Stefan Molyneux looks at the rise of Bitcoin and discusses it's history, mining, fees, altcoins, regulatory hypocrisy, worldwide awareness, comparisons to gold, anonymous transactions, possible government attacks and what the future holds for the decentralized cryptocurrency.
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| Hi, everybody. | |
| My name is Stefan Molyneux, and I'm the host of Freedom Aid Radio. | |
| I think it's really important to take a few minutes to understand the future of freedom, I would argue, which is Bitcoin and altcoins and related digital currencies. | |
| Now, why is this important? | |
| Fine question. | |
| I would argue that it's important because, fundamentally, control over human beings used to be direct control over them, like they were slaves or they were serfs. | |
| And now what's happened is the people who are in charge of society, the people who run society, have found it much more profitable and a better camouflage to control money. | |
| And through the control of money, they can control people. | |
| So like an amateur thief will stick a gun in your ribs and demand your wallet, but a really sophisticated thief will control a central bank and print money for his use and his friend's use and then stick you with the resulting inflation and have you blame the The poor helpless shopkeeper who is forced to raise prices because there's an overprinting of money. | |
| There doesn't seem to be any particular end to this problem of fiat currency, central banking, government control of money and interest rates, and the resulting control of human beings. | |
| Hundreds of fiat currencies have been around throughout history. | |
| They've all hit the same disaster, with, I guess, the exception of the British pound, which has only lost about 96% of its value since it was first introduced a few years. | |
| So I think it's really important to understand what digital currencies are, how they operate, and why they're so important. | |
| So we're going to focus a little bit on Bitcoin here. | |
| There are some other stories that we'll talk about as well. | |
| So what is a Bitcoin? | |
| A Bitcoin is a networked cryptocurrency. | |
| Now, crypto sounds cryptic, but it just means that it is cryptography. | |
| It's based on the cryptography branch of mathematics or the hiding of particular information in special codes. | |
| Bitcoins are transmitted from one Bitcoin address to the next in any amount desired with zero cost overhead. | |
| You can apply a small cost overhead if you want in the terms of pennies to have it transact a slight amount faster, but it is free. | |
| Bitcoin addresses are identified by a string of 32 random numbers and letters. | |
| Just like a bank account number, users can have one or many Bitcoin addresses. | |
| You can create a new Bitcoin address for every transaction if you want. | |
| And if you want to learn how to use Bitcoin, it's very, very simple. | |
| You can just go weusecoins.com or try btc.com. | |
| So, Bitcoin is software. | |
| You download, like an email client, you download it and install it on your local computer or device, and you can send and receive a Bitcoins. | |
| And the Bitcoin software is designed and written by developers who are publicly known from around the world, and changes are made to the software over time based on fixes and features that are in demand by a consensus of users. | |
| No one person or authority can enforce changes. | |
| You see how it's not hierarchical, not centrally controlled. | |
| It is a voluntary participation of like-minded and talented people to produce something of great value to the world. | |
| Now, unfortunately, for those of us who like freedom, Bitcoin has a lot of qualities that government regulators require. | |
| Don't like. | |
| And it doesn't have qualities that government regulators do like, which is why it's going to be a challenge and an exciting challenge to get it adopted in a more widespread way. | |
| So how does Bitcoin come into existence? | |
| It's called mining, and what happens is you set up a computer, a series of computers, particularly with good graphics cards, to solve mathematical equations. | |
| And a lot of permutations of these equations have to be solved to find the right solution, and this serves as a proof of work performed by this miner. | |
| The miner is the machine or the person who's running it. | |
| And so it's like you expend energy to dig into the ground to extract gold, and that's called mining, and in the same way you extend computer power and CPU cycles and electricity to create a Bitcoin, to mine a Bitcoin. | |
| Both require the consumption of resources. | |
| The processing power of computers that are actively involved in currently mining for Bitcoins is estimated to be six to eight times greater than the top 500 supercomputers combined as of May 2013. | |
| Let's have a look at the fees. | |
| So recently somebody transferred $6.5 million in bitcoins for a fee of 6 cents. | |
| That's a lot of zeros with a 9% in terms of fees. | |
| Let's compare that to PayPal. | |
| PayPal typically charges 2.9% plus a 30 cent fee per transaction. | |
| Bank wire transfers charge around 3.5% and take 3.5 business days to clear. | |
| If you look at something like Visa, you're looking at similar kinds of amounts. | |
| So to do this, transfer over PayPal would have cost $188,500. | |
| To do a wire transfer would have cost over a quarter million dollars. | |
| Bitcoin can do it for six cents. | |
| How do you feel if you're a bank looking at this competitor on the horizon and is not the next call you make going to be to your personally rented congressman to write interfering legislation into this kind of stuff? | |
| So there are third-party websites. | |
| It's an open API, such as Coinbase and BitPay service, and they aim to make merchant transactions simpler and link Bitcoin accounts to legacy bank accounts. | |
| And they charge 0 to 0.99% for transactions. | |
| Bitcoin transactions are irreversible, so there's less risk to senders of fraud or chargebacks. | |
| And this is important. | |
| The reason that they're not reversible is if you want to send someone back the Bitcoin since it costs you nothing if you want that option. | |
| Since it costs you nothing, you just send them back. | |
| Somebody sends you a Bitcoin by accident or you want to reverse the transaction, you just send them the Bitcoin back. | |
| Because there's not this overhead of transaction fees. | |
| You can just do that very easily. | |
| And you can put escrow services, which means that you basically put your Bitcoin into a holding cell until a particular condition is satisfied, like some good is delivered or some services provided, and then it's released. | |
| Transactions anywhere in the world are generally confirmed within 10 minutes, regardless of the size of the transaction. | |
| It's possible to have confirmed transactions within moments by introducing trusted intermediaries and off-chain transactions that are validated by third parties rather than by the Bitcoin network. | |
| So if you're doing something incredibly time-sensitive, then you can, of course, accelerate it. | |
| Now, highly regulated money services like PayPal I have been unable to connect foreign marketplaces, really remote places. | |
| Bitcoin permits those with an internet connection of any kind previously in isolated areas to send or receive wealth, creating a truly global marketplace. | |
| And look, I use PayPal. | |
| I like PayPal, but they have to conform with a huge amount of government regulations and legislations, which is what drives their price up to some degree. | |
| Bitcoin is often described as frictionless because of the lack of need for intermediaries, the low fees or no fees, and the speed. | |
| The authenticity of transactions are double-checked and assured by the rest of the network. | |
| One measurement of the authenticity of transactions is measured by the BRICS index, which estimates that approximately $500 million would be required in order to trick the network and create fake transactions. | |
| Not too likely. | |
| I'm sure that's better use for half a billion dollars, like funding the U.S. government for about eight nanoseconds. | |
| Now, of course, Bitcoin is not the only pony in the show. | |
| The blueprints for Bitcoin are open source. | |
| People can make their own modified versions of Bitcoin with different properties, often referred to as altcoins. | |
| This opens up the Bitcoin currency to competition, which is kind of what you want in order to keep it moving ahead and becoming as efficient and friendly as possible. | |
| If any fundamental problems with Bitcoin are discovered in the future, then users can just switch to a new or existing altcoin. | |
| And there are dozens already traded on exchanges. | |
| The top five in terms of market cap are Litecoin, Feathercoin, Terracoin, Namecoin, and Novacoin. | |
| So, you may have a question. | |
| It sounds like a whole bunch of digital burping, bleeps and bloops and blurps. | |
| So, is it real money? | |
| Well, that's a question. | |
| Let's go back in time to our good friend, shaggy face, ZZ Top Aristotle dude. | |
| So, of course, as you probably know, many, many different things have been used as money throughout history, from conch shells to salt to buffalo hides to beaver pelts and so on. | |
| And so, what is money? | |
| Well, Aristotle defined a sound form of money in terms of durability, it's got to last, portability, you've got to be able to carry it, like if you want to pay for a car in iron, you're going to need a couple of tons at least. | |
| Divisibility, can you divide it without it losing its value, right? | |
| You can cut a gold bar in half and it's worth half a gold bar. | |
| But if you cut a diamond in half, it's worth a whole lot less. | |
| And does it have intrinsic value? | |
| So gold, of course, is popular because you can use it for jewelry and now, of course, you can use it for industrial manufacturing and so on. | |
| Other important qualities for money. | |
| Fungibility. | |
| Not just something you have to dig out from between your toenails, but what it means is that if you lend someone $10 and they give you back a different talent dollar bill, you don't care. | |
| Whereas if you lend someone your car and they give you back a different car, that might bother you a little. | |
| So fungibility and scarcity is really, really important. | |
| And so in terms of fiat currency, because what you want to do is not necessarily compare Bitcoin to gold. | |
| I mean, we can do that, but it's important to compare Bitcoin to gold. | |
| Existing government-issued fiat currency, which is backed by nothing, can be printed at will, relies on debt, and all these other awful things. | |
| Okay, dollars are durable. | |
| They are portable. | |
| You can divide them. | |
| They have no intrinsic value. | |
| They're fungible, and they are certainly not scarce. | |
| You don't even need to print them anymore. | |
| You can just type them into the Fed's bank account, and bingo, bango, bongo, you've made yourself some wealth, and enslaved yourself some poor people. | |
| So, is it real money? | |
| Well, it certainly is more real than Federal Reserve notes. | |
| It's more real than the asswipe paper towels of money printing extravaganzas notice modern government currencies. | |
| So Bitcoin has all of these qualities. | |
| It doesn't have a huge amount of intrinsic value. | |
| You could make the argument both ways. | |
| And it certainly is true. | |
| A single Bitcoin doesn't have alternative uses like gold. | |
| But it has intrinsic utility in the same way that if you have a lot of phones networked together, that's a lot more valuable than a single telephone. | |
| You can buy things all over the world with it. | |
| And having a... | |
| Money that is used elsewhere is not always the best thing in the world. | |
| Now, let's say you use gold and you have a gold standard, and then there's some new use that is found for gold that drives its price up. | |
| That really discombobulates the system. | |
| What you do want to some degree is predictability. | |
| In terms of the value of the currency and predictability in terms of its value is useful. | |
| Bitcoin is still settling into that. | |
| But just because you have a money based on or composed of something that's used elsewhere doesn't mean that it's going to be stable unnecessarily better. | |
| So Bitcoin versus gold I think is interesting. | |
| This is from July 2010 to January 2013. | |
| It is starting to stabilize out a little bit. | |
| Now, since Bitcoin has many of the positive money properties that gold has and some that gold does not, it's conceivable that the anticipated return of a gold standard will be leapfronced by a cryptocurrency standard. | |
| Do we want to go back to a gold standard or do we want to go to a cryptocurrency? | |
| Gold, of course, is hard to transport. | |
| It's difficult to store safely and so on. | |
| It also does get shaved down and so on. | |
| Crypto stuff is pretty cool from that standpoint. | |
| You can't pay with gold from your phone very easily, but you can with bitcoins. | |
| Compared to gold, of course, Bitcoin, easier to transfer, less expensive to secure and storage, easier to verify, and much easier to granulate, to slice down into tiny little bits. | |
| You wouldn't want to buy a piece of penny candy with gold, but you can do that with Bitcoin, because it doesn't really matter, since there's no overhead to the paying or selling of things through Bitcoin. | |
| You can make it a.0000001 if you want. | |
| So there are some economic theorists who are making the argument that the traditional definition of a tangible asset may need to be updated. | |
| Now, since Bitcoin is not tangible in the traditional sense, but meets the standard of being corporeal, it does exist as electricity as something that is on your hard drive or is on your smartphone or whatever. | |
| So it does exist. | |
| It's not purely conceptual. | |
| It's not like the dream you had last night. | |
| You know, it is actually sort of something that exists. | |
| Is it tangible? | |
| Well, it requires effort to produce. | |
| It exists as tangible value on a hard drive, so it's something to be explored. | |
| The Aristotelian definitions of money did not, of course, include the digital age. | |
| So, if you're not particularly aware of Bitcoin, and more than a quarter or half of people are in certain areas, there may be a reason for that, which is that you don't live in a highly unstable banana republic. | |
| So, what products and services do you typically tend to buy using bitcoins? | |
| So, in the country, USA, electrical items like a TV, 28%. | |
| Sorry, it's UK, US, 28%. | |
| Argentina's 40%, because the Argentina is just a tragic example of a government gone wild. | |
| Like in the 1920s, Argentina had the same standard of living that America did, and then they went into the socialist vacuum-baked hell of central planning, and their wealth all went up in smoke, as did the value of their money. | |
| They had to reform the currency many times, so they're very interested in not sullying their hands with the magic, corrosive, rust-based, very pixie dust of government currencies. | |
| So computer stuff, I'll let you, if you want to pause, sorry for those just listening to the audio, there is a lovely video. | |
| I'm not going to read off all these percentages, but there's lots of different ways. | |
| So, of course, electrical items, computer software and hardware, entertainment goods, DVDs, clothes, beauty items, betting, gambling, and other all-important. | |
| Oh, just, yeah, I do have bitcoins. | |
| Make this clear. | |
| I do have some bitcoins, but I'm going to hold on to them like grim death because I think they're going to be the foundation of significant wealth. | |
| A survey of US consumers in May 2013 found that 25% of them had heard of Bitcoin. | |
| Another survey found that nearly 40% of Argentinians, where official yearly inflation figures are 10% or more, probably many times more in reality, have heard of Bitcoin. | |
| 32% of people living in the UK have heard of Bitcoin. | |
| And the word Bitcoin was recently added to the Oxford English Dictionary, and you know you've made it when. | |
| The average Bitcoin user, according to a survey of users, is 96% male. | |
| I think that's similar to libertarianism. | |
| 32.7 years old, if you're a libertarian or anarcho-capitalist. | |
| 37% non-religious, 61%. | |
| If you have a full-time job, 43%. | |
| In a relationship, 56%. | |
| So, the most common use of Bitcoins, according to the survey, was for gifts and donations. | |
| I, of course... | |
| As a show that doesn't really sell anything and doesn't have any advertisements, I do take Bitcoins, so it's in the low bar or in the notes for the podcast if you'd like to help out. | |
| I really appreciate that. | |
| It's also going to put the QR code up. | |
| As of September 2013, 29% of downloads of the official Bitcoin client software have been from Internet connections in the U.S., followed by China, 10%, and Germany, 7%. | |
| In the U.S., there have been almost... | |
| Wait, there have been... | |
| 3,455 downloads of the official Bitcoin client per million capita compared with a sizable 1,751 per million capita in Cyprus and 697 per million capita in Argentina. | |
| The country with the most downloads per capita has been Iceland, who of course took a rather stern, though temporarily helpful stance with their banksters during the recent economic crisis. | |
| The largest base of Bitcoin users is in the US, followed by China. | |
| China's market cap and volume is growing quickly. | |
| Of course, they're in fascistic, semi-socialist remnants of free market hell, so they're interested in that as well. | |
| And this is just some statistics you can have a look at. | |
| Pause the video if you like. | |
| Bitcoin client downloads per capita. | |
| This is a logarithmic scale, so it'd give you whiplash if we put it straight. | |
| Several new charities and other donation-based organizations have been created based on Bitcoin, and a number of charities are now accepting Bitcoin or have switched entirely in an attempt to avoid government regulations or bank interference. | |
| Famously, WikiLeaks underwent a banking blockade and account freezes by PayPal, Visa, and Mastercard under pressure from governments. | |
| They now circumvent this through Bitcoin. | |
| Free Domain Radio. | |
| That would be us. | |
| Let me read it for you. | |
| You can, of course, look at it in the low bar or scan the QR. Bitcoin Not Bombs funnels Bitcoin donations to charities. | |
| BitcoinNotBombs.com Free FR338 is a medical volunteer charity that now only accepts Bitcoins. | |
| FreeAid.com Bitcoin100 encourages Bitcoin adoption by offering charities $1,000 in Bitcoin. | |
| Bitcoin100.org Here are some logos. | |
| It's like a scattershot of the advertising hard drive. | |
| This is all the people who are interested or involved in or using Bitcoins, and you can, of course, pause this, look at it in more detail if you like. | |
| So, Bitcoin has likely created a significant number of new millionaires. | |
| Tragically, I'm not among them. | |
| As of April 2013, at least 250 Bitcoin addresses contained a balance of more than $1 million in Bitcoins. | |
| As of April 2nd, the address with the most Bitcoins was worth around $13 million. | |
| The Winklevoss twins of Facebook fame own millions in Bitcoins and are working to create tradable ETF, electronic fund transfers, based on Bitcoin. | |
| Several venture capitalist firms have been keenly interested in Bitcoin. | |
| In May 2013, a company called CoinLab announced a $5 million investment by Union Square Ventures. | |
| Merchant transaction company BitPay raised $2 million from Founder Fund and recently signed up their 10,000th merchant partner. | |
| Much of the money that flows into the Bitcoin economy comes through Bitcoin exchanges, which convert fiat currencies into Bitcoins and vice versa. | |
| You don't have to mine them. | |
| You can buy them, or you can, of course, supply goods and services in return for Bitcoins, how you acquire them. | |
| Let's look at an important predecessor to Bitcoin, eGold. | |
| The story of eGold is important to understand where Bitcoin came from and what might happen to it. | |
| The eGold company and website was a predecessor providing an alternative currency that was not centrally controlled. | |
| It was backed by physical gold. | |
| And quickly transferable globally. | |
| Because the origin of paper money was simply as receipts for money that you'd given a jeweler with a safe to store your gold. | |
| And people just found it a lot easier to trade those receipts than it was to go and get their gold every time they wanted to buy something. | |
| So the e-gold was a noble hat tip back to the way it used to work. | |
| Users could open accounts denominated in grams of gold, divisible by up to 1 in 10,000, and transfer to other eGold accounts. | |
| At its peak, eGold had around $20 million in market capitalization and had around 5 million users. | |
| eGold is widely regarded as the first successful digital currency system to gain a widespread user base and merchant adoption. | |
| Users could register with any name they wanted, but their real identity was often revealed when initially depositing money to their account, i.e. | |
| you buy a bank wire transfer. | |
| So you take your bank wire, you put it in to Ego, then they kind of know who you are. | |
| So what happened? | |
| Oh, here we dip our face into the tasty, acidic, apple-bobbing bucket of government hypocrisy. | |
| Ego was criticized by lawmakers and competitors for not confirming the identity of its users. | |
| Oh! | |
| But fraud committed via e-gold was often done through the traditional banking system, when criminals used credit cards that did not require identity verification. | |
| Despite this, it was slandered as a tool favored by crooks and terrorists to launder their cash. | |
| See, laundering cash is when you take money from illicit proceeds and then you turn it into legitimate, quote, legitimate proceeds by running it through a business or running it through something like that. | |
| And so if you counterfeit, you want to make that money legitimate, say, by having a central bank where you can counterfeit at will and then calling it legitimate. | |
| After 9-11, a bureau within the U.S. Treasury called FinCEN, Financial Crimes Enforcement Network. | |
| Financial Crimes Enforcement Network. | |
| I do believe that is, in fact, the central business plan of the Federal Reserve. | |
| I'll have to look that up. | |
| FinCEN made it illegal to operate any business it classified as a money service business without licensing. | |
| Ooh, licensing. | |
| Because that keeps everyone safe. | |
| E-gold was told by the U.S. State of California and the U.S. Treasury that it wasn't defined as a money service business. | |
| So the Treasury wouldn't have to define gold as money. | |
| If they define gold as money, they have to explain to us what this... | |
| However, the definition of an MSB was later extended to describe any company that involved an exchange of value. | |
| Fortunately, not an exchange of fluids, just value. | |
| FinCEN also expanded the MSB classification and its laws to include any foreign business that allowed U.S. citizens to register accounts. | |
| Even though Egold was initially compliant, under the changed rules, the U.S. government prosecuted the company. | |
| Can you believe that? | |
| You've obeyed the law, but you still get prosecuted. | |
| Ah, well, no good. | |
| These goes unpunished. | |
| Three directors of the company pled guilty to money laundering, paying millions in fines and serving community service and house arrest sentences. | |
| In January of 2012, competitor Gold Money disabled their account-to-account payments as well, unwilling to deal with the cost and risk of these expanded FinCEN regulations. | |
| Because you get three telephone books worth of regulations, nobody can tell you whether you're in compliance or not, and you face massive legal bills and years in court and so on. | |
| It's soft fascism. | |
| The hard fascism is where you're just told to go into a camp and you're not allowed to work and you just get a gun to your head, right? | |
| The soft fascism is when they just bury you, like De Niro in Brazil. | |
| They just bury you in paper to the point where you become avoidant. | |
| Soft threats and over-regulation, it's quite different. | |
| The story of Liberty Reserve is similar. | |
| Liberty Reserve was a centralized digital currency service based in Costa Rica. | |
| Users' identities were based on an unverified email address, name, and date of birth. | |
| Users could deposit an exchange currency for Liberty dollars and Liberty euros that were pegged to the fiat currencies. | |
| At its height, Liberty Reserve had about 1 million users worldwide, with 200,000 from the United States. | |
| Loose requirements on identification allegedly attracted criminals for money laundering and fraud purposes. | |
| An official at the IRS was quoted, quote, If Al Capone were alive today, this is how he would be hiding his money. | |
| Nice. | |
| Well, um... | |
| Government is clearly concerned with money laundering and problems at financial institutions. | |
| Let's have a look at the persecution of E-Gold and Liberty Reserve for money laundering. | |
| What about larger, more established financial organizations? | |
| What were they charged with? | |
| In December 2012, the Standard Chartered Bank, the fifth largest bank in the UK, was caught laundering 250, yes, that's a B, billion dollars and only had to pay fines. | |
| That same month, HSBC was granted immunity from charges of allegedly laundering $2.3 billion for international organized crime. | |
| I assume that's the private one, not the public one. | |
| The Honorable Senator Chuck Grassley. | |
| I think that's funny. | |
| Do you know if you really are honorable, you really don't need to say it in front of your name? | |
| I think maybe I'll just start introducing myself. | |
| Hello, I'm the bald Stefan Molyneux, just in case people miss out on that. | |
| Well, I guess if they're short, let me see. | |
| Nose hairs are there. | |
| The Honorable Senator Chuck Grassley, quote, What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists. | |
| It's really inexplicable. | |
| I wonder if I could explain something to Send Chuck, which is that a lot of banks donate money to politicians. | |
| There you go. | |
| An HSBC spokesperson stated, We are focused on taking all necessary steps to fulfill our obligation under the agreements with the US and UK governments and on implementing effective global standards across HSBC. Good. | |
| This, of course, entirely ignores the ethical considerations and the questionable meaning of the term money laundering. | |
| Let's delve into a brief history of Bitcoin before discussing its importance in the future. | |
| Bitcoin technology results on literally decades and millions of man-hours of previous research and inventions in cryptography, in networking, and electronic cash systems. | |
| In 2008, the Zorro-like and pseudonymous inventor of Bitcoin, Satoshi Nakamoto, released a white paper online presenting its design. | |
| Nakamoto combined elements from peer-to-peer technologies like BitTorrent, With various cryptographic algorithms and techniques to create the blueprints for the new electronic currency, Nakamoto's true identity remains mysterious to the public domain. | |
| I can tell you, though, it's not me. | |
| So that should help. | |
| In 2009, Nakamoto and admirers of his paperwork to create the first version of the Bitcoin software. | |
| And this was the beginning stages of the Bitcoin network and making the software not only available to the public to use, but also open source. | |
| After Nakamoto's contribution, the project was largely taken over by publicly known programmers such as Gavin Andresen, who is now the lead developer of the official Bitcoin client and protocol. | |
| During the early period of Bitcoin, each Bitcoin was cheap. | |
| It was relatively trivial to mine hundreds or thousands of them with personal computers. | |
| It was once famously sold for 10,000 bitcoins. | |
| I won't even tell you what that's worth right now because you will cry. | |
| During the first six months of the act of trading, the price of one bitcoin stayed below 14 cents. | |
| Ever-escalating effort from bitcoin entrepreneurs, speculators, and journalists have grown the bitcoin ecosystem into one of a semi-mature technology and launched the price of one bitcoin well beyond $100. | |
| So, purchasing power of the U.S. dollar since 1774. | |
| So, there were a couple of early attempts at a central bank in the United States, fought back valiantly by the defenders of light, freedom, and liberty. | |
| And then, of course, from 1913 onwards, the value of the U.S. dollar has fallen by about 95%. | |
| So, this is what happens when the government takes control of a currency. | |
| It turns it into... | |
| Basically, it's like turning a lake into a cloud without the value of it raining back down on you. | |
| So that's what happens to the government currency. | |
| It just drops and drops and drops in value as they print money to bribe constituents and donors in the here and now with the blood, sweat, and tears of the unborn. | |
| Let's look at Bitcoin's value. | |
| Ah, you see? | |
| It goes up like crazy. | |
| This is from October of 2012. | |
| Through to the, I guess, mid to late September. | |
| And you can see it's beginning to stabilize now. | |
| And it's doing really, really nicely. | |
| Median price, about $124. | |
| For a Bitcoin. | |
| And this is kind of what you expect with decentralized money that has a cap that requires energy and time to create. | |
| It's going to become more stable in value than anything that the government has to do with. | |
| Of course, in the 19th century in the United States, the price of most things fell over time. | |
| It's like everything was a computer. | |
| But, you know, there were war, the slavery, the Confederate dollars. | |
| I mean, just a mess. | |
| Greenbacks, all just a bunch of nonsense that went on with governments attempting to, as they always do, pay for their overspending by debasing the currency. | |
| So, I think it's very interesting to see, and this is something that I predicted years ago, which is that a free market currency would aim for stability and would increase in value over time. | |
| Let's look at the supply of the U.S. dollar. | |
| So, from less than $2 trillion in 1980, about $1.5 trillion, it's now projected to go over $11 trillion in 2015. | |
| And this is just the money that they're telling us about. | |
| I'm sure the truth is much worse. | |
| So, it's risen from less than $2 trillion in 1980 to over $10 trillion now, 400% increase. | |
| There are no hard limits on the increase of supply of U.S. dollars now that it is off the gold standard. | |
| When the dollar was tied to gold, you couldn't print a lot more money than you had gold to back it up. | |
| But now they could just print whatever they want. | |
| And this is something people don't understand. | |
| They think that somehow the minimum wage needs to be increased. | |
| But if the minimum wage was tied to the price of silver, then the minimum wage now, the minimum wage in 1960, would be about $23 or $24 an hour now. | |
| It is not the minimum wage that needs to be fixed. | |
| It's the currency that needs to stop debasing the currency and you won't need to keep raising the minimum wage. | |
| Topic for another time. | |
| Okay, so the US dollar has lost about 97% of its value since 1900 despite increases in adoption. | |
| It is now, of course, the world's reserve currency and so on. | |
| Let's look at the supply of bitcoins. | |
| Well, this is exactly how it's supposed to go. | |
| The algorithms get progressively harder and harder to solve and so the number of bitcoins Diminished. | |
| The total number of bitcoins that will ever exist is hard-coded into the software at about 21 million bitcoins. | |
| These 21 million bitcoins are divisible down to eight decimal places, providing for about 2.1 quadrillion transactable units of the currency. | |
| 2.1 quadrillion. | |
| Sounds like quite a bit to me. | |
| The software is designed, as I mentioned, so that the difficulty of getting new bitcoins or mining bitcoins increases over time. | |
| So it's an even decline of money supply near its maximum. | |
| This leveling off is projected to take place somewhere around 2033. | |
| By the year 2040, about 99.8% of all Bitcoins that will exist are expected to be mined. | |
| Though surges in mining due to the deployment and breakthrough of mining technologies such as the ones observed in August 2013 can speed up the process. | |
| Currently, Bitcoin is near 56% of the maximum of 21 million. | |
| As Bitcoin approaches the point of being mined out, it will become a currency with a decreasing money supply and thus deflationary, as some Bitcoins are accidentally lost or small amounts of Bitcoins are purposefully destroyed. | |
| And imagine, deflationary. | |
| The value of your money increases without you doing anything. | |
| Wouldn't that change our entire buying habits as a society? | |
| I mean, so much of stuff is bought simply because the value of money is going to go down over time. | |
| So much of our decision making is based upon that. | |
| It would be wonderful. | |
| What are the current regulations for Bitcoin? | |
| Well, in March 2013, FinCEN released guidance regarding, it was nothing like government guidance, regarding virtual currencies, essentially classifying any Bitcoin business as a money service business and money transmitter under its definition. | |
| This could potentially require those businesses to acquire relevant licenses in 48 different states, equating to millions of dollars in regulatory compliance fees per business. . | |
| FinCEN's vague guidance may also classify Bitcoin miners even as hobbyists to register as a money transmitter, commented one lawyer on the guidance. | |
| A person that creates units and sells those units is a monetary transmitter. | |
| This is akin to requiring people who cook at home for friends to meet the same food safety standards as food-producing corporations. | |
| The world's largest Bitcoin exchange based in Japan, MT Gox, has had $5 million in U.S. Bank Sigh. | |
| well before FinCEN ever released guidance regarding electronic currencies. | |
| Instead of politely pointing out this deficiency in their paperwork due to a changed regulatory guidance, laws are not supposed to be retroactive, people. | |
| They cease the bank accounts. | |
| These disruptions to the company's balance sheets may lead to its demise. | |
| Income tax classifications in the U.S. are still unclear, but it's likely that Bitcoin will be subject to capital gains taxes. | |
| Germany currently classifies Bitcoin as private money, subject to capital gains taxes and possibly sales taxes as well. | |
| You'd never know I was half German, would you? | |
| FinCense, slightly less bloodthirsty Canadian court's cousin FinTrack, has determined that Canadian Bitcoin exchanges are currently not classified as money service businesses. | |
| The Central Bank of Thailand recently ruled that a lack of existing laws concerning Bitcoin made it effectively illegal, prompting new Bitcoin-based businesses in the country to close their doors amidst regulatory uncertainty. | |
| This is the soft fascism that we have to deal with. | |
| Okay, so let's look at BitTorrent, which has some technological similarities to Bitcoin. | |
| BitTorrent permits peer-to-peer file sharing, often copyrighted movies and music, and is, like Bitcoin, decentralized in nature. | |
| That's different from Napster, which relied on centralized stuff. | |
| However, it's still possible for copyright holders to monitor the use of BitTorrent and attack participants with lawsuits through the participants' internet service providers and legal threats towards the ISPs that coerce cooperation. | |
| There are technological solutions to combat this monitoring, such as the use of private networks like Tor and identity-obscuring services such as VPNs. | |
| Legal threats in the form of subpoenas have forced privacy-protecting VPN services to move to a select number of countries. | |
| It's this cat and mouse of freedom and control. | |
| There are some centralized bottlenecks of BitTorrent usage. | |
| A large percentage of BitTorrent traffic is orchestrated through the Pirate Bay platform. | |
| A website based in Sweden. | |
| Sweden was bullied into prosecuting the Pirate Bay, threatened with trade sanctions by the United States government. | |
| Shortly before news of this threat broke, these servers were raided. | |
| The Pirate Bay was a backup in three days on new service and due to the Streisand effect, doubled in its number of users. | |
| However, while the Pirate Bay remains active, its four founders were tried on criminal charges and civil prosecution. | |
| All four were sentenced to a year in jail and three and a half million dollars in damages to copyright holding corporations. | |
| Yay! | |
| Bay Torrance's example teaches us that it is challenging to shut down an underground decentralized technology, even when widely used. | |
| However, the Pirate Bay demonstrates that registered companies and public figures are giant target marks for prosecution, and fall neatly within the umbrella of force that governments excel at. | |
| Amen. | |
| Thank you. | |
| So could governments shut down Bitcoin? | |
| Well, the public developers of Bitcoin could be threatened by state actors. | |
| This might just lead developers to retire and be replaced by anonymous The most famous example is the eBay of illegal drugs, the Silk Road. | |
| And did you know about half of the world's workers operate off the grid and in the grey market or the black market? | |
| It's expected to rise within a few years to about 60%. | |
| These are people who don't need government, who are avoiding government, who can't enforce contracts, and the economy still works fairly well. | |
| Imagine how well it could work without all this endless interference and control. | |
| Governments can coerce ISPs into implementing Internet censoring technologies used to identify and stop or throttle Bitcoin traffic. | |
| But this may prompt an arms race between Bitcoin developers and ISPs to detect and evade detection. | |
| Historically, ISPs have had mixed success implementing such technologies to hogtie BitTorrent. | |
| The Chinese government has extensive experience with internet censorship, but even that great firewall can be bypassed. | |
| Some regimes, particularly those with weak fiat currencies, will be tempted to become safe havens for Bitcoin businesses and traffic in order to feed off the wealth generated or as a political favor to constituents. | |
| However, as we discussed earlier, the US has prosecuted foreign businesses under US laws and threatened other countries with trade sanctions for inconveniences that did not threaten its control over the world's reserve currency. | |
| With a vast arsenal of Connecticut digital weapons and an NSA-based stranglehold on many segments of the Internet, how far would the U.S. government and allied states go to protect its ability to inflate and borrow? | |
| Many early adopters predicted the Bitcoin to dollar spot price will rise ten times, a hundred times, and more beyond its current level. | |
| Certainly, the most likely short-term scenario for fiat currencies is to inflate. | |
| This is what governments do. | |
| It's called the soft default. | |
| The government can't pay its bills. | |
| It just keeps printing money to pretend to pay its bills and thus devaluing The currency, and therefore, since the amount of fiat currency is going to increase and the rate of growth of Bitcoins is going to decrease, the Bitcoin to fiat currency ratio is going to be very, very profitable, I would argue. | |
| It's not advice, it's just my particular opinion. | |
| Cryptocurrencies such as Bitcoin have the potential to supply fiat currencies. | |
| They're much more beneficial to non-aggression principle friendly businesses. | |
| Even if cryptocurrencies don't take over the white or regular market, they have the potential to overtake System D. This is the French term for off-the-grid, grey market, black market. | |
| And these are not people who are dealing in anything particularly illegal. | |
| These are street vendors or people who provide goods and services for barter or other kinds of exchange. | |
| Capturing just 10% of the System D market would represent a growth of 300 to 1,000 times in market cap. | |
| I think it's not a bad place to be. | |
| As fiat currencies inflate and collapse, we can expect more and more interest from large populations, including Cyprus and Argentina. | |
| There will be substantial interest from the third world countries, many African countries operating on the mobile phone-based M-Pesa. | |
| If It seems inevitable. | |
| The US dollar is going to collapse, at least as a world reserve currency. | |
| People are going to be looking for an alternative, a replacement. | |
| And there's no particular currency that I think is going to step up as the natural successor because everybody's inflating and everybody's government is growing. | |
| So why not think about this as a currency that's already there for you? | |
| Bank consolidation. | |
| So this, of course, is interesting. | |
| 1990 to 1995, we can see here on the left, tons and tons of banks, and they've all been collapsed and ground into these monster banks. | |
| This has nothing to do with the free market, of course. | |
| It's simply that if you're big, you get bailouts, and you're too big to fail, and therefore there's a huge I would argue. | |
| And therefore, are going to need more bailouts, triggering more What about political attacks on Bitcoin? | |
| They're going to happen. | |
| Of course they're going to happen. | |
| Mafia doesn't like it when you move into their neighborhood and out-compete them substantially. | |
| To convert fiat currencies into Bitcoin on a large scale, you've got to interface with banks. | |
| Many Bitcoin exchanges have had difficulty finding banks willing to work with them. | |
| Notable examples include Trade Hill losing their accounts with the Internet, Archive Federal Credit Union and MT Gox finding partners in the wake of account seizures by the Department of Homeland Security. | |
| In the long run, will banks want to support Bitcoin? | |
| Well, they ain't getting bailouts from Bitcoin users, so it's hard to say. | |
| Many enjoy the regulatory hurdles that keep out potential new competitors and make much of their profits off of state-supported fractional reserve rules and the amount of money coerced into stock markets. | |
| You know, all your money is forced into the stock markets, particularly for retirement plans. | |
| Otherwise, you wouldn't be there, but you have to be there. | |
| Banks really like that. | |
| Based on the lessons of e-gold, I think it's reasonable to expect political attacks on Bitcoin, and it's going to be the usual. | |
| It supports terrorism, child pornography, the drug trade, and organized crime, all these terrible things. | |
| Fudd, right? | |
| Fear, uncertainty, and doubt. | |
| As Bitcoin adoption grows and begins to threaten some of the viability of fiat currencies, oh, it's going to Threaten economic stability and there's going to be systemic risk with little objective considerations for whether the world is benefited by the current system. | |
| Well, you see, Bitcoin is hard to tax and the poor need your tax money or they're going to... | |
| As an illustrative example, the Liberty Dollar, a private gold and silver certificate-based currency, was shut down and labelled a unique form of domestic terrorism far before it became disruptive. | |
| So, Bitcoin is pseudo-anonymous. | |
| Built into the Bitcoin protocol is a public ledger of all Bitcoin transactions called the blockchain. | |
| This ledger doesn't contain personal information about the participants, but other sources of information can link real identities to the addresses involved in Bitcoin transactions. | |
| These sources can include third parties such as Bitcoin exchanges and web traffic sent from Bitcoin users. | |
| So, the NSA will probably have an eye on this stuff. | |
| But of course, like all markets where there is a demand for anonymity, there will be a supply of it. | |
| Bitcoin's primary mechanism for protecting privacy is Bitcoin mixing, in which Bitcoin users or trusted third-party websites can obscure the flow of Bitcoins from address to address. | |
| In order to protect privacy against incredibly powerful actors like the NSA, if it is possible to do so at all, a variety of semi-obscure tools must be utilized in very particular ways. | |
| Any small mistakes can leak information about the participants of a Bitcoin transaction. | |
| The notion that Bitcoin is anonymous out of the box is a myth, very important to remember, and few users are sufficiently educated to use Bitcoin as anonymously as possible. | |
| The ability of Bitcoin to truly flourish may depend heavily on the ability to avoid taxation. | |
| Beyond the whims of the state, this will be defined by users' access to and understanding of anonymity tools. | |
| For a comprehensive guide on Bitcoin anonymity, sign up for the newsletter at anonymousbitcoinbook.com. | |
| The e-book is targeted for a Q4 2013 release with the goal of making the subject accessible to everyone. | |
| Thank you for your patience. | |
| I really, really wanted to emphasize just how important I think this is. | |
| Political power is money power. | |
| Political power used to be guns alone, now fundamentally... | |
| It is money power. | |
| It is the power to control money. | |
| It is the power to print money. | |
| It is the power to issue IOUs. | |
| It is the power to sell bonds. | |
| It is the power to have national debts. | |
| This is what political power fundamentally is these days. | |
| And so they will be about as receptive in the halls of political power to a way of bypassing the power of money As a king would be to you poisoning his knights. | |
| That is the source of his power. | |
| The sword was the source of his power. | |
| The money is the source of political power. | |
| Now, politicians have nothing to offer Bitcoin users. | |
| The only thing they can do is get in the way and make things difficult. | |
| If you are a big pharmaceutical company or part of the military-industrial complex, then politicians have real goodies to offer you. | |
| Hey, donate to us. | |
| Be part of the system. | |
| Be upfront. | |
| Comply with these regulations. | |
| It'll keep smaller competitors out, and we'll give you all these... | |
| Big-ass juicy contracts and all this kind of great stuff. | |
| We'll give you tariff walls to competitors. | |
| So if you're in the system and you're public and you're a big corporation, politicians have a lot to offer you, so you'll donate a lot of money to politicians. | |
| The more economy shifts to things like Bitcoins, each individual Bitcoin user doesn't want to have anything to do with the government as much as possible, most likely. | |
| And so politicians aren't going to have anything to offer them. | |
| Which means that there will be fewer donations. | |
| And also, the power of the state is kind of hidden from a lot of salaried workers. | |
| Okay, they take your money and so on, but you're sort of hidden from the regulations. | |
| They're all hidden from you. | |
| The controls, the laws, the accounting requirements, just all this stuff. | |
| These mountains and mountains of regulations are kind of all hidden from you. | |
| You start dealing with bitcoins, the power of the government. | |
| Okay. | |
| You know, a little bit more in your face. | |
| Very important to understand that. | |
| So it's likely that it will be attacked from a variety of reasons, but since political power is based on control of money, political freedom is based on the liberty of money, is based on removing the power of money from the ruling classes, | |
| I would argue that other than the internet, there's nothing more revolutionary, nothing with a greater capacity To enhance and expand human freedom, then getting out of the pockets of the state, then getting out of the paper currency of the state, trading direct one-to-one. | |
| It is an astounding opportunity to take back the power of the economy, the power of trade, the power of freedom, the power of life itself. | |
| Trade is life. | |
| Where trade is banned, people die. | |
| You don't get the division of labor, and money is incredibly For the facilitation of trade. | |
| Frictionless money has never existed before in history. | |
| Money without overhead, or with very little overhead, has never existed before in history. | |
| And untraceable money has almost never before existed in human history. | |
| This is an incredible development in allowing us to get free of the matrix of state power and state control. | |
| Now, I urge everyone, obey the laws and declare what you need to declare and keep track of things, talk to your accountants and so on. | |
| But what an amazing opportunity it is to, where legal, bypass the corrosive and destructive and child-eating power of fiat currency. | |
| I strongly urge you, look into the stuff, learn to understand it, and recognize it for the astounding breakthrough that it is. | |
| This is Stefan Molyneux from Freedom Main Radio. | |
| Thank you so much for watching. |