1
00:00:00,000 --> 00:00:17,220
Welcome in to This Week in Bitcoin, episode 115.

2
00:00:17,760 --> 00:00:23,300
My name is Chris, chrislas.com, jupiterbroadcasting.com.

3
00:00:23,460 --> 00:00:26,080
I am excited about this episode.

4
00:00:26,080 --> 00:00:30,780
Another name for this episode could have been why the real identity of Satoshi Nakamoto doesn't matter.

5
00:00:31,720 --> 00:00:36,700
I want to mention at the top as well that there is a video version of all these episodes, but particularly this one.

6
00:00:36,760 --> 00:00:43,140
It's not required, but I've slopped together some visual aids like names and diagrams and documents.

7
00:00:43,280 --> 00:00:47,920
And later in the show, there's going to be some old price action and old chat rooms and stuff that the visual aids are nice.

8
00:00:48,020 --> 00:00:52,580
So you may want to grab it. You can grab it from the MP3 RSS feed or you can get it on YouTube.

9
00:00:52,740 --> 00:00:54,600
It's not needed, but I thought I'd mention it.

10
00:00:54,600 --> 00:00:57,040
It may make the experience even nicer.

11
00:00:57,620 --> 00:01:01,200
So while I'm on the road, I've put together something I hope you're really going to enjoy.

12
00:01:01,700 --> 00:01:07,700
And I think it'll help us all have a better appreciation for Bitcoin and where we're at today.

13
00:01:08,060 --> 00:01:10,320
This week, we're going back in time.

14
00:01:10,520 --> 00:01:16,560
And we're going to talk about some of the key innovations that led to Bitcoin, the things that were tried before Satoshi.

15
00:01:17,360 --> 00:01:20,420
And when it's done, we'll revisit the early days of Bitcoin.

16
00:01:24,600 --> 00:01:31,620
Ah, okay. It worked.

17
00:01:32,620 --> 00:01:36,560
So, in fact, what I've just demonstrated to you,

18
00:01:36,560 --> 00:01:45,360
it's the first public demonstration of the first software-only electronic money for the network.

19
00:01:46,140 --> 00:01:50,680
That was David Chom at the World Wide Web Conference in Geneva in 1994,

20
00:01:51,120 --> 00:01:54,260
14 years before the Bitcoin white paper.

21
00:01:54,600 --> 00:01:59,180
He had just used DigiCash software to demonstrate an electronic payment over a network.

22
00:01:59,580 --> 00:02:02,900
It was working with digital cash, but it was not decentralized money.

23
00:02:02,900 --> 00:02:05,980
To understand what it solved and what it left behind,

24
00:02:06,100 --> 00:02:10,380
we have to go back to the problem Chom started thinking about in the early 80s.

25
00:02:10,500 --> 00:02:14,180
Physical cash doesn't normally create a permanent record of who paid whom.

26
00:02:14,900 --> 00:02:16,380
Computerized payment systems could.

27
00:02:16,960 --> 00:02:20,580
Chom saw that transaction data might expose the same relationships

28
00:02:20,580 --> 00:02:23,580
that privacy systems were designed to conceal.

29
00:02:23,580 --> 00:02:47,060
And so then the next step has come to your question about money was, well, then I thought, well, great. So I can participate in this upcoming internet thing or this, you know, the future digital world. We didn't know exactly how it was going to play out in the late seventies, but I'll need some way to pay things and be paid to do things.

30
00:02:47,060 --> 00:03:08,800
And if, you know, that payment system allowed the linking of who's paying who to be recognized, you know, by people listening in on the network, then it would undo all of the what we call traffic analysis protection, now called metadata shredding.

31
00:03:08,800 --> 00:03:16,540
the hiding of who talks to who in the messaging system would be obviated, would be undone by

32
00:03:16,540 --> 00:03:21,700
learning who pays who, because then you'd know anyway. So I thought, well, we need a payment

33
00:03:21,700 --> 00:03:28,560
technology that will work in this privacy protective metadata shredding sphere.

34
00:03:28,960 --> 00:03:34,620
Chom's answer was a cryptographic technique called a blind signature. The bank could authorize a

35
00:03:34,620 --> 00:03:39,120
digital note without seeing a note's identifying number and therefore without being able to link

36
00:03:39,120 --> 00:03:44,240
its later deposit to the person who withdrew it. His simplest explanation used an envelope

37
00:03:44,240 --> 00:03:49,940
and carbon paper. Basically, the easy way to understand, he cashed it. It's very close to

38
00:03:49,940 --> 00:03:56,300
the reality of it. The blind signature is that, let's just say, I make, I take a piece of paper

39
00:03:56,300 --> 00:04:01,300
and I write a random serial number on it that only I know. And I put an envelope with some carbon

40
00:04:01,300 --> 00:04:04,320
paper inside or carbonless lining or whatever.

41
00:04:04,580 --> 00:04:09,880
I give it to my bank and they say, here, it's me, you know, take the money out of my checking

42
00:04:09,880 --> 00:04:16,360
account and validate this with your special worth $1 stamp, where it's like a signature

43
00:04:16,360 --> 00:04:17,180
that they can make.

44
00:04:17,260 --> 00:04:20,680
But on the outside of the envelope, they return the envelope to me.

45
00:04:20,740 --> 00:04:22,120
Then I can remove the envelope.

46
00:04:22,720 --> 00:04:28,760
Now I have my own random serial number with their, the carbon image of their unforgeable

47
00:04:28,760 --> 00:04:30,900
worth a dollar stamp on it.

48
00:04:31,300 --> 00:04:35,120
So now I have this dollar, but no one knows the serial number.

49
00:04:35,120 --> 00:04:36,480
The issuer still mattered.

50
00:04:36,840 --> 00:04:40,840
It signed the notes and it maintained a list of serial numbers that had already been spent.

51
00:04:41,380 --> 00:04:45,100
But it didn't need to know which customer had used a particular valid note.

52
00:04:45,600 --> 00:04:48,580
Chom then tried to turn that protocol into a payment infrastructure.

53
00:04:49,240 --> 00:04:51,240
DigiCash ran its own trial currency.

54
00:04:51,520 --> 00:04:55,920
It demonstrated web payments and it built systems for banks issuing national currencies.

55
00:04:55,920 --> 00:05:07,920
So it was a very industrial strength e-cash banking system, if you will, that attached to their, you know, what are called current accounts, so their, you know, regular consumer bank accounts.

56
00:05:08,420 --> 00:05:10,640
And there were shops that were accepting.

57
00:05:10,760 --> 00:05:12,540
And in those days, of course, it was before the euro, right?

58
00:05:12,560 --> 00:05:13,840
It was Deutschmarks.

59
00:05:14,420 --> 00:05:20,280
And so you could use Deutsche Bank issued Deutschmarks and buy things online.

60
00:05:20,820 --> 00:05:22,920
And so we made all that for them.

61
00:05:22,960 --> 00:05:24,520
It was all Deutsche Bank branded.

62
00:05:24,520 --> 00:05:30,020
And then we had Mark Twain Bank in the U.S., which offered U.S. dollars.

63
00:05:30,220 --> 00:05:32,800
This was more than a thought experiment.

64
00:05:33,360 --> 00:05:36,840
But the privacy mechanism still had an institutional center.

65
00:05:37,260 --> 00:05:42,840
It had a bank or a company that issued the notes and checked whether they had been spent before.

66
00:05:43,500 --> 00:05:48,340
DigiCash also failed to achieve durable commercial adoption and entered bankruptcy in 1998.

67
00:05:49,160 --> 00:05:53,140
The architecture did not by itself necessarily cause the company to fail.

68
00:05:53,140 --> 00:06:21,160
So I think it's an interesting trade-off, right? Because with the DigiCash and related blind signature-based protocols, you've got a very strong assurance that you can't selectively block transactions. And the only thing that a party operating it could do is shut down, right? They could say, well, I refuse. I mean, I can't block anything selectively. So what do you want me to do? They're all indistinguishable to me, assuming that the sender wants privacy.

69
00:06:21,160 --> 00:06:24,260
Chom had shown that digital payments could preserve privacy.

70
00:06:24,440 --> 00:06:25,980
The next question was harder.

71
00:06:26,400 --> 00:06:31,120
Could digital money survive without a company, a bank, or a central mint at all?

72
00:06:31,480 --> 00:06:34,180
That question then moved into the cypherpunk world.

73
00:06:34,980 --> 00:06:39,280
And these ideas coalesced in two groups, the Xtropians and the Cypherpunks.

74
00:06:39,980 --> 00:06:45,600
Xtropians were libertarian futurists, very interested in the intersection of Rand, Rothbard, Hayek, and high technology.

75
00:06:45,600 --> 00:06:50,080
and cypherfunks wanted to free cryptography from government control

76
00:06:50,080 --> 00:06:51,820
and make it a tool for the masses.

77
00:06:52,460 --> 00:06:53,720
And they're very interested in privacy.

78
00:06:54,840 --> 00:06:57,420
And one of the chief cypherfunks here was Tim May,

79
00:06:57,520 --> 00:07:02,440
who came up with the idea of fusing a lot of these ideas of gulch and cyberspace,

80
00:07:03,140 --> 00:07:08,620
that you can really secure free markets from outside interference using cryptography.

81
00:07:09,460 --> 00:07:13,440
One possible tool came from an apparently different problem, junk email.

82
00:07:13,440 --> 00:07:20,020
In 1992, DeWalk and Nowhere proposed a pricing via processing idea.

83
00:07:20,540 --> 00:07:25,120
A sender would perform a modest computation before gaining access to a resource.

84
00:07:25,660 --> 00:07:28,940
The work would be costly to produce, but cheap for the recipient to check.

85
00:07:29,520 --> 00:07:32,380
Adam Back developed Hashcash independently several years later.

86
00:07:32,380 --> 00:07:47,220
And, yeah, and I mean, so in terms of Hashcash, I was not aware of Dwork's paper until somebody sent me a link to the publication a couple of months after I'd posted the source code for Hashcash.

87
00:07:47,480 --> 00:07:52,960
Back published Hashcash in 1997, but its original purpose wasn't to create money.

88
00:07:53,480 --> 00:07:59,660
It was electronic postage, a way to make bulk abuse expensive without requiring the sender to reveal their identity.

89
00:07:59,660 --> 00:08:04,840
So it got me to thinking about it in a different way, which is, well, what's the underlying problem?

90
00:08:05,120 --> 00:08:09,200
You know, the blocking people based on identity is not really a solution.

91
00:08:09,340 --> 00:08:10,140
It's just a patch.

92
00:08:10,460 --> 00:08:11,700
And it doesn't work that well.

93
00:08:11,800 --> 00:08:17,020
People just create, you know, people who want to determine to spam for commercial reasons just create lots of email accounts.

94
00:08:17,100 --> 00:08:19,660
And there's essentially no cost to creating an email account.

95
00:08:20,160 --> 00:08:52,218
So the real underlying problem is it free There no cost to sending And so that where I came up with Hashcash which is a way to add a cost to sending So the sender could let say run their computer for a couple of minutes and create I guess about five leading zeros in hex or 20 leading zeros in binary

96
00:08:52,598 --> 00:08:58,278
of collisions on the beginning of a stamp by grinding on their computer for a few minutes.

97
00:08:58,718 --> 00:09:02,898
And they could attach that to their email as a kind of electronic postage stamp,

98
00:09:03,098 --> 00:09:05,138
and the recipient would be able to verify it.

99
00:09:05,278 --> 00:09:09,738
Hashcash produced evidence that a computer had spent time searching for a valid result,

100
00:09:10,418 --> 00:09:13,778
but it did not maintain a balance, transfer ownership, or issue a currency,

101
00:09:13,958 --> 00:09:17,138
or decide which transaction history a network should accept.

102
00:09:17,458 --> 00:09:22,138
But it supplied a useful asymmetry, costly creation, cheap verification,

103
00:09:22,598 --> 00:09:26,218
Other designers began assigning that property new jobs.

104
00:09:26,618 --> 00:09:29,518
In 1998, Wei Dai published B-Money.

105
00:09:30,158 --> 00:09:34,718
The participants would be identified by public key pseudonyms, not legal names.

106
00:09:35,218 --> 00:09:39,718
In the first of two protocols, every participant kept a separate copy of the Bounce database.

107
00:09:40,558 --> 00:09:46,198
When Alice Broadcast assigned payment to Bob, everyone debited Alice's pseudonym and credited Bob's.

108
00:09:46,378 --> 00:09:49,998
New units could be created by broadcasting a solution to a computational problem.

109
00:09:49,998 --> 00:09:56,338
The first version assumed a synchronous, anonymous broadcast channel that Dai himself called impractical.

110
00:09:56,678 --> 00:10:01,158
His second protocol assigned the accounts to a subset of participants called servers.

111
00:10:01,718 --> 00:10:07,798
Those servers posted deposits, published their databases, and could be penalized for misconduct.

112
00:10:08,258 --> 00:10:12,318
But Dai was explicit. The servers still had to be trusted to a degree.

113
00:10:12,958 --> 00:10:16,178
The money creation rule also had a coordination problem.

114
00:10:16,778 --> 00:10:22,538
Account keepers had to agree on the real cost of computation, even as hardware improved,

115
00:10:22,938 --> 00:10:24,678
sometimes done privately.

116
00:10:25,318 --> 00:10:30,458
B-Money described distributed money accounting, but it remained a proposal, not a deployed

117
00:10:30,458 --> 00:10:30,958
currency.

118
00:10:31,218 --> 00:10:36,078
B-Money imagined a shared balance sheet, and Nick Sasbo pursued a related but different

119
00:10:36,078 --> 00:10:40,998
target, a scarce digital object that did not begin as somebody's redeemable IOU.

120
00:10:41,518 --> 00:10:45,978
And so what interested me was that people like David Choum and so forth had already

121
00:10:45,978 --> 00:10:51,158
solve the IOU problem. Like, you can do that digitally as long as, you know, have a central

122
00:10:51,158 --> 00:10:55,618
party issue an IOU and then redeem it for something. But what they hadn't solved is the

123
00:10:55,618 --> 00:10:58,798
gold part of it. And that's really the trust minimized part of it.

124
00:10:59,058 --> 00:11:06,238
Sasbo called the design property unforgivable costliness. In his BitGold proposal, a participant

125
00:11:06,238 --> 00:11:11,538
computed a proof of work string from a public challenge. The result was then secretly transmitted

126
00:11:11,538 --> 00:11:14,098
and entered into a distributed property-like registry.

127
00:11:14,898 --> 00:11:16,418
The previous bit cold string

128
00:11:16,418 --> 00:11:18,578
then supplied the challenge for the next one.

129
00:11:19,118 --> 00:11:22,038
Ownership was established through a chain of signed titles.

130
00:11:22,558 --> 00:11:25,038
Anyone assessing a piece could check its challenge,

131
00:11:25,358 --> 00:11:26,958
its work, and its timestamp.

132
00:11:27,318 --> 00:11:29,898
This brought together a computational cost,

133
00:11:30,278 --> 00:11:33,178
secured timestamping, and chained records

134
00:11:33,178 --> 00:11:34,898
with a registry of ownership.

135
00:11:35,498 --> 00:11:37,558
Timestamping itself drew on earlier work,

136
00:11:37,618 --> 00:11:39,538
including the schemes developed by Stuart Haber

137
00:11:39,538 --> 00:11:41,158
and Scott Sturenta.

138
00:11:41,538 --> 00:11:44,058
But Bitgold was never launched as a currency.

139
00:11:44,598 --> 00:11:47,618
It still needed a distributed timestamping and a registry machinery.

140
00:11:47,978 --> 00:11:51,738
And its proofs could have had different values as hardware changed.

141
00:11:52,278 --> 00:11:58,818
SASBO proposed markets, exchanges, and bundled them to try to turn those unequal objects into something more fungible.

142
00:11:59,298 --> 00:12:02,578
He also thought Bitcoin made the money supply radically simpler.

143
00:12:02,578 --> 00:12:04,158
Yeah, simplifying the money supply.

144
00:12:04,158 --> 00:12:13,838
I have a really complicated multilayer way to get a fungible currency out of what starts out as non-fungible proof-of-work solutions in Bickle.

145
00:12:14,578 --> 00:12:20,718
And so he sort of, I thought maybe papered that over a little bit, but it's radically simplified.

146
00:12:20,718 --> 00:12:28,298
So it turns out to be quite worth it what he did, which is to just have this fixed schedule going up to 21 million.

147
00:12:28,518 --> 00:12:30,298
Hal Finney explored another branch.

148
00:12:30,298 --> 00:12:36,318
In 2004, his reusable proofs-of-work system accepted hashcash work and returned a signed token.

149
00:12:36,678 --> 00:12:42,958
Each token could be spent only once, but spending it created a new token of equal value.

150
00:12:43,478 --> 00:12:45,878
Proof-of-work had then become transferable.

151
00:12:46,638 --> 00:12:53,638
RPOW reduced trust through published code and remote attestation, but it didn't eliminate the verifier.

152
00:12:54,018 --> 00:12:59,498
The system depended on a server running inside a tamper-evident IBM secure coprocessor.

153
00:12:59,498 --> 00:13:05,018
It was an important experiment, but it wasn't a decentralized monetary network.

154
00:13:05,338 --> 00:13:11,358
In August of 2008, Satoshi Nakamoto emailed Adam Back about citing Hashcash.

155
00:13:12,018 --> 00:13:13,358
Back pointed him to B-Money.

156
00:13:13,978 --> 00:13:19,298
Satoshi then wrote to Dai saying Back had noticed the similarity and asked for B-Money's publication year.

157
00:13:19,818 --> 00:13:23,278
That correspondence, it documents a citation path.

158
00:13:23,458 --> 00:13:28,358
But by the time Back saw the Bitcoin design, it seems clear it had already been using Hashcash.

159
00:13:28,358 --> 00:13:33,358
Well, I mean, obviously, you know, it became evident that he'd already used it.

160
00:13:33,478 --> 00:13:45,498
I'd said implement the system, he'd used hashcash, increased the precision on it a bit, which is something contemplated before, but not, you know, you didn't need that kind of fine level of precision for the previous use cases.

161
00:13:45,638 --> 00:13:47,858
It was okay, the difficulty would just buy a factor of two.

162
00:13:49,658 --> 00:13:53,998
And so, yeah, that was actually the topic of his initial email, which is I'm using hashcash.

163
00:13:54,138 --> 00:13:55,418
Is this the correct way to slice it?

164
00:13:55,418 --> 00:14:02,978
The Bitcoin white paper explicitly cites hash cash and B money along with secure timestamping work done by Harper and Sereta as well as others.

165
00:14:03,278 --> 00:14:09,058
It does not cite CHOM or Bicol, but similarity is not the same thing as documented borrowing.

166
00:14:09,178 --> 00:14:12,558
Bitcoin's central move wasn't just attached proof of work to a digital coin.

167
00:14:12,858 --> 00:14:13,418
You have nodes.

168
00:14:13,518 --> 00:14:16,458
They broadcast transactions and group valid transactions into blocks.

169
00:14:16,738 --> 00:14:18,378
Each block commits to the previous block.

170
00:14:18,738 --> 00:14:19,738
That creates a history.

171
00:14:20,278 --> 00:14:24,598
That proof of work makes rewriting that history more and more expensive as time goes on.

172
00:14:24,598 --> 00:14:29,838
And when histories compete, nodes follow the valid chain with the most accumulated work.

173
00:14:30,358 --> 00:14:33,458
So an attacker trying to reverse a payment must redo the work to catch up.

174
00:14:34,278 --> 00:14:38,858
So confidence in the network grows as more is built on top of each transaction.

175
00:14:39,318 --> 00:14:49,458
This replaced the central spent note database with a peer-to-peer method for ordering transactions and converging on one usable history.

176
00:14:49,578 --> 00:14:53,638
Bitcoin also connected that history to its monetary issuance.

177
00:14:54,538 --> 00:15:00,158
The miner who extends the chain can claim newly issued Bitcoin and, over time, transaction fees.

178
00:15:00,658 --> 00:15:07,198
The difficulty adjusts so that the changes in total computing power don't permanently change the intended rate of block production.

179
00:15:07,698 --> 00:15:12,858
So the block reward gives participants a reason to spend resources validating and extending the network's history.

180
00:15:13,258 --> 00:15:19,998
None of these mechanisms alone were entirely unprecedented, but their integration was.

181
00:15:20,178 --> 00:15:22,458
Chom had provided digital notes.

182
00:15:22,458 --> 00:15:24,998
Hashcash had figured out computational cost.

183
00:15:25,458 --> 00:15:28,398
And B-Money has pseudonymous distributed balances.

184
00:15:28,958 --> 00:15:32,438
And Bitcold had costly timestamped digital objects.

185
00:15:32,838 --> 00:15:36,258
And then there was RPOW that made proof of work tokens usable.

186
00:15:36,918 --> 00:15:39,158
Bitcoin was not a copy of any one of them.

187
00:15:39,398 --> 00:15:46,758
It was a design that made several older components and several important new mechanisms operate as one system.

188
00:15:46,758 --> 00:15:55,218
I mean, you know, of course, people look at Bitcoin as a design and it's elegant and you can understand it at different levels.

189
00:15:56,518 --> 00:16:01,338
And so when you see something and you can understand it, some people's intuition is, oh, I could have done that.

190
00:16:01,658 --> 00:16:08,518
But, you know, we tried. A lot of people tried in 95 to 2005 and didn't quite make it.

191
00:16:09,738 --> 00:16:15,118
Bitcoin wasn't necessarily just created. It was the accumulation of all of this work brought together.

192
00:16:15,118 --> 00:16:22,258
It wasn't necessarily inevitable, but it was 30 years of work and finally produced something truly unique.

193
00:16:22,658 --> 00:16:25,498
We have a usable system without a central mint.

194
00:16:25,498 --> 00:16:49,838
well coming up we'll move a little forward in time to just the very early days of bitcoin when these

195
00:16:49,838 --> 00:17:06,457
things started to come together if you want to support the show you can do it by doing what you do Buy sats on river Use my link in the notes All about self Check out the Bitcoin Well link in the notes You want to spend your sats You can go from sats over lightning to a gift card

196
00:17:06,457 --> 00:17:11,377
in just like seconds using the Bitcoin company. You want to stack sats while you pay your bills?

197
00:17:11,437 --> 00:17:16,657
You got to pay them. Fold card. Salt lending. Great for lending. And now strike as well for like

198
00:17:16,657 --> 00:17:20,357
all of your Bitcoin needs and just super solid lightning infrastructure.

199
00:17:20,817 --> 00:17:23,257
Links to all of that in the show notes.

200
00:17:23,337 --> 00:17:25,277
You can support the show by doing what you do.

201
00:17:25,657 --> 00:17:30,537
No boost this week, but I still want to know, how did you find Bitcoin?

202
00:17:30,857 --> 00:17:31,677
What got you in there?

203
00:17:31,737 --> 00:17:34,317
And did you poop around and find out with the altcoins first?

204
00:17:34,917 --> 00:17:35,917
Boost it and let me know.

205
00:17:36,357 --> 00:17:38,577
I'll cover those on next week's episode.

206
00:17:46,657 --> 00:17:51,617
All right, let's talk about the early days of Bitcoin.

207
00:17:51,937 --> 00:17:58,957
And, well, it just so happens I was around and I had a podcast going for some of that as well.

208
00:17:58,957 --> 00:18:03,797
It's a bit different than this one, but it still had some great music and we still talked about Bitcoin.

209
00:18:04,497 --> 00:18:07,297
The first episode was 13 years ago.

210
00:18:07,657 --> 00:18:14,917
I had a co-host named Drew Adlant, and our first episode was on April 10th, 2013.

211
00:18:14,917 --> 00:18:16,837
and Bitcoin had been pumping.

212
00:18:16,997 --> 00:18:19,217
It was up to 148 US dollars.

213
00:18:19,377 --> 00:18:20,737
Of course, it would slide later on.

214
00:18:21,217 --> 00:18:23,397
And every episode we did was live.

215
00:18:23,477 --> 00:18:25,477
And we had a chat room and it's a hoot to read

216
00:18:25,477 --> 00:18:26,757
if you're watching the video version.

217
00:18:27,537 --> 00:18:29,497
At one point, somebody in the chat room

218
00:18:29,497 --> 00:18:32,677
just casually mentions that they've just picked up 500 Bitcoin.

219
00:18:34,797 --> 00:18:39,737
2013 was also the year that the Bitcoin conference went mainstream.

220
00:18:39,997 --> 00:18:42,837
They had other events in 2010 and 2011,

221
00:18:42,837 --> 00:18:49,837
But in 2013, it was the big one, the Future of Payments Conference in San Jose, California.

222
00:18:50,077 --> 00:18:53,997
It happened on May 17th through May 19th, 2013.

223
00:18:54,637 --> 00:18:58,877
And the big narrative back then was payments and bringing companies on to do payments.

224
00:18:59,177 --> 00:19:03,837
And it was called and still is sometimes referred to as the Woodstock of the cryptocurrency community.

225
00:19:04,617 --> 00:19:09,437
And it just so happened that my co-host Drew went and the vibes were high.

226
00:19:09,437 --> 00:19:12,557
So tell me about the Butterfly Labs booth, because, you know, I have one on pre-order.

227
00:19:12,837 --> 00:19:29,157
I got one too. Yeah, the labs was there. They had a wafer out. They had the little Android app there mining. It was really cool. If you go to the link in the show notes, you can see the picture that I took. They have both one of the, I guess, the small units, and then also I think they have a 50 giga hash unit right there as well.

228
00:19:29,157 --> 00:19:29,837
Yeah, yeah.

229
00:19:30,737 --> 00:19:32,597
Yeah, so that's really cool.

230
00:19:32,997 --> 00:19:33,337
All right.

231
00:19:33,397 --> 00:19:38,877
So the other thing I heard is that despite the fact that DHS just recently seized the

232
00:19:38,877 --> 00:19:45,277
Mt. Gox, you know, Shell Corporation account here in the U.S., not many people were even

233
00:19:45,277 --> 00:19:45,997
talking about Gox.

234
00:19:46,057 --> 00:19:47,497
No, nobody really was talking about it.

235
00:19:47,577 --> 00:19:50,157
I mean, Gox couldn't make it because they were dealing with their legal stuff.

236
00:19:50,497 --> 00:19:54,877
But I mean, everybody was really focusing on like new ideas and what we can do.

237
00:19:54,877 --> 00:19:59,117
And it's really interesting because the financial community has really like gotten the idea.

238
00:19:59,157 --> 00:20:27,397
And so they're basically, you know, piling tons and tons of money for people that have good ideas. So everybody is really, really excited about the space. And it's about I mean, it's about to blow up. Now, you can look at that as a bad thing because you could say, well, the financial community is going to try to regulate it or going to try to do, you know, the usual thing that they do. But I mean, it's good that that it's valid now that Bitcoin, in my opinion, we've made it. We've hit critical mass, you know, maybe that's not true. But, you know, that seems that's what everybody seems to think. Right. So we're kind of on our way.

239
00:20:27,397 --> 00:20:31,337
Did you get the sense there was a lot more suits there than you would expect?

240
00:20:31,537 --> 00:20:32,517
Or what was your sense of that?

241
00:20:32,797 --> 00:20:35,057
It was probably 50-50, but there were a lot of suits.

242
00:20:35,537 --> 00:20:39,957
There was three tracks, you know, for the conference talks.

243
00:20:40,117 --> 00:20:44,337
And one was technology, and one was business, and one was financial, like, regulations or whatever.

244
00:20:44,757 --> 00:20:49,277
So according to the talks, two out of three were for the suits, and one was for the nerds.

245
00:20:49,537 --> 00:20:52,797
But in general, it was about 50-50 as far as the breakdown, right?

246
00:20:53,037 --> 00:20:54,117
So, yeah.

247
00:20:54,117 --> 00:20:56,677
I have heard reports about 1,000, 1,100 people.

248
00:20:57,137 --> 00:20:57,977
Is that the sense you got?

249
00:20:58,397 --> 00:20:59,597
Yeah, that was really good.

250
00:20:59,657 --> 00:21:00,937
I wanted to tell you a quick little story.

251
00:21:01,077 --> 00:21:03,717
I was sitting at a table with just some people I'd met,

252
00:21:03,997 --> 00:21:05,097
and this guy came up and he said,

253
00:21:05,177 --> 00:21:07,937
hey, do you guys want to buy some Bitcoins?

254
00:21:08,277 --> 00:21:09,597
And we kind of looked at him like kind of weird,

255
00:21:09,757 --> 00:21:11,197
like why would, like, who are you?

256
00:21:11,277 --> 00:21:12,937
Like, this seems really sketchy, right?

257
00:21:13,277 --> 00:21:15,217
And then someone said, well, why are you doing this?

258
00:21:15,217 --> 00:21:16,637
And he said, oh, I don't have any money.

259
00:21:16,657 --> 00:21:17,797
I'm just trying to get money here.

260
00:21:18,017 --> 00:21:19,217
I just need some cash.

261
00:21:19,537 --> 00:21:22,097
And everybody at the table then said, oh yeah, let's do it.

262
00:21:22,097 --> 00:21:23,597
Like their opinion flipped immediately.

263
00:21:24,217 --> 00:21:26,637
So because the community is really helpful,

264
00:21:26,677 --> 00:21:30,637
about each other, if you just say, listen, I need some help. This is what I need. The community will

265
00:21:30,637 --> 00:21:36,337
come and sponsor you. I love that. I love that. You know, it strikes me a bit of familiarity with

266
00:21:36,337 --> 00:21:43,117
the last entrance into the bear market we just went through. This Gawk situation, as you might

267
00:21:43,117 --> 00:21:50,197
have picked up, was brewing. And there was a train at the end of the tunnel. We thought it was a light

268
00:21:50,197 --> 00:21:56,037
of payment systems and commercial companies coming on board. And we were all going to embrace Bitcoin

269
00:21:56,037 --> 00:21:56,997
as a payment system.

270
00:21:57,097 --> 00:21:58,457
We thought that's what the light was

271
00:21:58,457 --> 00:21:59,597
at the end of the tunnel back then.

272
00:22:00,757 --> 00:22:02,497
Turns out it was a fast approaching train

273
00:22:02,497 --> 00:22:03,377
called Mt. Gox.

274
00:22:04,257 --> 00:22:06,137
So it blows my mind.

275
00:22:06,417 --> 00:22:07,797
It blows my mind too

276
00:22:07,797 --> 00:22:10,957
that plan B was 13 years ago

277
00:22:10,957 --> 00:22:12,977
and 13 years ago was seven years

278
00:22:12,977 --> 00:22:14,157
into my journey of becoming

279
00:22:14,157 --> 00:22:15,337
a full-time podcaster.

280
00:22:15,577 --> 00:22:17,137
I don't normally talk about this kind of stuff,

281
00:22:17,237 --> 00:22:18,457
but I thought this was noteworthy

282
00:22:18,457 --> 00:22:20,957
because I was interviewing Adam Levine

283
00:22:20,957 --> 00:22:22,557
from the Let's Talk Bitcoin podcast

284
00:22:22,557 --> 00:22:24,517
and the topic of how Bitcoin

285
00:22:24,517 --> 00:22:31,037
could be useful in monetizing podcasts came up, I don't know, 10 years before we started using

286
00:22:31,037 --> 00:22:36,957
Bitcoin for that. And I tell you, people really don't know actually how difficult it is to

287
00:22:36,957 --> 00:22:41,037
monetize this kind of stuff. Now, this is what I do for a full time living, but it's taken me about

288
00:22:41,037 --> 00:22:45,777
seven years to get it to the point to be able to do that. And I'm talking seven years of extremely

289
00:22:45,777 --> 00:22:51,197
hard work, the hardest kind of work that I've ever known was possible. And, you know, it's been

290
00:22:51,197 --> 00:22:55,357
a certain formula that I've had to land on. And one of the reasons that I'll be completely honest

291
00:22:55,357 --> 00:23:01,157
with you, Adam, that interested me in Bitcoin back in 2011 was I saw it as a potential way to

292
00:23:01,157 --> 00:23:08,277
completely revolutionize the way new media is funded. I'm one of those people, I subscribe to

293
00:23:08,277 --> 00:23:13,837
the school of no agenda where there is a value for value model where if you believe you're getting

294
00:23:13,837 --> 00:23:18,637
something valuable from the content producer, you would tip them appropriately for that as much as

295
00:23:18,637 --> 00:23:23,577
you can afford. And that's different for each person. And I find, I find too, that a big barrier

296
00:23:23,577 --> 00:23:27,757
to this and a problem that Bitcoin solves specifically is, you know, Bitcoin can be a

297
00:23:27,757 --> 00:23:31,937
world currency. One of the problems we have is we have people that listen from all around the world

298
00:23:31,937 --> 00:23:35,337
and there's different fees associated for every single different country that wants to donate to

299
00:23:35,337 --> 00:23:40,557
us. And Bitcoin just sort of neutralizes that. Yeah, no, you know, you were talking earlier in

300
00:23:40,557 --> 00:23:44,737
the show about, well, you weren't talking specifically about this, but you said something

301
00:23:44,737 --> 00:23:48,757
earlier in the show before I got on that made me think of it. Bitcoin is a global local currency,

302
00:23:49,137 --> 00:23:50,997
right? Yeah. It's a local currency of the internet.

303
00:23:51,557 --> 00:23:55,277
It's a local currency of the internet, but it's even a local currency of wherever your locality

304
00:23:55,277 --> 00:24:00,997
is. Because since there's no common centralized point it needs to go through, legitimately,

305
00:24:01,297 --> 00:24:04,457
it's just person to person. So it doesn't matter where you are. And that's the fun part about

306
00:24:04,457 --> 00:24:09,457
Bitcoin is that you can be a person in one town talking exactly to a person, talking to a person

307
00:24:09,457 --> 00:24:14,717
in another town, sending them value, and it's just as easy. So yeah, no, absolutely. The ability

308
00:24:14,717 --> 00:24:19,817
to include international audiences is huge. It really is, you know, and, and you said it,

309
00:24:20,297 --> 00:24:24,257
it's hard to monetize this stuff. You know, you did it for seven years. I just got out of the

310
00:24:24,257 --> 00:24:28,677
game for a long time because I, you know, it, it, it was, this is always something podcasting is

311
00:24:28,677 --> 00:24:34,277
always something that I've done despite the costs because it's important to me. Yeah. Rather than

312
00:24:34,277 --> 00:24:37,917
the other way around. And so with Bitcoin, you know, so like when we received like $200 worth

313
00:24:37,917 --> 00:24:42,357
of donations from a single person, that's like more than I made in a year, you know, on, on,

314
00:24:42,357 --> 00:24:48,757
on my project in 2006. And it's pathetic, but it's because like we were using CPM ads when we had,

315
00:24:48,817 --> 00:24:52,237
you know, we had like 10,000 subscribers. So it wasn't even that small a base. It just was

316
00:24:52,237 --> 00:24:56,737
that there was no effective way to do this. Right, right. Too bad it would take 10 years

317
00:24:56,737 --> 00:25:03,837
before we'd have boosts. But at the time we recorded that Bitcoin was 120 US dollars. Just

318
00:25:03,837 --> 00:25:09,817
absolutely remarkable. However, it would soon crash. And that is because of that ticking time

319
00:25:09,817 --> 00:25:11,597
bomb that was Mount Gox.

320
00:25:11,857 --> 00:25:13,937
The thing that I think I was

321
00:25:13,937 --> 00:25:15,737
reminded of listening to these clips,

322
00:25:16,077 --> 00:25:29,995
and maybe it something we forgotten with the passage of time is it wasn an overnight crash Like FTX happened pretty quickly Not Mt Gox Mt Gox took months to unfold

323
00:25:30,495 --> 00:25:32,715
And there was misinformation initially.

324
00:25:33,415 --> 00:25:37,535
And there was a lot of misleading, like, oh, we're going to work this out.

325
00:25:37,615 --> 00:25:38,715
We've got some of the funds.

326
00:25:38,835 --> 00:25:40,415
It took forever to play out.

327
00:25:41,155 --> 00:25:45,315
And about seven months before they collapsed, Bitcoin started to slide.

328
00:25:45,315 --> 00:25:48,035
It had crashed down, quote unquote, to $87.

329
00:25:48,815 --> 00:25:50,575
And I was smelling a rat.

330
00:25:51,355 --> 00:25:52,495
Why don't we talk about that price?

331
00:25:52,535 --> 00:25:54,355
So we've kind of been mentioning it all episode.

332
00:25:54,535 --> 00:25:56,395
It's been sort of the elephant in the room.

333
00:25:57,375 --> 00:26:03,755
You know, when we were on the air last week, I think I talked about I bought some Bitcoins at $97.

334
00:26:05,275 --> 00:26:06,495
How's that doing right now?

335
00:26:06,755 --> 00:26:08,755
You never try to catch a falling knife, Drew.

336
00:26:08,955 --> 00:26:10,795
You never try to catch a falling knife.

337
00:26:10,875 --> 00:26:11,455
I always do.

338
00:26:11,615 --> 00:26:12,195
I thought you were supposed to.

339
00:26:12,195 --> 00:26:16,135
You know what's playing out is exactly what we thought would play out.

340
00:26:16,255 --> 00:26:17,515
It just took a lot longer.

341
00:26:17,975 --> 00:26:18,075
Right.

342
00:26:18,195 --> 00:26:21,835
And I think it's a representation of how the Bitcoin economy has grown.

343
00:26:21,955 --> 00:26:26,735
It used to be in the past when something really bad happened, you'd have an immediate, immediate, immediate result.

344
00:26:27,095 --> 00:26:30,295
But now I believe what we are seeing is the death of Mt. Gox.

345
00:26:30,415 --> 00:26:37,835
We are seeing the collection of that $75 million lawsuit, the shutdown of funding options and getting money out of Gox.

346
00:26:37,835 --> 00:26:42,395
I mean, don't forget, USD, there's just no way you're getting it out of Gox right now completely.

347
00:26:42,815 --> 00:26:44,475
I mean, that's nuclear right there.

348
00:26:44,495 --> 00:26:45,295
That's massive.

349
00:26:45,815 --> 00:26:45,995
All right.

350
00:26:46,055 --> 00:26:50,115
And then you've also got sort of all of these questions around the security state of Mt.

351
00:26:50,175 --> 00:26:53,435
Gox and they're trying to file to get legit now.

352
00:26:53,575 --> 00:26:57,235
Like now they're trying to file to get legit and nobody knows if that's going to go through.

353
00:26:57,755 --> 00:27:05,135
I think you're seeing a major sort of correction because of all of those events that we expected

354
00:27:05,135 --> 00:27:05,895
a while ago.

355
00:27:05,895 --> 00:27:10,095
honestly we expected three or four weeks ago we're just now getting in the last week yeah it's

356
00:27:10,095 --> 00:27:14,635
turning down very slowly from from the peak you know like i would have thought like like you were

357
00:27:14,635 --> 00:27:17,175
saying that we were talking about us you know you're going to see a huge spike and then a huge

358
00:27:17,175 --> 00:27:21,055
drop but it's moving much slower in a downward direction yeah we keep getting like these little

359
00:27:21,055 --> 00:27:25,075
we get these drop what we're getting is like we get these drops and then we then think it picks

360
00:27:25,075 --> 00:27:28,915
back up for a little bit and then we get these drops which is actually not i guess from what i'm

361
00:27:28,915 --> 00:27:34,275
reading all that uncommon i guess that's generally how this kind of works this is why i don't i

362
00:27:34,275 --> 00:27:43,595
I don't really get into short-term investment because, to me, I go based on, like, I look at the fundamentals and I think this is a great idea.

363
00:27:43,795 --> 00:27:45,115
There's obviously a need for this.

364
00:27:45,775 --> 00:27:51,855
To me, it seems like a screaming deal at $120 and it seems like an outrageous deal at $90.

365
00:27:52,355 --> 00:27:56,095
Like, to me, this seems like the big secret that nobody's got into yet.

366
00:27:56,515 --> 00:28:00,375
And so when it gets down around $90, I start, oh, I got to buy.

367
00:28:00,475 --> 00:28:00,915
I got to buy.

368
00:28:00,915 --> 00:28:01,295
I know, yeah.

369
00:28:01,395 --> 00:28:02,795
I'm getting excited as the price is dropping.

370
00:28:02,795 --> 00:28:07,595
And it's not like hyperbubly, you know, trying to pump, you know, Plan B or Bitcoin or anything.

371
00:28:08,455 --> 00:28:11,915
I would like, I would, as pessimistic as I am, I'm still going to buy more.

372
00:28:12,555 --> 00:28:15,755
Yeah, although the trend is definitely not our friend.

373
00:28:16,235 --> 00:28:19,195
Some people are thinking as low as 60.

374
00:28:19,335 --> 00:28:24,815
I'm hoping, I'm hoping there's still enough demand out there that it's not going to go down that low.

375
00:28:24,855 --> 00:28:26,935
But if it does, you better believe I'm going to buy in.

376
00:28:27,215 --> 00:28:27,555
I don't know.

377
00:28:27,555 --> 00:28:29,435
I don't know at what point I would stop buying, to be honest.

378
00:28:30,135 --> 00:28:32,355
I would just, my goal is not to buy while it's falling.

379
00:28:32,355 --> 00:28:37,595
My goal is to see it actually start going up a little bit and get it as it's going up.

380
00:28:38,095 --> 00:28:38,315
Right, right.

381
00:28:38,855 --> 00:28:39,535
That's the dream.

382
00:28:39,635 --> 00:28:40,015
That's the dream.

383
00:28:40,135 --> 00:28:40,255
Hopefully.

384
00:28:40,615 --> 00:28:44,275
You know, it's so funny because now we're talking about $60,000 and $87,000.

385
00:28:44,415 --> 00:28:46,695
Of course, back then we were talking about $60 and $87.

386
00:28:48,455 --> 00:28:50,235
And I think the analysis holds.

387
00:28:50,515 --> 00:28:52,855
I think the analysis 13 years still holds.

388
00:28:53,495 --> 00:28:55,655
It was a screaming deal at $100, and I knew it.

389
00:28:55,755 --> 00:28:56,555
I knew it.

390
00:28:57,455 --> 00:28:57,995
Dang it.

391
00:28:58,395 --> 00:28:59,055
Why did I sell?

392
00:28:59,055 --> 00:29:12,315
Now, I think to kind of set the context of what what the community was really worried about and focused on besides Mt. Gox back then, and actually Mt. Gox brought additional concerns around this.

393
00:29:12,515 --> 00:29:16,575
People called it a big widowmaker of Bitcoin, the U.S. federal government.

394
00:29:16,915 --> 00:29:22,735
And it was at least back then and assumed that eventually the U.S. federal government would come for Bitcoin.

395
00:29:23,115 --> 00:29:25,255
It was only a matter of time, most of us figured.

396
00:29:25,575 --> 00:29:28,855
And it was a common question that was sent in by the audience.

397
00:29:29,055 --> 00:29:29,915
Please email first.

398
00:29:30,495 --> 00:29:31,195
Joey writes in.

399
00:29:31,255 --> 00:29:32,895
He says, this was a text message?

400
00:29:33,415 --> 00:29:33,595
Yep.

401
00:29:33,755 --> 00:29:35,795
Was this like a lot of text messages that you had to compile?

402
00:29:36,255 --> 00:29:36,975
Only four.

403
00:29:37,235 --> 00:29:37,495
Okay.

404
00:29:37,695 --> 00:29:37,855
Okay.

405
00:29:38,655 --> 00:29:39,595
You know how guys are.

406
00:29:40,595 --> 00:29:44,195
He says, it seems to me that it would be possible for the U.S. government to gain control over

407
00:29:44,195 --> 00:29:46,815
the Bitcoin network by creating an online wallet.

408
00:29:47,255 --> 00:29:51,275
This wallet would only send coins to other U.S. approved wallets and could accept coins

409
00:29:51,275 --> 00:29:52,375
from unapproved wallets.

410
00:29:52,755 --> 00:29:56,075
People could be lured in with their higher values and regulated coins.

411
00:29:56,735 --> 00:30:00,915
The effect would be a walled-off ecosystem that could be regulated and controlled.

412
00:30:01,235 --> 00:30:04,275
I know this could be a dangerous idea, but is it worth thinking about?

413
00:30:04,375 --> 00:30:04,855
Thanks, guys.

414
00:30:05,015 --> 00:30:05,175
Joey.

415
00:30:06,655 --> 00:30:11,035
I still don't like the whole use of the word regulation because nobody defines it anywhere,

416
00:30:11,255 --> 00:30:13,575
you know, like this guy or anybody else or Joey or whatever.

417
00:30:15,055 --> 00:30:19,395
I mean, I guess they can kind of, I guess saying that they can kind of co-opt it is

418
00:30:19,395 --> 00:30:22,815
like the way that I would think about it, if this were to be done is they would have,

419
00:30:22,915 --> 00:30:25,875
you know, an address here and they'd have an address that was unique and registered

420
00:30:25,875 --> 00:30:29,635
to individuals and you can, you know, you get some, I guess, greater degrees of protection.

421
00:30:29,635 --> 00:30:30,715
I guess it was applied.

422
00:30:30,835 --> 00:30:35,475
The only way that could work, because what he's saying is that you'd have these U.S.-based

423
00:30:35,475 --> 00:30:38,475
wallets and they would only be allowed to send to other U.S.-based wallets, right?

424
00:30:38,795 --> 00:30:42,675
But if you're using Bitcoin and the Bitcoin protocol.

425
00:30:42,915 --> 00:30:44,095
You're not restricted from going outside of the system.

426
00:30:44,215 --> 00:30:44,375
Yeah.

427
00:30:44,435 --> 00:30:49,455
Every wallet out there, every downloaded wallet on every computer, on every Android device,

428
00:30:49,455 --> 00:30:57,355
on every server would have to support some sort of additional code that allowed them to somehow,

429
00:30:58,375 --> 00:31:01,575
how would you even allocate these Bitcoin addresses to the US?

430
00:31:01,755 --> 00:31:05,355
And these, I don't even, it seems impossible because people can generate a Bitcoin address

431
00:31:05,355 --> 00:31:06,395
at will.

432
00:31:06,875 --> 00:31:07,955
It's impossible.

433
00:31:08,095 --> 00:31:09,015
This is impossible.

434
00:31:09,415 --> 00:31:09,715
Right, right.

435
00:31:10,075 --> 00:31:11,715
Which is great, Joey.

436
00:31:12,115 --> 00:31:13,195
I mean, that's great, right?

437
00:31:13,195 --> 00:31:21,915
You think about some of the things that Satoshi figured out seem so simple at their first pass.

438
00:31:21,975 --> 00:31:28,455
But then when you go down thinking about the ramifications of some of those early decisions, you see how brilliant those decisions were.

439
00:31:28,675 --> 00:31:36,295
Like this example, people are constantly every week coming up with new scenarios on how the U.S. government could take over Bitcoin, right?

440
00:31:36,375 --> 00:31:38,835
Would you agree we get an email at least one or two every week?

441
00:31:38,835 --> 00:32:04,015
Right, right. And we can't really, because I mean, they can't do it. They can't do it like in this example, inclusively, like you're not going to be able to co-opt a Bitcoin, the entire, the entire thing and regulate in any kind of way. People will be able to jump in and jump out of, if they have their own wallet and, you know, registered addresses or whatever, you can jump in and utilize those. I mean, they can kind of co-opt that portion of the Bitcoin network, but they're not going to be able to co-opt the entire thing. And you're still going to be able to exit, you know, exit their little scenario that they could possibly build. I don't put much credence into that, but yeah.

442
00:32:04,015 --> 00:32:06,115
So these are all different things that we're evaluating.

443
00:32:06,255 --> 00:32:09,195
And it's like, well, I don't quite see a way they could do it, which is a...

444
00:32:09,195 --> 00:32:11,335
All right, that's enough. That's enough. That's enough. That's enough.

445
00:32:11,395 --> 00:32:12,955
I think that's enough of the classic clips.

446
00:32:13,295 --> 00:32:14,075
You know what I'm going to do?

447
00:32:14,835 --> 00:32:20,215
I will upload all 20 episodes to archive.org, and I'll put a link in the show notes.

448
00:32:20,715 --> 00:32:23,415
And if you find a gem in there, you let me know.

449
00:32:23,495 --> 00:32:25,075
You send me the episode and the time code,

450
00:32:25,555 --> 00:32:28,595
and I'll see about maybe playing another one in the future.

451
00:32:29,455 --> 00:32:31,235
But that's it for me. I'm on the road.

452
00:32:31,235 --> 00:32:37,815
But I hope you found this useful and hopefully informational and entertaining infotaining.

453
00:32:38,455 --> 00:32:40,435
Links at thisweekinbitcoin.show.

454
00:32:40,555 --> 00:32:42,115
And I'll see you back here next week.

455
00:33:01,235 --> 00:33:31,215
Thank you.

456
00:33:31,235 --> 00:33:50,155
Thank you.