[00:00.000 --> 00:04.820]  All right, super. Thank you very much, Justin. And welcome to day three of Monero Village.
[00:06.260 --> 00:12.640]  And let's see, let me... all out today with the fanciness of the video setup here, if
[00:12.640 --> 00:18.600]  you can tell. Let me... and we hope it works out. So part of this pandemic stuff is that
[00:19.160 --> 00:25.040]  we're all individuals trying to put together something that looks sophisticated from a
[00:25.040 --> 00:31.980]  video production standpoint. All right, so here we go to the talk. And I'm going to take
[00:31.980 --> 00:41.840]  these because I'll put them back on for the... and I'll be talking about Monero and try to
[00:41.840 --> 00:51.280]  make the case that is sound money safe mode. So about myself, I am trained as a physicist.
[00:51.280 --> 00:57.060]  So I did experimental particle physics at Harvard. I spent 10 years there, including
[00:57.060 --> 01:02.340]  the undergrad. And from that, I got a sense of always wanting to look at data. So I will
[01:02.340 --> 01:09.560]  be showing a fair amount of empirical data, both financial, economic, and blockchain data.
[01:10.660 --> 01:15.660]  Most of my career was spent in the nonprofit sector. So I was a symphony orchestra musician.
[01:15.660 --> 01:19.540]  That was my job out of grad school. So I ended up doing over 700 concerts professionally
[01:19.540 --> 01:23.500]  as a violinist and then an artist. And then concurrently with that, I became a medical
[01:23.500 --> 01:29.060]  school professor doing radiation oncology physics. So about a couple thousand cancer
[01:29.060 --> 01:37.100]  patients fight their against cancer using a focused high dose radiation. After that,
[01:37.100 --> 01:42.060]  I want to kind of branch out a bit. So I ended up signing up for the executive program at Yale.
[01:42.320 --> 01:48.740]  And at that point, I got used to the for-profit world. And I made a transition at that point,
[01:48.740 --> 01:53.480]  joined a hedge fund, managed about a billion dollars in assets in equities. I became a
[01:54.560 --> 01:59.640]  research and as part of that, published a paper on the role of liquidity in the pricing,
[01:59.640 --> 02:04.380]  which won a paper of the year award from the CFA Institute, which is a kind of premier
[02:04.980 --> 02:11.540]  credentialing authority for equity analysts. After that, I do blockchain kind of just as
[02:11.540 --> 02:17.380]  a hobby initially, but then I did that. There were only a few things in life and, you know,
[02:17.380 --> 02:22.560]  as fundamental innovations. I was in grad school when the dot-com bubble happened and that kind
[02:22.560 --> 02:28.760]  of revolutionized life. And when blockchain came around, after initially being rather skeptical
[02:28.760 --> 02:34.500]  about it, I came to the conclusion that a genuine kernel of innovation in the Satoshi white paper.
[02:34.720 --> 02:40.560]  And so I am often my own as a solo independent consultant. I seek to bridge two very separate
[02:40.560 --> 02:46.160]  worlds that often never talk to each other and kind of have oftentimes nothing but the
[02:46.160 --> 02:50.820]  negative stereotypes about the other side. But I think there's value to be had from both sides
[02:50.820 --> 02:55.140]  to have genuine engage with the other. So the two sides I'm talking about are shown in the bottom
[02:55.140 --> 03:00.340]  here. There's a DEF CON world. So that's non-commercial, open source, cypherpunk,
[03:00.340 --> 03:06.460]  roots cryptocurrency. That is on the one side. And then on the other side is asset protection,
[03:06.860 --> 03:12.660]  trust and families, portfolio management and estate and tax planning. So yeah,
[03:12.660 --> 03:18.580]  there's a very parallel that is happening. So basically, there are OGTO guys who I talk to
[03:18.580 --> 03:24.200]  and try to help to put together a plan to use the existing laws to help their cryptocurrency
[03:24.200 --> 03:32.980]  assets from a legal standpoint, from legal threats, and also to legally minimize taxes.
[03:33.160 --> 03:37.640]  And from the other side, in the traditional world, there are a lot of people who are very
[03:37.640 --> 03:44.220]  interested in cryptocurrency, but find themselves having a whole lot to learn. And so I try to help
[03:44.220 --> 03:50.840]  them with a Sherpa sort of service as someone who can bridge both of the worlds and speak both of
[03:50.840 --> 03:57.760]  their languages. But nonprofit work these days, I am a community volunteer with the Monero Project.
[03:57.760 --> 04:04.320]  So I am volunteering to be speaking here right now. I do not get any compensation from the Monero
[04:04.320 --> 04:09.300]  Project. I have never sought to get compensation from the Monero Project. In fact, I want to keep
[04:09.300 --> 04:17.220]  my independence because my primary duty is to my consulting clients to whom I have the duty of
[04:17.220 --> 04:25.800]  looking at this space. And by this space, I mean the space of nonprofit, open source,
[04:25.800 --> 04:32.220]  non-security cryptocurrencies, and look at that space and come to a conclusion to what is going
[04:32.220 --> 04:38.480]  to be best for my clients. And in my current opinion, there are really just two projects worth
[04:38.480 --> 04:46.990]  mentioning in this, and those would be Bitcoin and Monero. So my talk today is called Sound Money
[04:46.990 --> 04:53.430]  Safe and it has got four parts. First, I am going to show the backdrop, the backdrop that none of
[04:53.430 --> 04:57.990]  us can avoid here in 20N, that is that of the global pandemic that is happening. And I will
[04:57.990 --> 05:04.490]  focus on the economic impact of that. Second part is independent scarcity. So given that fiat
[05:05.030 --> 05:12.630]  money is showing signs of strain at the moment, I will go into independent sources of scarcity that
[05:13.320 --> 05:18.810]  would be wise for people to consider at this point in history. Third is fungibility versus
[05:18.810 --> 05:25.750]  surveillance. So it turns out that not all of the independent scarcity sources are aimed as in terms
[05:25.750 --> 05:32.370]  of fungibility and against a larger backdrop of growing mass surveillance. There are societal
[05:32.370 --> 05:38.250]  issues to consider about the fungibility or lack thereof in sources of independent scarcity. And
[05:38.250 --> 05:44.250]  then finally is the section involved. And this section has two different levels. So the more
[05:44.250 --> 05:51.030]  superficial level would be that of considering independent sources of scarcity as a content of
[05:51.030 --> 05:55.830]  one's portfolio. So basically an investment sort of framework where I put my hedge fund hat on and
[05:55.830 --> 06:00.110]  at Monero and Bitcoin and gold from that perspective. And then a more
[06:00.110 --> 06:05.230]  deeper level of actual, you know, involvement of people into this project.
[06:06.030 --> 06:11.190]  All right, and I wanted to know that I gave acknowledgement to a few people who I had
[06:11.190 --> 06:17.710]  conscience with in preparing for this talk. So Howard H.Y. Hsu, a very frequent Monero code
[06:17.710 --> 06:24.510]  contributor, Dr. Serang of the Monero Research Lab, and Dr. Francisco Cabanas of the core team.
[06:24.510 --> 06:30.710]  So thank you to them. Okay, so much has been said about the pandemic, but I'll just
[06:31.310 --> 06:39.710]  frame it with a couple of ideas here. So one is that one could look at this whole pandemic as a
[06:39.710 --> 06:46.330]  very clever people of social engineering on the part of a microbe. So it's been social engineered
[06:46.330 --> 06:52.610]  to take advantage of how humans have evolved to have simple heuristics to determine whether we're
[06:52.610 --> 06:58.190]  sick or not. So here's what I'm talking about. So this is how most of us behave pre-pandemic.
[06:58.190 --> 07:03.390]  We'd be sitting around at home. I feel like going out. Yes or no, if you don't feel like going out,
[07:03.390 --> 07:08.170]  you remain at home. But eventually you do feel like going out. And so because you feel like
[07:08.170 --> 07:12.530]  going out, therefore you must be healthy. That's the dramatic conclusion that you come up with,
[07:12.530 --> 07:17.570]  because if you were not feeling health, obviously you would not feel like going out. You would feel
[07:17.570 --> 07:24.110]  lying down in bed. And now we can look back at this kind of self-diagnosis with a bit of
[07:25.270 --> 07:30.570]  kind of like it was a long ago sort of thing to do to come to the conclusion that you're
[07:30.570 --> 07:36.310]  healthy if you feel like going out. That's how it was, and that's how the virus basically
[07:36.310 --> 07:42.450]  social engineered that tendency. So now we're public. Do we see anyone coughing? And that
[07:42.450 --> 07:48.770]  is our criteria for making a thought assessment as to the wellness or sickness state of people
[07:48.770 --> 07:54.470]  who we interact with. So in the pre-pandemic times, we would notice that I saw somebody
[07:54.470 --> 07:58.470]  coughing and then we would say, oh, gee, that must be a sick person. I'm going to avoid that.
[07:58.470 --> 08:02.550]  But otherwise, just carry on. So you might distance from someone who's coughing, but
[08:02.550 --> 08:06.870]  you don't make a big out of it in your mind. You just kind of make a little note and then maybe
[08:07.790 --> 08:12.250]  stay another two away from them when you're talking to them. But otherwise, just carry on.
[08:12.450 --> 08:24.610]  So basically, the SARS-CoV-2, the virus that's caused the COVID-19 disease and the current
[08:24.610 --> 08:33.490]  pandemic can be seen as having social engineered reaction to diagnosing wellness versus sickness.
[08:33.550 --> 08:38.430]  And of course, no soon likes to be told that your instincts are way off. And there's something new
[08:38.430 --> 08:47.310]  out there that is screwing up your ability to tell sickness wellness. So lots of people don't
[08:47.310 --> 08:52.110]  really react well to that. They take offense to the idea that natural instincts could possibly
[08:52.110 --> 08:58.090]  be wrong. But unfortunately, they're lost to that, to kind of clinging to this notion that one's
[08:58.090 --> 09:06.530]  former framework was even in the face of new data. All right, on the right side, I'm showing a paper
[09:06.530 --> 09:11.590]  that was published in The Lancet, which is the premier medical journal from the UK. And what they
[09:11.590 --> 09:17.370]  did is that these researchers took a COVID-19 virus, and they deliberately put some of it on
[09:17.370 --> 09:23.950]  money, on cash money. And then they measured how long it would take for that virus to dissipate
[09:23.950 --> 09:30.210]  and not be measurable anymore. And you get there's a rather unfortunate situation here.
[09:30.210 --> 09:37.430]  Seeing that the 50-hour mark, but they're still seeing detectable amounts of virus on money.
[09:37.730 --> 09:44.390]  So days after deliberately putting virus on money, it's still detectable. There's actually three or
[09:44.390 --> 09:50.650]  four days that are necessary for the virus levels to become undetectable on money.
[09:51.170 --> 09:58.010]  So basically, this puts a damper on the physical media as a store of value.
[10:00.640 --> 10:06.100]  So of course, this has rippled through the economy. Here I'm looking at M1 money supply is
[10:06.100 --> 10:11.380]  the amount of money that's in circulation in cash, credit, and checking accounts. And I'm
[10:11.380 --> 10:19.440]  looking at all of the fiat currencies of the G20. Here I'm getting data from 2009. And I 2009 because
[10:19.440 --> 10:25.520]  that is the year in which Bitcoin became a realty. So basically, in January of 2009, I'm showing that
[10:25.520 --> 10:31.420]  one on the vertical scale here for all of the G20 fiat currencies. And then you can see that
[10:31.420 --> 10:36.300]  every single one of them has inflated since then. And then if you look at 20 here,
[10:36.300 --> 10:43.160]  you can see that there's a hockey stick shape curve, in which the money supplies of all the
[10:43.160 --> 10:48.720]  G20 were growing previous to the pandemic. But now that the pandemic has hit, it's really taken
[10:48.720 --> 10:57.220]  off. As a med school professor, I can't help but think of doubling times and for tumor growth,
[10:57.220 --> 11:03.340]  because this is the kind of thing that we in oncology think about in terms of exponential
[11:03.340 --> 11:07.940]  growth. It's like what's the link time? How long does it take for a cancerous tumor to double in
[11:07.940 --> 11:14.220]  size? And if you apply that same sort of framework here, you can see that pre-pandemic, it took the
[11:14.220 --> 11:22.780]  average G20 currency about maybe 10 years, 10 years to double, 8 to 10 years. So let's just say
[11:22.780 --> 11:29.720]  it's, you know, years to double. That means in 80 years, there will have been 10 instances of double,
[11:29.720 --> 11:35.460]  in other words, 2 to the 10th, or 1000 fold increase in the money supply over a year time span,
[11:35.460 --> 11:42.000]  which is an average life expectancy. So this money supply has been growing, it's been growing at a
[11:42.000 --> 11:46.520]  rate that's really unsustainable even before the pandemic. And now that the pandemic has hit,
[11:46.520 --> 11:53.000]  it's gotten even more out of control. Notable on this chart is the United States, because
[11:53.600 --> 11:59.820]  the U.S. has the privilege of being the world's reserve currency, and that is in gray here. And
[11:59.820 --> 12:05.300]  you can see here in 2020 that the slope of the gray line in the pandemic is even steeper than
[12:05.300 --> 12:11.720]  that of other countries. So if we lean on the U.S. a little bit more, we see the following situation.
[12:11.720 --> 12:17.340]  I'm looking at historical data from the U.S. Federal Reserve Bank. This data is all from FRED,
[12:17.340 --> 12:23.620]  which is the U.S. Federal Reserve's kind of warehouse of data. And there's a lot going on,
[12:23.620 --> 12:27.900]  so I'll break it down line by line. First, if you look at the blue line, this line here is U6
[12:27.900 --> 12:33.080]  unemployment. U6 is the broadest measure of unemployment. It counts not only people who are
[12:33.080 --> 12:38.440]  currently actively looking for work, but also counts people who are underemployed, also people
[12:38.440 --> 12:42.140]  part-time employed when they want to be full-time employed, and it also counts people who are so
[12:42.140 --> 12:47.440]  discouraged from looking for work that they give up. So those three categories of people are
[12:47.440 --> 12:52.020]  actually not counted in the less expansive U3 definition of unemployment, which is what you
[12:52.020 --> 12:57.680]  can see in the news. But I'm plotting the more kind of accurate and expansive measure of
[12:57.680 --> 13:02.700]  unemployment, which is U6. And that is the left scale here. So you can see it starts at zero and
[13:02.700 --> 13:07.460]  goes to 20 percent, 40 percent on the scale. And so through history, and I'm looking at a pretty
[13:07.460 --> 13:14.500]  long term here, 40 years of data starting in 1980, the unemployment rate kind of spiked here in the last
[13:14.500 --> 13:20.540]  financial crisis at about 18 percent. But now if you look here at the year 20, the unemployment
[13:20.540 --> 13:26.200]  rate has spiked even higher. It peaked at about 23 percent a couple months ago. Thankfully it's
[13:26.200 --> 13:34.020]  gone down since then, but this is bigger than the rest the others have been. Also in response to this
[13:34.020 --> 13:40.740]  has been the increase in the money supply. As you know, the supply of U.S. dollars is
[13:40.740 --> 13:46.900]  controlled by a committee of people, the Federal Open Committee, and they get together and they
[13:46.900 --> 13:51.620]  just, do we want to print more money or do we want to not print more money? And so if you can look at
[13:51.620 --> 13:57.240]  this green curve, this is MZM money supplies, which stands for money zero maturity. That means
[13:57.740 --> 14:02.240]  currency checking accounts, also savings accounts and money market accounts, which a lot of people
[14:02.240 --> 14:07.560]  use kind of liquid storage savings that's denominated in U.S. It does not include the
[14:07.560 --> 14:13.980]  certificates of deposit, which would be included in the M2 money. So anyway, the MZM money supply
[14:13.980 --> 14:21.000]  is a more, it's a broad and also liquid, completely liquid measure of the money supply.
[14:21.380 --> 14:26.320]  So if you look at that throughout history, of course it's hard to get a handle on how big that
[14:26.320 --> 14:30.740]  is because it's numbering the trillions of dollars. So I normalized the MZM money supply
[14:30.740 --> 14:35.940]  by big domestic product with U.S. And result here is on the green line. And that is using the
[14:35.940 --> 14:43.660]  right-hand scale here. You can see that this supply has been growing steadily from 30% in the
[14:43.660 --> 14:53.000]  Reagan era, going to about 70% in the last financial crisis. And now in 2020, it's truly taken
[14:53.000 --> 14:59.900]  off. It's this line here that is now above 100%. So we've managed to inflate our money supply from
[14:59.900 --> 15:08.140]  about 75% of GDP to about 100% of GDP in just a few months. Okay. So that's monetary policy,
[15:08.140 --> 15:13.540]  which is money is there existing in the economy. There's a fiscal policy to look at. Fiscal policy
[15:13.540 --> 15:20.580]  being the income and expenses of the federal government, which is ostensibly independent
[15:20.580 --> 15:25.940]  from that of the monetary policy. On the bottom here, you're looking at how much money is the U.S.
[15:25.940 --> 15:30.680]  government taking in minus how much money the U.S. government spending on a monthly basis all the way
[15:30.680 --> 15:36.600]  back to 1980. And you can see it's kind of going back and forth, usually slightly below this 0%
[15:36.600 --> 15:42.340]  line, meaning the usual situation is for there to be a slight deficit. You got the deficit got
[15:42.340 --> 15:52.240]  bigger here in the last financial 2009, 2008-2009. But now fast for you, the current place and all of
[15:52.240 --> 16:00.660]  these here have to be renormalized to accommodate just how far gone south. Now, this particular
[16:00.660 --> 16:06.240]  might be temporary because if you're in the U.S., you probably know that usual deadline for submitting
[16:06.240 --> 16:11.780]  taxes, which is April got postponed this year to July 15 due to the pandemic. And so for this
[16:11.780 --> 16:17.520]  three-month period between April and July, there was no tax due, neither income tax of the year
[16:17.520 --> 16:26.760]  2019 nor estimated taxes for Q1 of 2020. So you have to see with basically zero income coming in
[16:26.760 --> 16:34.420]  from the IRS's point of view, that the income minus expenses would tank like this. So, you know,
[16:34.420 --> 16:39.920]  I'm actually hoping to see that this line recovered. So hopefully now that July 15 has come
[16:39.920 --> 16:45.880]  and gone, hopefully the IRS has had a, you know, a bonanza of tax money coming in and this downward
[16:47.520 --> 16:55.940]  spike here will be temporary because they're upward spike, if this is true, of revenue coming in.
[16:57.320 --> 17:05.200]  Now, if you take the time integrated of having a budget deficit, that is, if you have a month
[17:05.200 --> 17:09.500]  deficit, that's basically like you have a credit card bill coming in and you don't pay it off in
[17:09.500 --> 17:15.560]  full. You pay 90% of it and 10% of it you don't, and then that grows interest. So what is the
[17:15.560 --> 17:20.620]  overall balance of your credit card as it grows over time? And that is the time integrated
[17:21.240 --> 17:26.420]  curve of this gray line in the bottom. And that is the top line here, federal debt as a, again,
[17:26.420 --> 17:33.080]  normalized function of GDP. You can see again that it's grown quite a bit since 40 years ago,
[17:33.080 --> 17:41.480]  since about 30% of GDP. And then in the financial crisis, it grew to about 100% of GDP.
[17:41.480 --> 17:48.320]  Now, we're seeing the number up here. Now, this particular metric is delayed because
[17:48.320 --> 17:52.520]  all of these are coming from government bureaucracies. So they're delayed by several
[17:52.520 --> 17:58.660]  months as it takes much time for these aggregate statistics to get figured out.
[17:58.660 --> 18:05.680]  So this federal debt to GDP black line is, you're only seeing Q1 20, which is why you have not seen
[18:05.680 --> 18:11.100]  this particular line spike upwards in terms of the federal debt to GDP. But that's a number to
[18:11.100 --> 18:20.760]  look at. Why is this all of grave concern? There is a interesting by Peter Bernholz. He is an
[18:20.760 --> 18:26.060]  academic in Switzerland called Monetary Regimes and Inflation. And he did a study of 29 historic
[18:26.060 --> 18:32.380]  instances of hyperinflation going all the way back to Roman Empire. And in 25 is 29 historical
[18:32.380 --> 18:37.980]  cases of hyperinflation. The root cause of the hyperinflation was money creation on the part
[18:37.980 --> 18:45.020]  of the government being used to finance government deficits. So get this curve here, you have money
[18:45.020 --> 18:51.520]  creation, that's the green line spike, and then we have deficits. And that as soon as we see the
[18:52.320 --> 18:59.580]  data flag period, I'm sure we're going to see that spike as well. So this is all rather concerning.
[19:01.720 --> 19:10.920]  And I think given, you know, given this data, it is prudent to consider the possibility that
[19:10.920 --> 19:17.320]  inflating in the future, price inflation, now not just by asset inflation, will be higher than it
[19:17.320 --> 19:23.820]  has been. And if that's true, then you'll want to be considering looking at alternate sources of
[19:23.820 --> 19:30.600]  scarcity. So here, economy of assets, and they're divided into six categories, physical assets.
[19:30.900 --> 19:37.160]  So you have real estate, art, cash, and precious metal. And I would argue that in the COVID era,
[19:37.160 --> 19:43.240]  all of these physical assets, maybe with the exception of real estate, have taken a bit of a
[19:43.240 --> 19:48.480]  hit in terms of desirability because of all of the issues having to do with, you know, contamination.
[19:49.280 --> 19:55.260]  You have digital centralized assets here. So that includes bank accounts, all the stuff in
[19:55.260 --> 20:00.040]  the chart just been showing, the stock market, the bond market. I would say also crypto exchange
[20:00.040 --> 20:06.640]  accounts. So people think they own crypto, but actually just have on a crypto exchange,
[20:06.640 --> 20:11.720]  don't actually own crypto. They own an IOU from a crypto exchange, and that is a centralized
[20:11.720 --> 20:18.000]  asset because the exchange itself is a centralized entity. Therefore, if the exchange goes down,
[20:18.000 --> 20:25.060]  then the IOU becomes less. So I would categorize that as a centralized asset.
[20:25.700 --> 20:31.980]  Now, since 2009, which is the Nakamoto white paper coming out, there's been a new option
[20:31.980 --> 20:39.820]  in terms of assets, and these are digital decentralized assets. Decentralized means not a
[20:39.820 --> 20:46.640]  single committee of people who can arbitrarily increase or decrease the government asset.
[20:46.640 --> 20:53.260]  And if you look at the non-fungible of asset, that would be Bitcoin. And the fungible type,
[20:53.260 --> 21:00.720]  the dominant leader now is Monero. So part of this talk, I'm not assuming that the
[21:00.720 --> 21:06.540]  viewer is one who has been kind of thinking deeply about cryptocurrency for the last many years.
[21:06.540 --> 21:13.440]  DEF CON is a pretty, you know, it's a big tent for geeks of all varieties in DEF CON, including
[21:14.000 --> 21:18.060]  people who have not really been kind of living and breathing, you know, cryptocurrency for several
[21:18.060 --> 21:27.220]  years. So I want to give some, I guess, high level points to take away as to why cryptocurrency is
[21:27.220 --> 21:32.680]  not kind of the scammy thing I'd have heard of, but there is actually a kernel of genuine
[21:32.680 --> 21:38.220]  innovation in this stuff is worth thinking about and further exploring. So I want to contrast
[21:38.220 --> 21:42.140]  two types of digital scarcity. Neutralized scarcity, which is what we currently have
[21:42.140 --> 21:47.840]  with fiat currencies, because after all, the U.S. dollar is currently, it's a digital currency.
[21:48.020 --> 21:52.520]  When you go to your bank, they're not, you know, handwriting stuff in some ledger,
[21:52.520 --> 21:56.900]  it's all computerized, obviously. And, you know, there's such a thing as online banking,
[21:56.900 --> 22:02.560]  in which your USD in digital form can be limited, in a limited way, manipulated within your
[22:04.420 --> 22:11.220]  online account. So the U.S. dollar is currently in digital form, but it's centralized. What that
[22:11.220 --> 22:16.720]  means is access to the database, that by database, I mean, keeping track of who owns what,
[22:16.720 --> 22:22.220]  that is protected, that is like moat sort of security model, in which you have the precious
[22:22.220 --> 22:27.560]  database in the middle of the moat, you build this protective moat around it to defend that
[22:27.560 --> 22:34.380]  database from bad actors. So there's one authoritative version of that. So this goes all
[22:34.380 --> 22:39.080]  the way up to the Federal Reserve. So when a reserve comes and makes a decision that it wants
[22:39.080 --> 22:44.420]  to be printing money, that it just issues a command to somebody and then somebody, you know,
[22:44.420 --> 22:50.140]  click mouse button to increase the U.S. dollar money supply by, you know, in dollars. That must
[22:50.140 --> 22:56.120]  be actually quite a bit of job security in that particular federal employee. The person has to
[22:56.120 --> 23:00.880]  sit there at the computer and click create a billion dollars over and over on their computer.
[23:01.300 --> 23:07.800]  But the point is that there's one authoritative version of USD ledger, and it just takes,
[23:07.800 --> 23:14.280]  you know, at the heart of it, just one person to just change it at will. Of course, the code
[23:14.280 --> 23:18.900]  behind this also is closed. So I mean, why would a bank open source its code that it's running on?
[23:18.900 --> 23:22.780]  That would be ridiculous. Then you're showing, you know, basically the blueprints of the
[23:22.780 --> 23:27.980]  of the joint and people who would have bad intentions. So there's a closed source
[23:28.860 --> 23:33.720]  software development model in centralized security. If you're familiar with the book,
[23:33.720 --> 23:39.200]  Cathedral R, actually it started out as an article and then it got expanded. This is a book
[23:39.200 --> 23:45.040]  that details the kind of conflicting or contrasting ways of software development. One is the Cathedral,
[23:45.040 --> 23:51.700]  that is the top-down command and control sort of Microsoft-style building of software,
[23:51.700 --> 23:56.140]  which is exactly what we're looking at in the kind of bank sort of realm. And also I'd say
[23:56.140 --> 24:00.680]  ethical realm, where you have a highly regulated industry. So you have specialized software
[24:00.680 --> 24:05.820]  companies that kind of learn all of the rope that they have to comply with within that industry. And
[24:05.820 --> 24:12.580]  then they make expensive ware that they then sell to players within that industry. So that sort of
[24:12.580 --> 24:18.980]  top-down model works in industries like that. And that's in contrast to the bazaar, which is
[24:18.980 --> 24:23.860]  just a whole bunch of flea market of people working and people coming and going, people
[24:23.860 --> 24:29.500]  selling at will, buying at will. And that is the Linux model of software development with more in
[24:29.500 --> 24:34.400]  keeping with Bitcoin and Monero. So there are downsides to this centralized security model,
[24:34.400 --> 24:38.760]  even though Equitas and everyone uses it, there are downsides to it. So mismanagement,
[24:39.520 --> 24:45.280]  the charts that I showed of really out-of-control growth in the money supply could be interpreted
[24:45.280 --> 24:50.740]  as signs of mismanagement in fiat currency. There's also insider abuse. In other words,
[24:50.740 --> 24:56.140]  if you are in a position where you have access to the database of who owns what,
[24:56.140 --> 25:00.360]  there are things that can be done to abuse that. So for example, there is a case in which
[25:00.360 --> 25:07.200]  the Bank of America, sorry, it was Wells Fargo, that took personal data of its own customers
[25:07.200 --> 25:13.920]  to fictitiously create accounts, fake checking and savings accounts in the names of their customers.
[25:13.920 --> 25:20.220]  And then they proceeded to charge fees on those accounts, which was unbeknownst to their
[25:20.220 --> 25:28.220]  actual customers. So, and then, you know, really egregious violation of trust was punished with
[25:28.220 --> 25:32.540]  just basically a slap on the wrist. It was like, you know, a day's process. That was the fine from
[25:32.540 --> 25:39.040]  the federal regulators. So insider abuse, you have basically a protected class of middle people and
[25:39.780 --> 25:46.180]  is something that is a downside of this. And finally, it's slow to improve. So if you are
[25:46.180 --> 25:53.280]  in a position of middleman in a database that everyone needs access to, then, you know, you can
[25:53.280 --> 25:58.280]  impose things like, we're only going to do wire transfers through Friday, you know, nine to five
[25:58.280 --> 26:03.480]  during bank hours. Why would you need to improve that? Because, you know, they have to go through
[26:03.480 --> 26:08.400]  you to access to the network. So, you know, what incentive is there really to try to improve your
[26:08.400 --> 26:13.980]  service levels? So that's why we still have a situation in which, you know, for many,
[26:13.980 --> 26:20.020]  for many, for options in fiat banking that are not the simplest level of option,
[26:20.020 --> 26:25.220]  you still need to wait for somebody to show up at the branch office to get your business done.
[26:25.500 --> 26:30.040]  And you'll trust this with a situation, for example, shopping where everyone can, you know,
[26:30.040 --> 26:34.920]  everyone's used to shopping 24-7 on their phone with Amazon. The financial service industry has
[26:34.920 --> 26:42.240]  been lagging in terms of adopting the advantages. So then if we move to decentralized security,
[26:42.240 --> 26:48.360]  this is Bitcoin and Monero, then anyone can do peer-to-peer network. So as in contrast to the
[26:48.360 --> 26:53.940]  situation in fiat banking, in the Monero, anyone in the world can download the Bitcoin software,
[26:53.940 --> 26:59.600]  Monero software, and join their own computer to the global network of computers that is in track
[26:59.600 --> 27:05.660]  of who spends, who sends what to who in this anonymy using these new forms of currency.
[27:06.120 --> 27:11.460]  So anyone in the world can join this peer-to-peer network. Each node maintains its own virtual ledger.
[27:11.460 --> 27:16.300]  So this is in contrast to there being just one authoritative ledger. In Bitcoin and Monero,
[27:16.300 --> 27:21.240]  there are thousands and thousands of copies of the ledger sent what to who, and these copies are
[27:21.240 --> 27:28.040]  distributed worldwide. The code is all open source, so anyone in the world is free to download the
[27:28.040 --> 27:36.040]  source code and look at it, examine it themselves, commit themselves, run it themselves, and nothing...
[27:37.260 --> 27:41.660]  this is actually a feature, it's not a bug, it's a feature, because just like in the Linux software
[27:41.660 --> 27:48.600]  development world, the idea is more eyeballs on the code are going to squash more bugs than just
[27:48.600 --> 27:53.020]  having a closed source version of the code in which only a few people are able to see the code.
[27:53.020 --> 27:56.540]  If you have only a few people seeing the code, then the chances are that a bug
[27:57.600 --> 28:02.380]  gets... could be undetected for a long time. Whereas in this decentralized security model,
[28:02.380 --> 28:08.440]  it's open source, free and open software. The downsides of this new kind of way of measuring
[28:08.440 --> 28:14.880]  scarcity is that it's new. So the Bitcoin white paper came out in 2008, and I guess unfortunately
[28:15.380 --> 28:19.820]  it's... technically it's complicated. It's hard for people to get their heads around, like even
[28:19.820 --> 28:25.820]  like, you know, elite geeks have trouble getting around like these ideas, because it's like not
[28:25.820 --> 28:31.460]  only do you need a measure, a high degree of technical competence to kind of grasp the idea
[28:31.460 --> 28:37.200]  of the Nakamoto white paper, you also need a certain amount of plessy in terms of not immediately
[28:37.200 --> 28:43.720]  rejecting something that is foreign at first. And so those two things combined mean that adoption
[28:43.720 --> 28:47.780]  is slow. I mean, it's just necessarily going to be slow. You have something that's hard to
[28:47.780 --> 28:54.260]  understand and requires like a flexibility in order to accept that it might actually work.
[28:54.700 --> 28:58.880]  Another side is that it's inefficient. So if every computer in this network has its own copy
[28:58.880 --> 29:03.120]  of the ledger, isn't that inefficient? How are you going to figure out what the correct version
[29:03.120 --> 29:11.340]  ledger is if people have disagreements about that? So I have a lot of material in this talk,
[29:11.340 --> 29:17.040]  so I'm going to boil down how Bitcoin and Monero work to just one slide, and it's necessarily fast.
[29:17.600 --> 29:25.220]  So if this goes too fast for any of you viewers, for example, my DEF CON keynote Monero Village
[29:25.220 --> 29:30.960]  last year, we'll go through this in a bit slower detail. There are three things that we want to
[29:30.960 --> 29:37.140]  take an analog of a fiat banking world and then move that to this new world centralized scarcity.
[29:37.260 --> 29:41.400]  Number one, how do you have rights? That is, what do you have for account numbers?
[29:41.640 --> 29:45.800]  So the analog of a bank account number is a solution to an elliptic curve.
[29:45.800 --> 29:51.560]  So an elliptic curve is just an equation. It's a specific equation. It's got x's and y's in it,
[29:51.560 --> 29:58.480]  just like your ninth grade high school algebra class. You have a relation relating x's and y's,
[29:58.480 --> 30:03.560]  and there's only a sub of combinations of points, x and y, that satisfy that equation.
[30:03.660 --> 30:08.420]  So in an elliptic curve, there is a large number of these solutions,
[30:08.420 --> 30:14.220]  but they are very hard to find by brute force. So in the elliptic curve standard,
[30:14.220 --> 30:19.540]  one is told not only the identity of the equation being used, but also what's called a base point.
[30:19.660 --> 30:26.420]  This base point p sub b, which the x y coordinate in space is going to be a solution that you hold
[30:26.420 --> 30:32.240]  will satisfy this elliptic curve. And then furthermore, given this base point, it is possible
[30:32.240 --> 30:38.280]  if somebody tells you some arbitrary n, it is possible to calculate the nth solution
[30:38.280 --> 30:44.020]  through the elliptic curve. So you have p sub n is x sub n, y sub n. And that is something that
[30:44.020 --> 30:49.340]  anyone can calculate with a computer, given that somebody tells you an arbitrary number n,
[30:49.340 --> 30:55.460]  and also that you know the base point p sub b, and also the exact form of the elliptic curve
[30:55.460 --> 31:00.660]  that you're talking about. This is a one-way function, so you cannot calculate the number n
[31:00.660 --> 31:06.880]  if somebody tells you the point p sub n. So this asymmetry, which is crucial to
[31:08.600 --> 31:15.880]  public-private key cryptography, it's just a fact that it's very easy to go one direction,
[31:15.880 --> 31:20.920]  that is to go from n to p sub n. But it's very hard. It's actually computationally infeasible.
[31:20.920 --> 31:25.920]  You have to brute force guess your solutions if somebody tells you p sub n and you want to
[31:25.920 --> 31:30.880]  try and recover n from them. So a natural application of this fact is to use sub n,
[31:30.880 --> 31:36.740]  which is the derivable number as the public, and use n, which is derivable,
[31:36.740 --> 31:41.920]  going the other way as the private key. So getting a new Bitcoin account, getting a new Monero,
[31:41.920 --> 31:46.760]  what do those both really mean at the heart of it? It means picking number for yourself.
[31:46.780 --> 31:54.000]  That's literally what it is. You're picking a number, which is a vast range that you can pick.
[31:54.000 --> 32:01.980]  It needs to be an integer between 1 and basically 256, roughly, which is a 78 number. It's just an
[32:01.980 --> 32:09.120]  unfathomably large number of combinations. It's an unfathomably large space of numbers that you
[32:09.120 --> 32:12.140]  are allowed to choose from when you pick your number. But that's what you're doing. You pick
[32:12.140 --> 32:18.920]  an account, you are picking a particular solution to the elliptic curve. The number is known only
[32:18.920 --> 32:25.800]  to you, and the X, Y coordinates are known to everybody. So, you know, they thankfully made
[32:25.800 --> 32:30.040]  steps to make it a little less geeky. Instead of sharing X, Y coordinates with people, you have
[32:30.040 --> 32:35.280]  what gets converted into a Bitcoin address or a Monero address, which is thankfully less cumbersome
[32:35.280 --> 32:42.380]  to use than, you know, two 77-digit numbers. But nevertheless, that's what they do.
[32:42.700 --> 32:48.600]  Okay, then second is, what is the decentralized world of check writing? So now we've established
[32:48.600 --> 32:55.240]  there's such a thing as private property, which constitutes having knowledge of a number.
[32:55.640 --> 32:59.500]  So let's say you have an account, you've picked your number, you have your public and private
[32:59.500 --> 33:05.960]  key pair, and you've gotten some funds in your account. How do you spend it? How do you write a
[33:05.960 --> 33:11.480]  check? And so that is secure messaging. So of course, the public and private key that I explained
[33:11.480 --> 33:15.920]  above, in addition to being used as your bank account number, it is also used as a secure
[33:15.920 --> 33:20.240]  message signing. So that's one of the clever things of the Nakamoto White Paper that we're
[33:20.240 --> 33:26.440]  used to thinking of public-private keys, you know, long, you know, basically, secure message
[33:26.440 --> 33:30.760]  signing came long before cryptocurrency. So it came decades before. So we're used to thinking
[33:30.760 --> 33:35.220]  of private and public keys as being the base of making secure message signing. What's new is that
[33:35.220 --> 33:40.340]  there's a second interpretation of the public and private key in the kind of finance. It's now
[33:41.080 --> 33:49.040]  ownership of funds. So forgery in this is when somebody else learns your key. If somebody else
[33:49.040 --> 33:55.320]  knows your private key, then they can write check and sign it convincingly, because that's what you
[33:55.320 --> 34:00.120]  need to write your signature is knowledge of the private key. So from the system's point of view,
[34:00.120 --> 34:04.900]  the system doesn't know who owns what, it doesn't know who owns what from a person point of view,
[34:04.900 --> 34:09.980]  it does know who owns what from a knowledge of the private key point of view. So knowledge of
[34:09.980 --> 34:17.100]  private key in this system is tantamount to and itself money. Finally, once a check gets written,
[34:17.100 --> 34:20.800]  and I process it, somebody's got to process the check. So in the fiat world, you write a check
[34:20.800 --> 34:25.560]  unit, and then it goes into the banking system, the banking system needs to process the check
[34:25.560 --> 34:31.740]  that you've written. So in the decent world, this is taken care of by a peer to peer accounting
[34:31.740 --> 34:37.940]  network. Again, as I said before, anyone in the world is free to do the Bitcoin core software or
[34:37.940 --> 34:43.880]  the Monero software, run their computer, and then they will be part of this accounting network.
[34:44.140 --> 34:50.440]  The accounting network is run by Moss, which is simply the nomenclature used in this world for a
[34:50.440 --> 34:56.720]  gossipy majority was peer to peer accountant. So world there is no boss computer, there is no
[34:56.720 --> 35:01.680]  master copy of the base that says who owns what you have thousands and thousands of scattered
[35:01.680 --> 35:07.380]  around the world of who owns what and nobody has a boss computer who who is to be deferred.
[35:07.380 --> 35:12.660]  Instead of having a boss, they will defer to instead majority rules. So that is what
[35:13.140 --> 35:19.140]  this difficult and that is what it makes network difficult for somebody to casually hack by
[35:19.140 --> 35:24.640]  introducing their own various computer onto the network that does something like sends all the
[35:24.640 --> 35:31.840]  Bitcoin to their own address. To make that work, in order for this transaction on your computer,
[35:31.840 --> 35:37.480]  which sends money to your own account, in order for that to be accepted by the overall network,
[35:37.480 --> 35:42.320]  it would have to be a majority computing power on the network that thinks that it is right and
[35:42.320 --> 35:48.560]  proper for the reward to be going to the to a single person's account. And so that's the
[35:48.560 --> 35:55.000]  impractical, expensive, infeasible to do. And in the game theory of this, if somebody did have
[35:55.000 --> 36:00.260]  that many computers would be in their interest, instead of trying to crash the system,
[36:00.260 --> 36:04.800]  crash the price of, say, Bitcoin, it would be in their interest to just join the system
[36:04.800 --> 36:10.480]  and use all of this fast computing power that they've amassed to work with this is because
[36:10.480 --> 36:15.400]  if you have more than 51% of the hash power, then you can get 21% of the rewards.
[36:16.640 --> 36:23.980]  Key to this system is that valid blocks are rare. So a block is a kind of data. That is,
[36:23.980 --> 36:29.320]  it's a it's a compilation of a certain time period of transactions that have happened at work.
[36:29.320 --> 36:35.260]  These transactions get checked for validity on a micro level, that is, each of these transacts
[36:35.260 --> 36:40.300]  checked for like a bounce check, they get checked to make sure that the person who wrote the check
[36:40.300 --> 36:45.160]  actually had enough money to the funds, right? So that those kind of checks happen on a on a
[36:45.160 --> 36:50.880]  micro level, on a macro level, when when, when 10 minutes worth of transactions, at least in the
[36:50.880 --> 36:54.820]  case of Bitcoin, it's 10 minutes in Monero, it's two minutes. But when a block of transaction
[36:54.820 --> 37:00.600]  into a block, it's not just copied and then written. There's a block actions that needs to
[37:00.600 --> 37:07.160]  have this rare character that that data collection of blocks has a hash that is below a different
[37:07.160 --> 37:12.580]  number. So a hash function, as I don't have to explain too much to a DEF CON is is a cryptographic
[37:12.580 --> 37:18.900]  hash function, it takes an input of any size outputs a output of fixed size, a fixed byte
[37:18.900 --> 37:26.060]  length. And this fixed byte length, the, the secrets in that fixed byte length are extraordinarily
[37:26.060 --> 37:32.280]  sensitive to even bit levels in the input. So it functions basically as a signature of any input.
[37:32.280 --> 37:39.360]  So usually we use hashes in a double checking that the hash that we have now is the hash that
[37:39.360 --> 37:43.800]  we had at some previous time. So if you are checking the integrity of a file that you don't,
[37:43.800 --> 37:47.520]  you will download the file, and then you will check the hash of what you did. And then you'll
[37:47.520 --> 37:53.100]  check that hash against a published hash of what people found for the same download. That way,
[37:53.100 --> 37:57.260]  you have some indicator that the file that you downloaded is indeed the same file that other
[37:57.260 --> 38:02.940]  people need to upload. And by the way, of course, checking hashes is something that is do record,
[38:02.940 --> 38:09.320]  it needs to be done by anyone who is downloading code from Bitcoin or Monero to run on their own
[38:09.320 --> 38:13.940]  computer, you want to make sure that the client that you download, the hash of that client is
[38:13.940 --> 38:20.900]  that of the of what the devs actually made. But in this case, in this case of the process
[38:20.900 --> 38:25.040]  of clearing checks, that is the peer to peer network that is keeping track of who spent what
[38:25.040 --> 38:31.220]  care about the actual value of that hash function. So when what comes out, it needs to have a hash
[38:31.220 --> 38:36.460]  function that is a small number needs to be. And that's a rather arbitrary thing. It's like there's
[38:36.460 --> 38:42.140]  no there's no intrinsic to having a low hash number. The transactions inside that block are
[38:42.140 --> 38:48.040]  still as if they if the block had a high hash number, what is different is a block, any block
[38:48.040 --> 38:52.940]  that has a very hash number is going to be a rare block, it's going to be very difficult to fake
[38:52.940 --> 39:00.400]  that. And that is the key, it's difficult to fake, it takes and trial and error to fake that block.
[39:00.540 --> 39:07.620]  And that's why a valid block needs to have a hash that is lower difficulty number. And this
[39:07.620 --> 39:14.020]  difficulty number in both Bitcoin narrow gets dynamically adjusted, so that in total,
[39:14.540 --> 39:21.760]  the entire network blocks will be generated new blocks rated at a on average fixed time. It's not
[39:21.760 --> 39:27.620]  constant time, because the process is Poisson distributed. In other words, the the probability
[39:27.620 --> 39:32.620]  per unit time new block will get created is constant. And when you have that you have Poisson
[39:32.620 --> 39:37.920]  distribution of the block time distribution. Alright, so the big picture point here is that
[39:37.920 --> 39:44.980]  every Bitcoin and Monero every like, I'm talking about the coin at the network, every unit of
[39:44.980 --> 39:51.660]  Bitcoin and every Monero currently in existence was given initially to a miner as compensation
[39:51.660 --> 39:56.960]  for helping to do the accounting work. So this is an important thing if you're new to the whole
[39:56.960 --> 40:04.820]  blockchains. There is a lot of truth to this claim that just a lot of scams, a lot of like a
[40:04.820 --> 40:10.980]  money grabbing in crypto. And having been in grad school at the dot-com bubble, I can say that there
[40:11.140 --> 40:15.600]  are a lot of similarities to the current situation in blockchain versus the c-track there than in
[40:15.600 --> 40:23.420]  the dot-com. So back then, internet was new, and normies had no idea what email was or website was.
[40:23.420 --> 40:28.560]  It's hard to imagine, I know, if you're younger than a certain age, but that's what the world was
[40:28.560 --> 40:35.060]  like back then. People had no idea what email was and why would somebody bother to send email when
[40:35.060 --> 40:40.200]  you have the perfectly good system where you can just stick a stamp on something and send it.
[40:40.200 --> 40:43.740]  Like, why would you do email? It's hard to understand now, but that was the mentality.
[40:43.760 --> 40:48.600]  And along with that went kind of a gold rush in which kind of information investors
[40:49.440 --> 40:54.760]  went chasing around and that had any, you know, hint of internet in it. So there was a thing
[40:54.760 --> 41:00.600]  called pets.com back in the day, and their business model was to FedEx pound sacks of dog
[41:00.600 --> 41:07.700]  food around to people. Their, you know, innovation here was that they use the internet, the website,
[41:07.700 --> 41:12.940]  to take their pet food orders. And so that made this, you know, sexy new company and investors
[41:12.940 --> 41:18.160]  actually bought that. And, you know, eventually it went bankrupt. You know, it's obvious to us
[41:18.160 --> 41:23.920]  now there's a pretty boneheaded idea, but now you look today at the blockchain space and the exact
[41:23.920 --> 41:30.720]  same thing is happening. It's like stupid idea plus blockchain equals sexy. And yeah, that's the
[41:30.720 --> 41:37.520]  situation. So, but one way that you can quickly weed out a lot of these companies is to ask them
[41:38.180 --> 41:43.780]  who gets the block reward. You might have this kind of variation of an automotive consensus on
[41:43.780 --> 41:49.720]  your particular little project, but who's getting the money is getting the issuance of the coins.
[41:49.760 --> 41:56.000]  And in pretty much every scammy case, you will find that the bit, the, the unit, which in Bitcoin
[41:56.000 --> 42:01.700]  gets democratically did it to all of the computers that are helping secure the network. And again,
[42:01.700 --> 42:07.340]  that happens in the same way in Monero. In Monero, all of the Monero currently in existence previously
[42:07.340 --> 42:12.920]  given out as a reward to the distributed network of computers for which everyone has an event of
[42:12.920 --> 42:20.720]  getting a piece of that pie, if you just put your computer on it. In any, in, in the vast majority
[42:20.720 --> 42:27.280]  of currencies that has been subjugated and changed to quickly funnel some of that, some or all of
[42:27.280 --> 42:35.320]  that money to a group of people. And it goes by various names, you know, but the, the idea is that
[42:35.320 --> 42:41.600]  this reward, which goes to a decentralized miner in the case of a true cryptocurrency goes to,
[42:41.880 --> 42:47.980]  a select group of people who, as you are told, have nothing but the best intentions in mind.
[42:48.100 --> 42:53.380]  And they are going to spend money wisely, but history suggests that such promises should be
[42:53.380 --> 43:01.080]  taken with a bit of skepticism. All right, so scarcity and bit Monero, Nakamoto consensus
[43:01.080 --> 43:07.220]  synthesizes scarcity. This is what would be a Nobel prize winning in psychonomics.
[43:07.240 --> 43:10.240]  But unfortunately, the Nobel prize needs to be given to an actual human.
[43:10.240 --> 43:15.040]  And since Satoshi Nakamoto pseudonym, there's, there's not going to be a Nobel for the,
[43:15.040 --> 43:22.620]  for the Bitcoin, but this idea that scarcity can be measured in this decentralized way,
[43:22.620 --> 43:29.020]  that does not require somebody up being the centralized guru of that, of that source of
[43:29.020 --> 43:34.960]  scarcity. That is a fundamentally new kernel of insight. And it's worth thinking, I think,
[43:34.960 --> 43:39.780]  pretty deeply if you haven't already. So when I say scarcity and Bitcoin and Monero, that's scarcity
[43:39.780 --> 43:44.380]  is sort of a broad word. So I'm specific. There are three types of scarcity that I'm about in
[43:44.380 --> 43:49.180]  these decentralized currencies. Number one is at the account level. So that's property. How do we
[43:49.180 --> 43:54.720]  know that there's scarcity in terms of who owns what? So that is enforced each user of that
[43:54.720 --> 44:01.520]  cryptocurrency selecting, and then subsequently protecting their particular elliptic elliptic
[44:01.520 --> 44:06.620]  curve solution. In other words, private key and public key pair, and then keeping that private
[44:06.620 --> 44:12.660]  key private and their own personal secret. So that is how account level scarcity is used.
[44:12.780 --> 44:18.700]  Aggregate level scarcity. How do we know that the total number of value units in this accounting
[44:18.700 --> 44:24.800]  system is not going to run away with growth like we see in fiat? In other words, how is the macro
[44:24.800 --> 44:30.220]  money supply control? Well, that is controlled at the level of the miners on the network for
[44:30.220 --> 44:37.740]  the emission schedule of future duration of the money is programmed in advance. So for example,
[44:37.740 --> 44:46.100]  Bitcoin, every 210,000 blocks, the reward that is given to the miner who successfully comes up
[44:46.100 --> 44:52.660]  with a new block in the Bitcoin blockchain gets cut in half. And so that is known for all of
[44:52.660 --> 44:58.720]  history. Basically, all of the miners in the net know what the emission schedule for new money is
[44:58.720 --> 45:04.040]  in advance. So it's basically programmed in advance to all of these mining computers,
[45:04.040 --> 45:09.140]  how much money is there going to be in the entire net. And that is enforced because these again,
[45:09.140 --> 45:14.920]  these network of decentralized computers is majority rules. So anyone new who joins the
[45:14.920 --> 45:21.220]  network is advised to go along with the majority rule set because that the blocks that they
[45:21.220 --> 45:25.000]  generate are going to be accepted by their peer network, they're not going to get it.
[45:25.000 --> 45:30.940]  So that is why there's disincentive for them to attempt to hack the network by putting their own
[45:31.460 --> 45:35.580]  nefarious node on. That nefarious node, yes, it can join the network, but he's going to stop it
[45:35.580 --> 45:40.280]  from joining the network. But once it comes up with kind of attractions and blocks that the
[45:40.280 --> 45:44.260]  rest of the network thinks are fraudulent, the rest of the network will reject those
[45:44.260 --> 45:50.560]  blocks coming from the nefarious node. So and it's in the interest of each individual node
[45:51.200 --> 45:56.080]  joining the network to play along, to play nice. That's the part of the game theory of the Nakamoto
[45:56.080 --> 46:01.460]  white paper and the brilliant way it works. Finally, third scarcity is database modification
[46:01.460 --> 46:07.480]  scarcity. So in a SQL database, if you have super user privilege, you can always write anything you
[46:07.480 --> 46:12.160]  want to the database at any time. So this is different in situation with a decentralized
[46:12.160 --> 46:19.880]  ledger that Nakamoto census puts together. Each page that written to the database has to have a
[46:19.880 --> 46:24.980]  hash that is lower than a dynamically adjusted difficulty threshold, which means you cannot just
[46:24.980 --> 46:30.660]  have arbitrary write access to this, to the big database or the Monero database. You have to put
[46:30.660 --> 46:36.180]  in a lot of computational power just to add one quanta of information, that is the block,
[46:36.180 --> 46:41.960]  to add one block of information to this. This takes an extraordinary net effort of computing
[46:41.960 --> 46:47.780]  power to do. So it's restricted in that way. And then further, since each block in the chain
[46:47.780 --> 46:54.140]  contain as a check, the hash of the block that preceded. So now you have a linked list of
[46:54.740 --> 47:01.440]  block, each of which has a pointer, contains the hash of the previous block, which means that not
[47:01.440 --> 47:07.400]  only is there scarcity in ability to introduce new data to the database, there's basically
[47:07.400 --> 47:13.540]  permanence of the, especially the older records in that database, because for somebody to fake
[47:13.540 --> 47:17.520]  the database, you would have to put in an inordinate amount of computing power, more than
[47:17.520 --> 47:35.380]  the GLOW currently has, to actually do a rollback of the chain. Oh, I'm seeing that there are
[47:35.380 --> 47:45.000]  problems here. Well, at least I'm looking at the YouTube feed. The video looks to be okay.
[47:45.000 --> 47:51.900]  I apologize for any technical issues. We do have a local recording, so at the very least,
[47:51.900 --> 47:59.300]  even if the stream is not working correctly, we have a pristine 1080p version copy of this, so
[47:59.300 --> 48:05.920]  it will go later. So, proceeding on. So, scarcity. What are miniatures of scarcity? Number one
[48:06.940 --> 48:12.780]  is it has a code base that is not a bit fork. So, many of the cryptocurrencies that simply did a
[48:12.780 --> 48:18.360]  copy-paste of Bitcoin, and then they slap some things on there, and they claim that they have
[48:18.440 --> 48:23.140]  a new cryptocurrency. That is not the case. It was built from the ground up as a separate
[48:23.140 --> 48:28.400]  coin code base. The elliptic curve used in Monero is different than Bitcoin. So,
[48:28.400 --> 48:33.520]  Monero uses the ED2551 elliptic curve, which is different than Bitcoin. So, the fundamental
[48:33.520 --> 48:41.760]  equation governing valid XY coordinators is different. So, the difference is the
[48:41.760 --> 48:47.860]  indents of Monero goes down to the deepest level of cryptographic primitives. In Monero,
[48:48.440 --> 48:54.540]  so, in Monero, we have a spend key, which is akin to the private key of Bitcoin. But we also,
[48:54.540 --> 48:59.200]  in Monero, we have what's called the view key, which is basically a graphic subset of the view.
[48:59.320 --> 49:05.260]  And the view key is what is going to be used if somebody wants to get view access to the ledger
[49:05.260 --> 49:10.080]  shared around the world. So, in Monero, everyone in the world can download a copy of the ledger
[49:10.080 --> 49:16.080]  for themselves, in which they can see who sent what to who. But in Monero, this ledger is encrypted
[49:16.580 --> 49:21.920]  because the default position in Monero is that unless you were part of the transaction,
[49:21.920 --> 49:26.660]  it's just not your business what the details of the transaction were. It's basically just how
[49:26.660 --> 49:32.960]  cash works. Like imagine a system of cash that you could, you know, stick your nose to everyone
[49:32.960 --> 49:38.560]  else's business around the world and be privy to the details of who gave cash to who around the
[49:38.560 --> 49:43.900]  world. That's basically the system that everyone has set up. And one thing that Monero has done
[49:43.900 --> 49:50.160]  is to meet a solution with its own technical stack. Another difference is the address space.
[49:50.160 --> 49:55.260]  So, in Monero, the address space is 10 to the 76, roughly, whereas in Bitcoin, it's about 10 to 60.
[49:55.260 --> 50:00.740]  So, this means that in Monero, the birthday problem is less of a concern than it is in Bitcoin.
[50:00.740 --> 50:09.040]  The birthday problem being that if what is to get an account is to pick a number,
[50:09.040 --> 50:16.500]  then make a public-private key pair out of that, then you have the problem that the random number
[50:16.500 --> 50:21.900]  that you pick for your account could, by coincidence, be the same random number that's on the other side
[50:21.900 --> 50:26.120]  of the world picks for their own account. And if that situation happens, then you have
[50:26.120 --> 50:31.040]  two people with knowledge of the private and public key pair, and so you don't actually have
[50:31.040 --> 50:35.740]  single ownership of that. There's somebody else somewhere else in the world that also can spend
[50:35.740 --> 50:41.260]  your money. Obviously, that's bad. And the chance of that happening is astronomically low just
[50:41.260 --> 50:46.980]  because of the astronomically high number of addresses there are in both in Monero.
[50:46.980 --> 50:52.900]  But because there are another, you know, 16 zeros worth of addresses in Monero, this is going to be
[50:52.900 --> 51:00.440]  16 zeros worth of zeros, even more rare and less of a concern in Monero. Next is a difference in
[51:00.440 --> 51:05.380]  the emission, the minor reward schedule. So, in Monero, it's continuously decreasing. There are not
[51:05.380 --> 51:11.400]  four-year happenings like we have in Bitcoin. So, the continuously decreasing
[51:12.500 --> 51:16.840]  emission is, like many things, something that the Monero community has looked at
[51:17.620 --> 51:23.020]  as happening in the granddaddy community, that is the Bitcoin community, and then think ways that
[51:23.020 --> 51:29.620]  things could be done maybe a bit different than are done in the granddaddy, and giving all due
[51:29.620 --> 51:36.620]  respect to Bitcoin. So, in Bitcoin, every four years, like I mentioned before, the block reward
[51:36.620 --> 51:41.780]  that is given successful computers that add a block to the blockchain is cut in half, which
[51:41.780 --> 51:45.960]  means if you're a Bitcoin miner, there's a date circled on the calendar in which the mining
[51:45.960 --> 51:52.880]  reward, your mining income, is going to get in half. And so, as a result, there is a lot of
[51:52.880 --> 51:58.080]  drama that happens. Like, imagine if you're doing mining as a business, then basically there's a
[51:58.080 --> 52:03.400]  date that's contrary, in which your income is going to get cut in half. So, that puts in a lot
[52:03.400 --> 52:08.300]  of disruption to the act of mining. And so, this is something that we avoid in the Monero community
[52:08.300 --> 52:14.320]  by having a continuously decreasing miner rewards. There's also a form of unwanted scarcity, which
[52:14.320 --> 52:21.060]  future miner rewards. The block reward in Monero will never be less than zero in Monero per minute,
[52:21.060 --> 52:26.760]  and we call this the tail emission. Why do we have this? It is to guarantee miner incentives
[52:26.760 --> 52:35.260]  perpetuity. So, in Monero, we do not have to worry about miners in the far future having no
[52:35.260 --> 52:41.360]  incentive to connect their computers, spend money on electricity, devote time of their computing
[52:41.360 --> 52:46.640]  power to help the Monero network, that those people will be disincentivized to join because
[52:46.640 --> 52:52.740]  getting offered an insufficient reward in terms of the block reward. Now, this unfortunately gets
[52:52.740 --> 52:57.920]  portrayed as being infinite inflation by people who have not either thought this through, or they
[52:57.920 --> 53:03.920]  might have a vested interest in portraying it that way. But in Monero, if you think about
[53:03.920 --> 53:09.020]  linear inflation, which is the case in Monero, the block reward flow will never go below 0.3
[53:09.020 --> 53:14.680]  Monero per minute. In fact, it will be 0.3 Monero per minute starting in a short time, like a year
[53:14.680 --> 53:20.380]  or so. So, if you think of that as a linear rate of inflation, every year there's going to be a
[53:20.380 --> 53:25.620]  fixed rate of Monero that gets added. If you think of what is the impact on the inflation rate,
[53:25.620 --> 53:31.580]  the inflation rate is going to be going to zero asymptotically. So over time, the inflation rate
[53:31.580 --> 53:36.520]  in Monero will get lower and lower and lower, and continuously be going towards zero, but never
[53:36.520 --> 53:41.280]  actually touch zero. And this is in contrast to the situation in Bitcoin, which will have
[53:41.280 --> 53:46.180]  equally zero, identically zero inflation in about 100 years time.
[53:46.880 --> 53:55.720]  So the distinction though between asymptotically zero inflation versus identically zero inflation
[53:55.720 --> 54:00.160]  is really irrelevant from the point of macroeconomic. If you look at any macroeconomic
[54:00.160 --> 54:06.120]  theory of money supply, even variable is the percentage of monetary growth per year. It's
[54:06.980 --> 54:13.880]  a percentage rate. He cares that the supply of U.S. dollars is going up by however trillions per
[54:13.880 --> 54:20.140]  year. You have to normalize that by the existing monies. It's the percentage inflation rate that
[54:20.140 --> 54:26.820]  has any impact on macroeconomic theory. And so the reality of the situation is that far from being
[54:26.820 --> 54:33.960]  quote unquote infinitely inflating, the inflation rate of Monero is asymptotically zero in contrast
[54:33.960 --> 54:41.020]  to Bitcoin, identically zero. And that distinction is totally irrelevant from the point of view of
[54:41.020 --> 54:46.980]  macroeconomic theory. From the point of macroeconomic theory, they're both zero.
[54:48.380 --> 54:52.240]  Here is showing what I'm talking about. So this is supply emission. So you're seeing
[54:52.920 --> 54:59.520]  to the left of the present, you are seeing actual data. So for the Bitcoin blockchain,
[54:59.520 --> 55:05.360]  this is the actual number of Bitcoin inflation historically taken from blockchain.com. And for
[55:05.360 --> 55:10.200]  Monero, what you're seeing is actual data from the Monero blockchain taken from the CLI client
[55:10.200 --> 55:18.520]  as very helpful utilities to glean like system level data on things on the blockchain within
[55:18.520 --> 55:27.540]  Monero. To the right, you see in faint color, the future projection, how much Bitcoin there will be
[55:27.540 --> 55:32.480]  over time, how much Monero there will be over time. So again, this is like a cool thing about
[55:32.480 --> 55:36.440]  cryptocurrencies, at least the ones that are legitimately set up to not be just a money
[55:36.440 --> 55:41.960]  on the part of people who create them. For legitimate decentralized cryptocurrencies,
[55:41.960 --> 55:49.480]  like Bitcoin and Monero, the emission schedule is designed in advance. And so you can kind of count
[55:49.480 --> 55:54.620]  on that there is a, of course, nobody can predict the future with uncertainty, like maybe the
[55:54.620 --> 56:01.040]  emission will not match these curves. But on the same time, you have an over 10 year history
[56:01.040 --> 56:05.220]  of matching between what actually happened on the blockchain and what was supposed to happen
[56:05.220 --> 56:11.140]  on the blockchain. That is due to the cooperation of this globally decentralized network by the
[56:11.140 --> 56:20.940]  rules. Next, if you look at Euro supply inflation, there's a really sobering curve to look at here
[56:20.940 --> 56:25.960]  with the dollar. Again, we're looking at the money zero maturity curve. We're seeing that
[56:25.960 --> 56:34.100]  post pandemic, there's been an over 30%, not over, almost 30% inflation in the supply of US dollars
[56:34.100 --> 56:39.800]  since then. So I'm taking the supply of the money now versus the supply of the money a year ago.
[56:40.340 --> 56:46.780]  And you can see that it's truly spiked to a kind of scary level since the pandemic.
[56:47.440 --> 56:51.580]  You can contrast this to the legit cryptocurrencies, Bitcoin and Binair,
[56:51.580 --> 56:56.120]  in which in the past, the inflation rate of both of these currents been very high.
[56:56.120 --> 57:01.020]  That is in order to get these coins out there to get, you're launching a new money. So we want to
[57:01.020 --> 57:06.000]  get these coins out there, get them into circulation. And also incentivize miners to
[57:06.000 --> 57:12.220]  get in kind of to join this network early to get in and help out like this fledgling new network.
[57:12.280 --> 57:16.460]  So as a result, in the past, inflation rates within cryptocurrency have been very high.
[57:16.780 --> 57:21.300]  You see, we're coming up on a new era of scarcity here. Bitcoin and Monero,
[57:21.300 --> 57:27.100]  both having year over year inflates that are on the order of 3%. And by the end of 2020,
[57:27.100 --> 57:31.260]  well, or if you look at a year from now, the inflation rates of Bitcoin and Monero will
[57:31.260 --> 57:37.520]  actually be lower than that. So the world gold council keeps track of its estimate of how much
[57:37.520 --> 57:42.160]  gold there is above in the world. And it's been doing this estimate for about 10 years now.
[57:42.160 --> 57:47.360]  You plot this inflation rate, which is the inflation rate of the gold supply that has
[57:47.360 --> 57:53.360]  been mined and refined and turned into bullion. So basically, this is the rate of gold bullion,
[57:53.360 --> 58:00.520]  right? And that ends up being an average of about 1.8% per year. Also, as an interesting aside,
[58:00.520 --> 58:05.560]  take this data from the world gold council and ask the question, is gold inflation more
[58:05.560 --> 58:10.880]  consistent with exponential growth or near growth? And it turns out significantly, it's more
[58:11.740 --> 58:17.600]  correlated like the, like an exponential fits the growth of the gold inflation better than
[58:17.600 --> 58:24.500]  the growth curve. So this is truly, it's more supported data, the past data to say that
[58:24.500 --> 58:28.840]  gold is growing all exponentially, just at a slower rate at about 1.8% per year.
[58:28.840 --> 58:33.940]  So if you think of gold as money, and most people kind of view gold as the first thing they think of
[58:33.940 --> 58:38.660]  when they use the phrase sound money, that was a line in the sand. So there's basically this 1%
[58:38.660 --> 58:43.700]  per year line in the sand where anything to the left of that is going to be a candidate for
[58:43.700 --> 58:49.120]  money. Anything to the right of that is going to be maybe more suspect in terms of a form of
[58:49.120 --> 58:54.880]  store of value. And you can see that again, the future of Bitcoin and Monero, that the inflation
[58:54.880 --> 59:01.120]  rate is very soon going to blow that of gold, which would, I would say, qualify both of the
[59:01.120 --> 59:08.780]  candidates for being sound money. All right, there's another unwanted form of scarcity I
[59:08.780 --> 59:13.580]  wanted to, that is that of mining hardware. So in the Bitcoin white paper, there's a phrase will be
[59:13.580 --> 59:18.620]  you one vote. And what that means is that the idea, when a computer joins the mining network,
[59:18.620 --> 59:22.500]  is that probability of getting a block reward should be roughly proportional to the
[59:23.060 --> 59:31.500]  to the resources that they have dedicated towards helping the network. So in other words,
[59:31.500 --> 59:35.600]  you put 10 computers on the network to help and you should get 10 times the reward of somebody
[59:35.600 --> 59:41.400]  who only put one computer on the Bitcoin network. So this is fine as long as all different types of
[59:41.400 --> 59:46.660]  computing device equally efficient at the mining algorithm. Fortunately, the economics of silicon
[59:46.660 --> 59:53.680]  development is linearity. So in Bitcoin, mining algorithm is simple enough that it is possible
[59:53.680 --> 59:59.660]  to design a custom piece of silicon that does nothing but mine for Bitcoin. The end result is
[59:59.660 --> 01:00:08.240]  that you have, you know, $50 million to invest in a fabrication facility in Shenzhen. Then it's
[01:00:08.240 --> 01:00:13.060]  possible for you to take that $50 million investment and develop with, you know, PhD
[01:00:13.060 --> 01:00:18.460]  electrical engineers, a custom piece of silicon that does nothing but mine Bitcoin. A whole bunch
[01:00:18.460 --> 01:00:24.100]  of those, you print out a whole bunch of those with your silicon fab. And now you have a specialized
[01:00:24.100 --> 01:00:29.500]  army of computers, which you can then use to connect to the Bitcoin network and have an
[01:00:29.500 --> 01:00:36.400]  advantage over all these others on the network who are using their Intel or AMD CPUs that are
[01:00:36.400 --> 01:00:42.080]  not optimized to do the Bitcoin proof of work and therefore are at a disadvantage. These little guys
[01:00:42.080 --> 01:00:49.380]  who are running their little CPUs now are spending much more on electricity per hash in Bitcoin
[01:00:49.380 --> 01:00:54.880]  than you are with your custom piece of silicon. So this situation has been happening many years now in
[01:00:54.880 --> 01:01:01.120]  the Bitcoin network. And we're at a point now, Bitcoin mining is now a Chinese dominated oligopoly.
[01:01:01.360 --> 01:01:06.160]  It's not necessarily a problem that it's China that has mining power. It is a problem that it's
[01:01:06.160 --> 01:01:11.460]  central. It's all in one region of the world. It's dominated by just a few people. One company
[01:01:11.460 --> 01:01:17.860]  that is on top of this oligopoly. And it's actually arguably still an oligopoly. It's
[01:01:17.860 --> 01:01:22.960]  moving towards monopoly status. So in the Monero community, we've looked at this and we've tried
[01:01:22.960 --> 01:01:29.840]  to avoid this, having this situation in Monero. And what we've done is we've adjusted the proof
[01:01:29.840 --> 01:01:35.480]  of work algorithm and evolved it to keep small indent miners viable. So unlike the situation
[01:01:35.480 --> 01:01:40.340]  in Bitcoin, where the guy with just a little, you know, gaming PC that they want to, you know,
[01:01:40.340 --> 01:01:45.500]  run overnight while weeping and they want to put that on the Bitcoin network. Well, somebody who
[01:01:45.500 --> 01:01:49.760]  does that on Bitcoin, you're wasting your power because your chance of getting a block on one
[01:01:49.760 --> 01:01:56.900]  with a CPU, it's like you have a better chance of a lotto, the Powerball. It'd be a better spend of
[01:01:56.900 --> 01:02:02.400]  your money to go buy a lottery ticket to increase your power bill by putting your suit on the
[01:02:02.400 --> 01:02:08.040]  Bitcoin network. That is not true in Monero. The math of the mining might, you know, it goes up
[01:02:08.040 --> 01:02:15.020]  and down. It might not be like a net positive for just to put their computer on the Monero network,
[01:02:15.020 --> 01:02:21.340]  but you have a magnitude higher chance of getting a payout by mining on Monero, a little guy with
[01:02:21.340 --> 01:02:27.060]  commodity hardware due in Bitcoin. So to make this proof of work has in Monero changed actually
[01:02:27.060 --> 01:02:33.180]  four times in 2018. And each of these proof of work changes has required a hard, hard forks
[01:02:33.180 --> 01:02:38.980]  or something that you never see in Bitcoin. There have been, you know, there's been a decision
[01:02:38.980 --> 01:02:46.480]  that hard forks in Bitcoin's core, in Bitcoin's, yeah, in Bitcoin core are not to be targeted because
[01:02:46.480 --> 01:02:51.700]  they want to preserve backwards capability. They want miners who don't bother to
[01:02:51.700 --> 01:02:57.500]  update their software to still be part of the network. Okay, well, I mean, that's their decision.
[01:02:57.500 --> 01:03:02.880]  It means that something like what we've done in Monero, which is to dynamically play this game
[01:03:02.880 --> 01:03:10.020]  with ASIC miners or ASIC manufacturers to reduce their impact on the Monero system, you could play
[01:03:10.020 --> 01:03:14.400]  that game if you are tying your hands behind your back and saying you're not going to accept hard forks.
[01:03:15.500 --> 01:03:20.600]  So here is data from the Monero blockchain that is shown talking about. So what I'm showing is
[01:03:20.600 --> 01:03:26.560]  since the invention of Monero in 2014, April 2014 is when Monero started, about five years
[01:03:26.560 --> 01:03:33.860]  ago. But since 2014, it's been running for over six years now. So Monero has a demonstrated
[01:03:33.860 --> 01:03:39.360]  track record of over six years of operation. So initially, the proof of work algorithm was
[01:03:39.360 --> 01:03:44.300]  Kryptonite, which defined in the Kryptonite white paper. But as you see, in late 2017,
[01:03:44.300 --> 01:03:49.480]  there's to be a increase in the network. And what this means is that all of a sudden,
[01:03:49.480 --> 01:03:53.980]  the Monero network was seeing a whole bunch of extra computing power to its mining network.
[01:03:53.980 --> 01:03:59.820]  And this was interpreted as being ASICs. ASICs were in other words, people had figured out
[01:03:59.820 --> 01:04:03.900]  Monero's proof of work and then designed a custom people can to do nothing but that,
[01:04:03.900 --> 01:04:08.680]  then plug it in. And once they get into the Monero network, they were receiving the lion's share
[01:04:08.680 --> 01:04:14.620]  of rewards to the detriment of the, you know, little guys out there who were just trying to
[01:04:14.620 --> 01:04:20.920]  run Monero on their single little, you know, commodity hardware rig. So there was a lot of
[01:04:20.920 --> 01:04:24.780]  alarm and just got this in the Monero community. And as a result of this,
[01:04:24.780 --> 01:04:29.500]  0.12 came out of Monero, which introduced Kryptonite v2, which variant, you know,
[01:04:29.500 --> 01:04:34.760]  it was just a couple numbers in Kryptonite. But it was enough to render the currently existing
[01:04:34.760 --> 01:04:39.180]  ASICs operable on the old network. And so you can see when that went live on the network,
[01:04:39.180 --> 01:04:43.480]  and again, that required a hard fork, which means it acquired the cooperation of the Monero community
[01:04:43.480 --> 01:04:49.620]  to other nodes to run Kryptonite v2 as the new perk. And that happened. After that happened,
[01:04:49.620 --> 01:04:55.960]  you can see the different nodes dived back down. So again, you had small miners with
[01:04:55.960 --> 01:05:02.760]  commodity hardware being able to mine. Then a few months later, ASICs came onto the network.
[01:05:02.780 --> 01:05:08.440]  So there's a lead time of several months that ASIC makers to introduce a new piece of silicon to
[01:05:09.260 --> 01:05:15.440]  fruition. So that happened again. ASICs, again, spiked the difficulty level of the Monero network.
[01:05:15.440 --> 01:05:20.240]  Again, we changed the proof of work to Kryptonite v3. It happened again in 2008,
[01:05:20.400 --> 01:05:25.080]  a third time ASICs on the network. And then we came up with Kryptonite. So now we're changing
[01:05:25.080 --> 01:05:30.680]  the proof of work in bigger and bigger increments. So Kryptonite introduced a random code execution
[01:05:30.680 --> 01:05:35.960]  aspect. And for then several months, there was apparently no reaction from the ASICs,
[01:05:35.960 --> 01:05:40.340]  because they also knew that the Monero community, what it said, when it said,
[01:05:40.340 --> 01:05:44.900]  we didn't want ASICs on the network, and we were going to try to evolve to prevent that.
[01:05:44.900 --> 01:05:52.540]  So finally, in v0.15, RandomX became the proof of RandomX is now a, it does fully random code
[01:05:52.540 --> 01:06:00.060]  execution as its proof of work. And ASIC that is most eyes to do RandomX, as it turns out,
[01:06:00.060 --> 01:06:06.960]  is Ryzen Threadripper CPU that you can buy on Amazon. It's not a custom Bitcoin miner that
[01:06:06.960 --> 01:06:12.600]  you have to go on the express or, you know, have have connection then to be able to get
[01:06:12.600 --> 01:06:19.080]  in a timely manner. So since that CPUs have been healthily dominating the network, and
[01:06:19.080 --> 01:06:26.040]  all signs are so far that that has been working. And, but this is a testament to the length to
[01:06:26.040 --> 01:06:29.880]  which you need flexibility in your protocol deal with these sorts of things. This is,
[01:06:29.880 --> 01:06:35.440]  this is network security software and network security is always changing. And so to, to have
[01:06:36.000 --> 01:06:40.060]  a attitude like we have in the Monero community, that hard forks are going to be necessary from
[01:06:40.060 --> 01:06:45.640]  time to time to new improvements. And unfortunately, the nodes in the mining network
[01:06:45.640 --> 01:06:51.060]  that fail to upgrade their computers, or they're just, they just gonna, they're going to miss the
[01:06:51.060 --> 01:06:55.740]  train. I mean, this is a moving train, there's new technology going, and they're going to miss it.
[01:06:55.740 --> 01:07:01.220]  And so that's the decision that's been made in Monero, or it's been working. There's another
[01:07:01.220 --> 01:07:05.480]  form of unwanted scarcity and that access to layer one. So Bitcoin's one megabyte block limit
[01:07:05.480 --> 01:07:11.100]  has caused a project. There was a line of code in the Bitcoin code base that Satoshi
[01:07:11.100 --> 01:07:17.160]  has a spam prevention measure. So the network was going to end in the early days of Bitcoin. So
[01:07:17.160 --> 01:07:24.640]  Satoshi wrote that the maximum size of a new block could only make a byte. And so the question,
[01:07:24.640 --> 01:07:29.520]  you know, should we move this came up several years ago when interest in the Bitcoin was growing
[01:07:29.520 --> 01:07:35.020]  and the transactions were growing and coming up against that one megabyte limit. So basically a
[01:07:35.020 --> 01:07:39.780]  civil war happened within Bitcoin to fight over whether this should be retained or not. And yes,
[01:07:39.780 --> 01:07:44.960]  of course, I'm well aware that one of the sides adopted SegWit, which kind of effectively
[01:07:44.960 --> 01:07:49.860]  increased the block limit to 1.3 megabytes. Although, you know, that extra 300 kilobytes
[01:07:49.860 --> 01:07:54.980]  in this big scheme of things, you know, it's like a, it's not that big. Anyway, you have one side
[01:07:54.980 --> 01:07:58.840]  in Bitcoin that wanted to stick with this and the other one didn't. And then the one that didn't had
[01:07:58.960 --> 01:08:05.840]  a further divorce. So you basically have, you know, a lot of animosity in the larger Bitcoin
[01:08:05.840 --> 01:08:11.300]  community using, when I group all the forks together, it's not really a key because they
[01:08:11.300 --> 01:08:18.280]  really don't play well together. And even though they've had a divorce and separate blockchains
[01:08:18.280 --> 01:08:23.460]  with separate assets at this point, there's still a lot of hate going on still to this day. If you
[01:08:23.460 --> 01:08:30.220]  want to join, you know, Bitcoin as a person to contribute, you have to, you know, make your
[01:08:30.220 --> 01:08:35.700]  loyalty very early on. Are you loyal to Bitcoin Core or Bitcoin Cash or Bitcoin SV? You have to
[01:08:35.700 --> 01:08:41.820]  make that decision. And once you're in, that's your, that's your camp. That's your, in Monero,
[01:08:41.820 --> 01:08:46.400]  there is just one team. And I think that the reason for that is that the goal of the project
[01:08:46.400 --> 01:08:52.420]  is more easily defined. It is to be private, digital, fungible cash that takes all of the
[01:08:52.420 --> 01:08:59.460]  goodness of Bitcoin that is the centralized nature. It's not having a committee or a company
[01:08:59.460 --> 01:09:06.520]  behind, being a totally grassroots effort, just like Bitcoin is, but add integrability to it.
[01:09:07.320 --> 01:09:11.800]  So in Monero, we have one adaptive block weight. It used to be called the adaptive size, but then
[01:09:11.800 --> 01:09:17.000]  it got, the algorithm got changed and upgraded. So the adaptive block weight. But the basic idea
[01:09:17.000 --> 01:09:22.480]  is that the, instead of having a hard-coded limit on the size of new blocks, in Monero,
[01:09:22.480 --> 01:09:27.640]  the limit is going to dynamically expand and contract to kind of organically reach that of
[01:09:27.640 --> 01:09:35.240]  the underlying demand for Monero transactions. So there's a disincentive that kicks in if a miner
[01:09:35.240 --> 01:09:40.360]  chooses to make a block that's big, but also user fees increase if the blocks are big. So
[01:09:40.360 --> 01:09:46.180]  if there's a lot of, if there was a sudden crash in Monero for transactions based, then there's
[01:09:46.180 --> 01:09:50.480]  going to be an increase in the user fees to help make up for the fact that I'm not going to be
[01:09:50.480 --> 01:09:58.300]  disincentivizing it, less of a reward from coin emission. So as you can see, putting the system
[01:09:58.300 --> 01:10:04.800]  into practice, you can see that overall the trend in Bitcoin transactions per day has been roughly,
[01:10:04.800 --> 01:10:11.180]  I would say for the last say five years, if you look back to say 2016, then you can see that
[01:10:11.180 --> 01:10:15.220]  there's been a limit here, an asymptotic limit of transactions per day that have been happening
[01:10:15.220 --> 01:10:21.600]  in Bitcoin. Look at the recent history of Monero, you can see basically an uptrend line here. It
[01:10:21.600 --> 01:10:25.060]  doesn't look like much of a trend line, but you have to, this is an exponential scale that I'm
[01:10:25.060 --> 01:10:30.980]  showing here on the vertical axis, which means basically in the last four years or so, between
[01:10:30.980 --> 01:10:36.800]  now and say 2017, so like a little under four years, there's been almost effect on increasing
[01:10:36.800 --> 01:10:42.100]  the transactions per day. So it's been growing. It's been organically growing. There's nothing
[01:10:42.740 --> 01:10:49.380]  artificially limiting growth in the Monero blockchain like an arbitrarily sized block limit.
[01:10:50.660 --> 01:10:56.680]  All right, so moving on then to the difference between transparency and fungibility. Bitcoin
[01:10:56.680 --> 01:11:02.200]  is transparent. If you are new to cryptocurrency, you have kind of read all these news articles,
[01:11:02.200 --> 01:11:06.980]  which of course mature the details of what's going on all the time in the popular press,
[01:11:06.980 --> 01:11:12.760]  you might be under the false impression that Bitcoin is a very secretive currency, that
[01:11:12.760 --> 01:11:17.380]  once you're trending Bitcoin, nobody knows what you're doing. Nothing could be further from the
[01:11:17.380 --> 01:11:23.040]  truth. It itched to get itched forever for all to see. Every transaction, you have the sender,
[01:11:23.040 --> 01:11:29.220]  the receiver, and the amount. Those are in plain text in every Bitcoin block specified in the
[01:11:29.220 --> 01:11:33.980]  Bitcoin white paper. It's all there. You can see the transaction is in plain text. Every address
[01:11:33.980 --> 01:11:40.620]  is encoded in the blockchain in plain text, which means it's trivial to code up what's called a
[01:11:40.620 --> 01:11:45.940]  block explorer. You go to these block explorers and you type in anyone's address. It doesn't have
[01:11:45.940 --> 01:11:49.600]  to be your address. It can be anyone in the world's Bitcoin address that you type in,
[01:11:49.600 --> 01:11:54.580]  and it'll instantly spit out for you how much money does that account have,
[01:11:56.240 --> 01:12:01.900]  who did that send money to or receive money to for its complete history, all the way back to the
[01:12:01.900 --> 01:12:06.360]  miner who initially mined that Bitcoin. So it's as if you have a dollar bill, and on the back of
[01:12:06.360 --> 01:12:10.980]  that $10 bill, you have a nice list showing everyone in history who owned that $10 bill
[01:12:10.980 --> 01:12:17.200]  before you. So it went to a bunch of people, then all the way back to the mint. So what possibly
[01:12:17.200 --> 01:12:21.680]  could be the downside consequence to a system like that? And actually, in Bitcoin, it's even
[01:12:21.680 --> 01:12:26.500]  worse than a piece of cash that has it on the back of it. Because at least if this list were
[01:12:26.500 --> 01:12:31.140]  written on paper on the currency bill, then it would be only you who could see that list at any
[01:12:31.140 --> 01:12:38.060]  time. But as in Bitcoin, everyone in the world has access to that complete history of every Bitcoin
[01:12:38.060 --> 01:12:44.540]  for every single Bitcoin in existence. This puts innocent people and businesses at risk.
[01:12:45.180 --> 01:12:51.260]  Not only is there the risk that key clean innocent people can become victims of crime,
[01:12:51.260 --> 01:12:55.940]  because it is possible for anyone in the world to look at their address and see how much money
[01:12:55.940 --> 01:13:02.520]  they have. And therefore, for nefarious people to assess their credits before they go after them.
[01:13:02.700 --> 01:13:07.300]  There's also an even more pernicious effect that putting innocent people at jeopardy
[01:13:07.300 --> 01:13:13.180]  is that reputation trend in Bitcoin as well as value. So because every coin is traceable back
[01:13:13.180 --> 01:13:18.000]  to there, this invites voyeurism. Like I mentioned, it's possible to up anyone's bank account
[01:13:18.000 --> 01:13:24.160]  in Bitcoin at any time. But it also promotes guilt by association. Because if you have knowledge of
[01:13:24.160 --> 01:13:30.840]  who sends money to who, and then somehow figure out who, like faces that correspond to these
[01:13:30.840 --> 01:13:36.200]  Bitcoin addresses, and furthermore, you have known, quote unquote, bad people in the network
[01:13:36.200 --> 01:13:42.540]  who are in transact Bitcoin, then you can connect the dots. Basically, you can come up with a
[01:13:42.540 --> 01:13:48.320]  hypothesis that people who have transacted coin with known bad actors are themselves
[01:13:48.320 --> 01:13:54.140]  more likely to be bad. So what ends up happening is that really transparent data that is in
[01:13:54.140 --> 01:14:02.420]  in blockchain, combined with the ever-growing mass of metadata that links specific coin addresses to
[01:14:02.420 --> 01:14:08.020]  the identities of names and people, that grows, you have what constitutes a social credit score
[01:14:08.020 --> 01:14:13.900]  within Bitcoin. So we in the West, we tend to look at this news of social credit score in China and
[01:14:13.900 --> 01:14:18.800]  kind of shake our heads at it and say, wow, that's just horrible that they tell this,
[01:14:19.280 --> 01:14:23.980]  you know, this data of who your friends are, who you choose to interact with,
[01:14:23.980 --> 01:14:29.980]  and then deliver consequences, either good or bad at behavior. Wow, that's just awful that they do
[01:14:29.980 --> 01:14:35.740]  that in China. And then people sign up for Bitcoin accounts in which the exact same is happening.
[01:14:35.740 --> 01:14:40.820]  So the transparency of the Bitcoin network is being used again to formulate these social credit
[01:14:40.820 --> 01:14:45.580]  score networks. And there are companies that specialize in nothing but this. There are chain
[01:14:45.580 --> 01:14:51.880]  analysis companies that will assign basically a social credit score to every Bitcoin address that
[01:14:51.880 --> 01:14:59.040]  exists. So there's a guilt by association that is introduced at the human level. This has nothing to do
[01:14:59.040 --> 01:15:03.920]  with the technical level. And so it's a reason why those people in Bitcoin who tend to see things
[01:15:03.920 --> 01:15:11.460]  as just technical things and ignore the social human aspect will discount this. Because, oh, well,
[01:15:11.460 --> 01:15:17.120]  they're censorship resistant Bitcoin. Nobody can possibly stop a Bitcoin transaction happening.
[01:15:17.120 --> 01:15:21.740]  Yes, that's true on a technical level. But if you have a situation where certain Bitcoin
[01:15:21.740 --> 01:15:28.740]  addresses are basically hot potato, they're like pariahs, they're bad people that aren't supposed
[01:15:28.740 --> 01:15:34.520]  to be dealt with. Then on a social level, there are consequences to certain addresses that are
[01:15:34.520 --> 01:15:39.920]  transacting in Bitcoin as opposed to us. So this technical censorship resistance that happens
[01:15:39.920 --> 01:15:46.180]  on an IP on a data sort of level gets destroyed at a human level, at the actual societal level,
[01:15:46.180 --> 01:15:52.260]  because the chain is completely transparent. In contrast to this, Monero is fungible. There are
[01:15:52.260 --> 01:15:56.220]  three technologies in Monero that combine to promote this indistinguishability. There's ring
[01:15:56.220 --> 01:16:00.700]  signatures that protect the sender's identity, stealth addresses that protect the receiver's
[01:16:00.700 --> 01:16:06.760]  identity, and RingCT that keeps the amount sent private. Now, original Monero white paper,
[01:16:06.760 --> 01:16:11.120]  the CryptoNote white paper, had specifications for the first two of these three technologies
[01:16:11.120 --> 01:16:14.500]  for rings and stealth addresses, but it did not mention RingCT. That was a new
[01:16:14.500 --> 01:16:20.160]  innovation that happened after Monero went live. And so, again, this is another example
[01:16:20.160 --> 01:16:25.040]  of the attitude within Monero, which is no compromises. We are going to do what is best
[01:16:25.040 --> 01:16:29.660]  to make the best fungible currency possible. That includes doing hard forks, and that includes lots
[01:16:29.660 --> 01:16:35.720]  of research, coming up with new stuff, and putting the best that we have out there. So
[01:16:36.500 --> 01:16:41.440]  RingCT required original cryptographic research on the part of a research lab. We're talking about
[01:16:41.440 --> 01:16:48.860]  like post-doc, PhD-level cryptography with mathematicians. We have those working with us
[01:16:48.860 --> 01:16:53.720]  in Monero. Furthermore, you needed coders, like developers, software developers, who could
[01:16:53.720 --> 01:16:58.200]  understand higher-level math that was being discussed and then put that implementation in code
[01:16:59.220 --> 01:17:04.180]  and also have kind of wisdom to realize that there might be bugs in this. And so maybe it'd be a good
[01:17:04.180 --> 01:17:09.880]  idea to pay independent parties to do an external audit of any new code that gets in Monero. That
[01:17:09.880 --> 01:17:13.380]  happened with Monero, and it's happened on a routine basis for all major innovations that
[01:17:13.380 --> 01:17:18.080]  have happened within Monero, including RingCT, and there have been four or five in the last few years.
[01:17:18.300 --> 01:17:22.300]  And then finally, you need a community that has a commitment to actually implementing the stuff
[01:17:22.300 --> 01:17:28.260]  that gets out from the research and the development phases. So you have a community of people running
[01:17:28.260 --> 01:17:34.360]  Monero on their own computers. They stay with the program. They have their ears to the ground.
[01:17:34.360 --> 01:17:38.860]  They know, they're aware that there's such a thing as RingCT coming up, and then they implement it.
[01:17:38.860 --> 01:17:44.220]  They do the hard work to make it happen. So this, again, is showing some data that's comparing some
[01:17:44.220 --> 01:17:49.780]  data between the Bitcoin and Monero blockchains to show how fungible scarcity has been made better
[01:17:49.780 --> 01:17:54.160]  in Monero and its history. So here on top, I'm showing the average bytes per transaction.
[01:17:54.820 --> 01:18:00.420]  That is, on Bitcoin, it's been pretty constant. Again, there's been this attitude in Bitcoin that
[01:18:00.420 --> 01:18:05.040]  be very conservative. They don't want to make many changes to the code because that there's
[01:18:05.240 --> 01:18:10.340]  a whole lot of money being entrusted on their network. Whereas, of course, if you look on a
[01:18:11.380 --> 01:18:16.340]  global scale, you zoom out a little bit, you know that Bitcoin is just like a tiny,
[01:18:16.340 --> 01:18:25.480]  bug-sized in a land of dinosaurs. The existing fiat monetary infrastructure dwarfs Bitcoin.
[01:18:25.480 --> 01:18:32.940]  And so one can question whether the attitude of, oh, we are trusted with such a huge amount of
[01:18:32.940 --> 01:18:37.980]  money. We have to be super conservative and not introduce anything that could rock the boat.
[01:18:37.980 --> 01:18:41.480]  Is that really the right attitude to take for something that is an upstart?
[01:18:41.920 --> 01:18:46.040]  Nevertheless, that's been the kind of ethos within Bitcoin. And you can see that the daily
[01:18:46.040 --> 01:18:50.880]  average byte per transaction is pretty constant over time, over its history. In contrast with
[01:18:50.880 --> 01:18:58.620]  Monero, it's been quite a bit of a story that is encoded in this that shows the size in bytes of
[01:18:58.620 --> 01:19:03.240]  average trend in Monero. In the early days of Monero, there were limited outputs. And what
[01:19:03.240 --> 01:19:08.260]  that means is you can envision there's like a one Monero, a two Monero chunk, a three Monero chunk,
[01:19:08.260 --> 01:19:14.520]  and tens, 10, 20, 30, 100, 200, 300, and then going the other way, so 0.1s or 0.2s or 0.3s.
[01:19:14.520 --> 01:19:21.400]  There are these discrete units, little globs of Monero that were used as kind of the nugget of
[01:19:21.400 --> 01:19:27.620]  the money supply. So if somebody in the early days of Monero to send, say, 123 Monero to somebody,
[01:19:27.620 --> 01:19:32.440]  then you would have to come up, round around in your wallet, in your cryptocurrency wallet,
[01:19:32.440 --> 01:19:37.840]  to come up 100 Monero bill, a 20 Monero bill, and a three Monero, and put those together,
[01:19:37.840 --> 01:19:41.400]  and then make a transaction that would send those out to the desired recipient.
[01:19:41.880 --> 01:19:47.220]  There are problems with this because one could see in those early days of Monero that a 100
[01:19:47.220 --> 01:19:52.800]  unit got sent, a 20 Monero unit, and a three unit Monero, like the values of those denominators
[01:19:52.800 --> 01:20:00.940]  all were seen. So if somebody did a 123 Monero, and then three days later another trend showed up
[01:20:00.940 --> 01:20:09.100]  that also moved 123 Monero, then you could have a pretty educated guess that those two transactions
[01:20:09.100 --> 01:20:15.720]  were related somehow. So when RingCT came out and it was researched, it was quickly enabled,
[01:20:15.720 --> 01:20:22.020]  even though it wasn't, that the transaction size would inflate by order of magnitude. So when RingCT
[01:20:22.020 --> 01:20:26.760]  was enabled, you can see here in early 2017, it was enabled and not mandated, and yet you see that the
[01:20:26.760 --> 01:20:31.240]  transaction sizes jumped way up, and that is because people in the Monero community actually
[01:20:31.240 --> 01:20:38.160]  did tend to use RingCT because it was a better technology. Then in 2017 RingCT became
[01:20:38.160 --> 01:20:43.960]  mandatory. So you could see that there's this situation for about two years, almost two years,
[01:20:43.960 --> 01:20:49.660]  in which transactions in Monero were almost three orders of magnitude larger than in Bitcoin. So you saw
[01:20:49.780 --> 01:20:55.820]  a lot of chatter in the crypto Twitter and the crypto press that Monero transactions
[01:20:55.820 --> 01:21:01.120]  are gigantic and how could you possibly scale this kind of system. And you still see
[01:21:01.120 --> 01:21:07.480]  objections to this to this day. Even this problem was mitigated to a large extent late 2018 when
[01:21:07.480 --> 01:21:12.180]  Bulletproofs came around. Bulletproof was a new cryptographic advance that the Monero research
[01:21:12.180 --> 01:21:18.380]  left with, and again it went through the same process of coding, external audit, and after the
[01:21:18.380 --> 01:21:24.220]  audit came back by several independent audits that the code was legit, the research was legit,
[01:21:24.220 --> 01:21:28.780]  it went into the Monero network, and you can see the effect of Bulletproofs was to reduce the
[01:21:28.780 --> 01:21:34.020]  transaction size of RingCT transactions by more than an order of magnitude, while keeping the
[01:21:34.020 --> 01:21:39.280]  same cryptographic guarantee that the sum of the inputs was the sum of the outputs.
[01:21:40.700 --> 01:21:48.540]  Okay, so at that point then the transaction size went down, and as you can see in Monero,
[01:21:48.540 --> 01:21:53.380]  since the transaction fee is a function of transaction size, the transaction fee also
[01:21:53.380 --> 01:21:58.860]  took an order of magnitude reduction in late 2018 when Bulletproofs went live on the system.
[01:21:58.860 --> 01:22:04.840]  So you can see since, you know, fall of 2018, transactions on Monero have been at the one penny
[01:22:04.840 --> 01:22:11.260]  level instead of the the dollars level. And coming up in Monero, there's even more research
[01:22:11.260 --> 01:22:15.100]  coming down the pipeline. That's CLs, which is a new innovation, it's a new optimization
[01:22:15.640 --> 01:22:20.700]  that was noted by Dr. Soren Noether of the Monero Research Lab, in which he noticed that there was
[01:22:20.820 --> 01:22:27.100]  a further efficiency gained for zero, for a negative computational cost, and if space being
[01:22:27.100 --> 01:22:32.860]  taken up retroactively for even trends that have happened in the past. So what we're going to see
[01:22:32.860 --> 01:22:37.980]  when CL sags in October 2020, and again CL sags went through the same audit process, there was an
[01:22:37.980 --> 01:22:43.360]  external audit process that just completed, actually which my consulting was, had the
[01:22:43.860 --> 01:22:49.920]  pleasure of contributing to financially. After that audit came back positive, now it is set,
[01:22:49.920 --> 01:22:54.880]  it is being worked on for inclusion in the Monero hard fork coming up on mid-October of this year.
[01:22:54.880 --> 01:22:58.300]  And once that happens, you're going to see daily average bytes per transaction.
[01:22:58.840 --> 01:23:04.340]  Step down. It's a more modest step down than bullet, but you can see that the direction is
[01:23:04.340 --> 01:23:09.420]  that the transaction size between Monero and Bitcoin is shrinking. It's shrinking that's due
[01:23:09.420 --> 01:23:17.120]  to sustained effort on the part of the Monero community to not only recognize innovation,
[01:23:17.120 --> 01:23:21.160]  but also support its development, actually implement the innovation when it comes through.
[01:23:22.360 --> 01:23:27.300]  All right, there's a Nobel Prize winning paper in the used car market that I talk about, because
[01:23:27.300 --> 01:23:35.580]  this really hits home why it is that key clean people need Monero. People with nothing to hide
[01:23:35.580 --> 01:23:41.420]  actually need Monero. And the basis comes from this paper from the 1970s from George A. Kellogg,
[01:23:41.420 --> 01:23:45.480]  again won the Nobel Prize in economics for this insight, on asymmetric information.
[01:23:46.160 --> 01:23:50.740]  So here's what his paper talks about, the used car market. Now there are two types of used cars
[01:23:50.740 --> 01:23:55.740]  in this paper. There are lemons, lemons are the bad cars which break down and nobody wants to
[01:23:55.740 --> 01:24:00.900]  own them like those who are involved in a flood or hurricane or something like that. Now they're,
[01:24:00.900 --> 01:24:06.980]  you know, problem cars. On the other hand, peaches, peaches are the good used cars, which were taken
[01:24:06.980 --> 01:24:12.400]  care of by their owners. Now sellers, which type of car they have, they know whether they're selling
[01:24:12.540 --> 01:24:16.780]  a lemon, and they know if they're selling a peach. You know, if your car has been involved
[01:24:16.780 --> 01:24:21.260]  in a hurricane, know that you will have seen your car sitting in four feet of water. And now you
[01:24:21.260 --> 01:24:25.600]  decide that you want to try and sell your car because it's been in four feet of water. So but
[01:24:25.600 --> 01:24:29.700]  before you do that, you make sure that the paint job on your car is extra shiny and clean because
[01:24:29.700 --> 01:24:35.760]  you want it to superficial look good. Superficial good looks are also going to be there for the
[01:24:35.760 --> 01:24:40.780]  peach seller. But in contrast to the lemon seller, the peach seller has been busy, you know, keeping
[01:24:40.780 --> 01:24:45.400]  their car in a garage and doing the oil changes all the time and so on. They've been taking,
[01:24:45.400 --> 01:24:51.180]  you know, top care of their car. Now buyers come to this market and they can't sell apart lemons
[01:24:51.180 --> 01:24:57.200]  from peaches. But they know that they're ignorant. They know there are both bad cars in the market
[01:24:57.200 --> 01:25:02.060]  and there are good cars in the market. And there is a probability that as a used car buyer, you
[01:25:02.060 --> 01:25:06.940]  are going to end up with a lemon. You'll do everything you can to try to reduce your level
[01:25:06.940 --> 01:25:12.760]  of ignorance to, you know, the condition of any given used car. But at the end of the day, you
[01:25:12.760 --> 01:25:18.280]  don't know what happened to that car before you owned it. So you have to, you can't discount the
[01:25:18.280 --> 01:25:22.860]  probability that you're going to get a lemon. So what is a buyer going to do when they faced with
[01:25:22.860 --> 01:25:28.740]  this situation, when they are relatively ignorant with the buyer as to the condition of the goods
[01:25:28.740 --> 01:25:34.680]  that they're buying? The buyer is going to make an offer price for the purchase of a car, and that's
[01:25:34.680 --> 01:25:39.560]  going to be equal to the lemon price. Because after all, the lemon price is the minimum price a car
[01:25:39.560 --> 01:25:43.920]  could be worth. So they're going to offer at least that. And then on top of that, they're going to
[01:25:43.920 --> 01:25:50.080]  offer a bit more. And the bit more part is going to be contingent on what the buyer perceives as
[01:25:50.080 --> 01:25:55.100]  being the probability that the buyer is going up with a peach or a lemon. So here, offer price
[01:25:55.100 --> 01:26:01.460]  equals lemon price plus the perceived peach probability or likelihood multiplied by the
[01:26:01.460 --> 01:26:06.020]  price difference between a peach and a lemon. So if you think there's a 100% chance that you're
[01:26:06.020 --> 01:26:09.620]  going to get a lemon, you're going to offer the lemon price. If there's a 100% chance that you're
[01:26:09.620 --> 01:26:15.140]  going to get a peach, you would offer the lemon price plus the peach price minus the lemon, which ends up being
[01:26:15.140 --> 01:26:20.540]  the peach price. And then if you have a probability of getting a peach that's less than a percent,
[01:26:20.540 --> 01:26:24.540]  then you adjust your price accordingly. This is just very rational. It's what a rational do
[01:26:24.540 --> 01:26:30.580]  when faced with a probability of getting something of inferior quality, and they are ignorant as to
[01:26:30.580 --> 01:26:33.860]  which they're going to get, but know that there's a probability that they're going to get either a
[01:26:33.860 --> 01:26:39.340]  good one or a bad one. So now let's offer that's coming from the buyer and look at it from the
[01:26:39.340 --> 01:26:42.500]  seller's point of view. And again, there are two types of sellers. There are lemon sellers and
[01:26:42.500 --> 01:26:46.160]  there are peach sellers. The lemon sellers are going to look at this offer and they're going to say,
[01:26:46.160 --> 01:26:54.280]  wow, this sucker here is offering me almost a peach price because they think that there's a
[01:26:54.280 --> 01:27:00.620]  90% chance they're going to get a peach. I'm selling them my lemon. So let me act like I'm
[01:27:00.620 --> 01:27:05.480]  going to hum in high and be very on the fence about this, but on the inside, I'm jumping with
[01:27:05.480 --> 01:27:11.000]  joy because I'm about to dump lemon and sell it to this sucker who is on me almost a peach price
[01:27:11.000 --> 01:27:15.620]  for it. So basically when this offer is to a lemon seller, they say, okay, offer accepted.
[01:27:16.060 --> 01:27:21.680]  That same offer when heard by the ears of a peach seller is not quite attractive.
[01:27:21.680 --> 01:27:26.360]  So basically the peach seller has been doing all the maintenance, all the work to keep their car
[01:27:26.360 --> 01:27:33.760]  nice and clean. And here comes this idiot, this greedy buyer who is too stupid to understand
[01:27:33.760 --> 01:27:42.540]  that this peach is selling a pre-moped. It is worth every penny that is being advertised for,
[01:27:42.540 --> 01:27:48.780]  which is the peach price. And yet this guy comes to you and in spite of all of the evidence
[01:27:48.780 --> 01:27:53.080]  that you provide, been doing a great job of upkeeping that car, you still get lulled because
[01:27:53.080 --> 01:27:57.160]  they're still afraid that they're going to get a lemon. So the tendency is for sellers to say,
[01:27:57.160 --> 01:28:01.480]  no, thanks. I am not going to accept your offer. I'm going to keep my used car because it's worth
[01:28:01.480 --> 01:28:06.040]  quite a bit to me. I'll just drive until it, you know, until it stops working. And in fact,
[01:28:06.040 --> 01:28:10.520]  that's what you see in real life. Peach sellers disengage from the used car market.
[01:28:10.640 --> 01:28:16.760]  And what happens when the peach sellers disengage from the market is that now the fraction of lemons
[01:28:16.760 --> 01:28:23.060]  being sold goes up. Because the fraction of lemons now is higher than it used to be,
[01:28:23.060 --> 01:28:28.960]  the buyers get wind of that, wise to that fact. And when they adjust their probability of getting
[01:28:29.220 --> 01:28:34.680]  a lemon to be higher, now they're going to lower offer price. And so the key insight of the
[01:28:34.680 --> 01:28:38.600]  paper is that you have this race to the bottom. You have the situation of a negative feedback
[01:28:38.600 --> 01:28:42.900]  loop in which the people buying used cars, because of ignorance, because of their fear of getting
[01:28:42.900 --> 01:28:48.680]  burned, they are going to continually lower their offer price as more and more evidence comes in,
[01:28:48.680 --> 01:28:54.960]  that it's only lemons that there are likely to buy in the market. Meanwhile, as the offer price
[01:28:54.960 --> 01:29:00.360]  going down and down and down, the peach sellers become even more likely to leave the market.
[01:29:00.360 --> 01:29:06.400]  As buyers are increasingly unwilling to pay a peach price they know to be a peach, the peach
[01:29:06.400 --> 01:29:10.340]  sellers are going to disengage from that market and withdraw from it and keep there. They're just
[01:29:10.340 --> 01:29:15.360]  not going to participate in that market. So this conclusion in the Akerlof paper that what
[01:29:15.360 --> 01:29:22.540]  you end up with is a market of used cars 100% lemons. Let's look at this and apply it to two
[01:29:22.540 --> 01:29:28.940]  applications. So first is DEF CON safe mode, what we're doing right now. So if you think of used car
[01:29:28.940 --> 01:29:32.640]  status, you think of the used car market, and instead of the car market now we're going to have
[01:29:32.640 --> 01:29:40.360]  the market for social interaction, right? So a healthy person is a peach. A healthy person is
[01:29:40.360 --> 01:29:45.840]  faced with this decision of wanting to go to DEF CON this year and have a sweet time because it's
[01:29:45.840 --> 01:29:51.020]  this, you know, the geeks taking over Las Vegas for a few days and that is just super cool because
[01:29:51.020 --> 01:29:55.880]  usually it's not geek taking over Las Vegas. And you know, I want to go and I want to make new
[01:29:55.880 --> 01:30:00.240]  friends. I want people who are into the same stuff I am. I want to learn about new stuff I hadn't
[01:30:00.240 --> 01:30:05.580]  known about before. That's a graceful marketplace that I in the past have been to get into. That's
[01:30:05.580 --> 01:30:09.360]  the social marketplace that we're talking about instead of the used car market. And you as a
[01:30:09.360 --> 01:30:15.000]  healthy person, you are a peach seller. You have a healthy body so that's like a peach, right?
[01:30:15.000 --> 01:30:20.380]  What is your chance of returning home from DEF CON having bought a lemon? That is, what is your
[01:30:20.380 --> 01:30:26.520]  chance of going to DEF CON and then come back home having contracted a virus that spread around
[01:30:26.520 --> 01:30:32.340]  in a global pandemic? It's a probability that you have to assess. And just like the buyer in the
[01:30:32.340 --> 01:30:37.280]  used car market, there's a lot of unseen behind that probability assessment. There's a lot of
[01:30:37.280 --> 01:30:41.720]  subsidy, you know, different people will come to different conclusions on what that probability is
[01:30:41.720 --> 01:30:47.220]  and different people come to different conclusions on the negative kind of value of the consequence
[01:30:47.220 --> 01:30:53.420]  if you do end up with a lemon, right? But the end result is that in the marketplace of social
[01:30:53.420 --> 01:30:59.720]  interaction, just like in the used market, there is now high uncertainty as to what the value is of
[01:30:59.720 --> 01:31:04.680]  the social interaction product that you're buying convention. What is the value of that? It could be
[01:31:04.680 --> 01:31:09.680]  positive like it has been in most DEF CONs where you come from DEF CON with a lot of new friends
[01:31:09.680 --> 01:31:15.540]  and a lot of new knowledge or be highly negative because you come home with the same knowledge and
[01:31:15.540 --> 01:31:22.760]  stuff but with the virus. So that kind of dampens the value of the fun geeky fun you had during
[01:31:22.760 --> 01:31:29.960]  DEF CON. So in that situation, it is a rational decision for a peter, in other words, a healthy
[01:31:29.960 --> 01:31:35.620]  person to decide not to interact with the marketplace for social interaction, at least
[01:31:35.620 --> 01:31:42.160]  for this year. And thus you have DEF CON safe mode. By this to transparency coins or surveillance
[01:31:42.160 --> 01:31:47.840]  coins as I like to call them. So these are coins such as in which the complete history of who owned
[01:31:47.840 --> 01:31:53.920]  what is known to everybody. And because of this, there is this unfortunate tendency for people
[01:31:53.920 --> 01:32:00.660]  trying to come up with a transaction graph that draws lines from who sent money to everyone else
[01:32:00.660 --> 01:32:05.800]  in this in this situation. And unfortunately, they're going to come up with false positives.
[01:32:05.800 --> 01:32:13.040]  So let's say we have a squeaky clean person who is buying a car, choose another car example.
[01:32:13.040 --> 01:32:19.220]  So a clean person is buying or selling their car to somebody to a stranger. So they they
[01:32:19.220 --> 01:32:26.420]  advert a car on Craigslist. And then they make a deal, a stranger shows up, they have, let's say,
[01:32:26.420 --> 01:32:34.200]  for example, Bitcoin. And then so the car and the Bitcoin change hand. And as is, as is usual in a
[01:32:34.200 --> 01:32:39.180]  car transaction, as long as the whoever is selling the clean title to the car, it doesn't matter. You
[01:32:39.180 --> 01:32:44.680]  don't have like a deep biographical inquiry on the idea of the of the seller of the car, you don't
[01:32:44.680 --> 01:32:49.580]  have to go check their, you know, credit history, or they're, they're not the higher, you know,
[01:32:49.580 --> 01:32:54.060]  private investigator to do a background check on this seller of the car, or investigate whether
[01:32:54.060 --> 01:32:58.680]  they got enough as a child, and are likely to be a, you know, a sociopath. Now, you don't kill that
[01:32:58.680 --> 01:33:03.540]  you just know that they have clean title to a car. And so Bitcoin and a clean title to a car now
[01:33:03.540 --> 01:33:08.640]  changed. Unbeknownst to the squeaky clean person in this transaction, the other person in the
[01:33:08.640 --> 01:33:14.040]  transaction, the counterparty was a bad actor. And so now as a result of there's a Bitcoin
[01:33:14.040 --> 01:33:19.280]  transaction that has taken place between squeaky clean and bad person. Now the people are doing
[01:33:19.280 --> 01:33:24.220]  blockchain analysis from far away from somewhere else, you know, somewhere on the other side of the
[01:33:24.220 --> 01:33:30.400]  world, they come to the false conclusion then that the squeaky clean person is involved in the same
[01:33:30.400 --> 01:33:38.420]  nefarious business that the bad person is. If they make that wrong call, do they have any bad
[01:33:38.420 --> 01:33:44.680]  consequence when the innocent guy gets investigated? And all of a sudden the innocent guy finds their
[01:33:44.680 --> 01:33:49.980]  cryptocurrency accounts being used. And maybe they get a visit from law enforcement asking,
[01:33:49.980 --> 01:33:55.140]  what happened to this? Why did you spend this Bitcoin? Why did you get this Bitcoin from selling?
[01:33:55.140 --> 01:33:59.180]  And then you try to explain that it was a car and you had no idea who this other person was. They
[01:33:59.180 --> 01:34:04.920]  had clean title to their car. Isn't that all you need to know? Now that misunderstanding happens.
[01:34:04.920 --> 01:34:09.420]  Is this analyst of the blind doing blockchain analytics? Is that analyst going to be held
[01:34:09.420 --> 01:34:14.940]  responsible for the disruption to the innocent person's life? No, they are not going to be held
[01:34:14.940 --> 01:34:21.060]  for that. The innocent person has no recourse in a situation like that. And so we have a situation
[01:34:21.060 --> 01:34:27.240]  that in transparent chains, squeaky clean people are now the peach owners. And they're deciding
[01:34:27.240 --> 01:34:33.740]  whether or not they want to interact in an ethic system that makes a social link between people who
[01:34:33.740 --> 01:34:40.700]  are actually extorting money for services at arm's length. And so you have a squeaky clean reputation
[01:34:41.390 --> 01:34:46.400]  and you are with the choice, do I want to engage with this situation, which could mix up
[01:34:46.400 --> 01:34:52.380]  my reputation with that of somebody else? Just like the peach seller in the Akerlof paper, your
[01:34:52.920 --> 01:34:58.020]  logical conclusion is going to be no. No, thank you. I would not like to take this that my good
[01:34:58.020 --> 01:35:03.320]  reputation is going to be besmirched due to some some analyst somewhere in the world
[01:35:03.320 --> 01:35:09.520]  coming up and connecting the dots in a wrong way. I am not willing to have my life suffer
[01:35:09.520 --> 01:35:16.060]  as a result of somebody else's social miscalculation. So that is going to be the reason why
[01:35:16.800 --> 01:35:21.280]  squeaky clean people are going to disengage with such a system and go to a system where their
[01:35:21.280 --> 01:35:28.480]  reputation protected, like in Monero. So Monero is cryptocurrency safe mode. It is what Bitcoin
[01:35:28.480 --> 01:35:38.100]  noobs think bot. It is sound money in safe. All right, so I have a few minutes. I'm psyched about
[01:35:38.100 --> 01:35:43.200]  that because usually I put out any sort of price charts is actually part of the like the
[01:35:44.440 --> 01:35:48.820]  ethos of Monero is that people don't talk about money. One of the great things about it is that
[01:35:48.820 --> 01:35:56.220]  people discourage talking about it. In time, you know, it is in a time of history in which it is
[01:35:56.220 --> 01:36:03.880]  prudent for people, like in my personal opinion, to consider again the likelihood that fiat currency
[01:36:03.880 --> 01:36:09.980]  in the future, the far future or perhaps even future, could be going through a period of
[01:36:09.980 --> 01:36:15.500]  inflation that the magnitude which we are not accustomed to seeing, at least in the Western
[01:36:15.500 --> 01:36:22.720]  world. So in that context, what is one thing that one can do to protect oneself if one has its to
[01:36:22.720 --> 01:36:28.820]  save in such a high inflation environment, and that is going to be to look at sources of scarcity that
[01:36:28.820 --> 01:36:35.800]  are not really the fiat system. And again, these are going to be things like gold. And since 2009,
[01:36:35.920 --> 01:36:42.820]  a couple of digital alternatives to gold, be Bitcoin and Monero. So here I'm showing how have
[01:36:42.820 --> 01:36:48.520]  the prices evolved since 2009, which is when the Bitcoin Y came out. And I think this is really the
[01:36:48.520 --> 01:36:55.360]  only price chart that anyone, most people, almost everyone should be looking at. I'd zoom into what
[01:36:55.360 --> 01:36:59.700]  happened to the price in the last week or the last month, or even the last year, looking at the last
[01:36:59.700 --> 01:37:06.500]  11 years. And I'm looking at a vertical that is logarithmic. So we have one penny up to $10,000.
[01:37:06.500 --> 01:37:13.560]  So this is like, obviously, it's like a life sort of scale, and one is involved in the assets that
[01:37:13.560 --> 01:37:19.920]  are changing value at this rate. You hear that the traditional fiat investments have
[01:37:19.920 --> 01:37:25.940]  looked like basically very, they look basically like lines. And all of the drama that you see
[01:37:25.940 --> 01:37:30.820]  from virtual news about the stock market, you know, going up, having a super fantastic day,
[01:37:30.820 --> 01:37:37.520]  went up 5%, or, oh, my gosh, you know, the stock crashed yesterday and went 7%. And all these sort
[01:37:37.520 --> 01:37:43.640]  of alarm bells are ringing at the stock exchange. These shows like little tiny pixel-sized blips
[01:37:44.180 --> 01:37:50.400]  plotted on this scale, right? Similarly, with gold, gold looks pretty throughout the history.
[01:37:50.400 --> 01:37:57.380]  But if you look at these new digital assets, so basically, as realization sinks in,
[01:37:57.380 --> 01:38:02.920]  that there is something generally innovative about these assets. You have seen adoption come
[01:38:02.920 --> 01:38:09.120]  in at first like a hardcore geek community, but then that kind of to broaden out over time. And
[01:38:09.120 --> 01:38:17.320]  so you've seen this growth in the asset values. If you look at monthly returns of these various
[01:38:17.320 --> 01:38:24.100]  asset classes since the inception of Monero, then actually, if you might not realize this,
[01:38:24.100 --> 01:38:28.640]  you've only been looking at Monero prices for the last, say, year or two. But on average,
[01:38:28.640 --> 01:38:34.060]  average return from Monero on a monthly basis is higher than that of Bitcoin since Monero's
[01:38:34.060 --> 01:38:39.380]  inception. So we're talking a geometric average return of 5.2% per month versus 0.04% per month.
[01:38:39.460 --> 01:38:44.300]  And again, these dwarf the monthly returns that are coming from more traditional assets like gold,
[01:38:44.300 --> 01:38:49.120]  U.S. equities, bonds. Although that higher return in Monero has been at the expense of higher
[01:38:49.120 --> 01:38:54.560]  standard deviation. So there's been more knowledge up and down of Monero relative to that of Bitcoin
[01:38:54.560 --> 01:39:02.260]  in the past. One thing that especially intuitional investors find to be important is that of asset
[01:39:02.260 --> 01:39:07.900]  questions. So when putting a portfolio together of several different asset classes to look at,
[01:39:07.900 --> 01:39:13.340]  do the ups and downs of each of these assets, do they go up and down in concert together,
[01:39:13.340 --> 01:39:18.180]  or do they actually cancel each other out? And it's desirable to have things that partially
[01:39:18.180 --> 01:39:23.480]  each other out because then on average, your portfolio will have a lower average volatility
[01:39:23.480 --> 01:39:29.020]  because part of the components of your portfolio will be canceling each other out when it comes to
[01:39:29.020 --> 01:39:34.000]  the short-term ups and downs of it. So here I'm showing a cross-section matrix of Monero,
[01:39:34.000 --> 01:39:40.340]  Bitcoin, gold, stocks, and U.S. bonds. And you can see that compared to the traditional assets,
[01:39:40.340 --> 01:39:45.160]  that is gold, U.S. stocks, U.S. bonds, correlation, historical monthly correlation,
[01:39:45.160 --> 01:39:51.000]  actually these are historical weekly correlations have been very low, 0.45 for gold, 0.05 for
[01:39:51.000 --> 01:39:58.560]  stocks, and 0.02 for U.S. bonds. It has been somewhat correlated to Bitcoin, and I say that
[01:39:58.560 --> 01:40:02.940]  is primarily due to it being still early days in crypto. It's like the dot-com stuff I was
[01:40:02.940 --> 01:40:08.460]  talking about. People are still, I would say, ignorant as to how this stuff actually works.
[01:40:08.820 --> 01:40:16.460]  And rather than have a actual understanding of how, say, Bitcoin works, they use instead of a
[01:40:16.460 --> 01:40:20.180]  de-technical and kind of social, societal understanding of how the system actually works,
[01:40:20.180 --> 01:40:24.780]  use their buddy network. They say, oh, this person and that person and this person. They
[01:40:24.780 --> 01:40:29.540]  build an echo chamber to try and determine the validity of something because they are
[01:40:29.540 --> 01:40:35.240]  unable or unwilling to take the time for it to sit down and learn all these details of
[01:40:35.240 --> 01:40:41.960]  elliptic curves and so on. So as a result, all the currency tends to get lumped together as
[01:40:41.960 --> 01:40:47.280]  one kind of big asset from people unable to distinguish between legitimate projects like
[01:40:47.280 --> 01:40:54.920]  Bitcoin and Monero and those that are far less convincing in the decentralized flow of
[01:40:54.920 --> 01:40:58.300]  minor rewards that are being given out to the network.
[01:40:59.740 --> 01:41:04.500]  So again, the chart that I showed was showing the unit prices. So what is the price of one
[01:41:04.500 --> 01:41:10.140]  Bitcoin? What is the price of one ounce of gold? And so on. That made it difficult, though, in
[01:41:10.140 --> 01:41:15.200]  the terms of trying to figure out if crypto is currently overvalued or undervalued because
[01:41:15.200 --> 01:41:21.180]  it's arbitrary. An ounce is an arbitrary unit for gold. We're not talking about the price of one
[01:41:21.180 --> 01:41:26.660]  metric ton of gold or about the price of a gram of gold. Those are equally valid. I mean,
[01:41:26.660 --> 01:41:34.220]  it's just a mass that you have. So it's more, I think, instructive to consider what is the value
[01:41:34.220 --> 01:41:38.620]  of all the gold in the world. And let's compare the value of all the gold in the world to the
[01:41:38.620 --> 01:41:43.000]  value of all the Bitcoin in the world and all of Monero in the world. So here's what I'm showing
[01:41:43.000 --> 01:41:49.000]  here in this cap ratio chart. This is the ratio of two different cryptos, all of it, versus the
[01:41:49.000 --> 01:41:53.480]  value of all the gold. So there are several different times you're going to this. So,
[01:41:53.480 --> 01:41:58.080]  for example, for the Bitcoin curve, I have the number of Bitcoin distance at any given time.
[01:41:58.180 --> 01:42:02.120]  So again, as the number of Bitcoin has been growing because it's been doled out to miners
[01:42:02.120 --> 01:42:07.580]  as a reward, the number of coins in existence has been changing. That's a Bitcoin on the open
[01:42:07.580 --> 01:42:13.460]  market. The amount of gold that's been dug out of and refined into bullion, that's been changing
[01:42:13.460 --> 01:42:17.540]  with the World Gold Council. So I take that data and throw that in. And then the price of gold has
[01:42:17.540 --> 01:42:22.500]  been changing over time. So you take those four pieces of data and you get one ratio out of it.
[01:42:22.500 --> 01:42:28.000]  So this is the ratio of the value of all the world's Bitcoin divided by the value of all the
[01:42:28.000 --> 01:42:33.560]  world's gold. And you can see that it's, again, gone through the hard to believe appreciation
[01:42:33.560 --> 01:42:39.960]  silly days. And at the current moment, all of the world's Bitcoin is worth roughly 10% of all
[01:42:39.960 --> 01:42:45.340]  the world's gold. If you do the same calculation for a minute, you get a result that all the
[01:42:45.340 --> 01:42:52.860]  Monero is worth about one one-hundredth of all the gold in the world. It's one ten-thousandth
[01:42:52.860 --> 01:42:58.940]  of the value of the above ground gold in the world. Actually, this comparison of crypto versus
[01:42:58.940 --> 01:43:05.320]  gold is more apt for the case of Monero, because when you take a bar of gold and you flip it over,
[01:43:05.320 --> 01:43:10.320]  you do see a detailed list of everyone before you who owned a bar of gold going back to the
[01:43:10.320 --> 01:43:17.040]  found from which it came. Whereas you do see that for Bitcoin. So arguably, Monero is a pure
[01:43:17.880 --> 01:43:22.080]  digital replica characteristic of gold, and it's more appropriate to look at this
[01:43:22.080 --> 01:43:25.400]  valuation ratio for that particular pairing.
[01:43:27.560 --> 01:43:33.800]  All right, I think the big reason that one one common objection about Monero from people who
[01:43:33.800 --> 01:43:38.100]  are used to thinking about Bitcoin is that, oh, the infinite emission. So I talked about this
[01:43:38.100 --> 01:43:45.580]  before that the the in the so-called, quote unquote, infinite emission in Monero is number
[01:43:45.580 --> 01:43:51.700]  one, it's linear. And number two, it's only infinite if you consider the Monero in the
[01:43:51.700 --> 01:43:56.620]  limit as time goes to infinity. In other words, you you take this kind of mathematical construction
[01:43:56.620 --> 01:44:01.880]  of what happens to a function as x axis goes to infinity and you look at what happens to the y
[01:44:01.880 --> 01:44:07.220]  axis eventually. So that's a useful construction if you're to, you know, derive differential
[01:44:07.220 --> 01:44:13.620]  calculus. But in terms of actual people using actual money, it's irrelevant what the limit of
[01:44:13.620 --> 01:44:19.160]  emissions as t goes to infinity. Let me use it as an example. 100 years from today, everyone
[01:44:19.160 --> 01:44:26.100]  seeing this talk right now is going to be dead in 100 years. So let's look at the supply
[01:44:26.100 --> 01:44:34.580]  of that's in 100 years time in the year 2120. And up here is to make the point that if you put
[01:44:34.580 --> 01:44:40.040]  if you pick a time point in the future, you can actually calculate the expected inflation,
[01:44:40.040 --> 01:44:45.320]  not only of Bitcoin, but also of Monero. You'll quickly see that this so-called infinite inflation
[01:44:45.320 --> 01:44:51.760]  is in fact highly inaccurate. So again, let's look at the year 2120 and let's look at Bitcoin
[01:44:51.760 --> 01:44:57.460]  and Monero. Let's pretend that you have an investor who has as their goal, they want to
[01:44:57.460 --> 01:45:03.020]  own one one millionth of one of these assets, but not one one millionth of the current supply.
[01:45:03.020 --> 01:45:07.780]  They want to own one one millionth of the future supply in the year 2120. So how much gold are
[01:45:07.780 --> 01:45:11.440]  they going to have to buy now if they want to own one one millionth of all the world's gold
[01:45:11.440 --> 01:45:18.660]  in the year 2120? So for gold, we can extrapolate the past inflation rate of 1.8% per year.
[01:45:18.660 --> 01:45:23.420]  And it turns out that that very reasonable 1% per year, when you extrapolate that out to a century,
[01:45:23.420 --> 01:45:27.840]  it ends up being pretty significant. So if you extrapolate that 1.8% year to a century,
[01:45:27.840 --> 01:45:32.820]  you get a fivefold is almost sixfold increase in the expected amount of gold 2120,
[01:45:32.820 --> 01:45:37.340]  which means if you want to own one millionth of that to buy over a metric ton of gold,
[01:45:37.340 --> 01:45:43.160]  which at current prices would be worth over $77 USD. Now let's do this for Bitcoin. So we know
[01:45:43.160 --> 01:45:49.360]  what the current supply of Bitcoin is. And okay, hooray, the Bitcoin people, they have this figure
[01:45:49.360 --> 01:45:53.220]  that is extremely easy for normies to understand, which is that there's only going to ever be 21
[01:45:53.220 --> 01:45:58.260]  million Bitcoin ever. So the expected supply in a century is going to be about 21 million Bitcoin.
[01:45:58.440 --> 01:46:03.200]  How much Bitcoin do you need to buy today, if you want to be guaranteed of having one one
[01:46:03.200 --> 01:46:08.220]  millionth of this source of scarcity in the year 2120? Well, you would need to buy 21 Bitcoins
[01:46:08.220 --> 01:46:14.300]  and current value $244,000. Let's do the same with Monero. So we know the emission of Monero
[01:46:14.300 --> 01:46:20.000]  from the blockchain. And also we know from L emission, which is again, 0.3 Monero per minute.
[01:46:20.440 --> 01:46:27.020]  Now, if you just sit down to do elementary school math and translate that per minute emission to a
[01:46:27.020 --> 01:46:31.980]  per centuation, you get this maybe surprising result that the number of Monero in existence
[01:46:31.980 --> 01:46:38.140]  in a century from now is going to be less than double that of the current supply of Monero.
[01:46:38.140 --> 01:46:43.720]  That is, for an inflation rate, it's pretty dang respectable. It's more than gold.
[01:46:43.980 --> 01:46:49.860]  And it's actually not that far off from Bitcoin. So for one to use the phrase infinite inflation
[01:46:49.860 --> 01:46:56.140]  and say that Monero is on the wrong side of that line, is thinking in terms of,
[01:46:56.140 --> 01:47:01.640]  you know, it's just not a practical real world calculation. Everyone's going to be dead in
[01:47:01.640 --> 01:47:08.440]  100 years. And so why don't you know, if you use 100 years from now, the actual inflation that's
[01:47:08.440 --> 01:47:13.460]  going to happen in Monero during your life is far from infinite. It's actually a lot closer
[01:47:13.460 --> 01:47:18.800]  to the coins than you think. And so again, for Monero, if you have a goal of buying one millionth
[01:47:18.800 --> 01:47:25.900]  of all the Monero in the world, but the year 2120 supply, that's going to require buying 30.1
[01:47:25.900 --> 01:47:32.280]  Monero or 33.6. And the market value of that is currently $3. So this is another framework for
[01:47:32.280 --> 01:47:39.140]  getting how relatively undervalued or overvalued these assets are in the current place.
[01:47:40.800 --> 01:47:45.840]  All right, so I'm out. I don't know if there's going to be time for questions. Maybe not.
[01:47:45.840 --> 01:47:50.480]  But thank you for listening. I hope you enjoyed this presentation. Enjoy the rest of Monero
[01:47:50.480 --> 01:47:54.420]  Village for the final day that it's happening. If you want to learn more, the Monero Village
[01:47:54.420 --> 01:47:59.920]  schedule is at monerovillage.org. For the Monero mainnet, that's getmonero.org. So
[01:48:00.460 --> 01:48:05.720]  important to know, getmonero.org, it's not .com. It's not just, it's getmonero.org.
[01:48:05.760 --> 01:48:09.110]  And if you want to get in touch with me, since there's not time for questions now,
[01:48:09.680 --> 01:48:15.180]  I think probably on Discord, hang out on Discord, on DefCon Discord, at least.
[01:48:15.880 --> 01:48:22.600]  That's my handle there is intj440. And otherwise, you can email me at danielbeatwater.consulting.
[01:48:22.600 --> 01:48:25.820]  And with that, I will hand it back to Justin.