money in the United States of America.
And so, that was the case for a while.
We had two central banks.
One was called, I think, the Bank of the United States.
It was founded in like 1800 or something like that.
And then, its charter ran out.
And then, Andrew Jackson, there was a second bank in the United States that was chartered as well.
And Andrew Jackson quashed that one.
It's something he's kind of famous for.
It's kind of a crazy story.
And then we didn't really have a central bank until 1913.
Actually, I just went to a conference on Jekyll Island last week, which is an island off the coast of Georgia.
It's a little barrier island.
It's, I think, actually the smallest one.
It used to be a retreat that J.P. Morgan owned in the 1800s.
It was the Jekyll Island Club.
And there's this book that everybody should read by a guy named G. Edward Griffin called The Creature from Jekyll Island.
And it's basically like the comprehensive history of the founding of our Federal Reserve.
And it was founded, the reason it's called The Creature from Jekyll Island is that it was like they got together, a cabal of guys, some senators and some big bankers got together on Jekyll Island in 1910.
And they basically drafted what would become the Federal Reserve Act that created the Federal Reserve Bank.
Which is the Fed.
We know it is the Fed.
So that's why you guys did your conference there?
Yeah.
There was a conference there over the weekend.
It's kind of a fun thing to go.
And if you go to the Bajek Allen Club, there's a Federal Reserve room and there's a plaque that says, In this room, the Federal Reserve was drafted.
Wow.
At the time, though, it was a big secret because they didn't want anybody to know who was getting together and why and where because it would have gotten people suspicious.
But bottom line is with the creation of the Federal Reserve, it allowed the.
With any central bank, England pretty much invented central banking.
They had the Bank of England.
It was like the first central bank.
And the Federal Reserve is pretty much a copycat of that.
And what it allows the government to do is this whole fractional reserve system.
So, you know, the government has a certain amount of money.
And that the Federal Reserve will hold that money, like the gold, literally gold.
There's literally gold in the Federal Reserve?
Well, there's debate about that too.
But there definitely has been in the past.
So, you know, Fort Knox is where the Treasury holds, supposedly holds a lot of its gold.
And then also the Federal Reserve Bank of New York, I think, has a big vault.
Supposed to be a lot of gold in there too.
So you have this gold.
Before 1913, only gold and silver was money in the United States.
So we had.
Silver coins, so the quarter, the nickel, the dime.
Well, not the nickel, the nickel is made of nickel.
But so the nickel, sorry, the dime and the quarter, the half dollar, the dollar were all silver coins, pure silver.
Well, like 90% silver, I believe.
And then we had what was called the Morgan dollars, which were these big gold pieces.
And these actually circulated as money.
We also had banknotes that circulated and stuff like that, too.
Before the Federal Reserve.
But when the Federal Reserve was founded, what we had is this ability of the government to.
The way the government funds itself is with taxes, up to that point, and debt.
So the government issues bonds.
And I'm sorry, I know this is like.
I feel like this is like feeding you with a water hose here.
No, no, it's okay.
No, it's okay.
Skipping over so much stuff.
No, it's good.
But the government raises money with bonds, which is basically debt.
Okay.
So people buy the bonds like, you know, during the war, you heard about like World War II, buy your war bonds to help pay for the war and stuff like that.
Okay.
And so they'd sell them to private entities, basically.
And so people would buy the bonds and they would yield a return.
That was a way the government could raise money for projects.
Okay.
Well, what the Federal Reserve can do is they can buy bonds as well.
Uh huh.
So they're like a bank, but they're chartered by the Congress, actually.
So they're like a.
Like a hybrid sort of organization.
So it's a private bank, but it's chartered by Congress.
So they have special privileges.
And they can buy the government's debt.
And this is kind of getting to how it works today.
But when they buy the government's debt, they issue the government dollars for that debt, right?
But they literally just print the money for that debt to the government.
So they say, okay, thank you, government, for, oh, we'll buy a billion dollars in treasury bonds from you, sure.
And they'll send the US Treasury a billion US dollars, a billion Federal Reserve notes.
They're called Federal Reserve notes.
Those Federal Reserve notes are, they literally just print them.
Well, these days they don't even print them, it's just like a data entry.
So, kind of the brass tax is that when the government needs money, so let's just use like you want to know about today's money.
When the government needs money for stimulus checks for people, they don't say, okay, how much taxes do we raise this year?
Can we afford this?
How much money did they spend on the stimulus checks this year?
Something in the trillions?
Yeah, it was like a trillion or two trillion dollars.
So when they do that, they don't sit there and say, okay, how can, let's take from, we're going to.
We can't afford this.
We're going to take from this entity.
We're going to cut the FDA budget here.
We've got to make this happen.
No, they don't do that.
They don't look at the tax revenues.
They don't care.
All they do is they go to the Federal Reserve and they say, hey, we need $2 trillion.
And the Federal Reserve says, okay, well, start printing your treasury bills, your bonds that we're going to buy, and print $2 trillion of them.
We'll buy $2 trillion worth of bonds, and then we'll give you $2 trillion.
It's literally just comes out of.
So now the government just owns, owes them $2 trillion.
Yes.
Okay.
In the future.
And they pay interest on that too to the Federal Reserve.
So that's.
So basically, there really is, and ever since 1971, I can talk about that in a second, there is no gold backing for the US dollar at all.
Okay.
In the story.
It's not backed by anything.
It's backed by the faith and the military, essentially, of the United States of America.
Okay.
Is all that's back in the US dollar.
How does that make sense?
Backed by the military?
Well, I mean, yeah.
How?
Explain that.
Well, all right, let me go back a little ways.
So after World War II, there was a state of affairs in the world where the United States actually held something like 60% of the world's gold.
Because, you know, we were this huge manufacturing powerhouse and we manufactured so much of like the war materials.
And so, so many countries were sending us their gold for safekeeping, one, but also mostly just for commerce.
And so, the United States had this huge stock of gold, and the kind of, I guess, world elites, if you will, didn't like this sort of imbalance.
And so, they all met at Bretton Woods, which is a place in New Jersey, I think.
And they came up with this thing called the Bretton Woods Agreement.
And what that said is that it made the U.S. dollar essentially the world reserve currency.
And the reason it was the World Reserve currency is because the US dollar would be redeemable for gold at $35 an ounce.
It pegged gold at $35 an ounce for foreign countries.
So foreign countries could come, if they had dollars, they could use their dollars and trade them from gold.
So that caused a few things to happen.
Foreign governments started hoarding dollars and getting dollars because it was the one currency that was backed by gold still.
And so, this Bretton Woods kind of state of affairs.
And by the way, U.S. citizens weren't allowed to own gold at this time.
So, it was illegal.
Weren't allowed to own gold.
Yeah.
FDR in 1933 banned gold.
Nobody could hold gold.
They said that, what was the slogan?
It was something like they blamed people who hoarded gold for the economics, the economy not turning around.
They're like, because they were.
They would hoard it.
They were saying, Oh, they're hoarding it so it's not getting out in the economy.
So, choking the economy, choking the economy, right?
And so, they said, You better give it up.
Yeah.
So, there was like a you could have like some tiny amount, like two ounces or something like that, or something of gold.
But the fines were crazy.
It was like a $10,000 fine.
And in 1933, I think that's like a quarter of a million dollars now.
And then people got put in jail for it too.
Not very many, but some if they were found to have been hoarding more gold.
So U.S. citizens weren't allowed to own gold, but U.S. dollars were redeemable for gold from foreign countries.
So these foreign countries, what they started doing is a lot of them started redeeming their gold.
In the 60s, they redeemed their dollars for gold.
And so, sure enough, the gold was flowing out of the U.S. to.
These other countries at a rapid rate.
Because the U.S. had produced a lot more, the U.S. government had produced a lot more dollars than it had gold in the bank.
Just like the old bankers of old time, the goldsmiths did.
There's more dollars in circulation than there were gold in Fort Knox.
So you're saying the U.S. military is the only thing that's going to stop other countries from coming and taking all of our gold?
I'll.
Okay, let me get to that.
I haven't forgotten that original question.
I'm just trying to get to where we're at.
So, in 1971, Richard Nixon basically the outflow of gold was happening so fast that we were going to run out, essentially, if we kept exchanging the dollars for gold with the foreign countries.
So, Richard Nixon closed the gold window in 1971.
It was an executive order, and he basically said Bretton Woods' agreement is done.
And the US dollar is no longer redeemable for gold.
What they had done at that point is Henry Kissinger, who was his, I think, Secretary of State, had worked out a bunch of deals with like the Saudi sheikhs and princes and whatever and kings in the Middle East that basically we would industrialize their economies and we would come in and because we figured out they had a ton of oil.
And we'd go in and we'd build up their countries, build up their oil industries.
But OPEC would only accept dollars for oil.
So at the same time we closed the gold window, this deal was just happening and just happened where if you wanted oil, you had to pay for it in dollars.
So one would think that if we were saying, okay, you can't get any more gold, people would lose confidence in the dollar and the dollar's value would collapse.
Because they had this other system in the works, they would, it basically became like the petrodollar.
So the countries could still hold dollars and be like, okay, these are still useful because I still need these to buy oil.
I still have to buy it.
And that's how it is to this very day.
So when I say it's backed by the U.S. military, what I mean is there's been several countries, like Iran is the one that pops out most in my mind, who have tried to set up, because Iran has a ton of oil, they've tried to set up.
Like oil exchanges where they would accept something other than dollars, US dollars, so they'd accept Euros or Chinese Yuan, something like that.
And I think that has a lot to do with a lot of the tensions that we have with Iran, is that they, I mean, there's other things too.
We've caused a lot of problems over there and in the past.
But basically, if anybody threatens this sort of Dollar hegemony on oil, they will get a military response, most likely of some kind.
And so in that respect, the U.S. military does sort of back the dollar, like the force of the U.S. military.
Because if anybody truly threatens the sort of global world reserve status of U.S. dollar, like if any nation state does, they could receive retribution.
Dollars Chasing Oil Hegemony00:06:46
But basically, that's what government is.
Government in general is.
You know, the ability to force somebody to do something, okay.
They, in my opinion, like they, they uh, it's the monopoly on the use of force basically is what a government is, like in a certain jurisdiction, okay.
You know, legal, like the legal monopoly on it.
Like, of course, people use force all the time and commit crimes and stuff, but they can't legally do it, okay.
So, how does Bitcoin solve this, okay, solve this problem?
And before, actually, before you do that, how do you explain to people, like dummies out there, Like me, what Bitcoin is.
If somebody has no clue, how do you explain it?
Right.
So, Bitcoin is a new sort of evolution in monetary technology.
And I guess the sort of elevator pitch is it's an uncensorable, unconfiscatable, fixed supply.
Monetary, easily transferable, transmittable monetary unit.
Okay.
So, there's a lot of, like, if you exist in the world we live in today, like, there's capital controls that keep you from moving your capital from place to place.
There's tons of middlemen.
Tons of middlemen.
Yes.
It also cuts out the middlemen.
In the early days of Bitcoin, we had like an easy pitch, and that was, hey, check it out.
I can send you money.
Between our phones, because Bitcoin kind of had that was sort of revolutionary in like 2009, but now everybody does that with like Cash App and stuff, so that's right as cool.
But what makes Bitcoin different and Bitcoin and cryptocurrency is different is that, um, the well, let me talk about what happens when the government or banks or whatever in you know basically issue the do the fractional reserve scheme, issue all the money.
What we see is so, like, uh I'm a realtor up in Atlanta, as you know, Andy.
So, over the last six months, we've seen housing prices go up like quite a bit.
Are they still going up?
They're starting to level off a little bit.
Okay.
But they're going up.
And I think this is a phenomenon in a lot of places.
Some would say, I mean, part of that is because there's low supply.
Supply and demand is like kind of the whole market.
A lot of people are kind of like not wanting to move because they, COVID and stuff like that.
So, like, there were fewer houses on the market than historically there would have been.
And so that helps drive prices up.
But also, it is, it's, you know, the government gave all these loans to people, like the PPP loans.
They did the stimulus packages.
There's people on unemployment making, you know, like reasonable amounts of money, actually, like $1,200 a week sometimes when it was kind of at its height.
And, you know, when you, This money is just injected into the economy.
Like it didn't come from tax revenues.
It came from that sort of mechanism I was telling you about where the Federal Reserve buys the debt and just creates the money.
The economy, it's still the same as it was the day before they sent these checks out.
There's still the same amount of stuff.
Yeah, still the same amount of houses, still the same amount of food, still the same.
You know, the economy hasn't grown overnight to you know to match whatever percentage increase the supply of money was.
So, what you end up having is you have these you have more and more dollars chasing after the same amount of goods and services.
And so, what you see happening, like for instance, real estate, is you say, Okay, my client really likes this house, let's make an offer.
I call the listing agent.
Oh, well, sorry, we already have 10 offers on this house.
So if you want it, you know, you got to pay more.
You need to go over list price.
So, okay, well, go over list price and we'll go over it.
And then we'll, hey, we'll put an escalation clause in, which basically says we'll go $1,000 more than the highest bidder, you know, stuff like that.
Yeah.
To try and get the house.
And so what happens is the price gets bid up, right?
And part of that is because there's more of these dollars in the system.
And also, you know, interest rates are low.
Which is another kind of aspect of inflation.
So, all these dollars are chasing after the same amount of assets.
What you have is price inflation, which means the prices of everything go up.
And so, when you magnify this effect over, you know, the Federal Reserve's been around for 107 years since 1913.
When you magnify that out over 100 years of this sort of gradual debasement of the money, The dollar is worth a fraction of 1% of what it was when the Federal Reserve was started.
So you have to ask yourself, where did that money go?
Like, where did that purchasing power go?
Like, who got it?
And the answer is it goes to the people who get the money first.
So it's called the Cantillion Effect, if you want to Google it.
Some people say it Cantillon, but Cantillion?
Cantillion Effect.
Okay.
Basically, the first person that gets that new money, they can go out and spend it in the world at the same prices as things were yesterday before the market has had a chance to realize that, hey, there's all this new money in the world.
So, you know, where are we going to.
So they get to purchase it at sort of a lower price than everybody else.
So, like, say a month later, if the money supply is increased by 10%, what that will mean is in a month, Or so, once the markets kind of worked this out, everything will cost 10% more.
So, the guy that bought that item for 10% less with the money when he first got it has essentially, you know, since the money was just made out of thin air for him, he stole 10% of the purchasing power of everybody in the economy by injecting that new currency into the economy.
Right.
Hard Coded Fixed Supply00:04:35
So, with Bitcoin, one of the key Sort of founding principles of Bitcoin is it has a fixed supply.
So it's emitted gradually over time through a process called mining.
But at some point, it tapers off to zero that are emitted.
And the total amount that will ever exist is 21 million Bitcoins.
But how?
How is it possible?
How can you cut it off?
So at one point, miners won't be able to make any money on it?
Well, the miners also make money on transaction fees.
So when people want to make a transaction, They pay what's called a minor fee in Bitcoin.
And the fee, it's just like a market.
So if the Bitcoin network's kind of busy, the fees can go up.
If it's not really that busy, it goes down.
But the idea is that I think the last Bitcoins will be emitted in like 2130.
And so once that happens, the hope is that there'll be so many people using Bitcoin and there'll be so many transactions and it will have scaled to meet the demands of the economy that, yeah, the miners can exist easily off of those transactions.
Okay.
But the way that it's done is it's hard coded into the Bitcoin code that the Bitcoin miners, which basically they are people who own a computer.
In the early days, it was any computer.
Now you've got to buy these $2,000 processors, right?
Yeah, or something like that.
So just a brief thing about mining and what it is because it's a big part of how Bitcoin works.
It's super complicated to understand.
It's not super complicated, but it is somewhat technical.
So the example I give is that.
If you imagine these computers, every 10 minutes, well, on average 10 minutes, they're given a new cryptographic puzzle to solve.
And I think of it like a needle in a haystack.
So they have to find the needle in this cryptographic haystack.
It's basically like if you have an email password and somebody wants to figure it out.
Know you well enough to like social engineer you or something, they can try what's called brute forcing it, which is basically like, well, I'll try this word.
That didn't work.
Okay, I'll try that word.
Okay, maybe if I tweak it a little bit here.
And people can code computers to do this and brute force your passwords.
And so it just takes a certain amount of time to do that.
And then eventually they'll guess right.
And if you don't have any protections in place, you'll have access to your stuff.
And so basically, these computers are.
Trying to brute force this puzzle, and it's like looking for a needle in a haystack.
And so, the first computer that finds the needle broadcasts, Hey, I found it to the network, and then the rest of the network looks at the needle.
Based on the last needle that was found, they can prove that this needle is the legitimate needle.
It's the next block in the blockchain.
They've solved the puzzle, and And then that miner gets a reward for finding that needle.
And he also gets a monetary reward and he also gets the ability to write all the transactions that have happened in that last 10 minutes.
So if people are like, hey, I want to send you some Bitcoin, and the other guy says, I want to send you some Bitcoin, those transactions are all put out there.
And then the miner who finds the needle will sweep up those transactions and then Earn the fees off those transactions?
And then earn the fees off those transactions as well.
And then he'll encode them into that needle, it's more like a key.
It allows him to write to the Bitcoin blockchain.
And then once he does that, he gets a block reward, which is how Bitcoin is created.
So he gets some Bitcoin for that?
He gets some Bitcoin for that.
Participate in the network and validate the transactions.
It started off at 50 Bitcoin, and then every four years it's hard coded that it cuts in half.
Who created the first 50 Bitcoins?
Decentralized File Sharing Origins00:08:59
That was the anonymous founder, Nakamoto.
Yes, or a group of founders.
Satoshi Nakamoto, right.
Nobody to this day really knows who he was, if it was a lone person acting or a group of individuals, where they come from.
There's people who have speculated certain things, people who have found evidence to try and figure out where he may have lived or whatever.
Based on when he did his posts, people think that he probably lived in the East Coast of the United States, stuff like that.
But.
Or he could have just been clever and every time he posted, posted at a certain time that would make him look like somewhere else.
Or it could have been multiple people.
Where did he post stuff?
It started off in a mailing list called the Cypherpunks mailing list.
Which was formed in the mid 90s.
A bunch of nerds in California, San Francisco, started doing a little meetup at one of the guy's headquarters.
What was his name?
Eric Hughes, I think.
And Eric Hughes wrote the Cypherpunk Manifesto, which you can look up.
It's just like a paragraph.
And then they had a mailing list.
And these guys had been trying for.
They were basically a bunch of guys that really conserved with privacy.
And the Cypherpunk Manifesto basically says that privacy is key to free society in this modern era.
Like cryptographics.
And along with those kind of ideas, also come a lot of guys who are interested in sound money and they know about how the Federal Reserve works and how it basically robs savers of their money, you know, over the course of generations.
And so they worked on this whole idea of cryptocurrency.
And the nearest thing to it was HashCash, which I think was Nick Sabo's project.
Hashcash was a way to protect you from email spam by basically it would make you do a little computational work.
He invented proof of work, basically, which is what the mining algorithm sort of is for Bitcoin.
Basically, he said you have to do a little computational work to send an email.
That way, if somebody couldn't just send out a zillion emails as spam to somebody.
It was like 2000 something, 2003 or 2004.
He came out with that.
And then Satoshi Nakamoto just basically came out of the blue.
Like, I just started posting in this thing and dropped the white paper for Bitcoin and this thing.
And everybody was kind of like, well, this is really interesting.
And what Nakamoto had done is he just basically had taken a lot of the stuff that the cypherpunks had learned and figured out and just kind of put them together nicely into this nice package and coded it up.
And.
And launched it.
And so he was the one that, to answer your question, he or she, whatever, was the one that mined the first blocks of Bitcoin.
And the first transaction.
Mined the first blocks of.
It's called the Genesis block.
It's the first block of information.
It was empty because there were no transactions.
Right.
It didn't even exist, right?
Nothing was there.
Nothing was there.
But it did reward him with 50 Bitcoins to his Bitcoin wallet that he could create.
And he actually.
I think he ran it as kind of a testnet for a while.
He did send some Bitcoin to Hal Finney, who's now dead.
He was another cypherpunk contributor.
That was, I think, the first Bitcoin transaction where he sent, you know, he's like, okay, download the software.
The software creates what's known as a wallet file and I'll send you some.
And it worked.
But it's another kind of breadcrumb they think that Nakamoto may have worked in some kind of lab where he had access to a bunch of computers because he actually had a whole bunch of computers that were mining in the beginning that he was testing with.
Like it was something like 30 or 40 computers and they were all kind of the same.
They all kind of did blocks at about the same time.
So they, it took them about the same time to find the needle.
So they figured they're probably about the same type of computer.
But that's kind of a rabbit hole.
Yeah, for sure.
But that's who mined the first bitcoins.
So I don't know.
I feel like I'm jumping around a lot.
Yeah.
No, no, no.
It's super interesting.
Now, there's also multiple different types of bit.
Like there's Bitcoin, then there's things like Ethereum.
Right.
How are these things different?
Are these just people like finding opportunities in this whole Bitcoin craze?
Well, Bitcoin's an open source project.
So that means that anybody can go read the code.
It's not like some secret.
Right.
So, like, one of the first altcoins that I knew about was one called Litecoin.
Altcoin.
That's the term.
Okay.
They're alternate versions of Bitcoin.
Okay.
And it literally was just an alternate version of Bitcoin.
It was a word for word, basically, copy paste of Bitcoin.
The only thing that he changed in the code, a guy named Charlie Lee, the only thing that he changed was.
He changed the block time.
And that, so Bitcoin, the way that it works, that's so interesting.
It took, have you ever heard of BitTorrent?
Yeah.
Yeah.
So it's basically like decentralized file sharing.
Right.
Like you want to download a movie or something.
Right.
So basically, hundreds of people will have this movie on their computers, right?
Okay.
And then you say, hey, I want to download that too.
And so you get a little file.
And then it, And then that it goes out and looks says, okay, who has this?
Okay, this guy has it.
That guy has that guy has that guy has it.
I'm going to download from him, him, him.
And you download a little bit from each peer, right?
But there's no like the reason it works is because there's no, uh, and the reason it hasn't been taken down by the authorities is there's no central, uh, like BitTorrent company that you can sue, raid, uh, fine, take down otherwise.
Nobody owns BitTorrent?
No, not, no, no, nobody owns BitTorrent.
Okay.
It's just a program that exists.
It's just a decentralized protocol.
Okay.
And people can.
Now, there's.
And it's open source.
So a lot of people have developed different apps and stuff that work with Bitcoin and they talk to the network.
But yeah, that's how.
What about websites like Pirate Bay or those types of websites?
The thing is, those are just repositories for the key files that let you know that they're like little tags that basically say, okay, This movie, this, like, say this, or let's say something legal, like a public domain book or something.
You want to download it.
It's in the public domain.
Because there's plenty of legal content available, of course, on BitTorrent as well.
You'll download this.
You'll say, okay, I'm going to search something like The Pirate Bay and find Moby Dick.
Okay.
I want to read it.
I want to get the e reader version of Moby Dick.
And it'll come up and it'll show several files and it'll say, okay, this.
This file has 15 people that also have it.
And this file has one.
This one's kind of dead.
There's nobody that, like, we know about it, but nobody out there is hosting it.
And so you click on that file, and all that file is is just basically metadata about that file.
And then you load that into your BitTorrent software, and then it goes out and looks for who else has it.
But Pirate Bay doesn't host anything aside from just those basically the metadata for those torrent files.
So the only thing you download from the Pirate Bay is like a tiny, like three kilobyte file.
So it's like a portal to these other files that you can download.
Right.
It's basically like you have your library cards, and not anymore.
When I was growing up, you had the Dewey Decimal System, you know?
Yeah, yeah, yeah.
You'd have your card catalogs, and then you'd say, okay, I need to.
The author's name starts with an L.
So you open up the L drawer, and you look, oh, here it is.
And then you go to the stacks, and you find it.
So all that Pirate Bay is, is just the card catalog.
GPU Mining and Block Rewards00:16:02
Oh, okay.
That makes sense.
You're not actually downloading.
So unlike Napster, so Napster actually hosted.
This stuff.
Napster started you know, Napster was like 1990, whatever eight, nine and they got.
They were a company though, and they they ran this file sharing thing and they got sued out of existence, basically by the record companies and everybody.
So so bitcoin right took this idea of a decentralized platform uh, like bit torrent, where it's just one node connecting to another in like a spider web, but there's no central point of failure, like all you have to do to run a bitcoin node is just open up the software and bam, You're part of the network.
So even if somebody wanted to take down the Bitcoin network, right?
They would have to find every computer that's running it in the world.
It's like smash that computer.
They'd have to go into space, I think, at this point, because I think there's Bitcoin nodes running in orbit and kill those.
When you say node, you mean those computers that are mining?
It's just a computer.
It doesn't even necessarily have to be mining anymore.
Okay.
In the beginning, all nodes were pretty much miners.
Okay.
We'll get to the sort of, we can get to the, let's, Shelve that for a second.
The arms race.
The arms race in mining.
Right.
That's kind of a fun thing to talk about.
But anyhow, it's a very durable network because it has no central point of failure as a protocol.
So it took that.
So Satoshi Nakamoto took that idea, sort of BitTorrent and decentralized networks.
And then he also took this proof of work idea.
And then combine them with, in my opinion, what were some pretty sound economic principles and created what we know as Bitcoin.
The proof of work algorithm, which is what does the mining, the needle in the haystack search is what, you know, it gets people to contribute something of value.
And so, because The power and the computing, the computer you use is they cost money.
And so a lot of people will say that unlike gold, Bitcoin doesn't have any intrinsic value.
It's not backed by anything.
Technically, it's true that there's no ounce of gold or anything else in a vault for every Bitcoin in the world.
But Bitcoin is backed by the hardware and the power, like physically backed by the hardware and the expenditure of energy.
That it takes to run the network.
And it's very high at this point.
I was watching something with this guy who had this massive, massive warehouse or like a bunch of warehouses in Iceland that were just storing these computers, like racks and racks and racks of these computers.
It must have been like tens of thousands of computers that were all mining the Bitcoin.
So it's people like that who keep Bitcoin alive, right?
Right.
Yeah, basically.
Well, they secure the network.
And so most people don't know this, but Bitcoin is.
And what kind of money does that carry?
It's the largest.
Basically, a cryptographic network in the world.
So, it's the Bitcoin network is actually the biggest supercomputer in the world.
That's pretty scary.
Together, it's not scary because it only is good at doing one thing.
Right.
But right now, yeah, it's only good at finding, you know, for the most part, the way the hardware is built these days.
It's really only good at one particular hashing algorithm, which is good for finding Bitcoin.
So, why isn't Bitcoin good for investing or like long term investing?
It's only good because it's so.
You said that.
I was watching something earlier.
I think it was Andreas Antonopoulos.
He's awesome.
You should leave him on.
He was saying that Bitcoin is not good for investing your money into.
It's good for making transactions, but it's not good.
It's not a good way to invest money and earn a return, something because it's so volatile.
Maybe I didn't hear that right.
Well, okay.
If you're getting in the world of investing, it's not investment advice.
Am I better to invest in the SP 500 or invest all my money in Bitcoin?
Well, the SP 500 has been pretty volatile as well lately.
But over the past 100 years, it's gone up.
Right.
That's a personal preference thing.
So, Andreas, kind of famously, a few years ago, he's always spent, he's received payment in Bitcoin for his speaking fees, and he spends it for everything.
And so, I think he had some family emergencies and stuff where he cashed in a lot of his Bitcoin.
Earlier on, before it went parabolic the last time.
And so he really didn't have a lot of Bitcoin that he held.
And so that's his personal investment philosophy.
He uses it as a medium of exchange.
And he kind of, I think, hedges against the volatility by going ahead and spending it more immediately.
A guy named Roger Ver, who's a big name kind of in the Bitcoin world, he used to be called Bitcoin Jesus.
Right, yeah, he's a kind of a wacky guy.
He owns bitcoin.com.
Right.
He said he tweeted out something like to Andreas.
This is like two or three years ago now.
He tweeted out that if only Andreas had kept a few hundred dollars worth of Bitcoin and hold on to it, he would be a millionaire by now, you know.
And Andreas said, responded somehow.
But what ended up happening?
You know, Andreas has like a donation address, like a Bitcoin address.
That he just has posted on his Twitter.
Somebody donated a million dollars to Andreas.
He's like, no.
Now you're a millionaire.
Holy shit.
When was this?
2017 or 16, 17, 18, something like that.
What's the most Bitcoin has ever been worth?
It was actually, I think the highest value was $19,666, is what I saw.
Wow.
So almost $20,000.
And that was in December of 2017.
December.
And what is it at right now?
It is at October of 2020.
11,300.
$11,300.
Yeah, so that's about half.
About half.
That's not good.
But, well, it was even worse than that.
I think it hit 3,000 something in 2018.
Really?
Actually, no.
In March, when the big crash happened in the market, everything crashed.
Yeah.
Bitcoin went down to, I think, 4,000 something again.
It had been back up at like 10 or whatever, or 8 or 9, but it came back just like the market did.
It came back in.
Rebounded and it's back to where it was before the March crash, but yeah.
Um, that being said, so when I started with Bitcoin, Bitcoin was a hundred dollars almost exactly.
And what 2012 something, 2013.
Okay, I was gonna start mining in 2012, fall 2012, but um, here I'll talk about the arms race a little with mining, and that was a little rabbit hole.
Um, when Bitcoin, I told you earlier that Litecoin was just a tweak of the Bitcoin network.
It changed the block time.
What that means is that the network targets for a new block to be found about every 10 minutes for Bitcoin.
But it's not like a hard, it's not like a hard, it's not like this happens every 10 minutes.
It's a target.
It's how fast the computers can do it, right?
Exactly.
So a lot of times what happens is a computer will get lucky.
And it'll find it in two minutes or something, you know.
And so, over the course of two weeks, it checks to see if the average is 10 minutes.
And if it's not, what it'll do is it'll either make the puzzle harder or easier, depending on how many minutes it takes.
So, if and pretty much all the time, it's always been getting harder because computers are getting faster and faster and able to find it faster and faster.
So, if you so the faster the computers are, the more height, like.
The more complex they're encrypted, the harder the, if you want to think about it this way, the bigger the haystack gets, right?
For finding the needle in the haystack.
Right.
So if you get a machine, if you imagine this machine that gets, it's kind of good at finding needles in the haystack.
And, you know, you can have a little small haystack, it'll take it 10 minutes and it'll find it.
But if you have this like industrial hay sorter machine that can just gobble that through that in two seconds and find the needle, then it just needs to make a bigger stack.
So it started off, you could just mine Bitcoin on your laptop.
Like anybody could mine it.
But then people figured out that if you used GPUs, graphic processing units, like video cards, you could get pretty efficient performance.
And it was like an order of magnitude better at solving the puzzle.
And so then people who had CPUs, you know, just doing it with their laptops, weren't really able to do it anymore because the GPUs were so good at it that the algorithm had to make it harder.
So, like, if you had your little CPU, You know, it would be like one guy looking at this giant haystack, you know, to go through, and he wouldn't be able to.
But if you had the GPU, it could power through it and do it in 10 minutes.
And then what came out next was FPGAs, field programmable gated arrays, field programmable gate arrays, anyhow.
And those lasted a little while.
They're basically just like highly adaptable programmable circuits.
You can, you can.
Sort of specialized things for.
So they're very good, like specialist chips.
You can program them to do all.
They're used in all kinds of industries for all kinds of things.
But then, shortly after those came out, the ASICs came out, application specific integrated circuits.
Basically, these are CPUs that are designed to do just one thing, and they're designed to do them really well, special built, custom built.
And these are supposed to come out in like the fall of 2012.
And there was this one company that was developing them or putting them out called Butterfly Labs.
I almost hate to give them a plug because it.
They ended up being huge scammers, but they're not around anymore, so it's not a big deal.
But so in fall of 2012, when I was looking to get into mining, I was going to get some GPUs and build some computers and whatever.
But these Butterfly Labs guys had built all these, or put out all these Google ads.
Like, I don't know how much they paid on Google ads, but literally anytime I searched for anything Bitcoin mining related, their ads were everywhere.
And these ASICs were like an order of magnitude.
More efficient than the GPUs.
So I'm like looking at all these profitability calculators.
Okay, if I buy this GPU, you know, it'll pay for itself in like a year or something like that.
And then you're looking, then this ad pops up and you're like, oh my God, if this thing comes out, it would pay for itself in like three days.
You know, you pay $1,000 for it or $500 for it.
And then it's so fast that in three days of mining Bitcoin, you would get $500 worth of Bitcoin.
But then they just, so I was like, well, I'll just wait until they come out and there's no point in getting my GPU gear.
Reading and so, but then they didn't come out, they didn't come out, they didn't come out, and then it was like 2013.
They still hadn't come out, or they well, they still hadn't been delivered.
They were out there.
It turned out that what Butterfly Labs was doing is, yeah, of course, like if they have the heart, it's like the Cantillion effect I was telling you about with the person that has the money first.
So they had these miners that could mine like ridiculously fast first, like they were the first guys.
So they're like, well, you know, they didn't have a burn in period.
Right?
Where they're tested or something.
Right.
So they would run them.
They were running them at their facilities.
And then that would cause the network hash rate to go up a lot because they were really powerful.
So that meant that the haystack was getting bigger.
And then once the haystack had gotten big enough, then they would send them to the customers that paid for them.
Wow.
So they would make a ton of money.
Oh my God.
What a scam.
Yeah.
And ASIC companies still do that.
It's still that way that you need to be.
Whatever the next generation ASIC is, the closer you are to the hardware manufacturer.
Because literally, if you order one, making a profit, getting it next week versus the week after next could be the difference between you breaking even and making money or you never really recouping your.
Because of how fast they're advancing?
Well, because of how.
It's not just the advancement.
There's also.
If you manufacture a bunch of these, there's.
Strength of numbers, too.
So, the more you have looking, right, the more odds there are that somebody's going to get lucky and find it faster, you know?
Right.
So, they're mass producing these things, too.
But that's why, instead of getting in in 2012 when Bitcoin was like $20 or $12 or something like that, I ended up getting in.
Finally, I just, it was March, I think, or no, January, February 2013, the price started going up.
And I was like, man, I missed the boat.
I should have started mining.
I should have just.
Said, forget it, and bought the computers and mined.
And, and, uh, yeah, I remember like a year later, after I'd been mining for a while, I remember I was looking, I was trying to like troubleshoot something.
And I looked through this, uh, I was looking through this forum, and it was a post from like, yeah, mid, late 2012.
And this guy was like, Oh, guys, I'm only making, I've got this GPU, which is the exact GPU I had, because I was trying to troubleshoot that one GPU.
He's like, Oh, there's one, I'm only getting one Bitcoin a day.
What am I doing wrong?
One Bitcoin a day.
Yeah.
And, and, and, And at that time, that would have been a fantastic return because Bitcoin was, when I was reading it, Bitcoin was like $200.
And so that would have been like $200 a day off that one little GPU if you'd held anyhow.
So Bitcoin right now is, you said at about $11,000.
Yeah.
That's right.
How much, how could I mine enough to make one Bitcoin in a day?
Well, the way, I told you the block, there's the block reward.
Yeah.
Right?
It rewards out.
Now it's for completing a block, so so we've had, every four years it cuts in half.
So it started at 50.
Then four years after it started, it went to 12 and a half, and then just recently it went to sorry sorry, 25.
I went to 25 and then it went the third happening it went to 12 and a half and just recently it went to 6.25.
And this is how the 6.25 what bitcoins per block okay, rewarded it cuts itself in half every four years and that's how it's going to go to zero in the future.
Pooling for Regular Returns00:14:33
That's the mechanism.
Oh, okay.
Sorry, I didn't really.
I get it now.
That's all right.
This is the largest audience I've ever confused.
Hopefully.
Yeah.
So what was the question?
Oh, you own my Bitcoin.
Yeah, so how can I, yeah, how can you mine it?
So now it's down to six and a half Bitcoin per block.
Per block.
What people realized, and this happened really early in Bitcoin, like back even when CPUs and GPUs were used to mine it.
So, if you were going to buy some hardware to mine Bitcoin, you could set it to mine Bitcoin called solo mining, where you're just looking, you're just playing with everybody else trying to find on the chain.
And maybe you'd get lucky and you get 50 Bitcoin, but it would take, you know, it's all about statistics and averages, or not statistics, but how plausible it is you'll find.
It's like playing blackjack or something.
Well, yeah, but it could.
So, you could run your machine, you could get the 50 Bitcoins.
Or the 25 bitcoins are now the 6.25 bitcoins.
But it could take you like three years or something of mining.
Or what people have done is they join pools.
So they pool their power, their mining power into this pool.
And then the pool is much more, because it has a huge amount of mining power.
If you just have like one miner or something, you can link up with the pool.
And the pool has a huge amount of mining power.
So they find a couple of blocks a day.
Oh, wow.
Right?
And then what they do is they divvy it up.
Okay.
To all the, you know, depending on how much you contributed to the miners.
I did in the past, yeah.
Okay.
I always did pool mining.
Why'd you stop?
Because, well, I stopped mining seriously in 2015 or 14.
The prices of everything, you know, Bitcoin went up to $1,300 in 2013, and then it crashed back down to like $600 by the.
By January 2014 or February, something like that.
And then it actually eventually made its way back down to, I think, almost 200 or 250, something like that.
And during that time, it was just not profitable to mine.
Like, you spent more on power and being a pain.
Also, I had it at a friend's warehouse and he ended up not being able to do it there anymore.
So, yeah, isn't it scary, especially pooling?
Like, if you're talking about pooling and joining other people's power grid and having to watch people with their processors that are mining Bitcoin, I mean, you got to be pretty scared.
You know, that place has to be pretty secure.
Well, no, no.
The thing is, you don't need to pool with people in a physical location, you pool with them wherever they are.
So, you can be alone in your dorm room and you can join a pool.
Oh.
And so.
They're all just basically what it'll do is it'll so when you're searching for the needle in the haystack, you know, what they'll do is they'll say, Okay, I've got this giant stack.
All right, here, you take this clump of hay, you take this clump of hay, you look through that, you look this clump of hay, okay, I get it, you look through this clump of hay, right?
And they can divvy that out over the internet, right?
So, um, but there are huge facilities that like you talked about the one in Iceland where, and there's a ton of them in China where they, um, They just go through the, you know, they have these giant facilities.
And so, yeah, securities probably need to, although really, if you break in there, all you're going to really be able to get is you're not going to be able to get at the Bitcoin, you know, like, right.
It's just a bunch of hardware.
But if someone wants to, they could just go fucking take a baseball bat and break all your computers.
And yeah, they could do that.
So, yeah, pooling, so pooling allows small operators to get like a regular return, you know, instead of like if you buy a piece of hardware, To mine Bitcoin and you hook it up as a solo miner, you'd be like, well, maybe I'll get 6.25 Bitcoins, but it might take two years for me to find that.
Or you could say, I'm going to hook up to a pool where they're regularly finding blocks and then they're going to divvy up, you know, depending on how many stacks of hay you looked at, they'll give you your proportionate share of that block plus a fee, you know, for them running the pool.
Right.
Maybe you'll get the same amount.
Maybe you get 6.25 Bitcoin in two years over the course of you running it.
But you're getting it in a steady stream instead of just, oh, wow, I found a block all at once.
So when did you say it stops again?
I think it's 2130.
2130.
So today is 2020 today, and we're already at 18 million, I think, of the 21 million Bitcoins of the 21.
Yeah.
So it's.
It's going to get a less and less amount, you know, as like it's a really like winnowing down.
It's probably going to be way earlier.
Well, no, it'll be that.
It'll be 2130.
But by then, you know, what's funny is it's actually worked that the value has kept up with the halvenings, you know.
So, like, at every halvening, it's kind of like basically the miners' profitability is cut in half overnight.
But on the long run, The price has managed to keep up pretty well as far as, you know, so even in, you know, 21, 30 or whatever, when people are mining some fraction of, you know, like one Bitcoin every block, you know, like 0.05 Bitcoin per block or whatever it is, you know, that 0.05 Bitcoin may be worth.
How do they convert that number?
Why that number though?
I don't get it.
21.
21 million?
Yeah.
You know, I think Satoshi talked about it somewhere.
There's a really cool book called The Book of Satoshi that's all of his writings.
Anybody's been able to really find, like so online or whatever, and they compiled them into a book called The Book of Stoji.
And I think he may have talked about why he picked 21 million.
I think it was just like an equation he did that basically, you know, because people think, you know, hey, what if the global economy is running on Bitcoin?
Remember we talked about divisibility being a fundamental thing of money?
Mm-hmm.
There's more than 21 people in the world.
So, you know, does that mean it's going to be too scarce?
Like, are people going to be 21 million people?
Yeah, there's, you know, seven, eight billion.
Right.
Exactly.
So that's not enough for everybody to have one Bitcoin.
So, but Bitcoin's divisible by eight.
Decimal points.
So it's so of the 21 million, it's that many times, you know.
So the amount of units can be chopped up into is eight billions.
Oh, oh, yeah.
Once you okay, yeah, it may even be trillions.
One bitcoin you can divide eight times.
No, you can divide it to the eighth decimal place, eighth decimal place.
Okay, so it's it's real small.
I've never done the math on it, but right, okay, so you can have a lot of Bitcoin units.
So even if Bitcoin was worth like a million dollars.
Theoretically, the unit of Bitcoin is they've called it the Satoshi.
So that's like 0.0000001 Bitcoin is one Satoshi.
So I think I did the math once where even if Bitcoin was a million dollars, one Satoshi is still worth $5.
So you can buy coffee with it.
Wow.
So I think you just did some math like, okay, 21 million is a good number.
It's divisible.
When you divide it up, eight by to the eighth decimal place, it's plenty of currency to go around uh, and be used around the world practically for for things.
But um, and these, these apps that you use on your phone to buy stuff, do they do the math for you, like?
Do they automatically like wallets?
Like yeah, like the wallet, whatever?
Yeah, however you transact on your phone yeah yeah, they they'll they.
They usually keep up with some exchange rate okay, or something, and so you can either enter us dollar amount or the bitcoin amount, however you want to do it.
Okay, so now, when we were talking about those alt Coins like Litecoin or Ethereum or whatever.
What did the Winklevoss twins, the two Facebook twins, when they first got into Bitcoin, is that what they started doing?
Was developing their own alt coin or did they just invest a bunch of money into Bitcoin?
And they, what they did is they, I don't know their thought processes when they got in exactly, but they saw it as something very promising.
And so they, when they got their settlement from Facebook, You know, they had a fair amount of capital to play with.
What they started doing is they started investing in early Bitcoin companies that were dealing with Bitcoin.
So they were angel investors for a couple of companies, I think.
And then they bought a ton of it.
And they bought it at like, I don't know how much, I don't know what their cost basis per coin was, but it's low.
It was probably below $100 per coin.
And they put millions and millions into it.
So they're worth a lot of money.
What were the companies doing that they were investing in, the Bitcoin companies?
The one I know about, I'm pretty sure about this.
I'm not.
Isn't it called Libra or something?
No, that was Facebook's.
Oh, yeah.
Zuckerberg tried to make a competing one.
That's an interesting story, too.
Everything's a rabbit hole in crypto.
So that's why it's so hard to talk about.
So the Wink of Us, I believe they invested in BitInstant, which was you could buy Bitcoin with a credit card over their website.
The founder, one of the founders of that, Charlie Shrem.
He actually lives in this area.
We should get him on.
He lives around here.
What's his name?
Charlie Shrem.
Charlie Shrem.
But he ended up being kind of made an example of.
He actually went to jail for a couple years for some stuff involved, but BitInstant basically ended up failing.
But the Winkle Boss still didn't keep them from owning, they own a ton of Bitcoin.
I don't know what it is, how much it is, but they've definitely got billions of dollars in, I think, Bitcoin at this point.
Is Charlie the guy who was running Silk Road?
No.
Oh, okay.
That was Ross Ulbricht.
Ross Ulbricht.
Allegedly.
Right.
Allegedly.
Okay.
Is that the guy you were telling me about?
Who, yeah, we were talking about on the phone.
I think so.
What's his story?
So he was in like a library or something.
Yes, that was crazy.
So the Silk Road, there's been many aversions after him.
Yeah, because I guess it's a popular idea.
But basically, that's why Bitcoin has such a bad rap to it because people think about buying drugs or buying organs or buying whatever.
Whatever, yeah, human trafficking.
So basically, Ross andor people around Ross or a group of people built this thing in 2000.
Probably 11 or 10, maybe 2010.
Yeah, no, no, it's probably 2011 or 12.
They built this thing called the Silk Road, it ran on the dark web, right?
Which is sort of an area of the internet that you can't really access unless you know how to get there.
But it was basically eBay for, but you use Bitcoin and you could list anything on there.
So while one could easily sell shirts or Tchotchkes or knitted sweaters.
I'd say that there was a large amount of drug sales on the Silk Road.
And it was brought to the attention of some political folks.
I think the famous video was like Chuck Schumer, who was like looking at it.
It was like a news story, and Chuck Schumer was like scrolling.
He's like, oh my God, you can buy anything on here.
And that's when they exploded.
Like, that's when it became like that was like huge advertising for them.
People were like, oh, wait, I can do what?
Yeah.
So, yeah, they went on.
Silk Road, and you could buy basically you'd pay for it with Bitcoin and then it would get mailed to you, you know.
So just like eBay, except for you know anything, anything basically, it was free market, right?
And so Ross was kind of, and there's no way of tracking you when you buy it with Bitcoin, right?
There's no way anyone can find out it was you.
Well, unless you're like an extreme hacker, no, it's that's part of the so.
Bitcoin is this is a little tiny rabbit hole here.
Bitcoin is what we call pseudonymous, it's not anonymous, okay?
So Basically, you have an address that you're given, right?
Or that your wallet creates.
And it's just like a long string of characters, right?
It's like, I don't know how many, 36 digits long or something like that.
And it just looks like gobbledygook.
But that's your address.
And so the way Bitcoin forms consensus, which is another big innovation of Bitcoin, is the ledger.
So it's like if you have your money in a bank, right?
The bank has, you know, let's just imagine it's the olden days, and they ascribe, says, Okay, you came by and you deposited $10 in the bank.
And so they make an entry in their little ledger, says, Okay, this account, this person's account plus $10.
Then you come out next day and you withdraw five.
Okay, this person's account minus $5.
That's how, you know, all the banks in the world do it.
There's some guy.
And so if you come and you try to withdraw $15, so you only have 10 in, they say, Oh, no, you don't have enough.
So, we can't give you $15 because you only have 10 in there or 5 left, whatever.
So, the way that Bitcoin solves this sort of problem of seeing who owns what, which is a big problem that they solve, is the ledger for Bitcoin is public.
So, you can go and you can look on the Bitcoin blockchain.
Tracking Addresses on Blockchain00:02:18
There's like websites called Block Explorers.
That basically will check all these transactions that the miners have written into the blockchain.
And they'll, they can, if you put in an address, you can see all the transactions that have ever happened for that address.
Really?
But how do you know who owns that address?
I don't necessarily.
But if you can map a person to an address, like if I send you a Bitcoin address to pay me for something, right?
Then you know, hey, that address belongs to Rich.
And then you can go to Blocket Spore and you can see my entire history for that.
Address.
And then, so the various authorities andor companies, organizations have actually gotten very good at this sort of blockchain analysis stuff.
There's lots of tricks they can use.
And so, this is actually something that's because remember, the cypherpunks were all about privacy.
So, at the time, it was thought to be when Bitcoin came out, people said it's private, you know, and it was more or less.
It's kind of anonymous.
But with the tools that have come out now, that's actually becoming.
More of a problem where people can kind of figure out who's doing what on the blockchain through some complex analytics and stuff like that.
There's like actually, not too long ago, the IRS put out a job posting basically asking for people who are experts in blockchain analysis to reply.
Yeah, because they're very interested in stuff too.
Because if people are making money on Bitcoin, they want to know.
We want you to pay tax on that shit, right?
Exactly.
Okay.
So, uh, The original question, though, yeah, I want to hear about how this guy got the guy who started Silk Road and how he got busted and what's going on with him.
So, he, um, uh, I forget how I was tying all that in, but yeah, so basically, he built this, he built like an eBay where you can buy anything you want, and people didn't like it.
Well, no, people loved it, the government didn't like it.
The government, um, so the FBI started investigating and figured out, and actually, part of the, I think, one of the ways that they were able to track it to him is he had posted a Bitcoin address at some point.
In a forum for somebody to send money to him.
The Dread Pirate Roberts Case00:14:37
And he went by the handle Dread Pirate Roberts, DPR.
And so they were able to link that address to one of the Silk Road addresses and then to that username, and then just had to figure out who that username was.
And a lot of people speculate that he may have not been.
Like the only guy running, but he was just maybe an admin or something.
He definitely was involved as far as we can tell.
But he, so they figured out who he was, and yeah, they did a sting operation on him, and they did it in a public library.
He would go to a public library to work.
And so the big thing when you're dealing with somebody who's trying to investigate or get their, you know, any encrypting evidence that may be on their computer, right?
But he's a, Fairly knowledgeable crypto security guy.
So, like a lot of, if you're in a position like him where he may or may not be like favorable to the government, under an investigation or something, you might like have a thing where if you do a certain key press on your computer, it encrypts your whole computer.
Or if you close your lid, you know, it's encrypted and like it's locked so they can't get into it.
So, they set up this thing where this male and female FBI agent pretended to get into a fight.
In the library.
They were right near him.
And the fight escalated to a point where he felt like he needed to get involved.
So, what he did is he sat his laptop down open and stood up to go approach them or something.
And that's the moment where they basically pounced.
And the dude moved to restrain him.
And then the girl went and threw this thumb drive thing in his computer that would keep it from shutting down and start downloading everything off of it.
What?
Yeah.
They have these little, it's like a little, it's just like a little.
It's like a thumb drive that just sucks everything out of the computer.
Yeah, basically.
And he doesn't have any kind of.
And it's also got like a mouse wiggler in it.
So basically, like if, so it won't let the laptop go idle.
You just keep wiggling the mouse or something.
So it keeps.
And then they, so yeah, they got him and then they leveled all these crazy charges on him.
To this day, when I talk to people about Ross Ulberg, they're like, oh yeah, isn't that a guy that did murder for hire on the Silk Road?
There was a murder for hire charge placed on him as this long list of charges.
And one of them was murder for hire.
And that's the one that made all the headlines that he basically was trying to have somebody off and pay them in Bitcoin, you know, and this thing.
But before the trial even started, that was completely dropped.
It was completely baseless.
No basis in fact whatsoever.
But it's enough to like.
Why did they come up with that?
Why did they say that?
To smear him.
Really?
Yeah, I think so.
Nobody tried to pay somebody on Silk Road as a hitman.
There's the old saying that a lie can go around the world twice before the truth gets its shoes on.
That's fun.
So the redaction of that or the fact that those charges are dropped isn't news.
But the charges themselves are good news.
You know what I mean?
Like posting that this kid was doing murder for hire stuff.
You know, makes sell newspapers, but like saying, oh, that was retracted like a year later or doesn't.
But either way, they what they got him for.
Well, maybe they said that maybe they said that like somebody did like on Silk Road tried to hire a hitman to commit a murder on his platform.
No, they said so therefore he's guilty.
They said that he did it himself.
That was the that was the implication was he did it himself.
Okay, but do you know?
Do you know if that was something that happened on Silk Road?
I don't think it did happen on Silk Road.
No, it's not really.
Uh, like, uh, I don't know how you would advertise like murder.
I mean, would you just say, I don't know if you put up a posting like, hey, I'll kill people for you?
I don't, I don't, enforcer or like, I don't think, I think they did have, I think they did have terms of service.
I'm not an expert on it, but I think they did have terms of service.
I'm pretty sure that would have been outside and they might have flagged it or something.
Yeah, might have flagged it.
Okay.
So I don't, I don't think that actually was happening on Silk Road.
And, uh, he definitely was not involved in it personally.
So, but that.
That kind of helped soil his reputation, though.
And then, I mean, basically, he was made an example of, I think.
They hit him with like kingpin charges for all the drug stuff.
It resulted in the arrests of a bunch of people who were actually dealing drugs because they were able to tie their addresses to them personally through like chain analysis or something.
They made missteps somewhere along the way to compromise their identities on the blockchain.
And they so they made several arrests on the.
Of actual drug dealers, but to my knowledge, I don't think Ross ever dealt any drugs.
He just ran the platform, you know?
Right.
And what he made, he hit like a middleman fee on transactions.
Yeah, he hit a middleman fee.
And he was also the escrow agent.
So, like, now if you send money to somebody, you have PayPal, right?
And PayPal basically kind of holds the money until you transfer it.
And then make sure that you send the goods, right?
So they would act as like, An escrow agent.
So the Bitcoin, they would hold the Bitcoin and then release it once it was delivered safely.
So actually, they were holding a lot of Bitcoin when it was seized.
So a lot of people who were using the platform lost a lot of Bitcoin to the government.
And they, I guess, were able to, I don't know if it was on his laptop or via his laptop, they were able to get access to other servers.
But it was a lot of Bitcoin.
It was like 600,000 Bitcoin or 60,000, something like that Bitcoin.
That was on there.
It was millions of dollars.
And they sent it out in increments that I don't know what it is on the phone, but if you know on a Touchstone phone, you got the numbers that line up with the letters that line up.
Like in the old days, if you wanted to text, you'd do like, you know, like two, let's see, like so.
I can't do it in my head, but like, you know, two, one, three would spell a word.
It's like each letter had three, each number had three letters attached to it.
Like five, eight, oh, oh, eight upside down is boobs.
No, not like that.
Like, oh.
Anyhow, it was, I think it was like, let's see, one is ABC, two is on a touchstone phone, two is.
Oh, I see your hand.
Right, I see your hand.
Okay, so it was, yeah, I want to say it was, it was two, one, they sent it out in increments that was two, one, three or four, two, one, four, and it was the FBI.
Like if you typed it into a phone, it'd be FBI.
And so they sent it out of the, Ross Ulbricht's wallet in those increments that made FBI.
So it was like 100 transactions of that amount to different wallets.
And then the government auctioned him off a couple years later.
Really?
Yeah.
Do you know what the current status of his case is?
Yeah, it's pretty sad.
So he got, like I said, leveled.
He had kingpin charges put on him.
So he was a drug kingpin.
And he got a double life sentence.
So he's in jail forever.
They've appealed it.
A double life sentence.
Double life sentence, yeah.
For running a website where people can sell drugs.
I think he was like 25 or 26 when this all happened.
So, yeah, so he's got a double life sentence.
His mom, who's a great person, her name's Lynn.
If you go to freeross.org, you can find a bunch of information about him and his case.
She runs freeross.org.
She's spoken in my meetup before a couple years ago.
And.
You know, she basically, I mean, she's his mom, so of course, but she talks about they've done, they've appealed it all the way to the Supreme Court.
And basically, his only hope now is a presidential pardon.
Really?
That's all he's got left.
Yeah, it's a presidential pardon.
So, Free Ross.org, they're trying to do petitions and stuff to.
How old was he when he went in?
What's that?
How old was he when he went into prison?
In his 20s.
God.
Yeah, I'm pretty sure.
He was like 25, 26, something like that.
You know, a couple years out of college.
And, you know, she says he was just an idealistic kid.
You know, he just wanted to create this marketplace to facilitate.
Trade and whatever.
He wasn't like trying to be a drug kingpin or ruin people's lives or anything like that.
But yeah, that's what you get for building certain websites is double life sentences.
So it's pretty bad.
So yeah.
But there's more Silk Road.
Like there's more.
Go ahead.
What were you saying?
I was going to say, anybody listening, go to freeross.org and check out his story and what you can do to help.
Yeah.
Now, aren't there other websites like Silk Road out there now?
Yeah.
Like dark web style websites where you can buy stuff.
Yeah, it's like Silk Road went down.
Somebody built another one.
Right.
And that one scammed everybody.
Like the second one that was built, once they got to a certain critical mass, because they were acting as an escrow agent as well.
So instead of the FBI stealing all their money, stealing all the users' money like the original Silk Road, this guy just, once he got to a certain amount of Bitcoin that he had, he just shut everything down and took the money and ran.
But yeah, since then, there have been tons of people that make different.
I mean, it's just.
It was a good idea or a popular idea.
It got a lot of traction.
And you think about it, you know, if you're into doing drugs or whatever, it's a pretty safe way of acquiring.
I know that there's, I mean, I had a friend of mine in college who he got like carjacked and beat up once just trying to get some drugs from some neighborhood once.
Oh, you mean like on the streets?
Yeah, he went to the wrong neighborhood and they stole his car.
I had his guitar, his civic guitar in the back seat.
Yeah.
Stole his car and beat him up.
God damn, dude.
And he was just trying to buy some weed, I think.
What?
Where was he?
It was in Augusta, Georgia.
Okay.
Yeah.
So it's dangerous.
I mean, it's for all parties involved, you know, just paying some money and getting it in the mail.
If it's just something you're, you know, it's just for your own recreational purposes and whatever, and, you know, it's your body, you can screw it up however you want or become enlightened however you look at it.
Yeah.
Right.
They see the legalized drugs, man.
It makes everything so much better.
All drugs.
Yeah.
Yeah, I mean, the war on drugs has been pretty terrible for our country and the world.
Like, it's definitely failed.
And definitely the biggest hoax ever.
Well, and it's the biggest overreach.
I mean, I've had my car searched at least two times just based on one was when I was a teenager and the cop was like, hey, you know, can we search your car?
And I was an idiot.
And I was like, yeah, sure, I don't care.
And I mean, because I knew there was nothing in there.
Mm hmm.
But my dad's car before it was mine.
Oh, shit.
He found some like pill bottles for my dad's prescription.
What are these?
And I was like, I don't know, man.
Like, you know, it's just my dad's.
It had my name.
He's the same name as mine.
So I put my name on it.
And I was like, I don't know, man.
There's my dad.
It's like, still, he was trying, you know, they're trying to find something.
And then the second time was maybe five, six years ago.
Yeah.
And then I was smarter and I was like, no, you can't search my vehicle.
And next thing I know, they had a dog there.
And they told me that the dog had alerted to my vehicle and then the dog was in my car.
And I was like, Yeah.
Well, that's happened to me multiple times on the way to back and forth from Miami and the Keys.
Really?
Yeah, on Alligator Alley.
There's a road that I don't know if you're very familiar with, like South Florida, but there's a.
There's this long stretch of road that goes from the west coast of Florida to the east coast of Florida, like down low, and that's where a lot of the drug traffickers are notorious for traveling right and smuggling shit.
And I, when I was younger, I got pulled over almost every time that I drove down that road.
Get my car completely strip searched, everything right, even if you said no, but that's a wormhole to, that's a whole I mean, that's a whole other rabbit hole.
We could go down to the war on drugs.
But I get in a lot of arguments with my wife about politics and You know, like the unfairness of our society in a lot of ways.
Yeah.
And really, I think that it's, I mean, a lot of it orbits right around that, this whole criminalization of drugs and what people want to do with their own bodies.
Right.
And, and the, I mean, luckily we're in a time where like weed is becoming, you know, marijuana is becoming legal in most places.
Yeah.
Especially for, I mean, it's even legal in Georgia for medical use.
Medical marijuana is legal as far as I know, CBD is legal in Georgia.
And we're not exactly known for being a progressive state.
Not at all.
So, I mean, I think that putting people in prison for nonviolent things is.
I mean, even Trump did something a couple years ago where he rolled out some forgiveness program for people with nonviolent drug offenses and stuff like that.
Because, I mean, you ruin people's lives.
Actually, funny enough, I was just at.
A diner before I came here, and I was talking to this guy there.
He's older now, he's probably in the late 50s.
But he said that he'd gone to jail for four years in the 90s for dealing cocaine.
Arrest Proof Yourself Strategy00:03:26
Really?
Yeah, he's like, you know, it's part of my story now.
It's fine.
He's a successful guy now.
You know, he came out and he's doing fine.
But, you know, it just drags so many people into it that really, you know, otherwise be productive members of society.
Yeah, you get sucked into that system, that criminal justice system that.
It's just the vicious cycles.
Yeah, I mean, I've talked about it.
You can't escape it, and it's slavery is what it is.
I mean, it's literally just like modern day slavery.
Yeah, well, I don't know if they're out doing work in the fields, but I know.
Right, but they work for those prisons.
The people in those prisons, they do a shitload of work, and they make, I forget what the number is, but they make those federal prisons get paid a certain amount of money per inmate per day.
Right, it definitely feeds the bureaucracy.
Right.
And, yeah, so there's a.
I recommend a book.
I forget the author's name, but he's from Florida.
It's called Arrest Proof Yourself.
I would definitely read that book.
Arrest Proof Yourself.
Interesting.
Yeah, it's a good book.
It's on Audible, so you can listen to it while you're driving to the Keys.
Okay.
Yeah, I haven't driven there in a while, but that's a good one.
I'll have to check that one out.
I just read that recently.
It's really good.
But it talks about, he calls it the Electronic Plantation, which is basically what he calls the NCIC National Arrest Proof.
Records.
Basically, even if you're arrested in this country now, it goes into the NCIC database.
Even if everything's dropped, even if you get paid by the state because it was all done improperly and you're innocent, just having that arrest record can really screw up your life.
And he goes through all kinds of examples of how that is.
Really?
Yeah.
You said he's in Florida?
Yeah, he lives in Florida.
I forget his name.
But he wrote it like 10 years ago, but it's still an interesting book.
So, yeah, arrest proof yourself.
But it just kind of goes into.
How corrupt and how incentivized, how arrest happy our nation is.
And then when you combine that with the war on drugs, where you can get people to go into jail for just having possession of something, I mean, if we could get rid of that one, if I could snap my fingers and say there's one thing to get rid of in this country, I think even ahead of the whole fiat money system,
the Federal Reserve system where our money is backed by nothing.
I would probably just get rid of the war on drugs.
I think that would help.
There's a country, I can't remember, I can never remember exactly what country it is, but there's a country that actually made all like the hardcore drugs legal.
And if you're a heroin addict, you can actually go into a clinic and have a conversation with a doctor who can like talk to you about what the effects of them are.
And if you want to safely take your heroin, they'll give you a fucking syringe.
I think it's like Spain or something like that.
It's not Spain.
Maybe it is, I don't know.
I don't know.
It is some, yeah, I've heard that same thing.
But they've seen a huge drop in crime, like a massive.
Right.
Their crime rate is extremely low because of that.
When you treat it like a disease instead of making them a criminal, you help a lot of things.
Mt Gox Exchange Collapse00:14:47
I mean, a lot of people are just self medicating themselves for pain and suffering and whatever, you know.
And so, like.
Especially here, right?
Especially in this country.
A lot of people are unhappy.
Yeah, I guess so.
We got the opioid crisis or whatever.
But.
Yeah, I don't know, man.
I think that's a.
But like I was saying, the Silk Road, it just provided a safer way.
I mean, it's happening anyway.
I mean, people are going to go find this stuff if they want it.
It's a safer way to do it.
It's a safer way to do it, in my opinion.
So, I mean, it's to a degree charitable.
And I've talked to people, I've had some conversations with people, not many, that have used those types of things on both sides of the transaction.
And they were just like, yeah, man, it's just night and day.
They liked it?
Oh, yeah.
I mean, just because of the safety and the ease of it.
And yeah, so.
So what's the best way for me to start investing in Bitcoin?
Do I use one of these altcoins like Litecoin or Ethereum?
Well, there's literally thousands and thousands of altcoins now.
Right.
And they're all just, so what's the difference between most of these altcoins and the original Bitcoin?
They all have various.
Some of them, like Litecoin, I told you about, they were just like, they even dubbed themselves when they came out, like, Bitcoin is gold and will be silver.
They had a faster block time.
There's going to be more of them emitted in the end because of that faster block time, I'm pretty sure.
And, um, but literally it was just a copy and paste of the code.
There's no new functionality.
Just trying to rebrand it and make money.
And it worked out.
And it's still a fairly valuable coin, you know, despite.
What is so stupid?
So then there's a lot of other ones, though, that, um, The ad functionality of some kind.
So there's a lot of experimentation happening.
So Ethereum.
Yeah, this kid Vitalik, right?
He's getting flown.
He's meeting with Vladimir Putin and the Kremlin, and he's all over.
Like, what's so special about this kid?
I think he's Canadian, and he is, but he's a Russian son of Russian immigrants.
He's a scary looking kid.
He's funny.
There's lots of really funny memes of him.
I bet.
Vitalik laughing.
It's a famous meme.
Vitalik laughing.
Anyhow, I've met him.
In 2014, at a conference before Ethereum launched, and he was just a kid that was writing for Bitcoin.
Was it Bitcoin Magazine?
Yeah, Bitcoin Magazine.
He was just doing some writing for them and he was super interested in Bitcoin.
He was a programmer.
And I mean, at the time, he couldn't have been over 20 years old.
And so, yeah, he just, I think he actually was trying to pitch some of his ideas to the Bitcoin sort of core developing team, the guys who kind of maintain Bitcoin.
But in the end, he just ended up launching Ethereum and it's basically a smart.
It's called a smart contracts platform.
So it just adds a bunch of that's what Ethereum is?
Yeah, it adds a bunch of sort of a code layer on top of the currency.
And actually, he never really envisioned, according to him, he never envisioned Ethereum itself being like a currency.
It's just the token that everything runs on all these smart contracts.
So smart contracts can do things like basically, instead of Bitcoin where you just, okay, I want to send it to you, I'm going to send it to you now.
Okay, did you get it?
Yes, I got it.
Bitcoin can do some other things and it can actually do smart contracts too.
It just hasn't really been built out.
But instead of that, you can make a lot more complicated things happen on Ethereum.
Like you can make a smart contract that, say, if you put your coins in it, it'll send them out to everybody in three weeks or something.
It'll send them out to these four people or something like that.
Or if you want to have a job done or something, you could send it to a smart contract and once you You know, that way the guy doing the job knows that the funds are there and locked in the smart contract.
And then maybe once you guys both agree that everything's done to satisfaction, then the funds get dispersed to whoever needs them.
And then there's lots of more complicated use cases.
But one of the main ones that's happening right now, like as we speak, that's kind of a big deal.
You asked me, Where can you get Bitcoin?
Okay, where can you get this?
That was your initial question.
So the answer to that a year ago, well, the answer to that now is still there's centralized exchanges.
So, there's people who have set up services like the one I told you about earlier, BitInstant, where you just buy Bitcoin with a credit card.
One of the earliest ones, well, the earliest one, I think, was one called MTGox, which stands for Magic the Gathering Online Exchange.
Oh, yeah, I've heard of that one.
It was basically eBay, it was based in Japan for trading magic cards, which is like a card game.
Yeah, I know magic.
Yeah.
So.
So they had this marketplace kind of thing.
And the owner of the guy that bought it, it was this French guy.
What was his name?
Wow, I can't believe I forgot his name.
Anyhow, he bought it and decided that he wanted to add a Bitcoin market.
Like, okay, you can buy Bitcoins here.
And so he just put a thing up where they were selling Bitcoins because I guess he was mining them or whatever.
And it became like a huge thing.
And then they ditched the.
They were still called Mt. Gox or Mt. Gox.
They ditched the card trading thing altogether.
It was gone.
They just became a Bitcoin exchange.
Really?
So you could wire them money and then they would send you Bitcoin or ACH money to them.
And there were no restrictions, pretty much whatsoever.
But they went down in 2014, kind of epically.
How did they go down?
I think it was a hack.
It could have been an inside job.
It's still under investigation.
Oh, and they lose like millions and millions of dollars.
Yeah, lots.
Lots of money.
It was in.
It happened sometime in early 2014.
Their website went down.
What happened first?
They'd have a bunch of scares, first of all.
It wasn't very well run.
So they'd have a bunch of problems for like ever with scaling to meet this huge demand that was coming in.
And so they'd have problems.
And they usually had fixed them.
And they had like a big lead in the whole kind of network effect.
Like they were the big name.
And yeah, then one day, I think in like January, February of 2013, they stopped doing.
Bitcoin withdrawals.
So they suspended with Bitcoin withdrawals.
And people were like, whoa, what's going on with that?
And then their website was still up, so people could still log in and you could actually trade Bitcoin between users still.
And so this one guy had this brilliant idea.
It was really brilliant.
He made another exchange.
He called it BitcoinBuilder.com.
And so he was like, okay, if you send me your coins on Mt. Gox, I'll credit you on my website.
And you can exchange your Mt. Gox coins for real Bitcoin for people who want to deposit and buy.
So it's a way for basically people to speculate on whether they thought Mt. Gox would come online again or not, which I actually partook in and lost money.
Really?
I know some people lost a lot of money doing that though.
So yeah, it was dumb of me.
But so yeah, basically I went on and bought, I sent Bitcoin to this guy, BitcoinBuilder.com, and I bought.
So if I had sent one Bitcoin in there or something, I could buy like four Gox coins, right?
Because.
So, if Mt. Gox just was like, okay, everything's fine, bam, I would have had four Bitcoin basically that I could have withdrawn.
But of course, that's not what happened.
They went down.
One day their website went down, and it came out later that they were hacked.
And then there was another exchange implicated that went down a couple years later called BTC E.
They were a Russian exchange.
And the FBI took them down somehow.
I don't know.
But they said they were implicated actually in the Mt. Gox hack.
So, I think Mt. Gox, that's still like the people who have like bankruptcy claims against. Mt. Gox because they filed bankruptcy.
So anybody who had coins there could maybe get something back through the bankruptcy process.
It's still ongoing as far as I know.
What happened to all those coins that got stolen?
They went out and got laundered in various places.
I think BTC-E was involved in that somehow.
But again, you can kind of track them.
Theoretically, you can track them.
But I'm not sure if.
Since it's all under investigation, I'm not sure if any of that has been made public, what happened to them.
Oh, yeah, because you would think it would all be trackable, right?
You'd be able to figure out where everything went.
Right.
But I don't know.
I'm sure there are people that have gone down that rabbit hole.
I haven't particularly.
But that brings me to sort of another point, though.
There's a saying in crypto, since we're talking about exchanges and how to buy it, there's a lot of exchanges now in the US.
It's not like the old days, though, where you just send money and you get Bitcoin back.
It's pretty heavily regulated now.
Which has its good things and its bad things.
I'd say mostly bad.
But, you know, they have to verify who you are, follow all the sort of anti money laundering, know your customer laws.
The big ones are Coinbase and Gemini.
Of those two, I kind of like Gemini better.
Gemini, that's the Winklevoss.
Yes.
Winklevoss twins.
Winklevoss twins.
The Gemini twins, right?
Okay.
That's their exchange that they built.
And, but the thing is, when you hold, when a lot of people, And I know a lot of people who've been in Bitcoin for a long time, they still do this.
They leave their coins on the exchange, like in the exchange wallet.
And essentially, what you're doing then is you're holding your coins in somebody else's ledger, just like you have it in a bank.
Like if you have your money in your bank, if that bank becomes insolvent or something, there's FDIC insurance, which is another rabbit hole, to insure you.
But essentially, that money's gone if somebody, you know, if the bank becomes insolvent.
So when Mt. Gox became insolvent and went under and those coins got.
I mean, it was game over for I know people that lost hundreds of bitcoins on Mt. Gox and So it was it's just that it's just gone man, you know, it's a wild west, you know, yeah, and so Whenever you're sending them to these exchanges, you're you're you're taking your bitcoin, which is Kept track of on the bitcoin blockchain So that means you have an account balance on the bitcoin blockchain ledger, you know,
that's the one that I told you that's shared across all the computers and everything There's short of the entire internet shutting down, there's nothing that can really take or you losing your access to those by losing, like not taking care of your security well enough or losing your hard drive dies and you didn't have backups.
Short of that, there's nobody can take that money from you, those Bitcoin from you.
Nobody can go and seize them easily unless they physically take your computer and force you to send them out, you know.
But once you put them on a third party exchange, it's just an entry on their bank ledger.
They control the actual asset, the Bitcoin.
You don't control it anymore.
So if they go under, if they get hacked, whatever, your stuff's all at risk of that.
And they're pretty big.
A lot of these exchanges, they're pretty big honeypots.
Hackers are always trying to get into these exchange wallets.
They've gotten very good at securing the coins.
How the hell do you pay taxes on your Bitcoin?
If it is so volatile, the price goes up and down.
What if you would have bought it at like.
$10,000 and but in December it's worth 30 handles.
It is that if you it's just like any other investment, so the same thing with stocks like you can hold a stock and go up to 100 and then back down to what you bought it for.
You know it's they.
They count it whenever you convert it back to US dollars.
So that's the taxable event is when you convert it back to US dollars.
Yeah, so you can hold Bitcoin, you can buy it $100 and then it goes up to $1,300 and it goes back down to 200.
As long as you didn't sell in any point in there, there's no taxable event.
Okay.
So, but there's the crypto universe and taxation is a nightmare, frankly.
I bet.
Yeah, you'd have to get like a specialized accountant if you're doing anything crazy with crypto to deal with that.
But if you're just, you know, buying the coins and holding them, stuff like that, it's pretty straightforward, just like buying anything else and holding it.
Okay.
What kind of stuff are you doing in Atlanta?
You do a lot of conferences and stuff?
We do our normal Bitcoin meetup.
Of course, we haven't done, we did our first one since COVID hit last month.
But basically, we just kind of are topical.
We do something, like I think we're having done next week.
We're going to talk about Fedcoin, which is the Federal Reserve is actually going to be rolling out some interesting stuff next year, probably, that's kind of similar to its own version of Bitcoin.
Interesting.
Yeah, there's this law that got passed in March.
Anyhow, we're going to talk about that.
Usually it's something topical.
We get together at this co working space at an executive airport in Atlanta called Peach Duty Cab Airport at the Globe Hub.
And we usually have like barbecue and stuff.
And it's just more like a social club of people who are interested in Bitcoin and crypto.
So that's what we do there in Atlanta.
So it's bitcoinatlanta.org.
Okay.
Securing Wallets Best Practices00:03:05
And I do have a crypto consulting company called clarkcrypto.com.
Okay.
What's it called?
Clark Crypto.
My last name is Clark.
C L A R K. K E. Actually, but if you type either one in, you can get there.
Crypto Clark.
Or Clark Crypto.
You have both just in case they type it wrong.
All right, perfect.
So it's ClarkCrypto.com.
So, you know, I'll do consulting for anything as simple as, hey, can you help me buy some Bitcoin or help me navigate these exchanges or whatever, all the way up to like helping.
I know a lot of people in the business, so if I don't know the answer to your question, I can point you in the right direction.
So, legal consulting for like, if you want to launch like a token or something, we can help you with the tokenomics and the legal aspects of that, of doing a launch.
And securing your coins is a big thing I like to talk to people about because with great freedom, because you basically, Barack Obama actually gave us like the best line for Bitcoin.
He said, if the If the cryptography can't be broken, it's just like people running around with Swiss bank accounts in their pockets, which is what basically like what having a Bitcoin wallet is basically.
That's exactly right.
That's exactly what it is.
So, but you have to be able to secure them properly.
You just want to do some best practices type of things.
So, help people with that.
I also have a friend of mine who does wallet recovery.
You know, if you screw something up and you Think you lost your bitcoins, he can help you recover them.
Um, but yeah, I am, but there's a lot of great products coming out that are making it easier and easier to store your coins effectively.
This company, Edge, they're uh, they don't pay me or anything, I just am a big fan of them.
They have a wallet, they're out of California, the Edge wallet, and uh, I've known their founder since 2014, and uh, they they kind of try and straddle that line of.
You know, we want your grandma to be able to use this, but we also want to back it up and make it secure so you can.
And so I've done it where I've got a new phone or something, and I just go on and install the app, enter my username and password, and bam, it's all repopulated from their backups.
But they don't actually keep anything on their servers.
So even if they got raided or something, all the data they have, or if they got hacked, all the data they have on their wallets is all encrypted.
Your device.
Okay, so if you forget username password, it's compartmentalized.
Yeah so, so they never get any raw data on their end.
But yeah, if you remember username, your username and password, you can restore it on any device stuff like that so you can also buy cryptocurrency through their wallet too.
Inflation and Income Reality00:04:28
Oh really okay, they have us have a service now.
They just started a year or two ago, so sweet, I got to get on that.
Yeah well, I'll set you up with some.
I'll send you with some after this.
Hell yeah, let's do it man, But that's what I'm up to.
And I don't know.
I feel like we jumped around a lot.
I hope you guys got something out of it.
Yeah.
Well, I definitely did.
I definitely learned a lot.
It's a super fascinating subject.
And there's tons, like you said, tons of rabbit holes you can get lost down.
Right.
We should do it again.
Yeah, we will.
Try and do like a more linear progression through everything.
But yeah, the moral of the story is the takeaways inflation is a giant hidden tax on the world.
The governments of all the world governments use against their populace to basically.
We don't even need a tax system anymore.
They could just.
They could just print the money and through inflation do everything they wanted at this point.
Someday it'll fall apart, but until it does, it's.
God damn, can you imagine that day?
I don't want to, but I mean.
They don't want, I mean, they want to regulate it.
The thing is, they're very smart and they've got a lot of levers they can pull to keep things going.
But Bitcoin is like gold and silver, a hedge against.
Inflation, which inflation is, you know, they say like death and taxes.
Well, these days, death and inflation are like a sure thing.
So, because of the limited supply of Bitcoin, I think it's going to be a sink for a lot of US dollars that are printed out of thin air.
And I'm, you know, I'm a big anti war on drugs.
I'm a big anti war guy, though, too.
And so, Really, this whole notion of global war that we've seen World War I, World War II, and then this kind of whatever we have now, which is just wars going on all the time, the Middle East or whatever, they all couldn't be funded without this fiat money system where they can tax everybody stealthily through this hidden tax of inflation,
where gradually your savings are eroded.
And income never keeps up with it.
Like I was talking to the Uber driver last night.
Your income, you know, there's all this new money in the economy.
And yeah, but he gets paid the same.
He's not making, you know, Uber still pays him the same rates pretty much, maybe even less.
Right.
Because, you know, there's so many people driving Uber now, unemployment and all that stuff.
So the wages never quite keep up with inflation.
So even if like inflation is really like 4% a year, every year, let's just say, like, That's the inflation rate.
Well, most employers give like 3%, right?
But if you magnify that out over 40 years, right?
Where's that money go?
That's a 40% reduction in your salary.
Like, you know what I mean?
Oh, yeah.
There's a 1% difference there.
So inflation is 4%, but your salary only goes up 3%.
So there's a 1%.
But if you take that over a 40-year career, that means that if you're working kind of the same job for 40 years, which a lot of people do, on that 40th year when you retire, you're, as far as like keeping up with your expenses, you're 40%.
You're 40% less well off than when you started.
God damn.
That's dark.
Yeah.
But that's why all households, you know, it used to be in the 50s and 60s.
One dude could make money for his whole family and the wife could stay home with the kids or whatever.
But now everybody's, you know, two income family.
You have to have like a two income family to keep up most.
Yeah.
So sound money.
And Bitcoin are the answer to that.
End the wars.
If you want to end war and increase the living standard of more people in the world, buy Bitcoin.