← The Peter McCormack Show
The Peter McCormack Show
Bitcoin in One Lesson - WBD223
01:17:33
Location: Zoom Date: January to March 2020 Bitcoin can be intimidating for beginners. The protocol is complicated, the community can be unforgiving, silly mistakes can lose you money, and it is easy to succumb to altcoin marketing. Bitcoin...
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- [00:01]
Andreas Antonopoulos
It shouldn't be easy to create a new money and bitcoin shouldn't have succeeded. You know, it succeeded against all odds. Like every digital cache prior to bitcoin had failed miserably and the founders went to jail. And then Satoshi comes along with his revolutionary idea and says, well, what if we decentralize everything and no one's in charge?
- [00:25]
Peter McCormack
Hello there from Bedford uk. How are you all? Welcome to the what Bitcoin did podcast which is brought to you by Kraken, the best place to buy, sell and trade bitcoin. I'm your host, Peter Moore Cormac and today I've got some of the biggest names in the industry together to explain bitcoin in one lesson. But before that, I have a message from my amazing sponsors. Don't skip them. It's the sponsors that allow me to do this. So first up, we have the future of bitcoin and financial services. We have BlockFi and a few days ago they announced the launch of their mobile app. Have you downloaded it? Have you tried it? They've done a pretty amazing job. There is so much packed into the app. It has a very quick and easy sign up. You can get started in just a few minutes, allowing you to earn interest, borrow USD and instantly access your portfolio. You can open a BlockFi interest account and earn money on your bitcoin. I've been doing this now, it's got to be getting close to a year. I'm a customer, I've got skin in the game. I do love this product. Also, using your Bitcoin as collateral, you can take out a USD loan. The app enables funds to be transferred directly from from a crypto wallet into your BlockFi account. So you can get started straight away. The app also includes market expertise. They've got sophisticated security working with their primary custodian, Gemini, and they've got so much more coming. They've been telling me some stuff on the side. So if you are interested in checking this out and finding out more about BlockFi, you can head over to blockfi.com or download the app. It's available for the Android and app stores. Just search for blockfi, which is B, L, O, C, K, F, I. Also, we have the mighty Kraken who puts the power in your hands to buy, sell and trade Bitcoin. And you know what, following the halving, it's been interesting times, right? We haven't had a massive dump. It looks like we're going to be challenging 10k soon. The market is very healthy and right now Look, I've had so many of my friends getting in touch and saying, pete, tell me about this bitcoin thing. Is it a good time to invest? Which is why I did my beginner's guide and which is why I've made the show we've got today. And I'm always like, yep, you got to find out, you got to learn about bitcoin and then you got to head over to Kraken because there is no better place for Bitcoin. @kraken.com, it could not be easier to sign up and buy bitcoin. And they have a beautiful mobile first app so you can buy bitcoin on the go. With their world class security and their amazing customer support, you can trust Kraken to look after you. There is no better place to buy bitcoin. Find out more@kraken.com or download the app, which is available for the iPhone and Android. Just search for Kraken Pro, which is K R A K E N P R O. Okay, so onto the show today and earlier this year I put Together a comprehensive 17 part beginner's guide to bitcoin. I got some of my favorite bitcoiners on discuss everything from the cypherpunks to the history of bitcoin, what money is to how the protocol works all the way through to opsec and why you should avoid shitcoins. It all came in at about 20 hours of content, which can be a bit daunting for anyone wanting to get into bitcoin. So over the last two weeks I've put together the key pieces of information from that guide and distilled it into lesson. That comes in at just over an hour. And I released it on my other show, Defiance. I put it out there first to begin with just to let my defiance audience check it out. And then this week I had a show book yesterday which was meant to come out today and the guy was sick, so we've had to put that interview back. Couldn't do it. So I was like, sod it, let's get this show out. Let's get the show out to the bitcoiners. Also, not everyone's on Twitter so they might not have seen the show. Now, if you like me, you've got people coming to you saying, what is this bitcoin thing? You can point them to this episode as a great starting point. Listen, obviously when condensing down so much content, they're parts I had to leave out. So if anyone does find this interesting or they want to find out more, they can go and check out the full beginner's guide. Anyway, I hope you enjoy this slightly different style from my normal show. There's a lot of narration and voiceover from me, but it's something I've been working on trying to tell stories a little bit more with my show. So would love your feedback on that. And if you want to reach out to me, you can do. I've had so much feedback lately, it's been brilliant. Honestly, I lost count. But I'm getting one or two emails a day and I do try and reply to everyone. So if you do want to get in touch, you can reach out to me. It's hellohatbitcoindid.com Outside of that, have a great weekend and I will catch up with you soon. So you want to learn about Bitcoin, the currency of choice for drug dealers, terrorists and money launderers. The one that is killing the polar bears. And a Ponzi scheme which turned a few lucky nerds into billionaires. Well, these are just a few of the myths that I've become used to defending since I fell down the bitcoin rabbit hole three years ago. A journey which would take me around the world where I would see how bitcoin is used to keep kids out of gangs in El Salvador and help Venezuelans avoid the effects of hyperinflation. And I would meet the techies, economists and activists who believe in a better form of money. Bitcoin, a currency misunderstood by those on the outside and passionately defended by those on the inside. Because those on the inside understand that Bitcoin is the best form of money the world has ever known. Money which can't be stopped or controlled by any government. And the best performing investment of the last decade. This show is all about Bitcoin. But before I tell you what it is, we're going to start with why we need it.
- [05:14]
Andreas Antonopoulos
So why bitcoin? Because the 21st century needs a 21st century system of Internet money that is open, borderless, neutral, censorship, resistance, immutable and permissionless. That serves the needs of commerce for every person in this planet, no matter where they are, no matter who they are, anytime, anywhere. And that's Bitcoin.
- [05:39]
Peter McCormack
Ever since I discovered bitcoin, I've always been interested in helping new people understand what it is and why it is important. So this year I gather some of the leading experts and produced a 17 part beginner's guide. Proud of my epic 20 hours of content, I sent it out to a few friends to which I was told, Pete, I I do not have 20 hours. So I did the only thing I could do and crammed that 17 part beginner's guide into a single episode to give you and them a kickstart into what bitcoin is. From Bedford UK, I am Peter McCormack and this is Bitcoin explained in one lesson. Hey Pete, is now a good time to invest in Bitcoin? This is the most common question a friend will ask me when they get interested in Bitcoin. It's an understandable question because most people hear about Bitcoin when the media reports that the price has exploded or is telling the story of some 25 year old traveling the world on his bitcoin profits. To most newcomers, Bitcoin is just another asset to make money on an investment like gold or stocks. And while investing in Bitcoin can be profitable, really profitable if you time it right. The time in bit is really hard and the volatility will test anyone's patience. Yes, Bitcoin, Bitcoin is an investment, but it requires an investment of time as well as money to avoid the painful lessons which others have experienced. While some people have made a fortune, others have lost money in a number of ways. From being hacked to losing their Bitcoin by trying to become a trader in a market which is very difficult to trade. This show is not designed for those looking to make a quick buck. Bitcoin rewards patience and this is a primer for becoming a long term Hodler. Now you might be asking what a Hodler is. A Hodler is someone who has forged their Bitcoin investment thesis in the long term opportunity that Bitcoin offers a thesis where profit alone is not enough, where patience and nerves of steel are required. And there are some fighting in the trenches defending Bitcoin from its enemies. Now this might sound dramatic, but in this show you will learn about the insidious tactics of government and how Bitcoin threatens their power. Now of course you can treat Bitcoin like any other investment. You are free to buy and sell it at will. But this is risky even for seasoned traders. So if you're going to try and outsmart the market, I just have one question for you. What is so special about you? Bitcoin is super volatile. One day it can accelerate in price and another day it can crash. The most hardened of Hodlers have the battle scars which allow them to ride out the long bear markets. Yet enjoy the rallies each time Bitcoin explodes into life. Based on my previous beginner's Guide. This is a starting point for you to head down the Bitcoin rabbit hole.
- [08:09]
Andreas Antonopoulos
We're heading into the 21st century now with a system of money built in the 16th century and a system of banking and finance built in the early 20th century. And both of them are plagued by politics and fighting and restrictions which are not suitable for the kinds of problems our planet is facing. So we've got these global markets, we've got this global community, we've got this global Internet, and yet our money is fragmented and plagued by these petty considerations of nationalism and putting the flag and faces of old dead people on bits of paper. The money system is controlled by governments in such a way as to promote nationalistic ideals rather than improve commerce, which is what money is supposed to do. And even while in the Western world, we have the best forms of money and banking that money can buy, even those are horribly fragmented, slow, inefficient and full of mistakes. But the truth is that that's the best. It gets depressingly bad from there on. If you go to South America or Africa or even Southern Europe, if you go into Asia, the money systems get progressively more political, more about surveillance, more about control, less about commerce, and even more inefficient. And these systems exclude a huge number of people counting in the billions from the world economy.
- [09:50]
Peter McCormack
That was Andreas Antonopoulos talking about the problems with the modern financial system, which for me was a natural starting point for this show. You see, when planning my Beginner's guide to Bitcoin, it would have been very easy to jump straight in and tell you, the listener, what Bitcoin is. But without understanding the disease which plagues our current financial system, how can you understand the cure? So many of us have been conditioned to this current financial system, where our governments have a monopoly on the issuance of money, and we, the workers, the value creators, have to play by their rules and pay the cost of their mistakes.
- [10:22]
Andreas Antonopoulos
A lot of the problems we see with money have a lot to do with moving money across borders. So borders are a very big thing in traditional money, and also the difficult politics of various repressive, dysfunctional and corrupt governments. If your government isn't repressive, corrupt or dysfunctional, your money still is a giant surveillance system. But you don't notice the impact of that because it happens slowly. It erodes democracy, it erodes the institutions of popular will, it erodes a lot of those things, and it enables kind of corrupt criminal activity at the highest levels within your society. But you don't Notice those, because they don't generally affect your day to day. In countries where those problems are much more in your face, the question why Bitcoin doesn't come up. Instead, the question becomes, how do I do Bitcoin and how quickly can I do it?
- [11:23]
Peter McCormack
Ask yourself, why should politicians get to create arbitrary rules about how you can spend your money and impose increasingly draconian levels of surveillance to track what you are spending it on? You went to work, you earned the money, right?
- [11:36]
Andreas Antonopoulos
Cash is deliberately being taken away from us. And that is a very deliberate political strategy that started in the 1970s and is gaining momentum, especially in countries like the United Kingdom. And it is a very, very dangerous trend, like many of the other control surveillance authoritarian trends we' seen even in supposedly free and democratic countries. Why is privacy in financial affairs so important? The reason is that if you understand that money is the language by which society not only coordinates, but also expresses value, and where cash is the last remaining mechanism before cryptocurrencies that allows people to coordinate and express value to each other without anyone else in the transaction, without intermediaries, then it becomes obvious that if you lose the ability to have privacy on those issues, it undermines many of the other fundamental freedoms. If you strip away financial privacy, then in many practical ways, your ability to exercise all of your other fundamental human rights is significantly eroded. So first of all, with modern credit cards and payment systems, you get surveilled in three different ways. You get surveilled in terms of your network, meaning the associations you form. You get surveilled in terms of the content of your purchases, so people can see which books you're buying, which organizations you're subscribing to. Not just create a graph of your associations, but look for specific types of content. And then the third one that most people don't think about is the geographical aspect of it, which is every time you do a transaction, it reveals the location at the moment you did a transaction. And that means that if you string enough of these together in your daily life, you can basically be tracked as to your whereabouts through your bank account without even having to activate the GPS on your phone. So all of these are critical aspects of freedom, because if you take them away, what happens is that all of the other human rights and freedoms gradually start to crumble. And a government, on the other hand, that has power over financial information and the ability to do financial surveillance, censorship and control, gains enormous political power. They can monitor the activities of dissidents and political opponents. They can monitor their campaign spending directly related to things like that, but they can also apply consequences by, for example, penalizing democratic expression. And I'm not talking here about North Korea. Let's come a lot closer, why don't we? How about Catalonia, right? How about the ability of a Spanish government to apply those kinds of extrajudicial controls over people who associate with the Catalan Independence Party or right in the UK with a Scottish devolution movement, or Northern Irish and Irish devolution movements and all of those things. So even in free societies, the power given to governments to control is enormous. And financial surveillance is one of the most powerful tools they have.
- [15:05]
Peter McCormack
This is why I started with why we need Bitcoin. As I said before, to understand the cure, you first must understand the disease. We must dissect how governments use money as a tool for oppression, surveillance and control. And we must also understand the global macro issues at play. Looking through the lens of the 2008 financial crisis and the financial impact of coronavirus, we are able to see how central banking is the enemy of money. Bitcoin is not just an investment in a new asset class. It is also a peaceful revolution, one which takes the power back from the corrupt and incompetent, creating a fairer financial system for everyone.
- [15:40]
Andreas Antonopoulos
We are in the midst of the largest monetary experiment in, in human history.
- [15:44]
Peter McCormack
This is Travis Kling, chief investment officer at Ikigai Asset Management.
- [15:48]
Andreas Antonopoulos
And that's not hyperbole, that's unequivocal fact. And there is no plan to end that. That monetary experiment is, in a really straightforward way, led to drastic wealth inequality that started a couple decades before the financial crisis, but on the back of quantitative easing is massively accelerated. And that wealth inequality is giving a rise to populism. And that populism is going to push for large scale changes that we're going to see across many facets of our lives over the Next, call it 10 years or more. And in my opinion, I think those changes, which are of a scale that are difficult to implement and are not often or easily implemented, they're going to be implemented on the back of what I think is going to be a pretty vicious global recession and asset price collapse at some point, likely in the next decade. And that's going to occur right around the time that boomers are retiring and dying, and wealth and power are being transferred to Gen X and to millennials. And that's a really important sort of backdrop for Bitcoin as well too, because of the generational differences in how Bitcoin is approached from younger generations to Older generations.
- [17:17]
Peter McCormack
So money is an experiment. Had you realized this all those hours you were slaving away to pay your rent and put a little money away for your retirement is just based on an experiment. Have you ever considered that your savings could be wiped out? The more you look through the cracks in the system, the more you will see how central banking is counterproductive to wealth creation. Where a few guys get together in a room to make decisions which affect all of us, the millions of hard workers who pay for their mistakes. So why do they keep getting it so wrong?
- [17:45]
Andreas Antonopoulos
It's a misalignment of incentives. And it's the potential for a group of individuals, fallible, influenceable individuals that have their, the monetary policy under their complete control and there's not an efficient set of checks and balances on that power. And the incentive for business, which you should always assume that business is going to act in its sort of best interest, profitable manners. There's too much incentive for business to come and try and corrupt those individuals for the sake of those businesses profits. And that was what the founding fathers were warning us of at the beginning of this country's history. It's what the politicians that were against the Federal Reserve act in 1913 were warning against. And it's the exact same problem that we're facing right now.
- [18:43]
Peter McCormack
The Founding fathers is a topic I've personally been diving into recently. And it is interesting to note their thoughts regarding money. Like when George Washington said to contract new debts is is not the way to pay old ones. And Thomas Jefferson said the modern theory of the perpetuation of debt has drenched the earth with blood and crushed its inhabitants under burdens ever accumulating. Modern economics is based on spend, spend and more spend, eternal growth built on cheap debt. But this is why we get bubbles. Like in 2008 when the whole system came crashing down. And this is why we need Bitcoin.
- [19:14]
Andreas Antonopoulos
It is an insurance policy against monetary and fiscal policy irresponsibility from central banks and governments globally. And it's like the comparison that I always like to make is how much does hurricane insurance cost in Kansas? It doesn't cost very much. There's not any hurricanes in Kansas. And how much does hurricane insurance cost in Miami? You know, I'm not even sure you can get hurricane insurance in Miami because of how many hurricanes they have. So the more irresponsible the monetary and fiscal policies are, the more valuable the insurance against that is. And I say this a bunch too. If there was no such thing as quantitative easing, if we were still on the gold standard, I think Bitcoin would still be a science experiment in the closets of a bunch of computer science nerds, because the need for a non sovereign form of money would be diminished if the sovereign money that we were using was being well tended to. But that's not the world that we're living in right now.
- [20:09]
Peter McCormack
So how did we get into this message? Have you ever actually sat down and really considered what money is, what gives it value, why some people keep gold under the mattress while others get into mountains of debt?
- [20:20]
Andreas Antonopoulos
Money exists as a tool that man created or humans created to essentially advance civilization, to advance the ability to facilitate trade, and to benefit from the gains of specialization and trade.
- [20:34]
Peter McCormack
This is Parker Lewis from Unchained Capital explaining how money is just an invention.
- [20:39]
Andreas Antonopoulos
People will gravitate to in an ab test, a form of money that performs its function better than its lesser competitor. And so while bitcoin can be considered an investment, I think at the end of the day, I think it would be wrong to say it's an inflation hedge. It's just a better form of money that has stronger foundational principles that will allow it to fulfill the role of money better than the dollar, the euro, the yen. We have all been lulled to sleep by this idea that 2% inflation is normal and that we, as a result of that, kind of explain away, oh, 2% this year. No big deal. But when you add that up, like multiply that by a decade and multiply that by two decades, if you have 2% inflation, then your money's losing its purchasing power by 20% over a decade and 40% over two decades. And the analogy that I like to to think about, that is 2%. And that slow degradation seems fine, but when you multiply it over a decade or decades, what it essentially equates to is having to recreate your monetary savings, 20 to 40% of it. And what you end up doing as a result of that is saving less and going and trying to run faster on a treadmill. You're basically on a hamster wheel. You're recreating 20% and 40% of your monetary savings savings just to stay in place. And what happens when you do that is there's a lot of malinvestment that occurs. People, rather than having a stable form of money that shouldn't be losing its value, they're making investments to try to grow their money, rather than just finding a stable form of money that holds its value.
- [22:25]
Peter McCormack
Traditional economists will teach you about the virtues of inflation, but inflation is just A hidden tax on wealth. It chips away at your purchasing power year after year. And if you aren't outperforming inflation, then it's quite simple. You're getting poorer. Bitcoin changes this. Because Bitcoin is sound money. It has superior properties than the paper money that government issues.
- [22:44]
Andreas Antonopoulos
Beyond the question of what is money, it's a tool to facilitate trade. Well, when humans start looking around for, well, what are the tools that will help me do this and ultimately help me measure value over time, there were certain properties that needed to exist in a form of money that, that would be better than others. And those are scarcity, durability, fungibility, or uniformness, which then allowed things to be subdivided and aggregated such that if you needed more of it or less of it for to trade for something that had lesser perceived value, you could and then also the ability to transport. We've essentially been perfecting money over time. From gapstones and salt to glass beads to metal to base metals. Each one of those times, somebody figured out a property that would make trade more reliable and be more effective. We went from this period of overtime all converging on a better, better, better form of money, until we ultimately got to maybe the worst money of all time, which is essentially paper or a digital representation that's inherently infinite. But if we ignore that small blip in history that is fiat, that's not actually reserve backed, and we just look at gold relative to bitcoin, it is that in gold, we found the good that had all of those characteristics that would facilitate trade, and it had the lowest rate of supply. And as a result, because of that low rate of inflation, it more effectively measured the exchange ratio between other goods. Well, what do we have in bitcoin? We have the good that has the optimal money supply. And monetary policy scarcity alone is not sufficient to make something money when combined with other properties. And when we think about the specific purpose and the specific reason why we need the tool that is money and it's to facilitate trade, that a key aspect of that is the ability to transfer.
- [24:50]
Peter McCormack
Gold has always played an important role in money. Like bitcoin, it has properties which make it superior to sovereign currencies such as the dollar and the pound. But for convenience, we moved to paper money, opening the gates to abuse by central banks.
- [25:03]
Andreas Antonopoulos
Fiat currency emerged because of the limitations that existed in gold. It was the most effective form of money that man had converged on until that point in time. But the limitations were it was difficult to transport even though it was transportable. And more transportable than other forms of money, it was still difficult to transport. It was susceptible to centralization from a perspective, and that ultimately, while gold is divisible, you can melt down gold and come up with smaller units of gold and mint smaller units of coins that in order to get precise change or to get smaller amounts of gold. From a practical perspective, while it was divisible, it wasn't as divisible as potentially the economy that it was trying to serve needed. And so the dollar or banknotes, initially, and in part a combination of both emerged as that fractional representation to really be a technological solution to the limitations of gold.
- [26:00]
Peter McCormack
If you have made it this far, you now understand why we need Bitcoin to fight against government mismanagement. And you also understand the properties of sound money and that Bitcoin is the soundest money ever created. Now it's time to get into the weeds of what Bitcoin is used for. And I'm starting with my buddy Matt O'Dell, the co host of the Tales from the Crypt podcast.
- [26:17]
Matt O'Dell
I think that the way you, you store wealth in this world now is it's just everything relies on all these different trusted third parties where you have other people basically holding your money for you. And Bitcoin is separate from all of that. So in like a worst case scenario, maybe Bitcoin keeps its value or goes up. And then the other reason I'm in bitcoin is because of speculative reasons, like I think the number is going to go up, I think the price will increase, increase. It's a scarce asset. It's more scarce than anything else we've ever seen. And I think as more people realize that, like, the price should naturally go up. But in other places, I mean, we're, we're both from western countries, we can accept payments and use the traditional financial system if we want. But for a lot of people in the world, they don't have bank accounts, they can't access global marketplaces. With Bitcoin, you're able to accept money through the Internet. Doesn't matter where you're located, you just need the Internet. Like, for a lot of people, you can't open a bank account. With Bitcoin, it's as simple as just downloading an app and then pasting this code into WhatsApp and you can receive money. Like, that's pretty powerful. And then for a whole other subset of people, and of course there's overlap here you have political turmoil and unrest, which goes back to my first point. And because Bitcoin is Independent of any company or government. You know, it's. It's particularly well suited for a political turmoil type situation where you can't trust your. There's nowhere to put your money. So if you have no other option, you still have Bitcoin.
- [27:54]
Peter McCormack
Now let me ask you something. How do you feel when you go to the bank and you try to take some money out and the bank asks you what it's for? Personally, I want them to mind their own fucking business. Or worse, ask those people in Greece or Cyprus how they felt when their governments raided their bank accounts to finance the bailout plans after their incompetent government saddled the countries with debt. Or the people of Venezuela or Zimbabwe whose savings were wiped out by hyperinflation.
- [28:17]
Matt O'Dell
Everyone who's interacted with the bank knows what that relationship is like, where you have withdrawal limits and they're asking you questions about every single little thing you do and there's tons of paperwork. But with bitcoin, it's just independent, all of that. It's just, it's pretty crazy. It feels more real like it's imaginary Internet money. It feels more real to me than like any other stocks or like my bank account or stuff like that. Like, it feels more real than that to me. These money systems that we have nowadays, these fiat systems are, they're completely reliant on the government. It's just a full trust in the government. And you see in countries like Venezuela and Argentina, where this trust erodes and there's gross mismanagement and the currencies become worthless and that can basically happen anywhere. Like, this is a very new experiment, this whole fiat idea. It was like 50 years old. That's pretty crazy when you think about it. Everyone just says to themselves, like, oh, that's the way it's always been. So, like, why be so cocky about that? The way I look at it from like a Western perspective, like when I pitch it to my peers and stuff is I say this is a, an insurance policy that may go up in value significantly. And you know, so you out, you just put a little bit, you don't put everything into bitcoin. You just, you know, put in an amount that's a high risk investment.
- [29:41]
Peter McCormack
Before we get into explaining what Bitcoin is, there's one more thing we need to cover where it came from. Because this is an important part of what makes bitcoin so special. Bitcoin was not the first attempt at creating a new form of digital money outside of the control of governments. It is just the most Successful. For decades, people have been trying. But when satoshi nakamoto, the mysterious unknown creator of bitcoin, dropped his invention on the world, he had assembled the pieces of the jigsaw which made this new financial paradigm possible.
- [30:09]
Andreas Antonopoulos
Yeah, it definitely didn't come out of nothing, which some people may still think, like there was nothing. And then all of a sudden, this satoshi demi God created bitcoin. And there it was.
- [30:21]
Peter McCormack
This is Aaron van werden, a journalist whose genesis files research looked into the projects which led to the creation of bitcoin.
- [30:28]
Andreas Antonopoulos
No. Yeah. It was more of a step by step process. And if you see all the steps, then you also see that satoshi, he didn't invent anything particularly new. He just put it together in a very clever way. A very clever way. I mean, all credit to him. I don't want to take anything away from that. Like, it was genius, but all of the pieces of the puzzle were there.
- [30:50]
Peter McCormack
Bitcoin would not have been possible without the invention of public key Cryptography in 1976 by Whitfield Diffien and Martin hellman. Prior to this, encryption was a tool that the public did not have access to. Now, people could engage in encrypted communications, one of the building blocks which would allow for the creation of bitcoin. But it was a man named David chaum who would change the game. He could foresee the importance of privacy. With the Internet saying, cyberspace doesn't have all the physical constraints. There are no walls. It's a different, scary, weird place. And with identification, it's a panopticon nightmare. Right. Everything you could do could be known to anyone else, could be recorded forever. It's antithetical to the basic principle underlying the mechanism of democracy. And he figured out a way to use encryption tools for money. And with his creation, blind signatures, he created digicash, a way of layering privacy onto the existing banking infrastructure. Now, while digicash ultimately failed, it was an important step in the journey to the creation of bitcoin, which was furthered by the cypherpunks. They were a group of activists advocating for the widespread use of cryptography and privacy enhancing technologies to drive social and political change. Eric hughes, a founding member, famously said, privacy is necessary for an open society in the electronic age. We cannot expect governments, corporations, or other large faceless organizations to grant us privacy. We must defend our privacy. If we want to have any cypherpunks write code, we know that someone has to write software to defend privacy, and we're going to write it. And in October 2008, Satoshi Nakamoto released his Bitcoin white paper on metsdao.com, a cryptography mailing list associated with the cypherpunks. Next up, I talk to more of the leading experts in bitcoin as we cover Bitcoin in one lesson. But before that, we do have to hear from my amazing sponsors, the people that allow me to make this show happen. So first up, let's talk about Least Authority. They are a new sponsor this month and now this is really for you techies out there, the builders creating the applications. Least Authority is a security consulting company pushing the limits of how to build privacy respecting solutions. They specialize in security audits, design specification reviews, security by design, and also make regular contributions to the open source and decentralized space. They can help you improve the security of your wallet, application, key management solution layer 2, protocol P2P networks, design, use of cryptography, and so much more. Do you want to get a boost for your security strategy? Well you can get a free no obligation call to find out how Least Authority can help your next project. Just head over to their website, hit the schedule a call button. That's at leastauthority.com which is L E A S T A U t h o R-I-T-Y.com also we have Crypto Mining Tools and with the halving past Scott offered is back here on the show helping you out with your bitcoin miners. Now we know the Bitcoin halving can have a big impact on mining profitability and Scott from Crypto Mining Tools has a solution for bitcoin mining equipment owners looking to get more life out of their equipment. I've told you before about Scott's bitcoin mining calculator. While Scott has recently launched a Bitcoin miner hosting directory. If you need to move your miners to a more cost effective location due to the Harvin, go to Cryptomining Tools to research hosting options available in your country and around the world. Scott is also looking to add more hosting and colocation providers to his hosting directory. So if you own a mining farm, if you've got extra space you want to get filled, reach out to Scott's hosting partnership guy Shannon Squires who is on Telegram Squires which is quote or use the contact form at Crypto Mining Tools. Also have you checked out sportsbet IO yet? The best place for online gambling and they accept bitcoin and we love these guys, right? They are the people that put the bitcoin logo on the Watford shirt and listen while football's out. It's very sad. I feel very sad without the football. They've done so much to keep gaming alive on their platform. One of the really interesting things they've done is this growth in esports. I watched my first esports event recently. I watched a Formula one race, had some racing drivers, had Sergio Aguero in there. It's really interesting. But they've got 11 markets on the website, including E, FIFA, EMBA and ENHL. Not only that, but Sportsbet IO has a Bitcoin casino and my personal favorite, the poker rooms. I really do love my poker. And we've got another poker tournament sponsored by sportsbet IO coming soon. So if you want to find out more about them, please head over to sportsbet IO which is S P O R T S B E T IO Now I want to dive a little bit into the tech to explain what bitcoin is and how it works. The unique infrastructure design which stops individuals exerting too much influence over it and governments from shutting it down. I asked my friend and fellow podcaster Stefan Avera to explain what Bitcoin is, both the currency and the protocol.
- [35:42]
Matt O'Dell
Yeah, so you're right, there's two parts to it. And so the currency of it, the token, if you will, you can think of it like how we've got dollars and cents, we've got bitcoin and satoshis, right? And every bitcoin is divisible down to 100 million Satoshis. Or in the community we say Sats, right? And so this money, if you will, has been designed with a hard cap in mind. And so there will never be more than 21 million bitcoins.
- [36:09]
Peter McCormack
One of the tricky things for new people to get their head around is what really is unique about Bitcoin. Why would I want to use it to send money to someone when I have PayPal or my bank account, ways I've used for sending money for years.
- [36:21]
Matt O'Dell
There are a few differences there with PayPal because PayPal think of it like they are maintaining a central database of who has what. And fundamentally the unit that's being transacted on PayPal is different. So for example, you might be sending me pounds or US dollar, whereas with Bitcoin there's a. It can be a little bit confusing because bitcoin is the payment network or the protocol and it is also the token, the unit. And the other part that's different with Bitcoin is it's intended to be like a peer to peer cash Right now, that means that you're not trusting a third party. So in that, in that PayPal example, you and I, we're both trusting that PayPal will not censor or stop that transaction. Whereas in the Bitcoin world, it's much more difficult for that to be stopped because it's just basically, you're running this software and I'm running this software, and we just, we use it to just send to each other.
- [37:16]
Peter McCormack
And this is what makes Bitcoin unique. Legacy financial systems rely on central authorities to manage things. With PayPal and your bank, you are trusting them to make the payments you request, which is fine when it works for you. But the problem is they are a gatekeeper to your financial decisions. They can block payments, they can take money from you, and they can even tell the government what you're spending your money on. Bitcoin solves these problems. It removes the need for trusting a central authority by distributing the ledger of payments. It is this decentralization of Bitcoin which removes gatekeepers offering financial freedom. But it also goes much deeper than this.
- [37:49]
Matt O'Dell
There are some people who don't have access to PayPal or credit cards, or they've been deplatformed or debanked. Those people basically have to use something like Bitcoin because it's much harder for them to use cash over the Internet, obviously. So that's one way that they are able to still accept payment for their services. And this can happen in different scenarios where somebody's been say, kicked off social media, or maybe the payment processes don't like them, or for whatever reason they've been debanked. That's one part of it. And then the other part of it, where people who buy Bitcoin and over the longer term, when they have really taken a long time horizon on their purchase of Bitcoin, they've been up in purchasing power terms. And part of the reason for that is that now again, this is being honest, being open, this is speculation, right? So this is basically speculating on future adoption of Bitcoin and also speculating on this future value of Bitcoin relative to other forms of savings that you could have held. And so in some ways, it's kind of like a hidden tax of inflation. You know, if you keep pounds in your bank account, or I keep Australian dollars in my bank account, over time, the amount that I can purchase is going down. So in that way, people can think of Bitcoin as a kind of savings outside, sort of independent of the mainstream banking system and independent of the Government. And so people can speculate on that with a percentage of their investment or if they want to regularly accumulate. Right. Known as dollar cost averaging or stacking stats, as we say. These are ways that people try to accumulate a position in Bitcoin. And they do that typically because they have a future bullish belief on bitcoin. And this has sort of proven out over the history of bitcoin is that there are people who bought at a high and then lost money. But typically there weren't that many people who bought it that high. And typically the people who held for a long enough time eventually got out into the positive. But again, that is a speculation. Right. So we should be upfront about that. So it's two prongs, right? So it's a savings technology and a payments technology that are difficult for somebody to stop you. And that's kind of one of the powers or special things about Bitcoin.
- [40:09]
Peter McCormack
So how does it all work? How are users able to send each other Bitcoin and trust that it works without a central authority? Well, the software which runs the Bitcoin protocol, which any user can download, has a set of rules. Each time someone posts a transaction to Bitcoin, everyone else's software checks the rules have been followed. If someone tries to break the rules, then their transaction is rejected. But new people coming to Bitcoin need to understand that the way it works comes with consequences. You are entirely responsible for your money. We call this being self sovereign.
- [40:39]
Matt O'Dell
There are no bailouts in Bitcoin. And so that is why it might be a little bit scary at the start. But we have to learn to basically advance our knowledge and our accountability, personal accountability. What happens with Bitcoin is if you lose the seed and the and or passphrase, you basically lose access to that bitcoin. So it's basically like those Bitcoin will get trapped in the ledger forever.
- [41:05]
Peter McCormack
Now you understand what Bitcoin is. It is important to consider its monetary policy. While Bitcoin is a tool for financial freedom, it is the monetary policy which drives value. Remember earlier when we talked about how central banks fuck with the money? Where a few guys get together in a room to make decisions which affect us all. Well, bitcoin flips this. Bitcoin is designed so that everyone is fully aware of the monetary policy and it never changes.
- [41:27]
Andreas Antonopoulos
A 21 million hard cap is, I would argue, Satoshi's most brilliant innovation. The 21 million hard cap drew me to it. And in 2012 that was a pretty rare trade. Most people felt like Decentralized money or a cash like digital currency was kind of the cool thing about it. Or gold 2.0. But gold 2.0 isn't valuable unless there's a monetary policy that ties with it, that makes it a good gold 2.0. And not many people appreciated it back then. That's what makes it so rare is that, to me, was my aha moment, where 21 million hard cap. That was a huge breakthrough.
- [42:04]
Peter McCormack
This is Dan Held, one of my favorite writers on the topic of Bitcoin.
- [42:08]
Andreas Antonopoulos
It could be 21 million, 21 billion or 21 trillion as long as it is fixed. And this is the brilliance and the breakthrough in monetary policy is that previous monetary policies are flexible. So governments and the central banks and investment banks all work together and they come up with the optimal rate of inflation. But that inherently comes with several problems. One is that it's an impossible problem to solve. There is no way to even properly calculate the rate of inflation. For example, in the United States, we have something called cpi, which is an attempt to calculate inflation. But that excludes many different assets. I believe it excludes food and energy, and it also excludes real estate and equities. Capturing inflation or even measuring it is a really difficult issue. And there's actually a term in computer, like in software development on the product side, which is called if you can't measure it, you can't manage it. So, like, if you have an app and you're trying to track the number of signups you're getting, you know, if you don't measure that accurately, you can't manage to either raise or lower the number of signups. And so with an economy, choosing the proper rate of inflation is an impossible task. So first of all, ingesting data, parsing it, analyzing it, that's an impossible task. And then let's say if you could do that, and then you could also, let's say you could properly manage it, well, what's the proper rate of inflation? Is it 1%, 2%, 3%, 4%, 10%, 100%? There is no appropriate rate of inflation. It is a completely subjective term. Because it's subjective, that means that the inflation rate will always be up for debate. And because of that, that means that the monetary policy will always be malleable. And typically, people in power will move that monetary policy to be malleable to their benefit.
- [44:03]
Peter McCormack
The monetary policy for Bitcoin is beautiful in its simplicity. It also never changes. So where central banks are always changing their policies, Bitcoin is the opposite. It is entirely Predictable, where central banks will create complex rules to manage the economy with their decisions affecting everyone else. With Bitcoin's monetary policy fixed, it is you, the user, who has to adapt.
- [44:24]
Andreas Antonopoulos
What's nice about that is first you can easily understand your monetary policy in one sentence. 21 million. That's it. That's all you got to know versus the existing Fiat system where you've got this deeply lengthy explanation around how the monetary base and the monetary policy and the entities that interact with that and how it all works. Bitcoins is extremely simple. Two, it means that there will never be a political influence on Bitcoin's monetary policy. Now, Bitcoin, the only reason why that monetary policy exists and has existed from inception is that those rules have been hard coded in and Bitcoiners have rallied around that code and that's called social consensus. So we have all rallied around that code and that 21 million hard cap. And that is very core to the ethos of Bitcoin. If all the bitcoiners came together and decided to change the 21 million to 22, that could happen. But the likelihood of that happening is infinitesimally small due to everyone who has bought Bitcoin has bought into the 21 million hard cap already. That's why often we see central banks have a mandated policy to stimulate the economy through inflation. If you keep 2%, if you keep your cash in your bank account, you're losing 2% a year versus putting it into, as they call it, productive assets or stimulating consumerism, where you go purchase items because you want to spend today versus saving and consuming later. So Bitcoin flips this on its head. Where Bitcoin has a disinflationary monetary policy, where Bitcoin, the rate of Bitcoin issuance halves every four years to the total Bitcoin number of 21 million Bitcoin, and that will happen about the year 2140. 99% of Bitcoins, I think, will be produced in the next decade or two. Though. So largely most Bitcoins will be produced and after that moment no more will be produced. And that's all entirely predictable and entirely understood by all the participants in that economic system. Now, what's cool about Bitcoin is that it really is a rejection of all mainstream economics. Not just a rejection of the banking system and the Fed, but of all academics, almost nearly every single economist in the world. It's rejection of their ideas. It goes back to an older form of economics that was popular called Austrian economics. Essentially in Keynesian economics. There's two types of economic thought, Keynesian and Austrian. Keynesian is the current modern day economics thought, which is about government should heavily influence the economy and stimulate growth. Whereas Austrians were more hands off, decentralized sort of economics. And so bitcoin hearkens back to that day, back to that sort of thought. And what people worry about with a bitcoin monetary policy is, for example, people will withhold their spending in anticipation of price increasing. And so that's often worried that in a bitcoin style economy, people would forever withhold their spending and the economy would essentially grind to a halt as no one wants to spend because the value of their coins keep increasing. With Bitcoin right now, it's very early stages. So the price of Bitcoin increases dramatically. As Bitcoin succeeds and stabilizes in price, it becomes more useful as that medium of exchange and unit of account. So in that final stage, that's when Bitcoin's monetary policy will be criticized in terms of encouraging people to hoard versus spend. However, as we've seen with consumer electronics, consumer electronics like my TV, I've got a 65 inch TV on my wall, it's $1,000. Ten years ago, that was like $100,000 and that technology didn't even exist. And my iPhone, My iPhone today versus 10 years ago is an incredible feat. And so when we look at consumer spending with electronics, electronics get cheaper and better every year, but we still buy them. Even though we can anticipate that they will become cheaper and better in the future, we still need to consume now because we're humans and we have needs. In a bitcoin economy or in a bitcoin monetary policy, we shouldn't worry about people. When Bitcoin becomes the standard medium of exchange and unit of account for everyone in the world, we don't need to worry about the implications of that because people will intuitively spend if they need to. They're not going to withhold spending until they die and shrivel up in bed.
- [49:00]
Peter McCormack
Now, if you are following and you are sold on Bitcoin, you may be reaching a point where you are thinking about investing. So now is the time for a big warning. You may previously heard that there are these other cryptocurrencies and if you haven't, you soon will. You may hear about other things with Bitcoin in their name, like Bitcoin cash or Bitcoin shit version, or even fancy things like Ethereum. If you are considering other cryptocurrencies, then I have two warnings for you. Firstly, if you just want to trade them and you just want to make money then I wish you good luck. It is really tough to beat the market and if you don't outperform bitcoin then you have just wasted your money. Secondly, even if you do want to hold onto them as an investment, if you think they are a good long term prospect, then ask yourself are they a better investment than Bitcoin? Perhaps. Go through the price charts for some of them and compare them to Bitcoin. Now I don't actively trade bitcoin anymore. I did once and found it is really hard. Even seasoned traders struggle with the volatility. I personally though have an unwavering long term belief in Bitcoin. I believe that there will be a growing demand for it and its limited supply will drive its value. So I am happy to just buy and hold and ride out the years as Bitcoin grows. Now back to the other cryptocurrencies. I understand it might be difficult for you as a newcomer to understand why Bitcoin is superior. I mentioned Ethereum earlier. I'll let Dan explain this project to you.
- [50:18]
Andreas Antonopoulos
There was a VC in Silicon Valley who wrote an article called Tech Crypto versus Money Crypto. So tech crypto is engineer focused. Money crypto is ex finance, ex banker types who really understand economics. And Ethereum largely appeals to the tech crypto types. They like to tinker with things. They like to to poke and prod and change things. They're engineers, they're meant to go build things. They like to build apps and they want everything. They want an app platform like the App Store, Play Store or the Ethereum blockchain to do everything they want. And so the protocol becomes largely very malleable because of that, because it's constantly changing at the whim of all of these engineers. But none of these engineers have really a good grasp of economics or monetary policy. So Ethereum largely ignored monetary policy or just a very primitive at all really talking about it that much until 2018. I remember Ethereum coming out and almost no one ever mentioned the word monetary policy and Ethereum in the same sentence. Ethereum was a smart contract platform and ETH was the oil or the gas, wherever you want to put it. And the Ethereum community has seen a lot of failure with their narrative of adapt platform, smart contract platform, a fundraising platform. As we saw ICOs collapse and these Dapps fail to find product market fit Ethereum. The Ethereum community is scrambling to find a new narrative and that new narrative is that Ethereum is A Good Gold 2.0 or Ethereum is a good money because of its usefulness that copper is worth more than gold, because copper can be used for so many things. We're only seeing them pivot to that narrative as their narrative around Dapps and everything collapsed. So they're desperately grasping at straws for something that's tangible, something that's real. And so they're trying to make themselves equivalent to Bitcoin. And this is the first time that I've seen the Ethereum community talk about monetary policy. Was in early 18 is where they go, okay, wait a second. We got to figure out the new narrative and we have to figure out why our monetary policy, how we can compare and contrast that to bitcoins. What's funny is that the Ethereum community is trying to meme and trying to align themselves with Bitcoin's fixed supply and monetary policy, but they don't realize that they will continually and perpetually be. Less people have less confidence in their monetary policy than Bitcoin. Bitcoin has already won. It is far too late for them to do this now. You can't just say, hey, we have a low rate of inflation, because I don't trust that you will in the future. You could choose to change the rate of inflation. It's about the continuity of the monetary policy that is paramount and the belief in the continuity of the monetary policy, the faith in it. And there's no continuity to Ethereum's monetary policy, and there's no faith that it will continue that way. Whereas bitcoins is super strong, it also has the largest network effect in terms of market cap holders of the currency and liquidity and faith in the monetary policy.
- [53:23]
Peter McCormack
Ethereum is not the only alternative cryptocurrency. There are thousands of tokens and altcoins which make up the cryptocurrency industry, from those which are scams to legitimate, though misguided attempts at creating alternative currencies. If you are still tempted by these, then please, please be aware the industry is plagued by failure. Outside of Bitcoin, many people have enriched themselves by creating new monies at the cost of investors. The opposite of satoshi. And this was something I discussed with Nick Carter from Castle Island Ventures.
- [53:53]
Andreas Antonopoulos
Satoshi also chose anonymity, and so they were never able to publicly take credit for their invention. So whoever they are, they've shown some extreme restraint in staying anonymous all these years. And that is something that really distinguishes Bitcoin from virtually everything else.
- [54:10]
Peter McCormack
Bitcoiners have become hardened in their opinion of these alternative currencies. And when you head down the rabbit hole, you will witness this intolerance to the creation of new altcoins.
- [54:19]
Andreas Antonopoulos
It shouldn't be easy to create a new money and bitcoin shouldn't have succeeded. You know, it succeeded against all odds. Like every digital cache prior to bitcoin had failed miserably and the founders went to jail. And then Satoshi comes along with this revolutionary idea and says, well, what if we decentralize everything and no one's in charge? That is the only reason bitcoin succeeded. But even despite that, it had a very brittle and risky early days. Bitcoin had an inflation bug. It had a rollback. Its largest exchange mount Gox collapsed. It could have failed in a myriad of ways. And it's absolutely amazing that it succeeded. So. So many altcoins took that model of bitcoin as this behemoth and they just presumed that they could kind of piggyback on its success. But the truth is that like the hardest problem is maybe not even technical. It's just convincing the world that you've created a valid alternative money. And just because it's technically maybe easy to do that in the wake of bitcoin does not mean it's politically or economically a viable idea. So it's not surprising to me that virtually all of these altcoins have failed. That should be the default. New monies shouldn't come around every day.
- [55:35]
Peter McCormack
So back to the original question. Is now a good time to invest in bitcoin? I'm sorry, but this is a really hard question to answer because bitcoin is volatile. If I knew the best time to buy and sell, then I'd be very wealthy myself. Trading bitcoin is difficult, as is time in the market. So if you only hear for the short term gains, your experience might be painful. There are those strategies people employ to de risk their bitcoin investment.
- [55:59]
Matt O'Dell
I like stacking sats, right? So I like dollar cost averaging. I think that people Bitcoin is a very scarce asset and it's as close to a free market as we've ever had. So you have these marketplaces running 247 around the world trading this super scarce asset that is not very liquid. There's not that many bitcoin being traded around and that means the price is going to move up and down tremendously in the short term. Up and down. We'll take, you know, we had huge hits. What last, last year it hit 14k and 3,500in the same fucking year. So this thing will move up and down a lot and no one has any idea where it's going in the short term. But long term, the prediction is that the price will go up long term. So if you dollar cost average and you put a little bit in every week, then you're able to not freak out. And at the, at what the price is on any given day, you can just say, okay, this is just a long term investment. I'm just averaging in, you know, maybe quit cigarettes or something like that and put that $10 a day into bitcoin money that you, you know, probably would have just thrown away anyway.
- [57:07]
Peter McCormack
So if you're ready to dive in, there are a few more things you need to understand. Payments are irreversible, something Stefan mentioned earlier. This is known as immutability. Once you have sent Bitcoin, it can't come back.
- [57:19]
Matt O'Dell
There's no customer support line to call either. So if you send this, your money to a bitcoin address and that's the wrong address, like you're never getting that back. So always double check your addresses. You got to be very careful with bitcoin because anyone you pay can track your payments. Anyone who sends you money can then track your payments from there. The actual addresses aren't necessarily tied to your name by default, but if people can tie them to your name, that's when they can end up tracking you. There's no privacy. The Bitcoin blockchain is a ledger that shows every transaction publicly and it's going to last forever. It'll always be there. People can always look back. So even if someone's not trying to track your transactions now they could in five years time, six years time. You never know if it'll, if it'll happen. So you have to assume like that you're just anyone who pays you can track your transactions or anyone who links your, your address. So if you like post your address on Twitter or something like that, then they can link it to you and, and take it from there and try and make judgment calls based on your, your addresses. If you go to btcprivacy.org you can, there's a bunch of reading material there if you want to try and use Bitcoin privately. But it is complicated. So this is a beginner's guide. So just keep that in mind.
- [58:38]
Peter McCormack
Before we get into how to Bitcoin, there is one very, very important thing you need to be aware of and be ready for. With Bitcoin you are self sovereign. I've told you this already. What it means is that you are entirely responsible for securing your money, and therefore you're entirely responsible for managing your private keys. This might sound scary to begin with, but it is something you will learn quickly when you first buy Bitcoin and send it to a wallet.
- [59:00]
Matt O'Dell
Bitcoin is all about personal responsibility. There's no customer support line. You have to take matters into your own hands and make sure that your Bitcoin is is safe and secure. We've had multiple exchanges get hacked. Mount Gox is the big one that everyone knows about. Quadriga just happened recently. We have a saying in Bitcoin. Not your keys, not your coin. So basically there's two different ways to use Bitcoin. You can use Bitcoin in a way that someone else is holding your Bitcoin for you, which was the case with Mount Gox and every everyone lost their money who was holding it with Mount Gox. Or there's a case where you hold your Bitcoin yourself and then you could lose it because you forgot your password, or you could get hacked, but at least you're not trusting someone else with your Bitcoin. And that's become a lot easier lately. So lucky for you beginners, you get to come in on that note.
- [59:51]
Peter McCormack
Now, if you are ready to get some Bitcoin, your starting point is to get yourself a wallet and understand how it works and how to back up your private keys.
- [59:58]
Matt O'Dell
The first wallet I suggest to most people is Blockstream Green wallet, because you hold your own keys and you get to keep a backup of it offline. They're going to give you these 12 words. You write down the 12 words, and if you have those 12 words, you can recover your funds. And it's on your phone. And phones are relatively secure. They're not near the most secure thing. But if you don't have a large amount of money on it, it's free and you can download it today, just like from the App Store.
- [60:26]
Peter McCormack
So what are these private keys we keep talking about and what is a seed? I know this is starting to sound a little bit complicated, but it will make sense once you start playing around with Bitcoin.
- [60:36]
Matt O'Dell
So you're going to download the wallet like any other app on your phone. And once you download it, they're going to give you 12 words to back up. And so these words derive your keys for you. So that's all you need. If you have those 12 words, you can put the words in and you have access to your Bitcoin. So you have to be careful that also means that if anyone gets those seed words, they can spend your bitcoin as well. They can take your bitcoin. So you have to keep those, those that 12 word phrase safe. However you deem, deem fit. Don't like put them on a post it note next to your computer.
- [61:10]
Peter McCormack
While bitcoin is tricky to get your head around, I've always felt you learn by doing so. My personal advice is just to dive right in. My recommended starting point is to follow these five steps. Go and download a wallet, something like Green Wallet. Write down your recovery seed words. Buy a small amount of bitcoin from an exchange and send it to your wallet, say $10. I would then delete that app, download it again and restore it from your seed. Just by doing these five steps you will learn about sending and receiving Bitcoin and backing up your seed. You must though keep these seed words hidden and in a secure place. If you lose your seed and you also lose your phone, the bitcoin in that wallet will be lost forever.
- [61:48]
Matt O'Dell
Don't put those seed words on any Internet connected device. Like don't put it in like Apple Notepad or whatever you know, don't put it on, in your Gmail drafts folder on Evernote or anything like that. Like that's the beauty of having it offline is someone has to physically get it wherever it is. If you have it on an Internet connected device, you have to rely on the security of that device as well. It's all about personal responsibility. So you're going to have to figure out a situation that works best for you and you have to iterate on it and improve on it over time. Phones are a nice stepping stone, but really ultimately where you want to be is you want your bitcoin to never touch an online device. And that's why you have these hardware wallets. The three best hardware wallets are Cold Card, Ledger and Treasure. Ledger and Treasure are easier to use I guess if you want a user friendly one, probably the Ledger X which is the newest ledger because you can use it with a phone app as well. It's a little USB stick. And then if you want the, the better one that's more advanced, you get the cold card is like basically my recommendation now. But this is like a little USB drive that holds that secret for you on it and it's got a pin. So someone needs to get that device and the PIN to be able to take your bitcoin. And then you also still have that, that word phrase, that seed phrase, those 12 words where you can back it up if for some reason the device gets lost or stolen or broken.
- [63:14]
Peter McCormack
There are many ways to buy bitcoin for the first time to get yourself started. Firstly, if you have a friend in bitcoin, you can always ask them for advice about where they get their Bitcoin from. Or you can sign up to an exchange like my sponsor Kraken, register, buy Bitcoin and then send it to your wallet. But there are some other things I still need you to be aware of.
- [63:32]
Matt O'Dell
Whichever service you choose, you have to be ready that you're going to have to give them. The exceptions are hodl, HODL and Bisque and they both have their own UX issues. It's, it's hard to use for a beginner you should definitely check them out, especially as you go down further down the rabbit hole. But any of these more user friendly ways to buy Bitcoin are going to require you to give ID information in America, give Social Security information. We call this kyc. It's know your customer anti money laundering laws. So they like are going to make you give tons and tons of personal information. And then you have to remember that you're trusting whatever this company you choose. You have to choose a reputable one. Don't do it just based on whoever is the cheapest because you're trusting them with all this information.
- [64:22]
Peter McCormack
Okay, we're making good progress. You have a wallet, you've bought some Bitcoin and you've learned about storing your seed. Now it is time as a self sovereign bitcoiner to take your privacy and operational security seriously. Now this itself is another big rabbit hole, something you need to spend time on after the show. But there are some basic things you should be thinking about. This is Jamison Lobb, widely regarded as one of the leading experts in Bitcoin privacy and opsec.
- [64:46]
Andreas Antonopoulos
It's all about who your adversaries are and what you think people are trying to do to you. So from the operations security perspective, you kind of have to come up with a threat model of who might try to use private information against me and as a result what is the information that is most important for me to keep secure? And so it really comes down to what are the most common types of attacks and what is the information that the most number of adversaries out there are trying to get from you and use against you. You don't know what's going to happen in the future, you don't know where some data that you currently consider to be unimportant might suddenly become much more important.
- [65:39]
Peter McCormack
As I said, this is a complicated subject, but specifically with regards to Bitcoin, there are a few important things you should consider.
- [65:46]
Andreas Antonopoulos
For most people, I think that the easy thing, the most important thing to do is just not post your addresses in public places. This is actually something that I've run into a lot as I've been doing various research of historical events in bitcoin, is that I've gone back, you know, eight, nine, 10 years ago and back then people were just publishing their bitcoin addresses and forum posts and leaving trails all over the place. And so that was terrible for them though. Very helpful for me when I wanted to basically de anonymize some of the early adopters and what they were doing many years ago. It comes down to who you're trying to protect yourself against. I think if we don't worry about, you know, nation state level attackers, then really the most important thing is not to broadcast your addresses all over the place publicly. Also not to reuse addresses. At the very least, when you are receiving coins, it costs you nothing to generate a new address. And that means that whoever is sending you the coins can't look up on the blockchain and say, oh, you've received all of these other coins at the same address. As I mentioned earlier, the flip side unfortunately is then when you are sending money to other people, they could potentially look back in your history, but you may not necessarily care about that. It just depends on the sensitivity of what you're doing and whether or not you're worried about your counterparty learning more information about you. But at least by having those funds split up amongst more addresses, it would be difficult for someone you're sending money to to see, you know, your entire wallet. But there are many different types of adversaries on the network that are doing many different types of listening for data, whether it's on the blockchain or the network or you know, harvesting data from various providers like exchanges. And so, you know, it's hard to stay completely out of the, off the radar of everything. But I think by keeping a low profile, you know, not associating your real identity with any coins like at least on social media, you know, in the public, that is going to get you a lot further than what I think a lot of people do by default.
- [68:30]
Peter McCormack
Now as this show closes out, I do hope it has been useful lesson. Trying to cram a 17 episode introduction to bitcoin into a single show does come with challenges. There has been an awful lot I've had to miss out. But before we end, there are a few things I want to tell you about. Firstly is the lightning network. As you start to spend more time learning about bitcoin, this is something you will hear more and more about. One challenge with building a decentralized form of money is scaling it to be used by millions and even billions of people. Today is not the time to explain the background to this. It is a whole other rabbit hole right now. All you need to understand is that the lightning network is another way of sending and receiving bitcoin, which is faster and cheaper. But rather than explain how lightning works, which is for another day, Jack Mallers, a lightning application wallet developer, will explain why it is important.
- [69:17]
Andreas Antonopoulos
I think instant finality for this commodity in markets is going to be a huge deal. There's going to be a lot of demand. I think instant finality in online commerce and consumer payments is going to be a big deal. I think instant finality for remittance payments that can make remittance payments now that are generally close to free, extremely cheap compared to western Union and they settle.
- [69:39]
Matt O'Dell
Instantly and they know no borders.
- [69:42]
Andreas Antonopoulos
I think all of this stuff to a beginner like everyone should be really excited that this is one of the more important enhancements and inventions in money. If we think of money as a technology. Lightning is a huge development in money as a technology. It's a really, really big deal. We've never seen a money be able to act like this. And so to a beginner, I think everyone should be generally pretty excited. How would instant finality affect your life? I have no idea. Idea. But everyone has an opinion and so many people are working on it. And so it's just generally exciting time.
- [70:13]
Peter McCormack
As we get close to the end. I hope you're starting to see the potential with Bitcoin. The possibilities are endless. And this new paradigm in money can lead to a better and fairer financial system for all. And despite all the turmoil in the world, Bitcoin has a promising future, which my buddy Jeremy Welch will tell you all about.
- [70:30]
Andreas Antonopoulos
I can predict that short of kind of collapse of Internet and power consumption and some massive, massive casualty event that results in just massive, kind of catastrophic failure of a lot of our other civilizational systems, Bitcoin will be around, right? Like that's, that's the one kind of thing is that there is this kind of codependence, interdependence between bitcoin and between the kind of social and economic system and the civilization that we have. And so if that collapses, then sure, there's a risk of bitcoin also, also collapsing. But as long as those two are alive like that, it's going to be around, it's going to be growing. You know, in 25 years, 10, even 10 years, the banking systems will have all changed and we'll have all realized and, and further internalized the reality of bitcoin. And so you will see some very different systems there. I do think that we'll see kind of more stable systems long term. I think that we'll see a more peaceful future and a lot of ways long term as some of these things realign. But it's in that chaos of realignment that things are going to be complicated. On the bitcoin specific side, I do think that there's no way around people managing keys in some capacity. So that's something that, you know, again at CASA we've invested a lot of time in and we were doubling down on this year. And I do think that usability around bitcoin is important, but just usability around key signing more widely is going to be really important for the future of bitcoin in the future. A lot of systems and a lot of kind of personal data and personal wealth for people. So I do think that we will get to kind of mass adoption and mass thinking around key signing and key management. And I think that overall a computing experience is going to change pretty dramatically. I would predict it and expect that at least one of the major components, kind of fang type companies, you know, you've got Facebook and Google, Amazon, at least one of those will kind of go the way of Kodak and being, and losing a lot of market share or just totally collapsing or something. Just as again, I think all the computing stuff is actually intricately tied into the monetary system as well and how things work. And so as bitcoin grows, you know, again, companies are going to have to adapt to, so there's going to be a lot of activity. Activity. I think bitcoin itself is going to be relatively boring. That's a great thing. Bet on Balkanization and we're going to see more isolation and coronavirus is accelerating that. But overall I think the future is quite bright and, and I'm very optimistic for where things are going in terms of our, you know, personal wealth and family wealth. There's going to be a bumpy road to get there and, but we've all got to, you know, as bitcoiners and as one big community, we've all got to kind of band together and work together to build this better Future.
- [73:10]
Peter McCormack
That is it. We are done. The entire 17 episode guide filtered down to a single introduction to bitcoin. If you enjoyed this, I do recommend going out and checking out the full episodes. They're available on my website. For my other podcast, whatbitcoindid.com if you click on specials at the top, you can then click on the beginner's guide. We're going to close out with John Carvalho, someone who, more than anyone, has hardened me to the importance of bitcoin and protecting it from bad actors.
- [73:35]
Andreas Antonopoulos
We have a lot of human rights talk and a lot of freedoms and a lot of, like, achievements we've made.
- [73:41]
Peter McCormack
As a species, you know, overcoming our.
- [73:44]
Andreas Antonopoulos
Own idiocy and greed and evilness that.
- [73:47]
Peter McCormack
We can sometimes have.
- [73:49]
Matt O'Dell
But I don't actually think we've ever.
- [73:50]
Andreas Antonopoulos
Achieved true freedom for ourselves. I think the current government dynamic with the way things operate with border controls and money controls, and we're all still.
- [74:02]
Peter McCormack
Kind of slaves in a way.
- [74:04]
Andreas Antonopoulos
And it feels that way, you know, when you're traveling and you're crossing these.
- [74:08]
Matt O'Dell
Borders or getting letters from the government about your taxes or whatever, just every.
- [74:13]
Andreas Antonopoulos
Interaction, for me at least, there's this underlying, like, paranoia because, you know, you're.
- [74:19]
Matt O'Dell
Kind of their slave in a way that, like, they. Any moment, if there's something they don't.
- [74:24]
Andreas Antonopoulos
Like about your behavior, they can just lock you up and. And it's over. It'll kill you or whatever.
- [74:29]
Peter McCormack
And for most people in most situations, it never gets to that point.
- [74:33]
Andreas Antonopoulos
But bitcoin is like the first time.
- [74:36]
Matt O'Dell
I have ever in my whole life.
- [74:38]
Peter McCormack
And probably all of us have had.
- [74:40]
Matt O'Dell
An opportunity of achieving an ideal, a.
- [74:42]
Andreas Antonopoulos
Kind of better setup that maybe dismantles the power of governments in one way and makes them have to behave more.
- [74:51]
Matt O'Dell
Like what we designed them to, you know, like to serve the people and provide, you know, centralized deficiencies for us.
- [74:58]
Andreas Antonopoulos
Which I think is what they're really.
- [74:59]
Peter McCormack
Supposed to be for.
- [75:00]
Andreas Antonopoulos
And I'm not like, anti government. I'm just anti evil and anti corruption.
- [75:04]
Matt O'Dell
I think the current design allows for.
- [75:06]
Andreas Antonopoulos
Too much corruption, too much inefficiency, too much basically arbitrage of ignorance, and that bitcoin helps cure that.
- [75:14]
Matt O'Dell
I feel totally impotent to participate in.
- [75:17]
Peter McCormack
Politics, to vote to make the world.
- [75:20]
Matt O'Dell
A better place, to volunteer to make.
- [75:22]
Andreas Antonopoulos
The world a better place.
- [75:23]
Peter McCormack
It just feels totally minuscule.
- [75:26]
Andreas Antonopoulos
But when I help bitcoin, when I do something, you know, to even just.
- [75:31]
Matt O'Dell
Buying a little bit of bitcoin just.
- [75:33]
Andreas Antonopoulos
Feels way more powerful.
- [75:34]
Matt O'Dell
Like I'm doing way More for the future of everybody.
- [75:39]
Peter McCormack
Okay, so what did you make of that? Did you enjoy that? Will you be sending the show out to your no coin affair friends? I do hope so. That and the full beginner's guide I really think is a good solid place to start with bitcoin. Now introducing people to bitcoin can be really hard. Convincing people that it is more than just a make believe magic Internet money is tricky. Trying to get them to think beyond just making short term gains is always hard. Now I've really worked hard myself to try and give people a chance to head down the rabbit hole to learn as much about the broad topics relating bitcoin as possible. And trying to distill this down to one episode, to get that 20 hours of content into a single show that's just over an hour was really, really tricky. So there are some bits missing, there are some bits that aren't in this. If your friends do enjoy this, please do direct them to the full beginners guide. Now I do enjoy making these shows and I have really enjoyed this new format. It's something I'm working on for my other show, Defiance. I've got some really interesting shows coming out on that soon. I've got one looking at the future of money with a whole bunch of interesting guests coming out that should be out next week. So please do check that out and please do let me know what you think. And listen, if you've got any feedback on the show, if you want to reach out to me, I do try and reply to everyone. I've had a lot of feedback recently which has been amazing. Really enjoying reading your emails, especially as I got one from a founding member of the Clash which is pretty cool. All right, have a great weekend. Look forward to hearing from you. It's hello. What bitcoindid.com if you want to reach out, have a great weekend. And yeah, sun is shining, lockdowns are hopefully going to be ending soon. Hopefully. Hopefully we can get people back to business and life and get back to as much as normal as possible. Take care and I will see you soon.