Speaker 1: Brought to you by Toyota. Let's go places. Welcome to
Speaker 1: Forward Thinking Taylor, and welcome to up Forward Thinking, the
Speaker 1: podcast that looks at the future and says, grabbed that
Speaker 1: cash with both hands and make a stash. I'm Jonathan Strickland,
Speaker 1: and I'm Lauren Voke Obama, and our other co host,
Speaker 1: Joe is not here today, but hey Jonathan, Hey Lauren.
Speaker 1: I didn't. I didn't prepare anything to say. That's we
Speaker 1: usually turned to Joe for this. Joe is keeper of
Speaker 1: two things, the introduction and the acts, the mystical acts,
Speaker 1: the mystical acts, and so neither of those are here.
Speaker 1: But honestly, this should be pretty much a walk in
Speaker 1: the park because we're going to give sort of a
Speaker 1: focused update to something we talked about in our previous
Speaker 1: episode way back in April two thirteen, which is so
Speaker 1: long ago. I didn't open the show with lyrics back then.
Speaker 1: I no. I sometimes wish that we could go back
Speaker 1: to them, but I feel like now I've committed, and
Speaker 1: if I don't open the show with the lyrics, yeah,
Speaker 1: it's fun. It's it's fun when I remember it before
Speaker 1: we hit record, and then I think, oh, no, I
Speaker 1: need to come up with a lyric that is somehow
Speaker 1: tangentially related to our topic. But yes, back then we
Speaker 1: recorded a show called Brother, Can You Spare a Zero?
Speaker 1: One one zero zero one zero zero, which was an
Speaker 1: episode specifically about digital currency, and we talked a lot
Speaker 1: about a particular digital currency called bitcoin, which I'm sure
Speaker 1: many of you are very familiar with. It's kind of
Speaker 1: the big one. Yeah, that would be the one that
Speaker 1: I think most people have heard about. There are other
Speaker 1: digital currencies out there, by the way, Often people refer
Speaker 1: to bitcoin as the one that started at all. Guess what,
Speaker 1: it didn't. There were other ones before it, but it
Speaker 1: is definitely the one that got the most attention, including
Speaker 1: I think no small part but due to the mysterious,
Speaker 1: mysterious nature of the inventor of bitcoin. We'll touch on
Speaker 1: that a little bit in this episode. Yeah, but let's
Speaker 1: give a quick overview of what bitcoin is and how
Speaker 1: it works. Okay, So it's a cryptocurrency, so called because
Speaker 1: the currency depends partly on cryptography, in the way that
Speaker 1: transactions are recorded and the way that the currency itself
Speaker 1: is built. We'll talk about that a little bit later too.
Speaker 1: Not because it's used by Bigfoot. No, it is not
Speaker 1: a cryptid currency, although who knows, I mean Bigfoot could
Speaker 1: use it. It actually would make a lot of sense
Speaker 1: because you know, you don't trace it back. But so
Speaker 1: I mean, if you want, if you need to buy
Speaker 1: us pair of size twenty eight shoes, that would be
Speaker 1: an excellent way of doing it. But it exists independently
Speaker 1: of any national government backing it. So it is a
Speaker 1: completely independent currency in that respect. So unlike dollars or pounds, sterling,
Speaker 1: or yen or the euro, there's no official state behind
Speaker 1: the money, which is considered to be a pro in
Speaker 1: the folks who really support bitcoin. Sure, although like the
Speaker 1: way real money real money, like the way traditional currency
Speaker 1: systems are supposed to work, it's based on a limited
Speaker 1: number of of bitcoins, right, and generally speaking, when we
Speaker 1: talk about currencies, you know, you can't solve a financial
Speaker 1: crisis just by printing more currency. In fact, that makes
Speaker 1: it worse. Yeah, devalues the currency that's already out there.
Speaker 1: The way that you generally make more wealth is that
Speaker 1: as you do it through something like loans, where you
Speaker 1: have interest on those loans, that quote unquote creates more wealth.
Speaker 1: Thus you need more currency it's complicated. We won't get
Speaker 1: into it. But at any rate, the way Bitcoin does
Speaker 1: this is it just establishes the fact that there is
Speaker 1: this thing, there is a limited number of this thing,
Speaker 1: and at any given time, there's a smaller amount of
Speaker 1: that available in circulation. Because it's treating it almost like
Speaker 1: it would be a precious mineral, you you don't have
Speaker 1: access to all of it all at once. Rather, you
Speaker 1: have to go through a process to get more of
Speaker 1: the existing bitcoins that are not yet in circulation so
Speaker 1: that they can then enter circulation. That the total number
Speaker 1: of bitcoins that will ever exist, assuming that this system
Speaker 1: actually works out the way it was intended and doesn't
Speaker 1: totally crash the way that it might. Yep, it would
Speaker 1: be twenty one million bitcoins. That's it there. Once you
Speaker 1: get to that that last bitcoin, then you're done. There
Speaker 1: are no more bitcoins to be mined, and the ones
Speaker 1: that exist are the only ones that will ever be
Speaker 1: used in circulation. Uh. Now. This is done through a
Speaker 1: process that's called mining, which evolves using computer processing power
Speaker 1: to perform certain transactions, and sometimes when your computer completes
Speaker 1: such a transaction, it finds a bitcoin, or more likely
Speaker 1: part of a bitcoin. They can be divided up all
Speaker 1: the way down to a unit that's tend to the
Speaker 1: minus eight bitcoins. Yeah. Yeah, you wouldn't really find a
Speaker 1: whole bitcoin or mine a whole bitcoin, right, That is
Speaker 1: not a thing that happens. No, it'd be like kind
Speaker 1: of panning for gold. You're gonna find flakes of gold,
Speaker 1: not a bar of gold, right right. Uh. And it's
Speaker 1: it's really interesting elegant in a convoluted way system because
Speaker 1: you get a chance at earning a piece of a
Speaker 1: bitcoin by helping run the software that that the company uses,
Speaker 1: that the bitcoin the organization uses to process and confirm
Speaker 1: its transactions. Uh. And it's also interesting because bitcoins can't
Speaker 1: be counterfeited. Each time they're traded, a block of code
Speaker 1: is added to the transaction chain describing it, and that
Speaker 1: chain is public, So you can't just just duplicate you
Speaker 1: some bitcoins. That's not how it does. And that's that's
Speaker 1: meant to not just for for counterfeiting purposes, but like
Speaker 1: you said, duplicating purposes, which I guess is a kind
Speaker 1: of counterfeiting. You wouldn't be able to spend a bitcoin
Speaker 1: and then spend that same bitcoin a second time. Immediately thereafter,
Speaker 1: because the transaction is part of this entire chain of
Speaker 1: information that dates all the way back to when the
Speaker 1: bitcoin was first mind. Sure, and and it's a matter
Speaker 1: of public record. Yeah, so here's another thing we gotta
Speaker 1: we gotta mention. Currencies depend upon people accepting them as
Speaker 1: a form of payment. Whether it's backed by a country
Speaker 1: or it's independent, it doesn't matter if people don't see
Speaker 1: that your currency has value. Right, money is essentially imaginary
Speaker 1: and therefore terrifying. Yeah, it actually is completely based upon
Speaker 1: all of us agreeing that this thing represents value of
Speaker 1: some sort, that it represents the value of a product
Speaker 1: or a service. So if you were to ask me
Speaker 1: to come over and paint your house and offer me here,
Speaker 1: I I've printed up these sheets of paper that have
Speaker 1: Bongo bucks on them, and they don't relate to anything else.
Speaker 1: I would say, I need to go do something else
Speaker 1: because my time, Because the Bongo bucks don't mean anything
Speaker 1: to anyone else. I can't go and take those Bongo
Speaker 1: bucks and spend them to get delicious ice cream, which
Speaker 1: fuels my ability to paint your house. Right now, maybe
Speaker 1: if I had offered you delicious ice cream to begin with, Yeah,
Speaker 1: there was more of a you probably wouldn't respend the
Speaker 1: ice cream. So yeah, that's a barter currency, but total
Speaker 1: legitimate By the way, I will I will paint your
Speaker 1: house if there is the proper amount and flavor of
Speaker 1: ice cream involved. Offers will be entertained at the end
Speaker 1: of the show. So at any rate, Yeah, we have
Speaker 1: to have this situation where the people spending and the
Speaker 1: people accepting all agree that this currency has value, that
Speaker 1: that value is something that both parties agree to, that
Speaker 1: it represents a certain amount of buying power. And bitcoins
Speaker 1: have had a pretty crazy roller goes to ride of
Speaker 1: an existence from the time when they first came out
Speaker 1: in two thousand eight to present day, right, because the
Speaker 1: amount of value it's not holding steady the way that
Speaker 1: most currency does. Yeah, currencies can fluctuate in value, but
Speaker 1: not not too wildly dramatic extent unless there's serious financial
Speaker 1: crisis going on, right, right, But bitcoins are fluctuating all
Speaker 1: the time. Yeah, to the point where you know, at
Speaker 1: their peak, they were almost twelve dollars for a bitcoin,
Speaker 1: and right now they're somewhere they're lower than there, between
Speaker 1: two hundred and two hundred fifty dollars depending upon exactly
Speaker 1: when you check. So definitely some some crazy variation in
Speaker 1: value there. Although it's really not a small system like
Speaker 1: this might seem really fringe, especially if you don't participate
Speaker 1: in the mining of bitcoins and if you don't have
Speaker 1: a bitcoin wallet, but the system is currently worth some
Speaker 1: like three point three billion dollars. Yeah, yeah, So getting
Speaker 1: into the problems of bitcoins, we're gonna talk about does
Speaker 1: bitcoin actually have a future? That's the real question we
Speaker 1: want to answer today as best we can. And part
Speaker 1: of that it means that we have to acknowledge the
Speaker 1: challenges that bitcoin faces, the problems and difficulties it has
Speaker 1: as a currency, And we already mentioned one the volatility,
Speaker 1: the variability of its value from that twelve hundred dollars
Speaker 1: to two d and thirty some odd bucks this morning
Speaker 1: when I checked it. Yeah, that's a big that's a
Speaker 1: big difference. Yeah. Yeah. If you if you've found out
Speaker 1: that your money was no longer nearly as valuable as
Speaker 1: it once was, that you would not be able to
Speaker 1: buy the same amount of stuff today as you could
Speaker 1: back in early two thousand and fourteen, you'd probably be
Speaker 1: a little more than a little upset uh. And keep
Speaker 1: in mind that this also means that a lot of
Speaker 1: people have trouble figuring out when they can spend that
Speaker 1: money U, because you know, if you're if your dollar.
Speaker 1: Let's say, let's let's take dollars as an example. So
Speaker 1: let's say I've got a Crisp one dollar bill, and
Speaker 1: today that one dollar bill, and I'm just making up examples,
Speaker 1: but today that one dollar bill could buy me a
Speaker 1: small cup of coffee. I've found a discount coffee place somewhere,
Speaker 1: and that one dollar bill will buy me a small
Speaker 1: cup of coffee. And I it's a very small cup
Speaker 1: of yes coffee, and exactly it's not espresso. It's still
Speaker 1: just regular old coffee. So I spend that dollar and
Speaker 1: I get my little espresso cup of coffee. I go
Speaker 1: back to the coffee shop the next day, but because
Speaker 1: the value of the dollar has changed, the coffee is
Speaker 1: the same, the size of the cup is the same.
Speaker 1: But because the value of the dollar has changed, it
Speaker 1: now requires me me to spend two of my Crisp
Speaker 1: one dollar bills to get that small cup of coffee.
Speaker 1: And although this might feel like what's going on when
Speaker 1: you go to Starbucks, yeah, it's it's really not that dramatic, right,
Speaker 1: It's not. It's not that the coffee place has dramatically
Speaker 1: increased their price. It's that the dollar has dramatically reduced
Speaker 1: in value. But let's say the next day, because this
Speaker 1: is going to be illustrating the craziness of bitcoin, the
Speaker 1: next day, I come in and I find out that
Speaker 1: my Crisp one dollar bill, which yesterday I needed too
Speaker 1: off to buy a small cup of coffee, now my
Speaker 1: CRISP one dollar bill will give me that trendy size
Speaker 1: the ridiculous like like hot tub sized cup of cost. Yeah,
Speaker 1: I have to have a dolly to move the cup
Speaker 1: of coffee out. That's kind of the the the what
Speaker 1: bitcoin has been through. And that makes it very difficult
Speaker 1: to figure out when you can spend a bitcoin, because
Speaker 1: if I, if I, if I price things in bitcoin,
Speaker 1: even in fractions of a bitcoin, I will constantly be
Speaker 1: scared that the price will not reflect the value of
Speaker 1: the product, either as a merchant or as a buyer.
Speaker 1: Oh yeah, yeah, it's difficult for both sides of the
Speaker 1: equation because one person or the other is at I mean,
Speaker 1: both people really are continually going to be unsure whether
Speaker 1: they being cheated, right, And even if they're not being cheated,
Speaker 1: they may just feel like are being cheated by the system. Yeah,
Speaker 1: like like like they had the worst timing, like they
Speaker 1: either spent way too much or they sold for way
Speaker 1: too little. And that the same the same thing sold
Speaker 1: by at the same quote unquote price each day could
Speaker 1: end up giving you crazy different values of actual dollar
Speaker 1: money or or whatever you know. And I hate saying
Speaker 1: actual because of course bitcoin is actual money. Yeah, you
Speaker 1: can use it to buy stuff. It's a money. It's
Speaker 1: just that I think of it more in terms of
Speaker 1: of a of a you know, a tradeable entity, rather
Speaker 1: than as a currency, simply because of this volatility. Yeah,
Speaker 1: it works so much more like a like a stock market,
Speaker 1: for example, than it does like other currencies currencies that
Speaker 1: we see out there. And and as it turns out,
Speaker 1: even the very top people involved in bitcoin are are
Speaker 1: not entirely sure how much how much bitcoin you should bitcoin?
Speaker 1: Right exactly. Yeah, we'll get into more of that too,
Speaker 1: so h In my notes I gave an example. The
Speaker 1: coffee makes a perfect example. But in my notes I
Speaker 1: mentioned that because one bitcoin is around two dollars, let's
Speaker 1: say I'm selling a current generation, gently used video game console,
Speaker 1: and those are around four hundred bucks or so, depending
Speaker 1: upon which ones you're looking at. But I it's gently used,
Speaker 1: so I want to sell it for about two d
Speaker 1: thirty bucks or one bitcoin. Now it maybe that when
Speaker 1: I sell it for one bitcoin, it turns out that
Speaker 1: the bitcoin is actually worth two dollars, so I'm under
Speaker 1: selling a little bit. Or it may turn out that
Speaker 1: the bitcoin at that moment is worth two hundred sixty
Speaker 1: so I actually got more value out of it than
Speaker 1: I thought I would. But that could all change if
Speaker 1: I don't cash out the bitcoin, and then the value
Speaker 1: of bitcoins dramatically plummets or escalates. Yeah, yeah, it could
Speaker 1: wind up being that you sold that console for either
Speaker 1: you know, fifty cent or for Yeah, it hasn't dropped
Speaker 1: as low as fifty cents. No, it hasn't had that
Speaker 1: bad of a day yet, all right. So one way
Speaker 1: to get around that, if you are in the bitcoin
Speaker 1: like market biz is to offer up your various goods
Speaker 1: or services at a dollar or other you know, less
Speaker 1: volatile currency price tag, and then when it comes to
Speaker 1: the actual moment of purchase, agree with the the person
Speaker 1: who wants to buy something what that is in bitcoin
Speaker 1: at that moment, right, right, Although really this this is
Speaker 1: just making the problem a little bit more complicated, it's
Speaker 1: not actually solving it. Furthermore, the lack of that transcription
Speaker 1: of of dollars to whatever, it's part of what attracts
Speaker 1: people to us in bitcoin in the first plaint, right
Speaker 1: it really, I think the only thing it does is
Speaker 1: create a little bit of a psychological cushion for the
Speaker 1: person buying it. But then the and it doesn't change
Speaker 1: the fact that the bitcoin value itself will change. It's
Speaker 1: the same problem exists. It's just you might be able
Speaker 1: to go away thinking, oh, I spent bucks on that,
Speaker 1: not I spent point zero zero zero four bitcoins on that,
Speaker 1: and now I I'm out a significant amount of money
Speaker 1: because of the value of bitcoin changing. So do we
Speaker 1: know why this volatility exists. Yeah, it's because people don't
Speaker 1: want to spend them. So one of the one of
Speaker 1: the big points of currency, one of the really important
Speaker 1: things is that in order for a currency to work,
Speaker 1: people have to be willing to spend the currency. Right
Speaker 1: if it's all buried in their boxes in their backyard,
Speaker 1: and then it's not really doing anyone good, and it's
Speaker 1: it's not a system at that point. It's a box
Speaker 1: in a backyard. You're looking at like a commodity, not
Speaker 1: a currency. And that's a problem. Right. So there was
Speaker 1: a two thousand, fourteen UM study by bitcoin itself. Actually
Speaker 1: they made the they created the bitcoin distribution chart to
Speaker 1: find out where all these bitcoins are going and where
Speaker 1: they're hanging out. Yeah, so they they found that about
Speaker 1: out of all the addresses associated with owning a bitcoin,
Speaker 1: only two d fifty thousand owned more than one. So
Speaker 1: and also those addresses don't necessarily translate to a single person.
Speaker 1: But let's say let's say just for the sake of argument,
Speaker 1: these are easy Indians, exactly two human beings. That means
Speaker 1: two d fifty thousand people out of everyone on earth
Speaker 1: for this global currency, owns more than one bitcoin. And
Speaker 1: that that's like the overwhelming percentage of bitcoins that are
Speaker 1: already in circulation, which means that people are not spending
Speaker 1: these bitcoins. They are hoarding the bitcoins. Yeah, they're they're
Speaker 1: they're mining them and keeping them. Yeah, because their value
Speaker 1: goes up so high. It would be again, it seems
Speaker 1: weird to spend something like that you might think, no,
Speaker 1: this is security here. I've got this huge amount of
Speaker 1: of existing value that I could trade in for other
Speaker 1: currencies at any time, and then we might go back
Speaker 1: up to a thousand bucks of bitcoin. Yeah, and then
Speaker 1: which case I would feel stupid for cashing out before
Speaker 1: it got really big, right, And uh, keep in mind again,
Speaker 1: these people are are folks who are using lots and
Speaker 1: lots of computer power to get at these One of
Speaker 1: the interesting things about bitcoin is the mining process gets
Speaker 1: more complicated the more computer power is dedicated to mining,
Speaker 1: So that means that if you want to be effective
Speaker 1: at mining, you have to leverage larger and larger systems
Speaker 1: of computers are faster and faster computers, which then narrows
Speaker 1: down the number of people who can actually do this effectively.
Speaker 1: Like you and your basement with your old you know,
Speaker 1: IBM to eight six. You're not going to compete with
Speaker 1: the folks who are doing this. Yeah, uh, you know,
Speaker 1: it's just not going to happen. That kind of brings
Speaker 1: up another Another issue with bitcoins is that not everybody
Speaker 1: is going to be excited about using them. But there
Speaker 1: are other reasons why some people might not be excited
Speaker 1: about using them. Yeah, so volatility being one big challenge.
Speaker 1: The other one being that bitcoin has had no shortage
Speaker 1: of scandals associated with it, and in some cases it
Speaker 1: has nothing to do with the currency itself. The currency
Speaker 1: is just involved, right the the currency was there. It's
Speaker 1: like if you watch Scarface, you can't blame the huge
Speaker 1: piles of money for the behavior of the characters, and Scarface,
Speaker 1: it's the character's desire for the huge piles of money
Speaker 1: that cause all the problems. Who Scarface at any rate?
Speaker 1: H So, bitcoin has always had kind of a seedy reputation,
Speaker 1: largely because a lot of the people who are attracted
Speaker 1: to this non state sponsored currency happen to be involved
Speaker 1: in things that states are Generally they don't, they aren't
Speaker 1: in favor of them. Sure, well, you know, some people
Speaker 1: just really want privacy, and that's understandable to but some
Speaker 1: people specifically want privacy because they're going to do illegal stuff,
Speaker 1: right exactly. There are people who just like we would
Speaker 1: argue with things like like peer to peer sharing. There's
Speaker 1: nothing inherently wrong with peer to peer sharing. It's a
Speaker 1: great means of distributing large files, right you distributing large files?
Speaker 1: I put the wrong emphosis on the wrong level. Uh,
Speaker 1: distributing large files, nothing wrong with that. It's the problem
Speaker 1: that some people use it to pirate stuff and share
Speaker 1: pirated material that give it a bad name, so as
Speaker 1: it is with bitcoin, and that there are some very
Speaker 1: well publicized incidents of people using bitcoin as the currency
Speaker 1: of choice on things like the Silk Road, which was
Speaker 1: the illegal black market that dealton lots of stuff, some
Speaker 1: stuff that was just completely benign, you know, there was
Speaker 1: nothing wrong with it, but there was a significant number
Speaker 1: of illegal goods on sale on the Silk Road, whether
Speaker 1: they'd be weapons or mostly drugs, but other stuff too,
Speaker 1: And bitcoin was one of those things that a lot
Speaker 1: of people like because it wasn't something that was easily
Speaker 1: despite the fact there's a public record of the transaction,
Speaker 1: it's not traceable in the classic sense. So that's definitely
Speaker 1: part of it. Was that has this bad reputation because
Speaker 1: of the association with the way bitcoins have been used.
Speaker 1: But you can't really blame that on the currency. But sure,
Speaker 1: sure Another thing that you can't really blame directly on
Speaker 1: the currency is the behavior of some of its exchanges. Yes,
Speaker 1: this is a huge issue. So the neat thing about
Speaker 1: bitcoins is that on the individual level, on the individual
Speaker 1: coin level, they're pretty secure because they have this record
Speaker 1: behind them, and it's not the currency that's at fault
Speaker 1: when things like the Mount Cox scandal happen. Uh, just
Speaker 1: as just as again, you would not blame a dollar
Speaker 1: for getting stolen out of a bank, you can't blame
Speaker 1: a bitcoin for being stolen out of Mount Cox. But
Speaker 1: what you can say is what the heck happened? And
Speaker 1: what we can tell you is we don't know. Nobody
Speaker 1: knows still, at least at least nobody nobody who is
Speaker 1: curious about it knows. The people who perpetrated it probably do.
Speaker 1: Oh it's likely. Uh, I mean unless they had a
Speaker 1: very strange weekend. What did I do? How did I
Speaker 1: get bitcoins in my account? Yeah? So so in this
Speaker 1: this giant exchange for bitcoins, uh, in which it's sort
Speaker 1: of like a little bit like a bank, yeah kind
Speaker 1: of it. It's like, you know, essentially it's meant to
Speaker 1: help exchange bitcoins for other currencies. So if you wanted
Speaker 1: to come in and buy a bunch of bitcoins, they
Speaker 1: would sell them to you. Or if you had a
Speaker 1: bunch of bitcoins, you wanted to exchange it for some
Speaker 1: other currency, they would then exchange it for you, and
Speaker 1: then you know, of course they take some percentage of
Speaker 1: that transaction for themselves. Sure, sure, but rather than having
Speaker 1: to purely mine your own bitcoin, as your ancestors would
Speaker 1: have done. Yeah, maybe it. Maybe that the bitcoin value
Speaker 1: you suspect that it's going to escalate, and you think, well,
Speaker 1: the way I'm gonna make my money is by investing
Speaker 1: in bitcoin, waiting for that value to go high and
Speaker 1: then I'll cash out. But but so in it had
Speaker 1: like eight hundred and fifty thousand bitcoins stolen from this
Speaker 1: one exchange mount cox They they disappeared, and uh, there's
Speaker 1: some suggestions that I have seen that at least some
Speaker 1: some of it was due to bought activity bots that
Speaker 1: were buying up bitcoins during certain hours of the day,
Speaker 1: early trading hours in in Japan, because this all took
Speaker 1: place in Japan. Really, um so at early trading hours,
Speaker 1: bots were buying up bitcoins using fake money they were creating,
Speaker 1: they were creating profiles that had huge bank accounts, fake
Speaker 1: baking bank accounts associated with them. We're purchasing bitcoins with
Speaker 1: fake money and then uh, sort of disappearing after a while,
Speaker 1: but that has not really led investigators to any pathways
Speaker 1: to figuring out who actually was behind this. It might
Speaker 1: have been a group of hackers, it could have been
Speaker 1: a single person. No one could have been someone on
Speaker 1: the inside Amount Cox, No one's really sure. Um So,
Speaker 1: a hundred fifty thousand bitcoins missing. That's about four hundred
Speaker 1: fifty million dollars at that time during the you know,
Speaker 1: when they were valued at two thousand fourteen, and some
Speaker 1: of them were recovered, but about six hundred and fifty
Speaker 1: thousand still have not been there, just still lost. They're gone, Yeah,
Speaker 1: at six hund fifty thousand. Now that twenty one million
Speaker 1: are are in there there, we don't know where they are.
Speaker 1: So in September two thousand fifteen, Japanese prosecutors in Tokyo
Speaker 1: filed criminal charges against Mark Carpel, who is the former
Speaker 1: CEO of Mount Cox. The charge was a Carpel embezzled
Speaker 1: more than fifty million dollars of his client's money. But
Speaker 1: here's the weird thing that has nothing to do with
Speaker 1: the missing bitcoins. It's a separate thing. Now there are
Speaker 1: some who wonder if the authorities are trying to find
Speaker 1: out if Carpel had any if he was complicit in
Speaker 1: the missing bitcoins, but so far they have not leveled
Speaker 1: any specific charges related to that. UM. And here's the
Speaker 1: thing is Mountain Cox is not the only exchange that
Speaker 1: has created a scandal. There was another one called my
Speaker 1: Coin in Hong Kong. It didn't last very long. UM
Speaker 1: so my Coin UH closed business with about three six
Speaker 1: million dollars worth of investments unaccounted for, so nearly four
Speaker 1: million dollars lost there. And there are accusations that the
Speaker 1: exchange was really just a Ponzi scheme. It was a
Speaker 1: pyramid scheme, specifically a Ponzi scheme. UH. You can learn
Speaker 1: how about Ponzi schemes, by the way, if you listen
Speaker 1: to Stuff you Should Know, which is one of our
Speaker 1: sister podcasts, and they did a great episode. That's the
Speaker 1: one that for about two or three weeks had Chuck
Speaker 1: walking around the office going it's a ponzi Uh that
Speaker 1: tho was there was those were good times. So five
Speaker 1: people involved with my Coin were actually arrested by Hong
Speaker 1: Kong police and the charge was conspiracy to defraud. Now
Speaker 1: again that had nothing to do with the actual currency
Speaker 1: of bitcoin. But once again there was a scandal associated
Speaker 1: with bitcoin and which which damages the concept of the
Speaker 1: currency over exactly, and because we've established that it's all psychological.
Speaker 1: If we if we lose confidence in the currency, whether
Speaker 1: due to the fall of the currency itself or not,
Speaker 1: it loses value. Oh sure, yeah, yeah, Well you know
Speaker 1: it's it's a little bit harder to associate yourself yourself
Speaker 1: with something that a lot of criminals are praying on. Yeah.
Speaker 1: It it doesn't help your case much. So there have
Speaker 1: been other dodgy operations that also have tried to leverage bitcoin.
Speaker 1: One was called Neo and B, which launched out of
Speaker 1: Cyprus in February two fourteen and closed up of Cyprus
Speaker 1: in March two thousand fourteen, so so essentially a little
Speaker 1: more than a month in operation and they closed and
Speaker 1: then the Ciperian government issued arrest warrants for the CEO.
Speaker 1: And like the Mycoin scandal, this one also had very
Speaker 1: little to do with bitcoin and more due to suspicious behavior.
Speaker 1: In fact, with both my Coin and with Neo and B,
Speaker 1: there were accusations that at no time to either exchange
Speaker 1: ever actually have possession of bitcoins that they were taking
Speaker 1: people's money and saying they had bitcoins but didn't. So yeah,
Speaker 1: not not great. Obviously, that hurts confidence in the currency.
Speaker 1: Not again, not because of the currency, but because if you,
Speaker 1: as an investor or someone who wishes to get some
Speaker 1: bitcoins to use them as a currency, if you don't
Speaker 1: have confidence in the people who can exchange your money
Speaker 1: for bitcoins, that hurts the currency too. Of course. Uh,
Speaker 1: there's also kind of just a basic problem with the
Speaker 1: technology involved in bitcoin to begin with. Yeah, and this
Speaker 1: one is really what prompted us to talk about this,
Speaker 1: this particular subject, and it's that it's interesting that bitcoin
Speaker 1: a have a problem about with success. Not not that
Speaker 1: bitcoin would have a problem with it's you know, the
Speaker 1: way that you mind them necessarily or how however many
Speaker 1: bitcoins eventually end up in circulation. Sure that the system
Speaker 1: is working fine as it is right this very moment,
Speaker 1: but it's completely unscalable. Yeah, and that's the problem, is
Speaker 1: that if it were to get successful, it would fail
Speaker 1: because it could not meet the demand that a a
Speaker 1: global successful payment structure requires. So specifically, we're talking about
Speaker 1: a piece that appeared in m I T S Technology Review,
Speaker 1: Tom Simonite in interviewed Gavin and Reason and Reason served
Speaker 1: as the chief caretaker of Bitcoin from two until. He's
Speaker 1: still very much heavily involved in it. Uh. He's been
Speaker 1: a part of bitcoin pretty much since the very beginning,
Speaker 1: being the person that Satoshi Nakamoto. They created a Bitcoin
Speaker 1: trusted to keep things going. Yeah, yeah, yeah, because Toshi
Speaker 1: Nakamoto is not necessarily a real person. Um, well, I
Speaker 1: mean a person or person's certainly wrote the code for
Speaker 1: bitcoin and distributed it to the world, But we don't
Speaker 1: know who or whom. No, that's the wrong grammar. We
Speaker 1: don't know who or who extra people that could be. Yeah,
Speaker 1: we don't have a word in English to say who
Speaker 1: single person and who whole bunch of people, And yeah,
Speaker 1: we don't know. There was an interesting report, and I'm
Speaker 1: sure Lauren you remember that a couple of years ago
Speaker 1: there was a report of a journalist who had tracked
Speaker 1: down a person who has the name at least the
Speaker 1: middle name of Stoshi in the last name of Nakamoto,
Speaker 1: and had tracked this person down to find out if
Speaker 1: in fact he was the guy behind it. And he
Speaker 1: protested and said, no, I'm I'm not he was. He
Speaker 1: was almost leaving living kind of a hermetic lifestyle, and
Speaker 1: that made people think, oh, this, this has to be
Speaker 1: the guy. It doesn't look like that's the guy. Yeah yeah,
Speaker 1: but there was a lot of attention on him for
Speaker 1: a while about this. So, uh, yeah, we don't know
Speaker 1: who the actual creator of bitcoin is, like the true identity,
Speaker 1: whether it's someone with that name or or a group
Speaker 1: of people who assume that name. As the way of
Speaker 1: publishing this at any rate, let's get to the limitation,
Speaker 1: and it really centers on the number of transactions that
Speaker 1: can take place within a given amount of time. So
Speaker 1: if you're looking at established transaction systems like Visa or PayPal,
Speaker 1: anything that's meant to handle lots and lots of transactions
Speaker 1: around the world, most of them can handle tens of
Speaker 1: thousands of transactions. How many can bitcoin handle per second?
Speaker 1: Seven seven thousand, seven seven seven transactions? Now seven doing
Speaker 1: something seven times in a second sounds fast until you
Speaker 1: think of a global currency, right right when you know,
Speaker 1: hypothetically more than seven people are going to be wanting
Speaker 1: to to do a thing, yeah, like literally anything at
Speaker 1: a at a given point in time. You've got seven
Speaker 1: billion people on the planet. So let's say that Bitcoin
Speaker 1: actually succeeded in becoming a true cryptocurrency. I mean it's
Speaker 1: actually used to buy and sell stuff all the time.
Speaker 1: It's not being awarded, it's being shared by a larger
Speaker 1: population than two people. This seems like it seems like
Speaker 1: a deal breaker, right, Yeah, And the reason behind this is, Okay,
Speaker 1: if you remember that that public transaction chain that we
Speaker 1: were talking about the matter of public record, uh and
Speaker 1: how people mind bitcoins earn bitcoins by helping run bitcoins software.
Speaker 1: So the network can't handle more than those seven transactions
Speaker 1: a second because of the purposeful complexity involved in this system. Okay,
Speaker 1: so every time a transaction is made, the network of
Speaker 1: Bitcoin's users computers is basically solving a cryptographic puzzle in
Speaker 1: order to update this public log and confirm the transaction.
Speaker 1: And it can't get faster without intrinsically changing this this
Speaker 1: computing system in some way. And realistically, you know, you say, oh, there,
Speaker 1: you can have seven transactions a second, and that sounds
Speaker 1: pretty fast, but it can lead to any given transaction
Speaker 1: taking like minutes or hours to be uh completed, to
Speaker 1: to be confirmed. Right, So imagine that you're trying to
Speaker 1: use bitcoin to purchase something it could delay that purchase
Speaker 1: by a matter of hours, which, yeah, it backs everything
Speaker 1: else up in the chain, right, Yeah, so it really
Speaker 1: creates a huge problem, and it's not what shoppers are
Speaker 1: excited about. Yeah, it means that you would be less
Speaker 1: likely to try and spend your bitcoins because it's such
Speaker 1: a hassle to do it, and then you're you're actually
Speaker 1: reinforcing that hoarding behavior. So again, the bitcoins are not
Speaker 1: acting as a currency, they're acting as a commodity. And
Speaker 1: then beyond that, uh, there's also an issue that Andreeson
Speaker 1: said that, you know, you could maybe help fix this
Speaker 1: problem by building out greater network capability, but that would
Speaker 1: increase transaction fees because you have to pay for that
Speaker 1: that upgrade, right, So transaction fees go up. That means
Speaker 1: you're spending more money on top of whatever the prices
Speaker 1: in order for you to actually get that transaction to happen.
Speaker 1: Anyone who has ever bought tickets from a certain really
Speaker 1: well known ticket broker has had the experience of convenience
Speaker 1: fees which it rhymes with ticket plaster. Yeah. I once
Speaker 1: did not buy tickets through this particular ticket broker because
Speaker 1: the convenience fee was fifty of the ticket price on
Speaker 1: top of the ticket price. Yeah, I have experienced that thing,
Speaker 1: that that same feeling as well. Yeah, and and so
Speaker 1: this could be the problem with bitcoin for all transactions,
Speaker 1: and that would be a huge blow and again would
Speaker 1: reinforce the idea of this is something I keep, not
Speaker 1: something I spend, and that that is antithetical to the
Speaker 1: concept of a currency. I know we're beating a dead horse,
Speaker 1: but this is why we're having this discussion. So Andreson
Speaker 1: has said that he would go so far as he's
Speaker 1: actually done this already. It's not he's talking about. He's
Speaker 1: done it. He's proposed a new version of bitcoin that
Speaker 1: would actually address this transaction limitation problem. And uh. And
Speaker 1: so he first released the code, the code for the
Speaker 1: old bitcoin code to shape say, here's exactly where the
Speaker 1: issue is. This is what is holding us back, and
Speaker 1: I want to release this and pointed out so that
Speaker 1: people are aware of the extent of the problem and
Speaker 1: understand that if they value bitcoin is a currency, this
Speaker 1: is something that we must address. And so he's proposed
Speaker 1: a new currency called bitcoin xt, which would recognize all
Speaker 1: existing bitcoins up to the point of activation of bitcoin xt.
Speaker 1: But at that point forward, any other mind bitcoins under
Speaker 1: the old system would be invalid. So all all all
Speaker 1: bitcoins up to that point would be fine. They could
Speaker 1: transfer over. Yeah yeah, but anything mind under the old
Speaker 1: software after the new software activates would or like might
Speaker 1: not be recognized by major exchanges and new tailors. And technically,
Speaker 1: like in a really weird world, maybe both could be
Speaker 1: recognized by some right, or or some exchanges might recognize
Speaker 1: one but not the other. It would be almost as
Speaker 1: if we had two different kinds of dollars in the
Speaker 1: United States and some stores said, oh no, we don't
Speaker 1: take the old dollars, we only take the new dollars. Yeah. Well,
Speaker 1: you know, it's such a large I mean, relatively small
Speaker 1: compared to the seven billion people in the world, but
Speaker 1: it's such a relatively large network of people who are
Speaker 1: using it. And the very nature of bitcoin is partially
Speaker 1: that it doesn't have a leader, you know, it doesn't
Speaker 1: have a president, doesn't have someone who makes the decisions
Speaker 1: for it, and that's kind of the point. Yeah, it's
Speaker 1: decentralized for a reason, right, right, And so that's really cool,
Speaker 1: But you know, it also means that that all even
Speaker 1: someone as as influential and authoritative within the community. As Anderson,
Speaker 1: all he can do is say like, all right, well,
Speaker 1: I wrote this code that fixes this problem. I released it.
Speaker 1: It was out there in August, and and that's all
Speaker 1: he can do, you know. And so so if of
Speaker 1: bitcoins miners switch over to using the new software, then
Speaker 1: the software will start. Then then Bitcoin's software will start
Speaker 1: sending out kind of like the tide is turning kids
Speaker 1: messages to the ones who are still using the old stuff.
Speaker 1: And then if of bitcoins of miners switched to using
Speaker 1: the new software, you know, thereby implicitly approving of this
Speaker 1: fix of Anderson's, then the whole system will will be
Speaker 1: forced into the new software. And so if that happens,
Speaker 1: there's going to be a two week grace period in
Speaker 1: which anyone using the old system will be told like
Speaker 1: like get out of the water, kids, And then after
Speaker 1: that that this plan will go into effect where any
Speaker 1: new bitcoins mind using the old software won't be have
Speaker 1: have the danger of not being recognized. Yeah, so this
Speaker 1: is you know, this is wacky. We're getting into technology, psychology, economics,
Speaker 1: and when these things all combine, they make a mess.
Speaker 1: But that's that. That was as Andrews and says, that's
Speaker 1: on purpose. It's messy. On purpose, it's meant to be
Speaker 1: something that no one entity can come in and completely change.
Speaker 1: Everyone else's is victim to it. So that's the other
Speaker 1: side of this decentralized approach is that, yeah, it's messy,
Speaker 1: but also you don't have to worry about a government
Speaker 1: making a decision that is completely separate from your life
Speaker 1: and yet affects you and your money, right right, It's
Speaker 1: it's literally being decided by the actions of the people
Speaker 1: and so and you know what, whether or not that
Speaker 1: plays out the way Anderson hopes is is up to
Speaker 1: the future. You know, we we won't know about it
Speaker 1: and for probably another few months. Yeah, we'll definitely need
Speaker 1: to see again some shifts in the behavior of the
Speaker 1: people who are mining these bitcoins, to see them actually
Speaker 1: using them more frequently as a currency, for that volatility
Speaker 1: to start to stabilize. Uh. And you know, if that
Speaker 1: never happens, then it maybe that bitcoin just becomes this oddity,
Speaker 1: this this thing that doesn't really exist, not in the
Speaker 1: same way that tables and chairs and gold bars exist,
Speaker 1: but yet still computer programs exist because you know, yeah,
Speaker 1: they're technically collections of electrons that move in certain ways.
Speaker 1: But yeah, it's yet we will we say that they
Speaker 1: have some sort of value because people believe they have value.
Speaker 1: Uh again, not that much different from saying a piece
Speaker 1: of paper has a certain value because of the numbers
Speaker 1: and pictures printed on it. But it's it's one of
Speaker 1: those leaps we have to make in order to understand
Speaker 1: the behaviors of people and of economics in general. Personally,
Speaker 1: I think that it's gonna take something way bigger than
Speaker 1: bitcoin xt for this to actually become a currency. I
Speaker 1: don't know that it's going to go away anytime soon,
Speaker 1: unless people finally just get tired of playing the game
Speaker 1: of I can't actually use this to buy anything. I
Speaker 1: can only use it to too, I can only trade
Speaker 1: it for other currencies. Um. And it may just be
Speaker 1: one of those things that people say, are I'm gonna
Speaker 1: put my money into bitcoin to hold it until the
Speaker 1: value of bitcoin is high enough where I'm going to
Speaker 1: make a profit and uh and and maybe that only
Speaker 1: lasts for so long before people just say I'm not
Speaker 1: willing to buy it anymore, sure, or before some other
Speaker 1: way of of getting around the normal restrictions and regulations
Speaker 1: of currencies comes about. Yeah, we can always hope for
Speaker 1: that post scarcity environment where you no longer have to
Speaker 1: pay money for anything anyway, because everything is free. As
Speaker 1: long as we don't all have to wear jumpsuits, I
Speaker 1: think it'll be okay. Yeah, I do not look good
Speaker 1: at Nobody looks good at a jumpsuit. It's hard to do.
Speaker 1: So yeah, I'm I'm on board with you there, Lauren. Alright,
Speaker 1: So this was fun. It was interesting to actually take
Speaker 1: a closer, more focused look at bitcoin in particular, and
Speaker 1: I'm curious to hear what our listeners think. I'm sure
Speaker 1: some of you have had experience. In fact, I know
Speaker 1: there are people in this office who have done it.
Speaker 1: They're in the video department. Yeah, exactly, They're exactly the
Speaker 1: ones who are behind us right now. I like turned
Speaker 1: as though I could look through the wall and see them.
Speaker 1: I was like, Matt fred Rank, how did you guess?
Speaker 1: You are absolutely correct with that. So, guys, I want
Speaker 1: to hear your thoughts on this. We're really curious if
Speaker 1: you've had experience with bitcoin, or if you've or any
Speaker 1: other cryptocurrency. They're like, we said, bitcoin is just one.
Speaker 1: It's just the one that everyone has heard about. So
Speaker 1: let us know what you think, and also if you
Speaker 1: have any suggestions for future topics, let us know that too.
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