hi this is Charles Hoskinson and I'm making a very special very unusual video today I noticed a tweet from JK Rowling asking for an explanation of Bitcoin what is Bitcoin what are crypto currencies what's all this magic about I've been a big fan of JK Rowling for many years and I had the great privilege of even seeing where she worked as a waitress when oftentimes walking by it while I was in Edinburgh the elephant cafe and anytime there's someone prominent or someone who's inspired so many people asks for explanation of what our industry is all about I think we in the industry have an obligation to give it our best shot to explain it to her and so I invite all the other people in the cryptocurrency space who lead cryptocurrency companies please do make a video and talk about crypto currencies talk about Bitcoin and try to explain what we're trying to accomplish it's a movement so you asked JK and I will present as best I can as concise as I can an explanation for Bitcoin and I hope that this reaches you I will tweet the video to you if it doesn't well perhaps it'll be useful to somebody and that's good so let's start from the top what is bit and actually this I got started in the cryptocurrency space many people remember that I did a course years ago over seven years ago called Bitcoin or how I learned to stop worrying and love crypto and the point of the course was basically to give an understanding of what does Bitcoin all about and why do we care why are we bothering doing all this work building all these things writing all this code I and I started that course way back in the day with the question what is money this is how we begin because the killer application of Bitcoin was really an exploration of money and in general money has three properties that we tend to care about it's a means of exchange so when you go to buy something if you were bartering you'd have to have this phenomenon called the dual coincidence of wants and needs so if you're for example trading grain for I don't know would you'd have to somehow both parties would want to have each other's items so the party with the would want the other party is grain the party with the grain would want the other parties would and then they'd have to find a a ratio that they were both comfortable with money is a disintermediate er so if you have some middleman between that transaction then you can use that as a much more effective way of exchanging second it's a unit of account so you think of things like this is $25 or $30 or a hundred pounds these are meaningful units to the people who live within the culture that accepts that money and finally it's a store of value so we don't really usually store our money in gold or land or other things we certainly can and many people do myself included but generally speaking when we think about how rich someone is like Bill Gates or Elon Musk we tend to quote a dollar amount or a pounds amount we say this person's works X million dollars or something like that so these three properties together our fundamental properties of money and there are a lot of other things to think about it the money story like how easy is it to transport how durable is the money is it something called fungible and fungible is just one of those silly little words for you can't really distinguish between one unit of it and another so for example when you take out a pound sterling if you have a one of those coins they should all look the same and you shouldn't differentiate one or the other whereas there are other things which are not fungible for example a priceless piece of art there's only one melesa so it's a non-functional asset so we tend to think about things like that fungibility durability how easy is it to transport how easy is it to divide these types of things then when we move to kind of meta concepts we think well there's money but then there's also this concept of debt and credit so it's not just good enough to have something that you can use to buy stuff so it means of exchange and you can measure the value in terms of that eye and you can hold on to it and it holds its value you'd also like to be able to convert that into loans for future purchases because people who are poor people in middle class they just simply don't have enough money to buy a large purchase today right now like a house or car so they need to be able to convert that to something for the future so there's a very strong relationship between credit and debt and money itself so there's a big conversation of what makes good money and this is something that is debated in every single economics program this is something is debated by every single central bank and every now and then no matter where you live you encounter this conversation of what makes good money should your money for example hold its value pretty constantly over time or will your money lose value over time or will your money gain value over time so inflation or deflation for example is your money a pretty reliable unit of account where it's easy to price things inside of it and furthermore is your money making exchanges easy so we tend to think of person-to-person exchanges so those are personal exchanges but what about online exchanges for example so if you're an online merchant what about cross-border settlement so for example you're buying something from England if on Etsy from California and they have to ship it to you so this is a really interesting question of what makes good money and there's a lot of opinions about what makes good money so the bitcoin experiment that was started in 2009 Bitcoin 2009 was basically saying we're going to take a collection of ideas about a particular form of money and what we're going to do is we're going to take those ideas and we're going to connect them to some cool technology okay and in particular you're going to see a lot of terms like proof-of-work scary terms you're gonna see terms like blockchain you're gonna see terms like cryptography can't spell tonight roughy there we go having some trouble with that that's okay no mistakes there's only happy little accidents alright so you're gonna see a lot of these cool terms for technology that are a bit intimidating to beginners and really what all these things have to do are putting you in charge so in general when you think about digital money when you think about how do you translate cash into something that you can spend on the Internet generally speaking you have a trusted third party a bank or some form of exchange that will digitize and take a digital representation of that so here's you and I'm a terrible artist I do apologize and what you're going to do is you're going to put something into the bank and then what happens is it creates a digital representation of that digital dollar and then there's some form of network that all these other banks plug into and that network will allow for you to send a wire transfer let's say Bob or maybe a PayPal payment or maybe some other means of exchange okay but all of this is a very expensive middleman and the point of things like proof-of-work and blockchain and crypto at the end of the day is to get rid of that middleman so starting back at the top money has these properties it's a means of exchange it's a unit of account it's a store value it has some other properties like fungibility and divisibility and ease of transport and durability and so forth and we'd like to be able to use it for financial products like credit and we're right now asking what makes good money and bitcoin is a particular philosophy on money we'll get to that philosophy in a second and it said well if we're gonna do this and get this online we need some cool technology and what Satoshi did is invented some cool technology and then the goal of the debt cool technology is so that at the end of the day Alice and have a direct relationship with Bob just like you do with cash so Alice wants to be able to send value to Bob and the Bitcoin network because it was the first of its kind the only form of value can send is a Bitcoin so a little bit of tokens that live on the Bitcoin network and you can send that to Bob so this was an experiment and the point of the experiment was to see could we get this mechanism here the actual transfer of value to work so could we construct a database of a ledger and that ledger is called the blockchain that stores all those transactions that occur can we have this little unit of account this bitcoins thing will then actually be valuable will people actually pay money for it and will this network get large enough that it's sustainable and stable and it's also capable of actually having people wanting to accept bitcoins for products and services and when I joined the space the answer was no it was very early days I we did not have a sustainable or stable Network there was a lot of volatility and it's its architecture so there was people coming and going the hash rate was very going up a lot going down a lot bitcoins were basically worthless you couldn't really get a lot of products and services in it and it was not clear if this model is actually going to be secure or going to last a long time however in just a few short years the answer switched to yes Bitcoin has grown to a global phenomena that has not only stabilized to an extent that you actually can use Bitcoin as money but it's also grown to a point where it's launched an entire industry we call the blockchain industry and the blockchain industry is basically saying hey all this cool technology that some anonymous person over the Internet invented for an experiment to be able to explore can we create some sort of new type of money that has some cool properties about and could we abstract that technology and then apply that technology for all kinds of things like identity for things like rights management so for example you are an author you've written books that are sold out probably hundreds of millions of copies now there's intellectual property there how do you manage that better way things like property rights registration of Deeds and land things like remittances those are sending transactions from the developed world development world like from London to Addis Ababa Ethiopia doing this cheap new forms of credit and financial products and you can just continue the list on and on and on and on and on and on and on and that's what we entrepreneurs in the blockchain industry - and the basic concept here is that you have people who don't trust each other and people can be businesses governments individuals but need to they need to trust each other for an industry to work so for example imagine the telecommunications business you have a cell phone I have a cell phone if you travel your cell phone goes from one cell phone network to another cell phone network which is owned perhaps by a competitor of your incumbent cellphone network so I'm willing to wager that competitors really aren't on the best of terms and they don't necessarily fully trust each other but despite the fact that they don't trust each other they need to work together for you the customer to be able to have a data plan no matter where you go so that's an example of where blockchain technology works another example would be a voting system so as a collective whole we in a society need if we're in a democratic society to have faith in the credibility and structure and stability of our voting system but there are political parties and political parties have a personal incentive to corrupt the voting system for them to get an advantage in the election so the parties don't trust each other but they need to work together for their industry or endeavor to work together some of the biggest problems we have in the world whether those be climate change or this current pandemic are great examples of where individually you have nations people corporations doing what's best for them but they're not working together for the common good so for example the supply chains of medical equipment the movement of medical records who gets ventilators who doesn't get ventilators these are great examples of people who don't really want to work together trust each other because they're representing their individual interests but they need to if we ever want to make progress so this topic of brokering trust and making sure that we can somehow find a way for a common good deform but be decentralized is kind of the crux of the blockchain industry this is what we think about in this industry how do we navigate trust and how do we make sure that we can build solutions for people to work together without relying on centralized power much the same way that Bitcoin gets rid of these middlemen and it replaces it with a network that facilitates that same thing you can get rid of conceivably any middleman whether that middlemen be the broker or property of voting rights of identity whatever have you it's this concept of disintermediation that's the key word for our industry disintermediation so in an essence what is Bitcoin bitcoin began as one thing as an experiment and almost all great things in life begin this way an experiment of passion and frustration and the passion was could we re-examine what makes good money and a good financial system and the frustration was that the system that we have right on the back of the 2008 financial crisis was not working so well and so there has to be a fundamentally different way of doing things so in essence Bitcoin was just basically an attempt to do something different now I mentioned what makes good money what's the point of that well good money is a hotly contested thing amongst economists you have different schools like modern monetary theory and kansian economics neoclassical economics you have things like Austrian economics and there are some people who think that it doesn't really matter how much money is in circulation they think who cares about inflation you know you can always just print more and somehow the economy will sustain it there are other people that think only things that are connected to real life if things like gold can make good money because you can't trust government institutions so Bitcoin chose kind of a neo Austrian viewpoint in that it has a finite supply and this is in stark contrast to the policy of the Bank of England or the Federal Reserve System the United States the People's Bank of China there will only ever be 21 million of these units kind of like synthetic gold in a certain respect there's only a finite amount of gold in the entire world and once we mine it all it's mined and so there will never be any more unless an asteroid hits the earth and gives us more or we find a way to transmute it from using clever atomic physics or something they're not really going to get anymore so it says we're going to have a finite supply so the value increases over time given that the demand continues to increase this is in stark contrast to inflationary money where the value tends to decrease over time and this is the current system just in my own experience with the Bitcoin industry I've witnessed money go from Bitcoin go from less than a dollar token to $20,000 a token so it's been a pretty remarkable surge in less than 10 years and it's only going to continue if people seem to think that the system is valuable and reduces utility for them whereas in I remember my grandfather the first home that he purchased he purchased for about ten thousand dollars and the last home that he purchased he purchased for two hundred thousand dollars and the home that he bought for ten thousand dollars was actually larger and on more land than the home that he bought for two hundred thousand dollars so the dollar tends to lose its value over time and SEC since the creation of the Federal Reserve System in the United States the dollar has lost 98% of its buying power and this is similar for the pound sterling in England so basically Satoshi had some new Austrian economic ideas he decided to create a finite supply of money with the hope that the value would increase over time and the network would become stable and sustainable he invented some cool stuff like proof-of-work and blockchain and use cryptography to make everything secure and the fundamental concept is get rid of the banks get rid of the exchanges let's create a digital money that's like cash so you directly pay it from person to person like Alice to Bob here's Alice and here's Bob and the experiment was will it work well people actually use it will it become valuable will actually be something that people trea real money for will you be able to buy products and services and currently there are hundreds of thousands of products and services you can buy airline tickets and food and medicine and pretty much anything you want these days with it and will get large enough that it's not going to go away and when I started the answer was no and to the benefit of all humanity the answer is yes but bitcoin itself as magical as it is and how much of an impact it's had is not the end-all be-all the reality is it launched an entire movement an entire industry and inspired millions of people throughout the world and billions of dollars of capital to begin looking at some of the hardest problems we're currently facing from identity to property to voting the remittances and the goal here is to put you in charge to put the individual in charge of their own identity we call that self sovereign identity to put you in charge of your own property your own money and ultimately for you to be your own bank it's pretty magical when you think about it this concept that we no longer need middlemen to be able to do business with each other and we can do business with each other across an entire global spectrum and what got me into the space and keeps me in this space is that we have a system where everybody is equal we do a lot of work in Africa and we do a lot of work in Eastern Europe and Southeast Asia and this concept that everybody is treated the same regardless of where they come from or who they are is something that's pretty magical and it's never really been done before in human history and what makes me most excited about this concept is that once you've gotten this idea out there it's really hard to go back and that's why we have a movement of millions of people people are starting to ask if I have the ability to own my own my own bank I have the ability on my own property why would I ever want to go back to a system where somebody else takes that away from me especially when by doing so I lose my privacy I lose my autonomy and in many cases is actually more expensive and the consequence of everybody being equal is that the least amongst us have access to the same markets the same infrastructure as the most amongst us there's never been a time in human history or a way of governing things has been proposed that way so this is kind of the underlying core philosophy blockchain is the technology of trust and coordination in a decentralized way amongst people who don't trust each other and that forms the heart of the system called Bitcoin and Bitcoin was an experiment to see is there a better way of managing money and introducing different monetary concepts to people across the world so that we could perhaps do things a little differently than the way that we've been doing things for a long time certainly a lot of controversy certainly a lot of scandals certainly a lot of drama like all great things that spread across the world quickly there's stories to tell positive and negative and the story isn't over yet there are many sequels coming but that's the point of our industry that's the point of Bitcoin and in my view it's probably one of the greatest inventions in human history and it is really the missing manual for liberty it allows us to get sound money it allows us to trust each other in new ways and ultimately allows the world to be just a little bit more peaceful so thank you so much for your time I hope that this was useful and thank you for the books that you've written in the inspiration you've given to so many millions of people around the world and I hope my industry as a whole takes this as a call to action and makes many videos with their own explanation and we could turn you into an advocate at some point take care of JK
