Banking on Bitcoin | BITCOIN DOCUMENTARY | Crypto News | Blockchain | Digital Money Explained

[Music] [Music] i really like it down here i live right literally right by the world trade center i walk home i live above it actually my ankle bracelet tells the government where i am every second of the day any time of the day but it's going to come off when i go to prison i think and i don't think i'm wearing this in prison so that's what that's what the plan is for [Applause] that [Music] so closing numbers on the markets today at one point the market fell as if down a well it was an historic day with wall street shaken to its very foundation and even the health of the most trusted firms are now being called into question we have former secretaries of treasury who go from government to wall street pocketing hundreds of millions of dollars in 2008 i became somewhat obsessed with the role that money itself played in the crisis and the role that governments and banks played in money and why was it that our money was controlled by central banks if something new happens is the government likely to give it a nod or at least ignore it for a while or is the government likely to come down and try to crush it because they're afraid of anything new and different this is a monetary revolution bitcoin is the honest currency [Music] so okay this past week we've been talking about money i'm going to ask everybody what you think money is can you give me some answers now money is like paper and you can like buy stuff with it so you have to have like four quarters for a dollar you need money to buy your house like food water oxygen not accident money is basically just an accounting system it is a way of recording who owns what who has what who owes what to whom that is all money really is and you needed somebody who could stand as the central issuer somebody who was the trusted third party someone who could guarantee that the money was real and for hundreds of years now we have had governments issue money again money is just an accounting system that's what bitcoin is bitcoin is really just an accounting system it is a way of recording transactions recording value and it does it digitally so you and i can send it to each other directly and everything is recorded in the open ledger by monitoring and updating that ledger in a collective consensus based system uh you do away with the need for somebody in the middle having to be the sort of repository of all the information and that's what gets away from the fees the inefficiencies and ultimately the potential for corruption and risk that come with centralizing information in that way what it does is it takes that that trusted third-party function and it automates it it puts it into an open ledger that is put online that is there for anybody to see so that every bitcoin is accounted for so that you know that you're not getting a counterfeit bitcoin it's kind of remarkable that this idea of bitcoin was launched just a few weeks after lehman brothers went bankrupt and the whole system nearly collapsed and the problems that cropped up in the crisis were very much a part of the writings of satoshi nakamoto i think what the crisis showed is that the existing system had some major flaws it wasn't working and people were hungry for some sort of alternative [Music] i discovered bitcoin's power when i understood for the first time that it was not controlled by a central company or a central person because i knew that meant it couldn't be shut down and if it can't get shut down all it needs is to do something useful and it will become more and more adopted and as the value grows people find more and more uses for it the beauty of bitcoin is it's easily transferable it's anonymous and by 2140 there's going to be 21 million and that's the cap there's only x amount of gold there's only x amount of bitcoin before if you wanted to send something of value across the internet you had to get somebody else involved you had to have a credit card company or paypal or maybe a bank involved in the transaction the promise of bitcoin is that you're directly sending this currency to another person and then the bitcoin network performs the function that normally paypal or bank or your credit card company would perform bitcoin really puts the control back in the hands of everybody everybody who's participating the bitcoin system is controlling how it works if you want to look for the genesis of cryptocurrency uh it was a cypherpunk movement you know growing out of a kind of a love of the internet and its possibilities the discovery of cryptography and imagining that you could actually uh give birth to a new world really out of the internet um that a world that lives outside of the nation state and outside the structures of power and the hierarchies that are associated with that these people had talked about the need and the possibility for a digital currency that was anonymous or could be anonymized using cryptography the cypherpunks that emerged in the early 90s were hyper concerned about privacy about personal liberty and a lot of people come up with their own systems some of them came very close to happening the one that probably came the closest was digicash from david choum privacy of payments is actually essential for democracy the reason is not because you need to be able to make private payments in order to express yourself but rather that in order to inform yourself you may need to purchase information and that's the thing that allows you to have opinions uh worth expressing although i wouldn't say david chom was a cyberpunk he definitely inspired the cypherpunk movements it's as if the cypherpunks kind of came upon david chom's tools like the technology of some alien species and they only took the weapons they were most interested in the ones that could be used to disempower the government and empower individuals the break between him and the cypherpunks came when he realized he would need existing institutions to help him with it so he started talking to governments he started talking to banks he was very close to having this thing happen in the late 90s and nobody was really prepared for this outside of the cypherpunk movement people seemed like had almost sort of given up on the project other than a few experiments here and there by hal finney uh nick sabo the conversation around this really died down and then all of a sudden it came back to life after the financial crisis and you had people going back to those experiments in the 1990s and looking at new ways of putting those ideas together uh nixabo in 2006 had just finished up a midlife stint at law school and if you look at nick's writing around the financial crisis that it really revived his interest in these ideas that you know he'd been working on in the 1990s with privacy and contracts and the problems of governments and other trusted third parties and he brought bitgold back into the conversation so how finney came up with his own system adam back has hash cash way die has b money zabo has big gold so what satoshi did in 2008 was satoshi took a lot of these ideas and made them work and created an encryption-based protocol it's not really a currency utilizing a ledger called the blockchain allowing for many kinds of transactions to occur contracts all kinds of things can be built into the blockchain and it does this through a system of consensus building where multiple computers all participate in the the management of the blockchain ledger the kind of digital document if you will that keeps track of all the payments [Music] i understand it's something that is instantaneous online and it can go from one country to the other and you know they have their money well i never heard of it until nancy called me and mentioned digital currency and i'm thinking she must have been in the bottle this morning or something yeah what what you know but they say it's for people who don't have bank accounts i can't understand if you have one coin that's let's say it's worth 150 um what do you do give the number or something to the say the grocery store person and then they subtract it how do you know how do you make change how do you know what you have left or what you've spent you can have the money supply controlled by a computer that's all bitcoin really is the key point here is that this is a distributed ledger there is no central server all the other ledgers that we have all banking ledgers all company ledgers they all sit and reside inside that company which means they have one point of attack they can be hacked jp morgan was was hacked by you know cyber thieves not so long ago home depot target we've had all these companies get hacked precisely because there's one central repository of information the bitcoin ledger resides on you know thousands of computers you can't hack that every single transaction is recorded and once it is recorded in the blockchain it is there it is permanent it cannot be altered it cannot be changed so that you can read it now the identities of the people are encrypted the wallets are encrypted so you don't know who is spending the money but you know that every single bitcoin out there has a history you know where it's been you know the different addresses it's gone between the most important pieces of the bitcoin infrastructure are the miners these are the computers that are tasked with maintaining the ledger of the blockchain to verify the information to update it to make sure that this is trustworthy so how do we incentivize them to do so as they are going through the process of confirming transactions they are simultaneously being subjected to a very very difficult computing test the bitcoin core protocol is is forcing them to look for a number all of these miners are ultimately competing to be the one that receives that payout every 10 minutes but really that's the secondary component they're really being rewarded with bitcoin but what is the more important task and that is the validation and verification of transactions and the maintaining of the ledger bitcoin in being the first to achieve this holy grail of decentralized value exchange that transfers that process of trust to a collective agreement around a body of independent computers who are compelled by an incentive system to maintain that consensus and firm the information to be correct is incredibly liberating because it means that we can do it without all these intermediaries in all these different realms the most important thing behind bitcoin is not the currency the key factor is the blockchain nobody expected this you know in 2008 you know very few people cared about it it was just the computer scientists and the sort of code geeks that were really interested in all my communication with satoshi was ever um by either the bitcoin talk forums which all that communication is public or private forum messages or private emails satoshi was always all business it was just always about the code my very first message to satoshi i asked him so you know is satoshi your real name what have you done before can you tell me a little bit about yourself and he just ignored that completely but came back and said you know great to have more experienced programmers helping out with the project you know here's a couple of problems that need to be solved maybe you can help solve them [Music] in 2011 i was into bitcoin sort of just as a hobby i didn't really know what to do in it yet i was trying to meet everyone i could figure out what projects would be cool to work on i met roger vere sort of in august of that year and a few months later he recommended to this guy charlie shrem who started bitin that charlie should hire me as the head of marketing for biddington bitcoin is cash with wings it's the ability to be able to take a local transaction and do it globally and that's why bitcoin is going to overturn the financial infrastructure bitcoin is like the largest socio-economic experiment the world has ever seen our conversations would range from you know the mundane and practical like how the hell are we gonna get another bank account since our current bank account's probably gonna get shut down any day now two uh very high-minded aspirational ones you know like is this actually going to change the world in a good way are we just a bunch of crazy people who don't know what the hell we're talking about or are we actually starting to initiate an industry which in hindsight will look obvious to everyone but you know right now it's not charlie shrimp was at that stage a fairly high profile figure in the bitcoin community the vice chairman of the bitcoin foundation and you know one of these bitcoin uh millionaires who made a lot of money very quickly and really played an important role in the infrastructure of managing the movement of funds around the system in that you know early rudimentary phase 632 bid 654 offer in the new york cash market for bitcoin buyers right now will pay 632 dollars cash on the spot where have you been getting your bitcoin sir who's next for the bitcoin do i know what bitcoin is 6.53 i don't want it again in the last two weeks i got one-third more dollars if you want to go on down to 40 broad right next door to the stock exchange there to the new york bitcoin center you can buy and sell all the time [Music] you have a table in the middle yeah just one small table round and i have flowers like a flower arrangement a really nice flower arrangement bitcoin flowers coin flowers so corn flowers would be uh white lily purple and orange which is right here three colors we're putting together the first uh bitcoin center here in new york city right next door to the new york stock exchange bitcoin is a new space and many of the rules and regulations that haven't been imposed yet but uh we will open one day soon after the lawyers do their job a live digital currency exchange what's happening here is a fusion between wall street and bitcoin hopefully satoshi seemed to acknowledge that it would be hard for bitcoin to develop in any way in which it wasn't interacting with the regular economy of dollars and euros the problem with exchanges is that they took you back to this old world that bitcoin was really trying to get away from as soon as you move back to an exchange you're moving back to a world in which some third party has all this personal data on you has all of your money has all the security vulnerabilities and really has none of those strengths that bitcoin was designed to provide jen mccaleb created mount gox essentially on a lark one night because he couldn't buy bitcoins as quickly as he wanted to and interestingly he did it by starting with a url that he'd previously used to run a magic card trading site so you get an idea about where some of these ideas are coming from and how you know really kind of rudimentary some of them were jed essentially threw this site together and put it online without too much thought uh it immediately took off like much faster than i thought it would and then i realized that at the u.s there's all these regulations you have to apply with there's a there's a lot of like legal risk around like money transmissions judd essentially sold it to the first person he found who was mark karpeles a french guy who was living in tokyo he really knew very little about mark when he decided to sell it to him and once he took it over it began growing much more quickly than mark was expecting or was prepared for he's still running it poorly but it's still going there are 21 million bitcoins programmed into the system that are going to be released it's a set number but within that every single bitcoin can be divided up into 100 million different pieces so there's room for it to expand as the use expands especially in the emerging markets in the developing world that is really the most interesting place to see where this thing goes so in my pocket i have 100 trillion zimbabwe dollars from the reserve bank of zimbabwe just as a reminder of you know what happens if our government screw up our money you know zimbabwe is a good example of a government that lost the trust of their people and they lost the trust of their people by printing too much money and causing runaway hyperinflation so i think you will see you know people in other parts of the world who've experienced hyperinflation who've experienced bank failures i think those will be the kind of people who are looking for something something new right they're willing to take the risk a lot of us take the capacity to send money to others receive money store money and do it electronically these days for granted because we are amongst the lucky 50 or so of the world that have bank accounts but 2.5 billion adults in the world do not have access to bank accounts a technology like bitcoin cryptocurrency has the capacity to to bring those people into the financial system to give them this power to effectively have what you could argue is a bank in their cell phone a bank in their pocket really could open up commerce to a lot of people who are currently excluded from it somebody who is maybe working in one country and you know they want to send money back home and right now you know like western union is a big way that people do remittances from a western union perspective we serve clients in many different locations around the globe and and primarily for remittances western union serves typically an unbanked customer a customer who is either a migrant worker or a individual who doesn't feel comfortable in the financial services sector and the problem with remittances is they're really expensive so if i'm sending 100 back home i may end up spending five or ten dollars just on fees to you know get that money back to my family that's a huge percentage if you're poor and working so since bitcoin doesn't care about borders i could just send bitcoin to another country and if if my family in that other country has some way of spending that bitcoin or has some way of transfer of exchanging that bitcoin into the local currency uh then it's just quicker and cheaper and more convenient and a lot of people think that remittances will be one of the really big first uses for bitcoin the one challenge there is we deal with you know in our company 750 transactions peak a second and those happen instantly if you look at a blockchain you have to wait for verifications and if you do a recent test it takes about 15 minutes for every transaction to be validated by the network that doesn't scale so it has its challenges as well [Music] wikileaks which solicits and publishes secrets and suppressed material from whistleblowers around the world has been under cyber attack from governments that want to shut it down paypal is the latest business to break ties with wikileaks but the whistleblowing website dedicated to publishing classified government documents still continues to seek funding while crossing out paypal as one method of payment in order to ensure our future survival wikileaks is now forced to temporarily suspend all publishing operations in order to direct all our resources into fighting the blockade and raising funds the wikileaks scandal seemed to provide an opportunity for bitcoin at the time the big banks and credit cards stopped processing payments for wikileaks and some people thought that bitcoin would provide a way to send donations to wikileaks you could certainly see in the hubbub around wikileaks that satoshi was still somebody who was very paranoid about the government and the government coming in and taking too close a look at the bitcoin project and you could also see that satoshi i think realized at this point that bitcoin was still young software and the kinks hadn't been worked out yet in i think late 2010 he asked me if it'd be okay if he put my email address on the bitcoin.org homepage because he had been the primary contact for people um and i said sure and he went ahead and changed the web page and but what he did is he he he left his name there he took away his email address and so it was just me and my email address who was suddenly getting all of the attention and i think that was satoshi's way of kind of saying you know you're the you're the leader of the project now there was one particular email where he told me that he was going to step away from the project and do something else he never told me what else he's going to do or that he is doing i had just been invited to give a talk at the cia and i told satoshi that i accepted the invitation to go speak at the cia after he sent that email to satoshi telling him that he was planning on going to the cia he never heard from satoshi again and that was essentially the last time anybody heard from satoshi you very quickly get caught up in the question of who is satoshi nakamoto where did this come from who is this person i mean this is the 2000s information is out there everything everyone knows everything about everybody how can there possibly be a person that nobody knows who this guy is but there is a person and at least they think it's a person it might be a group who nobody knows who this guy is and he kind of appears out of nowhere in 2008 on these cryptography email lists with this system called bitcoin he's very active in the early years there's a lot of back and forth with him communicating with people it seemed like most people kind of wrote them off it's kind of like a illusions of grandeur kind of scheme hal finney on the other hand seemed to be really interested right from the beginning he was a crypto idealist like he was not as kind of cynical as many of the other cypherpunks so he got really into this he started talking to satoshi nakamoto who he said seemed like some young japanese american coder hal finney was the first guy to work with nakamoto he was a cryptographer as soon as nakamoto released it he was one of the first people to email him back and say hey this is interesting i'd like to work with you and in the first weeks of bitcoin he worked with him back and forth setting up the system and satoshi nakamoto ended up sending half any the first ever bitcoin transaction any discussion of satoshi's identity has to go back to the fact that bitcoin was based on this small number of projects back in the 1990s that only a handful of people knew about like hash cash and bit gold and b money and so you end up with a pretty small group of people who would have known about these projects people thought chom david chong was and you know everybody in the cypherpunk movement at one point or another they've said well he must have been satoshi they've all come out and denied it probably somebody who started out in the 90s in california with the cypherpunks somebody who was very very good at cryptography who understands encryption and has done a wonderful job of just separating bitcoin from anything that can identify him i think for bitcoin's sake the continuing anonymity of satoshi has ended up being a really good thing because people who have gotten involved in it have been able to write their own ideas and dreams onto this technology and there was nobody there to say no that's not what i meant [Music] in the early early days the first group was really just a bunch of more or less tech-minded coders then you had the libertarians come on board who saw it through a political lens i'm excited to be a little bit of part of it with allowing and accepting bitcoin and then you had these two groups working together and they overlapped too and the timing was very good because the existing system was in utter disrepair it was like a match to a pile of wood with gasoline pour on top of it and the whole thing kind of really goes viral and takes off and then you have the suits the vc money and it was very small at first just a couple guys out in silicon valley who ran into bitcoin guys at coffee houses and you started having this meshing of conversations once silicon valley gets on board that whole dynamic starts to take off so now you have the tech-minded coders the libertarians the counter-culture people the vc silicon valley and you have this entire great mishmash of people coming together you had a network effect the more people that got involved the stronger the network got and the more it grew and it really started growing on itself and in 2013 especially you would literally see this thing mushroom the thing was just growing growing and growing and growing as more and more people got involved [Music] i think most bitcoin companies at the time knew that a big part of the market for bitcoins was people buying drugs on silk road who needed bitcoins to do that the big bang moment for bitcoin was the silk road what ross albrick did by creating the silk road was he took this by no means common but usable cryptocurrency called bitcoin and he married it with a streamlined workable user interface that was a free market that could sell anything what would happen if people were really free truly free to trade what they wanted to ross did have an extremely radical libertarian viewpoint and really wanted to experiment with using technology to create free markets for people what ross albrick did it's a combination of tor and bitcoin that was the aha moment that ross must have had the silk road was basically the fruition of all of the cypherpunk dreams the cryptoanarchist utopia that they had imagined in the 90s you know was real now this was a perfectly in theory anonymous website with perfectly in theory anonymous money used to buy any contrabands imaginable the silk road website is a particular headache for authorities it's an anonymous online marketplace where people sell drugs that are posted to customers all over the world cyber investigators you know when there's a crime can kind of trace you back because you have an ip address it's like a telephone number so if you call another computer that ip address is tracked on tor that's taken away because your information hops from computer to computer computers and there's no way to trace you back to your original one tor is an anonymous system so if you use the tor browser which it has a browser you can go to tor and download their browser you can browse with some degree of security so that's great for plugging your banking information into a site so you don't get hacked the other component of tor which is has similar uses is called tor hidden services tor hidden services is actually to put it simply a url that doesn't have com on the end it has dot onion and that is its own little space where you can create websites and you could freely transact without oversight or regulation people put websites on there that are outside of law enforcement's view there's hackers for hire there was malware there was credit card dump services there was a whole bunch of them chris tarbell has ended up being in some ways the most important fbi digital crime investigator of the last few years he was the one who took down anonymous essentially so we decided to start looking at some of the services on tour and silk road being one of them other cases they would hit tor and they would kind of throw their hands in the air and say it's tour there's not much we can do about it i found it interesting to kind of take a look at it and tackle it vinstin was basically born because if you want to move your dollars into a bitcoin exchange it takes you know at least three days and since the major exchange of mount cox was in tokyo it could take a week or more so that's really problematic um and basically charlie had figured out that if he just held a balance of dollars at the exchange you could go to him and say charlie i'll give you a hundred dollars will you give me a hundred dollars of credit at the exchange and you can literally then have your dollars at the exchange in 10 seconds as opposed to a week so that's hugely helpful especially when bitcoin is so volatile and you need to know exactly what price you're gonna get charlie was raising capital uh right is sort of i i joined during that process he came across lots of interested investors who are starting to get a whiff that maybe this bitcoin thing was was cool we had an interesting debate early on about um do we invest in bitcoin or bitcoin companies and we sort of decided to do both more towards investing in actually bitcoin in the asset early days but also trying to place a few bets in the ecosystem to support the companies support the entrepreneurs and and see how that went a few days after they first found out about bitcoin they were in the bit instant offices in new york meeting with eric and charlie and eric and charlie uh essentially talked them through bitcoin and answered all of their questions and concerns what made you invest in bit instant there are a lot of companies and exchanges and websites with respect to bitcoin regulation is obviously a big question what you do want is a company that sort of takes that seriously and understands that there's the technology element um there's building the company and then there's also creating the company that works with regulators and so that's been instant it's not this sort of completely underground thing i mean charlie the ceo happens to have been in the space for a long time so he's sort of on the pulse and the cutting edge you know you come out and you say like we want this bitcoin thing to overturn everything but at the same time we have to be compliant and we have to know you have to know your customer you have to know every single customer no matter what even if they're transferring a dollar or a thousand dollars and how reasonable is that the term money laundering was invented by banks and knowing your customer shouldn't be this complicated expensive thing and you shouldn't treat everyone like a criminal at the beginning they really wanted us involved people were really friendly because it benefits you to onboard more people in so bitcoin's always been this very friendly community and it's also in in some ways it's it's self-serving that way but we were there for the right reasons at the time bit instant was the big company other than mount goffs it was the way that most americans were able to buy bitcoins here it is so bit instant was located right there i think it's the one that now says bling it was a whirlwind six months going from total obscurity with with no money to becoming you know one of the hot startups of bitcoin but almost as soon as the twins made their investment in the company it began falling apart the twins had a much more practical approach to bitcoin and bit instant they wanted to see the company making money and making as much money as it could as quickly as it could they saw early on that it would be regulated that it wasn't going to be this big and have no one be interested in regulating it so they feared that all kinds of regulators would come in at all different angles and tie the thing up in a complete morass where nothing would ever get done so they wanted to help drive the regulation so that whatever regulation would be there would work and would not end up being a complete dead end for bitcoin that strategy is smarter from purely a business perspective but i'm not in this purely from business perspective i am in this for business and because i'm trying to change the world and make it better and building bitcoin companies and begging for regulation that matches exactly the banking regulation that has caused so many problems i feel like is counterproductive for the most part bit instant was actually taking steps to make sure that people weren't using the service for illegal purposes but charlie made the mistake in dealing with btc king of acknowledging that he knew what btc king was doing and that he was acquiring bitcoins to sell them to silk road customers in this case charlie worked with the guy and wrote emails that essentially acknowledged he knew what this guy was up to [Music] [Music] that stunning arrest of the drug kingpin who goes by the name dread pirate roberts appears to have cornered the internet drug market his real name is ross albrecht and his website silk road is packed with products like cocaine and heroin the payment system is all through bitcoins which is basically digital currency not backed up by any international banks not backed up by any u.s banks but simply based on the confidence of the users who exchange these bitcoins computer to computer [Music] there's a reason why the case was tried in new york in the southern district and largely that was because of bitcoin [Music] ross was caught in san francisco the silk road servers were out of the country so why was ross's case tried in the southern district of new york where most of the financial regulations cases are dealt with where the district of attorney preet bharara has been all over bitcoin where charles schumer the senator has been all over bitcoin ross albrecht's case is a bitcoin case there's absolutely no denying it the the level of threat that the silk road posed to the marketplace to wall street whether it's a perceived threat or an actual threat was humongous and the idea that somebody could create a marketplace where you could freely transact without oversight or regulation had to be dealt a massive and public blow bitcoin kind of monetized that anonymous part of the internet and made it possible to trade in things that the federal government doesn't want you to trade in law enforcement moves slowly but it's it's a big heavy wheel that grinds finally so you know someone was running a hidden service and now they're in prison for life they were playing hardball it was very evident that their intention as the judge herself said in her sentencing was to make an example out of ross was to say to all of you people using bitcoin to all of you people who want to tangle with unregulated um marketplaces and technologies and open source you know cryptocurrencies we will throw the book in its entirety at you if you do this we seized a whole bunch of bitcoins and in order to sell those bitcoins off or or go to an exchange you have to fit within federal law and state law there's not really an exchange that could handle that that met those regulations at the current time so it had to be handled through auction [Music] you know anything about bitcoins there's a article in there wall street journal today on bitcoins really right here if you want to read it it is digital currency do you see that wow oh digital currencies will disrupt global finance transform the way we pay for things and just maybe make the world a fairer place from what i read on the computer they have had some problems it does say here it's a hand for drug dealers wow the reason is because you can't track it well i think i don't like this idea at all [Music] when we saw the silk road shut down a lot of people said you know bitcoin is nothing but illegal drugs on the internet that's what it is and they would point at the silk road and say look here at all the stuff that's happening here and i think when you saw the silk road shut down in bitcoin transaction volume take a tiny little dip and then keep going up you know i think that was that was a great event to point at and say you know it it really wasn't about that it really isn't about that you know it's a tiny little part of the economy [Music] i guess in the last week i've really started hearing about bitcoin recently i heard a scenario after the fbi had seized a bunch of bitcoins due to illegal transactions now they're going to be auctioning them off like they would a private yacht for you know from some drug dealer so that in a way legitimizes the use of it as a currency [Music] looks like it's the first live bitcoin exchange on wall street it looks that way [Music] right now we are looking at the open interest at the floor of the bitcoin exchange there's different exchanges that are online that will present the bid and ask but there's no true open outcry exchange buyers and sellers coming together in an open clear transparent honest way here's my transaction probably the first two transactions of the day it's really not about the money it's about being involved and i think there's a lot more people going to follow me charlie shrump 24 years old arrested today and charged with engaging in money laundering sram enabled people to transfer money from bitcoin to cash via his company called bit instant now the other point the dea is making is that shrem bought drugs online at silk road and that he knew silk road was a trafficking website and we know the winklevoss twins who obviously were featured in the movie about facebook they're actually investors in sram's company yeah you know a lot of people are very excited by this idea they like the idea that you can have a currency that is not tied to any kind of central bank but at the same time i mean think about it if you're in the federal government you don't like the idea that people could effectively use another form of cash to buy things that they shouldn't be buying online with me it wasn't all my customers it was one customer out of about a hundred thousand customers this was one customer one thing and i made that case to my senator i said your honor this was one customer it happened that literally i was coming home from amsterdam it was my sweatshirt i was still stoned i don't know what's going on charlie did not know when to shut up and that ended up getting him in trouble and probably led to the end of his company but they got me into the patriot act and it's money laundering because i knew that the money i was taking was eventually possibly going to be used for drug trafficking now drug trafficking is not buying drugs it's selling drugs i didn't have the drug seller i helped the guy buy drugs but i never went to trial because and i pled guilty because who wins at trial you know like this guy's still growing he's gonna go to life and in trial all i need to get was a lady who son died from a cocaine overdose and i would have the jury would have convicted me right there so essentially charlie was selling bitcoins to a guy who was selling bitcoins to people who were putting drugs into their own bodies um and for this charlie was charged with crimes that could have put him in jail for 20 years that's what the prosecutors were shooting for we have banks that have atms on every street corner in america and those banks know very well that that cash is getting used for drugs and yet that's fine they're allowed to do that no one gets in trouble but charlie sells bitcoin to a guy who sells bitcoin to someone who uses drugs and he goes to jail he was an entrepreneur that started building this industry built services that people found useful when bankers almost destroyed the world economy and none of them got in trouble whatsoever and here we have this 23 year old kid he goes to jail because he started building an alternative over the last six months our agency has been conducting an extensive inquiry into virtual currency the information we're going to gather in this fact-finding effort will allow us to put forward during the course of 2014 a proposed regulatory framework for virtual currency firms operating in new york yesterday we had serious criminal conduct come to light involving virtual currency as a vehicle from money laundering drug trafficking and other major felonies right now the regulation of virtual currency industry is still akin to a virtual wild west that's why we're evaluating whether our agency should issue a so-called bit license specifically tailored to virtual currencies i think people who imagine a very powerful utility like bitcoin that would somehow escape regulation entirely are either naive or extreme optimist bitcoin is a battle of ideas and it forces the issue of whether people should be as free in their handling of money as they are in their handling of speech or religion or relationships with each other if you want to have this thing go mainstream you're going to have to have the regulators the lawmakers weigh in on it one of the first ones who really took an interest was benjamin lowsky very important regulator in the financial world and in january 2014 holds these public hearings because he wants to come up with a license for bitcoin companies we believe that putting in place appropriate regulatory safeguards for virtual currencies will ultimately be beneficial to the long-term strength of the industry itself lossy was essentially given the opportunity to write the rules for this whole new industry from scratch the first question is the obvious one that's on everyone's mind it was sort of unexpected yesterday but with the arrests we saw obviously that's put a bit of a cloud hanging over the industry right now and so how do each of you react to what we saw yesterday what it means for bitcoin or virtual currency and its future i think it further supports that um bad guys are going to do bad things and they're going to use whatever technology is available to them but i view it as if the allegations are true and they're convicted the system works are people still doing bad things with bitcoin sure is the majority of the bitcoin activity vice not a chance so i think the issue you raise is one um that people like to write about the media likes to write about makes great headlines you get a lot of clicks you can sell a lot of ads but i think it's in in the rear view mirror there are some people in the bitcoin community from the libertarian side of things that want government to just leave it alone would you say regulation is both inevitable but more importantly actually ultimately going to be crucial for the survival of virtual currency sounds like a terrible idea to me uh just understand what we're trying to do with bitcoin we're trying to create a world where transactions can move globally for free okay and making these companies hire you know some outsourced compliance firm is is a bad idea it'd be great in any industry if you could just open the door and let folks run out and give a shot we may choose not to invest in a company if they can't get licensed by you if the choice ultimately is between preventing money laundering on the one hand then i probably even shouldn't use the word money laundering because it's too nice a word frankly money laundering is the facilitation of all kinds of horrific crimes that i think everyone in this room never wants to see happen acts of terrorism funding rogue nations etc all take place through massive money laundering now the choice for the regulator is permit money laundering on the one hand or permit uh innovation on the other we're always going to choose squelching the money laundering first um i agree that that i don't think anybody wants money laundering um when we got him first saw bitcoin you know about a year and a half almost two years ago i don't think anybody would deny that it was a bit of a while out west because there was no regulation there was no framework to evaluate the asset evaluate companies determine who is compliant who is not and a wild west you know attracts cowboys and i don't think anybody here would disagree with the fact that a sheriff would be a good thing a lot of i think the entrepreneurs feel like they have to self-censor they don't want to come out vocally critical of the regulations part of that is maybe because some of them just like regulations but i think another part of it some of them just feel like they will get attention of the regulators if they come out against them yes we want them to innovate but at the same time we just can't live in a world where we're going to permit money laundering to go on i think regulators should give bitcoin some time to grow up too much regulation now will just stifle innovation and i think before regulators kind of come in and say we're going to solve all your problems and then fail to solve all our problems i think they should give the innovators time to solve those problems one function of regulation is to make things clearer so right now bitcoin because it's so new is in a state of flux everywhere the lesson from the internet is anything that china bans invest in and that's a joke but the u.s allows google to operate here allows twitter to operate here allows bitcoin to operate here allows facebook to operate here chinese government doesn't allow any of those companies to operate the way they operate in this country or at all it's about freedom ultimately you know we're 50 yards from the old world trade center here and i think all of us never want to see anything like that happen again and it would have been a lot harder for 9 11 to ever occurred had we had the protections in place that would prevent the movement of massive amounts of money around the globe by people who would want to kill everybody in this room so um i think the key is to not create useless regulation but i think the motives behind a lot of those rules are to ensure uh we don't miss something again since 2001 there's this absurd obsession with terrorism so anytime a regular gets up and says well bitcoin can be used for terrorism well of course it can so can anything so can cell phones and soak in the internet and soak in a car it doesn't mean that we should you know stifle the growth of those industries just because bad people can use it [Music] this has arguably been the worst week in the cryptocurrency short life stunned by the collapse of once dominant exchange mount gox now that failed firm ceo mark karpeles is in hiding some 750 000 bitcoins allegedly stolen or lost which accounts for about six percent of the total circulation by the time mount cox went down it was holding what its customers believed were about a half a billion dollars worth of their bitcoins and the company's bitcoins it was no longer the largest exchange in the world but part of what's so amazing is that people kept using it even after there had been numerous incidents in which it was clear that the company was not up to the task of safeguarding the money and the only reason he survived as long as he did was because in 2013 the price started going up people kept putting money into it he had more and more money because the price was going up but as soon as the price started going down this is what happened right it peaks in late 2013 starts coming down in 2014 as soon as that price started coming down it all just tumbled for him gox was going to collapse that it lasted as long as it did was actually kind of a stroke of fate but its failure was it didn't have the kind of more boring mainstream institutional controls that we require to bring it to the next level and there's a whole bunch of money missing and no one knows if they just lost it if it was stolen from them if they uh embezzled it or what but the important lesson from gox isn't that bitcoin doesn't work the important lesson from gox is that you don't leave your money with a trusted third party because you can't always trust them you can only trust them until you can't this was also a lesson that people were supposed to learn during the financial crisis but they don't seem to have learned it yet [Music] mark carpales was a gamer he was not a finance pro he really didn't know what he was doing and he didn't he didn't build it jed mikhailov built it he didn't improve upon it i mean it lurched from crisis to crisis throughout the entire history last year was a terrible year uh for bitcoin an especially terrible year for the foundation because we had two of the people on our board of directors who had to resign in disgrace basically you know my my expertise is technology my expertise is not figuring out like who's trustworthy who's not you know which businesses are going to succeed which businesses are going to fail after we had held our hearings we thought we would take six months to nine months even a year to draft our initial regulations this was so complicated that we wanted to really take our time and get it right uh what happened was though mount cox collapsed and i think that gave us a real renewed sense of urgency and we realized that if we got regulation right we could create more confidence in bitcoin frankly as opposed to the sort of loss of confidence you saw uh not only from the silk road case but also from the collapse of malcox so your sense though of the regulators right now i assume you've had conversations with the discussions that we've had um i think everybody recognizes the innovation and doesn't want to stifle it they just want to make sure that there's healthy regulation so it's used in a safe and uh and productive manner i'm not giving up on new york new york's giving up on me i can't even turn on a bitcoin machine an atm i can't turn it on i can't make trades i can't do anything there's no cash flow at all and it's potential regulation it's uh regulation that i should believe is coming down the uh pipe i don't want to do anything that someone's frowning upon right next door to the stock market they're going to lock me up you know you can't have an exchange well we don't people meet then exchange with each other new york's sitting there on the high horse and the whole world's waiting on new york to create some [ __ ] license ultimately lowsky's office brought out the final rules for the bit license in the spring of 2015. a lot of companies complained that the regulations were too burdensome for them to operate in new york and still make money i saw just overnight dozens of companies that were on the verge of launching they just threw in the towel said we can't can't afford this eric voorhees new company shapeshift would have had to apply for the bit license if it wanted to keep customers in new york so in my lab here i have the the application forms for license to engage in virtual currency business activity which is a very statist way of of saying the the bit license this is this is the application to be approved to do basically what we've all been doing for years now which is building bitcoin companies in new york and a lot of stuff in here i personally feel is unethical so we're not going to comply with it which means we have to block new yorkers entirely and when an entire new industry starts blocking a place like new york that used to be the financial center of the world hopefully some of those politicians will take notice the point of it is to one make sure there are enough consumer protections to make sure we have adequate cyber security three make sure that the companies are adequately capitalized so they don't collapse upon themselves you know you've seen a tug of war between the hardliners and those who are saying you know you've got to have enough space for innovation in here and the system has has come out i think probably stronger as a result of that and there's a widespread view amongst certainly the business bitcoin community that some level of regulation gives legitimacy to what they're doing it gives people confidence in what they're doing this is an important part of growing up ultimately they're not going to get it right because no regulation is ever right but i'm highly confident that whatever um happens going forward um the bit license will be looked at as a as a positive development in the evolution of bitcoin because it just removed one of the biggest pieces of uncertainty which is how is this industry going to be regulated i think most of us at least a lot of us think that sensible regulation that sets guidelines that makes sure people's money doesn't uh just go into a black hole that that's a really important thing that regulation i'm sure satoshi wouldn't be happy to see this kind of thing which is not based on the the logic and reason that a programmer is used to i think a lot of developers understandably so try to stay out of the political nonsense it has been one of the biggest mysteries raging across the internet who is satoshi nakamoto newsweek published an article claiming the man in these images is the bitcoin founder the man who created bitcoin is known as the father of bitcoin the online currency now worth billions when you asked him about bitcoin and he says i can't talk about this anymore he was not referring to bitcoin but with me he definitely acknowledged bitcoin i think at this point now he's saying he was confused by the conversation clearly somebody thought that we did this into an act of war against satoshi nakamoto or bitcoin and i want to be very clear that i certainly never meant it that way i have nothing to do with bitcoin it was a monstrous story how did they figure it out oh my god look at this guy that they named his name is dorian satoshi nakamoto living in california basically hiding in plain sight it becomes a gigantic media scramble and then dorian emerges from his house looking kind of disheveled looking kind of confused and he says he's not satoshi nakamoto says he's never heard of bitcoin he doesn't understand he had one conversation with leah she misunderstood what he said she took it the wrong way and you probably would have had to have been a cypherpunk to understand all the elements of it that had already been put together the odds of it seemed very low to me that it was somebody from completely outside that community who happened to know all these different things and put this together and appear out of nowhere the day that newsweek's story came out naming dorian nakamoto as the creator of bitcoin i got this email from an old acquaintance that was titled what are the odds and it's laid out the fact that hal finney lives less than two miles away from the known address of dorian nakamoto where newsweek had found him and halfini is the number two ever user of bitcoin who received the first bitcoin transaction he works on an early prototype of an anonymous currency system he was a cypherpunk [Music] so how could it be that the purported creator of bitcoin and this known confirmed second ever user of bitcoin had it never collaborated that hal finney who was less than two miles away from during nakamoto hadn't helped to create bitcoin or maybe he really was the creator of bitcoin maybe hal finney was satoshi nakamoto [Music] when you look at the bitcoin white paper it made reference to a lot of the earlier projects that fed into bitcoin but it's very notable that the one project it doesn't refer to is nick zabo's big cold which is perhaps the closest precedent and the closest parallel to bitcoin i mean big gold is so close to bitcoin it's hard not to think that you know maybe nick is satoshi a lot of people will say nakamoto must be zabo nakamoto must have been finney but i don't think he was trying to leave any breadcrumbs out there for anybody to follow i told my editor about it he agreed that you found satoshi nakamoto so i got on a plane to santa barbara and i drove out to hal finney's house but at this stage he was already completely paralyzed by als this really awful debilitating terminal illness that slowly shuts down your body while leaving your mind completely intact and the time when he started to fade in his physical abilities did roughly coincide with the time that satoshi nakamoto started to disappear maybe the reason that satoshi nakamoto had chosen to fade away was because halfini was physically fading [Music] there have been a number of stylometric studies and you see so many of these similarities between satoshi's writing and those of nics including these little things like having two spaces at the beginning of a sentence and phrases and spellings that nobody else uses so i talked to hal as much as i could mostly in a kind of one-way interview because he could really only respond with yes and no answers and he denied being satoshi nakamoto you could tell that he was amused by the whole idea that i thought he was satoshi nakamoto one of the really remarkable things from nick zabo's writing in those months before bitcoin was publicly launched is that nick in responding to some comments about a post he had made about bitgold actually asked the other people who were reading him if anybody wanted to help him code this idea into real software that could work it was never turned into a reality but when you look at bitgold it's it's hard not to be struck by uh the similarities between it and and bitcoin maybe it was a duo it was zebo and hal finney and now it's possible yeah how could have been the coder um i don't know you know this idea that the alfinia could have been the kind of ghost coder for bitcoin i guess it's possible other people kind of speculating on reddit or other parts of the internet thought that maybe hal finney had used dorian nakamoto as a patsy if he were ever traced back to dorian nakamoto it seemed like this guy was the creator and hal finney would be sort of immunized from it everyone else who was involved in the project leading up to bitcoin has released their communications with satoshi from this period nick has avoided doing that and essentially went silent in those critical months after bitcoin was released you know when you talk to people face to face and they tell you these things you can get a sense if they're being honest and if alfinia actually had a secret billion dollar cash with bitcoins he wouldn't have been able to lie to me so effectively about it in the end the reasons to believe that this was all just a coincidence began to outweigh the coincidence itself it's almost like an eel there is something there you can see it but as soon as you touch it it just slides right out of your hands and you're left with nothing anybody who is of any note in the cypherpunk movement and even outside of it too has at one time or another been called satoshi hal finney denied it nick zabo denied it they've all denied it maybe one of them is satoshi maybe all of them are satoshi it really is a mystery [Music] that's your original ticker from next door all right so we're over here bitcoin center hundred feet from the stock exchange over here and uh you know some of you guys took a hit last week last couple weeks a lot of the big guys they got their foothold in the business that they weren't a part of in the beginning i don't know what's going on but uh i don't know i wouldn't write over bitcoin that easy i know that bitcoin is going to change the world it's changing the world already and we have to stand tall and proud as bitcoiners and early adopters they don't know anything about new technology but once it starts making sense they throw their dollars behind it [Music] you know unfortunately early adopters make the roads that we all travel down and they are usually paved over in the process the first guy through the door gets shot you know but somebody's got to go through the door but they're going to get shot charlie schrem ross albrecht julian assange they got shot coming through the door but we are all utilizing the freedoms and technologies afforded to us because they knocked the door down hey michael can i put you on speakerphone for a minute if i know how hey michael can i ask you where did where did you buy bitcoins where did i yeah um there's a number of exchanges but did you lose how much do you still have them can you use it do i want to buy it no not today though it is going to be around i don't know did you ever use it to buy anything um i bought some heroin [Laughter] no okay they should go back to you know day one and just start all over and forget about bitcoin and call it something else i think it's been so tarnished now with this uh with the silk road and uh you know i just think you know that all that stuff about 400 million dollars disappearing and uh you're just not gonna get off the ground nobody's gonna you know like warren buffett said stay the hell away from it to put all the cards on the table i'm going to be leaving the department in the coming weeks and if you asked me back when i took this job in 2011 what i thought we'd be working on during my tenure uh digital currencies would not have been at the top of the list so ben lasky created this thing called the bit license which is new york's attempt to regulate uh this scary new technology it's now law and he has announced that he is leaving government in order to set up his own private consulting firm to help companies navigate financial regulations such as the bit license that he created so we essentially had this beautiful new ecosystem being built and ben lasky comes by says i'm here to protect consumers he builds a huge wall around the thing and then he sits outside the gate charging people to get in this is the very definition of crony capitalism and for some reason ben lasky doesn't even see anything wrong with that i i think history will not judge him as favorably as he thinks so um yeah um i've started up my own consulting business uh it's been quite interesting doing a lot of work in the fintech space but also doing work with a lot of traditional uh companies in the financial services world as well ben lowsky's team at the dfs that was working on this these this bit license and the bitcoin initiative have all ended up leaving the agency and going to consulting firms that are now working on these issues danny alder is going to work for ipbit and dana syracuse is going to work for the consulting firm k2 it bit is particularly notable because they were the first to find a way to partner with the dfs to get license to open their own bitcoin exchange [Music] when this is over i'm definitely going to leave new york when i can um where i'm going to go i don't know i think the bitcoin community in new york is done with there's no one it doesn't foster innovation here it's too difficult to have a bitcoin company no banks will open up accounts you have the threat of regulation your high profile arrests like myself and others it's no one wants to deal with it when did you first start digging in on bitcoin two two and a half years ago when i took over the foreign exchange payments business at jp morgan so you probably had to mount gox pit instant your you know charlie and those guys i mean it's interesting almost none of those guys are around anymore two years ago at all the major banks bitcoin was an afterthought it was kind of a you know maybe in a hallway conversation at the water cooler and now you know even this week i met with one of one of the major banks everyone's got a bitcoin specialist at least one working group kind of teams of people who are trying to figure out how to incorporate the technology into their existing operation banks and institutions associated with the financial system i really started to recognize that the payment system underlying banking could be made more efficient by the application of blockchain technologies the blockchain technology underlying bitcoin has become something that a lot of people are now very very interested in for all kinds of other uses whether it's allowing for derivatives to be transferred or securities to be transferred or all manner of financial instruments to be transferred in complex interesting ways i think different companies are going to adopt different strategies and it's going to be fascinating to watch companies like digital asset holdings life masters company doing very very interesting work [Music] i didn't become aware of bitcoin in any meaningful sense until uh 2014 late in the year and at the time my perspective was one of skepticism i would say specifically because the storyline that i heard related very much to cryptocurrency as a potential medium of exchange and store of value which is a valid debate and application but it doesn't have uh the full extent of the power that the underlying technology has to achieve live masters is not just any banker she is this person who i think is really seen as being behind some of the most problematic innovations in the financial industry over the last three decades blythe is the one who's essentially given credit for creating the credit default swap which essentially provides a way to bet on the default of a bond and the credit default swap ended up taking this place at the center of the financial crisis and these bets that banks had made against subprime mortgages blockchain technology eradicates a significant amount of inefficiency in the system and reduces costs it doesn't mean that we are doing away with the need for trust in financial services at all bitcoin was designed to find a way to circumvent wall street and what blithe masters is doing is essentially trying to find ways to bring wall street into bitcoin and make it possible for them to use this technology as well what the bankers seem to be looking to do at this point is create their own private blockchain where their computers are powering it rather than these anonymous miners they want control over the system the banks are looking at this incredibly wide array of ways that they might use this which include you know replacing stock exchanges finding new ways to originate loans uh finding new ways to move money between countries and of course that's going back to the original idea of bitcoin but now it's happening within these financial institutions rather than outside it as bitcoin had imagined i have no problem with the banking system in the financial industry co-opting bitcoin primarily because bitcoin can't really be co-opted the fact that it's decentralized means no one can control it no matter who they are or how much money they have i think it's all good for bitcoin i think all of the innovation that's happening both on wall street and in silicon valley i think competition will take care of people who want to try to have a monopoly or who want to try to charge more than they should for whatever product or service that is happening on the blockchain it really is as advertised it really is controlled by all the people who are using it and it really is designed just to be a a more efficient more fair way of sending value over the internet bitcoin is not neutral you cannot remove the political component that satoshi implanted in bitcoin from bitcoin it's what a lot of the people on the wall street side try to do you cannot neutralize bitcoin it's impossible [Music] thankfully i'm gonna go to a you know comfy federal prison camp without fences there's pool tables and a track and a baseball field and decent food and kind of 100 to 200 people that are like color those guys in prison are the best ones to use a bitcoin they're smart i'm very excited to talk to them about it [Music] do so yes the vcs are driving this thing right now they're pouring money into it they're they're building these for-profit companies people who have a background outside of bitcoin seeing the value of it and coming to it but just because they're doing everything they're doing doesn't mean that the libertarians and the utopians have to go away bitcoin is open source you can do whatever you want with it so they're still there they're still building their products they're still building their vision and if bitcoin goes mainstream and if it gets picked up even if it's running in the background they're going to be elements of that and that's that's kind of what utopia movements always are the thing that the utopians were dreaming about is not going to happen the way they expected it but i do think it is going to filter through and you are going to see it you're going to see it so you're going to show me that satoshi nakamoto is you yes some people will believe some people won't and to tell you the truth i don't really care but you can say hand on heart to me i am satoshi nakamoto i was the main part of it other people helped me i'm going to come in front of a camera once and i will never ever be on a camera ever again for any tv station or any media ever [Music] [Music] me [Music] be [Music] so [Music] so [Music] so [Music] you

Channel: Plot11

Views: 454,636

Keywords: Banking on Bitcoin, digital money documentary, crypto banking, bitcoin documentary, cryptocurrency documentary, crypto trading documentary, blockchain news, bitcoin, bitcoins, bitcoin news, bitcoin mining, documentary, cryptocurrency, bitcoin cash, blockchain, Bitcoin price, btc, crypto news, crypto currencies, bitcoin explained, crypto currency, blockchain technology, info bitcoin, block chain, satoshi nakamoto, what is blockchain, Smart contracts, cryptocurrencies explained

Id: ByvbAi924TI

Length: 82min 58sec (4978 seconds)

Published: Tue Dec 15 2020

Reddit Comments

[u/BTCMachineElf]

One very interesting bit, from the 23 to 25 minute mark they discuss Satoshi disappearing.

"After he [Gavin Andresen] sent that email to Satoshi, telling him that he was planning on going to the CIA, he never heard from Satoshi again, and that was essentially the last time anybody heard from Satoshi."

[u/nota-doc]

This is a phenomenal chronicle of the origins of bitcoin. There is great history and explanation of how it functions. A great watch for anyone who has never seen it and has baseline interest in crypto.

[u/BF740]

Never seen this, thanks

[u/Love2Ponder]

Been awhile since I’ve watched. Thanks for sharing!

[u/katastroph777]

"You need your money to buy...like food, water, oxygen--not oxygen."

[u/WYTW0LF]

Dude I had been wondering where to find this doc for the longest time esp recently. Thanks for sharing!

[u/PilotF]

Thanks a lot! I wanted to re-re-watch it.

That's the best documentary on Bitcoin I've seen.

[u/E1ated]

Bookmarked, will definitely watch

[u/ZZ3xhZz]

Obviously still on Netflix. Great doccie.