EB81 – Nathaniel Popper: Digital Gold - The Inside Story Of Bitcoin

Transcript

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to discover the future of cryptocurrency exchanges hi welcome to epicenter Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian KU and my name is Brian fan crane and we're here today with Nathaniel popper Nathaniel popper is a writer for the New York Times And The Wall Street Journal and he's written a book that just got out named the digital gold uh and yes I I was going to hold it up as well you know if you have like a print book this looks really cool but you know with a Kindle don't get the Kindle get the book on the Kindle um and so we we just finished reading it both of us and it's

it's been really fantastic so we're super excited to have Nathaniel on so thanks for joining us today thank you guys for having me and I I'm surprised that as as as Bitcoin lovers you would be so still enamored with print books I mean come on guys this is this this is a this is a Kindle I know I know you're you're you're it's like it's not cool to hold up an electronic book that's even better well it's it at least it's not as like uh it's not could have done that 50 years ago yeah and I just want to point out by by Brian saying we just finished reading it I actually got my copy less than 48 hours ago and I've been reading it Non-Stop

and I finished reading it probably about 15 minutes before we came on live so man I'm sorry it's all fresh I've got so many questions yeah yeah so I mean before we dive in so what I really loved about this is that there's just all these stories behind the all these little stories about the history of Bitcoin right because I mean most of us have you know heard about Mount go heard about Sil Gro and and know maybe a lot of things about it but there were all these like who exactly was there who was talking with whom how did it exactly happen uh so you write about all those things and you talk with all those people and that was just so interesting and so enjoyable for me uh so yeah I

absolutely loved it because it just gives you this different perspective it feels like you sort of behind the scenes of of the history of Bitcoin and and they're just there I mean it's a great story first of all bitcoin's a great story but there are so many great stories within that bigger great story H you know even more so than I anticipated when I began this project and that's that's what made doing this book so much fun and I hope it's what makes reading it so much fun there's there's a whole lot of great stories that I ended up having to to leave out of here just to try to streamline it but um it's it's you you certainly picked up on something that I felt in reporting it no totally I

mean I think that's one of the things I came away with as well is like just such a a wealth of uh interesting strange uh and different people and interesting situations and scenarios and crazy stories and uh yeah I'm sort of I mean I think obviously that a lot of that is just how Bitcoin happened so we I was we were talking I Sebastian were talking about this before is like you know is this mainly uh you doing a really good job as a writer that people come across is is so interesting or is this really just the Bitcoin space absolutely no no these these people are interesting on their own and that was why I decided to write the book I mean I

as I began reporting it um it was it and we can talk about this more but it was as I talked to people and got to know the people it was actually the people that convinced me to write the book book rather than the technology and so tell us how did you get involved with this in the first place how long has this project been been going on for how do this come about well um my my first story about Bitcoin was I I wrote in March actually I think April 2013 so pretty late in the game um and actually the first story was about the winkl Vos Twins and their horde of Bitcoins um which hadn't previously been

public and it kind of came out of the closet with us so to speak and um that was a story I kind of wrote you know nobody had been covering this at the times and there hadn't been too much interest in it um and that story just generated so much feedback it was the most read story in the New York Times for a while that kind of woke me up to the fact that there was something interesting going on here um and in any case I I I sort of continued covering it for much of the next year and um ended up signing a book contract in almost exactly a year later in March of

2014 um and you know we it was a long process of how I got to the point where I wanted to write the book um but uh once I once I got started I took a a leave of absence from the paper here and uh for basically the first three months of that I just traveled around reporting so I obviously some of that I could do in New York I mean I went to visit Charlie who Charlie Shem who was under house arrest at the time and I got to spend a bunch of time with him and some of the other New York characters who are important like the the winkl Vos twins but um I spent a bunch of time out in the Bay Area I went to Japan I went to China um I went to

Argentina um and just sort of immersed myself in this world oh that's really fascinating and what what what I thought was really inspiring about this book is these people that that you talk about in in this book these people that you write these stories about that's what they were doing they were also traveling all all over the world and I thought that was just really inspiring in fact after reading the book I was like man I want to start a Bitcoin business like a Bitcoin startup that was uh that was I think as I was mentioning one of the things that sort of convinced me to do the book was seeing the the the the the degree to which people had sort of left

their old lives behind to pursue this thing you know to pursue this this promise that seemed to lie within this technology and and actually I I have to give Charlie uh Shem credit because it was a it was a day that I met with him at a bar uh his a bar that he had invested in along with some of his Bitcoin um and I met with him and Nick KY at blockchain and this was actually just like two weeks before Charlie got arrested um and the two of them sort of talking about how this pursuing Bitcoin had just changed their lives um made me realize there was something deep there

that I needed to understand and didn't I I I think that's the case for a lot of people working now working in this industry I mean a lot of people that we've talked to um came about it in some way from hearing about it by a friend or it was definitely the way that I came into it and uh I think Brian as well so I mean for the most part I think that story is Will um will people will resonate with that story yeah and and I think I guess this is similar yeah for Charlie shn and and a lot of us including you know myself for example you know you start seeing this thing and understanding you know what Bitcoin is

and just what it can do and and I think you you pain you you do a great job at sort of showing the belief that people develop in in the potential of this and and it was the same thing with me right and then it's just like well why would I focus on anything else but that it just makes complete sense and and then I guess for the especially for the people who were so early right it's that just of course had then also like all kinds of other dramatic implications including like some people getting extremely rich and uh or starting to work on these uh revolutionary projects I think it's shut down I mean I think also one of the

interesting things that I often think about in the context of Bitcoin is I have some old Bitcoin magazines and if you look at the companies there none basically the only one you know who were a iing back then the only one that's still around is generally big pay and everybody else is is gone you know and I think that's also just shows how much crazy transformation it's been going on in such a short time yeah absolutely you've sort of been through different generations of companies um I mean I think there are I'm trying to think of companies from back then I think actually bitstamp is uh is one of the older ones that's still around and there there are a few other names like that Kraken actually Ripple got started all

the way back way them but but um but you're right that that a lot of the names that were kind of leading this for a long time are are not are not around anymore yeah it was obvious to me when a lot of the names in the book I mean I wasn't even aware of some some of the some of the earlier failures uh I had never heard of myself and and and some of these characters who are who are no longer around in yet who I think without you know Bitcoin might not exist yeah absolutely no mean and I think that's another thing I mean I I knew that in the beginning it was there was not very much interest but it it's

just I wasn't aware that there was like so little you know there was literally like two people for like six months or something right right yeah I mean yeah that that that the two early characters who I focus on we can we can get back to but but how finny and Marty malmy but Marty particularly fascinates me just because you know he largely started working on this basically because he didn't get a summer job in college and I think if he had gotten a summer job you know I don't know if Bitcoin would have stayed alive during that summer I mean it was basically just Satoshi um and there weren't really too many other people who were willing to put in any time so uh you know little things like that that are sort of fascinating to

look back up so before me get into some of the content the title of your book is digital gold why did you choose that title well um some of it is is is is purely practical I actually when I uh sold this book it it was called making money um and uh and actually my Publishers felt that that it was you know it's kind of this pun but they didn't feel that it was a strong enough statement and so we kind of went through Alternatives and I didn't particularly want Bitcoin in the I didn't want to throw people off we wanted to give some sense of just like

this sort of universal idea um and and I think um digital gold sort of has that sort of boldness to it so it's you know partly just a matter of publishing taste but but I think that um you know as I came to understand it more there are a few metaphors that I have used to explain Bitcoin and and to me that's kind of the first one that's the simplest one to understand it's this scarce digital asset and um and it's a way for people to begin to understand what this is so you know no better way to sort of start it than with that idea one two two things that came to my mind when I I heard the title and and as

I read the book and that I think that make a lot of sense for me is one is the idea of this Gold Rush right this is like land of opportunity where you can go and there's like this promise of enormous riches and people like leave their old lives behind and go there and and then of course also with the Gold Rush right if you think back there was you know people leaving the east of us go to the west and and this idea of a sort of a new frontier right like you step into this unknown and and I think with Bitcoin that's the way yeah you risk a lot and and not everybody not everybody finds those those gold nuggets that they set out for yeah absolutely right was that intentional to to to write the book

especially the beginning of the book as though it was some sort of a gold rush um absolutely it's it's actually to go back to this question of how the book came about I actually uh agents were approaching me about writing a book um and I uh because I was writing about it and i' found these sort of interesting characters to talk about I wrote a story about the winlos twins I wrote a story about this Bitcoin mine in Iceland that people got really into and and so around those stories agents approached me and said you know you should write a book this would be a great book and I and and I initially just said no you know this is too fleeting there's not there's not enough here and it was actually my colleague Here Andrew sorin who um he's

the guy who wrote too big to fail and he's a he's a um he works for the times he's also a TV host but he pulled me into a room at one point uh after one of these stories I think it was after Charlie got arrested and he he said you have to write a book you have to do this and I said you know I'm just I'm not sure I don't think I don't think there's enough there and he just said you know what you just have to tell this like a gold rush story this is a gold rush story this is these people just chasing this thing and and that night I kind of still said nah you know but that night I went home and talked with my wife and

that that phrase literally was what made realize okay there's a story you know there's a book to write here not just like a oh what is this technology does it matter it's a tale you know it's a story and so very much that was uh the Inception of this and and it it just so happened that I I I was a part of this moment in the Sierra Nevada mountains uh this this event at uh at a vacation house of this old uh Goldman Sachs guy that happened to be in the midst of where the old gold rush was um literally trucky California is where a lot of that you know 1849 Gold Rush was and uh it

ended up being the scene where I began the book um but that was that was probably more an accident but a very happy accident yeah how did you end up there that's uh I mean for the people who haven't read the book right that's when you that's the house of Dan Morehead who's is the head of panta capital and Penta Capital has has invested in a lot of Bitcoin companies and and done I guess been one of the most active sort of financial uh institutional investors in the space yeah so how did you and that was that that they they they've done a couple of these events that they call Bitcoin Pacifica there where they bring together you know the elite and so that

was where I met Nick Zabo um and you know when I was there Jed MCB was there and and Roger there was at one of them he wasn't at the second one because he had renounced his American citizenship but um all these characters going back you know Bobby Lee from China and you know people from New York so um I you know I kind of got lucky uh they they asked me to come out to that they haven't otherwise had journalists there but they knew I was working on this book and uh it was uh it was a pretty great scene to get to witness how how did it feel to be there I mean it it must have felt like you were

among that that you were witnessing something happening right a changing of CH some changing up the guard from the you know the the previous Financial world to like into the new Financial world yeah exactly I mean that's why that scene was so evocative and why I began the book with it um you know here you had these this Wall Street guy who' kind of gotten excited about Bitcoin um Dan Morehead who runs panta and he'd invited a bunch of his sort of hedge fund Bank guys so there was a people from some of the largest banks who were there they even had some Regulators there um but they invited and flew in

all of these old school Bitcoin people like Eric Vorhees and Jed maleb and because they wanted to learn from them um and you know I think this is one of the tensions throughout the book but you know to what degree is it those early people who are kind of guiding Bitcoin versus this new generation of Wall Street and Silicon Valley people who you know might have a different vision for it um but uh you know you could see that conversation happening there and uh certainly a lot of the old guys were very excited that it had brought them to this place where they could be flown

around on private jets and catered to and you know go on private skiing runs with Olympic gold medalists and stuff like that which was part of that weekend as well yeah and and and let's not mention all the apparent um trips to strip clubs in this book which seems to be one of the main things that these guys like to do with all their money well uh you you might even be referring to the sex club rather than just a strip club it gets a little bit better than a just a mere strip club but what's that yeah that was that was in Vienna um where there's a I guess a famous sex club and and uh the crew went

out the bid instant crew went out to that one night um I actually I I will I I'll def I'll you know defend these guys to their wives that I will that that wasn't such a such a common thing and you know the way that came about in vietna may have been somewhat unique um and you know I I again one of the things that struck me not to be a sort of uh well the one of the things that struck me is the degree to which people were happy to sort of just sit around all night and talk about Bitcoin rather than going to a strip club I mean that that that certainly happened but um you know obviously part of part of what's so amazing about this is you know the degree to which people can just sort of talk about Bitcoin

endlessly this episode is brought to you by Ledger and we've been talking and we will talk a lot in this episode about Mount Cox and it's such a pivotal story in the whole Bitcoin history and it if it's taught us if it has taught us one thing it's don't trust with your Bitcoin wallets and a huge amount of Bitcoins to some dubious people who have no clue what they're doing in countries far away no you can do it differently you can store it yourself and the traditional way of doing this was you ordered a secondhand laptop online you set up Linux got an extra CD then sent a copy of your hard drive to your grandmother dug a hole in the basement where you hit another hard drive and and then you

pined a lot of paper copies of some some seed and and you mailed those to your grandfather where he hit them somehow it's not the most smooth way it is an option but Sebastian has a better one this is what I sleep with at night this is The Ledger and or Hardware wallet The Ledger Nano Hardware wallet is a smart card wallet that is uh you plug it into your USB drive and you can use your wallet on your computer even if it's pest filled with malware your Bitcoins will will remain safe they use industry Standard Security and the nice thing about the Nano is that they're always improving it so whenever there's a new feature they just update the firmware and boom you've got the new feature and you don't even need to um to get a new Nano or anything it's all built in and

you know this thing is so secure that the Belgian police are using it to store Bitcoins that they've sees so there you go Belgium is using it so we have a special offer for you if you go to Ledger wallet.com and use the code eb09 at checkout you'll get 10% off your first order so there's no point in waiting to get a secure setup and by the way that officer code is until September 30th of 2015 so go to Ledger wallet.com and give it a try and we would like to thank Ledger for their support of episer Bitcoin in in your book you focus a lot on on the people and the stories why did you make that choice I mean we we touched on it maybe a little bit but yeah I mean I think I think uh just

practically as a journalist part of what I saw as I began to cover this was that um articles where people sort of talked about the technology in dry terms didn't seem to be particularly captivating or compelling I mean it's just you know you you hear about this and you're trying to figure it out and it just ends up being off-putting um and I found you know my first story was about the winkl Voss Twins and you you have these people through which you understand this okay they own it what does it mean that they own it and you know what do they do to get it and how do they hold on to it and suddenly you put it into the physical world of real

people and it starts to become comprehensible um and I found the same thing you know when I went to this this mining operation in Iceland you know when you talk to people about how Bitcoins are made it's you know people's eyes glaze over they they can never understand it but you say okay there's a bunch of computers that are sitting in a data center in Iceland and they're really hot and why are they hot and what are they doing there um you know why did they why why did this guy choose to do it in um Iceland and and suddenly you start to have a way to talk about things and um and that was um you know I think that's what my colleague here picked up on when

he said you should write a book this this this complicated topic that everybody sort of fascinated with they get bored when they read about the sort of technical specifications of it but when you start talking about the people you understand okay here's why people care about this you know you the reason this is interesting is because people care about it if people didn't care about it it would have died a long time ago and so you kind of start with that human emotion and it becomes a lot more approachable so one of those people and of course the first person is Satoshi and you also made an interesting argument we're certainly not the first

person to make that but that Satoshi is Nick Sabo can you what what has your impression been of of this Satoshi that character or that mythical figure in in the in the Bitcoin story well um just just you know to to be clear I mean I I I sort of end the book uh with the sense that Nick Zabo does seem to be the person that most most educated bitcoiners kind of think think of as the best candidate right now the people you know who who are named

frequently as Satoshi and I kind of looked into okay why is that I got a chance to meet Nick and talk to him about that I mean I'm certainly certainly not sort of saying Nick is Satoshi I've tried to be very careful about that but I think I think Nick's story gives you a window even if he's not Satoshi into how these ideas sort of percolated up and came together in Bitcoin and um and again a a personal story through which to understand that because it because it was something that you know really came about over two decades of experimentation it wasn't a uh it wasn't a bolt out of the blue it

wasn't just Satoshi came out of nowhere and said here's Bitcoin you know it was all these previous Innovations and Concepts that were pulled together to make uh Bitcoin um so so that's that's sort of the background on Satoshi I mean I I think you know Satoshi is a very vibrant character in this book I I I tried to make clear to everybody from the beginning you know I'm not setting out to try to find Satoshi that's not my goal here I don't think uh Satoshi is actually a central character in the story of Bitcoin as it developed he was Central in the first year and a half but he was really as Central as some other people and again if it had just been

Satoshi this thing would have never gone anywhere it was all the people who decided to use it and care about it that made this into what it is um so uh I think you know part of the interesting story as it begins is how did Satoshi sort of start to get those first followers get those first people who um who bought into this and started helping out and um and um I think in the end uh we can get back to this but in the end his anonymity his you know the fact that we don't know who Satoshi is um has actually been a big help to bitcoin because um it's meant that everybody has

sort of been able to write their own uh Vision onto Bitcoin and there isn't some person to stand up and say this is what I meant with Bitcoin each person can kind of Envision Envision it in their own image and pursue that image and you know there are a lot of different images and Visions for what this will be and the fact that there isn't one Central person to Define it I think has allowed that to happen let me put it like this if you had to defend the fact that thinko is not Satoshi what arguments would you use I mean if I would had to argue that he wasn't Satoshi yeah um let's think what are what are the best arguments against it well I I I think

even in my the the sort of article that I wrote about this I didn't get to go into this in great detail but I hint at it Nick Zeo isn't known as being a crack programmer uh particularly C++ which Bitcoin was written in and so I think you know there's a sense that if it was Nick he probably had some help with the coding um H and there are some other sort of smaller details that um that people point to I mean you know there's Satoshi some of his writing has britishisms British spellings of words and Nick is not British I mean I I think I find that a little bit less compelling because it's pretty easy to decide

you're going to spell color differently um you know like a British person would rather than an American would but you know that's there um I think um I don't know there are some of the sort of quirks in the dialogue that that Satoshi had with early people that you know could suggest that it was someone other than Nick um but uh you kind of have to dig very far down into the details to to get to that one one of the impression I have of Satoshi and I read recently this the book of Satoshi which is like a collection of of his Forum posts and uh I always came away with the impression that this guy had really good social

skills he was like somehow very of course maybe it's just an online setting and maybe he didn't have those in in the real world it's possible but I just always had the impression he he's very good at taking like responding to criticism in a way that like wins the other person over he's very good at presenting his arguments a very clear writer um so that's yeah I I think that's actually some of the strongest reasons that it is Nick Zabo he he is he is an incredibly sharp writer and good at interacting online uh not I not from what I understand as good in person um but I think a lot of people and I would actually count myself in

this In This Crowd um people who aren't aren't necessarily as comfortable in Social settings actually over develop their online communication skills to compensate um and uh as I say I I I often think of myself in in those terms so um so that's actually I think the the way Nick deals with people and there is a long history with Nick of his communicating on these message boards on the cipher Punk boards on the extropia boards and he's actually very good with that sort of dialogue so um to me uh that's that is true that that's uh that's something that you see

in satoshi's writing but I think it's also something that you see in Nick's writing cool it's also something that you see for instance with with Mark carelis you know in terms of having the ability to interact online and not having so many social skills no no I disagree not he was certainly more comfortable Mark was more comfortable interacting online but he wasn't very good there either so yeah um well one more thing about the Satoshi story so that's something I I sort of got from your book that that I didn't really see like that before but I had the impression in your book that this the whole a lot of the ideology of this

libertarian ideas and of the 21 million being this you know finite quantity that those were sort of not so much his but brought by people who joined uh the project you know like Marty uh being one of them but then others afterwards and that he sort of promoted those uh as as primarily as a means to actually you know get people to to work on this project and to invest time in it um yeah as as I mean Satoshi kind of evolved as he went along his his his presentation of it and he adapted the presentation of Bitcoin certainly later

on he did not uh talk a lot about the ideology um and and initially uh you know when he very at the very beginning when he presented um Bitcoin he focused on the technical stuff but um what one of the things that's interesting looking at the at the writing and interactions with people is you know after a month or two when it wasn't really catching on he began to in the presentations focus more on um the sort of libertarian Aran anti- Central Bank uh potential of Bitcoin and talk you know talk to the sort of gold bug mindset that you know we have these

free spending central banks that are bailing out Banks um and bailing out Wall Street and uh there was a kind of shift there to to emphasize that more and and it did indeed draw in uh Marty Maly who's this you know this Finnish kid who was very important in the first year and a half in bitcoin's development and I think he one of the things that Drew him most initially was that that sort of gold buishand over to let's talk bitcoin.com to sign

in enter the magic word and claim your part of the listener [Music] reward can you tell us a little bit more about how uh Bitcoin evolved after that maybe after that sort of initial you know getting started and getting the first followers um yeah I mean there there are sort of a couple of big spikes where I think it gained most of its followers um the first one was you know at the tail end of Marty M's involvement um there was this item on slash dot um that was sort of the first media coverage of

Bitcoin and this was uh like a year and a half into Bitcoin and up to that point it had been worth essentially nothing and slash thought was where uh Jed MB found out about Bitcoin and started looking into it and decided to create uh Mount gax and um a bunch of other important programmers at that point sort of got excited about this idea that was around the time that Gavin and Dron first got involved um and so you saw a first s a big surge there and you that was the first time where you could no longer mine Bitcoins with your CPU and your computer after that you basically needed um you started to need gpus and

and you know you couldn't just sort of mine Bitcoins at will and so that was a first big spike um then the next year after the creation of of uh the Silk Road um in the first media coverage of that you saw a big spike that um you know coincided with with Mount gox's rise and um and that that kind of drove a big uh increase in the price which brought on a lot of new people including a lot of people who um ended up being important later on Charlie Shem that was when he first gotten involved and then there was yet another crash or or that was the first big crash I guess and uh then you had another one in March

2013 um where the reasons I think are debated um but you you know it sort of moved in these big spikes where the price went up a lot suddenly the Press got interested new people read about it and learned about it and sort of got involved and started doing their own things and it really kind of moved in these cycles and the last the last one of those Cycles was I think you know the end of 2013 the beginning of 2014 when you had this big China runup and all this excitement in China and then sort of Came Crashing Down with Charlie shrum's arrest and the the the the end of Mount goau and I think it's kind of

been a you know a slide since then and I think you're sort of waiting for that next big uptick to to what extent do you think that uh the role that mount gos played in these crashes because it seems that in the book when there are these crashes Mount goau seems to coin that there seems to be some sort of Mount gox incompetence that coincides with them at some point I I mean I think that the the the certainly the mar April 20 13 crash was essentially uh entirely immediately caused by Mount gaau and I think that you know over the last year the biggest damage to bitcoin's confid you know the

confidence within the wider world and the interest in Bitcoin uh was a result of uh you know problems at Mount gaau I mean I think in in each case you did have a big runup before that was likely to um encounter you know likely to come down somewhat but I I do think that if you'd had a sort of a more competent business um in control of all these Bitcoins at those times uh the story could have looked very different it fell entirely to them and um I mean part of what's amazing is that despite despite the number of times that that they proved that they weren't up to it people

kept going back there that is amazing I mean that's that's uh it's certainly you know that's true with exchanges is the most valuable thing that an exchange provides is liquidity and so if people are there other people have to be there too um but you know they sort of lure the inertia of that uh kept everybody at this place that you know had proven itself uh not up to the task several times but yeah that's that's also something that has really amazed me because when I got into interested in Bitcoin it was maybe around May 2013 so it was you know after that crash and you know it was I guess late quotequote but it depend uh at the time Mount GA had a

terrible reputation and I was like I had zero desire to use Mount go you know it was already that it t it took a long time to get your money out in F and it was like so it was like obviously you cannot trust that place and and there was other was other options you know bitstamp Bitcoin E Local Bitcoin all these places you could go so it it is really amazing that people kept using it and never mov their money away CU it you know for at least a year or more it was just a sort of a common view that monox is incompetent maybe uh has some other problems um so yeah it's quite amazing how much inertia there was in

that and I and I think that you know this is a this is something we could we could debate but um and I and I think it probably wasn't debated adequately but you know there was often a desire in the Bitcoin Community to say that mount gaau the weakness there was not the weakness of Bitcoin and um that's true that you know Mount goau was a centralized institution holding everybody's money and Bitcoin was created for the opposite reason so as not to rely on on uh centralized institutions but um I think at the same time the the fact that uh Mount gaau the fact that that Bitcoin

was this decentralized uh uh technology made it so that there was nobody who could uh sort of step in and say you know this institution should not be operating it needs to give people its money back um and I think that's uh you know that was something that was wasn't necessarily discussed enough at the time but it was I think to some degree a weakness of Bitcoin and the way this technology worked that something like Mount goau could keep going up to the end in that way and in the book you keep coming back to that you keep coming back to uh the the initial uh sort of IDE ideological um ideas like that the

Satoshi had that the money that Bitcoin shouldn't be in centralized uh exchanges or shouldn't be kept by by C by companies um and right I mean people just kept keeping their money in these exchanges and keep getting uh gawed um at multiple occasions keep to continue to this day it's you know I it's it's I don't know that it's easy to tell but I would wager that most Bitcoins are still held in sort of centralized organizations like coinbase zapo you know where you have a third party that is responsible for your money and you know you go back

and look at the at the Bitcoin white paper and that's why this was created so that you didn't have to rely on a third party so I mean there that's not the only reason Bitcoin exists but um you know it's that's true to this day and I think you know this I I make this point in the book but I think there's a degree to which it makes you wonder whether people really want to have control over their money whether they want whether they trust themselves enough um you know even people like Roger ve um throughout the you know initial years of Bitcoin he's obviously this um staunch uh libertarian you know talks about having control of your money but you know he put a lot of his money

in these Central institutions and and the reason people do that is because they don't trust themselves to hold on to their private key because yeah or because they want that responsibility to somebody else and um and you know that's that's how that's how governments come about you know you want to you want to offload some of that responsibility so it's not on your shoulders um and you know it's been one of the the central tensions of this whole experiment so our episode today is brought to you by shapeshift uh if you going to read this book digital gold actually one of the key characters in the book is Eric Vorhees who's brought

us this wonderful creation of an exchange where you can exchange coins but it's actually non-exchange so you don't need an account so it's much better and he he's one of the few characters in the book that have sort of survived uh and have Bridge being an early adopter and really uh advocating this technology and decentralizations and they're still here today and doing things that actually work instead of being jail unfortunately or drinking Frappuccinos and getting haunted by angry ex Mount gox users so that's that's I think that's a real plus and then you know that's that's something good you know when you use shape shift well Brian I couldn't put it better myself very well said so if you want to

trade some all coins uh go to shapeshift.io and get it done in less than one minute with no counter sign required they now support more than 30 altcoins and they're adding new altcoins all the time so good job guys on providing such a great service we'd like to thank shap sh for the support of eper Bitcoin so let let's talk about the S growth story because that also has such a central role I mean one of the ways I think about this right so if if you think of of Bitcoin most of it is all like potential and and dreams and aspirations and and hopes um but there are in my in my view there are like two big successes so far with Bitcoin and the one is actually sort of the thing

you're talking about right right this like digital decentralized stateless Global asset that just didn't exist before and and it has you know maybe it's still small but at least you know several billion dollars a lot of people put a lot of time and money in that so you know that's definitely a success right and then the other thing is Silk Road right because otherwise none of these businesses that exist really have made money or found the business model that that really works uh and and Silk Road you know was so early on and and such a big success um so such such a crucial part of that story do you think do you think Sil Gro was in inevitable I I I think first first of

all you know there is a often a desire now to sort of Play Down Silk Road and to say oh you know that was that was uh that was never a big part of the system and you know you over exaggerate that I think absolutely you know for for at least a year or two there Silk Road was the main way you could use Bitcoin and and I think you know if you look into the buildup you know in the Years really the two years before the Silk Road came about there was constant discussion on the Bitcoin forums about how are we going to find something for people to do with their Bitcoins and everybody always came back to porn and drugs because you

know you needed to find something that you couldn't do with normal money right you with normal credit cards it's online Commerce works pretty smoothly for most people you know it's not it's there there there's no roadblock to buying stuff online but what can you not do um is you know buy illegal things and and so you know Ross alri his first message about the Silk Road advertising it was interestingly just a continuation of long Forum post or or a long thread on the Bitcoin Forum about uh creating a heroin store so this this had been a conversation that had been going on for six months and there was all this debate

about could you create a heroin store in which Bitcoin is the currency and you know people had gone back and forth about why it would work why it wouldn't work here you know how are people going to trust each other and it was into that debate that Ross launched um the Silk Road so you know I think it was something that people were sort of waiting for and when it came about I think people figured out pretty quickly okay this is something we couldn't do before and I think to a certain degree you're to a certain degree you're still waiting for another thing that you couldn't do before that people really start doing you know people talk about

people talk about remittances and there are people using it for that um but you know not not in any widespread way I don't know that anybody's really making money off of that yet um so uh you know I think the Silk Road is is crucial to understanding this story what did you get to talk to Ross Albert I did not I uh I talked to his family I talked to people um who knew him um in the end uh in the trial that took place you had more personal documents uh on display there than I had about almost any other character I mean the the

amount of things he kept on his laptop that really others haven't mined yet you know his his Diaries and his logs of activity I mean it's it's it's it's almost easier to know about Ross rri than it is about anybody else in the Bitcoin project because of the number of things that were captured by the uh authorities when they arrested him so are these Diaries Etc they all publicly available um essentially yes I mean there they were all entered into the court as uh as as evidence and um you know I attended the the trial and so they kind of distributed them there

other people have posted a lot of them online but they're generally available within the court documents for that case Okay interesting what I found interesting was so that in in s of the Bitcoin media when he was arrested and and trial and everything uh and sentenced um that's happened next week yeah so when when the impression that I got from this guy was that you know the Bitcoin media sort of portrayed him as a you know a collateral damage and sort of a victim of the system and you know that he that yeah that he was a victim and made an example but in the book like I read him as like a criminal you know

like he whether it these people got murdered or not like he intentionally wanted to have these people um murdered to protect uh himself and to protect the business that he had built what was your impression about him yeah I mean one of the things you see in the documents in his documents is his Evolution I mean I think at the beginning um he was he was very sort of pure in his intentions um and um and and he was very insecure and he he he was okay with the fact that you know it was illegal to sell drugs he he didn't he wasn't bothered by that but he hated lying to

people and and um and he kind of evolved over time into this person who it seems in the end was willing to kill to maintain this business um you know whether or not he did end up whether whether anyone ended up dying I think is uh it seems like probably nobody did but um it seems that pretty clear that he was willing to kill um for this business and I think you know in the end um he was willing to kill in part because he really believed in the uh the ideas that this site represented and he thought it was you know it was fair for one person to die if it would protect you know

5,000 members of his site from getting arrested and going to jail um but I think the debate since he's been arrested you know does there is this division between uh running the site and whether that was an admirable thing and allowing people to buy drugs online and you know is that uh is that something that you should admire and then this other set of issues with you know being willing to kill for the site and is that something to admire and I think you you know that there's frequently a a divide and people over those you know two separate issues yeah absolutely and and I I agree right that in the way we are this B

Community what everybody is looking for is sort of a you know a new Silk Road I mean legal Silk Road but that sort of thing that you can't do otherwise and that gives us such a compelling reason for Bitcoin and yeah that search sort of hasn't you know the killer app right exactly and and and Sil grow without the question I mean my view it was the second killer up for Bitcoin right the first was the bill up as a store of value um or maybe I guess this two kind of went together uh let's you know it seems like the S quote was was was really pivotal in the first part and then you talk a lot about this transition where a lot of venture

capitalists become interested a lot of Silicon Valley people and one of the things that really amazed me in the book and that just wasn't aware of before or not nearly the extent that venis ceris the CEO of xaos was absolutely crucial in recruiting people and convincing people and talking to people with a lot of power and getting them excited about this technology uh can you tell us a bit more about his story and how that he ended up playing such he was somebody who I wasn't particularly aware of when I started writing this book I didn't realize his significance um and I think in part because you know the

people who were sort of the spokesmen for Bitcoin people like Roger ve and and uh Charlie shrem um they those early folks uh they didn't get convinced by uh by Wes um and so actually the first time I met him I almost he showed up late and I almost sort of walked out and never talked to him but he actually caught me as I was on my way out of the building and started telling me his story and and started telling me about the um you know the people he'd convinced sort of quietly long before starting zapo and I actually spent that next week in Silicon Valley in San Francisco and everybody I

came Ross said oh well have you talked to Wes he's the one he's the one who sort of got all of us excited about this um and it wasn't a a a public uh thing so it wasn't something you could see on the message boards or at conferences I mean he more recently he's spoken at conferences and and all of that but this was all kind of in these private exclusive events with Silicon Valley people and Wall Street people and it sort of began slow in 2012 he got David Marcus who was the president of PayPal at the time and a good friend excited that was one of the first people he sold on it and David began buying a lot and then he got the

guys at Fortress Investment Group which is one of the biggest private Equity hedge funds around um actually on a hellis trip out in Canada and it kind of went from there and I think the kind of culmination of that to some degree was March 2013 I mentioned this big spike in price then um and a lot of people at the time attributed uh that Spike to uh the the problems in Cypress um or there was a a guidance from the treasury Department people kind of thought oh that's why the price is going up so fast um I I think hearing it through wus and sort of getting to know

some of the people who he convinced what you see is that was the month where there was a conference where he got some of the biggest names in Silicon Valley excited and they were buying like hundreds of thousands of dollars you know orders that um I think may have you know cumulatively been responsible for that big spike in price and that's something that people aren't necessarily aware of when they think about that they think about big world events as having caused that but usually when you look at the spikes in price it's because somebody put some big orders in and it and it and it pushed the price up yeah I mean that that's another thing that that really surprised me and I think it has been clear for a while that that PayPal has been you know aware of cryptocurrencies and interested in in at

least researching it to some extent but I wasn't aware that you know David Marcus uh is either president or this PayPal he was the president he's not anymore he's now at Facebook uh leading he was kind of personally recruited to Facebook by Mark Zuckerberg working on their messenger uh app which by the way is working towards integrating payments but um yeah he first got excited when he was at PayPal and uh got PayPal into this got and got the president of eBay which owned PayPal into it um and and you know developed a pretty big stash of Bitcoins himself yeah and and was at the first biton conference right we said so that's that's really uh it's really

surprising especially because in in the Bitcoin Community I mean on the Reddit and stuff which is I always thought it was a little bit nonsensical but it was always like PayPal sort of painted as this like ultimate adversary of this force of evil where you know the the president of PayPal is like at the Bitcoin conference like learning about Bitcoin buying Bitcoin at you know at the same time so that that was right he and and one of the funny little elements of the story is that he actually when he went to that conference in San Jose in 2013 he was so unimpressed by what he saw that he almost decided to quit PayPal and start a Bitcoin exchange he he just thought this this is such a mess

somebody needs to uh somebody needs to to create a professional business with a professional exchange and he contemplated for a few weeks before he kind of decided not to so as we kind of come to the end of a show let's talk a little bit about where you see uh where you see Bitcoin going what are your expect ations over the next um the next year or years well you know this is this is the area in which I am the least well informed and probably you know my my opinions on this are as as valid as either of yours um I mean I

think for one thing one of the thing places I probably ended up is that it's it this this may take a lot longer than people in the Bitcoin World want it to um I you know wus uh said some memorable stuff on this you know front you know he said if this takes 5 years if it takes 10 years if it takes 20 years I don't care you know this is this is not about two years from now this is about 50 years from now um and you know obviously the the the comparison with the internet gets tossed around a lot but it did take a long time before uh things could be built on the internet that you know Ordinary People

wanted to use and so this process does take a while um I think there's a lot of interesting stuff going on right now I think certainly the stuff that Wall Street is trying to do could drive real money into this Market in a way that hasn't been the case um but uh I I think that's going to take a while I think that the the this idea that we have in the Bitcoin space at so first of all the it's going to take like as little time as people like to think it it will is completely nonsensical and this idea also that there's some sort of finality like at some point like we've made it this is like you know the what we were trying to achieve is also pretty

nonsensical because everything is still evolving I mean like who says we're at the finality of the internet right things are still being built and I I have a little bit of a different opinion on that I mean I think it may take a long time and it's it's unclear to me how this is going to happen I mean it's clear to me I think that cryptocurrencies and this blockchain technology uh will change the world in dramatic ways I don't know I a lot less certain whether you know Bitcoin will be the new world currency or become the sort of digital gold that you know still has value 20 years from now but one thing I am convinced of is is a really unique property of cryptocurrencies and and of Bitcoin particularly is that sort

of inherent uh virality by giving people this incentive right because you know you you buy into Bitcoin you all of a sudden have a lot of interest uh to convince other people and you have a lot of interest to go first which is I think is kind of unique because often otherwise with Technologies maybe you rather wait for other people to do it and then go but with Bitcoin because of this Dynamic that you know as more people get interested price Rises uh I think and I think actually that was was a absolutely crucial thing too to get Bitcoin started at all was that there was always this possibility there that you work on these really speculative project that may not

go anywhere but if it does you know you can become rich and and I think that was I mean in my view that must have been played a crucial role in the early years of Bitcoin and still do and then I think that also has the seed in it for this really really explosive development yeah they may come or may not come right but U I think the incentive system is you know at the very center of what Bitcoin fig figured out um and Nick Zabo said uh when I talked to him he he said that you know he had created this thing called bit gold before that didn't really go anywhere and he said what what

Satoshi figured out was a way to get people excited about this and to make people care and that's the incentives um and the incentives I think you know they're they're what will make it work if it works um and uh you know there's there's a lot of other stuff there as well but um it's it's already worked in getting a lot of people to care about this maybe maybe let me throw in here one last Point uh that I I saw that I thought was interesting you wrote Somewhere that coinbase at one point had to convince the sil Valley Bank that they knew what happened with Bitcoins

leaving coinbase do you know what happened with this is this something that they are you know they continue to have to monitor in order to work with their Banks so that you know this is all I mean all the American companies that are large work with Silicon Valley Bank because it's the only bank that will work with anybody um actually itbit is different um now but um but that's that's the whole danger to uh to the banks that's that's the reason they're not getting involved is because they're afraid they don't know where it's going and it could be going to Hezbollah or um you know North Korea and they won't know and so

essentially they do allow transactions to take place if they're small even if they don't know who the other address is um but once they a certain limit they have to be able to know something about who is getting the coins um and so I I think generally that's going to be done in a way that both parties are aware of so it's not as though this is going to be um kept from you know it's not as though coinbase is going to be necessarily secretly keeping track of where the money is going but I think they and circle and others you know when big amounts of money move when I you know I I don't know if there's a hard limit whether it's $1,000 I think it can

sort of move somewhat but um they they they have to know that and that's the only way that they can continue working with their Banks yeah yeah I mean we had a we had a podcast we did a podcast a few weeks ago with um Michael groger who's doing a startup called chainalysis that does exactly that right that they monitor the blockchain try to figure out where things are going so they can I guess sell this to companies like coinbase um so well thanks so much for coming on it was super interesting talking with you thanks again so much for writing this book it was it was a true pleasure to read it and and to our listeners I can I can highly recommend it I think anyone who's interested in Bitcoin uh at kind of any level we will'll get a lot

out of this book and a lot of super fascinating background stories thank you guys it's been a lot of fun um of course we'll have the link um to the book uh in the show not so if people want to want to buy it uh it will be available there great thank you um and uh is there some other place people can reach you is there a website for the book uh yeah it just my name Nathaniel popper.com okay perfect so we'll put that in the show and that that if people dig they can find my email address on there um so uh you know so if people have other exciting stories to tell you then

perhaps uh you could write a second edition yes exactly yeah thanks so much for joining us today so we release new episodes of7 Bitcoin every Monday so if you want you can subscribe to the show on iTunes SoundCloud or in your favorite podcast app you can also get the show on YouTube at epicenter BTC and uh if you want to if you like the show you can always send us a tip and the Tipping address will be in the show description so thanks so much and until next time n [Music]