Speaker 1: Hey, welcome back. You are listening to the Mark Moa Show,
Speaker 1: and we're talking about bitcoin. We're talking about cryptocurrencies, and
Speaker 1: we are talking about the decentralized revolution. We are talking
Speaker 1: about a revolution that is sweeping the world. And I'm
Speaker 1: trying to bring this to you each end, every week.
Speaker 1: It should be the most important part of your week,
Speaker 1: the most powerful, the most profitable part of your week,
Speaker 1: because you're literally witnessing, like I said, a revolution, a
Speaker 1: decentralized revolution, a technological revolution that's literally going to change
Speaker 1: the way the world works. We've had about five technological
Speaker 1: revolutions over the last two d and fifty years. They
Speaker 1: happen um about every fifty years, and we're witnessing one
Speaker 1: right now. It's one of the key pivotal moments in history.
Speaker 1: You know, when you study history like I do, you'll
Speaker 1: see that. You know, history books are written about key
Speaker 1: points right where history changes, and history books will be
Speaker 1: written about this point in time. And while you know,
Speaker 1: the future is uncertain and sometimes it's scary, UM, I
Speaker 1: think it's scary anyway, UM, it can be overwhelming. Sometimes
Speaker 1: I also like to step back and appreciate the fact
Speaker 1: that we are literally witnessing this happening. We're living through it, um,
Speaker 1: and we have massive opportunity in front of us. So, UM,
Speaker 1: if you listen on a regular basis, thank you, welcome back.
Speaker 1: I'm gonna make sure that I'm gonna make it a
Speaker 1: priority to make sure it's the most important part of
Speaker 1: the week. If you're new to the Markma Show listening
Speaker 1: about bitcoin and cryptocurrencies, then UM, pull out your phone
Speaker 1: if you're not driving, and put a calendar reminder for
Speaker 1: this channel at this time to come back with me
Speaker 1: each and every week. Now, I try to talk about
Speaker 1: There's a couple of things that I'm trying to do. One,
Speaker 1: I want to give you the education you need so
Speaker 1: you understand what's happening with bitcoin and cryptocurrencies in this
Speaker 1: decentralized revolution. You need to have the education, the education
Speaker 1: what is going on? What is this? How does it work? How?
Speaker 1: How can it make money for me? Right? How can it?
Speaker 1: How can it saved the world? Right? So you need
Speaker 1: that education base and education is so important. That's why
Speaker 1: you know, you see people that win the lottery or
Speaker 1: pro athletes that make a hundred million dollars, or you know,
Speaker 1: rappers or musicians and they make all this money and
Speaker 1: then they go broke. And the reason why they go
Speaker 1: broke is because they got the money, but they didn't
Speaker 1: have the education. And so if you want to participate
Speaker 1: in this this revolution, in this wealth transfer, then you
Speaker 1: have to understand what's going on. Now you can get lucky.
Speaker 1: You can you can go buy some random meme coin
Speaker 1: because one of your friends told you to, and you
Speaker 1: might get lucky. And that's great and and I hope
Speaker 1: it works out for you. You can also get lucky
Speaker 1: buying lottery tickets, and you can also get lucky going
Speaker 1: to Vegas as well. But it's not a good long
Speaker 1: term strategy. You need to have the edge. You need
Speaker 1: to have the education. And so I want to bring
Speaker 1: you that education eagent every week and kind of kind
Speaker 1: of help you build that base. I also keep you
Speaker 1: up to date on the latest news and development, so
Speaker 1: you know what's going on, so you know you're not
Speaker 1: just being distracted by the price, but rather you know
Speaker 1: what's going on. And I keep you have to date.
Speaker 1: That way, when you you know you go to the
Speaker 1: go to the cocktail party this weekend, you can talk
Speaker 1: with your friends and you can sound like you're the
Speaker 1: smartest guy in the room. I'm gonna I'm gonna be
Speaker 1: that secret weapon for you. And then of course I
Speaker 1: want to make it entertaining so it's fun while you're
Speaker 1: learning these things. Today, I want to start off with
Speaker 1: some good education that we have, and I want to
Speaker 1: talk about some of the big differences that are happening
Speaker 1: in the cryptocurrency space. And there's a big difference between
Speaker 1: UM how they work and how they achieve this decentralization UM.
Speaker 1: And there's two main ways that's done through proof of
Speaker 1: work and proof of steak. So I'm gonna talk to
Speaker 1: you a little bit about what those means so you
Speaker 1: can understand what that is, the trade offs, the pros
Speaker 1: and cons, what are the differences of there. I then
Speaker 1: want to take that and I want to dig into
Speaker 1: a little bit into UM the proof of steak and
Speaker 1: then what kind of use cases it may have UM
Speaker 1: ways to look at that, and then we're gonna dig
Speaker 1: into a little bit of defy. We're gonna talk about
Speaker 1: this decentralized finance UM, and then we'll even talk a
Speaker 1: little bit about some n f T s. All Right,
Speaker 1: it's a it's a it's a big subject to dive into.
Speaker 1: And I don't have a lot of time, so I'm
Speaker 1: gonna go through some of this a little bit faster,
Speaker 1: and then if I get some good feedback from you guys,
Speaker 1: we'll dig in a little bit more into each of
Speaker 1: these subjects. All right. So that's what I thought we'd
Speaker 1: cover today. Give you that foundation so you understand what
Speaker 1: the heck is going on. Now if you're just tuning in,
Speaker 1: you listen to the markma Show and we're talking about bitcoin,
Speaker 1: and we're talking about cryptocurrencies, and we're talking about the
Speaker 1: decentralized revolution. So when we say decentralized, what does that
Speaker 1: even mean. Well, it's the opposite of centralized, right, So, um,
Speaker 1: most databases are all data based up and down now
Speaker 1: are centralized. So Facebook, Amazon, Netflix, these are giant databases.
Speaker 1: It's a giant computer that stores all the data in
Speaker 1: a centralized database. Everything in the world is a centralized database.
Speaker 1: It's also why you see these major hacks happening, right.
Speaker 1: Experience was hacked. Everybody's information got leaked onto the onto
Speaker 1: the web. Facebook gets hacked. Um, even the n s
Speaker 1: A was hacked. And when they hacked the n s A,
Speaker 1: they stole the N s as hacking software, which is
Speaker 1: why we have all these ransomware attacks today. They say
Speaker 1: it's Bitcoin's fault, Cryptocurrenci's fault. No, no, no, no, it's
Speaker 1: the NSA's fault. They're the one that got hacked. They
Speaker 1: could have just told Microsoft to fix the patch, but
Speaker 1: they didn't, and now we have this ransomware attack. But
Speaker 1: that's a whole another story. Um. But so those are
Speaker 1: centralized databases, and no matter if you have the best
Speaker 1: security in the history of the world, like the n
Speaker 1: s A UM in a in a secure building, with
Speaker 1: the best I T team in the world, UM and
Speaker 1: the best hypersecurity experts, you still get hacked. All right.
Speaker 1: What we have the opposite is we have decentralized databases.
Speaker 1: So Bitcoin was started as a decentralized database. So what
Speaker 1: does that mean. It means that it's study and having
Speaker 1: one computer with one database. Now you have hundreds of
Speaker 1: thousands or millions of computers, each with their own copy
Speaker 1: of the database. And then all of those computers, those
Speaker 1: millions of computers be spread all around the world in
Speaker 1: different locations, and they each run the exact copy of
Speaker 1: the full database. And then in order for a transaction,
Speaker 1: to happen, the databases have to achieve consensus. That means
Speaker 1: they have to have fifty or more have to agree
Speaker 1: that that is a valid transaction, and that's what creates
Speaker 1: the decentralization. It would be kind of like if I
Speaker 1: had a billion dollars. If I had a hundred billion
Speaker 1: dollars sitting in a bank account, there would be a
Speaker 1: lot of people that want to break into that bank account.
Speaker 1: Bank robbers would be planning and scheming to break into
Speaker 1: that bank. And and if it was a hundred billion dollars,
Speaker 1: they could spend a lot of money and time trying
Speaker 1: to break into that bank because the reward would be
Speaker 1: so high. Right, But what if I had a hundred
Speaker 1: billion banks that each had one dollar in them each?
Speaker 1: Mm hmmm. See, now it wouldn't be worth anyone's time.
Speaker 1: The cost to do the attack would be more than
Speaker 1: the reward they could potentially get. Now you're starting to
Speaker 1: get the idea. Now. Bitcoin is a lot of things,
Speaker 1: and I talked about this on a regular basis. Um,
Speaker 1: it's sort of like digital cash, it's sort of like
Speaker 1: digital gold. Um, it's sort of like a lot of things.
Speaker 1: But one thing we do know for sure is it's
Speaker 1: the most secure computer network in the history of the world.
Speaker 1: While all those other centralized databases have been hacked, the
Speaker 1: Bitcoin network has never been hacked. As a matter of fact.
Speaker 1: Unlike the n s A that has an cybersecurity team
Speaker 1: and you know, impeneture walls and all these things protecting it.
Speaker 1: Unlike that, the Bitcoin network is completely open. It's open source.
Speaker 1: Anybody can see it, anybody can see the code. It's permissionless,
Speaker 1: anybody can join it, anybody can build on it. And
Speaker 1: there's a trillion dollars of value sitting there in an
Speaker 1: open network that's not guarded, it's not protected, anybody can
Speaker 1: start programming on it, and it's never been hacked. It's
Speaker 1: pretty amazing. It's never been hacked. And the reason why
Speaker 1: is because it's a decentralized database. All right, So that
Speaker 1: sets the foundation. Now stick with me. I'm gonna I'm
Speaker 1: gonna I'm gonna dig into a little bit of technical,
Speaker 1: technical stuff, but I'll try to keep it simple. So,
Speaker 1: how do these databases achieve consensus? Remember they all have
Speaker 1: to achieve better well, with Bitcoin, it's done via a
Speaker 1: proof of work protocol, a proof of work, all right,
Speaker 1: So there's proof of work, and then there's a new
Speaker 1: version that's come out with all these new protocols called
Speaker 1: proof of steak, and there's a big difference, and you
Speaker 1: need to understand what the difference is. Proof of work
Speaker 1: is good for money. Proof of work is a decentralized database,
Speaker 1: where proof of steak is more like equity. It's more
Speaker 1: like a corporation um where you have these central players
Speaker 1: that can control it. But I want to explain to you,
Speaker 1: without going into super crazy detail, what the differences are,
Speaker 1: what type of programs would work on each one, and
Speaker 1: some pros and cons of each and then we're gonna
Speaker 1: get them to defy. What defy is how it works,
Speaker 1: some dangers that you need to be watching out for.
Speaker 1: And then I'm gonna talk a little bit about about
Speaker 1: n f t s and some some real dangers and
Speaker 1: n f t s that you need to know about.
Speaker 1: I get asked all the time, and I want to
Speaker 1: bring this to you. You're listening to the markma Show.
Speaker 1: Of course we're talking about bitcoin, we're talking about cryptocurrencies,
Speaker 1: and we're talking about the decentralized revolution. Trying to give
Speaker 1: you the information, the education you need to participate to
Speaker 1: profit from the largest wealth transfer in history. We're talking
Speaker 1: about proof of steak versus proof of work, and I'll
Speaker 1: be right back. Hey, welcome back. You are listening to
Speaker 1: the Markma Show, and of course each and every week
Speaker 1: I'm talking about bitcoin and cryptocurrencies and the decentralized revolution,
Speaker 1: which is the most important part of your week because
Speaker 1: this is the biggest revolution that we're witnessing. All the
Speaker 1: humanity is gonna be changed, that's how powerful this is.
Speaker 1: And we're currently we're talking about UM. Why, well really
Speaker 1: what bitcoin and how this decentralized UM technology works. And
Speaker 1: I was explaining, how do you have all these individual
Speaker 1: databases and they achieve consensus? So the network has to
Speaker 1: agree with each other, and there's two main consensus protocols.
Speaker 1: So Bitcoin uses something known as proof of work Ethereum
Speaker 1: also uses proof of work, but then a lot of
Speaker 1: these newer ones use something called proof of steak. Now,
Speaker 1: people are proposing these proof of steak protocols because they
Speaker 1: say they're more efficient. They don't use as much electricity
Speaker 1: or energy that bitcoin does, and so supposedly that makes
Speaker 1: them better. In my opinion, it doesn't. But what what
Speaker 1: I think most people are lacking some context on is
Speaker 1: that everything in life requires a trade off. Everything in
Speaker 1: life has a trade off. Right, there's no such thing
Speaker 1: as a free lunch. So in order to go from
Speaker 1: a proof of work to a proof of steak, maybe
Speaker 1: it is less energy efficient, but what are the tradeoffs?
Speaker 1: What are you giving up? All? Right? So I think
Speaker 1: I wanted to touch on that real quickly, and so
Speaker 1: real quickly. Um, you hear the term blockchain, So blockchain
Speaker 1: you could typically you could read any um it's called
Speaker 1: a white paper, any white paper for any cryptocurrency that
Speaker 1: there fifteen thousand of them, and as you're reading it,
Speaker 1: you could just substitute the word blockchain for database. You
Speaker 1: could read any of those papers and just substitute that
Speaker 1: word blockchain for database, and it would read exactly the
Speaker 1: same way. Now, in the Bitcoin white paper, they didn't
Speaker 1: reference the word blockchain. But the blockchain is basically the
Speaker 1: database and every tent on the Bitcoin blockchain, every ten minutes,
Speaker 1: a new block is added, which has thousands of transactions
Speaker 1: inside of it, and it adds one block onto the next,
Speaker 1: onto the next, onto the next. That's how it works.
Speaker 1: And what happens is you have all these computers that
Speaker 1: are specifically made for this purpose. Um. They didn't used
Speaker 1: to be in the beginning, you could do on your
Speaker 1: home computer. But today they've gotten to be very powerful computers.
Speaker 1: And this this powerful computer is now hooked in and
Speaker 1: to the critics point, that uses energy, and it uses
Speaker 1: quite a lot of energy. It could cost two hundred
Speaker 1: bucks or three hundred bucks a month to run this computer.
Speaker 1: And what what this computer is doing is it's solving.
Speaker 1: These millions of computers that are supporting the Bitcoin network
Speaker 1: are solving a puzzle, and they're trying to solve this
Speaker 1: mathematical puzzle to create the next block. So there's like
Speaker 1: this feedback and mechanism, and like I said, they're created
Speaker 1: about every ten minutes. And regardless of how many miners
Speaker 1: are on the network or not, it doesn't matter. The
Speaker 1: same amount of rewards will be created and released. Um.
Speaker 1: And what's important to understand about this is they all
Speaker 1: do this in this decentralized way. Now, if a minor,
Speaker 1: if one of these computers were to create an invalid block,
Speaker 1: then nobody else, none of the other nodes in the
Speaker 1: network would approve it, and that minor would have wasted
Speaker 1: the electricity they paid for and so it's the incentive. Right,
Speaker 1: Bitcoin changes the incentive structures. So UM show me the incentive,
Speaker 1: I show you the outcome. That's what Charlie Monger says.
Speaker 1: And so all of these miners are incentivized to be
Speaker 1: good actors. I spent a lot of money on the computer.
Speaker 1: I spent a lot of money on the electricity, and
Speaker 1: so now I'm incentivized to put up good blocks, to
Speaker 1: be a good actor on the network. If I don't,
Speaker 1: then the electricity I paid for and the money I
Speaker 1: spent on my mining computer would be wasted. All right.
Speaker 1: This is what's called proof of work. Millions of machines
Speaker 1: using electricity to apply processing power to guess the answer
Speaker 1: to a cryptographic puzzle that was left by the most
Speaker 1: recent block. Right, that's proof of work. It's a proof
Speaker 1: of work. We know the work was done. There's proof
Speaker 1: of it because they spent the money. Now this may
Speaker 1: seem like a waste of energy, but this is what
Speaker 1: keeps the system decentralized, all right, the work itself, the
Speaker 1: cost of the work. It's the arbiter of truth, right,
Speaker 1: because in this case, there's no central authority that decides
Speaker 1: what a valid block is so there's nobody there, there's
Speaker 1: no central authority that decides at Instead, it's the longest
Speaker 1: blockchain that wins and is recognized as the truth by
Speaker 1: the rest of the network based off that code. All right. Now,
Speaker 1: the more energy that bitcoin network uses, the more secure
Speaker 1: that its latest transaction is against attacks. So we we
Speaker 1: don't want the bitcoin network to use less energy. As
Speaker 1: a matter of fact, we want the bitcoin network to
Speaker 1: use more energy. The more energy it uses, the more
Speaker 1: resistant it is to attacks. Now, there's a lot of
Speaker 1: uh tiny or actually say smaller block chains that are
Speaker 1: not Bitcoin that have been victims to attacks. We call
Speaker 1: them attacks. So a single entity could temporarily get control
Speaker 1: of a bunch of processing power, so I can go
Speaker 1: rent it. Right now, I can go rent the hash
Speaker 1: power and for a few hundred thousand dollars or a
Speaker 1: few hundred for a few million dollars, I could rent
Speaker 1: that hashpower, that computer power, and I can attack a
Speaker 1: smaller network by taking over majority of the processing power.
Speaker 1: I could reorganize their blocks and do what's called a
Speaker 1: double spend, basically, create my money, create money from than air.
Speaker 1: All right, And and we've seen this happen over and
Speaker 1: over and over with these smaller coins, all right, And
Speaker 1: that's why this proof of work is important. And this
Speaker 1: is also why there will never be another Bitcoin, all right.
Speaker 1: And the reason why is because when other blockchains try
Speaker 1: to start a proof of work and set up like
Speaker 1: what Bitcoin has done, they don't have enough miners, enough
Speaker 1: computers supporting the network. There's not enough energy being used
Speaker 1: to secure it, and they get attacked all the time. Um. So,
Speaker 1: Like one good example is if we look at Bitcoin
Speaker 1: and then in two seventeen there was a fork of Bitcoin,
Speaker 1: and so bitcoin cash was spun off of that, and
Speaker 1: then bitcoin SV was spun off of that, and so
Speaker 1: a lot of people are saying, well, bitcoin cash is
Speaker 1: the real Bitcoin or Bitcoin SV, But both of those
Speaker 1: other blockchains have one percent or less of bitcoin network
Speaker 1: total processing power, all right, and they've both been hit
Speaker 1: by these attacks by these reorganizations. In fact, if just
Speaker 1: one percent of the Bitcoin miners decided that they wanted
Speaker 1: to just one percent of the mining miners and Bitcoin
Speaker 1: decided they want to attack on either of those two
Speaker 1: hard works, they could totally do it. But it's not
Speaker 1: true the other way. Bitcoin cash and bitcoin SV could
Speaker 1: not attack Bitcoin because there're only one percent of that.
Speaker 1: So that shows you the importance of the network effects.
Speaker 1: So anyone could copy Bitcoin, sure, they could fork it,
Speaker 1: no problem, but they can't replicate the network. They can't
Speaker 1: get the mining power that secures the network. All right.
Speaker 1: It would be like trying to copy, um, Facebook. I mean,
Speaker 1: I could probably hire developer for you know, ten dollars
Speaker 1: and build a very good copy of Facebook. But that
Speaker 1: doesn't mean I would have any traffic. That doesn't mean
Speaker 1: they can get all the users to come over, right. Uh,
Speaker 1: it would just be an empty shell. All right. Now
Speaker 1: let's compare that to a proof of steak. So that
Speaker 1: was proof of work. Hopefully that makes sense. I wasn't
Speaker 1: trying to go to too technical, but I want to
Speaker 1: give you this rough overview. Now I do want to
Speaker 1: say that this maybe doesn't matter that much. Um. Right now,
Speaker 1: you're hearing my voice come over the radio. How how
Speaker 1: is it that my voice from my studio is showing
Speaker 1: up in your car or your headphones? Do you know
Speaker 1: how that works? Of course the answer is no. Do
Speaker 1: you know who the Do you know who the developer
Speaker 1: is that designed this radio system? No? Of course you
Speaker 1: don't know that either. So none of this really matters, UM.
Speaker 1: But I think at a at a at an at
Speaker 1: least at least a high level, it's a good idea
Speaker 1: to understand this because there's a lot of confusion going
Speaker 1: in into the space, and I at least want to
Speaker 1: give you the two main you know, consensus mechanisms. You
Speaker 1: can understand that by the way. You're listening to Mark
Speaker 1: Moss the Mark mos Show. We're talking about bitcoin, we're
Speaker 1: talking about cryptocurrencies, and we're talking about the decentralized revolution.
Speaker 1: I'm explaining to you the difference of the two big
Speaker 1: consensus mechanisms, the proof of work, which we just went
Speaker 1: over with bitcoin, and then we're gonna talk about what
Speaker 1: proof of steak is and what's being done with that
Speaker 1: and how you should look at that UM again from
Speaker 1: a high level. Then we're gonna talk about defy, and
Speaker 1: we're gonna talk about n f T s and some
Speaker 1: danger that you may not be aware of in the
Speaker 1: n f T space, but I want you to be
Speaker 1: aware of it. So don't go away. I'm gonna be
Speaker 1: right back. Hey everyone, welcome back. You are listening to
Speaker 1: the Mark Moa Show, and we're talking about bitcoin. Of course,
Speaker 1: each and every week, and we're talking about cryptocurrencies and
Speaker 1: we're talking about the de centralized revolution. Now I was
Speaker 1: talking about how bitcoin, what what what what the decentralized
Speaker 1: technology is, and I'm explaining the two basic consensus mechanisms.
Speaker 1: Proof of work, which we just went over, which is
Speaker 1: what bitcoin a ethereum used today, and now we're going
Speaker 1: to talk about proof of steak, which is what a
Speaker 1: lot of other blockchains are using. And Ethereum is trying
Speaker 1: to transition from a proof of work to a proof
Speaker 1: of steak. Now, as I explained before the break, I
Speaker 1: said that proof of work is a system where miners
Speaker 1: compete with electricity and processing power to build the longest blockchain,
Speaker 1: which then becomes the accepted blockchain and the digital blockchain
Speaker 1: via a proof of work. Right, proof of work because
Speaker 1: they to prove their work by spinning that capital um.
Speaker 1: And it's proof of work because it's connected to real
Speaker 1: world natural resources. So they're taking a real world natural resource,
Speaker 1: electricity and converting it into a virtual asset. It's the
Speaker 1: only thing that's ever been done like this in the
Speaker 1: history of the world. All Right. It's been operated as
Speaker 1: proof of work since since it started in two thousand nine.
Speaker 1: Now Ethereum is the second largest network out there, and
Speaker 1: it's also operated proof of work as well since the beginning.
Speaker 1: But as I said, a lot of new smart contract
Speaker 1: block chains UM that have launched after that are now
Speaker 1: using this proof of steak network. Now, proof of steak
Speaker 1: is a system where holders of the cryptocurrency lock it
Speaker 1: up or they quote unquote steak um not like you
Speaker 1: eat but s T a k E. Steake their coins
Speaker 1: and by staking their coins by locking them up, they
Speaker 1: get to vote on the valid blockchain, and then they
Speaker 1: get rewarded with more coins for successfully creating the new
Speaker 1: blocks instead of like the proof of work, instead of
Speaker 1: having to commit electricity, instead of having to actually put
Speaker 1: money up for the electricity and the processing power to
Speaker 1: create new blocks on the blockchain. Instead, all they're doing
Speaker 1: is staking their coins. They're putting them up without actually
Speaker 1: giving them up. All right, now, proof of proof of
Speaker 1: work or simple right, there's no need to punish these
Speaker 1: bad miners. Remember, they're incentivized to do good work UM
Speaker 1: because if they do it wrong, they lose their UM,
Speaker 1: they lose the money they spent on electricity. Okay, easy
Speaker 1: um that they lose it they self inflict their own wound,
Speaker 1: and and so that that doesn't ever happen because there's
Speaker 1: a tangible connection between the blockchain and the real world
Speaker 1: resource of energy. But proof of stakes way more complex,
Speaker 1: way more complex than I can get into in this
Speaker 1: short segment. But there's no connection to the real world resources.
Speaker 1: There's a disconnect, and the system needs a way to
Speaker 1: punish the stakers that would improperly vote on the wrong chain.
Speaker 1: Now there's there's a very complex issue that doesn't have
Speaker 1: any UM way to do it, and that's part of
Speaker 1: the reason why Ethereum has been trying to move from
Speaker 1: proof of work to proof of steak for the last
Speaker 1: like four or five years and still hasn't been able
Speaker 1: to do it. It's such a complex issue. There's obviously
Speaker 1: other blockchains that are doing that, but they all have
Speaker 1: their problems. I don't have the time to dig into
Speaker 1: each one of those right now. But besides the larger
Speaker 1: amount of complexity that's involved UM, the trust that you
Speaker 1: have to give up so Bitcoin is what's known as
Speaker 1: trust to lists. You don't have to trust anybody because
Speaker 1: you can verify everything UM, but these are more complex.
Speaker 1: They don't have the trust and they have a bigger
Speaker 1: attack surface. Um, the bigger issue is that proof of
Speaker 1: steak is that it can be prone to centralization. And
Speaker 1: the entire revolution is decentralization. What is the problem we're
Speaker 1: trying to solve. We're trying to solve centralization. That's it.
Speaker 1: That's that's it. We're not trying to manage supply chains better.
Speaker 1: We're not trying to find a better way to buy
Speaker 1: tickets from ticket agencies. We're trying to solve centralization. And
Speaker 1: so the problem with of of steak is that's easy
Speaker 1: to be centralized. The proof of stake system basically says
Speaker 1: the more coins that I have, the more voting power
Speaker 1: I have, and those with the coins are also the
Speaker 1: ones that are earning new coins from staking. Now, since
Speaker 1: I don't need to expend any more resources to steak,
Speaker 1: then I can simply just increase my overall staking amount
Speaker 1: as I earn ongoing coins from my own staking rewards,
Speaker 1: which then exponentially grows my influence on the network over
Speaker 1: time and forever. And because of this, network dominance tends
Speaker 1: to lead to more network dominance. All right, so let
Speaker 1: me explain. Let me let me use an analogy. It'd
Speaker 1: be like a political system. Imagine a political system where
Speaker 1: you get a vote for every hundred dollars that you have,
Speaker 1: and then you also get paid a dollar by the
Speaker 1: government for casting each vote. So let's say that you're
Speaker 1: a school teacher and you have thirty thousand dollars in
Speaker 1: net worth, So you get three hundred votes and you
Speaker 1: earn three hundred dollars from the government for voting. You
Speaker 1: have thirty thousand, you get three votes, and you earned
Speaker 1: three hundred bucks for those votes. But then you have
Speaker 1: just Jeff Bezos with two hundred billion dollars in net worth,
Speaker 1: so he gets two billion votes and he earns two
Speaker 1: billion dollars from the government for voting. So now, in
Speaker 1: this system and this type of a system, he would
Speaker 1: be a more valuable citizen than the school teacher by
Speaker 1: a factor of a million, and he would also be
Speaker 1: getting paid more by the government for already being wealthy.
Speaker 1: Does that sound like a system that you want to
Speaker 1: live in, because it sure it doesn't sound like a
Speaker 1: system I want to live in. The rich only get richer.
Speaker 1: That leads to this centralization. Eventually, it would lead to
Speaker 1: a consolidation of power where a handful of multibillionaires would
Speaker 1: control all the vote votes and they would rule everything.
Speaker 1: And if it gets too centralized, it kind of defeats
Speaker 1: the purpose of a decentralized blockchain. Right now, who who
Speaker 1: has the most coins to stake right now today? Well,
Speaker 1: it's the people that create the blockchain, because they did
Speaker 1: what's called a pre mind. So when they created the blockchain,
Speaker 1: they gave themselves thirty, forty or seventy percent of the tokens.
Speaker 1: So you might think you hold a lot of tokens,
Speaker 1: but the creator might have. So guess what they're going
Speaker 1: to stake the most, and guess what they're always going
Speaker 1: to control the network? Sort of sounds like the central
Speaker 1: bank system that we have today, doesn't it. Let's keep
Speaker 1: going now, UM, I would That is why I would
Speaker 1: kind of look at these as as different things. If
Speaker 1: I was looking at a proof of steak model for
Speaker 1: UM a corporation, I mean, it's kind of like how
Speaker 1: corporation works. Right. If I buy stock in a corporation, UM,
Speaker 1: I get a vote, and the more stock I have
Speaker 1: than the more votes I get, and the more stock
Speaker 1: I have, the more dividends I get paid on my stock,
Speaker 1: which then means I own even more stock, which the
Speaker 1: means I get even more votes. So like that works
Speaker 1: pretty good. We kind of already have that model today.
Speaker 1: I don't see what's revolutionary about that. I mean, instead
Speaker 1: of a stock that I have in my E trade account.
Speaker 1: Now it's a token, But isn't it the same sort
Speaker 1: of a system? Sounds like it to me. Now. The
Speaker 1: thing you have to understand about money, like commodity money,
Speaker 1: like physical gold, um is a system that's always worked
Speaker 1: because the money has a cost. Um. Money that doesn't
Speaker 1: have a cost ultimately ends up being a being political
Speaker 1: in nature, So the people that are closer to the
Speaker 1: money have the most advantages, called the cancel on effect.
Speaker 1: All right, that's a problem. Now, there's so much to
Speaker 1: dig into here. I want to. I'd like to dig
Speaker 1: into some of the importance of why this matters. But man,
Speaker 1: we could just we could jump into so much some
Speaker 1: of the technical difficulties here. There's a lot to dig into,
Speaker 1: but I want to. I want to try to skip
Speaker 1: ahead here a little bit. Let's talk about um I
Speaker 1: want to. I want to. I want to cover some
Speaker 1: stable Well, let's talk about the decentral as a first, right,
Speaker 1: So how important is decentralization, Well, it depends right, Um,
Speaker 1: in a ball market or in a time, in a
Speaker 1: time when things are good and a time when there's
Speaker 1: no regulatory crackdowns, when there's no drama any of that,
Speaker 1: then it probably doesn't matter, right. Um. That's why Wall
Speaker 1: Street loves defy right and from a tactical sense, because
Speaker 1: they can understand the idea of leveraging liquidity. They can
Speaker 1: management exchanging, arbitrage and all these inefficiencies. They don't care
Speaker 1: about decentralization. They don't care about technical details, all right,
Speaker 1: But for cipherpunks, the creators, for people that are sound
Speaker 1: money advocates like myself, those who care about censorship, resistant immutability,
Speaker 1: and they care about the money supply being assured over decades,
Speaker 1: over centuries that I could keep my money. Um. Those
Speaker 1: who care about security laws, well they notice I care.
Speaker 1: So Wall Street probably doesn't care. I care. Um. As
Speaker 1: I was saying that the blockchain is basically an inefficient
Speaker 1: data base, and so some users are willing to trade
Speaker 1: inefficiency to ensure decentralization. That's basically tradeoff. So the tradeoff
Speaker 1: is do I want it to be decentralized or am
Speaker 1: I willing to and and and am I willing to
Speaker 1: be be inefficient or do I want to be efficient
Speaker 1: and centralized? That leads us into defy and then that
Speaker 1: leads us into n f t s. There's some danger
Speaker 1: lurking and n f t s that probably you're not
Speaker 1: aware of. And I want to explain to you what's
Speaker 1: going on. So don't go away. I'm gonna be right
Speaker 1: back after this break. All right, welcome back. You're listening
Speaker 1: to the Mark Moss Show, and we're talking about bitcoin.
Speaker 1: We're talking about cryptocurrencies. We're talking about the decentralized revolution,
Speaker 1: and we're talking about the difference in what makes these decentralized.
Speaker 1: We're talking about the consensus mechanism of bitcoin, and we're
Speaker 1: talking about how Bitcoin and etherem today use what's called
Speaker 1: proof of work, and how these new smart contract platforms
Speaker 1: are using something called proof of steak. And I was
Speaker 1: breaking those down for you. Now, if you've missed all this, UM,
Speaker 1: just know that you can go catch it on the
Speaker 1: catch the podcast this week you'll be be able to
Speaker 1: hear this back. UM. You can just search Mark Moss
Speaker 1: on my Heart and you can find the podcast. You
Speaker 1: can listen to that. UM, because I've gone over some
Speaker 1: important stuff, I can't recap it all. But I was
Speaker 1: basically talking about the trade off of going fully decentralized
Speaker 1: and being inefficient, and then being totally centralized and being
Speaker 1: totally efficient, right, And so those are the two sides
Speaker 1: of the coin, the two the two trade offs. There.
Speaker 1: There's so much more we can dig into UM, but
Speaker 1: we're kind of running out of time, and so I
Speaker 1: want to jump into UM something else. I want to
Speaker 1: jump into some DEFY. I want to jump into some define,
Speaker 1: jump into some n f T s, and maybe I
Speaker 1: may have to bring these back for another show and
Speaker 1: UM depend on some feedback, maybe we'll digging deeper. All right,
Speaker 1: So let's talk about D five for a second. So
Speaker 1: UM DEFY as this stands for decentralized Finance, and then
Speaker 1: there's also n f T s and so these are
Speaker 1: probably the two most popular mark contract applications that are
Speaker 1: happening on these proof of stake platforms. UM. These are,
Speaker 1: you know, aside from just storing and transmitting value like
Speaker 1: what happens on on Bitcoin, and DEFY includes decentralized exchanges
Speaker 1: where then users can trade various tokens just between themselves,
Speaker 1: and it includes UM, you know, decentralized platforms for leveraging
Speaker 1: tokens UM, so then users can then earn yield by
Speaker 1: lending them out or they can pay yield to borrow
Speaker 1: with collateral and then UM. What we've seen is that
Speaker 1: many of them still have these very centralized companies that
Speaker 1: run them. So you might have heard of unite swap
Speaker 1: or compound or those are like decentralized exchanges or ways
Speaker 1: that you can earn like either loan out or earn yield,
Speaker 1: But both of these are centralized venture capital backed companies.
Speaker 1: Right now, they do have an open source code component
Speaker 1: UM and you can kind of see that, but they
Speaker 1: are backed by centralized VC companies. Now, n f t
Speaker 1: s are what's called a non fungible token. So a
Speaker 1: fungible token means one is worth one. So if I
Speaker 1: have an old, torn up, marked up dollar bill, it's
Speaker 1: worth a brand new dollar bill. One dollar bill is
Speaker 1: worth the dollar bill, doesn't matter how old or what
Speaker 1: condition it's in. One bitcoin is worth one bitcoin. One
Speaker 1: ethereum is worth one ethereum. But an n f T
Speaker 1: is a non fungible that that means one token isn't
Speaker 1: worth one token. These are things like digital art UM,
Speaker 1: unique game items, digital movie tickets, or UM. Things that
Speaker 1: exist as unique items on a blockchain, and there's a
Speaker 1: lot of nuance in there. I can give me some
Speaker 1: feedback if I'm gonna dig into it more. UM. And
Speaker 1: then we have things like digital art UM. So for example, UM,
Speaker 1: digital art doesn't really exist on the blockchain, but rather
Speaker 1: there's a pointer on the blockchain that links to where
Speaker 1: the image is stored somewhere else. UM. It's kind of
Speaker 1: like owning a signed receipt from the artist of that image.
Speaker 1: So you've got a picture from an artist and then
Speaker 1: he gives you a receipt somewhere. Then we have unique
Speaker 1: game items, and these would be like digital pets or
Speaker 1: in game items or in game land or property. UM
Speaker 1: could be a skin for your gun or a new
Speaker 1: backpack or something like that, and they can be that.
Speaker 1: These can be owned, they can be sold to other players,
Speaker 1: or even removed from the game potentially at some point,
Speaker 1: and maybe they could even go into another game. I
Speaker 1: think that's kind of where the future goes, all right.
Speaker 1: But one of my concerns is that the biggest use
Speaker 1: case for decentralized apps is that a lot of these
Speaker 1: use case are are there. It's a circular economy, it's
Speaker 1: all within itself. So let let's let let me give
Speaker 1: an example. So Ethereum is heavily used for decentralized exchanges
Speaker 1: of crypto tokens crypto stable coins that serve as units
Speaker 1: of account for trading these crypto tokens, and then used
Speaker 1: for lending and earning interest on crypto tokens, which is
Speaker 1: a practice that is served as liquidity and borrowing sources
Speaker 1: for traders of crypto tokens. So to lesser extent, it's
Speaker 1: also used for gamified ways to earn or trade various
Speaker 1: crypto tokens. So it's a big operating system powered by
Speaker 1: crypto tokens for the purpose of moving around crypto tokens.
Speaker 1: That makes sense. It's one giant circular economy. It's it's
Speaker 1: an operating system powered by crypto tokens for the purpose
Speaker 1: of moving around crypto tokens. That's it. Now, a healthy
Speaker 1: banking system in the real world would consist of people
Speaker 1: depositing money and the bank's making various loans for mortgages
Speaker 1: or businesses that would generate real world utility, not just
Speaker 1: system powered by cryptotkens for the purpose of moving around cryptotokens.
Speaker 1: All right. According to the largest blockchain analytics firm called
Speaker 1: chain Analysis, DEFY is almost entirely a trading, leveraging and
Speaker 1: arbitrage environment for institutional scale traders and professional whales, with
Speaker 1: hardly with almost no individual rate reta traders being in
Speaker 1: the system. So while all these individual people thinking that
Speaker 1: defies the coolest thing in the world, you probably don't
Speaker 1: realize that. The largest analysts company, Chainalysis, said that all
Speaker 1: of almost entirely all trading leverage and arbitroed is done
Speaker 1: on an institutional scale and professional whales. Um. There's a
Speaker 1: saying that if you're playing a game of poker and
Speaker 1: you don't know who the sucker is the table, you're
Speaker 1: the sucker. And unfortunately that's pretty much the case in
Speaker 1: the DeFi space. You have institutions and professional whales that
Speaker 1: are using this system and you're probably the sucker at
Speaker 1: the table. So be aware of that now. The same
Speaker 1: is also generally true for n f T s. There's
Speaker 1: a huge um frenzy speculation around crypto punks. You might
Speaker 1: have heard of that, for example, Uh, it's crazy that
Speaker 1: everybody's all of a sudden and art collector everyone's in
Speaker 1: art collector all of a sudden. But the key problem
Speaker 1: is that these types of n f t s are
Speaker 1: very easy to manipulate. And this is what you need
Speaker 1: to be aware of. This is the danger. By the way,
Speaker 1: you're into the Markmas show, we're talking about bitcoin and
Speaker 1: cryptocurrencies and the decentralized revolution um and I'm just one
Speaker 1: are the dangers of n f t s that they're
Speaker 1: very easily to manipulate because each one has a unique price,
Speaker 1: and because each one has a unique price, it's very
Speaker 1: hard to establish what the real demand is, what the
Speaker 1: real market value is. Now, there's two scams that can
Speaker 1: be done very easily, and they're done on a regular basis,
Speaker 1: And I want you to be aware of these two
Speaker 1: scams right um and And they're done most easily because
Speaker 1: it's not a fungible liquid asset. So the first scam
Speaker 1: is to basically bit up buyer, bit up the asset prices.
Speaker 1: So because I can create a bunch of a theory addresses,
Speaker 1: I could buy an n f T, I can buy
Speaker 1: crypto punk and I could I could buy it for
Speaker 1: a hundred dollars and I could sell it to my
Speaker 1: other address for five dollars, sell to my other edges
Speaker 1: for a thousand dollars, my other address for a million dollars,
Speaker 1: and then you buy it for me for one point
Speaker 1: one million. But then there's no one else to buy it.
Speaker 1: You're the unsuspecting newcomer. You're the sucker at the table
Speaker 1: because I created a market, or me and a bunch
Speaker 1: of friends created a market for this, and when we
Speaker 1: finally sell it to you as an outsider, you find
Speaker 1: yourself without a buyer. And it happens all the time.
Speaker 1: So um, you can't know there's there's it's very difficult
Speaker 1: to find out how this happens until you're the sucker.
Speaker 1: You get stuck with this asset. So it's something to
Speaker 1: be very very careful of. Another scam that happens is
Speaker 1: to create a big loss to reduce tax liabilities in
Speaker 1: a fraudulent way. Um. And so again you create several
Speaker 1: wallets like I said, um, and you can link one
Speaker 1: to your real name, and then all the other ones
Speaker 1: are linked to an anonymous name. So then you buy
Speaker 1: an n f T with an anonymous account that you
Speaker 1: control for stay two hundred. You sell it to another
Speaker 1: anonymous account for two and fifty. Then you sell it
Speaker 1: to your real name account for five hundred thousand. Your
Speaker 1: real name account then sells it to another one of
Speaker 1: your anonymous accounts for two hundred thousand, which then locks
Speaker 1: in a massive three hundred thousand dollar loss. Then with
Speaker 1: that loss, you can write that off of your taxes.
Speaker 1: Your anonymous account can then potentially sell it for roughly
Speaker 1: what you paid for it the two since the market
Speaker 1: value didn't change, but you can lock in that loss. Now,
Speaker 1: to be clear, this is both illegal. I don't want
Speaker 1: you doing either of these unless you like spending your
Speaker 1: vacations in the prison with handcuffs on um. But these
Speaker 1: are scams that are happening, and I want you to
Speaker 1: be aware of them because I don't want you to
Speaker 1: be the sucker at the table. Um. You might wonder
Speaker 1: why some of these n f T s take off
Speaker 1: like they do, and now you probably know why. Now
Speaker 1: I'm not saying that all liquid and price action is
Speaker 1: a fraud, but like I said, these are things that
Speaker 1: you should be aware of. I'm just doing my best
Speaker 1: to educate you. Here. Public service announcement. Now you're listening
Speaker 1: to the Mark Moss Show. Of course, we're talking about bitcoin,
Speaker 1: We're talking about cryptocurrencies, We're talking about the decentralized revolution.
Speaker 1: We talked about the different consensus mechanisms of proof of
Speaker 1: work versus proof of steak. We talked about defile a
Speaker 1: little bit. We talked about n f t S a
Speaker 1: little bit. If you want to hear more about any
Speaker 1: of these topics and want me to dig in deeper,
Speaker 1: make sure to give me some feedback than that you
Speaker 1: listen to Mark Moss, and thanks for listening