Video - Bitcoin vs. The Federal Reserve

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.

Hi, everybody. It's Defendant Mullin, you from Free Domain Radio. I have Andreas Santanopoulos, 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 and export on information security and cryptography. By the way, we're both going to be at the Texas event. Oh, great.

There's Toronto. So there's a Toronto Bitcoin Expo and a Texas event. The Texas Bitcoin conference in Austin, Texas, March 56, Ben Swann, Jeffrey Tucker, Jeff Burwick, myself. Andreas, of course, and Toronto Bitcoin Expo, April 11th, the 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 in person in Texas.

So 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 MT Gox, 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 honorability and reliability and maturity and all that kind of stuff. So this is nothing to do with the Bitcoin architecture as a whole. This is a choice people made to give other people their bitcoins for storage and for trading.

So I think that these two things should be kept separate. But I turn it to your considerably greater expertise to help people understand this situation. 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 has web wallets. And as a company, we have no access to the customer funds and we have no access to the customer keys.

So 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, the 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 empty gocs, 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 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 empty gocs 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 empty gocs, an organization and run by an individual that had proven again and again that they were not deserving of that trust. Well, and 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.

And 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 of 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. I mean, 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 of security in between. And the rest of it is an absolute mess.

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 an individual's or institutions, but instead to use cryptographic proof as a better means of security. Empty Gox was a bank failure that really demonstrated why banks are not a reliable means for wealth management in the long term because they do 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. Now, 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 Empty 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. 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 that 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, and a properly implemented cold storage system, what you would do is, at 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, you said sweep funds, that's not something I can 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, your cash flow. Just like in a bank, you have some cash reserves on hand to satisfy withdrawal demand. So, if people show up at the Tellers 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 a 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 and retail institutions that have a little a 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. Now, getting it out of the cold storage system, then involves a rather elaborate process.

You have to, 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, bring them 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, and I use a very simple cold storage system, which in Bitcoin is a paper wallet, where you just print the keys on paper. And I keep paper wallets in a safe deposit box. I also distribute them in the safe of friends and colleagues. And so, if 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's 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. Now, 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 empty Gox, the Bitcoins, the 750 or 740,000 that is 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.

And in fact, the elaborate manual process required to move funds from cold storage into the hot wallet would have been an obvious red flag. So if suddenly your hot wallet's empty and you have to move things from cold storage, you know, 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, there's what they're saying, essentially, I think in the alleged leak documents that I read, it said there was a leak between the hot and cold wallets 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 made-off.

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 empty gags. My particular perspective, and I say this with all due sympathy to the people whose money is either gone or up in the air, let's say. And I feel it's tragic. It's a new environment.

The new system, I myself, I lost some Bitcoins due to my own lack of understanding, and this was pure idiocy on my part. So there is, you know, I really, 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, right?

It's like going to Vegas, you know, you put your money on red 22, there's a risk, and then there's a benefit. And 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 rights 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, so 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 biobeware scenario, particularly in the wild west of a new technology. So I wonder what benefit MT Gox was providing to people 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, you know, I'm sympathetic, but at the same time, I don't even know how to put it. You know, 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 MT Gox ever launched 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 Carpellus, 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, MT Gox provided not only the first exchange, not only the first liquidity pool, but also the first price discovery mechanism, which was critical before then, they really walls into 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. Certainly not when there are programming languages like COBOL available. Actually, that's just my programming language.

But yeah, you need something a bit more scalable than robust. Right. I think it might be available to native, right? Right.

Well, exchanges are usually built as collections of loosely coupled components on the distributed systems that can be scaled out horizontally so that you have different components like an order matching engine and an order pricing engine, et cetera, et cetera 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. So 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 not solvent and at the same time is predatory and will chew up depositors to satisfy the bankers.

Started looking for alternatives and that gave a lot of prominence to Bitcoin. Bitcoin's price shot up to about 260, 266 at highest. And at that point, a flood of trading hit empty gox as well as supposedly denial of service attack. And the trading engine basically screech came screeching to a hold.

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 a 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. So that was 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 a problem of management and competence. And that problem will not be fixed by throwing more servers out 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 too many further by July.

Well, I'm sorry, just 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 a bunch of crap before. So I know I don't want to talk about it as far as this goes.

You take your bunch as a 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 business plans and all this kind of stuff. And then people give you lots of money and you build it properly. You know, nobody built it properly the first time around because you just try to find out if there's a market. And it doesn't sound like they went through that phase of scrub and rebuilt with experts.

Well, there was there was no lack of money. That's for sure. I mean, EmptyGox was a highly profitable organization at this point that was getting the benefit of explosive growth on which they were making a nice percentage commission fee. So at this point, EmptyGox was probably one of the biggest Bitcoin holders out there.

They certainly have the money to buy the skills they needed to throw away that unskillable piece of crap and build something correctly. And they didn't do that. And the reason they didn't do that was was gross management incompetence. And this pattern continued again and again in July, they were they had one of their bank accounts confiscated.

Then that caused a panic which then caused a run on the bank essentially there withdrawal system for wire transfers in US dollars was was based on a manual system because that's how things are processed in Japan. That came to a screeching halt and they had six month back. Well, not six months, but like two or three month backlogs at some point, six weeks plus. And then 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 war 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 when something that was well known and handled by most of the other exchanges quite well, which was transaction maliability was blamed by gox for causing essentially extraneous withdrawals.

They had to freeze withdrawals. And and now several weeks later, we see this in the in the document if it is true. It says that that was the reason they lost the money, which which really completely beggars belief. I mean, this is something that other exchanges handled quite comfortably.

And 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. Well, it happened as the exchanges actually became more resilient and more robust and were able to ignore some of the the transaction spoofing that was going on and proceed it as if nothing was going on.

And once again, I just wanted to mention to, I mean, 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 cost a doubt on the entire architecture, which, you know, people like you and I will understand is not particularly a significant issue, but it scales the scare factor out into the mainstream world, out into the non Bitcoin world. And then it sounds like, well, the whole thing is screwed. It's, 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, you know, if you, 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, is truly staggering. And I just, you know, if it's all true, it is so violent, 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 in competence 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. I mean, that caused a raft of really appalling headlines all around the world that completely misrepresented the situation. But I mean, that's, that's Mark Car Palace.

It's not just incompetence. It's, it's blaze basically blaming others for his own incompetence and shifting the blame. And, you know, once again, that's what happens. 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 very trustworthy.

And one of the most secure systems for payments that exists in the world today. And what happened was a faulty implementation by Mark Car Palace caused and by MT Gox caused him problems and his customers. Now, 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, you know, 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. And a lot of the media, Gox was Bitcoin and Bitcoin was Gox. And as a result, they kept funneling essentially new users into the mall of Gox. And it chewed them up because they would quickly learn the lesson, but then they'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 the matter 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. 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 O8. 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. They're rotting teeth chewing festival of the last 20 plus years where their economy has died and now young men do 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 it's failure will actually end up helping competitors. Because what happened in the meantime since Cox was the leading exchange back in April of 2013, Cox still accounted for about 65 to 70 percent of the global volume weighted trade of US dollars. Now, by a month ago, just before this series of failures at Cox, they were already down to less than 20 percent of the market. And 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, had emerged in this market and had provided a second generation of well-run, well-oiled businesses that were innovating, that were creating trust and security, and that were doing the job right.

So not only were they already eroding Cox'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 Cox who got burned, if in fact this is an ends up crashing completely. And 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 Cox was not a failure of business. Failure of Cox 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. And they chose not to do that. And the end result was a lot of people got burned.

And keep in mind, this will happen again. There will be fly-by-night operators who will set off centralized exchanges, who will gather the money of their customers in a single account, and who will not be trustworthy. And new users who come into this unaware, and will buy Bitcoin from those exchanges, will get burned when they fail. What we need to do is 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 Cox that pays more like a legacy bank than a Bitcoin company. Yeah, you don't, I mean, you generally approach anything version 1.0 with skepticism. And as far as I understand it, the architecture of empty Cox 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 management team that has not dealt with significant financial growth or significant financial interests before.

It's just a risk. I hope that them sure that they will come with some big market need, of course, for the BBB, the Bitcoin, better business bureau or something like that, four Bs. Some sort of stamp of approval. This has gone through the Andres 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, there's just some stamp of approval that will hopefully give people peace of mind. And if you don't have that, well, 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 worth.

It just means that some people want to cut corners and take the easy way. So yeah, it's my hope that a standard of excellence, you know, 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 cell phones, a 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, and 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, if I just suddenly say, hey, I could just go fly a plane.

I flew a flight simulator on the Atari 800 off I go and I'm going to leave a bald shadow on some mountaintops. So I really hope that the community will come up with good stamping mechanisms for best practices, but also I 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, let's 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's 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 is 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 to 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. And currency is just the first app on this incredibly exciting invention.

Now, just because Altavista isn't a great search engine anymore doesn't mean the internet went away. And just because my space 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. And this thing can solve that problem.

So if we have failures that happen in the meantime, that does not change the fundamental utility of the concept. And in this case, this failure will demonstrate once again the resilience. This is not about a currency. This is about a network of trusts 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, you know, the whole point of failure within a market system is to take assets out of the hands of the last competent people and put them into the hands of the more competent people. You know, if I'm sitting there in a cafe, I don't play guitar, right? 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 did 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 turn tune and learn a guitar, but they're going to play to listen Eric Clapton to 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. And what's going to, I think you alluded to this earlier, but what's going to happen with the failure of the silk road or the failure of, for the end of empty gocs?

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.

So 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 them because to do so would somehow threaten the integrity of the financial services system.

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 if you never have a fire and you suppress it in the 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.

And at the same time, the other thing it does is it chokes the possibility of new growth. Just again, just like in a forest when you have too much undergrowth because you've been preventing fires, nothing new grows. And 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 and gradually 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.

And 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 risks 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 self-restraiding 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, like the moment I became competent in a language that language evaporated and the architecture evaporated and 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, worker 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 zero percent interest from the Fed and you can go by a bunch of government bonds at three or four percent 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. Now it's all this financial thumb jiggery of sending this crap paper all around the world and relying, as you said, on cozy relationships with central banks and regulators and so on, the risk has gone out. I can understand from a business standpoint why they wouldn't be that into risk, but it's not just because China can produce things cheaper, is that China is at the moment really boiling over with innovation because they're in the early enthusiastic phase before people become rich enough to capture the government and turn it towards their own ends. Same thing with India and it's just so frustrating seeing all of the energy and creativity of a culture gets 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. And of random. 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. Now, 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. And 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 pick a random server and they cause it to crash. And the idea is that if you have that happening all the time and you build your systems to be resilient despite chaotic behavior and despite constant crashing, the emergent resilience of the system is much greater. So 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. And 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. And 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 is 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 antifragile. Antifragile 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. Yeah.

And I'm 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. And even if they were to want to do that, they really can't because everybody else would have to accept. So 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. You know, once I win Wimbledon, nobody else can play tennis. So I can never lose again.

And this can't really happen. And 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. And also there's this view that people have.

I've just, you know, went on free-form Bitcoin Jazzland at the moment. So hopefully this will make some sense that 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 accounts. You know, throw them a bone or two because you've got public ledgers with Bitcoins for free.

Bitcoins value remains invisible to people who always pay above the table. You know, I was just reading, I did a show on the on Ukraine recently, not the Ukraine. I know I got to correct this only on Ukraine. And 40% of their economy is gray 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 so a method and between a quarter or 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 Bitcoin architecture. Like, let's throw them a bone that, you know, just because you and I can afford accounts doesn't mean that there's not you know hundreds of millions of people out the world around the world who are going to hugely benefit from this, even though it's, you know, part of what we would call the cost of doing business. Boy, if it can go way down how great is that for the third world, how great is that for entrepreneurs in Somalia, how great is that for, you know, 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 these public ledgers and these abilities. And if you don't see that, there's something where people are just looking in the mirror saying, well, that's the whole world, right? Well, that 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 two and a half billion unbanked people. What they're counting is 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 operational loans 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 invests 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. And if you take a moment and 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 atinerance, 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 and 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 and you could fail a thousand boxes 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 caught 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 10 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 fads. This is not a speculative investment. This is a life-changing opportunity that will uplift the entire community around them and will improve their water and their sanitation and their health care 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 gocs 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. So 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. 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 marketways of the world constantly like the whole micro loan foundation or the whole micro loan phenomenon which is turned into a stranglehold on the poor with massive debt and so 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 our so we're going completely unable to compete. Yeah right 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 rubber neck and look at it in horror and fascination at this failed experiment of the last 100 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 like one square foot solar panels distributed around various places in Africa in places where they have no electricity in the home they they have no plumbing and maybe they're providing heat and and cooking capability by burning wood but there's a solar panel on the roof and that solar panel is useful one purpose only to run a little radio and to charge a feature phone and that feature phone is their connection to the rest of the world now 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 you know 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 impesa now represents 40 percent of the GDP of Kenya 40 percent without anybody planning to turn that into a currency we know this can happen when you combine the capability and utility of of very fluid money frictionless commerce with feature phones that can be affordable for anyone i mean for 10 euros you can buy yourself a seat at the international economy people will do that and an instantly overnight you will see this explosion of economic activity and 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 somebody develops some you know anybody who tries to develop a gold back currency now it's going to have several thousand central bank lasers targeted directly on that forehead as has rumored to be the case with the cadaphey and and sedam Hussein so this not possible with the 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 of render that one pretty much moved but this idea that somebody's going to develop a better currency and therefore you're just going to because you know the current 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 uh 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 with bitcoin because who who you're going to catch who you're going to capture there's no big pile of gold you can go pick up you you can't even stop its use at its basic what bitcoin has done what the invention of the blockchain of the distributed asset ledger has done is it's changed money uh 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 uh 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 uh 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's 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 diffuse through the network and 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 and once you do that you have the ability to attach innovation at the edge just like we had with the internet innovation without permission and you have this pent-op uh 50 years of innovation that hasn't happened in financial services because no one did innovation in financial services from the garage because they couldn't get permission to attach to the network and the network had to be closed and now all of this pent-op innovation is now exploding in this uh incredible tsunami of startups that are generating their own economic activity now you take that and you have money as a content and you look at the world as it is today and there are 193 currencies of which we see the US dollar as the world reserve of currency and it is stable you know 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 ask me that question about the other 193 currencies and i can less 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 now 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 that they can transact with anyone else in the world and tap into this giant and growing economy that is represented by this new currency what you're going to see is some very disruptive effect because they can take their 10 pot dictator and is fake money and they can 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 and they're not going to make that choice in the US and then not going to make that choice in 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 their 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 oh i would add to it um Andreas is the idea that i think having a portfolio with fiat currency in it and and and stuff that's basically traded and 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 store of value but 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 with you can't eat or draw on with some crappy drawings on it and numbers that you maybe can use as they use the the fiat currency in the vimar republic to to burn for heat that's all you can really do with it are the you know people at libertarian conferences handing out these billion dollars in bobway currencies and all that from like 80s or 90s and so 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 but you know boy you you think the people at empty got scot shafted i mean the people who are going to end up with uh devalued dollars uh is uh gonna 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 uh bitcoin doesn't needs 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 percent and which up to now the solution to uh 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 uh 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 uh 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 uh they can exchange bitcoin and with the internet that is a uh solution or capability that is available to a very large percentage of the world and with SMS even a larger percentage of the world and so you can no longer take your population hostage and hold them in a rapidly defle uh rapidly inflating hyperinflating currency uh people now have choice and that's the bottom line this isn't about whether bitcoin is better than something else or worse than something else and and we don't need to persuade people whether it's better or worse uh what people need to realize is they have a choice they have a choice to participate in a transnational global internet currency uh that is fast that is secure and is cheap and that is a useful currency and if they make that choice they can make that choice freely themselves uh we're not going to force them to use a specific currency that's what governments do that's what fiat does uh what we're doing uh 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 is early on we talked about how the failure of empty garks is going to cause a liberation of resources towards more competent and forward thinking and efficient and mature individuals i i would really argue that in the in the competition between bitcoin and 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 uh the idea of the internet of of currency is uh the currency that runs through the internet has the same relationship to to the uh to data and the internet it's so 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 and people who go towards some sort of digital currency are going to gain in value which means that societies resources are going to drift away from old school to new school you know in the same way that then a lot not a lot of pony express operators around now that we have the car and you know that that 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 uh and and who understand where where things are going and i think that's going to be uh for the best in the long run i think you want you want the majority of societies resources concentrated into the hands of the most competent uh 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 um a multi decades things though and 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 uh i think bitcoin is going to play out in three to five years uh not longer and uh 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 uh the law established by Bob Matkaf 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 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 and 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 rumenbee with the with the chinese uh but i can trade bitcoin with everyone and the bigger bitcoin gets the more of 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 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 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 changed is because when you combine utility with network effect that becomes an unstoppable force so 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 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 it seems as ridiculous as the fax seems to an internet generation it seems as ridiculous as a rotary phone is to the texting facebook generation and and that's what happens you get steeped into this technology and then suddenly you look back at the traditional banking system and you're like what do you mean it takes four working days to clear paper check what the hell is this the 18th century and and so it changes your perspective completely it what do you mean it takes 35 dollars 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 ten thousand and by the way just the fact that i can do that puts me in the top ten percent 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 still soon turn around and look at the existing financial system in horror and 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 US dollar suffered a 1% proof of stake attack and was compromised by the banking institutions and is really frustrated by this assignment because they can't possibly understand why anyone would best trust in a non-blockchain non-decentralized currency that can be controlled just by a few people who can then corrupt it through inflation and you're like this makes no sense i don't understand why our professor is making a study these peculiar people of the past who were 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 more or less to make the present incomprehensible to the future i mean if if 200 years from now they look back and say yeah i can pretty much see how they did it is like then we've completely failed in 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 the the present incomprehensible to the future that certainly is the goal and that just one last point i wanted to mention i know i always said one cheat and slide one more but 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 free for 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 like bonds and so on a government bonds imagine how unstable it would be i mean once one this is how unstable currency is in its origin you know in in first couple of years really of its widespread adoption how stable was the us 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 corled 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 and exaggerates and exacerbates the instability to come so to compare bitcoin to to to fiat currencies like it's like comparing somebody who's in a manic phase of of production uh with somebody who's been drugged with full horse tranquilizers up the ass you know it's not a fair comparison uh 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 bitcoins volatility has been like this going up and the argentinian peso has been like this going down for decades uh so they look at that and say you know i 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 you know that the argentinian standard of living up until the 1920s was equal to that at the united states but they've had 90 years of latency theft i mean they're dying for something better right right i mean uh Buenos Aires used to be the power of some latin america and and the standard of living has 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 ivy drip of petroleum uh and blood from overseas adventures uh 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 what you're seeing is we can do bernies you know somebody's behind kind of waving at your arm and it's working exactly the reason it's not volatile is because it is being artificially preserved with a trillion dollars uh benn Bernanke is behind the scenes holding up the US dollars arm and saying look look i'm alive no it's dead and the economy behind it is stagnating and gradually rotting uh 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 bernie is it's exhausting to be holding up that corpse and the US economy is exhausted by it uh 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 would be looking at that tech industry if it was a yacht building industry if it was uh the barbecue industry if it was any industry of a comparable size we'd be having CNBC's interview 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 and they're now very excited to be working in this in this vibrant tech sector look at bitcoin as an economy in itself because the weird phenomenon that has happened is because of its closed currency system it's created liquidity where none existed and that liquidity has allowed investments and that investment has created jobs so 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 and rest what other places that you believe are the best places to buy and sell well what are the secure places the reliable places with mature management and stable investment and and all of that so where do you go where do you recommend people go i think you're a fan of coin base 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 just like 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 dollars coin base the least amount you can buy right the least amount you can buy is about 20 or 30 dollars 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 class drink class go to a fewer cinemas eats 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 so ironically enough coin base is a competitor of my company and i went to did a security review to provide independent verification of their systems last night during this crisis because i felt it was important that we come together as an industry and support each other i use coin bases a customer and they allow you to connect your checking account for your bank and using a ch withdrawal you can transact directly and you can buy bitcoin it's relatively easy it takes it takes about a week to get verified the first time in many other places in the world you can access bitstamp.net and bitstamp is a eastern european exchange that operates very well it's got very large volume it's one of the standard bearers of exchanges and you can use cpa transfer which is the european system for wire transfers and 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 um 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 uh 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 and localbitcoins.com is like a classified ad service is kind of like Craigslist or something like that but what it has is it has a very nifty escrow feature which ensures that if you do a transaction in bitcoin uh you won't get robbed people won't just run away with your cash and uh and keep the bitcoin uh so what you can do is for small amounts uh say under a hundred dollars or under two hundred dollars you can go on to localbitcoins and either uh search for a seller in your area and this is an international market you can find people in Kuala Lumpur you can find people in Bangalore um you can find a seller in your area see the price of the list arranged to meet at a very public and safe place uh 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 uh do a small trade and through the escrow mechanism you can be protected if you don't find a seller you can go and put your own ad and say you're looking to buy uh i think that's one of the best and easiest ways you won't need to do uh complex account verification and things like that uh you can just do a simple small scale cash transaction uh once a week i got most of my bitcoin in the early days uh through localbitcoins and things like that right and your website my website i don't really have a website i work for blockchain uh blockchain.info is the world's largest web wallet service uh we proud ourselves i'm not having control of your funds and not having access to your keys and 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 uh start uh 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 for people who understand to help people understand the the value why would they put it there rather than on their own pc well they they can put it on their own pc absolutely um one of it's it's uh in order to put it on your own pc you have to download uh software uh you can go to bitcoin.org and find software to download for your pc uh software like multi bit or armory which is slightly more sophisticated for power users uh 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 uh my cilium or the original bitcoin client from undress uh shilbach and uh all of these allow you to create essentially a wallet that gives you a bitcoin address that allows you to transact and bitcoin both receive and send bitcoin uh and it makes it very very easy. Fantastic well i really appreciate uh obviously your time it's been a pretty exciting couple of days in the bitcoin universe uh again i view that as more of a blep you know everything seems like an ember good thing about getting close to the 50 years everything in life always seems like an emergency in turns that 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 uh look at the long picture and the big picture and view this i view as a healthy pruning uh in the bitcoin ecosystem to allocate resources to more competent uh and perhaps even more honorable people so yeah uh please check out blockchained.info um and reiss and i will be uh you can check us out uh at the uh trono bitcoin at expo april 11th the 13th uh bitcoin expo.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 um and we'll both be uh in march 56th at the texas bitcoin conference that's texasbitconconference.com uh thanks again for your time and of course i appreciate your evangelizing uh 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 uh so thanks again so much for your time i really appreciate it thank you stuff on a really pleasure being here take care