 We now have available this through the magic of Skype. Patrick Byrne, I think a gentleman, he needs little introduction to many of you, but for those who are not as familiar, I'll very briefly, without embarrassing him, talk about a little bit of his background. He is a Wall Street slayer of sorts. He has gone to bat against some of the nefarious interests in Wall Street and put some of his own skin in the game. And that aspect, he not only holds degrees from... Tell me if I'm right here, Patrick, from Dartmouth, from Cambridge and from Stanford. Despite all of that, he came out on the other side just fine. He is, of course, an internet entrepreneur, and I'm sure many of you, my wife in particular, are available with Overstock.com and all of its many offerings for the house. But most importantly for our conversation today, he is an early adopter like Caitlyn Long, an innovator in the blockchain and Bitcoin space. And again, when we talk about skin in the game, putting his own skin in the game to create... This term went around earlier today, a nascent company which will now blockchain technology to make property titles far more dependable and useful all around the world. So that said, please give a big round of applause and welcome to Patrick Byrne. Thank you very much, Jeff. It's a great honor to speak with you and the Mises Institute once again. Okay, this is Wired Magazine, has me, Bitcoin Messiah, and as you've actually already heard, Scourge of Wall Street. I have something else going for me. I'd like to think that we have a solution to global poverty. It's based on an insight of an economist named Hernando DiSoto, a Peruvian. This is his great insight. Seven and a half billion people on earth, two-thirds of them do not live in the world as we know it. No formal property rights. So the point is they do own assets, but two-thirds of the world keep their assets in informal ledgers, not in formal land registries as we know them. And yet, and because of that, there's a market opportunity for businesses like ISIS and Al Qaeda and FARC and so forth. Because what they do, because these people do not have records to their lands, there's all kinds of things that you and I can do that they can't do, such as what you see on your screen. If they try to get, and so if somebody's living on, and say, a favela on a hillside outside Rio de Janeiro, they may have lived there for four generations. They don't have any piece of paper that says they own that house they live in, but because they don't have the piece of paper, of course they never know if the local Genelissimo shows up and says, Senor, that's not your land, that was my grandfather's land and you must leave tomorrow. And so you don't have any incentive to invest, you don't have any piece of paper you can go and borrow some money against, start a fruit stand, start a business. If they try to get formal property rights, it may take 30 years and 200 steps, which means 200 bribes to 200 petty bureaucrats, it's not feasible. This has led to a lot of problems. Here's one, groups like Shining Path, FARC, Al-Qaeda, ISIS, what they do is they roll into a town, they're actually quite well organized, ISIS in particular, they would go into a town and have DMV on a laptop, and they'd have people go around that look at land titles and say, oh, let's see the land title you're certificate to this home you live in. And if you may have some informal little certificate of occupancy from a municipal authority or something, they say, do you support ISIS? We'll put our stamp on it. And so they get people to support ISIS and they put their chop on it. That's really the business they're in. They're selling protection, a little bit like happened to be in New York in the moment, and I have a friend who's an entrepreneur here. She was a small restaurant owner and a few days after she started her business many years ago, a couple guys, a couple rough looking characters show up and say, oh, beautiful restaurant, boy, would be shame if anything happened to this. Let me do something nice for us and it won't. And she didn't. Three days later she came in and the whole front of the restaurant was covered in black paint. It's a protection racket. That's really the business that the terrorist groups are in fundamentally. It also leads to, it's led to the Arab Spring. The Arab Spring, 64 people starting with a guy named Wazouzi in Tunisia, set themselves on fire. Of the 64, about 35 live. Hernando de Soto went around and interviewed about 18 of them he was able to find. Not a single one of them was an al-Hu'akhar kind of guy. They were all little entrepreneurs. The guy with a fruit stand was Wazouzi in Tunisia. It was a guy with a fruit stand that he'd been selling for years out of one spot in the city market. Nothing's licensed. It's all convention. One day a cop, a female police woman shows up and slaps him and makes him leave. And he set himself on fire. And that began the Arab Spring that took down all these countries. Well, it turns out it was really a revolution of the merchants. It was a revolution, that's not specific. It's a revolution of the untitled entrepreneurs. And they were tired of getting their stuff expropriated. And that was the word they used all the time, by the way. They often decried how their capital had been expropriated. These guys, you know, there's all kinds of cell phone videos of the guys who set themselves on fire. And they said things like that. I mean, I shouldn't laugh, but it's odd. They're capitalists who were objecting that their capital had been expropriated. They're objecting to no rule of law, environmental damage, commons, results. This has been a result. People switch sides. In other words, when people, when poor people get their ledgers law, their informal property turned into property, into legal property. They have a stake in the system. They switch sides. Entrepreneurship starts. This happened. This has happened a couple of times. In Peru, Hernando de Soto had this theory that they could do this. In 1990, for you youngsters out there, there was a movement in Peru called Sandero Luminoso, the Shining Path. It was a Maoist group very much like the Khmer Rouge. They scalped people, killed about 70,000 people. And they had 60% of the country. It was Peru was lost. Eagle Burger, our Secretary of State, said it was the biggest problem in the Western Hemisphere, biggest heritage threat. Hernando got the government of Peru and the US Banking to go out and they titled every, they went out to, he calls it the Indiana Jones phase of his life. They would go out to these little villages and creeks and get the books of documents, turn them into, bring them back to Lima, turn them into real documents, bring them back to the people, give it to them. Everybody switched sides. In six months, this group that had won 60% of the country collapsed and everybody had to turn themselves in for protection. Otherwise, people would have lynched them. It's really the last time the West won a war against terrorism, actually. It led to something of a miracle. Peru's done very well. I know that a lot of we Mises, Miseans like to think, talk about Chile. Peru's really done very well in the 28 years since then. Lots of small businesses started up, et cetera. It's a real gem. Incidentally, this is what we did in Japan after World War II. They had all these feudal ledgers that is how feudalism worked and MacArthur went and made it all get turned into real law, real legal system. And we know what happened. So now the problem has been, Hernando wrote his book in 2000, The Mystery of Capital, why capitalism worked in the West and fails everywhere else. It was never really possible to implement it though. However, now due to the magic of things like Facebook and blockchain and digital marketing and mobile apps, it is possible to bring that to the world. I know a place that's really good at blockchain and digital media and mobile apps. It's overstock.com. We've won all kinds of awards for our technology. Hernando and I have gotten together, formed a company, and we have built an app that lets his thinking finally get implemented. See, that's really always been the take. Great in theory, never got implemented. His theory was that the West instead should be helping developing countries just build land titling systems. And if you did that, it would unleash far more capital than the West has ever given the developing world in terms of aid and such. It would just get unleashed if we helped them get land titling. But there have been different world bank projects to try to make it happen. They really can't. But now through the combination of these technologies and about 20 million bucks, we think we can make this happen globally. I think it's really a civilizational moment. So we've been working on this for some time and I actually expect to have a prototype in the marketplace this summer. I won't name the country, but there is a country and we're going to get it tuned in right there and then there's other, there's whole continents reaching out that say, will you fly here? When can you get this? I'm saying, let us just get the thing built. But anyway, it's a, it's blockchain-based. See, the whole thing is, it's really all about the trust aspect. Nobody, people will always say, well, why couldn't you do that with a database? When you get into blockchain, every time you get talking about a business, people say who are against blockchain. So why couldn't you just done that with a database? It's like they missed the point. We want systems where there's not a single point of trust, where there's nothing you got to trust, no corporation you have to trust, no government you have to trust. That's what blockchain lets us do in crypto we trust. Let me play, I'm hoping- There are additional regulatory changes at this breakdown of the central pillar of competitive markets requires in order to return to stability, particularly in the areas of fraud, settlement, and securitization. Okay, so Alan Greenspan, this is, he referred to settlement. When Wall Street collapsed in 2008, Alan Greenspan went before Congress and identified it correctly as a settlement crisis. This is what he meant by settlement. When grandpa is buying stock from a hedge fund, brokers are communicating. And the act of them exchanging stock and cash is settlement. And actually when I was a kid, this happened on bicycle. Wall Street was filled with guys on bicycles running around with sacks of stock over their shoulders. And they were delivering among the brokers. That's how settlement worked. However, in the 1960s, volume on Wall Street quadrupled and the guys on the bicycles log jammed. Wall Street was actually there was a period that only the real old timers would remember called the Great Wall Street paperwork crisis. Wall Street was only open Monday, Tuesday, Thursday, Friday for a few hours a day. They were trying to give a chance for the guys on bicycles to get caught up. And it's something like a database. If a database gets log jammed and how that ripples out, that happened. It took down some brokerages. It took down a large brokerage actually in America, this database ripple at the center of our capital market. So the SEC called the industry together and they proposed a solution. Well, there were two solutions proposed actually. One was let's have a peer-to-peer electronic settlement system. The other solution was called central counterparty clearing. And that's where there's just one counterparty to every broker in the market. And anyone, all we have to worry about is settlement between that counterparty and every broker. They created a vault, a depository, under Wall Street called Cedian Company. Now this is what's funny. If I were in the room, I would ask you, raise your hand if you own any public stock. And about half the people in room will put your hand up. And then I would tell you that everyone with your hand up is incorrect. Nobody in the room owns any public stock. Nobody in the room owns any stock in any public company. All the stock in the world, all the stock in every American publicly traded company is owned by a company you never heard of. It's called Cedian Company. It's in New Jersey. And I'm not just talking about they warehouse or they store the stock. They have the legal ownership to all of America, all of corporate America. What they do is they have generated what are basically in casino land, it'd be called a marker. They've generated chits. I use contractual claims against those shares called share entitlements. When you're trading stock, all that's really going on is these contractual claims against that stock are swirling around among different parties. All the stock, both the location and the legal ownership is staying with the corporation no one's ever heard of. Literally 98% of the stock of corporate America, publicly traded corporate America is legally owned by an entity that no one's ever heard of. And all the rest of us have are strings or daisy chains of contractual right. If you're, say, in the lower left-hand corner, that's your broker. And that broker clears through a broker who clears through another broker who's cleared to the DCCC and I'm on, say, the lower right-hand corner, if I sell you 100 shares of IBM and you buy 100 shares of IBM, all that's really happening is these different contractual claims are shifting around among parties and everything gets netted and pre-netted and such has nothing to do with any actual property right. What could possibly go wrong? What could go wrong is that can log jam and that's what happened in 2008 and it's sort of this thing that, well, there's a reason Alan Greenspan was talking about it on October 23rd, 2008. So our system log jammed and it log jammed because all you really own when you think you own 100 shares of IBM is you have a contractual claim against a broker who has a contractual claim against another broker who has a contractual claim against another broker who has a contractual claim against the DCCC who has a contractual claim against CDN company who actually owns the stock and there's nothing that says those have to be a one-to-one relationship. So what it is is fractional reserve banking without a reserve requirement and it allows for all kinds of mischief I won't go into. The whole thing, the point is this is Wall Street as we know it that can all be, and it didn't come out of a burning bush it's stuff that was created in the 70s and it's not like anyone was necessarily evil to do it. The technology of peer-to-peer settlement wasn't ready is what they decided so they went with this system which had been tried in Vienna in the 1860s. In 1986, the SEC hired, I think it was a retired judge to look at it all, got him Pollock and he studied this and he wrote a very disturbing report talking about how bad this was for all kinds of reasons it could lead to systemic collapse which is what happened in 2008 and it could lead to different opportunities for mischief and if you heard about a fight I had 12 years ago with Wall Street that's what it was about. It wasn't about overstock it wasn't about I realized that there were huge opportunities for mischief in this system including the possibility of a systemic collapse so that's why Greenspan was saying that let's go back to the idea of settlement using a ledger this ledger is magic it's cryptographically protected it's public, transparent, there's copies of it everywhere we could make money just exist as entries within that ledger and the cash component of settling say grandpa buys a baseball glove from the guy on the right from entries in a ledger that's the concept of course behind Bitcoin you can apply it to Wall Street by adding entries for coins for stocks and as people buy and sell stock it's just entries in that cryptographic magic ledger you could take this whole meshagus and replace it seems simple seems simple that's what I've spent four years and about 75 million dollars working on it's called T0 and that's what we're doing in the stock market okay I'm going to stop there so that's how two examples of how we can use blockchain to address poverty and mischief global poverty and mischief in Wall Street let's go to questions thank you I just wanted to ask for one of the first global retailers to accept crypto what do you think is holding back the rest of the world and large retailers from accepting crypto and what will it take to get them to start accepting the way Overstock has let me correct you we were the first global retailer back when we there was the largest company in the world someone ought to check this the largest company in the world accepting Bitcoin on December 31st 2013 was my understanding is it was an 800,000 dollar a year diner in Australia we stepped in and started taking it we were a billion three so we like to think we saved the movement you know what it taken a year or two to get someone doing 10 million and a year or two someone a hundred yeah so maybe we like to save it five or six million we're probably giving ourselves too much credit why have not more people done it still has a stigma attached to it I still get asked about XGC dealing and gun running and money laundering it's got that but you know it really is there isn't on the demand side that's really the answer only about 0.2% of our sales are in crypto maybe half of that or three quarters of that Bitcoin and the other little stub and other altcoins so people and I've said that publicly so the fact that only 0.2% of our sales are in Bitcoin maybe tells people it's not worth integrating it's not worth all the trouble and reputational cost I've got a question thank you very much for that presentation and it's very encouraging to hear the way you jumped in and actually change the trend of the market it also suggests that with your heft perhaps you've got insights into what the next tipping point might be to actually bring make it more mainstream your thoughts well it still is not really integrated in many places it's a little bit like getting adoption on Apple Pay or something so we're going to do more you're going to start seeing us do more actually at the beginning of June we're introducing an alpha project that will do more to make us help us spread crypto we want to create economic incentives it's kind of funny people don't I think everyone has an economic incentive it's an insurance policy because of all the systems as they exist these crazy Keynesian magic money tree multiplier effect magic money tree ever comes crashing down the goal is to have this robust set of alternative institutions that will survive and I feel like I'm going to race against time building capital markets building central banking blockchain central bank blockchain capital markets etc so everybody but you have to create an incentive for people to do it what happens is when company when countries I was just in a pretty lousy country I won't say its name and everybody is like rushing to crypto everybody's in on crypto it happened in Cyprus that's really what what happens when people wait they don't buy their insurance policy until they read about the hurricane coming so I think at the end of the day what's going on in countries is as they get start going parachute their economies you have people turned to crypto if you have any ideas on how do you think we can get that to be accelerated in the United States and not wait till our dollar crisis yes Patrick a question what is your opinion on the deep states reaction to you and whether or not you think that if this threatens the basic military industrial complex structure in the American economy how is that going to affect the progress that you're attempting to make it's a good question I think that the US government has an ambivalent attitude towards it I think maybe it's the case that if the powers that be had it to do again and they could go back seven years in time they would go back and make all of this illegal everything cryptographic just make it illegal it's too late now it's all out in the world in white papers any math department any graduate math department in any university in the world can recreate it all so it can't be stopped and there are people here who get it there are people here who don't people who care about systemic risk in my experience no matter which institution they're in they like it people who are even a lot of regulators like it they get it's going to make their job a lot easier all kind of the beautiful thing about that capital market I showed you all kinds of mischief that goes on on Wall Street can't even go on in a blockchain capital market that's the funniest thing it can't go on because the original sin as by the way you just had Caitlyn Longsby she's one of the great minds in this field and her point is that's the original sin when you separate it's when you separate when you shave the property rights off it's only that all kinds of mischief can happen by reuniting the trading with the settlement it actually makes a whole bunch of mischief impossible so there's regulators who see that too and there's politicians who see that people have I think they're torn between two things here they fear it because they think it is going to disrupt the world as they know it and it will I'll get back to that but on the other hand they don't want to fall behind when Clinton did something smart when the Internet came along Bill Clinton a lot of hands here wanted to regulate it Clinton stood up against the Democrats and did not regulate it because he knew if he did China or Russia or someone else would become the boss of it that's one of the directions things are pulled here in DC and that has been amplified by the fact that China came out two years ago a year and a half ago with their newest five-year plan and in their newest five-year plan they name three or four technologies they want to be the dominate the world and at the end of this five years blockchains the first of them so I think once the US saw that the politicians saw that and the regulators and stuff everybody's scared to death of stopping it actually I'll be honest I mean I've never said a nice thing about DC in my life but I do have to say what I've seen in the last six months to a year is very good and encouraging and professional people it's almost I've met with different people and some of it's in the newspapers I'm not going to go through it but I've met with different people some under duress and some not I've had lots of conversations seems to me Washington wants to play what they say anyway is they want to play a constructive role and don't want it to be able to help terrorism and so they want to make sure their AML KYC instincts are assuaged and that's their prerogative I know that bothers some would bother some libertarians but they do have and they do have terrorism to worry about so anyway that's how I'm not sure that so the deep state the deep state I think is afraid to stop this because if they stop it China gets it all that's what's crazy China's right out there on our tail they are building all these systems too even though they're blocking it down in China and they made it illegal they made it mining illegal so the only people mining in China are the people really connected to the government in some way and government connections and I mean different ways people are finding around the rules but basically they're cracking down in China on Bitcoin but they want to be masters of blockchain technology they're creating things to distribute around the world and if the Chinese get it we can live with maybe with Chinese everything running on Chinese transistors we don't want or chips or something we don't want any authoritarian government to have control of the underlying technology of blockchain and if the US backs off this it is we become a it becomes a Chinese world everyone starts blurring Chinese because it'll be a Chinese world if the Chinese will conquer the world with blockchain the US government tries to slow it down here sad to say I'm not in favor of that I have a question that with deflation there's a one of the problems with deflation which I think is somewhat natural is that there's a liquidity problem so for example if I can use one US dollar to buy a car how do I buy a cup of coffee but with something like blockchain or Bitcoin it's infinitely divisible so gold isn't if you keep dividing gold essentially the molecule is no longer gold but with something that is structured like Bitcoin is I could buy a cup of coffee with like one billionth of a Bitcoin eventually so there's never the excuse to inflate the currency for the purpose of liquidity and I've never heard anybody talk about that and I'm wondering if somebody has and if there's something I can read about that I think that's one of the really attractive things to me interesting well Bitcoin actually does have some limit it goes out I think it's eight digits so what would that be a hundred million I think it breaks up into a hundred million cents one Bitcoin but of course that's not fixed but I do they could take it out further people have been attracted to the deflationary aspect of Bitcoin I think there's more deflation than probably Satoshi planned on frankly there's something called bit rot which is some number of people everyday who own Bitcoin get sick or die or lose a key or get disinterested in Bitcoin or whatever and or get Alzheimer's and they don't remember their key and for that reason there are there is coinage that is just rotting and so there's probably a bit higher factor of deflation within Bitcoin than had originally been planned incidentally just I don't know I forget what the number is so it may actually be a sharply deflationary or you know it's not insignificant other than that no but you ought to look up see how many digits Bitcoin breaks into and so I don't think that is the case that we're infinite by the way but next question two quick questions first of all what should we do with our stock those of us who own stock and the second one is I don't understand I understand how Bitcoin is secured because you got these minors that are going to make a lot of money either by getting a new coin or by charging to put a block you know but put the transactions in a block but how do all these other chains encourage people to make nodes and to secure the network especially your property a title system well different systems for different coins people have different theories and some of them are private ledgers where there's a private corporation which does maintain the system there's different models proof of work proof of stake I'll mention one that is of great interest to me and I'm just now have been given permission to talk about it it's called Raven coin Raven as in Edgar Allen Poe the Raven it is an open source project that launched on January 3rd actually launched on October 31st and the first the Genesis block was mined on January 3rd those are the dates that Satoshi himself chose so no one can complain pre-mining there's all kinds of mischief that can go on our field too but by keeping this Satoshi's dates there's no pre-mining it was an adequate amount of time it has spread faster in terms of number of nodes far faster than anything in history I think it may already be in the top ten in hashing power I heard like number six or something it's only three or four months old I don't know if that sounds I don't know don't quote me on that but it is up to 12,000 nodes it's a fork or an evolution of Bitcoin but it's ten times more informational efficient there's ten times the blocks are ten times bigger and the energy is a thousand times more and it's trading at four cents a coin now you can either oh and what's very interesting about it but if I make you rich on this remember this moment this is four cents a coin now there's an argument it's better than Bitcoin and Ethereum it's called Ravencoin once again it's very interesting because it's A6 resistant there's CPUs, GPUs and A6 and A6 are chips with dedicated circuits to one algorithm well the mathematical question that runs underneath Bitcoin people build A6 chips for and they're so much more efficient that they dominate everyone mining Bitcoin uses these rigs well Ravencoin runs on 16 different math problems and those math problems very randomly and you need the answer to one problem to start the next problem because of that you can't make an A6 chip I think the most circuits anyone ever put on an A6 chip is three maybe four he couldn't put 16 circuits on so there's no way to do this with an A6 chip because of that it means you don't have a disadvantage to be back just on your game on your GPUs that fact is there's some very interesting this Ravencoin and I know one of the big thinkers in the part of the movement is a tricky guy clever guy and this kind of hacks this is a hack but not a hack I mean a metaphorical hack they've kind of hacked through a bunch of the problems of around the crypto community take a look into something called Ravencoin Patrick Steve Sadler a quick question for you as you look at your T0 platform and I guess we went through a couple years ago with the hopefulness where we thought capital markets would be more free and open to smaller companies raising capital how do you see the T0 ICO opportunity and then what's your view on let's call it the regulatory overlords stepping into Kibosh well let me let me take those let me reverse those here's the regulatory situation I'm going to shock you while a libertarian I'm a small L libertarian I don't think we want to be too ideological and here's one example we used to live in a country where people drove around with a suitcase full of stock certificates penny stock flimflam and they would stop at some farm guys stopped at some farm and swindles a widow out of her farm and returns for some phony stock certificates so 1933 we passed these laws that say if you're raising money from the public you have to do things you have to create a you got to write a prospectus lawyers and accounts have to check it all out and certify the government has to look at it and say yes this prospectus fairly describes this business and then you take this and you give it to the public and you sell and stock and raise capital now a libertarian is going to say why that's big brother or that's paternalism why does the government get to do that I'll just tell you that before we had this system everyone was getting swindled all the time and now maybe it'd be better to have that than to have the mayor planning a sign saying beach is safe for swimming when in fact it isn't safe for swimming I don't know but if I can tell you if you're I'm as libertarian as the next guy I'd like to think that the invisible hand will take care of things but the truth is the financial industry draws more than its fair share of swindlers that's because the nature of every financial business is give me money now I'll do something in the future so anyway so that's the rule I thought that by a year ago people were going to be all over the idea of using blockchain coins to do shares of stock but a year ago this thing happened instead the ICO movement initial coin offering which is selling utility tokens it was people going out and raising money from the public for a business idea and really distorting it and saying there's ways you could reframe this business idea and I'm going to walk you through an example because this is actually quite important in terms of understanding what's going on now if I come to your town and say I'm going to set up a video or game parlor and I've got this parlor and I've put in 20 video games and I've got a million of those little brass tokens you buy and I'll sell them to you in town for 700,000 and I'm doing that to sort of get people interested in getting you coming in with your tokens and using my video games and maybe we'll prime the pump that's just a pre-sale of those tokens okay I'm going to sell you these million dollars with the tokens I'll take your 700,000 dollars and then I'm going to go out with the 700,000 and buy a bunch of video games and find a place to put them and I'll open a store at some point you're really buying those on an expectation of some future benefit and back on July 25th of last year the DC in my view correctly said that's the security if you do that and they were ruling on the DAO token they said that's the security the fact that you're not able to use the tokens today you're able to use them in the future that makes it a security and so what people were doing last year felt to me like they drove down a cul-de-sac they went in this cul-de-sac called ICOs instead of using blockchain to do securities they said we're going to come up with these business models where we can kind of say we're selling these tokens that you're going to be able to use in video games in the future and that's how we're going to capitalize our business so that's not a security we're just pre-selling tokens that's what the SEC came in on July 25th and said with regard to one company that was over the line and December they did they did another company and then just a couple months ago the SEC chairman Clayton came out and said if you raise money like the truth there's every security token I've ever seen every utility token I've ever seen is really a security meaning all thousand of those that came out last year broke the law they were out there raising money from the public and they were ignoring all those laws about 19 from 33 and 34 I don't know what's going to happen with them however I believe that that means if you're nuts if you violate those laws by the way if you're in the public and you don't follow the rules you take that money you build a successful business 20 years later they can show up and take your business and just unwind the whole thing they unwind it all and they find the original people and get them money back and believe it or not they do that so it doesn't matter if your business works or not you're nuts if you violate that law and all these thousand businesses are more which raised all this capital I think they're kidding themselves if they think they're not going to have trouble in the future it can happen 20 years down the road so however it's undeniable Bob Greiffel the retired chairman and CEO of NASDAQ came out in November and said 100% of the stocks and bonds being sold on Wall Street today could be tokenized and in five years 100% of the stocks and bonds on Wall Street will be tokenized that's saying that the plumbing of Wall Street is going to be deprecated over the next five years all that crazy red cloud that I was showing you is going to go away and it's going to be replaced by blockchain I mean that's what he was saying the retirement chairman of NASDAQ that's what he was saying and I hope he's right because what we've done is we built the replacement and I don't think I think the SEC is okay with this I'm sorry I'm under SEC investigation I think this is investigation number 7 and in my life and I expected it that when we started building a whole alternative Wall Street they would show up and want to know about it so and they don't they've made clear to me that the only thing they like said when you're under SEC investigation is I'm under SEC investigation I'm under federal investigation and in my time in my life I can say that by the way okay next question thank you very much Patrick for speaking with us and number 7 is lucky so I hope that one goes well for you both from your speech and from Caitlin's speech we've all learned that we're crazy to invest in Wall Street that being said however should we be investing in Overstock.com or other companies and is the developmental work you're doing with blockchain utilities something that is associated with Overstock or with a different company and are there I guess one final question are there other companies in the blockchain space that you think are worthy of investing in for those of us crazy enough I certainly cannot comment on should you invest or not invest in Overstock I'm already got enough headaches with Washington without that all the blockchain stuff we are doing is within Wall is within Overstock it's and it owns this blockchain Medici and Medici has 12 investments in blockchain just one of them is T0 there's some other very exciting ones in there there's also 65 million Raven coins it's pretty interesting which is in the notes it's out there in the public nobody's figured out and that only has a few million dollars of value now who knows if it ever does more so but everything I've described you is within Overstock yes Patrick Hunter Hastings here you said at the beginning that this could be a civilizational moment and you talked about with Dr. DeSoto eliminating terrorism through blockchain entrepreneurship could you say a little bit more about your vision for the civilization effect of blockchain sure here's the deep meaning I think for 6000 years we as we go about consensual exchange have had this problem to solve of trust me I don't if I don't know you and you don't know me I can't we can't trust each other so I go to buy a camel from you and I'm going to give you this gold coin you don't know if you can trust me did I debase the coin or not so we create an institution like a mint and it has monopoly on violence in a Oasis puts its face on the coins and says anyone who debases this I kill that's a way to it's a business model a way to monetize this but it's an institution that lets us that creates trust are you and I can go about our camel for gold coin exchange same thing with land titling we can't trust each other but there's one office the land titling office so when you buy a piece of land from me and I give you that piece of paper and it gets registered there you know it's trustworthy I was in five years ago I was in a company in Silicon Valley that had 160 industries written on a wall that really had that same common denominator or I'd say functions or institutions in society that have that common denominator they're there to inject trust so strangers can conduct exchange well for 6000 years we accumulated those institutions like barnacles and depending on the country in the time some of those institutions we are government and some are private but they all have that same common denominator now though we can achieve that trust between parties using cryptography using tokenization and cryptography exchange becomes trustworthy which means we have turned in it's like becoming a buggy with manufacture we have made into buggy with manufacturers all those 160 institutions that accumulated over 6000 years and I mean from notary public to even tax collector to visa card etc etc we've made cryptography properly lined up with tokens and such all this crypto stuff means we can achieve that without those institutions well here's the funny part if you're a liberal a philosophical liberal you remember those institutions we don't live to serve them they're just things we created so we could go about our pursuits of life, liberty, property, happiness we created them and now we don't need them so it's going to be a really funny time because what the internet did to publishing I think crypto is going to do to 160 institutions that we accumulated over 6000 years in fact I think it's so big I actually worry I worry about the story of Frankenstein remember Frankenstein wasn't the monster the monster was the monster Frankenstein was the doctor who was so enamored the young scientist so crazy about what he could do with science that he didn't give any thought to the ramifications well you know civilization as we know it has grown up and around these 100 plus institutions if they're the glue that bind everything together and make it work blockchain is like a corrosive acid to that glue we don't need them and I'm an incrementalist I want to see it unwind slowly because I think lots of bad things happen when things snap thank you very much Patrick I had a question on the let's just take an example of the solution to poverty that you're working towards let's say that we do get titling of say land farms in say Tanzania or South Africa or something like that and now we have you know the title cannot be corrupted or changed through a corrupt government official or something like that and now we have a worldwide network where that title can be used as collateral to provide that someone can borrow against and things like that but my question is it seems like there's a link where if you don't have a good I don't know police force or what you want to call it on the ground that when you know say that the loan is not repaid and I need to collect that collateral I can't actually get it because there's a new gang in town that says well actually that title is not valid here it's not worth anything how do you kind of move from that technology you know the good blockchain technology to the actual boots on the ground that might make that contract enforceable well we do want at some point the informal ledgers which we surface using this technology to be recognized by government in some cases that's going to be us hiring law firms in the country and fighting and demonstrating that what we have meets and by the way before anyone can dig before a western company can go and do business and dig a hole in the ground somewhere since 1940 there have been laws in the US and Canada this whole string by international treaty by national by local boom boom so part of our work is going to be servicing these and representing and getting government to acknowledge but we think it's going to come as much from that governments are going to cooperate with us we can do this without them but we think if we go to the government of a country in the Middle East with 40 million people and say we can show you where 15 million people if you will title them we can show we can we can surface where 15 million people live and they will register and they will register their land and start paying taxes on and so forth if you will commit to titling them Hernando de Soto can do that 10 million people in Peru have titled to land because of what he did for them back then so we you know we think we can do that and in fact the early I got to the organizations that are calling me and asking me to come and do this in their countries convince me that we're not going to have as big a that big a problem maybe we will and we'll have to hire a bunch of law firms in different countries and fight but the point is it's almost like being a union leader I used to work for Buffett and when I worked for Buffett I ran a group of companies that were in a union fight and I learned the union model and the union model is kind of interesting you hire you know some college kids for next to nothing and you get them to live in a crummy motel in Odessa, Texas for six weeks and get folks in some 500 800 person plant to sign a card and turn them into a union you're going to start collecting about a million bucks a year from them every three or four years you have to send a suit down to renegotiate a contract for a week but you know you spend 20,000 30,000 up front and they get this wonderful annuity it's a very lovely business I wish I could go invest in being a union unfortunately can't we capitalist but anyway what my sense is kind of what we're doing is like that we are organized we'll be organizing the voices of tens of millions of people gathering the best law firms like the Kravath Swain and more of Uruguay and the Kravath Swain and more of you know whatever Ivory Coast and bringing this stuff to the government and fighting and getting it done however I really don't because governments are calling and leaders are calling I don't think it's going to be that hard I think we're going to be doing in some place with government agreement before we even have to go in before we even go in they may already be agreeing that what we surface they will recognize Hi Patrick, Sean Lynch both you and Caitlin have talked about Blockchain is tracking ownership of either cryptocurrency or stocks or property or whatever but Blockchain doesn't tie anything to a human being it ties it to a private whoever controls a private key right Key management is one of the hardest problems in the interaction between humans and computers right it's why we don't use cryptography with you know long lived private keys for the most part like PGP hasn't taken off for this reason so what what's your plan with T0 to help people in countries that don't even have well developed legal systems actually manage their private keys and not get fish not get their private key stolen and their property that's stolen without having to resort to central solutions well first of all let me go back a step I do think there's going to be a place in the ecosystem for corporations like for example in our stock exchange in our T0 we could have built T0 so it's the exchange and you don't need brokers the exchange just has a wallet with the exchange our understanding is the regulators don't want to don't want to see that happen because they don't want exchanges to be doing AML KYC customer service when grandma loses a stock certificate or a key having to deal with it so there's still going to be a ring of brokers around the exchange who handle those functions and I think that's a pretty good description of where the corporate evolution is going to go around this there's all kinds of people seeing themselves getting disrupted this is an extinction event for a lot of the financial industry as we know it but some of the dinosaurs will evolve into birds successful birds and that's to me the avenue they evolve is to focus on all those customer services and and not fight to defend all the back office that blockchain can replace when you go overseas well we do everything AML KYC because I don't want to go to jail and I've had seven federal investigations and if I do anything wrong the feds are going to bury me under a prison so they're not just going to put me in prison they're going to bury me under a prison so I I'm keen on doing things AML KYC and but in the you know it's interesting and in poor countries 10% 15% of people have a bank account but 140% of people have a cell phone because everybody has a cell phone every some people have too and that's really the magic been for decades this discussion of the problem of the unbanked that bank accounts and they're cut off in the global economy and all that stuff but since everyone has a cell phone the more we can move this on to cell phones so for example once you have land you have capital Fernando de Soto's point once you have the land you have capital then we introduce in Barbados we have the world's leading blockchain meets central bank company it's called BIT B-I-T-T 35% of BIT we have a central bank on a laptop we can go into a central bank we've got actually Barbados and the eastern Caribbean central bank which covers eight other countries in the Caribbean have now signed up and it's live in Barbados and we're doing things in the ECCB so suppose so for example one African country well-known African country contacted us recently the first advisor to the president and we walked him through this and he told me we want to as soon as possible to have that de Soto thing and then we want our central bank to be to go on BIT and then and once you have everybody on BIT BIT also includes as a central bank in a laptop and everyone just downloads a mobile app under their phone so money just becomes it's on your phone this is live in Barbados you can walk into a chicken shop in Barbados and buy a drum stick which is my test with money on your phone that's not tied to any bank account anywhere it's just digital Beijing dollars and soon there'll be eight other countries with digital ECCB dollars and soon there'll be other countries now once you have that and this is this is so magical to me and all listen this this is a big thought this is my big thought for the day you can have on top of that suppose we introduce a peer-to-peer lending app so those poor people you know Hernando thinks that when you do this if we could actually globalize up the five billion people's ledgers it frees many tens of trillion dollars maybe hundreds of trillions of dollars of wealth of capital into existence if you have peer-to-peer lending app and well if you have digital currency and then you have a peer-to-peer which we're also building and then a peer-to-peer lending app those mean that means those five billion poor people can start saving and borrowing and lending and sharing capital in a way they can start doing it immediately what's so funny about that is for 70 years and I'll close this answer on this note I used to study development economics and I used to talk about how much how many tens of millions of tons of copper it was going to take to wire up India tells you how old I was but back how many phones at phone and every home in India how many tens of millions of tons of copper then of course eight years later cell phone came along and they realized they weren't going to do that anymore well for 70 years the West has been telling the developing world look at our institutions and copy them our Wall Street and copy them our DTCC copy it our banking institutions and you copy and here you have these countries you know doing the equivalent of laying cable delay I mean digging digging holes and trenches to lay copper cable that's what they're doing well now we can go into the laptop and give them the world's most advanced land titling system well a laptop and everybody downloads a mobile app we give them another laptop and they have the world's most advanced central bank that they can micro adjust and an unbelievable surveillance of their economic activity and perfect adjustment they can program in the tailor rule if they want and then you layer on top of that a peer to peer lending app all which just people download on their phones suddenly you have all the functionality of the most advanced western countries land and capital money and capital formation processes and you have it without any opportunities for mischief it's all iron clad immutable cryptographically protected pure that's what I think and you don't have to spend another 70 years building copies of our city bank and our JP Morgan not that they you know that they should means that they can like inventing the cell phone and they can skip all the 50 million pounds or tons of copper wire that's what blockchain does and that's why I think it is the bible says the poor you shall always have with you well maybe not I think that if the disorder thing works billion people can start practicing capitalism between consenting adults I'll know what that's going to do for the world if it happened so you just mentioned Patrick one of the advantages to say government adopting this digital currency being surveillance I find that remark profoundly disturbing I don't want people to be able to be surveilled this to me is one reason you know if we can have blockchain technology where it's really in the hands of the people and it's anonymous and governments can't track it great but you know if it's going to become something that they can track we're better off sticking with old-fashioned cash I think good point I was using surveillance of there's a lot more fudge in the numbers that get reported in the United States about what's just the the statistics that get reported about our economy there's I think there's more slop in that I think for example they have been deliberately understating inflation for years I think all kinds of games get played in that but also I think they just don't know I think that the that the government's understanding of economic activity is in is imprecise it's not precise so for those for those who think that they should be managing that one of the selling points is they can manage the money supply and they can understand the flows of money and manage the money supply much better with blockchain than what the system they do now I believe they will learn that they can that's the sense in which I meant surveillance does blockchain increase the other the what is it called the Patriot Act kind of surveillance well the frankly I don't think it increases it it does make the once things are digital it does make everything digital you know immutable and the government can find it someday but you know what you're kidding yourself if you think it doesn't now you know unless you're living on cash 97% of transactions in America I believe do not involve cash 90 something last I heard it then then it's all being kept it's all being stored where you're sitting right now who you're sitting next to is stored a year from now they can find out who was in the room from you know unless you all turned off your cell phones so if you're using credit cards now or Apple Pay now or anything like that everything's being tracked and now that's not to say anybody is doing it but everything is being recorded blockchain doesn't make that any worse and you know if you're if you want to survive on cash you can rip up your visa card I mean you can always have cash outside your visa card and you can always have cash outside of blockchain but in any case that's not this sense in which I meant surveillance I just meant in the sense of the Bureau of Economic Statistics trying to figure out what's actually going on in the economy so they can manage it better I don't think they should be but anyway for this is a selling point when I'm talking to conventional people not people from the Mises Institute Hey Patrick Bird thank you so much for your time ladies and gentlemen Big round of applause