1
I really like it down here.
I live literally right by
the world trade center.
I walk home.
I live above it, actually.
My ankle bracelet.
Tells the government where I am
every second of the day,
any time of the day.
But it's gonna come off
when I go to prison, I think.
I mean, I don't think I'm
wearing this in prison, so...
That's what
the plan is for that.
Closing numbers
on the markets today,
at one point, the market
fell as if down a well.
It was an historic day,
with wall street shaken
to its very foundation.
And even the health
of the most trusted firms
are now being
called into question.
We have former
secretaries of treasury
who go from government
to wall street
pocketing hundreds
of millions of dollars.
In 2008, I became
somewhat obsessed
with the role that money
itself played in the crisis
and the role that governments
and banks played in money,
and why was it that our money was
controlled by central banks?
If something new happens,
is the government
likely to give it a nod
or at least ignore it for a
while, or is the government
likely to come down
and try to crush it
because they're afraid
of anything new and different?
This is a monetary revolution.
Bitcoin is the honest currency.
Okay, this past week
we've been talking about money.
I'm gonna ask everybody
what you think money is.
Can you give me
some answers now?
Money is, like, paper
and you can, like,
buy stuff with it.
So you have to have, like,
four quarters for a dollar.
You need money to buy
your house, like, food,
water, oxygen...
Not oxygen.
Money is basically just
an accounting system.
It is a way of recording
who owns what,
who has what,
who owes what to whom.
That is all money really is.
And you needed somebody
who could stand as
the central issuer,
somebody who was
the trusted third party,
someone who could guarantee
that the money was real.
And for hundreds of years now,
we have had
governments issue money.
Again, money is just
an accounting system.
That's what bitcoin is.
Bitcoin is really just
an accounting system.
It is a way of
recording transactions,
recording value,
and it does it digitally,
so you and I can send it
to each other directly,
and everything is recorded
in the open ledger.
By monitoring and
updating that ledger,
in a collective,
consensus-based system,
you do away with the need
for somebody in the middle
having to be
that sort of repository
of all the information.
And that's what gets away
from the fees,
the inefficiencies,
and ultimately the potential
for corruption and risk
that come with centralizing
information in that way.
What it does is it takes
that trusted
third party function
and it automates it.
It puts it into an open
ledger that is put online
that is there
for anybody to see,
so that every bitcoin
is accounted for,
so that you know that you're not
getting a counterfeit bitcoin.
It's kind of remarkable
that this idea of bitcoin
was launched just a few weeks
after lehman brothers
went bankrupt
and the whole system
nearly collapsed.
And the problems
that cropped up in the crisis
were very much a part of the
writings of satoshi nakamoto.
I think what the crisis
showed is that
the existing system
had some major flaws.
It wasn't working
and people were hungry
for some sort of alternative.
I discovered bitcoin's power
when I understood
for the first time
that it was not controlled
by a central company
or a central person.
Because I knew that meant
it couldn't be shut down.
And if it can't get shut down,
all it needs is
to do something useful,
and it will become
more and more adopted
and as the value grows,
people will find
more and more uses for it.
The beauty of bitcoin is,
it's easily transferrable,
it's anonymous.
And by 2140
there's gonna be 21 million,
and that's the cap.
There's only x amount of gold.
There's only x amount
of bitcoin.
Before, if you wanted to send
something of value
across the Internet,
you had to get
somebody else involved.
You had to have
a credit card company
or PayPal, or maybe a bank
involved in the transaction.
The promise of bitcoin is that
you're directly sending
this currency to another person
and then the bitcoin network
performs the function
that normally PayPal
or a bank or your credit
card company would perform.
Bitcoin really puts the control
back in the hands of everybody.
Everybody who's participating
in the bitcoin system
is controlling how it works.
If you want to look
for the Genesis
of cryptocurrency, it was
the cypherpunk movement,
you know, growing out of a
kind of a love of the Internet
and its possibilities.
The discovering
of cryptography and imagining
that you could give birth
to a new world, really,
out of the Internet.
A world that lives outside
of the nation-state,
and outside the structures
of power and the hierarchies
that are associated with that.
These people had talked
about the need
and the possibility
for a digital currency
that was anonymous
or could be anonymized,
using cryptography.
The cypherpunks that emerged
in the early '90s
were hyper-concerned
about privacy,
about personal Liberty,
and a lot of people had come up
with their own systems.
Some of them came
very close to happening.
The one that probably came the closest
was digicash from David chaum.
Privacy of payments
is actually essential
for democracy.
The reason is not
because you need to be able
to make private payments
in order to express yourself,
but rather that in order
to inform yourself,
you may need
to purchase information
and that's the thing that allows you
to have opinions worth expressing.
Although I wouldn't say
David chaum was a cypherpunk,
he definitely inspired
the cypherpunk movement.
It's as if the cypherpunks
kind of came upon
David chaum's tools,
like the technology
of some alien species,
and they only took the weapons.
They were most interested
in the ones that could be used
to disempower the government
and empower individuals.
The break between him
and the cypherpunks came
when he realized he would need
existing institutions
to help him with it,
so he started
talking to governments,
he started talking to banks.
He was very close to having
this thing happen
in the late '90s,
and nobody was really
prepared for this
outside of
the cypherpunk movement.
People it seemed like
had almost sort of
given up on the project.
Other than a few
experiments here and there,
by hal Finney, Nick szabo,
the conversation around this
really died down.
And then all of a sudden
it came back to life
after the financial crisis,
and you had people going back to
those experiments in the 1990s
and looking at new ways of
putting those ideas together.
Nick szabo, in 2006,
had just finished up
a mid-life stint
at law school,
and if you look Nick's writing
around the financial crisis
that is really revived
his interest
in these ideas that, you know,
he had been working on
in the 1990s
with privacy and contracts
and the problems
of governments and other
trusted third parties.
And he brought bit gold
back into the conversation.
So hal Finney
came up with his own system.
Adam back has hashcash,
wei dai has b money,
szabo has bit gold.
So what satoshi did in 2008,
was satoshi took a lot of these
ideas and made them work.
He created an
encryption-based protocol...
It's not really
a currency...
Utilizing a ledger
called the blockchain,
allowing for many kinds
of transactions to occur.
Contracts, all kinds of things
can be built
into the blockchain.
And it does this through a
system of consensus building
where multiple computers
all participate
in the management
of the blockchain ledger,
a kind of digital document,
if you will,
that keeps track
of all the payments.
I understand it's something that
is instantaneous online
and it can go from one
country to the other
and you know,
they can have their money.
Well, I never heard of it
until Nancy called me
and mentioned digital currency
and I'm thinking
she must have been
in the bottle this morning
or something.
Digital currency, oh.
What, what?
You know.
But they say it's for people
who don't have bank accounts.
I can't understand.
If you have one coin,
it's...
Let's say it's worth $150.
What do you do, give the
number or something to the...
Say, the grocery store person,
and then they subtract it?
How do you know?
How do you make change?
How do you know what you have
left or what you've spent?
You can have the money supply
controlled by a computer.
That's all bitcoin really is.
The key point here is that
this a distributed ledger.
There is no central server.
All the other ledgers
that we have,
all the banking ledgers,
all company ledgers,
they all sit and reside
inside that company,
which means they have
one point of attack.
They can be hacked.
Jp Morgan was hacked
by, you know, the cyberthieves
not so long ago.
Home depot, target, we've had
all these companies get hacked,
precisely because there's one
central repository of information.
The bitcoin ledger resides,
on, you know,
thousands of computers.
You can't hack that.
Every single transaction
is recorded,
and once it is recorded
in the blockchain,
it is there, it is permanent.
It cannot be altered. It cannot be
changed, so that you can read it.
Now the identities
of the people are encrypted.
The wallets are encrypted,
so you don't know who
is spending the money,
but you know that every
single bitcoin out there
has a history,
you know where it's been,
you know the different
addresses it's gone between.
The most important pieces
of the bitcoin infrastructure
are the miners.
These are the computers
that are tasked
with maintaining
the ledger of the blockchain
to verify the information,
to update it,
to make sure
that it is trustworthy.
So how do we
incentivize them to do so?
As they are going through the
process of confirming transactions,
they are simultaneously
being subjected to
a very, very difficult
computing test.
The bitcoin core protocol
is forcing them
to look for a number.
All of these miners
are ultimately competing
to be the one that receives
that payout every ten minutes.
But really that's
the secondary component.
They're really being
rewarded with bitcoin,
but what is
the more important task
is the validation
and verification
of transactions and
the maintaining of the ledger.
Bitcoin, in being
the first to achieve
this holy grail of
decentralized value exchange
that transfers
that process of trust
to a collective agreement
around a body
of independent computers
who are compelled
by an incentive system
to maintain that consensus
and affirm the information
to be correct
is incredibly liberating
because it means
that we can do it without
all these intermediaries
in all these different realms.
The most important thing behind
bitcoin is not the currency.
The key factor
is the blockchain.
Nobody expected this.
You know, in 2008,
very few people cared about it.
It was just
the computer scientists
and the sort of code geeks
that were really interested.
All of my communication
with satoshi
was ever via either
the bitcoin talk forums,
which, all of
that communication is...
Public, or private forum
messages or private emails.
Satoshi was always all business.
It was just always
about the code.
My very message to satoshi,
I asked him, "so,
is satoshi your real name?
What have you done before?
Can you tell me
a little bit about yourself?"
And he just ignored
that completely.
But came back and said,
"you know,
great to have more
experienced programmers
helping out
with the project."
You know, "here's a couple of
problems that need to be solved.
Maybe you can
help solve them."
In 2011,
I was into bitcoin
sort of just as a hobby.
I didn't really know
what to do in it yet.
I was trying to meet
everyone I could,
figure out what projects
would be cool to work on.
I met Roger ver sort
of in August of that year
and a few months later,
he recommended to this guy,
Charlie shrem,
who started bitinstant
that the Charlie should hire me
as the head of marketing
for bitinstant.
Bitcoin is cash with wings.
It's the ability to be able
to take a local transaction
and do it globally,
and that's why bitcoin
is gonna overturn
the financial infrastructure.
Bitcoin is like the largest
socioeconomic experiment
the world has ever seen.
Our conversations
would range from
you know,
the mundane and practical,
like how the hell are we gonna
get another bank account
since our current bank account's
probably gonna get
shut down any day now?
To very high-minded,
aspirational ones,
like, is this actually gonna
change the world in a good way?
Are we just a bunch
of crazy people
who don't know what
the hell we're talking about,
or are we actually starting to
initiate an industry
which, in hindsight,
will look obvious to everyone,
but, you know,
right now does not?
Charlie shrem was,
at that stage,
a fairly high-profile figure
in the bitcoin community.
The vice chairman
of the bitcoin foundation
and you know, one of these
bitcoin millionaires
who'd made a lot of money
very quickly.
And really played an important
role in the infrastructure
of managing the movement
of funds around the system
in that early rudimentary phase.
632 bid!
654 offer in the New York
cash market for bitcoin.
Buyers right now will pay
$632 cash on the spot.
Who's next for the bitcoin? You
want to know what bitcoin is?
You know what I prefer?
I prefer dollars.
If you want to go on
down to 40 broad,
right next door to
the stock exchange there,
to the New York bitcoin center,
you can buy and sell
all the time.
- You have a table in the middle.
- Yeah.
Just one small table, round.
And I have flowers,
like a flower arrangement.
- A very nice flower arrangement.
- Bitcoin flowers?
Bitcoin flowers.
Bitcoin flowers would be
white Lily, purple and orange.
Just right here, three colors.
We're putting together
the first bitcoin center
here in New York City,
right next door to
the New York stock exchange
bitcoin is a new space,
and many of the rules and regulations
haven't been imposed yet.
But we will open one day soon,
after the lawyers do their job,
a live digital currency
exchange.
What's happening here
is a fusion between
wall street and bitcoin,
hopefully.
Satoshi seemed to acknowledge
that it would be hard for
bitcoin to develop in any way
in which it wasn't interacting
with the regular economy
of dollars and Euros.
The problem with exchanges is
that they took you back
to this old world
that bitcoin was really
trying to get away from.
As soon as you move
back to an exchange,
you're moving back to a world
in which some third party has
all this personal data on you,
has all of your money,
has all of the security
vulnerabilities,
and really has none
of those strengths
that bitcoin
was designed to provide.
Jed mccaleb
created mt. Gox,
essentially on a lark one night
because he couldn't buy bitcoins
as quickly as he wanted to.
And interestingly,
he did it by starting
with a url
that he'd previously used
to run magic card trading sites.
So you get an idea about where
somebody's ideas are coming from
and how really kind of
rudimentary some of them were.
Jed essentially threw
this site together,
and put it online without
too much thought.
Jed essentially sold it
to the first person he found.
Who was mark karpeles,
a French guy
who was living in Tokyo.
He really knew
very little about mark
when he decided
to sell it to him.
And once he took it over,
it began growing
much more quickly
than mark was expecting
or was prepared for.
There are 21 million bitcoins
programmed into the system
that are going to be released.
It's a set number,
but within that,
every single bitcoin
can be divided up
into a hundred million
different pieces
so there's room for it
to expand as the use expands,
especially in the emerging
markets, in the developing world.
That is really
the most interesting place
to see where this thing goes.
So in my pocket I have a hundred
trillion Zimbabwe dollars
from the reserve bank
of Zimbabwe,
just as a reminder
of what happens
if our governments
screw up our money.
You know, Zimbabwe's
a good example
of a government that lost
the trust of their people,
and they lost
the trust of their people
by printing too much money
and causing runaway
hyperinflation.
So I think you will see people
in other parts of the world
who've experienced
hyperinflation
who've experienced
bank failures.
I think those will be
the kind of people
who are looking for something...
Something new, right?
They're willing
to take the risk.
A lot of us take the capacity
to send money to others,
receive money, store money
and do it electronically
these days for granted
because we are amongst the
lucky 50% or so of the world
that have bank accounts.
But 2.5 billion adults
in the world
do not have access
to bank accounts.
A technology like bitcoin,
cryptocurrency,
has the capacity to bring those
people into the financial system,
to give them this power
to effectively have
what you could argue
is a bank in their cell phone,
a bank in their pocket.
Really could open up commerce
to a lot of people
who are currently
excluded from it.
Somebody who is maybe
working in one country
and, you know, they want
to send money back home.
And right now, like,
western union is a big way
that people do remittances.
From a western union
perspective,
we serve clients in many different
locations around the globe,
and primarily for remittances.
Western union serves typically
an unbanked customer,
a customer who is
either a migrant worker,
or an individual who doesn't
feel comfortable
in the financial services
sector.
And the problem with remittances
is they're really expensive.
So if I'm sending $100
back home,
I may end up spending
$5.00 or $10.00
just on fees to get that
money back to my family.
That's a huge percentage
if you're poor and working.
So since bitcoin
doesn't care about borders,
I could just send bitcoin
to another country,
and if my family
in that other country
has some way of spending
that bitcoin
or has some way of trans...
Of exchanging that bitcoin
into the local currency,
then it's just quicker and
cheaper and more convenient.
And a lot of people think
that remittances
will be one of the really big
first uses for bitcoin.
The one challenge there
is we deal with
you know, at our company, 750
transactions, peak, a second.
And those happen instantly.
If you look at a blockchain, you
have to wait for verifications,
and if you do a recent test,
it takes about 15 minutes
for every transaction
to be validated by the network.
That doesn't scale,
so it has
its challenges as well.
Wikileaks, which solicits
and publishes
secrets and suppressed material
from whistleblowers
around the world,
has been under cyber attack
from governments
that want to shut it down.
PayPal is the latest business
to break ties with wikileaks,
but the whistle-blowing
website
dedicated to publishing
classified government documents
still continues to seek funding,
while crossing out PayPal
as one method of payment.
In order to insure
our future survival,
wikileaks is now forced
to temporarily suspend
all publishing operations
in order to direct
all our resources
into fighting the blockade
and raising funds.
The wikileaks scandal
seemed to provide
an opportunity for bitcoin.
At the time,
the big banks and credit cards
stopped processing payments
for wikileaks,
and some people thought that
bitcoin would provide a way
to send donations to wikileaks.
You could certainly see in
the hubbub around wikileaks
that satoshi was still somebody
who was very paranoid
about the government,
and the government coming in
and taking too close a look
at the bitcoin project.
And you could also see
that satoshi,
I think, realized at this point
that bitcoin was still
young software
and the kinks hadn't been
worked out yet.
In, I think, late 2010,
he asked me if it'd be okay
if he put my email address
on the bitcoin. Org
home page,
'cause he had been the
primary contact for people.
And I said, "sure."
He went ahead
and changed the web page,
but what he did is
he left his name there,
but he took away
his email address.
And so it was just me
and my email address
who was suddenly getting
all of the attention.
I think that was satoshi's way
of kind of saying,
"you're the leader
of the project now."
There was one particular email
where he told me that he was
gonna step away from the project
and do something else.
He never told me what else
he's gonna do
or that he is doing.
I had just been invited
to give a talk at the CIA.
And I told satoshi that
I accepted the invitation
to go speak at the CIA.
After he sent
that email to satoshi
telling him that he was
planning on going to the CIA,
he never heard
from satoshi again,
and that was essentially the last
time anybody heard from satoshi.
You very quickly get caught up
in the question
of who is satoshi nakamoto?
Where did this come from?
Who is this person?
I mean, this is the 2000s.
Information is out there,
everything.
Everyone knows everything
about everybody.
How can there possibly
be a person
that nobody knows
who this guy is?
But there is a person...
At least I think it's a person.
It might be a group...
Who nobody knows
who this guy is.
And he kind of appears
out of nowhere in 2008
on these cryptography
email lists,
with this system called bitcoin.
He's very active
in the early years,
there's a lot of back and forth
with him communicating
with people.
It seemed like most people
kind of wrote him off
as kind of like a
delusions-of-grandeur kind of scheme.
Hal Finney, on the other hand,
seemed to be really interested
right from the beginning.
He was a crypto-idealist.
Like, he was not as
kind of cynical
as many of the other cypherpunks
so he got really into this.
He started talking
to satoshi nakamoto,
who he said seemed like some
young Japanese American coder.
Hal Finney was the first guy
to work with nakamoto.
He was a cryptographer.
Soon as nakamoto released it,
he was one of the first people
to email him back and say,
"hey, this is interesting.
I'd like to work with you."
And in the first weeks
of bitcoin
he worked with him
back and forth
setting up the system.
And satoshi nakamoto
ended up sending hal Finney
the first ever bitcoin
transaction.
Any discussion
of satoshi's identity
has to go back to the fact
that bitcoin
was based on this small number
of projects back in the 1990s
that only a handful
of people knew about,
like hashcash
and bit gold and b money,
and so you end up with
a pretty small group of people
who would have known
about these projects.
People though chaum,
David chaum, was, you know...
Everybody in
the cypherpunk movement
at one point or another,
they've said,
"well, he must have been
satoshi."
They've all come out
and denied it.
Probably somebody
who started out in the '90s,
in California,
with the cypherpunks.
Somebody who was very,
very good at cryptography
who understands encryption,
and has done a wonderful job
of just separating bitcoin from
anything that can identify him.
I think for bitcoin's sake,
that continuing anonymity
of satoshi
has ended up being
a really good thing,
because people who
have gotten involved in it
have been able to write
their own ideas and dreams
onto this technology,
and there was nobody
there to say,
"no, that's not
what I meant."
In the early, early days,
the first group was
really just a bunch of
more or less
tech-minded coders.
Then you had the libertarians
come on board,
who saw it through
a political lens,
I'm excited to be
a little bit of a part of it
with allowing
and accepting bitcoin.
And then you had these
two groups working together
and they overlapped too,
and the timing was very good
because the existing system
was in utter disrepair.
It was like a match
to a pile of wood
with gasoline
poured on top of it.
And the whole thing kind of
really goes viral and takes off,
and then you have the suits,
the vc money,
and it was very small at first,
just a couple of guys
out in silicon valley
who ran into bitcoin guys
at coffee houses
and you started having
this meshing of conversations.
Once silicon valley
gets on board,
that whole dynamic
starts to take off.
So now you have
the tech-minded coders,
the libertarians,
the counter-culture people,
the vc, silicon valley,
and you have this entire
great mishmash of people
coming together.
You had a network effect.
The more people
that got involved,
the stronger the network got,
and the more it grew and it
really started growing on itself.
And in 2013 especially,
you literally see
this thing mushroom.
The thing was just growing,
growing and growing and growing
as more and more people
got involved.
I think most bitcoin
companies at the time
knew that a big part
of the market for bitcoins
was people buying drugs
on silk road
who needed bitcoins to do that.
The big bang moment for bitcoin
was the silk road.
What Ross ulbricht did
by creating the silk road
was he took this
by no means common
but usable cryptocurrency
called bitcoin
and he married it
with a streamlined,
workable user interface
that was a free market
that could sell anything.
What would happen
if people were really free
truly free to trade
what they wanted to?
Ross did have
an extremely radical
libertarian viewpoint,
and really wanted to experiment
with using technology
to create free markets
for people.
What Ross ulbricht did is a
combination of Tor and bitcoin.
That was the "aha" moment
that Ross must have had.
The silk road was
basically the fruition
of all the cypherpunk dreams,
the crypto-anarchists' utopia
that they had imagined
in the '90s,
you know, was real now.
This was a perfectly,
in theory, anonymous website,
with perfectly, in theory,
anonymous money
used to by any contrabands
imaginable.
The silk road website is a
particular headache for authorities.
It's a anonymous
online marketplace
where people sell drugs
that are posted to customers
all over the world.
Cyber investigators, you know,
when there's a crime
can kind of trace you back
because you have an ip address.
It's like a telephone number,
so if you call another computer
that ip address is tracked.
On Tor, that's taken away,
because your information
hops from computer
to computer to computer
so there's no way to trace you
back to your original one.
Tor is an anonymous system,
so if you use the Tor browser,
which it has a browser.
You can go to Tor
and download their browser,
you can browse with
some degree of security.
So that's great for plugging
your banking information
into a site
so you don't get hacked.
The other component of Tor,
which has similar uses,
is called Tor hidden services.
Tor hidden services
is actually, to put it simply,
a url that doesn't have ".Com"
on the end of it.
It has ".Onion."
And that is its own little space
where you can create websites
and you could freely transact
without oversight or regulation.
People put websites on there
that are outside of
law enforcement's view.
There's hackers for hire,
there's malware,
there's credit card
dump services
there's a whole bunch of them.
Chris tarbell has ended up
being, in some ways,
the most important
FBI digital crime investigator
of the last few years.
He was the one who took
down anonymous, essentially.
So we decided to start looking
at some of the services on Tor,
and silk road being one them,
other cases, they would hit Tor,
and they would kind of throw
their hands in the air
and say "it's Tor, there's not
much we can do about it."
I found it interesting to kind of
take a look at it and tackle it.
Bitinstant was basically born
because if you wanted
to move your dollars
into a bitcoin exchange,
it takes at least three days.
And since the major exchange,
mt. Gox, was in Tokyo
it could take a week or more.
So that's really problematic,
and basically
Charlie figured out that
if you just held a balance
of dollars at the exchange,
you could go to him and say,
"Charlie, I'll give you $100.
Will you give me $100
of credit at the exchange?"
And you can literally then have
your dollars at the exchange
in ten seconds
as opposed to a week.
So that's hugely helpful, especially
when bitcoin is so volatile
and you need to know exactly
what price you're going to get.
Charlie was raising capital
right as, sort of, I joined.
During that process,
he came across lots of
interested investors who were
starting to get a whiff
that maybe this
bitcoin thing was cool.
We had an interesting
debate early on
about do we invest in bitcoin
or bitcoin companies
and we sort of
decided to do both.
More towards investing
in actually bitcoin
in the asset early days,
but also trying to place
a few bets in the ecosystem
to support the companies,
support the entrepreneurs,
and see how that went.
A few days after they first
found out about bitcoin,
they were in the bitinstant
offices in New York
meeting with Erik and Charlie.
And Erik and Charlie essentially
talked them through bitcoin
and answered all of their
questions and concerns.
What made you invest
in bitinstant?
There are a lot of companies
and exchanges and websites.
With respect to bitcoin, regulation
is obviously a big question.
What you do want is a company
that sort of takes that seriously
and understands that
there's the technology element,
there's building the company,
and then there's also
creating the company
that works with regulators.
And so that's bitinstant.
It's not this sort of
completely underground thing?
Yeah, Charlie the ceo happens to have
been in this space for a long time,
so he's sort of on
the pulse and the cutting edge.
You know, you come out
and you say, like,
"we want this bitcoin thing
to overturn everything,"
but at the same time
we have to be compliant
and you have to know
your customer.
You have to know every single
customer no matter what.
Even if they're transferring
a dollar or $1,000.
And how reasonable is that?
The term "money laundering"
was invented by banks,
and knowing your customer
shouldn't be
this complicated,
expensive thing.
And you shouldn't treat everyone
like a criminal in the beginning.
They really wanted us involved.
People were really friendly,
because it benefits you
to onboard more people in,
so bitcoin's always been
this very friendly community
and it's also... in some ways
it's self-serving that way,
but we were there
for the right reasons.
At the time, bitinstant
was the big company
other than mt. Gox.
It was the way that most
Americans were able
to buy bitcoins.
Here it is.
So bitinstant
was located right there.
I think it's the one
that now says "bling."
It was a whirlwind six months.
Going from total obscurity
with no money
to becoming one of
the hot startups of bitcoin.
But almost as soon as the twins made
their investment in the company,
it began falling apart.
The twins had a much more
practical approach
to bitcoin and bitinstant.
They wanted to see
the company making money
and making as much money
as it could
as quickly as it could.
They saw early on
that it would be regulated,
that it wasn't
gonna be this big,
and have no one be
interested in regulating it.
So they feared that
all kinds of regulators
would come in
at all different angles
and tie the thing up
in a complete morass
where nothing
would ever get done.
So they wanted to help
drive the regulation
so that whatever regulation
would be there would work
and would not end up being a
complete dead end for bitcoin.
That strategy is smarter,
from purely
a business perspective,
but I'm not in this purely
from a business perspective.
I am in this for business
and because I'm trying
to change the world
and make it better,
and building bitcoin companies
and begging for regulation
that matches exactly
the banking regulation
that has caused so many problems
I feel like is
counterproductive.
For the most part, bitinstant
was actually taking steps
to make sure that people weren't using
the service for illegal purposes,
but Charlie made the mistake
in dealing with btcking
of acknowledging that he knew
what btcking was doing,
and that he was acquiring
bitcoins to sell them
to silk road customers.
In this case,
Charlie worked with the guy
and wrote emails that
essentially acknowledged
he knew what this guy was up to.
That stunning arrest
of the drug kingpin
who goes by the name
"dread pirate Roberts"
and appears to have cornered
the Internet drug market.
His real name is Ross ulbricht
and his website, silk road,
is packed with products
like cocaine and heroin.
The payment system
is all through bitcoins,
which is basically
digital currency,
not backed up by
any international banks,
not backed up by any us banks,
but simply based on
the confidence of the users
who exchange these bitcoins
computer to computer.
There's a reason why
the case was tried in New York,
in the Southern district,
and largely that
was because of bitcoin.
Ross was caught
in San Francisco.
The silk road servers
were out of the country.
So why was Ross's case tried in
the Southern district of New York
where most of the financial
regulations cases are dealt with?
Where the district attorney,
preet bharara
has been all over bitcoin.
Where Charles schumer, the senator,
has been all over bitcoin.
Ross ulbricht's case
is a bitcoin case.
There's absolutely
no denying it.
The level of threat
that the silk road posed
to the marketplace,
to wall street,
whether it's a perceived threat
or an actual threat,
was humongous.
And the idea that somebody
could create a marketplace
where you could freely transact
without oversight or regulation
had to be dealt
a massive and public blow.
Bitcoin kind of monetized that
anonymous part of the Internet
and made it possible
to trade in things
that the federal government
doesn't want you to trade in.
Law enforcement moves slowly
but it's a big heavy wheel
that grinds finely,
so, you know, someone
was running a hidden service,
and now they're
in prison for life.
They were playing hardball.
It was very evident
that their intention, as the judge
herself said in her sentencing,
was to make an example
out of Ross,
was to say to all of you
people using bitcoin,
to all of you people
who want to tangle
with unregulated marketplaces
and technologies
and open source
cryptocurrencies,
"we will throw the book in its
entirety at you if you do this."
We seized a whole bunch
of bitcoins.
And in order to sell those
bitcoins off or go to an exchange,
you have to fit within
federal law and state law.
There's not really an exchange
that could handle that,
that met those regulations
at the current time,
so it had to be handled
through auction.
You know anything
about bitcoins?
There's an article in "the
wall street journal" today
- on bitcoins.
- - Really?
Right here,
if you want to read it.
It is?
Digital currency,
did you see that?
Wow, oh!
"Digital currencies
will disrupt global finance,
transform the way
we pay for things,
and just maybe,
make the world a fairer place."
From what I've read
on the computer,
they have had some problems.
- Yeah.
- Yeah.
The reason is
because you can't track it.
Well, I think I don't like
this idea at all.
When we saw
the silk road shut down,
a lot of people said,
"bitcoin's nothing but
illegal drugs on the Internet.
That's what it is."
And they would point
at the silk road and say,
"look here at all the stuff
that's happening here."
And I think when you saw
the silk road shut down
and bitcoin transaction volume
take a tiny little dip,
and then keep going up,
you know, I think that was
a great event to point at
and say, "it really
wasn't about that.
It really isn't about that."
It's a tiny little part
of the economy.
I guess in the last week
I've really started
hearing about bitcoin.
Recently I heard a scenario
after the FBI had seized
a bunch of bitcoins
due to illegal transactions,
now they're gonna be
auctioning them off
like they would a private yacht
for, you know,
from some drug dealer.
So that, in a way,
legitimizes the use of it
as a currency.
Looks like it's the first live
bitcoin exchange on wall street.
Looks that way.
Yeah, so one for 950.
- Buying or selling?
- -Selling.
550 on a thousand...
Right now we were looking
at the open interest
at the floor of
the bitcoin exchange.
There's different
exchanges that are online,
that will present
at the bidding house,
but there's no true
open outcry exchange.
Buyers and sellers
coming together
in an open, clear,
transparent, honest way.
- Gox is the highest one.
- Why don't we call it 900?
900...
There's my transaction,
probably the first two
transactions of the day.
It's really not about the money,
it's about being involved,
and I think there's a lot
more people gonna follow me.
Charlie shrem, 24 years old,
arrested today and charged with
engaging in money laundering
shrem enabled people
to transfer money
from bitcoin to cash via his
company called bitinstant.
Now the other point
that the DEA is making
is that shrem bought drugs
online at silk road
and that he knew silk road
was a trafficking website.
And we know the winklevoss twins
who obviously were featured
in the movie about Facebook.
They're actually investors
in shrem's company.
Yeah, you know, a lot of people
are very excited by this idea.
They like the idea that
you can have a currency
that is not tied
to any kind of central bank,
but at the same time,
I mean, think about it.
If you're in
the federal government,
you don't like the idea
that people could
effectively use another
form of cash
to buy things that they
shouldn't be buying online.
With me, it wasn't all
my customers.
It was one customer,
out of about 100,000 customers.
This was one customer.
One single...
And I made that case
in my sentencing.
I said, "your honor,
this was one customer."
It happened that I was literally
coming home from Amsterdam.
I was in my sweatshirt.
I was still stoned.
I didn't know what was going on.
Charlie did not know
when to shut up,
and that ended up
getting him in trouble,
and probably led to the end
of his company.
But they got me under
the patriot act,
and it's money laundering
because I knew that
the money I was taking
was eventually possibly going to
be used for drug trafficking.
Now drug trafficking is not
buying drugs, it's selling drugs.
I didn't help the drug seller.
I helped the guy buy drugs.
But I never went
to trial because...
And I pled guilty because
who wins at trial, you know?
Like this guy, silk road,
he's gonna go to life.
In trial, all he needed
to get was a lady
whose son died
from a cocaine overdose
and I would've... the jury
would've convicted me right there.
So essentially Charlie was
selling bitcoins to a guy
who was selling
bitcoins to people
who were putting drugs
into their own bodies.
And for this, Charlie
was charged with crimes
that could've put him
in jail for 20 years.
That's what the prosecutors
were shooting for.
We have banks that have atms
on every street corner
in America,
and those banks know very well
that that cash
is getting used for drugs.
And yet, that's fine.
They're allowed to do that.
No one gets in trouble.
But Charlie sells bitcoin
to a guy who sells bitcoin
to someone who uses drugs,
and he goes to jail.
He was an entrepreneur that
started building this industry,
built services
that people found useful,
when bankers almost destroyed
the world economy
and none of them
got in trouble whatsoever.
And here we have this 23-year-old
kid, he goes to jail
because he started
building an alternative.
Over the last six months,
our agency has been conducting
an extensive inquiry
into virtual currency.
The information
we're going to gather
in this fact-finding effort
will allow us to put forward,
during the course of 2014,
a proposed regulatory framework
for virtual currency firms
operating in New York.
Yesterday, we had
serious criminal conduct
come to light involving
virtual currency
as a vehicle
for money laundering
drug trafficking,
and other major felonies.
Right now, the regulation
of virtual currency industry
is still akin
to a virtual wild west.
That's why we're evaluating
whether our agency should issue
a so-called bitlicense,
specifically tailored
to virtual currencies.
I think people who imagine
a very powerful utility,
like bitcoin
that would somehow escape
regulation entirely
are either naive
or extreme optimists.
Bitcoin is a battle of ideas,
and it forces the issue of
whether people should be
as free in their handling
of money as they are
in their handling
of speech or religion
or relationships
with each other.
If you want to have
this thing go mainstream,
you're going to have
to have the regulators,
the lawmakers weigh in on it.
One of the first ones
who really took an interest
was Benjamin lawsky.
Very important regulator
in the financial world.
And in January, 2014,
holds these public hearings
because he wants
to come up with a license
for bitcoin companies.
We believe that putting in place
appropriate regulatory safeguards
for virtual currencies
will ultimately be beneficial
to the long-term strength
of the industry itself.
Lawsky was essentially
given the opportunity
to write the rules for this whole
new industry from scratch.
The first question
is the obvious one
that's on everyone's mind.
Sort of unexpected yesterday,
but with the arrests
we saw obviously
that's put a bit of a cloud
hanging over
the industry right now,
and so how do each of you react
to what we saw yesterday,
what it means for bitcoin or
virtual currency and its future?
I think it further supports that
bad guys are gonna do
bad things,
and they're gonna use whatever
technology is available to them.
But I view it as, if the allegations
are true and they're convicted,
the system works.
Are people still doing bad
things with bitcoin?
Sure. Is the majority of
the bitcoin activity vice?
Not a chance.
So I think the issue you raise
is one that people
like to write about,
the media likes to write about
it, makes great headlines.
You get a lot of clicks.
You can sell a lot of ads,
but I think
it's in the rearview mirror.
There are some people
in the bitcoin community
from the libertarian
side of things
that want government
to just leave it alone.
Would you say regulation
is both inevitable
but more importantly,
actually ultimately
going to be crucial for the
survival of virtual currency?
Sounds like a terrible
idea to me.
Just understand what we're
trying to do with bitcoin.
We're trying to create a world
where transactions can move
globally for free, okay?
And making these companies hire
you know, some outsourced
compliance firm
is a bad idea.
It'd be great, in any industry,
if you could just
open the door and let folks
run out and give it a shot.
We may choose not
to invest in a company
if they can't
get licensed by you.
If the choice ultimately
is between
preventing money laundering
on the one hand,
and I probably shouldn't even
use the word "money laundering"
'cause it's too nice
a word, frankly.
Money laundering
is the facilitation
of all kinds of horrific crimes
that I think
everyone in this room
never wants to see happen.
Acts of terrorism,
funding rogue nations, etc.,
all take place through
massive money laundering.
Now the choice
for the regulator is,
permit money laundering
on the one hand,
or permit innovation
on the other.
We're always going to choose
squelching
the money laundering first.
I agree that I don't think
anybody wants money laundering.
When we got a...
First saw bitcoin
you know, about a year and
a half, almost two years ago.
I don't think anybody would deny
that it was a bit
of a wild, wild west,
because there was no regulation.
There was no framework
to evaluate
the asset, evaluate companies,
determine who was compliant
and who was not,
and a wild west
attracts cowboys.
And I don't think anybody here
would disagree with the fact
that a sheriff
would be a good thing.
A lot of, I think,
the entrepreneurs
feel like they have
to self-censor.
They don't want to come out vocally
critical of the regulations.
Part of that is maybe
'cause some of them
just like regulations,
but I think another part of it,
some of them just feel like
they will get
attention of the regulators
if they come out against them.
Yes, we want them to innovate,
but at the same time,
we just can't live in a world
where we're gonna permit
money laundering to go on.
I think regulators
should give bitcoin
some time to grow up.
Too much regulation now
will just stifle innovation.
I think before regulators
kind of come in and say,
"we're gonna solve
all your problems,"
and then fail
to solve all their problems,
I think they should give
the innovators time
to solve those problems.
One function of regulation
is to make things clearer,
so right now bitcoin,
because it's so new,
is in a state of flux
everywhere.
The lesson from the Internet
is anything that China bans,
invest in.
And that's a joke,
but the U.S.
Allows Google to operate here,
allows Twitter to operate here,
allows bitcoin to operate here,
allows Facebook to operate here.
Chinese government doesn't allow
any of those companies to operate
the way they operate in
this country, or at all.
This is about freedom,
ultimately.
You know, we're 50 yards
from the old
world trade center here
and I think all of us
never want to see
anything like that happen again, and
it would have been a lot harder
for 9/11 to ever have occurred
had we had
the protections in place
that would prevent the movement
of massive amounts of money
around the globe
by people who would want to
kill everybody in this room,
so I think the key is
to not create useless regulation
but I think the motives
behind a lot of those rules
are to ensure we don't
miss something again.
Since 2001,
there's this absurd
obsession with terrorism.
So any time a regulary
gets up and says,
"well, bitcoin can be used
for terrorism."
Well, of course it can.
So can anything.
So can cell phones and so can the
Internet and so can the car.
It doesn't mean that we should stifle
the growth of those industries
just because bad people
can use it.
This has arguably been
the worst week
in the cryptocurrency's
short life,
stunned by the collapse of
once-dominant exchange mt. Gox.
Now that failed firm's ceo
mark karpeles is in hiding.
Some 750,000 bitcoins
allegedly stolen or lost
which accounts for about 6%
of the total circulation.
By the time
mt. Gox went down,
it was holding what
its customers believed
were about
a half a billion dollars
worth of their bitcoins
and the company's bitcoins.
It was no longer the largest
exchange in the world.
But part of what's so amazing is
that people kept using it
even after there had been
numerous incidents
in which it was clear
that the company
was not up to the task
of safeguarding the money.
And the only reason he survived
as long as he did
was because in 2013,
the price started going up.
People kept
putting money into it.
He had more and more money
'cause the price was going up,
but as soon as
the price started going down,
this is what happened, right?
It peaks in late 2013.
It starts coming down in 2014.
Soon as that price
started coming down,
it all just tumbled for him.
Gox was going to collapse.
That it lasted as long as it did
was actually
kind of a stroke of fate.
But its failure was
it didn't have
the kind of more boring
mainstream
institutional controls
that we require to bring it
to the next level.
And there's a whole bunch
of money missing,
and no one knows
if they just lost it,
it if was stolen from them,
if they embezzled it or what,
but the important
lesson from gox
isn't that bitcoin doesn't work.
The important lesson from gox
is that you don't leave your
money with a trusted third party
because you can't
always trust them.
You can only trust them
until you can't.
This was also a lesson
that people were
supposed to learn
during the financial crisis
but they don't seem
to have learned it yet.
Mark karpeles
was a gamer.
He was not a finance pro.
He really didn't know
what he was doing,
and he didn't build it.
Jed mccaleb built it.
He didn't improve upon it.
I mean, it lurched
from crisis to crisis
throughout the entire history.
Last year was
a terrible year for bitcoin,
and an especially terrible
year for the foundation,
because we had two of the people
on our board of directors
who had to resign
in disgrace, basically.
You know, my expertise
is technology.
My expertise is not
figuring out, like,
who's trustworthy, who's not,
which businesses
are gonna succeed,
which businesses are gonna fail.
After we had held our hearings,
we thought we would take six months
to nine months, even a year,
to draft
our initial regulations.
This was so complicated
that we wanted
to really take our time
and get it right.
What happened was, though,
mt. Gox collapsed.
And I think that gave us
a real renewed sense of urgency,
and we realized that
if we got regulation right,
we could create more confidence
in bitcoin, frankly,
as opposed to the sort of
loss of confidence you saw
not only from the silk road case
but also from the collapse
of mt. Gox.
So your sense, though,
of the regulators, right now.
I assume you've
had conversations.
The discussions that we've had,
I think everybody
recognizes the innovation
and doesn't want to stifle it.
They just want to make sure
that there's healthy regulation
so it's used in a safe
and productive manner.
I'm not giving up on New York.
New York's giving up on me.
I can't even turn on
the bitcoin machine.
An atm, I can't turn it on.
I can't make trades.
I can't do anything.
There's no cash flow at all.
And it's potential regulation.
It's regulations
I should believe
is coming down the pipe.
Like, I don't want to do anything
that someone's frowning upon
right next door
to the stock market.
They're gonna lock me up.
You know, you can't
have an exchange.
Well, we don't.
People meet there
and exchange with each other.
New York's sitting there
on the high horse,
and the whole world's waiting
on New York to create
some fuckin' license.
Ultimately lawsky's office
brought out
the final rules
for the bitlicense
in the spring of 2015.
A lot of companies complained
that the regulations
were too burdensome for them
to operate in New York
and still make money.
I saw just overnight
dozens of companies that were
on the verge of launching.
They just threw in the towel and
said, "we can't afford this."
Erik voorhees' new company
shapeshift
would have had to apply
for the bitlicense
if it wanted to keep
customers in New York.
So, in my lap here
I have the...
The application forms
for license to engage
in virtual currency
business activity,
which is a very statist way
of saying the bitlicense.
The is the application
to be approved
to do basically what we've
all been doing for years now,
which is building bitcoin
companies in New York.
And a lot of stuff in here I
personally feel is unethical,
so we're not gonna
comply with it,
which means we have to block
new yorkers entirely.
And when an entire new industry
starts blocking
a place like New York
that used to be the financial
center of the world,
hopefully some of those
politicians will take notice.
The point of it is to, one,
make sure there are enough
consumer protections;
two, make sure we have
adequate cybersecurity;
three, make sure that the companies
are adequately capitalized
so they don't collapse
upon themselves.
You know, you've seen
a tug of war
between the hard liners
and those who are saying,
"you know, you've got to have
enough space
for innovation in here,"
and the system has come out,
I think,
probably stronger
as a result of that
and there's a widespread view
amongst certainly
the business bitcoin community
that some level of regulation
gives legitimacy
to what they're doing.
It gives people confidence
in what they're doing.
This is an important part
of growing up.
Ultimately, they're not
going to get it right,
because no regulation
is ever right.
But I'm highly confident
that whatever happens
going forward,
the bitlicense will be looked at
as a positive development
in the evolution of bitcoin
because it just removed one of the
biggest pieces of uncertainty,
which is how is this industry
going to be regulated.
I think most of us...
At least a lot of us...
Think that sensible regulation
that sets guidelines
that makes sure people's money
doesn't just go into
a black hole
that that's
a really important thing,
that regulation.
I'm sure satoshi
wouldn't be happy
to see this kind of thing,
which is not based
on the logic and reason
that a programmer is used to.
I think a lot of developers,
understandably so,
try to stay out of
the political nonsense.
It has been one of
the biggest mysteries
raging across the Internet:
Who is satoshi nakamoto?
Newsweek published an article
claiming the man in these
images is the bitcoin founder.
The man who created bitcoin,
is known as
the father of bitcoin,
the online currency
now worth billions.
When you asked him
about bitcoin,
and he says, "I can't talk
about this anymore,"
he was not referring to bitcoin.
But with me, he definitely
acknowledged bitcoin.
I think at this point now
he's saying
he was confused
by the conversation.
Clearly somebody thought
that we did this
as an act of war
against satoshi nakamoto
or bitcoin,
and I want to be very clear
that I certainly never
meant it that way.
I have nothing to do
with bitcoin.
It was a monster story.
How did they figure it out?
Oh, my god, look at
this guy that they named.
His name is
Dorian satoshi nakamoto,
living in California,
basically hiding in plain sight.
It becomes a gigantic
media scramble,
and then Dorian emerges
from his house
looking kind of disheveled,
looking kind of confused,
and says
he's not satoshi nakamoto,
says he's never heard
of bitcoin.
He doesn't understand. He had
one conversation with Leah.
She misunderstood what he said,
she took it the wrong way.
And you probably would have
had to have been a cypherpunk
to understand all
the elements of it
that had already been
put together.
The odds of it seemed
very low to me
that it was somebody from
completely outside that community
who happened to know
all these different things
and put this together
and appear out of nowhere.
The day that "newsweek's"
story came out
naming Dorian nakamoto
as the creator of bitcoin,
I got this email
from an old acquaintance
that was titled
"what are the odds?"
And it laid out the fact
that hal Finney
lives less than
two miles away from
the known address
of Dorian nakamoto
where "newsweek" had found him.
And hal Finney is the number two
ever user of bitcoin,
who received the first
bitcoin transaction.
He worked on an early prototype
of an anonymous currency system.
He was a cypherpunk.
So how could it be that the
purported creator of bitcoin
and this known, confirmed,
second-ever user of bitcoin,
hadn't ever collaborated?
That hal Finney, who was less
than two miles away
from Dorian nakamoto
hadn't helped to create bitcoin?
Or maybe he really was
the creator of bitcoin.
Maybe hal Finney
was satoshi nakamoto.
When you look at
the bitcoin white paper,
it made reference to
a lot of the earlier projects
that fed into bitcoin.
But it's very notable that the
one project it doesn't refer to
is Nick szabo's bit gold,
which is perhaps
the closest precedent
and the closest parallel
to bitcoin.
I mean, bit gold
is so close to bitcoin,
it's hard not to think
that, you know,
maybe Nick is satoshi.
A lot of people will say
"nakamoto must be szabo."
"Nakamoto
must have been Finney."
But I don't think
he was trying to leave
any breadcrumbs out there
for anybody to follow.
I told my editor about it.
He agreed that
"you found satoshi nakamoto."
So I got on a plane
to Santa Barbara
and I drove out
to hal Finney's house.
But at this stage,
he was already
completely paralyzed by als,
this really awful,
debilitating terminal illness
that slowly shuts down your body
while leaving your mind
completely intact.
And the time when he started to
fade in his physical abilities
did roughly coincide
with the time
that satoshi nakamoto
started to disappear.
Now maybe the reason
that satoshi nakamoto
had chosen to fade away
was because hal Finney
was physically fading.
There have been a number
of stylometric studies
and you see so many
of these similarities
between satoshi's writings
and those of Nick's,
including these little things
like having two spaces
at the beginning of a sentence,
and phrases and spellings
that nobody else uses.
So I talked to hal as much as I
could, mostly in a kind of
one-way interview because he could really
only respond with yes and no answers,
and he denied being
satoshi nakamoto.
You could tell that he was
amused by the whole idea
that I thought
he was satoshi nakamoto.
One of the really
remarkable things
from Nick szabo's writing
in those months before bitcoin
was publically launched
is that Nick,
in responding to some comments
about a post he had made
about bit gold,
actually asked the other people
who were reading him
if anybody wanted to help him
code this idea up
into real software
that could work.
It was never turned
into a reality,
but when you look at bit gold,
it's hard not to be struck
by the similarities
between it and bitcoin.
It's possible.
Hal could've been the coder.
I don't know.
You know, this idea that...
That hal Finney could've been
the kind of ghost coder
for bitcoin...
I guess it's possible.
Other people kind of
speculating on reddit
or other parts of the Internet
thought that maybe hal Finney
had used Dorian nakamoto
as a patsy.
If he were ever traced
back to Dorian nakamoto,
it seemed like this guy
was the creator,
and hal Finney would be
sort of immunized from it.
Everyone else who was
involved in the projects
leading up to bitcoin
has released
their communications
with satoshi from this period.
Nick has avoided doing that,
and essentially went silent
in those critical months
after bitcoin was released.
You know, when you talk
to people face to face,
and they tell you these things,
you can get a sense
if they're being honest.
If hal Finney actually
had a secret
billion-dollar cache
of bitcoins,
he wouldn't have been able to lie
to me so effectively about it.
In the end, the reasons to believe
that this was all just a coincidence
began to outweigh
the coincidence itself.
It's almost like an eel.
There's something there,
you can see it,
but as soon as you touch it it just
slides right out of your hands
and you're left with nothing.
Anybody who is of any note
in the cypherpunk movement,
and even outside of it too,
has at one time or another
been called satoshi.
Hal Finney denied it.
Nick szabo denied it.
They've all denied it.
Maybe one of them is satoshi.
Maybe all of them are satoshi.
It really is a mystery.
That's the original ticker
from next door.
All right, so we're over here.
Bitcoin center, 100 feet from
the stock exchange, over here.
And, uh...
You know, some of you guys
took a hit last week,
last couple of weeks.
Lot of the big guys,
they got their foothold
in the business
that they weren't a part of
in the beginning.
I don't know what's going on.
But, uh, I don't know.
I wouldn't write off
bitcoin that easy.
I know that bitcoin
is gonna change the world.
It's changing the world already.
And we have to stand tall
and proud
as bitcoiners
and early adopters.
They don't know anything
about new technology,
but once it starts making sense,
they throw their dollars
behind it.
You know, unfortunately,
early adopters
make the roads
that we all travel down,
and they are usually paved over
in the process.
The first guy
through the door gets shot.
You know, but somebody's
gotta go through the door,
but they're gonna get shot.
Charlie shrem, Ross albricht,
Julian Assange,
they got shot
coming through the door.
But we're all utilizing
the freedoms
and technologies afforded to us
because they knocked
the door down.
Hey, Michael.
Can I put you on
speakerphone for a minute?
If I know how.
Hey, Michael, can I ask you,
where did you buy bitcoins?
Yeah.
Did you lose... how much...
Do you still have them?
You put into it.
Can you use it?
Do I want to buy it?
No, not today.
Though it is going to be around.
Did you ever use it
to buy anything?
- Michael.
No, okay.
They should go back to,
you know,
day one and just start all over.
Forget about bitcoin,
call it something else.
I think it's been
so tarnished now
with this...
With the silk road...
You know, I just think,
you know,
that all that stuff about
$400 million disappearing
and... you're just not
gonna get off the ground.
Nobody's gonna...
You know,
like Warren buffet said,
"stay the hell away from it."
To put all the cards
on the table,
I'm gonna be leaving the
department in the coming weeks.
And if you asked me back
when I took this job in 2011
what I thought we'd be
working on during my tenure,
digital currencies would not have
been at the top of the list.
So Ben lawsky created
this thing call the bitlicense
which is New York's
attempt to regulate
this scary new technology.
It's now law.
And he has announced
that he is leaving government
in order to set up his own
private consulting firm
to help companies navigate
financial regulations
such as the bitlicense
that he created.
So we essentially had this beautiful
new ecosystem being built,
and Ben lawsky comes by,
says, "I'm here
to protect consumers."
He builds a huge
wall around the thing,
and then he sits
outside the gate
charging people to get in.
This is the very definition
of crony capitalism,
and, for some reason,
Ben lawsky doesn't even see
anything wrong with that.
I think history
will not judge him
as favorably as he thinks.
So, um, yeah.
I've started up
my own consulting business.
It's been quite interesting.
Doing a lot of work
in the fintech space,
but also doing work with a
lot of traditional companies
in the financial services
world as well.
Ben lawsky's team at the dfs
that was working on
this bitlicense
and the bitcoin initiative
have all ended up
leaving the agency
and going to consulting firms
that are now working
on these issues.
Danny alter is going
to work for itbit
and Dana Syracuse
is going to work for
the consulting firm k2.
Itbit is particularly notable
because they were
the first to find a way
to partner with the dfs
to get licensed
to open their own
bitcoin exchange.
When this is over,
definitely going to leave
New York when I can.
Where I'm gonna go,
I don't know.
I think the bitcoin community
in New York is done with.
No, it doesn't foster
innovation here.
It's too difficult
to have a bitcoin company.
No banks will open up accounts.
You have the threat
of regulation,
and your high-profile
arrests
like myself and others.
No one wants to deal with it.
When did you first
start digging in on bitcoin?
Two, two and half years ago,
when I took over the foreign
exchange payments business
- at jp Morgan.
- So you probably had your mt. Gox,
bitinstant, you know,
Charlie and those guys.
It's interesting, almost none of
those guys are around anymore.
Two years ago
at all the major banks,
bitcoin was an afterthought.
It was kind of a... maybe in a
hallway kind of conversation
at the water cooler and now,
you know, even this week, I met
with one of the other major banks.
Everyone's got a bitcoin specialist,
at least one working group.
Kind of teams of people
who are trying to figure out
how to incorporate
the technology
into their existing operation.
Banks and institutions
associated with
the financial system
are really starting to recognize
that the payment system
underlying banking
could be made more efficient
by the application
of blockchain technologies.
The blockchain technology
underlying bitcoin
has become something that
a lot people are now
very, very interested in
for all kinds of other uses,
whether it's allowing for
derivatives to be transferred
or securities to be transferred,
or all manner of financial
instruments to be transferred
in complex, interesting ways.
I think different companies
are going to adopt
different strategies.
And it's gonna be
fascinating to watch
companies like
digital asset holdings,
blythe masters' company,
doing very,
very interesting work.
I didn't become aware of bitcoin
in any meaningful sense
until 2014,
late in the year,
and at the time,
my perspective was one
of skepticism, I would say.
Specifically because
the storyline that I heard
related very much
to cryptocurrency
as a potential medium
of exchange and store of value,
which is a valid debate
and application,
but it doesn't have
full extent of the power
that the underlying technology
has to achieve.
Blythe masters
is not just any banker.
She is this person
who I think is really seen
as being behind some of the
most problematic innovations
in the financial industry
over the last three decades.
Blythe is the one who's
essentially given credit
for creating
the credit default swap
which essentially provides a way
to bet on the default of a bond,
and the credit default swap
ended up taking this place
at the center
of the financial crisis
and these bets
that banks had made
against sub-prime
mortgages.
Blockchain technology eradicates
a significant amount
of inefficiency in the system,
and reduces costs.
It doesn't mean
that we are doing away
with the need for trust
in financial services at all.
Bitcoin was designed
to find a way
to circumvent wall street,
and what blythe masters is doing
is essentially
trying to find ways
to bring wall street
into bitcoin
and make it possible for them
to use this technology as well.
What the bankers seem to be
looking to do at this point
is create their own
private blockchain,
where their computers
are powering it.
Rather than
these anonymous miners,
they want control
over the system.
The banks are looking
at this incredibly wide array
of ways that
they might use this,
which include replacing
stock exchanges,
finding new ways
to originate loans,
finding new ways to move money
between countries,
and, of course,
that's going back
to the original idea of bitcoin,
but now it's happening within
these financial institutions
rather than outside it,
as bitcoin had imagined.
I have no problem
with the banking system
and the financial industry
co-opting bitcoin,
primarily because bitcoin
can't really be co-opted.
The fact that it's decentralized
means no one can control it,
no matter who they are
or how much money they have.
I think it's
all good for bitcoin.
I think all of the innovation
that's happening,
both on wall street
and in silicon valley
I think competition
will take care of
people who want to try
to have a monopoly,
or who want to try to charge
more than they should
for whatever product or service
that is happening
on the blockchain.
It really is as advertised.
It really is controlled by all
the people who are using it,
and it really is designed
just to be a more efficient,
more fair way of sending
value over the Internet.
Bitcoin is not neutral.
You cannot remove
the political component
that satoshi implanted
in bitcoin from bitcoin.
That's what a lot of the people
on the wall street side
try to do.
You cannot neutralize bitcoin.
It's impossible.
Thankfully, I'm gonna go to
a comfy federal prison camp
without fences, that has
pool tables and a track,
and baseball field
and decent food,
and kind of 100 to 200 people
that are white collar.
Those guys in prison are the
best ones to use bitcoin.
They're smart.
I'm very excited
to talk to them about it.
So yes, the vcs are
driving this thing right now.
They're pouring money into it.
They're building these
for-profit companies
people who have a background
outside of bitcoin
seeing the value of it
and coming to it.
But just because they're doing
everything they're doing
doesn't mean that the
libertarians and the utopians
have to go away.
Bitcoin is open source.
You can do whatever
you want with it.
So they're still there.
They're still building
their products.
They're still building
their vision.
And if bitcoin goes mainstream
and if it gets picked up,
even if it's running
in the background,
there are going
to be elements of that
and that's kind of what
utopia movements always are.
The thing that the utopians
were dreaming about
is not gonna happen
the way they expected it,
but I do think it
is going to filter through
and you are gonna see it.
You're gonna see it.
So you're gonna show me
that satoshi nakamoto is you.
Yes.
Some people will believe,
some people won't.
And to tell you the truth,
I don't really care.
But you can say,
hand on heart to me,
"I am satoshi nakamoto."
I was the main part of it.
Other people helped me.
I'm going to come in front
of that camera once,
and I will never
ever be on a camera ever again
for any TV station
or any media ever.