All right, super. Thank you very much, Justin. And welcome to day three of Monero Village.
And let's see, let me... all out today with the fanciness of the video setup here, if
you can tell. Let me... and we hope it works out. 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. All right, so here we go to the talk. 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. So about myself, I am trained as a physicist.
So I did experimental particle physics at Harvard. I spent 10 years there, including
the undergrad. And from that, I got a sense of always wanting to look at data. So I will
be showing a fair amount of empirical data, both financial, economic, and blockchain data.
Most of my career was spent in the nonprofit sector. So I was a symphony orchestra musician.
That was my job out of grad school. So I ended up doing over 700 concerts professionally
as a violinist and then an artist. And then concurrently with that, I became a medical
school professor doing radiation oncology physics. So about a couple thousand cancer
patients fight their against cancer using a focused high dose radiation. After that,
I want to kind of branch out a bit. So I ended up signing up for the executive program at Yale.
And at that point, I got used to the for-profit world. And I made a transition at that point,
joined a hedge fund, managed about a billion dollars in assets in equities. 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. After that, I do blockchain kind of just as
a hobby initially, but then I did that. There were only a few things in life and, you know,
as fundamental innovations. I was in grad school when the dot-com bubble happened and that kind
of revolutionized life. 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.
And so I am often my own as a solo independent consultant. 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. But I think there's value to be had from both sides
to have genuine engage with the other. So the two sides I'm talking about are shown in the bottom
here. There's a DEF CON world. So that's non-commercial, open source, cypherpunk,
roots cryptocurrency. That is on the one side. And then on the other side is asset protection,
trust and families, portfolio management and estate and tax planning. So yeah,
there's a very parallel that is happening. 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.
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. 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. But nonprofit work these days, I am a community volunteer with the Monero Project.
So I am volunteering to be speaking here right now. I do not get any compensation from the Monero
Project. I have never sought to get compensation from the Monero Project. 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. 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. And in my current opinion, there are really just two projects worth
mentioning in this, and those would be Bitcoin and Monero. So my talk today is called Sound Money
Safe and it has got four parts. 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. And I will
focus on the economic impact of that. Second part is independent scarcity. 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. Third is fungibility versus
surveillance. 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. There are societal
issues to consider about the fungibility or lack thereof in sources of independent scarcity. And
then finally is the section involved. And this section has two different levels. So the more
superficial level would be that of considering independent sources of scarcity as a content of
one's portfolio. 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. And then a more
deeper level of actual, you know, involvement of people into this project.
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. So Howard H.Y. Hsu, a very frequent Monero code
contributor, Dr. Serang of the Monero Research Lab, and Dr. Francisco Cabanas of the core team.
So thank you to them. Okay, so much has been said about the pandemic, but I'll just
frame it with a couple of ideas here. 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. 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. So here's what I'm talking about. So this is how most of us behave pre-pandemic.
We'd be sitting around at home. I feel like going out. Yes or no, if you don't feel like going out,
you remain at home. But eventually you do feel like going out. And so because you feel like
going out, therefore you must be healthy. 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. You would feel
lying down in bed. 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. That's how it was, and that's how the virus basically
social engineered that tendency. So now we're public. Do we see anyone coughing? And that
is our criteria for making a thought assessment as to the wellness or sickness state of people
who we interact with. 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. I'm going to avoid that.
But otherwise, just carry on. So you might distance from someone who's coughing, but
you don't make a big out of it in your mind. You just kind of make a little note and then maybe
stay another two away from them when you're talking to them. But otherwise, just carry on.
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.
And of course, no soon likes to be told that your instincts are way off. And there's something new
out there that is screwing up your ability to tell sickness wellness. So lots of people don't
really react well to that. They take offense to the idea that natural instincts could possibly
be wrong. 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. 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. 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. And then they measured how long it would take for that virus to dissipate
and not be measurable anymore. And you get there's a rather unfortunate situation here.
Seeing that the 50-hour mark, but they're still seeing detectable amounts of virus on money.
So days after deliberately putting virus on money, it's still detectable. There's actually three or
four days that are necessary for the virus levels to become undetectable on money.
So basically, this puts a damper on the physical media as a store of value.
So of course, this has rippled through the economy. Here I'm looking at M1 money supply is
the amount of money that's in circulation in cash, credit, and checking accounts. And I'm
looking at all of the fiat currencies of the G20. Here I'm getting data from 2009. And I 2009 because
that is the year in which Bitcoin became a realty. So basically, in January of 2009, I'm showing that
one on the vertical scale here for all of the G20 fiat currencies. And then you can see that
every single one of them has inflated since then. 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. But now that the pandemic has hit, it's really taken
off. 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. It's like what's the link time? How long does it take for a cancerous tumor to double in
size? 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. So let's just say
it's, you know, years to double. 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. So this money supply has been growing, it's been growing at a
rate that's really unsustainable even before the pandemic. And now that the pandemic has hit,
it's gotten even more out of control. Notable on this chart is the United States, because
the U.S. has the privilege of being the world's reserve currency, and that is in gray here. 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. So if we lean on the U.S. a little bit more, we see the following situation.
I'm looking at historical data from the U.S. Federal Reserve Bank. This data is all from FRED,
which is the U.S. Federal Reserve's kind of warehouse of data. And there's a lot going on,
so I'll break it down line by line. First, if you look at the blue line, this line here is U6
unemployment. U6 is the broadest measure of unemployment. 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. 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. But I'm plotting the more kind of accurate and expansive measure of
unemployment, which is U6. And that is the left scale here. So you can see it starts at zero and
goes to 20 percent, 40 percent on the scale. 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. But now if you look here at the year 20, the unemployment
rate has spiked even higher. It peaked at about 23 percent a couple months ago. Thankfully it's
gone down since then, but this is bigger than the rest the others have been. Also in response to this
has been the increase in the money supply. As you know, the supply of U.S. 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? And so if you can look at
this green curve, this is MZM money supplies, which stands for money zero maturity. 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. It does not include the
certificates of deposit, which would be included in the M2 money. So anyway, the MZM money supply
is a more, it's a broad and also liquid, completely liquid measure of the money supply.
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. So I normalized the MZM money supply
by big domestic product with U.S. And result here is on the green line. And that is using the
right-hand scale here. 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. And now in 2020, it's truly taken
off. It's this line here that is now above 100%. So we've managed to inflate our money supply from
about 75% of GDP to about 100% of GDP in just a few months. Okay. So that's monetary policy,
which is money is there existing in the economy. There's a fiscal policy to look at. Fiscal policy
being the income and expenses of the federal government, which is ostensibly independent
from that of the monetary policy. On the bottom here, you're looking at how much money is the U.S.
government taking in minus how much money the U.S. government spending on a monthly basis all the way
back to 1980. 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. You got the deficit got
bigger here in the last financial 2009, 2008-2009. But now fast for you, the current place and all of
these here have to be renormalized to accommodate just how far gone south. 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. 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. 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. So, you know,
I'm actually hoping to see that this line recovered. 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.
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. You pay 90% of it and 10% of it you don't, and then that grows interest. So what is the
overall balance of your credit card as it grows over time? And that is the time integrated
curve of this gray line in the bottom. And that is the top line here, federal debt as a, again,
normalized function of GDP. You can see again that it's grown quite a bit since 40 years ago,
since about 30% of GDP. And then in the financial crisis, it grew to about 100% of GDP.
Now, we're seeing the number up here. Now, this particular metric is delayed because
all of these are coming from government bureaucracies. So they're delayed by several
months as it takes much time for these aggregate statistics to get figured out.
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. But that's a number to
look at. Why is this all of grave concern? There is a interesting by Peter Bernholz. He is an
academic in Switzerland called Monetary Regimes and Inflation. And he did a study of 29 historic
instances of hyperinflation going all the way back to Roman Empire. And in 25 is 29 historical
cases of hyperinflation. The root cause of the hyperinflation was money creation on the part
of the government being used to finance government deficits. So get this curve here, you have money
creation, that's the green line spike, and then we have deficits. And that as soon as we see the
data flag period, I'm sure we're going to see that spike as well. So this is all rather concerning.
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. And if that's true, then you'll want to be considering looking at alternate sources of
scarcity. So here, economy of assets, and they're divided into six categories, physical assets.
So you have real estate, art, cash, and precious metal. 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.
You have digital centralized assets here. So that includes bank accounts, all the stuff in
the chart just been showing, the stock market, the bond market. I would say also crypto exchange
accounts. So people think they own crypto, but actually just have on a crypto exchange,
don't actually own crypto. They own an IOU from a crypto exchange, and that is a centralized
asset because the exchange itself is a centralized entity. Therefore, if the exchange goes down,
then the IOU becomes less. So I would categorize that as a centralized asset.
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. Decentralized means not a
single committee of people who can arbitrarily increase or decrease the government asset.
And if you look at the non-fungible of asset, that would be Bitcoin. And the fungible type,
the dominant leader now is Monero. 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.
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. 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. So I want to contrast
two types of digital scarcity. Neutralized scarcity, which is what we currently have
with fiat currencies, because after all, the U.S. dollar is currently, it's a digital currency.
When you go to your bank, they're not, you know, handwriting stuff in some ledger,
it's all computerized, obviously. 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. So the U.S. dollar is currently in digital form, but it's centralized. 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. So there's one authoritative version of that. So this goes all
the way up to the Federal Reserve. 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. dollar money supply by, you know, in dollars. That must
be actually quite a bit of job security in that particular federal employee. The person has to
sit there at the computer and click create a billion dollars over and over on their computer.
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. Of course, the code
behind this also is closed. So I mean, why would a bank open source its code that it's running on?
That would be ridiculous. Then you're showing, you know, basically the blueprints of the
of the joint and people who would have bad intentions. So there's a closed source
software development model in centralized security. If you're familiar with the book,
Cathedral R, actually it started out as an article and then it got expanded. This is a book
that details the kind of conflicting or contrasting ways of software development. 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. And also I'd say
ethical realm, where you have a highly regulated industry. So you have specialized software
companies that kind of learn all of the rope that they have to comply with within that industry. And
then they make expensive ware that they then sell to players within that industry. So that sort of
top-down model works in industries like that. 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. And that is the Linux model of software development with more in
keeping with Bitcoin and Monero. So there are downsides to this centralized security model,
even though Equitas and everyone uses it, there are downsides to it. 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. There's also insider abuse. 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. 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.
And then they proceeded to charge fees on those accounts, which was unbeknownst to their
actual customers. So, and then, you know, really egregious violation of trust was punished with
just basically a slap on the wrist. It was like, you know, a day's process. That was the fine from
the federal regulators. So insider abuse, you have basically a protected class of middle people and
is something that is a downside of this. And finally, it's slow to improve. 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. Why would you need to improve that? Because, you know, they have to go through
you to access to the network. So, you know, what incentive is there really to try to improve your
service levels? 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.
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. The financial service industry has
been lagging in terms of adopting the advantages. So then if we move to decentralized security,
this is Bitcoin and Monero, then anyone can do peer-to-peer network. 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.
So anyone in the world can join this peer-to-peer network. Each node maintains its own virtual ledger.
So this is in contrast to there being just one authoritative ledger. In Bitcoin and Monero,
there are thousands and thousands of copies of the ledger sent what to who, and these copies are
distributed worldwide. 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...
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.
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. Whereas in this decentralized security model,
it's open source, free and open software. The downsides of this new kind of way of measuring
scarcity is that it's new. So the Bitcoin white paper came out in 2008, and I guess unfortunately
it's... technically it's complicated. 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, you also need a certain amount of plessy in terms of not immediately
rejecting something that is foreign at first. And so those two things combined mean that adoption
is slow. I mean, it's just necessarily going to be slow. You have something that's hard to
understand and requires like a flexibility in order to accept that it might actually work.
Another side is that it's inefficient. So if every computer in this network has its own copy
of the ledger, isn't that inefficient? How are you going to figure out what the correct version
ledger is if people have disagreements about that? 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.
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. 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.
Number one, how do you have rights? That is, what do you have for account numbers?
So the analog of a bank account number is a solution to an elliptic curve.
So an elliptic curve is just an equation. It's a specific equation. It's got x's and y's in it,
just like your ninth grade high school algebra class. 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.
So in an elliptic curve, there is a large number of these solutions,
but they are very hard to find by brute force. 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.
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. 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. So you have p sub n is x sub n, y sub n. 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. This is a one-way function, so you cannot calculate the number n
if somebody tells you the point p sub n. 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. But it's very hard. It's actually computationally infeasible.
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. 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. So getting a new Bitcoin account, getting a new Monero,
what do those both really mean at the heart of it? It means picking number for yourself.
That's literally what it is. You're picking a number, which is a vast range that you can pick.
It needs to be an integer between 1 and basically 256, roughly, which is a 78 number. It's just an
unfathomably large number of combinations. It's an unfathomably large space of numbers that you
are allowed to choose from when you pick your number. But that's what you're doing. You pick
an account, you are picking a particular solution to the elliptic curve. The number is known only
to you, and the X, Y coordinates are known to everybody. So, you know, they thankfully made
steps to make it a little less geeky. 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. But nevertheless, that's what they do.
Okay, then second is, what is the decentralized world of check writing? So now we've established
there's such a thing as private property, which constitutes having knowledge of a number.
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. How do you spend it? How do you write a
check? And so that is secure messaging. 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. 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. So it came decades before. So we're used to thinking
of private and public keys as being the base of making secure message signing. What's new is that
there's a second interpretation of the public and private key in the kind of finance. It's now
ownership of funds. So forgery in this is when somebody else learns your key. 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. 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. So knowledge of
private key in this system is tantamount to and itself money. Finally, once a check gets written,
and I process it, somebody's got to process the check. 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. So in the decent world, this is taken care of by a peer to peer accounting
network. 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.
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. 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.
Instead of having a boss, they will defer to instead majority rules. 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. 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. And so that's the
impractical, expensive, infeasible to do. 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, then you can get 21% of the rewards.
Key to this system is that valid blocks are rare. So a block is a kind of data. That is,
it's a it's a compilation of a certain time period of transactions that have happened at work.
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? 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. But when a block of transaction
into a block, it's not just copied and then written. 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. 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. And this fixed byte length, the, the secrets in that fixed byte length are extraordinarily
sensitive to even bit levels in the input. So it functions basically as a signature of any input.
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. 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. And then you'll
check that hash against a published hash of what people found for the same download. That way,
you have some indicator that the file that you downloaded is indeed the same file that other
people need to upload. 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. 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. So when what comes out, it needs to have a hash
function that is a small number needs to be. And that's a rather arbitrary thing. It's like there's
no there's no intrinsic to having a low hash number. 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. And that is the key, it's difficult to fake, it takes and trial and error to fake that block.
And that's why a valid block needs to have a hash that is lower difficulty number. 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. It's not
constant time, because the process is Poisson distributed. In other words, the the probability
per unit time new block will get created is constant. And when you have that you have Poisson
distribution of the block time distribution. 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. So this is an important thing if you're new to the whole
blockchains. There is a lot of truth to this claim that just a lot of scams, a lot of like a
money grabbing in crypto. 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. So back then, internet was new, and normies had no idea what email was or website was.
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. 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.
Like, why would you do email? It's hard to understand now, but that was the mentality.
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. 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. Their, you know, innovation here was that they use the internet, the website,
to take their pet food orders. And so that made this, you know, sexy new company and investors
actually bought that. And, you know, eventually it went bankrupt. 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. It's like stupid idea plus blockchain equals sexy. And yeah, that's the
situation. So, but one way that you can quickly weed out a lot of these companies is to ask them
who gets the block reward. 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.
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. And again,
that happens in the same way in Monero. 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. 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. 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.
And they are going to spend money wisely, but history suggests that such promises should be
taken with a bit of skepticism. All right, so scarcity and bit Monero, Nakamoto consensus
synthesizes scarcity. This is what would be a Nobel prize winning in psychonomics.
But unfortunately, the Nobel prize needs to be given to an actual human.
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. That is a fundamentally new kernel of insight. And it's worth thinking, I think,
pretty deeply if you haven't already. So when I say scarcity and Bitcoin and Monero, that's scarcity
is sort of a broad word. So I'm specific. There are three types of scarcity that I'm about in
these decentralized currencies. Number one is at the account level. So that's property. How do we
know that there's scarcity in terms of who owns what? So that is enforced each user of that
cryptocurrency selecting, and then subsequently protecting their particular elliptic elliptic
curve solution. In other words, private key and public key pair, and then keeping that private
key private and their own personal secret. So that is how account level scarcity is used.
Aggregate level scarcity. 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? In other words, how is the macro
money supply control? 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. 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. And so that is known for all of
history. Basically, all of the miners in the net know what the emission schedule for new money is
in advance. 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. And that is enforced because these again,
these network of decentralized computers is majority rules. 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.
So that is why there's disincentive for them to attempt to hack the network by putting their own
nefarious node on. That nefarious node, yes, it can join the network, but he's going to stop it
from joining the network. 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. So and it's in the interest of each individual node
joining the network to play along, to play nice. That's the part of the game theory of the Nakamoto
white paper and the brilliant way it works. Finally, third scarcity is database modification
scarcity. So in a SQL database, if you have super user privilege, you can always write anything you
want to the database at any time. So this is different in situation with a decentralized
ledger that Nakamoto census puts together. 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. 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. This takes an extraordinary net effort of computing
power to do. So it's restricted in that way. And then further, since each block in the chain
contain as a check, the hash of the block that preceded. 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, 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. Oh, I'm seeing that there are
problems here. Well, at least I'm looking at the YouTube feed. The video looks to be okay.
I apologize for any technical issues. 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. So, proceeding on. So, scarcity. What are miniatures of scarcity? Number one
is it has a code base that is not a bit fork. 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. That is not the case. It was built from the ground up as a separate
coin code base. The elliptic curve used in Monero is different than Bitcoin. So,
Monero uses the ED2551 elliptic curve, which is different than Bitcoin. So, the fundamental
equation governing valid XY coordinators is different. So, the difference is the
indents of Monero goes down to the deepest level of cryptographic primitives. In Monero,
so, in Monero, we have a spend key, which is akin to the private key of Bitcoin. But we also,
in Monero, we have what's called the view key, which is basically a graphic subset of the view.
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. 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. 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. It's basically just how
cash works. 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. That's basically the system that everyone has set up. And one thing that Monero has done
is to meet a solution with its own technical stack. Another difference is the address space.
So, in Monero, the address space is 10 to the 76, roughly, whereas in Bitcoin, it's about 10 to 60.
So, this means that in Monero, the birthday problem is less of a concern than it is in Bitcoin.
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. 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. There's somebody else somewhere else in the world that also can spend
your money. Obviously, that's bad. And the chance of that happening is astronomically low just
because of the astronomically high number of addresses there are in both in Monero.
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. Next is a difference in
the emission, the minor reward schedule. So, in Monero, it's continuously decreasing. There are not
four-year happenings like we have in Bitcoin. 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, and giving all due
respect to Bitcoin. 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, your mining income, is going to get in half. And so, as a result, there is a lot of
drama that happens. 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. So, that puts in a lot
of disruption to the act of mining. And so, this is something that we avoid in the Monero community
by having a continuously decreasing miner rewards. There's also a form of unwanted scarcity, which
future miner rewards. The block reward in Monero will never be less than zero in Monero per minute,
and we call this the tail emission. Why do we have this? It is to guarantee miner incentives
perpetuity. 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. 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. 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. In fact, it will be 0.3 Monero per minute starting in a short time, like a year
or so. 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. If you think of what is the impact on the inflation rate,
the inflation rate is going to be going to zero asymptotically. 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. And this is in contrast to the situation in Bitcoin, which will have
equally zero, identically zero inflation in about 100 years time.
So the distinction though between asymptotically zero inflation versus identically zero inflation
is really irrelevant from the point of macroeconomic. If you look at any macroeconomic
theory of money supply, even variable is the percentage of monetary growth per year. It's
a percentage rate. He cares that the supply of U.S. dollars is going up by however trillions per
year. You have to normalize that by the existing monies. It's the percentage inflation rate that
has any impact on macroeconomic theory. 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. And that distinction is totally irrelevant from the point of view of
macroeconomic theory. From the point of macroeconomic theory, they're both zero.
Here is showing what I'm talking about. So this is supply emission. So you're seeing
to the left of the present, you are seeing actual data. So for the Bitcoin blockchain,
this is the actual number of Bitcoin inflation historically taken from blockchain.com. 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. 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. 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. For legitimate decentralized cryptocurrencies,
like Bitcoin and Monero, the emission schedule is designed in advance. 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. 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. That is due to the cooperation of this globally decentralized network by the
rules. Next, if you look at Euro supply inflation, there's a really sobering curve to look at here
with the dollar. Again, we're looking at the money zero maturity curve. 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. So I'm taking the supply of the money now versus the supply of the money a year ago.
And you can see that it's truly spiked to a kind of scary level since the pandemic.
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.
That is in order to get these coins out there to get, you're launching a new money. So we want to
get these coins out there, get them into circulation. 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.
So as a result, in the past, inflation rates within cryptocurrency have been very high.
You see, we're coming up on a new era of scarcity here. Bitcoin and Monero,
both having year over year inflates that are on the order of 3%. 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. So the world gold council keeps track of its estimate of how much
gold there is above in the world. And it's been doing this estimate for about 10 years now.
You plot this inflation rate, which is the inflation rate of the gold supply that has
been mined and refined and turned into bullion. So basically, this is the rate of gold bullion,
right? And that ends up being an average of about 1.8% per year. 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? 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. 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.
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. 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. Anything to the right of that is going to be maybe more suspect in terms of a form of
store of value. 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. All right, there's another unwanted form of scarcity I
wanted to, that is that of mining hardware. So in the Bitcoin white paper, there's a phrase will be
you one vote. 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. 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. So this is fine as long as all different types of
computing device equally efficient at the mining algorithm. Fortunately, the economics of silicon
development is linearity. 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. The end result is
that you have, you know, $50 million to invest in a fabrication facility in Shenzhen. 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. A whole bunch
of those, you print out a whole bunch of those with your silicon fab. 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. 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. So this situation has been happening many years now in
the Bitcoin network. And we're at a point now, Bitcoin mining is now a Chinese dominated oligopoly.
It's not necessarily a problem that it's China that has mining power. It is a problem that it's
central. It's all in one region of the world. It's dominated by just a few people. One company
that is on top of this oligopoly. And it's actually arguably still an oligopoly. It's
moving towards monopoly status. So in the Monero community, we've looked at this and we've tried
to avoid this, having this situation in Monero. And what we've done is we've adjusted the proof
of work algorithm and evolved it to keep small indent miners viable. 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. 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. 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. That is not true in Monero. The math of the mining might, you know, it goes up
and down. 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. So to make this proof of work has in Monero changed actually
four times in 2018. And each of these proof of work changes has required a hard, hard forks
or something that you never see in Bitcoin. 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. They want miners who don't bother to
update their software to still be part of the network. Okay, well, I mean, that's their decision.
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.
So here is data from the Monero blockchain that is shown talking about. So what I'm showing is
since the invention of Monero in 2014, April 2014 is when Monero started, about five years
ago. But since 2014, it's been running for over six years now. So Monero has a demonstrated
track record of over six years of operation. So initially, the proof of work algorithm was
Kryptonite, which defined in the Kryptonite white paper. But as you see, in late 2017,
there's to be a increase in the network. 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.
And this was interpreted as being ASICs. 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. 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. So there was a lot of
alarm and just got this in the Monero community. 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. But it was enough to render the currently existing
ASICs operable on the old network. 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. And that happened. After that happened,
you can see the different nodes dived back down. So again, you had small miners with
commodity hardware being able to mine. Then a few months later, ASICs came onto the network.
So there's a lead time of several months that ASIC makers to introduce a new piece of silicon to
fruition. So that happened again. ASICs, again, spiked the difficulty level of the Monero network.
Again, we changed the proof of work to Kryptonite v3. It happened again in 2008,
a third time ASICs on the network. And then we came up with Kryptonite. So now we're changing
the proof of work in bigger and bigger increments. So Kryptonite introduced a random code execution
aspect. 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.
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. And ASIC that is most eyes to do RandomX, as it turns out,
is Ryzen Threadripper CPU that you can buy on Amazon. 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. So since that CPUs have been healthily dominating the network, and
all signs are so far that that has been working. And, but this is a testament to the length to
which you need flexibility in your protocol deal with these sorts of things. This is,
this is network security software and network security is always changing. 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. 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. I mean, this is a moving train, there's new technology going, and they're going to miss it.
And so that's the decision that's been made in Monero, or it's been working. There's another
form of unwanted scarcity and that access to layer one. So Bitcoin's one megabyte block limit
has caused a project. There was a line of code in the Bitcoin code base that Satoshi
has a spam prevention measure. So the network was going to end in the early days of Bitcoin. So
Satoshi wrote that the maximum size of a new block could only make a byte. 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. So basically a
civil war happened within Bitcoin to fight over whether this should be retained or not. 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. Although, you know, that extra 300 kilobytes
in this big scheme of things, you know, it's like a, it's not that big. Anyway, you have one side
in Bitcoin that wanted to stick with this and the other one didn't. And then the one that didn't had
a further divorce. 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. 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. If you
want to join, you know, Bitcoin as a person to contribute, you have to, you know, make your
loyalty very early on. Are you loyal to Bitcoin Core or Bitcoin Cash or Bitcoin SV? You have to
make that decision. And once you're in, that's your, that's your camp. That's your, in Monero,
there is just one team. And I think that the reason for that is that the goal of the project
is more easily defined. It is to be private, digital, fungible cash that takes all of the
goodness of Bitcoin that is the centralized nature. It's not having a committee or a company
behind, being a totally grassroots effort, just like Bitcoin is, but add integrability to it.
So in Monero, we have one adaptive block weight. It used to be called the adaptive size, but then
it got, the algorithm got changed and upgraded. So the adaptive block weight. 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. 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. 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. 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, an asymptotic limit of transactions per day that have been happening
in Bitcoin. Look at the recent history of Monero, you can see basically an uptrend line here. 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. So it's been growing. It's been organically growing. There's nothing
artificially limiting growth in the Monero blockchain like an arbitrarily sized block limit.
All right, so moving on then to the difference between transparency and fungibility. Bitcoin
is transparent. 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, that
once you're trending Bitcoin, nobody knows what you're doing. Nothing could be further from the
truth. It itched to get itched forever for all to see. Every transaction, you have the sender,
the receiver, and the amount. Those are in plain text in every Bitcoin block specified in the
Bitcoin white paper. It's all there. You can see the transaction is in plain text. Every address
is encoded in the blockchain in plain text, which means it's trivial to code up what's called a
block explorer. You go to these block explorers and you type in anyone's address. It doesn't have
to be your address. 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. 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. So it went to a bunch of people, then all the way back to the mint. So what possibly
could be the downside consequence to a system like that? And actually, in Bitcoin, it's even
worse than a piece of cash that has it on the back of it. 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. But as in Bitcoin, everyone in the world has access to that complete history of every Bitcoin
for every single Bitcoin in existence. This puts innocent people and businesses at risk.
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. And therefore, for nefarious people to assess their credits before they go after them.
There's also an even more pernicious effect that putting innocent people at jeopardy
is that reputation trend in Bitcoin as well as value. So because every coin is traceable back
to there, this invites voyeurism. Like I mentioned, it's possible to up anyone's bank account
in Bitcoin at any time. But it also promotes guilt by association. 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. 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. 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. 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, either good or bad at behavior. Wow, that's just awful that they do
that in China. And then people sign up for Bitcoin accounts in which the exact same is happening.
So the transparency of the Bitcoin network is being used again to formulate these social credit
score networks. And there are companies that specialize in nothing but this. There are chain
analysis companies that will assign basically a social credit score to every Bitcoin address that
exists. So there's a guilt by association that is introduced at the human level. This has nothing to do
with the technical level. 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. Because, oh, well,
they're censorship resistant Bitcoin. Nobody can possibly stop a Bitcoin transaction happening.
Yes, that's true on a technical level. 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. Then on a social level, there are consequences to certain addresses that are
transacting in Bitcoin as opposed to us. 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. In contrast to this, Monero is fungible. There are
three technologies in Monero that combine to promote this indistinguishability. 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. 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. That was a new
innovation that happened after Monero went live. And so, again, this is another example
of the attitude within Monero, which is no compromises. We are going to do what is best
to make the best fungible currency possible. 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. So
RingCT required original cryptographic research on the part of a research lab. We're talking about
like post-doc, PhD-level cryptography with mathematicians. We have those working with us
in Monero. 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. 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. 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.
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. So you have a community of people running
Monero on their own computers. They stay with the program. They have their ears to the ground.
They know, they're aware that there's such a thing as RingCT coming up, and then they implement it.
They do the hard work to make it happen. 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. So here on top, I'm showing the average bytes per transaction.
That is, on Bitcoin, it's been pretty constant. Again, there's been this attitude in Bitcoin that
be very conservative. 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. 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. The existing fiat monetary infrastructure dwarfs Bitcoin.
And so one can question whether the attitude of, oh, we are trusted with such a huge amount of
money. We have to be super conservative and not introduce anything that could rock the boat.
Is that really the right attitude to take for something that is an upstart?
Nevertheless, that's been the kind of ethos within Bitcoin. And you can see that the daily
average byte per transaction is pretty constant over time, over its history. 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. In the early days of Monero, there were limited outputs. 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.
There are these discrete units, little globs of Monero that were used as kind of the nugget of
the money supply. 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,
and then make a transaction that would send those out to the desired recipient.
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. 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. 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. 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. Then in 2017 RingCT became
mandatory. 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. 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. And you still see
objections to this to this day. Even this problem was mitigated to a large extent late 2018 when
Bulletproofs came around. 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,
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.
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.
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. And coming up in Monero, there's even more research
coming down the pipeline. That's CLs, which is a new innovation, it's a new optimization
that was noted by Dr. 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. 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. 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.
And once that happens, you're going to see daily average bytes per transaction.
Step down. 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. 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.
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. People with nothing to hide
actually need Monero. And the basis comes from this paper from the 1970s from George A. Kellogg,
again won the Nobel Prize in economics for this insight, on asymmetric information.
So here's what his paper talks about, the used car market. Now there are two types of used cars
in this paper. 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. Now they're,
you know, problem cars. On the other hand, peaches, peaches are the good used cars, which were taken
care of by their owners. 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. 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. And now you
decide that you want to try and sell your car because it's been in four feet of water. 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. Superficial good looks are also going to be there for the
peach seller. 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. They've been taking,
you know, top care of their car. Now buyers come to this market and they can't sell apart lemons
from peaches. But they know that they're ignorant. They know there are both bad cars in the market
and there are good cars in the market. And there is a probability that as a used car buyer, you
are going to end up with a lemon. You'll do everything you can to try to reduce your level
of ignorance to, you know, the condition of any given used car. But at the end of the day, you
don't know what happened to that car before you owned it. So you have to, you can't discount the
probability that you're going to get a lemon. 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? 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. Because after all, the lemon price is the minimum price a car
could be worth. So they're going to offer at least that. And then on top of that, they're going to
offer a bit more. 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. 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. 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. 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. And then if you have a probability of getting a peach that's less than a percent,
then you adjust your price accordingly. This is just very rational. 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. So now let's offer that's coming from the buyer and look at it from the
seller's point of view. And again, there are two types of sellers. There are lemon sellers and
there are peach sellers. 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. I'm selling them my lemon. 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. So basically when this offer is to a lemon seller, they say, okay, offer accepted.
That same offer when heard by the ears of a peach seller is not quite attractive.
So basically the peach seller has been doing all the maintenance, all the work to keep their car
nice and clean. And here comes this idiot, this greedy buyer who is too stupid to understand
that this peach is selling a pre-moped. It is worth every penny that is being advertised for,
which is the peach price. 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. So the tendency is for sellers to say,
no, thanks. I am not going to accept your offer. I'm going to keep my used car because it's worth
quite a bit to me. I'll just drive until it, you know, until it stops working. And in fact,
that's what you see in real life. Peach sellers disengage from the used car market.
And what happens when the peach sellers disengage from the market is that now the fraction of lemons
being sold goes up. Because the fraction of lemons now is higher than it used to be,
the buyers get wind of that, wise to that fact. And when they adjust their probability of getting
a lemon to be higher, now they're going to lower offer price. And so the key insight of the
paper is that you have this race to the bottom. 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. Meanwhile, as the offer price
going down and down and down, the peach sellers become even more likely to leave the market.
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. They're just
not going to participate in that market. So this conclusion in the Akerlof paper that what
you end up with is a market of used cars 100% lemons. Let's look at this and apply it to two
applications. So first is DEF CON safe mode, what we're doing right now. 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? So a healthy person is a peach. 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. And you know, I want to go and I want to make new
friends. I want people who are into the same stuff I am. I want to learn about new stuff I hadn't
known about before. That's a graceful marketplace that I in the past have been to get into. That's
the social marketplace that we're talking about instead of the used car market. And you as a
healthy person, you are a peach seller. You have a healthy body so that's like a peach, right?
What is your chance of returning home from DEF CON having bought a lemon? 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? It's a probability that you have to assess. And just like the buyer in the
used car market, there's a lot of unseen behind that probability assessment. 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? 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. What is the value of that? 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. So that kind of dampens the value of the fun geeky fun you had during
DEF CON. 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. And thus you have DEF CON safe mode. By this to transparency coins or surveillance
coins as I like to call them. So these are coins such as in which the complete history of who owned
what is known to everybody. 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. And unfortunately, they're going to come up with false positives.
So let's say we have a squeaky clean person who is buying a car, choose another car example.
So a clean person is buying or selling their car to somebody to a stranger. So they they
advert a car on Craigslist. And then they make a deal, a stranger shows up, they have, let's say,
for example, Bitcoin. And then so the car and the Bitcoin change hand. 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. 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, or investigate whether
they got enough as a child, and are likely to be a, you know, a sociopath. Now, you don't kill that
you just know that they have clean title to a car. And so Bitcoin and a clean title to a car now
changed. Unbeknownst to the squeaky clean person in this transaction, the other person in the
transaction, the counterparty was a bad actor. And so now as a result of there's a Bitcoin
transaction that has taken place between squeaky clean and bad person. 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. If they make that wrong call, do they have any bad
consequence when the innocent guy gets investigated? And all of a sudden the innocent guy finds their
cryptocurrency accounts being used. And maybe they get a visit from law enforcement asking,
what happened to this? Why did you spend this Bitcoin? Why did you get this Bitcoin from selling?
And then you try to explain that it was a car and you had no idea who this other person was. They
had clean title to their car. Isn't that all you need to know? Now that misunderstanding happens.
Is this analyst of the blind doing blockchain analytics? Is that analyst going to be held
responsible for the disruption to the innocent person's life? No, they are not going to be held
for that. The innocent person has no recourse in a situation like that. And so we have a situation
that in transparent chains, squeaky clean people are now the peach owners. 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. 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? Just like the peach seller in the Akerlof paper, your
logical conclusion is going to be no. No, thank you. 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. I am not willing to have my life suffer
as a result of somebody else's social miscalculation. 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. So Monero is cryptocurrency safe mode. It is what Bitcoin
noobs think bot. It is sound money in safe. All right, so I have a few minutes. 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. One of the great things about it is that
people discourage talking about it. 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, at least in the Western
world. 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. And again, these are going to be things like gold. And since 2009,
a couple of digital alternatives to gold, be Bitcoin and Monero. So here I'm showing how have
the prices evolved since 2009, which is when the Bitcoin Y came out. And I think this is really the
only price chart that anyone, most people, almost everyone should be looking at. 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. And I'm looking at a vertical that is logarithmic. So we have one penny up to $10,000.
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. You hear that the traditional fiat investments have
looked like basically very, they look basically like lines. 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%. And all these sort
of alarm bells are ringing at the stock exchange. These shows like little tiny pixel-sized blips
plotted on this scale, right? Similarly, with gold, gold looks pretty throughout the history.
But if you look at these new digital assets, so basically, as realization sinks in,
that there is something generally innovative about these assets. You have seen adoption come
in at first like a hardcore geek community, but then that kind of to broaden out over time. And
so you've seen this growth in the asset values. 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. But on average,
average return from Monero on a monthly basis is higher than that of Bitcoin since Monero's
inception. So we're talking a geometric average return of 5.2% per month versus 0.04% per month.
And again, these dwarf the monthly returns that are coming from more traditional assets like gold,
U.S. equities, bonds. Although that higher return in Monero has been at the expense of higher
standard deviation. So there's been more knowledge up and down of Monero relative to that of Bitcoin
in the past. One thing that especially intuitional investors find to be important is that of asset
questions. 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? 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. So here I'm showing a cross-section matrix of Monero,
Bitcoin, gold, stocks, and U.S. bonds. And you can see that compared to the traditional assets,
that is gold, U.S. stocks, U.S. 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. bonds. It has been somewhat correlated to Bitcoin, and I say that
is primarily due to it being still early days in crypto. It's like the dot-com stuff I was
talking about. People are still, I would say, ignorant as to how this stuff actually works.
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. They say, oh, this person and that person and this person. 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. 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.
So again, the chart that I showed was showing the unit prices. So what is the price of one
Bitcoin? What is the price of one ounce of gold? And so on. That made it difficult, though, in
the terms of trying to figure out if crypto is currently overvalued or undervalued because
it's arbitrary. An ounce is an arbitrary unit for gold. We're not talking about the price of one
metric ton of gold or about the price of a gram of gold. Those are equally valid. I mean,
it's just a mass that you have. So it's more, I think, instructive to consider what is the value
of all the gold in the world. 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. So here's what I'm showing
here in this cap ratio chart. This is the ratio of two different cryptos, all of it, versus the
value of all the gold. So there are several different times you're going to this. So,
for example, for the Bitcoin curve, I have the number of Bitcoin distance at any given time.
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. That's a Bitcoin on the open
market. The amount of gold that's been dug out of and refined into bullion, that's been changing
with the World Gold Council. So I take that data and throw that in. And then the price of gold has
been changing over time. So you take those four pieces of data and you get one ratio out of it.
So this is the ratio of the value of all the world's Bitcoin divided by the value of all the
world's gold. And you can see that it's, again, gone through the hard to believe appreciation
silly days. And at the current moment, all of the world's Bitcoin is worth roughly 10% of all
the world's gold. 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. It's one ten-thousandth
of the value of the above ground gold in the world. 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. Whereas you do see that for Bitcoin. 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.
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. 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. And number two, it's only infinite if you consider the Monero in the
limit as time goes to infinity. 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. So that's a useful construction if you're to, you know, derive differential
calculus. But in terms of actual people using actual money, it's irrelevant what the limit of
emissions as t goes to infinity. Let me use it as an example. 100 years from today, everyone
seeing this talk right now is going to be dead in 100 years. So let's look at the supply
of that's in 100 years time in the year 2120. 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. You'll quickly see that this so-called infinite inflation
is in fact highly inaccurate. So again, let's look at the year 2120 and let's look at Bitcoin
and Monero. 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.
They want to own one one millionth of the future supply in the year 2120. 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? So for gold, we can extrapolate the past inflation rate of 1.8% per year.
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. 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. Now let's do this for Bitcoin. So we know
what the current supply of Bitcoin is. 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. So the expected supply in a century is going to be about 21 million Bitcoin.
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? Well, you would need to buy 21 Bitcoins
and current value $244,000. Let's do the same with Monero. So we know the emission of Monero
from the blockchain. And also we know from L emission, which is again, 0.3 Monero per minute.
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.
That is, for an inflation rate, it's pretty dang respectable. It's more than gold.
And it's actually not that far off from Bitcoin. 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. Everyone's going to be dead in
100 years. 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. It's actually a lot closer
to the coins than you think. 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. And the market value of that is currently $3. So this is another framework for
getting how relatively undervalued or overvalued these assets are in the current place.
All right, so I'm out. I don't know if there's going to be time for questions. Maybe not.
But thank you for listening. I hope you enjoyed this presentation. Enjoy the rest of Monero
Village for the final day that it's happening. If you want to learn more, the Monero Village
schedule is at monerovillage.org. For the Monero mainnet, that's getmonero.org. So
important to know, getmonero.org, it's not .com. It's not just, it's getmonero.org.
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.
That's my handle there is intj440. And otherwise, you can email me at danielbeatwater.consulting.
And with that, I will hand it back to Justin.