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Feb. 27, 2014 - Freedomain Radio - Stefan Molyneux

01:28:33

2626 Bitcoin vs. The Federal Reserve - Andreas Antonopoulos and Stefan Molyneux

Stefan Molyneux and Andreas Antonopoulos discuss the fall of Mt. Gox, the greatly exaggerated death of Bitcoin, the joy of failure within the Bitcoin economy, the incredible opportunity Bitcoin provides those without access to the modern banking system, and the difference between Bitcoin and the Federal Reserve System and fiat currencies worldwide.

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	Hi, everybody.
	It's Stefan Molyneux from Freedomain Radio.
	I have Andreas Antonopoulos, who is really the go-to Bitcoin guy for a wide variety of technical requirements, security and stability and non-crashability, taking your Bitcoins in a giant sucking sound to the center of the universe.
	So he's the chief security officer of blockchain.info.
	Of course, he's a host.
	On Let's Talk Bitcoin, an expert on information security and cryptography.
	By the way, we're both going to be at the Texas event.
	Oh, great.
	So there's a Toronto Bitcoin Expo and a Texas event.
	The Texas Bitcoin Conference in Austin, Texas, March 5th to 6th.
	Ben Swan, Jeffrey Tucker, Jeff Berwick, myself, Andreas, of course, and Toronto Bitcoin Expo, April 11th to 13th.
	BitcoinExpo.ca.
	Andreas, thank you so much for taking the time tonight.
	Oh, thank you.
	I really appreciate it.
	It's great to finally meet you on video, at least, and looking forward to meeting you in person in Texas.
	Let's clear away some of the truly horrifying two individuals, but I would argue an actual advantage to the Bitcoin universe, which is Mt.
	Gox or Mt.
	Gox.
	I didn't even know that until it's actually Magic the Gathering online exchange.
	That's where it started, right?
	It was a card trading, and then I think in 2009 they rebranded themselves as Bitcoin experts and then began taking people's money and holding that money.
	And of course, basically, this is putting your money in a bank.
	I just want people to understand that you can go into much more detail about the technicalities of it, of course.
	But when you go to an exchange like MTGox, you are giving them your wallet.
	You are giving them your money.
	And then you are, of course, vulnerable to their levels of security and Thank you.
	Well I think you got it right.
	One of the incredible things about Bitcoin is that it allows you to exert control and ownership over your funds directly through the use of cryptographic keys which you can own.
	It also offers tremendous transparency Because everything happens on a distributed public asset ledger, the blockchain.
	And these are great security features.
	So, for example, the company I work for in terms of security as the chief security officer of blockchain...
	As a company, we have no access to the customer funds and we have no access to the customer keys.
	The reason we do that is because we make the browser control the keys on the user end.
	And we never touch the keys.
	And that's a deliberate design decision which takes full advantage of the security controls and capabilities of the Bitcoin blockchain to empower the users, but also to protect them.
	Protect them not only from people who might rob us as blockchain, but even protect them from us in case we suddenly went rogue and decided to rob all our customers.
	We can't even do that.
	We have no access to their funds.
	We have no access to their keys.
	With MTGOX, what they did, in fact, was they removed the Bitcoin from the protective control of the users.
	They removed them from the ownership control of the keys of the users by taking the keys, by essentially users giving them access to the keys or giving them access to the Bitcoin.
	And they ran custodial accounts, just like a bank, only worse.
	Because, you know, on the one hand in the blockchain, you have security through the blockchain.
	On the other hand, in the traditional banking system, you have this elaborate set of controls and institutions designed to protect consumers.
	And what MTGox did is it took the security out of the blockchain, but it wasn't subject to any of the regulations, which, you know, though fallible and often, you know, not working very well to protect consumers, would have been better than nothing.
	And in this particular case, consumers were left with the only trust embedded entirely in MTGox, an organization and run by an individual that had proven again and again that they were not deserving of that trust.
	So I think the argument could be made that if we could trust any particular individual or group of individuals to securely manage the money, then we would never have bank runs.
	Of course, the Federal Reserve would be an upright and honest institution serving the consumer and not massive financial interests and politicians and so on.
	It is really the very fallibility of human nature and our temptations and our capacity for corruption that requires the kind of public ledger and open exposure that Bitcoin architecture can provide and requires the trust mechanisms and cryptography which Bitcoin provides.
	So in a weird way, if this had never happened, there'd be no need for Bitcoin.
	I don't know if that makes any sense to you, but this is sort of one of the takes that I have on it.
	It does, it absolutely does.
	If you look at it historically, the history of banking is a history of continuous bank failure, currency failure, runs on banks, and fraud, punctuated by brief periods...
	I mean, it's a cycle of failure after cycle of failure, bubble after bubble.
	Because every time you give trust to people, and then you give them enormous power that is absolutely corrupting, that trust will soon be violated.
	And the whole point of the blockchain is to not trust in individuals or institutions, but instead to use cryptographic proof as a better means of security.
	MTGox was a bank failure that really demonstrated why banks are not a reliable means for wealth management in the long term because they imbue trust in individuals and institutions.
	The blockchain is a better solution.
	In fact, we have the ability with programmable money to solve many of the issues that we saw here.
	Even if you had an organization that has custodial access to the funds, on the blockchain you can do cryptographic proof of solvency, which means that the custodian of the funds, without a regulator, without an independent audit, can simply sign With their keys and prove that they have adequate reserves corresponding to every customer account on the system.
	So even if you have custodial accounts you can do a lot better than a traditional regulatory system.
	Right.
	Now, one of the things that may be confusing to people is this idea of cold storage.
	And I wonder if you could go into the sort of the tripartite way of verification or access to funds that MT Gox seems to have promised and seems to have, let's put it charitably, failed to deliver on that promise of the cold storage of keys.
	Right.
	So cold storage is the use of cryptographic keys that have never been on an online system and have never touched an online system.
	And the way you do that is using one of the features of the cryptographic keys that are used in Bitcoin, which is that you have a pair of keys that are asymmetric.
	You have a private key that is used to unlock funds, and it is the one you must keep private.
	And then you have a public address Like an email address, you can give that to anyone, and that allows you to send funds that are then locked and can only be unlocked by the private key.
	One of the things you can do is you can generate these key pairs on an offline system and then print them on paper, perhaps even split them between multiple people, achieving separation of duties, where, for example, you take the private key and you split it into six shares, and it can only be reconstructed If any of those six shares, if three at least of those shares come together.
	Now, in a traditional cold storage system, in a properly implemented cold storage system, what you would do is, on a regular basis, you would sweep funds from your online system by sending them to one of the addresses that are in cold storage.
	Now, you can do that without bringing those addresses online.
	Sorry to interrupt...
	You said sweep funds.
	That's not something I'm familiar with.
	Maybe the listeners are, but I wonder if you could just mention what that is.
	So let's say, for example, you have in your exchange, you would have some funds that you have online, and these are used in order to fulfill the withdrawals of the day.
	So that's your active cash or cash flow.
	Just like in a bank, you have some cash reserves on hand to satisfy withdrawal demands so that if people show up at the teller's window and try to withdraw, you can give them cash.
	Now, just like in a bank, you don't keep all of the cash in the bank at all times.
	And what you do is, if you have excess cash from what you need for the day, you take the rest and you lock it in a vault.
	Now, in the case of cryptography, what you would do is at regular intervals, any excess cash you have in the system, whether that's an exchange or a web wallet or something like that, You would transfer those funds to one of the cold storage addresses.
	Now, because only the public keys are used in the online system, that's a one-way transfer.
	It's like...
	You know how you have these safes in retail institutions that have a little tube in the top so you can stuff cash into them, but they say the cashier doesn't have access to the keys to unlock it, so it's one way in?
	It's kind of like that.
	So you essentially...
	You stuff money into the cold storage system.
	Getting it out of the cold storage system involves a rather elaborate process.
	For example, if you have it in multiple shares, you have to get all the shares together and reconstruct the keys.
	Or you have to bring the keys from some printed material into an online system.
	And then create a transaction that transfers from the cold storage back into the hot storage.
	And that means that the keys are never online until you need to completely empty that cold storage system back into the, as it's called, the hot wallet, which is the one that's online.
	Now, this sounds elaborate, and it sounds like something that you would use in a large environment.
	But let me tell you something.
	I do this myself.
	I use a very simple cold storage system, which in Bitcoin is a paper wallet, where you just print the keys on paper.
	I keep paper wallets in a safe deposit box.
	I also distribute them in the safe for friends and colleagues.
	I keep more than a few Bitcoin.
	I have a small amount for daily spending, like you would have cash in your wallet.
	And then when I get paid in Bitcoin, or if I have an excess amount of Bitcoin in my account, every now and then I'll sweep, I'll move some of it into my cold storage system.
	And that way it's locked away.
	So even if my computer is hacked, even if my Bitcoin system is hacked, all it can get to is just the petty cash I have on hand.
	And the amount that's in my paper wallets is secure.
	This is how a cold storage should work.
	And the definition of cold storage is you cannot access it from online.
	It's impossible to access from online.
	In this particular case, it sounds like cold storage is not what was being implemented there.
	Well, because in MTGox, the bitcoins, the 750,000 or 740,000 that it's rumored to have been stolen, have been stolen over years in small increments, I would assume.
	It's sort of like that office space gig where they shave off little pennies here and there and end up with a lot of money.
	So that could not have occurred in a cold storage scenario.
	And I think that's why people are skeptical that it's ever been implemented there.
	Yes, so there are a number of possible scenarios here.
	Obviously, one is, at some point, the level of incompetence required for this story to be credible is so extreme that it just becomes completely ridiculous.
	But in a cold storage system, you could not do that, because it would be a one-way transfer.
	In fact, the elaborate manual process required to move funds from cold storage into the hot wallet...
	It would have been an obvious red flag.
	So if suddenly your hot wallet's empty and you have to move things from cold storage, if you had to do that again and again and again, you would notice that something was wrong.
	There's no way you can do it to the back door.
	Now, what they're saying, essentially, I think in the alleged leak document that I read, it said there was a leak between the hot and cold wallet system.
	What that tells me is it wasn't a cold wallet.
	It was simply an intermediate storage that was stored elsewhere, but was linked so that it could automatically move funds.
	Now, even that is a scenario that stretches credulity, because to be able to do that over time and not notice that the balance was being drained, and we're talking about a very large amount of money, well, at least by Bitcoin standards.
	By normal banking standards, you know, this is like a thousandth of the Madoff Just one of the scandals we saw in the last few years, it's a drop in the ocean.
	But by Bitcoin standards, this is a pretty large amount of money.
	And I mean, the explanation just makes no sense whatsoever.
	So I guess time will tell what happened with MTGox.
	My particular perspective, and I say this with all due sympathy to the people whose money is either gone or It's tragic.
	It's a new environment.
	It's a new system.
	I myself have lost some bitcoins due to my own lack of understanding and this was pure idiocy on my part.
	I really feel very sorry for the people but the reality is that if you give other people your money, There's always a risk involved and there was a benefit.
	It's like going to Vegas.
	You put your money on Red 22, there's a risk and then there's a benefit.
	Anytime you try to seek a benefit from people, you are going to incur a risk.
	The benefit there may have been that they were able to pay you better rates because they didn't have a cold storage system if they indeed didn't.
	Or they didn't spend the money to buy the proper expertise or to hire the proper expertise or to put the right standards in place, the right protocols.
	So you were getting some kind of deal based upon less overhead.
	And with that, of course, comes the risk.
	And I really feel for people who weren't aware of that, but I think most people who are invested in Bitcoin, at least to any significant degree, are old enough to know that it is a buy-a-beware scenario, particularly in the Wild West of a new technology.
	So I wonder what benefit MT Gox was providing to people that – That outweighed some of the risks.
	Because you talked about this, I think it was about 10 months ago, you told people that MT Gox was not a reliable place to be and there were significant concerns raised.
	Of course, they had problems last fall.
	So with all these red flags, people who left their money there, I'm sympathetic, but at the same time, I don't even know how to put it.
	There is a gambling element involved there.
	I think I can provide an explanation and unfortunately it's not an issue of risk and reward.
	So you have to understand the history here and maybe I can give a very brief history of what has happened in this space.
	So first of all, I don't think that...
	as a card trading site.
	I think the intention was to build Magic the Gathering online exchange.
	But then at some point, just before it was launched, Bitcoin came on the scene, and Mark Karpelis, the CEO of MT Gox, decided this would be a better use of his skills and built the world's first open exchange for Bitcoin.
	Now this was really a pioneering and visionary thing.
	This was much earlier than most other people figured it out.
	And for that actually the Bitcoin community owes him great thanks because at a time when there was no other source, MTGox provided not only the first exchange, not only the first liquidity pool, but also the first price discovery mechanism, which was critical.
	Before then, there really wasn't a Bitcoin price.
	Now, here's what that did.
	That established the brand as very closely associated with Bitcoin.
	And then things got big, and they got big pretty fast, and it quickly became evident that the skills that got him to be a visionary and a pioneer were not going to be the skills that scaled.
	In fact, it was comical that this thing was built In PHP and MySQL in a monolithic application stack.
	Now, nothing wrong with PHP for building web applications, but you do not build a scalable exchange in a web application language, and you certainly don't build it as a monolithic stack.
	That will not scale.
	And so it didn't scale.
	Well, certainly not when there are programming languages like COBOL available.
	Actually, that's just my first programming language.
	But yeah, you need something a bit more scalable and robust.
	Perhaps even compilable to native, right?
	Right.
	Well, exchanges are usually built as collections of loosely coupled components on a distributed system that can be scaled out horizontally so that you have different components like an order matching engine and an order pricing engine, etc., etc., that communicate together over a distributed message bus.
	And that allows you to scale systems out.
	But in any case, the point is that What you had here is essentially a hobbyist with some elementary programming skills in web programming, who managed to build it that far, but then it wouldn't scale.
	From that point on, we had a series of goxings, as they're now known, and that's now in the Urban Dictionary, and at this point will probably be legendary, but these were failures to scale, where the exchange would collapse under load.
	April 2013 was one of the more spectacular goxings because what happened then was simultaneous with the bail-in attempts in Cyprus, which caused not only a great panic among people who suddenly realized that the banking system itself is which caused not only a great panic among people who suddenly realized that the banking system itself is not solvent and at the same time is predatory and will chew up depositors to satisfy the bankers, started looking for alternatives and
	Bitcoin's price shot up to about $266 at its highest and at that point a flood of trading hit MTGOX as well as supposedly a denial of service attack and the trading engine basically came screeching to a halt and at some point you had one-hour lags.
	Now we're talking about a system where you place a market order and then it isn't filled for an hour.
	And when it is filled, it's filled at whatever price it is an hour later.
	And that's a terrible system to be trying to trade on.
	That caused the flash crash.
	And the flash crash took the price down to about $55.
	From 266, and that was probably the third goxing, but it was one of the most prominent.
	At that point, I and many others in the industry said, look, this is not going anywhere, and the biggest problem here is the problem of management incompetence, and that problem will not be fixed by throwing more servers at the problem.
	You need to fundamentally rethink how you're building this architecture, and the skills that got marked there are not going to get them any further.
	Sorry, just for those who don't have entrepreneurial backgrounds, generally, you build a bunch of crap to prove a concept, and then once the concept is proven and the market demand is shown to be there, you go and use your bunch of crap.
	And I've built bunches of crap before, so I know what I'm talking about as far as this goes.
	You take your bunches of crap code that works but isn't really scalable, and you say, look, people really want this.
	Here's the price.
	Here's the investment opportunity.
	Here's all our I mean,
	MTGox was a highly profitable organization at this point that was getting the benefits Of explosive growth on which they were making a nice percentage commission fee.
	At this point, MTGOS was probably one of the biggest Bitcoin holders out there.
	They certainly had the money to buy the skills they needed to throw away that unscalable piece of crap and build something correctly.
	They didn't do that.
	The reason they didn't do that was gross management incompetence.
	This pattern continued again and again.
	In July, They had one of their bank accounts confiscated.
	That caused a panic, which then caused a run on the bank, essentially.
	Their withdrawal system for wire transfers in U.S. dollars was based on a manual system, because that's how things are processed in Japan.
	That came to a screeching halt, and they had two or three-month backlogs at some point, six weeks plus.
	And then eventually...
	We saw this beginning to speed up a bit.
	So by September, they could process withdrawals in a few weeks instead of, you know, with six-plus-week delays.
	Well, and sorry, just to point out, those withdrawals are, you put your order in and a few weeks later, at whatever price it's at, that's what you get.
	Which, in such a volatile market is, I mean, you couldn't design a worse system.
	It's crazy, yeah.
	And so these problems continue.
	That was the fourth goxing.
	And then the fifth goxing, of course, was three weeks ago.
	Something that was well known and handled by most of the other exchanges quite well, which was transaction malleability, was blamed by Gox for causing essentially extraneous withdrawals.
	They had to freeze withdrawals.
	And now, several weeks later, we see this in the document, if it is true, it says that was the reason they lost the money, which really completely beggars belief.
	I mean, this is something that other exchanges handled quite comfortably, and...
	Even when it became a denial of service attack against the Bitcoin network as a whole, it disrupted operations briefly and 24 hours later everybody was back up and running.
	The attack didn't even stop.
	What happened is the exchanges actually became more resilient and more robust and were able to ignore I just wanted to mention too,
	just from a moral perspective, I find it So contemptible and vicious and destructive that if it's their incompetence that caused these losses, to then cast a doubt on the entire architecture, which people like you and I will understand is not particularly a significant issue, but it scales the scare factor.
	It sounds like, well, the whole thing is screwed.
	It's completely vulnerable.
	Cryptocurrency, my ass.
	You can just basically go in with a fly-fishing line and pull out as many bitcoins as you want.
	And that's...
	If you're a bad driver, don't say that there's something fundamentally wrong with the entire line of cars because the amount of cost that that incurs upon everybody else is truly staggering.
	If it's all true, it is so vile and contemptible that they would then destroy the value of Bitcoin in the minds of people rather than admit to their own incompetence.
	But I guess that's part of the incompetence, right?
	Right.
	I mean, that was the outrageous thing in that case.
	And I think, you know, I had certainly criticized Car Palace for his management competence, but his management incompetence was something he inflicted on his customers who had better choices.
	But turning around and blaming Bitcoin at a time where everybody was looking for an excuse and there was plenty of media appetite for salacious news about Bitcoin that would make splashy headlines.
	And that caused a raft of really appalling headlines all around the world that completely misrepresented the situation.
	But, I mean, that's Mark Karpelis.
	It's not just incompetence.
	It's basically blaming others for his own incompetence and shifting the blame.
	And, you know, once again, that's what happened.
	Here's the bottom line: Bitcoin and its core security mechanism of the distributed consensus and the distributed asset ledger, which provides authoritative records of every transaction that you can trust, was never violated.
	There was not a single bit stolen from that system, and not a single bit can be stolen from that system.
	That system continues to be...
	It's very trustworthy and one of the most secure systems for payments that exist in the world today.
	What happened was a faulty implementation by Mark Garpellas and by MT Gox caused him problems and his customers.
	I would love to see this be the final goxing.
	Because here's what happened.
	Every time there was one of these scenarios, the veterans went, oh well, there goes gox again.
	We're going to suffer a brief price dip.
	Maybe we'll even buy into the dip and then hope everything recovers in a couple of months while people figure out.
	They're going to write the obituary of Bitcoin.
	They're going to look around two weeks later.
	Bitcoin's going to still be there.
	They're going to figure out it wasn't Bitcoin.
	And great, the price is going to rally again.
	No big deal.
	We can handle that.
	Here's the problem.
	Because Gox was associated with Bitcoin, in a lot of the media, Gox was Bitcoin, and Bitcoin was Gox.
	As a result, they kept funneling news users into the maw of Gox.
	And it chewed them up because they would quickly learn the lesson, but then there'd be a whole new generation of users who just adopted the currency who would go looking for an exchange to buy Bitcoin and would fall into the trap of seeing the oldest and first exchange and assuming that is the best place to do it.
	Now, you know, we were at the same time saying, friends, don't let friends get gox.
	Don't go there.
	Tell your friends not to go there.
	But the problem is that there was always a steady stream of new adopters because we're looking at exponential growth and they had to go somewhere.
	So this brand was sticky enough to create a new bunch of victims with every round.
	Right.
	So taking them out of the equation is now going to channel people towards more reputable and stable and secure networks.
	And I think my argument is fundamentally, this is not, to me, this is not the end of Bitcoin.
	This is proof of Bitcoin.
	Why?
	Because it failed.
	That's the whole point.
	Things which cannot fail in a market environment have no chance of flourishing or growing.
	I mean, look at the bailouts that were pumped at the financial institutions after 2008.
	And these zombie banks are still continuing to go and eat the young and the unborn and sell off everyone to foreign banksters.
	Look at the zombie businesses that have had Japan in their death-dealing grip, their rotting teeth-chewing festival of the last 20-plus years where their economy has died and now young men don't even want to breed.
	Letting things fail is absolutely essential.
	I mean if everyone got a gold, there'd be no Olympics.
	So the fact that an institution in the Bitcoin universe has failed, to me, is proof of the whole point.
	It didn't get bailed out.
	What more could you want?
	Right.
	And its failure will actually end up helping competitors.
	Because what happened in the meantime, since Gox was the leading exchange, back in April of 2013, Gox still accounted for about 65% to 70% of the global volume-weighted trade of U.S. dollars.
	A month ago, just before this series of failures at Gox, they were already down to less than 20% of the market.
	The reason for that was that gradually other exchanges, properly run, mature, well-operated exchanges, with experienced management teams, with credible investors and venture capital behind them, They had emerged in this market and provided a second generation of well-oiled businesses that were innovating, creating trust and security, and doing the job right.
	Not only were they already eroding Gox's hold on the market, but now they are ready to reap the benefits of being good players in this economy.
	That's going to be very little solace for the customers of GOX who got burned if in fact this ends up crashing completely.
	I'm hoping some money will be able to be recovered so that there will be some restitution.
	I'm hoping, although that's a pretty slim hope at the moment.
	But the good news is, yes, no one got bailed out.
	The failure of Gox was not a failure of business.
	Failure of Gox was the failure of an institution that acted like a bank with none of the maturity of a bank in an environment where they had the ability To use the trust and security of the blockchain and empower their users to keep control of their money.
	They chose not to do that.
	The end result was a lot of people got burned.
	Keep in mind, this will happen again.
	There will be fly-by-night operators who will set up centralized exchanges, who will gather the money of their customers in a single account, and who will not be trustworthy.
	New users who come into this unaware We need to educate users about the importance of using the blockchain security features to establish and maintain ownership and control of their funds.
	By owning and controlling their own keys.
	And that's where you can really take advantage of that and put behind you the legacy banking system and its serial failures, which were only demonstrated once again with Gox that behaves more like a legacy bank than a Bitcoin company.
	You generally approach anything version 1.0 with skepticism, and as far as I understand it, the architecture of MT Gox is more of a beta, and you don't put hundreds of thousands or millions of dollars in a beta with an untested and inexperienced I hope that I'm sure that there will come some big market need,
	of course, for the BBB, the Bitcoin Better Business Bureau or something like that, 4Bs, some sort of stamp of approval.
	This has gone through the Andreas...
	Antonopoulos' seal of approval for its security and reliability and all of that.
	And that will become known as something you need to look for.
	So then it's, you know, there's just some stamp of approval that will hopefully give people peace of mind.
	And if you don't have that, well, you know, the Nigerian scam emails still flood your inbox because unfortunately a few people click on them and give away their money.
	That doesn't mean that money is worthless.
	It just means that some people want to cut corners and take the easy way.
	It's my hope that a standard of excellence, an ISO standard it would be similar to, will be developed and people will submit themselves to that testing and also spend more time educating users on Bitcoin and its architecture.
	It's not like money.
	I mean, this is what people say.
	I mean, the coin thing is kind of annoying because it sounds like it's like money.
	But it is, of course, basically just a massive database of distributed information, one aspect of which can be used as currency, the rest of which can be used for wonderful things like your own stock market for free, saving you millions of dollars of IPO costs and extending the capacity to get capital even under the third world or people with the burner saving you millions of dollars of IPO costs and extending the capacity Wonderful third party verification, dispute resolution, public ledger information.
	I mean, it's a whole financial slash data slash copyright multiverse.
	One of which you can use as currency and it's a fine thing to use as currency but people need to spend the time to actually educate themselves.
	I mean I can't imagine that people who've got hundreds of thousands of dollars or more invested in something wouldn't have spent at least a couple of days becoming familiar.
	There are books out there.
	There are experts like yourself to figure out how this stuff can work.
	So, there is a little bit like if you don't study, you know, if I just suddenly say, hey, I could just go fly a plane.
	You know, I flew a flight simulator on the Atari 800.
	Off I go.
	You know, I'm going to leave, you know, a bald shadow on some mountaintops.
	So, you know, I really hope that the community will come up with good stamping mechanisms for best practices.
	But also, I, you know, really strongly urge people to get involved.
	Learn something about it.
	I mean, be an investor, which means know what you're doing.
	Don't just be a speculator throwing dots at a board.
	Right.
	Pay attention to this.
	There are going to be many obituaries for Bitcoin written over the next couple of weeks.
	And then just hold on and give it three or four weeks and look around and guess what?
	Bitcoin is still going to be there.
	Because Bitcoin is not just money for the internet.
	While it is one of the most perfect forms of money for the internet, it's safe, it's instant...
	And it is cheap to transmit money anywhere in the world across borders with no controls by anybody else.
	It is really good money for the internet, but that's not the point.
	Bitcoin and the blockchain technology that underlies it is the internet of money.
	It is a network that allows innovation at the edge.
	It allows for a distributed trusted asset ledger, which we've never had in history before.
	And on top of that, we can build a myriad applications.
	Currency is just the first app on this incredibly exciting invention.
	Just because AltaVista isn't a great search engine anymore, doesn't mean the internet went away.
	Just because MySpace is a backwater of music...
	Videos doesn't mean that social media died, or more importantly, the internet went away.
	The internet of money is here, and it's going to remain here because it has use, it has potential, and there is enormous demand across the world for financial liberty.
	and world integration in terms of economic activity and financial services.
	This thing can solve that problem.
	If we have failures that happen in the meantime, that does not change the fundamental utility of the concept.
	In this case, this failure will demonstrate once again the resilience.
	This is not about a currency.
	This is about a network of trust that enables international consensus on an asset ledger.
	And that is a huge invention that has a myriad of applications.
	Yeah, and I really wanted to reiterate to people that the whole point of failure within a market system is to take assets out of the hands of the less competent people and put them into the hands of the more competent people.
	If I'm sitting there in a cafe, I don't play guitar.
	If I'm sitting there in a cafe learning how to tune and play my guitar, and then Eric Clapton walks in, people are going to say, Hey, Steph, why don't you give your guitar to Eric Clapton?
	Because he knows what the hell he's doing.
	And so for the marketplace, people aren't going to pay to watch me tune and learn a guitar, but they're going to...
	Play to listen Eric Hampton do a slow blues version of Lola.
	They'll pay hundreds of dollars.
	So that guitar is going to go to the more skilled person, which makes everyone happier.
	I think you alluded to this earlier, but what's going to happen with the failure of...
	The Silk Road or the failure of the end of Mt.
	Gox, if that's the way it goes, is that the Bitcoins, the infrastructure, the architecture, the expertise, and most importantly, the Bitcoin users are going to be transferred to more competent and efficient and effective people.
	That's how it's supposed to work.
	It's the old rotting trees, there's a fire, and now there's room for new growth, and that's sort of the point of the free market.
	It's so weird to me that we've drifted so far from this idea of the free market that people view the failure of an institution as the failure of a market situation.
	That's sort of the whole point of the market situation is to make sure that the assets move to the most competent people.
	Yeah, I mean this speaks to an underlying issue which is this idea that we can somehow de-risk capitalism.
	which this is an idea that is relatively recent, and it's gripped the imagination of all of these regulators and what they're trying to do by pouring trillions of dollars in quantitative easing and ignoring regulations and letting bankers get away with massive crimes and not jailing and it's gripped the imagination of all of these regulators and what they're trying to do by pouring trillions of dollars in quantitative easing and All of this de-risking has had two effects.
	One, it actually ends up magnifying the risk by sweeping it under the carpet, just like if you never have a fire and you suppress it in a forest, eventually the undergrowth turns that fire into a giant inferno.
	And when it takes off, it doesn't just burn a bit and allow for regrowth.
	It turns the ground into glass and turns that hillside into a barren landscape for decades because it's so destructive.
	At the same time, the other thing it does is it chokes the possibility of new growth.
	Again, just like in a forest when you have too much undergrowth because you've been preventing fires, nothing new grows.
	What's happened in the financial services industry is by artificially de-risking and pouring all of this capital...
	That allows banks to make more money by sitting on zero interest money instead of innovating.
	Innovation has disappeared.
	Gradually, it not only disappeared from financial services, but because of the financialization and securitization of other parts of the economy, It's now sucked innovation out of every part of the economy until the only thing that is profitable is securitization and war.
	As a result, the rest of the economy is stagnant.
	It's basically dying on the vine because all of the money gets sucked into these giant flows where bankers can stick a straw into a flow of money and suck out and do rent-seeking behavior.
	That has nothing to do with innovation.
	It has nothing to do with rewarding productivity.
	It has nothing to do with rewarding risk.
	And it has everything to do with cozy relationships with regulators.
	And that is death for an economy.
	No risk means no innovation.
	And what we've seen over the last 10 years is hiding risk, which destroys innovation, and then it comes and blows up in your face when that risk is ignited.
	Yeah, I mean, we could probably spend another hour on this topic, but one of the things that is so frustrating is North America, and in particular, used to be this incredible furnace of creativity.
	Now, a lot of it remains in the IT sector.
	And it's funny, I mean, having spent 15 years as an IT entrepreneur, The idea that stability is the goal is insane.
	I mean, it felt like the moment I became competent in a language, that language evaporated and the architecture evaporated to find something new.
	The moment you get a customer relationship going or a whole series of customer relationships going, everything shifts underfoot and you've got to stay nimble.
	So we've kind of lost that, particularly in the manufacturing sector.
	Of course, in the manufacturing sector, really for the economy as a whole, I would argue, worker productivity is the only thing that matters.
	I mean, as far as economic growth goes, work of productivity requires the constant experimentation and investment into new capital equipment and technologies and processes and all that.
	And, yeah, this has completely died off the vine.
	I mean, you can get money at 0% interest from the Fed and you can go buy a bunch of government bonds at 3% or 4% and you can call yourself a financial genius if you're sitting on a trillion dollars to begin with or something like that.
	But the idea that you'd go out there, put on a hard hat, go on a factory floor and try to understand how the hell people make stuff and how you can help them make it better has become incomprehensible to people.
	people.
	Now it's all this financial thumb jiggery of sending this, you know, crap paper all around the world and relying, as you said, on cozy relationships with central banks and regulators and so on.
	The risk is...
	Yeah.
	Same thing with India.
	It's so frustrating seeing all of the energy and creativity of a culture get sucked into this giant jab-of-the-hut financial asshole of the universe and not give anything back other than debt for future generations.
	Sorry.
	End of rant.
	No, absolutely.
	And here's the worst thing.
	The risk doesn't go away.
	What it does is it goes from being risk that is compartmentalized in individual institutions, which is dealt with through the failure of those institutions when they extend too much risk.
	And instead...
	It becomes this massive interlinked systemic risk that through these collateralized obligations ends up infecting the entire financial sector.
	So now we've got a set of very, very fragile dominoes where everybody's trying to keep hands off because the slightest tremor can bring the whole thing tumbling down in a cascade reaction.
	We've generated this systemic risk by allowing too big to fail.
	Let's look at how the IT industry deals with this when it builds anti-fragile systems.
	Systems that actually distribute risk and then deal with it on a localized basis, where security and resilience is not something that is in the system.
	It is something that emerges from the architecture.
	Let me give you an example.
	One of the most successful companies out there, which is a large distributed video streaming company, uses a special software technique called Chaos Monkey.
	Basically, what this is is really brilliant.
	Instead of trying to build servers that cannot crash, what they do is they have a system of interlinked servers where they deliberately crash servers.
	They have programs that go out there and deliberately crash their own servers at random intervals.
	They cause it to crash.
	The idea is that if you have that happening all the time and you build your systems to be resilient despite chaotic behavior and constant crashing, the emergent resilience of the system is much greater.
	So that when servers do crash because of phenomena that are outside of your control, you already know the system will be resilient to that because you've been crashing them yourself.
	This leads to emergent resilience of the system.
	Bitcoin is exactly like that.
	You have 100,000 distributed nodes.
	Each of which has a complete copy of the decentralized ledger and can independently verify and trust transactions just by looking at that decentralized ledger.
	No part of the system is essential.
	No part of the system is controlling.
	No part of the system is not expendable.
	That means you can blow up different parts of the network, they can crash, they can become disconnected, and then they will reconnect, reassemble, And continue.
	And the network as a whole exhibits resilience.
	In fact, what happens is the more you stress it, the more resilient it becomes because it has adaptive behavior.
	And that is the essence of anti-fragile.
	Anti-fragile doesn't mean just that it's not fragile.
	It means that the more you test it and the more crisis it faces, the stronger it gets.
	Like an immune system.
	If you shelter your immune system, you develop allergies.
	But if you expose your immune system to small doses of germs, then gradually your immune system gets stronger and stronger until you can resist infection.
	And that's exactly what we see in antifragile systems, and Bitcoin is one of them.
	Now, it's a completely opposite concept from traditional financial services where, oh no, we can't touch that because it's too big to fail.
	Nothing is too big to fail.
	Everything should be susceptible to failure all the time, and that will make the system as a whole resilient to failure because we can survive the failure of individual institutions, and when we stop being able to survive the failure of individual institutions, then we all fail together.
	One of the great things about the decentralized aspect of the Bitcoin network is that there's nobody who has enough concentrated value and wealth that lobbying the government for preferential behavior is to the advantage.
	Even if they were to want to do that, they really can't because everybody else would have to accept It's truly democratic.
	Everybody else would have to accept some new parameter, which they wouldn't if it was at the expense of the general for the benefit of the individual.
	So I really like this anti-political, because you know what happens.
	I mean, concentrated economic power always wants to exclude the natural creative destruction of capitalism from its own environment.
	Once I win Wimbledon, nobody else can play tennis, so I can never lose again.
	This can't really happen.
	This is what is so economically democratic, which means the opposite of political democracy, which tends to serve concentrated economic power.
	That's what I love about it.
	Also, there's this view that people have.
	We're on freeform Bitcoin jazz land at the moment, so hopefully this will make some sense.
	The value of Bitcoin remains invisible, I think, for a lot of people who can afford to have accountants.
	Well, lots of people in the world can't afford to have accountants.
	Throw them a bone or two because you've got public ledgers with Bitcoins for free.
	Bitcoin's value remains invisible to people who always pay above the table.
	I was just reading – I did a show on Ukraine recently.
	Not the Ukraine.
	I know I corrected so many times on Ukraine.
	And 40% of their economy is grey market because people simply can't survive in the maze of regulations and corruption and legislation and regulatory capture and special interest groups and complex laws and taxes.
	They can't survive.
	And between a quarter, a third, depending on how you measure it, up to 40% of the world's economy is outside of the reach of legality.
	That does not mean illegal.
	It just means that they don't have access to any kind of legal dispute system.
	They can't afford… How great is that for the third world?
	How great is that for entrepreneurs in Somalia?
	How great is that for women who want to start a sewing collective in Dubai?
	I mean, God, the value of it is not necessarily from where everyone is standing in the privileged Western, often white world.
	There's a whole world out there of people who need these transactions and these public ledgers and these abilities.
	And if you don't see that, there's something where people are just looking in a mirror saying, well, that's the whole world, right?
	Yeah.
	Well, that's the key point, and I think that bears emphasizing even more.
	It's something I've been talking about for more than a year now.
	Do it again, but louder?
	Well, slightly different.
	Let's look at it from this perspective.
	Right now, if you look at the world and split it into banked and unbanked, you really miss the picture.
	So, for example, the World Bank says that there are approximately 2.5 billion unbanked people.
	Employment age adults who have no access to banking facilities.
	That is a very narrow perspective of what it means to be unbanked.
	Let me look at it from a different perspective, and this is the way I like to look at it.
	Approximately a billion people in the world have the type of banking facilities that we take for granted among the upper echelons of the middle class and upper middle class in the United States.
	These are banking facilities that have high liquidity, that have broad availability to credit instruments, that allow you to source credit from a variety of providers, that allow you to transmit money not just nationally, but also internationally with very few and quite liberal currency controls,
	that allow you to own and transact in multiple currencies, that allow you to access stock markets and invest, that allow you to raise capital, All of these facilities are facilities that about 60% of the US population and about 60% of Western Europe's population have at their fingertips, and of course the richest layer of people in the world.
	About a billion people have fully enabled, internationally capable, very liquid, high credit banking facilities.
	Then there's the other six billion.
	If you take a moment to look at the other six billion and you count the underbanked, those who are banked but have no access to credit facilities, who have checking accounts but no ability to transfer international funds, and therefore have no ability to outsource their services to other countries, who have credit facilities and banking but no ability to invest on a stock market or a very limited stock market in their own company, Or their own country, so they can't invest internationally.
	And then you add to that the underbanked, the itinerants, the migrants, the people who work in completely cash-based societies, all the way down to the people who lack basic electricity and capabilities, basic food, sanitation, shelter, electricity, who are obviously completely unbanked in cash-based societies.
	That's six billion people.
	Now, here's the magic thing about that.
	About a billion and a half of these people who have very limited banking facilities are already on the internet.
	We can onboard them to Bitcoin, either with a download of an application onto a desktop or smartphone, or perhaps even using simple feature phones and text messaging gateways into Bitcoin.
	We can take a billion and a half people and bring them online to an international class, cross-border, full-credit economy which will empower them economically to a level we have never before seen in the history of humanity.
	That's what excites me about Bitcoin.
	You could fail a thousand goxes and it wouldn't put a dent in the possibility that that type of solution brings To people who are desperately hungry for these types of capabilities, because they have productive potential, but they are on an economic island cut off from the rest of the world.
	If a shopkeeper in Kenya can use a feature phone and SMS to source a loan from 20,000 Bitcoin people around the world, each of whom is paying a fraction, maybe ten pennies, and source a loan that allows that shopkeeper to build inventory for their store.
	This is not shopping for them.
	This is not a fad.
	This is not a speculative investment.
	This is a life-changing opportunity that will uplift the entire community around them.
	And we'll improve their water and their sanitation and their healthcare and their education and the next generation of their children.
	I mean, this is really groundbreaking stuff.
	It's world-changing stuff.
	So we're not going to let Gox stop us from bringing that vision to people.
	Well, and, oh, man.
	You know, they're not laying copper phone wires in Somalia.
	Because it's wireless.
	It's all cell phone technology.
	You wouldn't build...
	90% of the crap that we have was just all first and second generation nonsense, which frankly should just be thrown away, except we use it because it's there.
	You know, when you can teleport, you don't build roads.
	And can you imagine growing an economy...
	From subsistence level to middle classdom, without a banking sector of any fundamental size, without the financial predators that roam the corridors of power and the market ways of the world, constantly, like the whole microloan foundation or the whole microloan phenomenon, which has turned into a stranglehold on the poor with massive debt and so on.
	on.
	It just gets taken over by the sociopaths.
	All the great stuff in the world gets taken over.
	This decentralized model can't be.
	But isn't it amazing to think that we can take an economy from subsistence to middle class without growing this white-collar bunch of predators and banksters and they could just bypass that whole thing?
	I mean, we're going to have to shred ours or we're going to be completely unable to compete.
	Yay!
	They leapfrog the entire system.
	They bypass central fiat banking with currency issuance from corrupt central banks that use inflation to steal money in the form of hidden taxation.
	And they bypass that as if it's a car accident that they rubberneck.
	And look at it in horror and fascination at this failed experiment of the last hundred years in Western society.
	And they look at that and think, well, thank God we skipped that one.
	And we could go directly to a decentralized global currency that empowered individuals and gave them full control over their finances.
	And if you look at some places in Africa, for example, we've seen this experiment already succeed.
	Not with Bitcoin, but with examples that have very close parallels.
	With cell phones, for example, they bypass landlines, and you see these one square foot solar panels distributed around various places in Africa, in places where they have no electricity in the home, they have no plumbing, and maybe they're providing heat and cooking capability by burning wood.
	But there's a solar panel on the roof, and that solar panel is used for one purpose only, to run a little radio and to charge a feature phone.
	That feature phone is their connection to the rest of the world.
	If you can turn that feature phone into a fully enabled international wire transfer and checking account combination, that is an incredibly powerful technology.
	We saw what happens when you give people the ability to have a currency that is incredibly fungible.
	We saw it in Kenya, where a system that was originally developed to allow family members to exchange cell phone minutes.
	I can imagine the day that one person went into a store and said, look, I don't have any money.
	But I have two minutes left on my cell phone.
	Can I give you two minutes for six eggs?
	And boom!
	A currency was born.
	And less than 12 years later, the currency called M-Pesa now represents 40% of the GDP of Kenya.
	40% without anybody planning to turn that into a currency.
	We know this can happen.
	When you combine the capability and utility of very fluid money...
	Frictionless commerce with feature phones that can be affordable for anyone.
	For 10 euros, you can buy yourself a seat at the international economy.
	People will do that.
	Instantly, overnight, you will see this explosion of economic activity.
	You can bring online the productive capacity of two-thirds of the planet that have never had the opportunity to interact.
	Not only to interact with us, but to interact with each other.
	Right.
	And the traditional method of dealing with better currencies is to invade the country.
	Tragically, this is just traditionally what happens.
	Anybody who tries to develop a gold-backed currency now is going to have several thousand central bank lasers targeted directly on their forehead.
	As has rumored to be the case with Gaddafi and Saddam Hussein.
	So this is not possible with the traditional remedy of, of course, the traditional remedy of unfunded liabilities, you know, massive amounts of deferred liabilities in a country is simply to bleed off the excess population through war.
	Nuclear war, nuclear capacities have rendered that one pretty much moot.
	But this idea that somebody is going to develop a better currency and therefore you're just going to, because, you know, the kind of bad money drives out good, but good money also drives out bad.
	And since all central banking money is not even money, it's just, you know, ass white toilet paper in debt enslaving crap.
	If anybody invents good money, it's going to drive out the bad money.
	That usually provokes a war to snuff out the supplier of the good currency.
	That actually, that traditional expedient of empire can't work with Bitcoin because who are you going to catch?
	Who are you going to capture?
	There's no big pile of gold you can go pick up.
	You can't even stop its use.
	At its basic, what Bitcoin has done, what the invention of the blockchain and distributed asset ledger has done, is it's changed money from being something tangible into being a content type that can be transmitted without the need for security, because the security is embedded in a distributed system, not in who accesses the network.
	This is something that most people haven't quite realized yet.
	But what Bitcoin does, what the blockchain invention does, is it inverts the trust model.
	Traditional financial payment networks depend on exclusion.
	They work through access control.
	Being on the network is how you are trusted, and you must be trusted to be on the network.
	So very few can be on the network, because you have to trust everyone who is on the network.
	In the decentralized system of trust that is the blockchain, the trust is embedded in computation, and it's completely distributed and diffused through the network.
	Because you're trusting no individual, you're only trusting the mathematics and the provable cryptography behind these transactions.
	You can open the network to everyone.
	Once you do that, you have the ability to attach innovation at the edge, just like we had with the internet, innovation without permission.
	You have this pent-up 50 years of innovation that hasn't happened in financial services, because no one did innovation in financial services from their garage, because they couldn't get permission to attach to the network, and the network had to be closed.
	Now all of this pent-up innovation is now exploding, This incredible tsunami of start-ups that are generating their own economic activity.
	You take that, and you have money as a content type, and you look at the world as it is today.
	There are 193 currencies, of which we see the US dollar as the world reserve currency.
	It is stable.
	When you ask me the question, is Bitcoin better than the US dollar?
	For most values and for most people and under most circumstances, the answer is no.
	Not yet.
	It's not better than the US dollar.
	It doesn't have the capital base.
	It doesn't have the stability.
	It doesn't have a lot of the characteristics of the US dollar.
	You asked me that question about the other 193 currencies, and I can list 30 or 40, they're already far inferior to Bitcoin, or Bitcoin is far superior to those other currencies.
	And it's climbing and getting better.
	It's increasing the liquidity pool, which is reducing the volatility over time, and we're seeing more stability, more acceptance, and the network effect is causing exponential growth.
	What happens when in these 30, 40, 50 countries, people who have access to the internet can voluntarily make the choice to divest from their national currency and to join a community of common purpose, a community formed around a common transnational currency?
	They can transact with anyone else in the world and tap into this giant and growing economy represented by this new currency.
	What you're going to see is a very disruptive effect.
	They can take their tin pot dictator and his fake money and simply not attack them, not disrupt them, but render them irrelevant.
	By divesting from that system through choice.
	Never before have people had a choice to leave their national currency and use something else.
	They're not going to make that choice in the U.S. and Western Europe yet.
	Not for most people.
	But they are going to make that choice in places like Argentina.
	We're seeing that happen already.
	And as you have these crises in emerging economies and their currencies, you're going to see more and more people who have just the right level of education and infrastructure, computer literacy, and the basic internet infrastructure to adopt this are going to divest From their clownish currencies, they're going to divest from this worthless paper that is destroying the future of their families and everything they invested in all their life.
	And they're going to choose another way.
	And that's an incredibly powerful phenomenon.
	It's very difficult to even imagine the impact of a movement like that that also exhibits exponential growth.
	I would agree with that.
	I think the area where I would – I don't know if it was an incomplete explanation or I would add to it, Andreas, is the idea that I think having a portfolio with fiat currency in it and stuff that's basically traded and denominated in fiat currency is a very short-sighted strategy.
	Bitcoin is a great hedge against fiat currency.
	And so, yeah, there's lots of people who wouldn't want Bitcoin as their primary – We all know that the long-term survivability of fiat currencies is effectively zero.
	Hundreds of them have come and gone, and they all revert back to being worth exactly what they're worth, which is some paper you can't eat or draw on with some crappy drawings on it and numbers that you maybe can use as they used the… The fiat currency in the Weimar Republic to burn for heat.
	That's all you can really do with it.
	People at libertarian conferences handing out these billion dollars in barbway currencies and all that from the 80s or 90s.
	I think that it is part of Every person's financial responsibility to have a hedge against fiat currency.
	Not just those of us who are somewhat familiar with Austrian economics, but anyone who can do basic math knows that the existing systems can't possibly sustain themselves, particularly with an aging population.
	So I think it needs to be part of a consideration for everyone's portfolio.
	I think it's a better hedge than gold myself.
	I have some gold too, but I consider Bitcoin to be a better hedge than gold.
	You know, boy, you think the people at MT Gotts got shafted.
	I mean, the people who are going to end up with devalued dollars are going to be much worse off in the long run if they don't find some way to hedge.
	I think that's Bitcoin, but whatever it's going to be for people, they really need that stuff.
	Yeah, one of the nice things about this is that Bitcoin doesn't need to succeed at first.
	All it needs to do is survive and watch as the other currencies fail one after another.
	And already you've got probably at this moment 15 to 20 currencies in emerging markets that are suffering from severe crises.
	With hyperinflation exceeding 30% a year.
	Up to now, the solution to a currency crisis with hyperinflation was to lock down the borders and take the entire population hostage And force them to keep using the currency until you hope you can stabilize things by pegging it to this, or controlling prices through coercion, or all of these other methods.
	Now, we know historically these don't work.
	They just postpone the inevitable pain until the currency collapses in a giant and sudden...
	Collapse.
	But here's what changed.
	You can no longer lock the borders and take people hostage.
	As long as they have the ability to exchange 350 bytes of information with the rest of the world, they can exchange Bitcoin.
	And with the internet, that is a solution or a capability that is available to a very large percentage of the world.
	And with SMS, even a larger percentage of the world...
	You can no longer take your population hostage and hold them in a rapidly hyperinflating currency.
	People now have choice.
	That's the bottom line.
	This isn't about whether Bitcoin is better than something else or worse than something else.
	We don't need to persuade people whether it's better or worse.
	What people need to realize is they have a choice.
	They have a choice to participate in a transnational global internet currency that is fast, that is secure, and is cheap.
	That is a useful currency.
	If they make that choice, they can make that choice freely themselves.
	We're not going to force them to use a specific currency.
	That's what governments do.
	That's what fiat does.
	What we're doing, I think, is through innovation and creativity and through the dedication of many of the people in the Bitcoin community, what we're doing is simply presenting the choice and saying, here, why don't you try it out and see for yourself.
	Yeah, and I think the last point that I would make is early on we talked about how the failure of MT Gox is going to cause a liberation of resources towards more competent and forward-thinking and efficient and mature individuals.
	I would really argue that in the competition between Bitcoin and Bitcoin, Fiat currency, we're going to see the same thing.
	It's going to take a lot longer.
	It may take decades, but over time, the idea of the internet of currency or the currency that runs through the internet has the same relationship to data and the internet.
	It's so efficient and it's so productive and it's so cheap that Anybody who stays with fiat currency is going to lose value, I think, in the long run.
	People who go towards some sort of digital currency are going to gain in value, which means that society's resources are going to drift away from old school to new school, in the same way that there are not a lot of Pony Express operators around now that we have the car.
	If it wasn't propped up by the power of the state, the post office would be a shadow of its former self.
	Resources are going to flow to people who see further and who understand where things are going.
	And I think that's going to be for the best in the long run.
	I think you want the majority of society's resources concentrated into the hands of the most competent, whether they be rich or poor or middle class.
	And I think that's going to happen with Bitcoin versus fiat.
	It's not going to be a multi-decade thing, though.
	I think people massively underestimate two things.
	One, they massively underestimate the potential time frame for Bitcoin, or they overestimate how long it's going to take.
	And I've made that mistake before watching previous technological revolutions.
	They always happen faster than I expected.
	I think Bitcoin is going to play out in three to five years later.
	Not longer.
	And the reason for that is because one of the most powerful forces is the other one that people underestimate is the force of a network effect.
	A network effect is the law established by Bob Metcalf in 1984 where he said that the value of a network increases exponentially with the addition of each new node.
	That means that if you have a telephone network and there's two people who can use a phone, if a third person comes along, it doesn't just make a useful phone for the third person, It makes the phones that the other two people already have more useful because they now have one more person to call.
	And that effect multiplies the bigger the network gets.
	Now if you think about it, Bitcoin is not the 194th currency.
	It's not yet another national currency.
	Therefore, it's competing on this playing field with other currencies in a completely unfair way, because I can trade dollars with Americans, and I can trade Euros with Europeans, and I can trade renminbi with the Chinese, but I can trade Bitcoin with everyone.
	And the bigger Bitcoin gets, the more of an obvious choice it becomes.
	Do I use the currency that's only usable here?
	Or do I use the currency that's usable everywhere?
	That is a very powerful effect.
	And what it will do is you'll go from a situation where we're having the discussion right now, well, what can you really buy with Bitcoin?
	You can't really buy that much with Bitcoin.
	Which is highly reminiscent of the discussion in 1994 when people said, well, the internet is not going to do anything with e-commerce because after all, look, my local mall has so much economic activity.
	What is the internet doing?
	It's doing one-tenth of one-thousandth of a percentage of that.
	And guess what?
	Things change really, really fast.
	And the reason they change is because when you combine utility with network effect, that becomes an unstoppable force.
	I expect we're going to be surprised by how quickly the simple choice made by individuals...
	Do I use a currency that I can use here?
	Or do I use a currency that I can use everywhere?
	A currency that is not controlled by governments?
	A currency that cannot be eroded by inflation?
	A currency that is not hampered by currency controls?
	And a currency that allows me instantaneous transmission in a secure fashion across the internet?
	Then the question no longer becomes which country adopts Bitcoin first.
	That question misses the point because the country that is adopting the internet first is the world's most populous, the internet.
	The economy that adopts the internet first is the world's largest economy, the internet, and that is a global network.
	The world is adopting Bitcoin, and it's adopting Bitcoin as a world currency.
	And that changes things dramatically.
	It's a choice that most people haven't even realized.
	But once they do, it's a very easy choice to make.
	And once you put yourself in a Bitcoin environment, as I do, I earn all of my income in Bitcoin.
	I transact in Bitcoin every single day.
	I pay contractors all around the world.
	I transact in my businesses.
	I invest in Bitcoin.
	I get paid in Bitcoin.
	I pay for my plane tickets in Bitcoin.
	I use Bitcoin every single day.
	It is convenient.
	It is easy to use.
	And it's getting easier all the time.
	There are more places to use it.
	And the bottom line is that when I have to pull out a credit card, and when I have to use cash, and when I have to use, God forbid, a wire transfer, one of these antiquated fax-based technologies, It seems ridiculous to me.
	To clear a paper check.
	What the hell is this?
	The 18th century?
	And so it changes your perspective completely.
	What do you mean it takes $35 to wire money from here to Japan and it takes seven days?
	And it can be reversed.
	And by the way, I can send more than 10,000.
	And by the way, just the fact that I can do that puts me in the top 10% elite of the world.
	This is insane.
	But the only reason you can survive in that insanity and consider it normal is because you've never had a choice before.
	And now people have a choice.
	So don't tell people about Bitcoin.
	Give them some bitcoin, let them experience it for themselves, and they will soon turn around and look at the existing financial system in horror.
	They won't understand why people did this.
	I imagine this world where a student in the 22nd century is studying classical economics, and they're trying to explain...
	The time in 2008, when a non-blockchain currency called the U.S. dollar...
	suffered a 1% proof-of-stake attack and was compromised by the banking institutions.
	He is really frustrated by this assignment, because they can't possibly understand why anyone would invest trust in a non-blockchain, non-decentralized currency...
	that can be controlled just by a few people, who can then corrupt it through inflation.
	This makes no sense.
	I don't understand why our professor is making a study...
	These peculiar people of the past who wore funny clothes and had currencies printed on dirty green cotton and handed this around and couldn't transact internationally.
	I don't understand these people, just like a student today really doesn't understand people living in the 18th and 19th century.
	Oh, it is the purpose of technology and moralists to make the present incomprehensible to the future.
	I mean, if 200 years from now they look back and say, yeah, I can pretty much see how they did it, then we've completely failed in any kind of evolution of the human condition.
	I can't fundamentally understand why anyone would want to own slaves when you can get a combine harvester, but that's because moralists have made the present incomprehensible to the future.
	That certainly is the goal.
	Yeah.
	Just one last point I wanted to mention.
	I know I always said one.
	Cheat and slide one more in.
	People complain about the volatility of Bitcoin, but Bitcoin is the real volatility.
	I mean, imagine what the volatility of fiat currencies would be if they allowed for free exchanges, if they allowed for the importation and exportation of money for free with no limits.
	Imagine how unstable fiat currencies would be without central banks controlling interest rates or without bailouts.
	Or without all the hedging that goes into all of the financial instruments that are predicated on central banking, like bonds and so on, government bonds.
	Imagine how unstable it would be.
	I mean, this is how unstable a currency is in its origin, you know, in the first couple of years, really, of its widespread adoption.
	How stable was the U.S. dollar, you know, three or four years after the revolution?
	But you're comparing it.
	People are comparing Bitcoin to a...
	Highly drugged and controlled and fenced in and corralled and lassoed and tied down currency, which is constantly propped up and manipulated to make itself appear a lot more stable.
	Which, as you point out, simply puts off and exaggerates and exacerbates the instability to come.
	So, to compare Bitcoin to… To fiat currency, it's like comparing somebody who's in a manic phase of production with somebody who's been drugged with four horse tranquilizers up the ass.
	It's not a fair comparison, but people still think that we've got these fiat currencies, which are stable, and we've got Bitcoin, which is unstable.
	It's like, no, that's not a non-drugged currency.
	So, I mean, here's the thing.
	People who complain about the volatility of Bitcoin are American people who complain about the volatility of Bitcoin or European people who complain about the volatility of Bitcoin.
	Because I can tell you something.
	Argentinian people do not complain about the volatility of Bitcoin.
	They look at Bitcoin and they see that in 2014 Bitcoin has had slightly less volatility than the Argentinian peso and most importantly Bitcoin's volatility has been like this going up and the Argentinian peso has been like this going down for decades.
	So they look at that and say, you know, I'd really like some of your upwards trending volatility instead of our equally bad and sometimes worse, but always downwards trending volatility.
	And to your point about the heavily drugged patients...
	Do you know that the Argentinian standard of living up until the 1920s was equal to that at the United States?
	They've had 90 years of cryptocurrency theft.
	I mean, they're dying for something better.
	Right.
	I mean, Buenos Aires used to be the Paris of Latin America, and the standard of living has dropped precipitously, and one of the main reasons has been currency manipulation.
	So when you look at the highly stable world reserve currency of the US dollar that is fed with an IV drip of petroleum and blood from overseas adventures, the real question is not to check what is the volatility of that system.
	I would say check the pulse.
	Because that's not a stable currency.
	That's a dead currency.
	It may be standing, but that's what you're seeing is Weekend at Bernie's.
	You know, somebody's behind kind of waving the arm and it's really a force.
	Right, exactly.
	The reason it's not volatile is because it is being artificially preserved with a trillion dollars.
	Ben Bernanke is behind the scenes holding up the US dollar's arm and saying, look, look, I'm alive.
	No, it's dead.
	And the economy behind it is stagnating and gradually rotting.
	Because the effort that it takes to hold up the dead weight of a corpse currency is enormous.
	And it saps the energy for any other activity.
	One thing I can tell you about Weekend at Bernie is it's exhausting to be holding up that corpse.
	And the US economy is exhausted by it.
	Right now, what we're seeing within Bitcoin is not just the conversion of currencies into Bitcoin.
	What we're seeing is a tech industry in itself, which is generating innovation and growth and jobs.
	And this is a little island of growth in the middle of a stagnant economy.
	If Bitcoin was anything other than a currency, we'd be looking at that tech industry.
	If it was a yacht building industry, if it was The barbecue industry, if it was any industry of a comparable size, we'd be having CNBC's interviews saying, wow, look at this little engine of growth in the middle of a stagnant economy.
	It's generating jobs.
	There are hundreds and hundreds of startups that are using innovation, that are creating excitement, and that are actually now drawing away valued employees from Silicon Valley, but also from Wall Street and other areas of stagnant growth.
	They're now very excited to be working in this vibrant tech sector.
	Look at Bitcoin as an economy in itself.
	The weird phenomenon that has happened is, because of its closed currency system, it created liquidity where none existed.
	That liquidity has allowed investment, and that investment has created jobs.
	Here we are, with a little currency that could, in the middle of a sea of stagnation, actually creating jobs.
	I'm one of the people employed in this industry, and I'm on a hiring tear.
	I get resumes every single day, and I'm helping place people in this industry every single day, because Bitcoin is open for business, is vibrant, and is hiring right now.
	So just for those who are now, you know, pumped to the point where they want to trade in, say, left or right or both kidneys for a Bitcoin, Andreas, what are the places that you believe are the best places to buy and sell?
	What are the secure places, the reliable places with mature management and stable investment and all of that?
	Where do you go?
	Where do you recommend people go?
	I think you're a fan of Coinbase, if I understand it correctly.
	And are there any others that you like?
	So first of all, let me point out that you do not need to buy one Bitcoin.
	You don't need to buy a whole bar of gold.
	You can just buy a fraction of it.
	You can buy a small amount.
	I think the lowest amount you can buy is something like $20 or $30.
	Coinbase.
	The least amount you can buy.
	The least amount you can buy is about $20 or $30 worth of Bitcoin.
	So you can buy a tiny bit every week.
	In fact, that's the best strategy, which is a dollar cost averaging strategy, a very conservative and traditional investment strategy.
	We just pick a day a week.
	I pick Mondays.
	On Mondays, I buy Bitcoin.
	And I've been doing that consistently for months now.
	And buy a tiny bit of Bitcoin.
	Not a lot.
	Don't go out and spend your life savings.
	That would be imprudent.
	But if you've got a bit of spare cash, if you've got a bad habit like smoking and you want to make more productive use of that money, smoke less, drink less, go to a few cinemas, eat out less, and then put just a small amount of money in Bitcoin and diversify your portfolio.
	Some of the places you can buy.
	Ironically enough, Coinbase is a competitor of my company.
	I went and did a security review to provide independent verification of their systems last night during this crisis.
	I felt it was important that we come together as an industry and support each other.
	I use Coinbase as a customer.
	They allow you to connect your checking account from your bank And using ACH withdrawal, you can transact directly and you can buy Bitcoin.
	It's relatively easy.
	It takes about a week to get verified the first time.
	In many other places in the world, you can access bitstamp.net.
	Bitstamp is an Eastern European exchange that operates very well.
	It's got very large volume.
	It's one of the standard bearers of exchanges.
	You can use SEPA Transfer, which is the European system for wire transfers.
	You can use that to transfer money, just like into a brokerage account, and then buy Bitcoin there.
	However, here's the easiest way to do this.
	Actually, the best way to get Bitcoin is to find a product or service, a skill that you have, something you already sell.
	And sell it for Bitcoin.
	Find someone who wants that product or service and sell it to them for Bitcoin.
	And then start earning Bitcoin.
	Much better than buying Bitcoin, earn Bitcoin if you can.
	And then the second method I want to talk about is LocalBitcoins.com.
	LocalBitcoins.com is like a classified ad service.
	It's kind of like Craigslist or something like that.
	But it has a very nifty escrow feature, which ensures that if you do a transaction in Bitcoin, you won't get robbed.
	People won't just run away with your cash and keep the Bitcoin.
	What you can do is, for small amounts, say under $100 or under $200, you can go onto LocalBitcoins and either search for a seller in your area.
	This is an international market.
	You can find people in Kuala Lumpur, you can find people in Bangalore.
	You can find a seller in your area, see the price of the list, arrange to meet at a very public and safe place, a local mall, a local coffee shop, somewhere where there's security cameras.
	Some people even meet inside the lobby of a bank because that's one of the safest places for not getting robbed.
	And you can deposit the cash pretty much straight away.
	And do a small trade.
	And through the escrow mechanism, you can be protected.
	If you don't find a seller, you can go put your own ad and say you're looking to buy.
	I think that's one of the best and easiest ways.
	You won't need to do complex account verification and things like that.
	You can just do a simple, small-scale cash transaction once a week.
	I got most of my Bitcoin in the early days through local Bitcoins and things like that.
	Right.
	And your website?
	My website, I don't really have a website.
	I work for blockchain.
	Blockchain.info is the world's largest web wallet service.
	We proud ourselves of not having control of your funds and not having access to your keys.
	You can go to blockchain.info.
	You can also download the Android application for blockchain and use it on your phone.
	Unfortunately, the iPhone application was banned because they banned all Bitcoin applications, but we're working on that with an HTML5 solution.
	With blockchain.info, you can create a web wallet and you can use it to open a Bitcoin account and very easily start using that to do transactions.
	And then when you go buy your first Bitcoin, you can put the resulting Bitcoin in blockchain.info.
	And just to help people understand the value, why would they put it there rather than on their own PC? Well, they can put it on their own PC, absolutely.
	In order to put it on your own PC, you have to download software.
	You can go to bitcoin.org and find software to download for your PC. Software like Multibit or Armory, which is slightly more sophisticated for power users.
	And you can use that to secure Bitcoin on your own PC. You can also download wallets onto your Android phone, both blockchain but also others like Mycelium or the original Bitcoin client from Andreas Schilbach.
	And all of these allow you to create essentially a wallet that gives you a Bitcoin address that allows you to transact in Bitcoin, both receive and send Bitcoin.
	And it makes it very, very easy.
	Fantastic.
	Well, I really appreciate, obviously, your time.
	It's been a pretty exciting couple of days in the Bitcoin universe.
	Again, I view that as more of a blip.
	The good thing about getting closer to 50 is everything in life always seems like an emergency and turns out to be a whole lot less than you think, unless you're actually being creamed by a Greyhound bus in the moment.
	So I urge people to look at the long picture and the big picture and view this, I view, as a healthy pruning in the Bitcoin ecosystem to allocate resources to more competent and perhaps even more honorable people.
	So yeah, please check out blockchain.info.
	Andreas and I will be, you can check us out at the TorontoBitcoin.
	Expo, April 11th or 13th, bitcoinexpo.ca.
	I'll probably be in town for a day or two, so I'm hoping to meet up with some people, and I'm always available for doing chatting and sit-downs, and we'll both be in March 5th to 6th at the Texas Bitcoin Conference.
	That's texasbitcoinconference.com.
	Thanks again for your time, and of course, I appreciate your evangelizing at all times about what I consider to be one of the most crucial bits of liberty technology to come along I imagine in my entire lifetime, assuming I live to be 250, which I'm sure will be available for Bitcoins in about three or four years.
	So thanks again so much for your time.
	I really appreciate it.
	Thank you, Stefan.
	A really pleasure being here.

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