start	end	text
1430	8570	All right. Thank you, Diego, for that introduction and to the whole team at Monero for putting on
8570	16230	another Monero Village at Devon. Just before I go on too long here, can people hear me?
16230	32670	Can I get a from chat or otherwise? Okay, great. Thanks for the feedback. All right.
32950	38730	So, I'm here to give the keynote at Monero Village again. It's a privilege and honor
38730	45410	to do that. I'm Dr. Daniel Kim, Founder and CEO of Sweetwater Digital Asset Consulting.
45450	50530	A little bit about myself. So, academically, I'm trained as a particle physicist. I did
50530	55370	my undergraduate and graduate work in experimental particle physics at Harvard.
55470	63070	Later, I wanted to show an interest in the way the real world worked. Because a PhD shows you
63070	68710	can go deep, I wanted to also go wide and learn about different things and how the world works.
68730	75490	Picked up an MBA later. Most of my career was spent in the non-profit sector. I spent 10 years
75490	81290	as a symphony orchestra musician. Ended up doing about 700 concerts professionally. And concurrently
81290	87290	with that, I was a medical school professor as well. It was as a medical professor that I did my
87290	94090	perhaps most DEF CON thing, which was to invent a device that did packet sniffing on a medical
94090	99750	network to reconstruct treatment data being delivered to cancer patients just before the
99750	106790	time of treatment. So, I got that patented and kind of learned about how the intellectual property
106790	115990	system works. After that, I decided that I wanted to try something new. So, I went into the
115990	122910	for-profit world. I ended up becoming Director of Research at an equity hedge fund. And it was
122910	128910	there that I started to look into cryptocurrency kind of as a hobby, just as this interesting thing.
129450	135270	And it was there that I decided that there are only a few times in one's life that a truly
135270	141330	fundamental discovery is going to happen. And I came to the conclusion that Nakamoto Consensus
141330	147330	was one of those. And so, I decided to go off on my own. And so, I'm an independent consultant now.
147330	153910	Sweetwater Digital Asset Consulting is my firm. And I seek to connect two very separate worlds
153910	161310	that often see each other with a rather distorted lens. So, on one side is the non-commercial,
161310	168130	open source, cypher, grassroots, cryptocurrency side, which is well represented at DEF CON.
168310	174270	But then there's a parallel world that happens. And it really is a world like it goes on
174270	180790	independently. And there's very little kind of real dialogue between these two groups.
180790	187150	And so, that would be the traditional investment and estate planning, trust, family offices,
187150	196670	asset protection. These are using, taking full use of the legal system to protect wealth and
197430	203450	create value for clients. And so, I help people on both sides of this divide. So, I talk with
203450	210950	crypto guys who want some guidance in putting together a plan to shield their crypto from
210950	217030	future creditors, whether they be random people who might sue them or a potentially vindictive
217030	222870	future ex-spouse. And then from the other direction, I talk with traditional portfolio
222870	230210	managers in the trust and estate world who are well acquainted with traditional assets, but
230210	233510	have heard about this cryptocurrency stuff, want to know if it's for real,
233510	238950	and want to get in touch with a Sherpa who can help them sort through all the noise.
240350	246570	So, that's my for-profit work right now. But for my non-profit work, I'm also a community
246570	254230	volunteer for the Monero project. And so, for example, my doing this talk is without any
254230	259670	compensation from Monero. I'm doing this because I personally feel that this is an important project
259670	269070	for humanity. And I think it's important for people to speak out and make their voices heard
269070	277110	on matters like this. So, yeah. So, I'm not a dev. I'm not related to a dev. Let's see,
277110	285290	what else? I really am independent from the Monero project. My duty is to my clients of
285290	294250	my consulting firm to whom I offer my best advice on what I think is legitimate in terms
294250	303630	of cryptocurrency. And specifically in that, I specialize in the non-security store of value
303630	314450	type tokens like Bitcoin and Monero. Okay, so this talk, I'm calling sound money safe mode.
314450	320990	And there are four sections to it. There's the pandemic economy to set the framework of
320990	328230	everything. Second part is independent scarcity, that is sources of scarcity that run independently
328230	335650	of governmental control. Third is fungibility versus mass surveillance. And so, this is
336350	344070	in the crypto world, this is, I think, insufficiently discussed because the current
344070	350650	market leader cryptocurrency does not have fungibility as a defining feature. So, I'll talk
350650	358410	about the consequences of a fungible versus a non-fungible value token in the third part.
358450	362130	And then the fourth part is about getting involved. So, there are kind of, there's a
362130	365410	shallow way to get involved and there's a deeper way to get involved. The shallow way would be
365650	370750	because it's a cryptocurrency, it is like, it behaves like an asset. And so, I put on my hedge
370750	378970	fund hat and I kind of look at Monero and Bitcoin and also gold as parts of one's portfolio. That's
378970	384730	one way to get involved with this project is to, you know, purchase. But the deeper, more
384730	390930	significant way is getting involved personally, like with your time and energy and expertise.
390930	400530	So, I talked about that at the end. So, before I start, thanks to Howard H.Y.C. Chiu, Dr. Serang
400530	406990	Noether of the Monero Research Lab, and Dr. Francisco Articman Cabanas, who is on the
406990	412590	Monero core team for helpful discussions and technical assistance in preparation for this
412590	423120	presentation. All right. So, everyone's seen a ton of stuff about the pandemic. I won't rehash
423120	430500	anything that I think that you've already seen before. But, oh, gee, this...
434560	450370	I'm just realizing that this display is not showing the slide completely. Let me close some
450370	459780	stuff. Yeah, there's a weird thing where, like, what I see here on my local screen is not what is
459780	467620	getting sent by Jitsi. So, I apologize. This is the problem being the first speaker of the day.
468540	475880	Okay. It's not super pretty, but at least I can see that the whole slide is showing.
476940	486020	There's a couple other work things. Okay. So, yeah, apologies for all the clutter on the
486020	490260	display here. But I think it's probably more important that you see the entire slide than to
490260	498440	see it framed in a pretty way. Okay. So, back to the pandemic. Oh, yeah. So,
499280	504940	one way to see the pandemic is that there's a microbe that succeeded in social engineering
504940	513480	all of us. So, the left here shows basically a flowchart of our social protocol pre-pandemic.
513480	520720	Going to this is going to seem like a quaint exercise in a long ago era. So, you're sitting
520720	526560	at home. Do you feel like going out? No, you don't feel like going out? Well, you stay home.
526560	531400	But if you feel like going out, well, then you must be healthy because the fact that you feel
531400	537140	like going out means that you must be healthy. So, based on that self-diagnosis, you go out.
537140	542120	Now you're in public. Okay. So, while you're out and about in public, do you see anyone coughing,
542120	548200	looking like they're sick? Well, if the answer is yes, then you diagnose that there's a sick
548200	553700	person over there and maybe you should avoid them. But then you carry on doing what you were doing.
554260	558800	You feel like going home? Yes or no. And then you kind of repeat this out in public where you just
559320	565640	generally avoid people who are visibly obviously looking sick and don't worry about things
565640	573180	otherwise. And the thing is that this worked. This switch has been kind of arguably evolved
573180	579760	into us. It's led to the survival of a lot of people basically going by this simple heuristic.
580100	585080	And of course, one thing about the pandemic is that we're told that this heuristic is ineffective
585080	590660	now, right? Because we're told that the self-diagnosis of being healthy if you just feel
590660	598760	like it is no longer true. The diagnosis that you are able to diagnose other people by seeing
598760	605700	if they're coughing or not. And it turns out that that now is insufficiently accurate diagnosis.
606020	611900	So of course, nobody likes being told that their instincts are off. And so that's been
611900	617560	one of the social difficulties in getting like a public health message out.
618760	625100	But that's one way of looking at this, is that the pandemic has taken advantage of a social
625100	632120	engineering weakness in humans that has to do with self-diagnosis and spot-checking others'
632120	639800	diagnosis of disease. All right, on the right side of the slide, I'm showing what I'm calling
639800	644940	dirty money. And so this is a research paper that was published in Lancet, which is the UK's
644940	651020	premier medical journal. And what they did was they took samples of COVID, I mean, I'm sorry,
651020	657720	SARS-CoV-2, and deliberately put it on various surfaces to test how long the virus would live
657720	664280	on various surfaces. And kind of interestingly, one of the surfaces that they tested was money.
664280	669720	So they took money, they put a virus on it, and then they measured that money to see how much
669720	676920	virus was remaining on the money as time went on. And as you can see, there's basically a dual regime
677520	684660	half-life here. So initially, the half-life is rather quick, with a half-life about one hour.
684760	693100	But yet, that's not so fast that the virus is not measurable. So basically, the amount of virus
693100	701700	remaining on money remains highly measurable, even after 24 hours here, 48 hours here.
702100	707180	And so I think at the third day, they came up with a no measurement for that.
715120	720860	All right, so what did this trigger in an economic sense? So there's a lot going on in this chart,
720860	726720	which is all US data from the Federal Reserve. So I'll go through it step by step. So first,
726720	732560	you look at this blue line here, that is the U6 unemployment rate. Now, U6 is the more broad
732560	738540	measure of unemployment. It counts not only those people who are attempting to find work, but also
738540	744240	those people who are underemployed, and also those people who are so discouraged about their prospects
744240	749080	of finding work that they give up, and they stop even looking for work. So those people who are not
749080	755380	counted in the usual measure of unemployment, which is U3, do get counted in U6. And the blue
755380	760140	line here is showing on the left scale. The other thing to note on this plot is that this is a very
760140	767440	long timescale. So we're going back to 1980 here. And you can see that the unemployment rate, which
767440	776200	kind of peaked at about 18% in the last financial crisis in 2009. If you look at that for 2020,
776640	784560	you can see that it peaked at about 23% unemployment. So what was the response to
784560	792540	this? The response was to, for the current response by the Federal Reserve, is to be
792540	796780	primarily concerned that this is going to cause deflation. That is, that people are going to just
796780	802940	stop spending money, and that the economy is going to grind to a halt because of that. So the remedy
802940	808580	to that particular short-term problem is to print money. Because by printing money, that reduces
808580	813960	interest rates. And when interest rates go down, it becomes less attractive to save your money, and
813960	820300	more attractive to just spend your money. So it's part of the stimulus. And so you can see that the
820300	827080	MZM money supply here, which is shown in green, MZM money supply is the broadest measure of liquid
827080	834340	money in the US. It includes cash, currencies, checking accounts, savings accounts, and also
834340	840020	money market accounts, which many people nowadays use as a kind of form of a checking account.
841540	846780	So the green line shows the total of the MZM money supply, and I divide that, because it's an
846780	850000	enormous number. It's in the trillions of dollars, which is hard to get your head around what that
850000	855460	means. So I normalize that number by the gross domestic product. And you can see that that is
855460	863700	the green line. And you can see that in 2020, the money supply took this very steep upward jump
863700	867080	as a result of the pandemic.
869180	874680	Now on the bottom here, you see this very wiggly line. So what this is showing is how much money
874680	880700	the US government takes in on a monthly basis, minus how much the US government spends on a
880700	886880	monthly basis. And you can see this half century history is shown here. And there's never been
886880	895380	this occurrence ever in which the government is taking in much, much less than it's spending.
895560	900560	Now, part of this might be temporary, because at least in the US, there was a tax moratorium.
900560	907640	The usual tax due date of April 15 was moved back to July 15. So in those intervening months
907640	912900	between April and July, there was basically likely to be no money into the Treasury.
912900	920140	So it could be that this line will spike back up because taxes were due July 15 this year.
920720	929520	But it remains to be seen. You know, how much will receive taxes go up back up? It's hard to know.
929860	936160	The time integrated result of this gray line here gives you the black line on top, which is
936160	941420	the overall federal debt, which I'm normalizing to, again, to the GDP on the right scale.
941420	948480	So you can see that during the 2009 financial crisis, our federal debt to GDP went from about
948480	954460	60% to about 100%. Now, at the beginning of the year, we were looking at about 110%.
955500	961740	And this federal debt to GDP number is lagging now by four months. So what you're seeing here
961740	967360	is actually only going up till March of this year. It's not showing the worst
968480	979200	so far, the worst so far time of the crisis. So yeah, it's to say that this pandemic on an
979200	986440	economic basis is unprecedented, at least within the lifetime of all the people who are likely to
986440	995200	be looking at this stream. It's not an understatement. Nor is this limited to the US.
998030	1006370	So if we look at the G20 fiat currencies that have reported data to the OECD, it turns out that
1006370	1014750	there's eight countries who have been reporting data consistently through the this time. And here
1014750	1019950	I'm plotting the money supplies of each of these eight countries. And I'm looking at a more limited
1019950	1026070	timescale. Now I'm looking at 2018 to the present. And I'm normalizing each of these money supplies
1026070	1034330	to the money supply as it was on January of this year. So all of these different monies
1034770	1041590	are normalized to 1.0 at the beginning of this year. You can basically see that there's like a
1041590	1048070	hockey stick shape to this curve, right? So up until January 1st, the money supplies of these
1048070	1057290	was growing at a concerning rate. But now in retrospect, now that we can see how the rate
1057290	1064910	of money printing has been going post pandemic, the 2019 and 2018 periods look like rather
1064910	1072730	restrained periods in retrospect. The size of the USD money printing is really, it's hard to get
1072730	1081630	one's head around this. The size of this gap here amounts to $1.3 trillion, which means that
1081630	1086250	in that time period, in the first six months of this year, the rate of money creation has been
1086250	1095010	$300 million per hour. Now, given that the market cap of Monero is about four or five times that,
1095010	1102370	so we're talking about the money supply growing by the market cap of Monero about six to seven
1102370	1116210	times a day for six months. All right, if we look now at a larger set of countries, so now all of
1116210	1121070	the G20 fiat currencies, including those that stopped reporting data for whatever reason to
1121070	1128370	the OECD in late 2018. So now you're seeing 17 different countries' fiat currencies here.
1128370	1137230	It's 17 and not 20 because France, Germany, and let's see, I'm blanking out on one other.
1137390	1144110	There are three countries that don't have their own money yet sit on the G20, and the euro, like
1144110	1149390	all of the euro zone, has a seat on the G20. So that's why the number of currencies is not exactly
1149390	1156550	20 for the G20. But nevertheless, you can see that this is all of them. And since 2009,
1156550	1161910	which is the date of the Nakamoto white paper, the world's fiat currencies have
1162550	1167490	basically doubled or tripled in the about 11 years since.
1168370	1175530	So as a former med school professor who worked in oncology, I was a physicist helping with the,
1175530	1180270	you know, technical details of delivering high-dose radiation to cancer patients.
1180350	1185970	This whole concept of exponential growth is pretty familiar. Like this exponential growth
1185970	1192590	curve, it's basically like a tumor growth curve. You have basically a doubling time for this
1193430	1199970	malignancy that's growing. And so here in, you know, if you apply that math to this,
1199970	1209490	we're looking at a doubling time of about eight years. So if you apply a doubling time of eight
1209490	1217150	years through your lifetime, so if you imagine an average lifetime is 80 years, let's just say,
1217150	1222210	which would amount to 10 doubling times. So you're looking at an expected growth of two
1222210	1227730	to the 10th power for the money supply in your lifetime if you extrapolate the results in this.
1227730	1236210	So that's a 1000x growth given the compounding rates that we're seeing in this chart.
1237470	1243050	There's an interesting book called Monetary Regimes and Inflation. It's in its second edition,
1243050	1250690	and it's written by an academic in Switzerland who studied 25, or I'm sorry, 29 different historical
1250690	1257150	cases of hyperinflation and found that in 25 of them, the root cause of this was that governments
1257150	1265390	were funding their deficits with money creation. So this chart is showing that the money creation
1266150	1270690	is happening, and especially now in 2020, it's happening even more than ever.
1271330	1277610	The other, what this chart is not showing is the government deficit part, but well,
1277610	1286930	it's hard to be too optimistic about that, frankly. So what does all this mean? It means that
1287770	1296950	it's probably a good idea to entertain the possibility that the probability of increased
1296950	1307220	inflation in the future has gone up as a result of the pandemic. So in a time of high inflation
1307220	1314080	in fiat currency, what does it make sense to consider looking at for those who have assets?
1314640	1319120	Independent sources of scarcity are what traditionally get looked at. So we're talking
1319120	1325560	about physical commodities like gold and silver. And since 2009, now there's been a digital option
1325560	1332500	in terms of digital commodities. Bitcoin was the first, and in my opinion, Monero is probably the
1332500	1340620	only other one that checks the necessary boxes to be taken seriously as a second digital commodity
1340620	1350780	in the space of store of value cryptocurrencies. Now, physical commodities are interesting. So
1350780	1357920	gold and silver, if you follow the gold prices, you've probably seen that the gold prices have
1357920	1365460	also spiked recently. There's a generational divide here as far as how people react to this
1365460	1371260	divide between physical commodities and digital commodities. And as a Gen X-er,
1371260	1377960	for whom the kind of one way you can define Gen X is that these are people who had a considerable
1377960	1382880	chunk of their childhood spent in a time that didn't have the internet. So as a result, I can
1382880	1387780	kind of see things from both perspectives. I can see, I can remember a time when there was no
1387780	1394260	internet. And so I can, I can see how people would kind of gravitate towards gold and silver in a
1394260	1400620	time like this. But also having seen the transformative effect of the internet, I can
1400620	1407500	also see things from like a, you know, like a Gen Z or millennial type view, in which one can sort
1407500	1411640	of assume that the internet's always going to be there, just like running water is always going to
1411640	1423700	be there. It's funny though, because for gold and silver, there are lots of ways to buy gold and
1423700	1429560	silver. And not all of them involve actually getting your hands on metal. So some of them
1429560	1435720	involve hiring somebody to buy your metal and store it for you. And then you think you have
1435720	1440360	your metal because you have a piece of paper or you have an email saying you own this much gold
1440360	1448420	in this vault that's somewhere. And it's probably true. I mean, or it's going to be true until it
1448420	1456780	ceases to be true. And there have been like a lot of scams, basically in the precious metals market
1457300	1464660	of people being taken advantage of in ways like this. And it's funny because it's like history
1464660	1470220	repeats itself, but rhymes. So they're like now in the crypto space, there's like the analog of
1470220	1476620	all these things. Basically people offering to, you know, to take your crypto as you know,
1476620	1481640	they offer to store your crypto for you. So you don't have to worry about all that trouble of
1481640	1486140	learning, you know, what's going on behind the crypto. We'll take care of all those details.
1486140	1492000	You pay us just a little bit and we promise crypto is all going to be there. That's happened in the
1492000	1500440	precious metals market. It happens now and people get in both cases. Trading on margin with leverage
1500440	1508400	is another way for kind of the less sophisticated investors who want to try and make a quick buck
1508400	1515660	get taken advantage of. It turns out that the mathematics of margin borrowing, which is
1515660	1521380	necessary to take on highly leveraged positions in any asset, including precious metals or in
1521380	1530100	cryptocurrency, highly disfavor the person placing the bet. So basically if you go 10x on something,
1530440	1536580	and it goes up, you're not going to get the 10x because part of the gains from that 10x are going
1536580	1542760	to be used to repay the loan that you took in order to go 10x. So you're not going to see 10x
1542760	1548640	going up. But if the asset that you 10x on goes down, then yeah, you're going to lose all your
1548640	1555800	money in a strictly linear fashion like you would expect. So and then, you know, now in the crypto
1555800	1563500	era, you have people getting kind of attracted to the casino of trading on leverage and using that
1563500	1572770	to basically lose to more sophisticated, more knowledgeable counterparties. But let's talk
1572770	1578210	about digital scarcity networks. So taking aside gold and silver for now and focusing on digital
1578210	1584210	commodities. So let's look at centralized security versus a decentralized security model. In
1584210	1589830	centralized security, you have banks and fiat. So you have a database, which is protected,
1589830	1594750	it's got firewalls around it. And the idea is that once you have access, once you're a trusted
1594750	1599270	insider, you're a bank employee or something like that, then you have access to the database.
1599270	1604310	Otherwise, you have no access to the database. There's one authoritative version of the ledger,
1604310	1609650	which exists inside the bank walls. It's all closed source, of course, it's closed source,
1609650	1614170	why would you open up the source, because that would be, you know, showing potential
1614170	1620670	vulnerabilities to people. And there are downsides to this, of course, there's mismanagement, there's
1620670	1627750	like all these charts showing the runaway growth of fiat currency are arguably
1627750	1635590	categorizable under mismanagement of centralized scarcity model. There can be insider abuse.
1635590	1642270	There are numerous accounts of bad behavior on the part of, you know, regulated banks,
1643180	1648810	who basically do, you know, egregious violations of their customers trust and end up getting just
1648930	1656750	a slap on the wrist for it. The other thing, if you are in charge, if you are the designated,
1656750	1662510	approved gatekeeper of a centralized security network, then as the gatekeeper, you don't
1662510	1667190	really have that much incentive to improve your service, because you're the gatekeeper, people
1667190	1672990	have to come to you to get service, you know, to get access to the central database, they have to
1672990	1678470	come to you. Now, so that means you're a middleman, you're in a position of power. And that means
1678470	1684390	there's less incentive for you to improve your hours, or your services, which is why we still
1684390	1690070	see banks having, you know, nine to five Monday through Friday hours, in a time where, you know,
1690070	1695770	for years and years now, people have been able to go onto Amazon and, you know, go shopping, you
1695770	1702770	know, 2.30 in the morning, you know, from their bed if they want, but for banking, like to get a
1702770	1708990	wire sent out, you still have to do business hours. So these are the pros and cons of a centralized
1708990	1714930	security model for digital scarcity. If we turn now to a decentralized security model, now everything
1714930	1720410	is turned on its head relative to the centralized security model. Anyone can join the peer-to-peer
1720410	1727750	network whose job it is to maintain a ledger of who owns what. Each of these nodes maintains its
1727750	1736070	own version of the ledger. The code is open source, under the more eyeballs is fewer bugs, kind of
1736070	1742390	principle that's espoused in open source software development. The downsides are that this source of
1742390	1747490	scarcity are new, and so people have to get their heads around it, and there's going to be a lot of
1747490	1754690	noise, and there's going to be a lot of excitement, a lot of not very smart ideas being given a
1754690	1763110	decentralized security sheen around them in order to sound new and glamorous. So there's a lot of
1763110	1770030	noise to sort through because it's new. It's also inefficient because the efficiency of centralized
1770030	1773770	security models, you just have one database that's in the middle, so as long as you
1774630	1781510	you just have to, you know, maintain one computer's worth of computing power, whereas in a
1781510	1787850	decentralized model you have different ideas of what the state of the ledger is among all of the
1787850	1794430	computers in the network, and the methods to obtain consensus on what is the true state of the network
1794430	1798950	are going to necessarily be less efficient than that of a centralized network.
1802540	1809780	So for this talk, I'm assuming that the, you know, you viewing this are not necessarily
1811200	1817860	immersed in Bitcoin and blockchain topics, since Defcon is a pretty broad tent. There are a lot of
1817860	1826440	people with a lot of diverse interests in Defcon, and so I'm going to assume that you have not taken,
1826440	1831520	you know, a lot of time to think about how Bitcoin works. So I'm going to do that. I'm going to try
1831520	1838120	and do it very briefly. So I would invite you, if you're new to cryptocurrency, and even if you're
1838120	1842980	not new to cryptocurrency, I think it's a good thing to do to put yourself in the mindset of
1842980	1849760	pretending like things were back when they were in 2009, before there was a way to check the price
1849760	1855960	of every cryptocurrency every second, before there were, you know, limit orders and exchanges and all
1855960	1864400	this, you know, that, that unfortunately tend to put a profit and loss, you know, like a profit and
1864400	1871740	loss framework on around Bitcoin, that gets away from the kind of true spirit of the thing, which
1871740	1881080	is really a technological and computing, like, miracle. So it's, it's good to kind of disregard
1881080	1887360	all of that price stuff. I think, I think most of the time when you're thinking about cryptocurrency.
1887860	1893200	So let's go back to Bitcoin's early history. So on Halloween of 2008, that's when the
1893200	1900860	Naokimoto white paper came out. January 9th, 2009 was the Bitcoin Genesis block. That was the very
1900860	1907320	first block. In other words, the very first list of transactions of who sent what to who in Bitcoin.
1907960	1913960	And since January 2009, this network has been going strong ever since, 24-7.
1914980	1920040	In, in the year 2009, Bitcoin was operational, but it had zero value.
1920040	1927300	Right. So it was just this, this thing that was like a, like a geek play thing. There was no,
1927300	1930960	there's no money involved, there's no profit involved, there's no trying to sell
1930960	1939220	anything involved. It was just this interesting innovation of a digital thing that claimed to
1939220	1947340	act like money without needing a central authority to, to limit its scarcity like money.
1947340	1951860	So the Bitcoin white paper describes a way to synthesize this digital scarcity without needing
1952060	1958860	a central authority. So there are three parts to the analogy between Bitcoin and a bank network.
1958860	1965200	So the first part of the analogy to, to describe is like, what, what is the analogy of a bank
1965200	1971180	account? And that is a Bitcoin address. Second, what's the analogy of writing a check or sending
1971180	1975720	funds out? That would be in the Bitcoin world, in the cryptocurrency world, it's a message signing.
1975720	1981780	And then third, who is the party that is going to clear the check and process the check once it's
1981780	1988000	been written? Who is doing that function in, in this new digital commodity realm? And so there's
1988000	1992780	an accounting network of peer-to-peer computers that gets used to do that in Bitcoin.
1993940	2001240	So going through these three analogies in a bit more detail. So the SecP256k1 elliptic curve
2001240	2008420	is what defines the cryptography in Bitcoin. So that I'm showing what it is. It's Y squared is
2008420	2014560	congruent to X cubed plus seven mod this very large prime number. And the mod and the three
2014560	2019600	lines on the equal sign means that we're talking about clock arithmetic. So in clock arithmetic,
2019600	2024800	one o'clock and 13 o'clock and 25 o'clock are all the same thing because the, when the hour hand
2024800	2031740	goes around, it repeats. So here we're talking about a clock that has like a, you know, a gigantic
2031740	2040540	prime number, number of numbers on its dial. So Y and X, sometimes you'll see drawn in, you know,
2040540	2046180	diagrams explaining what elliptic curves are. You'll see like a curvy shape to that. That's true
2046180	2052780	if X and Y are real numbers, but in this case, X and Y are integers. And so it's not very helpful
2052780	2058200	to have that image of a classic curve in your mind as you're doing this. Really what this is
2058200	2064960	more like is you, you have a, you have a giant grid of X and Y points and the Xs are both
2064960	2072400	integers. So you have points on the intersections of this giant, you know, graph paper and certain
2072400	2079180	one, certain intersections on this graph paper are lit up. So when you have an X, Y combination
2079180	2085540	that satisfies this equation, it's lit up. And to have an X, Y combination that satisfies this
2085540	2093560	equation is a rare thing. It's, it's if you try to brute force and guess pairs of X, Y numbers
2093560	2099780	that satisfy this equation, because this prime number, this modulus number is so huge,
2099780	2106080	it's, it would take a, you know, unimaginably long time, like, you know, 10 to the 40, 50,
2106080	2111060	something like that years to basically brute force and try to figure out an X, Y combination
2111060	2117660	on your own that satisfies this equation. But yet there's more. So as part of the elliptic
2117660	2123020	curve definition, there's a base point that is defined. So I'm saying piece of B, that's the
2123020	2130520	coordinate X of B, Y sub B. So there's a certain point in this vast grid paper of very sparse
2130520	2135180	points on it. There's a certain point that's called the base point. That one's special.
2135180	2142000	That one is told to you by the elliptic curve kind of standard, right? So basically the formula
2142000	2147520	for the curve is given and the solution, a solution to this curve is also given to you.
2147520	2153520	Furthermore, there's a third step that you can use. So that is given that you know a solution,
2153520	2159480	there's a way to calculate N times that base point solution, which is another solution,
2159480	2165960	piece of N. So in other words, if somebody tells you N, a number N, you can figure out the Nth
2165960	2172940	point on this graph paper by doing some simple manipulations on the base point, which you are,
2172940	2177020	which you have knowledge of, which you know, because it's part of the standard of the elliptic
2177020	2185120	curve. So if you want to go from N to piece of N, you can compute that, but the inverse is not
2185120	2190900	calculable. So piece of N to N doesn't, you have to brute force that. And so that's the asymmetry
2190900	2200100	behind the encryption process. So what that means is that the, the number N is a private key.
2200100	2208080	That's the secret. And that knowing that number N is the authorized signature to spend the money
2208080	2214380	that is associated with the private, the public key piece of N. What this really means is getting
2214540	2218960	a new, a Bitcoin account really means you're picking a number, you're picking a number in this
2218960	2226000	vast numeric field. You're calling that number yours. And you're keeping that number secret,
2226000	2233700	just like you would keep like, just like Coca-Cola keeps the formula to its soft drink secret. It's
2233700	2239380	this piece of information that you can write on an index card, but you need to keep secret because
2239380	2245000	it's the, it's the keys to the kingdom. So that's what's going on in Bitcoin is that you, you and
2245000	2254100	you alone are in, are the person who knows the existence of this one certain point on the elliptic
2254100	2261340	curve, which is yours. And those, that elliptic curve point is described by two numbers, the X
2261340	2267540	coordinate and the Y coordinate, right? One of those you make public and the other one you keep
2267540	2272300	secret and they're linked to each other. So that's why it's not like a password where you can just
2272300	2277240	change the X, Y numbers that you're assigned. It's, it doesn't work like that. There's a math
2277240	2285740	equation behind it. So that X, Y pairing is unchangeable. It's, it's not modifiable so that
2285740	2290320	if somebody, you know, forgets their secret, there's no recourse to get their money.
2293280	2298400	All right. So moving on to how does writing a check work in a network like this? So there's secure
2298400	2302700	message signing, which is facilitated by the elliptic curve math that I showed on the last
2302700	2309600	slide. So what a sender does is take a message and combine that with their private key. Once you
2309600	2313980	take a message and combine that with a private key, you get a signature, which is just a sequence
2313980	2319620	of bytes, which is derived from the combination of the message and the private key. So the signature
2320140	2327100	can only have been made by somebody who had the message and the private key. So once the sender
2327100	2332400	does this, basically generates a signature based on their message and their private key, they would
2332400	2338320	send out the message and the signature. They would definitely not send out the message and
2338320	2342300	their private key because then that would leak the, you know, basically their signature for,
2342300	2348020	for signing. They would send out the message and the signature. So the recipient now gets this
2348020	2354680	purported message from the sender, plus the signature from the sender. And the recipient
2354680	2359720	also knows the sender's public key. So because that is supposed to be a data point that is
2359720	2364840	associated per person. So with those three pieces of information, you can get a binary verification
2364840	2370080	result. You get a result that says, yes, that was a legitimate message by the, this person, or no,
2370080	2377080	it was not. And so sending Bitcoin means that you're sending this signed message to the Bitcoin
2377080	2383680	network. This, this kind of message signing happens in all, in a variety of computing contexts. For
2383680	2392280	example, HTTPS uses this and here we're just using it in a financial kind of like a self-contained
2393120	2401240	accounting system point of view. So interestingly, knowledge of the private key, which is a form of
2401240	2409860	speech, is now tantamount to money. Knowledge is tantamount to money. And so that makes that,
2409860	2420840	for the era that we're living in, the idea that just knowledge of something can in itself be cash.
2423240	2430760	All right, third. So once you have a person who has a Bitcoin account and they sign a message
2430760	2436060	saying, I want to spend this Bitcoin, who's going to do the processing? Who's going to make sure
2436060	2441100	it's legit? And so on. So that is done by a network of miners in Bitcoin. So miners
2441320	2446860	are just a word for peer-to-peer Bitcoin accountants. So peer-to-peer, meaning that
2446860	2454480	there is no boss computer, there is no super user in this network. They are all equal. So
2454480	2460860	how do they settle disputes? It's basically, they gossip a lot and they do majority rules.
2460860	2465540	So that's, that's basically how they, they figure out who's right, if there's a disagreement between
2465540	2471100	them. Now, each of these Bitcoin accountants have pre-programmed into them, the, like the
2471100	2477520	elliptic curve, they have pre-programmed into them the code that determines whether an incoming
2477520	2483300	message is legit or not. And so each of these accountants, when, when they receive a spend
2483300	2489640	message, they will check it. And if it's legit, then they will pass that message on to their
2490660	2495260	compatriots. So this is what I meant by gossipy accountants. So each of these miners is,
2495260	2500340	is taking in incoming messages for spend instructions around the world,
2500340	2505020	checking them for themselves. And then if they're correct, they'll spread those messages around.
2505620	2511620	So every 10 minutes on average, you have a list of transactions then that has been
2511620	2518080	kind of building up in that time. And so that's called a block. A block is simply a list of valid
2518080	2526280	signed spend messages. Now, how do we make sure that this global network of computers,
2526280	2533860	of which there is no one boss, is going to properly process these messages? Well,
2534340	2539860	in addition to having the rules of allowance kind of programmed into them, they, there's what's
2539860	2547280	called proof of work. And so what proof of work is, is that in each block, there is a small data
2547280	2552780	field within each block called the nonce. The nonce is something that it's a blank data field
2552780	2561660	that each miner is free to fill with whatever random bits they want. Now, in this system, a
2561660	2568800	block is not accepted by the network until the hash of the block is lower than a certain number
2568800	2573640	called the difficulty. So this is something that's hard to get your head around if this is the first
2573640	2577020	time you're hearing it, because usually when you think about hash functions, you don't care about
2577500	2582680	what the hash function is, you just care that the hash function matches something else. For example,
2582680	2586980	if you're checking the download of a file, you want to take a hash of what it is you downloaded
2586980	2591240	and check that against the hash of what you think you downloaded and make sure that they match.
2591400	2596800	Here in this case, we actually care if the hash starts with a zero, or a one, or a two,
2596800	2601880	or what the hash starts with. In fact, we care about what the first several digits of the hash
2601880	2607980	starts with, and we will require them typically to all be zeros. So what that ends up meaning is
2607980	2615980	that each of these miners is going to try repeatedly, and most often fail, to find a nonce
2616600	2624160	that causes a block of spend messages to be considered valid. So basically, you have this
2624160	2629240	worldwide network of computers, each of them is churning away, brute force guessing different
2629240	2636200	values of the nonce that will eventually, one of them will eventually succeed, and come up with a
2636200	2642300	block that satisfies the difficulty. In other words, one miner in the world will take their
2642300	2648120	page of transactions, which is, you know, the list of valid transactions from their point of view,
2648120	2655800	combine that with a nonce, which was randomly generated, and then the hash of that entire block,
2655800	2661840	that is the messages plus their nonce, the hash of that is going to be a bunch of zeros, and then
2661840	2667120	some gibberish, right? So because it started with a bunch of zeros, that satisfies the difficulty,
2667440	2675720	therefore that block is accepted by the network. The kind of announcement of this new block is,
2675720	2681460	again, because the accountants here are very gossipy, the news of this is sent around the
2681460	2686800	Bitcoin network, right? And so once all of the computers in the world get news of this new block,
2686800	2694660	then they clear out the pending transactions in their own personal queues with the
2695300	2700320	transactions that have been officially kind of ratified in this new block, and then they continue
2700320	2705980	working on the next block. So the computer that succeeds in getting this done gets what's called
2705980	2713400	the block reward, and so that's a Bitcoin payout to the nonce. So in Bitcoin, every Bitcoin in existence
2713400	2719900	came into being as a payout to a miner helping to secure the network. So this is important to realize
2719900	2724720	that sometimes you'll see, you know, people who have very little technical knowledge about
2724720	2730180	cryptocurrency make a claim that, you know, Bitcoin is just some, you know, scam, it's
2730180	2738160	some company that's out there to get, you know, money from people. Bitcoin is just a decentralized
2739600	2744540	group of computers. Anyone can download the Bitcoin software, run it on their computer,
2744540	2753260	and join this network. Anyone who does that has a probability of finding a
2753260	2756240	nonce that satisfies difficulty and therefore getting the block reward.
2757020	2763900	So contrary to the assertion that money in Bitcoin has gone to some third party,
2763900	2769300	some centralized organization, that's not true. All of the block rewards in Bitcoin have gone
2769300	2779080	out to miners who are helping to secure the network. Now again, we're in 2009 here. We're in a time,
2779080	2785180	we're imagining that we're in a time in which Bitcoin did not have monetary fiat value. So
2785180	2790960	we're thinking in terms of this self-contained system in which this kind of imaginary unit of
2790960	2796220	account, Bitcoin, gets created, and we're going to try and see if it actually acts like money like
2796220	2801380	it claims it might be able to. All right, so there's conflict resolution. So what happens if
2801380	2806020	two computers on opposite sides of the world come up with a block at the same time? So this could
2806020	2810280	happen, for example, with the latency that's introduced by the Great Firewall of China, that
2810280	2817080	you could have computers within China coming up with a different idea of what the next legit block
2817080	2824080	is relative to the outside of China world. So what happens then? Well, again, the miners are
2824080	2839790	all gossipy, right? So the miner within China is going to likely to hear about that Chinese found
2839790	2852050	block first. And so they will proceed with the network as if that is the legit block.
2852090	2855730	So the same thing is going to happen in the non-Chinese world. There's going to be a different
2855730	2862490	block that satisfies difficulty that will be deemed the next block in the chain.
2863090	2868550	And then that news is to propagate among the miners in the non-Chinese world, right? So now you
2868550	2873870	have this schism, you have a disagreement in the network as to the state of the network.
2873870	2880510	What happens then? So basically, both halves of the network then proceed as normal, trying to work
2880510	2887670	on the next block. And then one of them is going to come up with a block first. I suppose I could
2887670	2892570	come up with it simultaneously, but that's highly unlikely, since the probability distribution of the
2892570	2897030	time distribution between blocks is Poisson distributed, because it's basically a fixed
2897030	2903310	probability per unit time that a block is going to be found. So that means that, on average,
2903310	2911190	blocks come out every 10 minutes, but it's a highly peaked distribution in the short end,
2911190	2917810	actually, of the 10 minutes. Most blocks are going to be found... the median block is going to be
2917810	2928830	found, like, shorter than 10 minutes. So what happens is one of the blocks, either in the
2928830	2934690	Chinese world or the non-Chinese world, find the next block. And because conflict resolution works
2934690	2941310	in that the chain with the more hash power wins, whichever of those chains comes up with the longer
2941310	2947870	chain first will be the winner. So for example, if the second block is found in the Western world
2947870	2955690	first, then that block will be propagated around the world, it'll get past the Chinese firewall,
2955690	2961830	eventually the Chinese mining commuters will see that, and they'll see that, oh, this chain that
2961830	2966350	came from elsewhere is longer than our chain, so we're going to adopt the chain that has more
2966350	2972570	proof-of-work behind it. So that's basically how the network self-heals itself against disagreements
2972570	2978870	in the state of the network. So then finally, blockchain is a distributed append-only linked
2978870	2986110	list of blocks with low-value hash-verified pointers. So to summarize, Nakamoto consensus
2986110	2991470	synthesizes digital scarcity. There's account-level scarcity, which is basically property rights.
2991470	2996250	What defines property rights in Bitcoin? It's enforced by the user's selection
2996250	3000690	and their subsequent protection of an elliptic curve private key.
3001330	3007450	Next is aggregate-level scarcity. That is, how do we know that there's not going to be an
3007450	3013330	infinite number of Bitcoin created? It's because each of these miners have programmed into them
3014010	3018750	a recognition that there's going to be a limit of 21 million Bitcoin produced,
3018750	3027830	and if any rogue node is added to the network that has a different idea of coin issuance,
3027830	3034190	because it's going to be vastly outnumbered by the rest of the network, its idea on what coin
3034190	3038110	issuance should be is going to be ignored by the rest of the network. So that's how that gets
3038110	3043350	enforced, is that the aggregate-level scarcity that is the macroeconomic money supply gets
3043350	3047610	enforced by an open network of peer-to-peer accountants who are rewarded for behaving
3047610	3053050	consistently with a consensus rule set. They're rewarded by getting the block reward. So basically,
3053050	3060410	if a computer works under mistaken rules, and mistaken meaning minority, if a computer is
3060410	3066450	working under minority rules, comes up with its own idea of a block, gives itself a block reward,
3066450	3071990	then when it propagates that supposed good block to the rest of the network, it's not going to be
3071990	3079650	recognized by the rest of the network. And so it might have succeeded in getting a block reward
3079650	3085050	for itself, but it's not going to be in the currency that the rest of the network is using.
3086690	3092450	Okay, finally, database modification scarcity. How do we establish record permanence in Bitcoin?
3092450	3098990	Well, that is enforced by requiring that each page in the transaction block have a hash that
3098990	3103690	is smaller than the dynamically adjusted difficulty threshold. So the fact that the
3103690	3108970	difficulty threshold is dynamically adjusted according to how many computers are currently
3108970	3115510	active on the network, that is how a 10-minute block time gets established on average, even if
3115510	3125050	computers leave or join the network. Okay, so let's contrast that with the scarcity features of Monero.
3125050	3132230	So first, code is a scarce asset. Unfortunately, in much of the cryptocurrency world,
3132230	3138010	new currencies get made by basically copy-pasting Bitcoin's code, changing a few
3138650	3143850	lines of it, and then declaring that you've created a new cryptocurrency. So in that sense,
3143850	3150650	they're not really using any scarcity of their own intellectual property. They're basically
3150650	3155950	copying off the Bitcoin intellectual property, which is open source. That's a kind of an
3155950	3160130	unfortunate drawback of that, is that it's open for everyone to look at and to copy,
3160130	3166490	but that's the downside. It's open for everyone to copy. So unlike the situation, for example,
3166490	3173270	in precious metals, where authentication is a difficult thing, right? So if you have a gold bar,
3173270	3178690	the chief worry is that the gold bar that you bought is actually gold-plated tungsten, right?
3178690	3186070	For example, there's a case in China where there's a very significant storage of gold bars
3186070	3194390	that was being used as collateral for loans. And it turns out that tons and tons of gold was
3194390	3201590	actually tungsten with gold plating on it. So this is a problem in precious metals that happens to
3201590	3205890	the big boys, too, not just the retail little guys. But even little guys, you have to worry
3205890	3210790	about that, too. You have to worry about, is this shiny piece of metal? It looks legit,
3210790	3216210	but is it legit? And so you have a challenge in precious metals to do authentication. That is,
3216210	3222170	you have to buy devices to check and make sure that the conductivity and the resistivity and
3222170	3227070	the density and all the properties of the metal that you think are going to be true are actually
3227070	3233970	true. And even then, you don't know, because the only real test is to do destructive testing,
3233970	3239430	stick the thing in a furnace, you know, and melt it down and see what you've really got.
3239870	3245050	In contrast to that, in cryptocurrency, authentication is not that big of a
3245050	3250770	problem. So basically in Bitcoin, it's easy to see if a Bitcoin is legit.
3250770	3256730	The problem in cryptocurrency is that the falsehood happens in the myriad of cryptocurrencies
3256730	3263890	that exist that offer nothing of value. So basically, that is the challenge for an investor
3263890	3270010	or, you know, anyone new getting into cryptocurrency is wading through all of this,
3270920	3276190	all of these low quality projects and figuring out where the good ones are.
3276610	3283270	All right, so Monero's code base is not a copy of Bitcoin's. It started from the ground up
3283270	3290970	as its own thing. So this is, I'd say it's a pretty strong acid test of legitimacy is,
3290970	3296130	can something start from its own with a code base that is totally not derived from
3297190	3300610	Bitcoins and survive and do something useful for humanity?
3302130	3308270	All right, the elliptic curve used in Monero is different too. So Monero uses ED25519.
3308270	3314890	So this is yet another source of technical hedging. So to the extent that one of
3314890	3319890	Bitcoin's weaknesses could be its reliance on this particular elliptic curve,
3319890	3326950	one can hedge one's reliance on that by looking at a alternate elliptic curve as a basis for a
3326950	3335350	cryptocurrency like Monero does. In Monero, there are dual private keys. So there's a spend key and
3335350	3341130	spend money, just like knowledge of the key is in Bitcoin. But in Monero, there's a second key.
3341130	3346290	There's a view key, which is basically like a cryptographic subset of the spend key. If you
3346290	3352270	know the view key, then you can look at details of transactions that you were involved in.
3352470	3359090	So it basically offers an opt-in transparency. So one of the misconceptions about Monero,
3359090	3364310	it's just this completely secret box where you can tell nothing about what's going on in it.
3364310	3369290	You can. And you can actually share details of what's going on in your particular Monero account
3369290	3377470	if you share your view key. The address space is different. It's larger in Monero. It's 10 to 76
3377470	3386490	versus 10 to the 60 in BTC. But there's a cost to that expanded address space, which has a pro
3386490	3391810	in that it reduces the birthday problem, which is the birthday problem being the probability that
3391810	3398890	the account number that you personally choose for your crypto account is going to, by random,
3398890	3403550	be the same as the number that somebody else somewhere else in the world chooses for their
3403550	3407610	crypto account. And you have a conflict because now you have two people who actually have
3407610	3413050	the knowledge of the spend key for a account, not just the one that it's supposed to be.
3413210	3419270	So that probably goes down in Monero, but there's a cost to that. That is of complexity. So for
3419270	3426250	example, the addresses in Monero are quite a bit longer than they are in Bitcoin, which has
3426250	3433730	an effect on user friendliness. The emission schedule is different. So in Monero, there's
3433730	3440450	kind of a theme in that this project looks at how things are done in Bitcoin, gives it
3440450	3447790	due and proper respect as the granddaddy of the space, but then thinks, well, what could we do
3447790	3454030	that's maybe even better than that? And the emission schedule, in my opinion, is one of those.
3454030	3460010	So it's continually decreasing. There is not a four-year half-mean cycle. So in Bitcoin,
3460010	3467750	every 210,000 blocks, the size of the miner's reward gets cut in half. So that means if you're
3467910	3473590	a miner in Bitcoin, there's a date every four years, approximately, circled on your calendar
3473590	3479670	in red, in which your income is going to get cut in half. So that introduces a lot of drama
3479670	3488430	in the mining world. So it's hard for any business to make plans if your income and
3488430	3494770	your expenses are unpredictable or change drastically over time. So that's exactly
3494770	3501970	what happens in Bitcoin with the mining reward happening as it does. In Monero, we have a
3502690	3505640	continuously decreasing schedule.
3507700	3513750	In Monero, we have what we think is a solution to a form of unwanted scarcity.
3513750	3522510	A form of unwanted scarcity is the future miner rewards. So in Bitcoin, the mining reward
3522510	3530180	is projected to get cut in half every four years, approximately, until it's basically zero.
3530180	3536620	And so at that point, who is going to reward the network miners for doing the accounting work of
3536620	3542580	the network? In Bitcoin, it's hypothesized that a fee network, basically user fees, are going to
3542580	3551200	step in and make up the difference. But there are papers that question the viability of such
3551360	3557120	a system. And so what we do in Monero is called the tail emission. So basically, in Monero,
3557120	3562700	the block reward is never going to be smaller than 0.3 Monero per minute. We call this the
3562700	3567180	tail emission. We call it the tail emission because you have a distribution with a tail,
3567180	3574560	and the tail extends out far into time. So often this gets described as being infinite
3575240	3581180	emission, which I suppose is technically true. As time goes to infinity, yes, the emission will go
3581180	3587740	to infinity. But in practice, no human is going to live to the limit as t goes to infinity. That's
3587740	3595160	basically a theoretical construct that's useful in calculus. But as far as, you know, mortal humans
3595160	3603300	are concerned, it is quite sufficient to know that the coin supply is going to be such and such a
3603300	3608340	level in 10 years from now, 20 years from now, 50 years from now, 100 years from now. It is not
3608340	3615460	necessarily relevant to a mortal human what the emission is as time goes to infinity.
3616680	3626540	Secondly, the absolute value of coin emission is not that relevant. It's actually annualized
3626540	3631960	inflation. That is, what is the percentage of inflation that takes place in a supply,
3631960	3637300	like, say, over a year's time? That is more relevant. And so if you have a situation like
3637300	3642940	you have in Monero, in which the coin emission is growing linearly over time, it means with
3642940	3649460	linear growth, you have a growth rate, a growth percentage rate, which is asymptotically going
3649460	3655560	to zero over time. And in any macroeconomic theory, it's the inflation rate that is relevant
3655560	3664660	to a theory. So basically, the difference between equal zero inflation, which is what you have in
3664660	3671640	Bitcoin versus asymptotically zero, which is what you have in Monero, it's irrelevant. It gets
3671640	3677400	swallowed up in the noise of whatever macroeconomic theory you're looking at. So what do we get
3678120	3686860	in exchange for this very small kind of, I guess, you know, giving up of a continual
3688120	3693500	block reward into perpetuity? Well, at least in Monero, we know that minor incentives are
3693500	3698420	guaranteed forever. We don't worry about who is going to be forced to pay for this,
3698420	3705620	which is, it actually was one of the causes of the civil war and the divorce a few years ago
3705620	3712200	within Bitcoin was that there is a disagreement as to how much of a load should the transactors
3712200	3717520	of the coin be paying? Is it okay that people actually transacting in the coin are
3717520	3722840	paying hundred dollar fees to make one transaction? Is that okay or not? There's a disagreement of that
3722840	3730400	over that in Bitcoin. And the argument for, yes, it is okay for them to be paying that is that,
3730400	3736160	well, eventually minor rewards are going to go to zero. And so we're going to rely on user fees to
3736160	3740400	pay the miners. So they better get used to it because, you know, this is going to be the future
3740400	3744260	is that, you know, the fees are going to pay the miners. So, you know, they better just get used
3744260	3750900	to ponying up the money. So anyway, without getting too much into that, you know, civil war,
3750900	3757280	that's something that we avoid in Monero by having this tail emission. All right. So I mentioned that
3757280	3762920	as a physicist, I like to look at data. So I'm going to show some of it here. This is looking
3762920	3769260	at supply emission. So this is over time, how many Bitcoin have there been in existence? And again,
3769260	3775420	each one of these Bitcoin was given in the past to a computer as a reward for doing the computing
3775420	3781180	power of maintaining the network of who owns what within Bitcoin. So you can see the
3781820	3788360	solid part of this Bitcoin line is what actually happened. And that is taken from block explorers.
3788360	3795420	In this case, I'm using blockchain.com. And what's shown in the light shaded gray, like the not solid
3795420	3800120	black, but the gray, that is projecting into the future what the supply emission of Bitcoin is
3800120	3806060	going to be. And that is basing that off the Bitcoin white paper. So the Bitcoin white paper
3806060	3813240	basically is what programmed all the computers that generated this line for the last 11 years.
3813320	3818240	And so you can kind of, you know, have some confidence that the future coin emission of
3818240	3825740	Bitcoin is going to be what was predicted as well. And so let's not kind of dismiss or downplay
3825740	3833320	the, you know, how crazy this is in terms of monetary policy. This is a monetary system
3833320	3839100	in which the emission is declared in advance. And not only is it declared in advance,
3839100	3846520	like there's an 11-year track record of it actually happening as predicted. So you can't
3846520	3853640	have a situation like a, you know, for example, a pandemic causing a committee of, you know, men
3853640	3859640	in a boardroom deciding that it's time to print a bunch of money. That doesn't happen in Bitcoin.
3860540	3866660	All right. We can look at Monero's supply emission as well. So again, in Monero, we do not
3866660	3872360	have four-year halvenings. So in contrast to this Bitcoin line, which you see has these kinks in it
3872360	3878600	every four years or so, there's a, it's like basically it's a piecewise linear emission line.
3878600	3886180	Monero's curve is actually smooth. And so again, to the left of the present between 2014, which is
3886180	3891440	when Monero came into existence. And now you can see this very smooth curve. It looks like that's
3891540	3895180	a theoretical curve, but that's actually not a theoretical curve. That is actually, that is
3895180	3900240	empirical data that I'm showing on the left on Monero. And then on the right, there's a formula
3900240	3905400	that declares, just like in Bitcoin, it declares what the coin emission is going to be. And in
3905400	3913360	Monero, just like in Bitcoin, all of the coin reward that is now in existence was once given
3913360	3919020	in the past to a miner that helped do the accounting work in the Monero network. There was no
3919020	3926480	centralized company. There was no kind of person behind the scenes getting a cut of the action.
3926480	3932260	Now, all of the money that was rewarded in Monero was given to a random computer out there
3932260	3937720	in the Monero network that just happened to come up with a difficulty-satisfying nonce,
3937720	3944980	therefore coming up with a rare set of data that could be added to the Monero blockchain.
3946060	3951440	All right, and so the tail emission in Monero, you can see it as this very gradual slope that
3951440	3957980	continues upward. The tail emission is going to get hit not too long from now, and then it'll
3957980	3965860	continue in perpetuity. All right, here's year-over-year supply inflation. And in case
3965860	3976220	you've seen Monero means money, which is the lecture I was a part of, which featured my
3976220	3982420	last keynote lecture that I gave at 3063 in Leipzig, Germany, I also showed a version of
3982420	3991680	this plot. What I had to do this year to make this plot actually fit was to change the scale
3991680	3998820	of the y-axis. So it was 20% before, it's 30% now, and that is because I had to fit the supply
3998820	4004280	inflation of the U.S. dollar that's shown in green. And so you can see that spike there is
4004280	4012920	post-pandemic, and the MZM money supply line inflation, that is the amount of
4012920	4021060	USD in circulation now versus one year ago, is up 30%. So you have this kind of
4021060	4028940	interesting turn of events in which just a few years ago, it was cryptocurrencies that had the
4028940	4035840	drastic supply inflation, as the cryptocurrencies were trying to get Boeing put out there.
4037860	4043520	But now we're coming on a new era of scarcity in cryptocurrencies, in which the inflation
4043520	4051060	rates of both Bitcoin and Monero are now on the sub-3% level. They're continuing to drop.
4051480	4056520	And interestingly, you can also see there's going to be an eight-year period, basically,
4056520	4062240	between now and about 2028, in which the inflation rate of Monero is actually going
4062240	4067660	to be smaller than that of Bitcoin. So if you want to, if scarcity, you know, if extreme scarcity
4067660	4075480	is something that interests you, Monero should be a contender on your list. Here, I'm showing also
4075480	4082320	the inflation curve for gold. So the World Gold Council keeps track of an estimate every year of
4082320	4091880	how much gold it thinks exists. And it calls it its estimate above ground gold. So basically,
4091880	4097880	it's not counting the gold in the ground that hasn't been mined yet. It's not counting estimates
4097880	4103420	of that. It's only counting estimates of, you know, ore that's been mined and processed and
4103420	4111580	turned into bullion. So if you look at that, the inflation rate of gold has been roughly 1.81%,
4111580	4115860	if you average that out over all of the data that it's provided.
4116360	4120580	So we tend to think of gold as not being inflationary, but the money supply of gold
4120580	4126360	actually does inflate as, you know, it gets dug out of the ground every year at this rate of,
4126360	4132160	pretty steady rate of about 1.8% per year. So if you think of gold as being sound money, that
4132160	4139240	basically introduces this figure, like basically this 1.8% per year figure. Like if you have some
4139240	4147980	source of scarcity, that is, I'd say around or below that 1.8% per year figure, then it's a
4147980	4153180	candidate for being called sound money. And so I would say, I would posit that both Bitcoin and
4153180	4158960	Monero, if they don't technically meet that definition right now, they certainly will
4158960	4164080	be literally below the year over year supply inflation rate of gold by the end of 2020.
4164080	4174370	And it'll just drop after that. All right, there's another form of unwanted scarcity
4174370	4178950	that I want to talk about, that is mining hardware. And so miner reward should scale
4178950	4183370	with miner expense. So in the Bitcoin white paper, there's this phrase, one CPU, one vote.
4183370	4190390	And what that means is that, you know, you basically want to be fair to the miners. You want to
4191650	4197050	have every miner's probability of hitting a block reward be proportional to the investment that they
4197050	4204150	put in to securing the network. Now, unfortunately, silicon economies of scale destroy this linearity.
4204150	4211470	So if you have an algorithm that is simple enough that you can design a piece of silicon to do
4211470	4217870	nothing but that algorithm super efficiently, then you'll have an advantage over general purpose
4217870	4223650	computing devices like CPUs, and to a lesser extent, GPUs that are meant to be general purpose.
4223650	4229730	They're not optimized for this certain problem. So in Bitcoin, you have exactly this situation.
4229730	4236190	So the proof-of-work algorithm in Bitcoin is simple enough that ASICs got custom designed to do
4236190	4245610	nothing but a Bitcoin proof-of-work algorithm over and over. And so at this point, ASICs are what are
4246590	4255290	practically dominating the Bitcoin mining network. It is simply a silly exercise for any, you know,
4255290	4263150	little guy, any one of us to put our, you know, our little gaming rig on the Bitcoin network and
4263150	4269350	think that we have any infinitesimal chance of getting a Bitcoin reward. I mean, basically,
4270210	4274830	it's like lotto sorts of chances. It's like, you might as well just, you know, go buy lottery
4274830	4281970	tickets. It's that bad of a return on investment for someone who does not have the requisite
4281970	4288270	hardware. And unfortunately, all of the requisite hardware happens to be all made in China. So
4288270	4293510	Bitcoin mining currently is a Chinese dominated oligopoly. Now, this is not necessarily a problem
4293510	4299610	that it's China. The problem is that it's just one part of the world that effectively has a monopoly
4299610	4305630	on the production of the necessary equipment to maintain the accounting system.
4306250	4313610	So in Monero, we have taken steps to try to keep the proof of work algorithm viable for small,
4313610	4319150	independent miners who don't necessarily have, for example, $50 million to spend on their own
4319150	4326570	silicon fabrication facility, or, you know, have social inroads with the CEOs of the companies who
4326570	4333390	do have these silicon fabs. So if you look at the proof of work at Monero, since 2018,
4333390	4340290	it has changed four times. This is remarkable for any cryptocurrency. We've done it four times.
4340290	4345070	It started out as Kryptonite, then Kryptonite v2 came, Kryptonite v3, then Kryptonite R,
4345070	4351370	and now RandomX. So this is looking at, again, data from the Monero blockchain.
4351370	4357610	And this is looking at Monero network difficulty. So in other words, this is the number that is
4357610	4365090	required for miners to successfully submit a new block to the Monero blockchain. So the higher the
4365090	4372050	number, the higher the difficulty, that means the more competing computers there are doing the
4372050	4378050	accounting work on the Monero network. So you can see, and so on this timescale, we're starting at
4378050	4384590	April 2014, which is when April 2014 is when Monero started. So through version 0.11,
4384590	4389310	the proof of work was Kryptonite. But then you see here, there's this spike up in the difficulty,
4389310	4395030	and that was basically due to ASICs having figured out how to do Kryptonite efficiently on ASICs,
4395030	4399830	making an ASIC to do that, putting it on the network, and then basically running away with
4399830	4405050	the vast majority of the miner rewards. So that caused a fair bit of alarm within the
4405050	4412070	Monero community, and steps were taken to basically render these ASICs useless. So that's
4412070	4420070	Kryptonite v2 came out with v0.12 in early 2018. That worked for a while, but then there's basically
4420070	4427350	just a lag time before the development of an ASICs to do Kryptonite v2. So once there was
4428090	4434690	another alarming spike up in the difficulty rate, well, Kryptonite v3 went out. And these were all
4434690	4441250	hard forks. So these all were changes that had to be adopted by everyone on the Monero network,
4441250	4448350	otherwise they would be mining an obsolete coin. So it... and this process continued again. So
4448350	4452550	then in 2019, there was another spike in the hash rate. So we went with Kryptonite R. And then
4452550	4460690	finally, around Thanksgiving of last year, is when RandomX got put into the network in v0.15.
4460690	4468870	And all signs so far are that things are looking good as far as keeping the network open and
4468870	4474430	available for little guys with just a CPU, just a gaming computer, for example, that they set to
4474430	4482270	mine, you know, overnight or whatever. People like that have a shot at mining a block in Monero.
4486210	4490170	All right, there's another form of unwanted scarcity, and that's access to layer one.
4490170	4496150	And that is, can you actually get a transaction onto the network during, say, busy times,
4496150	4503470	during peak times? So this is another cause of a civil war in Bitcoin. There's a one megabyte
4503470	4514010	limit in the Bitcoin code. So basically, Satoshi, in a kludgy, hacky way to prevent the network from
4514010	4521230	getting spammed, Satoshi coded in a one megabyte hard-coded limit on the size of every new block
4522490	4527750	and saying that it was a temporary thing. But is this actually temporary? Should it have been
4527750	4532810	removed? Like, basically, a few years ago, when interest was picking up in Bitcoin and
4532810	4537750	the block sizes were running up against this one megabyte limit, you had two camps.
4538950	4542470	You know, again, if you're new to crypto, I guess I don't want to go too much into
4542470	4548610	details of this messy civil war and divorce. And even though they've divorced, they're still at
4548610	4557850	war. Basically, the first thing you have to do if you want to be in the social circles of Bitcoin
4557850	4564010	is you have to declare your allegiance, whether you have allegiance to Bitcoin Core or Bitcoin
4564890	4571870	Cash or Bitcoin SV. And then you have to declare your unending scorn and hatred for everyone else
4571870	4577650	and the other, you know, forks who don't do things right. They just don't get it for this and that
4577650	4583570	reason. And, you know, this bickering has been going on for years, and it really hasn't
4583570	4592230	dissipated much since then. But anyway, it's an example of what, I guess, can go wrong within
4592450	4599390	a crypto community is that you have like a civil war blow up of a seemingly technical parameter.
4599390	4605490	So, again, in the Monero community, we've looked at what Bitcoin's done and we've, I think, taken
4605490	4612690	steps to try to avoid at least the, you know, direct brunt of the drama that results from
4612690	4618230	making some of these decisions. So in Monero, instead of having a hard-coded limit on how big
4618230	4625270	blocks can be, we have an adapted block weight algorithm. It used to be called adaptive block
4625270	4630170	size, but then, you know, some improvements got made to it. Now it's called adaptive block weight.
4630330	4636350	I will spare you the details in this talk, but ArcticMine actually is going to be talking right
4636350	4643070	after me. So I expect his talk will have a lot of good details on this matter. But the basic idea is
4643070	4650950	that there's a disincentive to the minor reward that kicks in when the blocks are above a certain
4650950	4658270	size, like 300 kilobytes. So, basically, the minor is disincentivized from just putting all sorts of
4658270	4664310	spam into a block and then, you know, saying, hey, here you go, world, here's your new block. So, basically,
4664310	4670950	their minor reward is going to go down the bigger the block they make. And to make up for that,
4670950	4675790	though, user fees are going to increase if recent blocks are bigger than that. So, basically, if
4675790	4679530	there's congestion on the network, then users are going to be asked to pay a little bit more.
4679530	4685070	The block reward to the minor goes down a bit. But all of this is handled dynamically in a system
4685070	4692230	that's not hard-coded. So that if you have a case in which there is actual organic, slowly growing,
4692230	4697390	legitimate, non-spam use of the Monero network, it's going to accommodate that. It's going to allow
4697390	4701890	for that. And you can see this in the transactions per day plot that I'm showing in the bottom here.
4701890	4706530	Here I'm showing transactions per day on a logarithmic scale. So we're going from 10 up to 1
4706530	4711990	million transactions per day on Bitcoin versus Monero. And in Bitcoin, you can see that there's
4711990	4717110	like this, basically, this asymptotic limit that is being hit because there's this one megabyte
4717110	4724090	block limit. Whereas in Monero, we're liberated from that with this adaptive algorithm. And you
4724090	4728890	can see, basically, the general trend line in Monero is that the transactions per day are going
4728890	4737200	up. We are seeing usage of the network. All right. So I want to move on to fungibility
4737200	4743140	and its consequences in a surveillance society. Bitcoin is transparent. So if you're new to
4743140	4749460	crypto, you might be under the mistaken assumption based on, and it's an understandably mistaken
4749460	4756400	assumption, based on how wrong the popular press is. So often when it comes to any sort of reporting
4756400	4762660	on Bitcoin or blockchain related topics, they routinely, you know, mangle the details
4762660	4769080	in ways that you would expect and ways you wouldn't expect. But this narrative that Bitcoin
4769080	4777960	is this, you know, super secret currency that nobody knows what's going on in it once you're
4777960	4784960	in it is totally categorically false. Bitcoin is 100% transparent. It's all there in the Bitcoin
4784960	4792260	whitepaper. The Bitcoin block etches forever for everyone to see. For every transaction,
4792260	4797520	it shows the sender, the receiver, how much got transferred. For every Bitcoin address,
4797520	4802800	it's trivial for anyone to go to a Bitcoin block explorer and type in anyone's address. It doesn't
4802800	4808560	have to be your own address. It can be any person's address. It can be the, you know, donation address
4808560	4814840	of somebody you see online. You can type them that address and you can see how much money they have.
4814960	4822760	You can see a complete balance history in live, real time. What this does is it puts innocent
4822760	4829040	people and businesses at risk. So, for example, let's say you, you know, pay for a pizza with
4829040	4835420	Bitcoin, but just as it happens, let's say that, you know, this innocent person happens to be,
4835420	4842040	have a significant amount of wealth in Bitcoin. So when they pay for this $10 pizza with Bitcoin,
4842040	4847660	then the delivery guy now knows that, okay, here's the Bitcoin address that I just got my
4847660	4853580	payment from. You know, delivery guy goes home, types in the address and can instantly see that
4853580	4860400	the guy that he just delivered a pizza to has enough Bitcoin in it to be worth maybe considering
4860400	4869020	sharing with some of his unsavory friends who might be interested in, you know, making a visit
4869020	4875660	to this guy and seeing if he might be persuaded to share his Bitcoin with them. So this transparency
4875660	4882200	puts innocent people and businesses at risk. For businesses, trade secrets are routinely
4883060	4889340	considered part of business and nobody questions that. So no business wants to divulge how many
4889340	4895600	customers it has, how much those customers pay, who its suppliers are, when they pay their suppliers.
4895600	4905040	But all this sort of proprietary information that is necessary to make the special sauce
4905040	4911160	of any legitimate business that is adding value for its customers, these operational details
4911680	4917580	are an important part of that success. And so businesses don't want to give that away.
4917680	4921940	On a transparent blockchain like Bitcoin, they are forced to give that information away. They
4921940	4926740	have no choice. They have to give it away because it's by design transparent.
4928540	4933980	It's as if you have a situation in which you have $10 bills, but on the back of every $10 bill,
4933980	4939740	you see a nice list of everyone before you who's owned that $10 bill going all the way back to the
4939740	4944580	U.S. Mint. You know, it shows you like every dollar bill shows you the mint that it came from.
4944580	4952340	Imagine it showed the date of the printing, the employee at the mint who was the last person to
4952340	4958400	touch it before it left the mint, the first bank that it got. And then basically every single
4958400	4964500	person on that dollar bill, a list of that is shown. That's Bitcoin. Every single coin is
4964500	4972140	traceable back to the miner. That invites voyeurism. It invites people to just basically be snoopy,
4972140	4977020	like snoop, be creepy because they can. Because it's easy to type in, you know,
4977020	4981040	your buddy's Bitcoin account into your own browser and look up how much cash they have.
4981040	4985100	It's easy to do it. The system invites you to do it. So people do it.
4986700	4992480	It also invites guilt by association because let's say you have a situation in which a squeaky
4992480	4998500	clean guy, I'm going to use this squeaky clean guy example a lot. So I guess maybe in a Monero
4998500	5003920	talk, you're not going to expect a whole bunch of talk about the interests of squeaky clean people,
5003920	5008580	but maybe that's a refreshing thing. Like I would like to talk about squeaky clean people if that's
5008580	5015540	okay and not criminals. You know, I identify more with the squeaky clean group quite a bit more.
5015580	5020220	So I would like to talk about the interests of the squeaky clean people and what they would
5020220	5026000	like to see in a cryptocurrency. So let's say you have a situation in which a squeaky clean guy is
5026000	5031200	buying a car from somebody, right? So when you buy a car from somebody and you go on Craigslist
5031200	5038540	or whatever, you see a bunch of cars posted. You don't really think to do a background check
5038540	5043480	on the person selling the car. Is that really relevant? Like you're just buying a car.
5043520	5049500	Is it necessary to, you know, pull a credit report and go on a detailed investigation on the person
5049500	5054620	selling the car to find out if they had a, you know, a happy childhood, got enough hugs when
5054620	5060100	they were a kid, like find out all that kind of stuff. Is that really something that we think as a
5060100	5065760	society should be a necessary part of buying a car on Craigslist? Currently the answer is no.
5065760	5071260	So basically it's okay to just go buy a car from a stranger and you don't know what that
5071260	5076100	stranger's history is as long as they have clear title to the car and you have the cash, you can
5076100	5081640	make a deal, right? And it's not going to be... and if it turns out that the person selling you the car
5081640	5088220	was an unshady character in some way, you would expect in the cash system, in our current fiat
5088220	5092620	system, that that is not going to come back to haunt you, that that is not going to be used to
5092620	5097760	falsely accuse you. But yet in Bitcoin we have this situation where you have complete transparency
5097760	5105420	in the blockchain, yet ignorance on the social circumstances surrounding each transaction.
5105420	5112560	So, but you also have this perfect voyeurism that's part of the currency, which means like
5113100	5117660	you're thinking, well, gee, I have this blockchain that shows every single detail of who sent what to
5117660	5123940	who. If only I could associate each of these Bitcoin addresses to actual names and faces,
5124540	5131040	then I would have a graph, I would have a graph showing different people giving money to different
5131040	5136560	people. And let's say I could further identify certain members of this system as being bad
5136560	5143580	actors, right? So now I have this graph of bad actors and I have that bad actor's complete
5143580	5149060	financial history on this transaction, on this transparent blockchain. Well, let's say this bad
5149060	5160840	actor sold his car to Squeaky Clean Guy. So Squeaky Clean Guy now gave his Bitcoin,
5160840	5167820	in this scenario, his or her Bitcoin, to this, unbeknownst to them, bad actor who was selling
5167820	5174100	them a car. Now this bad actor goes out and does something bad with that Bitcoin. Let's say, you
5174100	5180080	know, drugs or organized crime or whatever, you know, whatever, whatever the bad thing is, right?
5180080	5185280	So this criminal goes out and does that with the Bitcoin that they got from this
5185280	5193900	innocent Squeaky Clean Guy. Well, because the Bitcoin blockchain is transparent and you have
5193900	5198560	multiple companies whose job it is to do precisely what I just said, that is,
5198560	5207020	put names and faces on accounts in the Bitcoin system and basically come up with what amounts
5207020	5212480	to a social credit score for everyone in the Bitcoin network. Your social credit score will
5212480	5220720	be good if your dot in their graph is only connected to other dots in their graph that
5220720	5226880	are known to be quote-unquote good. And as soon as you have a link from your dot to another dot
5226880	5232920	that's quote-unquote bad, that's going to ding your social credit score. This is currently live
5232920	5239180	and in place in Bitcoin. And by participating in Bitcoin, it's like you are signing an implicit
5239180	5245960	terms and conditions saying that I agree for my data that is being put on the Bitcoin blockchain
5245960	5253420	to be poured over by analysts somewhere in the world who have no idea who I am, but based on
5254060	5261160	basically who is sending money to who, could well have the power to make false assumptions,
5261160	5268100	false positive results against my character. And I have no recourse over that. That is part of the
5268100	5273780	implicit terms and conditions that squeaky clean people sign in effect when they participate in
5273780	5284520	Bitcoin. Technical censorship resistance, which is proudly featured within Bitcoin,
5284520	5289800	you know, our network is censorship resistant. We have the most hash power behind us.
5290420	5296600	Unfortunately, when this comes up against the topmost OSI layer, right, we're talking like the
5296600	5301960	human meatspace layer. Unfortunately, technical censorship resistant turns out to be insufficient,
5301960	5308500	because if you have a Bitcoin address that is associated with a, like, let's say a really bad
5308500	5314300	guy, like an undisputed, you know, international terrorist who everybody agrees is like a really
5314300	5322920	bad person, and they have a Bitcoin address. In effect, anyone who does a transaction with that
5322920	5330420	Bitcoin address is going to get a lot of unwanted attention. It's going to be instant. And because
5330420	5337900	the Bitcoin blockchain is so public, and there are companies that are looking at this sort of data.
5338420	5345000	So even though you have technical censorship resistance, well, yeah, yeah, I guess. I mean,
5345000	5350220	but so what if you have, like, every three letter agency has this certain, you know,
5350220	5357300	list of Bitcoin addresses on its bad list? How many Bitcoin people are there who are actually,
5357300	5363040	you know, checking against all of these addresses on their list? I would say they're probably very
5363040	5370880	few, like, like individuals. But every company is paying 10s of 1000s of dollars per month
5370880	5379270	to one of these blockchain analysis companies that is doing. All right, in contrast with Bitcoin,
5379270	5384030	Monero is fungible. And Monero does this by integrating three separate technologies,
5384030	5388390	all of which combine to promote indistinguishability between the tokens in the
5388390	5394730	Monero network. One is ring signatures. So ring signatures, keep the identities of the senders
5394730	5402630	private. So in Monero, what happens is that, let's, let's say I want to send Monero, what happens is
5402630	5409330	that when I put together my transaction, and I sign it at the time of signing, I take my,
5410790	5415750	my transaction input, basically, you can think of my little chunk of Monero, which is associated
5415750	5422770	with my address, and then the protocol will pick 10 other chunks of Monero that exist on the
5422770	5428830	network. And when I construct the signature to spend that Monero, the only thing that you know
5428830	5434250	cryptographically is one of these 11 chunks of Monero are the are the ones that actually are
5434250	5440810	being sent. You don't know which one it is. So that's how ring signatures keep the transacting
5440810	5446630	senders private. Stealth addresses keeps the transacting receivers private. So in Bitcoin,
5446630	5451670	the receiver's Bitcoin address shows up in plain text on the blockchain for everybody to see.
5451770	5458150	So in Monero, that doesn't happen. In Monero, the receiving blockchain address gets encrypted
5458790	5462610	in a one-time sort of thing. So it doesn't get encrypted the same way every time it gets
5462610	5467950	encrypted in a different way for every transaction. So a stealth address gets a one-time stealth
5467950	5472110	address gets put on the blockchain. That's what everyone can see. It's an encrypted version of the
5472110	5477090	receiver's address. And so that keeps the transacting receivers private. Then finally, RingCT
5477090	5485610	is a technology that keeps transaction amounts sent private. So the original white paper for
5485610	5491150	Monero was a crypto note white paper. The crypto note white paper included ring signatures and
5491150	5496850	stealth addresses in it, but it did not include RingCT. RingCT came later. It's a fungibility
5496850	5503930	innovation. And I think it's an interesting example of the kind of stubbornness and dedication and
5503930	5509290	kind of alignment of all the elements of the Monero community in improving fungibility in this
5509290	5516330	project. So to put RingCT live into action, it required three things. It required original
5516330	5522730	cryptographic research. So we're talking, you know, post-PhD level mathematics. It required
5522730	5528110	development and an external audit of new code. So you need some code ninjas to make
5528110	5533930	this stuff happen. So you have some higher level math being created, new knowledge being created on
5533930	5540550	the mathematical cryptography front. Then that has to be applied into code that people
5540550	5547550	are confident enough can be entrusted with keeping safe custody of people's money. So
5548330	5553730	you need development in an external audit of new code. So the external is actually optional.
5553810	5558750	There might be projects out there who don't do an external audit because it costs money.
5558830	5565150	So in Monero, all of the new, all of the big, you know, code upgrades that I can think of,
5565150	5572990	certainly in the last several years, have all had a separate external audit phase in which
5572990	5579210	community members are asked to contribute to pay for other, you know, basically extra eyeballs to
5579210	5584530	look at code before it gets put into production. And then third, you needed community commitment
5585330	5596110	to hard fork RingCT into existence. So here's some data from the blockchains that
5596770	5603610	kind of explain the story here. So the top chart I'm showing is the daily average of the average
5603610	5610130	number of bytes per transaction. So you can see I'm showing in black is Bitcoin. It's been very,
5610130	5617750	you know, pretty constant in Bitcoin. Like they're, you know, the ethos coming from Bitcoin is that,
5617750	5623130	you know, we want the protocol to be safe and we don't want to make too many changes because,
5623130	5627790	you know, there's a lot of money riding on this network. You know, set aside the fact that
5627790	5633870	Bitcoin is still like a baby in terms of global finance, like the Bitcoin in global terms is not
5633870	5638150	keeping track of a whole lot of money. But that's the attitude that they take is that, you know,
5638150	5643350	we're the custodians and you want to be very conservative and we don't want to make changes.
5643350	5649370	It's going to be what it is. So you can see that there's been very little change over 11 years on
5649370	5656010	this front in how big a Bitcoin transaction is. It's quite different for Monero. So if you look
5656010	5662630	here now at 2014, the Monero network was born. Initially, nobody was using the Monero network.
5662630	5670090	And so you would see only minor rewards being sent out. And in Monero, minor reward blocks are,
5670090	5675570	they don't take that many bytes. So that's why in like the birth days of Monero, you see that
5675570	5680390	the transaction size in bytes was very small because those were mostly Coinbase transactions
5680390	5686850	going out to basically empty blocks. But then people started using it. And then in the early
5686850	5693730	days of Monero, the way it worked was that the system used denominated outputs. So for example,
5693730	5702010	you can think of there being like a, like one Monero, like gold chunk that is encased in plastic,
5702010	5707950	right? And it's engraved with the kind of owner's, you know, private key information on it.
5707950	5712370	And it can only be used by that person. And once a person spends that one Monero
5713490	5718430	output, then it transmits and it goes, it becomes the property of somebody else on the Monero
5718430	5724710	network. But you basically have this discrete kind of chunk of value that gets passed around.
5724750	5729310	And so in the early days of Monero, you had, you know, one Monero chunks, two Monero chunks,
5729310	5734450	10 Monero chunks, 100 Monero chunks. You had basically every round number. So you had one
5734450	5739030	through nine, 10 through 90, 100 through 900, 1,000 through 9,000. So you had, you know, and
5739030	5744990	then going the other way, 0.1 through 0.9, 0.01 through 0.09, all the way going there. So basically
5744990	5750950	to put a transaction together, if you wanted to spend 341 Monero, you'd have to get a 300 block,
5751270	5755150	a 40 block and a one block or some combination. You had to, you know, scrounge around your outputs
5755150	5760710	and come up with 341. And then when you spent it, you'd have to either, you know, you'd have to
5760710	5766610	spend the actual chunks that you had, or you'd have to break them up. Right. So that was, that's
5766610	5773190	what was going on in the early days of Monero up until 2017. Then it was recognized that this was
5773190	5779810	not so good for privacy because, you know, if you spend 341 Monero, just to make up a number,
5779810	5786490	I sent 341 Monero to my buddy. Now my buddy has 341 Monero and they send it to somebody else.
5786490	5790870	You can see the 300 and the 40 and the one, you can see they're kind of traveling around.
5791250	5796910	That's what you could see in Monero pre-RingCT. And so it was decided in the community that this
5796910	5803670	was not acceptable. And so when the result, the research for RingCT was increasingly tested and
5803670	5809530	vetted and, and it was seen to be good and also externally audited, there was a decision in the
5809530	5815050	community, community to do it. Now, this was despite the fact that when RingCT was enabled,
5815050	5819910	you can see there's this big jump in 2017 of the transaction size. So it went to about
5819910	5825570	10 kilobytes per transaction and it peaked almost to like, you know, 20 kilobytes per
5825570	5829790	transaction. We're looking at very large transactions compared to the size of the
5829790	5834910	Bitcoin transactions. But that was a price that was kind of unanimously decided in the,
5834910	5839730	in the Monero community was worth it to improve fungibility of the coin,
5839730	5845730	which would protect the innocent. All right. And you can see that in the bottom chart here,
5845730	5851350	I'm showing the daily average transaction fee. So this is how much a, the person signing the
5851350	5856030	check. This is how much that person who signs a check to spend money in Monero,
5856030	5862370	how much money they are kicking in to chip into the miner, whose job it is to add their
5862370	5869330	transaction to the next block. And so you can see that for quite a while, the Monero and the
5869330	5875770	Bitcoin block fees kind of went in, in parallel together. At the last big bull run at the end of
5875770	5881810	2017, Bitcoin's transaction fees were in the like, you know, 50, a hundred dollar range.
5882190	5888850	It's basically because, you know, there's all this, you know, new interest of new people into
5888850	5893670	cryptocurrency and Bitcoin in particular. The new interest was driven by the, you know,
5893670	5899010	spectacular rise of price. And so you had all these noobs wanting to try their, you know,
5899010	5903830	their new Bitcoin, going to the network, you know, basically all these people were flooding the
5903830	5911550	network with their transaction requests because Bitcoin has this one megabyte block size limit.
5911550	5917910	There's a ceiling to how many transactions that can process. And so as a result, the fees went way up.
5918870	5926990	And so they went up in Monero as well. And that was largely, you know, there's,
5926990	5931610	RingCT had a role in that because RingCT was making the transaction sizes that much bigger.
5932250	5940130	Then later Bulletproofs came. So Bulletproofs were a method to use more clever mathematics to,
5940910	5948030	to ensure that the balance of inputs and outputs that is guaranteed using higher math in RingCT
5948510	5953090	can be done with far less byte space than it previously did. So you see when Bulletproofs
5953090	5957710	and again, there's a, there's a research process, an audit process, a coding process,
5957710	5962030	and a vetting process for all this for Bulletproofs as well. But when that went live on the network,
5963390	5968610	and that was in late 2018, you can see that the transaction size dropped by basically an order
5968610	5974330	of magnitude. And then you can see here on the transaction fee side, the fees also dropped by
5974330	5981010	an order of magnitude. So you can see that all of this innovation happened relatively recently.
5981010	5986270	We're talking since 2017, 2018. I know it's a long time in terms of crypto terms because,
5986270	5990190	you know, things move so fast in crypto, but, you know, if you look on human terms,
5990190	5996390	like, like all this improvement happened in a short timeframe, which means that oftentimes you'll
5996390	6002690	see like, kind of criticism of Monero being like, the transaction sizes are way too big. It's never
6002690	6006670	going to scale, or the transaction fees are way too big. People are never going to want to pay
6006670	6013110	that. Well, that, that is all obsolete as of like, basically, you know, two years ago. As of late
6013110	6019350	2018, these things are no longer really true. You could argue that the Monero transaction sizes are
6019350	6024750	still quite a bit larger than Bitcoins. But there's a, there's a new news item in the Monero
6024750	6032270	research pipeline. CL-SAGs are a way to compress the byte size requirement of transactions even
6032270	6037010	further, on top of what Bulletproofs have done. That's been, that just went through an audit
6037010	6043170	process, and it's being coded up for inclusion in the next hard fork, the next planned hard fork.
6043170	6048990	And again, in Monero, hard fork is not like a term of, you know, war. It's like a kind of something
6048990	6053810	we look forward to, because it means that new good stuff is coming, going to come on live.
6053970	6060610	So CL-SAGs are set to go on live on the network this October. And once that happens, you're, I'm
6060610	6065450	showing in a dotted line here, like basically the order of magnitude of improvement that we're
6065450	6071530	going to, that we're expecting to see on the average transaction side size post-CL-SAG. So
6071530	6076030	you can see that there's a gap here between the transaction sizes between Monero and Bitcoin,
6076030	6080530	but it's shrinking. And the reason it's shrinking is that there's a lot of
6082250	6087030	dedicated smart effort being put into that by members of the Monero community.
6089470	6095150	Meanwhile, on the fee side, fees in Monero have been like in the penny range for like a, like over
6095290	6103190	a year now. So, you know, if you're thinking of contrasting that with Bitcoin, in which, you know,
6103190	6107710	if you want to try to achieve some measure of fungibility within Bitcoin, you have to do all
6107710	6113410	sorts of, you know, ninja stuff, which is, you know, questionable in effect, because in the end,
6113410	6118470	everything you do in Bitcoin is totally transparent. So, I mean, it's like a cat and
6118470	6124390	mouse game. Anyway, to try and get some semblance of privacy in Bitcoin, there's like a bunch of
6124390	6131570	different steps you got to do of varying practicality. Some of it might, and most of it
6131570	6139730	just doesn't get done by most people in Bitcoin. So if you compare the, for the use case of
6139730	6147370	transacting privately, especially for squeaky clean people who want to be insulated from the
6147370	6154170	unrelated actions of other people on the network, Monero is the way to go.
6155890	6160650	Monero benefits people with nothing to hide. It eliminates the risk of receiving coins that are
6160650	6165070	tainted due to no fault of the receiver. So this is the example of the selling the used car.
6165070	6169850	So one interesting thing is that these chain analysis companies, basically one thing that
6169850	6176290	they do is that they flatten the time dimension. And what I mean by that is that it doesn't matter
6176290	6185370	if person A sent a Bitcoin to person B 10 minutes ago, or six years ago. Once that link happens
6185370	6192910	between person A and person B, now there's a link. Now there's a certain probability of suspicion
6192910	6199430	that people A and B are actually, you know, business partners and not just random people doing
6200190	6205570	a arm's length transaction like with selling a car to a stranger. Like the people analyzing the
6205570	6211130	blockchain have no idea of that social context. All they can do is, you know, assign some sort of
6211130	6217490	probability of social involvement with that, right? What that ends up meaning is that for
6217490	6223750	people who actually are squeaky clean, any involvement in the Bitcoin blockchain means
6223750	6229250	you have a probability of interacting with somebody else on the Bitcoin blockchain who is
6229250	6235150	not as squeaky clean as you are. And if that happens, that's going to be flagged in these
6235150	6242690	companies doing blockchain analysis as a potentially meaningful link. When the fact is,
6242690	6248510	it's a false positive. It's an actually meaningless link. But you as the user have
6248510	6253550	no power over that. You have no recourse. You have no way of communicating to these
6253550	6258630	companies and saying, hey, yo, I'm actually squeaky clean. They don't know. They don't know.
6258630	6264630	They don't care. They have no liability. If they do a false positive, well, it's just, you know,
6264630	6270190	they can't help it if they thought that, you know, well, this person looks suspicious,
6270190	6274530	you know, I guess, you know, it's not my fault that they sent the SWAT team to this
6274530	6280770	innocent guy's place. I was just doing my job, right? I mean, that's the kind of issue that is
6280770	6285950	going to increasingly be happening on a totally transparent blockchain.
6287410	6294710	All right. There's a Nobel Prize winning paper that I want to talk a bit about. It was by George
6294710	6299950	Ekerlof who won the Nobel in economics, and he got the Nobel by talking about the used car market.
6300050	6307030	So there's a linkage here between used cars, the pandemic, and surveillance coins,
6307030	6313730	which is what I like to call transparent coins. All right. There are two used cars types. They're
6313730	6318050	lemons and they're peaches. So lemons are the ones, those are the bad cars, right? Those are
6318050	6323090	the cars that are junk. And they were, you know, they went through a hurricane or a flood or
6323090	6327430	something. There's some big problem with the car. Whoever buys that lemon is going to have nothing
6327430	6331730	but problems because the thing's going to break and they're going to have repair bills. On the other
6331730	6336330	hand, you have peaches. Peaches are the kind of slang name within the used car industry for
6336330	6342670	cars that are good. They were in care of. Usually it's like the person who actually bought the car
6342670	6347270	and didn't, you know, didn't lease the car. They bought the car new. They took good care of it.
6347270	6350810	They did all the maintenance. They changed the oil. They did all, you know, they took the car to
6350810	6356590	the dealer and paid higher prices for maintenance rather than just take it to their cousin who did
6356590	6363310	oil changes for cheap in their garage or whatever, right? So peaches are the cars that got like the
6363310	6368470	first class treatment in terms of maintenance. Lemons are the opposite, right? And when it's
6368470	6373690	time to sell these cars, you can't tell them apart though because both the lemons and the peaches
6374290	6380350	go through a very thorough paint job process in which the finish is, you know,
6380350	6385890	polished down to a mirror finish so that both the lemons and the peaches look, they look superficially
6385890	6391590	to be fantastic. So the buyers can't tell them apart, but the buyers know that they are ignorant
6391590	6397210	in this situation. They know that even though all of the cars on this used car lot look great,
6397210	6402030	there's some of them that are actually lemons and some of them are peaches, right? So the Akerlof
6402030	6407530	insight goes as follows. There is a negative feedback loop in this marketplace which has
6407530	6413050	asymmetric information between buyers and sellers. The buyers are relatively ignorant
6413050	6418270	relative to the sellers. The sellers know which of the cars are the lemons and which of the cars
6418270	6423670	are the peaches. The buyers don't know that, but they know that they're ignorant. So in that
6423670	6429650	situation, here's what happens. The buyers come up with an offer price for their used car. That offer
6429650	6434210	price is going to be the lemon price because that's, that's the minimum possible price it
6434210	6440150	can be worth is the lemon price. But then based on the buyer's perceived probability of getting
6440310	6445370	a peach versus getting a lemon, they're going to adjust their offer price to account for the
6445370	6450570	probability that they're going to get a lemon. So in, for example, if the used car buyer thinks
6450570	6455010	that there's only a 1% chance that they're going to get a lemon, then their offer price is going
6455010	6461670	to be almost equal to that of a peach price. It's going to be basically 99% of the difference
6461670	6466210	between the lemon and the peach. That's the rational offer price. If you think there's a
6466210	6474090	1% chance, you're going to get a lemon. So let's say the buyer thinks there's,
6474090	6477890	thinks there's a 5% chance of getting a lemon. So they come up with this offer price that's
6477890	6482150	in between a lemon price and a peach price, but it's pretty close to the peach price, but it's not
6482150	6489270	quite. So what happens when the, um, the seller makes this offer? Well, the lemon seller is delighted.
6489270	6493350	The lemon seller is delighted because they're selling a thing that's worth the lemon price.
6493350	6499790	Here comes the sucker offering almost a peach price for this car. So the lemon seller says,
6499790	6505030	great deal. Great. I will accept your offer. And they shake hands. They sell that lemon.
6505070	6509550	How about the peach sellers? The peach sellers are the people who took good care of their cars.
6509830	6515830	They know that their car is worth the peach price, but because of this ignorance, they are unable to
6515830	6520530	transmit this goodness, the knowledge of that goodness to the buyer. The buyer is unwilling to
6520530	6525450	pay for full goodness. They are willing to only pay for partial goodness because they think there's
6525450	6529930	some probabilistic chance that they're going to get burned on the deal. So the peach sellers are
6529930	6535490	being offered less than what their car, what they know their car is worth. So they will tend to say
6535490	6541550	no thanks. When the peach sellers say no thanks, they end up leaving this used car market. In other
6541550	6548550	words, the peach sellers who had put their car up for sale, now they delete their Craigslist ad,
6548550	6556030	right? As a result, the fraction of Craigslist ads that are selling lemons goes up because some of
6556030	6561190	these peach sellers left. Therefore, the chances of getting a lemon have gone up. Now the buyers
6561190	6566390	are eventually going to get wise to this. They're going to observe that, oh gee, I thought the chance
6566390	6571050	of getting a lemon was 5%, but you know, my buddy just bought a used car. He got a lemon.
6571050	6576170	This other buddy, he got a lemon too. So, you know, maybe I think it's like, you know, 10 or 15%.
6576170	6580990	So basically the offer price goes down. When the offer price goes down, the lemon sellers
6580990	6585870	continue to accept that because basically everything in the second probabilistic term for
6585870	6591610	the offer price is gravy. That's their profit. So there's no way for a lemon seller to lose in
6591610	6596210	this situation. No matter what the offer price coming in is, they're going to accept it. But the
6596210	6601710	lower the prices, the stronger the reaction from the peach sellers is going to be to leave the
6601710	6607170	market. So you basically have this negative feedback loop and this race to the bottom in
6607170	6612950	which all of the sellers of the good stuff leave the market and you're left with only a market of
6612950	6620270	junk. You have 100% lemons in the used car market. And even despite like the real used car market,
6620270	6626090	which has been assisted by things like Carfax, which, you know, gives you some semblance of
6626190	6633110	a history of a car to help you assess that probability, it's still, you know, it's still an
6633110	6646470	unknown. So, right. So even though there's Carfax now, the used car market continues to have a bit
6646470	6651470	of a shady reputation, right? It continues to be the case that people who take really good care of
6651470	6657570	their cars tend to be the ones who will keep the cars and not sell them. They exit that market.
6657710	6663310	All right. So the Akerlof paper has direct applications to Defcon safe mode, what we're
6663310	6670150	doing now, and also transparent coins. So let's, let's look at the pandemic example. So people with
6670150	6675550	good health, right? People who are healthy and actually are healthy. Those are peaches in this
6675550	6682770	situation. So, and the used car marketplace is the marketplace that consists of going to a
6682770	6690990	conference and meeting cool other people and making new friends and all that. So when, when
6690990	6696930	a peach seller, in other words, a healthy person is faced with the prospect of engaging in such a
6696930	6704310	marketplace, that buyer is ignorant of whether the product that they're going to buy when they go to
6704310	6709810	that marketplace is continued good health from making new friends and staying healthy, or if
6709810	6715050	they're going to get a lemon. Getting a lemon would be, you know, you know, making buddies with someone
6715050	6722790	who is asymptomatic and had the virus and didn't know it. They come home sick, right? So that's,
6722790	6730630	that's the situation where you have ignorance of the particular details of who is a lemon and who
6730630	6737230	is a peach, but a probabilistic assessment that if you engage in the marketplace, there's a
6737230	6743610	percentage of probability that you're going to end up with a lemon. And so the rational,
6743610	6749110	the rational action in that is for the healthy people to bypass that market. They, they, they
6749110	6756210	say, no thanks, I am not going to engage in the market for real in-person networking at this
6756210	6762610	point in time. And it's going to be a good idea to do Defcon in safe mode, right? That is an example
6762610	6769110	of the peaches leaving the market. Let's look at transparent coins of which Bitcoin is one. So when
6769110	6775550	you have a surveillance coin in which all of the details are put, put up on a ledger, and you have
6775550	6782970	squeaky clean people, right? Who genuinely have nothing to hide. They, they live their lives well.
6782970	6787050	They haven't done anything to anybody, which is actually the majority of people, I think.
6787050	6793810	You have squeaky clean coin owners. They are the owners of transparent coins that have their
6793810	6800070	reputation attached to them. Is it worth it for these people to go out into the Bitcoin marketplace
6800070	6806190	and transact goods and services in Bitcoin when they are, when they have full knowledge of the
6806190	6811950	fact that some of the people in the Bitcoin ecosystem are not as squeaky clean as they are?
6811950	6819950	And if they transact with these people, they have some risk of being falsely flagged in a
6819950	6828990	false positive as being a, a comrade of some bad guy. They don't know who it's going to happen with.
6828990	6833390	This is, it's exactly the same as the Yukon market. They don't know which of these people
6833390	6837550	that they're transacting with is the lemon who's going to cause them all sorts of problems,
6838110	6843350	because some chain analysis company makes a false association between them. They don't know who it
6843350	6847890	is, but they know that they're out there somewhere and that there's some probability of that happening.
6848090	6854850	So if you are truly squeaky clean, what is the rational response to such an ecosystem?
6854850	6859810	What is the rational response? Would you like to opt in to this social system where you might
6859810	6864490	be falsely accused of someone who you have nothing to do with, but you just happen to
6864490	6871210	exchange coins in some, some one-off transaction? Are you okay with that? So that's the question
6871210	6875250	that's being asked to the squeaky clean people when they are being asked to participate in a
6875250	6883090	system like Bitcoin. So there's a cryptocurrency safe mode idea I want to get across. So
6883090	6889090	just like it was, you know, we look back and we, we say, wow, it was a little bit naive of,
6889090	6893890	of people to, to automatically assume that they're healthy just because they feel healthy.
6894490	6900210	It was naive of people to think that the only people out there who are sick are the ones who
6900210	6906190	are actively sneezing and coughing, right? So we can look back at, you know, several months ago,
6906190	6910330	wake to prehistoric times of several months ago and kind of wonder how we could have possibly
6910330	6913930	lived our lives like that. There's a similar kind of thing I think that's going to happen
6913930	6920290	with transparent coins. You have people who are squeaky clean. Somebody wants to send them Bitcoin.
6920290	6926390	Yes. Well, I guess they have Bitcoin, so they must be legit. They, they're cool enough to get
6926390	6932030	with it with understanding Nakamoto consensus. They must be a good guy, right? Okay. I'll take
6932030	6938090	your money. So funds received later, any unpleasant effects. And this could be immediate and it could
6938090	6942610	not be immediate. Like that's the thing about flattening the transaction graph between people.
6942690	6948750	It takes away the time dimension. So let's say you do, let's say, you know, you settle a dinner
6948750	6956090	bill with your buddy, right? Five years later, you and your buddy, you know, diverge paths. And
6956090	6960630	it turns out that your former buddy is now involved in organized crime, right? And then
6960630	6966050	they use their Bitcoin to do something unsavory with their Bitcoin. But part of that spending
6966050	6970510	came back from five years ago when you had dinner together and you settled the bill and you,
6970510	6975390	you know, you gave him, you know, whatever, 50 bucks to like pay for your share of a dinner,
6975390	6983410	right? But now your address has been associated with this bad guy. So it could strike and you
6983410	6988570	don't know when. So like the naive way of thinking about this is that, well, okay,
6988570	6993110	you're going to interact with other people, strangers on the Bitcoin network. Is anything
6993110	6997810	unpleasant going to happen as a result of that? Well, ha ha, no, that's not going to happen.
6997910	7001870	That's just something that these, you know, delusional Monero people talk about
7001870	7007950	as being something, right? Like nobody in my friend group thinks that anything like that ever happens,
7007950	7013070	you know, that I don't, I don't think that this, this bad thing that this guy's talking about even
7013070	7018690	exists. I'm going to call it fake news, right? So like maybe, maybe your entire circle of crypto
7018690	7024010	buddies, like dismisses this entire possibility out of hand, never talks about it. Or maybe they
7024010	7029770	talk about it and they say, oh, it's going to get fixed 18 months from now with this new technical
7029770	7036630	change that's, you know, in the pipeline and in Bitcoin, as long as at least 40% of the nodes,
7036630	7041710	you know, indicate through a BIP that they, they approve it. And then, then maybe at the 40%
7041710	7046650	happens and six months after that, there's like a count, like all this, all this contingency stuff.
7046650	7050690	And you, you listen to that and you say, okay, yeah, that's good enough. That's yeah, that, that,
7050690	7056890	that should, you know, fix the problem, right? But just like in the pandemic, we are at a time
7056890	7065430	in which one's wellbeing depends on the ability to separate one's, what one is hearing
7065430	7072710	from a variety of sources and kind of listen to that quiet voice inside that is saying something
7072710	7080110	that might well be true. And that quiet voice might be saying, well, you know, maybe fungibility
7080110	7085710	is, is important. You know, maybe this stuff is actually true, what the Monero guys are saying
7085710	7093270	that, you know, maybe this will help usher in a integrated surveillance state in which the fact
7093270	7098970	that Bitcoin's transparency is so radically transparent gets used against us and not for us.
7099090	7103950	Like we thought that was going to be used for us as a, as a force to kind of open up the inner
7103950	7108850	workings of large institutions like banks and make sure that they couldn't take advantage of
7108850	7113710	the little guy anymore. Well, gee, maybe it's possible that could, that could be turned on us,
7113710	7119470	turned against the little guy and, and the, and the results used to deepen the surveillance that
7119470	7124810	gets used against all of us. There was a recent decision that came from the top regulator of US
7124810	7132490	banks saying that banks are now allowed to custody crypto for their customers. So now you have a lot
7132490	7138150	of like, this opens up the possibility for Goldman Sachs and all these traditional guys in finance
7138150	7146330	to offer, you know, Bitcoin products for their customers. So great. So you're combining, combining
7146330	7152210	all of the surveillance capabilities of legacy fiat, and you're augmenting that with the additional
7152210	7160390	power of, of surveillance that the transparency of Bitcoin gives you. What could go wrong with that?
7161730	7166470	Monero is what Bitcoin noobs think they bought, which is sound money in safe mode.
7168770	7174550	All right. I'm going to skip to the Monero community. It has no formal organizational
7174550	7180070	structure. It's idealistic, scientific, and yet welcoming. It's a cypherpunk community.
7180550	7185590	I think of all the cryptocurrencies, it is the one that's most aligned with organizations such
7185590	7192250	as the Electronic Frontier Foundation and DEF CON itself. I think it's appropriate and fitting that
7192250	7198770	this is the only crypto that gets its own village at DEF CON. Again, I think it's an important
7198770	7203450	project for humanity. And I think it's important for people who, for squeaky clean people in
7203450	7211330	particular, who want to unapologetically claim this right of privacy for themselves, which is
7211330	7216730	legal. Monero is legal in the United States and a lot of other places too. And it's actually
7217330	7222570	better at compliance with a lot of laws that regard privacy. For example, the GDPR in Europe,
7222570	7228090	which mandates privacy protections for its citizens. That is a law that Bitcoin totally
7228090	7234610	fails because part of that law includes a right to be forgotten. So in Europe, you're supposed to
7234610	7239250	be able to write, send an email to a company and say, delete me from all your databases.
7239290	7243710	I don't want to be on there anymore. Destroy your records, any record you have of me. And
7243710	7247930	European companies have to comply with that. Is that possible in Bitcoin? It's absolutely
7247930	7253930	impossible in Bitcoin because you have a mountain of proof of work that is basically etched in stone
7253930	7260250	every past transaction. You can't erase any of that. You also can't undo the metadata associations
7260250	7266850	of actual people to addresses. So there are significant ways in which Monero is more compliant
7266850	7273650	with existing law than a project like Bitcoin. Nobody talks about that though. It's always,
7273650	7277590	you know, oh gee, what are the criminals going to do? Well, again, why don't we talk some more
7277590	7285770	about what the innocent guys are going to do? All right. All right. With that,
7285770	7289970	I think I might've already been kicked off, but all right. Thanks.