WEBVTT - Bonus: The Crypto Story by Matt Levine - Part 7

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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<v Speaker 1>and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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<v Speaker 1>Bloomberg News. Let me cut to the chase. Matt Levine,

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<v Speaker 1>my colleague on the Bloomberg Opinion side of the house,

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<v Speaker 1>is perhaps the greatest finance blogger ever to do it,

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<v Speaker 1>and in what is both a flex and a service,

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<v Speaker 1>He's just written tens of thousands of words on the

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<v Speaker 1>subject of crypto for a special issue of Bloomberg Business Week.

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<v Speaker 1>Matt's gone deep into the blockchain to break down its origins,

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<v Speaker 1>it's possible, futures, and the current state of a technology

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<v Speaker 1>that's showing up everywhere in industries ranging from finance to

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<v Speaker 1>shipping too, of course video games. And we're going to

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<v Speaker 1>be bringing his exploration to you in audio form thanks

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<v Speaker 1>to the talents of Bloomberg editor and professional voice actor

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<v Speaker 1>Mark Ledoff. You'll get weekly chapters of the special Crypto

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<v Speaker 1>issue of Bloomberg Business Week. Welcome to the seventh chapter

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<v Speaker 1>of the special audio edition of the Bloomberg Business Week

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<v Speaker 1>Crypto issue, written by Matt Levine and narrated by Mark Ladoff.

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<v Speaker 1>If you need to catch up on a previous chapter.

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<v Speaker 1>You can find episodes right here in the Bloomberg Crypto

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<v Speaker 1>podcast feed. Part four Trust Money Community. Let me tell

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<v Speaker 1>a couple of stories about crypto and society. A trust

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<v Speaker 1>one story goes like this, We live in a world

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<v Speaker 1>of trust, that trust pervades everything we do. We're spoiled.

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<v Speaker 1>The institutions we deal with every day are trustworthy. Not

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<v Speaker 1>all of them, not all the time, not in every way,

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<v Speaker 1>but quite a lot of them to a high degree.

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<v Speaker 1>We put money in the bank, and when we go

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<v Speaker 1>to take it out, it's there. Crypto Satoshi Nakamoto and

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<v Speaker 1>his disciples said no, no, no, trust is bad. Don't

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<v Speaker 1>trust your bank. Use immutable code, verify every transaction for yourself,

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<v Speaker 1>or download open source code and verify that it works correctly,

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<v Speaker 1>and then use it to verify every transaction for yourself,

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<v Speaker 1>or at least use a network in which that's possible

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<v Speaker 1>and in which economic incentives demonstrably make it likely that

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<v Speaker 1>it will happen. And do all of this in a

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<v Speaker 1>system that's resistant to changes, that can't be controlled by

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<v Speaker 1>governments or banks, that's immune to the rules of wider society.

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<v Speaker 1>This had an appeal, and crypto became very valuable, and

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<v Speaker 1>people looked to put their money to work in crypto,

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<v Speaker 1>and they trusted people over and over again. They trusted

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<v Speaker 1>Quadriga and Terra and Voyager and Celsius and dozens of

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<v Speaker 1>other projects that failed or ran off with their money

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<v Speaker 1>or got hacked. They just fell over themselves to trust people.

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<v Speaker 1>Why did they do this, Well, there's a common thread

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<v Speaker 1>in these kinds of things. The people who are easiest

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<v Speaker 1>to pull in are often the ones who think they're

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<v Speaker 1>the most independent minded and cynical. Either the bank is

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<v Speaker 1>lying or Celsius is lying. Celsius told people flattering their

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<v Speaker 1>unjustified belief that they know the real score. But there's

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<v Speaker 1>something else too. The people who trusted Celsius weren't tripped

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<v Speaker 1>up only by their belief that they were outsmarting the system,

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<v Speaker 1>though there was that. They also they thought Celsius was

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<v Speaker 1>a bank. It looked sort of like a bank. It

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<v Speaker 1>did things with crypto that were banklike. They were familiar

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<v Speaker 1>with how banks work. They understood that banks are safe,

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<v Speaker 1>that if you put money in a bank you can

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<v Speaker 1>get it act. They looked at Celsius and thought, well,

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<v Speaker 1>this is a big thing. It has a nice website.

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<v Speaker 1>It's available to Americans. Surely, if it was a problem,

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<v Speaker 1>someone would have done something about it. Why didn't anyone

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<v Speaker 1>do anything about it? Why were these platforms allowed to

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<v Speaker 1>take money from retail customers, run high levels of leverage,

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<v Speaker 1>and blow themselves up. I think the basic answer is

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<v Speaker 1>that regulatory authorities are still very much catching up to

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<v Speaker 1>how crypto works and who should regulate it. There's a

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<v Speaker 1>very well understood system for regulating a bank. There are

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<v Speaker 1>bank examiners who know how banks work, and who visit

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<v Speaker 1>banks regularly to make sure they're working properly. In crypto,

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<v Speaker 1>big platforms are often decentralized and vaguely stateless, and even

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<v Speaker 1>in the US, there's a lot of jurisdictional jousting over

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<v Speaker 1>which regulators get to regulate crypto and how they should

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<v Speaker 1>do it. If you launch a terrible crypto platform, it

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<v Speaker 1>might take regulators a long time to get around to

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<v Speaker 1>understanding what you're doing and figuring out how to stop you.

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<v Speaker 1>You and crypto has been very much in a move

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<v Speaker 1>fast and break things mode, so it broke a lot

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<v Speaker 1>of things before the regulators could catch up. There's something

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<v Speaker 1>a bit alarming about all this Crypto is in a

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<v Speaker 1>way about rejecting the institutions of society, about being trustless

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<v Speaker 1>and censorship resistant, But it quietly free rides on people's

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<v Speaker 1>deep reservoir of trust in those institutions. People are so

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<v Speaker 1>used to trusting banks that when Celsius told them not

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<v Speaker 1>to trust banks, they said, ah, yes, okay, then trusted

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<v Speaker 1>Celsius to work like a bank, to be regulated like

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<v Speaker 1>a bank. They didn't worry about celsius opacity and leverage.

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<v Speaker 1>They didn't do their own due diligence on its loans

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<v Speaker 1>and audit its defied positions, and demand irrefutable proof of

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<v Speaker 1>its soundness. It promised to pay them back, and that

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<v Speaker 1>was good enough for them. But there's something hopeful about

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<v Speaker 1>it too. Trust in institutions is so strong and resilient

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<v Speaker 1>that all of crypto's bluster can't stamp it out. Not

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<v Speaker 1>your keys, not your coins, Put your trust only in

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<v Speaker 1>verifiable code. Crypto evangelists yelled, and people heard them and said, yes,

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<v Speaker 1>that is nice, but I'm busy. I'm going to trust

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<v Speaker 1>these nice strangers with my bitcoin. Crypto in its origins,

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<v Speaker 1>was about abandoning the system of social trust that's been

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<v Speaker 1>built up over centuries and replacing it with cryptographic proof,

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<v Speaker 1>and then it got going and rebuilt systems of trust

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<v Speaker 1>all over again. What a nice vote of confidence in

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<v Speaker 1>the idea of trust. One thing crypto has done is

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<v Speaker 1>show just how valuable trust is b money. There's a

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<v Speaker 1>related story about money. One way to think of money

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<v Speaker 1>is that it's a system of social credit. Society has

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<v Speaker 1>mechanisms capitalism, politics, etcetera to allocate resources with a rough

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<v Speaker 1>heuristic of the more good stuff you do for society,

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<v Speaker 1>the more good stuff you get for yourself. Money is

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<v Speaker 1>a rough way of keeping track of that. If you

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<v Speaker 1>do good stuff for other people, they give you money

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<v Speaker 1>which you can use to buy good stuff for yourself.

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<v Speaker 1>Another way to think about money is that it's some

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<v Speaker 1>sort of external objective fact. If you have money, it's

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<v Speaker 1>your money, and society has nothing to say about whether

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<v Speaker 1>you can keep it or what you can do with it.

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<v Speaker 1>Crypto starts from the second view. Your bitcoin are yours immutably.

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<v Speaker 1>They're controlled only by your private key, and no government

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<v Speaker 1>or bank can take them away from you. But the

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<v Speaker 1>history of crypto since Satoshi has undermined this view. If

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<v Speaker 1>you got your bitcoin illegitimately, the government can trace them

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<v Speaker 1>and stop you from spending them. There are still gatekeepers

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<v Speaker 1>crypto exchanges and FIAT off ramps and banks that decide

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<v Speaker 1>what you can do with your money. Crypto might be

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<v Speaker 1>immutable and censorship resistant, but its interactions with the real

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<v Speaker 1>world are not. Not just that crypto isn't even immutable,

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<v Speaker 1>not really. In twenty sixteen, an important smart contract on

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<v Speaker 1>the Ethereum blockchain called the Tao got hacked. Dow is

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<v Speaker 1>now a generic term, but this was the DOW, the

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<v Speaker 1>first of its name. There was a flaw in the

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<v Speaker 1>contract that allowed a hacker to drain a lot of

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<v Speaker 1>money from it, and he did. Ethereum was a new technology,

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<v Speaker 1>so the hack was a big deal. This hack was controversial.

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<v Speaker 1>There was controversy about whether it was even a hack.

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<v Speaker 1>Some people said, look, if the code of the smart

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<v Speaker 1>contract allowed the hacker to do this, then it was allowed.

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<v Speaker 1>There's no external standard of validity, just the code, and

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<v Speaker 1>if it happened in the code, it's fine. If we

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<v Speaker 1>reverse this transaction, we will destroy the essence of the blockchain,

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<v Speaker 1>which is the irreversibility of transactions. Other people said, no,

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<v Speaker 1>that's nuts. This was a big hack and lots of

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<v Speaker 1>people lost money. It was clear enough to humans anyway

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<v Speaker 1>that this was not how people intended the smart contract

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<v Speaker 1>to work. Even if it was in fact how the

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<v Speaker 1>smart contract worked, sometimes the code is wrong. The Ethereum

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<v Speaker 1>network decided to roll back the blockchain and reverse the hack.

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<v Speaker 1>That's hard to do. You couldn't just amass a bunch

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<v Speaker 1>of computer power yourself and hack the Ethereum blockchain and

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<v Speaker 1>reverse transactions. But if everyone in Ethereum agrees to do it,

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<v Speaker 1>they can, or if enough of them did. In fact,

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<v Speaker 1>a minority of dissenters split off, forking the Ethereum blockchain

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<v Speaker 1>and starting their own network, now called Ethereum. Classic cryptocurrency

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<v Speaker 1>isn't money that's totally immune to censorship, that's atomic and

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<v Speaker 1>individual and immutable. It's money that's controlled by consensus, much

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<v Speaker 1>like dollars are. It's a different form of consensus, proof

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<v Speaker 1>of work, mining, proof of stake, validation, decentralized communities, dows,

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<v Speaker 1>discord chats. But the thing that gives you the money,

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<v Speaker 1>and that makes the money valuable is that consensus. Money

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<v Speaker 1>is a social fact, even when the money is bit

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<v Speaker 1>point or ether see community. Here's another more speculative story.

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<v Speaker 1>The most valuable thing in human life. This story begins,

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<v Speaker 1>is connection, being with your friends, making friends, feeling esteemed

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<v Speaker 1>by your peers. These are the things that give life meaning. Sure, sure, sure,

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<v Speaker 1>whatever you say, because this feels fuzzy and fake. But

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<v Speaker 1>look how rich Mark Zuckerberg is. If you'd said a

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<v Speaker 1>giant contributor to us gross domestic product is the friends

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<v Speaker 1>we made along the way, that wouldn't have made any sense.

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<v Speaker 1>Now Facebook is worth almost half a trillion dollars, though

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<v Speaker 1>to be fair, it's changed its name to meta platforms,

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<v Speaker 1>to markets pivot away from friendships and to markets pivot

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<v Speaker 1>to the metaverse. I don't know what the metaverse is,

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<v Speaker 1>but I gather that the metaverse means something like our lives,

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<v Speaker 1>our social lives, are intellectual lives, are professional lives, are

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<v Speaker 1>esthetic lives. The things that we do all day and

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<v Speaker 1>that give our lives meaning will take place increasingly on

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<v Speaker 1>interconnected computers. Our reality will be intermediated increasingly by computers

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<v Speaker 1>and the Internet. Human social life moving to the Internet

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<v Speaker 1>has economic value, it turns out, though, if you explain

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<v Speaker 1>the mechanism, it seems remarkably trivial. If people talk to

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<v Speaker 1>their friends about vacuums and you show them an ad

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<v Speaker 1>about vacuums. They'll probably buy a vacuum. If we intermediate

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<v Speaker 1>between people's friendships, we can serve ads. A key lesson

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<v Speaker 1>of crypto is a bunch of people can get together

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<v Speaker 1>online and make their community have economic value and then

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<v Speaker 1>capture that value for themselves. If you explain the mechanism

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<v Speaker 1>for that, it sounds even worse. Well, see, there's this

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<v Speaker 1>token of membership in the community, and it's up this week. Also,

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<v Speaker 1>the tokens are JPEGs of monkeys. But look, pretty soon,

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<v Speaker 1>what are we going to sell each other? Online communities

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<v Speaker 1>are valuable. There's money to be made. Why shouldn't the

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<v Speaker 1>community members get the money. We'll be right back with

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<v Speaker 1>more from Bloomberg Business Week Special Crypto issue, written by

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<v Speaker 1>Matt Levine a narrated by Mark Leedoff d Finance. There

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<v Speaker 1>are lots of online communities, though one is board Ape

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<v Speaker 1>Yacht Club, a self selected club where you become a

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<v Speaker 1>member by buying an expensive membership token. The value of

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<v Speaker 1>that community is I guess you feel cool and exclusive.

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<v Speaker 1>Maybe you befriend a celebrity or a venture capitalist. Bonding

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<v Speaker 1>over your apes or their social networking Facebook is valuable.

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<v Speaker 1>Make a neo Facebook. Give people a token, let them

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<v Speaker 1>keep the value for themselves. Advertise can get your data

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<v Speaker 1>only if they pay you in tokens you tell them.

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<v Speaker 1>Or you can earn tokens for posting, which you can

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<v Speaker 1>then use to pay other people for posting why not.

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<v Speaker 1>Or gaming. If you buy a laser in this game,

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<v Speaker 1>it's an n f T and it's yours to keep forever.

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<v Speaker 1>Maybe you can use it in another game why not.

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<v Speaker 1>These are standard claims about web three that leave me

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<v Speaker 1>mostly cold. I don't want to be in the advertising,

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<v Speaker 1>data selling, or computer game arms dealing businesses, but other

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<v Speaker 1>online communities are defy like in some crude sense, what

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<v Speaker 1>decentralized finances is a big community of people who get

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<v Speaker 1>together to pretend to trade financial assets, or rather who

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<v Speaker 1>trade financial assets in a sort of virtual world. They've

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<v Speaker 1>built derivatives exchanges and secured lending protocols and new ways

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<v Speaker 1>to do market making. But instead of trading stocks or bonds,

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<v Speaker 1>they trade tokens that they made up, and those tokens

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<v Speaker 1>are value able in part because they're linked to other

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<v Speaker 1>online communities. You can use defy to buy ether that

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<v Speaker 1>you then use to buy n f T s to

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<v Speaker 1>become a board ape owner, but also in part because

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<v Speaker 1>defy is itself an online community or cluster of communities,

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<v Speaker 1>and the tokens it trades are points in that community.

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<v Speaker 1>If you build a cool trading platform or execute a

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<v Speaker 1>cool trade, you'll earn tokens, which you can spend on

0:14:25.640 --> 0:14:30.240
<v Speaker 1>other cool trading platforms or trades. Talented financial traders are

0:14:30.240 --> 0:14:33.520
<v Speaker 1>willing to work on projects to get those tokens. If

0:14:33.600 --> 0:14:36.920
<v Speaker 1>you had some of those tokens, you could hire those traders.

0:14:37.880 --> 0:14:41.280
<v Speaker 1>A problem and an advantage of crypto is that it

0:14:41.400 --> 0:14:45.840
<v Speaker 1>financializes everything. What if reading your favorite book made you

0:14:45.920 --> 0:14:49.920
<v Speaker 1>an investor in its stock. It's a story that only

0:14:49.960 --> 0:14:53.520
<v Speaker 1>a venture capitalist could love. On the other hand, it's

0:14:53.560 --> 0:14:57.960
<v Speaker 1>a story that venture capitalists love. A minimalist case for

0:14:58.000 --> 0:15:01.760
<v Speaker 1>crypto is it's an efficient way to get venture capitalists

0:15:01.800 --> 0:15:05.960
<v Speaker 1>to put money into software projects, or it's a ponzi.

0:15:06.680 --> 0:15:09.280
<v Speaker 1>The Web three vision of having the customers of every

0:15:09.280 --> 0:15:12.560
<v Speaker 1>project also be its investors works well in times of

0:15:12.600 --> 0:15:17.400
<v Speaker 1>speculative excess, but is disastrous in a crash. All our

0:15:17.440 --> 0:15:20.680
<v Speaker 1>customers have a stake in our success is great when

0:15:20.720 --> 0:15:23.560
<v Speaker 1>token prices go up, but it also means that all

0:15:23.600 --> 0:15:27.400
<v Speaker 1>your customers become poorer when token prices go down, which

0:15:27.440 --> 0:15:31.320
<v Speaker 1>makes it hard to attract customers. But we've only really

0:15:31.400 --> 0:15:35.520
<v Speaker 1>seen the boom. The problem with making every product also

0:15:35.560 --> 0:15:37.760
<v Speaker 1>a ponzi is that you can't be sure if your

0:15:37.800 --> 0:15:41.520
<v Speaker 1>customers are there for the product or the ponzi. But

0:15:41.600 --> 0:15:45.040
<v Speaker 1>when it collapses, you can if they're still there. If

0:15:45.040 --> 0:15:47.880
<v Speaker 1>they still use your product without getting rich off the token,

0:15:48.240 --> 0:15:52.440
<v Speaker 1>then that means your product is promising. If not, well,

0:15:52.800 --> 0:15:57.200
<v Speaker 1>you ran a ponzi. The great speculative frenzy of crypto

0:15:57.240 --> 0:15:59.640
<v Speaker 1>and Web three over the last few years drew a

0:15:59.640 --> 0:16:02.840
<v Speaker 1>lot of money and attention and talent into the crypto world.

0:16:03.480 --> 0:16:05.840
<v Speaker 1>A great deal of that money and attention and talent

0:16:05.920 --> 0:16:10.200
<v Speaker 1>went strictly to optimizing the speculative frenzy, to tweaking the

0:16:10.240 --> 0:16:13.120
<v Speaker 1>token omics and leveraging the bets so that people could

0:16:13.160 --> 0:16:16.520
<v Speaker 1>make as much money as possible without actually building anything.

0:16:17.480 --> 0:16:21.000
<v Speaker 1>Some of it probably went into building, though now the

0:16:21.000 --> 0:16:26.200
<v Speaker 1>speculative frenzy has, if not disappeared, at least cooled. Now

0:16:26.240 --> 0:16:28.520
<v Speaker 1>if you're trying to raise money for a Web three project,

0:16:28.880 --> 0:16:32.520
<v Speaker 1>it should probably do something besides issuing a token that

0:16:32.560 --> 0:16:36.040
<v Speaker 1>goes up. If it creates value for people. If the

0:16:36.040 --> 0:16:38.720
<v Speaker 1>product is something that people want, then the tokens will

0:16:38.760 --> 0:16:41.920
<v Speaker 1>take care of themselves. Crypto people have a lot to

0:16:42.000 --> 0:16:46.560
<v Speaker 1>prove on that front. One reason Crisis and Crypto didn't

0:16:46.560 --> 0:16:49.560
<v Speaker 1>spark a contagion is that it has so few connections

0:16:49.560 --> 0:16:52.600
<v Speaker 1>to things that matter to people. They play games and

0:16:52.680 --> 0:16:55.600
<v Speaker 1>gamble on the blockchain, but they don't have mortgages there.

0:16:56.680 --> 0:16:59.960
<v Speaker 1>Perhaps this is all a self referential sinkhole for smart

0:17:00.120 --> 0:17:03.360
<v Speaker 1>finance people, but honestly, it would be weird if that's

0:17:03.360 --> 0:17:06.120
<v Speaker 1>all it ever turned out to be. If so many

0:17:06.200 --> 0:17:09.680
<v Speaker 1>smart finance people have moved into the crypto financial system,

0:17:09.720 --> 0:17:12.440
<v Speaker 1>if they find it so much more enjoyable and functional

0:17:12.480 --> 0:17:16.880
<v Speaker 1>and productive than the traditional financial system, surely they'll eventually

0:17:16.920 --> 0:17:21.000
<v Speaker 1>figure out how to make it, you know, useful. Here's

0:17:21.040 --> 0:17:24.200
<v Speaker 1>another way to tell this story. There's the real world,

0:17:24.520 --> 0:17:27.400
<v Speaker 1>and people do stuff in the real world. They grow

0:17:27.480 --> 0:17:31.280
<v Speaker 1>food and build houses. Over many centuries, a financial system

0:17:31.320 --> 0:17:34.560
<v Speaker 1>grew up as an adjunct to the real world. That

0:17:34.600 --> 0:17:37.280
<v Speaker 1>financial system enabled people to do more stuff in the

0:17:37.280 --> 0:17:41.119
<v Speaker 1>real world. They could build railroads, or semiconductor factories or

0:17:41.200 --> 0:17:44.560
<v Speaker 1>electric cars because they could raise money from strangers to

0:17:44.600 --> 0:17:48.520
<v Speaker 1>fund their activities. They could buy bigger houses because they

0:17:48.560 --> 0:17:52.200
<v Speaker 1>could borrow money from banks. They could also trade out

0:17:52.240 --> 0:17:54.960
<v Speaker 1>of the money call options on game stop because that's

0:17:55.000 --> 0:17:57.440
<v Speaker 1>fun and you can make memes about it. But that's

0:17:57.480 --> 0:18:00.600
<v Speaker 1>an accidental feature of a financial system that mostly does

0:18:00.680 --> 0:18:04.280
<v Speaker 1>serious stuff in the real world. By two thousand and

0:18:04.320 --> 0:18:09.040
<v Speaker 1>eight or two, that system looked pretty abstract. When you

0:18:09.040 --> 0:18:12.239
<v Speaker 1>think about modern finance, you often think about things like

0:18:12.280 --> 0:18:15.480
<v Speaker 1>those game stop options, or the system of payment for

0:18:15.600 --> 0:18:19.800
<v Speaker 1>order flow that enables their trading, or synthetic collateralized debt

0:18:19.800 --> 0:18:23.280
<v Speaker 1>obligations referencing other c d O s, referencing pools of

0:18:23.359 --> 0:18:27.480
<v Speaker 1>mortgage backed securities. There's a house there somewhere under the

0:18:27.520 --> 0:18:32.240
<v Speaker 1>CDO squares. All the sophisticated modern finance can be traced back,

0:18:32.400 --> 0:18:35.879
<v Speaker 1>step by step to the real world. Sure it's a

0:18:35.880 --> 0:18:38.600
<v Speaker 1>lot of steps now, but the important point is that

0:18:38.680 --> 0:18:42.920
<v Speaker 1>sophisticated modern finance was built up step by step from

0:18:42.960 --> 0:18:47.280
<v Speaker 1>the real world. The real world came first, then finance,

0:18:47.600 --> 0:18:52.840
<v Speaker 1>then the more complicated epiphenomena of finance. Crypto, meanwhile, has

0:18:52.880 --> 0:18:56.920
<v Speaker 1>built a financial system from first principles, pure and pleasing

0:18:56.960 --> 0:19:00.440
<v Speaker 1>on its own, unsullied by contact with the real world.

0:19:03.160 --> 0:19:06.120
<v Speaker 1>Coming up next, you'll hear more from Matt Levine's special

0:19:06.200 --> 0:19:09.719
<v Speaker 1>Crypto issue of Bloomberg Business Week, narrated by Mark Ladoff.

0:19:18.560 --> 0:19:22.240
<v Speaker 1>I exaggerate the basic function of sending money using crypto.

0:19:22.440 --> 0:19:28.840
<v Speaker 1>Satoshi's original goal is fairly practical. But otherwise that's interesting

0:19:28.920 --> 0:19:32.960
<v Speaker 1>as an object of esthetic contemplation. And I've enjoyed contemplating it,

0:19:33.240 --> 0:19:36.040
<v Speaker 1>and I hope you have to. And it's attracted a

0:19:36.040 --> 0:19:39.280
<v Speaker 1>lot of finance people who also enjoy contemplating it and

0:19:39.320 --> 0:19:42.600
<v Speaker 1>getting rich. And their task is to build back down,

0:19:42.880 --> 0:19:46.080
<v Speaker 1>step by step, to connect the elegant financial system of

0:19:46.119 --> 0:19:51.240
<v Speaker 1>crypto to the real world. You've built a derivatives exchange, cool, cool,

0:19:51.760 --> 0:19:54.040
<v Speaker 1>but can a real company use it to hedge a

0:19:54.080 --> 0:19:58.120
<v Speaker 1>real risk facing its real factory. You've built a decentralized

0:19:58.200 --> 0:20:02.000
<v Speaker 1>lending platform, awesome, But can a young family use it

0:20:02.080 --> 0:20:05.359
<v Speaker 1>to buy a house? And the answer is, you know,

0:20:06.000 --> 0:20:11.000
<v Speaker 1>maybe give it time. The cryptosystem has attracted a lot

0:20:11.040 --> 0:20:14.040
<v Speaker 1>of smart people who want to solve these problems, in

0:20:14.119 --> 0:20:17.760
<v Speaker 1>part because they're intellectually interesting problems, and in part because

0:20:17.760 --> 0:20:21.160
<v Speaker 1>solving them will make these people rich. But another part

0:20:21.160 --> 0:20:24.359
<v Speaker 1>of the answer might be that the real world growing food.

0:20:24.480 --> 0:20:27.919
<v Speaker 1>Building houses is a smaller part of economic life than

0:20:27.960 --> 0:20:31.439
<v Speaker 1>it used to be, and that manipulating symbolic objects in

0:20:31.520 --> 0:20:35.880
<v Speaker 1>online databases is a bigger part. Modern life is lived

0:20:35.920 --> 0:20:39.399
<v Speaker 1>in databases, and crypto is about a new way of

0:20:39.480 --> 0:20:44.440
<v Speaker 1>keeping databases on the blockchain. If you build a financial

0:20:44.480 --> 0:20:48.040
<v Speaker 1>system that has trouble with houses but is particularly suited

0:20:48.080 --> 0:20:51.360
<v Speaker 1>to financing video games, one that lets you keep your

0:20:51.440 --> 0:20:54.800
<v Speaker 1>character on the blockchain and borrow money from a decentralized

0:20:54.800 --> 0:20:58.080
<v Speaker 1>platform to buy a cool hat for her or whatever.

0:20:58.320 --> 0:21:01.960
<v Speaker 1>I don't know, then that's system might be increasingly valuable

0:21:02.000 --> 0:21:05.160
<v Speaker 1>as video games become an increasingly important part of life.

0:21:05.840 --> 0:21:08.359
<v Speaker 1>If you build a financial system whose main appeal is

0:21:08.400 --> 0:21:11.639
<v Speaker 1>its database, it will be well suited to a world

0:21:11.680 --> 0:21:16.199
<v Speaker 1>lived in databases. If the world is increasingly software and

0:21:16.359 --> 0:21:21.280
<v Speaker 1>advertising and online social networking and good Lord, the metaverse,

0:21:22.160 --> 0:21:24.920
<v Speaker 1>then the crypto financial system doesn't have to build all

0:21:24.960 --> 0:21:27.480
<v Speaker 1>the way back down to the real world to be valuable.

0:21:28.280 --> 0:21:33.560
<v Speaker 1>The world can come to Crypto worth a shot. No,

0:21:39.080 --> 0:21:42.200
<v Speaker 1>thank you Matt Levine, and thank you Mark Ledoff. As

0:21:42.200 --> 0:21:44.200
<v Speaker 1>a reminder, if you're looking for these episodes in the

0:21:44.240 --> 0:21:48.119
<v Speaker 1>Crypto feed, will be publishing them every Sunday through December.

0:21:49.440 --> 0:21:51.840
<v Speaker 1>If you'd like to read this issue in print form,

0:21:51.880 --> 0:21:54.360
<v Speaker 1>you can head on over to Bloomberg dot com slash

0:21:54.520 --> 0:22:01.880
<v Speaker 1>the Crypto story. This is Boomberg Crypto, a daily podcast

0:22:01.880 --> 0:22:04.959
<v Speaker 1>from Bloomberg and I Heart Radio. For more shows from

0:22:05.000 --> 0:22:08.440
<v Speaker 1>I Heart Radio, visit the I Heart Radio app, Apple Podcasts,

0:22:08.600 --> 0:22:12.520
<v Speaker 1>or wherever you get your podcasts. Send us your comments, questions,

0:22:12.600 --> 0:22:15.440
<v Speaker 1>or suggestions for the show to Crypto at Bloomberg dot

0:22:15.480 --> 0:22:20.359
<v Speaker 1>net or find us on Twitter. We're at Crypto. The

0:22:20.400 --> 0:22:23.960
<v Speaker 1>supervising producer of Bloomberg Crypto is Vicky ver Galina. Our

0:22:24.000 --> 0:22:27.679
<v Speaker 1>senior producer is Janet Babin. Our producers are Mohammed Faruk

0:22:27.720 --> 0:22:31.119
<v Speaker 1>and Sharon Barriro. Our associate producers are Ty Butler and

0:22:31.200 --> 0:22:35.680
<v Speaker 1>Moses on Them. Desta wonder At is our engineer. Original

0:22:35.760 --> 0:22:39.760
<v Speaker 1>music by Leo Sidron. I'm Stacy Marie Schmal. We'll be

0:22:39.760 --> 0:22:40.360
<v Speaker 1>back tomorrow