1 00:00:08,117 --> 00:00:31,117 www.ZooCine.OrG watch movies and series! 2 00:00:52,118 --> 00:00:53,586 I really like it down here. 3 00:00:53,587 --> 00:00:55,488 I live literally right by the world trade center. 4 00:00:55,489 --> 00:00:58,290 I walk home. I live above it, actually. 5 00:01:02,495 --> 00:01:03,762 My ankle bracelet. 6 00:01:05,231 --> 00:01:06,833 Tells the government where I am 7 00:01:06,834 --> 00:01:09,769 every second of the day, 8 00:01:09,770 --> 00:01:11,571 any time of the day. 9 00:01:11,572 --> 00:01:14,641 But it's gonna come off when I go to prison, I think. 10 00:01:14,642 --> 00:01:17,110 I mean, I don't think I'm wearing this in prison, so... 11 00:01:17,111 --> 00:01:19,544 That's what the plan is for that. 12 00:01:42,202 --> 00:01:45,538 Closing numbers on the markets today, 13 00:01:45,539 --> 00:01:49,809 at one point, the market fell as if down a well. 14 00:01:49,810 --> 00:01:51,377 It was an historic day, 15 00:01:51,378 --> 00:01:54,414 with wall street shaken to its very foundation. 16 00:01:54,415 --> 00:01:57,517 And even the health of the most trusted firms 17 00:01:57,518 --> 00:01:59,319 are now being called into question. 18 00:01:59,320 --> 00:02:01,855 We have former secretaries of treasury 19 00:02:01,856 --> 00:02:03,790 who go from government to wall street 20 00:02:03,791 --> 00:02:06,658 pocketing hundreds of millions of dollars. 21 00:02:08,695 --> 00:02:10,864 In 2008, I became somewhat obsessed 22 00:02:10,865 --> 00:02:15,201 with the role that money itself played in the crisis 23 00:02:15,202 --> 00:02:17,337 and the role that governments and banks played in money, 24 00:02:17,338 --> 00:02:20,906 and why was it that our money was controlled by central banks? 25 00:02:23,510 --> 00:02:25,245 If something new happens, 26 00:02:25,246 --> 00:02:27,881 is the government likely to give it a nod 27 00:02:27,882 --> 00:02:29,883 or at least ignore it for a while, or is the government 28 00:02:29,884 --> 00:02:31,618 likely to come down and try to crush it 29 00:02:31,619 --> 00:02:34,519 because they're afraid of anything new and different? 30 00:02:35,788 --> 00:02:39,692 This is a monetary revolution. 31 00:02:39,693 --> 00:02:42,627 Bitcoin is the honest currency. 32 00:03:09,456 --> 00:03:10,623 Okay, this past week 33 00:03:10,624 --> 00:03:12,959 we've been talking about money. 34 00:03:12,960 --> 00:03:15,695 I'm gonna ask everybody what you think money is. 35 00:03:15,696 --> 00:03:17,797 Can you give me some answers now? 36 00:03:17,798 --> 00:03:21,634 Money is, like, paper 37 00:03:21,635 --> 00:03:23,770 and you can, like, buy stuff with it. 38 00:03:23,771 --> 00:03:26,873 So you have to have, like, four quarters for a dollar. 39 00:03:26,874 --> 00:03:29,943 You need money to buy your house, like, food, 40 00:03:29,944 --> 00:03:34,045 water, oxygen... Not oxygen. 41 00:03:35,715 --> 00:03:38,484 Money is basically just an accounting system. 42 00:03:38,485 --> 00:03:41,421 It is a way of recording who owns what, 43 00:03:41,422 --> 00:03:43,790 who has what, who owes what to whom. 44 00:03:43,791 --> 00:03:46,526 That is all money really is. 45 00:03:46,527 --> 00:03:48,828 And you needed somebody 46 00:03:48,829 --> 00:03:50,930 who could stand as the central issuer, 47 00:03:50,931 --> 00:03:53,366 somebody who was the trusted third party, 48 00:03:53,367 --> 00:03:56,703 someone who could guarantee that the money was real. 49 00:03:56,704 --> 00:03:58,404 And for hundreds of years now, 50 00:03:58,405 --> 00:04:00,673 we have had governments issue money. 51 00:04:00,674 --> 00:04:03,910 Again, money is just an accounting system. 52 00:04:03,911 --> 00:04:05,511 That's what bitcoin is. 53 00:04:05,512 --> 00:04:07,247 Bitcoin is really just an accounting system. 54 00:04:07,248 --> 00:04:09,916 It is a way of recording transactions, 55 00:04:09,917 --> 00:04:11,517 recording value, 56 00:04:11,518 --> 00:04:12,852 and it does it digitally, 57 00:04:12,853 --> 00:04:14,754 so you and I can send it to each other directly, 58 00:04:14,755 --> 00:04:17,490 and everything is recorded in the open ledger. 59 00:04:17,491 --> 00:04:20,593 By monitoring and updating that ledger, 60 00:04:20,594 --> 00:04:23,496 in a collective, consensus-based system, 61 00:04:23,497 --> 00:04:24,964 you do away with the need 62 00:04:24,965 --> 00:04:26,866 for somebody in the middle having to be 63 00:04:26,867 --> 00:04:29,035 that sort of repository of all the information. 64 00:04:29,036 --> 00:04:31,771 And that's what gets away from the fees, 65 00:04:31,772 --> 00:04:33,473 the inefficiencies, 66 00:04:33,474 --> 00:04:36,876 and ultimately the potential for corruption and risk 67 00:04:36,877 --> 00:04:40,912 that come with centralizing information in that way. 68 00:04:42,382 --> 00:04:43,716 What it does is it takes 69 00:04:43,717 --> 00:04:46,486 that trusted third party function 70 00:04:46,487 --> 00:04:48,288 and it automates it. 71 00:04:48,289 --> 00:04:51,557 It puts it into an open ledger that is put online 72 00:04:51,558 --> 00:04:53,493 that is there for anybody to see, 73 00:04:53,494 --> 00:04:56,062 so that every bitcoin is accounted for, 74 00:04:56,063 --> 00:04:59,766 so that you know that you're not getting a counterfeit bitcoin. 75 00:04:59,767 --> 00:05:02,735 It's kind of remarkable that this idea of bitcoin 76 00:05:02,736 --> 00:05:04,771 was launched just a few weeks 77 00:05:04,772 --> 00:05:07,407 after lehman brothers went bankrupt 78 00:05:07,408 --> 00:05:10,009 and the whole system nearly collapsed. 79 00:05:10,010 --> 00:05:14,047 And the problems that cropped up in the crisis 80 00:05:14,048 --> 00:05:18,484 were very much a part of the writings of satoshi nakamoto. 81 00:05:18,485 --> 00:05:20,620 I think what the crisis showed is that 82 00:05:20,621 --> 00:05:24,357 the existing system had some major flaws. 83 00:05:24,358 --> 00:05:27,026 It wasn't working and people were hungry 84 00:05:27,027 --> 00:05:28,860 for some sort of alternative. 85 00:05:36,436 --> 00:05:37,804 I discovered bitcoin's power 86 00:05:37,805 --> 00:05:39,706 when I understood for the first time 87 00:05:39,707 --> 00:05:41,040 that it was not controlled 88 00:05:41,041 --> 00:05:43,076 by a central company or a central person. 89 00:05:43,077 --> 00:05:45,445 Because I knew that meant it couldn't be shut down. 90 00:05:45,446 --> 00:05:47,080 And if it can't get shut down, 91 00:05:47,081 --> 00:05:49,449 all it needs is to do something useful, 92 00:05:49,450 --> 00:05:51,451 and it will become more and more adopted 93 00:05:51,452 --> 00:05:52,752 and as the value grows, people will find 94 00:05:52,753 --> 00:05:54,554 more and more uses for it. 95 00:05:54,555 --> 00:05:56,422 The beauty of bitcoin is, 96 00:05:56,423 --> 00:05:58,558 it's easily transferrable, it's anonymous. 97 00:05:58,559 --> 00:06:01,861 And by 2140 there's gonna be 21 million, 98 00:06:01,862 --> 00:06:03,029 and that's the cap. 99 00:06:03,030 --> 00:06:05,965 There's only x amount of gold. 100 00:06:05,966 --> 00:06:08,801 There's only x amount of bitcoin. 101 00:06:08,802 --> 00:06:10,870 Before, if you wanted to send 102 00:06:10,871 --> 00:06:12,805 something of value across the Internet, 103 00:06:12,806 --> 00:06:14,741 you had to get somebody else involved. 104 00:06:14,742 --> 00:06:16,743 You had to have a credit card company 105 00:06:16,744 --> 00:06:19,846 or PayPal, or maybe a bank 106 00:06:19,847 --> 00:06:21,781 involved in the transaction. 107 00:06:21,782 --> 00:06:23,616 The promise of bitcoin is that 108 00:06:23,617 --> 00:06:28,421 you're directly sending this currency to another person 109 00:06:28,422 --> 00:06:30,390 and then the bitcoin network 110 00:06:30,391 --> 00:06:32,692 performs the function that normally PayPal 111 00:06:32,693 --> 00:06:35,728 or a bank or your credit card company would perform. 112 00:06:35,729 --> 00:06:39,399 Bitcoin really puts the control back in the hands of everybody. 113 00:06:39,400 --> 00:06:41,901 Everybody who's participating in the bitcoin system 114 00:06:41,902 --> 00:06:43,935 is controlling how it works. 115 00:06:51,878 --> 00:06:53,713 If you want to look for the Genesis 116 00:06:53,714 --> 00:06:56,649 of cryptocurrency, it was the cypherpunk movement, 117 00:06:56,650 --> 00:06:58,818 you know, growing out of a kind of a love of the Internet 118 00:06:58,819 --> 00:07:00,453 and its possibilities. 119 00:07:00,454 --> 00:07:03,022 The discovering of cryptography and imagining 120 00:07:03,023 --> 00:07:07,794 that you could give birth to a new world, really, 121 00:07:07,795 --> 00:07:09,662 out of the Internet. 122 00:07:09,663 --> 00:07:11,731 A world that lives outside of the nation-state, 123 00:07:11,732 --> 00:07:14,100 and outside the structures of power and the hierarchies 124 00:07:14,101 --> 00:07:15,902 that are associated with that. 125 00:07:15,903 --> 00:07:18,104 These people had talked about the need 126 00:07:18,105 --> 00:07:20,473 and the possibility for a digital currency 127 00:07:20,474 --> 00:07:22,442 that was anonymous or could be anonymized, 128 00:07:22,443 --> 00:07:24,076 using cryptography. 129 00:07:24,077 --> 00:07:26,746 The cypherpunks that emerged in the early '90s 130 00:07:26,747 --> 00:07:29,882 were hyper-concerned about privacy, 131 00:07:29,883 --> 00:07:31,851 about personal Liberty, 132 00:07:31,852 --> 00:07:34,153 and a lot of people had come up with their own systems. 133 00:07:34,154 --> 00:07:36,622 Some of them came very close to happening. 134 00:07:36,623 --> 00:07:41,093 The one that probably came the closest was digicash from David chaum. 135 00:07:41,094 --> 00:07:42,562 Privacy of payments 136 00:07:42,563 --> 00:07:45,031 is actually essential for democracy. 137 00:07:45,032 --> 00:07:47,934 The reason is not because you need to be able 138 00:07:47,935 --> 00:07:50,870 to make private payments in order to express yourself, 139 00:07:50,871 --> 00:07:54,574 but rather that in order to inform yourself, 140 00:07:54,575 --> 00:07:56,843 you may need to purchase information 141 00:07:56,844 --> 00:08:01,681 and that's the thing that allows you to have opinions worth expressing. 142 00:08:01,682 --> 00:08:04,116 Although I wouldn't say David chaum was a cypherpunk, 143 00:08:04,117 --> 00:08:06,986 he definitely inspired the cypherpunk movement. 144 00:08:06,987 --> 00:08:09,956 It's as if the cypherpunks kind of came upon 145 00:08:09,957 --> 00:08:13,626 David chaum's tools, like the technology 146 00:08:13,627 --> 00:08:14,861 of some alien species, 147 00:08:14,862 --> 00:08:16,662 and they only took the weapons. 148 00:08:16,663 --> 00:08:19,565 They were most interested in the ones that could be used 149 00:08:19,566 --> 00:08:22,635 to disempower the government and empower individuals. 150 00:08:22,636 --> 00:08:24,704 The break between him and the cypherpunks came 151 00:08:24,705 --> 00:08:26,072 when he realized he would need 152 00:08:26,073 --> 00:08:28,007 existing institutions to help him with it, 153 00:08:28,008 --> 00:08:29,775 so he started talking to governments, 154 00:08:29,776 --> 00:08:30,977 he started talking to banks. 155 00:08:30,978 --> 00:08:32,545 He was very close to having 156 00:08:32,546 --> 00:08:34,146 this thing happen in the late '90s, 157 00:08:34,147 --> 00:08:36,516 and nobody was really prepared for this 158 00:08:36,517 --> 00:08:38,518 outside of the cypherpunk movement. 159 00:08:38,519 --> 00:08:40,019 People it seemed like 160 00:08:40,020 --> 00:08:41,954 had almost sort of given up on the project. 161 00:08:41,955 --> 00:08:44,123 Other than a few experiments here and there, 162 00:08:44,124 --> 00:08:47,059 by hal Finney, Nick szabo, 163 00:08:47,060 --> 00:08:50,530 the conversation around this really died down. 164 00:08:50,531 --> 00:08:53,566 And then all of a sudden it came back to life 165 00:08:53,567 --> 00:08:55,668 after the financial crisis, 166 00:08:55,669 --> 00:08:59,171 and you had people going back to those experiments in the 1990s 167 00:08:59,172 --> 00:09:02,041 and looking at new ways of putting those ideas together. 168 00:09:02,042 --> 00:09:05,845 Nick szabo, in 2006, had just finished up 169 00:09:05,846 --> 00:09:09,115 a mid-life stint at law school, 170 00:09:09,116 --> 00:09:12,885 and if you look Nick's writing around the financial crisis 171 00:09:12,886 --> 00:09:16,322 that is really revived his interest 172 00:09:16,323 --> 00:09:18,958 in these ideas that, you know, 173 00:09:18,959 --> 00:09:20,860 he had been working on in the 1990s 174 00:09:20,861 --> 00:09:24,830 with privacy and contracts and the problems 175 00:09:24,831 --> 00:09:27,667 of governments and other trusted third parties. 176 00:09:27,668 --> 00:09:31,837 And he brought bit gold back into the conversation. 177 00:09:31,838 --> 00:09:33,973 So hal Finney came up with his own system. 178 00:09:33,974 --> 00:09:37,009 Adam back has hashcash, wei dai has b money, 179 00:09:37,010 --> 00:09:39,077 szabo has bit gold. 180 00:09:41,080 --> 00:09:43,182 So what satoshi did in 2008, 181 00:09:43,183 --> 00:09:46,886 was satoshi took a lot of these ideas and made them work. 182 00:09:46,887 --> 00:09:49,188 He created an encryption-based protocol... 183 00:09:49,189 --> 00:09:50,723 It's not really a currency... 184 00:09:50,724 --> 00:09:53,192 Utilizing a ledger called the blockchain, 185 00:09:53,193 --> 00:09:56,329 allowing for many kinds of transactions to occur. 186 00:09:56,330 --> 00:09:57,763 Contracts, all kinds of things 187 00:09:57,764 --> 00:09:59,332 can be built into the blockchain. 188 00:09:59,333 --> 00:10:03,803 And it does this through a system of consensus building 189 00:10:03,804 --> 00:10:07,907 where multiple computers all participate 190 00:10:07,908 --> 00:10:10,876 in the management of the blockchain ledger, 191 00:10:10,877 --> 00:10:12,912 a kind of digital document, if you will, 192 00:10:12,913 --> 00:10:14,879 that keeps track of all the payments. 193 00:10:25,791 --> 00:10:27,693 I understand it's something that 194 00:10:27,694 --> 00:10:30,730 is instantaneous online 195 00:10:30,731 --> 00:10:33,699 and it can go from one country to the other 196 00:10:33,700 --> 00:10:35,768 and you know, they can have their money. 197 00:10:35,769 --> 00:10:39,005 Well, I never heard of it until Nancy called me 198 00:10:39,006 --> 00:10:41,874 and mentioned digital currency 199 00:10:41,875 --> 00:10:44,010 and I'm thinking she must have been 200 00:10:44,011 --> 00:10:45,778 in the bottle this morning or something. 201 00:10:45,779 --> 00:10:46,946 Digital currency. 202 00:10:46,947 --> 00:10:48,914 What, what? You know. 203 00:10:48,915 --> 00:10:51,917 But they say it's for people who don't have bank accounts. 204 00:10:51,918 --> 00:10:53,219 I can't understand. 205 00:10:53,220 --> 00:10:54,320 If you have one coin, it's... 206 00:10:54,321 --> 00:10:57,390 Let's say it's worth $150. 207 00:10:57,391 --> 00:11:01,227 What do you do, give the number or something to the... 208 00:11:01,228 --> 00:11:03,095 Say, the grocery store person, 209 00:11:03,096 --> 00:11:04,930 and then they subtract it? 210 00:11:04,931 --> 00:11:07,433 How do you know? How do you make change? 211 00:11:07,434 --> 00:11:10,335 How do you know what you have left or what you've spent? 212 00:11:11,337 --> 00:11:13,773 You can have the money supply 213 00:11:13,774 --> 00:11:15,241 controlled by a computer. 214 00:11:15,242 --> 00:11:16,909 That's all bitcoin really is. 215 00:11:16,910 --> 00:11:18,778 The key point here is that 216 00:11:18,779 --> 00:11:20,680 this a distributed ledger. 217 00:11:20,681 --> 00:11:22,181 There is no central server. 218 00:11:22,182 --> 00:11:23,716 All the other ledgers that we have, 219 00:11:23,717 --> 00:11:25,685 all the banking ledgers, all company ledgers, 220 00:11:25,686 --> 00:11:28,421 they all sit and reside inside that company, 221 00:11:28,422 --> 00:11:30,289 which means they have one point of attack. 222 00:11:30,290 --> 00:11:32,958 They can be hacked. Jp Morgan was hacked 223 00:11:32,959 --> 00:11:34,994 by, you know, the cyberthieves not so long ago. 224 00:11:34,995 --> 00:11:37,963 Home depot, target, we've had all these companies get hacked, 225 00:11:37,964 --> 00:11:41,967 precisely because there's one central repository of information. 226 00:11:41,968 --> 00:11:45,104 The bitcoin ledger resides, on, you know, 227 00:11:45,105 --> 00:11:46,772 thousands of computers. 228 00:11:46,773 --> 00:11:48,174 You can't hack that. 229 00:11:48,175 --> 00:11:50,076 Every single transaction is recorded, 230 00:11:50,077 --> 00:11:51,844 and once it is recorded in the blockchain, 231 00:11:51,845 --> 00:11:53,913 it is there, it is permanent. 232 00:11:53,914 --> 00:11:56,949 It cannot be altered. It cannot be changed, so that you can read it. 233 00:11:56,950 --> 00:11:59,185 Now the identities of the people are encrypted. 234 00:11:59,186 --> 00:12:00,786 The wallets are encrypted, 235 00:12:00,787 --> 00:12:03,022 so you don't know who is spending the money, 236 00:12:03,023 --> 00:12:05,791 but you know that every single bitcoin out there 237 00:12:05,792 --> 00:12:07,827 has a history, you know where it's been, 238 00:12:07,828 --> 00:12:10,461 you know the different addresses it's gone between. 239 00:12:12,865 --> 00:12:16,435 The most important pieces of the bitcoin infrastructure 240 00:12:16,436 --> 00:12:17,837 are the miners. 241 00:12:17,838 --> 00:12:20,206 These are the computers that are tasked 242 00:12:20,207 --> 00:12:22,875 with maintaining the ledger of the blockchain 243 00:12:22,876 --> 00:12:25,244 to verify the information, to update it, 244 00:12:25,245 --> 00:12:27,413 to make sure that it is trustworthy. 245 00:12:27,414 --> 00:12:29,915 So how do we incentivize them to do so? 246 00:12:29,916 --> 00:12:34,220 As they are going through the process of confirming transactions, 247 00:12:34,221 --> 00:12:37,356 they are simultaneously being subjected to 248 00:12:37,357 --> 00:12:40,226 a very, very difficult computing test. 249 00:12:40,227 --> 00:12:43,763 The bitcoin core protocol is forcing them 250 00:12:43,764 --> 00:12:46,132 to look for a number. 251 00:12:46,133 --> 00:12:48,234 All of these miners are ultimately competing 252 00:12:48,235 --> 00:12:51,137 to be the one that receives that payout every ten minutes. 253 00:12:51,138 --> 00:12:53,172 But really that's the secondary component. 254 00:12:53,173 --> 00:12:55,174 They're really being rewarded with bitcoin, 255 00:12:55,175 --> 00:12:56,542 but what is the more important task 256 00:12:56,543 --> 00:12:58,444 is the validation and verification 257 00:12:58,445 --> 00:13:01,847 of transactions and the maintaining of the ledger. 258 00:13:01,848 --> 00:13:05,084 Bitcoin, in being the first to achieve 259 00:13:05,085 --> 00:13:10,055 this holy grail of decentralized value exchange 260 00:13:10,056 --> 00:13:12,424 that transfers that process of trust 261 00:13:12,425 --> 00:13:16,128 to a collective agreement around a body 262 00:13:16,129 --> 00:13:18,230 of independent computers 263 00:13:18,231 --> 00:13:21,033 who are compelled by an incentive system 264 00:13:21,034 --> 00:13:22,401 to maintain that consensus 265 00:13:22,402 --> 00:13:25,070 and affirm the information to be correct 266 00:13:25,071 --> 00:13:27,039 is incredibly liberating because it means 267 00:13:27,040 --> 00:13:28,908 that we can do it without all these intermediaries 268 00:13:28,909 --> 00:13:30,810 in all these different realms. 269 00:13:30,811 --> 00:13:33,846 The most important thing behind bitcoin is not the currency. 270 00:13:33,847 --> 00:13:36,482 The key factor is the blockchain. 271 00:13:36,483 --> 00:13:38,250 Nobody expected this. 272 00:13:38,251 --> 00:13:41,120 You know, in 2008, very few people cared about it. 273 00:13:41,121 --> 00:13:43,022 It was just the computer scientists 274 00:13:43,023 --> 00:13:46,324 and the sort of code geeks that were really interested. 275 00:13:49,495 --> 00:13:51,030 All of my communication with satoshi 276 00:13:51,031 --> 00:13:55,601 was ever via either the bitcoin talk forums, 277 00:13:55,602 --> 00:14:00,039 which, all of that communication is... 278 00:14:00,040 --> 00:14:05,311 Public, or private forum messages or private emails. 279 00:14:05,312 --> 00:14:07,246 Satoshi was always all business. 280 00:14:07,247 --> 00:14:09,915 It was just always about the code. 281 00:14:09,916 --> 00:14:11,917 My very message to satoshi, 282 00:14:11,918 --> 00:14:15,855 I asked him, "so, is satoshi your real name? 283 00:14:15,856 --> 00:14:17,122 What have you done before? 284 00:14:17,123 --> 00:14:18,490 Can you tell me a little bit about yourself?" 285 00:14:18,491 --> 00:14:20,593 And he just ignored that completely. 286 00:14:20,594 --> 00:14:22,094 But came back and said, "you know, 287 00:14:22,095 --> 00:14:23,495 great to have more experienced programmers 288 00:14:23,496 --> 00:14:25,497 helping out with the project." 289 00:14:25,498 --> 00:14:27,900 You know, "here's a couple of problems that need to be solved. 290 00:14:27,901 --> 00:14:29,500 Maybe you can help solve them." 291 00:14:37,309 --> 00:14:39,211 In 2011, 292 00:14:39,212 --> 00:14:41,914 I was into bitcoin sort of just as a hobby. 293 00:14:41,915 --> 00:14:44,383 I didn't really know what to do in it yet. 294 00:14:44,384 --> 00:14:46,385 I was trying to meet everyone I could, 295 00:14:46,386 --> 00:14:48,520 figure out what projects would be cool to work on. 296 00:14:48,521 --> 00:14:51,957 I met Roger ver sort of in August of that year 297 00:14:51,958 --> 00:14:54,393 and a few months later, he recommended to this guy, 298 00:14:54,394 --> 00:14:56,095 Charlie shrem, who started bitinstant 299 00:14:56,096 --> 00:14:57,630 that the Charlie should hire me 300 00:14:57,631 --> 00:15:00,165 as the head of marketing for bitinstant. 301 00:15:00,166 --> 00:15:01,967 Bitcoin is cash with wings. 302 00:15:01,968 --> 00:15:04,536 It's the ability to be able to take a local transaction 303 00:15:04,537 --> 00:15:06,939 and do it globally, and that's why bitcoin 304 00:15:06,940 --> 00:15:08,607 is gonna overturn the financial infrastructure. 305 00:15:08,608 --> 00:15:10,476 Bitcoin is like the largest 306 00:15:10,477 --> 00:15:13,679 socioeconomic experiment the world has ever seen. 307 00:15:13,680 --> 00:15:15,681 Our conversations would range from 308 00:15:15,682 --> 00:15:18,150 you know, the mundane and practical, 309 00:15:18,151 --> 00:15:19,685 like how the hell are we gonna get another bank account 310 00:15:19,686 --> 00:15:21,220 since our current bank account's 311 00:15:21,221 --> 00:15:22,521 probably gonna get shut down any day now? 312 00:15:22,522 --> 00:15:25,291 To very high-minded, aspirational ones, 313 00:15:25,292 --> 00:15:27,960 like, is this actually gonna change the world in a good way? 314 00:15:27,961 --> 00:15:29,628 Are we just a bunch of crazy people 315 00:15:29,629 --> 00:15:31,196 who don't know what the hell we're talking about, 316 00:15:31,197 --> 00:15:33,666 or are we actually starting to 317 00:15:33,667 --> 00:15:36,335 initiate an industry which, in hindsight, 318 00:15:36,336 --> 00:15:37,603 will look obvious to everyone, 319 00:15:37,604 --> 00:15:39,770 but, you know, right now does not? 320 00:15:41,440 --> 00:15:43,342 Charlie shrem was, at that stage, 321 00:15:43,343 --> 00:15:46,078 a fairly high-profile figure in the bitcoin community. 322 00:15:46,079 --> 00:15:48,147 The vice chairman of the bitcoin foundation 323 00:15:48,148 --> 00:15:51,417 and you know, one of these bitcoin millionaires 324 00:15:51,418 --> 00:15:53,419 who'd made a lot of money very quickly. 325 00:15:53,420 --> 00:15:56,255 And really played an important role in the infrastructure 326 00:15:56,256 --> 00:15:59,124 of managing the movement of funds around the system 327 00:15:59,125 --> 00:16:01,559 in that early rudimentary phase. 328 00:16:02,294 --> 00:16:04,096 632 bid! 329 00:16:04,097 --> 00:16:08,000 654 offer in the New York cash market for bitcoin. 330 00:16:08,001 --> 00:16:12,837 Buyers right now will pay $632 cash on the spot. 331 00:16:15,507 --> 00:16:18,576 Who's next for the bitcoin? You want to know what bitcoin is? 332 00:16:22,381 --> 00:16:25,716 You know what I prefer? I prefer dollars. 333 00:16:36,695 --> 00:16:38,364 If you want to go on down to 40 broad, 334 00:16:38,365 --> 00:16:41,266 right next door to the stock exchange there, 335 00:16:41,267 --> 00:16:43,669 to the New York bitcoin center, 336 00:16:43,670 --> 00:16:46,337 you can buy and sell all the time. 337 00:16:55,514 --> 00:16:58,050 - You have a table in the middle. - Yeah. 338 00:16:58,051 --> 00:17:00,586 Just one small table, round. 339 00:17:00,587 --> 00:17:05,524 And I have flowers, like a flower arrangement. 340 00:17:05,525 --> 00:17:07,793 - A very nice flower arrangement. - Bitcoin flowers? 341 00:17:07,794 --> 00:17:10,129 Bitcoin flowers. Bitcoin flowers would be 342 00:17:10,130 --> 00:17:13,098 white Lily, purple and orange. 343 00:17:13,099 --> 00:17:14,966 Just right here, three colors. 344 00:17:17,336 --> 00:17:21,206 We're putting together the first bitcoin center 345 00:17:21,207 --> 00:17:22,641 here in New York City, 346 00:17:22,642 --> 00:17:25,310 right next door to the New York stock exchange 347 00:17:25,311 --> 00:17:28,080 bitcoin is a new space, 348 00:17:28,081 --> 00:17:32,351 and many of the rules and regulations haven't been imposed yet. 349 00:17:32,352 --> 00:17:35,587 But we will open one day soon, 350 00:17:35,588 --> 00:17:39,491 after the lawyers do their job, 351 00:17:39,492 --> 00:17:43,462 a live digital currency exchange. 352 00:17:43,463 --> 00:17:46,098 What's happening here is a fusion between 353 00:17:46,099 --> 00:17:49,900 wall street and bitcoin, hopefully. 354 00:17:51,170 --> 00:17:53,739 Satoshi seemed to acknowledge 355 00:17:53,740 --> 00:17:57,576 that it would be hard for bitcoin to develop in any way 356 00:17:57,577 --> 00:18:02,247 in which it wasn't interacting with the regular economy 357 00:18:02,248 --> 00:18:04,550 of dollars and Euros. 358 00:18:04,551 --> 00:18:06,485 The problem with exchanges is 359 00:18:06,486 --> 00:18:09,688 that they took you back to this old world 360 00:18:09,689 --> 00:18:12,391 that bitcoin was really trying to get away from. 361 00:18:12,392 --> 00:18:15,828 As soon as you move back to an exchange, 362 00:18:15,829 --> 00:18:18,430 you're moving back to a world 363 00:18:18,431 --> 00:18:23,402 in which some third party has all this personal data on you, 364 00:18:23,403 --> 00:18:24,703 has all of your money, 365 00:18:24,704 --> 00:18:26,839 has all of the security vulnerabilities, 366 00:18:26,840 --> 00:18:29,241 and really has none of those strengths 367 00:18:29,242 --> 00:18:34,346 that bitcoin was designed to provide. 368 00:18:34,347 --> 00:18:36,381 Jed mccaleb created mt. Gox, 369 00:18:36,382 --> 00:18:38,283 essentially on a lark one night 370 00:18:38,284 --> 00:18:42,421 because he couldn't buy bitcoins as quickly as he wanted to. 371 00:18:42,422 --> 00:18:44,823 And interestingly, he did it by starting 372 00:18:44,824 --> 00:18:47,459 with a url that he'd previously used 373 00:18:47,460 --> 00:18:50,362 to run magic card trading sites. 374 00:18:50,363 --> 00:18:53,232 So you get an idea about where somebody's ideas are coming from 375 00:18:53,233 --> 00:18:56,335 and how really kind of rudimentary some of them were. 376 00:18:56,336 --> 00:18:59,505 Jed essentially threw this site together, 377 00:18:59,506 --> 00:19:03,874 and put it online without too much thought. 378 00:19:14,820 --> 00:19:18,690 Jed essentially sold it to the first person he found. 379 00:19:18,691 --> 00:19:20,893 Who was mark karpeles, a French guy 380 00:19:20,894 --> 00:19:22,561 who was living in Tokyo. 381 00:19:22,562 --> 00:19:24,930 He really knew very little about mark 382 00:19:24,931 --> 00:19:27,232 when he decided to sell it to him. 383 00:19:27,233 --> 00:19:29,568 And once he took it over, 384 00:19:29,569 --> 00:19:32,237 it began growing much more quickly 385 00:19:32,238 --> 00:19:36,006 than mark was expecting or was prepared for. 386 00:19:46,652 --> 00:19:48,453 There are 21 million bitcoins 387 00:19:48,454 --> 00:19:50,322 programmed into the system that are going to be released. 388 00:19:50,323 --> 00:19:52,257 It's a set number, but within that, 389 00:19:52,258 --> 00:19:54,593 every single bitcoin can be divided up 390 00:19:54,594 --> 00:19:56,795 into a hundred million different pieces 391 00:19:56,796 --> 00:19:59,865 so there's room for it to expand as the use expands, 392 00:19:59,866 --> 00:20:03,335 especially in the emerging markets, in the developing world. 393 00:20:03,336 --> 00:20:05,537 That is really the most interesting place 394 00:20:05,538 --> 00:20:07,873 to see where this thing goes. 395 00:20:07,874 --> 00:20:10,876 So in my pocket I have a hundred trillion Zimbabwe dollars 396 00:20:10,877 --> 00:20:12,511 from the reserve bank of Zimbabwe, 397 00:20:12,512 --> 00:20:14,479 just as a reminder of what happens 398 00:20:14,480 --> 00:20:16,682 if our governments screw up our money. 399 00:20:16,683 --> 00:20:18,917 You know, Zimbabwe's a good example 400 00:20:18,918 --> 00:20:23,255 of a government that lost the trust of their people, 401 00:20:23,256 --> 00:20:24,523 and they lost the trust of their people 402 00:20:24,524 --> 00:20:25,757 by printing too much money 403 00:20:25,758 --> 00:20:28,660 and causing runaway hyperinflation. 404 00:20:28,661 --> 00:20:31,463 So I think you will see people in other parts of the world 405 00:20:31,464 --> 00:20:33,265 who've experienced hyperinflation 406 00:20:33,266 --> 00:20:35,467 who've experienced bank failures. 407 00:20:35,468 --> 00:20:37,336 I think those will be the kind of people 408 00:20:37,337 --> 00:20:41,506 who are looking for something... Something new, right? 409 00:20:41,507 --> 00:20:43,809 They're willing to take the risk. 410 00:20:43,810 --> 00:20:46,912 A lot of us take the capacity to send money to others, 411 00:20:46,913 --> 00:20:48,480 receive money, store money 412 00:20:48,481 --> 00:20:51,016 and do it electronically these days for granted 413 00:20:51,017 --> 00:20:54,353 because we are amongst the lucky 50% or so of the world 414 00:20:54,354 --> 00:20:55,787 that have bank accounts. 415 00:20:55,788 --> 00:20:58,590 But 2.5 billion adults in the world 416 00:20:58,591 --> 00:21:00,626 do not have access to bank accounts. 417 00:21:00,627 --> 00:21:03,028 A technology like bitcoin, cryptocurrency, 418 00:21:03,029 --> 00:21:08,367 has the capacity to bring those people into the financial system, 419 00:21:08,368 --> 00:21:10,435 to give them this power to effectively have 420 00:21:10,436 --> 00:21:12,804 what you could argue is a bank in their cell phone, 421 00:21:12,805 --> 00:21:14,473 a bank in their pocket. 422 00:21:14,474 --> 00:21:18,777 Really could open up commerce to a lot of people 423 00:21:18,778 --> 00:21:21,580 who are currently excluded from it. 424 00:21:21,581 --> 00:21:25,484 Somebody who is maybe working in one country 425 00:21:25,485 --> 00:21:28,453 and, you know, they want to send money back home. 426 00:21:28,454 --> 00:21:31,690 And right now, like, western union is a big way 427 00:21:31,691 --> 00:21:33,558 that people do remittances. 428 00:21:33,559 --> 00:21:35,527 From a western union perspective, 429 00:21:35,528 --> 00:21:38,330 we serve clients in many different locations around the globe, 430 00:21:38,331 --> 00:21:39,931 and primarily for remittances. 431 00:21:39,932 --> 00:21:42,968 Western union serves typically an unbanked customer, 432 00:21:42,969 --> 00:21:46,605 a customer who is either a migrant worker, 433 00:21:46,606 --> 00:21:48,940 or an individual who doesn't feel comfortable 434 00:21:48,941 --> 00:21:50,642 in the financial services sector. 435 00:21:50,643 --> 00:21:52,744 And the problem with remittances 436 00:21:52,745 --> 00:21:54,646 is they're really expensive. 437 00:21:54,647 --> 00:21:57,416 So if I'm sending $100 back home, 438 00:21:57,417 --> 00:22:00,352 I may end up spending $5.00 or $10.00 439 00:22:00,353 --> 00:22:05,023 just on fees to get that money back to my family. 440 00:22:05,024 --> 00:22:07,893 That's a huge percentage if you're poor and working. 441 00:22:07,894 --> 00:22:11,096 So since bitcoin doesn't care about borders, 442 00:22:11,097 --> 00:22:13,465 I could just send bitcoin to another country, 443 00:22:13,466 --> 00:22:15,767 and if my family in that other country 444 00:22:15,768 --> 00:22:17,102 has some way of spending that bitcoin 445 00:22:17,103 --> 00:22:18,737 or has some way of trans... 446 00:22:18,738 --> 00:22:21,840 Of exchanging that bitcoin into the local currency, 447 00:22:21,841 --> 00:22:26,445 then it's just quicker and cheaper and more convenient. 448 00:22:26,446 --> 00:22:28,480 And a lot of people think that remittances 449 00:22:28,481 --> 00:22:31,615 will be one of the really big first uses for bitcoin. 450 00:22:32,551 --> 00:22:35,487 The one challenge there is we deal with 451 00:22:35,488 --> 00:22:39,124 you know, at our company, 750 transactions, peak, a second. 452 00:22:39,125 --> 00:22:41,093 And those happen instantly. 453 00:22:41,094 --> 00:22:43,795 If you look at a blockchain, you have to wait for verifications, 454 00:22:43,796 --> 00:22:45,464 and if you do a recent test, 455 00:22:45,465 --> 00:22:47,632 it takes about 15 minutes for every transaction 456 00:22:47,633 --> 00:22:49,668 to be validated by the network. 457 00:22:49,669 --> 00:22:51,136 That doesn't scale, 458 00:22:51,137 --> 00:22:53,337 so it has its challenges as well. 459 00:23:00,746 --> 00:23:03,548 Wikileaks, which solicits and publishes 460 00:23:03,549 --> 00:23:05,384 secrets and suppressed material 461 00:23:05,385 --> 00:23:07,486 from whistleblowers around the world, 462 00:23:07,487 --> 00:23:09,588 has been under cyber attack from governments 463 00:23:09,589 --> 00:23:10,956 that want to shut it down. 464 00:23:10,957 --> 00:23:12,758 PayPal is the latest business 465 00:23:12,759 --> 00:23:14,593 to break ties with wikileaks, 466 00:23:14,594 --> 00:23:16,495 but the whistle-blowing website 467 00:23:16,496 --> 00:23:19,030 dedicated to publishing classified government documents 468 00:23:19,031 --> 00:23:20,866 still continues to seek funding, 469 00:23:20,867 --> 00:23:24,403 while crossing out PayPal as one method of payment. 470 00:23:24,404 --> 00:23:27,439 In order to insure our future survival, 471 00:23:27,440 --> 00:23:30,876 wikileaks is now forced to temporarily suspend 472 00:23:30,877 --> 00:23:33,145 all publishing operations 473 00:23:33,146 --> 00:23:36,715 in order to direct all our resources 474 00:23:36,716 --> 00:23:40,752 into fighting the blockade and raising funds. 475 00:23:40,753 --> 00:23:43,422 The wikileaks scandal seemed to provide 476 00:23:43,423 --> 00:23:44,990 an opportunity for bitcoin. 477 00:23:44,991 --> 00:23:47,826 At the time, the big banks and credit cards 478 00:23:47,827 --> 00:23:50,529 stopped processing payments for wikileaks, 479 00:23:50,530 --> 00:23:53,698 and some people thought that bitcoin would provide a way 480 00:23:53,699 --> 00:23:57,801 to send donations to wikileaks. 481 00:24:04,943 --> 00:24:09,214 You could certainly see in the hubbub around wikileaks 482 00:24:09,215 --> 00:24:11,716 that satoshi was still somebody 483 00:24:11,717 --> 00:24:14,886 who was very paranoid about the government, 484 00:24:14,887 --> 00:24:18,089 and the government coming in and taking too close a look 485 00:24:18,090 --> 00:24:19,558 at the bitcoin project. 486 00:24:19,559 --> 00:24:21,226 And you could also see that satoshi, 487 00:24:21,227 --> 00:24:22,994 I think, realized at this point 488 00:24:22,995 --> 00:24:26,998 that bitcoin was still young software 489 00:24:26,999 --> 00:24:29,701 and the kinks hadn't been worked out yet. 490 00:24:29,702 --> 00:24:31,970 In, I think, late 2010, 491 00:24:31,971 --> 00:24:35,173 he asked me if it'd be okay if he put my email address 492 00:24:35,174 --> 00:24:37,008 on the bitcoin. Org home page, 493 00:24:37,009 --> 00:24:40,745 'cause he had been the primary contact for people. 494 00:24:40,746 --> 00:24:42,581 And I said, "sure." 495 00:24:42,582 --> 00:24:44,683 He went ahead and changed the web page, 496 00:24:44,684 --> 00:24:47,686 but what he did is he left his name there, 497 00:24:47,687 --> 00:24:50,522 but he took away his email address. 498 00:24:50,523 --> 00:24:53,558 And so it was just me and my email address 499 00:24:53,559 --> 00:24:56,695 who was suddenly getting all of the attention. 500 00:24:56,696 --> 00:24:59,531 I think that was satoshi's way of kind of saying, 501 00:24:59,532 --> 00:25:01,833 "you're the leader of the project now." 502 00:25:01,834 --> 00:25:04,169 There was one particular email 503 00:25:04,170 --> 00:25:06,538 where he told me that he was gonna step away from the project 504 00:25:06,539 --> 00:25:08,940 and do something else. He never told me what else 505 00:25:08,941 --> 00:25:11,776 he's gonna do or that he is doing. 506 00:25:11,777 --> 00:25:15,981 I had just been invited to give a talk at the CIA. 507 00:25:15,982 --> 00:25:17,816 And I told satoshi that i accepted the invitation 508 00:25:17,817 --> 00:25:20,218 to go speak at the CIA. 509 00:25:20,219 --> 00:25:22,954 After he sent that email to satoshi 510 00:25:22,955 --> 00:25:25,757 telling him that he was planning on going to the CIA, 511 00:25:25,758 --> 00:25:27,859 he never heard from satoshi again, 512 00:25:27,860 --> 00:25:32,664 and that was essentially the last time anybody heard from satoshi. 513 00:25:32,665 --> 00:25:35,133 You very quickly get caught up in the question 514 00:25:35,134 --> 00:25:37,235 of who is satoshi nakamoto? 515 00:25:37,236 --> 00:25:39,571 Where did this come from? Who is this person? 516 00:25:39,572 --> 00:25:40,972 I mean, this is the 2000s. 517 00:25:40,973 --> 00:25:42,274 Information is out there, everything. 518 00:25:42,275 --> 00:25:44,109 Everyone knows everything about everybody. 519 00:25:44,110 --> 00:25:45,810 How can there possibly be a person 520 00:25:45,811 --> 00:25:47,812 that nobody knows who this guy is? 521 00:25:47,813 --> 00:25:50,949 But there is a person... At least I think it's a person. 522 00:25:50,950 --> 00:25:52,217 It might be a group... 523 00:25:52,218 --> 00:25:53,852 Who nobody knows who this guy is. 524 00:25:53,853 --> 00:25:58,189 And he kind of appears out of nowhere in 2008 525 00:25:58,190 --> 00:26:00,258 on these cryptography email lists, 526 00:26:00,259 --> 00:26:02,193 with this system called bitcoin. 527 00:26:02,194 --> 00:26:04,162 He's very active in the early years, 528 00:26:04,163 --> 00:26:05,597 there's a lot of back and forth 529 00:26:05,598 --> 00:26:07,599 with him communicating with people. 530 00:26:07,600 --> 00:26:10,101 It seemed like most people kind of wrote him off 531 00:26:10,102 --> 00:26:13,238 as kind of like a delusions-of-grandeur kind of scheme. 532 00:26:13,239 --> 00:26:15,040 Hal Finney, on the other hand, 533 00:26:15,041 --> 00:26:18,276 seemed to be really interested right from the beginning. 534 00:26:18,277 --> 00:26:20,078 He was a crypto-idealist. 535 00:26:20,079 --> 00:26:22,647 Like, he was not as kind of cynical 536 00:26:22,648 --> 00:26:24,649 as many of the other cypherpunks 537 00:26:24,650 --> 00:26:25,951 so he got really into this. 538 00:26:25,952 --> 00:26:27,886 He started talking to satoshi nakamoto, 539 00:26:27,887 --> 00:26:32,924 who he said seemed like some young Japanese American coder. 540 00:26:32,925 --> 00:26:37,162 Hal Finney was the first guy to work with nakamoto. 541 00:26:37,163 --> 00:26:38,229 He was a cryptographer. 542 00:26:38,230 --> 00:26:39,864 Soon as nakamoto released it, 543 00:26:39,865 --> 00:26:41,866 he was one of the first people to email him back and say, 544 00:26:41,867 --> 00:26:43,868 "hey, this is interesting. I'd like to work with you." 545 00:26:43,869 --> 00:26:45,604 And in the first weeks of bitcoin 546 00:26:45,605 --> 00:26:46,838 he worked with him back and forth 547 00:26:46,839 --> 00:26:48,306 setting up the system. 548 00:26:48,307 --> 00:26:51,142 And satoshi nakamoto ended up sending hal Finney 549 00:26:51,143 --> 00:26:54,245 the first ever bitcoin transaction. 550 00:26:54,246 --> 00:26:57,148 Any discussion of satoshi's identity 551 00:26:57,149 --> 00:27:00,185 has to go back to the fact that bitcoin 552 00:27:00,186 --> 00:27:04,356 was based on this small number of projects back in the 1990s 553 00:27:04,357 --> 00:27:07,292 that only a handful of people knew about, 554 00:27:07,293 --> 00:27:10,629 like hashcash and bit gold and b money, 555 00:27:10,630 --> 00:27:15,066 and so you end up with a pretty small group of people 556 00:27:15,067 --> 00:27:19,204 who would have known about these projects. 557 00:27:19,205 --> 00:27:21,306 People though chaum, David chaum, was, you know... 558 00:27:21,307 --> 00:27:22,941 Everybody in the cypherpunk movement 559 00:27:22,942 --> 00:27:24,142 at one point or another, they've said, 560 00:27:24,143 --> 00:27:25,844 "well, he must have been satoshi." 561 00:27:25,845 --> 00:27:27,379 They've all come out and denied it. 562 00:27:27,380 --> 00:27:29,381 Probably somebody who started out in the '90s, 563 00:27:29,382 --> 00:27:31,182 in California, with the cypherpunks. 564 00:27:31,183 --> 00:27:34,219 Somebody who was very, very good at cryptography 565 00:27:34,220 --> 00:27:37,288 who understands encryption, and has done a wonderful job 566 00:27:37,289 --> 00:27:42,292 of just separating bitcoin from anything that can identify him. 567 00:27:43,361 --> 00:27:45,397 I think for bitcoin's sake, 568 00:27:45,398 --> 00:27:48,333 that continuing anonymity of satoshi 569 00:27:48,334 --> 00:27:51,236 has ended up being a really good thing, 570 00:27:51,237 --> 00:27:54,906 because people who have gotten involved in it 571 00:27:54,907 --> 00:27:59,077 have been able to write their own ideas and dreams 572 00:27:59,078 --> 00:28:00,812 onto this technology, 573 00:28:00,813 --> 00:28:02,747 and there was nobody there to say, 574 00:28:02,748 --> 00:28:04,948 "no, that's not what I meant." 575 00:28:10,355 --> 00:28:11,923 In the early, early days, 576 00:28:11,924 --> 00:28:13,992 the first group was really just a bunch of 577 00:28:13,993 --> 00:28:18,061 more or less tech-minded coders. 578 00:28:41,820 --> 00:28:43,254 Then you had the libertarians come on board, 579 00:28:43,255 --> 00:28:45,023 who saw it through a political lens, 580 00:28:45,024 --> 00:28:47,492 I'm excited to be a little bit of a part of it 581 00:28:47,493 --> 00:28:50,428 with allowing and accepting bitcoin. 582 00:28:50,429 --> 00:28:52,864 And then you had these two groups working together 583 00:28:52,865 --> 00:28:54,365 and they overlapped too, 584 00:28:54,366 --> 00:28:56,301 and the timing was very good 585 00:28:56,302 --> 00:28:59,437 because the existing system was in utter disrepair. 586 00:28:59,438 --> 00:29:01,806 It was like a match to a pile of wood 587 00:29:01,807 --> 00:29:03,408 with gasoline poured on top of it. 588 00:29:03,409 --> 00:29:06,811 And the whole thing kind of really goes viral and takes off, 589 00:29:06,812 --> 00:29:11,049 and then you have the suits, the vc money, 590 00:29:11,050 --> 00:29:12,450 and it was very small at first, 591 00:29:12,451 --> 00:29:14,419 just a couple of guys out in silicon valley 592 00:29:14,420 --> 00:29:18,056 who ran into bitcoin guys at coffee houses 593 00:29:18,057 --> 00:29:20,391 and you started having this meshing of conversations. 594 00:29:20,392 --> 00:29:22,427 Once silicon valley gets on board, 595 00:29:22,428 --> 00:29:25,096 that whole dynamic starts to take off. 596 00:29:25,097 --> 00:29:27,332 So now you have the tech-minded coders, 597 00:29:27,333 --> 00:29:29,434 the libertarians, the counter-culture people, 598 00:29:29,435 --> 00:29:30,969 the vc, silicon valley, 599 00:29:30,970 --> 00:29:34,105 and you have this entire great mishmash of people 600 00:29:34,106 --> 00:29:35,373 coming together. 601 00:29:35,374 --> 00:29:37,041 You had a network effect. 602 00:29:37,042 --> 00:29:38,443 The more people that got involved, 603 00:29:38,444 --> 00:29:40,445 the stronger the network got, 604 00:29:40,446 --> 00:29:43,381 and the more it grew and it really started growing on itself. 605 00:29:43,382 --> 00:29:46,551 And in 2013 especially, 606 00:29:46,552 --> 00:29:49,854 you literally see this thing mushroom. 607 00:29:49,855 --> 00:29:52,891 The thing was just growing, growing and growing and growing 608 00:29:52,892 --> 00:29:55,492 as more and more people got involved. 609 00:29:58,396 --> 00:30:02,066 I think most bitcoin companies at the time 610 00:30:02,067 --> 00:30:06,237 knew that a big part of the market for bitcoins 611 00:30:06,238 --> 00:30:09,207 was people buying drugs on silk road 612 00:30:09,208 --> 00:30:11,042 who needed bitcoins to do that. 613 00:30:11,043 --> 00:30:12,911 The big bang moment for bitcoin 614 00:30:12,912 --> 00:30:14,379 was the silk road. 615 00:30:14,380 --> 00:30:17,849 What Ross ulbricht did by creating the silk road 616 00:30:17,850 --> 00:30:21,186 was he took this by no means common 617 00:30:21,187 --> 00:30:23,388 but usable cryptocurrency called bitcoin 618 00:30:23,389 --> 00:30:25,523 and he married it with a streamlined, 619 00:30:25,524 --> 00:30:27,392 workable user interface 620 00:30:27,393 --> 00:30:31,061 that was a free market that could sell anything. 621 00:30:32,397 --> 00:30:35,333 What would happen if people were really free 622 00:30:35,334 --> 00:30:38,136 truly free to trade what they wanted to? 623 00:30:38,137 --> 00:30:42,140 Ross did have an extremely radical 624 00:30:42,141 --> 00:30:44,542 libertarian viewpoint, 625 00:30:44,543 --> 00:30:48,146 and really wanted to experiment with using technology 626 00:30:48,147 --> 00:30:51,282 to create free markets for people. 627 00:30:51,283 --> 00:30:54,886 What Ross ulbricht did is a combination of Tor and bitcoin. 628 00:30:54,887 --> 00:30:57,188 That was the "aha" moment that Ross must have had. 629 00:30:57,189 --> 00:31:00,625 The silk road was basically the fruition 630 00:31:00,626 --> 00:31:05,930 of all the cypherpunk dreams, the crypto-anarchists' utopia 631 00:31:05,931 --> 00:31:07,866 that they had imagined in the '90s, 632 00:31:07,867 --> 00:31:09,400 you know, was real now. 633 00:31:09,401 --> 00:31:14,372 This was a perfectly, in theory, anonymous website, 634 00:31:14,373 --> 00:31:16,608 with perfectly, in theory, anonymous money 635 00:31:16,609 --> 00:31:19,244 used to by any contrabands imaginable. 636 00:31:19,245 --> 00:31:23,114 The silk road website is a particular headache for authorities. 637 00:31:23,115 --> 00:31:25,583 It's a anonymous online marketplace 638 00:31:25,584 --> 00:31:28,486 where people sell drugs that are posted to customers 639 00:31:28,487 --> 00:31:31,155 all over the world. 640 00:31:31,156 --> 00:31:33,324 Cyber investigators, you know, when there's a crime 641 00:31:33,325 --> 00:31:36,127 can kind of trace you back because you have an ip address. 642 00:31:36,128 --> 00:31:37,228 It's like a telephone number, 643 00:31:37,229 --> 00:31:38,930 so if you call another computer 644 00:31:38,931 --> 00:31:41,165 that ip address is tracked. 645 00:31:41,166 --> 00:31:43,434 On Tor, that's taken away, because your information 646 00:31:43,435 --> 00:31:45,403 hops from computer to computer to computer 647 00:31:45,404 --> 00:31:47,472 so there's no way to trace you back to your original one. 648 00:31:47,473 --> 00:31:52,110 Tor is an anonymous system, 649 00:31:52,111 --> 00:31:54,178 so if you use the Tor browser, 650 00:31:54,179 --> 00:31:55,613 which it has a browser. 651 00:31:55,614 --> 00:31:57,415 You can go to Tor and download their browser, 652 00:31:57,416 --> 00:32:01,052 you can browse with some degree of security. 653 00:32:01,053 --> 00:32:04,055 So that's great for plugging your banking information 654 00:32:04,056 --> 00:32:05,523 into a site so you don't get hacked. 655 00:32:05,524 --> 00:32:08,660 The other component of Tor, which has similar uses, 656 00:32:08,661 --> 00:32:10,361 is called Tor hidden services. 657 00:32:10,362 --> 00:32:14,165 Tor hidden services is actually, to put it simply, 658 00:32:14,166 --> 00:32:16,200 a url that doesn't have ".Com" on the end of it. 659 00:32:16,201 --> 00:32:17,535 It has ".Onion." 660 00:32:17,536 --> 00:32:19,404 And that is its own little space 661 00:32:19,405 --> 00:32:23,975 where you can create websites and you could freely transact 662 00:32:23,976 --> 00:32:26,611 without oversight or regulation. 663 00:32:26,612 --> 00:32:28,646 People put websites on there 664 00:32:28,647 --> 00:32:31,149 that are outside of law enforcement's view. 665 00:32:31,150 --> 00:32:33,084 There's hackers for hire, there's malware, 666 00:32:33,085 --> 00:32:35,119 there's credit card dump services 667 00:32:35,120 --> 00:32:36,554 there's a whole bunch of them. 668 00:32:36,555 --> 00:32:39,590 Chris tarbell has ended up being, in some ways, 669 00:32:39,591 --> 00:32:43,528 the most important FBI digital crime investigator 670 00:32:43,529 --> 00:32:45,196 of the last few years. 671 00:32:45,197 --> 00:32:48,032 He was the one who took down anonymous, essentially. 672 00:32:48,033 --> 00:32:51,169 So we decided to start looking at some of the services on Tor, 673 00:32:51,170 --> 00:32:52,470 and silk road being one them, 674 00:32:52,471 --> 00:32:54,172 other cases, they would hit Tor, 675 00:32:54,173 --> 00:32:55,974 and they would kind of throw their hands in the air 676 00:32:55,975 --> 00:32:58,576 and say "it's Tor, there's not much we can do about it." 677 00:32:58,577 --> 00:33:02,312 I found it interesting to kind of take a look at it and tackle it. 678 00:33:07,552 --> 00:33:09,120 Bitinstant was basically born 679 00:33:09,121 --> 00:33:10,755 because if you wanted to move your dollars 680 00:33:10,756 --> 00:33:12,123 into a bitcoin exchange, 681 00:33:12,124 --> 00:33:13,691 it takes at least three days. 682 00:33:13,692 --> 00:33:16,694 And since the major exchange, mt. Gox, was in Tokyo 683 00:33:16,695 --> 00:33:18,496 it could take a week or more. 684 00:33:18,497 --> 00:33:20,598 So that's really problematic, 685 00:33:20,599 --> 00:33:23,201 and basically Charlie figured out that 686 00:33:23,202 --> 00:33:27,305 if you just held a balance of dollars at the exchange, 687 00:33:27,306 --> 00:33:30,074 you could go to him and say, "Charlie, I'll give you $100. 688 00:33:30,075 --> 00:33:33,111 Will you give me $100 of credit at the exchange?" 689 00:33:33,112 --> 00:33:35,446 And you can literally then have your dollars at the exchange 690 00:33:35,447 --> 00:33:38,416 in ten seconds as opposed to a week. 691 00:33:38,417 --> 00:33:41,285 So that's hugely helpful, especially when bitcoin is so volatile 692 00:33:41,286 --> 00:33:43,354 and you need to know exactly what price you're going to get. 693 00:33:43,355 --> 00:33:45,023 Charlie was raising capital 694 00:33:45,024 --> 00:33:47,091 right as, sort of, i joined. 695 00:33:47,092 --> 00:33:49,627 During that process, he came across lots of 696 00:33:49,628 --> 00:33:52,330 interested investors who were starting to get a whiff 697 00:33:52,331 --> 00:33:56,134 that maybe this bitcoin thing was cool. 698 00:33:56,135 --> 00:33:58,036 We had an interesting debate early on 699 00:33:58,037 --> 00:34:01,406 about do we invest in bitcoin or bitcoin companies 700 00:34:01,407 --> 00:34:04,242 and we sort of decided to do both. 701 00:34:04,243 --> 00:34:07,078 More towards investing in actually bitcoin 702 00:34:07,079 --> 00:34:08,546 in the asset early days, 703 00:34:08,547 --> 00:34:11,482 but also trying to place a few bets in the ecosystem 704 00:34:11,483 --> 00:34:15,153 to support the companies, support the entrepreneurs, 705 00:34:15,154 --> 00:34:17,422 and see how that went. 706 00:34:17,423 --> 00:34:21,092 A few days after they first found out about bitcoin, 707 00:34:21,093 --> 00:34:24,529 they were in the bitinstant offices in New York 708 00:34:24,530 --> 00:34:26,564 meeting with Erik and Charlie. 709 00:34:26,565 --> 00:34:31,836 And Erik and Charlie essentially talked them through bitcoin 710 00:34:31,837 --> 00:34:35,540 and answered all of their questions and concerns. 711 00:34:35,541 --> 00:34:38,242 What made you invest in bitinstant? 712 00:34:38,243 --> 00:34:41,612 There are a lot of companies and exchanges and websites. 713 00:34:41,613 --> 00:34:45,316 With respect to bitcoin, regulation is obviously a big question. 714 00:34:45,317 --> 00:34:48,386 What you do want is a company that sort of takes that seriously 715 00:34:48,387 --> 00:34:50,855 and understands that there's the technology element, 716 00:34:50,856 --> 00:34:52,423 there's building the company, 717 00:34:52,424 --> 00:34:53,491 and then there's also creating the company 718 00:34:53,492 --> 00:34:54,792 that works with regulators. 719 00:34:54,793 --> 00:34:56,527 And so that's bitinstant. 720 00:34:56,528 --> 00:34:58,796 It's not this sort of completely underground thing? 721 00:34:58,797 --> 00:35:02,300 Yeah, Charlie the ceo happens to have been in this space for a long time, 722 00:35:02,301 --> 00:35:04,802 so he's sort of on the pulse and the cutting edge. 723 00:35:04,803 --> 00:35:06,471 You know, you come out and you say, like, 724 00:35:06,472 --> 00:35:08,339 "we want this bitcoin thing to overturn everything," 725 00:35:08,340 --> 00:35:10,408 but at the same time we have to be compliant 726 00:35:10,409 --> 00:35:12,210 and you have to know your customer. 727 00:35:12,211 --> 00:35:14,879 You have to know every single customer no matter what. 728 00:35:14,880 --> 00:35:17,281 Even if they're transferring a dollar or $1,000. 729 00:35:17,282 --> 00:35:18,783 And how reasonable is that? 730 00:35:18,784 --> 00:35:20,751 The term "money laundering" was invented by banks, 731 00:35:20,752 --> 00:35:22,553 and knowing your customer shouldn't be 732 00:35:22,554 --> 00:35:24,689 this complicated, expensive thing. 733 00:35:24,690 --> 00:35:27,792 And you shouldn't treat everyone like a criminal in the beginning. 734 00:35:27,793 --> 00:35:29,760 They really wanted us involved. 735 00:35:29,761 --> 00:35:32,530 People were really friendly, because it benefits you 736 00:35:32,531 --> 00:35:34,632 to onboard more people in, 737 00:35:34,633 --> 00:35:37,835 so bitcoin's always been this very friendly community 738 00:35:37,836 --> 00:35:41,372 and it's also... in some ways it's self-serving that way, 739 00:35:41,373 --> 00:35:45,143 but we were there for the right reasons. 740 00:35:45,144 --> 00:35:48,412 At the time, bitinstant was the big company 741 00:35:48,413 --> 00:35:49,747 other than mt. Gox. 742 00:35:49,748 --> 00:35:53,417 It was the way that most Americans were able 743 00:35:53,418 --> 00:35:55,386 to buy bitcoins. 744 00:35:55,387 --> 00:35:57,522 Here it is. 745 00:35:57,523 --> 00:36:00,191 So bitinstant was located right there. 746 00:36:00,192 --> 00:36:02,727 I think it's the one that now says "bling." 747 00:36:02,728 --> 00:36:04,829 It was a whirlwind six months. 748 00:36:04,830 --> 00:36:07,665 Going from total obscurity with no money 749 00:36:07,666 --> 00:36:11,636 to becoming one of the hot startups of bitcoin. 750 00:36:11,637 --> 00:36:15,606 But almost as soon as the twins made their investment in the company, 751 00:36:15,607 --> 00:36:17,208 it began falling apart. 752 00:36:17,209 --> 00:36:19,477 The twins had a much more practical approach 753 00:36:19,478 --> 00:36:21,312 to bitcoin and bitinstant. 754 00:36:21,313 --> 00:36:24,282 They wanted to see the company making money 755 00:36:24,283 --> 00:36:26,284 and making as much money as it could 756 00:36:26,285 --> 00:36:27,718 as quickly as it could. 757 00:36:27,719 --> 00:36:30,588 They saw early on that it would be regulated, 758 00:36:30,589 --> 00:36:32,223 that it wasn't gonna be this big, 759 00:36:32,224 --> 00:36:34,759 and have no one be interested in regulating it. 760 00:36:34,760 --> 00:36:37,595 So they feared that all kinds of regulators 761 00:36:37,596 --> 00:36:39,697 would come in at all different angles 762 00:36:39,698 --> 00:36:41,566 and tie the thing up in a complete morass 763 00:36:41,567 --> 00:36:43,201 where nothing would ever get done. 764 00:36:43,202 --> 00:36:46,604 So they wanted to help drive the regulation 765 00:36:46,605 --> 00:36:49,340 so that whatever regulation would be there would work 766 00:36:49,341 --> 00:36:53,576 and would not end up being a complete dead end for bitcoin. 767 00:36:54,579 --> 00:36:56,948 That strategy is smarter, 768 00:36:56,949 --> 00:36:58,916 from purely a business perspective, 769 00:36:58,917 --> 00:37:01,586 but I'm not in this purely from a business perspective. 770 00:37:01,587 --> 00:37:04,355 I am in this for business and because I'm trying 771 00:37:04,356 --> 00:37:05,756 to change the world and make it better, 772 00:37:05,757 --> 00:37:07,825 and building bitcoin companies 773 00:37:07,826 --> 00:37:09,393 and begging for regulation 774 00:37:09,394 --> 00:37:11,229 that matches exactly the banking regulation 775 00:37:11,230 --> 00:37:12,697 that has caused so many problems 776 00:37:12,698 --> 00:37:14,732 I feel like is counterproductive. 777 00:37:14,733 --> 00:37:19,570 For the most part, bitinstant was actually taking steps 778 00:37:19,571 --> 00:37:24,875 to make sure that people weren't using the service for illegal purposes, 779 00:37:24,876 --> 00:37:28,479 but Charlie made the mistake in dealing with btcking 780 00:37:28,480 --> 00:37:30,815 of acknowledging that he knew 781 00:37:30,816 --> 00:37:33,017 what btcking was doing, 782 00:37:33,018 --> 00:37:35,920 and that he was acquiring bitcoins to sell them 783 00:37:35,921 --> 00:37:37,821 to silk road customers. 784 00:37:39,890 --> 00:37:42,960 In this case, Charlie worked with the guy 785 00:37:42,961 --> 00:37:46,297 and wrote emails that essentially acknowledged 786 00:37:46,298 --> 00:37:49,165 he knew what this guy was up to. 787 00:38:10,354 --> 00:38:11,856 That stunning arrest of the drug kingpin 788 00:38:11,857 --> 00:38:13,891 who goes by the name "dread pirate Roberts" 789 00:38:13,892 --> 00:38:16,427 and appears to have cornered the Internet drug market. 790 00:38:16,428 --> 00:38:19,063 His real name is Ross ulbricht and his website, silk road, 791 00:38:19,064 --> 00:38:21,899 is packed with products like cocaine and heroin. 792 00:38:21,900 --> 00:38:23,868 The payment system is all through bitcoins, 793 00:38:23,869 --> 00:38:26,404 which is basically digital currency, 794 00:38:26,405 --> 00:38:28,706 not backed up by any international banks, 795 00:38:28,707 --> 00:38:30,474 not backed up by any us banks, 796 00:38:30,475 --> 00:38:33,044 but simply based on the confidence of the users 797 00:38:33,045 --> 00:38:35,812 who exchange these bitcoins computer to computer. 798 00:38:40,484 --> 00:38:42,520 There's a reason why the case was tried in New York, 799 00:38:42,521 --> 00:38:43,821 in the Southern district, 800 00:38:43,822 --> 00:38:47,925 and largely that was because of bitcoin. 801 00:38:47,926 --> 00:38:50,061 Ross was caught in San Francisco. 802 00:38:50,062 --> 00:38:53,564 The silk road servers were out of the country. 803 00:38:53,565 --> 00:38:56,767 So why was Ross's case tried in the Southern district of New York 804 00:38:56,768 --> 00:39:00,805 where most of the financial regulations cases are dealt with? 805 00:39:00,806 --> 00:39:03,040 Where the district attorney, preet bharara 806 00:39:03,041 --> 00:39:04,975 has been all over bitcoin. 807 00:39:04,976 --> 00:39:07,545 Where Charles schumer, the senator, has been all over bitcoin. 808 00:39:07,546 --> 00:39:09,980 Ross ulbricht's case is a bitcoin case. 809 00:39:09,981 --> 00:39:11,649 There's absolutely no denying it. 810 00:39:11,650 --> 00:39:14,719 The level of threat that the silk road posed 811 00:39:14,720 --> 00:39:16,854 to the marketplace, to wall street, 812 00:39:16,855 --> 00:39:19,590 whether it's a perceived threat or an actual threat, 813 00:39:19,591 --> 00:39:21,525 was humongous. 814 00:39:21,526 --> 00:39:25,629 And the idea that somebody could create a marketplace 815 00:39:25,630 --> 00:39:29,734 where you could freely transact without oversight or regulation 816 00:39:29,735 --> 00:39:34,038 had to be dealt a massive and public blow. 817 00:39:34,039 --> 00:39:39,677 Bitcoin kind of monetized that anonymous part of the Internet 818 00:39:39,678 --> 00:39:41,812 and made it possible to trade in things 819 00:39:41,813 --> 00:39:45,416 that the federal government doesn't want you to trade in. 820 00:39:45,417 --> 00:39:47,418 Law enforcement moves slowly 821 00:39:47,419 --> 00:39:50,121 but it's a big heavy wheel that grinds finely, 822 00:39:50,122 --> 00:39:52,957 so, you know, someone was running a hidden service, 823 00:39:52,958 --> 00:39:54,892 and now they're in prison for life. 824 00:39:54,893 --> 00:39:57,161 They were playing hardball. It was very evident 825 00:39:57,162 --> 00:40:02,032 that their intention, as the judge herself said in her sentencing, 826 00:40:02,033 --> 00:40:03,801 was to make an example out of Ross, 827 00:40:03,802 --> 00:40:06,837 was to say to all of you people using bitcoin, 828 00:40:06,838 --> 00:40:08,806 to all of you people who want to tangle 829 00:40:08,807 --> 00:40:12,910 with unregulated marketplaces and technologies 830 00:40:12,911 --> 00:40:15,179 and open source cryptocurrencies, 831 00:40:15,180 --> 00:40:19,984 "we will throw the book in its entirety at you if you do this." 832 00:40:19,985 --> 00:40:21,986 We seized a whole bunch of bitcoins. 833 00:40:21,987 --> 00:40:26,190 And in order to sell those bitcoins off or go to an exchange, 834 00:40:26,191 --> 00:40:29,560 you have to fit within federal law and state law. 835 00:40:29,561 --> 00:40:31,128 There's not really an exchange that could handle that, 836 00:40:31,129 --> 00:40:33,964 that met those regulations at the current time, 837 00:40:33,965 --> 00:40:36,065 so it had to be handled through auction. 838 00:40:47,044 --> 00:40:48,913 You know anything about bitcoins? 839 00:40:48,914 --> 00:40:53,584 There's an article in "the wall street journal" today 840 00:40:53,585 --> 00:40:56,053 - on bitcoins. - - Really? 841 00:40:56,054 --> 00:40:58,155 Right here, if you want to read it. 842 00:40:58,156 --> 00:41:00,691 It is? 843 00:41:00,692 --> 00:41:02,126 Digital currency, did you see that? 844 00:41:02,127 --> 00:41:04,161 Wow! 845 00:41:04,162 --> 00:41:06,931 "Digital currencies will disrupt global finance, 846 00:41:06,932 --> 00:41:08,966 transform the way we pay for things, 847 00:41:08,967 --> 00:41:12,470 and just maybe, make the world a fairer place." 848 00:41:12,471 --> 00:41:14,038 From what I've read on the computer, 849 00:41:14,039 --> 00:41:15,838 they have had some problems. 850 00:41:18,476 --> 00:41:20,711 - Yeah. - Yeah. 851 00:41:20,712 --> 00:41:23,147 The reason is because you can't track it. 852 00:41:23,148 --> 00:41:26,783 Well, I think I don't like this idea at all. 853 00:41:31,555 --> 00:41:33,090 When we saw the silk road shut down, 854 00:41:33,091 --> 00:41:34,825 a lot of people said, 855 00:41:34,826 --> 00:41:37,161 "bitcoin's nothing but illegal drugs on the Internet. 856 00:41:37,162 --> 00:41:38,829 That's what it is." 857 00:41:38,830 --> 00:41:40,598 And they would point at the silk road and say, 858 00:41:40,599 --> 00:41:42,967 "look here at all the stuff that's happening here." 859 00:41:42,968 --> 00:41:46,270 And I think when you saw the silk road shut down 860 00:41:46,271 --> 00:41:48,205 and bitcoin transaction volume 861 00:41:48,206 --> 00:41:50,574 take a tiny little dip, 862 00:41:50,575 --> 00:41:52,743 and then keep going up, 863 00:41:52,744 --> 00:41:55,212 you know, I think that was a great event to point at 864 00:41:55,213 --> 00:41:58,949 and say, "it really wasn't about that. 865 00:41:58,950 --> 00:42:00,918 It really isn't about that." 866 00:42:00,919 --> 00:42:03,252 It's a tiny little part of the economy. 867 00:42:09,026 --> 00:42:10,728 I guess in the last week 868 00:42:10,729 --> 00:42:13,564 I've really started hearing about bitcoin. 869 00:42:13,565 --> 00:42:15,132 Recently I heard a scenario 870 00:42:15,133 --> 00:42:17,935 after the FBI had seized a bunch of bitcoins 871 00:42:17,936 --> 00:42:19,803 due to illegal transactions, 872 00:42:19,804 --> 00:42:21,138 now they're gonna be auctioning them off 873 00:42:21,139 --> 00:42:23,607 like they would a private yacht 874 00:42:23,608 --> 00:42:26,043 for, you know, from some drug dealer. 875 00:42:26,044 --> 00:42:30,147 So that, in a way, legitimizes the use of it 876 00:42:30,148 --> 00:42:32,415 as a currency. 877 00:42:37,021 --> 00:42:41,892 Looks like it's the first live 878 00:42:41,893 --> 00:42:45,563 bitcoin exchange on wall street. 879 00:42:45,564 --> 00:42:47,296 Looks that way. 880 00:42:48,766 --> 00:42:50,668 Yeah, so one for 950. 881 00:42:50,669 --> 00:42:52,570 - Buying or selling? - -Selling. 882 00:42:52,571 --> 00:42:54,238 550 on a thousand... 883 00:42:54,239 --> 00:42:58,208 Right now we were looking at the open interest 884 00:42:58,209 --> 00:43:00,778 at the floor of the bitcoin exchange. 885 00:43:00,779 --> 00:43:03,981 There's different exchanges that are online, 886 00:43:03,982 --> 00:43:05,349 that will present at the bidding house, 887 00:43:05,350 --> 00:43:09,587 but there's no true open outcry exchange. 888 00:43:09,588 --> 00:43:11,188 Buyers and sellers coming together 889 00:43:11,189 --> 00:43:14,991 in an open, clear, transparent, honest way. 890 00:43:16,627 --> 00:43:19,163 - Gox is the highest one. - Why don't we call it 900? 891 00:43:19,164 --> 00:43:20,830 900... 892 00:43:25,936 --> 00:43:27,338 There's my transaction, 893 00:43:27,339 --> 00:43:29,306 probably the first two transactions of the day. 894 00:43:29,307 --> 00:43:30,708 It's really not about the money, 895 00:43:30,709 --> 00:43:32,276 it's about being involved, 896 00:43:32,277 --> 00:43:34,597 and I think there's a lot more people gonna follow me. 897 00:43:40,150 --> 00:43:42,152 Charlie shrem, 24 years old, 898 00:43:42,153 --> 00:43:44,622 arrested today and charged with engaging in money laundering 899 00:43:44,623 --> 00:43:48,025 shrem enabled people to transfer money 900 00:43:48,026 --> 00:43:50,961 from bitcoin to cash via his company called bitinstant. 901 00:43:50,962 --> 00:43:52,763 Now the other point that the DEA is making 902 00:43:52,764 --> 00:43:56,266 is that shrem bought drugs online at silk road 903 00:43:56,267 --> 00:44:00,304 and that he knew silk road was a trafficking website. 904 00:44:00,305 --> 00:44:02,706 And we know the winklevoss twins 905 00:44:02,707 --> 00:44:05,876 who obviously were featured in the movie about Facebook. 906 00:44:05,877 --> 00:44:09,046 They're actually investors in shrem's company. 907 00:44:09,047 --> 00:44:12,816 Yeah, you know, a lot of people are very excited by this idea. 908 00:44:12,817 --> 00:44:15,185 They like the idea that you can have a currency 909 00:44:15,186 --> 00:44:17,888 that is not tied to any kind of central bank, 910 00:44:17,889 --> 00:44:19,723 but at the same time, i mean, think about it. 911 00:44:19,724 --> 00:44:21,025 If you're in the federal government, 912 00:44:21,026 --> 00:44:22,660 you don't like the idea that people could 913 00:44:22,661 --> 00:44:25,295 effectively use another form of cash 914 00:44:25,296 --> 00:44:29,233 to buy things that they shouldn't be buying online. 915 00:44:29,234 --> 00:44:32,336 With me, it wasn't all my customers. 916 00:44:32,337 --> 00:44:34,071 It was one customer, 917 00:44:34,072 --> 00:44:36,407 out of about 100,000 customers. 918 00:44:36,408 --> 00:44:38,776 This was one customer. One single... 919 00:44:38,777 --> 00:44:40,144 And I made that case in my sentencing. 920 00:44:40,145 --> 00:44:42,680 I said, "your honor, this was one customer." 921 00:44:42,681 --> 00:44:46,283 It happened that I was literally coming home from Amsterdam. 922 00:44:46,284 --> 00:44:47,885 I was in my sweatshirt. I was still stoned. 923 00:44:47,886 --> 00:44:49,119 I didn't know what was going on. 924 00:44:49,120 --> 00:44:51,822 Charlie did not know when to shut up, 925 00:44:51,823 --> 00:44:54,958 and that ended up getting him in trouble, 926 00:44:54,959 --> 00:44:57,928 and probably led to the end of his company. 927 00:44:57,929 --> 00:44:59,263 But they got me under the patriot act, 928 00:44:59,264 --> 00:45:00,831 and it's money laundering 929 00:45:00,832 --> 00:45:03,133 because I knew that the money I was taking 930 00:45:03,134 --> 00:45:07,037 was eventually possibly going to be used for drug trafficking. 931 00:45:07,038 --> 00:45:09,773 Now drug trafficking is not buying drugs, it's selling drugs. 932 00:45:09,774 --> 00:45:11,275 I didn't help the drug seller. 933 00:45:11,276 --> 00:45:13,010 I helped the guy buy drugs. 934 00:45:13,011 --> 00:45:15,746 But I never went to trial because... 935 00:45:15,747 --> 00:45:19,483 And I pled guilty because who wins at trial, you know? 936 00:45:19,484 --> 00:45:22,319 Like this guy, silk road, he's gonna go to life. 937 00:45:22,320 --> 00:45:24,221 In trial, all he needed to get was a lady 938 00:45:24,222 --> 00:45:26,724 whose son died from a cocaine overdose 939 00:45:26,725 --> 00:45:29,793 and I would've... the jury would've convicted me right there. 940 00:45:29,794 --> 00:45:32,129 So essentially Charlie was selling bitcoins to a guy 941 00:45:32,130 --> 00:45:33,997 who was selling bitcoins to people 942 00:45:33,998 --> 00:45:37,434 who were putting drugs into their own bodies. 943 00:45:37,435 --> 00:45:40,170 And for this, Charlie was charged with crimes 944 00:45:40,171 --> 00:45:43,107 that could've put him in jail for 20 years. 945 00:45:43,108 --> 00:45:44,942 That's what the prosecutors were shooting for. 946 00:45:44,943 --> 00:45:47,911 We have banks that have atms 947 00:45:47,912 --> 00:45:49,413 on every street corner in America, 948 00:45:49,414 --> 00:45:51,749 and those banks know very well 949 00:45:51,750 --> 00:45:53,217 that that cash is getting used for drugs. 950 00:45:53,218 --> 00:45:54,885 And yet, that's fine. 951 00:45:54,886 --> 00:45:56,787 They're allowed to do that. No one gets in trouble. 952 00:45:56,788 --> 00:45:58,989 But Charlie sells bitcoin to a guy who sells bitcoin 953 00:45:58,990 --> 00:46:01,225 to someone who uses drugs, and he goes to jail. 954 00:46:01,226 --> 00:46:04,495 He was an entrepreneur that started building this industry, 955 00:46:04,496 --> 00:46:07,097 built services that people found useful, 956 00:46:07,098 --> 00:46:09,266 when bankers almost destroyed the world economy 957 00:46:09,267 --> 00:46:12,870 and none of them got in trouble whatsoever. 958 00:46:12,871 --> 00:46:15,405 And here we have this 23-year-old kid, he goes to jail 959 00:46:15,406 --> 00:46:18,407 because he started building an alternative. 960 00:46:27,885 --> 00:46:29,386 Over the last six months, 961 00:46:29,387 --> 00:46:32,322 our agency has been conducting an extensive inquiry 962 00:46:32,323 --> 00:46:35,893 into virtual currency. 963 00:46:35,894 --> 00:46:37,828 The information we're going to gather 964 00:46:37,829 --> 00:46:39,797 in this fact-finding effort 965 00:46:39,798 --> 00:46:41,431 will allow us to put forward, 966 00:46:41,432 --> 00:46:44,001 during the course of 2014, 967 00:46:44,002 --> 00:46:46,370 a proposed regulatory framework 968 00:46:46,371 --> 00:46:50,374 for virtual currency firms operating in New York. 969 00:46:50,375 --> 00:46:52,943 Yesterday, we had serious criminal conduct 970 00:46:52,944 --> 00:46:55,813 come to light involving virtual currency 971 00:46:55,814 --> 00:46:57,481 as a vehicle for money laundering 972 00:46:57,482 --> 00:47:00,083 drug trafficking, and other major felonies. 973 00:47:00,084 --> 00:47:03,420 Right now, the regulation of virtual currency industry 974 00:47:03,421 --> 00:47:07,057 is still akin to a virtual wild west. 975 00:47:07,058 --> 00:47:08,926 That's why we're evaluating 976 00:47:08,927 --> 00:47:10,427 whether our agency should issue 977 00:47:10,428 --> 00:47:12,296 a so-called bitlicense, 978 00:47:12,297 --> 00:47:15,299 specifically tailored to virtual currencies. 979 00:47:15,300 --> 00:47:17,835 I think people who imagine 980 00:47:17,836 --> 00:47:20,838 a very powerful utility, like bitcoin 981 00:47:20,839 --> 00:47:23,574 that would somehow escape regulation entirely 982 00:47:23,575 --> 00:47:27,244 are either naive 983 00:47:27,245 --> 00:47:30,848 or extreme optimists. 984 00:47:30,849 --> 00:47:33,083 Bitcoin is a battle of ideas, 985 00:47:33,084 --> 00:47:35,519 and it forces the issue of whether people should be 986 00:47:35,520 --> 00:47:38,488 as free in their handling of money as they are 987 00:47:38,489 --> 00:47:40,524 in their handling of speech or religion 988 00:47:40,525 --> 00:47:42,893 or relationships with each other. 989 00:47:42,894 --> 00:47:45,963 If you want to have this thing go mainstream, 990 00:47:45,964 --> 00:47:48,232 you're going to have to have the regulators, 991 00:47:48,233 --> 00:47:49,933 the lawmakers weigh in on it. 992 00:47:49,934 --> 00:47:52,102 One of the first ones who really took an interest 993 00:47:52,103 --> 00:47:53,637 was Benjamin lawsky. 994 00:47:53,638 --> 00:47:56,240 Very important regulator in the financial world. 995 00:47:56,241 --> 00:47:59,509 And in January, 2014, holds these public hearings 996 00:47:59,510 --> 00:48:01,879 because he wants to come up with a license 997 00:48:01,880 --> 00:48:04,147 for bitcoin companies. 998 00:48:04,148 --> 00:48:06,083 We believe that putting in place 999 00:48:06,084 --> 00:48:08,652 appropriate regulatory safeguards for virtual currencies 1000 00:48:08,653 --> 00:48:10,988 will ultimately be beneficial 1001 00:48:10,989 --> 00:48:14,524 to the long-term strength of the industry itself. 1002 00:48:14,525 --> 00:48:17,561 Lawsky was essentially given the opportunity 1003 00:48:17,562 --> 00:48:22,266 to write the rules for this whole new industry from scratch. 1004 00:48:22,267 --> 00:48:24,501 The first question is the obvious one 1005 00:48:24,502 --> 00:48:25,936 that's on everyone's mind. 1006 00:48:25,937 --> 00:48:27,938 Sort of unexpected yesterday, 1007 00:48:27,939 --> 00:48:30,173 but with the arrests we saw obviously 1008 00:48:30,174 --> 00:48:32,276 that's put a bit of a cloud 1009 00:48:32,277 --> 00:48:34,044 hanging over the industry right now, 1010 00:48:34,045 --> 00:48:37,547 and so how do each of you react to what we saw yesterday, 1011 00:48:37,548 --> 00:48:41,418 what it means for bitcoin or virtual currency and its future? 1012 00:48:41,419 --> 00:48:44,388 I think it further supports that 1013 00:48:44,389 --> 00:48:46,390 bad guys are gonna do bad things, 1014 00:48:46,391 --> 00:48:49,026 and they're gonna use whatever technology is available to them. 1015 00:48:49,027 --> 00:48:51,962 But I view it as, if the allegations are true and they're convicted, 1016 00:48:51,963 --> 00:48:54,298 the system works. 1017 00:48:54,299 --> 00:48:56,466 Are people still doing bad things with bitcoin? 1018 00:48:56,467 --> 00:49:00,103 Sure. Is the majority of the bitcoin activity vice? 1019 00:49:00,104 --> 00:49:01,271 Not a chance. 1020 00:49:01,272 --> 00:49:02,572 So I think the issue you raise 1021 00:49:02,573 --> 00:49:05,242 is one that people like to write about, 1022 00:49:05,243 --> 00:49:07,611 the media likes to write about it, makes great headlines. 1023 00:49:07,612 --> 00:49:09,579 You get a lot of clicks. You can sell a lot of ads, 1024 00:49:09,580 --> 00:49:12,950 but I think it's in the rearview mirror. 1025 00:49:12,951 --> 00:49:15,585 There are some people in the bitcoin community 1026 00:49:15,586 --> 00:49:17,688 from the libertarian side of things 1027 00:49:17,689 --> 00:49:20,691 that want government to just leave it alone. 1028 00:49:20,692 --> 00:49:24,561 Would you say regulation is both inevitable 1029 00:49:24,562 --> 00:49:26,730 but more importantly, actually ultimately 1030 00:49:26,731 --> 00:49:29,666 going to be crucial for the survival of virtual currency? 1031 00:49:29,667 --> 00:49:31,501 Sounds like a terrible idea to me. 1032 00:49:31,502 --> 00:49:33,136 Just understand what we're trying to do with bitcoin. 1033 00:49:33,137 --> 00:49:35,172 We're trying to create a world 1034 00:49:35,173 --> 00:49:39,609 where transactions can move globally for free, okay? 1035 00:49:39,610 --> 00:49:43,380 And making these companies hire 1036 00:49:43,381 --> 00:49:45,615 you know, some outsourced compliance firm 1037 00:49:45,616 --> 00:49:47,584 is a bad idea. 1038 00:49:47,585 --> 00:49:49,319 It'd be great, in any industry, 1039 00:49:49,320 --> 00:49:51,154 if you could just open the door and let folks 1040 00:49:51,155 --> 00:49:52,689 run out and give it a shot. 1041 00:49:52,690 --> 00:49:55,359 We may choose not to invest in a company 1042 00:49:55,360 --> 00:49:58,662 if they can't get licensed by you. 1043 00:49:58,663 --> 00:50:01,164 If the choice ultimately is between 1044 00:50:01,165 --> 00:50:03,533 preventing money laundering on the one hand, 1045 00:50:03,534 --> 00:50:06,103 and I probably shouldn't even use the word "money laundering" 1046 00:50:06,104 --> 00:50:07,771 'cause it's too nice a word, frankly. 1047 00:50:07,772 --> 00:50:10,474 Money laundering is the facilitation 1048 00:50:10,475 --> 00:50:12,376 of all kinds of horrific crimes 1049 00:50:12,377 --> 00:50:14,144 that I think everyone in this room 1050 00:50:14,145 --> 00:50:15,612 never wants to see happen. 1051 00:50:15,613 --> 00:50:18,415 Acts of terrorism, funding rogue nations, etc., 1052 00:50:18,416 --> 00:50:20,751 all take place through massive money laundering. 1053 00:50:20,752 --> 00:50:22,786 Now the choice for the regulator is, 1054 00:50:22,787 --> 00:50:25,188 permit money laundering on the one hand, 1055 00:50:25,189 --> 00:50:29,092 or permit innovation on the other. 1056 00:50:29,093 --> 00:50:31,228 We're always going to choose 1057 00:50:31,229 --> 00:50:33,329 squelching the money laundering first. 1058 00:50:34,798 --> 00:50:38,769 I agree that I don't think anybody wants money laundering. 1059 00:50:38,770 --> 00:50:41,772 When we got a... First saw bitcoin 1060 00:50:41,773 --> 00:50:43,807 you know, about a year and a half, almost two years ago. 1061 00:50:43,808 --> 00:50:43,807 I don't think anybody would deny 1062 00:50:43,808 --> 00:50:46,543 that it was a bit of a wild, wild west, 1063 00:50:46,544 --> 00:50:48,078 because there was no regulation. 1064 00:50:48,079 --> 00:50:50,480 There was no framework to evaluate 1065 00:50:50,481 --> 00:50:52,716 the asset, evaluate companies, 1066 00:50:52,717 --> 00:50:55,385 determine who was compliant and who was not, 1067 00:50:55,386 --> 00:50:57,788 and a wild west attracts cowboys. 1068 00:50:57,789 --> 00:51:00,824 And I don't think anybody here would disagree with the fact 1069 00:51:00,825 --> 00:51:03,627 that a sheriff would be a good thing. 1070 00:51:03,628 --> 00:51:05,262 A lot of, I think, the entrepreneurs 1071 00:51:05,263 --> 00:51:07,431 feel like they have to self-censor. 1072 00:51:07,432 --> 00:51:10,801 They don't want to come out vocally critical of the regulations. 1073 00:51:10,802 --> 00:51:12,536 Part of that is maybe 'cause some of them 1074 00:51:12,537 --> 00:51:13,737 just like regulations, 1075 00:51:13,738 --> 00:51:15,305 but I think another part of it, 1076 00:51:15,306 --> 00:51:17,707 some of them just feel like they will get 1077 00:51:17,708 --> 00:51:20,143 attention of the regulators if they come out against them. 1078 00:51:20,144 --> 00:51:22,279 Yes, we want them to innovate, but at the same time, 1079 00:51:22,280 --> 00:51:25,649 we just can't live in a world where we're gonna permit 1080 00:51:25,650 --> 00:51:27,451 money laundering to go on. 1081 00:51:27,452 --> 00:51:29,252 I think regulators should give bitcoin 1082 00:51:29,253 --> 00:51:30,387 some time to grow up. 1083 00:51:30,388 --> 00:51:32,255 Too much regulation now 1084 00:51:32,256 --> 00:51:33,790 will just stifle innovation. 1085 00:51:33,791 --> 00:51:37,094 I think before regulators kind of come in and say, 1086 00:51:37,095 --> 00:51:38,628 "we're gonna solve all your problems," 1087 00:51:38,629 --> 00:51:41,131 and then fail to solve all their problems, 1088 00:51:41,132 --> 00:51:43,233 I think they should give the innovators time 1089 00:51:43,234 --> 00:51:45,202 to solve those problems. 1090 00:51:45,203 --> 00:51:48,538 One function of regulation is to make things clearer, 1091 00:51:48,539 --> 00:51:51,208 so right now bitcoin, because it's so new, 1092 00:51:51,209 --> 00:51:54,511 is in a state of flux everywhere. 1093 00:51:54,512 --> 00:51:55,579 The lesson from the Internet 1094 00:51:55,580 --> 00:51:57,714 is anything that China bans, 1095 00:51:57,715 --> 00:51:58,915 invest in. 1096 00:52:00,818 --> 00:52:04,421 And that's a joke, but the U.S. 1097 00:52:04,422 --> 00:52:07,591 Allows Google to operate here, allows Twitter to operate here, 1098 00:52:07,592 --> 00:52:08,892 allows bitcoin to operate here, 1099 00:52:08,893 --> 00:52:11,194 allows Facebook to operate here. 1100 00:52:11,195 --> 00:52:13,897 Chinese government doesn't allow any of those companies to operate 1101 00:52:13,898 --> 00:52:18,435 the way they operate in this country, or at all. 1102 00:52:18,436 --> 00:52:20,504 This is about freedom, ultimately. 1103 00:52:20,505 --> 00:52:22,839 You know, we're 50 yards 1104 00:52:22,840 --> 00:52:24,574 from the old world trade center here 1105 00:52:24,575 --> 00:52:27,344 and I think all of us never want to see 1106 00:52:27,345 --> 00:52:29,679 anything like that happen again, and it would have been a lot harder 1107 00:52:29,680 --> 00:52:31,414 for 9/11 to ever have occurred 1108 00:52:31,415 --> 00:52:32,682 had we had the protections in place 1109 00:52:32,683 --> 00:52:34,484 that would prevent the movement 1110 00:52:34,485 --> 00:52:36,887 of massive amounts of money around the globe 1111 00:52:36,888 --> 00:52:41,258 by people who would want to kill everybody in this room, 1112 00:52:41,259 --> 00:52:44,261 so I think the key is 1113 00:52:44,262 --> 00:52:46,663 to not create useless regulation 1114 00:52:46,664 --> 00:52:50,267 but I think the motives behind a lot of those rules 1115 00:52:50,268 --> 00:52:54,370 are to ensure we don't miss something again. 1116 00:52:55,405 --> 00:52:56,840 Since 2001, 1117 00:52:56,841 --> 00:53:00,343 there's this absurd obsession with terrorism. 1118 00:53:00,344 --> 00:53:02,579 So any time a regulary gets up and says, 1119 00:53:02,580 --> 00:53:04,447 "well, bitcoin can be used for terrorism." 1120 00:53:04,448 --> 00:53:06,416 Well, of course it can. So can anything. 1121 00:53:06,417 --> 00:53:08,852 So can cell phones and so can the Internet and so can the car. 1122 00:53:08,853 --> 00:53:12,522 It doesn't mean that we should stifle the growth of those industries 1123 00:53:12,523 --> 00:53:14,556 just because bad people can use it. 1124 00:53:29,906 --> 00:53:31,942 This has arguably been the worst week 1125 00:53:31,943 --> 00:53:33,810 in the cryptocurrency's short life, 1126 00:53:33,811 --> 00:53:38,248 stunned by the collapse of once-dominant exchange mt. Gox. 1127 00:53:38,249 --> 00:53:42,352 Now that failed firm's ceo mark karpeles is in hiding. 1128 00:53:42,353 --> 00:53:46,790 Some 750,000 bitcoins allegedly stolen or lost 1129 00:53:46,791 --> 00:53:50,826 which accounts for about 6% of the total circulation. 1130 00:53:52,429 --> 00:53:53,964 By the time mt. Gox went down, 1131 00:53:53,965 --> 00:53:57,000 it was holding what its customers believed 1132 00:53:57,001 --> 00:53:59,469 were about a half a billion dollars 1133 00:53:59,470 --> 00:54:02,272 worth of their bitcoins and the company's bitcoins. 1134 00:54:02,273 --> 00:54:05,675 It was no longer the largest exchange in the world. 1135 00:54:05,676 --> 00:54:07,711 But part of what's so amazing is 1136 00:54:07,712 --> 00:54:10,447 that people kept using it 1137 00:54:10,448 --> 00:54:13,516 even after there had been numerous incidents 1138 00:54:13,517 --> 00:54:15,352 in which it was clear that the company 1139 00:54:15,353 --> 00:54:18,153 was not up to the task of safeguarding the money. 1140 00:54:24,861 --> 00:54:27,464 And the only reason he survived as long as he did 1141 00:54:27,465 --> 00:54:29,866 was because in 2013, the price started going up. 1142 00:54:29,867 --> 00:54:31,668 People kept putting money into it. 1143 00:54:31,669 --> 00:54:33,903 He had more and more money 'cause the price was going up, 1144 00:54:33,904 --> 00:54:35,805 but as soon as the price started going down, 1145 00:54:35,806 --> 00:54:36,806 this is what happened, right? 1146 00:54:36,807 --> 00:54:39,376 It peaks in late 2013. 1147 00:54:39,377 --> 00:54:40,877 It starts coming down in 2014. 1148 00:54:40,878 --> 00:54:43,013 Soon as that price started coming down, 1149 00:54:43,014 --> 00:54:45,348 it all just tumbled for him. 1150 00:54:45,349 --> 00:54:47,450 Gox was going to collapse. 1151 00:54:47,451 --> 00:54:48,918 That it lasted as long as it did 1152 00:54:48,919 --> 00:54:51,955 was actually kind of a stroke of fate. 1153 00:54:51,956 --> 00:54:53,523 But its failure was 1154 00:54:53,524 --> 00:54:55,525 it didn't have the kind of more boring 1155 00:54:55,526 --> 00:54:57,060 mainstream institutional controls 1156 00:54:57,061 --> 00:54:59,829 that we require to bring it to the next level. 1157 00:54:59,830 --> 00:55:02,799 And there's a whole bunch of money missing, 1158 00:55:02,800 --> 00:55:04,834 and no one knows if they just lost it, 1159 00:55:04,835 --> 00:55:05,935 it if was stolen from them, 1160 00:55:05,936 --> 00:55:08,371 if they embezzled it or what, 1161 00:55:08,372 --> 00:55:10,974 but the important lesson from gox 1162 00:55:10,975 --> 00:55:13,343 isn't that bitcoin doesn't work. 1163 00:55:13,344 --> 00:55:15,378 The important lesson from gox 1164 00:55:15,379 --> 00:55:17,580 is that you don't leave your money with a trusted third party 1165 00:55:17,581 --> 00:55:19,516 because you can't always trust them. 1166 00:55:19,517 --> 00:55:20,950 You can only trust them until you can't. 1167 00:55:20,951 --> 00:55:22,752 This was also a lesson that people were 1168 00:55:22,753 --> 00:55:24,087 supposed to learn during the financial crisis 1169 00:55:24,088 --> 00:55:26,788 but they don't seem to have learned it yet. 1170 00:55:29,059 --> 00:55:30,694 Mark karpeles 1171 00:55:30,695 --> 00:55:32,762 was a gamer. 1172 00:55:32,763 --> 00:55:35,031 He was not a finance pro. 1173 00:55:35,032 --> 00:55:37,701 He really didn't know what he was doing, 1174 00:55:37,702 --> 00:55:40,770 and he didn't build it. Jed mccaleb built it. 1175 00:55:40,771 --> 00:55:42,372 He didn't improve upon it. 1176 00:55:42,373 --> 00:55:44,574 I mean, it lurched from crisis to crisis 1177 00:55:44,575 --> 00:55:46,810 throughout the entire history. 1178 00:55:46,811 --> 00:55:50,680 Last year was a terrible year for bitcoin, 1179 00:55:50,681 --> 00:55:52,649 and an especially terrible year for the foundation, 1180 00:55:52,650 --> 00:55:55,852 because we had two of the people on our board of directors 1181 00:55:55,853 --> 00:55:59,622 who had to resign in disgrace, basically. 1182 00:55:59,623 --> 00:56:02,492 You know, my expertise is technology. 1183 00:56:02,493 --> 00:56:05,362 My expertise is not figuring out, like, 1184 00:56:05,363 --> 00:56:06,996 who's trustworthy, who's not, 1185 00:56:06,997 --> 00:56:08,832 which businesses are gonna succeed, 1186 00:56:08,833 --> 00:56:10,900 which businesses are gonna fail. 1187 00:56:10,901 --> 00:56:12,869 After we had held our hearings, 1188 00:56:12,870 --> 00:56:17,807 we thought we would take six months to nine months, even a year, 1189 00:56:17,808 --> 00:56:19,743 to draft our initial regulations. 1190 00:56:19,744 --> 00:56:21,411 This was so complicated that we wanted 1191 00:56:21,412 --> 00:56:23,847 to really take our time and get it right. 1192 00:56:23,848 --> 00:56:26,783 What happened was, though, mt. Gox collapsed. 1193 00:56:26,784 --> 00:56:28,051 And I think that gave us 1194 00:56:28,052 --> 00:56:30,420 a real renewed sense of urgency, 1195 00:56:30,421 --> 00:56:33,123 and we realized that if we got regulation right, 1196 00:56:33,124 --> 00:56:36,493 we could create more confidence in bitcoin, frankly, 1197 00:56:36,494 --> 00:56:38,928 as opposed to the sort of loss of confidence you saw 1198 00:56:38,929 --> 00:56:41,531 not only from the silk road case 1199 00:56:41,532 --> 00:56:43,400 but also from the collapse of mt. Gox. 1200 00:56:43,401 --> 00:56:44,968 So your sense, though, 1201 00:56:44,969 --> 00:56:46,736 of the regulators, right now. 1202 00:56:46,737 --> 00:56:47,904 I assume you've had conversations. 1203 00:56:47,905 --> 00:56:49,506 The discussions that we've had, 1204 00:56:49,507 --> 00:56:51,474 I think everybody recognizes the innovation 1205 00:56:51,475 --> 00:56:53,076 and doesn't want to stifle it. 1206 00:56:53,077 --> 00:56:55,445 They just want to make sure that there's healthy regulation 1207 00:56:55,446 --> 00:56:58,714 so it's used in a safe and productive manner. 1208 00:57:00,784 --> 00:57:03,119 I'm not giving up on New York. New York's giving up on me. 1209 00:57:03,120 --> 00:57:05,655 I can't even turn on the bitcoin machine. 1210 00:57:05,656 --> 00:57:07,824 An atm, i can't turn it on. 1211 00:57:07,825 --> 00:57:10,427 I can't make trades. I can't do anything. 1212 00:57:10,428 --> 00:57:14,197 There's no cash flow at all. 1213 00:57:14,198 --> 00:57:16,166 And it's potential regulation. 1214 00:57:16,167 --> 00:57:19,569 It's regulations i should believe 1215 00:57:19,570 --> 00:57:21,604 is coming down the pipe. 1216 00:57:21,605 --> 00:57:24,841 Like, I don't want to do anything that someone's frowning upon 1217 00:57:24,842 --> 00:57:27,777 right next door to the stock market. 1218 00:57:27,778 --> 00:57:29,078 They're gonna lock me up. 1219 00:57:29,079 --> 00:57:30,847 You know, you can't have an exchange. 1220 00:57:30,848 --> 00:57:32,649 Well, we don't. People meet there 1221 00:57:32,650 --> 00:57:33,950 and exchange with each other. 1222 00:57:33,951 --> 00:57:36,186 New York's sitting there on the high horse, 1223 00:57:36,187 --> 00:57:38,221 and the whole world's waiting 1224 00:57:38,222 --> 00:57:41,957 on New York to create some fuckin' license. 1225 00:57:50,133 --> 00:57:52,735 Ultimately lawsky's office brought out 1226 00:57:52,736 --> 00:57:54,637 the final rules for the bitlicense 1227 00:57:54,638 --> 00:57:56,539 in the spring of 2015. 1228 00:57:56,540 --> 00:58:00,910 A lot of companies complained that the regulations 1229 00:58:00,911 --> 00:58:04,147 were too burdensome for them to operate in New York 1230 00:58:04,148 --> 00:58:05,648 and still make money. 1231 00:58:05,649 --> 00:58:07,250 I saw just overnight 1232 00:58:07,251 --> 00:58:09,853 dozens of companies that were on the verge of launching. 1233 00:58:09,854 --> 00:58:12,622 They just threw in the towel and said, "we can't afford this." 1234 00:58:12,623 --> 00:58:14,824 Erik voorhees' new company shapeshift 1235 00:58:14,825 --> 00:58:16,960 would have had to apply for the bitlicense 1236 00:58:16,961 --> 00:58:19,728 if it wanted to keep customers in New York. 1237 00:58:21,064 --> 00:58:23,666 So, in my lap here i have the... 1238 00:58:23,667 --> 00:58:25,935 The application forms for license to engage 1239 00:58:25,936 --> 00:58:28,171 in virtual currency business activity, 1240 00:58:28,172 --> 00:58:31,941 which is a very statist way of saying the bitlicense. 1241 00:58:31,942 --> 00:58:35,245 The is the application to be approved 1242 00:58:35,246 --> 00:58:39,849 to do basically what we've all been doing for years now, 1243 00:58:39,850 --> 00:58:41,885 which is building bitcoin companies in New York. 1244 00:58:41,886 --> 00:58:45,822 And a lot of stuff in here I personally feel is unethical, 1245 00:58:45,823 --> 00:58:47,524 so we're not gonna comply with it, 1246 00:58:47,525 --> 00:58:49,092 which means we have to block new yorkers entirely. 1247 00:58:49,093 --> 00:58:50,560 And when an entire new industry 1248 00:58:50,561 --> 00:58:52,095 starts blocking a place like New York 1249 00:58:52,096 --> 00:58:54,664 that used to be the financial center of the world, 1250 00:58:54,665 --> 00:58:58,668 hopefully some of those politicians will take notice. 1251 00:58:58,669 --> 00:59:00,136 The point of it is to, one, 1252 00:59:00,137 --> 00:59:01,871 make sure there are enough consumer protections; 1253 00:59:01,872 --> 00:59:04,574 two, make sure we have adequate cybersecurity; 1254 00:59:04,575 --> 00:59:09,078 three, make sure that the companies are adequately capitalized 1255 00:59:09,079 --> 00:59:11,214 so they don't collapse upon themselves. 1256 00:59:11,215 --> 00:59:14,183 You know, you've seen a tug of war 1257 00:59:14,184 --> 00:59:17,320 between the hard liners and those who are saying, 1258 00:59:17,321 --> 00:59:18,888 "you know, you've got to have 1259 00:59:18,889 --> 00:59:21,691 enough space for innovation in here," 1260 00:59:21,692 --> 00:59:24,027 and the system has come out, i think, 1261 00:59:24,028 --> 00:59:26,829 probably stronger as a result of that 1262 00:59:26,830 --> 00:59:28,665 and there's a widespread view 1263 00:59:28,666 --> 00:59:30,867 amongst certainly the business bitcoin community 1264 00:59:30,868 --> 00:59:33,269 that some level of regulation 1265 00:59:33,270 --> 00:59:35,004 gives legitimacy to what they're doing. 1266 00:59:35,005 --> 00:59:36,706 It gives people confidence in what they're doing. 1267 00:59:36,707 --> 00:59:39,075 This is an important part of growing up. 1268 00:59:39,076 --> 00:59:41,144 Ultimately, they're not going to get it right, 1269 00:59:41,145 --> 00:59:44,080 because no regulation is ever right. 1270 00:59:44,081 --> 00:59:46,249 But I'm highly confident 1271 00:59:46,250 --> 00:59:49,786 that whatever happens going forward, 1272 00:59:49,787 --> 00:59:51,621 the bitlicense will be looked at 1273 00:59:51,622 --> 00:59:53,089 as a positive development 1274 00:59:53,090 --> 00:59:55,325 in the evolution of bitcoin 1275 00:59:55,326 --> 00:59:58,161 because it just removed one of the biggest pieces of uncertainty, 1276 00:59:58,162 --> 01:00:01,264 which is how is this industry going to be regulated. 1277 01:00:01,265 --> 01:00:05,268 I think most of us... At least a lot of us... 1278 01:00:05,269 --> 01:00:07,270 Think that sensible regulation 1279 01:00:07,271 --> 01:00:08,671 that sets guidelines 1280 01:00:08,672 --> 01:00:10,740 that makes sure people's money 1281 01:00:10,741 --> 01:00:12,909 doesn't just go into a black hole 1282 01:00:12,910 --> 01:00:15,678 that that's a really important thing, 1283 01:00:15,679 --> 01:00:17,180 that regulation. 1284 01:00:17,181 --> 01:00:19,282 I'm sure satoshi wouldn't be happy 1285 01:00:19,283 --> 01:00:20,783 to see this kind of thing, 1286 01:00:20,784 --> 01:00:22,719 which is not based on the logic and reason 1287 01:00:22,720 --> 01:00:24,187 that a programmer is used to. 1288 01:00:24,188 --> 01:00:26,990 I think a lot of developers, understandably so, 1289 01:00:26,991 --> 01:00:31,394 try to stay out of the political nonsense. 1290 01:00:31,395 --> 01:00:33,663 It has been one of the biggest mysteries 1291 01:00:33,664 --> 01:00:34,864 raging across the Internet: 1292 01:00:34,865 --> 01:00:36,899 Who is satoshi nakamoto? 1293 01:00:36,900 --> 01:00:38,735 Newsweek published an article 1294 01:00:38,736 --> 01:00:41,337 claiming the man in these images is the bitcoin founder. 1295 01:00:41,338 --> 01:00:43,406 The man who created bitcoin, 1296 01:00:43,407 --> 01:00:45,141 is known as the father of bitcoin, 1297 01:00:45,142 --> 01:00:49,012 the online currency now worth billions. 1298 01:00:49,013 --> 01:00:50,713 When you asked him about bitcoin, 1299 01:00:50,714 --> 01:00:52,949 and he says, "i can't talk about this anymore," 1300 01:00:52,950 --> 01:00:54,884 he was not referring to bitcoin. 1301 01:00:54,885 --> 01:00:57,253 But with me, he definitely acknowledged bitcoin. 1302 01:00:57,254 --> 01:00:58,721 I think at this point now he's saying 1303 01:00:58,722 --> 01:01:00,856 he was confused by the conversation. 1304 01:01:01,724 --> 01:01:02,892 Clearly somebody thought 1305 01:01:02,893 --> 01:01:05,094 that we did this as an act of war 1306 01:01:05,095 --> 01:01:06,996 against satoshi nakamoto or bitcoin, 1307 01:01:06,997 --> 01:01:08,331 and I want to be very clear 1308 01:01:08,332 --> 01:01:12,068 that I certainly never meant it that way. 1309 01:01:12,069 --> 01:01:14,871 I have nothing to do with bitcoin. 1310 01:01:14,872 --> 01:01:17,674 It was a monster story. 1311 01:01:17,675 --> 01:01:19,108 How did they figure it out? 1312 01:01:19,109 --> 01:01:20,810 My god, look at this guy that they named. 1313 01:01:20,811 --> 01:01:23,112 His name is Dorian satoshi nakamoto, 1314 01:01:23,113 --> 01:01:24,914 living in California, 1315 01:01:24,915 --> 01:01:26,683 basically hiding in plain sight. 1316 01:01:26,684 --> 01:01:29,786 It becomes a gigantic media scramble, 1317 01:01:29,787 --> 01:01:31,921 and then Dorian emerges from his house 1318 01:01:31,922 --> 01:01:34,390 looking kind of disheveled, looking kind of confused, 1319 01:01:34,391 --> 01:01:37,326 and says he's not satoshi nakamoto, 1320 01:01:37,327 --> 01:01:39,195 says he's never heard of bitcoin. 1321 01:01:39,196 --> 01:01:41,030 He doesn't understand. He had one conversation with Leah. 1322 01:01:41,031 --> 01:01:42,231 She misunderstood what he said, 1323 01:01:42,232 --> 01:01:45,034 she took it the wrong way. 1324 01:01:45,035 --> 01:01:48,037 And you probably would have had to have been a cypherpunk 1325 01:01:48,038 --> 01:01:49,806 to understand all the elements of it 1326 01:01:49,807 --> 01:01:51,340 that had already been put together. 1327 01:01:51,341 --> 01:01:53,242 The odds of it seemed very low to me 1328 01:01:53,243 --> 01:01:55,812 that it was somebody from completely outside that community 1329 01:01:55,813 --> 01:01:58,081 who happened to know all these different things 1330 01:01:58,082 --> 01:02:00,582 and put this together and appear out of nowhere. 1331 01:02:03,152 --> 01:02:05,388 The day that "newsweek's" story came out 1332 01:02:05,389 --> 01:02:07,957 naming Dorian nakamoto as the creator of bitcoin, 1333 01:02:07,958 --> 01:02:10,259 I got this email from an old acquaintance 1334 01:02:10,260 --> 01:02:12,795 that was titled "what are the odds?" 1335 01:02:12,796 --> 01:02:17,233 And it laid out the fact that hal Finney 1336 01:02:17,234 --> 01:02:20,103 lives less than two miles away from 1337 01:02:20,104 --> 01:02:22,138 the known address of Dorian nakamoto 1338 01:02:22,139 --> 01:02:23,973 where "newsweek" had found him. 1339 01:02:23,974 --> 01:02:27,210 And hal Finney is the number two ever user of bitcoin, 1340 01:02:27,211 --> 01:02:30,012 who received the first bitcoin transaction. 1341 01:02:30,013 --> 01:02:32,448 He worked on an early prototype 1342 01:02:32,449 --> 01:02:34,350 of an anonymous currency system. 1343 01:02:34,351 --> 01:02:36,351 He was a cypherpunk. 1344 01:02:38,287 --> 01:02:41,290 So how could it be that the purported creator of bitcoin 1345 01:02:41,291 --> 01:02:44,894 and this known, confirmed, second-ever user of bitcoin, 1346 01:02:44,895 --> 01:02:46,395 hadn't ever collaborated? 1347 01:02:46,396 --> 01:02:48,865 That hal Finney, who was less than two miles away 1348 01:02:48,866 --> 01:02:51,367 from Dorian nakamoto hadn't helped to create bitcoin? 1349 01:02:51,368 --> 01:02:54,003 Or maybe he really was the creator of bitcoin. 1350 01:02:54,004 --> 01:02:56,738 Maybe hal Finney was satoshi nakamoto. 1351 01:02:58,441 --> 01:03:00,910 When you look at the bitcoin white paper, 1352 01:03:00,911 --> 01:03:05,148 it made reference to a lot of the earlier projects 1353 01:03:05,149 --> 01:03:07,183 that fed into bitcoin. 1354 01:03:07,184 --> 01:03:11,554 But it's very notable that the one project it doesn't refer to 1355 01:03:11,555 --> 01:03:13,256 is Nick szabo's bit gold, 1356 01:03:13,257 --> 01:03:15,258 which is perhaps the closest precedent 1357 01:03:15,259 --> 01:03:18,528 and the closest parallel to bitcoin. 1358 01:03:18,529 --> 01:03:20,363 I mean, bit gold is so close to bitcoin, 1359 01:03:20,364 --> 01:03:21,831 it's hard not to think 1360 01:03:21,832 --> 01:03:26,101 that, you know, maybe Nick is satoshi. 1361 01:03:28,070 --> 01:03:31,107 A lot of people will say "nakamoto must be szabo." 1362 01:03:31,108 --> 01:03:32,441 "Nakamoto must have been Finney." 1363 01:03:32,442 --> 01:03:34,544 But I don't think he was trying to leave 1364 01:03:34,545 --> 01:03:37,479 any breadcrumbs out there for anybody to follow. 1365 01:03:39,549 --> 01:03:41,150 I told my editor about it. 1366 01:03:41,151 --> 01:03:43,853 He agreed that "you found satoshi nakamoto." 1367 01:03:43,854 --> 01:03:46,022 So I got on a plane to Santa Barbara 1368 01:03:46,023 --> 01:03:48,591 and I drove out to hal Finney's house. 1369 01:03:48,592 --> 01:03:51,394 But at this stage, he was already 1370 01:03:51,395 --> 01:03:53,863 completely paralyzed by als, 1371 01:03:53,864 --> 01:03:57,934 this really awful, debilitating terminal illness 1372 01:03:57,935 --> 01:04:00,503 that slowly shuts down your body 1373 01:04:00,504 --> 01:04:03,506 while leaving your mind completely intact. 1374 01:04:03,507 --> 01:04:07,443 And the time when he started to fade in his physical abilities 1375 01:04:07,444 --> 01:04:09,178 did roughly coincide with the time 1376 01:04:09,179 --> 01:04:11,447 that satoshi nakamoto started to disappear. 1377 01:04:11,448 --> 01:04:13,349 Now maybe the reason that satoshi nakamoto 1378 01:04:13,350 --> 01:04:15,518 had chosen to fade away 1379 01:04:15,519 --> 01:04:18,753 was because hal Finney was physically fading. 1380 01:04:21,457 --> 01:04:25,127 There have been a number of stylometric studies 1381 01:04:25,128 --> 01:04:28,097 and you see so many of these similarities 1382 01:04:28,098 --> 01:04:30,867 between satoshi's writings and those of Nick's, 1383 01:04:30,868 --> 01:04:33,536 including these little things like having two spaces 1384 01:04:33,537 --> 01:04:35,204 at the beginning of a sentence, 1385 01:04:35,205 --> 01:04:38,273 and phrases and spellings that nobody else uses. 1386 01:04:39,642 --> 01:04:43,246 So I talked to hal as much as i could, mostly in a kind of 1387 01:04:43,247 --> 01:04:49,418 one-way interview because he could really only respond with yes and no answers, 1388 01:04:49,419 --> 01:04:52,054 and he denied being satoshi nakamoto. 1389 01:04:52,055 --> 01:04:54,123 You could tell that he was amused by the whole idea 1390 01:04:54,124 --> 01:04:55,591 that I thought he was satoshi nakamoto. 1391 01:04:55,592 --> 01:04:58,961 One of the really remarkable things 1392 01:04:58,962 --> 01:05:00,229 from Nick szabo's writing 1393 01:05:00,230 --> 01:05:02,565 in those months before bitcoin 1394 01:05:02,566 --> 01:05:06,335 was publically launched is that Nick, 1395 01:05:06,336 --> 01:05:08,404 in responding to some comments 1396 01:05:08,405 --> 01:05:11,073 about a post he had made about bit gold, 1397 01:05:11,074 --> 01:05:14,243 actually asked the other people who were reading him 1398 01:05:14,244 --> 01:05:18,314 if anybody wanted to help him code this idea up 1399 01:05:18,315 --> 01:05:20,983 into real software that could work. 1400 01:05:20,984 --> 01:05:22,485 It was never turned into a reality, 1401 01:05:22,486 --> 01:05:24,487 but when you look at bit gold, 1402 01:05:24,488 --> 01:05:29,258 it's hard not to be struck by the similarities 1403 01:05:29,259 --> 01:05:32,560 between it and bitcoin. 1404 01:05:38,167 --> 01:05:40,102 It's possible. 1405 01:05:40,103 --> 01:05:42,403 Hal could've been the coder. 1406 01:05:44,206 --> 01:05:46,008 I don't know. 1407 01:05:46,009 --> 01:05:47,576 You know, this idea that... That hal Finney could've been 1408 01:05:47,577 --> 01:05:51,948 the kind of ghost coder for bitcoin... 1409 01:05:51,949 --> 01:05:54,650 I guess it's possible. 1410 01:05:54,651 --> 01:05:57,053 Other people kind of speculating on reddit 1411 01:05:57,054 --> 01:05:59,121 or other parts of the Internet 1412 01:05:59,122 --> 01:06:01,290 thought that maybe hal Finney 1413 01:06:01,291 --> 01:06:04,226 had used Dorian nakamoto as a patsy. 1414 01:06:04,227 --> 01:06:07,229 If he were ever traced back to Dorian nakamoto, 1415 01:06:07,230 --> 01:06:10,232 it seemed like this guy was the creator, 1416 01:06:10,233 --> 01:06:13,269 and hal Finney would be sort of immunized from it. 1417 01:06:13,270 --> 01:06:17,206 Everyone else who was involved in the projects 1418 01:06:17,207 --> 01:06:19,642 leading up to bitcoin has released 1419 01:06:19,643 --> 01:06:23,646 their communications with satoshi from this period. 1420 01:06:23,647 --> 01:06:25,648 Nick has avoided doing that, 1421 01:06:25,649 --> 01:06:28,517 and essentially went silent in those critical months 1422 01:06:28,518 --> 01:06:30,586 after bitcoin was released. 1423 01:06:30,587 --> 01:06:33,356 You know, when you talk to people face to face, 1424 01:06:33,357 --> 01:06:35,424 and they tell you these things, 1425 01:06:35,425 --> 01:06:39,428 you can get a sense if they're being honest. 1426 01:06:39,429 --> 01:06:42,031 If hal Finney actually had a secret 1427 01:06:42,032 --> 01:06:44,133 billion-dollar cache of bitcoins, 1428 01:06:44,134 --> 01:06:47,069 he wouldn't have been able to lie to me so effectively about it. 1429 01:06:47,070 --> 01:06:50,740 In the end, the reasons to believe that this was all just a coincidence 1430 01:06:50,741 --> 01:06:54,443 began to outweigh the coincidence itself. 1431 01:06:54,444 --> 01:06:55,711 It's almost like an eel. 1432 01:06:55,712 --> 01:06:58,047 There's something there, you can see it, 1433 01:06:58,048 --> 01:07:00,316 but as soon as you touch it it just slides right out of your hands 1434 01:07:00,317 --> 01:07:01,916 and you're left with nothing. 1435 01:07:02,785 --> 01:07:04,720 Anybody who is of any note 1436 01:07:04,721 --> 01:07:06,122 in the cypherpunk movement, 1437 01:07:06,123 --> 01:07:07,156 and even outside of it too, 1438 01:07:07,157 --> 01:07:09,058 has at one time or another 1439 01:07:09,059 --> 01:07:10,459 been called satoshi. 1440 01:07:10,460 --> 01:07:12,528 Hal Finney denied it. Nick szabo denied it. 1441 01:07:12,529 --> 01:07:13,796 They've all denied it. 1442 01:07:13,797 --> 01:07:15,798 Maybe one of them is satoshi. 1443 01:07:15,799 --> 01:07:17,600 Maybe all of them are satoshi. 1444 01:07:17,601 --> 01:07:19,867 It really is a mystery. 1445 01:07:55,304 --> 01:07:57,706 That's the original ticker 1446 01:07:57,707 --> 01:08:00,376 from next door. 1447 01:08:00,377 --> 01:08:02,511 All right, so we're over here. 1448 01:08:02,512 --> 01:08:06,282 Bitcoin center, 100 feet from the stock exchange, over here. 1449 01:08:06,283 --> 01:08:09,118 And... 1450 01:08:09,119 --> 01:08:11,153 You know, some of you guys took a hit last week, 1451 01:08:11,154 --> 01:08:14,623 last couple of weeks. 1452 01:08:14,624 --> 01:08:16,192 Lot of the big guys, 1453 01:08:16,193 --> 01:08:20,529 they got their foothold in the business 1454 01:08:20,530 --> 01:08:24,332 that they weren't a part of in the beginning. 1455 01:08:26,569 --> 01:08:28,270 I don't know what's going on. 1456 01:08:28,271 --> 01:08:30,339 But, I don't know. 1457 01:08:30,340 --> 01:08:32,141 I wouldn't write off bitcoin that easy. 1458 01:08:32,142 --> 01:08:34,510 I know that bitcoin is gonna change the world. 1459 01:08:34,511 --> 01:08:36,412 It's changing the world already. 1460 01:08:36,413 --> 01:08:39,615 And we have to stand tall 1461 01:08:39,616 --> 01:08:42,885 and proud 1462 01:08:42,886 --> 01:08:45,754 as bitcoiners and early adopters. 1463 01:08:45,755 --> 01:08:48,190 They don't know anything about new technology, 1464 01:08:48,191 --> 01:08:52,361 but once it starts making sense, 1465 01:08:52,362 --> 01:08:53,995 they throw their dollars behind it. 1466 01:09:00,870 --> 01:09:03,438 You know, unfortunately, 1467 01:09:06,275 --> 01:09:09,645 early adopters 1468 01:09:09,646 --> 01:09:13,649 make the roads that we all travel down, 1469 01:09:13,650 --> 01:09:17,253 and they are usually paved over in the process. 1470 01:09:17,254 --> 01:09:20,222 The first guy through the door gets shot. 1471 01:09:20,223 --> 01:09:22,258 You know, but somebody's gotta go through the door, 1472 01:09:22,259 --> 01:09:24,560 but they're gonna get shot. 1473 01:09:24,561 --> 01:09:26,795 Charlie shrem, Ross albricht, 1474 01:09:26,796 --> 01:09:28,497 Julian Assange, 1475 01:09:28,498 --> 01:09:31,433 they got shot coming through the door. 1476 01:09:31,434 --> 01:09:35,871 But we're all utilizing the freedoms 1477 01:09:35,872 --> 01:09:38,374 and technologies afforded to us 1478 01:09:38,375 --> 01:09:40,041 because they knocked the door down. 1479 01:09:41,844 --> 01:09:43,512 Hey, Michael. 1480 01:09:43,513 --> 01:09:45,681 Can I put you on speakerphone for a minute? 1481 01:09:45,682 --> 01:09:48,317 If I know how. 1482 01:09:48,318 --> 01:09:51,953 Hey, Michael, can I ask you, where did you buy bitcoins? 1483 01:09:53,455 --> 01:09:54,856 Yeah. 1484 01:09:58,227 --> 01:10:00,695 Did you lose... how much... Do you still have them? 1485 01:10:05,334 --> 01:10:06,402 You put into it. 1486 01:10:06,403 --> 01:10:08,270 Can you use it? 1487 01:10:08,271 --> 01:10:11,473 Do I want to buy it? No, not today. 1488 01:10:11,474 --> 01:10:13,875 Though it is going to be around. 1489 01:10:16,579 --> 01:10:19,747 Did you ever use it to buy anything? 1490 01:10:22,585 --> 01:10:25,420 Michael. 1491 01:10:27,756 --> 01:10:28,924 No, okay. 1492 01:10:28,925 --> 01:10:31,794 They should go back to, you know, 1493 01:10:31,795 --> 01:10:33,929 day one and just start all over. 1494 01:10:33,930 --> 01:10:36,699 Forget about bitcoin, call it something else. 1495 01:10:36,700 --> 01:10:39,401 I think it's been so tarnished now 1496 01:10:39,402 --> 01:10:42,637 with this... With the silk road... 1497 01:10:44,740 --> 01:10:47,443 You know, I just think, you know, 1498 01:10:47,444 --> 01:10:51,013 that all that stuff about $400 million disappearing 1499 01:10:51,014 --> 01:10:55,251 and... you're just not gonna get off the ground. 1500 01:10:55,252 --> 01:10:56,719 Nobody's gonna... 1501 01:10:56,720 --> 01:10:57,853 You know, like Warren buffet said, 1502 01:10:57,854 --> 01:10:59,587 "stay the hell away from it." 1503 01:11:03,359 --> 01:11:05,261 To put all the cards on the table, 1504 01:11:05,262 --> 01:11:07,663 I'm gonna be leaving the department in the coming weeks. 1505 01:11:07,664 --> 01:11:12,301 And if you asked me back when I took this job in 2011 1506 01:11:12,302 --> 01:11:16,572 what I thought we'd be working on during my tenure, 1507 01:11:16,573 --> 01:11:20,041 digital currencies would not have been at the top of the list. 1508 01:11:26,715 --> 01:11:28,717 So Ben lawsky created this thing call the bitlicense 1509 01:11:28,718 --> 01:11:32,621 which is New York's attempt to regulate 1510 01:11:32,622 --> 01:11:35,557 this scary new technology. It's now law. 1511 01:11:35,558 --> 01:11:39,061 And he has announced that he is leaving government 1512 01:11:39,062 --> 01:11:42,665 in order to set up his own private consulting firm 1513 01:11:42,666 --> 01:11:46,602 to help companies navigate financial regulations 1514 01:11:46,603 --> 01:11:48,904 such as the bitlicense that he created. 1515 01:11:48,905 --> 01:11:52,608 So we essentially had this beautiful new ecosystem being built, 1516 01:11:52,609 --> 01:11:55,311 and Ben lawsky comes by, 1517 01:11:55,312 --> 01:11:56,612 says, "I'm here to protect consumers." 1518 01:11:56,613 --> 01:11:57,980 He builds a huge wall around the thing, 1519 01:11:57,981 --> 01:11:59,081 and then he sits outside the gate 1520 01:11:59,082 --> 01:12:01,083 charging people to get in. 1521 01:12:01,084 --> 01:12:03,719 This is the very definition of crony capitalism, 1522 01:12:03,720 --> 01:12:06,322 and, for some reason, 1523 01:12:06,323 --> 01:12:08,603 Ben lawsky doesn't even see anything wrong with that. 1524 01:12:09,958 --> 01:12:11,727 I think history will not judge him 1525 01:12:11,728 --> 01:12:14,061 as favorably as he thinks. 1526 01:12:16,098 --> 01:12:17,633 So, um, yeah. 1527 01:12:17,634 --> 01:12:21,003 I've started up my own consulting business. 1528 01:12:21,004 --> 01:12:22,571 It's been quite interesting. 1529 01:12:22,572 --> 01:12:24,506 Doing a lot of work in the fintech space, 1530 01:12:24,507 --> 01:12:27,776 but also doing work with a lot of traditional companies 1531 01:12:27,777 --> 01:12:29,978 in the financial services world as well. 1532 01:12:29,979 --> 01:12:34,049 Ben lawsky's team at the dfs 1533 01:12:34,050 --> 01:12:37,353 that was working on this bitlicense 1534 01:12:37,354 --> 01:12:38,654 and the bitcoin initiative 1535 01:12:38,655 --> 01:12:40,989 have all ended up leaving the agency 1536 01:12:40,990 --> 01:12:42,758 and going to consulting firms 1537 01:12:42,759 --> 01:12:45,861 that are now working on these issues. 1538 01:12:45,862 --> 01:12:50,666 Danny alter is going to work for itbit 1539 01:12:50,667 --> 01:12:52,835 and Dana Syracuse is going to work for 1540 01:12:52,836 --> 01:12:54,603 the consulting firm k2. 1541 01:12:54,604 --> 01:12:56,605 Itbit is particularly notable 1542 01:12:56,606 --> 01:12:59,908 because they were the first to find a way 1543 01:12:59,909 --> 01:13:03,078 to partner with the dfs to get licensed 1544 01:13:03,079 --> 01:13:05,880 to open their own bitcoin exchange. 1545 01:13:10,152 --> 01:13:11,787 When this is over, 1546 01:13:11,788 --> 01:13:14,456 definitely going to leave New York when I can. 1547 01:13:14,457 --> 01:13:16,058 Where I'm gonna go, i don't know. 1548 01:13:16,059 --> 01:13:18,527 I think the bitcoin community in New York is done with. 1549 01:13:18,528 --> 01:13:20,095 No, it doesn't foster innovation here. 1550 01:13:20,096 --> 01:13:21,730 It's too difficult to have a bitcoin company. 1551 01:13:21,731 --> 01:13:22,965 No banks will open up accounts. 1552 01:13:22,966 --> 01:13:24,900 You have the threat of regulation, 1553 01:13:24,901 --> 01:13:26,034 and your high-profile arrests 1554 01:13:26,035 --> 01:13:27,136 like myself and others. 1555 01:13:27,137 --> 01:13:29,938 No one wants to deal with it. 1556 01:13:29,939 --> 01:13:31,907 When did you first start digging in on bitcoin? 1557 01:13:31,908 --> 01:13:33,742 Two, two and half years ago, 1558 01:13:33,743 --> 01:13:35,744 when I took over the foreign exchange payments business 1559 01:13:35,745 --> 01:13:37,980 - at jp Morgan. - So you probably had your mt. Gox, 1560 01:13:37,981 --> 01:13:40,616 bitinstant, you know, Charlie and those guys. 1561 01:13:40,617 --> 01:13:43,519 It's interesting, almost none of those guys are around anymore. 1562 01:13:43,520 --> 01:13:45,187 Two years ago at all the major banks, 1563 01:13:45,188 --> 01:13:45,187 bitcoin was an afterthought. 1564 01:13:45,188 --> 01:13:48,824 It was kind of a... maybe in a hallway kind of conversation 1565 01:13:48,825 --> 01:13:50,692 at the water cooler and now, 1566 01:13:50,693 --> 01:13:52,995 you know, even this week, i met with one of the other major banks. 1567 01:13:52,996 --> 01:13:57,065 Everyone's got a bitcoin specialist, at least one working group. 1568 01:13:57,066 --> 01:13:59,067 Kind of teams of people who are trying to figure out 1569 01:13:59,068 --> 01:14:01,603 how to incorporate the technology 1570 01:14:01,604 --> 01:14:04,740 into their existing operation. 1571 01:14:04,741 --> 01:14:06,575 Banks and institutions 1572 01:14:06,576 --> 01:14:08,143 associated with the financial system 1573 01:14:08,144 --> 01:14:10,579 are really starting to recognize 1574 01:14:10,580 --> 01:14:13,215 that the payment system underlying banking 1575 01:14:13,216 --> 01:14:14,850 could be made more efficient 1576 01:14:14,851 --> 01:14:17,818 by the application of blockchain technologies. 1577 01:14:18,754 --> 01:14:20,889 The blockchain technology 1578 01:14:20,890 --> 01:14:22,758 underlying bitcoin 1579 01:14:22,759 --> 01:14:24,693 has become something that 1580 01:14:24,694 --> 01:14:27,596 a lot people are now very, very interested in 1581 01:14:27,597 --> 01:14:29,631 for all kinds of other uses, 1582 01:14:29,632 --> 01:14:33,135 whether it's allowing for derivatives to be transferred 1583 01:14:33,136 --> 01:14:34,970 or securities to be transferred, 1584 01:14:34,971 --> 01:14:38,874 or all manner of financial instruments to be transferred 1585 01:14:38,875 --> 01:14:40,175 in complex, interesting ways. 1586 01:14:40,176 --> 01:14:41,777 I think different companies 1587 01:14:41,778 --> 01:14:43,812 are going to adopt different strategies. 1588 01:14:43,813 --> 01:14:45,981 And it's gonna be fascinating to watch 1589 01:14:45,982 --> 01:14:47,983 companies like digital asset holdings, 1590 01:14:47,984 --> 01:14:49,485 blythe masters' company, 1591 01:14:49,486 --> 01:14:53,154 doing very, very interesting work. 1592 01:14:55,257 --> 01:14:57,593 I didn't become aware of bitcoin 1593 01:14:57,594 --> 01:15:01,730 in any meaningful sense until 2014, 1594 01:15:01,731 --> 01:15:04,132 late in the year, and at the time, 1595 01:15:04,133 --> 01:15:08,637 my perspective was one of skepticism, I would say. 1596 01:15:08,638 --> 01:15:12,207 Specifically because the storyline that I heard 1597 01:15:12,208 --> 01:15:15,544 related very much to cryptocurrency 1598 01:15:15,545 --> 01:15:18,647 as a potential medium of exchange and store of value, 1599 01:15:18,648 --> 01:15:22,017 which is a valid debate and application, 1600 01:15:22,018 --> 01:15:26,221 but it doesn't have full extent of the power 1601 01:15:26,222 --> 01:15:30,191 that the underlying technology has to achieve. 1602 01:15:31,159 --> 01:15:34,263 Blythe masters is not just any banker. 1603 01:15:34,264 --> 01:15:38,700 She is this person who I think is really seen 1604 01:15:38,701 --> 01:15:42,271 as being behind some of the most problematic innovations 1605 01:15:42,272 --> 01:15:45,874 in the financial industry over the last three decades. 1606 01:15:45,875 --> 01:15:48,310 Blythe is the one who's essentially given credit 1607 01:15:48,311 --> 01:15:51,179 for creating the credit default swap 1608 01:15:51,180 --> 01:15:55,984 which essentially provides a way to bet on the default of a bond, 1609 01:15:55,985 --> 01:15:59,888 and the credit default swap ended up taking this place 1610 01:15:59,889 --> 01:16:02,090 at the center of the financial crisis 1611 01:16:02,091 --> 01:16:04,560 and these bets that banks had made 1612 01:16:04,561 --> 01:16:07,228 against sub-prime mortgages. 1613 01:16:08,297 --> 01:16:11,099 Blockchain technology eradicates 1614 01:16:11,100 --> 01:16:13,835 a significant amount of inefficiency in the system, 1615 01:16:13,836 --> 01:16:15,771 and reduces costs. 1616 01:16:15,772 --> 01:16:18,273 It doesn't mean that we are doing away 1617 01:16:18,274 --> 01:16:21,876 with the need for trust in financial services at all. 1618 01:16:23,045 --> 01:16:25,981 Bitcoin was designed to find a way 1619 01:16:25,982 --> 01:16:27,716 to circumvent wall street, 1620 01:16:27,717 --> 01:16:30,018 and what blythe masters is doing 1621 01:16:30,019 --> 01:16:32,220 is essentially trying to find ways 1622 01:16:32,221 --> 01:16:35,591 to bring wall street into bitcoin 1623 01:16:35,592 --> 01:16:38,894 and make it possible for them to use this technology as well. 1624 01:16:38,895 --> 01:16:41,930 What the bankers seem to be looking to do at this point 1625 01:16:41,931 --> 01:16:45,701 is create their own private blockchain, 1626 01:16:45,702 --> 01:16:48,070 where their computers are powering it. 1627 01:16:48,071 --> 01:16:50,739 Rather than these anonymous miners, 1628 01:16:50,740 --> 01:16:53,308 they want control over the system. 1629 01:16:53,309 --> 01:16:58,380 The banks are looking at this incredibly wide array 1630 01:16:58,381 --> 01:17:01,049 of ways that they might use this, 1631 01:17:01,050 --> 01:17:04,620 which include replacing stock exchanges, 1632 01:17:04,621 --> 01:17:08,023 finding new ways to originate loans, 1633 01:17:08,024 --> 01:17:12,394 finding new ways to move money between countries, 1634 01:17:12,395 --> 01:17:14,029 and, of course, that's going back 1635 01:17:14,030 --> 01:17:17,065 to the original idea of bitcoin, 1636 01:17:17,066 --> 01:17:20,636 but now it's happening within these financial institutions 1637 01:17:20,637 --> 01:17:24,238 rather than outside it, as bitcoin had imagined. 1638 01:17:25,774 --> 01:17:27,976 I have no problem with the banking system 1639 01:17:27,977 --> 01:17:29,911 and the financial industry co-opting bitcoin, 1640 01:17:29,912 --> 01:17:33,015 primarily because bitcoin can't really be co-opted. 1641 01:17:33,016 --> 01:17:34,249 The fact that it's decentralized 1642 01:17:34,250 --> 01:17:35,951 means no one can control it, 1643 01:17:35,952 --> 01:17:39,721 no matter who they are or how much money they have. 1644 01:17:39,722 --> 01:17:41,189 I think it's all good for bitcoin. 1645 01:17:41,190 --> 01:17:42,758 I think all of the innovation that's happening, 1646 01:17:42,759 --> 01:17:45,027 both on wall street and in silicon valley 1647 01:17:45,028 --> 01:17:47,029 I think competition will take care of 1648 01:17:47,030 --> 01:17:48,997 people who want to try to have a monopoly, 1649 01:17:48,998 --> 01:17:53,001 or who want to try to charge more than they should 1650 01:17:53,002 --> 01:17:54,269 for whatever product or service 1651 01:17:54,270 --> 01:17:56,138 that is happening on the blockchain. 1652 01:17:56,139 --> 01:17:57,973 It really is as advertised. 1653 01:17:57,974 --> 01:18:00,842 It really is controlled by all the people who are using it, 1654 01:18:00,843 --> 01:18:04,746 and it really is designed just to be a more efficient, 1655 01:18:04,747 --> 01:18:08,515 more fair way of sending value over the Internet. 1656 01:18:09,951 --> 01:18:12,054 Bitcoin is not neutral. 1657 01:18:12,055 --> 01:18:16,058 You cannot remove the political component 1658 01:18:16,059 --> 01:18:19,027 that satoshi implanted in bitcoin from bitcoin. 1659 01:18:19,028 --> 01:18:20,395 That's what a lot of the people 1660 01:18:20,396 --> 01:18:22,297 on the wall street side try to do. 1661 01:18:22,298 --> 01:18:25,333 You cannot neutralize bitcoin. 1662 01:18:25,334 --> 01:18:26,534 It's impossible. 1663 01:18:30,138 --> 01:18:33,141 Thankfully, I'm gonna go to a comfy federal prison camp 1664 01:18:33,142 --> 01:18:35,844 without fences, that has pool tables and a track, 1665 01:18:35,845 --> 01:18:38,480 and baseball field and decent food, 1666 01:18:38,481 --> 01:18:42,818 and kind of 100 to 200 people that are white collar. 1667 01:18:42,819 --> 01:18:46,822 Those guys in prison are the best ones to use bitcoin. 1668 01:18:46,823 --> 01:18:48,757 They're smart. I'm very excited 1669 01:18:48,758 --> 01:18:50,391 to talk to them about it. 1670 01:19:09,778 --> 01:19:12,814 So yes, the vcs are driving this thing right now. 1671 01:19:12,815 --> 01:19:14,182 They're pouring money into it. 1672 01:19:14,183 --> 01:19:16,785 They're building these for-profit companies 1673 01:19:16,786 --> 01:19:19,488 people who have a background outside of bitcoin 1674 01:19:19,489 --> 01:19:21,957 seeing the value of it and coming to it. 1675 01:19:21,958 --> 01:19:25,494 But just because they're doing everything they're doing 1676 01:19:25,495 --> 01:19:28,363 doesn't mean that the libertarians and the utopians 1677 01:19:28,364 --> 01:19:29,865 have to go away. 1678 01:19:29,866 --> 01:19:31,166 Bitcoin is open source. 1679 01:19:31,167 --> 01:19:32,801 You can do whatever you want with it. 1680 01:19:32,802 --> 01:19:34,035 So they're still there. 1681 01:19:34,036 --> 01:19:35,370 They're still building their products. 1682 01:19:35,371 --> 01:19:36,905 They're still building their vision. 1683 01:19:36,906 --> 01:19:38,840 And if bitcoin goes mainstream 1684 01:19:38,841 --> 01:19:40,142 and if it gets picked up, 1685 01:19:40,143 --> 01:19:41,910 even if it's running in the background, 1686 01:19:41,911 --> 01:19:44,179 there are going to be elements of that 1687 01:19:44,180 --> 01:19:46,515 and that's kind of what utopia movements always are. 1688 01:19:46,516 --> 01:19:49,518 The thing that the utopians were dreaming about 1689 01:19:49,519 --> 01:19:51,920 is not gonna happen the way they expected it, 1690 01:19:51,921 --> 01:19:54,156 but I do think it is going to filter through 1691 01:19:54,157 --> 01:19:57,091 and you are gonna see it. You're gonna see it. 1692 01:20:06,134 --> 01:20:10,270 So you're gonna show me that satoshi nakamoto is you. 1693 01:20:11,306 --> 01:20:13,809 Yes. 1694 01:20:13,810 --> 01:20:16,311 Some people will believe, some people won't. 1695 01:20:16,312 --> 01:20:19,848 And to tell you the truth, i don't really care. 1696 01:20:19,849 --> 01:20:22,384 But you can say, hand on heart to me, 1697 01:20:22,385 --> 01:20:25,086 "i am satoshi nakamoto." 1698 01:20:25,087 --> 01:20:28,123 I was the main part of it. Other people helped me. 1699 01:20:28,124 --> 01:20:32,360 I'm going to come in front of that camera once, 1700 01:20:32,361 --> 01:20:34,596 and I will never 1701 01:20:34,597 --> 01:20:36,865 ever be on a camera ever again 1702 01:20:36,866 --> 01:20:38,967 for any TV station 1703 01:20:38,968 --> 01:20:41,668 or any media ever.