 So without further ado, love to introduce our speaker for tonight. His name is Tyler, so let's give him a round of applause. Hey, folks, thank you for coming out tonight. I appreciate it. My name's Tyler. I've been a product manager for just shy of a decade. I've spent the majority of that time working at Google, working on the Chrome browser. So if any of you guys are Chrome users, you probably worked with features that I worked on. So thank you for that. And then a few weeks ago, I hopped ship and moved over to Reddit where I've been working on the product team leading ranking and relevance for Reddit. So that's kind of what I do in my day job. But I do my day job all day, so I'd rather talk about something totally different tonight, something that I just happened to think is a really cool concept, which is Bitcoin. So my academic background is in the intersection of artificial intelligence and economics. And so I feel about Bitcoin the way that a physics student would feel about a perpetual motion machine. It's magical that it works. And the first person who told me about it, I spent a good 20 to 30 minutes explaining to them that it was impossible. And really more than anything else, what I would love for you guys to take away from this evening is the idea that Bitcoin is a really neat idea. It's very, very clever. And the things that it does are interesting. And whether or not you believe it's going to be the future of money, I want you to take an appreciation for the fact that it was just a very interesting thing to have done it all. So what actually is Bitcoin? I mean, we talk about it a lot. We know that people are using it to buy drugs or get rich or to do all sorts of other crazy things on the internet. But at the end of the day, what is the actual concept that we're all talking about? Well, so Bitcoin is a digital currency. And that's the first thing that anybody describes it as. But it's actually kind of a poor description, because to a first approximation, all currency is digital. Something like 95% of US dollars don't have physical form. They're all just zeros and ones on bank servers. So what's interesting about this digital currency, almost all the payments that you ever get are going to be digital. You buy things with credit cards, and your boss probably isn't mailing you paper slips or gold bars. This digital currency is interesting because it embodies two properties that up to this point no digital currencies have had. And those two properties are trustlessness and permissionlessness. So Bitcoin is trustless in that you don't need to take anyone's word for it in order to accept a Bitcoin payment and to verify for yourself that you really got it. And it's permissionless in the sense that you don't need anybody's permission to use it and nobody can stop you. And that's never been true of any digital currency before. If you contrast that with $20 of US dollars sitting in a bank, you need to trust that that bank is actually keeping your dollars, and they'll have it for you when you want to withdraw it or spend it. And if you want to spend it, you have to spend it in a way that the US government is comfortable with, because otherwise the banks will say, no, we don't want to get involved in that. Digital US dollars don't have either of these properties, whereas Bitcoin does. But we do actually have a pretty good analogy for these properties in money that we're all very familiar with. And that is cash. So you don't need to trust me in order to know that when I hand you $20, you now have $20. And nobody can stop you from taking $20 from me. That $20 is both trustless and permissionless. When it becomes digital, we lose those properties. But when it's in physical form, we still retain them. And that's probably the easiest analog to think about Bitcoin with. Bitcoin is like digital cash. It's also like digital gold or digital real estate or digital bearer bonds. So there's a bunch of analogies that work sort of each with their own limitations and shortcomings. But the important thing to remember is that Bitcoin is scarce. If I send you a Bitcoin, I no longer have that Bitcoin. And that's never been true of any digital good before Bitcoin. If I sent you a file or if I sent you a piece of information, a document, a video, a funny animated GIF, I still have a copy of that thing. So all of the things that we've achieved online are taking advantage of how cheap and easy it is to propagate information. But none of them have been able to take advantage of the properties of scarcity until Bitcoin. So cool magic stuff that Bitcoin is doing. But I haven't really given you guys any indication of how it is that it's actually doing that. So let's talk about that a little bit. There's a rich and interesting debate about whether or not Bitcoin is good money or what it takes to be good money. But I want to table that for a moment and just talk about what it takes to be money at all. So in order to be money, you have to guarantee two things. One, only you can spend your money. And two, you can only spend your money once. As long as you've guaranteed those two things, you at least have a currency. It is a thing which one can transact in. It remains to be seen whether or not it's a thing you would want to transact in. But let's talk about how Bitcoin actually achieves these things. So the only you part is actually relatively straightforward. Bitcoin are stored in mathematical addresses that are called wallets, which are composed of a pair of keys, which are basically long numbers. There's the public key and the private key. And you can think of the public key as being loosely analogous to an email address. You can share it with anyone you want. Anyone who has it can use it to send you money. And then the private key, which you do not share, hence the name private key, is sort of loosely analogous to a password. And you use the private key in order to create signatures that sort of tell the network that you're allowed to spend the Bitcoin that's stored at that address. Now, this is all very elegant and lovely, but it's not especially new. This is the same basic public key cryptography that's powering essentially any secure experience that you have on the web. Anywhere that you're typing in a password, it's doing some variation on this math. So this isn't really where the new part is for Bitcoin. The new part is in only once. So there's a relatively famous problem that's in cryptocurrency circles known as the double spend problem. Outside of cryptocurrency circles, it's usually called the Byzantine generals problem, but it's a problem of sort of decentralized trust. And what it boils down to is figuring out what things happened in what order. So let me go into a little more detail about that. So let's think about banks. How do banks prevent you from spending your $20 more than once? Well, the answer is, if you try and write two checks for the same $20, the first one will go through, your $20 will clear, and then the second check will bounce because the bank will know you no longer have $20 in your account. That's fundamentally a time stamping problem. Neither of those checks is invalid until one of them has cleared. And fundamentally, the service that the bank is offering is they are the arbiter of which payment happened in which order, and therefore which of those two checks was the real payment and which one was the double spend. And the way that they're doing this is through a really old piece of technology called the ledger. And a ledger is just a list of transactions that people have made and a list of their account balances. So you spend $20, the bank goes to write down that you spent $20, they update your account balance from $20 to zero, and then the next time you try and spend $20, the bank is like, nah, you don't have that $20 anymore, right? So how do we manage to do that same trick with Bitcoin? Because with a bank, the way they're accomplishing that is by being the central arbiter of trust. You have to trust the bank is doing an honest job of solving the only one's problem, otherwise you're hosed. Well, the secret is my favorite part about Bitcoin, which is that Bitcoins don't exist. There's no such thing as a Bitcoin. You don't have one. There are none on your computers. There are none on any computers. There's no such thing as a Bitcoin. The only thing that exists is the blockchain. And what the blockchain is, is a ledger. It's just a list of all the transactions that have ever happened in the Bitcoin ecosystem. And by implication, it's a list of all the account balances in the Bitcoin ecosystem. So when you talk about buying or selling or spending Bitcoin, you're not actually getting anything. There's nothing that you're going to receive from the other person. There's nothing that you're going to have on your computer that's going to be the Bitcoin. What's actually happening is you're having them write to this public ledger to say, hey, the stuff that's on my balance should now go to that balance. And everyone has access to the same public ledger. So the blockchain is essentially the same thing as what banks are maintaining internally, except publicly available. And anyone can connect to the Bitcoin network and download the blockchain and verify for themselves the account balances of anyone on the network so you can verify that someone has the money that they say they have or you can verify that they've sent it to you in the way they say that they have. And that's what makes Bitcoin trustless. You don't have to take my word for it. You don't have to take the bank's word for it. You can download the blockchain yourself and you can do the math to verify it without requiring any trust in anyone. So the people who are actually updating and maintaining this shared ledger, the blockchain, are colloquially known as Bitcoin miners. They're functionally acting as accountants. So every transaction that hits the network, they're checking the transaction, they're making sure that the signature is valid, they're making sure the account has enough to actually spend it, they're making sure the transaction fee is enough to be worth their time. And then they're bundling all of those transactions together into what's called the block and then competing to add blocks to the blockchain. Anyone can become a Bitcoin miner. You guys could all go home and install Bitcoin mining software on your laptops. It would be an utter waste of time. These days you need specialized hardware in order to make money, but you can technically do it and if you have access to free electricity, it might even be a rational thing to do. But if you're paying for your electricity, please only do it as a hobby thing. It's no longer at the state where people at home can be making any meaningful money off of it. But this is important conceptually because this is why Bitcoin is permissionless. If you can't get anyone to add your transactions to the blockchain, you don't need to wait for them. You can become a miner and mine them yourself. Or more practically what happens is that someone else who doesn't have the same set of concerns as the people who are not interested in your transaction will be available. So because anyone can enter the Bitcoin mining network at any time, it's really hard to enforce any kind of control, which makes it very easy for anyone to participate whether or not another person in the network wishes they wouldn't. And that's what makes Bitcoin permissionless, trustless permissionless. Okay, so I just told you that the people who are updating and maintaining the shared ledger are the miners, but I also told you that anyone can become a miner. So what do we do about evil miners? How do we stop evil miners from screwing with the blockchain if they're the people that we're trusting? And this is really the key innovation that makes Bitcoin work. The answer is it's pointlessly expensive to update the blockchain. It is deliberately arbitrarily wasteful and the reason that it's deliberately arbitrarily wasteful is because you want it to be expensive. And then you pay the miners back in Bitcoin. So what's functionally happening when you're mining Bitcoin is that you're spending computation power and electricity to buy Bitcoin. And you have influence over the updating of the blockchain in proportion to how much capital you have provably sacrificed to the network. So you're incentivized to be honest because you've converted a bunch of your wealth into Bitcoin and if you then use that ability to damage the network, you will damage your own wealth. So you don't actually have to trust the miners. You just have to hope that more than half of them are greedy. And as long as the majority of the miners are greedy, then the system will work as intended. All right, so this is gonna be the most technically intense slide. So stay with me, I promise it'll get easier once we get past this. This is loosely speaking what the blockchain looks like. All transactions on the blockchain are bundled into what are called blocks. Blocks are produced approximately every 10 minutes. Blocks contain a hash of the previous blocks header which makes it impossible to build blocks into the future. You have to know what has happened in order to be able to build on top of it. And then there's a special magic number in the block. That's called the nonce. And the nonce is a meaningless number, it can be anything. But the reason that it's there is because Bitcoin has a rule that says to be valid, the next block has to have a certain number of leading zeros in its hash. So a hash function is a function that takes any arbitrary structured data and then maps it to a number. And the hash function in Bitcoin basically says, hey, this block isn't gonna be valid unless the number that you hash to is at least so many zeros. And that number is chosen in proportion to how many people have been mining recently which sort of makes sure that the network stays producing blocks every 10 minutes no matter how many people join. Hashing functions are one way. That's a property of hashing functions in math which means that if you're looking for a value that maps to a specific number like a number that has a certain number of leading zeros there's only one way to find it. And that's guess and check. So what Bitcoin miners are actually doing in practice is they're taking all of the transactions, they're putting them in a bundle and then they're taking the nonce and they're saying, is it one, no, is it two, no, is it three, no, is it four, no, is it five, no. And they're just scratching off all of these sort of conceptual lottery tickets trying to be the first one to guess a number that causes the hash to be the right answer and then they're allowed to update that into the network. So the reason that we do that kind of Rube Goldberg machine of guessing this weird random number that has this other random number result is that it's mathematically provably hard. It is irreducibly difficult no matter how you're doing it, whether it's on paper or whether it's with fancy specialized computers called A6, which are the common form of mining these days. And so we know that in order to have successfully been the person to have updated the network, you must have spent a minimum amount of computation power, a minimum amount of electricity, and that minimum amount is scaled as the network grows. So the reason that miners are willing to do this, the reason that they're willing to sort of effectively burn electricity and computers and sort of waste them in these pointless calculations is because the miner that successfully guesses the right magic number and gets to update the blockchain will be paid in Bitcoin. Specifically, they'll get two particular payments. One, they'll get transaction fees from all of the users that have transactions in that block. So every time you transact in Bitcoin, you pay the miners who are mining your transaction and that's part of their fees. But right now there's also a large chunk that's called the block subsidy, which is newly created Bitcoins. So you guys might have heard sort of conflicting things about there being only 21 million Bitcoin, but there also being miners out creating Bitcoin and that's kind of confusing. The reason is the block subsidy. And the block subsidy is sort of paying out at a fixed rate that cuts in half every four years. So right now every 10 minutes someone in the world is winning a lottery worth 25 Bitcoin, which is a decent chunk of change. So the miners are doing this pointless mathematical exercise in order to prove that they have done a pointless mathematical exercise in order to be eligible to win a Bitcoin lottery. And the reason that we're all interested in doing that is because then we all know that they must really care about Bitcoin because they put their money where their mouth is. Essentially speaking, every block is referencing every block all the way back down to the Genesis block which is the very first block that Satoshi Nakamoto mined back in 2009. So the blockchain forms a continuous history of everything that's ever taken place in Bitcoin. Okay, I'm proud of you guys. We made it through the technical part. We're back to the high level stuff. All right, so I'm kind of up to this point sidestep the question of whether Bitcoin is good money and I want to talk about it a little bit because I think it's really interesting but I also want to caveat it that nobody knows the answer to this question yet and anybody who tells you it with total confidence is full of it. So I think there are some very cool properties that Bitcoin has that make it interesting from a monetary perspective. So first of all, you cannot counterfeit Bitcoin. I don't know if you guys saw, but a few weeks ago there was a bit of a minor scandal because a gold bar was delivered from the Canadian Mint that was actually tungsten covered in gold plating and it sort of created this panic about, oh my God, what if all our gold isn't really gold? And that's kind of crazy when you think about it, when you think about how huge a part of the economy gold is and how much of us transact in it without actually ever attempting to like chemically assess the gold and understand if it's really gold. Bitcoin has this unique property that it is utterly uncounterfeitable. There is no way to create more Bitcoin because Bitcoin don't exist. There's only the blockchain and so you can only update the state of the blockchain and that has all of the very specific rules that we just talked about. Nobody can take your Bitcoin from you. Because Bitcoin don't exist, we can't prove you own it. There's no place to put it. There's no place that someone can take from you that will take it from you. It is strictly information. So it's possible to create an address that is strictly based on a word phrase that you can just memorize and then you have access to it in a way that has utterly no physicality whatsoever and no traceability. So if you're in a part of the world where you have severe security issues, whether it's because you're concerned about sort of institutional forces like your government or whether it's because you're concerned about more traditional criminal enterprises, Bitcoin is a way to sort of hide your money that can't be taken from you in the way that physical coins or physical currency could. Bitcoin can't be censored. I kind of alluded to this a little bit already when I talked about how Bitcoin is permissionless. No one can stop you from giving your Bitcoin to someone else. No one can stop you from accepting Bitcoin from someone else. That's why even though the governments hate it, all of the dark net markets are still operating or not all of them, but there are still dark net markets operating because there's no way to stop transfer of money within the Bitcoin network. Now in the context of dark net markets, that's a very complex question whether or not we should be interested in it. But there's actually much more ways in which freely transferable money is useful to ordinary human beings. And the easiest way I think to think about this is to think about the fact that Bitcoin costs different amounts of money in different parts of the world. Now Bitcoin can move anywhere. Bitcoin doesn't care about borders. That means one Bitcoin is one Bitcoin is one Bitcoin no matter what exchange you're buying or selling it at. But fiat money doesn't have that property. It's quite difficult to move fiat money around, especially across borders. And so as a result, there's a transaction cost to moving fiat money, which means that the fiat prices are actually the parts that are different. So the fact that Bitcoin has different prices in different markets is sort of a visceral proof that money doesn't transfer as smoothly as it could in a hypothetical world. Sorry, and then the last one and probably the most obvious one, I think the thing that a lot of people are initially drawn to Bitcoin about, it can't be inflated. There are 21 million, there will be 21 million. However much Bitcoin is worth, divide it by 21 million and that's how much one Bitcoin will be worth. Whereas all other forms of store of value that I'm aware of don't have perfect scarcity. Even things where there isn't a central bank that can just start printing new currency like gold, gold is still responsive to demand. So you can see gold mining actually rises and falls with the gold price, which makes total sense. So the supply of gold is not perfectly inelastic. It does have a little bit of give and take depending on how much people are asking for it. Bitcoin is the only store of value that I'm aware of that is literally uninflatable. But I actually think Bitcoin as money is kind of a boring way to think about it. I mean it's still fun and it's fun to think about the idea of owning something that might rise in value, so I don't mean to poo-poo it. But the thing that is most interesting to me about Bitcoin is that it is a form of social construct that has never existed before. And it allows us to do things that we've never tried before and we are just scratching the surface of what that might mean. So what I mean by that is this, I'm sure you guys have all heard the phrase, history is written by the winners. And if you look back at history, if you study it in a serious sense, there's a literal truth to that. Our understanding of past human events is filtered through human describers. It's historians, it's in older ages, it's monks, it's people who are writing down their perspective of events. They have limited viewpoint, subjective, they're biased, sometimes they lie. All of these things make our understanding of the past really complex and difficult to pin down in a precise way. But Bitcoin is different. The blockchain doesn't tell us a lot about human history, but the things that it does tell us about human history are unquestionably neutral. They are objective, shared reality. It is a history of all of the transactions that have taken place on the Bitcoin network that is immutable and that no one will ever be able to change as long as the Bitcoin network continues to operate the way that it's operating today. So for example, in the Genesis block, Satoshi Nakamoto included a reference to a recent headline about the chancellor of the UK approving a second bailout for banks. We can argue forever until we're blue in the face about what Satoshi Nakamoto's motives were, but we don't argue about what his words were, because his words are recorded in this place that no one can dispute. I think that's the most interesting property of Bitcoin. It is the notion of shared truth that we can all rely on without relying on any specific authority to be trustworthy. And I think there's a decent chance that if Bitcoin continues to operate the way that it has up to this point, that our ancestors will look back on this, or sorry, our children will look back on this as the dawn of recorded history, the first time when there ever was a truly objective neutral record that we could write to and read from. And I think that's pretty awesome, whether or not Bitcoin ends up being the money of the future. So with that, I want to turn it over to you guys to talk about whatever questions you might have. Oh, and we have questions on there too. I haven't done that. Let's start with a question from on there. What factors lead to Bitcoin's price volatility? That's a great question. There's a bunch of reasons. The simplest reason is liquidity. So the reason that the US dollar doesn't rise and fall in dramatic amounts is because there are so many people who are participating in the US dollar market that any given person who's participating in that market doesn't matter. So you could decide, oh my gosh, I'm panicking. I'm going to sell every dollar I have at any price. And the US dollar rate would be like, man, who cares? Because you're such a tiny fraction of the US dollar market. On the flip side and Bitcoin side, Bitcoin is relatively tiny. And some of the people who own Bitcoin are relatively large. And so it's easier to make large movements in the price, whether intentionally or unintentionally. So the simplest answer to Bitcoin's volatility is just that smaller sets of people are making decisions about whether to buy and sell. And that means there's sort of more dramatic quanta when things shift. There's also a bunch of other reasons in practice. A perfectly static supply commodity is something that we don't have a lot of experience with. A lot of the people who are buying and selling Bitcoin are not very experienced traders. And they're a little bit panicky. So there's a little bit more of herd behavior. But I think fundamentally it's really just about the size of the market. So you said there's only $21 million, I think you said? We'll be. Right now I think it's like $17 million or something like that. Yep. How does Bitcoin relate, if at all, to the Econ 101 ideas we learned about that even with a fixed money supply, banks can increase the money supply through their reserve rates. And suddenly it's vastly multiplied by banks, people save money in banks, and then they loan it out. And suddenly, there's a lot more money. Totally. So even if Bitcoin has a limited supply, couldn't you do fractional reserve banking and end up expanding the money supply? And the answer is absolutely. People did fractional reserve banking with gold. They could do fractional reserve banking with any commodity. It's totally possible with Bitcoin as well. What's different about Bitcoin than most things is that with Bitcoin, you actually have the opportunity to be your own bank. So with all the currencies up to this point, in practice, you could have your own gold, but transacting in your old gold was completely inconvenient. So you really had no choice but to give your gold to a bank and then transact in bank slips, because it was just so much more efficient and effective. With Bitcoin, you actually have the capacity to just choose to be fully independent if that suits your desires. And so to the extent that there will be fractional reserve banks, they're going to have to actually offer competitive interest rates in order to justify the risk. There will still be in the econ sense of monetary supply more than $21 million. But there was already going to be, based on the velocity of how much people spend Bitcoin versus how much they hold it. So the $21 million supply doesn't necessarily mean that $21 million is the only number that will be interesting in making calculations about the economy. It just means that once you buy a share of the economy, you'll know what share you own. Cool. What do you feel about Ethereum, Litecoin, and other altcoins? Excellent. I'm very glad someone asked this question. So you might have sensed from the fact that I totally avoided them in this talk that I am a bit of a Bitcoin maximalist. So I am one of the people who believes that ultimately there will be one cryptocurrency and that that cryptocurrency will almost certainly be Bitcoin. There are lots of intelligent people who believe other things, so certainly don't take my word for that. But the reason that I think that is this. So for those of you who don't know, Ethereum, Litecoin, and other altcoins are different cryptocurrencies that leverage the same basic mental trick that I told you about for Bitcoin. But they layer on other features or functionality. So in the case of Litecoin, they quadrupled the supply and divided by half the block time. So the idea was that they were going to be kind of the cheap, fast version of Bitcoin. Ethereum has a much more sophisticated engine of things that it can do. Bitcoin is pretty dumb. I can give you Bitcoin. You can give me Bitcoin. If we're really getting fancy, I can give you Bitcoin in 10 minutes or things like that. But for the most part, you can't do full programs. Ethereum, on the other hand, is designed to be a sort of full, turn-in-complete suite of capacity to express your cryptocurrency. So the reason that I think Bitcoin is the most interesting is this. There's essentially two parts to any given cryptocurrency. One part is the technology stack, the set of code that makes it run, and the set of things that it can do. And the other part is the ledger, which is the set of people who own or want to own that cryptocurrency and the sort of history of transactions that have gone into it. Cryptocurrency is necessarily decentralized in order to achieve the things that make it interesting. And that means that everyone has to have access to the technology. The technology has to be open source. So the existence of Ethereum means that all of Ethereum's functionality is available to be applied in other ways. Specifically, another way that it could be applied is to take Ethereum, but with all of the Bitcoin account balances. So you could take the ledger and history of people who value Bitcoin and plug it into the technology that Ethereum operates on, assuming that that was an interesting and compelling thing to do. The reason that you might be interested in doing that is, suppose that Ethereum comes up with some use case that's really powerful, and you own a lot of Bitcoin, and you're like, damn, I really would like it if my Bitcoin stayed valuable and it didn't all move over to Ethereum, maybe I'll just take that valuable thing that Ethereum can do and apply it to Bitcoin and see if that gains transactions. And then all of the other people in the Bitcoin network will say, hmm, all else SQL, I'd probably rather use Ethereum but with Bitcoin account balances because then I'd already own a bunch rather than Ethereum but within Ethereum account balances. So all of which is by way of saying that anytime you release a new cryptocurrency, you have to be competing not just against Bitcoin, but against your cryptocurrency, but with Bitcoin's network. And that's, in my opinion, an impossible bootstrapping problem. I don't see why you would ever want to own a cryptocurrency that was functionally the same as another cryptocurrency with a larger and deeper network. I can tell you're excited to ask a follow-up question, go for it. Hooray! Yeah. Yeah, so the question is like, we've just seen sort of a very contracted debate about how and whether to update Bitcoin and I've just told you that Bitcoin's secret power is that it'll update if it needs to and like, will it? Ooh, who knows? A fair answer is we don't know for sure and a lot of the people who believe in Ethereum believe that the governance model is the reason that Bitcoin won't be able to do the trick that I just described. I feel a little differently and the reason that I feel that is because I don't actually think Ethereum was as much of a threat to Bitcoin as the people who were excited about whether Ethereum might be a threat perceived it to be. And so I feel like the danger wasn't really at the height that it would need to be in order for us to really test that question. When we test that question, it might totally turn out that the governance model fails. But in my opinion, a really conservative governance model is desirable in cryptocurrency because there's only one way to prove that a new form of cryptocurrency functionality is safe and that's to put a whole bunch of money behind it and see if anyone steals it. And you've seen this in Ethereum in a couple of ways, right? We've had some fairly significant hacks in the Ethereum ecosystem or some bugs like the parody bug a few days ago that locked up like $150 million worth of Ethereum in multi-sig wallets. These are problems that occur because Ethereum is so much more expressive. It can do more things and some of the more things it could do are undesirable. Bitcoin can only do like two things but the two things it can do are the things you want it to do. My theory is in crypto you want it update in really teeny incremental boring ways. So like segwit was perfect. You know, like everybody was agreed segwit was good but not good enough maybe and that's the kind of update I want to see. I want to see stuff that's like super safe, super vetted, super incremental and that is in my opinion the fastest path towards long-term trust but there are people who view it as much more of a, you know, race to get to the key use case and that's probably the bull case for most altcoins is there is some interesting thing that could be done and we got to get there first before anybody else. The segwit 2x fork. Yeah, so happily for those of you who haven't seen the news earlier today the folks behind the segwit 2x fork announced that they were going to be discontinuing it. So there will be no segwit 2x fork, which is great. In general with forks, my advice to you is to wait it out and not do things. I think there are many, many more ways to screw yourself trying to be clever with a fork than there are ways to make it better. If you're actively using Bitcoin then there's things you need to do to protect yourself. If you're just holding Bitcoin as a long-term investment in general my advice to you would be like go have a pint at the Winchester and let it all blow up. The answer is a question. Ah, good. I'll think what you're had. You listen to things like viruses and you know, the parts you're talking about. What are the guarantees that, you know, for example the original blockchain will never be planted or invested? It's a great question and, you know, in some sense I can tell you some reasons that I have confidence but I would hesitate to use the word guaranteed you because I also would have guaranteed you that Bitcoin was impossible. So, you know, the truth is we're in very uncharted territory and if you do decide to participate in the Bitcoin ecosystem you should do so with the full belief that like tomorrow some crazy thing might be discovered that makes the whole thing invalid. And that might be because of a bug, it might be because of a hack, it might be because we all wake up one day and we feel like Bitcoins are beanie babies and we wanna sell them before the other guy gets out. You know, so like there's a bunch of things that could go wrong and it's really important if you're gonna play with Bitcoin to believe that, to like have it in your heart. And the way that I would think about it is if you own an amount of Bitcoin and then you imagine the price of Bitcoin crashing to zero tomorrow, if you are more sad about the money than about being wrong, you own too much Bitcoin. You should own only enough Bitcoin that when it all comes crashing down that the main thing you feel is like, darn, now I won't get to brag to people about how smart I was for owning Bitcoin. And anything more than that will cause you to make decisions that are almost certainly going to backfire because the market is really volatile and trying to time it is extraordinarily bad idea in my opinion. So I would own an amount that you're okay with the idea of there not being those guarantees. I've got a guy back here who's been waving for a bit. Yeah, you, yeah. Quantum computing. Yeah, yeah, quantum computing. Is it gonna ruin everything? So there's two things I can say to you. One is that we have quantum safe encryption. There are such things as encryption that is effective within quantum computers at least at a theoretical level. And then the other thing is that encryption breaks theoretically like years before it breaks practically. So I'm not super worried about it. I actually think we're probably quite a ways away from practical quantum computers. But if we reach that stage, there are both paths that we know we can go and there should be plenty of time for us to make those upgrades if needed. Right, so somebody will publish a paper and be like, technically I've broken this particular encryption and then somebody else will be like, well, we've got three years to ship this update that we've got a white paper that describes everything. So we'll have to do some work when that comes, but I don't think it'll be a disaster. And unlike, say for example, some of the upgrades that we were talking about with Seguit 2x, an upgrade to patch broken encryption is going to be uncontroversial. Like there's no winning from having the system be poorly encrypted. What are some San Francisco companies that are in, not necessarily San Francisco, but ideally San Francisco companies that are in the space of... Yeah, I mean the giant in the room is certainly Coinbase. They're based out of San Francisco, yep, yep. They're the largest US exchange and they're probably the largest retail Bitcoin exchange. So if you were interested in getting involved in a Bitcoin company, that's certainly the obvious place to start. There's a lot of smaller companies that I don't know well enough to make sort of any kind of recommendations for or against. A general thing that I would say to you about Bitcoin is if you're interested in getting involved in the ecosystem itself, I would encourage you to read an essay called Fat Protocols. And the basic gist of the Fat Protocols essay is that if Bitcoin is successful, the majority of the value will accrue to Bitcoin, the unit and not the Bitcoin companies. And I will try and reproduce the arguments there. I find them convincing, but you should read them for yourself. But what that basically means to me is if you're getting involved in a Bitcoin company you're essentially doing the same thing as buying Bitcoin but with more risk. So I would do it if you think Bitcoin is awesome and you're super excited to think about it all the time which to be clear, I would very much understand and sign up on but I would not do it because you think Bitcoin is gonna be the next big thing because if you think that, just buy Bitcoin and stick with your day job. You can get the same risk exposure and in fact with much finer granularity of control. Yeah, so the question was where do I think the Bitcoin price will go? I think the only thing I could tell you with confidence is it's not gonna be the same tomorrow. So I mean, I own some Bitcoin, I own some Bitcoin partially because I think it is beautiful and lovely and I want to own it and then I own it partially because I think it will go up in price over time. If it does the things that it says it does, then it is interesting at a scale much larger than the scale it is currently operating at. So the general rule of thumb I would give you is Bitcoin will either be worth a lot more than it is today or it will be worth nothing at all and it's very hard to say how much a lot more is because it's kind of like using physical mail to predict how much email will be sent. Like there will be a totally new class of economic activity that we've never observed before or there will be a cool story about why we thought it was going to be amazing but then it fell apart at the last minute. Pluck one off of the questions off here. Are there any projects that are using blockchain technology at Google? Yeah, so my information at Google is a couple of weeks out of date now so take it with a boulder of salt but generally speaking, there are a lot of blockchain enthusiasts at Google, it's a company full of thousands of technologists so there's a bunch of people who really think it's amazing. There aren't a lot of good business reasons for Google to get involved in Bitcoin. There are companies that if they want to be involved in Bitcoin would need to start building up the expertise now but Google's not one of those companies. If tomorrow they suddenly needed a bunch of blockchain experts then they would just email Bitcoin at Google and then the hundreds of Bitcoin hobbyists that already work for Google would be like, yes, please put me on that project. So Google can wake up at any moment and suddenly start doing Bitcoin stuff and if you look at Google historically, the majority of their major products and businesses were not first entrants. They weren't the first to search, they weren't the first to video, they weren't the first to email. First isn't really what they do. Really what they do is they wait to make sure their market is big enough to be worth their time and then they come in and build like an insanely high leverage technological solution that makes them more effective at competing. So I would expect if Bitcoin is a thing that Google will eventually get involved but I would be surprised if they were one of the early players. If I send you one Bitcoin, do we need to wait until the next block is added in order to verify 100% that I had the permission to send it? No, that's a great question. It's a little subtlety there. So if you send a Bitcoin to me and I would like to accept it before the first block, remember blocks happen on average every 10 minutes. So if you want to use Bitcoin to buy a coffee, it's kind of annoying to wait 10 minutes to be sure your transaction clears. There's a special category of trust you need in order to be willing to accept zero-con for transactions. You can tell that a person had that Bitcoin. So to map it to an analogy to physical checks, you could look at the check and be like, aha, this check actually is signed and it's from the right bank account and you would know that they had $20 in the bank account. All of that would be verifiable. What you couldn't tell until it's on the blockchain is whether I had shown the same transaction to someone else. So I could go and give you one Bitcoin and you one Bitcoin and you one Bitcoin and all of you would know I actually had a Bitcoin but until it hits the blockchain, none of you know whether or not I was trying to dance the same dance with a bunch of people. Now for a coffee, that's probably an acceptable level of risk. Companies that are already dealing with credit card fraud or already dealing with shoplifting, this is just another type of overage. I don't think it would be a dramatically different thing. For a human being that you have even a remotely comfortable level of trust, it's probably fine. Attempting a double spend in a mathematical sense has one of two possible outcomes. It either is just going to happen by chance. So they sort of could just be like hoping for like a small chance that they might get their coffee for free or they're doing it by trying to actually use mining power to boost that chance but using mining power to boost that chance costs astronomically more than most transactions are worth. So if anybody's ever selling you like $10 million worth of Bitcoin, maybe wait the 10 minutes but if they're just doing five bucks so you probably don't need to worry about it. This is the first talk about Bitcoin, how to. Thanks for coming. What should I do to invest and how do you do it? Yeah, so if you're brand new and you're interested in investing, like what steps should you take? I would say a couple of things. One is you should really give some thought to how much you're comfortable with and you should set that number before you get involved and then you should stick with that number because a lot of people, they get involved and then the numbers either go up or down and then they get really excited or really panicky and they change their plan midway through and then that's where people lose money. So the first thing I would say is like, figure out what the amount of Bitcoin that you're comfortable owning that you think you could put away for five years and not check the price ticker and not panic if it dropped and then set that. I think the easiest way for a new person to get Bitcoin is Coinbase. It does involve know your customer anti-money laundering stuff. If you wanted to sort of take advantage of the anonymity of Bitcoin, then local Bitcoins allows you to kind of do essentially Craigslist transactions. So those are two ways to get in and in particular I would emphasize that you use a strategy called Dollar Cost Averaging. Dollar Cost Averaging basically says you decide how much you're gonna buy and you decide what time you're gonna buy it over and then you do it in small regular rhythmic chunks during that window and that keeps you from getting screwed in the volatility. It also keeps you from getting really lucky in the volatility but I think with Bitcoin you're already accepting enough risk that there's no need to add the volatility risk to it. So if you say to yourself like, you know what I'm comfortable owning $500 worth of Bitcoin, I'll buy it over the course of the next month by buying it at like $10 a day until I'm done buying it. It would obviously take more than a month then but you get what I'm saying. So the things I would emphasize are make sure you buy an amount that you would be happy to put away for five years and not pay attention to. Don't try and time the market, buy in small increments over a window of time and whatever that amount that you decided beginning stick with it even when you're feeling like you're a genius investor or like you're panicked because it's all gone down. Banks can close your account for a lot of reasons and there are banks that have closed accounts for Bitcoin reasons. In practice, in my anecdotal observation the people who have had that experience are transacting in large and suspicious amounts of Bitcoin. If what you're doing is going to Coinbase and buying a couple hundred dollars worth of Bitcoin and leaving it in Coinbase I don't think anybody's gonna panic. But if you're buying and selling $10,000 worth of Bitcoin at a time then pretty soon people are gonna be like where's all that Bitcoin coming from? And that raises questions. And one of the things that happens with banks is that we're used to the standard of proof of courts but that's not the standard banks use. If they get suspicious of you they'll cut you off because they don't want the risk. I have a question. If Bitcoin is international why you have to be a US citizen to buy Coinbase? Because of the fiat money. So the question is if Bitcoin is international why do you need to be a US citizen in order to use Coinbase? And the answer is because you need to be a US citizen in order to be using Coinbase as banking. So it's not about the Bitcoin half of it. The Bitcoin half of it is free and clear. It's about the US dollars half of it. And it's a great example of how digital dollars are just not as free to move around as Bitcoin are. Yep, absolutely. There are exchanges all over the world. In the UK I think Kraken is one, if I remember off the top of my head. Kraken, K-R-A-K-E-N. There's a number in Europe, there's a number in Asia. They run the gamut in terms of respectability so do your research. But the reason that I recommend Coinbase is because they're the most buttoned up straight laced ones which is also why they're so restrictive about banking. So it's very easy for me to stand in front of a group of people and recommend Coinbase and be pretty confident you won't be screwed. But it's also gonna be the sort of like the most paperworky by the book kind of version and so there's a bunch of other possibilities. I'll get you next one. Yeah, yeah, this is great. So what are other uses of the blockchain technology besides literally being money? Well the way that I would think about it is anything where you would like an immutable record of the past that you can trust without having to trust anyone. So for example, the provenance of art or land records or diamond records or tracking fish supplies to be sure that they were sourced from ethical and sustainable fisheries or anything where you would want to be able to prove that something happened in the past in a way that everybody involved could know was true. So that's like a class of things that I think of as being like the shared ledger tasks. There's also a class of things which are a bit more speculative called decentralized applications or dApps. And the idea here is that you could imagine a company that is sort of expressed in code and the entire thing is running on the blockchain. So imagine an address where when you sent money it automatically sent that money to a self-driving car that would come pick you up and use the money that you spent on it to go buy itself gas and there would never be a human involved. It would all be computers just managing the flow of money to and fro. And that's really cool, it's like a really neat thing to think about the concept of a decentralized organization like that. And in fact, you can in some ways think about Bitcoin as it stands today as that kind of decentralized organization where they're raising capital from people who want to be able to transact and then spending that capital to hire miners in order to provide security for those transactions. None of those things are possible in Bitcoin today because the scripting language is so simple. But that's a big part of what the premise of Ethereum is. So Ethereum has this sort of concept of you can build what are called smart contracts and the smart contracts are the same as legal contracts except enforced in code and kind of provable mathematically. So my favorite example of this is in Ethereum there is a fair pyramid scheme. So somebody started a pyramid scheme where everybody who buys in pays the previous people in the same way as a classic pyramid scheme except that it's all transparent and provable and no one can run away with the money. So it's sort of like the honest version of Bernie made of it's like a really weird mathematical proof of what you can do. But right now all of these things are kind of thought experiments and like toys that we haven't yet found one that's actually like driving real value yet. So when I hear you talk about volatility and value it makes me wonder whether it's one should even think of Bitcoin as a currency or as an investment. What I mean by that is I was under the impression maybe this naive that one of the classic purposes of money is to facilitate transactions of real goods. Sure, medium of exchange, yeah. And if the value of Bitcoin is so volatile it would seem like I can't be a baker and sell myself for Bitcoin because it's going up and down and up and down and there's no central government making sure the money is fairly stable in value. It really earns here as an investment. Yeah, so the question makes sense. Yeah, the question if I may restate it slightly is if Bitcoin's price is so volatile then doesn't that damage its ability to function as a medium of exchange and if it can't function as a medium of exchange is it reasonable to call it money because people are using it differently? You know, there's a rich debate about whether or not Bitcoin is a medium of exchange or whether it's a store of value. I actually don't think those things are in conflict and I think one of the things that's kind of weird about Bitcoin is all of us are really used to a really stable currency like the majority of us in this room spend the majority of our time transacting in US dollars which is a very stable currency but the majority of currencies in the world are not that stable and in fact the majority of currencies throughout history have not been that stable. So when you talk about volatility damaging it as a medium of exchange you're right in the sense that it does make it work less well but it's not the case that that actually makes it dysfunctional as a medium of exchange and the sort of proof of that is the fact that people are still using it that way on the dark net markets, right? So in circumstances where the things that are convenient about exchanging in Bitcoin namely that it's uncensorable and that it can transact across borders then you're willing to tolerate the inconveniences of the volatility and over time if liquidity increases then the volatility will decrease and the set of use cases that are worth pursuing in spite of the volatility will grow until eventually you have a positive feedback loop that kind of both eliminates the volatility and leaves behind a functioning medium of exchange. You're certainly right that rising and falling and price dramatically is undesirable from a medium of exchange but it's not a binary like either works or doesn't it's a spectrum from like perfectly stable to perfectly dysfunctional and Bitcoin is actually not as far down the spectrum as you would think. So if you were to compare it in the like bell curve of volatility of currencies over the course of the past year well actually just recently we've destroyed it because we've jumped up so much but if you were to look like before this giant run like in the 500 to 2000 range it was actually on par with some of the major currencies not the US dollar and not the Euro but the ones in the next tier the yen and the renmin b and things like that. So it's not as crazy as you might think. Jamie Diamond. Yeah. Have any credibility in making Bitcoin? You're right about any of this. From the people who are counter-argument. Yeah, so the question is have I heard any credible arguments against trusting Bitcoin? Yes, but all of them are full of asterisks. So a lot of the people that you hear that are sort of the bankers that are kind of poo-pooing Bitcoin the Warren Buffett's, the Peter Schiff's Jamie Diamonds, a lot of their complaints I think are pretty ill-founded. So I think there's a real sense to which if you have spent your life immersed in the financial industry and then something comes along that seems totally different and like it's not going to appeal to you you're the kind of person who found the original system appealing so you would be I think naturally disinclined to be trusting of disruption. I mostly find that those arguments are usually motivated from a place of misunderstanding. So like Warren Buffett for example said Bitcoin is a means of transfer of value but so is a check and so why would you value a check? And it's like well if there were only 21 million checks and you could prove it and they were uncensurable and they could teleport around the world for free we would probably value checks. Like then the checks would be useful. So the people that both understand Bitcoin and are critical of it are rarer. They're not non-existent but they're rarer. I think the best argument against Bitcoin is the fact that it's so new that there's a buttload more things that could go wrong with it than we have any conception of. So I think the basic idea of what Bitcoin is if it is doing what it says it is I think it will be what people think it will be. But the real question is is it actually doing what we think it's doing because if you look at Ethereum for example which is a more complicated system and we've discovered countless places where it was doing things we didn't expect it's entirely possible those problems are happening in Bitcoin but are more subtle and harder to find. What do these forks happen? What is what happened? I mean the blocks of different size. Yeah so the question was why do the forks happen and there's sort of a different answer for every fork. The short answer is that a fork happens when different people have different consensus rules about what Bitcoin is. Sometimes that happens because people are left behind and they just haven't been updating their stuff. Sometimes it's because there's an actual disagreement and there's a philosophical objection about one path or another. Most of the recent ones have been arguments about scaling. So I alluded to the fact that there's a block that's produced every 10 minutes for Bitcoin and that block is fixed in size which means that if everyone in the world suddenly wanted to transact in Bitcoin and they desperately needed it to clear in the next block we'd be hosed because there's only so many slots and that is a limit enforced by the network in the same way that the 21 million Bitcoin limit is enforced. So a number of the recent hard forks have been arguments about whether or how to increase that block size. Way in the back. Yeah there are and the reason that they exist is because there aren't very many people who can easily move fiat across borders. So if you were the kind of person who had a bank account in Japan and South Korea and America and the UK then you could probably make some pretty decent money buying and selling Bitcoin in different places but the set of people who have the ability to cleanly and easily move large sums of fiat around across borders is just small enough that arbitrage opportunity doesn't get taken advantage of. Yeah I mean in practice a lot of the times arbitrage opportunities have hidden costs so like you look at it and you're like okay I have to also factor in the cost for all my ACH transfers and I have to factor in the cost of time as I wait for those transfers to clear and I have to factor in the time that I spend managing and micromanaging all the accounts. It's not really free money but there is definitely money to be made. I actually have an account on Gemini and GDAX which is Coinbase's exchange. By the way if you go to Coinbase go to GDAX not Coinbase. Same company lower fees. G-D-A-X G-D-A-X Yeah that's the pro tip for the people who stayed the whole time. Yeah so in practice I would say to you it's probably not a ton of money like I do it because I'm so obsessed with Bitcoin that I follow both trackers and then sometimes I connect it but for example for me I would say when G-D-A-X and Gemini differ by about $100 then you're in a position to make about $5 a coin in arbitrage. So that's like a coin today is like $7,000. So if you're willing to like move $7,000 around in a really complicated circle to get $10 back then you can but that's the reason that it's possible to do that is because the majority of people don't find it worth their while. So when you transfer Bitcoin it doesn't ever have a location. So like if you were to send me Bitcoin you could send it to me regardless of what country you're in and what country I'm in. What's that? Do I have to use the same method? Nope not at all. So what happens is if you wanna send me a Bitcoin you would sign a transaction and then you would broadcast it to the network and all of the people who are mining are constantly broadcasting transactions that they've seen to each other and that forms what's called the mem pool which is the sort of list of transactions that people have seen but have not yet put into the blockchain and that propagation would sort of reach all of the miners I would in whatever part of the network I was connected to then see that your transaction had hit the network and so I would know that you had paid me but it would at no point would we need to have a shared set of technology or a shared network or any kind of shared anything really other than being access to the same internet. I'm gonna hit the person behind me and then I'll go to you next. Yeah so can I quantify the security risk of owning Bitcoin? I probably can't quantify it but I can give you a rule of thumb. The rule of thumb is this if you are a perfect super genius who is flawless then Bitcoin is flawless in its protection of you. Like all of the protections are there and they work but unlike almost every other system that we interact with as humans Bitcoin is utterly unforgiving. If you forget your password there is no one to call up to click forget your password. Doesn't exist. Your Bitcoin is gone and I personally have destroyed Bitcoin by doing things like that so I'm not saying this in a hypothetical sense like if you transact in Bitcoin you're much closer to the wire than with most forms of monetary transaction that we do. So the security risks of Bitcoin aren't really risks of Bitcoin they're really risks of owning responsibility for your own money. In the same way that if you were to like take a bucket full of gold home it's like well if you have perfect security the gold isn't going to like teleport away but probably you don't really want to be holding a bucket full of gold probably you'd rather put that in a bank and let them take care of securing it. You share with us your own strategy and plan for acquiring and keeping Bitcoin. Yeah is it possible to skip back to the slide deck for a moment? Right now we're showing the slide oh is it possible to go back to the deck? Yeah sure. Oh terrific. Okay cool so one of the things that I think is interesting about Bitcoin is that it forces us to try and reason about large numbers and people are not very good about reasoning with large numbers and in particular the number 21 million seems like a really big number but it's actually a really really small number and that means that you actually if you think Bitcoin is an interesting experiment and you'd like to be a part of it you probably need to own a lot less Bitcoin than you think. So when we think about owning Bitcoin we kind of a lot of us sort of are mentally multiplying the number of Bitcoin by the current US price and then assessing that by seeing whether or not we think somebody owns a lot of Bitcoin. Don't think about it that way. If you own Bitcoin you own a lot of Bitcoin. So let me kind of quantify that a little bit. So the left here is using income inequality rates projected from Japan which has one of the most equal income rates in the world. This is using from the US which is actually pretty representative of the global income inequality and then this is actually projected from Zimbabwe which has a very high level of income inequality. So this is the amount of Bitcoin that you would need to own in order to be in the top X percent in a world where each of those things had that level of inequality. So right now if Bitcoin was perfectly distributed to everyone in the world you would need to own $21 worth of Bitcoin in order to own more than most people will ever own. $21 would be enough for you to own more than anyone else and that's if it was perfectly evenly distributed which obviously we know perfect equal distribution doesn't really happen in economic systems. If you look at say we'll take America as a projection if you assume that the Bitcoin ecosystem will have the same inequality as America then in order to be in the top 1% you need .02 of a Bitcoin, .026. So when people talk about owning Bitcoin and they say like, you know, how much should I buy? The answer I always have is like, you're fine. You know, you really don't need to buy a lot of Bitcoin, it counts. So this is the same amounts but just multiplied by today's US dollar prices which makes it a little bit easier to reason about. My theory is if you own $200 worth of Bitcoin today congratulations, you are part of the Bitcoin elite. Bitcoin either matters and you're gonna be stupidly wealthy or it doesn't matter and you lost $200 and you're probably okay. So like honestly I really don't think you need a lot and I think that the reason that people feel like they need a lot is because they're really chasing US dollars or whatever their local currency is. If you think about it in terms of actually wanting to own Bitcoin, there's just so little of it and we're so early that you are early adopters even though it doesn't necessarily feel like it. I own traditional currencies but I don't own any of the crypto currencies, yeah. Mm-hmm, yeah, yeah. So what happens when people lose their ability to spend Bitcoin and it's just sort of sitting there frozen on the blockchain? The answer is they've made everyone else on the Bitcoin ecosystem richer because that Bitcoin is unrecoverable. So there's no way to guess a person's password even if you are sort of like the CIA with all of the supercomputers in the world, like you can turn every atom in the sun into a quantum computer and then let it run for the rest of history and you would not be able to derive a private key from a public key. That's how strong the encryption is. So when you lose access to Bitcoin it really is functionally destroyed. There's actually other ways to destroy it. You can send it to a thing called the Bitcoin Eater Address which is a public key that provably doesn't have a private key so you can actually destroy things if you want. Sometimes people do that when raising money for altcoins for various reasons. The long and the short of it is from the point of view of everyone else in the ecosystem it doesn't matter. It's even maybe slightly good that you lost your money. From your point of view it obviously sucks but it doesn't damage Bitcoin as an ecosystem at all. I'm gonna hit them in the back and then I'll hit you. Yeah, so what's the biggest bottleneck in terms of more people joining the Bitcoin ecosystem? I would say that the biggest bottleneck is trust. People don't put their money in the thing which is the mathematically best thing. They put their money in the thing which they can form the most comfort with the idea of their money being there. The great example of that is passive investing has been a revolution since like the 70s and I think it's at like what 40% of the overall investing market right now. So even though index funds are very, very safe and very provably better than more actively managed funds they're newer and it just takes a while for people to gain trust in it. In fact if you look at the numbers of how people approach passive investing it's not really so much that people are gaining trust in it. It's more that the people that don't trust it are dying off and new people are forming wealth and those people actually have trust in that system. So like companies like Wealthfront for example which are sort of very much predicated on the idea of passive investing and index investing are things that are really only successful because a new class of investors have comfort with that category of asset class. I think the same thing is gonna have to happen with Bitcoin like if you have already built up your wealth over the course of a lifetime the idea of being able to get in on the ground floor of a crazy new investment isn't gonna be as appealing and so generally speaking I think it's gonna be a slow burn for Bitcoin to acquire the trust in order to accumulate the capital. I mean it's definitely true there's a huge amount that haven't been active for a long time and it's definitely true that a bunch of those coins are destroyed. On the other hand like approximately 1.1 million of those Bitcoins are Satoshis and if Satoshi has elected not to spend their Bitcoin I'm certain it wasn't because they accidentally lost the password. So they might have chosen to destroy the password or they might have chosen to wait until the system is more established and they felt like they could sell without destroying everything but I would find it unlikely that the person who invented the whole system wobbled their 1.1 million Bitcoins. That seems implausible to me. So there's this interesting state where like if you were to ask me to place money on whether or not those Bitcoin are gonna move in the next 10 years I would definitely bet they're not gonna move but if you were to ask me to place money on whether or not they could move if we could find a way to prove that I would probably bet they still can and I think that's probably true for a lot of people. A lot of early investors had very much this notion of like oh I bought a couple of Bitcoin for chump change I threw it on a USB drive I'll find it in a shoe box in 10 years and be like holy cow I forgot about this. I'm gonna grab one from online. I purchased Bitcoin on Coinbase. What additional steps do I need to take to make it as safe as possible? Coinbase is not an actual wallet is it? That's absolutely true. Coinbase is not a wallet it's an exchange. The difference is when you have Bitcoin when you have Bitcoin on Coinbase you don't have Bitcoin you have an IOU for Bitcoin from Coinbase. And just like we were talking earlier about the idea of fractional reserve banking you have to trust that Coinbase actually has the Bitcoin that they say they have and that they'll actually give it to you when you want it. Now Coinbase is a pretty reliable company. I actually applied to work there so I talked to a bunch of the people and I feel fairly comfortable in telling you I don't think Coinbase is gonna screw you. But at the same time it is definitely not the same as owning Bitcoin. And a lot of people would tell you with a very straight face that if you don't have the private keys then you're not participating in the ecosystem. Which is I think a reasonable stance. Each person needs to make their own trade off about how they feel about the risk of trusting Coinbase versus the risk of trusting yourself. And you should be realistic about the possibility of you making a mistake and also about how you would feel about it if you made that mistake. There's good reasons to think about using Coinbase's trust even if that's not pure Bitcoin. Coinbase also has a feature called the Coinbase Vault which I recommend if you're planning on doing long-sterm storage on Coinbase. It basically makes a 48 hour waiting period on any withdrawals. So if anybody manages to hack your account they try and withdraw all your Bitcoin. It gets stuck in a 48 hour window and you've got a chance to call Coinbase up and be like oh please don't give away my Bitcoin. What's the best way to buy Bitcoin for the lowest financial fee Coinbase is asking for my banking password? Yeah, I mean if you don't wanna share banking info Coinbase isn't gonna be your friend. It is, GDACs is probably the best ratio between cost efficiency and effort efficiency. I can't really give you a lowest cost because that has a lot to do with your specific circumstances. What I will say though is the only reason that fees should be a huge part of your decision making factor is if you're planning on doing day trading and don't do day trading. Instead buy it, hold it for five years and it won't really matter whether you paid 1% fee or 1.5% fee or 2% fee, it just won't be a big deal. So you said that it's really hard to hack Bitcoin but is it possible for a government or a terrorist or other bad actor to simply bring down the system somehow to network like to destroy where the vaults and blockchains are being stored? Yeah, so to bring down the block, oh so the question was suppose an arbitrarily powerful bad actor wants to destroy Bitcoin and is comfortable with just destroying it doesn't necessarily want to extract value from it, is it possible that they could just nuke the network in some way? And the answer is effectively you would have to destroy the internet itself. So there's a company called Blockstream that actually has a satellite that's broadcasting the blockchain all the time. So if you have a satellite connection anywhere in the world you can get the blockchain from them and then there are people that are practicing broadcasting blockchains over not blockchains transactions over SMS and over radio. And basically if I can communicate to you in any way then we can communicate Bitcoin transactions like the transactions themselves are just numbers. So any system whereby I can send you information is a system whereby I can send you Bitcoin information. So it's really, really difficult to extract Bitcoin. It also has to get to the miners not just when you and me, it has to get to the miner so this can be recorded somewhere. Right, yes, the network needs to generally be able to communicate. The miners need to communicate with each other we need to be able to communicate with miners and that's all that needs. So you need to find a miner, I need to find a miner and miners in general need to be able to communicate with each other. So it is possible to imagine a world where you sort of eliminate all of that communication but it would be pretty close to eliminating like all of the net and all of the cell phone services. There are some repressive governments that limit all kinds of internet communications. Right, and the majority of mining actually happens in China and you can't really stop it. It's not actually possible to separately censor just Bitcoin traffic. I mean it's possible to make your Bitcoin traffic visible and thus you could target it but if you wanted to make it not visible if you wanted to make it sort of obfuscated through other channels, hide it in steganography, sort of broadcast it in seemingly benign communication it's very possible to hide Bitcoin information in other things. So really as an absolute mathematical truth it would be very difficult to stop Bitcoin what you would want to do to stop Bitcoin if you were trying to stop it is you would attack the on ramps. So very difficult to stop Bitcoin pretty easy to stop Coinbase. Coinbase has an address, they've got a phone number they've got a bunch of lawyers you can call them up and be like Coinbase I'm gonna shut you down. So that's the route that I would expect governments that want to be hostile to Bitcoin to take is not so much attempting to destroy the network as attempting to destroy people's willingness to accept the currency. Three more questions, cool. I'll pick one off of this and two from the audience. China has asked the exchanges to shut down but not the miners. So the miners are still operating at full speed. And actually the exchanges, I don't wanna get into too much detail but basically speaking a lot of how China operates is by sort of distributing kind of multiple parallel rumors and then watching people's reaction to the rumors and then the one that has the reaction that they wanted is the one that then becomes the truth. So like what happens with Bitcoin exchanges is you'll get like one official thing that's publishing a story that says all Bitcoin exchanges are getting shut down and then another one that's like no, we just talked to them and we're fine and then another one that's like you're getting shut down but only for a little while and only to stop doing futures and it's deliberately murky. So I don't pretend to tell you I know the exact current state of things but it's more of a negotiation than an attack. Cool, what happens if all countries ban Bitcoin transactions? That's a great question. Sort of approach it from two ways. One is to just take that at face value. Let's assume that every government in the world simultaneously wants to censor Bitcoin transactions. Probably the price of Bitcoin would go down because a lot of people aren't really interested in a truly combat-ready currency. Most of the people participating in Bitcoin are not probably doing it as an act of government resistance. But there are people who are doing it that way. There are people in Venezuela who are transacting in Bitcoin in the same way that they transact in black market US dollars because the Venezuelan Bolivar isn't a reliable form of currency for them. So there certainly are people who would still continue to use Bitcoin in a world where there was absolute hostility from governments. Obviously the dark net markets would still find it interesting. In my personal opinion, that would just result in slower growth, not no growth. It's very difficult to eliminate the gray and dark markets. The second way I would answer that is, let's realistically think about all countries in the world acting in unison. I think that would be very difficult to achieve. I think in practice, a smaller country would say, hey, what if we were the only ones that did accept Bitcoin? You know, like, so the Cayman Islands or Aruba or some of these countries that are interested in being tax havens already, I think would be totally comfortable with being the Bitcoin and tax haven. So in practice I don't think all countries acting in unison is a very realistic threat, but even if it did come to play, there would still be some remaining part of the Bitcoin network that can continue to operate. Close this out strong. Yeah, totally. So can I expand a little bit on why I'm a Bitcoin maximalist and why I don't think in the long run there will be altcoins. So let's imagine two cryptocurrencies that can do exactly the same suite of things. They have all the same functionality. One of them is owned by 60% of the population and one of them is owned by 40% of the population. Everyone who is involved in the smaller ecosystem is probably more interested in accepting as payment the larger ecosystem because it's easier to spend. You know, if you've got more people that will accept it and more people that will give it back to you, then it's more valuable. And that's kind of functionally why a whole bunch of economies operate on the US dollar even though the US dollar isn't their local currency because so many people use the US dollar that it's a really convenient store of value and medium of exchange. So in a world where those two currencies are completely interchangeable, you would definitely expect to transition eventually towards one dominant currency. So the first belief that I have is that unless there's a competitive differentiator, we would have one dominant currency. The next belief that I have is that because all of the cryptocurrencies are open source, all of the technology is available to all of them. So any of the functionality that turns out to be useful, compelling, a competitive advantage will eventually be adopted by all of the currencies. So to a first approximation, I think the differences between cryptocurrencies now are marketing material, not actual use cases. And if there were actual use cases that were driving material value, then the other cryptocurrencies would be materially motivated to adopt that functionality. And then we're back in the first world where both currencies are capable of both things and we're competing just on network size. So ultimately I believe there will be one dominant cryptocurrency that serves all use cases. There's one exception to that possibility, and that's if there's a use case that literally cannot be accomplished in the same blockchain as another useful use case. So to give you I think the most obvious example, some of the cryptocurrencies are really focused on a very strong privacy case. It's possible that there's utility for a currency which is forcibly public and a currency which is forcibly private. If both of those things have value, then you would expect there to be two cryptocurrencies because you can't have a blockchain which is both forcibly public and forcibly private. So the only world where I would expect there to be long-term multiple cryptocurrencies is a world where there are valuable use cases that can't be accomplished by the same currency. If it can be accomplished by the same currency, it'd be more efficient that way. Cool. All right, let's get Tyler around to the class.