Andreas Antonopoulos on The Joe Rogan Experience explains Bitcoin as "cash on the internet," a peer-to-peer system with algorithmic scarcity—25 new coins every 10 minutes, halving every four years until 21 million. He contrasts its deflationary design and zero-fee efficiency (like a $150M transaction) with fiat inflation, dismissing manipulation claims while acknowledging legal risks, including IRS scrutiny and Silk Road parallels. Though Bitcoin may not replace the dollar, Antonopoulos predicts decentralized money will reshape finance, media, and governance globally, emphasizing its tech-driven resilience over centralized alternatives. [Automatically generated summary]
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You know what's the best thing about the internet is that it's a dumb network.
It transmits information from point A to point B, and it doesn't care what that information is.
So if you come up with a new idea, a new application, and you stick it on the edge of the network, you can transmit that information to anybody else.
And there's a cherished principle behind it, net neutrality, that you don't prioritize your content instead of somebody else's.
You allow equal access to all for all content.
And the Internet doesn't care.
It's just IP. All it sees is bytes, and it just moves them.
And then one day somebody invented a new application and stuck it on the edge.
The internet of money.
And that's what I'm here to talk about today because they didn't need to ask anybody permission and they launched Bitcoin and it happened.
And now that it's here, it's enabling other people to launch money applications on the internet and it's going to fuel the internet even faster than we've seen before.
Yeah, this is a very strange time in that there's actually people that are starting to accept Bitcoin, one of the first cryptocurrencies, for solid objects.
Like Tiger Direct is starting to accept Bitcoin for computers.
You can order a computer on Tiger Direct from fucking Bitcoins, and they'll send you a goddamn actual computer that you can get online with.
There's a lot of skepticism when it comes to Bitcoin.
I've spoken to people that are financial wizards that are skeptical, and I've spoken to people that have just looked into cryptocurrencies because of the rise of the popularity of Bitcoin.
They said, this doesn't make sense.
There's no room for inflation.
There's not enough people, not enough Bitcoins.
It's not going to work.
How are they going to create more?
There's all these different arguments about why.
Do you think that what we're seeing with the rise of Bitcoin is instead of just addressing all these financial concerns and all these people that are used to the current market and the place that it's at right now, the standards, the way they run things, Instead of that, Bitcoin just creates a completely new, network-driven, community-driven money.
Going back to shells and feathers and knots on string and giant rocks in the Polynesian Islands and then through the Iron Age to minted coins stamped with Emperor's faces.
This stuff has been part of our culture for tens of thousands of years.
As a result, it's no longer just technology.
It's a cultural phenomenon.
You are steeped in it from the moment you're born.
You acquire certain notions of what money is and how it works.
You think the current system by which money works is the only system because we've had it for thousands of years.
Even in computer science, the idea of getting distributed computers to agree on something without cheating, we thought that problem couldn't be solved until 2008 when the invention behind Bitcoin solved that problem and created a new way of doing money.
It's going to take a lot of time to understand it, primarily because people don't really understand money as it is today.
They don't understand how banks work.
They don't understand how the Federal Reserve creates money.
They don't understand a debt-based system for money.
Most of the people when they first face Bitcoin they start asking questions about money and it quickly becomes apparent to all of us when we do this that we don't know much about money so then we learn about money and we start reading about money.
But you know it's very much part of the culture to the point where I'll talk to people about Bitcoin and they'll say well it's not backed by gold so how can it have value?
The dollar hasn't been backed by gold for like 60 years.
And you talk to the average person in the street and they still think there's some gold in a vault and that stuff doesn't exist.
For decades and all of the currencies in the world are created based on the productive capacity of the country and the legal system and because they have value because you pay your taxes with them and then they just float freely in exchange rates so they vary against each other and because the dollar is used to buy oil it's the world reserve currency and all the other currencies are measured against it but there is no gold and that's fine that doesn't mean it doesn't have value it absolutely has value That fucks up a lot of old action movies man It really does.
Well, the thing is, gold isn't that efficient for building a currency on, because the rates at which you can produce gold is fixed, and it's hoarded, and, you know, you have certain problems.
Now, the nice thing about Bitcoin is that it takes the same concept of scarcity, of having something that is a limited resource, but it does it by algorithm.
So you essentially have math that says that every 10 minutes 25 new Bitcoin is created, by the network as a whole with all of the computing capacity of the network and that's fixed and every four years we create half as much every 10 minutes so in four years it goes down to 12 and a half Bitcoin every 10 minutes and then it goes down to six and a quarter and it keeps going down until you mint the last Bitcoin and then you're done 21 million coins it's done and the idea is that you provide a sound basis for money
something that is rare cannot be forged is easily transportable and that is the form of currency So 21 million bitcoins and then it's over?
Well, I think part of the reason is that it's easier to write a number without a decimal point and just to write a smaller unit with lots of zeros after it.
It's easier in computer terms to handle numbers that way.
But most importantly, it doesn't matter because what you see on your screen at today might be a Bitcoin.
Actually, on my wallets, I use Millibitcoins, thousands of a Bitcoin because it corresponds more to my daily purchases.
Maybe a few years from now, you're going to be using a millionth of a Bitcoin to look at your balance.
It doesn't matter what you call a unit.
The point is, what value does it have because someone else is willing to give you that amount of money?
And there are so many countries out there where their currency varies 30% a year.
And some now, 30% a month.
And in those countries, there is no stable anything.
And even the dollar, we look at it today and we have this idea of what its value is.
But if you look back historically, its value has been declining for almost a century now.
And today's dollar is worth the same as, you know, 13 cents at the beginning of the previous century.
We don't see that on a day-to-day basis, because it's one of the most stable currencies.
But there's 193 currencies out there, and 180 of them are far, far worse than the dollar in terms of management.
And a couple of handful of them are absolutely horrible.
And the people trapped in these countries...
Can now use Bitcoin.
So this is a lot broader than just the US dollar.
It's not just a matter of, is this going to be comfy for consumers?
This can bring people from countries that have extreme poverty, extreme problems, that are not necessarily based on a lack of technology, that have phones that can use Bitcoin, for example.
But because of politics, they're trapped in this situation.
Recently, I was in Argentina, in Buenos Aires, and now they're having an even worse currency crisis.
They devalued 18% last week.
They're locked down.
They can't take money out of the country.
They can't buy things online.
If they buy something online, they have to go pick it up from a customs office and pay 50% tax on it.
The country's trying to lock in the money, right?
And you have these extreme situations.
And then you have a choice suddenly.
So Bitcoin is a lot bigger than just, you know, a consumer thing for here in the US. How would someone get Bitcoins from those environments?
Well, so even in Argentina, for example, which is not a, you know, it's a second world country that was once the, you know, the Paris of Latin America, and it's still a beautiful place.
But it has these difficult political problems.
It's illegal to trade on the black market dollars for pesos, right?
So you can't go in and if you're a tourist and say, okay, I'm just going to give some dude on the street 200. That's illegal.
And yet, on every street corner, there's someone who will sell you pesos.
And last time I went, I just asked them, will you take Bitcoin?
And guess what?
Some of them said, never heard of it.
And some of them said, yeah, we're trying to do that now.
Can you help us?
So suddenly you already have this black market or grey market for currencies.
In the US you never see this.
But if you travel abroad, you see this all the time.
Most places in the world, the official currency rate versus the one you can get from a corner, a street seller who is selling vegetables and the local currency for dollars.
You can do that in so many countries in the world and for them it's a normal thing.
Before that I just didn't have as much income because I've been working on Bitcoin to a level almost obsession because it's such a fascinating technology for me and as someone who works in security and distributed systems this is a once in a lifetime opportunity to be involved in something monumental just like when I was involved in the early days of the internet as a young scientist and now I can do it again With Bitcoin.
So I've been obsessed.
But since October, I've also been making a living off Bitcoin and I get paid in Bitcoin.
Well, that's the nice thing about it, because unlike physical money, this is digital money, you can make copies of it.
You can't spend both copies.
You can only spend one, but you can make copies.
So you can make backups.
You can even backup right onto a piece of paper, which is what I do, and this is called a paper wallet.
So I have printed pieces of paper with Bitcoin keys on them, and I make two copies, and I put one in a safe, and I put the other in a safety deposit box, and I send Bitcoin to those wallets, and then I basically have my Bitcoin sitting on paper in a bank.
Kind of like a bearer bond.
It's like a bearer bond, you know, or like a stock certificate.
But the only difference is that that magic number that's on there allows me to redeem that Bitcoin anywhere in the world.
The straightforward one, if you come from the old banking-style world, is you open a brokerage account on a virtual currency exchange that will exchange dollars, yen, euros, whatever, to Bitcoin or even some other cryptocurrencies.
And then you can go there and you can wire transfer, you know, using your bank account.
You can wire transfer money into the brokerage account as you would to buy IBM stock.
You wire some money to your brokerage and then you buy some IBM stock.
Well, here you wire some money there and you buy some Bitcoin with it.
Yeah, because the thing is, it's one of the skills they have, right?
They also have the physical locations and branches to sell Bitcoin.
And before long, what we're going to see is the same thing that happened in the entertainment industry when MP3 hit the scene.
At first, everyone was like, whoa, we don't want to even touch this.
And then somebody started thinking, hey, if I start playing with this before everybody else, it's going to hurt all of us, but it's going to hurt me less, and I can start taking advantage.
And they peel off the herd, and boom, you have adoption.
And I think the same thing is going to start happening with banking.
Some of the banks, perhaps not the big six U.S. banks, they've got a nice, comfortable $70 billion a month from the Fed right now.
Why would they do innovation?
But maybe one of the more nimble banks, maybe, you know, in a country like Cyprus, that's been hit hard by these bail-ins, and you have a very open banking environment.
Maybe Singapore is going to decide this is a good strategic move.
Maybe Macau.
Who knows?
The point is, in an international financial environment, all it takes is one.
So this is where it gets a bit more complicated, but keep in mind, the internet in 1992, you had to know Unix command line skills to send an email and it took two days to cross the network.
We can get simpler and easier for most people over time, but it's still a bit geeky, so I'll get into it.
In 2008. 2008. The paper came out in 2008 and followed shortly thereafter by the code.
The discussion actually lasted about a year as he was mulling this over and discussing it.
Keep in mind, digital money is not new.
We've been doing digital money since probably the mid-80s.
I think the first notable one was David Cholm's Digicash.
He created a form of digital money using the new technology of cryptography at the time.
Cryptography is a way of scrambling and unscrambling messages and doing digital signatures and using mathematics to prove things basically on computers.
It's also what you use to protect your browsing session when you connect to your bank and it puts that little lock that's using cryptography.
You're doing an encrypted session.
At the time, David Choam basically created digital money.
And what it is, is you can have a number that has a signature on it that proves who owns it, and then you can spend that.
The problem is that because it's digital, you can copy it.
So what happens if you spend it twice?
Well...
You have to have some kind of central authority that checks to see that you don't spend it twice.
And so he put some servers together and they could handle all of the transactions and make sure nobody spent the money twice and issue the money and do all of the kind of Federal Reserve Central Bank functions and then ran it on the network and it worked.
Unfortunately, if you have a central server and you try to go against the banking system, they stomp on you.
In this case, there was a series of legal battles and then eventually the service got shut down.
And so we've seen this happen maybe four or five times with different attempts to do digital cash with various levels of centralization.
But the basic problem was this.
How do you ensure that the network remains trusted and honest?
Without having someone in the middle who checks everything, an authority.
How do you put trust not in an institution or central authority, as most hierarchical systems work, but spread that trust across the whole network?
And in 2008, Satoshi Nakamoto solved that problem.
And he solved it by putting together four or five ideas that each of them had been done somewhat before, but he put them together in an incredible combination that just worked and worked beautifully.
What the system does is it forces everyone who's participating on the network to do a bit of computing with their system, which is called mining.
If you just have a wallet, you don't do this, but if you want to be part of the Bitcoin network as a miner, what you do is you run on a specialized computer, and it solves this very difficult problem.
It's kind of like a competition.
It's like looking for a magical number, that if you plug it into an equation, it's the right number.
It's almost like a global competition.
Like solving a giant Sudoku puzzle.
So everyone's trying, and then somebody, every 10 minutes, on average, finds a solution, and that becomes a new block of transactions.
And when they find that solution, They get some Bitcoin, which is new Bitcoin that's created for the first time.
This is, if I'm not mistaken, this is a liquid cool rack system For folks who haven't seen this photo, if you're listening to this, which is the majority of our people, what are they Googling, Brian?
Alright, let me give you an argument for why that might actually make sense.
If you're a sex worker, one of the problems you will have is you're going to get extorted and exploited for that money, and you're not going to keep any of it.
With a Bitcoin wallet, you can basically hide that money, and you can also take it in a way that cannot be taken away from you, not easily.
And what that invention allows people to do is move value across the internet.
And that invention means you can do Bitcoin, but it also means you can do a lot of other things.
And Bitcoin is an incredible invention because for the first time it completely democratizes money.
It separates money.
From a function of power of the state to an individual exchange between people, like it used to be when it was shells and feathers, right?
Or, you know, barter exchange.
But the beauty of it is that it can, at the moment, if you think about it, there's, let's say, a billion people in the Western world who have not just banking facilities, but like turbocharged power banking.
They have international transactions.
They can buy stocks on any stock market.
They can do wire transfers, some of them are credited investors, etc.
The power users of banking.
There's another maybe two billion people who have a basic bank account, and then there's the rest of them.
The giant majority of the population on this planet has very limited access to banking, very limited access to international finance, to lending, to capital, to the ability to even change their money to another currency.
Bitcoin is so much more important for them.
I call this the other six billion.
Just keep the focus on the other six billion, because for the billion, it might be a fad.
But for the other six billion, this is an opportunity to change the way we deal with poverty and to change the way we unite the economic system of the planet, which is a whole other level of conversation.
We look at Bitcoin and we think of it as just money.
But it's not just money for the internet.
Money for the internet is what it does.
And it does it very well.
But it's the internet of money.
And it allows people at the edge by downloading just a simple application to join an economy.
And then to hold their own money without any state or corporation being able to steal it from them.
Or inflate it out of value and destroy their children's future.
It allows them to hold and control that money and send it to anyone in the world they want to.
Instantly, for very little money.
I mean, that's never happened before.
And the implications it has for poverty, for the developing world, for the way non-governmental organizations work, is staggering.
Just take one example.
International remittances.
At the moment, 500 or so billion dollars sent every year from the first world to countries in the developing world, right?
And out of that money, 74 billion gets spent in fees.
Fees as high as 30 or 40 percent.
In fact, the poorer the country, the higher the percentage of fee you have to pay.
So Somalian migrants in the U.S. who's sending a hundred dollars home, only 70 gets to the...
To the wife or the brother back home or the husband back home.
The rest gets chewed up by the money transfer companies.
Now, we give the developed world 150 or so billion to the richest and hope it trickles down.
Then we take 74 billion from the poorest.
What if we could change that?
What if we could enable Bitcoin remittances and international payments?
And re-deliver that $74 billion of their money and allow them to send that money directly home without paying that fee.
Yes, and the thing is, the dollar, again, is the world reserve currency, and there's only one of it.
Now, are there 193 other currencies that some of them may end up getting replaced?
Some of them may end up even converting into cryptocurrencies of a nation state, you know, like, I don't know, Thailand coin, why not?
Or Fed coin, if we're doing it here.
We can't judge Bitcoin on the standard of the most comfortable world reserve currency that's the most stable currency.
We have to look at the rest of the world and see what their currencies are like.
In many countries, the currency is worth less than goat shit because you can burn goat shit longer than you can burn these bundles of paper money that doesn't burn very well.
In those countries, this is not a matter of shopping.
This is a matter of the future of their children and it's a matter of development.
What are the concerns as far as if someone steals your bitcoins?
Is there any sort of a regulatory body that can determine whether or not someone's computer or phone's been hacked into and their bitcoins have been stolen?
I mean, has that become an issue yet or is that a potential issue?
Well, their computer gets hacked, and then they have a password on the account, but they don't have, like, you know, one of the things you can do very easily is set up what's called two-factor authentication.
So every time you try to use your Bitcoin wallet, it sends you a little text message, and you have to enter the secret code, like you do with your bank.
So if your computer's being hacked, they don't get the text messages, they can't easily get into your account.
Well, no, I mean, there's always been a thriving hacker underground that uses the most efficient way to steal money.
And they stole money from Target by compromising all of those credit cards just a few weeks ago.
And that affected a lot more people than any of these thefts.
And, you know, they're going to go after wherever the money is.
And if the efficient money is Bitcoin, they're going to go after Bitcoin, too.
But here's the trick.
Because this money is controlled through mathematical security, and because it's programmable, we can actually create new ways of securing money, so we can innovate.
Whether it's the paper wallet example I gave you, where you can create a physical copy that you can secure old-style in a safe deposit box.
Whether it's using multi-signature transactions, where, for example, the money is locked and it takes two keys or three keys to unlock it.
So, for example, you can have a backup company that provides the second key.
If you lose the primary key, you could use the secondary key.
You can do digital backups.
You can do time locks.
You can do all kinds of things now with money, because it's programmable, that allow you to create new ways of securing it.
It's still very early days.
Some people who don't take care, put too much of their Bitcoin in one place.
One of the key controls in the system is that it's like teleporting the digital cash.
And, you know, once it's not on your...
Teleporter pad and it's gone.
You just hope the other teleporter will send it back to you because otherwise it's gone.
I mean, it's digital cache.
It can go very easily because it flows very easily.
So what we're doing at the moment is developing new security techniques to make it both harder to steal in the first place, to have backups so that you can get back if a key is stolen before it's used.
There's all kinds of things we can do to make this better.
I was on Reddit the other day and I was reading this great story, this student who said, you know, back in 2010 I did some Bitcoin mining on my laptop and I just found that wallet and it says I have 917 Bitcoin Am I rich or am I missing something?
Because this would really change my life.
I've got student loans.
And the guy had, you know, at the time it was $900,000 worth of Bitcoin that he had found from a laptop he left laying around in 2010 and did some mining.
And that story is great and it's happened many, many times.
So, all of the people who are doing the mining, who have the hardware and are using it to mine for Bitcoin, what they do is they secure the network.
By running this very hard problem, they prevent anyone else from cheating.
Because in order...
Essentially, they end up voting on every block together with this enormous computing power.
And that enormous computing power means no one can falsify the block because they would have to do that much computing power to falsify the ledger, right?
So if you can't falsify it without doing enormous amounts of computing power, but if you do enormous amounts of computing power, you get a reward in Bitcoin, well, you're going to try and win the game rather than Cheat.
Cheating is extremely difficult and not rewarding, whereas participating I see.
Right?
So all of these miners are working.
And what they do is they verify the transactions and they secure the entire network.
Which actually, if you look at it on the grand scheme of things, is a lot cheaper than guards and armored trucks and alarm companies and vaults and data centers and fraud prevention centers and all of those things that we have in our traditional payment system.
It's actually a lot cheaper to do it by proving you're doing all of this computation for the network security.
Now, they collect fees.
So when they verify a block, the person who manages to verify it first by finding this little magic number, the solution to the problem, I'll explain that in a second, collects the fees that are in the block.
So all of the transactions that get verified in the next 10 minutes, the miner who finds that block will collect all of the little fees.
40 cents here, 40 cents there, 40 cents there.
It's about 40 cents to send a simple transaction right now.
And they'll also get a reward of 25 Bitcoin.
And then everyone will start the race again to verify the next block of transactions for the next 10 minutes of spending.
And the first one to find the solution wins, gets the reward, gets the fees, and they all start competing again.
But you don't know who's going to win it.
And the enormous amount of computation that goes into it ensures that no one can cheat.
Even if you put together 600 most powerful supercomputers in the world, you would not be able to beat the Bitcoin system right now.
What a fascinating element to be added to the idea of economy, this idea of the unified group of computers working on ever-increasingly complex computations.
So the scientific term for it is a consensus asset ledger, which means it's a ledger, a list of transactions about assets, in this case Bitcoin, that's based on consensus, on agreement.
And the agreement is reached by everyone voting with their computing power.
And because there's so much of it, you can't cheat the election.
Now, when you said that there have been other attempts at a new type of currency that have been shut down by the current banking system, That was because they had a place where they had centralized servers.
I mean, the banking system has this fortress wall of regulations around it that acts Partly, supposedly, to protect consumers from misbehaving banks, but also serves very well to prevent competition from small banks because it's very expensive to pass all the tests, right?
So it keeps the rabble out, but then a lot of the criminals end up being inside this whole system.
Here's the thing.
That whole regulatory system comes down hard on people who decide they want to create their own currency.
So no matter what, if you decide to create your own currency and you have an actual business and you're a centralized business, That centralized business is responsible for following all of the government's standards on banking, 100% across the board.
And if you don't, that's where money laundering charges, and that's where larceny and a lot of different charges get brought up.
That means that it's a recipe of code that implements the Bitcoin agreement according to the network standards.
You can write your own.
If you don't want to run that software, you can write a version of it.
In fact, there are five or six different fully compliant versions that can participate in the network.
Even if you take the basic one that started with him writing it, but since has involved in a community project with lots of people writing code, Just like the internet, you just agree to play by the rules and then you can read the code and you can see exactly what happens.
So there's no concern whatsoever that there's any security openings because of the fact these guys are producing their own software that communicates in Bitcoin?
Right, because the trust is based on computation, not access.
So this is a key thing to realize.
All of our payment systems and banking systems up to now keep trust in the system by keeping people out, by controlling very carefully who connects to the network.
That means the network is always very small.
In Bitcoin, all of the trust is done by this joint computation.
Who talks to the network doesn't matter, because the network is trusted and safe regardless of what you try to send to it, or receive from it, or how you interpret it, because there's no center.
So this has radical implications because that means you can let anyone talk to the network or rather you can let everyone talk to the network and everyone can be a bank on that network and everyone can send wires transfers on that network.
You have the power of a bank on your smartphone and as long as it speaks the Bitcoin language and understands it with the rest of the network you don't need to trust You know, that application is running.
The trust happens in the transactions in the network.
Like a BitTorrent client, there are three different versions, but they all speak BitTorrents, and your browsers all speak HTTP, the Hypertext Transfer Protocol.
So no matter what website you go to, and there are lots of websites, Programs made by different companies that speak the server side of the web.
There's lots of different versions, but what matters is the common language they speak.
Bitcoin is like that.
It's a common language, a protocol, or a standard.
That means that no matter what you attach to the network, Whether it's a wallet that's written for Android or a wallet that's written for iPhone or a wallet that's fancier or a wallet that's more geeky, all of these will speak Bitcoin to the network and will work with the system and the trust is in the network.
Now, when we were talking earlier about if you had a centralized location, centralized server, that could be shut down by the banks and they could charge you with all these crimes.
Is there any concern Legally speaking, that if you were a person who has all your money in Bitcoin, that maybe one day the government could come along and say, Bitcoin is not a valid currency, it's illegal to use, using it as a crime.
We find it on you, we're going to take it from you, and we're going to arrest you.
Right, but I mean, that's not different from what I did before when I got paid in euros.
I mean, occasionally I get a paycheck from a customer in Europe, they're gonna pay me in euros, right?
What do you do?
You convert it to dollars, you mark the rate at which they paid you, you know, you invoice them, they paid you in euros, you mark what rate it was, and then you put it on your tax return as income.
People are notoriously bad about reporting income when, you know, when it's independent, when they're not being taxed by their employer, when it's not coming directly out of their paycheck.
Comedians are terrible about that.
I know so many comedians that have had serious IRS problems because of that.
I would think that that sort of issue would arise with Bitcoin where people are responsible for paying taxes on these and they don't.
How much of an issue is that and how much of a criminality issue could that become?
Listen, I pay my taxes, and if you earn money in Bitcoin, you pay your taxes on Bitcoin.
It's as simple as that.
And if you think you can get away with not doing that, then you'll find out, like many people before you, that the IRS will come, will audit you, and you will end up paying a lot more.
I keep on finding new things about different news reports.
This was four hours ago where two guys have been arrested.
Major prominent players in the Bitcoin universe, Charles Sherman, was arrested by federal prosecutors on Sunday and accused of helping grease the wheels for drug transactions using Bitcoins.
And Mr. Shrim was also the founder and chief executive of a popular website called BitInstant, where Bitcoins could be bought using dollars.
And so it seems like there's a lot of people getting arrested, though.
There was another guy that I flashed up earlier that was arrested.
It seems like there's a lot of shady stuff going on in this universe right now.
Honestly, that's the only reason I never went and got into Bitcoins.
You don't feel nervous about all these recent news things at all?
Well, I think he already stated his position that, you know, people are not going to stop going online and shopping on Amazon.com if Amazon gets hacked.
Bitcoin is a technology that is powerful and is being used by school teachers to manage PTA groups.
It's being used by churches to manage tithing and their collection plates and their clubs.
And it's also being used by criminals Occasionally to do crimes, just like any other currency.
In fact, the point is that compared to another currency like the dollar, you know, the money laundering that happens with the dollar...
I mean HSBC was found and convicted under a consent agreement, I think, for $17 billion of money laundering with the worst Mexican cartels.
And they got a minor fine and no one went to jail.
And Wachovia was money laundering hundreds of billions of dollars with various drug cartels in Asia.
And again, nothing happened.
So let's not pretend that suddenly Bitcoin is...
Like this criminal situation.
It's not.
It just represents, just like the internet represents society, and you get the whole spectrum.
Bitcoin as a currency can be used for economic activity, and that means the whole spectrum.
And you'll have a small subset who are people who take advantage, and then you have the vast majority increasingly now as it's getting more mainstream.
Who see the possibility of being able to do exciting new things with money that weren't possible before and to enable new forms of commerce.
There are hundreds of startups that are innovating with new forms of, for example, how to do settlement and escrow on a real estate transaction and not spend 2% on that.
But do it with Bitcoin much more safely, much more effectively.
Companies that are working on doing charitable foundations based on Bitcoin endowments.
Charities that are working to do remittances to foreign countries to help the poor people.
You know, all kinds of activities are happening, but...
What is the primary focus of the media?
It is to generate page views and portraying the sensationalist stuff always wins out.
There's a lot more to Bitcoin.
Don't get fooled by the fact that...
You know, some things are emphasized as if that's the be-all and end-all to Bitcoin.
The problem is, you know, you get a lot more of that than is actually occurring, and you get a lot less of the stuff that's really interesting and important, in my view.
Your example of the bank that was laundering money with the drug cartels is absolutely perfect because that barely got a peep out of people.
That was a very recent decision.
I saw some outrage from a few Twitter users.
I read the story and my mouth was just hanging open.
I was like, how could they get away with that and just get a fine?
They dealt with murderers and they laundered their drug money and they did it for a long time and they made a lot of money and they just got a slap on the wrist.
There's a real issue with this whole Mexican drug war is that there's so much money to be made and being a part of it and it leaves so many holes open for corruption and even legal corruption like this type of stuff where it's it's they do something they get fined by whatever regulatory body but yet they're still in business they're still they're enacting and they profited on that decision Encouraging,
literally encouraging people to continue to do business with illegal groups like that.
If you can make that kind of profit, which, you know, there's a real issue in this country, a massive amount of distrust of law enforcement.
And there's a big part of that becomes, it comes out of the war on drugs.
It comes out of the war on, name the drug, you know, whether it's cocaine or whatever.
All these different people that are struggling to keep things illegal are pumping up all these businesses that sell these illegal drugs because there's this massive demand for it.
So when you see a war on drugs, what you're seeing is an engine to generate money for crime.
That's all it is.
People are not going to stop altering their consciousness.
But you are ensuring that the people that are profiting off of that are going to be criminals.
And then it leaves the door open for people who are in actual law enforcement to see these loopholes and see these ways they can skim a little money and take a little bit home for themselves.
And next thing you know, you got corruption.
And next thing you know, you got bankers going, listen, I can guarantee you the worst that's going to happen is we're going to get a fine.
And the fine's going to be little, and we're going to make a fuckload of money.
And these guys, Pedro's coming over, and he's got a donkey cart filled with gold coins.
In one of these bank situations where they had these branches in Mexico, and they were putting literally millions of dollars in suitcases and sticking them through the teller window, they actually ended up designing and mass manufacturing suitcases that fit through the slot.
I mean, it's that whole, that Fast and Furious investigation, you know about that?
That was where the whatever government agency was selling arms to Mexican drug dealers so that they can quote-unquote track the guns.
It's ridiculous because those guns actually got used for killing American service members, American people that were involved in Border Patrol, people that were involved in law enforcement.
A lot of these guns wound up being used to actually kill Americans.
More than one.
And the idea behind it is so preposterous.
The idea that you're going to sell weapons to criminals so that you could track where these weapons go?
No!
That's a fucking terrible idea.
These are the people that are in charge of deciding what kind of laws get enforced and what atmosphere of law enforcement this country has.
When you see things like that, it's so frustrating and confusing because it seems almost like a blatant crime.
Like someone sold some guns to these Mexican drug lords and they did it under the guise of this crazy operation.
Well, I mean, that's one of the reasons that I think a lot of people are also passionate about Bitcoin is that they've realized, especially since 2008, that these same people cannot be trusted to run the money system.
And we've seen now for the last, for example, five years, the Fed has been printing between 85 now tapered down to about $70 billion a month and giving it as corporate welfare and direct subsidies to the banks.
So we didn't get a stimulus, but they are continuing for five years now to remain solvent based on seventy billion dollars a month.
That's a trillion dollars a year almost in dollars generated by the Fed.
Most people don't even know this is happening.
These are the people running our money.
And what it means is that you go out to use your dollars at the store and suddenly you can buy a lot less bread and a lot less milk and a lot fewer eggs.
But then they take items out of the inflation index.
So it looks like there's no inflation.
Whereas anybody who's trying to spend their dollars knows that things are getting harder and harder and harder, right?
These are the people running our money.
So Bitcoin offers an alternative approach which says, let's trust math.
Let's trust that the system runs based on a rule, a simple mathematical rule, and everybody agrees that that is the rule by which money is created and no one can monkey with it.
And that's the beauty of it, because if you know the rules, it reduces the uncertainty, it reduces the risk.
And when you have a simple system where people can interact with each other and exchange money based on simple mathematic rules, that system's going to do quite well, because people no longer trust their governments, even here, and it's much worse everywhere else.
Do you think that these issues that we have with the financial system and the law enforcement system Are sort of magnified by the solution of Bitcoin, that this being the internet of money, that really we need an internet of law enforcement.
We need an internet of regulations.
We need what we all agree on.
We don't need what's been stuffed down our throat.
We need what we agree on by consensus based on the information that's currently available, which is what we would get.
We didn't have some sort of a centralized group that's in charge of deciding what's legal and not legal, how things are enforced, how things are done, how laws are created.
Let's talk about smart law and smart contracts because this is a perfect opportunity.
Bitcoin, the underlying invention, the blockchain asset ledger as it's called, basically allows people to agree on who owns what and to resolve differences through this computation.
But the basic thing that means is that you can start doing smart contracts.
That means that you can put contracts into the system and then they either get executed because the conditions are met or they do not, based on mathematics.
So you could say, for example, instead of having a deed to my car that's registered with the DMV, I'm going to have a digital deed that's on the Bitcoin network.
And when someone pays me the money to buy that car, that transaction is married to the deed transferring to them.
And the verification happens by the Bitcoin network, which I trust, based on distributed consensus.
No one at the center, no one monkeying with the rules.
So now you can start doing contracts Using the same basic mathematics to fully resolve contracts, you could have, for example, a parent setting up a number of transactions in the blockchain, in the Bitcoin network, that send money to their kids in two decades.
When they're going to be 18 or 20 or 21, right?
So, like a trust fund or a will.
And you could write that as a contract and then execute it on the Bitcoin network and then no one can stop it.
No one can reverse it.
No one can invalidate it.
That's pretty powerful stuff.
It allows people to have contracts between each other that are adjudicated, if you like, by the Bitcoin network based on the mathematical rules.
Is that instead of relying on the ambiguity of language, which is the basis of most law, for many things you will have to, but for some simple things, like doing an escrow for a house, or buying a car, or transferring property, or doing a trust or a will, you could simply...
We convert those legal contracts into Bitcoin transactions that then get executed under a set of rules.
And suddenly you've got a form of smart law, self-executing law, that happens based on the Bitcoin network's ability to agree on what's true.
It's fascinating to think that this could be one step in an ultimate revamping of our society.
A revamping of our society based on the internet.
If Bitcoin and things like Bitcoin, these peer-used groups, these groups of many people agreeing on a standard and subscribing to a system, If that can happen with this, it can start happening with a lot of things.
It can start happening with education.
It can start happening even with law enforcement.
The idea of community law enforcement or figuring out some way to fund private law enforcement or private contractors based on a situation like this.
For the biggest part of human history, a lot of the most difficult problems like communicating at distances or agreeing with lots of different people simply didn't scale.
And because you couldn't scale solutions to those problems, we built hierarchical institutions to solve them.
Representative democracy, we built councils and committees to solve decision-making, we built banks and central banks.
in order to solve issuance of currency and other things like that and we built hierarchical media organizations because we needed a single voice to tell us what to think and then gradually we're seeing these solutions that are decentralized that solve the problem without a hierarchical organization and that scale so the internet was the first decentralized communications that scales to the whole planet Suddenly, all of the hierarchical solutions for communication are no longer necessary.
They solve a problem that doesn't exist.
The problem of it being difficult to transmit information across a continent or across the globe.
Once that problem goes away, the institutions built to solve it, news systems, large entertainment and marketing organizations to create single output products, all of those are no longer necessary, and the choice blossoms.
Bitcoin is simply the same concept of decentralization, but applied to money.
And one of the interesting things is that Bitcoin at its core works on the fact that you can decentralize voting and do voting at scale.
And the voting that's happening right now is the voting to agree on who has the Bitcoin.
But you could do voting for other things like...
You know, stocks, bonds, global lotteries, national elections, and things like that.
So when, essentially, the mining process that verifies each block of transaction and secures it is like a giant vote, an election that happens every 10 minutes.
And by looking at the transactions, you can tell who has the bitcoin.
If the entire network has said...
Andrea sent Joe a Bitcoin and that's been verified by the network.
Then everyone trusts Joe has a Bitcoin and will be willing to accept that Bitcoin in payment for something, right?
So essentially, every 10 minutes you have this consensus where the entire network agrees on all of the transactions that have happened, who has what, what's going on on the system.
The ability to, at a massive scale, have everyone agree on what the truth is, That is the core invention behind Bitcoin that makes currency possible, but it also makes other things possible, including elections.
So you can do some pretty incredible things because what you've done is you've decentralized decision-making.
The internet decentralized communications.
Bitcoin is decentralizing money, but at its core is an invention that decentralizes decision-making.
No, I mean, you know, there's little misunderstandings that happen every now and then and, you know, people at first who don't understand the technology sometimes sit down and have conversations to understand it better.
But, you know, the point is that at the moment, Bitcoin is legal to use.
And it's not just legal to use in the U.S., but it's legal to use in pretty much every country.
For individuals, certainly, I don't think any country has banned it or has even attempted to ban it.
Bitcoin is money as a piece of content that you can send on the internet.
So even if you wanted to ban it, it would be relatively difficult to do that without shutting down the internet.
So that's one thing to put out there, but the point is that nobody's trying to ban Bitcoin.
Nobody's trying to shut us down.
I think, especially in the US, and especially among senior lawmakers like the Senate who had hearings, Recently about Bitcoin.
The prevailing attitude is, look, this is generating growth.
It's generating jobs.
It's a huge innovation.
We see that it's being used in a very broad manner and can change a lot of things.
Maybe we should take a wait-and-see approach.
The price went up quite dramatically after they said that.
The general attitude is most politicians are far more interested in the possibility that this might generate growth and also jobs.
And as a result, votes and campaign finance money than they are about beating this down because it's going to affect different interests.
So they're still open to it.
And I think we've got a tremendous opportunity to educate people about all of the incredible things we can do and also highlight the fact that this Bitcoin economy Just in the last year has generated thousands of jobs in an environment where we have economic stagnation.
We've got this bloom of innovation and technology, much like the first burst of the internet.
That's a tremendous thing.
You don't want to squash that just because of a misunderstanding.
Do you think that there's a lack of blowback because the people in the powers that be just haven't considered Bitcoin to be a threat yet?
Because we talk about politicians not acting to try to silence it to service the people that get them in the office, the lobbyists or special interest groups or what have you.
That's just because they haven't been contacted by those people to try to do something about Bitcoin.
I think even the banks are ambivalent on this because while it may be disruptive to some of their banking practices, it is also one of the most interesting and innovative things to happen in finance in the last hundred years.
And so, I think a lot of banks are smart enough to say, look, we're good at technology.
We know money.
We've got branches.
We've got customers.
We've got marketing.
We've got brands.
We know how to do security.
We could really make a good deal with this Bitcoin thing and use it and make some really interesting financial things.
So, there's this mixed bag.
Just like...
You know, and I'll bring the same example.
When entertainment companies were first faced with the possibility of MP3, yes, some people were like, oh my god, this is going to destroy everything, music will die, right?
Which is the same they've said with every previous technology.
But the point is that since then, the number of genres, the number of artists, the amount of music has exploded.
People get a broader range of music than ever before, and MP3s have created so much good in the entertainment industry, so much more than damage, right?
I think even in banking environments, they recognize that with Bitcoin, there's this mixed bag, which is that the good far outweighs the bad, and even in a business that's going to get disrupted, as banking will be, just like entertainment and telephone companies were disrupted by the internet.
Those that are smart can take advantage, and they can build something good with this.
And they're going to lose some power and leverage, but they can make some good money out of this.
So I don't think anyone's out to get Bitcoin right now.
I think people are kindly evaluating it and thinking about what opportunities it can bring.
That's what's interesting about this is you actually haven't started doing that yet because you've only been starting to get paid fully in Bitcoin over the last few months.
So, I mean, there are people who have already filed taxes a few times and they've used the same approach.
I'm going to be filing income taxes in Bitcoin for the first time for 2013. But, I mean, I'm discussing it with accountants and they think it's pretty straightforward.
And I think the IRS will give us guidance before April.
And the reason I think they will is because the IRS is interested in making revenue.
And what better way to make revenue from Bitcoin than to simply explain exactly how people should pay their taxes on it so we can.
I mean, kind of, but I don't know anybody who's using it all the time.
I mean, you might say if you're involved in these online groups, but the actual percentage of people that are using Bitcoin on a regular basis, what is it?
Well, so what I think about in terms of taking off, this has been around for five years.
It's been a very stable and secure network that has...
Preserved or increased in value.
At the same time, people have gradually improved the technology.
Now we've got this whole raft of startups that are doing innovation and delivering better and better products around it.
More and more merchants are doing it.
And most importantly, it's gone global.
It's now being used in dozens of countries around the world.
And the network is large and getting larger every day.
So all of those conditions remind me exactly of what the internet was in 1992. Again, most people didn't hear about it until 94, 95. At that point, you had people go on the morning show and say, you know, is internet the email or what's this at sign?
And they were having that conversation, but it had already been growing quite rapidly.
I think that's where we are with Bitcoin.
My mom is not going to do Bitcoin on her own for another six or seven years.
Most people won't hear much about it for the next two years.
They're going to hear about it occasionally.
But in the meantime, it's been building momentum and getting better, and I think it's already arrived.
Certainly, the invention behind it, which has also spawned many other currencies, you can't un-invent that invention.
So in whatever form, and if it's not this Bitcoin currency, which I think is already pretty damn strong, You know, that same invention can be repeated and improved.
Just like, you know, the internet.
The first early versions were really, really clunky and gradually it improved.
And keep in mind, currency is just the first application.
So if you were on the internet and you only knew email, you couldn't even imagine what the web would be like, let alone social media or mp3s or digital music and video.
The Bitcoin is still like that.
We've got the Bitcoin currency, which is just like email, and it's the basic application.
Now companies are building the other applications, and it's getting really exciting.
So I think we've got a bit to go until we're mainstream.
What I can say, first of all, if it's saying that it's the same in China, they're wrong.
It makes me wonder what else they're wrong about.
But in China, they banned central banks and other banking institutions from holding Bitcoin on their asset ledger.
They didn't ban people from trading.
In fact, Bitcoin is like 60% or more of the trading happens in China.
They didn't ban people from using it.
It's perfectly legal to use it there as well.
I think it might be an exaggerated headline, but even if it isn't, if Russia bans Bitcoin, I think that probably ends up hurting Russia more than Bitcoin.
China also limits internet use for its citizens, but that doesn't devalue the internet.
I mean, that's the point about this.
And keep in mind, there's also a matter of due process of law, and there's also a matter of different legal structures.
So, for example, in India, the first reaction of the regulators was, well, if it's not specifically licensed and permitted...
It's not legal.
Their legal system's attitude is, we say it's legal, it's legal.
If we haven't said anything about it, then it's illegal, right?
You need a license.
So it's the inverse of U.S. law.
But, you know, certainly here in the U.S., I'm certainly not worried about it being banned here, because there is a lot of legal precedent for private currencies in this country.
And there's constitutional protections and there's companies that can defend themselves against that.
We have a lot of people that listen to this podcast from other countries.
It's one of the reasons why I wanted to bring that up, the Russia story.
But to point out that this is not a universally accepted thing as far as governments and the ambivalence of American banks that they've shown and American politicians, this may not be the case in other countries.
This is Bank of Russia issues warning on digital currencies.
Well, you know, Russia is an incredibly suppressive place.
And the view, when you're driving through the mountains, oh my god.
It's just magical up there.
It's incredible.
Yeah.
I don't know.
Russia's a weird spot, man.
You know, Russia has had a long, hard history.
There's been a lot of horrible things that have happened to the Russian people, both, you know, World War II and before that, they were occupied by the Mongols for 200 years.
I mean, it's just a rough country.
And when it comes to their laws, they've got some really fucking shady laws and real weird attitudes on things, too, man.
You know, they have a habit of shipping people that don't agree with them off to Siberia.
That one really wealthy oligarch fellow was one of the most richest men in Russia, but crossed words with Putin.
Putin just sent that motherfucker to jail, kept him in jail for 10 years, and then finally released him.
A massive public outcry.
This guy, you know, they trumped up charges against him, just locked him up in a cage for a decade.
Yeah, well, here's the other perspective on this, which is, in places like the US, if the government bans something, they go through a very long, arduous process, they go through courts, they have to prove their case, they can't just willingly do it, and it takes a long process, and generally the people kind of agree with it.
Now, in a lot of places in the world, when something is banned by the government, the people go, hmm, maybe I should look into that.
So, you know, the fact that it's banned in Russia doesn't necessarily mean that Bitcoin disappears.
It simply means that Bitcoin is more of an underground currency in that place.
And people have a lot less respect for laws that are arbitrary and capricious.
So in countries where you have weak rule of law and you have rule of people, correspondingly, the people don't pay much attention to those.
You know, a lot of things are illegal in Russia, including, you know, buying and selling dollars on the black market, and you can do it on every corner in Moscow.
Actually, as in many areas of kind of emerging markets, one of the first to move in is Lloyds of London, which have historically been involved in types of insurance that other companies won't necessarily offer first and introduced to the new market.
So there is an organization in the UK that will take Where you can store Bitcoin and then have it insured by Lloyds of London for a specific fee and they'll protect it from theft.
But here's the interesting thing.
That's a fairly limited approach to it, but what you can do with Bitcoin is you can take insurance contracts and the guarantees of insurance companies and embed them into the transaction system.
So now you could have, for example, let's say when you go and buy something on eBay and you do a PayPal transaction, and they give you the ability to do escrow.
So if the product never arrives at your doorstep, you can get your money back, right?
Now when you do that, you have to use PayPal escrow.
You don't really have a choice.
And when you do that with Visa, you have to use Visa escrow.
Well, on Bitcoin, you can pick an escrow provider and have them add their own key into the transaction.
And now they're going to be your escrow, and you chose them.
So you can pick from a market of escrow companies and they can do it without actually holding your money, simply by putting an extra key in the transaction and either authorizing it or not.
So it opens up all of these possibilities for new forms of insurance, new forms of escrow, new forms of financial protections that couldn't be done with traditional money.
There was news just out that the Jamaican bobsled team, this wasn't from Bitcoin, but it was a Dogecoin or whatever it's called, raised $30,000 for this year's Olympics just the other day.
Yeah, and I mean, here's the other story that's not told very often, which is the charity aspect.
In study after study after study, looking both at charitable organizations and user profiles, And questionnaires Bitcoin users have said repeatedly that the number one thing they do with their Bitcoin is donate or give them away Charity is very active on the Bitcoin blocks blockchain on the Bitcoin network Just recently Bitcoiners raised a ton of money for the hurricane in the Philippines There's a number of charitable organizations helping the
homeless in Florida.
There's other organizations doing the same in San Francisco, all based around Bitcoin.
So there's this incredible charitable giving spirit in it, and we're seeing that replicate with other coins too.
One of the other interesting ones is the WikiLeaks recently announced that the vast majority of their donations now come in cryptocurrencies, Bitcoin and Litecoin.
This is fascinating because On certain payment networks, you can't donate to Wikileaks, right?
You can't donate to Wikileaks with PayPal.
You can't donate to Wikileaks with Visa.
They ban you from doing that, and that's how they've cut off the funding of that organization.
Yet, at the same time, on some of those payment networks, you could donate to the Ku Klux Klan.
Now, that doesn't represent my principles, and I have a big problem with that.
Well, with Bitcoin, you can.
Because you simply can donate to whoever you want.
You can just send Bitcoin to any address.
And as a result, WikiLeaks has seen a rise in the donations they receive through Bitcoin.
But a lot of other organizations too.
There's a lot of charitable giving.
There's a lot of non-profit organizations using Bitcoin.
Generally speaking, the term for alternative currencies is altcoins.
Some of them are alternative, some of them are more competitive with Bitcoin.
All of them are based on the same invention.
What this shows is that the underlying invention of how to do computational agreement on the network That invention has spawned all of these other currencies.
Some of them are very innovative, some of them are just fads and memes, and some of them are pump-and-dump schemes.
So there's a whole range.
One of the interesting things that this has created is that in the past...
Money was trusted and had value because not many people could create it.
We trust governments to create money and money has value because only governments can create money.
Now, because anyone can create money, how you give it value depends on other things.
Which is actually a good lesson because government money doesn't really have that much value in a lot of places either.
It's just an illusion that somehow that makes it valuable.
In the case of Bitcoin, what makes Bitcoin valuable is the enormous amount of investment, both in terms of resources, in terms of the computing equipment that people have bought, in terms of the invested companies that are in it and the people who work in it.
Other coins have slightly different variations of the same theme, and some of them are based on memes, internet memes.
I see a future where a five-year-old at school could use a web browser to build a coin in an afternoon and launch it among their friends.
Will there be more coins?
Yes, tens of thousands of them.
And will those coins have value?
Probably not.
No more than baseball cards or Pokemon or Tamagotchi.
But within an environment with young people, you're going to have...
You're going to have people who create them for trading purposes and as memes and fads.
And so they'll have a certain kind of value, just not monetary value.
So you have to evaluate which coins have monetary value based on what's running behind them.
The Bitcoin economy has an actual economy behind it.
It has merchants.
It has retail transactions.
It has startup companies that are investing and developing things with it.
Some of these other coins have some of those things.
But is there a risk of Bitcoin being like the MySpace of cryptocurrencies when you get off to this big head start and you're way ahead of the game but there's holes in your game and Facebook comes in and steals all your people?
One thing to realize is that money is a lot more sticky than a social site.
When people invest their skills and expertise and companies into a certain cryptocurrency, that carries a lot of weight.
Bitcoin has already achieved a very high level of network effect, which means that the more people are on it, the more people it attracts.
The more people are on it, the more people it attracts.
But at the same time, because it's building a capital base, that makes it very difficult to unseat Bitcoin.
I think what we'll end up seeing is one or two major currencies.
Bitcoin is probably going to be the biggest.
And then two or three or four or five secondary currencies that do some kind of niche thing that's useful for some group that Bitcoin can't do or won't do.
For example, Bitcoin has reverse inflation, deflation, because there's a fixed supply.
So over time, the value is gradually going to increase, right?
Other people have created coins where if you don't spend them, you lose a bit, which is like inflation.
So Bitcoin is not going to be able to copy that and take that feature and say, hey, that looks good, let's do it too.
But for a lot of other things, when an alternative coin invents something new, Bitcoin can simply pick it up and run with it too.
Bitcoin hasn't stopped moving.
It was invented in 2008, and five years of innovation have gone into it, and the level of innovation is accelerating.
So I think there's a lot of room for a lot of coins in this space, and not all of them are going to have value, but some of them will have value.
It has a different way of having the agreement on the network, which requires more memory on your computer and less CPU. More level.
At the same time, it does transactions on a different pace.
So instead of every 10 minutes, it does fewer minutes per block.
I think it's two and a half.
And then you have a larger number of total coins.
So it's a few tweaks.
The idea is if Bitcoin is gold, Litecoin is silver.
But that's the general competitive environment.
Now, beyond that, Dogecoin is, in fact, or Dogcoin or Doggycoin, I'm not quite sure how it's pronounced, is an enhancement on the original idea of Litecoin.
So it took that and then twisted it a bit more.
And then you've got this whole list of other coins.
Some of them are interesting.
One discovers prime numbers, which are useful in mathematics.
Another one uses a different peer-to-peer system.
Another one is more programmable.
One of the new coins that's come out now, Ethereum, allows each transaction to be full code for programming language.
You know, all of these may have interesting characteristics.
And then, you know, Kanye West coin, you know, whatever.
So I think the best day was maybe two and a half years ago, which was minus 40 or minus 50 percent in a day.
That was a really big crash, and it took it from above 30 to below a dollar.
And then there was another crash around 100, and then there was another one around 266, and then there was another one around 1000. And so we're now kind of in a relatively stable band between 800, 900, somewhere there.
Over time, these little hiccups get narrower and narrower.
And here's why they occur.
If you look at Bitcoin, the total market capitalization, if you take all of the Bitcoins that exist times the value that they have on the market today, it's about a $10 billion market.
Ten billion dollar market might sound like a lot.
Certainly, if it was a tech stock, it would be a nice-sized tech stock.
But as a currency, it's puny.
There are hundreds of countries that have a bigger monetary base for their currency, and this is an international currency.
It's small.
So what happens is, this is a shallow pool of liquidity.
When you have a shallow pool of liquidity like this, with a few markets that are not very efficient, the end result is that every time someone sneezes, All of the liquidity sloshes around, and you get these fluctuations.
But as it gets bigger in size, the waves get smaller, right?
So it's not as volatile.
And if you look at it, if you plot it on a graph and you plot the volatility, you'll see that every year it's getting less and less and less and less and less volatile.
Now, if at some point it became large, you know, the reason currencies like the US dollar are not very volatile is because if you think of a 14 trillion dollar economy, it's like a Titanic.
It takes, you know, three miles to turn 10 degrees, right?
So they're much more stable because they have weight behind them and inertia.
And even if you want to change it, you tweak something now and it changes in six months because it takes time to filter through the economy.
Meanwhile, think of Bitcoin.
It's like a little Zodiac boat next to Titanic, bouncing up and down in the waves.
Very nimble, but volatile.
Over time, as it gets bigger, Then the waves get smaller by comparison.
But I can tell you that there's a lot more of that going on in every other market.
So that's the interesting thing here.
We now know that LIBOR, the interest rates in the London Bank system, has been fixed for years, and that's the basis for most interest rates.
We know that the gold market's fixed.
We know that the stock markets, they're doing front-running on high-frequency transactions, those are fixed.
Every single market out there is currently rigged.
And so the people who are playing within these markets with like fiber optic connections to this main data center, you know, and they're three feet closer than the other server and can get that transaction in four nanoseconds sooner, our front running transactions are benefiting, are profiting from that distance.
And these markets are rigged.
You know, you go in with your little brokerage account and you trade some IBM and you think you're playing the game.
You're the dunce in the room, because you don't know who the dunce in the room is.
I mean, literally, they have racks trying to get closer to the rack where the transactions are happening, until data centers had to say, no matter where you are in the room, you're getting 300 feet of fiber, and if it's coiled at the bottom of your rack, or if it's stretched out...
You're still going to have to go, you know, so that everybody gets the same deal.
But right now, for example, all of the banks are playing this game.
How fast can you do a transaction?
So what I'm saying is, yes, there is manipulation in the Bitcoin market, but...
The manipulation is on the exchange rate that happens on a day-to-day basis, but it's not on the supply of money.
Whereas in the real economy, the stock market, the New York Stock Exchange, not only is the market rigged, and not only is the market being manipulated, but the currency itself is rigged and being manipulated.
The Fed is printing money and handing it to the banks.
It's definitely the lesser of the two evils, and also the larger it gets, the harder it is for outsiders to manipulate it, right?
Because they don't control the levers of power of the currency.
There are no levers, and that's the beauty of it.
So you create a system that doesn't have levers to control the currency, so all they can control is the price and manipulate it, but that's a dangerous game to play long term, because if the market turns against you, you lose a lot of money too.
We have seen some wild swings, but it seems to be stabilized around that level now, which by the way, is three times the level it had stabilized before the big bounce.
Well, the thing is, it starts operating more like a precious metal, which is that, you know, once supply of a precious metal gets restricted, it increases in value.
But the one difference is that a precious metal, you can only shave so thin, you can't cut it into smaller units, and it's difficult to transport and all of that.
Whereas Bitcoin, you can divide it into 100 million subunits.
So basically, instead of the money in your pocket losing value over time because the central government is diluting it, it's getting concentrated because more people want to use it and there's not enough around.
So it gains value in your pocket.
And that's a deflationary currency.
It creates some interesting savings opportunities.
I think I can make certain predictions for sure, and I can make other predictions with absolute 90% margin, which means I'm pulling it out of my ass.
So let me tell you one I can make for sure.
Cryptocurrencies will be part of our financial future.
Period.
Doesn't matter what form they take.
This invention has been invented.
It will change finance.
It will change banking.
And it might not be Bitcoin.
I think it will, but it might not be Bitcoin, but it will still be a cryptocurrency.
The idea of having a mathematical currency based on a distributed peer-to-peer network happened.
The invention happened.
You can't stop people from coming up with variations of it.
You can't easily shut it down.
If you shut down one, a hundred others are going to pop up in its place.
Now, at the same time, I think Bitcoin has a very good chance of being the one that was good enough, that grew fast enough and gained enough traction that it will actually have, as a store of value, value for a very long time.
You would think you would know if somebody spent that much money using Bitcoin because they would, you know, as a Bitcoin user, would probably scream, I just spent $1.5 million.
That's why it's so weird for me to think that, like, the guy that created it, no one knows what he looks like.
Some guys spent $1.5 million, but no one knows who this guy is.
It just says it seems so suspicious that there's so many...
See, my biggest problem, because people have been trying to get me on Bitcoin for the longest time, is things like this, where it just seems there's so much mystery to it.
Especially if you follow the conspiracies of the guy that created it, and you hear reports like somebody just spent All these millions of dollars using Bitcoin.
Not that big, but transactions happen all the time.
And so if you were watching the stream and transaction, you're like, you know, $10, $1,000, $500, $10,000, $150 million.
You're like, what?
Well, and you can see that transaction because it's on the public ledger and it did happen and it has been verified and the transaction went through and they paid zero fee.
So Bitcoin was a key player in that whole Silk Road scandal.
And for folks who don't know what Silk Road was, it was a website that allowed you to buy a lot of illegal things online, and some of it was purchased through Bitcoin.
And those things were as illegal as drugs or as guns.
Well, there's a lot of exaggerated claims and statements in prosecution indictments.
When you're a career prosecutor and you write up the indictment and decide to take it to the grand jury, you're not going to just write the littlest thing you do.
You're going to make it look like every person you arrest is the worst person in the world and has massive crimes going on.
Which means that reading that and seeing how much of a weak case it is, you know, allegedly sold to someone who allegedly sold to users who allegedly bought drugs.
What's scary is that you've got a 24-year-old sitting in jail for this, and you've got the 55-year-old CEO of HSBC who didn't even resign after being fined hundreds of millions of dollars for laundering billions.
Yeah, well, that's the one thing in this economy that's exploded in the places where it's been introduced and allowed to operate in the free market.
And ironically, the situation there was that they weren't letting those people who were selling the marijuana put their money in banks.
The government has since amended that and said that they're going to now start allowing these people who run these medical marijuana stores to put their money in banks, which is a huge victory.
And I think, you know, ultimately it's unconscionable to do anything else because you're allowing an environment where crime, violent crime, is most likely going to take place because you are making people targets.
If you're not allowing them to bank You're making sure they have massive amounts of cash on them on a regular basis, and they're going to get targeted.
It's just a matter of time.
You're going to create victims of violent crime.
So I'm glad they decided to not do that.
But it's a perfect example of the kind of fuckery that's involved in our government, that you could have these people that did pass a law allowing something to be legal, and yet still those people are kept from and prohibited from putting that money in banks.
Yeah, if a business, a private business, acted the way the IRS did as far as handing out audits to people that were political opponents, handing out audits to people that were personal opponents, to people that were in power...
If a private company acted out that way, they would be guilty of all sorts of fucking violations.
It would probably be somebody in jail.
I mean, it would be a really big issue if you found out.
But they've been auditing people just to fuck with them for the longest time.
And there's nothing good that will come out of it because at the end of the day, since they control nothing, and since what they invented is a mathematical solution, it doesn't matter.
Well, I think throughout the 90s, a lot of the people involved in the digital currency environment, because some of them were working in oppressive, highly oppressive environments, and I'm not, you know, I'm...
People may be working from Burma or from China or from who knows where.
And so it's not a good thing to be doing these with your own name attached.
So a lot of people in this space were involved anonymously to protect their own safety as they were working in digital currencies, basically doing science work in cryptography and mathematics and distributed systems.
A lot of people have tried to guess, and there's a lot of digital currency scientists and cryptographers, well-known cryptographers, who participated in the creation of many of the aspects of Bitcoin.
And people have fingered them and said, you know, maybe that's Satoshi, maybe that's Satoshi.
Boy, there's some fucking ferocious conspiracy theorists out there.
I'm fascinated by these things.
things.
I'm fascinated by these new avenues that our culture starts going down and these incredible avenues and branches of possibility off of these new paths.
It's just a really amazing, amazing time in so many ways.
And And this highlights just this...
The internet has changed everything.
And we've pretended that it's only been a little bit.
Oh, so you get email now.
What's the big deal?
It's monstrous.
It's changed my life 100%.
Changed the way I think 100%.
Changed my connection with just random human beings.
I interact with thousands of random human beings online on a daily basis.
You know, when people say, you know, the internet now is so co-opted and restrictive that you can't do anything.
Well, I can tell you you can because Bitcoin came right out of that and works well.
On that perfectly today.
Bitcoin is one more thing that happened because of the internet.
And now it's turning around.
And here's the interesting thing.
It allows you to do very small transactions.
Micro, nano transactions.
So for example...
If you want to monetize your podcast, and you accepted Bitcoin, and people sent you a tenth of a penny, or a penny, or a dollar, and you added up over hundreds of thousands of users, because it doesn't cost much to send, because it's an easy transaction, people will make transactions smaller, and smaller, and smaller.
So suddenly, Bitcoin can fund all of the independent content providers, and all of the independent infrastructure providers on the internet, and transform the internet again from the inside out.
Like, imagine all of these media companies that have gotten so horribly disrupted because there's basically two media models.
If you make content on the internet, you either sell advertising, so you're stuffing junk into the eyeballs of your customers or your ears, and the bigger the company, the more junk that comes out of it, right?
Or you're selling your customer.
If the product is free, you're the product.
Your personal information is what generates the value.
If you're on a social media site that's free, you're the product.
They're selling your information in order to make money.
It's either advertising or selling your information.
Now there's this third way, which is you can do transactions small enough To have value when accumulated in large numbers, that you could independently and directly fund content providers and infrastructure on the internet and break the hold of these systems of concentration that advertising and social media have become.
Selling privacy and selling advertising, which require concentration.
The other question I wanted to ask you about, we spoke about earlier, was net neutrality.
Now, that's a huge issue for anyone who loves the way the internet works and the way the internet does not judge, and the internet is freely available to anyone who ports into it at virtually whatever you pay for your connection, whatever your download speed is, but there's no regulation as far as it being...
It's easier for Walmart to get online or they have more of a percentage of the pipe.
Are we concerned about net neutrality being somehow or another compromised by nefarious sources?
Well, I mean, net neutrality suffered a massive setback in the courts just a couple of weeks ago with a decision that allowed Verizon Communications to not be subject to the FCC rule imposing net neutrality.
And that sent shockwaves through the industry because the average… What was the case?
The case was the FCC made a rule that said that carriers must support net neutrality and Verizon sued and had it overturned as unconstitutional or outside the mandate of the FCC to be more accurate.
They say they want to make the internet better, but they just got the rule that says that they have to treat all traffic equally taken out.
And most people don't realize that the reason the internet allows things like Netflix to happen is because they didn't have to ask anyone's permission.
Now, imagine if when Netflix started, it had to ask Comcast to run its traffic and pay for a premium.
Well, they wouldn't do that because it's a competitor.
So, of course, they'd crowd them out of the market with exorbitant fees.
Net neutrality means that everybody has a fair shake to be heard, and it's up to the end user to decide who they want to listen to.
All of the traffic will reach you if you want it as a listener or as a viewer.
I think the biggest threat right now comes to companies like Netflix or things like streaming radio and audio systems, Spotify, Pandora, etc., whereby Service providers who have their own TV streams or their own music streams that are competing are going to make their experience great and Netflix experience somewhat suckier.
Well, I mean, all kinds of shenanigans, but I mean, the basic deal is that this FCC rule was trying to establish a legal framework under which they'd be obliged to give equal access to all content.
As long as the viewer chose that's what they want to see or they wanted to connect to over the internet, they would connect to that with the same bandwidth that they've bought.
You buy bandwidth, and you use it for whatever you want, and you don't get better bandwidth if you use their shows than Netflix.
Well, once they tried to put that rule in place, you know, the lawsuit started, and now we have a very bad decision that could really, really hamper innovation.
A lot of the things that we see today on the internet would not have happened if net neutrality weren't observed.
And if you like that, net neutrality is why it happens.
And therefore we should be defending net neutrality.
So what people should do is probably boycott companies that don't Well, I'm a huge supporter of the EFF, the Electronic Frontier Foundation, that's been fighting for privacy and liberty and net neutrality on the internet since the early 90s.
And they've won several substantial cases, both against organizations like the NSA, but also against service providers that try to abuse their position to prioritize traffic.
And they've promoted the idea of an open, independent, transparent and fair internet for all.
With equal access for everyone.
I mean, that's the thing that's made the internet magic, and they've been at the forefront of doing that.
So here's one good idea or one good thought that comes out of this.
A lot of the problem right now is that you pay for both of your infrastructure and your content in a single payment to your ISP. Well, with Bitcoin, you could pay the recipient or the content provider directly in tiny, tiny, tiny payments.
It's almost, and I'm not, it's just, you know, it's almost like evangelistic.
Like, it's almost like a pyramid, like when you go to a pyramid type thing where they're sounding like, no, you know, is there anything you don't like about it?
Like, what's the number one thing that you're like, I hope something changes with this?
I mean, it's got some scalability issues that are being solved.
It's software, so we have to be very careful with the upgrades.
But, you know, I mean, compared to the existing form of money we have, I honestly think it's better money and it's a great technology.
I've spent 20 years doing security and distributed systems.
That's my area of expertise as a professional.
So what I love about this is that I can see the elegance of the technology and I understand its implications.
The last time I felt like this was 1992. And it was because I saw the internet and I saw the elegance of it.
And I was out telling as many people as I could, you know, this is really going to change things in ways you don't even expect.
And I can't even explain to you yet because it's going to unfold in ways no one anticipates.
Because what it does is it democratizes information.
So yes, I'm excited about something that democratizes money, but it's because I understand the underlying technology.
You know, I don't profit from talking about this.
I'm able to build a career on it, sure, and I love doing it, but really at the heart of it, I'm a geek, I love the technology, and that passion just comes through.
Then I went back and I read the Satoshi paper, and I grasped the science, and it was confusing, and then I read it again, and I really grasped the science, and then suddenly it hit me.
Oh my god, this isn't a currency.
It's a consensus network.
This is the holy grail of distributed systems of the last 15 years.
You can do so much more than currency.
And once that light bulb went off, all I could see was the possibilities.
Oh, well, now that we have this technology, we can do this and this and this, and the currency will do these things for us.
And, you know, all of these possibilities unfolded in my head, and it was a...
really dizzy experience but I understood the fundamental building blocks looked so much like the early internet and I knew what structures like that do they create a network effect they create this attractive force where it gets more useful the more people who use it network effect was coined first by Bob Metcalf in 1984 he said the value of the network It increases exponentially with the addition of each node.
When you join a network, you don't just gain that value, but by increasing the size of the network, you make it more valuable for everyone else, because they have one more person to connect to.
If you keep doing that, it achieves a scale where it starts multiplying.
That's how the internet grew.
When you have this magic combination of money for the people, that can be sent directly between people, that forms a network, those three things came together in my head.
I'm like, this is big, and nobody knows it yet.
When you see something that's big and nobody knows it yet, you want to tell everyone?
And you want to dedicate a large part of your time to doing this, because it's incredibly exciting.
You know, I don't generally debate on this because the simple truth is that none of us know.
Right.
And the reason we don't know is because the tools we have to analyze currencies don't apply because it's a completely different type of currency.
It's not a stock.
It's not a currency.
It's not an asset.
It's not a commodity.
It's a bit of everything.
Can I tell you what it's going to do in two years?
Of course not.
I don't know.
Nobody knows.
What I do know is I understand the technology, and what I see is something elegant and practical.
I'm interested in seeing where this experiment will go, because here's the thing.
If it doesn't work, some people lose money.
If it does work, we change the world of money forever.
And that's a pretty big thing to say, but cryptocurrencies, I think, are here to stay.
They offer an elegant solution to decentralized money, and whether Bitcoin survives or not, I want to see where this is going to go, because it has the possibility of changing a lot of people's lives.
So you download blockchain from your app store, and then you'll get an address, and I can then send you some Bitcoin, and you'll have it in a few seconds.
I'm obviously going to have to read a lot of shit after this.
There's so much involved in this subject and so much involved in cryptocurrencies.
It's really, really interesting stuff.
But I think it's badass, man.
And I really respect a guy like you who takes a giant leap like that and dives into something and something that you believe in and you get really passionate about it.
It's what life is about to me.
It's about pursuing passions, and I love the fact that you're really into it.
And I really, really appreciate you coming on here and enlightening us.
You know, sometimes you choose the things you want to do in life, but some of the most interesting things in life, once you find them, you have no choice.
I had no choice.
I couldn't sleep at night if I wasn't doing this.
It was just such a big draw.
But yeah, I mean, I hope you see, you know, I'm not trying to sell anything.
I'm genuinely passionate about this because I see an elegant solution.
The choice is in being that person who follows their passions.
That's inspirational.
To me, it's one of the most inspirational things I encounter both online and in the real world is watching people who are passionate about what they do.