Banking on Bitcoin Page #2

that is really revived

his interest

in these ideas that, you know,

he had been working on

in the 1990s

with privacy and contracts

and the problems

of governments and other

trusted third parties.

And he brought bit gold

back into the conversation.

So hal Finney

came up with his own system.

Adam back has hashcash,

wei dai has b money,

szabo has bit gold.

So what satoshi did in 2008,

was satoshi took a lot of these

ideas and made them work.

He created an

encryption-based protocol...

It's not really

a currency...

Utilizing a ledger

called the blockchain,

allowing for many kinds

of transactions to occur.

Contracts, all kinds of things

can be built

into the blockchain.

And it does this through a

system of consensus building

where multiple computers

all participate

in the management

of the blockchain ledger,

a kind of digital document,

if you will,

that keeps track

of all the payments.

I understand it's something that

is instantaneous online

and it can go from one

country to the other

and you know,

they can have their money.

Well, I never heard of it

until Nancy called me

and mentioned digital currency

and I'm thinking

she must have been

in the bottle this morning

or something.

Digital currency, oh.

What, what?

You know.

But they say it's for people

who don't have bank accounts.

I can't understand.

If you have one coin,

it's...

Let's say it's worth $150.

What do you do, give the

number or something to the...

Say, the grocery store person,

and then they subtract it?

How do you know?

How do you make change?

How do you know what you have

left or what you've spent?

You can have the money supply

controlled by a computer.

That's all bitcoin really is.

The key point here is that

this a distributed ledger.

There is no central server.

All the other ledgers

that we have,

all the banking ledgers,

all company ledgers,

they all sit and reside

inside that company,

which means they have

one point of attack.

They can be hacked.

Jp Morgan was hacked

by, you know, the cyberthieves

not so long ago.

Home depot, target, we've had

all these companies get hacked,

precisely because there's one

central repository of information.

The bitcoin ledger resides,

on, you know,

thousands of computers.

You can't hack that.

Every single transaction

is recorded,

and once it is recorded

in the blockchain,

it is there, it is permanent.

It cannot be altered. It cannot be

changed, so that you can read it.

Now the identities

of the people are encrypted.

The wallets are encrypted,

so you don't know who

is spending the money,

but you know that every

single bitcoin out there

has a history,

you know where it's been,

you know the different

addresses it's gone between.

The most important pieces

of the bitcoin infrastructure

are the miners.

These are the computers

that are tasked

with maintaining

the ledger of the blockchain

to verify the information,

to update it,

to make sure

that it is trustworthy.

So how do we

incentivize them to do so?

As they are going through the

process of confirming transactions,

they are simultaneously

being subjected to

a very, very difficult

computing test.

The bitcoin core protocol

is forcing them

to look for a number.

All of these miners

are ultimately competing

to be the one that receives

that payout every ten minutes.

But really that's

the secondary component.

They're really being

rewarded with bitcoin,

but what is

the more important task

is the validation

and verification

of transactions and

the maintaining of the ledger.

Bitcoin, in being

the first to achieve

this holy grail of

decentralized value exchange

that transfers

that process of trust

to a collective agreement

around a body

of independent computers

who are compelled

by an incentive system

to maintain that consensus

and affirm the information

to be correct

is incredibly liberating

because it means

that we can do it without

all these intermediaries

in all these different realms.

The most important thing behind

bitcoin is not the currency.

The key factor

is the blockchain.

Nobody expected this.

You know, in 2008,

very few people cared about it.

It was just

the computer scientists

and the sort of code geeks

that were really interested.

All of my communication

with satoshi

was ever via either

the bitcoin talk forums,

which, all of

that communication is...

Public, or private forum

messages or private emails.

Satoshi was always all business.

It was just always

about the code.

My very message to satoshi,

I asked him, "so,

is satoshi your real name?

What have you done before?

Can you tell me

a little bit about yourself?"

And he just ignored

that completely.

But came back and said,

"you know,

great to have more

experienced programmers

helping out

with the project."

You know, "here's a couple of

problems that need to be solved.

Maybe you can

help solve them."

In 2011,

I was into bitcoin

sort of just as a hobby.

I didn't really know

what to do in it yet.

I was trying to meet

everyone I could,

figure out what projects

would be cool to work on.

I met Roger ver sort

of in August of that year

and a few months later,

he recommended to this guy,

Charlie shrem,

who started bitinstant

that the Charlie should hire me

as the head of marketing

for bitinstant.

Bitcoin is cash with wings.

It's the ability to be able

to take a local transaction

and do it globally,

and that's why bitcoin

is gonna overturn

the financial infrastructure.

Bitcoin is like the largest

socioeconomic experiment

the world has ever seen.

Our conversations

would range from

you know,

the mundane and practical,

like how the hell are we gonna

get another bank account

since our current bank account's

probably gonna get

shut down any day now?

To very high-minded,

aspirational ones,

like, is this actually gonna

change the world in a good way?

Are we just a bunch

of crazy people

who don't know what

the hell we're talking about,

or are we actually starting to

initiate an industry

which, in hindsight,

will look obvious to everyone,

but, you know,

right now does not?

Charlie shrem was,

at that stage,

a fairly high-profile figure

in the bitcoin community.

The vice chairman

of the bitcoin foundation

and you know, one of these

bitcoin millionaires

who'd made a lot of money

very quickly.

And really played an important

role in the infrastructure

of managing the movement

of funds around the system

in that early rudimentary phase.

632 bid!

654 offer in the New York

cash market for bitcoin.

Buyers right now will pay

$632 cash on the spot.

Who's next for the bitcoin? You

want to know what bitcoin is?

You know what I prefer?

I prefer dollars.

If you want to go on

down to 40 broad,

right next door to

the stock exchange there,

to the New York bitcoin center,

you can buy and sell

all the time.

- You have a table in the middle.

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