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Nov. 30, 2013 - Freedomain Radio - Stefan Molyneux
40:46
2543 The True Value of Bitcoin: What You Really Need To Know
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Hi everybody, it's Stefan Molling from Freedom Main Radio.
I hope you're doing well.
This is just a brief preamble before we get into the value proposition of Bitcoin.
I gotta tell you, I have been struggling for days to try and find the right analogy or metaphor or language to describe Bitcoin.
What an astounding revolution Bitcoin represents.
And it's not like anything that's come before.
So you say, well, email is just faster mail and with, you know, additional features and so on.
Yes, that's very true.
And you can say like a bank transfer is faster than mailing a check.
And that's true.
You could even say that 3D printing is a way of moving the manufacturing process from source to destination, eliminating shipping and so on.
And that's true.
But they don't come close.
The closest thing that I can come to in terms of explaining what Bitcoin and its revolution represents is, I would imagine the closest thing would be the invention of the internal combustion engine, I think, in terms of how that changes society as a whole.
And it is a tough thing to understand, but the important thing to understand is Bitcoin is not just money transfer.
That's very, very important.
That's a component of it, and it's one of the things that gives a great value.
But Bitcoin is not just money transfer.
Bitcoin is an entire programming environment.
Bitcoin is a publicly audited ledger of what has occurred for you financially, in terms of property, in terms of ownership, in terms of contracts, and all these kinds of things can be publicly audited and verified.
Bitcoin is Immune from attack almost completely, the argument being that if you have the computing power to attack the network of Bitcoin, you will actually gain far more from using that computing power to generate Bitcoins than you will from attempting to spoof the network.
So it is practically impossible to hack.
It is completely encrypted.
Your identity is completely encrypted.
You can reveal it if you want, right?
You can be out there without avatar, or you can just be your avatar, and the encryption is functionally impossible to break.
This is what Julian Assange used to protect his information.
That's his life.
So you can assume that it's some pretty good stuff.
And what it does, most fundamentally, is it eliminates labor in financial transactions.
And it eliminates labor in conflict resolution.
It eliminates labor in things like wills.
It eliminates labor in accounting.
It eliminates labor in lending.
There is, in fact, an entire stock market running on Bitcoin.
It eliminates labor in an initial public offering or going public.
And it doesn't just eliminate some of it.
It can eliminate most, if not all of it.
And as you can imagine, the financial services sector It's completely insane in terms of how big it's become.
We'll get into some of those numbers in a moment.
The financial services sector is between 8 and 15% of the entire economy in the West.
And if you can eliminate a significant proportion of that, say 70 or 80%, then that means that 8 to 10 to 15% of the world's economy can go back into the hands of the people.
And away from those vertical ice cube tray glass towers of financial institutions.
The money can go back to the people.
So for example, why do you put money in a bank?
Fundamentally for two reasons.
One, because it might get stolen.
And two, because there's inflation.
And if you don't put your money somewhere, it's just going to get eaten away.
You put it under your mattress, you might as well have a box of termites in there as well, chewing away on the paper.
Well, you can't have your money stolen in Bitcoin.
I mean, you simply can't.
I mean, with even tiny and reasonable measures of security, you can even keep your money completely offline.
It's never exposed to any computers at all.
So you simply can't have your money stolen through Bitcoin.
That doesn't mean it never happens.
It just means that if you leave your wallet somewhere, it's going to get stolen.
But this is very, very simple things that you can do to keep it completely encrypted, anonymous.
So your money can't be stolen, so why would you put it in a bank?
And certainly your Bitcoin money isn't any safer in a bank.
So that is a very important thing as well.
A Bitcoin cannot be inflationary because the amount of Bitcoins is fixed at a maximum cap of 21 million.
They get progressively harder to make.
And so...
It cannot be inflationary, which is why the value of Bitcoin is going up.
Eleven months ago, it was $10.
Now, it's approaching $11.50 Canadian.
So, the question is why?
What possible value could Bitcoins have that would generate that amount of growth, that amount of...
Value per Bitcoin.
Well, people who don't know about what Bitcoin can do view it as a bubble.
They say, well, it's gone from $10 to $1,100 in less than a year.
Therefore, it has to be a tulip mania exuberant bubble.
And I can understand that.
I completely understand that perspective.
But I would argue that that's because the true value of what Bitcoin can do in terms of replacing financial services is truly astounding and will be, I argue, It's about the biggest revolution in economic history if widespread adoption continues, which I see no reason, given the amazing amount of value that is in having direct, one-on-one, no need for a third party financial transactions.
Having that available to people is such a value that It's irresistible.
There's just so much profit to be made from it.
And of course, what it will do is it will release all of the people currently involved in heavy duty accounting and heavy duty conflict resolution and financial services and banks and so on.
It will release them to get real jobs.
Obviously, we have a great deal of concern for these poor people in the finance industry who may be threatened with the loss of livelihood.
Naturally, of course, Bitcoin charities can be set up to take care of them and to make sure that they stay in the Lexuses and the Rolls Royces and the Bentleys and the Jaguars, to which they become accustomed because we wouldn't want them to have to downgrade.
That would be a great human tragedy, of course.
I'm making a pretty big case here, and I'm going to go through some details and help you sort of understand that Bitcoin is not just upgraded money.
It's not just PayPal without fees or bank transfers without fees.
It is those things, but it is much, much, much more than that.
And we are talking a massive revolution.
Money is everything in terms of power.
And people think that Having political power, having the power to have law courts and military and police and so on, that that's the real power.
That's not the real power.
The real power is always and forever in the money.
You cannot wage war without debt.
And you cannot have debt for war, since war is so inherently not profitable.
You cannot have it without central banking, without government control, without fiat currency unlinked from anything that is limited.
Gold is limited, so having a gold-backed currency means you just can't keep printing money, at least if you're not the government.
And so having something that's limited in terms of money is very important.
Otherwise, you just run the photocopier and you basically turn into the Weimar Republic where you need a wheelbarrow full of money to buy a loaf of bread and it's probably more cost effective to burn the bread for heat, sorry, to burn the money for heat than it is to actually spend it on something.
The real power in the world is the power of money, which is why governments will always try to gain control of money.
When you gain control of money, you then have to gain control of interest rates because debt drives up interest rates and thus invalidates the value of borrowing money for governments.
You get these massive controls over the economy in terms of currency, in terms of interest rates, in terms of debt.
And if you look at, say, the promises made by politicians, they're almost always to do with giving you something for nothing, pretending that you can violate the laws of physics and biology.
And give people something for nothing.
The only way they can do that is through control of money.
And this is one reason why you're getting poorer and the rich are getting richer.
Because the rich and the politically connected have control of money and you don't.
And neither do I, if there's any consolation.
But people complain that Bitcoin has a market cap of this, that, or the other.
More Bitcoins are being created.
The Federal Reserve creates about as much money in two hours as being created in the four years of Bitcoin history, and they're only accelerating, whereas Bitcoin is decelerating.
So these are just important considerations to have.
The choice is not between Some sort of fantasy money that you can have, which is anonymous and gold-backed and physical, yet interest-bearing, yet not subjected to the whims and caprices and incompetencies of various administrations or administrators.
The choice is between some sort of electronic currency And our existing fiat currency system, which is rapidly accelerating towards its inevitable mathematical conclusion, which is not pretty at all.
So I think it's really, really important to spend a few minutes to really, really understand the capacities and potentials of Bitcoin.
I'll just give you a little teaser.
Bitcoins and the Bitcoin architecture not only can replace the entire stock market, But it actually has.
In some instances, there are stock markets running in the Bitcoin environment.
One small part of it is the transfer of Bitcoins, the Bitcoin architecture.
But the major part of it is it's an entire programming environment, an entire lookup environment.
And we'll get into what that means in a few minutes.
But it is the biggest revolution.
In economics, in history, assuming that it is adopted, and I would really argue that the future of freedom relies upon its adoption.
So please educate yourself.
We'll provide links to other Bitcoin information providers so that you can check out more than what I have to offer.
And in my background, I worked in software for 15 years.
I did a lot of database programming and a lot of presentations on the value of software.
So I do sort of understand how to make a case for software, and I do understand a good deal of what goes on in the land of software.
I've also read the white paper that the Bitcoin originator wrote about his goals and purposes.
I'll link that in the video below, in the low bar and in the podcast notes.
So let's get started, shall we?
Alright, so let's get started.
This is the truth about Bitcoin's value proposition.
And just as a minor note, I'm not a late adopter to this.
In June of 2011, which is I guess over two years ago now, I was on television talking about Bitcoin as the currency of the future.
So I hope I have some credibility there.
So let's dive into the value proposition.
So if Bitcoin can replace significant proportions or significant portions of financial markets, well, what kind of size of market are we talking about?
Financial markets in the United States are the largest in the world.
In 2011, I don't believe it's gotten smaller since then, finance and insurance represented 8.3% or nearly $1.3 trillion of the U.S. gross domestic product.
Now, this is a rapid, rapid growth and it has not...
Coincidentally, coincided with the rise of the power of the size of the state.
Of course, a lot of these guys serve the state, and they serve stock markets and so on.
The U.S. finance industry was only 10% of total non-farm business profits in 1947, but it grew to 50% of non-farm business profits by 2010.
So it is intensely eating up, in many ways, the rest of the economy.
Over the same period, the finance industry income as a proportion of GDP rose from 2.5% to 7.5%, and the finance industry's proportion of all corporate incomes rose from 10% to 20%.
And the references for this will be, of course, in the low bar, as always.
And these are inflation-adjusted.
The mean salary in New York City's finance industry rose from 80K in 1981 to 360K in 2011, while the average New York City salaries rose from 40,000 to 70,000.
It is a wildly profitable and larger and larger sector of the economy, which is why I imagine that the originators of Bitcoin will end up with a horse's head in their bed.
Now, part of what happens, of course, this is things like foreign exchange, as you can imagine.
Foreign exchange vanishes in a Bitcoin environment because there is no such thing as foreign exchange.
Credit and debit card processing take half the profits of smaller stores, right?
You run a mom and pop store or a small restaurant or whatever.
They literally will take half of your profits, which means, of course, you have to charge a lot more.
It's not entirely greed, of course.
I mean, credit card companies spend approximately 40% of their profits and incomes fighting Things like fraud and so on.
And so it is a huge problem.
Credit and debit cards are a huge problem.
I mean you need the number, you need the three digits on the back, and you need the expiry date, and you can pretty much go to town in most places.
This is not the case with Bitcoins at all.
Bitcoins cannot be spoofed or impersonated in any way, shape, or form.
So if there is a way of transferring these kinds of transactions from credit cards and debit cards to Bitcoins, then you are doubling the profits immediately of smaller stores, which means they can lower prices.
And so on.
And that's fantastic.
I mean, 15% of the price that you pay is due to shoplifting and fraud and other things.
And of course, shoplifting will still occur in a Bitcoin environment, but some of that will be significantly reduced.
And again, we can shed as many crocodile tears as we want for the people at the credit card companies.
We don't all cry that we don't have to cut food by hand from the fields, right?
We like that there are combine harvesters.
These kinds of improvements is the essence of our growth as a species economically.
So, credit and debit card processing, if it's transferred to Bitcoins through smartphones or Bitcoin cards, there are no transaction fees for Bitcoins.
You can pay a tiny bit if you want it to be slightly faster, but there are fundamentally no transaction fees whatsoever for Bitcoins.
And people say, well, what about the volatility or what about if you want to buy things not using Bitcoins but using regular old...
Fiat currency, well, I mean, there are services that for a tiny fee will immediately, the moment you swipe, the moment it's approved, will immediately transfer your bitcoins to cash and put it in your bank account.
So there are lots of solutions.
Remember, when you're talking about the government, it's a monopoly control with vested political, financial, and military interests in the existing system.
When you're talking about Bitcoin, you're talking about a decentralized group of people who can adapt and can extend the architecture to do just about anything, who all have a vested interest in its stability, who all have a vested interest in its accountability, and who all have a vested interest in maintaining the value of their Bitcoin.
So remember, if Bitcoins go into a freefall, Let's say.
Then they'll go into a free fall either because the value proposition hasn't been made.
All you can do in business, all you can do is make the value proposition.
That's all you can do.
And the value proposition is so clear, it's not going to be because there's no value proposition.
It might fall because there's some competitor to Bitcoin, although almost all the electronic currencies are based on Bitcoin at the moment.
And so if there's some feature missing from Bitcoin, you have hundreds and thousands of people, soon to be millions and millions of people, who all have a vested interest in maintaining the value of their Bitcoins.
They are going to work to extend The feature set of the Bitcoin architecture to borg in and absorb any new features that people find necessary that may be causing a decline in its value.
Yeah, fraud costs for credit card companies run up to 40%.
Here's a number that might get your attention.
The bank bailout total worldwide was $29.616 trillion.
And you know you're in crazy Googleplex money territory when the third decimal place is still a jaw-dropping amount of money.
So I can tell you this for sure.
I'm not a big one for making predictions, but I can tell you this for sure.
Bitcoin We'll never need a bank bailout.
It will never need a bailout from the government.
And so, you know, we're already as a species up almost $30 trillion, which is more than twice the GDP of the entire United States.
So the fact that as a species we're already ahead $30 trillion by not using the banks and by moving to Bitcoin, well, I would say that's not a bad value proposition for a day's work.
Here we can see from 1860 through 2008.
Of course, it's only higher since.
GDP share of the U.S. financial industry.
Of course, you know, it went up in the 1920s because the Fed was printing all this money.
When you print a whole bunch of money and you force people into the stock market, stocks get artificially inflated.
The stock market is really an effective federal policy, just like the housing market, which is not going to be the case with Bitcoins.
Getting the cold, withering Cryptkeeper hand of the state off the throat of the economy in terms of its financial, political, and military motives is really essential to advancing the cause not just of human wealth and human predictability, but of human liberty and freedom fundamentally.
As you can see, it's just going up and up and up.
It went down, of course, at the end of the Second World War, and it's been going up ever since.
So, Bitcoin, what is it?
It's not a piece of digital currency.
You know, it's not a bits and bytes that you burp across the internet.
This is a tiny part of it.
But fundamentally, it is a revolutionary protocol for information synchronization.
So every client on the Bitcoin network, every computer gets all relevant pieces of financial transaction or property transaction or property ownership or changes or anything like that.
And what it does is it sends out updates to all the databases across the whole world and it checks their validity without any central authority.
I won't bore you with the details.
You can listen to the podcast below if you'd like to know more about how this works.
It's really, it's completely ingenious and I would never have thought of it in a million years.
Not that that's the final test of something being a genius but it is really brilliant.
It is a step forward in computer science technology that is the equivalent, I would argue, of the heliocentric model of the solar system for astronomy or the theory of relativity for physics and so on.
This is a way for all computers to be updated with valid transactions.
You can't double spend coins, you can't spoof, you can't take your coins back.
There are no chargebacks in the entire You can still pay back, but there's no chargebacks.
There's no sort of boomerang.
Boomerangs are very expensive, right?
You book something as a sale in a store, 30, 60, 90, up to a year, that money can just be yanked back out of your account, and you have very little way to appeal it.
This does not occur in the Bitcoin environment.
You can, of course, send money back for free that was sent to you, but there's no chargebacks, which is hugely important as to its efficiency.
So, it's data that is shared worldwide that is Guaranteed to be valid and authentic, a true representation of what has actually occurred.
It cannot be spoofed, it cannot be intercepted, and it can be as public or as anonymous So if you want to do all your financial transactions anonymously, you can do that.
And that cannot be penetrated in any way, shape, or form if you take the necessary steps.
If you are a company that's out there and you want people to see your innards and you want people to see your profits and losses and costs and all that, you can put all or some of them in a publicly digestible format as you like.
You can encrypt the contents of this information or you cannot encrypt them.
It's really up to you.
And of course, there's value in both.
So when you're dealing with someone on the Bitcoin network, you're dealing with either You're dealing with an avatar, and the avatar can be themselves, or it can be just like a hand puppet.
You don't know who it is.
But you still know whether that hand puppet is trustworthy or not.
The elimination of the need for a third party to validate financial transactions, a credit card company, a bank, Western Union, the Federal Reserve, you name it.
The elimination of that Is an astounding, astounding revolution in money and thus society.
Society is based on money.
The history of society is almost exclusively the history of money.
And just look at the French Revolution, the Roman Empire, the English Revolution, the American Revolution.
All of it is founded on cash.
And so when you change money, you change the world in the most fundamental.
The only way to change the world more is to adjust the laws of physics.
I haven't found the slider scales for those yet, so I guess I'll have to stop eating cheesecake.
Now the database that this Bitcoin protocol keeps synchronized is referred to as the blockchain.
And that's just a massive tree of everything that's occurred in the database from beginning to now.
And that's called the blockchain.
It's a giant accounting ledger.
It's the storage and transmission of financial information.
That's one aspect to it.
There's other things.
You can put anything you want into the blockchain.
So when the FBI stole a whole bunch of stuff from Silk Road, people sent them $0 tokens.
Zero Bitcoin transactions which had a bunch of graffiti, anti-FBI graffiti.
You can include anything.
You can put a novel in there.
You can put a deed to property.
You can put a patent.
You can put DNA information.
Any information can be included in your financial transaction.
Once the other person accepts that, that is like a EULA that is publicly, like an end-user license agreement that's publicly validated, which is why I'm saying you can include contracts.
In your financial transactions.
And if the contracts are violated, they can be automatically invalidated.
If I say, I want you to build me a website in 30 days, I include that, I'll pay you 50 bitcoins to do this website in 30 days.
And we can include automatically in that whole process that if the website is not up and running, in 30 days the money reverts to me.
We don't need a third party at all.
We don't need a third party at all.
All of this can be set up in the Bitcoin environment.
So, as mentioned, it's not the sole function.
It's a public record of anything that you can consider valuable.
So, like back in the day, I used to write novels, and you can gauge the quality of my novel writing by the fact that I'm doing this rather than reading from one of my novels.
But what I had to do was I had to mail the novel back to myself so that it would be timestamped with when it was written.
I can now put the novel in the blockchain, encrypt it, so that nobody can read it, and that I can decrypt it.
That's my ownership.
That's my ownership.
And none of this needs to register with anyone.
Nobody needs to look it up.
They don't need to pay someone to send them the paperwork.
It's just right there.
If you are a reporter, you can use the blockchain to file a story and you're the undisputed first person to file that story if you're first in the blockchain.
So these are all things that are there.
There's a lot of possibilities that are baked into the Bitcoin architecture that are only now being explored.
Okay, so let's look at what you probably have heard about Bitcoin as money.
So, Bitcoin's blockchain is combined with simple encryption functions and database rules to provide people with ownership rights to a certain balance of numbers dubbed coins.
And, you know, it's one of the challenges when you have a new technology is that you have to use words from the old technology to describe it.
And it's just data.
Coins are just data that are attached to a particular identity that is all encrypted and as private as you want it to be.
So with the right private encryption tree from a user of the database, one owner's balance or partial balance of coins can be sent to another user on the database, right?
So I transfer these little bleeps and bloops and blurps to you, and we'll call them coins because, you know, like Kindle still makes it look like you're turning over a piece of paper when you turn it.
It's kind of what we're used to, right?
These database rules allow for a condition where multiple private encryption keys must be used to send a balance to another owner.
What does that mean?
Well, it means that you can have three people involved in a financial transaction, and two of those people have to agree for it to complete, right?
So if I am doing something with you and we both agree it's been done, then we both put our passcode in and the transaction is complete.
If you and I disagree, it doesn't complete until a third party, which could be human or could be automated, Agrees with either one of us, right?
So let's say we go to some guy, you know, Bob the wise elder down the street, and we present her a case and he says, I agree with you, Steph, or someone else.
Then he agrees with that person, that person then gets the money.
Or it could be automated.
Insofar as if a certain condition is not fulfilled, the transaction reverts or the money reverts back to the original owner or it doesn't get sent at all.
And these are...
And imagine, you know, right now, let me tell you, dispute resolution for small transactions is almost completely unavailable to people who aren't enmeshed in things like credit cards and paying all of those points for that.
For poor people, people in the third world, it's just not really available.
The...
The architecture of Bitcoins allows for this to be baked right in and to be part of people's financial transactions and to be done either virtually for free or for a very small amount of money.
So it extends dispute resolution.
Like I once was thinking of using a court many years ago.
I was told it was going to cost me a quarter million dollars in five to ten years of my life.
I think the value proposition of Bitcoin relative to government courts is pretty key.
So these are escrow functions.
Escrow, of course, is generally holding money until a particular condition is completed, so you know the money's there, and then when its condition is completed, the money is released.
So the buyer and the merchant agree, the buyer and the mediator, or the merchant and the mediator agree.
That is what occurs.
So Bitcoin protocol doesn't care where these private encryption keys are used to authorize transactions, doesn't care where they come from, as long as they're the correct keys.
So does the origin, the IP address it originates from, the computer or the VPN or whatever, doesn't care.
Doesn't care at all.
It's just, does this key open this lock?
I don't care whose hand is holding it.
It could be dangled with puppet strings for all.
It cares.
As long as the key fits, it matters.
So a program in the blockchain called a script which contains the correct private encryption keys could be used to authorize a specific transaction.
So what that means is that Bitcoin is an entire global programming environment for the transfer of information.
Now some of that information can be keys.
Other of that information could be any number of things.
So maybe I'm going to write you an article and you're going to pay me a Bitcoin.
And I write that article and I send it to you.
It's encrypted on the Bitcoin network.
You like it and you approve it.
These are all things that are possible with no need for any third party whatsoever.
Nobody's in charge.
It just works.
This is unbelievable.
If you don't get how exciting this is, just keep listening.
It gets better.
So you can send a transaction to Bitcoins that are not executed for a certain period of time or on a certain date and so on.
And that is impressive, right?
So if I say, well, I want to leave my Bitcoins to my daughter when she turns 18, I can set that up now.
When she turns 18, she just automatically gets, I don't need a lawyer to set up a will for my property.
The degree to which my property deeds and the value of my Bitcoins are embedded in the Bitcoin network, I don't need a lawyer to set any of this stuff up.
I can just set it up myself.
So you can also do things like Kickstarter projects so people can say, I say, well, I need a thousand bitcoins to finish my documentary because J-Lo is pricey.
And people can say, well, I'll donate, but I don't think you're going to get that far.
Everyone, until I reach that, doesn't get deducted from anyone's account.
So all of these things are possible in the Bitcoin environment.
Now, there are scripts that can check the internet, right?
Of course, Bitcoin environment is on the internet, so it can check information that's on the internet, right?
So there's a variety of things that you can do.
So let's say I want my daughter to get my Bitcoins either when she turns 18 or when I'm dead.
Well, if states like Missouri put people's death notices online, you could ping that and as soon as your name and date of birth and maybe some special key shows up there, then the money will be released.
Again, you don't need a lawyer to execute this stuff.
And again, I know it's tough to think of reducing the amount of money that lawyers make.
Anyway, we'll hold hands, we'll sing some kumbaya to help them transition.
So if you say that, let's say you host with a particular website company, they guarantee uptime, and if your website is down, they'll pay you bitcoins every minute it's down.
Again, you just set this up.
The bitcoin chain will ping the website.
Anytime it goes down, the money will be transferred.
When it comes back up again, the money will stop being transferred again.
No people are necessary for any of this at all.
A reward can be automatically delivered on the completion of some sort of online project.
So, for instance, there's pretty good translation tools on the web, but let's say it's really important that I read a site in Turkish.
Well, I can just put something up there and say, translate this for me on the fly, and when I'm satisfied with it, the Bitcoin automatically gets paid to the person.
Again, you don't need human intervention or a third party from that standpoint.
So, we talked a little bit about the money aspect, and again, money is just one form of the data that Bitcoin can accept and transmit to everyone and verify, but it can be any kind of information.
Timestamping and verifying information without revealing what that information is, Or who posted it, right?
Because if you've got the key to your identity on the blockchain and you have the key to whatever's encrypted that you put there, I mean, it doesn't care.
It just, it's a blind photocopy.
It just replicates whatever's there.
And that's just astounding.
So as we mentioned, you can use it to protect yourself from plagiarism or from other people claiming they came up with the idea first or anything like that.
So here's a slightly more complicated example.
Again, it is only limited by the imagination of the programmers and the market demand for services.
This is why it is so revolutionary.
You can have it do almost anything that involves Data.
And these days, what doesn't involve data?
And, you know, to those blue-collar workers who were put out of work by some of the robots and some of the other automation that has occurred, don't worry, the white-collar workers are next, and then we can all get on to finger-painting clouds and other cool stuff.
An inventor could use the blockchains to verify and timestamp a digital fingerprint called a hash of a document describing their invention for free.
So even if you don't reveal the information about your invention, the blockchain could be used as proof of its existence.
If at some point later they said, well, who invented this?
Blockchain solves that.
It has nothing to do with money fundamentally, but it's right there.
Marriage certificates, divorce certificates, anything that you want could be put in these things as well.
So, if you remember that this thing called the blockchain, which is the ecosystem of Bitcoin, it's a giant public record of ownership or giant public record of data independently audited and verified by computers all over the world with ownership rights secured by cryptography.
Now, one of the projects that's underway in the Bitcoin community is called the Colored Coins Project.
See, people say, well, what if you get up with a competing currency that competes with Bitcoin?
Well, you can put that in the Bitcoin.
I can come up with Steph Bucks if I want.
I can say, I want to finish my documentary.
I will take Steph Bucks.
And they will give you, you know, every Steph Bucks gives you a half a point, a half a percentage point of the profits of the documentary.
And then I say, oops, fooled you.
I'm releasing it for free.
But thanks for the money.
And then you come storm the Bastille.
But Colored Coins...
They allow anyone to mark a Bitcoin or a fraction of a Bitcoin with ownership rights of just about anything you can imagine.
So here's an example.
If I sell you my house at 123 Lincoln Road, I can complete the transaction by sending you a scrap of a Bitcoin that I have uniquely marked with an ownership deed for that property.
So the legalese equivalent of this Bitcoin entitles its owner to the property at 123 Lincoln Road.
No registry, no contracts, no big old dusty filing cabinets with overweight public sector workers shuffling back and forth like zombies.
It's just right there in the architecture.
No need for a third party.
This ownership transfer of 123 Lincoln Road will now be publicly visible and auditable on the giant public record of ownership information.
And again, that doesn't mean that you live there.
You can privatize and keep encrypted and anonymous that it's you who lives there, but the ownership can be there, and if anybody questions it or opposes it, you can approve your own ownership.
No need for lawyers or registries or central authorities.
This is what I'm talking about.
Are you getting excited yet?
Let's keep going.
So the Colored Coins project takes the application of the blockchain as a public record of ownership below one step further.
So imagine, imagine, okay, it's a company that marks or colors bitcoins or fractions of them with proof of ownership in shares of that company.
So these are like shares.
They're not tradable, like you can't go in and buy a car with a share, but they entitle you to partial ownership of an organization and partial share or dividends in its profits.
So people can take full ownership of shares in companies they invest in, right?
Because right now they're physically or digitally stored with a third party.
Oh man!
But then we face the emotional barrier of not being able to give as a society so much money to stockbrokers.
Hold me?
Well, we'll try.
We'll try and struggle through that as best we can and release these people to do something productive in the world.
This would facilitate the purchasing, selling, or trading of shares without the need of intermediaries such as brokers or stock exchanges.
Oh my goodness!
Are you getting excited yet?
Von Mises said, a great Austrian economist, that the foundational difference between a free society and all other economies was the existence of a stock market.
We're talking about people.
We're talking about privatizing the stock market.
Isn't that amazing?
Isn't that astounding?
So it grants everyone in the world equal and free access to the stock market.
Do you ever think, oh, I know this great company.
I'd really like to get to the stock market.
Oh, the regulations.
Oh, I've got to find a stockbroker.
Oh, I've got to set up my account.
Forget all of that.
And forget about the overhead.
Of these people granting you the right to buy and sell stuff.
Imagine, you couldn't buy your groceries, you just got to go to a third party who are going to charge you 40% of your grocery cost to go and buy the groceries for you.
It's madness!
Direct economic opportunity.
That's what we're talking about.
Not even low barrier to entry, but virtually no barrier to entry.
This is how we help people in the third world.
It gives individuals and entrepreneurs and small businesses equal access to public funding.
A business of any size can have an IPO. Your daughter's thinking of opening a lemonade stand.
You can have an IPO and get the cost of lemonade up front.
And what is this going to save?
Oh, it's astounding.
Companies that want to offer shares to the general public.
I went through this when I was an entrepreneur.
The average cost, the average cost is $3.7 million, plus an underwriter's fee of at least 5% of whatever value their IPO raises.
Now, in moral terms, this is called highway robbery.
In Bitcoin terms, this is called, huh?
Oh, I think that's gone in the rear view.
We don't have to worry about that anymore.
This makes the ability to raise public funds extremely prohibitive for small and medium businesses, a luxury only available to companies of a certain size and clout.
Now, those companies like the fact that there's this massive barrier to entry to having an IPO.
We're talking about leveling the playing field.
This is going to shrink the gap between rich and poor as society and rules and regulations and laws and governments and money and financial instruments become more and more complicated, more and more regulated, more and more dependent upon certifications and approval by the state.
It becomes harder and harder for small businesses to access that, which is why big companies get bigger and small companies stay small.
We're talking about equalizing opportunity for access to capital with almost no overhead whatsoever.
Come on!
So for an artist or a band or a mom or a pop shop having equal access to the ability to offer shares to the public to raise money for new projects would be invaluable.
Think you're putting plumbing in, in your African village?
Why not have an IPO? Again, we will have to send condolence cards to all of the bald, empty-headed suits at Goldman Sachs.
But again, I think I can find my way to struggle through that.
Support for it is already built into the Bitcoin protocol.
Easy peasy, nice and easy.
It's one programming project away to create online Bitcoin wallets that support colored coins.
The front end is the stuff that sits on your computer.
It removes the need for stock exchanges, brokers, underwriters, and other barriers to entry.
In public finance.
That is yummy, tasty futurism right here and now.
People say, well, you know, but it's open source and so on.
It's like, hey, you know what else was open source?
Linux.
You know what the basis of Android is?
Linux.
Linux is the most widely propagated programming environment in the world, and it's open source.
These are just tips of the icebergs.
And again, this is some ideas that I've gathered together.
Again, the sources are below.
Really, the sky is wide open.
The possibilities are literally, not just virtually, but literally limitless.
It has been described as the internet of money, but given that it's not just mainly for porn and fraud, that it is also infinitely more secure than the internet, infinitely more anonymous than the internet.
So this is a complete revolution and a way of bypassing all of these third parties.
You could argue there was some necessity for them in the past, although through the process of regulatory capture they have invaded and infested the state and used the state to their own advantage right now.
They're generally parasitical upon the future health and wealth of mankind.
This is sunlight to these vampires, and it is a way of having us tunnel out the labyrinth and maze of financial regulations and complexities and having a clear, direct Friction-free interaction with each other.
If you can replace stock markets, a significant amount of banking, a significant amount of underwriting and IPO expertise, if you can eliminate the need for credit card companies, I believe we can literally, literally, literally double our wealth.
Within a few years.
Double our wealth of society.
That means more help for the poor.
That means more help for the third world.
That means more help for people who need medical care.
This means more income for people.
So if they want to stay home with their kids rather than putting them into bug-infested daycares, so much the better.
This is not just a revolution in money.
This is a revolution in what it is possible for us as a society and a species.
Plus, all the people who formerly used to do this stuff, who are all very smart and Some of which could theoretically be very ethical.
They can all go out and do really, really productive things.
So not only are we reducing overhead, we're liberating some of the best and brightest minds of the species to go and do stuff that is really market-driven, consumer-driven, and isn't just increasingly complex government food-addle overhead that slowly strangles the human race.
This is Devan Molyneux from Free Domain Radio.
Get yourself knowledge about all this stuff.
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