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All right, super.

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Thank you very much, Justin.

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And welcome to day three of Monero Village.

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And let's see, let me... all out today with the fanciness of the video setup here, if you can tell.

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Let me... and we hope it works out.

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So part of this pandemic stuff is that we're all individuals trying to put together something that looks sophisticated from a video production standpoint.

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All right, so here we go to the talk.

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And I'm going to take these because I'll put them back on for the... and I'll be talking about Monero and try to make the case that is sound money safe mode.

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So about myself, I am trained as a physicist.

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So I did experimental particle physics at Harvard.

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I spent 10 years there, including the undergrad.

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And from that, I got a sense of always wanting to look at data.

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So I will be showing a fair amount of empirical data, both financial, economic, and blockchain data.

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Most of my career was spent in the nonprofit sector.

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So I was a symphony orchestra musician.

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That was my job out of grad school.

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So I ended up doing over 700 concerts professionally as a violinist and then an artist.

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And then concurrently with that, I became a medical school professor doing radiation oncology physics.

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So about a couple thousand cancer patients fight their against cancer using a focused high dose radiation.

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After that, I want to kind of branch out a bit.

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So I ended up signing up for the executive program at Yale.

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And at that point, I got used to the for-profit world.

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And I made a transition at that point, joined a hedge fund, managed about a billion dollars in assets in equities.

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I became a research and as part of that, published a paper on the role of liquidity in the pricing, which won a paper of the year award from the CFA Institute, which is a kind of premier credentialing authority for equity analysts.

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After that, I do blockchain kind of just as a hobby initially, but then I did that.

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There were only a few things in life and, you know, as fundamental innovations.

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I was in grad school when the dot-com bubble happened and that kind of revolutionized life.

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And when blockchain came around, after initially being rather skeptical about it, I came to the conclusion that a genuine kernel of innovation in the Satoshi white paper.

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And so I am often my own as a solo independent consultant.

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I seek to bridge two very separate worlds that often never talk to each other and kind of have oftentimes nothing but the negative stereotypes about the other side.

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But I think there's value to be had from both sides to have genuine engage with the other.

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So the two sides I'm talking about are shown in the bottom here.

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There's a DEF CON world.

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So that's non-commercial, open source, cypherpunk, roots cryptocurrency.

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That is on the one side.

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And then on the other side is asset protection, trust and families, portfolio management and estate and tax planning.

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So yeah, there's a very parallel that is happening.

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So basically, there are OGTO guys who I talk to and try to help to put together a plan to use the existing laws to help their cryptocurrency assets from a legal standpoint, from legal threats, and also to legally minimize taxes.

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And from the other side, in the traditional world, there are a lot of people who are very interested in cryptocurrency, but find themselves having a whole lot to learn.

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And so I try to help them with a Sherpa sort of service as someone who can bridge both of the worlds and speak both of their languages.

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But nonprofit work these days, I am a community volunteer with the Monero Project.

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So I am volunteering to be speaking here right now.

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I do not get any compensation from the Monero Project.

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I have never sought to get compensation from the Monero Project.

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In fact, I want to keep my independence because my primary duty is to my consulting clients to whom I have the duty of looking at this space.

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And by this space, I mean the space of nonprofit, open source, non-security cryptocurrencies, and look at that space and come to a conclusion to what is going to be best for my clients.

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And in my current opinion, there are really just two projects worth mentioning in this, and those would be Bitcoin and Monero.

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So my talk today is called Sound Money Safe and it has got four parts.

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First, I am going to show the backdrop, the backdrop that none of us can avoid here in 20N, that is that of the global pandemic that is happening.

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And I will focus on the economic impact of that.

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Second part is independent scarcity.

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So given that fiat money is showing signs of strain at the moment, I will go into independent sources of scarcity that would be wise for people to consider at this point in history.

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Third is fungibility versus surveillance.

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So it turns out that not all of the independent scarcity sources are aimed as in terms of fungibility and against a larger backdrop of growing mass surveillance.

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There are societal issues to consider about the fungibility or lack thereof in sources of independent scarcity.

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And then finally is the section involved.

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And this section has two different levels.

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So the more superficial level would be that of considering independent sources of scarcity as a content of one's portfolio.

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So basically an investment sort of framework where I put my hedge fund hat on and at Monero and Bitcoin and gold from that perspective.

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And then a more deeper level of actual, you know, involvement of people into this project.

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All right, and I wanted to know that I gave acknowledgement to a few people who I had conscience with in preparing for this talk.

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So Howard H.Y.

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Hsu, a very frequent Monero code contributor, Dr.

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Serang of the Monero Research Lab, and Dr.

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Francisco Cabanas of the core team.

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So thank you to them.

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Okay, so much has been said about the pandemic, but I'll just frame it with a couple of ideas here.

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So one is that one could look at this whole pandemic as a very clever people of social engineering on the part of a microbe.

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So it's been social engineered to take advantage of how humans have evolved to have simple heuristics to determine whether we're sick or not.

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So here's what I'm talking about.

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So this is how most of us behave pre-pandemic.

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We'd be sitting around at home.

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I feel like going out.

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Yes or no, if you don't feel like going out, you remain at home.

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But eventually you do feel like going out.

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And so because you feel like going out, therefore you must be healthy.

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That's the dramatic conclusion that you come up with, because if you were not feeling health, obviously you would not feel like going out.

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You would feel lying down in bed.

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And now we can look back at this kind of self-diagnosis with a bit of kind of like it was a long ago sort of thing to do to come to the conclusion that you're healthy if you feel like going out.

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That's how it was, and that's how the virus basically social engineered that tendency.

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So now we're public.

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Do we see anyone coughing?

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And that is our criteria for making a thought assessment as to the wellness or sickness state of people who we interact with.

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So in the pre-pandemic times, we would notice that I saw somebody coughing and then we would say, oh, gee, that must be a sick person.

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I'm going to avoid that.

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But otherwise, just carry on.

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So you might distance from someone who's coughing, but you don't make a big out of it in your mind.

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You just kind of make a little note and then maybe stay another two away from them when you're talking to them.

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But otherwise, just carry on.

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So basically, the SARS-CoV-2, the virus that's caused the COVID-19 disease and the current pandemic can be seen as having social engineered reaction to diagnosing wellness versus sickness.

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And of course, no soon likes to be told that your instincts are way off.

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And there's something new out there that is screwing up your ability to tell sickness wellness.

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So lots of people don't really react well to that.

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They take offense to the idea that natural instincts could possibly be wrong.

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But unfortunately, they're lost to that, to kind of clinging to this notion that one's former framework was even in the face of new data.

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All right, on the right side, I'm showing a paper that was published in The Lancet, which is the premier medical journal from the UK.

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And what they did is that these researchers took a COVID-19 virus, and they deliberately put some of it on money, on cash money.

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And then they measured how long it would take for that virus to dissipate and not be measurable anymore.

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And you get there's a rather unfortunate situation here.

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Seeing that the 50-hour mark, but they're still seeing detectable amounts of virus on money.

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So days after deliberately putting virus on money, it's still detectable.

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There's actually three or four days that are necessary for the virus levels to become undetectable on money.

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So basically, this puts a damper on the physical media as a store of value.

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So of course, this has rippled through the economy.

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Here I'm looking at M1 money supply is the amount of money that's in circulation in cash, credit, and checking accounts.

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And I'm looking at all of the fiat currencies of the G20.

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Here I'm getting data from 2009.

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And I 2009 because that is the year in which Bitcoin became a realty.

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So basically, in January of 2009, I'm showing that one on the vertical scale here for all of the G20 fiat currencies.

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And then you can see that every single one of them has inflated since then.

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And then if you look at 20 here, you can see that there's a hockey stick shape curve, in which the money supplies of all the G20 were growing previous to the pandemic.

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But now that the pandemic has hit, it's really taken off.

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As a med school professor, I can't help but think of doubling times and for tumor growth, because this is the kind of thing that we in oncology think about in terms of exponential growth.

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It's like what's the link time?

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How long does it take for a cancerous tumor to double in size?

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And if you apply that same sort of framework here, you can see that pre-pandemic, it took the average G20 currency about maybe 10 years, 10 years to double, 8 to 10 years.

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So let's just say it's, you know, years to double.

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That means in 80 years, there will have been 10 instances of double, in other words, 2 to the 10th, or 1000 fold increase in the money supply over a year time span, which is an average life expectancy.

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So this money supply has been growing, it's been growing at a rate that's really unsustainable even before the pandemic.

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And now that the pandemic has hit, it's gotten even more out of control.

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Notable on this chart is the United States, because the U.S.

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has the privilege of being the world's reserve currency, and that is in gray here.

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And you can see here in 2020 that the slope of the gray line in the pandemic is even steeper than that of other countries.

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So if we lean on the U.S.

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a little bit more, we see the following situation.

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I'm looking at historical data from the U.S.

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Federal Reserve Bank.

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This data is all from FRED, which is the U.S.

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Federal Reserve's kind of warehouse of data.

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And there's a lot going on, so I'll break it down line by line.

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First, if you look at the blue line, this line here is U6 unemployment.

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U6 is the broadest measure of unemployment.

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It counts not only people who are currently actively looking for work, but also counts people who are underemployed, also people part-time employed when they want to be full-time employed, and it also counts people who are so discouraged from looking for work that they give up.

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So those three categories of people are actually not counted in the less expansive U3 definition of unemployment, which is what you can see in the news.

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But I'm plotting the more kind of accurate and expansive measure of unemployment, which is U6.

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And that is the left scale here.

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So you can see it starts at zero and goes to 20 percent, 40 percent on the scale.

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And so through history, and I'm looking at a pretty long term here, 40 years of data starting in 1980, the unemployment rate kind of spiked here in the last financial crisis at about 18 percent.

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But now if you look here at the year 20, the unemployment rate has spiked even higher.

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It peaked at about 23 percent a couple months ago.

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Thankfully it's gone down since then, but this is bigger than the rest the others have been.

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Also in response to this has been the increase in the money supply.

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As you know, the supply of U.S.

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dollars is controlled by a committee of people, the Federal Open Committee, and they get together and they just, do we want to print more money or do we want to not print more money?

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And so if you can look at this green curve, this is MZM money supplies, which stands for money zero maturity.

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That means currency checking accounts, also savings accounts and money market accounts, which a lot of people use kind of liquid storage savings that's denominated in U.S.

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It does not include the certificates of deposit, which would be included in the M2 money.

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So anyway, the MZM money supply is a more, it's a broad and also liquid, completely liquid measure of the money supply.

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So if you look at that throughout history, of course it's hard to get a handle on how big that is because it's numbering the trillions of dollars.

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So I normalized the MZM money supply by big domestic product with U.S.

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And result here is on the green line.

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And that is using the right-hand scale here.

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You can see that this supply has been growing steadily from 30% in the Reagan era, going to about 70% in the last financial crisis.

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And now in 2020, it's truly taken off.

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It's this line here that is now above 100%.

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So we've managed to inflate our money supply from about 75% of GDP to about 100% of GDP in just a few months.

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Okay.

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So that's monetary policy, which is money is there existing in the economy.

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There's a fiscal policy to look at.

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Fiscal policy being the income and expenses of the federal government, which is ostensibly independent from that of the monetary policy.

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On the bottom here, you're looking at how much money is the U.S.

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government taking in minus how much money the U.S.

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government spending on a monthly basis all the way back to 1980.

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And you can see it's kind of going back and forth, usually slightly below this 0% line, meaning the usual situation is for there to be a slight deficit.

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You got the deficit got bigger here in the last financial 2009, 2008-2009.

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But now fast for you, the current place and all of these here have to be renormalized to accommodate just how far gone south.

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Now, this particular might be temporary because if you're in the U.S., you probably know that usual deadline for submitting taxes, which is April got postponed this year to July 15 due to the pandemic.

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And so for this three-month period between April and July, there was no tax due, neither income tax of the year 2019 nor estimated taxes for Q1 of 2020.

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So you have to see with basically zero income coming in from the IRS's point of view, that the income minus expenses would tank like this.

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So, you know, I'm actually hoping to see that this line recovered.

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So hopefully now that July 15 has come and gone, hopefully the IRS has had a, you know, a bonanza of tax money coming in and this downward spike here will be temporary because they're upward spike, if this is true, of revenue coming in.

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Now, if you take the time integrated of having a budget deficit, that is, if you have a month deficit, that's basically like you have a credit card bill coming in and you don't pay it off in full.

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You pay 90% of it and 10% of it you don't, and then that grows interest.

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So what is the overall balance of your credit card as it grows over time?

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And that is the time integrated curve of this gray line in the bottom.

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And that is the top line here, federal debt as a, again, normalized function of GDP.

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You can see again that it's grown quite a bit since 40 years ago, since about 30% of GDP.

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And then in the financial crisis, it grew to about 100% of GDP.

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Now, we're seeing the number up here.

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Now, this particular metric is delayed because all of these are coming from government bureaucracies.

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So they're delayed by several months as it takes much time for these aggregate statistics to get figured out.

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So this federal debt to GDP black line is, you're only seeing Q1 20, which is why you have not seen this particular line spike upwards in terms of the federal debt to GDP.

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But that's a number to look at.

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Why is this all of grave concern?

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There is a interesting by Peter Bernholz.

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He is an academic in Switzerland called Monetary Regimes and Inflation.

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And he did a study of 29 historic instances of hyperinflation going all the way back to Roman Empire.

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And in 25 is 29 historical cases of hyperinflation.

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The root cause of the hyperinflation was money creation on the part of the government being used to finance government deficits.

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So get this curve here, you have money creation, that's the green line spike, and then we have deficits.

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And that as soon as we see the data flag period, I'm sure we're going to see that spike as well.

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So this is all rather concerning.

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And I think given, you know, given this data, it is prudent to consider the possibility that inflating in the future, price inflation, now not just by asset inflation, will be higher than it has been.

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And if that's true, then you'll want to be considering looking at alternate sources of scarcity.

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So here, economy of assets, and they're divided into six categories, physical assets.

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So you have real estate, art, cash, and precious metal.

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And I would argue that in the COVID era, all of these physical assets, maybe with the exception of real estate, have taken a bit of a hit in terms of desirability because of all of the issues having to do with, you know, contamination.

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You have digital centralized assets here.

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So that includes bank accounts, all the stuff in the chart just been showing, the stock market, the bond market.

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I would say also crypto exchange accounts.

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So people think they own crypto, but actually just have on a crypto exchange, don't actually own crypto.

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They own an IOU from a crypto exchange, and that is a centralized asset because the exchange itself is a centralized entity.

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Therefore, if the exchange goes down, then the IOU becomes less.

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So I would categorize that as a centralized asset.

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Now, since 2009, which is the Nakamoto white paper coming out, there's been a new option in terms of assets, and these are digital decentralized assets.

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Decentralized means not a single committee of people who can arbitrarily increase or decrease the government asset.

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And if you look at the non-fungible of asset, that would be Bitcoin.

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And the fungible type, the dominant leader now is Monero.

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So part of this talk, I'm not assuming that the viewer is one who has been kind of thinking deeply about cryptocurrency for the last many years.

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DEF CON is a pretty, you know, it's a big tent for geeks of all varieties in DEF CON, including people who have not really been kind of living and breathing, you know, cryptocurrency for several years.

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So I want to give some, I guess, high level points to take away as to why cryptocurrency is not kind of the scammy thing I'd have heard of, but there is actually a kernel of genuine innovation in this stuff is worth thinking about and further exploring.

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So I want to contrast two types of digital scarcity.

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Neutralized scarcity, which is what we currently have with fiat currencies, because after all, the U.S.

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dollar is currently, it's a digital currency.

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When you go to your bank, they're not, you know, handwriting stuff in some ledger, it's all computerized, obviously.

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And, you know, there's such a thing as online banking, in which your USD in digital form can be limited, in a limited way, manipulated within your online account.

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So the U.S.

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dollar is currently in digital form, but it's centralized.

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What that means is access to the database, that by database, I mean, keeping track of who owns what, that is protected, that is like moat sort of security model, in which you have the precious database in the middle of the moat, you build this protective moat around it to defend that database from bad actors.

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So there's one authoritative version of that.

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So this goes all the way up to the Federal Reserve.

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So when a reserve comes and makes a decision that it wants to be printing money, that it just issues a command to somebody and then somebody, you know, click mouse button to increase the U.S.

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dollar money supply by, you know, in dollars.

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That must be actually quite a bit of job security in that particular federal employee.

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The person has to sit there at the computer and click create a billion dollars over and over on their computer.

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But the point is that there's one authoritative version of USD ledger, and it just takes, you know, at the heart of it, just one person to just change it at will.

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Of course, the code behind this also is closed.

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So I mean, why would a bank open source its code that it's running on?

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That would be ridiculous.

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Then you're showing, you know, basically the blueprints of the of the joint and people who would have bad intentions.

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So there's a closed source software development model in centralized security.

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If you're familiar with the book, Cathedral R, actually it started out as an article and then it got expanded.

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This is a book that details the kind of conflicting or contrasting ways of software development.

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One is the Cathedral, that is the top-down command and control sort of Microsoft-style building of software, which is exactly what we're looking at in the kind of bank sort of realm.

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And also I'd say ethical realm, where you have a highly regulated industry.

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So you have specialized software companies that kind of learn all of the rope that they have to comply with within that industry.

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And then they make expensive ware that they then sell to players within that industry.

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So that sort of top-down model works in industries like that.

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And that's in contrast to the bazaar, which is just a whole bunch of flea market of people working and people coming and going, people selling at will, buying at will.

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And that is the Linux model of software development with more in keeping with Bitcoin and Monero.

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So there are downsides to this centralized security model, even though Equitas and everyone uses it, there are downsides to it.

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So mismanagement, the charts that I showed of really out-of-control growth in the money supply could be interpreted as signs of mismanagement in fiat currency.

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There's also insider abuse.

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In other words, if you are in a position where you have access to the database of who owns what, there are things that can be done to abuse that.

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So for example, there is a case in which the Bank of America, sorry, it was Wells Fargo, that took personal data of its own customers to fictitiously create accounts, fake checking and savings accounts in the names of their customers.

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And then they proceeded to charge fees on those accounts, which was unbeknownst to their actual customers.

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So, and then, you know, really egregious violation of trust was punished with just basically a slap on the wrist.

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It was like, you know, a day's process.

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That was the fine from the federal regulators.

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So insider abuse, you have basically a protected class of middle people and is something that is a downside of this.

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And finally, it's slow to improve.

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So if you are in a position of middleman in a database that everyone needs access to, then, you know, you can impose things like, we're only going to do wire transfers through Friday, you know, nine to five during bank hours.

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Why would you need to improve that?

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Because, you know, they have to go through you to access to the network.

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So, you know, what incentive is there really to try to improve your service levels?

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So that's why we still have a situation in which, you know, for many, for many, for options in fiat banking that are not the simplest level of option, you still need to wait for somebody to show up at the branch office to get your business done.

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And you'll trust this with a situation, for example, shopping where everyone can, you know, everyone's used to shopping 24-7 on their phone with Amazon.

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The financial service industry has been lagging in terms of adopting the advantages.

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So then if we move to decentralized security, this is Bitcoin and Monero, then anyone can do peer-to-peer network.

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So as in contrast to the situation in fiat banking, in the Monero, anyone in the world can download the Bitcoin software, Monero software, and join their own computer to the global network of computers that is in track of who spends, who sends what to who in this anonymy using these new forms of currency.

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So anyone in the world can join this peer-to-peer network.

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Each node maintains its own virtual ledger.

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So this is in contrast to there being just one authoritative ledger.

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In Bitcoin and Monero, there are thousands and thousands of copies of the ledger sent what to who, and these copies are distributed worldwide.

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The code is all open source, so anyone in the world is free to download the source code and look at it, examine it themselves, commit themselves, run it themselves, and nothing...

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this is actually a feature, it's not a bug, it's a feature, because just like in the Linux software development world, the idea is more eyeballs on the code are going to squash more bugs than just having a closed source version of the code in which only a few people are able to see the code.

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If you have only a few people seeing the code, then the chances are that a bug gets... could be undetected for a long time.

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Whereas in this decentralized security model, it's open source, free and open software.

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The downsides of this new kind of way of measuring scarcity is that it's new.

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So the Bitcoin white paper came out in 2008, and I guess unfortunately it's... technically it's complicated.

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It's hard for people to get their heads around, like even like, you know, elite geeks have trouble getting around like these ideas, because it's like not only do you need a measure, a high degree of technical competence to kind of grasp the idea of the Nakamoto white paper,

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you also need a certain amount of plessy in terms of not immediately rejecting something that is foreign at first.

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And so those two things combined mean that adoption is slow.

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I mean, it's just necessarily going to be slow.

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You have something that's hard to understand and requires like a flexibility in order to accept that it might actually work.

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Another side is that it's inefficient.

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So if every computer in this network has its own copy of the ledger, isn't that inefficient?

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How are you going to figure out what the correct version ledger is if people have disagreements about that?

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So I have a lot of material in this talk, so I'm going to boil down how Bitcoin and Monero work to just one slide, and it's necessarily fast.

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So if this goes too fast for any of you viewers, for example, my DEF CON keynote Monero Village last year, we'll go through this in a bit slower detail.

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There are three things that we want to take an analog of a fiat banking world and then move that to this new world centralized scarcity.

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Number one, how do you have rights?

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That is, what do you have for account numbers?

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So the analog of a bank account number is a solution to an elliptic curve.

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So an elliptic curve is just an equation.

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It's a specific equation.

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It's got x's and y's in it, just like your ninth grade high school algebra class.

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You have a relation relating x's and y's, and there's only a sub of combinations of points, x and y, that satisfy that equation.

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So in an elliptic curve, there is a large number of these solutions, but they are very hard to find by brute force.

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So in the elliptic curve standard, one is told not only the identity of the equation being used, but also what's called a base point.

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This base point p sub b, which the x y coordinate in space is going to be a solution that you hold will satisfy this elliptic curve.

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And then furthermore, given this base point, it is possible if somebody tells you some arbitrary n, it is possible to calculate the nth solution through the elliptic curve.

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So you have p sub n is x sub n, y sub n.

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And that is something that anyone can calculate with a computer, given that somebody tells you an arbitrary number n, and also that you know the base point p sub b, and also the exact form of the elliptic curve that you're talking about.

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This is a one-way function, so you cannot calculate the number n if somebody tells you the point p sub n.

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So this asymmetry, which is crucial to public-private key cryptography, it's just a fact that it's very easy to go one direction, that is to go from n to p sub n.

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But it's very hard.

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It's actually computationally infeasible.

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You have to brute force guess your solutions if somebody tells you p sub n and you want to try and recover n from them.

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So a natural application of this fact is to use sub n, which is the derivable number as the public, and use n, which is derivable, going the other way as the private key.

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So getting a new Bitcoin account, getting a new Monero, what do those both really mean at the heart of it?

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It means picking number for yourself.

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That's literally what it is.

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You're picking a number, which is a vast range that you can pick.

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It needs to be an integer between 1 and basically 256, roughly, which is a 78 number.

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It's just an unfathomably large number of combinations.

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It's an unfathomably large space of numbers that you are allowed to choose from when you pick your number.

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But that's what you're doing.

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You pick an account, you are picking a particular solution to the elliptic curve.

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The number is known only to you, and the X, Y coordinates are known to everybody.

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So, you know, they thankfully made steps to make it a little less geeky.

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Instead of sharing X, Y coordinates with people, you have what gets converted into a Bitcoin address or a Monero address, which is thankfully less cumbersome to use than, you know, two 77-digit numbers.

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But nevertheless, that's what they do.

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Okay, then second is, what is the decentralized world of check writing?

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So now we've established there's such a thing as private property, which constitutes having knowledge of a number.

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So let's say you have an account, you've picked your number, you have your public and private key pair, and you've gotten some funds in your account.

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How do you spend it?

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How do you write a check ?

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And so that is secure messaging.

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So of course, the public and private key that I explained above , in addition to being used as your bank account number, it is also used as a secure message signing.

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So that's one of the clever things of the Nakamoto White Paper that we're used to thinking of public-private keys, you know, long, you know, basically, secure message signing came long before cryptocurrency.

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So it came decades before.

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So we're used to thinking of private and public keys as being the base of making secure message signing.

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What's new is that there's a second interpretation of the public and private key in the kind of finance.

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It's now ownership of funds.

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So forgery in this is when somebody else learns your key.

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If somebody else knows your private key, then they can write check and sign it convincingly, because that's what you need to write your signature is knowledge of the private key.

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So from the system's point of view, the system doesn't know who owns what, it doesn't know who owns what from a person point of view, it does know who owns what from a knowledge of the private key point of view.

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So knowledge of private key in this system is tantamount to and itself money.

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Finally, once a check gets written, and I process it, somebody's got to process the check.

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So in the fiat world, you write a check unit, and then it goes into the banking system, the banking system needs to process the check that you've written.

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So in the decent world, this is taken care of by a peer to peer accounting network.

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Again, as I said before, anyone in the world is free to do the Bitcoin core software or the Monero software, run their computer, and then they will be part of this accounting network.

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The accounting network is run by Moss, which is simply the nomenclature used in this world for a gossipy majority was peer to peer accountant.

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So world there is no boss computer, there is no master copy of the base that says who owns what you have thousands and thousands of scattered around the world of who owns what and nobody has a boss computer who who is to be deferred.

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Instead of having a boss, they will defer to instead majority rules.

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So that is what this difficult and that is what it makes network difficult for somebody to casually hack by introducing their own various computer onto the network that does something like sends all the Bitcoin to their own address.

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To make that work, in order for this transaction on your computer, which sends money to your own account, in order for that to be accepted by the overall network, it would have to be a majority computing power on the network that thinks that it is right and proper for the reward to be going to the to a single person's account.

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And so that's the impractical, expensive, infeasible to do.

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And in the game theory of this, if somebody did have that many computers would be in their interest, instead of trying to crash the system, crash the price of, say, Bitcoin, it would be in their interest to just join the system and use all of this fast computing power that they've amassed to work with this is because if you have more than 51% of the hash power,

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then you can get 21% of the rewards.

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Key to this system is that valid blocks are rare.

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So a block is a kind of data.

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That is, it's a it's a compilation of a certain time period of transactions that have happened at work.

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These transactions get checked for validity on a micro level, that is, each of these transacts checked for like a bounce check, they get checked to make sure that the person who wrote the check actually had enough money to the funds, right?

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So that those kind of checks happen on a on a micro level, on a macro level, when when, when 10 minutes worth of transactions, at least in the case of Bitcoin, it's 10 minutes in Monero, it's two minutes.

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But when a block of transaction into a block, it's not just copied and then written.

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There's a block actions that needs to have this rare character that that data collection of blocks has a hash that is below a different number.

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So a hash function, as I don't have to explain too much to a DEF CON is is a cryptographic hash function, it takes an input of any size outputs a output of fixed size, a fixed byte length.

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And this fixed byte length, the, the secrets in that fixed byte length are extraordinarily sensitive to even bit levels in the input.

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So it functions basically as a signature of any input.

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So usually we use hashes in a double checking that the hash that we have now is the hash that we had at some previous time.

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So if you are checking the integrity of a file that you don't, you will download the file, and then you will check the hash of what you did.

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And then you'll check that hash against a published hash of what people found for the same download.

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That way, you have some indicator that the file that you downloaded is indeed the same file that other people need to upload.

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And by the way, of course, checking hashes is something that is do record, it needs to be done by anyone who is downloading code from Bitcoin or Monero to run on their own computer, you want to make sure that the client that you download, the hash of that client is that of the of what the devs actually made.

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But in this case, in this case of the process of clearing checks, that is the peer to peer network that is keeping track of who spent what care about the actual value of that hash function.

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So when what comes out, it needs to have a hash function that is a small number needs to be.

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And that's a rather arbitrary thing.

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It's like there's no there's no intrinsic to having a low hash number.

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The transactions inside that block are still as if they if the block had a high hash number, what is different is a block, any block that has a very hash number is going to be a rare block, it's going to be very difficult to fake that.

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And that is the key, it's difficult to fake, it takes and trial and error to fake that block.

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And that's why a valid block needs to have a hash that is lower difficulty number.

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And this difficulty number in both Bitcoin narrow gets dynamically adjusted, so that in total, the entire network blocks will be generated new blocks rated at a on average fixed time.

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It's not constant time, because the process is Poisson distributed.

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In other words, the the probability per unit time new block will get created is constant.

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And when you have that you have Poisson distribution of the block time distribution.

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Alright, so the big picture point here is that every Bitcoin and Monero every like, I'm talking about the coin at the network, every unit of Bitcoin and every Monero currently in existence was given initially to a miner as compensation for helping to do the accounting work.

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So this is an important thing if you're new to the whole blockchains.

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There is a lot of truth to this claim that just a lot of scams, a lot of like a money grabbing in crypto.

371
00:40:06,320 --> 00:40:16,140
And having been in grad school at the dot-com bubble, I can say that there are a lot of similarities to the current situation in blockchain versus the c-track there than in the dot-com.

372
00:40:16,140 --> 00:40:23,420
So back then, internet was new, and normies had no idea what email was or website was.

373
00:40:23,420 --> 00:40:29,380
It's hard to imagine, I know, if you're younger than a certain age, but that's what the world was like back then.

374
00:40:30,460 --> 00:40:40,200
People had no idea what email was and why would somebody bother to send email when you have the perfectly good system where you can just stick a stamp on something and send it.

375
00:40:40,200 --> 00:40:41,160
Like, why would you do email?

376
00:40:41,280 --> 00:40:43,740
It's hard to understand now, but that was the mentality.

377
00:40:43,760 --> 00:40:54,040
And along with that went kind of a gold rush in which kind of information investors went chasing around and that had any, you know, hint of internet in it.

378
00:40:54,080 --> 00:41:01,960
So there was a thing called pets.com back in the day, and their business model was to FedEx pound sacks of dog food around to people.

379
00:41:02,120 --> 00:41:09,440
Their, you know, innovation here was that they use the internet, the website, to take their pet food orders.

380
00:41:09,440 --> 00:41:13,980
And so that made this, you know, sexy new company and investors actually bought that.

381
00:41:14,480 --> 00:41:16,840
And, you know, eventually it went bankrupt.

382
00:41:16,840 --> 00:41:25,200
You know, it's obvious to us now there's a pretty boneheaded idea, but now you look today at the blockchain space and the exact same thing is happening.

383
00:41:25,200 --> 00:41:28,240
It's like stupid idea plus blockchain equals sexy.

384
00:41:28,500 --> 00:41:31,420
And yeah, that's the situation.

385
00:41:31,540 --> 00:41:39,900
So, but one way that you can quickly weed out a lot of these companies is to ask them who gets the block reward.

386
00:41:39,900 --> 00:41:49,720
You might have this kind of variation of an automotive consensus on your particular little project, but who's getting the money is getting the issuance of the coins.

387
00:41:49,760 --> 00:42:00,960
And in pretty much every scammy case, you will find that the bit, the, the unit, which in Bitcoin gets democratically did it to all of the computers that are helping secure the network.

388
00:42:00,960 --> 00:42:03,640
And again, that happens in the same way in Monero.

389
00:42:03,640 --> 00:42:17,280
In Monero, all of the Monero currently in existence previously given out as a reward to the distributed network of computers for which everyone has an event of getting a piece of that pie, if you just put your computer on it.

390
00:42:18,380 --> 00:42:29,340
In any, in, in the vast majority of currencies that has been subjugated and changed to quickly funnel some of that, some or all of that money to a group of people.

391
00:42:29,540 --> 00:42:47,980
And it goes by various names, you know, but the, the idea is that this reward, which goes to a decentralized miner in the case of a true cryptocurrency goes to, a select group of people who, as you are told, have nothing but the best intentions in mind.

392
00:42:48,100 --> 00:42:55,460
And they are going to spend money wisely, but history suggests that such promises should be taken with a bit of skepticism.

393
00:42:58,060 --> 00:43:02,700
All right, so scarcity and bit Monero, Nakamoto consensus synthesizes scarcity.

394
00:43:02,700 --> 00:43:07,220
This is what would be a Nobel prize winning in psychonomics.

395
00:43:07,240 --> 00:43:10,240
But unfortunately, the Nobel prize needs to be given to an actual human.

396
00:43:10,240 --> 00:43:29,320
And since Satoshi Nakamoto pseudonym, there's, there's not going to be a Nobel for the, for the Bitcoin, but this idea that scarcity can be measured in this decentralized way, that does not require somebody up being the centralized guru of that, of that source of scarcity.

397
00:43:29,480 --> 00:43:32,520
That is a fundamentally new kernel of insight.

398
00:43:32,520 --> 00:43:36,740
And it's worth thinking, I think, pretty deeply if you haven't already.

399
00:43:36,880 --> 00:43:41,140
So when I say scarcity and Bitcoin and Monero, that's scarcity is sort of a broad word.

400
00:43:41,140 --> 00:43:42,040
So I'm specific.

401
00:43:42,040 --> 00:43:46,220
There are three types of scarcity that I'm about in these decentralized currencies.

402
00:43:46,220 --> 00:43:47,680
Number one is at the account level.

403
00:43:47,680 --> 00:43:48,560
So that's property.

404
00:43:48,560 --> 00:43:52,320
How do we know that there's scarcity in terms of who owns what?

405
00:43:52,340 --> 00:44:02,820
So that is enforced each user of that cryptocurrency selecting, and then subsequently protecting their particular elliptic elliptic curve solution.

406
00:44:02,820 --> 00:44:09,880
In other words, private key and public key pair, and then keeping that private key private and their own personal secret.

407
00:44:10,060 --> 00:44:12,660
So that is how account level scarcity is used.

408
00:44:12,780 --> 00:44:14,340
Aggregate level scarcity.

409
00:44:14,340 --> 00:44:23,600
How do we know that the total number of value units in this accounting system is not going to run away with growth like we see in fiat?

410
00:44:23,600 --> 00:44:26,060
In other words, how is the macro money supply control?

411
00:44:26,060 --> 00:44:37,080
Well, that is controlled at the level of the miners on the network for the emission schedule of future duration of the money is programmed in advance.

412
00:44:37,080 --> 00:44:49,480
So for example, Bitcoin, every 210,000 blocks, the reward that is given to the miner who successfully comes up with a new block in the Bitcoin blockchain gets cut in half.

413
00:44:49,620 --> 00:44:53,340
And so that is known for all of history.

414
00:44:53,340 --> 00:45:00,140
Basically, all of the miners in the net know what the emission schedule for new money is in advance.

415
00:45:00,140 --> 00:45:06,860
So it's basically programmed in advance to all of these mining computers, how much money is there going to be in the entire net.

416
00:45:06,860 --> 00:45:12,540
And that is enforced because these again, these network of decentralized computers is majority rules.

417
00:45:12,580 --> 00:45:25,000
So anyone new who joins the network is advised to go along with the majority rule set because that the blocks that they generate are going to be accepted by their peer network, they're not going to get it.

418
00:45:25,000 --> 00:45:32,480
So that is why there's disincentive for them to attempt to hack the network by putting their own nefarious node on.

419
00:45:32,480 --> 00:45:36,760
That nefarious node, yes, it can join the network, but he's going to stop it from joining the network.

420
00:45:36,760 --> 00:45:46,580
But once it comes up with kind of attractions and blocks that the rest of the network thinks are fraudulent, the rest of the network will reject those blocks coming from the nefarious node.

421
00:45:47,180 --> 00:45:54,260
So and it's in the interest of each individual node joining the network to play along, to play nice.

422
00:45:54,260 --> 00:45:58,220
That's the part of the game theory of the Nakamoto white paper and the brilliant way it works.

423
00:45:58,680 --> 00:46:02,180
Finally, third scarcity is database modification scarcity.

424
00:46:02,180 --> 00:46:09,360
So in a SQL database, if you have super user privilege, you can always write anything you want to the database at any time.

425
00:46:09,360 --> 00:46:15,600
So this is different in situation with a decentralized ledger that Nakamoto census puts together.

426
00:46:16,280 --> 00:46:30,060
Each page that written to the database has to have a hash that is lower than a dynamically adjusted difficulty threshold, which means you cannot just have arbitrary write access to this, to the big database or the Monero database.

427
00:46:30,060 --> 00:46:38,080
You have to put in a lot of computational power just to add one quanta of information, that is the block, to add one block of information to this.

428
00:46:38,080 --> 00:46:43,180
This takes an extraordinary net effort of computing power to do.

429
00:46:43,180 --> 00:46:45,220
So it's restricted in that way.

430
00:46:45,220 --> 00:46:52,060
And then further, since each block in the chain contain as a check, the hash of the block that preceded.

431
00:46:52,060 --> 00:47:10,880
So now you have a linked list of block, each of which has a pointer, contains the hash of the previous block, which means that not only is there scarcity in ability to introduce new data to the database, there's basically permanence of the, especially the older records in that database,

432
00:47:10,880 --> 00:47:23,040
because for somebody to fake the database, you would have to put in an inordinate amount of computing power, more than the GLOW currently has, to actually do a rollback of the chain.

433
00:47:34,220 --> 00:47:36,580
Oh, I'm seeing that there are problems here.

434
00:47:37,800 --> 00:47:43,160
Well, at least I'm looking at the YouTube feed.

435
00:47:43,160 --> 00:47:45,000
The video looks to be okay.

436
00:47:45,000 --> 00:47:47,700
I apologize for any technical issues.

437
00:47:47,700 --> 00:48:00,780
We do have a local recording, so at the very least, even if the stream is not working correctly, we have a pristine 1080p version copy of this, so it will go later.

438
00:48:01,120 --> 00:48:03,060
So, proceeding on.

439
00:48:03,060 --> 00:48:03,800
So, scarcity.

440
00:48:03,800 --> 00:48:05,380
What are miniatures of scarcity?

441
00:48:05,380 --> 00:48:09,760
Number one is it has a code base that is not a bit fork.

442
00:48:09,940 --> 00:48:19,480
So, many of the cryptocurrencies that simply did a copy -paste of Bitcoin, and then they slap some things on there, and they claim that they have a new cryptocurrency.

443
00:48:19,580 --> 00:48:20,920
That is not the case.

444
00:48:20,920 --> 00:48:25,100
It was built from the ground up as a separate coin code base.

445
00:48:25,100 --> 00:48:27,740
The elliptic curve used in Monero is different than Bitcoin.

446
00:48:27,740 --> 00:48:32,740
So, Monero uses the ED2551 elliptic curve, which is different than Bitcoin.

447
00:48:32,740 --> 00:48:39,280
So, the fundamental equation governing valid XY coordinators is different.

448
00:48:39,380 --> 00:48:47,040
So, the difference is the indents of Monero goes down to the deepest level of cryptographic primitives.

449
00:48:47,320 --> 00:48:53,680
In Monero, so, in Monero, we have a spend key, which is akin to the private key of Bitcoin.

450
00:48:53,840 --> 00:48:59,200
But we also, in Monero, we have what's called the view key, which is basically a graphic subset of the view.

451
00:48:59,320 --> 00:49:06,740
And the view key is what is going to be used if somebody wants to get view access to the ledger shared around the world.

452
00:49:06,960 --> 00:49:13,020
So, in Monero, everyone in the world can download a copy of the ledger for themselves, in which they can see who sent what to who.

453
00:49:13,020 --> 00:49:25,360
But in Monero, this ledger is encrypted because the default position in Monero is that unless you were part of the transaction, it's just not your business what the details of the transaction were.

454
00:49:25,420 --> 00:49:27,780
It's basically just how cash works.

455
00:49:28,280 --> 00:49:39,240
Like imagine a system of cash that you could, you know, stick your nose to everyone else's business around the world and be privy to the details of who gave cash to who around the world.

456
00:49:39,240 --> 00:49:41,880
That's basically the system that everyone has set up.

457
00:49:41,880 --> 00:49:48,120
And one thing that Monero has done is to meet a solution with its own technical stack.

458
00:49:48,300 --> 00:49:50,160
Another difference is the address space.

459
00:49:50,160 --> 00:49:55,260
So, in Monero, the address space is 10 to the 76, roughly, whereas in Bitcoin, it's about 10 to 60.

460
00:49:55,260 --> 00:50:00,740
So, this means that in Monero, the birthday problem is less of a concern than it is in Bitcoin.

461
00:50:00,740 --> 00:50:23,860
The birthday problem being that if what is to get an account is to pick a number, then make a public-private key pair out of that, then you have the problem that the random number that you pick for your account could, by coincidence, be the same random number that's on the other side of the world picks for their own account.

462
00:50:24,060 --> 00:50:32,920
And if that situation happens, then you have two people with knowledge of the private and public key pair, and so you don't actually have single ownership of that.

463
00:50:32,920 --> 00:50:36,580
There's somebody else somewhere else in the world that also can spend your money.

464
00:50:36,700 --> 00:50:38,200
Obviously, that's bad.

465
00:50:38,200 --> 00:50:46,980
And the chance of that happening is astronomically low just because of the astronomically high number of addresses there are in both in Monero.

466
00:50:46,980 --> 00:50:58,680
But because there are another, you know, 16 zeros worth of addresses in Monero, this is going to be 16 zeros worth of zeros, even more rare and less of a concern in Monero.

467
00:50:59,080 --> 00:51:02,240
Next is a difference in the emission, the minor reward schedule.

468
00:51:02,240 --> 00:51:04,840
So, in Monero, it's continuously decreasing.

469
00:51:04,840 --> 00:51:08,680
There are not four-year happenings like we have in Bitcoin.

470
00:51:08,900 --> 00:51:28,300
So, the continuously decreasing emission is, like many things, something that the Monero community has looked at as happening in the granddaddy community, that is the Bitcoin community, and then think ways that things could be done maybe a bit different than are done in the granddaddy,

471
00:51:28,300 --> 00:51:31,740
and giving all due respect to Bitcoin.

472
00:51:32,540 --> 00:51:46,460
So, in Bitcoin, every four years, like I mentioned before, the block reward that is given successful computers that add a block to the blockchain is cut in half, which means if you're a Bitcoin miner, there's a date circled on the calendar in which the mining reward,

473
00:51:46,460 --> 00:51:48,680
your mining income, is going to get in half.

474
00:51:48,960 --> 00:51:53,920
And so, as a result, there is a lot of drama that happens.

475
00:51:53,920 --> 00:52:01,500
Like, imagine if you're doing mining as a business, then basically there's a date that's contrary, in which your income is going to get cut in half.

476
00:52:01,500 --> 00:52:05,640
So, that puts in a lot of disruption to the act of mining.

477
00:52:05,820 --> 00:52:11,760
And so, this is something that we avoid in the Monero community by having a continuously decreasing miner rewards.

478
00:52:12,080 --> 00:52:16,280
There's also a form of unwanted scarcity, which future miner rewards.

479
00:52:17,160 --> 00:52:22,960
The block reward in Monero will never be less than zero in Monero per minute, and we call this the tail emission.

480
00:52:23,380 --> 00:52:24,600
Why do we have this?

481
00:52:24,600 --> 00:52:28,020
It is to guarantee miner incentives perpetuity.

482
00:52:28,200 --> 00:52:50,540
So, in Monero, we do not have to worry about miners in the far future having no incentive to connect their computers, spend money on electricity, devote time of their computing power to help the Monero network, that those people will be disincentivized to join because getting offered an insufficient reward in terms of the block reward.

483
00:52:50,940 --> 00:53:01,560
Now, this unfortunately gets portrayed as being infinite inflation by people who have not either thought this through, or they might have a vested interest in portraying it that way.

484
00:53:01,640 --> 00:53:09,960
But in Monero, if you think about linear inflation, which is the case in Monero, the block reward flow will never go below 0.3 Monero per minute.

485
00:53:09,960 --> 00:53:15,480
In fact, it will be 0.3 Monero per minute starting in a short time, like a year or so.

486
00:53:15,980 --> 00:53:22,200
So, if you think of that as a linear rate of inflation, every year there's going to be a fixed rate of Monero that gets added.

487
00:53:22,200 --> 00:53:29,580
If you think of what is the impact on the inflation rate, the inflation rate is going to be going to zero asymptotically.

488
00:53:29,600 --> 00:53:38,180
So over time, the inflation rate in Monero will get lower and lower and lower, and continuously be going towards zero, but never actually touch zero.

489
00:53:38,240 --> 00:53:46,180
And this is in contrast to the situation in Bitcoin, which will have equally zero, identically zero inflation in about 100 years time.

490
00:53:46,880 --> 00:53:58,760
So the distinction though between asymptotically zero inflation versus identically zero inflation is really irrelevant from the point of macroeconomic.

491
00:53:58,760 --> 00:54:06,060
If you look at any macroeconomic theory of money supply, even variable is the percentage of monetary growth per year.

492
00:54:06,060 --> 00:54:08,620
It's a percentage rate.

493
00:54:08,620 --> 00:54:11,740
He cares that the supply of U.S.

494
00:54:11,740 --> 00:54:14,300
dollars is going up by however trillions per year.

495
00:54:14,300 --> 00:54:18,160
You have to normalize that by the existing monies.

496
00:54:18,160 --> 00:54:23,380
It's the percentage inflation rate that has any impact on macroeconomic theory.

497
00:54:23,400 --> 00:54:35,960
And so the reality of the situation is that far from being quote unquote infinitely inflating, the inflation rate of Monero is asymptotically zero in contrast to Bitcoin, identically zero.

498
00:54:36,060 --> 00:54:43,620
And that distinction is totally irrelevant from the point of view of macroeconomic theory.

499
00:54:43,980 --> 00:54:46,980
From the point of macroeconomic theory, they're both zero.

500
00:54:48,380 --> 00:54:50,180
Here is showing what I'm talking about.

501
00:54:50,180 --> 00:54:51,620
So this is supply emission.

502
00:54:51,620 --> 00:54:57,340
So you're seeing to the left of the present, you are seeing actual data.

503
00:54:57,340 --> 00:55:05,080
So for the Bitcoin blockchain, this is the actual number of Bitcoin inflation historically taken from blockchain.com.

504
00:55:05,080 --> 00:55:19,260
And for Monero, what you're seeing is actual data from the Monero blockchain taken from the CLI client as very helpful utilities to glean like system level data on things on the blockchain within Monero.

505
00:55:19,720 --> 00:55:30,280
To the right, you see in faint color, the future projection, how much Bitcoin there will be over time, how much Monero there will be over time.

506
00:55:30,340 --> 00:55:39,360
So again, this is like a cool thing about cryptocurrencies, at least the ones that are legitimately set up to not be just a money on the part of people who create them.

507
00:55:39,360 --> 00:55:46,460
For legitimate decentralized cryptocurrencies, like Bitcoin and Monero, the emission schedule is designed in advance.

508
00:55:46,800 --> 00:55:57,120
And so you can kind of count on that there is a, of course, nobody can predict the future with uncertainty, like maybe the emission will not match these curves.

509
00:55:57,120 --> 00:56:06,360
But on the same time, you have an over 10 year history of matching between what actually happened on the blockchain and what was supposed to happen on the blockchain.

510
00:56:06,380 --> 00:56:12,020
That is due to the cooperation of this globally decentralized network by the rules.

511
00:56:14,740 --> 00:56:21,820
Next, if you look at Euro supply inflation, there's a really sobering curve to look at here with the dollar.

512
00:56:21,820 --> 00:56:25,040
Again, we're looking at the money zero maturity curve.

513
00:56:25,040 --> 00:56:35,320
We're seeing that post pandemic, there's been an over 30%, not over, almost 30% inflation in the supply of US dollars since then.

514
00:56:35,320 --> 00:56:39,800
So I'm taking the supply of the money now versus the supply of the money a year ago.

515
00:56:40,340 --> 00:56:46,780
And you can see that it's truly spiked to a kind of scary level since the pandemic.

516
00:56:47,440 --> 00:56:56,120
You can contrast this to the legit cryptocurrencies, Bitcoin and Binair, in which in the past, the inflation rate of both of these currents been very high.

517
00:56:56,120 --> 00:57:00,580
That is in order to get these coins out there to get, you're launching a new money.

518
00:57:00,580 --> 00:57:03,280
So we want to get these coins out there, get them into circulation.

519
00:57:03,420 --> 00:57:12,220
And also incentivize miners to get in kind of to join this network early to get in and help out like this fledgling new network.

520
00:57:12,280 --> 00:57:16,460
So as a result, in the past, inflation rates within cryptocurrency have been very high.

521
00:57:16,780 --> 00:57:19,680
You see, we're coming up on a new era of scarcity here.

522
00:57:20,200 --> 00:57:25,060
Bitcoin and Monero, both having year over year inflates that are on the order of 3%.

523
00:57:25,060 --> 00:57:33,660
And by the end of 2020, well, or if you look at a year from now, the inflation rates of Bitcoin and Monero will actually be lower than that.

524
00:57:33,800 --> 00:57:39,280
So the world gold council keeps track of its estimate of how much gold there is above in the world.

525
00:57:39,280 --> 00:57:42,160
And it's been doing this estimate for about 10 years now.

526
00:57:42,160 --> 00:57:50,880
You plot this inflation rate, which is the inflation rate of the gold supply that has been mined and refined and turned into bullion.

527
00:57:50,880 --> 00:57:53,740
So basically, this is the rate of gold bullion, right?

528
00:57:53,980 --> 00:57:58,100
And that ends up being an average of about 1.8% per year.

529
00:57:58,160 --> 00:58:08,060
Also, as an interesting aside, take this data from the world gold council and ask the question, is gold inflation more consistent with exponential growth or near growth?

530
00:58:08,060 --> 00:58:18,540
And it turns out significantly, it's more correlated like the, like an exponential fits the growth of the gold inflation better than the growth curve.

531
00:58:18,540 --> 00:58:28,840
So this is truly, it's more supported data, the past data to say that gold is growing all exponentially, just at a slower rate at about 1.8% per year.

532
00:58:28,840 --> 00:58:37,180
So if you think of gold as money, and most people kind of view gold as the first thing they think of when they use the phrase sound money, that was a line in the sand.

533
00:58:37,180 --> 00:58:44,040
So there's basically this 1% per year line in the sand where anything to the left of that is going to be a candidate for money.

534
00:58:44,040 --> 00:58:50,360
Anything to the right of that is going to be maybe more suspect in terms of a form of store of value.

535
00:58:50,520 --> 00:59:04,000
And you can see that again, the future of Bitcoin and Monero, that the inflation rate is very soon going to blow that of gold, which would, I would say, qualify both of the candidates for being sound money.

536
00:59:05,820 --> 00:59:10,940
All right, there's another unwanted form of scarcity I wanted to, that is that of mining hardware.

537
00:59:11,020 --> 00:59:14,260
So in the Bitcoin white paper, there's a phrase will be you one vote.

538
00:59:14,260 --> 00:59:30,440
And what that means is that the idea, when a computer joins the mining network, is that probability of getting a block reward should be roughly proportional to the to the resources that they have dedicated towards helping the network.

539
00:59:30,620 --> 00:59:38,020
So in other words, you put 10 computers on the network to help and you should get 10 times the reward of somebody who only put one computer on the Bitcoin network.

540
00:59:38,260 --> 00:59:44,820
So this is fine as long as all different types of computing device equally efficient at the mining algorithm.

541
00:59:44,820 --> 00:59:49,140
Fortunately, the economics of silicon development is linearity.

542
00:59:49,240 --> 00:59:58,260
So in Bitcoin, mining algorithm is simple enough that it is possible to design a custom piece of silicon that does nothing but mine for Bitcoin.

543
00:59:58,340 --> 01:00:07,140
The end result is that you have, you know, $50 million to invest in a fabrication facility in Shenzhen.

544
01:00:07,440 --> 01:00:18,120
Then it's possible for you to take that $50 million investment and develop with, you know, PhD electrical engineers, a custom piece of silicon that does nothing but mine Bitcoin.

545
01:00:18,120 --> 01:00:21,800
A whole bunch of those, you print out a whole bunch of those with your silicon fab.

546
01:00:21,880 --> 01:00:41,120
And now you have a specialized army of computers, which you can then use to connect to the Bitcoin network and have an advantage over all these others on the network who are using their Intel or AMD CPUs that are not optimized to do the Bitcoin proof of work and therefore are at a disadvantage.

547
01:00:41,120 --> 01:00:51,940
These little guys who are running their little CPUs now are spending much more on electricity per hash in Bitcoin than you are with your custom piece of silicon.

548
01:00:51,940 --> 01:00:55,840
So this situation has been happening many years now in the Bitcoin network.

549
01:00:55,840 --> 01:01:01,120
And we're at a point now, Bitcoin mining is now a Chinese dominated oligopoly.

550
01:01:01,360 --> 01:01:04,960
It's not necessarily a problem that it's China that has mining power.

551
01:01:04,960 --> 01:01:06,520
It is a problem that it's central.

552
01:01:06,520 --> 01:01:09,080
It's all in one region of the world.

553
01:01:09,080 --> 01:01:10,880
It's dominated by just a few people.

554
01:01:10,880 --> 01:01:13,720
One company that is on top of this oligopoly.

555
01:01:13,720 --> 01:01:17,700
And it's actually arguably still an oligopoly.

556
01:01:17,700 --> 01:01:19,840
It's moving towards monopoly status.

557
01:01:20,140 --> 01:01:27,740
So in the Monero community, we've looked at this and we've tried to avoid this, having this situation in Monero.

558
01:01:27,740 --> 01:01:34,160
And what we've done is we've adjusted the proof of work algorithm and evolved it to keep small indent miners viable.

559
01:01:34,160 --> 01:01:44,380
So unlike the situation in Bitcoin, where the guy with just a little, you know, gaming PC that they want to, you know, run overnight while weeping and they want to put that on the Bitcoin network.

560
01:01:44,520 --> 01:01:55,080
Well, somebody who does that on Bitcoin, you're wasting your power because your chance of getting a block on one with a CPU, it's like you have a better chance of a lotto, the Powerball.

561
01:01:55,440 --> 01:02:03,100
It'd be a better spend of your money to go buy a lottery ticket to increase your power bill by putting your suit on the Bitcoin network.

562
01:02:03,100 --> 01:02:05,100
That is not true in Monero.

563
01:02:05,280 --> 01:02:08,940
The math of the mining might, you know, it goes up and down.

564
01:02:09,020 --> 01:02:23,740
It might not be like a net positive for just to put their computer on the Monero network, but you have a magnitude higher chance of getting a payout by mining on Monero, a little guy with commodity hardware due in Bitcoin.

565
01:02:23,960 --> 01:02:29,400
So to make this proof of work has in Monero changed actually four times in 2018.

566
01:02:29,400 --> 01:02:35,100
And each of these proof of work changes has required a hard, hard forks or something that you never see in Bitcoin.

567
01:02:35,100 --> 01:02:49,420
There have been, you know, there's been a decision that hard forks in Bitcoin's core, in Bitcoin's, yeah, in Bitcoin core are not to be targeted because they want to preserve backwards capability.

568
01:02:49,420 --> 01:02:54,720
They want miners who don't bother to update their software to still be part of the network.

569
01:02:54,960 --> 01:02:57,500
Okay, well, I mean, that's their decision.

570
01:02:57,500 --> 01:03:14,400
It means that something like what we've done in Monero, which is to dynamically play this game with ASIC miners or ASIC manufacturers to reduce their impact on the Monero system, you could play that game if you are tying your hands behind your back and saying you're not going to accept hard forks.

571
01:03:15,500 --> 01:03:18,920
So here is data from the Monero blockchain that is shown talking about.

572
01:03:18,920 --> 01:03:26,920
So what I'm showing is since the invention of Monero in 2014, April 2014 is when Monero started, about five years ago.

573
01:03:27,780 --> 01:03:31,720
But since 2014, it's been running for over six years now.

574
01:03:31,720 --> 01:03:36,400
So Monero has a demonstrated track record of over six years of operation.

575
01:03:36,460 --> 01:03:42,300
So initially, the proof of work algorithm was Kryptonite, which defined in the Kryptonite white paper.

576
01:03:42,340 --> 01:03:46,640
But as you see, in late 2017, there's to be a increase in the network.

577
01:03:46,760 --> 01:03:53,980
And what this means is that all of a sudden, the Monero network was seeing a whole bunch of extra computing power to its mining network.

578
01:03:53,980 --> 01:03:56,940
And this was interpreted as being ASICs.

579
01:03:57,320 --> 01:04:04,960
ASICs were in other words, people had figured out Monero's proof of work and then designed a custom people can to do nothing but that, then plug it in.

580
01:04:04,960 --> 01:04:19,080
And once they get into the Monero network, they were receiving the lion's share of rewards to the detriment of the, you know, little guys out there who were just trying to run Monero on their single little, you know, commodity hardware rig.

581
01:04:19,200 --> 01:04:23,540
So there was a lot of alarm and just got this in the Monero community.

582
01:04:23,540 --> 01:04:32,060
And as a result of this, 0.12 came out of Monero, which introduced Kryptonite v2, which variant, you know, it was just a couple numbers in Kryptonite.

583
01:04:32,120 --> 01:04:36,740
But it was enough to render the currently existing ASICs operable on the old network.

584
01:04:36,740 --> 01:04:47,140
And so you can see when that went live on the network, and again, that required a hard fork, which means it acquired the cooperation of the Monero community to other nodes to run Kryptonite v2 as the new perk.

585
01:04:47,140 --> 01:04:48,320
And that happened.

586
01:04:48,640 --> 01:04:51,740
After that happened, you can see the different nodes dived back down.

587
01:04:51,740 --> 01:04:58,680
So again, you had small miners with commodity hardware being able to mine.

588
01:04:59,200 --> 01:05:02,760
Then a few months later, ASICs came onto the network.

589
01:05:02,780 --> 01:05:10,040
So there's a lead time of several months that ASIC makers to introduce a new piece of silicon to fruition.

590
01:05:10,040 --> 01:05:11,340
So that happened again.

591
01:05:11,480 --> 01:05:15,440
ASICs, again, spiked the difficulty level of the Monero network.

592
01:05:15,440 --> 01:05:18,520
Again, we changed the proof of work to Kryptonite v3.

593
01:05:18,520 --> 01:05:22,040
It happened again in 2008, a third time ASICs on the network.

594
01:05:22,040 --> 01:05:23,460
And then we came up with Kryptonite.

595
01:05:23,460 --> 01:05:27,960
So now we're changing the proof of work in bigger and bigger increments.

596
01:05:27,960 --> 01:05:31,740
So Kryptonite introduced a random code execution aspect.

597
01:05:31,940 --> 01:05:44,900
And for then several months, there was apparently no reaction from the ASICs, because they also knew that the Monero community, what it said, when it said, we didn't want ASICs on the network, and we were going to try to evolve to prevent that.

598
01:05:44,900 --> 01:05:54,960
So finally, in v0.15, RandomX became the proof of RandomX is now a, it does fully random code execution as its proof of work.

599
01:05:55,320 --> 01:06:04,360
And ASIC that is most eyes to do RandomX, as it turns out, is Ryzen Threadripper CPU that you can buy on Amazon.

600
01:06:04,360 --> 01:06:13,960
It's not a custom Bitcoin miner that you have to go on the express or, you know, have have connection then to be able to get in a timely manner.

601
01:06:14,200 --> 01:06:22,260
So since that CPUs have been healthily dominating the network, and all signs are so far that that has been working.

602
01:06:22,380 --> 01:06:29,380
And, but this is a testament to the length to which you need flexibility in your protocol deal with these sorts of things.

603
01:06:29,380 --> 01:06:33,620
This is, this is network security software and network security is always changing.

604
01:06:33,620 --> 01:06:42,300
And so to, to have a attitude like we have in the Monero community, that hard forks are going to be necessary from time to time to new improvements.

605
01:06:42,760 --> 01:06:51,460
And unfortunately, the nodes in the mining network that fail to upgrade their computers, or they're just, they just gonna, they're going to miss the train.

606
01:06:51,460 --> 01:06:55,740
I mean, this is a moving train, there's new technology going, and they're going to miss it.

607
01:06:55,740 --> 01:06:59,740
And so that's the decision that's been made in Monero, or it's been working.

608
01:07:00,560 --> 01:07:03,840
There's another form of unwanted scarcity and that access to layer one.

609
01:07:03,840 --> 01:07:07,000
So Bitcoin's one megabyte block limit has caused a project.

610
01:07:07,420 --> 01:07:13,940
There was a line of code in the Bitcoin code base that Satoshi has a spam prevention measure.

611
01:07:14,460 --> 01:07:17,000
So the network was going to end in the early days of Bitcoin.

612
01:07:17,000 --> 01:07:22,700
So Satoshi wrote that the maximum size of a new block could only make a byte.

613
01:07:23,020 --> 01:07:34,040
And so the question, you know, should we move this came up several years ago when interest in the Bitcoin was growing and the transactions were growing and coming up against that one megabyte limit.

614
01:07:34,140 --> 01:07:39,300
So basically a civil war happened within Bitcoin to fight over whether this should be retained or not.

615
01:07:39,300 --> 01:07:47,560
And yes, of course, I'm well aware that one of the sides adopted SegWit, which kind of effectively increased the block limit to 1.3 megabytes.

616
01:07:47,560 --> 01:07:53,200
Although, you know, that extra 300 kilobytes in this big scheme of things, you know, it's like a, it's not that big.

617
01:07:53,500 --> 01:07:57,520
Anyway, you have one side in Bitcoin that wanted to stick with this and the other one didn't.

618
01:07:57,520 --> 01:08:00,120
And then the one that didn't had a further divorce.

619
01:08:00,120 --> 01:08:14,160
So you basically have, you know, a lot of animosity in the larger Bitcoin community using, when I group all the forks together, it's not really a key because they really don't play well together.

620
01:08:14,340 --> 01:08:23,240
And even though they've had a divorce and separate blockchains with separate assets at this point, there's still a lot of hate going on still to this day.

621
01:08:23,320 --> 01:08:31,780
If you want to join, you know, Bitcoin as a person to contribute, you have to, you know, make your loyalty very early on.

622
01:08:31,780 --> 01:08:35,200
Are you loyal to Bitcoin Core or Bitcoin Cash or Bitcoin SV?

623
01:08:35,200 --> 01:08:36,620
You have to make that decision.

624
01:08:36,620 --> 01:08:39,520
And once you're in, that's your, that's your camp.

625
01:08:39,520 --> 01:08:43,040
That's your, in Monero, there is just one team.

626
01:08:43,040 --> 01:08:48,000
And I think that the reason for that is that the goal of the project is more easily defined.

627
01:08:48,000 --> 01:08:55,960
It is to be private, digital, fungible cash that takes all of the goodness of Bitcoin that is the centralized nature.

628
01:08:56,140 --> 01:09:06,520
It's not having a committee or a company behind, being a totally grassroots effort, just like Bitcoin is, but add integrability to it.

629
01:09:07,320 --> 01:09:09,820
So in Monero, we have one adaptive block weight.

630
01:09:09,820 --> 01:09:14,460
It used to be called the adaptive size, but then it got, the algorithm got changed and upgraded.

631
01:09:14,460 --> 01:09:16,240
So the adaptive block weight.

632
01:09:16,240 --> 01:09:31,020
But the basic idea is that the, instead of having a hard-coded limit on the size of new blocks, in Monero, the limit is going to dynamically expand and contract to kind of organically reach that of the underlying demand for Monero transactions.

633
01:09:31,280 --> 01:09:40,240
So there's a disincentive that kicks in if a miner chooses to make a block that's big, but also user fees increase if the blocks are big.

634
01:09:40,240 --> 01:09:54,980
So if there's a lot of, if there was a sudden crash in Monero for transactions based, then there's going to be an increase in the user fees to help make up for the fact that I'm not going to be disincentivizing it, less of a reward from coin emission.

635
01:09:55,760 --> 01:10:12,860
So as you can see, putting the system into practice, you can see that overall the trend in Bitcoin transactions per day has been roughly, I would say for the last say five years, if you look back to say 2016, then you can see that there's been a limit here,

636
01:10:12,860 --> 01:10:16,400
an asymptotic limit of transactions per day that have been happening in Bitcoin.

637
01:10:16,400 --> 01:10:21,160
Look at the recent history of Monero, you can see basically an uptrend line here.

638
01:10:21,460 --> 01:10:38,120
It doesn't look like much of a trend line, but you have to, this is an exponential scale that I'm showing here on the vertical axis, which means basically in the last four years or so, between now and say 2017, so like a little under four years, there's been almost effect on increasing the transactions per day.

639
01:10:38,120 --> 01:10:39,580
So it's been growing.

640
01:10:39,580 --> 01:10:41,460
It's been organically growing.

641
01:10:41,460 --> 01:10:49,380
There's nothing artificially limiting growth in the Monero blockchain like an arbitrarily sized block limit.

642
01:10:50,660 --> 01:10:56,460
All right, so moving on then to the difference between transparency and fungibility.

643
01:10:56,460 --> 01:10:58,000
Bitcoin is transparent.

644
01:10:58,040 --> 01:11:12,740
If you are new to cryptocurrency, you have kind of read all these news articles, which of course mature the details of what's going on all the time in the popular press, you might be under the false impression that Bitcoin is a very secretive currency,

645
01:11:12,740 --> 01:11:16,160
that once you're trending Bitcoin, nobody knows what you're doing.

646
01:11:16,160 --> 01:11:17,920
Nothing could be further from the truth.

647
01:11:17,920 --> 01:11:21,240
It itched to get itched forever for all to see.

648
01:11:21,240 --> 01:11:24,660
Every transaction, you have the sender, the receiver, and the amount.

649
01:11:24,860 --> 01:11:30,040
Those are in plain text in every Bitcoin block specified in the Bitcoin white paper.

650
01:11:30,040 --> 01:11:30,880
It's all there.

651
01:11:30,980 --> 01:11:33,240
You can see the transaction is in plain text.

652
01:11:33,240 --> 01:11:41,480
Every address is encoded in the blockchain in plain text, which means it's trivial to code up what's called a block explorer.

653
01:11:41,480 --> 01:11:45,300
You go to these block explorers and you type in anyone's address.

654
01:11:45,300 --> 01:11:46,620
It doesn't have to be your address.

655
01:11:46,620 --> 01:12:03,980
It can be anyone in the world's Bitcoin address that you type in, and it'll instantly spit out for you how much money does that account have, who did that send money to or receive money to for its complete history, all the way back to the miner who initially mined that Bitcoin.

656
01:12:04,160 --> 01:12:11,920
So it's as if you have a dollar bill, and on the back of that $10 bill, you have a nice list showing everyone in history who owned that $10 bill before you.

657
01:12:12,080 --> 01:12:16,060
So it went to a bunch of people, then all the way back to the mint.

658
01:12:16,180 --> 01:12:20,320
So what possibly could be the downside consequence to a system like that?

659
01:12:20,320 --> 01:12:24,600
And actually, in Bitcoin, it's even worse than a piece of cash that has it on the back of it.

660
01:12:24,600 --> 01:12:32,080
Because at least if this list were written on paper on the currency bill, then it would be only you who could see that list at any time.

661
01:12:32,500 --> 01:12:40,880
But as in Bitcoin, everyone in the world has access to that complete history of every Bitcoin for every single Bitcoin in existence.

662
01:12:40,960 --> 01:12:44,540
This puts innocent people and businesses at risk.

663
01:12:45,180 --> 01:12:56,560
Not only is there the risk that key clean innocent people can become victims of crime, because it is possible for anyone in the world to look at their address and see how much money they have.

664
01:12:56,560 --> 01:13:02,520
And therefore, for nefarious people to assess their credits before they go after them.

665
01:13:02,700 --> 01:13:11,020
There's also an even more pernicious effect that putting innocent people at jeopardy is that reputation trend in Bitcoin as well as value.

666
01:13:11,160 --> 01:13:15,120
So because every coin is traceable back to there, this invites voyeurism.

667
01:13:15,120 --> 01:13:19,760
Like I mentioned, it's possible to up anyone's bank account in Bitcoin at any time.

668
01:13:19,760 --> 01:13:22,280
But it also promotes guilt by association.

669
01:13:22,280 --> 01:13:40,480
Because if you have knowledge of who sends money to who, and then somehow figure out who, like faces that correspond to these Bitcoin addresses, and furthermore, you have known, quote unquote, bad people in the network who are in transact Bitcoin, then you can connect the dots.

670
01:13:40,480 --> 01:13:49,500
Basically, you can come up with a hypothesis that people who have transacted coin with known bad actors are themselves more likely to be bad.

671
01:13:49,500 --> 01:14:09,060
So what ends up happening is that really transparent data that is in in blockchain, combined with the ever-growing mass of metadata that links specific coin addresses to the identities of names and people, that grows, you have what constitutes a social credit score within Bitcoin.

672
01:14:09,180 --> 01:14:26,560
So we in the West, we tend to look at this news of social credit score in China and kind of shake our heads at it and say, wow, that's just horrible that they tell this, you know, this data of who your friends are, who you choose to interact with, and then deliver consequences,

673
01:14:26,560 --> 01:14:28,280
either good or bad at behavior.

674
01:14:28,280 --> 01:14:30,820
Wow, that's just awful that they do that in China.

675
01:14:30,820 --> 01:14:35,740
And then people sign up for Bitcoin accounts in which the exact same is happening.

676
01:14:35,740 --> 01:14:41,880
So the transparency of the Bitcoin network is being used again to formulate these social credit score networks.

677
01:14:41,880 --> 01:14:44,680
And there are companies that specialize in nothing but this.

678
01:14:44,900 --> 01:14:52,820
There are chain analysis companies that will assign basically a social credit score to every Bitcoin address that exists.

679
01:14:53,420 --> 01:14:58,240
So there's a guilt by association that is introduced at the human level.

680
01:14:58,240 --> 01:15:00,020
This has nothing to do with the technical level.

681
01:15:00,020 --> 01:15:09,500
And so it's a reason why those people in Bitcoin who tend to see things as just technical things and ignore the social human aspect will discount this.

682
01:15:09,600 --> 01:15:13,640
Because, oh, well, they're censorship resistant Bitcoin.

683
01:15:13,640 --> 01:15:17,120
Nobody can possibly stop a Bitcoin transaction happening.

684
01:15:17,120 --> 01:15:18,880
Yes, that's true on a technical level.

685
01:15:18,880 --> 01:15:29,820
But if you have a situation where certain Bitcoin addresses are basically hot potato, they're like pariahs, they're bad people that aren't supposed to be dealt with.

686
01:15:29,820 --> 01:15:37,000
Then on a social level, there are consequences to certain addresses that are transacting in Bitcoin as opposed to us.

687
01:15:37,000 --> 01:15:49,000
So this technical censorship resistance that happens on an IP on a data sort of level gets destroyed at a human level, at the actual societal level, because the chain is completely transparent.

688
01:15:49,960 --> 01:15:52,240
In contrast to this, Monero is fungible.

689
01:15:52,240 --> 01:15:55,900
There are three technologies in Monero that combine to promote this indistinguishability.

690
01:15:55,900 --> 01:16:04,280
There's ring signatures that protect the sender's identity, stealth addresses that protect the receiver's identity, and RingCT that keeps the amount sent private.

691
01:16:04,640 --> 01:16:13,840
Now, original Monero white paper, the CryptoNote white paper, had specifications for the first two of these three technologies for rings and stealth addresses, but it did not mention RingCT.

692
01:16:13,840 --> 01:16:18,700
That was a new innovation that happened after Monero went live.

693
01:16:18,700 --> 01:16:23,620
And so, again, this is another example of the attitude within Monero, which is no compromises.

694
01:16:23,620 --> 01:16:27,060
We are going to do what is best to make the best fungible currency possible.

695
01:16:27,060 --> 01:16:35,240
That includes doing hard forks, and that includes lots of research, coming up with new stuff, and putting the best that we have out there.

696
01:16:35,600 --> 01:16:40,320
So RingCT required original cryptographic research on the part of a research lab.

697
01:16:40,320 --> 01:16:46,920
We're talking about like post-doc, PhD-level cryptography with mathematicians.

698
01:16:46,920 --> 01:16:49,820
We have those working with us in Monero.

699
01:16:49,960 --> 01:17:03,240
Furthermore, you needed coders, like developers, software developers, who could understand higher-level math that was being discussed and then put that implementation in code and also have kind of wisdom to realize that there might be bugs in this.

700
01:17:03,240 --> 01:17:09,260
And so maybe it'd be a good idea to pay independent parties to do an external audit of any new code that gets in Monero.

701
01:17:09,400 --> 01:17:18,080
That happened with Monero, and it's happened on a routine basis for all major innovations that have happened within Monero, including RingCT, and there have been four or five in the last few years.

702
01:17:18,300 --> 01:17:26,320
And then finally, you need a community that has a commitment to actually implementing the stuff that gets out from the research and the development phases.

703
01:17:26,320 --> 01:17:29,860
So you have a community of people running Monero on their own computers.

704
01:17:30,100 --> 01:17:32,220
They stay with the program.

705
01:17:32,220 --> 01:17:34,360
They have their ears to the ground.

706
01:17:34,360 --> 01:17:38,860
They know, they're aware that there's such a thing as RingCT coming up, and then they implement it.

707
01:17:38,860 --> 01:17:40,620
They do the hard work to make it happen.

708
01:17:41,460 --> 01:17:51,240
So this, again, is showing some data that's comparing some data between the Bitcoin and Monero blockchains to show how fungible scarcity has been made better in Monero and its history.

709
01:17:51,240 --> 01:17:54,160
So here on top, I'm showing the average bytes per transaction.

710
01:17:54,820 --> 01:17:58,280
That is, on Bitcoin, it's been pretty constant.

711
01:17:58,280 --> 01:18:01,980
Again, there's been this attitude in Bitcoin that be very conservative.

712
01:18:02,020 --> 01:18:08,880
They don't want to make many changes to the code because that there's a whole lot of money being entrusted on their network.

713
01:18:08,900 --> 01:18:19,620
Whereas, of course, if you look on a global scale, you zoom out a little bit, you know that Bitcoin is just like a tiny, bug -sized in a land of dinosaurs.

714
01:18:19,960 --> 01:18:24,900
The existing fiat monetary infrastructure dwarfs Bitcoin.

715
01:18:25,420 --> 01:18:33,560
And so one can question whether the attitude of, oh, we are trusted with such a huge amount of money.

716
01:18:33,560 --> 01:18:37,980
We have to be super conservative and not introduce anything that could rock the boat.

717
01:18:37,980 --> 01:18:41,480
Is that really the right attitude to take for something that is an upstart?

718
01:18:41,920 --> 01:18:45,200
Nevertheless, that's been the kind of ethos within Bitcoin.

719
01:18:45,200 --> 01:18:49,620
And you can see that the daily average byte per transaction is pretty constant over time, over its history.

720
01:18:49,780 --> 01:18:59,900
In contrast with Monero, it's been quite a bit of a story that is encoded in this that shows the size in bytes of average trend in Monero.

721
01:19:00,120 --> 01:19:03,080
In the early days of Monero, there were limited outputs.

722
01:19:03,080 --> 01:19:14,520
And what that means is you can envision there's like a one Monero, a two Monero chunk, a three Monero chunk, and tens, 10, 20, 30, 100, 200, 300, and then going the other way, so 0.1s or 0.2s or 0.3s.

723
01:19:14,520 --> 01:19:22,440
There are these discrete units, little globs of Monero that were used as kind of the nugget of the money supply.

724
01:19:22,520 --> 01:19:37,840
So if somebody in the early days of Monero to send, say, 123 Monero to somebody, then you would have to come up, round around in your wallet, in your cryptocurrency wallet, to come up 100 Monero bill, a 20 Monero bill, and a three Monero, and put those together,

725
01:19:37,840 --> 01:19:41,400
and then make a transaction that would send those out to the desired recipient.

726
01:19:41,880 --> 01:19:53,940
There are problems with this because one could see in those early days of Monero that a 100 unit got sent, a 20 Monero unit, and a three unit Monero, like the values of those denominators all were seen.

727
01:19:54,160 --> 01:20:10,480
So if somebody did a 123 Monero, and then three days later another trend showed up that also moved 123 Monero, then you could have a pretty educated guess that those two transactions were related somehow.

728
01:20:10,540 --> 01:20:20,880
So when RingCT came out and it was researched, it was quickly enabled, even though it wasn't, that the transaction size would inflate by order of magnitude.

729
01:20:21,020 --> 01:20:36,100
So when RingCT was enabled, you can see here in early 2017, it was enabled and not mandated, and yet you see that the transaction sizes jumped way up, and that is because people in the Monero community actually did tend to use RingCT because it was a better technology.

730
01:20:36,240 --> 01:20:39,200
Then in 2017 RingCT became mandatory.

731
01:20:39,320 --> 01:20:49,100
So you could see that there's this situation for about two years, almost two years, in which transactions in Monero were almost three orders of magnitude larger than in Bitcoin.

732
01:20:49,100 --> 01:21:00,040
So you saw a lot of chatter in the crypto Twitter and the crypto press that Monero transactions are gigantic and how could you possibly scale this kind of system.

733
01:21:00,280 --> 01:21:02,880
And you still see objections to this to this day.

734
01:21:02,880 --> 01:21:08,860
Even this problem was mitigated to a large extent late 2018 when Bulletproofs came around.

735
01:21:08,860 --> 01:21:24,220
Bulletproof was a new cryptographic advance that the Monero research left with, and again it went through the same process of coding, external audit, and after the audit came back by several independent audits that the code was legit, the research was legit,

736
01:21:24,220 --> 01:21:39,280
it went into the Monero network, and you can see the effect of Bulletproofs was to reduce the transaction size of RingCT transactions by more than an order of magnitude, while keeping the same cryptographic guarantee that the sum of the inputs was the sum of the outputs.

737
01:21:40,700 --> 01:21:58,860
Okay, so at that point then the transaction size went down, and as you can see in Monero, since the transaction fee is a function of transaction size, the transaction fee also took an order of magnitude reduction in late 2018 when Bulletproofs went live on the system.

738
01:21:58,860 --> 01:22:08,720
So you can see since, you know, fall of 2018, transactions on Monero have been at the one penny level instead of the the dollars level.

739
01:22:09,400 --> 01:22:12,340
And coming up in Monero, there's even more research coming down the pipeline.

740
01:22:12,340 --> 01:22:17,280
That's CLs, which is a new innovation, it's a new optimization that was noted by Dr.

741
01:22:17,280 --> 01:22:31,180
Soren Noether of the Monero Research Lab, in which he noticed that there was a further efficiency gained for zero, for a negative computational cost, and if space being taken up retroactively for even trends that have happened in the past.

742
01:22:31,180 --> 01:22:46,140
So what we're going to see when CL sags in October 2020, and again CL sags went through the same audit process, there was an external audit process that just completed, actually which my consulting was, had the pleasure of contributing to financially.

743
01:22:46,620 --> 01:22:54,880
After that audit came back positive, now it is set, it is being worked on for inclusion in the Monero hard fork coming up on mid-October of this year.

744
01:22:54,880 --> 01:22:58,300
And once that happens, you're going to see daily average bytes per transaction.

745
01:22:58,840 --> 01:22:59,820
Step down.

746
01:22:59,820 --> 01:23:08,420
It's a more modest step down than bullet, but you can see that the direction is that the transaction size between Monero and Bitcoin is shrinking.

747
01:23:08,420 --> 01:23:21,160
It's shrinking that's due to sustained effort on the part of the Monero community to not only recognize innovation, but also support its development, actually implement the innovation when it comes through.

748
01:23:22,360 --> 01:23:34,000
All right, there's a Nobel Prize winning paper in the used car market that I talk about, because this really hits home why it is that key clean people need Monero.

749
01:23:34,240 --> 01:23:37,440
People with nothing to hide actually need Monero.

750
01:23:37,440 --> 01:23:41,200
And the basis comes from this paper from the 1970s from George A.

751
01:23:41,200 --> 01:23:45,480
Kellogg, again won the Nobel Prize in economics for this insight, on asymmetric information.

752
01:23:46,160 --> 01:23:49,220
So here's what his paper talks about, the used car market.

753
01:23:49,220 --> 01:23:51,560
Now there are two types of used cars in this paper.

754
01:23:51,560 --> 01:23:59,900
There are lemons, lemons are the bad cars which break down and nobody wants to own them like those who are involved in a flood or hurricane or something like that.

755
01:23:59,900 --> 01:24:02,420
Now they're, you know, problem cars.

756
01:24:02,780 --> 01:24:08,960
On the other hand, peaches, peaches are the good used cars, which were taken care of by their owners.

757
01:24:09,240 --> 01:24:14,640
Now sellers, which type of car they have, they know whether they're selling a lemon, and they know if they're selling a peach.

758
01:24:14,800 --> 01:24:20,600
You know, if your car has been involved in a hurricane, know that you will have seen your car sitting in four feet of water.

759
01:24:20,600 --> 01:24:24,880
And now you decide that you want to try and sell your car because it's been in four feet of water.

760
01:24:24,980 --> 01:24:32,200
So but before you do that, you make sure that the paint job on your car is extra shiny and clean because you want it to superficial look good.

761
01:24:33,400 --> 01:24:36,400
Superficial good looks are also going to be there for the peach seller.

762
01:24:36,400 --> 01:24:44,600
But in contrast to the lemon seller, the peach seller has been busy, you know, keeping their car in a garage and doing the oil changes all the time and so on.

763
01:24:44,600 --> 01:24:47,580
They've been taking, you know, top care of their car.

764
01:24:47,960 --> 01:24:52,380
Now buyers come to this market and they can't sell apart lemons from peaches.

765
01:24:52,460 --> 01:24:54,700
But they know that they're ignorant.

766
01:24:54,700 --> 01:24:58,780
They know there are both bad cars in the market and there are good cars in the market.

767
01:24:58,780 --> 01:25:03,120
And there is a probability that as a used car buyer, you are going to end up with a lemon.

768
01:25:03,320 --> 01:25:11,180
You'll do everything you can to try to reduce your level of ignorance to, you know, the condition of any given used car.

769
01:25:11,180 --> 01:25:15,480
But at the end of the day, you don't know what happened to that car before you owned it.

770
01:25:15,480 --> 01:25:19,980
So you have to, you can't discount the probability that you're going to get a lemon.

771
01:25:20,060 --> 01:25:29,580
So what is a buyer going to do when they faced with this situation, when they are relatively ignorant with the buyer as to the condition of the goods that they're buying?

772
01:25:30,100 --> 01:25:36,760
The buyer is going to make an offer price for the purchase of a car, and that's going to be equal to the lemon price.

773
01:25:36,760 --> 01:25:40,440
Because after all, the lemon price is the minimum price a car could be worth.

774
01:25:40,440 --> 01:25:42,240
So they're going to offer at least that.

775
01:25:42,240 --> 01:25:45,100
And then on top of that, they're going to offer a bit more.

776
01:25:45,100 --> 01:25:53,780
And the bit more part is going to be contingent on what the buyer perceives as being the probability that the buyer is going up with a peach or a lemon.

777
01:25:53,960 --> 01:26:03,860
So here, offer price equals lemon price plus the perceived peach probability or likelihood multiplied by the price difference between a peach and a lemon.

778
01:26:03,900 --> 01:26:07,940
So if you think there's a 100% chance that you're going to get a lemon, you're going to offer the lemon price.

779
01:26:07,940 --> 01:26:16,500
If there's a 100% chance that you're going to get a peach, you would offer the lemon price plus the peach price minus the lemon, which ends up being the peach price.

780
01:26:16,540 --> 01:26:22,280
And then if you have a probability of getting a peach that's less than a percent, then you adjust your price accordingly.

781
01:26:22,280 --> 01:26:23,600
This is just very rational.

782
01:26:23,600 --> 01:26:34,840
It's what a rational do when faced with a probability of getting something of inferior quality, and they are ignorant as to which they're going to get, but know that there's a probability that they're going to get either a good one or a bad one.

783
01:26:35,480 --> 01:26:40,220
So now let's offer that's coming from the buyer and look at it from the seller's point of view.

784
01:26:40,220 --> 01:26:41,720
And again, there are two types of sellers.

785
01:26:41,720 --> 01:26:43,520
There are lemon sellers and there are peach sellers.

786
01:26:43,600 --> 01:26:56,080
The lemon sellers are going to look at this offer and they're going to say, wow, this sucker here is offering me almost a peach price because they think that there's a 90 % chance they're going to get a peach.

787
01:26:56,080 --> 01:26:57,660
I'm selling them my lemon.

788
01:26:57,820 --> 01:27:11,480
So let me act like I'm going to hum in high and be very on the fence about this, but on the inside, I'm jumping with joy because I'm about to dump lemon and sell it to this sucker who is on me almost a peach price for it.

789
01:27:11,480 --> 01:27:15,620
So basically when this offer is to a lemon seller, they say, okay, offer accepted.

790
01:27:16,060 --> 01:27:21,680
That same offer when heard by the ears of a peach seller is not quite attractive.

791
01:27:21,680 --> 01:27:27,300
So basically the peach seller has been doing all the maintenance, all the work to keep their car nice and clean.

792
01:27:27,300 --> 01:27:38,360
And here comes this idiot, this greedy buyer who is too stupid to understand that this peach is selling a pre-moped.

793
01:27:38,360 --> 01:27:43,920
It is worth every penny that is being advertised for, which is the peach price.

794
01:27:44,480 --> 01:27:55,120
And yet this guy comes to you and in spite of all of the evidence that you provide, been doing a great job of upkeeping that car, you still get lulled because they're still afraid that they're going to get a lemon.

795
01:27:55,120 --> 01:27:57,960
So the tendency is for sellers to say, no, thanks.

796
01:27:57,960 --> 01:27:59,440
I am not going to accept your offer.

797
01:27:59,440 --> 01:28:02,360
I'm going to keep my used car because it's worth quite a bit to me.

798
01:28:02,360 --> 01:28:05,400
I'll just drive until it, you know, until it stops working.

799
01:28:05,500 --> 01:28:07,160
And in fact, that's what you see in real life.

800
01:28:07,160 --> 01:28:10,520
Peach sellers disengage from the used car market.

801
01:28:10,640 --> 01:28:18,740
And what happens when the peach sellers disengage from the market is that now the fraction of lemons being sold goes up.

802
01:28:19,240 --> 01:28:25,960
Because the fraction of lemons now is higher than it used to be, the buyers get wind of that, wise to that fact.

803
01:28:25,960 --> 01:28:33,120
And when they adjust their probability of getting a lemon to be higher, now they're going to lower offer price.

804
01:28:33,120 --> 01:28:36,720
And so the key insight of the paper is that you have this race to the bottom.

805
01:28:36,720 --> 01:28:52,340
You have the situation of a negative feedback loop in which the people buying used cars, because of ignorance, because of their fear of getting burned, they are going to continually lower their offer price as more and more evidence comes in, that it's only lemons that there are likely to buy in the market.

806
01:28:52,840 --> 01:29:00,360
Meanwhile, as the offer price going down and down and down, the peach sellers become even more likely to leave the market.

807
01:29:00,360 --> 01:29:10,000
As buyers are increasingly unwilling to pay a peach price they know to be a peach, the peach sellers are going to disengage from that market and withdraw from it and keep there.

808
01:29:10,000 --> 01:29:12,100
They're just not going to participate in that market.

809
01:29:12,620 --> 01:29:18,940
So this conclusion in the Akerlof paper that what you end up with is a market of used cars 100% lemons.

810
01:29:20,460 --> 01:29:23,340
Let's look at this and apply it to two applications.

811
01:29:23,340 --> 01:29:25,960
So first is DEF CON safe mode, what we're doing right now.

812
01:29:26,200 --> 01:29:35,700
So if you think of used car status, you think of the used car market, and instead of the car market now we're going to have the market for social interaction, right?

813
01:29:36,060 --> 01:29:39,180
So a healthy person is a peach.

814
01:29:39,300 --> 01:29:53,620
A healthy person is faced with this decision of wanting to go to DEF CON this year and have a sweet time because it's this, you know, the geeks taking over Las Vegas for a few days and that is just super cool because usually it's not geek taking over Las Vegas.

815
01:29:53,880 --> 01:29:56,360
And you know, I want to go and I want to make new friends.

816
01:29:56,360 --> 01:29:58,380
I want people who are into the same stuff I am.

817
01:29:58,380 --> 01:30:01,340
I want to learn about new stuff I hadn't known about before.

818
01:30:01,420 --> 01:30:05,380
That's a graceful marketplace that I in the past have been to get into.

819
01:30:05,380 --> 01:30:08,560
That's the social marketplace that we're talking about instead of the used car market.

820
01:30:08,560 --> 01:30:10,760
And you as a healthy person, you are a peach seller.

821
01:30:10,760 --> 01:30:13,680
You have a healthy body so that's like a peach, right?

822
01:30:14,760 --> 01:30:19,360
What is your chance of returning home from DEF CON having bought a lemon?

823
01:30:19,360 --> 01:30:27,780
That is, what is your chance of going to DEF CON and then come back home having contracted a virus that spread around in a global pandemic?

824
01:30:28,000 --> 01:30:30,480
It's a probability that you have to assess.

825
01:30:30,480 --> 01:30:36,000
And just like the buyer in the used car market, there's a lot of unseen behind that probability assessment.

826
01:30:36,620 --> 01:30:49,660
There's a lot of subsidy, you know, different people will come to different conclusions on what that probability is and different people come to different conclusions on the negative kind of value of the consequence if you do end up with a lemon, right?

827
01:30:49,660 --> 01:31:03,140
But the end result is that in the marketplace of social interaction, just like in the used market, there is now high uncertainty as to what the value is of the social interaction product that you're buying convention.

828
01:31:03,160 --> 01:31:04,160
What is the value of that?

829
01:31:04,160 --> 01:31:17,220
It could be positive like it has been in most DEF CONs where you come from DEF CON with a lot of new friends and a lot of new knowledge or be highly negative because you come home with the same knowledge and stuff but with the virus.

830
01:31:17,220 --> 01:31:23,560
So that kind of dampens the value of the fun geeky fun you had during DEF CON.

831
01:31:23,740 --> 01:31:36,720
So in that situation, it is a rational decision for a peter, in other words, a healthy person to decide not to interact with the marketplace for social interaction, at least for this year.

832
01:31:36,720 --> 01:31:38,880
And thus you have DEF CON safe mode.

833
01:31:39,800 --> 01:31:43,360
By this to transparency coins or surveillance coins as I like to call them.

834
01:31:43,360 --> 01:31:49,420
So these are coins such as in which the complete history of who owned what is known to everybody.

835
01:31:49,420 --> 01:32:02,820
And because of this, there is this unfortunate tendency for people trying to come up with a transaction graph that draws lines from who sent money to everyone else in this in this situation.

836
01:32:02,840 --> 01:32:05,800
And unfortunately, they're going to come up with false positives.

837
01:32:05,800 --> 01:32:13,040
So let's say we have a squeaky clean person who is buying a car, choose another car example.

838
01:32:13,040 --> 01:32:18,360
So a clean person is buying or selling their car to somebody to a stranger.

839
01:32:18,360 --> 01:32:20,980
So they they advert a car on Craigslist.

840
01:32:21,200 --> 01:32:27,700
And then they make a deal, a stranger shows up, they have, let's say, for example, Bitcoin.

841
01:32:27,880 --> 01:32:31,200
And then so the car and the Bitcoin change hand.

842
01:32:31,280 --> 01:32:39,140
And as is, as is usual in a car transaction, as long as the whoever is selling the clean title to the car, it doesn't matter.

843
01:32:39,140 --> 01:32:52,900
You don't have like a deep biographical inquiry on the idea of the of the seller of the car, you don't have to go check their, you know, credit history, or they're, they're not the higher, you know, private investigator to do a background check on this seller of the car,

844
01:32:52,900 --> 01:32:57,820
or investigate whether they got enough as a child, and are likely to be a, you know, a sociopath.

845
01:32:57,820 --> 01:33:01,120
Now, you don't kill that you just know that they have clean title to a car.

846
01:33:01,120 --> 01:33:04,400
And so Bitcoin and a clean title to a car now changed.

847
01:33:04,640 --> 01:33:11,340
Unbeknownst to the squeaky clean person in this transaction, the other person in the transaction, the counterparty was a bad actor.

848
01:33:11,520 --> 01:33:18,120
And so now as a result of there's a Bitcoin transaction that has taken place between squeaky clean and bad person.

849
01:33:18,160 --> 01:33:34,040
Now the people are doing blockchain analysis from far away from somewhere else, you know, somewhere on the other side of the world, they come to the false conclusion then that the squeaky clean person is involved in the same nefarious business that the bad person is.

850
01:33:34,820 --> 01:33:42,620
If they make that wrong call, do they have any bad consequence when the innocent guy gets investigated?

851
01:33:42,760 --> 01:33:46,880
And all of a sudden the innocent guy finds their cryptocurrency accounts being used.

852
01:33:47,100 --> 01:33:51,360
And maybe they get a visit from law enforcement asking, what happened to this?

853
01:33:51,360 --> 01:33:52,780
Why did you spend this Bitcoin?

854
01:33:52,960 --> 01:33:55,140
Why did you get this Bitcoin from selling?

855
01:33:55,140 --> 01:33:58,980
And then you try to explain that it was a car and you had no idea who this other person was.

856
01:33:58,980 --> 01:34:00,300
They had clean title to their car.

857
01:34:00,300 --> 01:34:01,720
Isn't that all you need to know?

858
01:34:02,180 --> 01:34:04,920
Now that misunderstanding happens.

859
01:34:04,920 --> 01:34:08,260
Is this analyst of the blind doing blockchain analytics?

860
01:34:08,260 --> 01:34:13,620
Is that analyst going to be held responsible for the disruption to the innocent person's life?

861
01:34:13,620 --> 01:34:15,540
No, they are not going to be held for that.

862
01:34:15,540 --> 01:34:19,160
The innocent person has no recourse in a situation like that.

863
01:34:19,440 --> 01:34:26,100
And so we have a situation that in transparent chains, squeaky clean people are now the peach owners.

864
01:34:26,240 --> 01:34:38,100
And they're deciding whether or not they want to interact in an ethic system that makes a social link between people who are actually extorting money for services at arm's length.

865
01:34:38,420 --> 01:34:49,420
And so you have a squeaky clean reputation and you are with the choice, do I want to engage with this situation, which could mix up my reputation with that of somebody else?

866
01:34:49,540 --> 01:34:55,180
Just like the peach seller in the Akerlof paper, your logical conclusion is going to be no.

867
01:34:55,180 --> 01:34:55,960
No, thank you.

868
01:34:55,960 --> 01:35:07,160
I would not like to take this that my good reputation is going to be besmirched due to some some analyst somewhere in the world coming up and connecting the dots in a wrong way.

869
01:35:07,240 --> 01:35:13,460
I am not willing to have my life suffer as a result of somebody else's social miscalculation.

870
01:35:13,620 --> 01:35:23,880
So that is going to be the reason why squeaky clean people are going to disengage with such a system and go to a system where their reputation protected, like in Monero.

871
01:35:25,020 --> 01:35:27,280
So Monero is cryptocurrency safe mode.

872
01:35:27,280 --> 01:35:29,920
It is what Bitcoin noobs think bot.

873
01:35:29,920 --> 01:35:32,440
It is sound money in safe.

874
01:35:34,980 --> 01:35:36,880
All right, so I have a few minutes.

875
01:35:36,960 --> 01:35:47,260
I'm psyched about that because usually I put out any sort of price charts is actually part of the like the ethos of Monero is that people don't talk about money.

876
01:35:47,260 --> 01:35:50,800
One of the great things about it is that people discourage talking about it.

877
01:35:50,800 --> 01:36:14,120
In time, you know, it is in a time of history in which it is prudent for people, like in my personal opinion, to consider again the likelihood that fiat currency in the future, the far future or perhaps even future, could be going through a period of inflation that the magnitude which we are not accustomed to seeing,

878
01:36:14,120 --> 01:36:16,260
at least in the Western world.

879
01:36:16,880 --> 01:36:30,860
So in that context, what is one thing that one can do to protect oneself if one has its to save in such a high inflation environment, and that is going to be to look at sources of scarcity that are not really the fiat system.

880
01:36:31,040 --> 01:36:34,040
And again, these are going to be things like gold.

881
01:36:34,500 --> 01:36:40,780
And since 2009, a couple of digital alternatives to gold, be Bitcoin and Monero.

882
01:36:40,860 --> 01:36:47,360
So here I'm showing how have the prices evolved since 2009, which is when the Bitcoin Y came out.

883
01:36:47,360 --> 01:36:53,860
And I think this is really the only price chart that anyone, most people, almost everyone should be looking at.

884
01:36:54,100 --> 01:37:00,960
I'd zoom into what happened to the price in the last week or the last month, or even the last year, looking at the last 11 years.

885
01:37:00,980 --> 01:37:03,700
And I'm looking at a vertical that is logarithmic.

886
01:37:03,700 --> 01:37:06,500
So we have one penny up to $10,000.

887
01:37:06,500 --> 01:37:16,500
So this is like, obviously, it's like a life sort of scale, and one is involved in the assets that are changing value at this rate.

888
01:37:17,000 --> 01:37:24,480
You hear that the traditional fiat investments have looked like basically very, they look basically like lines.

889
01:37:24,480 --> 01:37:36,140
And all of the drama that you see from virtual news about the stock market, you know, going up, having a super fantastic day, went up 5%, or, oh, my gosh, you know, the stock crashed yesterday and went 7%.

890
01:37:36,140 --> 01:37:39,640
And all these sort of alarm bells are ringing at the stock exchange.

891
01:37:39,640 --> 01:37:46,200
These shows like little tiny pixel-sized blips plotted on this scale, right?

892
01:37:46,640 --> 01:37:50,400
Similarly, with gold, gold looks pretty throughout the history.

893
01:37:50,400 --> 01:38:00,980
But if you look at these new digital assets, so basically, as realization sinks in, that there is something generally innovative about these assets.

894
01:38:00,980 --> 01:38:09,020
You have seen adoption come in at first like a hardcore geek community, but then that kind of to broaden out over time.

895
01:38:09,020 --> 01:38:11,920
And so you've seen this growth in the asset values.

896
01:38:14,220 --> 01:38:27,760
If you look at monthly returns of these various asset classes since the inception of Monero, then actually, if you might not realize this, you've only been looking at Monero prices for the last, say, year or two.

897
01:38:27,760 --> 01:38:34,540
But on average, average return from Monero on a monthly basis is higher than that of Bitcoin since Monero's inception.

898
01:38:34,540 --> 01:38:39,380
So we're talking a geometric average return of 5.2% per month versus 0.04% per month.

899
01:38:39,460 --> 01:38:44,500
And again, these dwarf the monthly returns that are coming from more traditional assets like gold, U.S.

900
01:38:44,500 --> 01:38:45,560
equities, bonds.

901
01:38:45,920 --> 01:38:50,320
Although that higher return in Monero has been at the expense of higher standard deviation.

902
01:38:50,480 --> 01:38:55,760
So there's been more knowledge up and down of Monero relative to that of Bitcoin in the past.

903
01:38:56,060 --> 01:39:03,080
One thing that especially intuitional investors find to be important is that of asset questions.

904
01:39:03,080 --> 01:39:16,220
So when putting a portfolio together of several different asset classes to look at, do the ups and downs of each of these assets, do they go up and down in concert together, or do they actually cancel each other out?

905
01:39:16,220 --> 01:39:30,960
And it's desirable to have things that partially each other out because then on average, your portfolio will have a lower average volatility because part of the components of your portfolio will be canceling each other out when it comes to the short-term ups and downs of it.

906
01:39:31,020 --> 01:39:35,820
So here I'm showing a cross-section matrix of Monero, Bitcoin, gold, stocks, and U.S.

907
01:39:35,820 --> 01:39:36,440
bonds.

908
01:39:36,440 --> 01:39:42,460
And you can see that compared to the traditional assets, that is gold, U.S.

909
01:39:42,460 --> 01:39:42,920
stocks, U.S.

910
01:39:42,920 --> 01:39:52,700
bonds, correlation, historical monthly correlation, actually these are historical weekly correlations have been very low, 0.45 for gold, 0.05 for stocks, and 0.02 for U.S.

911
01:39:52,700 --> 01:39:53,340
bonds.

912
01:39:53,660 --> 01:40:01,820
It has been somewhat correlated to Bitcoin, and I say that is primarily due to it being still early days in crypto.

913
01:40:01,820 --> 01:40:03,740
It's like the dot-com stuff I was talking about.

914
01:40:03,740 --> 01:40:08,460
People are still, I would say, ignorant as to how this stuff actually works.

915
01:40:08,820 --> 01:40:21,940
And rather than have a actual understanding of how, say, Bitcoin works, they use instead of a de-technical and kind of social, societal understanding of how the system actually works, use their buddy network.

916
01:40:21,980 --> 01:40:24,700
They say, oh, this person and that person and this person.

917
01:40:24,700 --> 01:40:37,240
They build an echo chamber to try and determine the validity of something because they are unable or unwilling to take the time for it to sit down and learn all these details of elliptic curves and so on.

918
01:40:37,500 --> 01:40:58,300
So as a result, all the currency tends to get lumped together as one kind of big asset from people unable to distinguish between legitimate projects like Bitcoin and Monero and those that are far less convincing in the decentralized flow of minor rewards that are being given out to the network.

919
01:40:59,740 --> 01:41:03,660
So again, the chart that I showed was showing the unit prices.

920
01:41:03,660 --> 01:41:05,040
So what is the price of one Bitcoin?

921
01:41:05,040 --> 01:41:07,500
What is the price of one ounce of gold?

922
01:41:07,500 --> 01:41:08,480
And so on.

923
01:41:08,680 --> 01:41:16,460
That made it difficult, though, in the terms of trying to figure out if crypto is currently overvalued or undervalued because it's arbitrary.

924
01:41:16,460 --> 01:41:19,260
An ounce is an arbitrary unit for gold.

925
01:41:19,360 --> 01:41:25,180
We're not talking about the price of one metric ton of gold or about the price of a gram of gold.

926
01:41:25,200 --> 01:41:26,340
Those are equally valid.

927
01:41:26,340 --> 01:41:29,440
I mean, it's just a mass that you have.

928
01:41:29,580 --> 01:41:35,980
So it's more, I think, instructive to consider what is the value of all the gold in the world.

929
01:41:35,980 --> 01:41:41,760
And let's compare the value of all the gold in the world to the value of all the Bitcoin in the world and all of Monero in the world.

930
01:41:41,820 --> 01:41:44,300
So here's what I'm showing here in this cap ratio chart.

931
01:41:44,300 --> 01:41:50,540
This is the ratio of two different cryptos, all of it, versus the value of all the gold.

932
01:41:50,700 --> 01:41:53,300
So there are several different times you're going to this.

933
01:41:53,300 --> 01:41:58,080
So, for example, for the Bitcoin curve, I have the number of Bitcoin distance at any given time.

934
01:41:58,180 --> 01:42:05,800
So again, as the number of Bitcoin has been growing because it's been doled out to miners as a reward, the number of coins in existence has been changing.

935
01:42:05,880 --> 01:42:08,000
That's a Bitcoin on the open market.

936
01:42:08,640 --> 01:42:14,800
The amount of gold that's been dug out of and refined into bullion, that's been changing with the World Gold Council.

937
01:42:14,800 --> 01:42:16,400
So I take that data and throw that in.

938
01:42:16,400 --> 01:42:18,840
And then the price of gold has been changing over time.

939
01:42:18,860 --> 01:42:22,500
So you take those four pieces of data and you get one ratio out of it.

940
01:42:22,500 --> 01:42:28,560
So this is the ratio of the value of all the world's Bitcoin divided by the value of all the world's gold.

941
01:42:28,560 --> 01:42:34,900
And you can see that it's, again, gone through the hard to believe appreciation silly days.

942
01:42:35,280 --> 01:42:40,920
And at the current moment, all of the world's Bitcoin is worth roughly 10% of all the world's gold.

943
01:42:41,220 --> 01:42:51,260
If you do the same calculation for a minute, you get a result that all the Monero is worth about one one-hundredth of all the gold in the world.

944
01:42:51,260 --> 01:42:56,660
It's one ten-thousandth of the value of the above ground gold in the world.

945
01:42:56,780 --> 01:43:12,200
Actually, this comparison of crypto versus gold is more apt for the case of Monero, because when you take a bar of gold and you flip it over, you do see a detailed list of everyone before you who owned a bar of gold going back to the found from which it came.

946
01:43:12,300 --> 01:43:14,760
Whereas you do see that for Bitcoin.

947
01:43:14,760 --> 01:43:25,400
So arguably, Monero is a pure digital replica characteristic of gold, and it's more appropriate to look at this valuation ratio for that particular pairing.

948
01:43:27,560 --> 01:43:36,820
All right, I think the big reason that one one common objection about Monero from people who are used to thinking about Bitcoin is that, oh, the infinite emission.

949
01:43:36,820 --> 01:43:46,680
So I talked about this before that the the in the so-called, quote unquote, infinite emission in Monero is number one, it's linear.

950
01:43:46,680 --> 01:43:53,520
And number two, it's only infinite if you consider the Monero in the limit as time goes to infinity.

951
01:43:53,560 --> 01:44:03,100
In other words, you you take this kind of mathematical construction of what happens to a function as x axis goes to infinity and you look at what happens to the y axis eventually.

952
01:44:03,100 --> 01:44:07,960
So that's a useful construction if you're to, you know, derive differential calculus.

953
01:44:07,960 --> 01:44:15,560
But in terms of actual people using actual money, it's irrelevant what the limit of emissions as t goes to infinity.

954
01:44:15,720 --> 01:44:17,340
Let me use it as an example.

955
01:44:17,340 --> 01:44:23,340
100 years from today, everyone seeing this talk right now is going to be dead in 100 years.

956
01:44:23,340 --> 01:44:30,340
So let's look at the supply of that's in 100 years time in the year 2120.

957
01:44:30,540 --> 01:44:42,060
And up here is to make the point that if you put if you pick a time point in the future, you can actually calculate the expected inflation, not only of Bitcoin, but also of Monero.

958
01:44:42,060 --> 01:44:48,460
You'll quickly see that this so-called infinite inflation is in fact highly inaccurate.

959
01:44:48,560 --> 01:44:52,540
So again, let's look at the year 2120 and let's look at Bitcoin and Monero.

960
01:44:52,580 --> 01:45:03,020
Let's pretend that you have an investor who has as their goal, they want to own one one millionth of one of these assets, but not one one millionth of the current supply.

961
01:45:03,020 --> 01:45:06,680
They want to own one one millionth of the future supply in the year 2120.

962
01:45:06,680 --> 01:45:13,280
So how much gold are they going to have to buy now if they want to own one one millionth of all the world's gold in the year 2120?

963
01:45:13,440 --> 01:45:18,660
So for gold, we can extrapolate the past inflation rate of 1.8% per year.

964
01:45:18,660 --> 01:45:25,180
And it turns out that that very reasonable 1% per year, when you extrapolate that out to a century, it ends up being pretty significant.

965
01:45:25,280 --> 01:45:40,900
So if you extrapolate that 1.8% year to a century, you get a fivefold is almost sixfold increase in the expected amount of gold 2120, which means if you want to own one millionth of that to buy over a metric ton of gold, which at current prices would be worth over $77 USD.

966
01:45:41,300 --> 01:45:42,660
Now let's do this for Bitcoin.

967
01:45:42,660 --> 01:45:45,180
So we know what the current supply of Bitcoin is.

968
01:45:45,200 --> 01:45:54,540
And okay, hooray, the Bitcoin people, they have this figure that is extremely easy for normies to understand, which is that there's only going to ever be 21 million Bitcoin ever.

969
01:45:54,560 --> 01:45:58,260
So the expected supply in a century is going to be about 21 million Bitcoin.

970
01:45:58,440 --> 01:46:06,760
How much Bitcoin do you need to buy today, if you want to be guaranteed of having one one millionth of this source of scarcity in the year 2120?

971
01:46:06,760 --> 01:46:10,560
Well, you would need to buy 21 Bitcoins and current value $244,000.

972
01:46:11,000 --> 01:46:12,520
Let's do the same with Monero.

973
01:46:12,520 --> 01:46:15,480
So we know the emission of Monero from the blockchain.

974
01:46:15,540 --> 01:46:20,000
And also we know from L emission, which is again, 0.3 Monero per minute.

975
01:46:20,440 --> 01:46:38,140
Now, if you just sit down to do elementary school math and translate that per minute emission to a per centuation, you get this maybe surprising result that the number of Monero in existence in a century from now is going to be less than double that of the current supply of Monero.

976
01:46:38,140 --> 01:46:42,280
That is, for an inflation rate, it's pretty dang respectable.

977
01:46:42,280 --> 01:46:43,720
It's more than gold.

978
01:46:43,980 --> 01:46:46,840
And it's actually not that far off from Bitcoin.

979
01:46:46,920 --> 01:47:00,620
So for one to use the phrase infinite inflation and say that Monero is on the wrong side of that line, is thinking in terms of, you know, it's just not a practical real world calculation.

980
01:47:00,620 --> 01:47:02,640
Everyone's going to be dead in 100 years.

981
01:47:02,940 --> 01:47:12,580
And so why don't you know, if you use 100 years from now, the actual inflation that's going to happen in Monero during your life is far from infinite.

982
01:47:12,580 --> 01:47:14,700
It's actually a lot closer to the coins than you think.

983
01:47:14,920 --> 01:47:27,480
And so again, for Monero, if you have a goal of buying one millionth of all the Monero in the world, but the year 2120 supply, that's going to require buying 30.1 Monero or 33.6.

984
01:47:27,480 --> 01:47:29,920
And the market value of that is currently $3.

985
01:47:30,160 --> 01:47:39,140
So this is another framework for getting how relatively undervalued or overvalued these assets are in the current place.

986
01:47:40,800 --> 01:47:42,920
All right, so I'm out.

987
01:47:42,920 --> 01:47:45,020
I don't know if there's going to be time for questions.

988
01:47:45,020 --> 01:47:45,840
Maybe not.

989
01:47:45,840 --> 01:47:46,860
But thank you for listening.

990
01:47:46,860 --> 01:47:48,900
I hope you enjoyed this presentation.

991
01:47:49,080 --> 01:47:52,580
Enjoy the rest of Monero Village for the final day that it's happening.

992
01:47:52,580 --> 01:47:56,340
If you want to learn more, the Monero Village schedule is at monerovillage.org.

993
01:47:56,460 --> 01:47:59,640
For the Monero mainnet, that's getmonero.org.

994
01:47:59,640 --> 01:48:03,360
So important to know, getmonero.org, it's not .com.

995
01:48:03,360 --> 01:48:05,720
It's not just, it's getmonero.org.

996
01:48:05,760 --> 01:48:15,180
And if you want to get in touch with me, since there's not time for questions now, I think probably on Discord, hang out on Discord, on DefCon Discord, at least.

997
01:48:15,880 --> 01:48:18,720
That's my handle there is intj440.

998
01:48:18,740 --> 01:48:22,600
And otherwise, you can email me at danielbeatwater.consulting.

999
01:48:22,600 --> 01:48:25,820
And with that, I will hand it back to Justin.