The True Value of Bitcoin: What You Really Need To Know

Hi, everybody. It’s Stefan Molyneux from Freedomain
Radio. I hope you’re doing well.
This is just a brief preamble before we get
into the value proposition of bitcoin. I got
to tell you, I have been struggling for days
to try and find the right analogy or metaphor
or language to describe what an astounding
revolution bitcoin represents.
It’s not like anything’s come before. So you
say, “Well, email is just faster mail and
with additional features and so on.” Yes,
that’s very true. You can say like a bank
transfer is faster than mailing a check, and
that’s true. You could even say that 3D printing
is a way of moving the manufacturing process
from source to destination, eliminating shipping
and so on, and that’s true. But they don’t
come close.
The closest thing that I can come to in terms
of explaining what bitcoin and its revolution
represents is I would imagine the closest
thing would be the invention of the internal
combustion engine. I think in terms of how
that changes society as a whole.
It is a tough thing to understand, but the
important thing to understand is bitcoin is
not just money transfer. That’s very, very
important. That’s a component of it and it’s
one of the things that gets a great value.
But bitcoin is not just money transfer. Bitcoin
is an entire programing environment. Bitcoin
is a publicly audited ledger of what has occurred
for you financially in terms of property,
in terms of ownership, in terms of contracts
and all these kinds of things can be publicly
audited and verified.
Bitcoin is immune from attack almost completely.
The argument being that if you have the computing
power to attack the network of bitcoin, you
will actually gain far more from using that
computing power to generate bitcoins than
you will from attempting to spoof the network.
So it is practically impossible to hack. It
is completely encrypted. Your identity is
completely encrypted. You can reveal it if
you want, right? You can be out there without
avatar or you can just be your avatar and
the encryption is functionally impossible
to break. This is why Julian Assange used
to protect his information. That’s his life.
So you can assume that it’s in pretty good
What it does most fundamentally is it eliminates
labor in financial transactions. It eliminates
labor in conflicts resolution. It eliminates
labor in things like wills. It eliminates
labor in accounting. It eliminates labor in
lending. There is, in fact, an entire stock
market running on bitcoin. It eliminates labor
in an initial public offering or going public.
And it doesn’t just eliminate some of it;
it can eliminate most , if not all, of it.
As you can imagine, the financial services
sector is completely insane in terms of how
big it’s become, and we’ll get into some of
those numbers in a moment.
The financial services sector is between 8%
and 15% of the entire economy in the west.
If you can eliminate a significant proportion
of that, say, 70% or 80%, then that means
that 8% to 10% to 15% of the world’s economy
can go back into the hands of the people and
away from those vertical ice cube trade glass
towers of financial institutions. The money
can go back to the people.
For example, why do you put money in a bank?
Fundamentally, for two reasons: (1) because
it might get stolen; and (2) because there’s
inflation and if you don’t put your money
somewhere, it’s just going to get either way.
You put it under your mattress, you might
as well have a box of termites in there as
well chewing away the paper.
Well, you can’t have your money stolen in
bitcoin. I mean, you simply can’t. I mean,
with even tiny and reasonable measures of
security, you can even keep your money completely
offline. It’s never exposed to any computers
at all. You simply can’t have your money stolen
through bitcoin.
That doesn’t mean it never happens. It just
means that like if you leave your wallet somewhere,
it’s going to get stolen but this is very,
very simple things that you can do to keep
it completely encrypted and anonymous.
So your money can’t be stolen so why would
you put it in a bank? Certainly, your bitcoin
money isn’t any safer in a bank so that is
a very important thing as well. A bitcoin
cannot be inflationary because the amount
of bitcoin is fixed to the maximum cap of
$21 million. They can’t get progressively
harder to make. So it cannot be inflationary,
which is why the value of bitcoin is going
up. Eleven months ago it was $10. Now, it’s
approaching $11.50 Canadian.
The question is why? What possible value could
bitcoins have that would generate that amount
of growth, that amount of value per bitcoin?
Well, people who don’t know about what bitcoin
can do view it as a bubble. They say, “Well,
it’s gone from $10 to $1,100 in less than
a year. Therefore, it has to be a tulip mania
exuberant bubble.”
I can understand that. I completely understand
that perspective, but I would argue that that’s
because the true value of what bitcoin can
do in terms of replacing financial services
is truly astounding and will be, I argue,
about the biggest revolution in economic history
if a widespread adoption continues which I
see no reason given the amazing amount of
value that is in having direct one on one,
no need for a third-party financial transactions,
having vast available to people is such a
value that it’s irresistible. There’s just
so much profit to be made from it.
Of course, what it will do is to release all
of the people currently involved in heavy-duty
accounting and heavy-duty conflict resolution
and financial services and banks and so on.
It will release them to get real jobs. Obviously,
we have a great deal of concern for these
poor people in the finance industry who maybe
threatened with the loss of livelihood. Naturally,
of course, bitcoin charities can be set up
to take care of them and to make sure that
they stay in the Lexuses and the Rolls Royces
and the Bentleys and the Jaguars to which
they become accustomed because we wouldn’t
want them to have to downgrade. That would
be, well, a great human tragedy, of course.
I’m making a pretty big case here, and I’m
going to go through some details and help
you sort of understand that bitcoin is not
just upgraded money. It’s not just PayPal
without fees or bank transfers without fees.
It is those things but it is much, much, much
more than that. We are talking a massive revolution
in money.
Money is everything in terms of power. People
think that that’s having political power,
having the power to have a law courts and
military and police and so on that that’s
the real power. That’s not the real power.
The real power is always and forever in the
money. You cannot wage war without debt. You
cannot have debt for wars since wars are so
inherently not profitable, you cannot have
it without central banking, without government
control, without fiat currency unlinked from
anything that is limited. Gold is limited
so having a gold bank currency means you just
can’t keep printing money at least if you’re
not the government.
So having something that’s limited in terms
of money is very important. Otherwise, you
just run the photocopier and you basically
turn into the Weimar Republic where you need
a wheelbarrow full of money to buy a loaf
of bread, and it’s probably more cost-effective
to burn their money for heat than it is to
actually spend it on something.
So the real power in the world is the power
of money which is why governments will always
try to gain control of money. When you gain
control of money, you then have to gain control
of interest rates because debt drives up interest
rates and thus invalidates the value of borrowing
money for governments. And so you get these
massive controls over the economy in terms
of currency, in terms of interest rates, in
terms of debt.
If you look at, say, the promises made by
politicians, they’re almost always to do with
giving you something for nothing, pretending
that you can violate the laws of physics and
biology and you give people something for
nothing. The only way they can do that is
through control of money. This is one reason
why you’re getting poorer and the rich are
getting richer because the rich and the politically
connected have control of money and you don’t.
Neither do I, if that’s any consolation.
But people complain that bitcoin has a market
cap of this, that or the other. More bitcoins
are being created. The Federal Reserve creates
about as much money in two hours as being
created in the four years of bitcoin history,
and they’re only accelerating whereas bitcoin
is decelerating. So these are just important
considerations to have.
The choice is not between some sort of fantasy
money that you can have which is anonymous
and gold backed and physical yet interest-bearing
yet not subjected to the whims and caprices
and incompetencies of various administrations
or administrators. The choice is between some
sort of electronic currency and our existing
fiat currency system which is rapidly accelerating
towards its inevitable mathematical conclusion
which is not pretty at all.
I think it’s really, really important to spend
a few minutes to really, really understand
the capacities and potentials of bitcoin.
I’ll just give you a little teaser. Bitcoins
and the bitcoin architecture not only can
replace the entire stock market, but it actually
has in some instances. There are stock markets
running in the bitcoin environment. Bitcoin,
once more, part of it is the transfer of bitcoins,
the bitcoin architecture; but the major part
of it is just an entire programming environment,
an entire look-up environment. We’ll get into
what that means in a few minutes, but it is
the biggest revolution in economics in history
assuming that it is adopted. I would really
argue with a future freedom relies upon its
So please educate yourself. We’ll provide
links to other bitcoin information provider
so that you can check out more than what I
have to offer.
My background, I worked in software for 15
years. I did a lot of database programming
and a lot of presentations on the value of
software so I do sort of understand how to
make a case for software, and I do understand
a good deal of what goes on in the land of
software. I’ve also read the white paper that
the bitcoin originator wrote about his goals
and purposes. I’ll link that in the video
below in the low bar and in the podcast notes.
Let’s gets started, shall we?
All right. So let’s get started. This is the
truth about bitcoin’s value proposition. Just
as a minor note, I’m not a late adopter to
this in June of 2011, which I guess over two
years ago now. I was on television talking
about bitcoin as the currency of the future
so I hope I have some credibility there.
Let’s dive into the value proposition. If
bitcoin can replace significant proportions
or significant portions of financial markets,
well, what kind of size of market are we talking
about? Financial markets in the United States
are the largest in the world. In 2011 — I
don’t believe it’s gotten smaller since then
— finance and insurance represented 8.3%
or nearly $1.3 trillion of the US gross domestic
Now, this is a rapid, rapid growth and it
has not coincidentally coincided with rise
of the power of the size of the state. Of
course, a lot of these guys served the state
and they served stock markets and so on. The
US finance industry was only 10% of total
non-farm business profits in 1947, but it
grew to 50% of non-farm business profits by
2010. It is intensely eating up in many ways
the rest of the economy.
Over the same period, the finance industry
income as a proportion of GDP rose from 2.5%
to 7.5%, and the finance industry’s proportion
of all corporate incomes rose from 10% to
20%. The references for these will be, of
course, in the low bar as always. These are
inflation adjusted.
The mean salary in New York, the city’s finance
industry, rose from $80K in 1981 to $360K
in 2011. Well, the average New York City salaries
rose from $40,000 to $70,000. It is a widely
profitable in larger and larger sector of
the economy which is why I imagine that the
originators of bitcoin will end up with a
horse’s head in their bed.
Now, part of what happens, of course, these
are things like foreign exchange as you can
imagine. Foreign exchange vanishes in a bitcoin
environment because there is no such thing
as foreign exchange. Credit and debit card
processing take half the profits of smaller
stores. If you run a mom-and-pop store or
a small restaurant or whatever, they literally
will take half of your profits which means,
of course, you have to charge a lot more.
It’s not entirely greed, of course. I mean,
credit card companies spend approximately
40% of their profits and incomes fighting
things like fraud and so on. It is a huge
problem. Credit and debit cards are a huge
problem. I mean, you need the number, you
need three digits on the back, and you need
the expiry date and you can pretty much go
to town in most places. This is not the case
with bitcoins at all.
Bitcoins cannot be spoofed or impersonated
in any way, shape or form. So if there is
a way of transferring these kinds of transactions
from credit cards and debit cards to bitcoins,
then you are doubling the profits immediately
of smaller stores which means they can lower
prices and so on. That’s fantastic.
I mean, 15% of the price that you pay is due
to shoplifting and fraud and other things.
Of course, shoplifting will still occur in
a bitcoin environment but some of that will
be significantly reduced. Again, we can shed
as many crocodile tears as we want for the
people at the credit card companies, but we
don’t all cry that we don’t have to cut food
by hand from the fields, right? We like that
there are combine harvesters. These kinds
of improvements are the essence of our growth
as a species economically.
So credit and debit card processing, if it’s
transferred to bitcoins through smartphones
or bitcoin cards, there are no transaction
fees for bitcoins. You can pay a tiny bit
if you want it to be slightly faster, but
there are fundamentally no transaction fees
whatsoever for bitcoins.
People say, “Well, what about the volatility
or what about if you want buy things not using
bitcoins but using regular old feared currency?”
Well, I mean, there are services that, for
a tiny fee, the moment you swipe, the moment
it’s approved will immediately transfer your
bitcoins to cash and put it in your bank account.
There are lots of solutions.
Remember, when you’re talking about the government,
it’s a monopoly control with vested political,
financial and military interest in the existing
system. When you’re talking about bitcoin,
you are talking about a decentralized group
of people who can adapt and can extend the
architecture to do just about anything who
all have a vested interest in its stability,
who all have a vested interest in its accountability,
and who all have a vested interest in maintaining
the value of their bitcoins.
Remember, if bitcoins go into a free fall,
let’s say, then they’ll go into a free fall
either because the value proposition hasn’t
been made. All you can do in business, all
you can do is make the value proposition.
That’s all you can do. The value proposition
is so clear. It’s not going to be because
there’s no value proposition. It might fall
because there’s some competitor to bitcoin
although almost all the electronic currencies
are based on bitcoin at the moment.
So if there’s some feature missing from bitcoin,
you have hundreds and thousands of people
soon to be millions and millions of people
who all have a vested interest in maintaining
the value of their bitcoins. They are going
to work to extend the feature set of the bitcoin
architecture to absorb any new features that
people find necessary that may be causing
a decline in its value. Yeah, fraud cost for
credit card companies run up to 40%.
Here’s a number that might get your attention:
the bank bailout total worldwide was $29.616
trillion. You know you’re in crazy Googleplex
money territory when the third decimal place
is still a jaw-dropping amount of money.
I can tell you this for sure. I’m not a big
one for making predictions, but I can tell
you this for sure: bitcoin will never need
a bank bailout. It will never need a bailout
from the government. So we’re all ready as
a species up almost $30 trillion which is
more than twice the GDP of the entire United
The fact that as a species, we already had
$30 trillion by not using the banks and by
moving the bitcoin, well, I would say, that’s
not a bad value proposition for a day’s work.
Here we can see from 1860 through 2008, of
course, it’s only higher since GDP share of
the US financial industry, of course, it went
up to the 1920s because the Federal was printing
all this money. When you print a whole bunch
of money and you force people into the stock
market, stocks get out artificially inflated.
The stock market is really an effective federal
policy just like the housing market which
is not going to be the case with bitcoins
getting the cold, withering, crypt-keeper
hand of the state off the throat of the economy
in terms of its financial, political and military
motives is really essential to advancing the
course not just of human wealth and human
predictability but of human liberty and freedom
As you can see, it’s just going up and up
and up. It went down, of course, at the end
of the Second World War and it’s been going
up ever since.
So bitcoin, what is it? It’s not a piece of
digital currency. It’s not bits and bytes
and that you burp across the internet. It
is a tiny part of it, but fundamentally it
is a revolutionary protocol for information
Every client on the bitcoin network, every
computer gets all relevant pieces of financial
transaction or property transaction or property
ownership or changes or anything like that.
What it does is it sends out updates to all
the databases across the whole world, and
it checks their validity without any central
authority. I won’t bore you with the details.
You can listen to the podcast below if you
like to know more about how this works.
It’s completely a genius, and I would never
have thought of it in a million years. Not
that that’s the final test of something being
a genius, but it is really brilliant. It is
a step forward in computer science technology
that is the equivalent, I would argue, of
the heliocentric model of the solar system
for astronomy or the theory of relativity
for physics and so on.
This is a way for all computers to be updated
with valid transactions. You can’t double
spend coins. You can’t spoof. You can’t take
your coins back. There are no charge backs
in the entire system. You can still pay back
but there’s no charge backs. There’s no sort
of boomerang. Boomerangs are very expensive,
right? You book something as a sale in a store
30, 60, 90 up to a year. That money can just
be yanked back out of your account and you
have very little way to appeal it. This does
not occur in the bitcoin environment. You
can, of course, send money back for free that
was sent to you, but there’s no charge backs
which is hugely important as to its efficiency.
It’s data that is shared worldwide that is
guaranteed to be valid and authentic, a true
representation of what has actually occurred.
It cannot be spoofed. It cannot be intercepted
and it can be as public or as anonymous as
you want it to be. So if you want to do all
your financial transactions anonymously, you
can do that and that cannot be penetrated
in any way, shape, or form if you take the
necessary steps.
If you are a company that’s out there and
you want people to see your innards and you
want people to see your profits and losses
and costs and all that, you can put all or
some of them in a publicly digestible format
as you like. You can encrypt the contents
of this information or you cannot encrypt
them. It’s really up to you and, of course,
there is value in both.
So when you’re dealing with someone on the
bitcoin network, you’re dealing with an avatar
and the avatar can be themselves or it can
be just like a hand puppet and you don’t know
who it is. But you still know whether that
hand puppet is trustworthy or not. The elimination
of the need for a third party to validate
financial transactions, a credit card company,
a bank, Western Union, the Federal Reserve,
you name it, the elimination of that is an
astounding, astounding revolution in money
and thus society.
The society is based on money. The history
of society is almost exclusively the history
of money. Just look at the French Revolution,
the Roman Empire, the English Revolution,
the American Revolution, all of it is founded
on cash. When you change money, you change
the world in the most fundamental way. The
only way to change the world more is to adjust
the laws of physics. I haven’t found the slightest
skills for those yet so I guess I’ll have
to stop eating cheesecake.
Now, the database that this bitcoin protocol
keeps synchronized is referred to as the blockchain,
and that’s just a massive tree of everything
that’s occurred in the database from beginning
to now and that’s called the blockchain. It’s
a giant accounting ledger. It’s the storage
and transmission of financial information.
That’s one aspect to it. There’s other things.
You can put anything you want into the blockchain.
So when the FBI stole a whole bunch of stuff
from Silk Road, people sent them zero bitcoin
transactions which had a bunch of graffiti,
anti-FBI graffiti. You can include anything.
You can put a novel in there. You can put
a deed to property. You can put a patent.
You can put DNA information. Any information
can be included in your financial transaction.
Once the other person accepts that, that is
like a EULA that is publicly — like an End
User License Agreement that’s publicly validated
which is why I’m saying you can include contracts
in your financial transactions. And if the
contracts are violated, they can be automatically
If I say, “I want you to build me a website
in 30 days,” I include that and pay you 50
bitcoins to do this website in 30 days. We
can include automatically in that whole process
that if the website is not up and running,
in 30 days the money reverts to me. We don’t
need a third a party at all. We don’t need
a third party at all. All of this can be set
up in the bitcoin environment.
So as mentioned, it’s not the sole function.
It’s a public record of anything that you
can consider valuable. Like back in the day
I used to write novels and you can gauge the
quality of my novel writing by the fact that
I’m doing this rather than reading from one
of my novels. But what I had to do was I had
to mail the novel back to myself so that it
will be time stamped with when it was written.
I can now put the novel in the blockchain
encrypted so that nobody can read it and that
I can decrypt it. That’s my ownership. That’s
my ownership and none of this needs — you
don’t need to register with anyone. Nobody
needs to look it up. They don’t need to pay
someone to send them the paperwork. It’s just
right there. If you are a reporter, you can
use the blockchain to file a story and you’re
the undisputed first person to file that story
if you’re first in the blockchain.
These are all things that are there. There’s
a lot of possibilities that are baked into
the bitcoin architecture that are only now
being explored.
Let’s look at what you probably have heard
about bitcoin as money. So bitcoins blockchain
is combined with simple encryption functions
and database rules to provide people with
ownership rights to a certain balance of numbers
dubbed coins. It’s one of the challenges when
you have a new technology is that you have
to use words from the old technology to describe
it. It’s just data. The coins are just a data
that are attached to a particular identity
that is all encrypted. It’s private as you
want it to be.
With the right private encryption created
from a user of the database, one owner’s balance
or partial balance of coins can be sent to
another user on the database. So I transfer
these little bleeps and bloops and blurps
to you and you will call them coins because
like Kindle still makes it look like you’re
turning over a piece of paper when you’re
turn that — it’s kind of what we’re used
to, right?
These database rules allow for a condition
by multiple private encryption keys must be
used to send a balance to another owner. What
does that mean? Well, it means that you can
have three people involved in a financial
transaction, and two of those people have
to agree for it to complete. So if I am doing
something with you and we both agree it’s
been done, then we both put our pass code
in and the transaction is complete. If you
and I disagree, it doesn’t complete until
a third party, which could be human or could
be automated, agrees with either one of us.
So let’s say we go to some guy, Bob, the wise
elder down the street, and we present our
case and he says, “I agree with you, Stef,
or someone else,” then he agrees with that
person and that person then gets the money
or it could be automated insofar as if a certain
condition is not fulfilled, the transaction
reverts or the money reverts back to the original
owner or it doesn’t get sent at all.
Imagine, right now, let me tell you, dispute
resolution for small transactions is almost
completely unavailable to people who aren’t
in mesh in things like credit cards and paying
all of those points for that. For poor people,
people in the Third World, it’s just not really
available. The architecture of bitcoins allows
for this to be baked right in and to be part
of people’s financial transactions and to
be done either virtually for free or for a
very small amount of money. It extends dispute
resolution. Like I have once was thinking
of using a court many years ago. I was told
it was going to cause me a quarter million
dollars and five to ten years of my life.
I think the value proposition of bitcoin relative
to government courts is pretty key.
So these are escrow functions. Escrow, of
course, is generally withholding money until
a particular condition is completed so you
know the money is there and then when the
condition is completed the money is released.
So the buyer and the merchant agree and the
mediator or the merchant and the mediator
agree, that is what occurs.
Bitcoin protocol doesn’t care where these
private encryption keys are used to authorize
transactions. It doesn’t care where they come
from as long as they’re the correct keys.
Does the origin, the IP address that originates
from the computer or the VPN or whatever,
it doesn’t care. It doesn’t care at all. It
just does this key, open this lock. I don’t
care whose hand is holding it. It could dangled
with puppet strings for all it cares. As long
as the key fits, it matters.
So a program in the blockchain called a script
which contains the correct private encryption
keys could be used to authorize a specific
transaction. What that means is that bitcoin
is an entire global programming environment
for the transfer of information. Now, some
of that information can be keys. Author of
that information could be any number of things.
Maybe I’m going to write you an article, and
you’re going to pay me a bitcoin. I write
that article and I send it to you. It’s encrypted
on the bitcoin network. You like it and you
approve it. These are all things that are
possible with no need for any third party
whatsoever. Nobody’s in charge. It just works.
This is unbelievable. If you don’t get how
exciting this is, just keep listening. It
gets better.
So you can send a transaction of bitcoins
that are not executed for a certain period
of time or in a certain date and so on and
that is impressive. If I say while I want
to leave my bitcoins to my daughter when she
turns 18, I can set it up now. When she turns
18, she just automatically gets it. I don’t
need a lawyer to set up a will for my property,
the degree to which my property deeds and
the value of my bitcoins are embedded in the
bitcoin network. I don’t need a lawyer to
set this stuff up. I can just set it up myself.
You can also do things like kickstarter projects
so people can say, I say, “Well, I need a
thousand bitcoins to finish my documentary
because JLo is pricy,” and people can say,
“Well, I’ll donate, but I don’t think you’re
going to get that far.” Until I reach that,
it doesn’t get deducted from anyone’s account.
All of these things are possible in the bitcoin
Now, there are scripts that can check the
internet, right? Of course, bitcoin environment
is on the internet so it can check information
that’s on the internet. So there’s a variety
of things that you can do. Let’s say, I want
my daughter to get my bitcoins either when
she turns 18 or when I’m dead. Well, say states
like Missouri put people’s death notices online.
You could ping that and as soon as your name
and date of birth and maybe some special key
shows up there, then the money will be released.
Again, you don’t need a lawyer to execute
this stuff. And again, it’s tough to think
of reducing the amount of money that lawyers
make. Anyway, we’ll hold hands. We’ll sing
some Kumbaya to help them transition.
If you say that let’s say you host with a
particular web time company. They guarantee
uptime and if your website is down, they’ll
pay you bitcoins every minute that it’s down,
again you just set this up. The bitcoin chain
will be paying the website anytime it goes
down the money will be transferred. When it
comes back up again, the money will stop being
transferred. Again, no people are necessary
for any of this at all.
A reward can be automatically delivered on
the completion of some sort of online project.
For instance, there are pretty good translation
tools on the web but let’s say it’s really
important that I read the site in Turkish.
Well, I can just put something up there and
say, “Translate this for me on the fly,” and
when I’m satisfied with it, the bitcoin automatically
gets paid to the person. Again, you don’t
need human intervention or a third party from
that standpoint.
So we talked a little bit about the money
aspect. Again, money is just one form of the
data the bitcoin can accept and transmit to
everyone and verify but it can be any kind
of information. Time stamping and verifying
information without revealing what that information
is or who posted it because if you’ve got
the key to your identity on the blockchain
and you have the key to whatever is encrypted
that you put there, I mean, it doesn’t care.
It’s a blind photocopy. It just replicates
whatever is there and that’s just astounding.
As we mentioned, you can use it to protect
yourself from plagiarism or from other people
claiming they come up with the idea first
or anything like that.
Here’s a slightly more complicated example.
Again, it is only limited by the imagination
of the programmers and the market demand for
services. This is why it is so revolutionary.
You can have it do almost anything that involves
data and these days, what doesn’t involve
data? To those blue-collar workers who were
put out of work by some of the robots and
some of the other automation that has occurred,
don’t worry. The white-collar workers are
next and that we can all get on to finger-painting
clouds and other cool stuff.
An inventor could use the blockchains to verify
and time stamp a digital thing to print called
the hash of a document describe an intervention
for free. So even if you don’t reveal the
information about your invention, the block
chain could be use as proof of its existence
if at some point later they said, “Well, who
invented this?” blockchains solve that. It
has nothing to do with money fundamentally
but it’s right there. Marriage certificates,
divorce certificates, anything that you want
could be put in these things as well.
If you remember that this thing called the
blockchain which is the ecosystem of bitcoin,
it’s a giant public record of ownership or
giant public record of data independently
audited and verified by computers all over
the world with ownership rights secured by
One of the projects that’s underway in the
bitcoin community is called the colored coins
project. People say, “Well, what if you get
up with a competing currency that competes
with bitcoin?” Well, you can put that into
bitcoin. I can come up with Stef bucks if
I want. I can say, “I want to finish my documentary.
I will take Stef bucks,” and they will give
you — every Stef bucks gives you a half of
a percentage point of the profits of the documentary.
And then I say, “Oops, fooled you! I’m releasing
it for free but thanks for the money!” And
then it comes on the best deal.
But colored coins, they allow anyone to mark
a bitcoin or a fraction of a bitcoin with
ownership rights of just about anything you
can imagine. Here’s an example. If I sell
you my house at 123 Lincoln Road, I can complete
the transaction by sending you a scrap of
a bitcoin that I have uniquely marked with
ownership bid for that property. So the legalese
equivalent of this bitcoin entitles its owner
to the property at 123 Lincoln Road. No registry,
no contracts, no big old dusty filing cabinets
with overweight public sector workers shuffling
back and forth like zombies. It’s just right
there in the architecture. No need for a third
party. This ownership transfer of 123 Lincoln
Road will now be publicly visible and auditable
on the giant public record of ownership information.
Again, that doesn’t mean you live there. You
can privatize and keep encrypted and anonymous
that it’s you who live there but the ownership
can be there and if anybody questions it or
opposes it, you can prove your own ownership.
No need for lawyers or registries or central
authorities. This is what I’m talking about.
Are you getting exited yet? Let’s keep going.
So the colored coins project takes the application
of the blockchain as a public record of ownership
law one step further. Imagine, it’s a company
that marks or colors of bitcoins or fractions
of them with proof of ownership and shares
of that company. So these are like shares.
They’re not tradable. You cannot go in and
buy a car with a share but they entitle you
to partial ownership of an organization and
partial share or dividends in its profits.
People can take full ownership of shares in
companies they invest in because right now
they’re physically or digitally stored with
a third party. Oh, man! But then we face the
emotional barrier of not being able to give
as a society, so much money to stockbrokers.
Hold me. Well, we’ll try. We’ll try and struggle
through that as best as we can and release
these people to do something productive in
the world.
This would facilitate the purchasing, selling
or trading of shares without the need of intermediaries
such as brokers or stock exchanges. Oh, my
goodness! Are you getting excited yet? Von
Mises said, a great Austrian economist, that
the foundational difference between a free
society and all other economies was the existence
of a stock market. We’re talking about people.
We’re talking about privatizing stock market.
Isn’t that amazing? Isn’t that astounding?
It grants everyone in the world equal and
free access to the stock market. Do you ever
think, “Oh, I know this great company. I’d
really like to get it at the stock market.”
Oh, the regulations. Oh, I’m going to find
a stockbroker. Oh, I got to set up my account.”
Forget all about it. Forget about the overhead
of these people granting you the right to
buy and sell stuff. Imagine you couldn’t buy
your groceries. You just got to go to a third
party who are going to charge you 40% of your
grocery costs to go and buy the groceries
for you. It’s madness! Direct economic opportunity,
that’s what we’re talking about. Not even
low barrier to entry but definitely no barrier
to entry. This is how we help people in the
third world.
It gives individual and entrepreneurs and
small businesses equal access to public funding.
A business of any size could have an IPO.
You’re daughter is thinking of opening a lemonade
stand. You can have an IPO and get the cost
of lemonade upfront. What is this going to
save? Oh, it’s astounding. Companies that
want to offer shares to the general public.
I went through this when I was an entrepreneur.
The average cost is $3.7 million plus an underwriter’s
fee of at least five percent of whatever value
their IPO raises.
In moral terms this is called highway robbery.
In bitcoin terms this is called, “Oh, I think
that’s gone in the rearview. We don’t have
to worry about that anymore.” This makes the
ability to raise public funds extremely prohibitive
for small and medium businesses, a luxury
only available to companies of a certain size
and class. Now those companies like the fact
that this is a massive barrier to entry to
having an IPO. We’re talking about leveling
the playing field. This is going to shrink
the gap between rich and poor.
As society and rules and regulations and laws
and governments and money and financial instruments
become more and more complicated, more and
regulated, more and more dependent upon certifications
and approval by the state, it becomes harder
and harder for small businesses to access
that which is why big companies get bigger
and small companies stay small. We’re talking
about equalizing opportunity for access to
capital with almost no overhead whatsoever.
Come on.
For an artist or a band or a mom-and-pop shop
having equal access to the ability to offer
shares to the public, to raise money for new
projects would be invaluable. Think you’re
putting plumbing in your African village,
why not? Have an IPO. Again, we will have
condolence cards to all of the bald, empty-headed
suits at Goldman Sachs but again, I think
I can find my way to struggle through that.
Support traders already built into the bitcoin
protocol, easy piecey nice and easy. It’s
one programming project, a way to create online
bitcoin wallets that support colored coins.
The front end, this is stuff that sits on
your computer. It removes the need for stock
exchanges, brokers, underwriters and other
various entry in public finance. That is yummy,
tasty futurism right here and now. Our people
say, “Well, but it’s open source and so on.”
Hey, you know what else is open source? Linux.
You know what the basis of Android is? Linux.
Linux is the most widely propagated programming
environment in the world and it’s open source.
These are just tips of the icebergs. Again,
this is some ideas that I have gathered together.
The sources are below. Really this guy is
wide open. The possibilities are literally,
not just virtually but literally limitless.
It has been described as the internet of money
but given that it’s not just mainly for porn
and fraud that it is also a much more secure
— it is infinitely more secure than the internet,
infinitely more anonymous than the internet.
This is a complete revolution and a way of
bypassing all of these third parties.
You could argue there were some necessity
for them in the past although through those
process of regulatory capture, they have invaded
and infested the state and used the state
to their own advantage. Right now, they’re
generally parasitical upon the future health
and wealth of mankind. This is sunlight to
these vampires and it is a way of having us
tunnel out the labyrinth and maze of financial
regulations and complexities and have a clear,
direct, friction-free interaction with each
other. If you can replace stock markets a
significant amount of banking, a significant
amount of underwriting and IPO expertise,
if you can eliminate the need for credit card
companies I believe we can literally, literally,
double our wealth within a few years.
Double the wealth of society, that means more
help for the poor. That means more help for
the third world. That means more help for
people who need medical care. This means more
income for people so if they want to stay
home with their kids rather than putting them
into bug-infested daycares, so much the better.
This is not just the revolution in money.
This is the revolution in what it is possible
for us as a society and species. Plus, all
the people who formally used to do these stuff,
who are all very smart and some of which could
theoretically be very ethical, they can all
go out and do really, really productive things.
Not only are we reducing overhead. We are
liberating some of the best and brightest
minds of the species to go and do stuff that
is really market-driven, consumer-driven and
isn’t just increasingly complex government
foodadle overhead that slowly strangles the
human race.
This is Stefan Molyneux from Freedomain Radio.
Get yourself knowledgeable about this stuff.
It is the future.


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