Adam B. Levine (AL) Host Andreas M. Antonopoulos (AA) Co-host Stephanie Murphy (SM) Co-host
AL: Today is May 17th 2014 and this is Episode 110. This program is intended for informational and educational purposes only. Cryptocurrency is a new field of study. Consult your local futurist, lawyer and investment advisor before making any decisions whatsoever for yourself. [0:17]
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AL: Thanks for joining us again on Lets Talk Bitcoin. My name is Adam B. Levine and Im joined as always by the other hosts of the Lets Talk Bitcoin show, Andreas Antonopoulos. [0:31]
AA: Hey everyone. [0:32]
AL: ...and Stephanie Murphy. [0:33]
SM: Hi. [0:34]
AL: Its been a while since weve done a host recording. Well (??) with some of the normal back patting and jump right into topics. Today is interesting because one of the higher profiles companies in this space on the... (what I would consider) the entrepreneurial side, as opposed to the idealist side, is a company called Circle, led by CEO Jeremy Allaire. They raised some money last year. Actually, one of the largest amounts of money behind a Bitcoin company so far and today, they unveiled their product. In the pre-show when we were talking about this, I was like Should we even talk about this because I see this is getting talked about a lot but Stephanie, you had pretty much completely... you think that this is a bad thing overall. That was the impression that I got from you. The basics of what theyre offering is a kind of wallet like service thats very similar to Coinbase, in that they want you to link your bank account and they want you to link your personal identity information but, unlike Coinbase, they dont have any delays on any of your purchases. If you hook up a credit card to your Circle account, and then you want to buy $200 worth of Bitcoin, then you just do it and then it credits to your account immediately, and you can spend it immediately which is very different than something like Coinbase where theres usually like a 2 or 3 day wait for the money to move safely from dollars into bitcoin. There are some other things too, but Stephanie, can you give me your perspective on the Circle thing? What dont you like about this? *1:57+
SM: I wouldnt say I think its a bad thing overall, its just Im not sure its something Id be interested in using. It seems like pretty much a bank, with Bitcoin. They are going to be adjusting the vocabulary to try to make it more palatable to people, so instead of buying and selling Bitcoin, its going to be deposits and withdrawals. They will be managing peoples private keys, just like Coinbase and I think we all understand the problems with someone else holding on to your private keys when youre talking about Bitcoin. They, who hold the private keys, have control over the coins. This isnt much different than a bank that can just freeze your account, or seize your funds without you having to say anything about it. They did also say they are going to be stringently reporting anybody they suspect of illegal activity. They probably just said that to appease the regulators, or whatever but how are they going to be telling whos engaged in so called suspicious activity and what defines it? They dont really say. *2:56+
AA: By illegal activity, Im assuming they mean high frequency trading, lending without collateral, cheating on the stock market, or do they mean buying plants? [3:08]
SM: (Laughter) Well, they dont exactly say about that and all they suspect of suspicious activity is going to be reported. This is exactly like what the banks do. If you do a transaction thats over $3,000 in the US we try not to be US-centric on this show but the US has some of the most strict banking regulations, some argue what the point of them is, in the world. Theyre probably going to be following all these to the letter because theyre going to be a licensed money transmitter and pretty much acting as a bank. The other thing that they say, about that, is that theyre required to hold all the funds in reserve and theyre required to have auditing, and so forth and prove that they have all the funds, and not be able to invest them for their own purposes. They say that its going to be free of charge for people to store bitcoins. It sounds like Yeah, just give us your bitcoins, well hold on to them for free. (Laughter) [4:02]
AL: Well, and beyond that, theyre even going to insure them. I dont know if you saw that part of it... [4:07]
SM: Yes. [4:07]
AL: ...but yeah, theres free insurance too. This is something like Ive been super-excited about insurance coming to this space because it means that when you have insurance, you have standards because if there is theft or loss, then the insurance company actually has to make that thing right, has to fill the gap from their own side of it. Its very much in their best interest not to have that. [4:26]
SM: The thing that you cant get insurance from is government confiscation of your funds or if they believe that youre suspicious, you know, locking them down, or whatever. My concern about this kind of service is that its going to entice a lot of people to put their bitcoins in the service, or their dollars, or whatever put their funds in the service because its insured and its free and Oh, just trust us. Then, it has all the strings attached of a conventional bank where they can report you for any reason and they can deny service, or whatever. People are going to have their bitcoins in there and then they wont have control over their own funds, and then whats the point? Thats not Bitcoin. Bitcoin is when you have control over your own money in a way that you dont in the conventional banking system. Thats really my concern with it. *5:12+
AL: Im looking through their security features here and it does say they have a multi-sig architecture which means that more than one key is needed in order to sign something but the way that its described here makes it seem like... it says We employ multi-signature transactions. The physical isolation of keys means the ability to spend funds requires would- be attackers to breach multiple secure locations. The fact that theyre saying secure locations actually does kind of support what youre saying which is that they hold all the pieces of the keys, and just simplify that entirely, it seems like. [5:42]
SM: Yeah. You might be one of the signatures but they are the other ones and so, you cant move your money without their permission. Again, how is that different from a bank? It may be slightly faster. [5:51]
AA: Can they move the money without your permission? So who has the majority? [5:55]
AL: Exactly. How many keys are there? Do you control enough to prevent action from happening lacking your explicit permission? [6:03]
AA: I think theres room in the market for Coinbase competitors and there are six big banks out there that are eventually going to get into Bitcoin. Theyre going to need to acquire existing Bitcoin banks that already do this relatively well, so now theres two. We need four more. All of them have a nice path to exit because within a year or two, the big banks are going to get into this and then this business is going to be handled by people with much more capital, access to regulators and politicians and lobbyists to do it. This is a dead-end business unless you intend to sell to one of the big six banks and, as far as Im concerned, that seems to me to be the viable exit for all of these businesses and all the power to them. They will make some money; they will bring some people into Bitcoin by making the on- ramps easier. Theyre certainly going to make it easier for more traditional, more conservative businesses that like the current banking system for which the current banking system is working fine. People who want to sell tear gas and rubber bullets to dictators and not get reported, theyll be fine. Thats going to be a great avenue to replicate the existing banking system. Someone has to try and maintain the status quo by building replicas of the status quo in the new paradigm, at least in the transient period. We used to have fax to email gateways. That used to be a very profitable and good business for helping those who really couldnt give up their faxes to convert them into emails. Those really arent in use much anymore because people just gave up on the idea of faxes as a whole. [7:47]
AL: These are bridge services really. [7:49]
AA: Bridge services, exactly. You need bridge services with any new technology. You need to familiarize people for whom change is threatening. For some of us, the status quo is threatening. The status quo is disastrous, risky, threatening, freedom-sapping, horrible, unequal and evil. For some people, the status quo is working just fine and change is threatening and evil and so, this fits very well and will actually serve a need and will serve a very big market out there. It could actually make it easier to get more institutional investors, to get more conservative mainstream businesses into Bitcoin and they will be able to increase liquidity which will reduce volatility. Theyll be able to stabilize prices; theyll be able to introduce more people, more easily to Bitcoin and then, its up to us to persuade these people that theyre better off taking that Bitcoin and moving it to wallets they control, which theyll be able to do. *8:51+
AL: Thats exactly right is that at the core, this is competition. This is... Coinbase really hasnt had much. *8:57+
AA: Exactly. [8:57]
AL: They kind of compete with BitPay in their merchant services but other than that, its just been them. Now, Circle has come out and said OK, weve taken your model and basically, are doing all of the things slightly differently and its a little bit better for end users. Thats one of the things that really jumped out at me about this Coinbase doesnt take a lot of risk. Coinbase is a fairly conservative company when it comes to the way that they process incoming transactions because they, basically, have a complete capture on their market - the ability to reverse bank wires and things like that. They have a lot of control over that stuff but they still wait at least 2 or 3 days, even if youre a customer doing a fair amount of business with them before something like that will go through, whereas with Circle, literally, as soon as youve pressed the button, your account is credited. You have the bitcoin; you can spend the bitcoin as bitcoin wherever you want. That seems like thats huge. *9:45+
SM: How is that going to work for them? [9:47]
AL: This is why they need all the risk assessment and why they need to know their customers is because, to a certain extent, BitInstant did this a little bit they would extend credit, thats how they were doing it. They were playing the role of someone who was able to wait those 3 or 4 days for the money to actually go via wire, or as many as 10 days but they provide the service to their customer by making it so they dont have to do that. Its the same thing here, I think. [10:10]
SM: It sounds like Circle is already going to have all of your money and then you can withdraw some of it as Bitcoin but theyve already got your money, so what do they care because they dont have to wait, right? *10:19+
AA: Well, no not necessarily because you could reverse a reversible dollar transaction, so they have that risk. [10:27]
SM: No, but if they already have it, if theyre holding onto your dollars in your Circle account and then you want to withdraw some of it in the form of Bitcoin... [10:35]
AL: Theyre not holding onto your dollars. Thats not how this works. [10:38]
SM: OK. [10:39]
AL: What happens is that you can buy Bitcoin from them... the way that Coinbases market works is that you can buy it from Coinbase, or you can sell it to Coinbase, you can never hold dollars. If you have it on the Coinbase platform, it is by definition held in Bitcoin. If you take it out of the Coinbase platform through their dollar withdrawal process, it is by definition sold for dollars and only the dollars are transferred to you. Thats how they get around a lot of the licensing is because theyre not doing money transfer. Theyre essentially, brokers. [11:09]
AA: Right, so Circle is apparently going to be working in much the same way which means that in the period between you initiating an ACH and that ACH being non-reversible, if they give you Bitcoin during that period, theyre exposing themselves to risk. Being exposed to risk is not necessarily a bad thing, as long as they can measure, account for and contain that risk, then taking that risk is a competitive differentiator and a way for them to improve service. I think thats a really smart move. I see that as a great way to have a bit of differentiation in that market. I agree with you Adam. By the way, Im a Coinbase customer. I dont keep my Bitcoin there but I certainly use them very, very regularly to buy and sell Bitcoin for dollars, not because Im day trading (Im not interested in that) but because I need to pay certain bills that can only be paid in dollars and sometimes I get paid in dollars and I want to convert it to Bitcoin and so, I use them with my bank account all the time. One of the fears Ive had, for the last year, is if Im getting paid in bitcoins and most of my income is in bitcoins and I have certain expenses that I cant do in bitcoins, like paying my rent, then what happens if Coinbase gets shut down, or if they have a problem and they cant fulfil orders. Then, I have to move a large amount of money through LocalBitcoins, or local traders, or who knows what else, or through wire transfers through BitStamp which is slower and more complicated. Thats a risk. Thats something that makes me uncomfortable. Its one of the areas that I was worried about so, Im actually really glad to have potentially, in the very near future, two competing services. Ill have accounts on both and that way I will have two outlets for converting my Bitcoin into dollars, or vice versa. [13:06]
SM: But youre not going to keep your bitcoins in there? *13:08+
AA: But Im not going to keep my bitcoins in there either. No, Im going to keep control over my private keys. Im going to use them only as an exchange and as soon as I get bitcoins into bitcoins, Im going to move them out and keep them under my control. *13:22+
AL: Thats the middle ground here is using the services for what theyre intended to be without necessarily using them for all of the features that they wish that you would use. When you look at a lot of the business models that are circling around, things like exchanges and even wallets, a lot of it is analytics data, a lot of it is about how people are using these tools thats going to wind up being very valuable and that people are trying to build these things around. Circle, part of their thing is that they also offer if you go buy something at Overstock in their example video, they show Overstock which has Coinbase integrated and it shows a Bitcoin address and you click on the Bitcoin address and they have it set up so that it loads your Circle wallet on the web page. You just pay for it through there. If you do everything through this wallet, then yeah, potentially theres an issue. Its all off blockchain too, I mean thats the thing is there are no transaction fees for anything. At least, I think thats what the video said. Ill have to go back and check it again to make sure Im not totally wrong on that. The usability side of it, I think thats the most interesting part to me. The introduction of insurance this is the first insured wallet that weve seen, especially one that doesnt cost anything but if its available now, then its the first one thats even out there. The usability of it, the fact that people no longer have to wait days, or hours, or whatever for a transaction and that Circle will onboard the risk for them. This seems like its just part of the natural maturation process, what were going through. *14:45+
AA: Theres a range from completely centralized services to completely decentralized services. Up to now, weve only been able to operate in the entirely centralized part of that range. Bitcoin and other cryptocurrencies open up the possibility of operating across the range from completely centralized to completely decentralized. Now, completely decentralized is not easy either. It involves, in some ways, being your own bank, as the slogan goes and that involves some difficulty. Your average user today, given the existing technology in general purpose operating systems will find it hard to secure their bitcoins adequately to avoid theft with our existing Bitcoin technology. That still needs to advance and so, for the time being, using Bitcoin in a completely decentralized fashion is both cumbersome for new users and not particularly secure for new users. For power users, for people who have experience, its something that is both desirable and that we can achieve and so we can operate in that spectrum. For some users, a centralized service is actually safer but it also takes away a lot of the power and control over your money. Thats a decision each user needs to make. Now, if were interested in promoting the decentralized aspects of Bitcoin, weve got to do two things. Weve got to make it a hell of lot easier for simple users to use it securely and then, we have to spread the message of why a decentralized solution is superior; why it scales better, why it can reach more people around the world who do not have access to centralized services because those impose bureaucratic requirements that many people cant fulfil and controls that many people dont want to have and why its superior in terms of freedom, why its superior in terms of empowering individuals. In order to do that, we also have to make it easier, so we have a case to make and Circle is making the opposite case and theyre making it pretty well. Those of us who are interested in decentralized Bitcoin need to step up our game and I think thats good for everyone. [17:02]
AL: This is a pretty impressive product, I have to tell you. If it works as billed and as their video seems to demonstrate, this really is a substantial threat to Coinbase because they both have the identity problems, if you consider it a problem. Again, just the usability of the one really seems like its... they learned a lot from what people didnt like about Coinbase. [17:21]
AA: Its a positive thing for Bitcoin. All of these things are positive things for Bitcoin. [17:26]
AL: Thats the thing though, Andreas. That feels like it just doesnt even need to go stated because all of this is de facto a positive thing for Bitcoin. This is more money being invested in the ecosystem, more people caring about the types of technologies and more work being done to develop the ideas. Yeah, absolutely, I completely agree. This is the natural process and its a very good part of it. *17:45+
AA: Yeah and if one day, a year or two from now, this becomes Circle Chase versus Wells Coinbase Fargo. [17:56]
SM: Yeah, those logos are already a little similar, huh? [17:57]
AA: Yeah, then that will be OK too because then, it will both be obvious what choices are being made here and what this resembles so you can make the choices according to your ideology, or your concern about centralization. It will also represent the arrival of Bitcoin in the mainstream. This is one of the first steps. When we go mainstream, we dilute principles. That is always something that happens in technology. The question is whether diluting those principles is a choice or whether diluting those principles is something that changes the core architecture, in which case its no longer a choice. *18:37+
SM: Yeah, thats a great point. *18:39+
AA: This doesnt change the core architecture, so its a choice. If you want to follow your principles of decentralization, you can use this as a tool, maintain control of your bitcoins and now have an extra avenue for liquidity. I think thats great. *18:52+
SM: Andreas, I think youve brought up a great point that I just want to make sure we highlight though because it hasnt changed the core principles yet, but if it gets big enough, there is always that potential that Circle will be, or services like it, or Chase Circle, or whatever, will be dictating what happens with the core Bitcoin protocol. I just wonder how long is it going to be after this point before its radical to run your own Bitcoin wallet on your computer, or to even run the Bitcoin QT client, or something like that. How radical is it going to be to be a node, or whatever, in the future? [19:28]
AA: I think that question is answered more easily by numbers which is that it is inevitable that centralized solutions cannot reach the number of people who can be served by decentralized solutions. We have the advantage of scale on the side of decentralized solutions. The reason six billion people are underserved by banking is not because theyre not profitable customers, its not because they dont have money and its not because they dont have need for banking services. Its because the very nature of these centralized banking solutions cannot serve them, cannot extend their reach to serve them. Its the reason that 2.5 billion dont have bank accounts at all. In many cases, it has nothing to do with technology; it has everything to do with politics. Decentralized Bitcoin will better serve a far broader number of people than centralized Bitcoin. We can win that argument simply by serving more people and empowering them more than the centralized solutions. Even if everyone in North America used only centralized solutions like Circle and Coinbase, then we change the entire conversation to Mandarin and start again, and then we change that entire conversation to Brazilian and Portuguese and start again, and we keep doing that. There are many people out there who, not only are not being served by centralized banking but cannot be served by centralized banking in Bitcoin, or any currency. [21:11]
AL: One of the particularly interesting parts about this particular issue to me is that Circle is able to do all this stuff because they raised $30m from, essentially, the legacy financial system, like VCs that are on that side of things. What Im really curious about is whats the first company going to look like that raises $30m from the new type of paradigm that were talking about? If this is whats possible moving from Coinbase with... I cant recall how much they raised... Im terrible with these numbers... Circle coming along and overshadowing them with this larger raise that allows them to do these other things and be generous in these specific ways, what happens when you take the legacy out of it but you leave the resources and the drive there? Im very curious. *21:53+
SM: We might not ever see that because maybe its not needed. How much VC funding did Blockchain.info have to raise to begin? None. [22:00]
AL: Blockchain.info is a website. Its become a big website but there are differences in the types of projects were talking about. *22:06+
SM: But theyre a decentralized service. *22:06+
AA: Yes, but I think the bigger argument is are we talking about raising money from traditional VCs for decentralized services, or are we talking about decentralized services raising decentralized money from a decentralized community because I think thats even more powerful. [22:23]
AL: Exactly. [22:24]
AA: There are different models. What we saw here is the centralized service raising centralized legacy money and implement a centralized service. Were going to see decentralized services raising money from VCs too through traditional means but what gets really interesting is when you stop raising money through traditional means like VCs and you do things like a digital currency-based IPOs and global shareholder offerings. Those are coming too. They could be bigger and much, much more scalable than any of the things weve seen before. [22:57]
SM: Again, I think we really have to highlight the technologies that we have like Blockchain.info but also LocalBitcoins. They didnt raise any capital to start, they just put up a website and maybe those technologies are very powerful too. LocalBitcoins is a global thing. [23:12]
AA: You could scale better. Thats the thing. Decentralized services scale better and therefore can grow organically to scale with very little funding and generate their own momentum. [23:23]
SM: The point I wanted to make is is most of the funding to appease regulators and to deal with compliance costs, and that kind of thing? Is it possible to cut some of that out if you dont need to deal with that stuff? *23:35+
AA: Absolutely. I think thats absolutely true, Stephanie. The decentralized services have a low operating cost. Not only do they scale better, they have a lot lower operating cost because theyre not basically dancing the regulatory game, which is a barrier to entry which is very artificial and is designed more to protect incumbent banks from competition than it is to protect consumers. No matter what people may say about it, the reality is that it works at protecting incumbents from competition more than protect consumers in practice, as weve seen repeatedly over the last five years. The question is, do you really need to raise money to do that, or would you instead be raising money to do innovation? Circle has some innovation but they have regulatory innovation and regulatory capital more than anything else. [24:23]
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ANNOUNCEMENT:
Hey everybody, a quick update before we get back to the show. The last few months, weve been working on improving the ways you can access LTB content. A few days ago, we launched the new web platform at www.LetsTalkBitcoin.com which, right now, looks like a graphical, clean front page but, more importantly, will service our platform over the next number of years to have dozens of front pages created like www.LetsTalkBitcoin.com showcasing the best content from thousands of independent blogs, also operating on the platform. This is the first of many announcements well be making over the next few months. We hope you enjoy our work. Now, back to the show. [25:39]
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SM: Perhaps relevant to our discussion that we were just having, its recently come out that theres, basically, a government program in the US thats handed down by the Department of Justice (ironic name) to cut off banking services within the legacy banking system to certain legal industries that they just dont like, for instance, pornography, porn actors and firearms dealers and people who are in the firearms business. Even products that offer a lifetime guarantee, or a lifetime warranty, or products that just have a lot of chargebacks in their business bank accounts can find their accounts down with no explanation. In fact, there was a story that came out, I think in Vice, where they profiled someone who had this happen to them and she was a former adult actor, not even currently doing porn and both her bank account and her husbands bank account were shut down. Hes not even a porn star. He just was married to her and so her social security numbers were linked. Now, this is happening where banks are literally denying banking services to certain people. I believe there was another guy who was quoted in the same article who was a porn producer or something like that and he tried to refinance his mortgage and was told that he was being declined for moral reasons. (Laughter) This is actually happening and there have been a number of people in the banking... [27:15]
AL: He was legally declined for moral reasons. I like that. [27:16]
SM: Yeah. He was declined for refinancing his mortgage for moral reasons. It just sounds like something thats made up but its not. Its really happening. *27:26+
AA: Just for a second, before we move on to discuss this topic a bit deeper because I think its very easy to focus on one or two issues and Im sure some people may morally object to pornography and some other people may morally object to firearms. If you keep going down that slippery slope, you find some really interesting things. Heres the list of thirty high risk merchant categories that the FTIC has that are currently being pursued by the DOJ and supposedly that are also the focus of Operation Chokepoint, whereby applying regulatory and subpoena power pressure, they are forcing the banks, forcing the cost of business of serving these accounts so high because of extrajudicial administrative action (?? putting them down). Ammunition sales, cable box descramblers (cable box descramblers?) coin dealers, credit card schemes, credit repair services, dating services, debt consolidation scams, drug paraphernalia, escort services, firearm sales, fireworks sales, Get Rich products, government grants, home-based charities, lifetime guarantees, lifetime memberships, lottery sales, mailing list sales and personal info sales, money transfer networks, online gambling, payday loans, pharmaceutical sales, Ponzi schemes, pornography, pyramid type sales, racist materials, surveillance equipment, telemarketing, (?? tobacco sales) and travel clubs. Youll notice that there are at least half a dozen billion dollar industries and so, what this means is that theyre targeting only the tiniest instances. *29:19+
SM: Legal billion dollar industries. Legal ones. [29:20]
AA: Legal billion dollar industries that are run by giant SNP 500 listed corporations but theyre not targeting them. Dont think theyre shutting Pfizers accounts down, or shutting any of those. What theyre targeting is really small scale competitors that represent a nuisance to these large corporations. There is a very interesting aspect of due process and equal protection under the law here. This is legislation without legislative authority which should worry everyone. [29:50]
SM: I dont know if we mentioned this yet but the name of this is Operation Chokepoint. What theyre attempting to do is choke out certain industries by denying them banking services. [30:02]
AA: Centralized systems have choke points. Centralized banking is a chokepoint. This is what happens when you combine government authority, but not lawful authority, not authority derived through legislation because, listen, you can morally object to all these things. If you morally object to all these things, go lobby Congress, pass a law, and make them illegal. Tough luck! Then its legal to pursue these under law. What theyre doing is theyre pursuing them extra judicially. Theyre using power of regulation over a corporate system in order to pursue things they have not been authorized by Congress to do. That means that they are violating the separation of powers, principles and, at the same time, they are creating an unholy alliance of unaccountable government and unaccountable corporate power. I believe theres a word for that fascism? Yes. It may be soft fascism but this is most definitely fascism. The idea that you will take lawful activities that you morally object to, but you dont have the ability to pass laws against because you dont have the consent of the governed and then you strong-arm power through administrative and regulatory powers of the Executive to force corporations, or collude with corporations that is fascism. Its a nice little slippery slope here because, of course, if your account gets banned, what do you do? You dont have any due process right. If its a law, you can appeal, you can fight it through the courts, and you can challenge it constitutionally. You cant challenge an account closure constitutionally or judicially when the bank has done it under these circumstances. [Inaudible sentence] What this does is it removes the right to due process and equal protection under the law of individuals and these are applied disproportionately on minorities, on poor people, on small business and on people who dont have the power to either bribe the government not to target them, or fight this with an army of lawyers in the courts. This is really scary stuff because this proves definitively why government cannot be trusted with power over money. [32:23]
AL: Its authority and control, right? I mean, thats the thing is that if you make these things laws, then theres the ability to stop them, whereas if you just say OK, well nobody is paying attention anyway, lets just do stuff and nobody is going to call us on it, then you can get away with that for a long time. Were going down this path because the pie continues to get smaller because the current system we have isnt designed to make the pie bigger, its designed to continue perpetuating itself until absolutely it cannot any longer. Taking these things outside of the legal system is such a messy process. I dont know how you recover from that. How do you fix a problem like this without saying OK, everything thats happened, as far as government is concerned with all of these actions and all of the crazy repercussions surely that theyve caused in the millions of instances theyve been applied. How do you say OK, just kidding. That was all wrong. Everybody, actually, thats no longer... thats OK now. To a certain extent, doesnt it become engrained in the culture just because you have so many people who have already been subjected to it and gone through it? [33:22]
AA: This is a fundamental breakdown of the rule of law which is something that you see in most countries. This isnt surprising stuff. This is the classic set of tools of a banana republic, of a dictatorship, of an authoritarian regime. If you look around the world and certainly where I grew up in Greece, arbitrary and capricious implementation of law and administrative power is nothing new. What you do is, as you have this... Im sure in Russia you dont worry about whether there is lawful authorization to seize a business, or shut down this bank account because that doesnt really matter. As you erode the rule of law, what happens is you also erode respect for the law and then you also create corruption because then, the way to resolve this is through bribery. You dont have due process so instead, you replace that with corruption. [34:17]
SM: Were seeing banks settle... were seeing law suits from government agencies against banks for violating the vague statute and banks are settling. What is that but a bribe, really? [34:31]
AA: Where is the law being applied? The law is being applied to shut down things that are perfectly lawful for which the Executive cannot receive authorization from Congress, while at the same time, the Department of Justice did absolutely nothing to prosecute the rigging of markets, robo signing, mortgage fraud and massive theft that happened in 2008, in the run up to 2008 and, of course, in the five years since, continues unabated and rewarded. Eventually, were going to see more prosecutions under things like this than for fraud against consumers. What it reveals, once again, is the regulatory powers are not used to protect consumers. Theyre used to either implement morality without legislative approval or to create competitive barriers to entry. Now, a lot of these things that are on this list are things where you have large established corporations that want to be shielded from any type of competition and so this is a perfect opportunity to shut it down through regulation rather than competing in the free market. All it does is prove, once again, why having control over your own money is essential and why governments cant be trusted to control money. [35:48]
SM: Theres a related story to this from back in March, I believe, where we saw the tense situation in Russia, where Visa and Mastercard cut off payments to some Russian banks that were actually previously approved according to the US. The reason for that was to put pressure on people they saw as member Putins inner circle. Of course, this is used for political reasons, of course its used to apply pressure in ways that politicians want to apply pressure and youre exactly right, Andreas, thats why we really have to apply some questioning to these types of policies and also question whether being banked, so called, is such a great thing. Does it create more problems than it solves? [36:43]
AA: Yes, I mean thats the thing, the idea here what youre being sold is that the banking system and its regulations protect consumers from theft but then when the theft is being conducted by the banking system, they dont protect consumers from theft. When the government endorses that theft by not prosecuting it, or even reward it in some cases, then the banking system is not protecting consumers at all. Then, you have to think who is the banking system protecting and who is it benefitting? What that shows is why decentralized systems that give no one the power over the flows of money are more fair, scale better and deliver more power and more freedom to individuals to spend their money as they choose. Many individuals making individual choices is better than some unaccountable bureaucrat without any oversight being able to do whatever the hell they want and pressure banks because they dont like a specific industry or a specific practice. *37:49+
AL: Thats what happens every day, is people make individual decisions based on their own economic well-being, or what they perceive it to be moving forward. Thats really the interesting part about this to me is that where were talking about the US, and were talking about people there in various industries, essentially being unbanked forcibly, they didnt want to leave their bank. Theyre being kicked out and so because of that you have people who wouldnt probably have considered a change to anything other than a bank but now, suddenly, they have this experience and it gets... again, it changes things at a fundamental level about how people react to this stimulus when it comes in the future and how they make decisions about these things. We can see the same thing happening with the Russia situation. Its been described as the de-dollarization... the dollar is the worlds reserve currency. The token has been around for two hundred and something years. [38:38]
SM: I love how you just called the US dollar a token. (Laughter) [38:42]
AL: When the current system kicks people out, those people have a choice. They can use nothing or they can use something that they create, or that they worked with someone else to create, or that someone else has created and isnt related to the thing that they were kicked out from. Youre not actually doing anything other than making your own pool of users substantially smaller. Again, thats what I see happening over and over again with the situation in Asia, with Russia and with China is that the US seems to be acting in ways that are antagonistic to the point where it is becoming worthwhile for these countries simply to do their own thing. We are creating, in the parlance of what we may call in the future, if a war winds up happening between great powers, or reserve currency powers, we are setting up the Axis of Evil. Its entirely being done because we are treating them like ******* and basically, rubbing their faces in the fact that we can do whatever we want because we control the reserve currency and they cant do anything about it. Its just this super interesting soup of we wouldnt be able to even have the context to understand why this conversation is relevant if the existing system wasnt doing its damnedest to get everybody out of it as possible and then, those people have no attachment. [39:54]
AA: That difference is the people have a choice. Right now, most people dont even know they have a choice yet, but some of us already do. More and more people every day are discovering that they have a choice. If you become unbanked today, there is now a choice and that choice is Bitcoin and other cryptocurrencies. If you come over to Bitcoin, we will welcome you with open arms and we will give you full control over your own money, and over your financial destiny, and over your financial choices. [40:26]
AL: But youre saying, we WILL... and thats so wrong. *40:29+
AA: We are. [40:29]
AL: Its not we will, its there! *40:31+
AA: Its there, yeah exactly. Youre right. *40:33+
AL: You can. [40:34]
AA: Its not dont do evil, its cant do evil. The system is designed in such a way that it empowers individuals immediately without permission, without need for access (??) permission, without need for verification. It is available. Just make the choice and join it and then you have the power by default. Yeah, youre absolutely right. Great, come join us. Were having fun over here with Bitcoin. More people need to figure out they have a choice. [41:03]
AL: Yes, yes absolutely. They need to figure out they have a choice and that is, I think, the thing that really has come to me over the last couple of months is that, at the core, what weve done with this technology and what these types of technologies and decentralized... I mean, really its decentralization. Its not even about Bitcoin. Its just decentralization. Decentralized web-based technologies break monopolies. If you have a system where you have a centralized monopoly that has complete control over a market and you introduce a disruptive technology into it that does the same thing, you would no longer have a monopoly. If you make it international, then you really no longer have a monopoly because if it attracts negative attention in one country, it just shifts the tide, pushes the water and it seeks its own level. People have not realized that regardless of what youre talking about, the ability to perpetuate a monetary monopoly just doesnt exist in a way that it did, even four or five years ago and thats fundamentally changed the world we live in. [42:02]
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CREDITS:
Thanks for listening to Episode 110 of Lets Talk Bitcoin.
Content for todays episode was provided by Stephanie Murphy, Andreas M. Antonopoulos and Adam B. Levine This episode was edited by Adam B. Levine Music for this episode was provided by Jared Rubens
Any questions or comments? Email adam@letstalkbitcoin.com.