1 00:00:00,000 --> 00:00:11,860 We're not going to go very in-depth on Bitcoin, but what we are going to do is do a quick review of how we got here and then walk through a history of engineered money, why it's needed and what uses it has. 2 00:00:11,860 --> 00:00:21,520 So at the end of today, you will have the full understanding of how we got to the place we are with money from a logical step. 3 00:00:21,520 --> 00:00:33,280 And then you'll see the history of first the need for digital money when it first arose, the first attempts at it, which I presume occurred much earlier than you think. 4 00:00:33,360 --> 00:00:36,240 And I think this will be fascinating for a lot of people here. 5 00:00:36,320 --> 00:00:40,620 And then we'll step into the advancement of the field of engineering money. 6 00:00:40,840 --> 00:00:43,340 So I want to do a quick review of how we got here. 7 00:00:43,520 --> 00:00:46,820 So we started with small societies that had barter. 8 00:00:47,000 --> 00:00:48,840 I traded with you, you traded with me. 9 00:00:49,060 --> 00:00:50,380 Then we ran into a problem. 10 00:00:50,380 --> 00:00:53,300 That problem is called the non-coincidence of wants. 11 00:00:53,660 --> 00:00:58,060 It means that I have something you want, but you don't have something that I want. 12 00:00:58,380 --> 00:01:02,440 And so therefore, we need to create a technology to pass value in between us. 13 00:01:02,740 --> 00:01:04,340 This is where money came from. 14 00:01:04,620 --> 00:01:09,400 This is what allowed society to spawn because then we could specialize. 15 00:01:09,820 --> 00:01:20,080 If I didn't have to trade you the exact work that I did, but I could trade you a proxy of that work that is a representation of the time and energy that I put into it, 16 00:01:20,080 --> 00:01:21,600 then we could then specialize 17 00:01:21,600 --> 00:01:24,540 and we could move into different fields and different realms. 18 00:01:24,740 --> 00:01:27,300 So money was a first, a social contract. 19 00:01:27,460 --> 00:01:29,600 It was just an agreement between you and I. 20 00:01:29,600 --> 00:01:32,060 I would use something and at a future time, 21 00:01:32,200 --> 00:01:34,420 I would give you something of equal value 22 00:01:34,420 --> 00:01:35,840 of that time and energy. 23 00:01:36,080 --> 00:01:40,160 We soon rapidly outran the ability to keep that in our head 24 00:01:40,160 --> 00:01:42,200 and we needed to create a ledger. 25 00:01:42,520 --> 00:01:45,960 A ledger is just an accounting of who owns what. 26 00:01:46,240 --> 00:01:49,500 It just means that I have this much of the energy, 27 00:01:49,500 --> 00:01:56,240 you have this much. When we sum it all together, what we have is an accumulation of the sum total 28 00:01:56,240 --> 00:02:03,780 of expended energy and time of humanity. Money is fascinating because it measures our productivity 29 00:02:03,780 --> 00:02:11,300 as humanity. It is a barometer of technology. As technology advances, money buys more. And so that 30 00:02:11,300 --> 00:02:18,500 ability to buy more, that buying power is represented in our money. And the last thing that we learned 31 00:02:18,500 --> 00:02:20,300 was that money is a technology. 32 00:02:20,720 --> 00:02:24,040 And technologies, whether it's an advancement in shoes, 33 00:02:24,320 --> 00:02:26,480 whether it's an advancement in home safes 34 00:02:26,480 --> 00:02:29,960 or an advancement in air conditioning or carbureted engines, 35 00:02:30,180 --> 00:02:32,300 technology follows two paths. 36 00:02:32,500 --> 00:02:36,060 One is iteration, where you improve upon something that exists. 37 00:02:36,340 --> 00:02:39,520 And the other is innovation, where you create something 38 00:02:39,520 --> 00:02:42,580 that does what already exists in a better way, 39 00:02:42,580 --> 00:02:46,500 a faster way, a safer way, a more convenient way. 40 00:02:46,500 --> 00:02:55,800 And remember that innovation, one way to spot innovation, if you can tick off those things, you can say it's better, it's faster, it's stronger, it's safer, all that. 41 00:02:56,000 --> 00:03:06,640 One of your best guide points for recognizing innovation is that it's always first adopted by people outside the system, by what would be otherwise characterized as a criminal element. 42 00:03:06,960 --> 00:03:11,300 This would be moonshine runners adopting cars so that they could escape police on horses. 43 00:03:11,300 --> 00:03:16,820 This would be people that are adopting Bitcoin so that they can escape the system. 44 00:03:17,080 --> 00:03:22,780 This would be the pornographic industry adopting DVDs so they can get out of the VHS system. 45 00:03:23,000 --> 00:03:28,540 The thing that we need to learn about innovation that we cannot forget is that you adopt innovation or it kills you. 46 00:03:28,760 --> 00:03:35,740 If you do not move forward with what is the innovation, you will not have a chance to have a say in what goes on. 47 00:03:35,940 --> 00:03:37,520 It does not negotiate with us. 48 00:03:37,720 --> 00:03:38,740 So we created money. 49 00:03:38,740 --> 00:03:44,680 We started with commodity money, and we will end with commodity money. Commodity money began with 50 00:03:44,680 --> 00:03:51,360 seashells, beads, salt, cattle, silver, and gold. Each one of these things is progressively harder, 51 00:03:51,620 --> 00:03:57,500 hard in the sense that it's harder to create more of it. It's very easy to create more seashells. 52 00:03:57,800 --> 00:04:02,940 You just go to the ocean. They're pretty limitless. Beads, we found a way to manufacture them. Salt, 53 00:04:02,940 --> 00:04:08,940 the entire ocean. Cattle, just breed them, stop eating them. Silver, very abundant. Gold, 54 00:04:09,300 --> 00:04:14,980 pretty hard to find. Each one got progressively harder. Hard money is the concept from Austrian 55 00:04:14,980 --> 00:04:21,180 economics. That is what gives us the idea that money needs to stay consistent in the sum total 56 00:04:21,180 --> 00:04:27,560 of it because it is the standard. It is the unit of measure, much like the meter is the unit of 57 00:04:27,560 --> 00:04:33,560 measure for distance or the kilogram is the unit of measure for weight. The problem that we found 58 00:04:33,560 --> 00:04:39,560 is that as we got progressively harder money, it actually was harder. It was more dense. It was 59 00:04:39,560 --> 00:04:44,600 heavier. And that made it harder to secure. It made it harder to use. You couldn't just walk around 60 00:04:44,600 --> 00:04:49,860 with gold in your pocket. And so we had this problem where it was difficult to use it on a 61 00:04:49,860 --> 00:04:54,460 daily basis because you can't just cut it into little pieces and put it back together. You have 62 00:04:54,460 --> 00:04:59,340 melt it and reconstitute it. It's dangerous to have on you because if I take it from you, 63 00:04:59,380 --> 00:05:03,440 it's then mine. You don't have a mark on it. And even if you do have a mark on it, 64 00:05:03,440 --> 00:05:08,480 all I do is melt it down and put my mark on it. So it's very difficult to use on it every day. 65 00:05:08,480 --> 00:05:14,840 So we created a solution for that. This is the logical solution. We said governments can hang 66 00:05:14,840 --> 00:05:19,620 on to the money and we will trust. Always remember, trust is where you go wrong because 67 00:05:19,620 --> 00:05:24,360 trust is always broken. There's never an instance in history where trust was given and 68 00:05:24,360 --> 00:05:29,600 not broken. So we trusted our governments to hold our money, and they in turn issued us something 69 00:05:29,600 --> 00:05:36,480 that was more convenient to use every day. First, it was paper. Paper is very easy. It's not hard to 70 00:05:36,480 --> 00:05:42,280 create more. You're only limited by the amount of ink and paper that you have to make dollar bills. 71 00:05:42,280 --> 00:05:48,320 It is much easier to make more paper than it is to make more seashells, beads, cattle, silver, 72 00:05:48,440 --> 00:05:53,640 gold. And so that created a big problem. We started to see inflation, but then it got even worse. 73 00:05:53,640 --> 00:05:58,860 We had computers. And with computers, we could then create digital money, which led us to 74 00:05:58,860 --> 00:06:05,460 infinitely easy, which created this situation, which is unique to the 20th century, really. 75 00:06:05,620 --> 00:06:10,840 We do have some instances of like flooding markets, but it didn't happen nearly as fast 76 00:06:10,840 --> 00:06:16,920 as it happens with digital money. The problem with infinitely easy digital money is hyperinflation. 77 00:06:17,140 --> 00:06:21,940 This, by the way, is the problem with all digital goods. When we first had digital music, 78 00:06:21,940 --> 00:06:27,420 That was the fear of everybody is that we're not going to be able to find a way to secure this. 79 00:06:27,480 --> 00:06:33,440 If somebody just takes a copy of my song and they put it on the Internet, everyone can have that copy for zero cost. 80 00:06:33,800 --> 00:06:44,180 And so we created a problem because we were able to digitally transact, but we weren't able to digitally secure creating this problem of hyperinflation. 81 00:06:44,180 --> 00:06:55,860 And at a certain point, it was realized that we needed to bring in the engineers, that we needed to have engineered money in order to create something that was both hard and convenient to use. 82 00:06:56,060 --> 00:07:02,560 So this is going to step us into the discovery of the need for digital money. 83 00:07:02,920 --> 00:07:04,320 And so a quick question. 84 00:07:04,620 --> 00:07:07,760 When do you think the first need for digital money arose? 85 00:07:07,760 --> 00:07:13,680 When did we first create a world where digital money was needed, able to communicate at distances? 86 00:07:14,860 --> 00:07:16,480 Okay, that's the perfect answer. 87 00:07:16,760 --> 00:07:19,260 What was the thing that allowed us to communicate at distances? 88 00:07:19,500 --> 00:07:23,100 I suppose you could say that a little bit, 89 00:07:23,200 --> 00:07:25,760 but I think I'm looking for something a little bit more engineered. 90 00:07:26,060 --> 00:07:27,460 I think I'm looking for the telegraph. 91 00:07:27,460 --> 00:07:29,860 When you created the telegraph, 92 00:07:30,180 --> 00:07:33,100 you created an instance where the speed of commerce, 93 00:07:33,420 --> 00:07:34,800 the speed at which we do business, 94 00:07:35,180 --> 00:07:37,720 outran the speed at which we could settle business 95 00:07:37,720 --> 00:07:40,940 because we had to physically transport the money there. 96 00:07:40,940 --> 00:07:49,140 I could be in England and I could send a telegraph to France and I could say I want 10,000 of whatever. 97 00:07:49,480 --> 00:07:55,640 But then the payment had to go on a ship and then it had to get on a train and it would take days and months. 98 00:07:55,840 --> 00:08:02,680 So we have had the need for digital money for 165 years. 99 00:08:02,940 --> 00:08:04,220 That's kind of fascinating. 100 00:08:04,420 --> 00:08:07,080 When did we really first start thinking about it? 101 00:08:07,080 --> 00:08:13,420 So Nikola Tesla, he published a few papers that kind of give us a hint into what the future would be. 102 00:08:13,420 --> 00:08:23,960 In 1905, he wrote about a quasi-intelligent machine that would, for all practical purposes, render useless the battleship, the fortress. 103 00:08:24,280 --> 00:08:26,140 They would lose their importance and significance. 104 00:08:26,680 --> 00:08:32,200 And he could say with confidence that skilled electricians will settle the battles of the near future. 105 00:08:32,200 --> 00:08:38,340 1900, five years before that, he talked about how the development in the direction developing 106 00:08:38,340 --> 00:08:43,820 electricity would make war just a contest of machines without men, that we would be 107 00:08:43,820 --> 00:08:48,260 fighting wars in cyberspace with humans out of the loop. 108 00:08:48,720 --> 00:08:53,380 And it doesn't take much to step back and look at what a Bitcoin miner is and realize 109 00:08:53,380 --> 00:08:58,420 that Bitcoin miners are competing against each other, fighting a war with electricity 110 00:08:58,420 --> 00:09:01,920 for the prize, for the ultimate resource, which is Bitcoin. 111 00:09:01,920 --> 00:09:07,820 Without electricity, without this human out of the loop, we would not be able to progress. 112 00:09:08,120 --> 00:09:10,300 But he wasn't really talking about money. 113 00:09:10,520 --> 00:09:14,960 He was more just talking about war and talking about violence. 114 00:09:15,340 --> 00:09:21,560 And remember how we've talked about that violence is ultimately what backs fiat currency. 115 00:09:21,820 --> 00:09:25,080 That if you do not use our money, we will blow you up. 116 00:09:25,340 --> 00:09:28,700 The dollar is backed by the full faith and credit of the United States. 117 00:09:28,700 --> 00:09:32,140 The power of the United States comes from the military. 118 00:09:32,560 --> 00:09:35,580 So violence is what secures fiat money. 119 00:09:35,880 --> 00:09:40,120 And he foresaw a future in which we would no longer have violence because we would do 120 00:09:40,120 --> 00:09:41,380 wars in cyberspace. 121 00:09:41,620 --> 00:09:48,480 But it took the greatest industrialists of the 20th century to really figure this out. 122 00:09:48,980 --> 00:09:50,780 This is from 1921. 123 00:09:52,280 --> 00:09:58,680 In the New York Tribune, Henry Ford had realized that because gold has to be centralized, 124 00:09:58,700 --> 00:10:01,060 due to the problems we talked about earlier. 125 00:10:01,380 --> 00:10:02,640 We have to trust a government. 126 00:10:03,100 --> 00:10:04,560 Governments betray that trust. 127 00:10:04,900 --> 00:10:05,880 They issue more money. 128 00:10:06,240 --> 00:10:09,540 They issue debt and they draw money out of the future 129 00:10:09,540 --> 00:10:12,200 into the present and they use that to fight wars. 130 00:10:12,440 --> 00:10:15,180 And Henry Ford envisioned an electric currency 131 00:10:15,180 --> 00:10:17,560 that would replace gold and stop war. 132 00:10:17,560 --> 00:10:21,120 He bought a dam in Georgia, the state of Georgia, 133 00:10:21,420 --> 00:10:24,640 for $30 million, intending to use it 134 00:10:24,640 --> 00:10:27,960 to use the power from the dam, the hydroelectric power, 135 00:10:27,960 --> 00:10:32,040 to power an energy currency that would be used to replace gold. 136 00:10:32,380 --> 00:10:33,900 That is Bitcoin. 137 00:10:34,160 --> 00:10:36,860 And then we really started to find a need for it. 138 00:10:37,200 --> 00:10:38,140 This is Friedrich Hayek. 139 00:10:38,240 --> 00:10:43,260 He's an Austrian economist and one of the leading thinkers of the 20th century on money. 140 00:10:43,380 --> 00:10:49,120 And he had something very interesting to say about fiat money and what would come next. 141 00:10:49,740 --> 00:10:52,640 He's very well versed in Keynesian economics. 142 00:10:52,640 --> 00:11:05,740 Keynesian economics, remember Thomas Keynes, who said that inflation is the mechanism by which governments can secretly and unobserved steal wealth from their citizens over time without them knowing. 143 00:11:05,740 --> 00:11:08,500 So in the 80s, there was actually progress. 144 00:11:08,960 --> 00:11:10,100 There was actually development. 145 00:11:10,440 --> 00:11:15,900 David Chalm was a researcher and he was at University of California, Berkeley. 146 00:11:16,060 --> 00:11:22,540 He published two papers that are foundational to what is now Bitcoin and really all forms 147 00:11:22,540 --> 00:11:23,320 of digital money. 148 00:11:23,720 --> 00:11:29,920 Untraceable electronic mail, return addresses and digital pseudonyms, and then blind signatures. 149 00:11:30,120 --> 00:11:46,592 Blind meaning that I can sign my side and you can sign your side and we don have to know each other in order to do business with each other So that was kind of the first big step towards engineered money was being able to do this anonymously or pseudonymously 150 00:11:46,592 --> 00:11:48,832 and to be able to do it over the web 151 00:11:48,832 --> 00:11:51,912 without having to go through any sort of analog. 152 00:11:52,212 --> 00:11:56,172 Chom continued, and in 1983, he proposed eCash. 153 00:11:56,492 --> 00:12:00,732 eCash was the first digital money, the first thing. 154 00:12:00,732 --> 00:12:02,572 The first digital money 155 00:12:03,612 --> 00:12:08,772 is 42 years old. It didn't come about with Bitcoin. It didn't come about with Ethereum. 156 00:12:09,012 --> 00:12:15,392 It came about 42 years ago, a theoretical blueprint for digital cash. And you can still see 157 00:12:15,392 --> 00:12:22,552 the website if it comes up. Well, there we go. So Chom invents eCash. And look, he actually, 158 00:12:22,672 --> 00:12:29,072 he actually had a lot of success. He publishes the paper. He creates the team. He makes the world's 159 00:12:29,072 --> 00:12:35,092 first electronic cash payment over a computer, DigiCash. And then they start actually putting 160 00:12:35,092 --> 00:12:41,232 it into the world. CyberBucks trial begins. Companies were accepting eCash. These are all 161 00:12:41,232 --> 00:12:47,972 companies that in the 80s were accepting electronic cash, early 90s. Very small. It was, I can't 162 00:12:47,972 --> 00:12:52,992 remember what it ever got to. I could look it up, but I think it was like around a billion, 163 00:12:52,992 --> 00:12:55,992 but I'm surely wrong in saying that. 164 00:12:56,812 --> 00:12:59,392 In 1995, they started a worldwide trial. 165 00:12:59,692 --> 00:13:02,292 They created chip technology for smart cards 166 00:13:02,292 --> 00:13:04,012 that you could just tap, keep going, 167 00:13:04,232 --> 00:13:06,412 and then keep going in the 90s, 168 00:13:06,492 --> 00:13:08,272 and eventually it runs out. 169 00:13:08,512 --> 00:13:11,072 Eventually, they realize that they have a problem, 170 00:13:11,372 --> 00:13:14,192 and the problem is they can't solve the double spend problem, 171 00:13:14,372 --> 00:13:17,772 which means that you can't make DigiCash secure 172 00:13:17,772 --> 00:13:20,472 because it has a single point of failure. 173 00:13:20,472 --> 00:13:23,052 They were operating this from a centralized server. 174 00:13:23,432 --> 00:13:24,972 So first try, good try. 175 00:13:25,292 --> 00:13:25,872 Did some good. 176 00:13:26,172 --> 00:13:26,792 Did a lot of good. 177 00:13:27,092 --> 00:13:28,152 It got a lot of people thinking. 178 00:13:28,512 --> 00:13:29,952 Got a lot of people thinking. 179 00:13:30,132 --> 00:13:33,012 In 1988, the first time I read this, it gave me chills. 180 00:13:33,252 --> 00:13:36,852 And I know the text is small, but this is the, it's not coming up right. 181 00:13:36,932 --> 00:13:38,812 The Crypto Anarchist Manifesto. 182 00:13:38,812 --> 00:13:43,572 This was written by Timothy C. May back in 1987, I believe. 183 00:13:43,832 --> 00:13:49,632 And he talks about how technology will lead a revolution that will be both social and economic. 184 00:13:49,632 --> 00:13:51,632 It's existed in theory for a decade. 185 00:13:52,072 --> 00:14:00,172 The methods are based upon public key encryption, zero knowledge proof systems and software protocols to interact and authenticate and verify. 186 00:14:00,472 --> 00:14:15,052 And he talks about how just as a seemingly minor invention like barbed wire made possible the fencing off of vast ranches and farms, which took us from a hunter gatherer society to a settled society where we raised agricultural products. 187 00:14:15,052 --> 00:14:19,032 It altered forever the concept of land and property rights. 188 00:14:19,032 --> 00:14:25,792 We didn't have that before until you could put a barrier around it, much like you can put a barrier around your Bitcoin. 189 00:14:26,132 --> 00:14:36,392 So, too, will the seemingly minor discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property. 190 00:14:36,832 --> 00:14:39,712 Arise, you have nothing to lose but your barbed wire fences. 191 00:14:39,912 --> 00:14:46,032 The first time I read this, it gave me chills, probably because I grew up on a ranch and I understood power of what happened. 192 00:14:46,032 --> 00:14:50,792 It reshaped the entire United States when barbed wire came into play. 193 00:14:51,192 --> 00:14:58,452 Barbed wire is wire that has these little sharp projections on it that will keep cattle in and also keep people out. 194 00:14:58,692 --> 00:15:04,812 Prior to that, the way that cattle farming, cattle ranching worked, it didn't work like that. 195 00:15:04,892 --> 00:15:06,272 You rode down to Mexico. 196 00:15:06,772 --> 00:15:09,332 You rounded up a couple thousand cows. 197 00:15:09,612 --> 00:15:13,092 You drove those cattle through Texas, Oklahoma, and Kansas. 198 00:15:13,412 --> 00:15:16,332 You rested them in Kansas for about four months 199 00:15:16,332 --> 00:15:18,792 so that they could gain weight that they lost on the trip. 200 00:15:19,012 --> 00:15:20,452 Then you took them to Kansas City. 201 00:15:20,912 --> 00:15:21,892 You put them on a train. 202 00:15:22,352 --> 00:15:24,292 They went to Chicago to the stockyards. 203 00:15:24,712 --> 00:15:26,912 This is where the book Slaughterhouse-Five comes from. 204 00:15:27,172 --> 00:15:28,912 And they were slaughtered and then they were distributed. 205 00:15:29,292 --> 00:15:30,732 But now we have fences. 206 00:15:31,092 --> 00:15:34,692 And now those cattle live their entire life in one square mile. 207 00:15:34,692 --> 00:15:36,532 And then they're taken to be butchered. 208 00:15:37,252 --> 00:15:40,152 So 1989, again, this is DigiCash that was founded. 209 00:15:40,252 --> 00:15:41,132 I put this in here. 210 00:15:41,132 --> 00:15:49,672 I'm not going to play it because this is Jack Cruz and Jack has a theory on Bitcoin and he has a theory on who Satoshi Nakamoto is. 211 00:15:49,972 --> 00:15:51,532 And he takes an hour to explain it. 212 00:15:51,632 --> 00:15:53,872 I highly recommend that you watch this. 213 00:15:54,172 --> 00:15:56,572 This is from the What is Money show with Robert Breedlove. 214 00:15:56,932 --> 00:15:59,052 This is the third in a series that they did. 215 00:15:59,412 --> 00:16:00,892 But it effectively goes like this. 216 00:16:01,132 --> 00:16:05,272 In the 40s, the United States could not cover all of the borders and all the ports. 217 00:16:05,552 --> 00:16:07,452 And so they made a deal with the mafia. 218 00:16:07,452 --> 00:16:17,792 The mafia was running the ports in New York City, and they said, hey, you guys, if you'll cover the ports, try to keep the Nazis out, we'll let you alone because we know you're doing some shady stuff. 219 00:16:18,132 --> 00:16:20,552 And so they agreed. They had an agreement. They had a deal. 220 00:16:20,772 --> 00:16:27,672 They captured, I believe, 22 Nazi scientists, and a few of those scientists had some very interesting things to say. 221 00:16:27,672 --> 00:16:40,192 One of them had been doing research on how light can domesticate people, fluorescent light, how the wavelength of fluorescent light makes people docile, easy to be suggestible and calm. 222 00:16:40,412 --> 00:16:45,192 And they were using that in order to basically do subtle mind control on people. 223 00:16:45,192 --> 00:16:54,972 So the mafia takes this idea and they go to Las Vegas where nobody wants to be and they build Las Vegas and they build casinos and they fill them with artificial light. 224 00:16:55,132 --> 00:16:58,032 They black out the windows, they take away the clocks and they pump in oxygen. 225 00:16:58,312 --> 00:17:00,972 And they also offer free food so you can stay there the whole time. 226 00:17:01,232 --> 00:17:02,392 And it becomes a cash cow. 227 00:17:02,692 --> 00:17:05,612 They make tons of money, tons of money. 228 00:17:05,612 --> 00:17:12,172 And in the 60s, the government goes back on their deal with the mafia and they start trying to come after them for tax evasion. 229 00:17:12,172 --> 00:17:18,252 because remember all these casinos, they're cash, cash in, cash out. It's great for money laundering. 230 00:17:18,252 --> 00:17:23,552 They come at the mafia and in particular one guy, the guy who made the deal with him in the 40s. 231 00:17:23,672 --> 00:17:29,752 And that guy said, you know, the only reason that they can come after me is because they control the 232 00:17:29,752 --> 00:17:34,812 money. They issue the money. So what would happen if they couldn't control the money? And he digs 233 00:17:34,812 --> 00:17:41,492 into monetary theory and he starts funding research in monetary theory and in ways to get 234 00:17:41,492 --> 00:17:47,352 money out of the hands of government. And he has some ties to David Chom. David Chom was a little 235 00:17:47,352 --> 00:17:53,192 known researcher. He was not breaking the world. He was very poor. He did not have a whole lot going 236 00:17:53,192 --> 00:17:58,772 for him. And when he graduated with his PhD, all of a sudden he had a number of offshore companies 237 00:17:58,772 --> 00:18:05,732 started in his name and a ton of money to do research. He carried on that research, Digicash, 238 00:18:06,012 --> 00:18:11,012 all the way up until the late 90s when he passed away. And there's a guy who comes onto the list of 239 00:18:11,012 --> 00:18:12,612 who could be Satoshi Nakamoto. 240 00:18:12,772 --> 00:18:14,052 His name is Lynn Sassaman. 241 00:18:14,672 --> 00:18:18,152 Supposedly, Lynn Sassaman could be Satoshi Nakamoto. 242 00:18:18,632 --> 00:18:22,832 And Lynn Sassaman is definitely David Chalm's PhD student, 243 00:18:23,172 --> 00:18:24,132 carrying on the legacy. 244 00:18:24,592 --> 00:18:26,472 This is a fascinating interview to watch, 245 00:18:26,492 --> 00:18:28,152 and I highly recommend it and skip it. 246 00:18:28,412 --> 00:18:30,752 The Sovereign Individual in 1997, 247 00:18:31,352 --> 00:18:33,792 these are two economist traders 248 00:18:33,792 --> 00:18:38,072 who had predicted the 1987 stock market crash, 249 00:18:38,072 --> 00:18:46,212 which was just as bad, maybe not quite as bad as the Great Depression. But inflation had gotten so 250 00:18:46,212 --> 00:18:52,352 bad that at that time, the emperor's palace in Japan was valued more than all of the real estate 251 00:18:52,352 --> 00:18:57,812 combined in the state of California, sixth, seventh largest economy in the entire world. 252 00:18:57,992 --> 00:19:03,612 And that kicked off a massive crash. And they had written a book about it prior called Blood in the 253 00:19:03,612 --> 00:19:07,932 streets, foreseeing all of this, making millions. And then they wrote another one called the 254 00:19:07,932 --> 00:19:11,792 sovereign individual. And the sovereign individual is all about where the world is going to go, 255 00:19:11,992 --> 00:19:17,372 how it's going to get there. They talk about the advent of the information age. We have cyber 256 00:19:17,372 --> 00:19:22,472 commerce and it will lead to cyber money. And this new form of money will reduce the capacity of the 257 00:19:22,472 --> 00:19:27,592 world's nation states to determine who can become a sovereign individual. Sovereignty is your ability 258 00:19:27,592 --> 00:19:32,992 to act as you please. Soon you can pay for any transaction over the net at the same time that 259 00:19:32,992 --> 00:19:38,572 you place it using cyber cash. And a crucial part of this will come about because it will liberate 260 00:19:38,572 --> 00:19:44,392 the holders of wealth from expropriation through inflation, from the ability of a government to 261 00:19:44,392 --> 00:19:50,292 secretly confiscate your wealth. This will be a type of currency that's unique, anonymous, 262 00:19:50,512 --> 00:19:55,432 and verifiable. It will be divisible into the tiniest fraction. You can accommodate the largest 263 00:19:55,432 --> 00:20:01,052 transactions and it'll be tradable at a keystroke any time of day. This was in 1997. Bitcoin was 264 00:20:01,052 --> 00:20:07,812 invented in 2008. They have more to say. What they tell us is that at this stage, you're going to 265 00:20:07,812 --> 00:20:13,272 have mega political consequences that have already been outlined. What they're referring to is how 266 00:20:13,272 --> 00:20:17,512 they talked about the fall of nation states, is that nation states, if they can't control the money, 267 00:20:17,512 --> 00:20:23,612 if they can no longer extort people for services that cost more than they're worth, they'll have to 268 00:20:23,612 --> 00:20:30,152 then compete with other governments in order to provide those services at a reasonable cost. 269 00:20:30,152 --> 00:20:35,512 extraterritorial regulatory power. Remember, like the United States, no matter where I'm at, 270 00:20:35,572 --> 00:20:39,712 they can tax me. It doesn't matter that I'm here. They can reach outside of their territory. 271 00:20:40,132 --> 00:20:45,172 That power will collapse. Jurisdictions will devolve. You'll no longer see this jurisdiction 272 00:20:45,172 --> 00:20:50,952 having a 10% tax, this jurisdiction having none. Everything will collapse because you'll have to 273 00:20:50,952 --> 00:20:56,872 compete against each other. Inflation as a revenue option will largely be foreclosed by the emergence 274 00:20:56,872 --> 00:20:57,672 of cyber money. 275 00:20:57,852 --> 00:21:00,852 Remember, we had the last one was all about inflation, 276 00:21:01,112 --> 00:21:02,512 all about a government's ability 277 00:21:02,512 --> 00:21:03,952 to create money out of nothing 278 00:21:03,952 --> 00:21:07,832 that they then use to devalue all of the money that exists 279 00:21:07,832 --> 00:21:09,472 and take a larger portion of it. 280 00:21:09,732 --> 00:21:11,952 Remember, it's not your house that goes up in value. 281 00:21:11,952 --> 00:21:13,792 It's the dollar that you measure it with 282 00:21:13,792 --> 00:21:14,952 that goes down in value. 283 00:21:15,152 --> 00:21:17,232 And when you buy that house for 100,000 284 00:21:17,232 --> 00:21:19,072 and they tax you 2% dollars, 285 00:21:19,392 --> 00:21:21,572 in 50 years, you're gonna rebuy that house. 286 00:21:21,712 --> 00:21:25,712 But when it goes up to $400,000, they tax you 2%, 287 00:21:26,872 --> 00:21:29,712 it's $8,000 in 12 and a half years, 288 00:21:29,712 --> 00:21:30,872 you're gonna rebuy that house. 289 00:21:31,112 --> 00:21:32,752 The boomers are seeing this right now. 290 00:21:32,852 --> 00:21:35,392 There's so many people that bought houses in the 70s 291 00:21:35,392 --> 00:21:38,472 when the average price was like 10 to $12,000. 292 00:21:38,772 --> 00:21:40,852 And those houses are now worth $400,000. 293 00:21:41,212 --> 00:21:42,932 They've repurchased that house 294 00:21:42,932 --> 00:21:45,232 multiple times over their lifetime. 295 00:21:45,512 --> 00:21:46,732 In fact, now they're at the point 296 00:21:46,732 --> 00:21:49,072 where they're repurchasing that house every single year. 297 00:21:49,512 --> 00:21:50,392 So this brings us up, 298 00:21:51,292 --> 00:21:54,092 it's actually in the 90s that this was invented, May 1997. 299 00:21:54,092 --> 00:21:56,892 This brings us up to hashcash. 300 00:21:57,212 --> 00:22:04,632 So all Adam Back was trying to do when he invented hashcash was he was trying to impose a penalty on spam email. 301 00:22:04,912 --> 00:22:16,592 And he realized that if he created a difficult math problem for them to solve, for the sender to solve, they would have to expend electricity in order to do that. 302 00:22:16,832 --> 00:22:18,852 And that would make it not viable. 303 00:22:18,852 --> 00:22:24,412 You wouldn't be able to send billions of emails hoping that seven or eight people fall for your scam. 304 00:22:24,672 --> 00:22:28,012 It would make it economically infeasible to do this. 305 00:22:28,292 --> 00:22:31,052 This is the thing that makes Bitcoin work. 306 00:22:31,352 --> 00:22:31,952 Proof of work. 307 00:22:32,212 --> 00:22:35,512 Now, there's about 10 different things and we'll try to run through them very quickly. 308 00:22:35,912 --> 00:22:40,752 But proof of work is the tie between the digital world and the physical world. 309 00:22:41,032 --> 00:22:43,972 I want to send you something, but in order to send it, 310 00:22:43,972 --> 00:22:50,472 I have to prove to you by solving this mathematical problem that can only be solved by expending energy, which has a cost. 311 00:22:50,832 --> 00:22:52,112 We created the singularity. 312 00:22:52,432 --> 00:22:55,512 We created a tie between the digital world and the physical world. 313 00:22:55,872 --> 00:23:00,172 This was the first proof of work system, but it didn't quite solve the problem. 314 00:23:00,572 --> 00:23:01,292 We're getting closer. 315 00:23:01,712 --> 00:23:09,792 By the way, Adam Back is the guy who about two, a month or two ago, announced that he was starting along with a couple other people. 316 00:23:09,792 --> 00:23:22,524 the Bitcoin Standard Treasury Company which is a micro strategy type company They will have a treasury of Bitcoin They will issue debt against it and they will repeat They will buy Bitcoin with the debt 317 00:23:23,124 --> 00:23:24,465 They will buy Bitcoin with the debt. 318 00:23:24,684 --> 00:23:26,024 They will buy Bitcoin with the debt 319 00:23:26,024 --> 00:23:28,245 until there is no more fiat for them to buy. 320 00:23:28,245 --> 00:23:29,184 Still in play. 321 00:23:29,524 --> 00:23:30,445 Fantastic guy. 322 00:23:30,804 --> 00:23:33,324 Will respond to you on Twitter if you talk to him. 323 00:23:33,424 --> 00:23:33,824 Very cool. 324 00:23:34,324 --> 00:23:35,225 Very fantastic guy. 325 00:23:35,524 --> 00:23:36,064 English fella. 326 00:23:36,424 --> 00:23:38,924 1998, Nick Szabo proposed Bitgold. 327 00:23:39,205 --> 00:23:40,965 So this is really getting closer 328 00:23:40,965 --> 00:23:44,725 because he did the thing that Digicash didn't do. 329 00:23:44,844 --> 00:23:45,804 He made it decentralized. 330 00:23:46,104 --> 00:23:47,864 It wasn't operating on a centralized server. 331 00:23:47,985 --> 00:23:49,445 And he used proof of work. 332 00:23:49,745 --> 00:23:50,945 Okay, so we're getting closer. 333 00:23:51,064 --> 00:23:51,725 We're getting closer. 334 00:23:52,124 --> 00:23:53,884 Creating unforgeable bits. 335 00:23:54,424 --> 00:23:57,945 So creating that puzzle that you cannot forge. 336 00:23:57,945 --> 00:23:59,645 You have to solve the problem. 337 00:23:59,764 --> 00:24:00,905 You have to expend the energy. 338 00:24:01,145 --> 00:24:04,405 This was the precursor to Bitcoin's mining and scarcity, 339 00:24:04,405 --> 00:24:06,924 but he never got to implement it due to, 340 00:24:07,225 --> 00:24:08,965 again, the double spend problem. 341 00:24:08,965 --> 00:24:15,844 The double spend is that I can't verify that this bit, because remember, that's what we're doing is we're trading bits. 342 00:24:16,104 --> 00:24:22,184 I can't verify where this bit is, and I can't verify that only one person has that bit. 343 00:24:22,384 --> 00:24:24,084 I can't yet make it unique. 344 00:24:24,364 --> 00:24:26,705 I can't yet make it non-fungible. 345 00:24:26,905 --> 00:24:28,465 So 1998, we're getting close. 346 00:24:28,804 --> 00:24:34,205 Milton Friedman, one of the most famous economists from the United States, worked in the government, high, high level. 347 00:24:34,205 --> 00:24:38,764 and he predicted Bitcoin in 1999, 10 years before it came. 348 00:25:04,205 --> 00:25:07,264 It will make it easier when people are using it. 349 00:25:07,384 --> 00:25:12,205 Of course, as this negative side, it means that the gangsters, 350 00:25:14,145 --> 00:25:16,284 people who are engaging in illegal bandwins, 351 00:25:16,284 --> 00:25:20,024 will also have an easier way to carry on their business. 352 00:25:21,005 --> 00:25:25,544 But I think that the tendency to make it part of the collect taxes 353 00:25:25,544 --> 00:25:29,124 will be a very important part of the society community. 354 00:25:29,124 --> 00:25:36,364 He does a great job of noting the thing about innovation is that the criminals will use it. 355 00:25:36,364 --> 00:25:43,005 But remember, we talked before that competition will no longer be the source of taking resources from other people. 356 00:25:43,264 --> 00:25:53,965 Because up until this point in history, I could always put a gun to your head and I could tell you to give me your resources, your Bitcoin, your, no, not your Bitcoin, your land, your money, your horses, your cattle. 357 00:25:54,184 --> 00:25:55,104 And I could take them. 358 00:25:55,145 --> 00:25:58,024 Or if you refused, I could kill you and still take it. 359 00:25:58,024 --> 00:26:01,684 But with Bitcoin now, if I kill you, nobody gets the Bitcoin. 360 00:26:02,104 --> 00:26:06,864 So we've lowered the return to violence to the point now where it's useless. 361 00:26:07,124 --> 00:26:10,965 And now we must collaborate in order to work together. 362 00:26:11,324 --> 00:26:13,024 Yeah, $5 wrench attack. 363 00:26:13,344 --> 00:26:14,584 Yep, the $5 wrench attack. 364 00:26:14,584 --> 00:26:16,264 And remember, we talked about that. 365 00:26:16,384 --> 00:26:19,165 The $5 wrench attack works on small scale. 366 00:26:19,465 --> 00:26:20,424 It does not scale. 367 00:26:20,824 --> 00:26:27,445 You can't take everybody and beat them because there are more everybody's than there are people doing the beating. 368 00:26:27,445 --> 00:26:31,124 We talked about this in a previous one last month. 369 00:26:31,225 --> 00:26:35,445 We talked about this, I think it was called in the social games, status games. 370 00:26:35,564 --> 00:26:40,445 Status games have a couple different paths that you can take. 371 00:26:40,524 --> 00:26:41,684 One is that you can be a bully. 372 00:26:42,044 --> 00:26:45,405 The problem with being a bully is that there's always a bigger bully. 373 00:26:45,684 --> 00:26:46,024 What's that? 374 00:26:46,505 --> 00:26:47,184 You can try. 375 00:26:47,684 --> 00:26:48,245 Are they anonymous? 376 00:26:48,905 --> 00:26:51,084 They don't hide it very well, right? 377 00:26:51,145 --> 00:26:52,284 We all know what they're doing. 378 00:26:52,465 --> 00:26:54,344 We all know that they're doing things that are bad. 379 00:26:54,645 --> 00:26:56,124 We're starting to expose that. 380 00:26:56,124 --> 00:26:59,165 The internet is doing a great job of doing that, right? 381 00:26:59,465 --> 00:27:02,344 Think about 100 years ago, even 50 years ago, 382 00:27:02,584 --> 00:27:04,745 all of your news came from three newspapers 383 00:27:04,745 --> 00:27:07,124 that were all controlled by the government. 384 00:27:07,364 --> 00:27:09,344 And now you have an honest message board. 385 00:27:09,465 --> 00:27:12,604 You have people that are not afraid to risk their life 386 00:27:12,604 --> 00:27:13,884 in order to expose something. 387 00:27:14,165 --> 00:27:15,965 Yeah, that doesn't scale very well. 388 00:27:16,084 --> 00:27:19,184 Because you can't do it over and over and over and over 389 00:27:19,184 --> 00:27:21,665 because then you'd have to hire 10 million hitmen. 390 00:27:21,945 --> 00:27:24,485 And then those 10 million hitmen would just kill you, right? 391 00:27:24,485 --> 00:27:27,764 Why would you pay me to beat up Jack and take his money? 392 00:27:27,905 --> 00:27:29,564 Once I take his, it's mine now. 393 00:27:29,725 --> 00:27:30,684 Come get it, right? 394 00:27:31,324 --> 00:27:33,764 So it's just fight after fight after fight after fight after fight. 395 00:27:34,024 --> 00:27:38,584 This is the battle to the death over every ham sandwich that Robert Breedlove talks about. 396 00:27:38,925 --> 00:27:39,824 It does not scale. 397 00:27:40,264 --> 00:27:45,764 Violence does not scale when you have a source of money that cannot be taken. 398 00:27:45,905 --> 00:27:46,965 It can only be given. 399 00:27:47,344 --> 00:27:48,725 You cannot take my Bitcoin. 400 00:27:49,104 --> 00:27:50,165 I have to give it to you. 401 00:27:50,304 --> 00:27:53,524 Yes, I can give it to you under duress, but that does not scale. 402 00:27:53,524 --> 00:27:59,145 because somebody else will come along and they'll offer to be a better bully. 403 00:27:59,364 --> 00:28:03,425 They'll say, well, we'll beat you up for not all your money, just 80%. 404 00:28:03,425 --> 00:28:06,084 And then somebody will say, oh, we'll beat you up for 50%. 405 00:28:06,084 --> 00:28:09,505 And just like we have with digital services, 406 00:28:09,705 --> 00:28:11,624 everything crashes to the marginal cost. 407 00:28:11,985 --> 00:28:12,505 Hacking does. 408 00:28:13,205 --> 00:28:14,425 Yeah, but you can't hack Bitcoin. 409 00:28:15,005 --> 00:28:15,884 I'm not trusting them. 410 00:28:16,684 --> 00:28:18,005 There's no trust involved. 411 00:28:18,124 --> 00:28:19,284 You only have to trust yourself. 412 00:28:19,564 --> 00:28:19,684 Yeah. 413 00:28:19,864 --> 00:28:21,725 This is the era of responsibility. 414 00:28:22,104 --> 00:28:24,745 Like this is the time when we have responsibility. 415 00:28:24,985 --> 00:28:27,405 And there will be a lot of people that won't trust themselves. 416 00:28:27,725 --> 00:28:29,405 And this is why you have exchanges. 417 00:28:29,745 --> 00:28:33,684 And this is why you have Coinbase and why you have Strike and Swan. 418 00:28:33,965 --> 00:28:36,844 But all of those are not your keys, not your coins. 419 00:28:37,104 --> 00:28:38,485 If they hold it, it's not yours. 420 00:28:38,784 --> 00:28:39,665 FTX, right? 421 00:28:40,005 --> 00:28:42,124 Celsius, the big blowups in the system. 422 00:28:42,425 --> 00:28:44,485 Yeah, this is the common thing. 423 00:28:44,665 --> 00:28:46,725 Oh, you know, people can't be trusted. 424 00:28:46,725 --> 00:28:47,344 I don't know. 425 00:28:47,445 --> 00:28:49,425 I had a pair of underwear for 23 years, man. 426 00:28:49,485 --> 00:28:51,564 I'm pretty sure I could hold on to my Bitcoin passwords. 427 00:28:51,725 --> 00:28:54,665 If you value something, then you'll take steps in order to do it. 428 00:28:54,665 --> 00:28:58,544 And also there's multiple ways now that exist that make it much easier. 429 00:28:58,844 --> 00:29:04,104 Multi-sig, where you can break apart your password and put it in different physical places around the world. 430 00:29:04,485 --> 00:29:14,804 Or you can have multiple people that you trust, where in order to get my Bitcoin to move, Jack and me and you, we all have to come together to put that password together. 431 00:29:15,124 --> 00:29:16,945 So you have to round up those people. 432 00:29:17,005 --> 00:29:18,225 First, you have to beat it out of me. 433 00:29:18,284 --> 00:29:19,364 Then you have to go find them. 434 00:29:19,364 --> 00:29:22,965 And at a certain point, the cost of doing that just gets really high. 435 00:29:23,145 --> 00:29:23,985 It does not scale. 436 00:29:24,245 --> 00:29:27,304 Violence does not scale when the money cannot be taken. 437 00:29:27,445 --> 00:29:28,284 It can only be given. 438 00:29:28,485 --> 00:29:29,544 Oh, you can take my cryptocurrency. 439 00:29:29,884 --> 00:29:30,844 You can't take my Bitcoin. 440 00:29:31,005 --> 00:29:32,044 Let's make sure those are separate. 441 00:29:32,604 --> 00:29:38,544 Because cryptocurrency is Ethereum, Solana, centralized servers, trust faults, third party. 442 00:29:38,884 --> 00:29:40,145 You could take that, right? 443 00:29:40,264 --> 00:29:40,564 Yes. 444 00:29:40,745 --> 00:29:43,165 You think all cryptocurrencies are the same? 445 00:29:43,445 --> 00:29:44,725 You should have been to the last two. 446 00:29:44,925 --> 00:29:45,624 There is Bitcoin. 447 00:29:45,925 --> 00:29:46,965 There's copies of Bitcoin. 448 00:29:46,965 --> 00:29:49,804 and then there are shit coins on central servers. 449 00:29:50,184 --> 00:29:51,864 Central servers are a central point of failure. 450 00:29:52,024 --> 00:29:53,804 If I take that server, that's mine. 451 00:29:54,124 --> 00:29:55,784 If I hack that server, it's mine. 452 00:29:56,005 --> 00:29:58,445 Bitcoin was attempted to be hacked by China, 453 00:29:58,584 --> 00:30:01,145 by North Korea when it was an infant, right? 454 00:30:01,324 --> 00:30:04,024 When it didn't have the power that it does now, 455 00:30:04,104 --> 00:30:05,824 when it has exponentially more powerful. 456 00:30:06,024 --> 00:30:08,324 It's a toddler now, starting to cause problems. 457 00:30:08,524 --> 00:30:09,485 Soon it'll be a teenager 458 00:30:09,485 --> 00:30:10,684 and it'll start setting the rules. 459 00:30:11,024 --> 00:30:11,784 But anyways, your question. 460 00:30:13,425 --> 00:30:14,024 You're fine. 461 00:30:14,485 --> 00:30:15,364 Yeah, it was my fault. 462 00:30:15,364 --> 00:30:40,364 It either disappears and everyone in the world who holds Bitcoin is equally enriched, or I set up a transfer plan. There's multiple companies that are doing this now where you can, it's like a dead man switch, but a reverse dead man switch. If I don't access it, if I don't, if I don't put in the password for say 10 years, then it disperses to whoever that I've, whatever wallet addresses I've pre-programmed in there. 463 00:30:40,705 --> 00:30:44,844 Michael Saylor talks about, he says, you know, when he dies, he's taking his Bitcoin with him. 464 00:30:44,844 --> 00:30:53,304 Yeah. Because he can think, he said, you know, I can think of no better way to give a gift to humanity than to equally enrich everyone in the world. 465 00:30:53,405 --> 00:30:55,604 Right. Because if you give it to a charity, what's going to happen? 466 00:30:55,884 --> 00:30:58,705 They're going to hold fancy dinners. They're going to charge a thousand dollars a plate. 467 00:30:59,344 --> 00:31:02,544 Three percent of that money is going to go to starving children in Africa. 468 00:31:02,705 --> 00:31:05,324 Ninety seven percent of it's going to go to pay for somebody's salary. 469 00:31:05,324 --> 00:31:12,364 So yeah, yeah. When you die, you can pass it on. Talk to Peter McCormick about this. He's starting 470 00:31:12,364 --> 00:31:17,024 to already set up. How do I pass this on? But the dead man, the dead man, how can they use my money 471 00:31:17,024 --> 00:31:21,925 if they don't have my password? Yeah. I mean, that's why I'm saying that's, that's what the 472 00:31:21,925 --> 00:31:28,524 dead man switch is. It's the computer program that says, if I don't use my password for five years, 473 00:31:28,624 --> 00:31:33,925 10 years, whatever, if I don't, then that triggers an event that sends the money. If I do keep logging 474 00:31:33,925 --> 00:31:39,645 in, I'm still alive. Yeah, no, no, it's a smart contract. Yeah, yeah, yeah, yeah. Yeah, this is 475 00:31:39,645 --> 00:31:44,645 how smart contracts work, right? Like I bet against you that whatever Manchester United is going to 476 00:31:44,645 --> 00:31:51,564 win some soccer game. When the score is verified, the money which is held in escrow is then 477 00:31:51,564 --> 00:31:56,784 dispersed to whoever, right? You don't have to be involved in it and it goes straight to the winner. 478 00:31:56,784 --> 00:32:04,564 look yeah look in look into like look into legacy bitcoin uh transfer plans they exist 479 00:32:04,564 --> 00:32:09,185 there's there's a number of them and there will only be more and more and more correct 480 00:32:09,185 --> 00:32:15,465 you don't have to i mean you could it could just be it could just be that you keep it on a single 481 00:32:15,465 --> 00:32:21,145 server and that single server when you don't log in for five years or two years or however long 482 00:32:21,145 --> 00:32:26,505 whatever it just sends you're my son and it sends you my password and it doesn't even have to 483 00:32:26,505 --> 00:32:30,564 transfer, right? It just stays in the same wallet, but now somebody else has access to it. 484 00:32:30,965 --> 00:32:36,064 Yeah. Yeah. I used to work in banking and a lot of what we did was trusts and trusts are 485 00:32:36,064 --> 00:32:40,344 interesting because they're incredibly complicated. They're incredibly expensive. 486 00:32:41,425 --> 00:32:46,804 And most of what you see is people that have wealth that realize that their kids are too dumb 487 00:32:46,804 --> 00:32:51,304 to have it. And so they set up a trust that allows it to feed them a little bit, right? 488 00:32:51,304 --> 00:32:56,185 And you could do that. You could set up, like it'd be way easier to do that with Bitcoin than 489 00:32:56,185 --> 00:33:01,544 it is to do that with land and bank accounts and stocks and just feed them a little bit every year 490 00:33:01,544 --> 00:33:06,725 if you want to. Yeah. Yeah. That's a, that's an, that's a solved problem. It's not a, it's not an 491 00:33:06,725 --> 00:33:13,104 existing problem. 2004, our boy Hal Finney, he does something really cool. So he creates reusable 492 00:33:13,104 --> 00:33:17,185 proof of work. So we had the proof of work system, but the problem with the proof of work system is 493 00:33:17,185 --> 00:33:24,344 that the coins were destroyed after every time you proved that they existed. Proved, I, I put in 494 00:33:24,344 --> 00:33:30,384 my energy, I solved the problem and I created a coin that was proof. And then that coin was no 495 00:33:30,384 --> 00:33:36,925 longer usable. He created reusable proof of work. Reusable proof of work allows for the tokens to be 496 00:33:36,925 --> 00:33:43,665 reused without double spending, without the ability to spend it in two places at once, right? 497 00:33:43,905 --> 00:33:48,185 I mean, you can do this with a check, right? If you ever had like checks on a bank account, 498 00:33:48,185 --> 00:33:54,145 you got $10,000 account, you can write $100,000 worth of checks, right? And then it's just whoever 499 00:33:54,145 --> 00:33:58,844 gets to the bank first in order to get that. That's a double spend problem. That's what he 500 00:33:58,844 --> 00:34:05,445 solved was somebody being able to pass on value and prove that it had value. And then you see the 501 00:34:05,445 --> 00:34:10,745 balance transfer immediately. Reasonable proof of work. We think about this, by the way, we currently 502 00:34:10,745 --> 00:34:19,165 think about this as existing. We think about when I Venmo you cash or Cash App or Zelle or whatever, 503 00:34:19,165 --> 00:34:26,825 I send you this money and I'm sitting next to you and I Venmo you five bucks and you look at your balance and it's five higher and mine's five lower. 504 00:34:27,004 --> 00:34:29,385 And we think, well, I just transferred money to you. 505 00:34:29,544 --> 00:34:30,784 But that's not what happens, right? 506 00:34:31,044 --> 00:34:39,165 What happens is that that signal goes to a server at my bank and that bank sends a signal to a central clearing bank. 507 00:34:39,284 --> 00:34:42,644 And that clearing bank probably sends a signal to an international bank. 508 00:34:42,685 --> 00:34:47,185 And that international bank sends a signal to another clearing bank, which sends a signal to your bank finally. 509 00:34:47,185 --> 00:35:03,637 and it finally in typically 60 to 90 days it finally settles When you swipe your credit card that transaction is typically settled between 60 and 90 days later It instantaneous use right But we live in a society that has 510 00:35:03,637 --> 00:35:09,237 insane amounts of credit card debt because you can keep swiping without having the money to pay 511 00:35:09,237 --> 00:35:14,537 for it, right? You're double spending, double spending, double spending. Reusable proof of work. 512 00:35:14,537 --> 00:35:21,517 each token can only be used once but it gives birth to a new one so you can hand over a new one 513 00:35:21,517 --> 00:35:27,537 so one is created or sorry one one disappears one is created one disappears one is created 514 00:35:27,537 --> 00:35:34,157 when i send you bitcoin the bitcoin in my wallet disappears and bitcoin is created in your wallet 515 00:35:34,157 --> 00:35:38,777 sender owner cypherpunk at al-qaeda.net nice 516 00:35:38,777 --> 00:35:44,917 yeah people used to go to some funny places that's interesting i'm gonna look into that 517 00:35:44,917 --> 00:35:51,917 that's fun yes yeah yeah yeah we know yeah we know we know that for a fact right um started in 518 00:35:51,917 --> 00:35:58,257 the 70s when we uh when we built up osama bin laden gave him all kinds of weapons and trained 519 00:35:58,257 --> 00:36:05,977 him educated him yep yep yeah very good training so 2004 we finally get there we're we're almost 520 00:36:05,977 --> 00:36:11,357 there. We've solved the problem of the double spend. It prevents inflation. Remember, inflation 521 00:36:11,357 --> 00:36:17,097 was the problem that happened with seashells. As they became more valuable, it became more useful 522 00:36:17,097 --> 00:36:21,737 to go get more seashells. As cattle became more valuable, you bred more cattle. As gold became 523 00:36:21,737 --> 00:36:28,297 more valuable, you just mine more gold. 200 years ago, you could mine gold and keep up with a little 524 00:36:28,297 --> 00:36:33,237 pan. And today you have multimillion dollar machines with gigantic sluices that cover entire 525 00:36:33,237 --> 00:36:38,997 acres just to keep up. And that takes us to Satoshi Nakamoto in 2008. Remember what Milton Friedman 526 00:36:38,997 --> 00:36:44,497 said. He said that there will be a money that's invented where A can send to B and B can send to 527 00:36:44,497 --> 00:36:50,697 A without A or B knowing each other. That is peer-to-peer electronic cash, payments that you 528 00:36:50,697 --> 00:36:55,157 can send directly from one party to another without going through a financial institution. 529 00:36:55,157 --> 00:37:00,897 The digital signatures invented by David Chalm are in there, but the main benefits are lost if 530 00:37:00,897 --> 00:37:06,117 a trusted third party, if a centralized server is still required to prevent double spending, 531 00:37:06,277 --> 00:37:11,956 which was solved with reusable proof of work. We timestamp it, hashing, this is Adam Back's work, 532 00:37:12,197 --> 00:37:17,837 into an ongoing chain of proof of work, hash-based proof of work. I mentioned this one other time, 533 00:37:17,917 --> 00:37:23,637 but every single 10 minutes, every time that Bitcoin creates a new block, what it is doing, 534 00:37:23,637 --> 00:37:30,097 it is re-verifying every single transaction that has ever occurred on the Bitcoin network. 535 00:37:30,097 --> 00:37:35,956 We can't go five minutes into the past and verify all the payments that are sent in the fiat network. 536 00:37:36,137 --> 00:37:41,956 But we can go 16 years into the past and verify every single Bitcoin that's ever been spent. 537 00:37:42,257 --> 00:37:48,777 The longest chain is the proof, but it's proof that it came from power, the largest pool of CPU power. 538 00:37:48,917 --> 00:37:50,037 You broadcast messages. 539 00:37:50,437 --> 00:37:52,377 This was the, I solved the problem. 540 00:37:52,697 --> 00:37:53,617 I'm the first one. 541 00:37:53,837 --> 00:37:56,037 I broadcast the answer to all of you. 542 00:37:56,397 --> 00:38:00,917 Since it's a proof, it's easy to take the answer and put it into the top and verify that it's correct. 543 00:38:01,117 --> 00:38:03,897 But in order to get the answer, you have to do the proof of work. 544 00:38:03,897 --> 00:38:11,697 It makes it very easy in order to go all the way through and find yourself with value being transferred. 545 00:38:12,157 --> 00:38:15,077 In 2009, we launched the Bitcoin network. 546 00:38:15,337 --> 00:38:19,437 The first block, you can look at it online, has an inscription in it. 547 00:38:19,437 --> 00:38:24,677 and it is the headline from a German newspaper 548 00:38:24,677 --> 00:38:28,677 talking about bailing out more institutions 549 00:38:28,677 --> 00:38:31,777 that went broke, January 3rd of 2009. 550 00:38:32,617 --> 00:38:32,997 What's that? 551 00:38:33,297 --> 00:38:35,177 It was, oh, it might've been a British newspaper, 552 00:38:35,297 --> 00:38:36,357 but it was a German headline, 553 00:38:36,517 --> 00:38:38,177 German chancellor or something or other. 554 00:38:38,177 --> 00:38:40,217 Yeah, where do you get one for the home team? 555 00:38:40,617 --> 00:38:44,017 This is the first functional engineered money. 556 00:38:44,197 --> 00:38:45,677 It's the first one that actually worked. 557 00:38:45,797 --> 00:38:49,237 Remember, we'd been looking for it for 165 years. 558 00:38:49,437 --> 00:38:52,077 We had the need for 165 years. 559 00:38:52,357 --> 00:38:55,557 We'd been theorizing on it for 100 years. 560 00:38:55,877 --> 00:38:58,097 We'd been making efforts for 40 years. 561 00:38:58,377 --> 00:38:59,797 We're pretty good at figuring stuff out. 562 00:39:00,197 --> 00:39:01,197 Humans are good engineers. 563 00:39:01,537 --> 00:39:03,377 It still took 40 years to get it done 564 00:39:03,377 --> 00:39:05,017 after they had the first ones come about. 565 00:39:05,317 --> 00:39:07,456 So I wanna walk through a few things 566 00:39:07,456 --> 00:39:09,037 about what Bitcoin is. 567 00:39:09,297 --> 00:39:11,257 So public-private key cryptography. 568 00:39:11,597 --> 00:39:13,817 So this is the first public-private key. 569 00:39:14,317 --> 00:39:16,057 You deposited $1 with me. 570 00:39:16,277 --> 00:39:17,417 I make a mark on here. 571 00:39:17,417 --> 00:39:19,297 There's one mark on each side. 572 00:39:19,437 --> 00:39:20,317 I am the banker. 573 00:39:20,777 --> 00:39:27,597 I am the Italian man sitting on the banco, the bench in Italy, in Florence, where banks were created. 574 00:39:27,877 --> 00:39:30,757 And I create a key. 575 00:39:31,057 --> 00:39:33,757 And you get your piece and I get my piece. 576 00:39:34,157 --> 00:39:35,477 And I put it on a ring. 577 00:39:35,697 --> 00:39:36,657 They put it on a ring. 578 00:39:36,737 --> 00:39:37,517 They carried them around. 579 00:39:37,517 --> 00:39:41,197 And when you came back to claim your money, remember, you didn't have an ID, right? 580 00:39:41,277 --> 00:39:42,897 You didn't have a password. 581 00:39:43,237 --> 00:39:44,077 You didn't have a passport. 582 00:39:44,497 --> 00:39:46,377 You just said who you were. 583 00:39:46,637 --> 00:39:47,797 But I didn't care who you were. 584 00:39:47,797 --> 00:39:52,237 all I cared about was that I could take this and I could put it back together and I could say, 585 00:39:52,517 --> 00:39:58,797 yep, that's you. I owe you $1. Public private key technology. Pliny the Elder talked about 586 00:39:58,797 --> 00:40:04,377 public private key technology 2000 years ago. Tally sticks. These are called tally sticks. 587 00:40:04,557 --> 00:40:08,497 One of the things that make Bitcoin work. Another one is the digital signatures, 588 00:40:08,956 --> 00:40:15,597 elliptic curve digital signature. Basically, it means that I can send it or I can sign something 589 00:40:15,597 --> 00:40:18,537 and then it goes through a hashing system 590 00:40:18,537 --> 00:40:21,177 that makes that signature untraceable. 591 00:40:21,477 --> 00:40:23,397 And then it goes through another unhashing 592 00:40:23,397 --> 00:40:25,417 that locks it with the public key. 593 00:40:25,737 --> 00:40:27,037 And if both hash values equal, 594 00:40:27,137 --> 00:40:28,597 then the digital signature is verified. 595 00:40:28,817 --> 00:40:29,857 So we had digital signatures. 596 00:40:29,977 --> 00:40:31,117 That came about in 1985. 597 00:40:31,456 --> 00:40:33,797 Proof of work, how proof of work works. 598 00:40:33,837 --> 00:40:35,437 You have the miners, they mine blocks. 599 00:40:35,757 --> 00:40:37,477 By solving the block puzzle, 600 00:40:37,737 --> 00:40:39,257 they provide their proof of work. 601 00:40:39,357 --> 00:40:41,217 They broadcast the answer to the network. 602 00:40:41,456 --> 00:40:42,837 The network verifies it. 603 00:40:43,157 --> 00:40:44,697 They get rewarded their Bitcoin. 604 00:40:44,697 --> 00:40:46,297 and then the process starts over 605 00:40:46,297 --> 00:40:48,717 and the transactions start piling up again. 606 00:40:48,997 --> 00:40:50,537 1996 by Adam Back. 607 00:40:51,057 --> 00:40:52,377 Cryptographic hash functions. 608 00:40:52,637 --> 00:40:54,456 This is an NSA collaboration 609 00:40:54,456 --> 00:40:56,737 where you can take information, 610 00:40:57,117 --> 00:40:58,477 put it into a hash function 611 00:40:58,477 --> 00:40:59,657 and come out with something 612 00:40:59,657 --> 00:41:01,277 that is completely unrecognizable, 613 00:41:01,437 --> 00:41:02,777 much like the digital signatures, 614 00:41:03,057 --> 00:41:06,597 and be able to use that to not only make anonymous, 615 00:41:06,797 --> 00:41:09,817 but also make verified that work has been done. 616 00:41:10,177 --> 00:41:10,737 Merkle trees. 617 00:41:11,017 --> 00:41:13,157 This is the one that I don't know a whole lot 618 00:41:13,157 --> 00:41:13,977 about Merkle trees. 619 00:41:13,977 --> 00:41:16,377 I'm just going to say it like that. 620 00:41:16,857 --> 00:41:19,617 So you have the root, and the root has a big hash, 621 00:41:19,917 --> 00:41:23,337 and then you break it down into smaller and smaller pieces. 622 00:41:23,537 --> 00:41:24,797 You go to different leaves, 623 00:41:24,997 --> 00:41:28,637 and you end up with multiple leaves that constitute the root. 624 00:41:28,917 --> 00:41:32,497 Merkle trees are talked about in the Bitcoin white paper. 625 00:41:32,917 --> 00:41:34,437 Great read. Kind of hard read. 626 00:41:34,677 --> 00:41:35,197 But a great read. 627 00:41:35,297 --> 00:41:35,437 Yep. 628 00:41:36,097 --> 00:41:38,017 Linked timestamping hash chain. 629 00:41:38,157 --> 00:41:41,557 So you take this hash that completes this block 630 00:41:41,557 --> 00:41:44,517 is the beginning of this hash that begins this block 631 00:41:44,517 --> 00:41:46,117 and so on and so on and so on. 632 00:41:46,377 --> 00:41:48,657 You think about Bitcoin, you think about blockchain 633 00:41:48,657 --> 00:41:51,657 as you can physically think about it 634 00:41:51,657 --> 00:41:54,597 as just stacks of blocks that keep going up 635 00:41:54,597 --> 00:41:55,857 and up and up and up and up. 636 00:41:56,277 --> 00:41:59,477 And each new block, when that block of transactions, 637 00:41:59,777 --> 00:42:01,537 when all those transactions are verified, 638 00:42:01,777 --> 00:42:04,977 it also re-verifies all the other transactions 639 00:42:04,977 --> 00:42:05,917 that have ever occurred. 640 00:42:06,257 --> 00:42:09,717 The decentralized network, this is crypto, this is Bitcoin. 641 00:42:10,177 --> 00:42:11,977 Centralized server, decentralized. 642 00:42:12,477 --> 00:42:13,937 No single point of failure. 643 00:42:13,937 --> 00:42:18,937 We could have a nuclear war combined with an apocalyptic monsoon, 644 00:42:19,237 --> 00:42:22,797 combined with a spectral ejection from the sun, 645 00:42:23,197 --> 00:42:24,697 combined with the pole shifting. 646 00:42:24,937 --> 00:42:29,417 And as long as one Bitcoin node survives, then we still have Bitcoin. 647 00:42:29,677 --> 00:42:30,477 Node survives? 648 00:42:30,617 --> 00:42:31,937 Correct. Yep. Yep. 649 00:42:33,337 --> 00:42:36,097 Yep. It would be very, it would be, it would be bad. 650 00:42:36,297 --> 00:42:38,217 It would be Bitcoin in 2009. 651 00:42:38,217 --> 00:42:45,477 and 2012, 14, 15, 16, pretty nascent technology, 652 00:42:46,297 --> 00:42:47,937 pretty prone to attack, right? 653 00:42:48,097 --> 00:42:50,537 And then we started seeing nation states attack it. 654 00:42:51,477 --> 00:42:53,857 North Korea, China, even the US a little bit. 655 00:42:54,157 --> 00:42:55,417 And even at that time, 656 00:42:55,477 --> 00:42:57,257 it was still too strong to be attacked. 657 00:42:57,497 --> 00:43:00,057 So we would have to have the type of system where, 658 00:43:00,057 --> 00:43:03,137 or the type of occurrence where literally everyone but one. 659 00:43:03,377 --> 00:43:05,257 But remember, like if you knock all of these out, 660 00:43:05,297 --> 00:43:06,417 then you're just back at this. 661 00:43:06,417 --> 00:43:08,317 That's just a centralized point of failure. 662 00:43:08,517 --> 00:43:09,577 The difficulty adjustment. 663 00:43:10,017 --> 00:43:20,757 This is one of the things Satoshi came up with that's absolutely brilliant that you can't really, it's very hard to comprehend, but it's like being in the gym and there's a guy who lifts more than everybody. 664 00:43:21,177 --> 00:43:25,837 And what the difficulty adjustment does is it makes it harder for him to lift the same weight. 665 00:43:26,157 --> 00:43:35,777 So if you have an ability to supply way more power to the network than everybody else, we're going to handicap you so that it still takes you 10 minutes to solve the problem. 666 00:43:35,777 --> 00:43:40,857 we're going to make the problem harder. And if the miners go offline, if the price crashes, 667 00:43:41,377 --> 00:43:45,197 or if there is a mass event that knocks out a bunch of miners and it becomes easier, 668 00:43:45,577 --> 00:43:50,737 or sorry, it becomes harder, then we'll make it easier for you to solve. The target is between 669 00:43:50,737 --> 00:43:57,277 eight and 10 minutes. And it adjusts off of that every 2016 blocks. And then you have the having 670 00:43:57,277 --> 00:44:04,177 cycle. Having cycle is just a way to incentivize people to adopt something because it gives you 671 00:44:04,177 --> 00:44:09,417 greater rewards for taking earlier risk. When Bitcoin first started, you got 50 Bitcoin for 672 00:44:09,417 --> 00:44:15,077 mining a block. Every four years, that decreases by half. If you're a long-termer, you can recognize 673 00:44:15,077 --> 00:44:21,757 this because Bology copied the exact same thing for the NS points. At 64, you have the amount of 674 00:44:21,757 --> 00:44:28,657 points that you get. At 128, you have. And we keep going and going and going and going until in 2140, 675 00:44:28,657 --> 00:44:35,537 the year 2140, the Bitcoin network will survive on transaction costs, not on mining. And if you 676 00:44:35,537 --> 00:44:42,737 think Bitcoin is complicated, this is what the dollar looks like. You have the Fed, the government 677 00:44:42,737 --> 00:44:48,757 entities, the regulators, the onshore investors. You have the chosen few that are allowed to take 678 00:44:48,757 --> 00:44:54,436 money from the Fed before it becomes worthless and then extract value from people. Then you have 679 00:44:54,436 --> 00:45:01,517 payment and settlement systems. You've got the Fedwire, which is how many domestic operations 680 00:45:01,517 --> 00:45:05,557 settle funds. You have chips, which is how you settle international payments. You have settlement 681 00:45:05,557 --> 00:45:11,837 banks. This is infinitely more complicated. I've never met anyone who can describe how the dollar 682 00:45:11,837 --> 00:45:17,857 system works. You can reasonably talk about how money is created, but all the way around and all 683 00:45:17,857 --> 00:45:22,956 the way down, it's next to impossible. And they all end up doing this. 4,000 fiat currencies have 684 00:45:22,956 --> 00:45:29,197 existed. 1,840 of them are dead. 160 of them are down at least 99% of their original value. 685 00:45:29,637 --> 00:45:34,057 They will never make it back because they're designed that way. They're designed to be able 686 00:45:34,057 --> 00:45:39,697 to extract wealth. And so we have arrived at the end. This is how Bitcoin takes over the world. 687 00:45:40,117 --> 00:45:45,117 Digital markets, remember, are monopolies. If there's no barrier to having the best thing, 688 00:45:45,477 --> 00:45:49,157 everyone's going to have the best thing. If the iPhone is the best phone, everybody's going to 689 00:45:49,157 --> 00:45:55,117 have the iPhone. If Amazon is the best digital shop, everybody's going to use Amazon. Digital 690 00:45:55,117 --> 00:46:01,637 world creates natural monopolies. And just like the dollar became 87% of the world's transfer of 691 00:46:01,637 --> 00:46:09,017 value, Bitcoin, which is now at 0.2% of the world's transfer of value, is on its way to taking over 692 00:46:09,017 --> 00:46:14,377 everything. We may go in at a later date into some more interesting things about Bitcoin, how it 693 00:46:14,377 --> 00:46:19,857 changes things, how it fixes things, how it can be used in warfare. But that brings us to the end 694 00:46:19,857 --> 00:46:24,597 of our talk on money, inflation, and Bitcoin. And I want to thank you all for showing up, 695 00:46:24,797 --> 00:46:28,997 paying attention, having such great questions. I really appreciate it. Are there any questions 696 00:46:28,997 --> 00:46:34,117 before I end? All right. James, my friend, James of ARC, you're up. Thank you guys.