Andreas Antonopoulos recounts his 2012 discovery of Satoshi Nakamoto's 2008 white paper, defining Bitcoin as the internet's decentralized money that deinstitutionalizes finance for the unbanked. He critiques fractional reserve banking as a fragile Ponzi scheme while arguing governments cannot ban this mathematical system, only impose taxes or create neutered CBDCs. Antonopoulos advises treating Bitcoin like cayenne pepper for diversification, noting its 21 million coin cap and halving events ensure radical democracy against arbitrary rule changes. Ultimately, he envisions a future where instant, irreversible global payments replace fragile fiat systems, serving as a vital lifeline for refugees and a cornerstone of open financial sovereignty. [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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Reading The Bitcoin White Paper00:06:25
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Hello, world.
Andreas Antonopoulos is probably the most qualified human being on this planet to speak about Bitcoin.
He is a best selling author, speaker, educator, and highly sought after expert in Bitcoin and open blockchain technologies.
He's known for making complex subjects easy to understand and highlighting both the positive and negative impacts these technologies have on our global societies.
He's very good at explaining a very complex topic like this to a dummy like myself, which I really can appreciate.
So, without further ado, please welcome the amazing Andreas Antonopoulos.
Let's do this.
Great.
Let's do it.
Andreas Antonopoulos.
Did I get it right?
That's correct.
Thank you so much for joining me, man.
I've heard a lot about you.
A lot of people have told me about you.
I have a very loose familiarity with Bitcoin and cryptocurrencies in general.
I just had a guy on here two weeks ago from the Atlanta area, Rich Clark, who sort of gave me a breakdown of it.
I watched a documentary.
But all that being said, I still don't believe I fully understand it.
I mean, yes, that's absolutely understandable.
So I'm thankful to have you on here.
So hopefully, maybe you can clear up some of that misunderstanding I have.
Let's see.
I'll do my best.
I appreciate that.
So, what would you say it is that you do in the crypto world?
What is your significance to the world of cryptocurrency and Bitcoin and blockchain and all of that?
I'm the explainer.
Okay.
It is as simple as that.
I try to take these complex topics and explain them in simple terms.
The majority of my career in technology, I have been focusing on education and trying to explain complex topics in easy to understand terms.
I am a computer scientist by training, so I am a technical expert, but I try to speak the language of the non technical expert.
And that's what I do for Bitcoin and for open blockchains in general.
I believe it came out in 2008.
Bitcoin did.
Is that right?
The paper was released October 2008, October 31st.
And the actual network started live January 3rd, 2009.
Yes.
Okay.
So when this first came out, where were you and what made you decide to jump into this?
So I missed the first two and a half years, approximately, of Bitcoin's life.
I was interested in digital currencies and the application of cryptography to things like that since the early 1990s.
But when Bitcoin came out, I didn't really pay attention to it or hear about it.
I seem to remember hearing about it sometime in 2011.
I dismissed it out of hand because what I read was about a gambling site.
I wasn't particularly interested in gambling, so I made assumptions and ignored it.
Then in 2012, I heard about it again.
This time, the article that I was reading had a link to the scientific white paper written by the inventor of Bitcoin, Satoshi Nakamoto.
I read that white paper and completely derailed my life, my career, and the next four months of my life.
I devoured everything I could find about Bitcoin, all of the information I could find.
I spent 16, 18 hours a day reading, writing, and coding.
And not eating or sleeping much.
That was a pretty good derailment.
First of all, where did you find this so called white paper by Satoshi Nakamoto?
You can find it on the website bitcoin.org, in PDF format, as it was published in October 2008.
The article I was reading was on a geek news site called slashdot.org.
It is an old style geek news media site.
It was about Bitcoin, but one of the links in the article was directly to the white paper.
When I read this, keep in mind, I was primed to get it.
I'd worked for two decades in information security, distributed systems, and network protocols.
As I started reading, I was like, this is not what I thought it was.
This is not just a system of money, some kind of token thing, a company.
This is a very sophisticated, elegantly designed distributed system.
It seems to have solved one of the main problems.
Problems in this field, which is how do you make it decentralized and prevent people from cheating?
And that just blew my mind because I knew that a lot of people were working on that problem.
So I was primed and it pushed all my buttons and I had that epiphany moment.
As far as like, I like to use the term elevator pitch.
If someone asks you, what is Bitcoin?
Do you have like a boiled down one sentence summary of what it is, your own version?
In its simplest form, Bitcoin is the money of the internet.
Once you understand that, the next step is to understand that it is more than that.
It is the internet of money.
Then it is even more than that as you keep digging.
Investment Or Ponzi Scheme00:10:55
It is not a company, it is not an organization.
It is a software system that runs in thousands of different computers simultaneously, where no one has direct control over it.
It is a collaborative, open system.
It provides a currency and a system of payment that exists entirely online.
Do you see anything happening in the near future that's going to tip the scale and make this a widely known thing that everybody uses?
I think it's important to understand that it's already being used in some places, under some circumstances, and for some applications.
This is a technology that solves very specific problems.
Not that many people have yet.
It offers a number of opportunities, and as it matures, that space expands.
Whether or not the financial institutions start using it or not, that is a bit like asking which phone company will start supporting faxes over the internet.
That is not the point.
Which horse carriage manufacturer will start using automobiles?
To do rides around Central Park.
This is a system that allows us to not have financial institutions.
It deinstitutionalizes finance.
Just like the internet deinstitutionalizes news, media, or entertainment.
Which record company is going to use the internet as its main distribution?
Kind of all of them, but that's irrelevant.
The whole point is that you don't need the record company.
When you have the internet.
In the same way, you don't need the financial institution to engage in the acts of finance.
Finance becomes an application, just like media distribution becomes an application.
There is no TV station company supporting what you're doing right now, because a TV station is no longer an institution.
It's an app you run on your desktop.
If you think of Bitcoin as that, as an app you run on your desktop that makes you the banker, Then the question, when will bankers use this? doesn't really make sense because they won't.
In fact, this kills banking, at least traditional consumer banking, retail banking, of the type of a checking account, a savings account, sending money from one friend to another.
There is no need to do that, any more than there is a need to print out a newspaper and distribute it in the era of the internet.
As for broad adoption, at the moment, In the Western developed world, Bitcoin doesn't really solve a problem for someone.
US dollars work, Visa cards work, and most people, and that's about 85% of the population, have access to these tools.
The issue is, there's 15% of the population, some 60 million people in fact, here in the US who have no access to banking.
As you go around the world, that percentage increases further and further.
There are some countries where 75% of the population have no access to any form of financial service.
The really interesting thing is what happens if, for them, it is not about access to banking, it is simply about putting an app on a very simple smartphone.
Suddenly, that person, no matter where they are, has the same level of access to financial services as a licensed broker dealer on Wall Street.
That is where things get really interesting.
It opens up the entire space of finance.
Democratize it and makes it available to anyone with access to a basic computing device and some basic data services anywhere on the planet without vetting, without authorization, without middlemen, without any kind of controls and restrictions.
That really changes the way we see finance around the world.
I guess my question is what is the incentive for an average, everyday blue collar person who has a nine to five job?
Or is self employed, makes a decent amount of money, maybe invests in the stock market a little bit.
What is the main incentive for somebody like that to get into Bitcoin or start investing into Bitcoin?
Well, if they're in the US and they have access to financial services, then really investment is correctly the only area that might have some interest to them.
What is the last thing you said?
Sorry?
Investment might be the only area they have interest in.
If you think of someone who doesn't have access to those things, simply the ability to send money across borders, to protect their wealth from inflation, those are other questions.
Let's take a blue-collar worker in Pennsylvania who has access to a simple checking account, maybe even has a 401k.
The real question is: what can they do with this?
The main thing they can do is have an alternative form of investment that does not behave like the other investments in their portfolio.
Right now, all of their investments are all US dollar denominated in the American stock market.
They are all responding to the same kind of signals.
They are all very traditional, and they are all responding to the same signals.
Nowadays, how much stimulus is the Federal Reserve doing?
Lots?
Great.
Not so much?
Not so good.
It doesn't really matter which company you pick, which stock you pick, which bond you pick.
The entire economy is going to the song of the Federal Reserve.
That is not a very robust system.
It is a pretty fragile system, and it leads to these boom and bust cycles.
The US dollar loses value slowly, but through inflation, it loses value all of the time.
The thing about Bitcoin that is different is that while it is very volatile, it is not directly connected to these other things.
It behaves on its own tune.
From that perspective, I suggest that if someone is interested in investing in Bitcoin, they treat it like adding cayenne pepper to their stew.
A pinch will make it a bit spicy and interesting.
Put the whole pot of pepper into your stew, and you've ruined the stew.
I hear a lot of people who are like, I'm going to take all of my 401k and stick it into Bitcoin.
Well, that's probably not a smart first move.
I would start small and maybe see how that goes, as you gain experience.
But I'm not primarily interested in Bitcoin for its investment potential.
As an investment, it's a new technology, it's got some interesting characteristics.
What is really interesting is about opening the world of finance to six billion people who have never had access.
Connecting the world without barriers, without gatekeepers, without geopolitical games, without are you approved, vetted, documented, and politically correct enough to have access to this system.
That is interesting.
That is world changing.
I love the way you describe banks as being like Ponzi schemes.
Or you say the banking system is very.
Similar to the structure of a Ponzi scheme.
Can you explain that?
Well, I mean, part of the reason that I have difficulty explaining Bitcoin is because most people really don't have an in depth understanding of how money works and how the world of finance works.
So, if you actually understand how commercial banking works, how dollars are created, who creates them, how they're distributed, etc., the system is tilted in favor of those who have banking licenses and access.
To the centers of investment, in such a way that they can make enormous amounts of money, taking very little risk.
They can engage in all kinds of fraud and corruption, and never get punished more than a percentage fine, which they just wrap into the cost of doing business.
It is a system that is very easy to manipulate from the inside.
It creates a very fragile system that generates income inequality and absurd conditions of wealth in some areas.
Ridiculous poverty trap for many people.
Those are not bugs of the system.
Those are the natural outcomes of a system that is designed and architected in that way.
You will always get those outcomes because of the way the system is architected.
Those who are closest to the sources of money can gain an enormous advantage simply by the features of the system.
There is a mechanism called fractional reserve banking, which means that for every dollar of deposits that is.
Entered into circulation and held by the banks, the banks can issue nine dollars worth of loans out of thin air.
They take the one dollar that you deposit and issue another nine dollars for a total of ten of money that doesn't exist, that they created out of thin air, which they lend to you at interest rates that far exceed the interest rates that they pay on money, and make money on that.
If they were also taking enormous risks with those loans, maybe that might be a smart system.
But as we've seen again and again, anytime they get into any kind of systemic trouble, they just get bailed out with another bucket full of money, a river of money, or an ocean of money.
This is a system that will continuously transfer value from savers, investors, and the poor in the form of inflation.
And fees to those who are at the center of the investment system.
It's a corporate welfare mechanism, basically.
The biggest welfare queens on this planet wear $2,000 suits and work on Wall Street.
Governments Competing With Crypto00:12:23
Do you think there's any chance of, I mean, I see especially the US government trying to either ban Bitcoin or try to create their own Bitcoin and make Bitcoin?
Every government on the planet is going to try and do both of those things, to some extent or other.
Some will do it in a very ham fisted and short sighted way.
They will try to go for an outright ban.
The problem they face is this there is no place in which Bitcoin exists.
It exists everywhere on every computer that ever has participated in the Bitcoin system.
Who exactly do you go after?
It is not owned or controlled by any corporation or individual.
There is no center to it.
It is a decentralized thing.
It is like saying, let's ban the web.
Which part of it?
All of it?
At the same time?
How?
Ultimately, what Bitcoin does at its very fundamental basis is it uses mathematics to secure the distribution of money as communication.
As long as you can express transactions, money, in any communication medium, you can transmit it.
I can take a Bitcoin transaction, convert it into emoji, and post it on Twitter.
I have just transmitted a transaction.
How do you know it is a transaction?
You don't.
It just looks like a bunch of emoji.
My recipient does.
They will make sure to get that to the right place so that it works.
I can embed it in the color variations of a photo of six kittens, and post that on a Craigslist ad.
Bottom line.
Money is communication.
How do you ban money when money is communication?
The only way you can do that is by either banning all communication, which is impossible, or imposing enormously strict penalties or fines to people who dare touch this system of money.
Then you run into some other problems.
In countries where the rule of law matters, banning private individuals from engaging in legitimate commercial transactions for legal purposes doesn't make sense.
If you try to do it, you will get a lot of pushback and have to justify why you are doing it.
In places where the rule of law doesn't matter, you can do that in a very ham-fisted approach, and then everybody up and down the line is going to ignore you, get bribed, probably in Bitcoin, turn a blind eye, and the game continues.
Governments have never effectively banned anything, really.
They try, but saying it in the law and actually making it happen on the ground, two different things.
Especially when what you're talking about is, for many people, the difference between feeding their family next month or not.
How much risk are they willing to take?
You get into this weird situation, where you are really talking about banning legitimate commercial interactions between voluntary consenting adults in open markets.
You can't really do that in democratic countries without cracking down on everything.
More likely, sophisticated governments will try indirect approaches.
The first and obvious one is propaganda.
Bitcoin is only used by terrorists, criminals, pedophiles, and pornographers, as I'm sure you've heard.
The problem with that narrative is that every now and then you meet a hairdresser or a dentist who uses Bitcoin, and they don't look like a terrorist pornographer.
At that point, that creates some cognitive dissonance.
Then you find out that refugees in Venezuela are using it to fight the regime and escape from a dictatorship.
More cognitive dissonance, etc.
Measure.
Every time they say money laundering happens through Bitcoin, actually, it happens through Deutsche Bank and Goldman Sachs.
But as you've said in your reports, where you keep catching them and doing nothing about it, these propaganda techniques are largely failing to stop Bitcoin.
Another approach is to make a tangle of taxation around it.
Or to make it very difficult to acquire or exchange from national currency or to national currency.
Of course, the problem with that is if you cut off the on ramps and the off ramps, people just stay in the economy.
You stopped me from converting dollars into Bitcoin.
I ask to get paid in Bitcoin, and I pay other people in Bitcoin directly without converting it back to dollars.
Now you've encouraged me to stay in the economy.
It's kind of like if you build a wall on the southern border, the migrant workers who used to leave every season.
Because they could come back the next season, instead stay because they don't know if they can come back anymore.
There is this finicky thing called unintended consequences.
Bitcoin is a whole bundle of unintended consequences.
I think the more likely thing is governments will try to compete by building things that they pretend are kind of like Bitcoin, forms of digital currency that are managed by the Federal Reserve or other central banks.
In the industry, we call these CBDCs, which stands for Central Bank Digital Currencies.
They are basically a neutered, half-assed attempt to copy Bitcoin that has none of the characteristics of Bitcoin.
It is not open, borderless, censorship-resistant, surveillance-proof, neutral to transactions.
You can't join it without being vetted, etc.
It has taken away all of the interesting things.
AOL and CompuServe tried to do with the internet.
It is like, oh, you like the internet.
Well, here is our version.
It is proper, curated, and safe.
It is boring.
This is an ongoing battle.
Basically, what they are trying to do is stand in the way of the use of mathematics and advanced technology by consenting adults to do commercial transactions, with all of the economic incentives to bypass all of these controls.
That's not going to work.
So, what would the world look like in your view without the banking systems we have now?
I mean, everybody is so used to this.
Is what we've always had money backed by gold and a dollar, two dollars, three dollars.
No one's ever thought of things in terms of value in any other way.
How would the country or the world look without banks and only Bitcoin?
What would be the biggest differences?
Well, so money has gone through five major revolutions since the beginning.
If you start with early debt records from the Sumerians to Shells, feathers, and beads to precious metal nuggets, pressed into coins, paper money, certificates of deposit, and plastic credit card stuff.
Surprisingly, a lot of people in 2020 think that money is backed by gold.
I just heard you say that.
Our money is not backed by gold, it hasn't been backed by gold since 1971.
In fact, really, since the early 1900s, there is no gold backing any of the national currencies anymore.
Isn't it backed by oil now?
Well, indirectly, the US dollar is backed by oil only because there is this kind of deal with the Saudis.
We bomb your enemies and protect your dictatorship, and in return, you only sell oil to other countries if they pay with dollars.
But that is just the dollar.
Countries, and in general, money is backed by economic use.
If there is an economy that uses this currency, then that creates the expectation that if you have a unit of the currency, then tomorrow you can use it to buy something useful like eggs.
That basis is the basis of money.
It's utility.
I expect this will still be useful tomorrow because it was useful today and useful yesterday.
That illusion doesn't always work.
Countries run into problems when that illusion is.
Broken because the money doesn't actually buy as many eggs as you wanted.
Huge inflation, crisis, collapse of government, etc.
But for the most part, that's what money is backed by basically a social agreement and habit.
So, can it change again?
Well, first of all, I don't think we're going to see a world where magically everything's going to get replaced by Bitcoin.
Some Bitcoiners do.
I don't see that.
I think what we're going to see is a world where We had 194 currencies, each identified by a flag or a queen, to a world where there are thousands of currencies, 90% of them existing only in digital form, freely exchangeable and usable on the internet.
A kind of messy democratization of finance, where everybody can choose to use whatever is convenient at that moment.
With software, we will hide a lot of the nasty details so that.
Maybe your software changes from one money to another without you really noticing, so that it's not as confusing.
I think that's the world we're going into.
The reason I think that is because I've seen that happen with the internet and with previous technologies.
There used to be four TV stations.
Now there's tens of thousands of TV stations, but we don't really call them TV stations because it's really just independent programming whenever you want it.
Major newspapers.
Now, they're still there, but they're not as important anymore.
There used to be only one airline per country, had its flag on the tail, just like the currency is today.
Now, if you told someone the only airline that can fly out of France is Air France, they'd be like, no, that's ridiculous.
Why would you do that?
The idea that the only money you could use in France is the French money is also ridiculous.
We just haven't quite seen that yet.
The world is going to get more complicated, more nuanced.
But that also means more democratic, more open, more accessible to a lot more people.
Governments have abused their ability to control money consistently, as they do with many powers.
In the end, that happens at the expense of people who end up having to jump through all of these hoops simply to gain access to the main engine of economic activity and to essentially feed their family and protect their future.
If you create opportunities for that to happen without the interference through private means, through online systems that are open to everyone anywhere, that creates a very interesting future.
An initially very messy and confusing future, but ultimately, in my opinion, one that has much more choice.
Another confusing thing to me is that there is also the original Bitcoin, which the guy, Satoshi Nakamoto, Created with that white paper.
But then, since then, there's been like dozens of other alternate coins that people have invented.
Trade-Offs Between Speed And Security00:02:00
Yes.
So, is that, do you kind of relate that to being like someone having like a YouTube or a Hulu or Amazon Prime?
They're creating their own little like spin offs of television.
Yes, exactly.
I mean, I'm not interested.
They're using the exact same.
Program that Satoshi Nakamoto came up with, right?
Just like changing it a little bit.
Only some of them, especially the early ones, really modified the recipe very, very, only a tiny bit.
And then other people tried to improve and modify.
You know, when you design a piece of software that has financial implications like this, every decision you make is a series of trade offs.
Some people disagree with the trade offs.
Satoshi Nakamoto chose to make it very secure at the expense of making it not so fast.
What about if we make it more fast but less secure?
Some people are like, Yeah, that is a great idea.
Now there is another one.
It is more fast but less secure.
If that is what you need, great.
Every shade in between, on every axis of specialization you can imagine.
Think of it as first there was the Ford Model T, it was black.
One color, one chassis, one function.
You want a truck?
It is still a Ford Model T. You want something to run around town?
It is still a Ford Model T. You want it bigger?
Sorry.
You want it red?
No.
The difference between a Ferrari and an agricultural tractor, designed to haul logs through a forest, is so vast that you might not even recognize them both as being effectively the same kind of automotive vehicle.
One Function Like A Model T00:12:35
They have made different choices into how they treat the various trade offs.
You might say, the Ferrari is great.
Not if I want to haul logs through a forest.
It would be useless, it wouldn't get very far.
My agricultural tractor wouldn't go really fast around the Formula One track.
It really depends on what you are trying to do.
There is no one fits all purposes, because the purposes are so varied, and because you can't predict what the purposes are going to be.
This has led to, as we see in many early technologies, first you have a prototype that establishes, this is a viable concept, the Ford Model T.
Then people tweak it in a thousand varieties, and you get this explosion of.
Variety, differentiation.
Everybody tries to make a slightly different thing.
Initially, they are all mostly copies of that, but eventually they become quite differentiated.
That is what is happening with this.
The interesting thing is that once Bitcoin opened the door, anybody can create a currency.
Not only can they create a currency, but using this recipe, they can create a currency that is, from day one, instantaneously, entirely global, unforgeable.
Quite secure, verifiable, runs on lightweight software on a myriad of devices, and at first has no value, but people might start using it.
Then that begs the question how many currencies will we have?
The answer is a bit like how many YouTube stars will we have?
How many podcasts will we have?
We are all copying the same one idea of I have a TV channel or I have a.
A show.
In the end, you could have everybody in the world creating their own currency, just like everybody in the world could create their own podcast.
The vast majority would be crap.
For the most part, everyone would just use the most popular currency.
There is a particular statistic distribution that arises out of these phenomena called the Pareto distribution power law or long tail.
We see this with the 80 20 rule.
Twenty percent of the music artists are eighty percent of the market.
Twenty percent of the YouTube channel are eighty percent of the views.
You have a handful, five or so, who dominate the market.
They have the majority, more than fifty percent of all of the clicks.
Then you have a very long tail that goes off into infinity of these tiny, tiny little YouTube stars, channels, music artists, books, whatever the category is, that have one reader or one viewer.
But there is an infinity of them.
That is what I predict is going to happen in currencies.
In fact, we are beginning to see that distribution emerge.
It is a natural outcome when you have something that is socially distributed, like money is, and where there will be some affinities, some popular ones, or some ones that are just better.
But there is nothing stopping everybody and their uncle from doing one.
What is the incentive for me to create my own currency?
Because I get a small percentage of each transaction?
Well, there are all kinds of things.
But yes, of course, if you were conniving, what you could do is you create your own currency and then allocate a whole bunch of it to yourself before you gave it to everybody else.
That's called a pre mine in cryptocurrency.
And then if anybody else gets interested and they buy it and trade it and Give it some value, the many more units that you have already allocated to yourself acquire value.
It's a bit like starting a company and selling shares to it, which, by the way, also violates a whole bunch of US laws if you do it in that way.
There have been a lot of these kinds of pyramid, schemi, Ponzi schemi scams that people are doing.
If you're good at branding, marketing, shilling, promoting these things, you can go out and persuade them that what you just built is the next Bitcoin.
In fact, that's what they all say.
If anybody pays attention, you can make serious amounts of money.
Don't do this.
It is both unethical and illegal.
But people do anyway.
You should be skeptical.
The interesting thing is that, in a way, this is a form of human expression that is as old as time.
The idea that anyone can create money seems surprising when you are used to national money, but it is much less surprising if you walk into a kindergarten with.
The perspective of a sociologist or an anthropologist, and you watch kids turn rubber bands and colored wooden blocks into currency that they use to establish social hierarchy, bonds, affinity, approval, association, and friendship.
Social beings use the language of value to establish and reinforce social ties.
Not just humans, in fact, you can teach primates to do this.
They will not only readily adopt money, but they will very quickly evolve various uses from it.
Not perhaps the best uses.
An experiment that was done with primates teaching them how to exchange tokens for bananas resulted not only in broad adoption in the entire primate space that was being studied, but very quickly resulted in the invention of armed robbery.
Beat the other monkey, take his tokens, you have bananas, and prostitution.
Tokens for sex.
That was so funny.
I was just talking to somebody.
Somebody actually just told me about this last weekend.
That's amazing that you just brought it up.
Yes, but what this shows is it doesn't show us anything about money other than this.
I think this is a very interesting and important point.
Ultimately, money doesn't have value.
Money is a language.
It is a language that we use to communicate value to each other.
It is therefore an artifact of civilization, it is an artifact of a social species.
Engaging in acts of society and civilization.
As we build larger societies, the ways that we express value to each other become complex.
You can no longer exchange favors, or here's five chickens, give me a haircut.
I appreciate that you gave me some eggs last week, so why don't I help you fix your fence?
Keeping track of all of the relationships, debts, numbers, and opportunities, and the exchange rates of different types of favors becomes cumbersome.
Humans abstract this in linguistic terms by inventing money.
We invent tokens that can be used to express that value.
The tokens themselves don't have any value.
They just have to have certain characteristics.
They have to be rare.
If you can find them everywhere around you, then you get inflation very quickly.
They have to be unforgeable, because otherwise people will start creating them to increase their social status.
They have to be easily transportable in most cases.
Although there are some interesting exceptions in history of the giant raystones, as they are known.
They have to be instantly recognizable and with a universal unit of measure.
If you think about all of these characteristics, we have done this with physical things.
These physical things always have some disadvantages.
Some of the trade-offs we have to make involve getting a government in the game so they can produce them in a way that is scarce, unforgeable, and trusted by everyone.
But once you realize that as long as it has those characteristics, it can work as money, then you realize that software can do this very effectively.
That is basically what Bitcoin is.
It is the recognition that money is language, a language we use to express value.
Languages encoded digitally become communication media on the internet.
With software, we can manage the fundamental properties that ensure that this is good money rather than useless money.
We make sure that you can't just make more of it.
At a whim, you can easily recognize it, you can't forge it, you can verify that it's real, you can transport it easily, and it keeps its value over time.
You can divide it into smaller bits if you only need a bit of it, but also bunch it together into bigger bits.
All of these characteristics have been engineered into a software system.
Turns out, because we can tweak these parameters in software, we can make money that is better than any type of money that has ever existed.
That is where things get interesting.
Add to that that it is open and available for anyone to use without authorization, and the world changes.
You said it has to be scarce.
Who determines how many bitcoins there are allowed to be?
How is it scarce?
That is a great question.
In fact, the very concept of digital scarcity was a complete oxymoron until the invention of Sadoshi Nakamoto.
The way Bitcoin is produced is by.
A set of rules that are enforced by everyone who participates at every step of the way.
As new Bitcoin enters into circulation, it enters into circulation primarily as a reward for those who are ensuring that the rules are followed by doing certain security things.
We call those miners.
They verify that every transaction is correct, properly signed by the person who wanted to do the transaction, the money isn't being spent twice, and the person who is spending it.
Actually, they have that money.
They check that it was spent at the right time and various other conditions.
In return for doing this work, they get rewarded, but they also have to put down a bond, a guarantee, by spending energy.
If they do it wrong, they have already put down the energy, but they don't get any reward, so they end up losing.
If they do it right, they have put down the energy, but they get reward, so they make a small profit.
We don't need to know who they are or why they're doing this, because they're incentivized to do this.
Basically, we buy security with energy.
The end result is that no one's in charge.
The rules that everyone agrees on, which are written in software, get enforced by everyone.
The miners check us, we check the miners.
When I'm running the Bitcoin software, I'm checking everybody, and everybody's checking all of my transactions.
If we think that one of the transactions is wrong, our software will flag it and reject it.
Then it doesn't go anywhere on the network.
One of those rules is how much new Bitcoin enters circulation.
That was set at a fixed amount every ten minutes back in 2009.
Then, every four years, it gets cut in half in a grand event called the halving.
Three of those have happened.
The last one happened in July.
It was when the amount was cut to six and a quarter Bitcoin per block per ten minutes.
In four years, it will get cut to three and an eighth.
Then, four years after that, it will be 1.7, etc.
It keeps decreasing until eventually, 100 years into the future, the last block that has Bitcoin as a reward in it is issued.
Algorithmic Rules For Miners00:12:38
It only has the smallest unit, which is a Satoshi.
If you do the math 50 every 10 minutes for four years, then 25 every 10 minutes for four years, then 12 and a half, and you keep going down that route, you end up with a number that is 21 million.
In fact, it is a few bobs short.
It is 20,999,999.
Can you break down a Bitcoin into millions of bits?
A single Bitcoin can be broken down into 100 million subunits called satoshis, named after the owner.
21 million Bitcoin is 2.1 quadrillion satoshis, which all get issued by the year 2140.
After that, the network continues to operate based on transaction fees, which pay the miners to do security.
But there is no more Bitcoin issued.
Now, interestingly enough, before 2009, scarcity in a digital thing was an oxymoron.
After 2009, a digital scarcity is now the most scarce thing that has ever existed.
Because we talk about other things being rare diamonds, which aren't rare, gold, you know, whatever.
Yeah, gold is rare on this planet as far as.
Diamonds aren't rare?
No, that's a.
Scam cartel marketing plan by the De Beers consortium that organized persuading you that they are rare.
They are not.
Interesting side story.
They are not actually rare.
They are at least ten times more plentiful than the price would suggest.
They very carefully control the supply to keep them from having their price dump.
Gold is somewhat more rare.
We know that because we keep trying to extract it at a great price.
Then again, there could be an asteroid flying around the solar system on a thousand year orbit that will come by the Earth pretty soon, made of a hundred trillion tons of gold.
Gold is made in stars.
We do know how much is out there.
A lot.
Infinite amounts.
Any physical substance is only rare in a certain context.
Water is rare in the Sahara, but not in the Great Lakes region.
It is interesting when you think of a digitally created artificial scarcity that is more rare than anything that has ever been done, because the constraints are mathematical.
We can say that the rules of Bitcoin, which make Bitcoin what it is, say you cannot make more than 21 million.
Those rules cannot be broken without breaking the system and creating something that isn't Bitcoin.
People would ignore.
Based on those rules, we know exactly how much is going to be issued right now, in the next ten minutes, and all day today.
That gives us a degree of certainty that has never existed.
It is a fascinating design idea, a fascinating invention.
It has some really interesting implications for economists who have never seen anything like this.
It's a very abstract idea when you, in terms of this thinking of money, it's not any like you have to completely re-structure your understanding of money and how money works.
So, yes, so every revolutionary, revolutionary, absolutely.
So, every 10 minutes at the current moment, it's what four bitcoins or six bitcoins, six and a quarter.
Yeah, every 10 minutes, all of the transactions of the past 10 minutes or whatever else is waiting to be included in a block to be verified.
Gets bundled in a block.
A block is just like a bucket that we put all of the transactions and batch them so they can be recorded on the global system.
So every 10 minutes, a new batch of transactions is recorded.
And the first transaction in that batch is one that creates this new Bitcoin and issues it to the miner who completed the verification.
All the miners around the world are there.
They have like CPUs or computer towers or something that are processing all this information.
From everyone around the world that's making transactions, and they're bundled into one block of information.
That's correct.
The block inside it has a special number called a proof of work.
In order to find the special number that fits the puzzle, there's a mathematical puzzle involved, you have to spend a lot of energy.
The only reason you spend that energy is as a demonstration of your commitments that you've done the security correctly, that you've done the verification correctly.
The energy isn't necessary to do the verification.
It doesn't matter how many transactions you're verifying, it doesn't cost anything to verify them.
The reason we spend the energy is as a show of commitment.
It's the table stakes, quite literally, to participate in the mining process.
Because only one miner wins each round of ten minutes, and because they have to spend all of this energy, if they went and did that and messed up the security verification, they would end up losing a lot of money.
That's just a system of incentives.
The only purpose of that is to incentivize people to do security without having to know who they are, check their work, chase them around, or take them to court.
It is just a mathematical system of rewards.
How many people are doing this around the world right now?
We don't know.
Which is really interesting.
Again, it is one of those fascinating things about Bitcoin.
We don't know who they are, we don't know how many they are, we don't know where they are, and we don't know why they are doing this.
We do know why.
It is profitable.
People can say, Yes, I am a miner and I have this warehouse.
Come bring your TV crews, let us do a tour.
We can calculate by reference how much computing is being used and how much energy is being used to do these calculations, because the numbers are in the blocks.
But we don't know how many different companies and individuals are doing this.
It is hundreds, thousands.
Anyone can join or leave this.
System anytime they want, and new people join with new computers that are faster and more efficient all the time.
All these miners keep Bitcoin alive.
It makes Bitcoin what it is today.
They are among those who keep Bitcoin alive, but I'm not a miner.
I keep a copy of the Bitcoin blockchain on my computers, several copies in fact.
My computers are also verifying all of the transactions, including verifying the work of the miners.
If the miners all disappeared overnight, the blocks would stop being issued, but I would still have a copy of it and be able to verify it.
Interestingly enough, and here's another really incredible invention that happened here, Sudoshi Nakamoto designed a system whereby, if more miners join the game, what happens, practically speaking, is that as more miners are trying to find this proof for each block, they produce blocks faster than ten minutes.
Every two weeks, the entire global system recalculates how difficult it should be to find this proof.
If blocks have been produced faster than ten minutes, then it gets more difficult.
If blocks have been produced slower than ten minutes, then it gets easier.
The game dynamically adjusts.
Think of this as a bingo board or a Sudoku puzzle, and there are 20 people in the room and they are playing.
You run a game every ten minutes on average.
If you double the number of people playing in the bingo hall, you would probably be running games faster, because someone would make a bingo somewhere in the room twice as likely, because you have more bingo cards out there.
When the number of people playing in the room doubles, you make the bingo sheet twice as large.
Now it will go back to the same amount of time on average to find one.
If half your bingo players left, It would get slower for a while, and then after two weeks, you would reset it, make it half as big, and then it would go back to the same time.
The ten minute heartbeat is what stays stable.
The number of miners determine how difficult it is going to be.
If more of them join, it gets more difficult, so we stay at ten minutes.
If some of them leave, it gets easier, so we stay at ten minutes.
That algorithm has grown from one miner, Satoshi Nakamoto, on a laptop doing blocks by themselves.
To today, an industrial infrastructure that produces $100 billion worth of computer systems a year and electricity use, and is doing the mining.
Over time, through all of these adjustments every two weeks, they're still producing blocks at exactly the same rate.
That's all done by the algorithm or the software that Satoshi Nakamoto created?
Yeah, it's basically market economics implemented in a software algorithm.
Supply, demand.
The demand is for a block every 10 minutes, and depending on the supply, we change the difficulty price to adjust.
So it will forever be 10 minutes, 10 minutes increments.
Unless we change the rules, but in order to change the rules, you have to have everybody change the rules simultaneously and agree to change the rules.
Meaning every user of Bitcoin?
Everybody who is verifying the rules, which is every user who is running the software, has to agree.
Otherwise, if they see a block that doesn't have the necessary preconditions to be the correct difficulty, timing, and amount of reward, they will say, This is invalid according to my rules.
Rejected.
This is the other fascinating thing.
This runs a radical democracy, where every participant in the system is deciding whether to accept or not the results of the computation, every block, and every transaction in it, based on a set of rules.
In order to change the rules, you have to have a constitutional supermajority.
Everyone has to agree to change the rules.
It takes quite a bit of effort and coordination to change the rules.
You get a very high degree of confidence that the rules are not going to change arbitrarily.
What Bitcoin is doing today, I am confident it will do tomorrow.
Why?
Because it is very difficult to change the rules.
Remember when I said earlier on that?
One of the reasons, or the main reason, why money has value is because I am confident that the dollar I have in my hands today will be able to buy me something more or less of equivalent value tomorrow.
That confidence that it will remain useful, that it will remain running, that it will still mean something.
Bitcoin does that with an algorithm.
It makes it so difficult to change the rules that it can build a long term expectation of continuity.
Every day that goes by, People say, oh, Bitcoin is dead, or it is dying.
It is going to die.
This time, watch my words, it really is going to die.
You wake up the next morning and it is not dead, and that becomes the narrative.
Why Bitcoin Is Not Dead Yet00:06:45
I thought this thing was dead in 2013.
I thought this thing was dead when they arrested the CEO.
There is no CEO.
I thought this thing was dead when X happened.
There is a website for that.
It is called Is Bitcoin Dead?
I think.com.
You go there and it just displays the word no.
Wow, that just says no in big letters?
It just says no.
It's a bit of a silly meme.
Actually, what it tells you is about the narrative that provides stability and robustness in this system.
No matter how many times you've heard that this thing is dead, you then get up six months later and you're Idiot friend who can't stop talking about this thing reminds you that it's not yet dead.
And that can confound people's expectations because very, very serious economists, very, very serious bankers, very, very serious government ministers have told them repeatedly that this thing is dead or will die imminently.
What do you use, Bic?
Like every day, I'm sure you have a lot of people paying you for various things you do, for speaking or whatever it is you do.
Yes.
Does everybody pay you in exclusively Bitcoin?
No.
I take US dollars, I take euro, I take yen, I take Bitcoin, I take Ether, I take a bunch of other digital currencies as well.
I get paid in things that have value and I want to receive at the moment.
I also pay some of my employees in US dollars, some of my employees in euros, and some of my employees, quite a few, in Bitcoin.
Why?
Because it's a hell of a lot easier for both me and them.
If I want to run payroll on a Friday, all of my US dollar employees are not going to get paid until the following Wednesday.
That is as fast as the banking system will work.
Three to five days.
Business days, not days.
One day, our grandchildren will ask, Grandpa, what is a business day?
Then we will tell them stories of when it took three to five days to send a payment.
They will laugh at us.
With Bitcoin, I have sold my car at 11 p.m. on a Saturday, while the banks are closed, with absolute.
Certainty that I'm going to get paid by someone who wasn't even there.
They were buying it for their brother from another state.
Can't do that with banks.
I pay contractors all around the world.
For example, in the Philippines, I have someone who works for me.
They get paid an hour after I run payroll, whereas all of my US employees who get paid in US dollars have to wait another three days, plus the weekend.
But they get paid right away because they get paid in Bitcoin.
Cross border transactions become very easy.
Online transactions and e commerce become very easy.
There are a lot of interesting use cases.
For example, if I get paid in Bitcoin, nobody will do a chargeback.
They can't.
That doesn't exist.
Once I have that, if I'm a merchant and I'm getting paid through PayPal, I just had the other day someone reverse a charge.
They bought a t shirt.
Paid with PayPal and they reversed the charge.
The charge happened on August 29th.
I got paid on August 29th, but I didn't really because they just reversed it on November 15th.
It wasn't really my money.
PayPal can do that, as can all of the banks.
If you're a merchant, when do you actually get paid?
Maybe in 60 days it's final.
I've had people try to reverse things 18 months after the payment has been made.
With Bitcoin?
10 minutes, one confirmation, done.
No refunds, no refunds or anything like that.
I could give people refunds.
I do, in fact.
But it's solely up to you, right?
But it's solely up to me.
There is no intermediary.
It's exactly as if you paid me in cash.
In fact, that's why it is digital cash.
And it has many of the advantages, except for the fact that I can send it at the speed of light all across the planet.
So it stays.
So I have the guy Rich, who I just did a podcast with last week.
He basically installed this Edge wallet thing on my phone.
And he sent me, I think, like five bucks worth of Bitcoin.
This was very good, maybe a month ago.
And it's like, this was a month ago, about a month ago.
So it's like, it's like 0.00044 now, and it's like $7.
It's worth like $7 US now.
Yeah, Bitcoin's done a bit of one of those price things again, as it tends to do.
You know, so it could have gone the other way.
I'm afraid to tell you.
So that $7 or 0.0044 00044 Bitcoin I have in my Edge wallet on my phone, that's literally inside my phone.
So that money is basically like cash in my phone.
It's not stored anywhere else.
It's on my phone, nowhere else.
Well, yes.
The keys that control it are on your phone and nowhere else.
Those keys, which are digital keys, they're basically numbers, allow you to prove to the entire Bitcoin network that you own that money and to do a transaction with it.
The Bitcoin itself is on the blockchain, was always on the blockchain, never left the blockchain.
Rich, was it?
Yeah, Rich.
Rich didn't send you Bitcoin.
Rich recorded a transaction on the blockchain that transferred ownership from his keys to your keys.
Your wallet saw that this transfer of ownership had happened, but the Bitcoin didn't actually move.
All it did was an entry was recorded on the ledger.
That means that Bitcoin doesn't exist in a place.
It exists in every place where someone has a copy of the Bitcoin blockchain.
What exists in your phone.
It is kind of like the 77 digit PIN number that allows you to unlock that particular chunk of 0.0044 Bitcoin and prove to the world that you have the correct control over that.
Basics Of Using Your Wallet00:08:01
You can present that.
It is the PIN number that is the value.
Yes.
That is what is on your smartphone and hopefully also backed up in a number of different places.
You have an Edge wallet, they do the backup for you.
Oh, they back it up for you.
So if your phone gets stolen or something, you're safe.
You can use your password to recover that backup.
They can't take it, you can recover it.
Okay.
Well, I think we're running low on time.
I appreciate you doing this, man.
I really do.
Yeah.
And, you know, it's, I think it's important to say it's okay to not, to feel bewildered by all of this, to not understand it, to find that the more you dig, The more questions you have, the more it seems confusing, intricate, and detailed it is.
What I want to point out is that for those of us who are my age, this is the experience we had with the internet.
We watched all of these TV shows where people were going, What is the internet?
Is that the www or is that the at hotmail.com?
I was like, No, no, no, that's email.
Yeah, but email is the.
I don't get it.
That's exactly what it's like.
Yes.
If I was to try and explain.
To someone non technical, how routing works on the internet, or how TCPIP works, or how SSL works, or how a browser works, or how a complex infrastructure like Netflix works, then we're going into.
The important thing is that you don't actually need to understand how TCPIP routing works, or how the protocol works, or how SSL works, in order to watch something on Netflix.
What we need to separate here is the engineering from the use.
Like most technologies that humans build nowadays, we are building on top of layers of technological evolution that go back millennia.
As a result, the little bit we add on top is on this enormous complex foundation.
Sometimes the bit we add is, in itself, intricate and complex.
Most people have no idea how it works, whether it is the watch on my wrist, the car I drive, or the TV I am looking at right now.
Most people who are not experts don't really need to know these things.
It is important to understand that just because the technology is complex internally, it doesn't mean that it is difficult to use.
That is only the early days.
Understanding why Bitcoin works is not the same as explaining how to use it.
For your viewers who are like, this sounds interesting, but also very complex, why should I care?
The real answer is when the internet first came out, you could ignore it.
Now you can't.
It enriches your life if you become adept at using this technology, whether you are in it or not.
The same thing applies with these technologies.
They are fundamental and revolutionary reimaginings of how we do money, finance, banking, international relations, and a whole bunch of other things.
And so learning among the first how to do the basics, how to use it, back it up, send it, receive it, and be able to recognize the main things.
What does an address look like?
OK, so if I wanted to send some to my friend, how would I do that?
Just like, what is a browser?
How do I open it?
Then what do I type?
I taught my dad in his 80s how to do these things because that allowed us to connect.
There is value in learning these skills, even if you're not going to do much else with them.
When people ask, what do I do next?
Do I invest?
Do I buy this Bitcoin thing?
I say, start with learn and then continue with earn.
Learn the skills like anything else because you don't have to get the price right.
If you don't get it right, the knowledge is still yours.
You don't have to time it.
You can make mistakes, and it doesn't matter.
Then earn.
Rather than thinking about buying or investing in Bitcoin, see if you can do something that someone will pay you for with Bitcoin.
Maybe sell something at a garage sale.
A lot of the times, no one will, but someone might bite, and then you got an interesting experience.
Then maybe start thinking about invest, etc.
You can start using and playing with this.
It's a lot easier to demonstrate and experience than it is to explain and understand.
Right.
It's just one of those things you have to do.
Yes, exactly.
And I can talk to you about how I balance on my unicycle, and it looks fantastical from the outside.
But in fact, that will not teach you how to ride a unicycle.
Not only that, but I can't actually explain it that well.
Most people who use it can't.
You don't have to understand how the light bulb works.
You just have to be willing to flip the switch.
Yeah, exactly.
Exactly.
That is the case.
There are some places in the world where this understanding pays very significant dividends.
Those are places that are mostly dealing with crises of confidence, crises of politics, crises of government, or just straight up war, famine, problems like that, where if you have a mechanism to sidestep the traditional financial system, get money from abroad, Transferred across the border without getting robbed, and things like that, that's a game changer.
That's a life saving skill.
I'll give you a simple example.
If you're a refugee and you're trying to escape Venezuela or Syria or whatever, along the road, everything you own will be stolen from you.
This is the experience of every refugee on the planet, right?
And you will arrive with nothing.
Well, except.
You can store Bitcoin on a mnemonic, which is 12 randomly generated words.
This is what wallets use as backups.
I can use a wallet, install it, and generate 12 words.
That is control of all of the Bitcoin I will ever use with that wallet.
All I have to do is memorize them.
Memorize 12 words in sequence, then throw away your phone, or it gets stolen at the first opportunity, cross 17 international borders, land in another country destitute with nothing, find a phone.
Install a wallet, type in the 12 words, and all your bitcoins are waiting for you.
The fact that you can do that shows you how and why this may be something that is almost miraculous in some ways, but at the same time, so alien to the way money works today, that it can actually be a game-changer and a lifesaver under some circumstances.
Back to your original question: why would a blue-collar worker in Pennsylvania want to invest in Bitcoin?
Today, not that many reasons.
It is more of a curiosity, a plaything.
There might be some very interesting applications in the future.
But if you live in a place where a dictator is making your money unusable, stealing it from you, or making you run for your life, this is a technology that can literally provide an exit and a safe haven for you.
Cool, man.
Thanks again for doing this.
Safe Haven From Dictators00:01:16
Where can the people listening or watching it find more of your work?
I have a big collection of free videos where I discuss not only the how, but more importantly, the why, the social, political implications of this technology, why it matters for humanity, why it's interesting, why I'm enthusiastic, why I'm excited about this.
You can find that on YouTube.
My username is aantonop, which I use broadly.
If you could put that in the show notes, I'm sure people can find it easily.
Beyond that, my website, I've written six books.
Books on the subject, three technical books, the third one is in progress now for software engineers, and three books called The Internet of Money, Volume 1, 2, and 3, which are my ideas on where this technology is going and why it matters.
People can find those everywhere.
I have some cool workshops on my website where you can take, for example, a free introduction to Bitcoin and open blockchains workshop where we run through some of the practical things.
What does it look like?
How does it work?
And so they can find that on my website, antonop.com.