www.ZooCine.OrG watch movies and series!
I really like it down here.
I live literally right by the world trade center.
I walk home. I live above it, actually.
My ankle bracelet.
Tells the government where I am
every second of the day,
any time of the day.
But it's gonna come off when I go to prison, I think.
I mean, I don't think I'm wearing this in prison, so...
That's what the plan is for that.
Closing numbers on the markets today,
at one point, the market fell as if down a well.
It was an historic day,
with wall street shaken to its very foundation.
And even the health of the most trusted firms
are now being called into question.
We have former secretaries of treasury
who go from government to wall street
pocketing hundreds of millions of dollars.
In 2008, I became somewhat obsessed
with the role that money itself played in the crisis
and the role that governments and banks played in money,
and why was it that our money was controlled by central banks?
If something new happens,
is the government likely to give it a nod
or at least ignore it for a while, or is the government
likely to come down and try to crush it
because they're afraid of anything new and different?
This is a monetary revolution.
Bitcoin is the honest currency.
Okay, this past week
we've been talking about money.
I'm gonna ask everybody what you think money is.
Can you give me some answers now?
Money is, like, paper
and you can, like, buy stuff with it.
So you have to have, like, four quarters for a dollar.
You need money to buy your house, like, food,
water, oxygen... Not oxygen.
Money is basically just an accounting system.
It is a way of recording who owns what,
who has what, who owes what to whom.
That is all money really is.
And you needed somebody
who could stand as the central issuer,
somebody who was the trusted third party,
someone who could guarantee that the money was real.
And for hundreds of years now,
we have had governments issue money.
Again, money is just an accounting system.
That's what bitcoin is.
Bitcoin is really just an accounting system.
It is a way of recording transactions,
recording value,
and it does it digitally,
so you and I can send it to each other directly,
and everything is recorded in the open ledger.
By monitoring and updating that ledger,
in a collective, consensus-based system,
you do away with the need
for somebody in the middle having to be
that sort of repository of all the information.
And that's what gets away from the fees,
the inefficiencies,
and ultimately the potential for corruption and risk
that come with centralizing information in that way.
What it does is it takes
that trusted third party function
and it automates it.
It puts it into an open ledger that is put online
that is there for anybody to see,
so that every bitcoin is accounted for,
so that you know that you're not getting a counterfeit bitcoin.
It's kind of remarkable that this idea of bitcoin
was launched just a few weeks
after lehman brothers went bankrupt
and the whole system nearly collapsed.
And the problems that cropped up in the crisis
were very much a part of the writings of satoshi nakamoto.
I think what the crisis showed is that
the existing system had some major flaws.
It wasn't working and people were hungry
for some sort of alternative.
I discovered bitcoin's power
when I understood for the first time
that it was not controlled
by a central company or a central person.
Because I knew that meant it couldn't be shut down.
And if it can't get shut down,
all it needs is to do something useful,
and it will become more and more adopted
and as the value grows, people will find
more and more uses for it.
The beauty of bitcoin is,
it's easily transferrable, it's anonymous.
And by 2140 there's gonna be 21 million,
and that's the cap.
There's only x amount of gold.
There's only x amount of bitcoin.
Before, if you wanted to send
something of value across the Internet,
you had to get somebody else involved.
You had to have a credit card company
or PayPal, or maybe a bank
involved in the transaction.
The promise of bitcoin is that
you're directly sending this currency to another person
and then the bitcoin network
performs the function that normally PayPal
or a bank or your credit card company would perform.
Bitcoin really puts the control back in the hands of everybody.
Everybody who's participating in the bitcoin system
is controlling how it works.
If you want to look for the Genesis
of cryptocurrency, it was the cypherpunk movement,
you know, growing out of a kind of a love of the Internet
and its possibilities.
The discovering of cryptography and imagining
that you could give birth to a new world, really,
out of the Internet.
A world that lives outside of the nation-state,
and outside the structures of power and the hierarchies
that are associated with that.
These people had talked about the need
and the possibility for a digital currency
that was anonymous or could be anonymized,
using cryptography.
The cypherpunks that emerged in the early '90s
were hyper-concerned about privacy,
about personal Liberty,
and a lot of people had come up with their own systems.
Some of them came very close to happening.
The one that probably came the closest was digicash from David chaum.
Privacy of payments
is actually essential for democracy.
The reason is not because you need to be able
to make private payments in order to express yourself,
but rather that in order to inform yourself,
you may need to purchase information
and that's the thing that allows you to have opinions worth expressing.
Although I wouldn't say David chaum was a cypherpunk,
he definitely inspired the cypherpunk movement.
It's as if the cypherpunks kind of came upon
David chaum's tools, like the technology
of some alien species,
and they only took the weapons.
They were most interested in the ones that could be used
to disempower the government and empower individuals.
The break between him and the cypherpunks came
when he realized he would need
existing institutions to help him with it,
so he started talking to governments,
he started talking to banks.
He was very close to having
this thing happen in the late '90s,
and nobody was really prepared for this
outside of the cypherpunk movement.
People it seemed like
had almost sort of given up on the project.
Other than a few experiments here and there,
by hal Finney, Nick szabo,
the conversation around this really died down.
And then all of a sudden it came back to life
after the financial crisis,
and you had people going back to those experiments in the 1990s
and looking at new ways of putting those ideas together.
Nick szabo, in 2006, had just finished up
a mid-life stint at law school,
and if you look Nick's writing around the financial crisis
that is really revived his interest
in these ideas that, you know,
he had been working on in the 1990s
with privacy and contracts and the problems
of governments and other trusted third parties.
And he brought bit gold back into the conversation.
So hal Finney came up with his own system.
Adam back has hashcash, wei dai has b money,
szabo has bit gold.
So what satoshi did in 2008,
was satoshi took a lot of these ideas and made them work.
He created an encryption-based protocol...
It's not really a currency...
Utilizing a ledger called the blockchain,
allowing for many kinds of transactions to occur.
Contracts, all kinds of things
can be built into the blockchain.
And it does this through a system of consensus building
where multiple computers all participate
in the management of the blockchain ledger,
a kind of digital document, if you will,
that keeps track of all the payments.
I understand it's something that
is instantaneous online
and it can go from one country to the other
and you know, they can have their money.
Well, I never heard of it until Nancy called me
and mentioned digital currency
and I'm thinking she must have been
in the bottle this morning or something.
Digital currency.
What, what? You know.
But they say it's for people who don't have bank accounts.
I can't understand.
If you have one coin, it's...
Let's say it's worth $150.
What do you do, give the number or something to the...
Say, the grocery store person,
and then they subtract it?
How do you know? How do you make change?
How do you know what you have left or what you've spent?
You can have the money supply
controlled by a computer.
That's all bitcoin really is.
The key point here is that
this a distributed ledger.
There is no central server.
All the other ledgers that we have,
all the banking ledgers, all company ledgers,
they all sit and reside inside that company,
which means they have one point of attack.
They can be hacked. Jp Morgan was hacked
by, you know, the cyberthieves not so long ago.
Home depot, target, we've had all these companies get hacked,
precisely because there's one central repository of information.
The bitcoin ledger resides, on, you know,
thousands of computers.
You can't hack that.
Every single transaction is recorded,
and once it is recorded in the blockchain,
it is there, it is permanent.
It cannot be altered. It cannot be changed, so that you can read it.
Now the identities of the people are encrypted.
The wallets are encrypted,
so you don't know who is spending the money,
but you know that every single bitcoin out there
has a history, you know where it's been,
you know the different addresses it's gone between.
The most important pieces of the bitcoin infrastructure
are the miners.
These are the computers that are tasked
with maintaining the ledger of the blockchain
to verify the information, to update it,
to make sure that it is trustworthy.
So how do we incentivize them to do so?
As they are going through the process of confirming transactions,
they are simultaneously being subjected to
a very, very difficult computing test.
The bitcoin core protocol is forcing them
to look for a number.
All of these miners are ultimately competing
to be the one that receives that payout every ten minutes.
But really that's the secondary component.
They're really being rewarded with bitcoin,
but what is the more important task
is the validation and verification
of transactions and the maintaining of the ledger.
Bitcoin, in being the first to achieve
this holy grail of decentralized value exchange
that transfers that process of trust
to a collective agreement around a body
of independent computers
who are compelled by an incentive system
to maintain that consensus
and affirm the information to be correct
is incredibly liberating because it means
that we can do it without all these intermediaries
in all these different realms.
The most important thing behind bitcoin is not the currency.
The key factor is the blockchain.
Nobody expected this.
You know, in 2008, very few people cared about it.
It was just the computer scientists
and the sort of code geeks that were really interested.
All of my communication with satoshi
was ever via either the bitcoin talk forums,
which, all of that communication is...
Public, or private forum messages or private emails.
Satoshi was always all business.
It was just always about the code.
My very message to satoshi,
I asked him, "so, is satoshi your real name?
What have you done before?
Can you tell me a little bit about yourself?"
And he just ignored that completely.
But came back and said, "you know,
great to have more experienced programmers
helping out with the project."
You know, "here's a couple of problems that need to be solved.
Maybe you can help solve them."
In 2011,
I was into bitcoin sort of just as a hobby.
I didn't really know what to do in it yet.
I was trying to meet everyone I could,
figure out what projects would be cool to work on.
I met Roger ver sort of in August of that year
and a few months later, he recommended to this guy,
Charlie shrem, who started bitinstant
that the Charlie should hire me
as the head of marketing for bitinstant.
Bitcoin is cash with wings.
It's the ability to be able to take a local transaction
and do it globally, and that's why bitcoin
is gonna overturn the financial infrastructure.
Bitcoin is like the largest
socioeconomic experiment the world has ever seen.
Our conversations would range from
you know, the mundane and practical,
like how the hell are we gonna get another bank account
since our current bank account's
probably gonna get shut down any day now?
To very high-minded, aspirational ones,
like, is this actually gonna change the world in a good way?
Are we just a bunch of crazy people
who don't know what the hell we're talking about,
or are we actually starting to
initiate an industry which, in hindsight,
will look obvious to everyone,
but, you know, right now does not?
Charlie shrem was, at that stage,
a fairly high-profile figure in the bitcoin community.
The vice chairman of the bitcoin foundation
and you know, one of these bitcoin millionaires
who'd made a lot of money very quickly.
And really played an important role in the infrastructure
of managing the movement of funds around the system
in that early rudimentary phase.
632 bid!
654 offer in the New York cash market for bitcoin.
Buyers right now will pay $632 cash on the spot.
Who's next for the bitcoin? You want to know what bitcoin is?
You know what I prefer? I prefer dollars.
If you want to go on down to 40 broad,
right next door to the stock exchange there,
to the New York bitcoin center,
you can buy and sell all the time.
- You have a table in the middle. - Yeah.
Just one small table, round.
And I have flowers, like a flower arrangement.
- A very nice flower arrangement. - Bitcoin flowers?
Bitcoin flowers. Bitcoin flowers would be
white Lily, purple and orange.
Just right here, three colors.
We're putting together the first bitcoin center
here in New York City,
right next door to the New York stock exchange
bitcoin is a new space,
and many of the rules and regulations haven't been imposed yet.
But we will open one day soon,
after the lawyers do their job,
a live digital currency exchange.
What's happening here is a fusion between
wall street and bitcoin, hopefully.
Satoshi seemed to acknowledge
that it would be hard for bitcoin to develop in any way
in which it wasn't interacting with the regular economy
of dollars and Euros.
The problem with exchanges is
that they took you back to this old world
that bitcoin was really trying to get away from.
As soon as you move back to an exchange,
you're moving back to a world
in which some third party has all this personal data on you,
has all of your money,
has all of the security vulnerabilities,
and really has none of those strengths
that bitcoin was designed to provide.
Jed mccaleb created mt. Gox,
essentially on a lark one night
because he couldn't buy bitcoins as quickly as he wanted to.
And interestingly, he did it by starting
with a url that he'd previously used
to run magic card trading sites.
So you get an idea about where somebody's ideas are coming from
and how really kind of rudimentary some of them were.
Jed essentially threw this site together,
and put it online without too much thought.
Jed essentially sold it to the first person he found.
Who was mark karpeles, a French guy
who was living in Tokyo.
He really knew very little about mark
when he decided to sell it to him.
And once he took it over,
it began growing much more quickly
than mark was expecting or was prepared for.
There are 21 million bitcoins
programmed into the system that are going to be released.
It's a set number, but within that,
every single bitcoin can be divided up
into a hundred million different pieces
so there's room for it to expand as the use expands,
especially in the emerging markets, in the developing world.
That is really the most interesting place
to see where this thing goes.
So in my pocket I have a hundred trillion Zimbabwe dollars
from the reserve bank of Zimbabwe,
just as a reminder of what happens
if our governments screw up our money.
You know, Zimbabwe's a good example
of a government that lost the trust of their people,
and they lost the trust of their people
by printing too much money
and causing runaway hyperinflation.
So I think you will see people in other parts of the world
who've experienced hyperinflation
who've experienced bank failures.
I think those will be the kind of people
who are looking for something... Something new, right?
They're willing to take the risk.
A lot of us take the capacity to send money to others,
receive money, store money
and do it electronically these days for granted
because we are amongst the lucky 50% or so of the world
that have bank accounts.
But 2.5 billion adults in the world
do not have access to bank accounts.
A technology like bitcoin, cryptocurrency,
has the capacity to bring those people into the financial system,
to give them this power to effectively have
what you could argue is a bank in their cell phone,
a bank in their pocket.
Really could open up commerce to a lot of people
who are currently excluded from it.
Somebody who is maybe working in one country
and, you know, they want to send money back home.
And right now, like, western union is a big way
that people do remittances.
From a western union perspective,
we serve clients in many different locations around the globe,
and primarily for remittances.
Western union serves typically an unbanked customer,
a customer who is either a migrant worker,
or an individual who doesn't feel comfortable
in the financial services sector.
And the problem with remittances
is they're really expensive.
So if I'm sending $100 back home,
I may end up spending $5.00 or $10.00
just on fees to get that money back to my family.
That's a huge percentage if you're poor and working.
So since bitcoin doesn't care about borders,
I could just send bitcoin to another country,
and if my family in that other country
has some way of spending that bitcoin
or has some way of trans...
Of exchanging that bitcoin into the local currency,
then it's just quicker and cheaper and more convenient.
And a lot of people think that remittances
will be one of the really big first uses for bitcoin.
The one challenge there is we deal with
you know, at our company, 750 transactions, peak, a second.
And those happen instantly.
If you look at a blockchain, you have to wait for verifications,
and if you do a recent test,
it takes about 15 minutes for every transaction
to be validated by the network.
That doesn't scale,
so it has its challenges as well.
Wikileaks, which solicits and publishes
secrets and suppressed material
from whistleblowers around the world,
has been under cyber attack from governments
that want to shut it down.
PayPal is the latest business
to break ties with wikileaks,
but the whistle-blowing website
dedicated to publishing classified government documents
still continues to seek funding,
while crossing out PayPal as one method of payment.
In order to insure our future survival,
wikileaks is now forced to temporarily suspend
all publishing operations
in order to direct all our resources
into fighting the blockade and raising funds.
The wikileaks scandal seemed to provide
an opportunity for bitcoin.
At the time, the big banks and credit cards
stopped processing payments for wikileaks,
and some people thought that bitcoin would provide a way
to send donations to wikileaks.
You could certainly see in the hubbub around wikileaks
that satoshi was still somebody
who was very paranoid about the government,
and the government coming in and taking too close a look
at the bitcoin project.
And you could also see that satoshi,
I think, realized at this point
that bitcoin was still young software
and the kinks hadn't been worked out yet.
In, I think, late 2010,
he asked me if it'd be okay if he put my email address
on the bitcoin. Org home page,
'cause he had been the primary contact for people.
And I said, "sure."
He went ahead and changed the web page,
but what he did is he left his name there,
but he took away his email address.
And so it was just me and my email address
who was suddenly getting all of the attention.
I think that was satoshi's way of kind of saying,
"you're the leader of the project now."
There was one particular email
where he told me that he was gonna step away from the project
and do something else. He never told me what else
he's gonna do or that he is doing.
I had just been invited to give a talk at the CIA.
And I told satoshi that i accepted the invitation
to go speak at the CIA.
After he sent that email to satoshi
telling him that he was planning on going to the CIA,
he never heard from satoshi again,
and that was essentially the last time anybody heard from satoshi.
You very quickly get caught up in the question
of who is satoshi nakamoto?
Where did this come from? Who is this person?
I mean, this is the 2000s.
Information is out there, everything.
Everyone knows everything about everybody.
How can there possibly be a person
that nobody knows who this guy is?
But there is a person... At least I think it's a person.
It might be a group...
Who nobody knows who this guy is.
And he kind of appears out of nowhere in 2008
on these cryptography email lists,
with this system called bitcoin.
He's very active in the early years,
there's a lot of back and forth
with him communicating with people.
It seemed like most people kind of wrote him off
as kind of like a delusions-of-grandeur kind of scheme.
Hal Finney, on the other hand,
seemed to be really interested right from the beginning.
He was a crypto-idealist.
Like, he was not as kind of cynical
as many of the other cypherpunks
so he got really into this.
He started talking to satoshi nakamoto,
who he said seemed like some young Japanese American coder.
Hal Finney was the first guy to work with nakamoto.
He was a cryptographer.
Soon as nakamoto released it,
he was one of the first people to email him back and say,
"hey, this is interesting. I'd like to work with you."
And in the first weeks of bitcoin
he worked with him back and forth
setting up the system.
And satoshi nakamoto ended up sending hal Finney
the first ever bitcoin transaction.
Any discussion of satoshi's identity
has to go back to the fact that bitcoin
was based on this small number of projects back in the 1990s
that only a handful of people knew about,
like hashcash and bit gold and b money,
and so you end up with a pretty small group of people
who would have known about these projects.
People though chaum, David chaum, was, you know...
Everybody in the cypherpunk movement
at one point or another, they've said,
"well, he must have been satoshi."
They've all come out and denied it.
Probably somebody who started out in the '90s,
in California, with the cypherpunks.
Somebody who was very, very good at cryptography
who understands encryption, and has done a wonderful job
of just separating bitcoin from anything that can identify him.
I think for bitcoin's sake,
that continuing anonymity of satoshi
has ended up being a really good thing,
because people who have gotten involved in it
have been able to write their own ideas and dreams
onto this technology,
and there was nobody there to say,
"no, that's not what I meant."
In the early, early days,
the first group was really just a bunch of
more or less tech-minded coders.
Then you had the libertarians come on board,
who saw it through a political lens,
I'm excited to be a little bit of a part of it
with allowing and accepting bitcoin.
And then you had these two groups working together
and they overlapped too,
and the timing was very good
because the existing system was in utter disrepair.
It was like a match to a pile of wood
with gasoline poured on top of it.
And the whole thing kind of really goes viral and takes off,
and then you have the suits, the vc money,
and it was very small at first,
just a couple of guys out in silicon valley
who ran into bitcoin guys at coffee houses
and you started having this meshing of conversations.
Once silicon valley gets on board,
that whole dynamic starts to take off.
So now you have the tech-minded coders,
the libertarians, the counter-culture people,
the vc, silicon valley,
and you have this entire great mishmash of people
coming together.
You had a network effect.
The more people that got involved,
the stronger the network got,
and the more it grew and it really started growing on itself.
And in 2013 especially,
you literally see this thing mushroom.
The thing was just growing, growing and growing and growing
as more and more people got involved.
I think most bitcoin companies at the time
knew that a big part of the market for bitcoins
was people buying drugs on silk road
who needed bitcoins to do that.
The big bang moment for bitcoin
was the silk road.
What Ross ulbricht did by creating the silk road
was he took this by no means common
but usable cryptocurrency called bitcoin
and he married it with a streamlined,
workable user interface
that was a free market that could sell anything.
What would happen if people were really free
truly free to trade what they wanted to?
Ross did have an extremely radical
libertarian viewpoint,
and really wanted to experiment with using technology
to create free markets for people.
What Ross ulbricht did is a combination of Tor and bitcoin.
That was the "aha" moment that Ross must have had.
The silk road was basically the fruition
of all the cypherpunk dreams, the crypto-anarchists' utopia
that they had imagined in the '90s,
you know, was real now.
This was a perfectly, in theory, anonymous website,
with perfectly, in theory, anonymous money
used to by any contrabands imaginable.
The silk road website is a particular headache for authorities.
It's a anonymous online marketplace
where people sell drugs that are posted to customers
all over the world.
Cyber investigators, you know, when there's a crime
can kind of trace you back because you have an ip address.
It's like a telephone number,
so if you call another computer
that ip address is tracked.
On Tor, that's taken away, because your information
hops from computer to computer to computer
so there's no way to trace you back to your original one.
Tor is an anonymous system,
so if you use the Tor browser,
which it has a browser.
You can go to Tor and download their browser,
you can browse with some degree of security.
So that's great for plugging your banking information
into a site so you don't get hacked.
The other component of Tor, which has similar uses,
is called Tor hidden services.
Tor hidden services is actually, to put it simply,
a url that doesn't have ".Com" on the end of it.
It has ".Onion."
And that is its own little space
where you can create websites and you could freely transact
without oversight or regulation.
People put websites on there
that are outside of law enforcement's view.
There's hackers for hire, there's malware,
there's credit card dump services
there's a whole bunch of them.
Chris tarbell has ended up being, in some ways,
the most important FBI digital crime investigator
of the last few years.
He was the one who took down anonymous, essentially.
So we decided to start looking at some of the services on Tor,
and silk road being one them,
other cases, they would hit Tor,
and they would kind of throw their hands in the air
and say "it's Tor, there's not much we can do about it."
I found it interesting to kind of take a look at it and tackle it.
Bitinstant was basically born
because if you wanted to move your dollars
into a bitcoin exchange,
it takes at least three days.
And since the major exchange, mt. Gox, was in Tokyo
it could take a week or more.
So that's really problematic,
and basically Charlie figured out that
if you just held a balance of dollars at the exchange,
you could go to him and say, "Charlie, I'll give you $100.
Will you give me $100 of credit at the exchange?"
And you can literally then have your dollars at the exchange
in ten seconds as opposed to a week.
So that's hugely helpful, especially when bitcoin is so volatile
and you need to know exactly what price you're going to get.
Charlie was raising capital
right as, sort of, i joined.
During that process, he came across lots of
interested investors who were starting to get a whiff
that maybe this bitcoin thing was cool.
We had an interesting debate early on
about do we invest in bitcoin or bitcoin companies
and we sort of decided to do both.
More towards investing in actually bitcoin
in the asset early days,
but also trying to place a few bets in the ecosystem
to support the companies, support the entrepreneurs,
and see how that went.
A few days after they first found out about bitcoin,
they were in the bitinstant offices in New York
meeting with Erik and Charlie.
And Erik and Charlie essentially talked them through bitcoin
and answered all of their questions and concerns.
What made you invest in bitinstant?
There are a lot of companies and exchanges and websites.
With respect to bitcoin, regulation is obviously a big question.
What you do want is a company that sort of takes that seriously
and understands that there's the technology element,
there's building the company,
and then there's also creating the company
that works with regulators.
And so that's bitinstant.
It's not this sort of completely underground thing?
Yeah, Charlie the ceo happens to have been in this space for a long time,
so he's sort of on the pulse and the cutting edge.
You know, you come out and you say, like,
"we want this bitcoin thing to overturn everything,"
but at the same time we have to be compliant
and you have to know your customer.
You have to know every single customer no matter what.
Even if they're transferring a dollar or $1,000.
And how reasonable is that?
The term "money laundering" was invented by banks,
and knowing your customer shouldn't be
this complicated, expensive thing.
And you shouldn't treat everyone like a criminal in the beginning.
They really wanted us involved.
People were really friendly, because it benefits you
to onboard more people in,
so bitcoin's always been this very friendly community
and it's also... in some ways it's self-serving that way,
but we were there for the right reasons.
At the time, bitinstant was the big company
other than mt. Gox.
It was the way that most Americans were able
to buy bitcoins.
Here it is.
So bitinstant was located right there.
I think it's the one that now says "bling."
It was a whirlwind six months.
Going from total obscurity with no money
to becoming one of the hot startups of bitcoin.
But almost as soon as the twins made their investment in the company,
it began falling apart.
The twins had a much more practical approach
to bitcoin and bitinstant.
They wanted to see the company making money
and making as much money as it could
as quickly as it could.
They saw early on that it would be regulated,
that it wasn't gonna be this big,
and have no one be interested in regulating it.
So they feared that all kinds of regulators
would come in at all different angles
and tie the thing up in a complete morass
where nothing would ever get done.
So they wanted to help drive the regulation
so that whatever regulation would be there would work
and would not end up being a complete dead end for bitcoin.
That strategy is smarter,
from purely a business perspective,
but I'm not in this purely from a business perspective.
I am in this for business and because I'm trying
to change the world and make it better,
and building bitcoin companies
and begging for regulation
that matches exactly the banking regulation
that has caused so many problems
I feel like is counterproductive.
For the most part, bitinstant was actually taking steps
to make sure that people weren't using the service for illegal purposes,
but Charlie made the mistake in dealing with btcking
of acknowledging that he knew
what btcking was doing,
and that he was acquiring bitcoins to sell them
to silk road customers.
In this case, Charlie worked with the guy
and wrote emails that essentially acknowledged
he knew what this guy was up to.
That stunning arrest of the drug kingpin
who goes by the name "dread pirate Roberts"
and appears to have cornered the Internet drug market.
His real name is Ross ulbricht and his website, silk road,
is packed with products like cocaine and heroin.
The payment system is all through bitcoins,
which is basically digital currency,
not backed up by any international banks,
not backed up by any us banks,
but simply based on the confidence of the users
who exchange these bitcoins computer to computer.
There's a reason why the case was tried in New York,
in the Southern district,
and largely that was because of bitcoin.
Ross was caught in San Francisco.
The silk road servers were out of the country.
So why was Ross's case tried in the Southern district of New York
where most of the financial regulations cases are dealt with?
Where the district attorney, preet bharara
has been all over bitcoin.
Where Charles schumer, the senator, has been all over bitcoin.
Ross ulbricht's case is a bitcoin case.
There's absolutely no denying it.
The level of threat that the silk road posed
to the marketplace, to wall street,
whether it's a perceived threat or an actual threat,
was humongous.
And the idea that somebody could create a marketplace
where you could freely transact without oversight or regulation
had to be dealt a massive and public blow.
Bitcoin kind of monetized that anonymous part of the Internet
and made it possible to trade in things
that the federal government doesn't want you to trade in.
Law enforcement moves slowly
but it's a big heavy wheel that grinds finely,
so, you know, someone was running a hidden service,
and now they're in prison for life.
They were playing hardball. It was very evident
that their intention, as the judge herself said in her sentencing,
was to make an example out of Ross,
was to say to all of you people using bitcoin,
to all of you people who want to tangle
with unregulated marketplaces and technologies
and open source cryptocurrencies,
"we will throw the book in its entirety at you if you do this."
We seized a whole bunch of bitcoins.
And in order to sell those bitcoins off or go to an exchange,
you have to fit within federal law and state law.
There's not really an exchange that could handle that,
that met those regulations at the current time,
so it had to be handled through auction.
You know anything about bitcoins?
There's an article in "the wall street journal" today
- on bitcoins. - - Really?
Right here, if you want to read it.
It is?
Digital currency, did you see that?
Wow!
"Digital currencies will disrupt global finance,
transform the way we pay for things,
and just maybe, make the world a fairer place."
From what I've read on the computer,
they have had some problems.
- Yeah. - Yeah.
The reason is because you can't track it.
Well, I think I don't like this idea at all.
When we saw the silk road shut down,
a lot of people said,
"bitcoin's nothing but illegal drugs on the Internet.
That's what it is."
And they would point at the silk road and say,
"look here at all the stuff that's happening here."
And I think when you saw the silk road shut down
and bitcoin transaction volume
take a tiny little dip,
and then keep going up,
you know, I think that was a great event to point at
and say, "it really wasn't about that.
It really isn't about that."
It's a tiny little part of the economy.
I guess in the last week
I've really started hearing about bitcoin.
Recently I heard a scenario
after the FBI had seized a bunch of bitcoins
due to illegal transactions,
now they're gonna be auctioning them off
like they would a private yacht
for, you know, from some drug dealer.
So that, in a way, legitimizes the use of it
as a currency.
Looks like it's the first live
bitcoin exchange on wall street.
Looks that way.
Yeah, so one for 950.
- Buying or selling? - -Selling.
550 on a thousand...
Right now we were looking at the open interest
at the floor of the bitcoin exchange.
There's different exchanges that are online,
that will present at the bidding house,
but there's no true open outcry exchange.
Buyers and sellers coming together
in an open, clear, transparent, honest way.
- Gox is the highest one. - Why don't we call it 900?
900...
There's my transaction,
probably the first two transactions of the day.
It's really not about the money,
it's about being involved,
and I think there's a lot more people gonna follow me.
Charlie shrem, 24 years old,
arrested today and charged with engaging in money laundering
shrem enabled people to transfer money
from bitcoin to cash via his company called bitinstant.
Now the other point that the DEA is making
is that shrem bought drugs online at silk road
and that he knew silk road was a trafficking website.
And we know the winklevoss twins
who obviously were featured in the movie about Facebook.
They're actually investors in shrem's company.
Yeah, you know, a lot of people are very excited by this idea.
They like the idea that you can have a currency
that is not tied to any kind of central bank,
but at the same time, i mean, think about it.
If you're in the federal government,
you don't like the idea that people could
effectively use another form of cash
to buy things that they shouldn't be buying online.
With me, it wasn't all my customers.
It was one customer,
out of about 100,000 customers.
This was one customer. One single...
And I made that case in my sentencing.
I said, "your honor, this was one customer."
It happened that I was literally coming home from Amsterdam.
I was in my sweatshirt. I was still stoned.
I didn't know what was going on.
Charlie did not know when to shut up,
and that ended up getting him in trouble,
and probably led to the end of his company.
But they got me under the patriot act,
and it's money laundering
because I knew that the money I was taking
was eventually possibly going to be used for drug trafficking.
Now drug trafficking is not buying drugs, it's selling drugs.
I didn't help the drug seller.
I helped the guy buy drugs.
But I never went to trial because...
And I pled guilty because who wins at trial, you know?
Like this guy, silk road, he's gonna go to life.
In trial, all he needed to get was a lady
whose son died from a cocaine overdose
and I would've... the jury would've convicted me right there.
So essentially Charlie was selling bitcoins to a guy
who was selling bitcoins to people
who were putting drugs into their own bodies.
And for this, Charlie was charged with crimes
that could've put him in jail for 20 years.
That's what the prosecutors were shooting for.
We have banks that have atms
on every street corner in America,
and those banks know very well
that that cash is getting used for drugs.
And yet, that's fine.
They're allowed to do that. No one gets in trouble.
But Charlie sells bitcoin to a guy who sells bitcoin
to someone who uses drugs, and he goes to jail.
He was an entrepreneur that started building this industry,
built services that people found useful,
when bankers almost destroyed the world economy
and none of them got in trouble whatsoever.
And here we have this 23-year-old kid, he goes to jail
because he started building an alternative.
Over the last six months,
our agency has been conducting an extensive inquiry
into virtual currency.
The information we're going to gather
in this fact-finding effort
will allow us to put forward,
during the course of 2014,
a proposed regulatory framework
for virtual currency firms operating in New York.
Yesterday, we had serious criminal conduct
come to light involving virtual currency
as a vehicle for money laundering
drug trafficking, and other major felonies.
Right now, the regulation of virtual currency industry
is still akin to a virtual wild west.
That's why we're evaluating
whether our agency should issue
a so-called bitlicense,
specifically tailored to virtual currencies.
I think people who imagine
a very powerful utility, like bitcoin
that would somehow escape regulation entirely
are either naive
or extreme optimists.
Bitcoin is a battle of ideas,
and it forces the issue of whether people should be
as free in their handling of money as they are
in their handling of speech or religion
or relationships with each other.
If you want to have this thing go mainstream,
you're going to have to have the regulators,
the lawmakers weigh in on it.
One of the first ones who really took an interest
was Benjamin lawsky.
Very important regulator in the financial world.
And in January, 2014, holds these public hearings
because he wants to come up with a license
for bitcoin companies.
We believe that putting in place
appropriate regulatory safeguards for virtual currencies
will ultimately be beneficial
to the long-term strength of the industry itself.
Lawsky was essentially given the opportunity
to write the rules for this whole new industry from scratch.
The first question is the obvious one
that's on everyone's mind.
Sort of unexpected yesterday,
but with the arrests we saw obviously
that's put a bit of a cloud
hanging over the industry right now,
and so how do each of you react to what we saw yesterday,
what it means for bitcoin or virtual currency and its future?
I think it further supports that
bad guys are gonna do bad things,
and they're gonna use whatever technology is available to them.
But I view it as, if the allegations are true and they're convicted,
the system works.
Are people still doing bad things with bitcoin?
Sure. Is the majority of the bitcoin activity vice?
Not a chance.
So I think the issue you raise
is one that people like to write about,
the media likes to write about it, makes great headlines.
You get a lot of clicks. You can sell a lot of ads,
but I think it's in the rearview mirror.
There are some people in the bitcoin community
from the libertarian side of things
that want government to just leave it alone.
Would you say regulation is both inevitable
but more importantly, actually ultimately
going to be crucial for the survival of virtual currency?
Sounds like a terrible idea to me.
Just understand what we're trying to do with bitcoin.
We're trying to create a world
where transactions can move globally for free, okay?
And making these companies hire
you know, some outsourced compliance firm
is a bad idea.
It'd be great, in any industry,
if you could just open the door and let folks
run out and give it a shot.
We may choose not to invest in a company
if they can't get licensed by you.
If the choice ultimately is between
preventing money laundering on the one hand,
and I probably shouldn't even use the word "money laundering"
'cause it's too nice a word, frankly.
Money laundering is the facilitation
of all kinds of horrific crimes
that I think everyone in this room
never wants to see happen.
Acts of terrorism, funding rogue nations, etc.,
all take place through massive money laundering.
Now the choice for the regulator is,
permit money laundering on the one hand,
or permit innovation on the other.
We're always going to choose
squelching the money laundering first.
I agree that I don't think anybody wants money laundering.
When we got a... First saw bitcoin
you know, about a year and a half, almost two years ago.
I don't think anybody would deny
that it was a bit of a wild, wild west,
because there was no regulation.
There was no framework to evaluate
the asset, evaluate companies,
determine who was compliant and who was not,
and a wild west attracts cowboys.
And I don't think anybody here would disagree with the fact
that a sheriff would be a good thing.
A lot of, I think, the entrepreneurs
feel like they have to self-censor.
They don't want to come out vocally critical of the regulations.
Part of that is maybe 'cause some of them
just like regulations,
but I think another part of it,
some of them just feel like they will get
attention of the regulators if they come out against them.
Yes, we want them to innovate, but at the same time,
we just can't live in a world where we're gonna permit
money laundering to go on.
I think regulators should give bitcoin
some time to grow up.
Too much regulation now
will just stifle innovation.
I think before regulators kind of come in and say,
"we're gonna solve all your problems,"
and then fail to solve all their problems,
I think they should give the innovators time
to solve those problems.
One function of regulation is to make things clearer,
so right now bitcoin, because it's so new,
is in a state of flux everywhere.
The lesson from the Internet
is anything that China bans,
invest in.
And that's a joke, but the U.S.
Allows Google to operate here, allows Twitter to operate here,
allows bitcoin to operate here,
allows Facebook to operate here.
Chinese government doesn't allow any of those companies to operate
the way they operate in this country, or at all.
This is about freedom, ultimately.
You know, we're 50 yards
from the old world trade center here
and I think all of us never want to see
anything like that happen again, and it would have been a lot harder
for 9/11 to ever have occurred
had we had the protections in place
that would prevent the movement
of massive amounts of money around the globe
by people who would want to kill everybody in this room,
so I think the key is
to not create useless regulation
but I think the motives behind a lot of those rules
are to ensure we don't miss something again.
Since 2001,
there's this absurd obsession with terrorism.
So any time a regulary gets up and says,
"well, bitcoin can be used for terrorism."
Well, of course it can. So can anything.
So can cell phones and so can the Internet and so can the car.
It doesn't mean that we should stifle the growth of those industries
just because bad people can use it.
This has arguably been the worst week
in the cryptocurrency's short life,
stunned by the collapse of once-dominant exchange mt. Gox.
Now that failed firm's ceo mark karpeles is in hiding.
Some 750,000 bitcoins allegedly stolen or lost
which accounts for about 6% of the total circulation.
By the time mt. Gox went down,
it was holding what its customers believed
were about a half a billion dollars
worth of their bitcoins and the company's bitcoins.
It was no longer the largest exchange in the world.
But part of what's so amazing is
that people kept using it
even after there had been numerous incidents
in which it was clear that the company
was not up to the task of safeguarding the money.
And the only reason he survived as long as he did
was because in 2013, the price started going up.
People kept putting money into it.
He had more and more money 'cause the price was going up,
but as soon as the price started going down,
this is what happened, right?
It peaks in late 2013.
It starts coming down in 2014.
Soon as that price started coming down,
it all just tumbled for him.
Gox was going to collapse.
That it lasted as long as it did
was actually kind of a stroke of fate.
But its failure was
it didn't have the kind of more boring
mainstream institutional controls
that we require to bring it to the next level.
And there's a whole bunch of money missing,
and no one knows if they just lost it,
it if was stolen from them,
if they embezzled it or what,
but the important lesson from gox
isn't that bitcoin doesn't work.
The important lesson from gox
is that you don't leave your money with a trusted third party
because you can't always trust them.
You can only trust them until you can't.
This was also a lesson that people were
supposed to learn during the financial crisis
but they don't seem to have learned it yet.
Mark karpeles
was a gamer.
He was not a finance pro.
He really didn't know what he was doing,
and he didn't build it. Jed mccaleb built it.
He didn't improve upon it.
I mean, it lurched from crisis to crisis
throughout the entire history.
Last year was a terrible year for bitcoin,
and an especially terrible year for the foundation,
because we had two of the people on our board of directors
who had to resign in disgrace, basically.
You know, my expertise is technology.
My expertise is not figuring out, like,
who's trustworthy, who's not,
which businesses are gonna succeed,
which businesses are gonna fail.
After we had held our hearings,
we thought we would take six months to nine months, even a year,
to draft our initial regulations.
This was so complicated that we wanted
to really take our time and get it right.
What happened was, though, mt. Gox collapsed.
And I think that gave us
a real renewed sense of urgency,
and we realized that if we got regulation right,
we could create more confidence in bitcoin, frankly,
as opposed to the sort of loss of confidence you saw
not only from the silk road case
but also from the collapse of mt. Gox.
So your sense, though,
of the regulators, right now.
I assume you've had conversations.
The discussions that we've had,
I think everybody recognizes the innovation
and doesn't want to stifle it.
They just want to make sure that there's healthy regulation
so it's used in a safe and productive manner.
I'm not giving up on New York. New York's giving up on me.
I can't even turn on the bitcoin machine.
An atm, i can't turn it on.
I can't make trades. I can't do anything.
There's no cash flow at all.
And it's potential regulation.
It's regulations i should believe
is coming down the pipe.
Like, I don't want to do anything that someone's frowning upon
right next door to the stock market.
They're gonna lock me up.
You know, you can't have an exchange.
Well, we don't. People meet there
and exchange with each other.
New York's sitting there on the high horse,
and the whole world's waiting
on New York to create some fuckin' license.
Ultimately lawsky's office brought out
the final rules for the bitlicense
in the spring of 2015.
A lot of companies complained that the regulations
were too burdensome for them to operate in New York
and still make money.
I saw just overnight
dozens of companies that were on the verge of launching.
They just threw in the towel and said, "we can't afford this."
Erik voorhees' new company shapeshift
would have had to apply for the bitlicense
if it wanted to keep customers in New York.
So, in my lap here i have the...
The application forms for license to engage
in virtual currency business activity,
which is a very statist way of saying the bitlicense.
The is the application to be approved
to do basically what we've all been doing for years now,
which is building bitcoin companies in New York.
And a lot of stuff in here I personally feel is unethical,
so we're not gonna comply with it,
which means we have to block new yorkers entirely.
And when an entire new industry
starts blocking a place like New York
that used to be the financial center of the world,
hopefully some of those politicians will take notice.
The point of it is to, one,
make sure there are enough consumer protections;
two, make sure we have adequate cybersecurity;
three, make sure that the companies are adequately capitalized
so they don't collapse upon themselves.
You know, you've seen a tug of war
between the hard liners and those who are saying,
"you know, you've got to have
enough space for innovation in here,"
and the system has come out, i think,
probably stronger as a result of that
and there's a widespread view
amongst certainly the business bitcoin community
that some level of regulation
gives legitimacy to what they're doing.
It gives people confidence in what they're doing.
This is an important part of growing up.
Ultimately, they're not going to get it right,
because no regulation is ever right.
But I'm highly confident
that whatever happens going forward,
the bitlicense will be looked at
as a positive development
in the evolution of bitcoin
because it just removed one of the biggest pieces of uncertainty,
which is how is this industry going to be regulated.
I think most of us... At least a lot of us...
Think that sensible regulation
that sets guidelines
that makes sure people's money
doesn't just go into a black hole
that that's a really important thing,
that regulation.
I'm sure satoshi wouldn't be happy
to see this kind of thing,
which is not based on the logic and reason
that a programmer is used to.
I think a lot of developers, understandably so,
try to stay out of the political nonsense.
It has been one of the biggest mysteries
raging across the Internet:
Who is satoshi nakamoto?
Newsweek published an article
claiming the man in these images is the bitcoin founder.
The man who created bitcoin,
is known as the father of bitcoin,
the online currency now worth billions.
When you asked him about bitcoin,
and he says, "i can't talk about this anymore,"
he was not referring to bitcoin.
But with me, he definitely acknowledged bitcoin.
I think at this point now he's saying
he was confused by the conversation.
Clearly somebody thought
that we did this as an act of war
against satoshi nakamoto or bitcoin,
and I want to be very clear
that I certainly never meant it that way.
I have nothing to do with bitcoin.
It was a monster story.
How did they figure it out?
My god, look at this guy that they named.
His name is Dorian satoshi nakamoto,
living in California,
basically hiding in plain sight.
It becomes a gigantic media scramble,
and then Dorian emerges from his house
looking kind of disheveled, looking kind of confused,
and says he's not satoshi nakamoto,
says he's never heard of bitcoin.
He doesn't understand. He had one conversation with Leah.
She misunderstood what he said,
she took it the wrong way.
And you probably would have had to have been a cypherpunk
to understand all the elements of it
that had already been put together.
The odds of it seemed very low to me
that it was somebody from completely outside that community
who happened to know all these different things
and put this together and appear out of nowhere.
The day that "newsweek's" story came out
naming Dorian nakamoto as the creator of bitcoin,
I got this email from an old acquaintance
that was titled "what are the odds?"
And it laid out the fact that hal Finney
lives less than two miles away from
the known address of Dorian nakamoto
where "newsweek" had found him.
And hal Finney is the number two ever user of bitcoin,
who received the first bitcoin transaction.
He worked on an early prototype
of an anonymous currency system.
He was a cypherpunk.
So how could it be that the purported creator of bitcoin
and this known, confirmed, second-ever user of bitcoin,
hadn't ever collaborated?
That hal Finney, who was less than two miles away
from Dorian nakamoto hadn't helped to create bitcoin?
Or maybe he really was the creator of bitcoin.
Maybe hal Finney was satoshi nakamoto.
When you look at the bitcoin white paper,
it made reference to a lot of the earlier projects
that fed into bitcoin.
But it's very notable that the one project it doesn't refer to
is Nick szabo's bit gold,
which is perhaps the closest precedent
and the closest parallel to bitcoin.
I mean, bit gold is so close to bitcoin,
it's hard not to think
that, you know, maybe Nick is satoshi.
A lot of people will say "nakamoto must be szabo."
"Nakamoto must have been Finney."
But I don't think he was trying to leave
any breadcrumbs out there for anybody to follow.
I told my editor about it.
He agreed that "you found satoshi nakamoto."
So I got on a plane to Santa Barbara
and I drove out to hal Finney's house.
But at this stage, he was already
completely paralyzed by als,
this really awful, debilitating terminal illness
that slowly shuts down your body
while leaving your mind completely intact.
And the time when he started to fade in his physical abilities
did roughly coincide with the time
that satoshi nakamoto started to disappear.
Now maybe the reason that satoshi nakamoto
had chosen to fade away
was because hal Finney was physically fading.
There have been a number of stylometric studies
and you see so many of these similarities
between satoshi's writings and those of Nick's,
including these little things like having two spaces
at the beginning of a sentence,
and phrases and spellings that nobody else uses.
So I talked to hal as much as i could, mostly in a kind of
one-way interview because he could really only respond with yes and no answers,
and he denied being satoshi nakamoto.
You could tell that he was amused by the whole idea
that I thought he was satoshi nakamoto.
One of the really remarkable things
from Nick szabo's writing
in those months before bitcoin
was publically launched is that Nick,
in responding to some comments
about a post he had made about bit gold,
actually asked the other people who were reading him
if anybody wanted to help him code this idea up
into real software that could work.
It was never turned into a reality,
but when you look at bit gold,
it's hard not to be struck by the similarities
between it and bitcoin.
It's possible.
Hal could've been the coder.
I don't know.
You know, this idea that... That hal Finney could've been
the kind of ghost coder for bitcoin...
I guess it's possible.
Other people kind of speculating on reddit
or other parts of the Internet
thought that maybe hal Finney
had used Dorian nakamoto as a patsy.
If he were ever traced back to Dorian nakamoto,
it seemed like this guy was the creator,
and hal Finney would be sort of immunized from it.
Everyone else who was involved in the projects
leading up to bitcoin has released
their communications with satoshi from this period.
Nick has avoided doing that,
and essentially went silent in those critical months
after bitcoin was released.
You know, when you talk to people face to face,
and they tell you these things,
you can get a sense if they're being honest.
If hal Finney actually had a secret
billion-dollar cache of bitcoins,
he wouldn't have been able to lie to me so effectively about it.
In the end, the reasons to believe that this was all just a coincidence
began to outweigh the coincidence itself.
It's almost like an eel.
There's something there, you can see it,
but as soon as you touch it it just slides right out of your hands
and you're left with nothing.
Anybody who is of any note
in the cypherpunk movement,
and even outside of it too,
has at one time or another
been called satoshi.
Hal Finney denied it. Nick szabo denied it.
They've all denied it.
Maybe one of them is satoshi.
Maybe all of them are satoshi.
It really is a mystery.
That's the original ticker
from next door.
All right, so we're over here.
Bitcoin center, 100 feet from the stock exchange, over here.
And...
You know, some of you guys took a hit last week,
last couple of weeks.
Lot of the big guys,
they got their foothold in the business
that they weren't a part of in the beginning.
I don't know what's going on.
But, I don't know.
I wouldn't write off bitcoin that easy.
I know that bitcoin is gonna change the world.
It's changing the world already.
And we have to stand tall
and proud
as bitcoiners and early adopters.
They don't know anything about new technology,
but once it starts making sense,
they throw their dollars behind it.
You know, unfortunately,
early adopters
make the roads that we all travel down,
and they are usually paved over in the process.
The first guy through the door gets shot.
You know, but somebody's gotta go through the door,
but they're gonna get shot.
Charlie shrem, Ross albricht,
Julian Assange,
they got shot coming through the door.
But we're all utilizing the freedoms
and technologies afforded to us
because they knocked the door down.
Hey, Michael.
Can I put you on speakerphone for a minute?
If I know how.
Hey, Michael, can I ask you, where did you buy bitcoins?
Yeah.
Did you lose... how much... Do you still have them?
You put into it.
Can you use it?
Do I want to buy it? No, not today.
Though it is going to be around.
Did you ever use it to buy anything?
Michael.
No, okay.
They should go back to, you know,
day one and just start all over.
Forget about bitcoin, call it something else.
I think it's been so tarnished now
with this... With the silk road...
You know, I just think, you know,
that all that stuff about $400 million disappearing
and... you're just not gonna get off the ground.
Nobody's gonna...
You know, like Warren buffet said,
"stay the hell away from it."
To put all the cards on the table,
I'm gonna be leaving the department in the coming weeks.
And if you asked me back when I took this job in 2011
what I thought we'd be working on during my tenure,
digital currencies would not have been at the top of the list.
So Ben lawsky created this thing call the bitlicense
which is New York's attempt to regulate
this scary new technology. It's now law.
And he has announced that he is leaving government
in order to set up his own private consulting firm
to help companies navigate financial regulations
such as the bitlicense that he created.
So we essentially had this beautiful new ecosystem being built,
and Ben lawsky comes by,
says, "I'm here to protect consumers."
He builds a huge wall around the thing,
and then he sits outside the gate
charging people to get in.
This is the very definition of crony capitalism,
and, for some reason,
Ben lawsky doesn't even see anything wrong with that.
I think history will not judge him
as favorably as he thinks.
So, um, yeah.
I've started up my own consulting business.
It's been quite interesting.
Doing a lot of work in the fintech space,
but also doing work with a lot of traditional companies
in the financial services world as well.
Ben lawsky's team at the dfs
that was working on this bitlicense
and the bitcoin initiative
have all ended up leaving the agency
and going to consulting firms
that are now working on these issues.
Danny alter is going to work for itbit
and Dana Syracuse is going to work for
the consulting firm k2.
Itbit is particularly notable
because they were the first to find a way
to partner with the dfs to get licensed
to open their own bitcoin exchange.
When this is over,
definitely going to leave New York when I can.
Where I'm gonna go, i don't know.
I think the bitcoin community in New York is done with.
No, it doesn't foster innovation here.
It's too difficult to have a bitcoin company.
No banks will open up accounts.
You have the threat of regulation,
and your high-profile arrests
like myself and others.
No one wants to deal with it.
When did you first start digging in on bitcoin?
Two, two and half years ago,
when I took over the foreign exchange payments business
- at jp Morgan. - So you probably had your mt. Gox,
bitinstant, you know, Charlie and those guys.
It's interesting, almost none of those guys are around anymore.
Two years ago at all the major banks,
bitcoin was an afterthought.
It was kind of a... maybe in a hallway kind of conversation
at the water cooler and now,
you know, even this week, i met with one of the other major banks.
Everyone's got a bitcoin specialist, at least one working group.
Kind of teams of people who are trying to figure out
how to incorporate the technology
into their existing operation.
Banks and institutions
associated with the financial system
are really starting to recognize
that the payment system underlying banking
could be made more efficient
by the application of blockchain technologies.
The blockchain technology
underlying bitcoin
has become something that
a lot people are now very, very interested in
for all kinds of other uses,
whether it's allowing for derivatives to be transferred
or securities to be transferred,
or all manner of financial instruments to be transferred
in complex, interesting ways.
I think different companies
are going to adopt different strategies.
And it's gonna be fascinating to watch
companies like digital asset holdings,
blythe masters' company,
doing very, very interesting work.
I didn't become aware of bitcoin
in any meaningful sense until 2014,
late in the year, and at the time,
my perspective was one of skepticism, I would say.
Specifically because the storyline that I heard
related very much to cryptocurrency
as a potential medium of exchange and store of value,
which is a valid debate and application,
but it doesn't have full extent of the power
that the underlying technology has to achieve.
Blythe masters is not just any banker.
She is this person who I think is really seen
as being behind some of the most problematic innovations
in the financial industry over the last three decades.
Blythe is the one who's essentially given credit
for creating the credit default swap
which essentially provides a way to bet on the default of a bond,
and the credit default swap ended up taking this place
at the center of the financial crisis
and these bets that banks had made
against sub-prime mortgages.
Blockchain technology eradicates
a significant amount of inefficiency in the system,
and reduces costs.
It doesn't mean that we are doing away
with the need for trust in financial services at all.
Bitcoin was designed to find a way
to circumvent wall street,
and what blythe masters is doing
is essentially trying to find ways
to bring wall street into bitcoin
and make it possible for them to use this technology as well.
What the bankers seem to be looking to do at this point
is create their own private blockchain,
where their computers are powering it.
Rather than these anonymous miners,
they want control over the system.
The banks are looking at this incredibly wide array
of ways that they might use this,
which include replacing stock exchanges,
finding new ways to originate loans,
finding new ways to move money between countries,
and, of course, that's going back
to the original idea of bitcoin,
but now it's happening within these financial institutions
rather than outside it, as bitcoin had imagined.
I have no problem with the banking system
and the financial industry co-opting bitcoin,
primarily because bitcoin can't really be co-opted.
The fact that it's decentralized
means no one can control it,
no matter who they are or how much money they have.
I think it's all good for bitcoin.
I think all of the innovation that's happening,
both on wall street and in silicon valley
I think competition will take care of
people who want to try to have a monopoly,
or who want to try to charge more than they should
for whatever product or service
that is happening on the blockchain.
It really is as advertised.
It really is controlled by all the people who are using it,
and it really is designed just to be a more efficient,
more fair way of sending value over the Internet.
Bitcoin is not neutral.
You cannot remove the political component
that satoshi implanted in bitcoin from bitcoin.
That's what a lot of the people
on the wall street side try to do.
You cannot neutralize bitcoin.
It's impossible.
Thankfully, I'm gonna go to a comfy federal prison camp
without fences, that has pool tables and a track,
and baseball field and decent food,
and kind of 100 to 200 people that are white collar.
Those guys in prison are the best ones to use bitcoin.
They're smart. I'm very excited
to talk to them about it.
So yes, the vcs are driving this thing right now.
They're pouring money into it.
They're building these for-profit companies
people who have a background outside of bitcoin
seeing the value of it and coming to it.
But just because they're doing everything they're doing
doesn't mean that the libertarians and the utopians
have to go away.
Bitcoin is open source.
You can do whatever you want with it.
So they're still there.
They're still building their products.
They're still building their vision.
And if bitcoin goes mainstream
and if it gets picked up,
even if it's running in the background,
there are going to be elements of that
and that's kind of what utopia movements always are.
The thing that the utopians were dreaming about
is not gonna happen the way they expected it,
but I do think it is going to filter through
and you are gonna see it. You're gonna see it.
So you're gonna show me that satoshi nakamoto is you.
Yes.
Some people will believe, some people won't.
And to tell you the truth, i don't really care.
But you can say, hand on heart to me,
"i am satoshi nakamoto."
I was the main part of it. Other people helped me.
I'm going to come in front of that camera once,
and I will never
ever be on a camera ever again
for any TV station
or any media ever.