 My name is Dr. Malvi Kanair. I am an assistant professor of economics at Troy University down the road at the Johnson Center. If you've never heard of the Johnson Center, it's the Johnson Center for Political Economy. Check us out on the internet, on Facebook. We have a pretty cool program there. What I'm going to talk about today is what is Bitcoin and kind of get into what it is, but also the economics of it in terms of being able to understand how to classify it. Is it money? So the questions we're going to ask today is, okay, what is this thing and is it really money? Should we think about it as money? Is it about to die? You know, the last year I was here and Bitcoin had been pretty stable in its price, but over the past fall there was this giant, you know, volatile episode that took place where the price went from something like $2,000 to like $20,000 and then came back down and now it's kind of stayed stable at about $6,000 to $7,000 for a while. So we'll kind of get into all of that. But first of all, let's just define it, basics of Bitcoin. What is it? What are the basic technological features of it? So Bitcoin is a, first of all, a decentralized digital currency. Decentralized meaning it is not issued or backed by any one government, any one company. It is basically a piece of code, a piece of open source code and the code itself is pre-programmed and it's kind of preset to determine how much the money supply is going to be. So the total money supply that there can ever be of Bitcoin, the total number of Bitcoin that there can ever be created are 21 million. Now the way that these Bitcoin come into circulation is by what's called the mining process and it's a mining, I use quotes there because it's not, you're not exactly going in mining or digging, you know, in the ground. What you are doing is you have computer users that are supplying power to this network and by supplying power to the network or by verifying transactions in this network every time you verify or create a new block you are rewarded with new Bitcoin. So there's this kind of incentive compatibility there. There is an incentive that is created for just anybody. I mean it's just completely open. It could be anybody anywhere in the world to supply their computing power into the network because there is an incentive that you will be rewarded with Bitcoin. What purpose does supplying that power serve? Well, it actually creates that network and it helps to verify transactions and so it's completely, that's what's known as a peer-to-peer or P2P network or currency. So what's kind of interesting and the reason, you know, there's a lot of comparison that happens between Bitcoin and the way the code is set up and gold and the reason is, I mean, it's not a far-off comparison to make. The reason is that it does in some ways mimic the supply of gold. So if we think of the total supply of gold, gold is extremely scarce. The rate at which it increases, the rate at which we are able to mine and find more gold, it kind of has been increasing at a decreasing rate and because of that, because of that scarcity, it helps to create value in the eyes of users. And we all know when something is scarce, when something is, you know, not completely abundant in supply, that's what helps to establish a price for that thing. And so Bitcoin is kind of similar to that. It's kind of set up that way. Okay, now over the past year, I mean, this lecture is titled The Economics of Bitcoin, but really it could be the economics of just cryptocurrencies because over the past year what happened is Bitcoin proper, the Bitcoin that we all know about has kind of reduced maybe perhaps in importance and there's been the rise of several other cryptocurrencies that are gaining in importance, such as one of the main ones is Bitcoin Cash. And I'll talk about that a little later, Ethereum. I'm probably sure everybody's heard of Ethereum. That's kind of the one that's been in the news. And there's several others, Ripple, Litecoin and, I mean, the list goes on, these are kind of the more prominent ones. And so what we're seeing is there's been a lot more competition and a lot more other cryptocurrencies that are becoming prominent. Now, this is a good thing and a bad thing. I mean, bad in the sense that it makes it harder for Bitcoin to gain mass adoption, right? I mean, the more competition there is, the harder it is for any one currency or cryptocurrency to gain the market. But as an economist to me, this is great. Competition is always a good thing. And when there's competition, you know that it's only going to be the best currency that is going to have or the one that has the best properties that is going to have a chance of gaining larger adoption. Now, let's look at, so this is the price kind of crazy thing that happened over the past fall. This is where we're at right now, somewhere close to $7,000. Now, a lot of people, right? I mean, when this happened last year, did anybody buy and sell Bitcoin? You did? You did? Okay, good. Okay, good. I mean, so obviously, right? When you look at something like this, obviously there is a sort of a bubble element there, right? I mean, there was a large part of all of this that was being driven by speculation, okay? And if you look at this, this is not dissimilar to what happened here. I mean, it looks tiny right now, but this is, you know, I was talking and researching Bitcoin back here. This is 2013. And in the fall of 2013, the price went from about $100 to maybe $1,200. And that was huge. That was that first, you know, big bubble and everyone was like, oh my God, this thing, this is the end. You know, this is going to come crashing down. Nothing's ever going to happen. Well, it came down and then it kind of just stayed stable for a while. It was like $200, $300. It stayed right there. And it's really not dissimilar to this, okay? And we're kind of here now. And I mean, it could be that we kind of stay here and it could be we go, you know, see another kind of similar pattern. So if you were to ask me, okay, is this whole thing going to come crashing down? Because this is what a lot of people are predicting. I don't think so. I think there was a bubble element here, just like there was a bubble element here. But does that mean it's the end of Bitcoin with all the volatility that has taken place? No, I don't think so. Okay. This is a graph showing you, even with all the volatility, the number of users of wallets has continued to grow. So the people that are actually using it for transactions continue to do so. This is the number of transactions per day. And now you can see it's kind of taken a hit here. There was this kind of steady increase in the number of transactions. People actually using it as a payment mechanism. And that did definitely take a hit, but it didn't go away completely. It did take a hit with that large kind of bubble element, but we're still here. We're kind of stable. And there still is a lot of use of Bitcoin as a medium of exchange. Okay. Now, the first thing or the first question, you know, we have to answer from the point of view of economics is, okay, what is this thing? Is it money? Well, what is money? Money is basically money is what money does. Money is defined by its function. Money is not defined by its form. So anything that is able to serve as a medium of exchange can be a money. Now, how do we define a money? How do we distinguish between a medium of exchange and a money or a currency is once it has gained wide usage? Or it's something that is generally accepted as a medium of exchange is defined as money. Now, what does this matter? So if you think of defining money and you look back at history, you see so many different things and so many different commodities that have been money over, you know, the past thousands of years. It's been, you know, cattle and shells and coins and silver and gold and just tons of different kinds of commodities, right? So in the prisons, we know that on cigarettes and laundry detergent, things like that kind of emerge spontaneously to become media of exchange. So is it surprising that, you know, something like Bitcoin is also being used as a medium of exchange? Is it? No, it's not. It's not surprising. So electronic money, paper money, these things have been around and these things have been used as a medium of exchange now for the past 100 years, paper money, more than that. Money maybe last 40, 50 years. And so there's no inherent reason why something like Bitcoin cannot be used as a medium of exchange. Like I said, money is what money does. And so the question we have to answer is, is it being actually used as such? What is a medium of exchange? Well, how is it different from every other good, a consumption good or a production good? The key difference is a medium of exchange is something that is held in order to be exchanged again for goods. So if you think about the money that you have in your wallet or, you know, the money that you have in your checking account, all of that money, it's money that you're holding. You have a demand for it. You want to hold it right now only because you plan to spend it later. You plan to exchange it for goods that you do want to consume. That's a medium of exchange. The difference between a consumption good and a medium of exchange is consumption goods are things that we derive value or use from consuming directly. Money, we only derive value from exchanging for goods that we do want to consume. So we just have to kind of answer the question, well, is it a medium of exchange? We just have to look around us, look at the data. Is it being bought and sold for goods and services? Yes, yes it is. I mean, what can you buy? You can buy a bunch of things with Bitcoin, even today, even after, you know, the volatile episode. You can, I mean, anything on Overstock.com, like that opens up, you know, a lot of things. There's a lot of gift card websites. There's just tons of things that you can buy, movie tickets, airline tickets, restaurant meals, hotel rooms. Okay. So it is actually still being used as a medium of exchange. And that is what, that's all we need to define whether it is, in fact, a medium of exchange. Now, is it widely accepted? Is it generally used? That's kind of, that's harder, right? That's harder. There's a big, there's an arbitrary line between something being used as a medium of exchange, just saying, okay, now this is money. That's kind of hard. Would I say, okay, is it widely accepted? Should we call it a new currency? Should we say this is probably not, probably not yet. It's not as widely used, but it is being used as a medium of exchange. Now, how do we classify it? What kind of money is it? Maybe if we had to kind of put it in a box and put a name on it or, right? Because there's a lot of confusion about, okay, so what is this? It's not backed by anything. Is this fiat money? Is this going to come crashing down any second? Right? How do we understand it better? Now, I use the classification that Mises uses in his theory of money and credit. And he defines three different types of money. And one is the first one is credit money. The second one is fiat money. And the third one is commodity money. Now, credit money is only, it doesn't really apply anymore. Things like in the past, like bills of exchange, pieces of paper that were basically loans that were coming due, let's say three months from now, would start to circulate today and have a discounted value. That would be credit money. It's not something that we see often today. What we do have today is it's either fiat money or commodity money. Now, the world has basically been on a fiat standard since the 70s. So fiat money is generally defined as something that is only backed up by a government decree or a legal decree. So you have a government saying, okay, this piece of paper, we put our faith in it and we will back up its value and it is legal tender. There's legal tender laws that protect it. That would be fiat money. Commodity money is the money that we've kind of has been more prominent historically. Fiat money is something that's only kind of been around maybe 40, 50 years, but commodity money has been around thousands and thousands of years in the history of mankind. And commodity money is something that has a value or use value outside of its value as money. So something that is kind of something that you could use as a commodity for itself, something to consume in whatever way possible, right? Value is subjective. What is consumption value to me may not be consumption value to you, but hey, that doesn't matter. All that's required for consumption value to exist is that some people somewhere see some sort of use value in the thing. And so that's how commodity money is defined. Now, Mises goes further. He says, okay, so there's commodity money, but we can distinguish further between commodity money into money proper and money substitutes. Now, there's a lot of, I've seen arguments being made for Bitcoin as what Mises would call a money substitute. What is a money substitute? It is something that is redeemable or if you are backed up by another either commodity or fiat currency that would be a money substitute. Another term that economists use for money substitutes is inside money. It's money that is backed up or redeemable for an outside money or another currency. Now, a lot of criticism against Bitcoin has been, oh, well, it's not backed up by anything. Well, doesn't matter. I mean, are people still using it for exchanges? They are. And it doesn't matter. And the reason it does not matter is that Bitcoin is not a money substitute to start with. So what would be examples of money substitutes or legitimate money substitutes or so-called inside money would be stuff like today, your checking account balance. How many of you have cash in your wallets right now? That's a lot. I ask usually a little bit like $5. Because I will ask my class, my students, and it's like nobody raises their hands. And why is that? No, why is that? Because all of us, how many of you have a debit card? Yeah, everybody, right? That's precisely why. The reason is that all of us have a checking account balance, which is basically it's just a number somewhere online. And whenever we want, we can take that debit card and go swipe it at a restaurant, at a store, at an ATM. That checking account balance serves as a substitute for the money in my wallet. It is more convenient. It is safer to just kind of keep that debit card with me and just rely on the fact that there is somebody keeping the ledger, my bank. I trust my bank. We all implicitly trust our banks here, right? The money is there. We do. The fact that not all of us have cash in our wall is we are trusting the financial system to keep that electronic ledger safe. And because we trust it, that balance acts as a money substitute. Now in the past, stuff like banknotes, banknotes that were issued, banks had the freedom to issue their own banknotes. And competing banknotes would circulate against each other. Those banknotes, so if you had a bunch of gold under a gold standard or a silver standard, you would take your gold, go to the bank, deposit it, keep it there for them to keep it safe, and they would issue banknotes. And those banknotes would serve as money substitutes. In more recent times, an interesting example of a money substitute would be if you've heard of M-Pesa, which is an electronic currency in Africa which is being used. It's kind of spontaneously arisen in Africa, and especially in Kenya. It's basically minutes on your SIM card of your cell phone. People have been taking those minutes on their SIM card and transferring them, and those SIM card minutes have basically started acting like money. And it became such a widely used thing that it actually has a name, and you have competing companies issuing their own inside money. You basically deposit or you buy a SIM card, you put a certain amount of Kenyan shillings into it, and then that SIM card or those minutes act as your money substituted and you're able to transfer money, value, across distances. Because in Africa, it's dangerous. There's not a lot of banks. There's no financial system to transfer money. You can just write a check. If you want to send money to somebody, you have to send them physical cash. This makes it safer. You're just sending an electronic number of minutes on a cell phone. And those things, and there's a huge market. And that is an example of a privately created inside money. Bitcoin, on the other hand, is not. It's not a money substitute. It is not redeemable for anything. So redeemable or backed by means you would have to deposit actual money and be able to withdraw the Bitcoin, which it is not. What it is, is a money proper. Because it has a market price. A market price against every other major currency in the world now. And there are hundreds of Bitcoin exchanges. You can buy and sell Bitcoin for basically every other currency in the world. And that market price fluctuates, depending on demand and supply. And so it is not, if we had to go ahead and classify it, it would not be, it is not a money substitute. It is actually a money proper. And I would argue that it comes closest to being basically a commodity money. Now it's not, obviously it is not a typical commodity money. It is not gold. And this is one of the reasons it gets a lot of criticism. What is it? What if it just crashes? What is it backed up by? What is its actual intrinsic value or use value? Well, it did. Obviously there was some sort of initial use value in the beginning. Even though it's not something tangible that I can kind of hold in my hand. It's on my phone. It's a piece of code. But hey, I mean, there's so many things that add value to our lives that are literally pieces of code on our phones. So think about something like Facebook or Google or, right? I mean, all of those things, literally they are pieces of code, but they have a large use value to us. So the question, what we have to answer is, well, was there an initial intrinsic or use value for Bitcoin? And all the research that I've read on it says that, well, it was initially just being used and held for even by just a small inner circle of like, you know, computer geeks just to hold it as a play thing. And they were literally trying to hack it and break it. But people started to just buy it and hold it because it was something that was interesting. And so whatever that use value was initial, it existed because that was enough for a market price to be established. And that's what we've got today. Okay, now that's well and good, right? You can have the most perfect currency or the most perfect commodity, gold. Okay, in the past, we've had gold be money and you can have money that has the most perfect properties. But just having something that is perfect in terms of properties does not ensure that it actually gets used as a medium of exchange or that it actually goes past that barrier and becomes a currency. So what you need for a currency or a medium of exchange to emerge is for people to voluntarily trade with it, to trust it, to use it as a medium of exchange. And so the question then becomes, okay, you know, Bitcoin's pretty unlikely. Why are people using it and holding it and trusting it in the first place? Because trust is crucial when it comes to any kind of medium of exchange to emerge. So if you think about some of the properties that we talk about, okay, so if you have initial use value, initial intrinsic value, something like gold that has these industrial uses, it is scarce, it is divisible, it is transferable, it's non-perishable, all of those qualities. If you think of Bitcoin in those terms, well, I mean, yeah, okay, it does have a certain ease of use, it is pretty easily transferable, it's not perishable, does it have a large use value to start with? Well, not really. So the question we have to answer is, okay, why? Where does the trust come from? Because a medium of exchange is something that, again, like I said, it's something that you use only to exchange again, to give away again. So I'm only going to hold it. I'm only going to hold it if I trust that somebody else will take it from me in exchange. And that guy is only going to take it from me in exchange if he trusts that somebody else will take it from him in exchange for other goods. And that guy is only going to hold it if he trusts somebody else will take it from him in exchange. It is not a consumption good to start with. When it comes to consumption goods, you know when you consume it, there is a certain use value, right? You don't need to really trust it. So if you go buy something that is like a brand new watch or a pair of shoes from a new business, there's an easy test there. It's a consumption good. If it doesn't fulfill its promise, what do you do? You never go back there again, right? You don't trust them again. You leave a bad review. That's how the market sorts itself out, okay? How do you do that when it's a money? How do you do that when it's a currency? Why would you hold something ever? If you didn't know everybody else or somebody else would take it from you, why would you trust something? It's a huge chicken and egg problem when it comes to currency. And it's not just something that exists with new currency, it exists even with old currency. So even with the dollar, even with something as large and incumbent as the dollar, if trust, if tomorrow for some reason the trust that the dollar would hold its value would start to fall, guess what would happen to the value of the dollar? It would start to fall as well. It's the trust which is key. And so in terms of why people trust or have been trusting Bitcoin, I think is the more relevant question. A lot of people like to kind of think about Bitcoin, oh, it's going to crash. Oh, this is crazy. This will never last. And that's fine. It may crash and Bitcoin in the form that it is today, the original Bitcoin may not last. And that's not the point. To me, from the point of view economics, what is very interesting is how did it get this far in the first place? It's extremely unlikely. It's highly improbable. That's something that is not being created by a government. It is not being backed by anybody or anything. It is literally only backed by a piece of code, but somehow the market and somehow it becomes this global phenomenon where people actually start to use it as a medium of exchange. And that is incredible. It's incredible from the point of view of monetary economics. And that is the interesting question to answer. When is this thing going to die? The incredible question to answer is, okay, how did this thing get to this place in the first place? Because it should not be. I mean, if you asked a monetary economist 10 years ago, what if we had this thing that comes out of nowhere? It's a piece of code and suddenly it becomes this global thing and it has this market price and people are trading it and using it to buy things. They'd be like, no, that's crazy. That would never happen. But it did. And so we have to be able to answer why. And I think it goes deeper. The reason that it is, it still exists and it's still there is because there are these deeper characteristics of Bitcoin and blockchain in more generally that are helping create trust. So the first one is the fact that everything is public. Every transaction is up on this public ledger which is called the blockchain. And it is publicly verifiable. So if you had to create trust from nowhere for something that nobody has trust for yet, an important property is transparency. An important property is putting everything out there, putting it all out there for people to see. That helps. That goes a long way. Now another one is that a public blockchain, which is what the Bitcoin blockchain is modeled on, is completely open. It's an open blockchain. So what that means is it allows, there's complete free entry and free exit. Anybody in the world can choose to become a miner. Now it's gotten harder as time has gone on. In the past, maybe 2010, 2011, you could literally start mining on your little computer at home. You can't do that anymore. It's the harder that it's gotten to for Bitcoins to be generated, the more computing power it takes. So you actually have to make a sizable investment. Does anybody, is anybody a miner? Cool. Okay. How long have you been a miner? Okay. Neat. But the point is that anybody can do it. And anytime you want to leave, you can leave. As long as there is an incentive, as long as there is money to be made, as long as there is Bitcoin to be mined, as long as there's a profit to be generated, there will be computing power that is supplied. And the third or the last one, which I think is kind of the most important is the fact that it is based on open source code. Now what is open source code? Open source code is something it's completely different from, let's say, like a Microsoft or Apple, the way Apple works, stuff that we're used to, which is based on proprietary software. Open source code is not controlled or owned by any one person. No one person has control over what happens with the code. It's completely open. So anybody can supply and help and develop the code. Now that sounds crazy, right? It sounds ridiculous. It sounds like a public goods nightmare. But actually when it comes to software, it works. It works really well. And what you get is the distinction between proprietary software where you have one central decision maker that has all the power to change the code versus something that is completely open and no one person has power to change the code. The only way changes come about is through consensus. Now, why is that important when it comes to money or a medium of exchange? Well, if Amazon or Overstock tried to issue their own cryptocurrency, but they had complete power to change the code, like they started out saying, okay, so the total number of whatever Amazon coin will be 20 million. But as time goes on and they see that the price keeps inflating, they're like, oh, okay, no, we just changed the code. It's going to be 50 million now, right? How far do you think people would trust an Amazon coin where the proprietor had the power to change unilaterally the supply? And this is pretty similar to what we've got, right? In terms of our currency today, which is fiat money, right? You have a central bank that has power. You have a board of governors and you have Federal Open Market Committee. And basically it's pretty much them. And they do have that kind of power to unilaterally keep changing and increasing the money supply. This is the big difference here. No one person has that power to do that. Now, why does that create trust? Well, if I know that nobody else can cheat, right? I am much more likely to trust something and to use it, or even if I'm just holding it to be able to exchange it again. Now, that doesn't mean that there's no profit to be made. There is profit to be made. It's just not from changing the code. The profit comes from actually developing applications and websites and apps above the open source code. And so you can create proprietary apps and you can sell a service, something like what BitPay does, which is a payment processing website. And they've been in this business for a long time and they are one of the largest Bitcoin payment processors. That's a profit-making business, but they don't have the power to change the underlying code. Okay, why does this matter? Well, it does seem chaotic, right? How does change come about? Now, a great example of this is the Bitcoin Cash, which has kind of come about in the past one year. There has been a large disagreement in the core community of Bitcoin and there was this contingent that has kind of forked away and they've created their own Bitcoin, which is called Bitcoin Cash now. And the point of disagreement was that we need to be able to process more transactions. We need a blockchain that is processing more transactions that has a larger block size. And there was no way that they could agree. This core group, they couldn't find agreement. And so a part of the contingent decided to fork and to go their own way and create their own Bitcoin and that has happened. And so today, the Bitcoin that we're talking about isn't actually the only Bitcoin in existence. The Bitcoin that I kind of showed you the data on is the original Bitcoin, but there is a vibrant new Bitcoin, which is called Bitcoin Cash, which is based on a larger block size and the ability to process more transactions and which is something that is more going to be sustainable in the future. It seems chaotic, but it's actually not. It seems like a weakness, it's actually a strength. This is what competition and currency should look like. There should be freedom to exit, there should be freedom to start your own new currency that is based on more sustainable and better transparent principles and that is exactly what is happening. Now, has that led to, does that mean, you know, is that going to lead to Bitcoin or Bitcoin Cash becoming, you know, the new dollar taking over the dollar? Probably not, right? Probably not. Not in a country like the United States, which already has a very well functioning financial system. And so the demand for something like Bitcoin or Bitcoin Cash or Cryptocurrency, it's hard to create a demand, an initial demand. Despite the fact, you know, there are potential advantages. All of these potential advantages, which is being able to send money across the world for a very low transaction fee. Privacy, the fact that you don't have to divulge all of your financial information. Lower chance of, you know, charge backs and all of the fees that credit card companies and, you know, that they lose all the money on fraud, all of those things are reduced. Now, however, why have we not seen a large takeover of Bitcoin in, especially here in the United States? Now, it has gained in circulation in countries where, like Venezuela or Argentina, where there has been, you know, a lot of volatility in their fiat currency or there's been a lot of instability in their political atmosphere, there has been more use. But why do we not see a larger mass adoption in the United States or in Europe, right, in the developed countries? Well, obviously it doesn't help. The volatility doesn't help, especially over the past year. It's hard for something to be used as a unit of account and as a store of value when there is that kind of volatility. But that's not the only hurdle towards it being established as a strong medium of exchange. Now, how many of you have ever, how many of you hold Bitcoin or have a Bitcoin? Okay, that's cool. That's a lot more than last year. How many of you have ever paid for something with Bitcoin? Okay, cool. I mean, that's cool. That's about like 50% of the people that hold Bitcoin, right? That's probably the largest show of hands I've had in a group. But anyway, this is still a biased group, right? If you were to ask some, you know, if you were to just like pull people off the street and ask them the same question, I mean, that percentage would be way lower. And the reason is that unless you have a large incentive or a large amount of information and knowledge about this thing, it's really hard to go from, you know, not knowing anything about Bitcoin. You've just heard about stuff, you know, on the news. It's really hard to go from there to go to actually buying some and then paying for something with it. And if there was a monetary incentive, if there was a monetary incentive just the way there is a monetary incentive for merchants, the reason there's been a large adoption, the side on which there's been a large adoption of Bitcoin is on the merchant side. So there's literally hundreds of thousands of merchants that accept Bitcoin as payment. And the reason they do that is because it is in their best interest to do so. When you accept a payment through Bitcoin, you barely have any transaction fee or any kind of fee. It's probably 0.1% that you have to pay. But if you accept, well, if you are a merchant and you accept payment through a credit card or a debit card, you have to pay a 3% transaction fee to the bank or the credit card company. So for merchants, there's been a very clear advantage to accept Bitcoin. And this is something that has been, you know, basically created by companies like BitPay and Coinbase, the large payment processors that have created these very obvious incentives like, hey, it's obvious you should just start accepting Bitcoin on the side because, you know, if a bunch of people start paying you with Bitcoin, you're making up an extra 2.7, 2.8%. That's a large part. I mean, that when you are a merchant, that can be a large part of your profit margin. But on the consumer side, there has not been large monetary incentive to accept it. Now, that's not the only issue. The big issue, of course, is what we call network effects. Money is a network good, just like something like social media or Facebook is a network good. Right? How hard would it be for somebody to another social media website to, if they wanted to compete with Facebook, how hard is that going to be? If they wanted to bring the, how many billion people on Facebook now? Seriously? Two billion? Okay. I mean, how hard is it going to be to get two billion people to switch over? Because it's, again, it's a chicken and egg problem. I'm on Facebook because all my friends are on Facebook. I've got 500 people that I know that are on Facebook. They're on Facebook because their friends are on Facebook. All of you are on Facebook because your friends are on Facebook. It's because it's a network good. Right? It's a network good. You're there for the network. The money is the same way. You and I, we use dollars today because everybody else in the United States use dollars. Right? I mean, you could, I mean, if you really wanted to, you know, start your own little world. I mean, you could say like, hey, I'm just going to bother now or I'm just going to trade with Bitcoin. And you can try and do that. It's going to be way harder. Right? It's going to take a lot more. What economists call, there's going to be a much higher search cost involved. It's going to be much harder and it's going to take a lot more time to trade to find people to trade with. And this is why we all tend to why a certain network, once it gets to be a certain size, there's a self enforcing tendency for it to just kind of get larger and larger. Even though it may not be supplying you with the best quality of product or it may not have the best properties, but networks tend to kind of you tend to see a convergence towards something that is good, but not the best alternative because of the nature of network goods. And money just happens to be one of those goods which has extreme network properties. And so it's extremely hard in a country like the United States for something like Bitcoin or any other cryptocurrency to really take effect. And this is the exact reason why you see larger Bitcoin adoption rates in countries where the incumbent currency network, like their own fiat money, if it is faltering or there's high amounts of inflation or high amounts of uncertainty in that society and that network effect is not as strong anymore, it's precisely in those countries that Bitcoin adoption is high. And that's not the only issue. We're pretty spoiled. We're used to with our money. We're not used to a lot of competition. We're used to competition in things like cars and houses and shoes, but we're not used to competition in monetary products. Banks, what kind of informational burden do they put on you? Did any of us ever pay for starting a checking account at a bank? No, it's free. They give you an ATM card for free. They just want your money in the bank basically. And as long as that system keeps working, there's a large incentive for us to just kind of stay there. This is like a bias group. You guys want to learn and you want to know more and you're informed about everything that is happening. And so you do know what Bitcoin is and you may have used it, but most people think about your grandma or even your mom or your dad. Why should they care about something that sounds like it's crazy? About something that sounds like it would take a lot of understanding, a lot of understanding of economics and studying to even get to a point where you would be able to trust something to want to hold some of it. So there's a very large informational burden. And it's not something we're used to. And in fact, when it comes to money and fiat money and things like central banking and the institutions that come along with central banking, things like FDIC, if your bank goes under, what happens to your money in your checking account? Do you lose your money? No. I mean, it's backed up by FDIC. The fact that it's backed up by FDIC creates a moral hazard. It creates much less of an incentive for you to be keeping tabs on your bank. This is not the case with Bitcoin. I mean, it's a new technology. There's no thing as FDIC. You can lose your money. I mean, anybody lost Bitcoin here? That hurts. It's no fun. It's no fun losing money. There is no fun in losing money. So last year, I was in a position where I had some Bitcoin and I had forgotten or lost my password. And basically, if you lose your password, it's gone. It's gone forever. And then there was that extreme inflation that took place. And I was like, OK, now I've got the incentive to really find it. So it was me. And Bob Murphy, we were emailing back and forth. He was in the same position. And so we had these tricks going back and forth. I did go and find my password. But that was only because the price was at $20,000. And I did not sell, but that's another story. Which I wish I had. And I blame my students, actually. Because every time, somehow, there's these large bubbles in the fall. And I'm always teaching money in banking. And I ask my students, should I sell my Bitcoin? What do you think? And they're like, no, no, no. Just hold on to it. OK. OK. Yeah. So, yeah. It's no fun, right? I mean, there's way more risks involved. And so absent any kind of obvious monetary incentive, absent the fact that it is there's so much high informational burden involved. These are large hurdles. It's very hard. And we're not used to choice. We're not used to competition in monetary products. But this is a good thing. The way cryptocurrency has kind of evolved, there's been a lot of ups and downs. There's been volatility. There's been companies that come crashing down. All of that stuff is normal. It's normal in a marketplace. Market institutions are not perfect. And for some reason, when Bitcoin goes up and down or there's a bankruptcy or there's fraud taking place, people are really quick to just kind of like, oh, it's all crazy, right? It's all nuts. The entire concept of Bitcoin is it's going to be gone. That's not true. This is how a market evolves. There will be ups and downs. There will be volatility. The markets are not perfect. And we should not expect them to be. We should not expect to see perfection. What we should expect to see is the correcting mechanism of profit and loss. And so if you do do something that is wrong or you do defraud your customers, you should go out of business. And what we've seen over time is better and better developments of security taking place. And it's only the stronger entrepreneurs that are able to stay and that are able to raise money and that are able to raise venture capital. This is, I mean, this is extremely rare. It's very fascinating. You know, whatever you may think of Bitcoin, that's fine. But the basic economic characteristics of it is what make it so fascinating. This is something that should not exist. And yet it does. It's something that is a testament to entrepreneurship and to market institutions. It's something that is extremely rare historically. So money is something that has been highly regulated. It's probably the most regulated, the most controlled by the state institution that is good through history. And it's to be able to see markets and entrepreneurship working in this sphere is actually very fascinating. And it's something that is, you know, that we should cheer on and not just kind of be, you know, oh, that's just going to go away. I don't think it is. And like I said, it's even though there are so many challenges in the United States for it to become like this massively adopted currency, you know, a large part of the world still does not have banks or financial institutions. Even if they have central banks, they have very weak currencies or they have dictators and something like if you can have a currency on your phone, most people, even the poorest of the poor people in most of the world actually have cell phones, cell phone and just mobile phone. Penetration is much, much, much larger than, you know, something like a financial institution or a commercial bank. If you can have money that you can trust and that you can send and transfer value using your phone and your internet, that is huge. That's a big deal. And we may very likely see cryptocurrencies, especially the ones that are, you know, Bitcoin, Bitcoin Cash, the ones that are based on open blockchains, not the ones, you know, that are kind of like created by the government itself. Like why would you trust that? There's no real reason to trust a government or a right of Venezuela and dictate or create a cryptocurrency, even if it's a cryptocurrency, that doesn't make it. What matters is that it's open and it's transparent. Those cryptocurrencies, there's a good chance we see larger adoption rates in those countries and developing countries. And I think the best part of it is that it gives us competition and choice in currency and it's not something that we're used to having. So that's pretty neat. And so we should definitely something to kind of cheer on. And it's a very strong testament to how markets can coordinate complex behavior and bring about complex institutions spontaneously. And that's exactly what Bitcoin is, even with its volatility. Okay, thank you.