0:00:00yoko is jeopardy things when they I got my speech I super nice guy just I was
0:00:08hating the fact that people give him all this crap for actually playing the game
0:00:11well if you see the backlash I have actually seen this where he is or are
0:00:17this is actually interesting yeah he's sort of like a Moneyball you know hehehe
0:00:22jeopardy like Moneyball is to baseball yeah alright I asked him I was like how
0:00:27much did you spend on strategy how much memorizing her time is like totally
0:00:31strategy like ed memorize some stuff but he basically figured out how to play
0:00:35daily doubles during the games which is the people miss that you can win during
0:00:41the game you don't get Final Jeopardy and so you basically wins during the
0:00:44game and the most the highest grossing winners have also played the game that
0:00:50way I mean Ken Jennings was a little different but he was early after the
0:00:54change some of the rules and yeah but I actually who's the new guys name
0:00:57what's-his-name our third shoe r32 I actually became aware of him cuz I saw a
0:01:02piece that Jennings Road about him defend you is great it was really nice
0:01:06so they do sort of like the traditional way to play jeopardy the gentleman style
0:01:12if you would
0:01:13is you you pick a category if you have control of the board you pick a category
0:01:17that appeals to you and you pick the the lowest tonight you know go from the top
0:01:23down so in the first round your pic $200 than the $400 if you keep getting it
0:01:28right and work your way down to the wire money and you know I guess there's some
0:01:33correlation between higher money and harder questions
0:01:37well little bit I think the actually we are they do make the they do make the
0:01:42questions a little harder as it goes down as it goes down the board not
0:01:45always but typically and the producers asked you to go from top to bottom and
0:01:49they don't tell you to do instead of rule but they say look most people do
0:01:53best this way it's less confusing the audience prefers a
0:01:57it's probably a better way to play we're gonna make you do it and it's just in
0:02:01the heat of the moment it's very hard to make the right judgment but daily
0:02:04doubles are occur predominantly unpredictable locations right they're
0:02:09not randomly located that there is if you study the game and look at where
0:02:13they've been
0:02:14you can you know there's some spots that are higher percentage significantly
0:02:18higher percentage chance of being a daily Double than others and its if you
0:02:22have control of the board it is to your advantage to 200 yeah he's he's got the
0:02:28right combination of buzzer timing domain knowledge it's fairly broad and
0:02:33deep in like trivia categories and the strategy I think he's winning against
0:02:38sometimes stronger overall players who can master the strategy that's very
0:02:42Moneyball it's and it's great and I think the thing is he comes across as a
0:02:46feckless on-screen because you know I do this when I'm thinking really hard I go
0:02:51slack is playing the game so there is this like this geeky at all tonight
0:02:56Asian guys as bentsen racism is is winning the game it's like really is
0:03:01very funny so is his Twitter handle is Arthur underscore a theft and I think
0:03:07it's hilarious because he's clearly making fun of like the effortless thing
0:03:11about it is very funny on Twitter he's very personable in the interview and I
0:03:16know for all we know is just one like 20 more games because it's right
0:03:20tape months ago so you can talk about it but it is very enjoyable I just like
0:03:24playing the game always like to point of the game is to win is not to you at home
0:03:30may not like what he's doing great right thing they can Jennings pointed out in
0:03:34his piece on him is in addition to the fact that it's to your advantage to get
0:03:38the debt huge advantage to get the daily doubles it also by skipping around the
0:03:46board from category the category it gives you an advantage over opponents
0:03:49because you know if you get it right where you're going next
0:03:53and you are ready for that category where is your opponents are don't even
0:03:56know which category to be thinking about whereas if you play that traditional way
0:04:00and somebody picks you know potent quotables for 200 even if you don't
0:04:05doesn't get it you're ready for the next one to be potent quotables for 400 yeah
0:04:10it's totally true with so it's a bit since I think it plays into the game
0:04:13theory thing and and people have their own preset notions about what they they
0:04:18want but you know I am enjoying enjoying watching my boys and I watch them play
0:04:23it's very fun yeah it reminds me anything with game 3 but like one of my
0:04:28favorites is the history of blackjack yeah we're blackjack it's kind of funny
0:04:37because it's like the rules date at least back to the 1800's and were
0:04:44apparently you know came about without the help of any sort of computer
0:04:48modeling whatsoever and without computer modeling there's really no way to tell
0:04:52what perfect strategy is and whether the house actually has an advantage or not
0:04:58and so for decades
0:05:01decades and decades you know through the until the 1960's typical players in a
0:05:07casino like what was considered here's the right way to play actually we're
0:05:11playing at a tremendous disadvantage to the house the basic gist of the way most
0:05:17people played in a casino and and if you you know and if you sat down and were
0:05:21unfamiliar with the game and we're sitting next to somebody who was you
0:05:25know clearly a season blackjack player in and ask for help from this is the way
0:05:29you would learn to play is that you should never dust whenever you get to 12
0:05:35or 13 you just stop because you could bust and busting is an automatic loss
0:05:40and it's you know you know the dealer just takes your chips and it doesn't
0:05:44matter what the dealer does you know that's part of what makes the game a
0:05:47little complicated is
0:05:49if you bust the dealer takes your bad and it's gone and even if the dealer
0:05:53subsequently goes on to bust you don't you know there's no time in that
0:05:56situation even though in theory it's a tie because you both busted and so
0:06:02that's so devastating that the players you know developed this strategy never
0:06:08never never take a card if you can bust with the pot you know and in some people
0:06:12would play well maybe if they had a 12 maybe they would hit on 12 because
0:06:16attend the bus but it ends up that so horrendous horrendous strategy for the
0:06:21player in this case ya edwards who worked at I think IBM is he was the
0:06:26first guy to beat the game and he did it with not by like working it out through
0:06:32formulas but just through brute force computation that he just programmed in a
0:06:37simple game of blackjack and just ran it millions and millions of times you know
0:06:42given this hand you know if you play this way what you know what happened and
0:06:46came up with you know the basic strategy and it's you know it's very different
0:06:50from that but what happened then is players who would read the book and
0:06:54Thorpe also invented card counting which gave the play actually gave the player
0:06:59you know an advantage of 23 percent which is which is huge but even without
0:07:03the county park even just the basic strategy where you could just learn
0:07:07these simple rules if you have a fourteen and the dealer has a 16 you
0:07:11stay if you have a 15 in the dealer has 10 cards showing you have to hit the
0:07:18players who had that strategy would do very well and before the casino sort of
0:07:21adjusted the game you could maybe even have a slight advantage in the in like
0:07:25the sixties you can actually play the game without counting cards have a
0:07:28slight advantage but it was like a social thing though where where if these
0:07:33other guys at the table we're playing the traditional way and then there's a
0:07:37guy who's actually playing the mathematically right way they they would
0:07:41some of them would get angry you know they'd be like what the hell you doin
0:07:44hit 15
0:07:45because it would seem to be random it would seem to be counter-intuitive it
0:07:49seems like you're playing the game wrong even though I mean this is this is the
0:07:53the Indiana Jones moment when he shoots the guy we just got the whip like you're
0:07:58like wait a minute that's not fair 2008 the point is it's not you're there to
0:08:04play the game this is reality TV now I want some seasons of survivor and that
0:08:08was the thing that was fascinating I think it all developed into a pattern
0:08:11eventually but it was passing it was something like Boston Rob who is much
0:08:15reviled he figured out a new way to play the game a few seasons in and it
0:08:19transformed the game dynamics and everyone watching him how to play the
0:08:22game differently after that but it pisses you off if you're in the middle
0:08:26of the situation because it's an evolving game dynamic in which
0:08:29everything in your head that you built your strategy around the suddenly wrong
0:08:33and you hate that other person because they've changed your not playing the
0:08:36same game anymore
0:08:37yeah because I watched survivor in a couple years but I did watch first
0:08:41couple of years and then I do remember Boston Rob he was great he was the best
0:08:46villain he was exactly who he was and I think of all the people and i think i
0:08:50watch for five seasons like the guy on the very first season
0:08:56Richard Hatch Richard Hatch who he really thought I'd take the plea deal he
0:09:03went to jail because he thought he was sprayed on larry is unlike its
0:09:06straightforward tax situation but I bet he as the winner of the first series and
0:09:12you know seemingly played it pretty smart became like the one that's how you
0:09:17play the game
0:09:18yeah you know Richard Hadlee then he came back in the day whatever the
0:09:22tournament was the all-stars thing a few seasons into it he comes back he tries
0:09:27to play the game the same way and he is not like a few days in his favor
0:09:33statement was I was bamboozled there is a game changer you're out but the kids
0:09:38walk around with your wang wang looking at people and we'll get right well and
0:09:43the other thing he seemed unprepared for the fact that the first season
0:09:47nobody knew a nobody knew the game and be nobody knew what he was doing
0:09:52where else when he came back for the you know what was it like the jeopardy
0:09:57champions champions it was clearly everybody there you know as a survivor
0:10:02player had watched the first season of Survivor aware of is you know he really
0:10:08needed like a new strategy and you know there's a thing called the Markov chain
0:10:13and I talked I found out about it because of the game chutes and ladders
0:10:16of all things to someone wrote this whole area
0:10:18shoots and ladders are snakes or is called stakes letters someone years ago
0:10:22wrote this hilarious review / analysis of that kids came looking at it from
0:10:27this mathematical standpoint a Markov chain is a mathematical system that
0:10:34undergoes transitions from one state to another in the state gonna state space
0:10:38it's random things so it's the next action is not followed up on it because
0:10:43of the previous action and there are games that are the games are most
0:10:49interesting are the ones in which it is there's not a predictable outcome based
0:10:53on the sequence of things in which you do so chutes and ladders the diced are
0:10:58everything it's really a game that teaches kids how to play games but in
0:11:01poker the number of possibilities are two huge outdoor crowd counting they
0:11:07still become too huge to be predictable as an outcome from starting states and
0:11:12so there's this issue about the tension between games that have Markovian
0:11:16properties and non Markovian properties about which ones are fun or not because
0:11:20you know as a parent you know shits about her socks and Candyland sucks
0:11:24because they're they're
0:11:27chain on Marco V and the worst Candyland isn't even really a game because it's
0:11:34entirely deterministic you know that there's a deck of cards once the cards
0:11:38have been shuffled in you've decided what order the players gonna play in it
0:11:42the outcome is already determined that there's a day spa component to it which
0:11:46is ostensibly Markovian but the chain Markovian
0:11:49each car's plate and sequence so it's just it is horrible but it teaches kids
0:11:55how to its simple method he just kids how to play rules and follow the game
0:11:59and there's winners I don't think I don't think you can get a lot of his
0:12:05lessons whenever we lucked out Jonas ever play for cancer too long but now
0:12:11we're to sellers of Catan which is much better if anything Candyland it you have
0:12:18no choices and there are devastating you know bad cards you know they get the
0:12:27candy cane and send you all the way back to the beginning like you know I don't
0:12:32know it doesn't seem like you get any good lessons out of it you don't learn
0:12:35any strategy and you learn that you know something terrible happened to you at
0:12:41any moment he teaches you the essential hopelessness of life or not the working
0:12:45world is like as well yeah it's it's sort of a full of philosophical
0:12:52depressing game because it's sort of like you know it's like going back to
0:12:57college
0:12:58philosophy 101 and you know do you is there such a thing as free choice you
0:13:02know in Candyland there is there is no free choice it's reinforces the
0:13:06elementary school and college and the job and there's the house near ticky
0:13:11tacky about it but the hill is your life did this is the future you know like
0:13:17with sufficient knowledge you can already you know you could predict
0:13:20exactly when and where you're going to die and you're never gonna get the
0:13:23governor only piece of paper given play blackjack game
0:13:31a little bit I like the elected instincts you want to win now it's
0:13:36actually but I just lose inches like I don't have any I don't have any playing
0:13:42jeopardy jeopardy is a different kind of battle but I I just never happen don't
0:13:46have the I can't stick to wander off and look at the other things ready for some
0:13:52reason when you were on Jeopardy did you do to get daily doubles yeah I think i'd
0:13:59i'd never I didn't get a lock I was I was so IBM researchers know Watson one
0:14:06of things they do they did this one group in all this game theory and
0:14:09analysis and they found that people who were in jeopardy if in three categories
0:14:13are sort of regular Champions masters in Grand Masters and I was clearly in the
0:14:18regular I eat out a couple wins I'm happy that I want but I wasn't like a
0:14:24natural player like some people are so I did I did ok that's the Daily Double
0:14:30you know it ties in with blackjack as it is is the one part of jeopardy thats
0:14:35well the final Jeopardy is a bit of a gamble but you know it's a gamble where
0:14:39where you don't know the question you know where is the regular questions it's
0:14:44it's a combination of skill like your actual ability to recall the answer
0:14:49know the answer and physically to hit the buzzer first but you do you know you
0:14:55get the question so it's not your not gambling i mean you do in n you can
0:14:59maybe see you are if you only have certain of the answer and you get a buzz
0:15:04in any way and take a chance you got it right as you lose the money if you get
0:15:08it wrong in the daily challenges never buzzing when you don't know the answer
0:15:11for sure because you lose the money you have in someone else's most likely get
0:15:16it right and he backs you must double the different cuz you they've had it
0:15:19they've had the time to think about someone misspoke and then the other
0:15:24person disposed and got it and they need said almost exactly the right thing I
0:15:27remember as a kid when it was newer when when
0:15:30you know when it wasn't so ingrained in the culture of marijuana regularly
0:15:34anymore but it's been years since I've seen one where somebody forgot to put
0:15:38the answer in the form of a question is when I was a kid that happened fairly
0:15:41regularly and inevitably somebody else would buzz in with the same answer in
0:15:47the question to take the dollars there's actually a tiny rule which is in regular
0:15:53jeopardy in the first half of the game they will alert you and you can we
0:15:57stayed in double jeopardy you cannot if you say it without being questioned its
0:16:02automatic wrong is that a new role I don't remember a couple years I've got a
0:16:07couple years ago I know it's funny they just because the second half he later
0:16:11became get it but that's your problem doesn't and you have to have the heart
0:16:16of a gambler to the really play aggressively on the daily doubles like
0:16:20this is it richard too hard to see you
0:16:24yeah he's in cuz you if you can it's more likely you are to know the category
0:16:27you may have answered questions in the category C you know the kind of
0:16:30direction they're taking and then you can go all out and so Roger Craig who is
0:16:35now the number that for where authors display stand so far
0:16:39number four all-time regular-season winner Roger Craig he won $77,000 in one
0:16:44day because Daily Double
0:16:46and they got another and it made sense because he knew the category and he
0:16:51could have lost but daily doubles twice in a row but it didn't it's funny it
0:16:57didn't I don't think it was a bad game decision because he was competent enough
0:17:02and he could have much money at that point so there's a point where you've
0:17:06already won enough money when enough days like you know you're gonna be in
0:17:09the term Tournament of Champions
0:17:11you have to psychologically want to win more than you were afraid to lose you
0:17:18have that's exactly right and do something about that like we're sitting
0:17:21position and you're like I could get the highest score writer like let's say
0:17:24you've got thirteen thousand and I've got eight thousand
0:17:28and you get the daily WTO and normal conservative person is gonna think we'll
0:17:33have all i'm up by five thousand already I don't want to risk it I wanna stay up
0:17:37even if I get it wrong whereas it's probably a better game theory strategy
0:17:41to just go for it you know you know the other players play you know you're doing
0:17:47you look at the board if there's time left because you can win the game right
0:17:50there on that play
0:17:51yeah I mean I lost I did at Wrigley Doublemint the game and I thought I lost
0:17:55at five grams and I was going close the enemies of terrible game we're all
0:17:58playing we're all off my debt all five grand and I said George Sand's instead
0:18:03of George Sand I will never forget you know also tall but I still came back
0:18:07after a bit I got another daily double doubles in a row and if I had said
0:18:12saying I would have won the game so it was the right choice it was a category I
0:18:16knew I'd answered I think the other three or four questions correctly so is
0:18:20absolutely right choice and I lost in exactly the right way to lose the thing
0:18:33they just finished the five minutes ago a black day the thing that drives the
0:18:40blackjack players not if they think that they know the right way to play somebody
0:18:44else is playing differently is that then after the guy plays wrong according to
0:18:51them whether it's the modern era if you don't play the mathematical basic
0:18:55strategy are back in the sixties when people started to and then the next card
0:18:59comes out and if it had been the other way around would have you know busted
0:19:04the dealer and everybody would have won or whatever they blame the player as
0:19:08opposed to as opposed to excite you know like so you know let's say I've got a
0:19:16fifteen on the last player to go I've got a fifteen and the dealer as it
0:19:21twenty and its 1968 and everybody thinks I should just stay because I could bust
0:19:25but I know that I should what I should do is hit because 15 against it dealers
0:19:3010 I'm probably gonna lose anyway to terrible hand but I'm gonna lose less if
0:19:35I hit lose less out of a play the same here and a thousand times
0:19:39I'll lose fewer time so I hit and I take let's say seven and I bus 22 now then
0:19:47the dealer turns over their cards and and updated the dealer has 16 and
0:19:53they're so the DRS to hit and pulls a 42 have 20 and the dealer wins whereas if I
0:19:58had just done what everybody thought I should do and stay on this particular
0:20:02hand the dealer would have busted and everybody else who is still in the game
0:20:06with a 10 ICC statistically gonna annoy people because that's going to happen
0:20:09frequently enough so you come out ahead right and in specific games are going to
0:20:13be leaving people and most people don't you know they they don't have any
0:20:18concept of you know statistical what's the what's the phrase at large enough
0:20:25sample said to be statistically valid right now you know one hand anything
0:20:30could happen right some asshole could have it twenty and hit and get an ace to
0:20:34make 21 mean it's like the stupidest thing you could do but you know
0:20:37sometimes it's gonna work right when I was 13 cards in the deck is an ace it
0:20:43doesn't make the right play but then somebody will say we'll see if you won
0:20:46its proof that you did the right thing and if you lost its own
0:20:50into insanity is people develop their theories in the areas of their not
0:20:54statistically valid I mean gets back to the Moneyball thing right Moneyball is a
0:20:58battle between people going by their gut which is often wrong and by the
0:21:02statistics which which are statistically you know we're in this piece the
0:21:07magazine and Michaels wrote a great article called three strikes you shot
0:21:12about ten years after Moneyball and what it changed in baseball and there's tons
0:21:17of people who still reject ten years later watching the results of it they
0:21:21still think everything is a flu shots right there in the big game you know the
0:21:24big show they know what's going on and so you obviously don't know cause you to
0:21:29play baseball in whatever it's like I'm sorry the statistics are right they are
0:21:32and it kind of sucks but they are actually correct yeah absolutely
0:21:38less romance
0:21:39statistics yeah you still hear about that they're still like old-time
0:21:42baseball scouts who just you know don't look at the numbers and just look at how
0:21:46the guy looks you know judge eventually they will be and there's a there's a
0:21:52little things to like there's a surprising you know it's one of those
0:21:55things it's kind of hard to measure because it's it's effectively subjective
0:22:00but that better-looking players handsomer young men tend to be scouted
0:22:06hired then home layer players sure right and that's you know just you know one of
0:22:12those ways you know that good-looking people just have you know better fortune
0:22:18in all aspects of life but even in like sports they end up getting better
0:22:22scouting reports then players this is a cross I haven't been forced to bear
0:22:27there's a site called jeopardy hotties but i wanna tell you what's funny about
0:22:33it is it is it is I went to this site and I was like I'm not on it so boring
0:22:40boring article which is funny I was no picture of me there's a link to me but I
0:22:44look through it I gotta say things about it was non hetero normative and it was
0:22:49not on gender normative so the people that the person who had posted these
0:22:53pictures for years and years it is not like I only like certain aspects of
0:23:01society attractive blonde women it's all kinds of people and I agree the men the
0:23:07women the people of different you know
0:23:09orientations and so forth like it's also next is a celebration of his duty across
0:23:15the lot of different storms but I'm not so terrible analyst of talk show the
0:23:23talk shows so we're talking about mark off and all these statistics whatever I
0:23:30know you and some questions we hinted around yeah let me do the first sponsor
0:23:36in that will get dig into it because that's really why I feel like it's the
0:23:41whole bit clinton has reached a breaking point and then build up we have to
0:23:44establish credibility members
0:23:48this kind of related as the Laughing Man so there's a lot of gambling our first
0:23:54sponsors are good friends at igloo igloo is an internet you'll actually like I
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0:24:22research to study the challenges businesses face when implementing
0:24:26SharePoint SharePoint is Microsoft Internet product that dates to like 1983
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0:24:37includes software dot com slash the talk show and he came from the show and then
0:24:43they have the way people are linked to their new research but there's five main
0:24:47points that they got from the research number one SharePoint doesn't work well
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0:25:00any kind of cell phone with a WebKit browsers gonna work great with sure with
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0:25:11third it requires too many people got a license of a lot of people just to get
0:25:16started using it and then the last point is that ends up no one no one actually
0:25:22use it it gets put into place in you know from top down
0:25:27orders from I T department and then with such a pain in the ass to use what
0:25:31happens is the team's end up using other products anyway are going you know
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0:26:27ok
0:26:28so I've been putting it off I am vaguely familiar with it but I need you to do I
0:26:36really do I need you to explain this to me because I kinda am and I you know and
0:26:42I was good at math I really you know more mathematically that kind of kind of
0:26:47get the basics of math but I don't know I feel like and it's it clearly I mean
0:26:57it's maybe even with the the criminal stuff going on at the Mount dioxin the
0:27:01other place now it would still be in the news more and more you know it seems
0:27:08like it's a rising tide regardless of those things but then you know what I
0:27:15want that too so we'll start from the top
0:27:18ok I think there's three things you break it down to three things that you
0:27:23have to understand all of which are relatively easy to understand
0:27:26ok so big queen has like I guess it's three different aspects one is that the
0:27:34bitcoins themselves are just a bundle of cryptographic information of which the
0:27:38person who possesses it's sensibly has a secret that only they know about
0:27:43whatever quantity of bitcoins are in a particular address as it's called the
0:27:49second is that only transfer bitcoins other people you don't receive them you
0:27:54only send them and that is again a cryptographically signed transaction and
0:27:59that he becomes permanent in a way that I could talk about so you have a Bitcoin
0:28:04in you wanna give it to me so I never receive it
0:28:07you not technically what's interesting is a transactions are all one way only a
0:28:12transaction sends money from one addressed to another and the big wedding
0:28:16dresses and wallets are interchangeable terms like the address is this like the
0:28:20destination it contains some some of bitcoins from you once at OC which is
0:28:25the tiniest up to whatever quantity have so so I've got an address and you send
0:28:33me money and I send you money but I don't receive money per se so there's
0:28:38there's a big way address
0:28:40there's a transaction and then there's the issue of how transactions become
0:28:45permanent which is Bitcoin mining those are sort of the three pieces think each
0:28:50of them like when you lump it all together it's like what the hell so
0:28:54fundamentally what between is about is decentralized trust so no two parties in
0:29:01a bit quiet transaction or in any aspect the big quake was system need to have
0:29:06any implicit trust in each other like the system itself handles trust by using
0:29:11public key cryptography which essentially assures that once you create
0:29:16a secret a public keep it publicly peer uses one of multiple different formulas
0:29:21but let's say uses a diff is one that people as the diffie-hellman key that
0:29:28works and what would you do when you create public-private key pair is using
0:29:31very very large prime numbers and you went with two pieces at the end so I
0:29:36don't have to I mean you can look up the details of what he wanted her to pieces
0:29:39in one piece is a private key that you possess and you keep it absolutely
0:29:44secret no one else may never have access to it onto store anywhere has access
0:29:48because this private key proves your identity
0:29:51the possession or in the possession part of it like you being able to deploy the
0:29:55key gives you all the power over a transactions that involve that
0:30:00particular public key public-private key pair of you if you got your hands on my
0:30:06private key you could send my bitcoins to somebody else
0:30:13exactly and this is truly public key cryptography is used all over the place
0:30:17as the basis of SSL TLS used for web encryption is used in age transactions
0:30:23in the same way so for example to if you had my private keys for SSH
0:30:28you could log into during fireball over SSH exactly can't get on the command
0:30:35line on daring fireball done that if you had my private keys yeah and the notion
0:30:40with public key cryptography is that the public part of this you can be freely
0:30:44distribute it and no one can of computation power in the world over I
0:30:50forget how many years of its the heat death of the universe
0:30:52or not that would allow you to use any known technique to reverse engineer
0:30:59brute force attack and recovered the private key so resistant it's an
0:31:03asymmetrical key system and so the public he gets used broadly I get any
0:31:08system this is this is how you can sign something with the public case you take
0:31:14your data and you sign up with the public hearing results result is a
0:31:19cryptographic hash that only the recipient with the private key ally
0:31:24owner the private key can decrypt that so it's a way for a one-way method for
0:31:28someone to send you something securely that only you are the possessor that
0:31:32private he can read that's how it gets used you know a lot of time it's true of
0:31:36web pages when you do a web transaction the first thing that happens asshole
0:31:40digital certificate thing of which we've now found that was recently last three
0:31:44days
0:31:45not just go to fail but there's a new one that dates back many years and is
0:31:48also suspicious and how safe that says let's keep that in mind let's come back
0:31:54but the idea that you're
0:31:57you have information you want to pass in general the way cryptography is used to
0:32:02secure a secret in in Bitcoin it's not securing a secret it's proving ownership
0:32:07and identity so in the Bitcoin system you know there is no inherent value
0:32:13what's the value is that a set of numbers representing some quantity of
0:32:18bitcoins can only provably belong to a person who owns the private key that
0:32:23corresponds to that address that contains a number of bitcoins so nobody
0:32:28else so no one else can do anything with those crazy cannot prove ownership
0:32:33because they cannot because the private key can be used to sign transactions
0:32:39that by using the publicly available he can be proven to only have been signed
0:32:44by someone who possesses a private key so there's an absolute way to prove that
0:32:48you own a thing because you have the private key and there's I don't think
0:32:52any other systems things that are parallel but there's no method in the
0:32:57real world that corresponds that there's no physical method you know biometric
0:33:03identification is one of things but there are ways to fool that
0:33:05and you know to the curve I got nothin cutting off and pickling people and so
0:33:10forth
0:33:10joked about the iPhone 5s so big queen the idea that there is no way to because
0:33:18of the process by which they're made there's no way to forge a Bitcoin you
0:33:22can't counterfeit and you can't fraudulently transferred from one party
0:33:27to another with the access to that first parties private key so that'll be
0:33:34surprised if I had a copy of a Bitcoin belong to you now have the I can copy
0:33:41the Bitcoin and I can have it on my my computer I can't do anything with it
0:33:45because i dont have you were private key that's right what's weird is big claims
0:33:50are not store any where some level at the weird thing is let's get to the
0:33:54transaction work this explains the next thing so so big win at some level is
0:33:59it's a series of transactions is not actually late term banking system is
0:34:06ridiculous of course but so you know I do things as weird as like when I was
0:34:10serving office space with Jeff Carlson he would send me rent check I paid the
0:34:14rent for the whole office and he would go to our credit union he would fill out
0:34:17a thing it would make a check and ship it from the Midwest in an envelope it
0:34:22would wind up at the office I would take it I would scan the check and a scanner
0:34:25electronically deposited destroy the check and that's our banking system
0:34:29right like that's the USA USA USA as I mean people are our listeners in europe
0:34:35like what I don't think most people in Europe I i most people our age in Europe
0:34:41have never even like sent it check yes exactly like checks in in this is
0:34:46America checks of now the volume of texts gone way way down because a whole
0:34:52bunch of reasons including electronic deposit but so let's to wire transfers
0:34:59easier case so because my my my credit union has added three wire transfers a
0:35:04couple years ago from person to person stuff so when I don't wire transfer you
0:35:08know it's a ledger transactions my bank has a record that its story know it owns
0:35:13a certain amount of money and it transfers at another bank of that bank
0:35:16agrees that you know yes and that value is transferred forgetting the federal
0:35:20the Federal Reserve involved forget there's like some weird thing but like
0:35:25they're just transferring money in numbers around but there's no security
0:35:27in that process and it's abused all the time you hear all the stories about
0:35:30money being transferred out people's bank accounts Ashley companies being
0:35:34happy money being transferred in Western Union things and checks being cut the
0:35:38system is a secure but in essence it is just that is it is a decrement occurs in
0:35:44one banks ledger increment occurs in another that's the transaction between
0:35:48doesn't work that way but Quinn has this thing called the public block chain in
0:35:52this is distributed worldwide and its gigabytes in size now it is a record of
0:35:57every single transaction has occurred since Bitcoin went live like for over 45
0:36:02years ago now and the transaction ledger if you wanna figure who owns a Bitcoin
0:36:07you can trace back the address to its origin and the most the current owner is
0:36:12the person who is most recently signed it with their private key they've they
0:36:15are versatile person who is most recently received it by virtue of the
0:36:20Queen being signed over with the previous owners private key so and so I
0:36:27have an address addresses you know one-two-three-four a be CDF right and
0:36:32you can transfer money to me at that address by signing a set of bitcoins
0:36:38with your private key that corresponds to this but Quins that transaction
0:36:43occurs it's locked into the block and i own those there's no transfer from 2.22
0:36:49recognized globally by analyzing the chain that I now possess those and have
0:36:53the authority to spend them in some way and that's why all this very very
0:36:56different than any monetary system or transaction basis before and it's
0:37:01definitely novel yeah it's almost like a central ledger except that it's not
0:37:05recording deficits in addition
0:37:07transfers and that's what's baffling so you have to
0:37:09entire sequence of transfers and the most recent transfer winds essentially a
0:37:14surprise ownership so this is where you get into the third part which is like
0:37:17our transfers made permanent how do they become a permanent record and that's
0:37:22where you get to Bitcoin mining which defeats some people because it seems
0:37:25it's so we are at some level mining is the process of finding a so so miners
0:37:33run extremely specialized hardware that all they do is they generate tons of
0:37:37shock one cryptographic hashes based on specific numbers so the system works
0:37:45like this
0:37:46people are constantly engaged in between transactions and they generate these
0:37:52transactions to say johnnie the city one bit quiet so I use my software its signs
0:37:57over 120 your public-address sign in with my private key that transaction is
0:38:03then broadcast on the global set of peer to peer nodes and are used by Bitcoin
0:38:08miners and other people involved in ecosystem miners are constantly grabbing
0:38:12a set of transactions and they get a small fee small to large be sometimes no
0:38:17fee for each transaction that they grabbed still take let's save the number
0:38:20of thousands transactions they'll take those and they combine that with some
0:38:26other information that's unique to me it's randomly generated and they start
0:38:30churning away on creating Shah one shoes so a shot one hash hash is where you
0:38:37take input it runs algorithm that performs a number of transformations on
0:38:42it and the number that comes out the end is predictable it's always the same
0:38:45based on the same input but any change to the input no matter how slight
0:38:50results in a non deterministic Lee highly variant outwards so if I put in
0:38:57John Gruber into child when I get one thing if I put johnnie Graber the result
0:39:02is you cannot predict what will be will be so vastly different and there is no
0:39:06known way to easily predict how
0:39:09to reproduce the same hash from different input so i cant just create a
0:39:13slightly different record the same hash so the actor hashing proves that I did
0:39:19it because you can take the same inputs run into the same algorithm and produce
0:39:23the same results so here's what mining is mining is you're trying to find a
0:39:30certain hash but you don't know how to create a hash that match that pattern
0:39:33you just have to create billions upon billions of them in Bitcoin you're
0:39:37looking for a house that has a certain number of an starting zeros and the more
0:39:42computation power that enters into the Bitcoin ecosystem because it's now a
0:39:47ridiculous amount the harder the level of finding that number is a keep
0:39:51increasing the difficulty is a dynamic thing that's reset every two weeks by
0:39:54the system and you have to find like like a hash that's less than you know
0:39:59the numbers incredibly long as her meet its long you have to find a half that
0:40:04has a certain number of leading zeros and you could churn for you know you
0:40:09could run through a trillion transactions and you might not find one
0:40:12that meets those parameters
0:40:13III since I think so I've heard it described not mathematically similar but
0:40:20in layman's terms similar to looking for prime numbers it's a needle in a
0:40:25haystack search you're looking for prime numbers each one gets harder and harder
0:40:31to find because he has accepted this is random is the problem prime numbers you
0:40:36know what you're looking for and you don't there's no I think at this point
0:40:40they don't know where the next prime numbers right there's no prime number
0:40:44space in this case there's a space of all possible hashes and because you
0:40:48don't know which inputs will these two parameters one is you don't know which
0:40:52inputs produce which crashed so you don't know how to predict getting one
0:40:55with a bunch of zeros and the other is that you're taking up a whole bunch of
0:40:59material as a minor and sticking it together it has to be that material
0:41:03isn't set by you can't define the starting point of the transactions that
0:41:07your mining so but involves a real amount of computational power the last
0:41:14time I checked it was I think it was two hundred times the computation power of
0:41:18the top 500 supercomputers in the world to find to mind but claims worldwide and
0:41:26at this point I've read that it it's much more expensive to power the
0:41:36computer that's doing like you said most of the people doing now have specialized
0:41:40hardware if I just put software on my side like a brand new Mac and just had
0:41:46it start mining for bitcoins I my expectation is that I would spend more
0:41:51on electricity running a computer than the value of the Bitcoin might
0:41:54eventually trying that's that's right I don't know what it is exactly the same
0:41:58exact price a bit fallen but this thing about difficulty lake so big queen
0:42:03started on PCs right and then people got more powerful PCs in stock more the
0:42:07mining and so I stuck more processors and then they started using graphical
0:42:11processing units of course GPUs are very efficient at certain kinds of
0:42:15calculations then they started using these things for programmable gate
0:42:19arrays I think I forgot the name from there is a specialized term there like a
0:42:23programmable chip that you can program even more speed then they went to a 60
0:42:29which are custom circuitry designed specifically to do char one calculations
0:42:35a 600 and 1000 metre process to I think they're down 28 29 or something to a
0:42:40financial crisis now whatever the smallest things at that level it speeds
0:42:44up in speeds up the tab the efficiency ratio of power to calculations not only
0:42:49can you calculate faster but the power for calculation get slower you cannot
0:42:54compete on a PC or even a field programmable gate array it is called
0:42:58against custom
0:43:01dynamometer race in other words though that in just four years we've we've gone
0:43:06through several generations
0:43:09of Computer Engineering hardware computer engineering
0:43:14devoted specifically to Bitcoin mining year and it's it's not generalizable to
0:43:21modernizing hardware for this one specific so here I just found the number
0:43:26here's the numbers at this exact second there are three hundred and fifty-five
0:43:30thousand had a flops trillion that's quadrillion operations per second
0:43:38355 Quinn chilean floating point operations per second are being used
0:43:43globally to mine bitcoins and the top supercomputer in the world has what is
0:43:50it has like under a hundred terrified so this is this is here to add them all
0:43:56together the 500 or not 3000 teraflops this is hundreds of times more than the
0:44:03top 500 supercomputers in the world combined being used for the specialized
0:44:07purpose consuming god knows how many gigawatts energy just to find this
0:44:13needle in the haystack that lets them in a kind so when when a minor Mensa coin
0:44:17when they find this number they broadcast their solution there proof of
0:44:20work worldwide across the peer-to-peer network it happens on average in less
0:44:25than 10 minutes every 10 minutes every 10 minutes a new Bitcoin is found on
0:44:29average somebody finds in fact there are these concerns because it was too hard
0:44:33for any individual to bear this so there are groups of minors worldwide that band
0:44:37together no one of which has more than I think still twenty or thirty percent as
0:44:41a concession all worldwide capacity which is a whole other issue there and
0:44:47so some minor in this construction is found in the broadcasting it out there
0:44:51to get out there as fast as possible
0:44:54someone else and the next microsecond might find a different needle in the
0:44:57haystack the moment that's broadcast it gets a broadcaster block and the block
0:45:03is a break that that's placed on top of the ball or more during the break
0:45:07includes a reward to you as a minor which is 25 bitcoins and that still
0:45:11current exchange rates is not
0:45:13horrible right now thats whats exchanges like 600 bucks where's that she get 25
0:45:19of them when you finally every four years on average that that we would have
0:45:26so was fifty bitcoins for the first four years or so and I was 25 it'll be twelve
0:45:30and a half in a few years and this is part of the decreasing money supply is a
0:45:34finite number of bitcoins I will ever be mined in the current protocol system
0:45:38about 21 million so you're a minor you go boom I found one but that's still you
0:45:43don't win you don't win when you find a Bitcoin it's great but you then you have
0:45:47to broadcast this out your blog that has all the transactions that are in your
0:45:52block and some other numbers and information in it has to be accepted by
0:45:58notes all over the world who thin immediately begin calculating the next
0:46:02block in each block is cryptographically tied to the one before it
0:46:06this is the wonderful secret sauce of Bitcoin this is actually almost more
0:46:10important than the public key cryptography lets you protect each
0:46:14Bitcoin quantities identity and and ownership the block chaining is it
0:46:21builds upon each transaction each block so if you so what can happen in this
0:46:27happens frequently is minor in yo Africa
0:46:32finds a pic when they transmit their block out and its worldwide
0:46:35simultaneously within some short period time another minor has also found based
0:46:40on the same previous block they have found a new a new magic number eight and
0:46:45they broadcast Thurs so now you have two different chains which have each have
0:46:50different ending blocks all the rest of the same going back to 2009 and initial
0:46:55deployment but this the variance in what could happen though is different nodes
0:46:59on the Bitcoin network because they're still centralized hit accept different
0:47:04chains so you can have two different chains that are growing parallel but one
0:47:08of them but they don't have the same information for the last block in this
0:47:12can go on sometimes for one or two blocks and at a certain point one of
0:47:15them has probably shown to do more work like it's clear that it happened faster
0:47:20and more work was consumed
0:47:22and then they'll be this reconciliation which I believe is automatic in which
0:47:26all the nodes in the world except the longer chain that is the chain that has
0:47:30more blocks on it faster when that happens all the variants chains which
0:47:35may have one or two blocks that are not the same as the one that's been accepted
0:47:40those are discarded all the transactions that were exclusively in those blocks
0:47:45and did not get minted into these new blocks have to be committed against New
0:47:51blocks and you see why this gets complicated so somebody who founded
0:47:55found one of those blocks ends up with with nothing because I expected because
0:47:59it was a smaller chains precisely and this is a is a process that's that's
0:48:05actually this is part of the elegance of you know it's a little crazy at one
0:48:09level but it is also a really beautiful idea that then no one has to agree on
0:48:14anything you don't have to go into a reconciliation bill which block whatever
0:48:17it's no longer block wins and I think yeah I think whatever anybody would
0:48:21think about Bitcoin whether you think it's really super is going to
0:48:24revolutionize all of digital commerce in may be real world commerce and that it's
0:48:29maybe you think it's a great even with the recent stuff it's a great place to
0:48:33invest your money or you think the whole thing has gotten ridiculous scam I think
0:48:41everybody would agree that mathematically it's beautiful it's a
0:48:44beautiful system it's it's gorgeously designed if you disregard any the
0:48:49currency speculation part of it I just admire in the paper that you know
0:48:53so-called photo she is maybe a composite multiple people but is still preserved
0:48:58his or her they are in on it
0:49:00anonymity that paper is actually incredibly legible I've read it and I am
0:49:05NOT a I'm not a cryptographer and I my math background is not deep enough to
0:49:10really really get it but it's actually model of clarity about what's going
0:49:15about what the antennas and how it works and all of the
0:49:19attributes and that people have have persisted and the idea so so you know
0:49:23this is you understand but this has been quite as you have a quantity of currency
0:49:29that's protected in a public key which we all understand how public-private
0:49:33he's working so only the owner private he can do it
0:49:35a transaction transfers value from one party to another miners make their money
0:49:40by doing these fiendishly large number of calculations but they have to be on
0:49:46the winning side if multiple blocks are being minted it once the longest chain
0:49:51for it to be perfect so here's the other part is beautiful and again doesn't
0:49:55really relate to whether it's valid as a currency or anything else but it is a
0:50:00fantastic transaction system if you don't care about the value at all
0:50:03there's no contradicting is a beautiful transit system so here's the deal the
0:50:08amount of computation I described is ridiculous right after a few blocks go
0:50:13by you would need more computational power than exists in the Bitcoin network
0:50:18to go back a few blocks and create a new chain so if the longer chain always wins
0:50:23if any entity like a consortium controlled more than 50% in some people
0:50:28say the threshold is lower but let's say just at the Dr practical level but the
0:50:33theory is if you own under control more than 50% of the bit Queen mining
0:50:40capacity worldwide you will always win you will always have the longest chain
0:50:44because you can always calculate faster you can outpace everyone else put
0:50:48together so this would let you do things like to start the system and double
0:50:51spend in a mess of transactions you could do all kinds of bad things the
0:50:55Consorzio don't like this and so when anyone consortium has reached a point
0:51:00where they're worried about having too much capacity they voluntarily split off
0:51:05the breakdown hope things are do all sorts of stuff because it's not in the
0:51:09benefit of the system's integrity even for them to real that much control it
0:51:13would destabilize
0:51:15the validity of the system but it also means that it's a government entity
0:51:19let's see iraq says we hate between Russia primary simple says it's going to
0:51:25stay W us destroy Bitcoin and you know Putin maybe he's got whatever they would
0:51:29have to spend an enormous amount of money ridiculous amount of money to
0:51:33build up the capacity just to match the current system then they would have to
0:51:37be out there meeting like crazy in you know and be able to overtake everyone
0:51:42else in the world and continue their free time and also people would notice
0:51:47this is an anonymous process they know where the traffic coming from the know
0:51:50what the addresses are so there's really it's not that there's no way for someone
0:51:55to subvert the system by gaining control of more than 50% or even a lower
0:51:59threshold of mining capacity more that the bar is so high and so expensive now
0:52:03it's just very very unlikely one lie I wanna keep gone but here's one last
0:52:11question I have about this before we do thanks a bunch of break which is that my
0:52:16understanding of its common knowledge that one of the other things about the
0:52:23Bitcoin system from the get-go is that there's an upper bound on the eventual
0:52:28total global bitcoins that will exist that at a certain point that's it
0:52:33the last Bitcoin block will be mind is a trait yeah this is this is the the
0:52:40twenty its 21 is approximately 21 million it's just below 21 million and
0:52:45this is big queen is clearly influenced by Ludvig when he says that he was the
0:52:50Austrian economist that affects a lot of people with specific economic views and
0:52:56one level is a test of economic theory by not allowing there's no inflation
0:53:03Bitcoin per say you can't print new money the money gets released at regular
0:53:08intervals by the by the minors and we should also point out there's this thing
0:53:14I was mentioning that as as more computational capacity enters the system
0:53:18the difficulty factors adjusted because it's the system rebalances to try to
0:53:23take about 10 minutes between each block being rented
0:53:26and if because she's been increasing so fast it's more like seven or eight
0:53:33minutes but if for instance like everybody involved in this is stupid 99%
0:53:39of people got their equipment off the difficulty factor then reduces so
0:53:44everyone could be using CPUs again or whatever so you're not you not dependent
0:53:48on ever increasing computational papers pencils
0:53:51there because a shot one thing by hand so I mention that in part because the
0:53:57the Queen creation isn't a factor of computation the computation is intended
0:54:03to keep production at a steady pace instead of having inflationary thing
0:54:08where someone could certainly be green Queens every five seconds is also the
0:54:12system is there a layman's explanation for how there can be an upper limit like
0:54:17how there can be a last but Quinn mind yet they do them of the algorithm
0:54:22actually should say that there's there's the original paper that she wrote
0:54:26there's an implementation that he or they created in the first couple of
0:54:32years I understands very deeply involved before he disappeared and then there's
0:54:36the Bitcoin foundation other parties that engage in saudi and protocol
0:54:39improvements and software updates so the nodes the big cleanup workers have to
0:54:49agree to a software upgrade in the roll it out and deprecated previous version
0:54:53so there have been changes and improvements over time so right now the
0:54:58way the protocol works is that mining delivers 25 bitcoins every 10 say 10
0:55:04minutes on average less and the protocol states that on a certain point after a
0:55:09certain number of coins are generated and you can see a table you go to Lake
0:55:12Oahe PTAs a table of it will show you what the point is actually estimate the
0:55:16date for when this happens suddenly instead of 25 twelve and a half and then
0:55:21in the equivalent of roughly four years or a certain number of blocks blocks
0:55:25go by it'll be 6.25 and then it will be three point you know 125 and down yeah
0:55:33exactly so you'll you'll get closer and closer to 21 million never quite achieve
0:55:37it but most coins we mind within I think it was at 12 or 16 years almost all the
0:55:42Queen's will be mind and I'll show in other words it's sort of like a calculus
0:55:45thing where you know they're never may never exactly be a blast Bitcoin but
0:55:50eventually it'll approach this limit of 20 1,000,000 and get ever and ever
0:55:55closer and and there'll be ever so fractionally less value in getting a new
0:56:02Bitcoin
0:56:03here's the last thing free response but here's the thing that what's good what
0:56:06this system the system suspect will happen every transaction can have a
0:56:12mining fee attached I think some must have a mining fee attached and others
0:56:16can be done for free
0:56:17however miners preferentially take transactions that have these attached
0:56:21they're not required to take empty transactions are typically those get cue
0:56:25to me wait longer before their Premier League committed so this is an
0:56:28interesting bit of microeconomics microphones Bishop of like a microscale
0:56:33thing that goes on his arms in your money john but i dont wanna be a mining
0:56:36fees I mark 0 on that it might take like a couple hours worked to get big dinner
0:56:42maybe longer sometimes and until it's peaked in then more blocks oriented
0:56:46after its not really permanent so that idea of instantaneous transfer his true
0:56:51except that until the transaction is permanently baked into a block and at
0:56:56least a few blocks of it added after it to ensure that the chain is the correct
0:57:00chain we we can't really count that it's true there are some ways around in some
0:57:04predictability for it but what the idea that over time those mining fees will
0:57:08increase so that as the or decreases people have to pay more per transaction
0:57:14fee which right now is calm the argument that the transaction fees it does not
0:57:19have required ones most cases but transaction fees will be likely much
0:57:24smaller compared to say credit card transaction fees or wire transfers or
0:57:28other especially international money transfer that they will be increasing
0:57:31number of transaction fees
0:57:32that are given to minors to keep them actually engaged in the system and
0:57:36making new blocks even when we were disappointed 00001 Bitcoin you get a
0:57:44working example of free market economics yeah because if you can't get your
0:57:50transaction notice your blog mandatories no mandatory you can just put it out
0:57:56there and somebody wants to they can verify it put in the chain for free or
0:58:00no fee but if you want to motivate people to prioritize your transaction
0:58:08you can offer them yeah and if it's high enough they'll choose to do it and then
0:58:12you really will be some there will be some mandatory fees very likely but
0:58:17they'll be exceedingly tiny the mandatory ones when those and this this
0:58:21sort of pure free market economics at work you could see how this draws
0:58:28libertarian minded people to the whole Bitcoin world yes we take a break we'll
0:58:37come back and is more I wanna talk about it quite well I do thank our second
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1:00:07they have great great great customer support including something called
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1:00:26up and they're Valley transfer service will help you or just do the work for
1:00:32you you just give them access to the registrar and they'll take care of all
1:00:36the DNS stuff all the stuff we need to do to move a transfer registered domains
1:00:41from one store to another it's a great service and for most of us it's you know
1:00:48it's because we're not experts even I have a bunch of domain names but I
1:00:52almost never moved them or change anything to do with them so I'm not a
1:00:55DNS expert
1:00:56the people that however are this is what they do all day every day so you're in
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1:01:03everybody I know and I know a bunch of friends abuses rally service they swear
1:01:07by it they just it sounds too good to be true that you just sign up and let them
1:01:11do all the work for you but it actually that's actually how it works where do
1:01:16you go to find out more easy going to hover dot com H O R dot com slash talk
1:01:23show and I know you came from the show so happy to have him as a sponsored
1:01:31really just go check them out and you'll be happy to back to be a couple of
1:01:43things I want to ask you about we should talk about why I wanted to but yeah I
1:01:49want as part of it
1:01:50tell me about it so you may not even be one individual names said the credit for
1:02:03creating Bitcoin goes to a Japanese mathematician named said Toshi
1:02:12Nakamoto nobody knows an end the very least it's a pseudonym if it is one
1:02:21person if it is the work of one person it's Santoshi Nakamoto is apparently a
1:02:25pseudonym yeah it's i mean that's the way it's weird because you're not
1:02:31anonymous I guess it has to be sitting there is no one has no one has proved
1:02:36proven who this person is or if a single person today there's a suspicion and you
1:02:42know when you read stuff you know is often when it's the work of one person
1:02:45that way it's written and read the paper the paper reads like one person wrote it
1:02:50so it's a group one person drafted it does not have the feel is a very
1:02:54specific style doesn't have a feeling of a committee yeah I mean it's not a
1:02:58citizen in the statement of a very specific there's a style to his person
1:03:01posted prob someone as expected to be just an individual because this person
1:03:07was actively participating in the early between us
1:03:09sessions for years and you know there's a typical things would happen with the
1:03:13guy who was arrested for Silk Road the Silk Road Silk Road was arrested in the
1:03:21Bay Area he had posted something I know but you know in this is putting this is
1:03:27like this is a purely a very common friend 62 forensics technique and I
1:03:31heard about like oh this is so brilliant white you know I shoulda guessed what
1:03:36they do is they look at the first time someone post under an identity on some
1:03:40online thing and they traced back and see who fucks who follow them on Twitter
1:03:44who reference them who link to a website who favorite like so they went back and
1:03:49they found the Silk Road guy because they were fingerprints all over him
1:03:52pointing to the entity that you know he eventually became so that's really a big
1:03:58part of how they found it and you have to be very careful about so anyway that
1:04:03no ones found that kind of pain was with you know they even though the guy posted
1:04:09a guy probably another in other words you're saying like if somebody wanted to
1:04:13uncover the Mac elope goin actually think predates Twitter but I say or
1:04:19somebody else created a Mac elope like you know pseudonymous colin is the first
1:04:25person who retweeted it linked to it did you go to Tumblr and in favor of it love
1:04:30it under which is very clever so no one has found his fingerprints and a lot of
1:04:34people have looked in some very clever journalists have looked after get there
1:04:38is it wired someone did a piece with a look through a lot of likely subjects
1:04:41they talked to a ton of people and they're pretty sure it might be this one
1:04:45person but it's just there's not enough evidence to show that is the reason
1:04:51people care who Satoshi Nakamoto is is because Satoshi Nakamoto has like five
1:04:55million bitcoins I think it's it's it's a 45 percent of the outstanding but
1:05:01Quins it's a huge number because they were the only person mining initially
1:05:05and so whoever that is tryna money even with the current you know the drop to 50
1:05:12dollars Bitcoin this person conceivably has like I don't know what it's like a
1:05:16billion dollars eight hundred million dollars it's a huge amount of money if
1:05:19they wanted to convert it slowly
1:05:21cash now because between all the addresses are public people now watch
1:05:26those early bitcoins and see if they get transferred you know to get two
1:05:30exchanges are cashed out are used for things and apparently they're all very
1:05:33static so that's another aspect of bitcoins that all the transactions are
1:05:37done in public the identities are not tied to the bitcoins a person's identity
1:05:41isn't but the big coins you can see them move through time and that's an aspect
1:05:47of both like and hate about it so you can get somebody who owned like you said
1:05:54maybe some five million maybe five million probably too big a number of
1:05:56these only 21 it's a big percentage though let's just call it a million
1:06:04a lot of money somebody can watch those a million you know look at the Beverly
1:06:08bitcoins and if a bunch of them start moving you could you could safely assume
1:06:13that it's no wonder whether Nakamoto is a group of some sort of entity or
1:06:20something like that but this is the part that to me makes it seem most like a
1:06:26science fiction film probably a novel because I think the math is not his
1:06:32cinematic is you know but either way it's like a science fiction story is
1:06:39that there's a a sort of heroic mystery figure at the top of it you know an
1:06:47individual who wrote this paper and made this system and then disappeared very
1:06:53cinematic in that sense and it's almost now like a mythic figure yeah not to
1:07:02exaggerate in the least right that there's this mythic figure who created
1:07:05this beautiful system stands to be enriched personally tremendously by if
1:07:12if they so choose
1:07:14and then and and was very very very active at the outset and I wasn't just
1:07:20like the white paper dropped in the system within the place there's you know
1:07:24I guess was it mailing lists I don't know but there's a lot of online
1:07:28communication from Satoshi Nakamoto
1:07:33just disappeared and the dog did he did he write like ok I or did he just like a
1:07:43goodbye letter now and I enjoy her number I think they just stopped hosting
1:07:49is not funny I you know that I think that they just don't think they actually
1:07:59say goodbye they basically stopped posting and then but an anointed was
1:08:05somebody the person is Gavin Edwards something was the head of the bed queen
1:08:11foundation Gavin and Andreessen scientists at the Bitcoin foundations
1:08:16again very soon as I understand I believe he was sort of anointed as the
1:08:20person to carry on the software work but my recollection is that is that it
1:08:26wasn't like okay and now I've done my work and I'm leaving was more like like
1:08:31just stop posting and I found the numbers 1.5 million coins and so that's
1:08:36like eight hundred million dollars in today's exchange rate of 5% of the ones
1:08:41outstanding it's about 5% of the ones that will ever exist a little a little
1:08:45more so it's it's a it's a big chunk and there's still one of the rumors is that
1:08:52a so here's the thing with bitcoins you have to keep that private key secure but
1:08:57if you lose the Prodigy put coins are gone forever
1:09:01you can't spend that we can transfer them I'm in a Bitcoin miner and he were
1:09:05chatting and two interesting things one is I did not know initially but he was a
1:09:11few months before he and I met he was generating a significant single-digit
1:09:15percentage of all homes worldwide which was interesting and the other was he
1:09:20said I've gotta drive over there it's completely dead it is for you
1:09:24never recover those and I was at a time when I think it was $100 like a drive
1:09:29that has a two million dollars tried everything he could spending $1,000 on
1:09:36Dr savers or whatever and so when you lose the key they're not a sponsor this
1:09:43week but talking about you too bad Backblaze is hard drives people you know
1:09:51there are there issues about storing private keys for Bitcoin so there's
1:09:57something called cold storage and you transfer your private key either you've
1:10:01never had an internet-connected machine you sign on your transactions on a not
1:10:06ever connected you know glue and the USB port WiFi radio removed whatever your
1:10:14stuff on a non connected machine and then you signed transactions and you see
1:10:19them out but you're extremely careful you move those the public Internet and
1:10:24this is critical because if your private key stolen as as happened on a mass
1:10:29scale over the last few years at multiple online wallet services and
1:10:33exchanges if someone steals your private key they can transfer the money to
1:10:37anywhere they want to and in the same thing so the cold storages are some
1:10:41places I understand someone actually printed out the key information is like
1:10:46a pile of paper as an additional backup in case the spinning media hora sixties
1:10:51makes sense so there is no one you know one of the coin services went down and
1:10:57forgetting which one another one
1:10:59shut down and they did lose some number of coins but they said almost all of the
1:11:03coins were in cold storage and they will be transferring them back to their
1:11:06owners
1:11:07the ones they lost their lives storage was modest and those are gone forever
1:11:10for whatever reason but the ones that are cold storage are totally preserved
1:11:15ok so tell me about these exchanges wow what is it what what's the point of this
1:11:25gets in the basic nature of like you know since I lose money if you try to
1:11:29explain this to join unlike a generous and he said as he said to you and he's
1:11:33old enough
1:11:34like what is actually money i transfer my kids sometimes you know and they know
1:11:39that money buys things they can be exchanged for a great line from there is
1:11:43a beatles parody group called the rebels that Eric Idle and some other people
1:11:47involved in someone said you're just in it for the money and their joke
1:11:51responses no no we're not in it for the money so much as the the goods and
1:11:54services that money purchases
1:11:56you know it's Jonas is still at the point where money is like gravity and
1:12:02it's something he accepts and understands the gist of but that it's
1:12:09sort of it's at the bottom of you know those why you know kids are so it's the
1:12:19greatest thing about childhood is is the natural inclination of almost all
1:12:23children to just keep asking why why why they get you know parents of course you
1:12:28know you get sick of it but it's actually it you know it shows how what a
1:12:34fantastic state their brains are in their trust seeking answers you know and
1:12:38they're coming up at the you know whyyy gravity is one of those things that he's
1:12:41never he's never asked me about how exactly is it that we stick to the earth
1:12:47and money i think is exactly the same sort of thing it's just there and he
1:12:52accepts it and never has gotten to the point where you wonder why I still think
1:12:57I'm not sure the kids ask her we volunteer we like to the series of
1:13:01parenting lectures at some point came up it was like I tried to explain it and
1:13:06money
1:13:07sounds ridiculous when you explain it why does this piece of paper I'm giving
1:13:11you peace of paper with George Washington case on it and you can go
1:13:14anywhere and exchange it for something and people always accepted as legitimate
1:13:18and that's ridiculous it's completely ridiculous right so when you start to
1:13:23explain but according to people why there's value in it you're like this is
1:13:27just crazy and it was easier than money is crazy to is a little bit less crazy
1:13:32and I you know again that to get into the political aspects event I guarantee
1:13:37you with technical minded show somebody out there is gonna be offended by what
1:13:41I'm about to say
1:13:42but it it was a lot easier to explain when the EUS was on the gold standard
1:13:48yes you could say a correspondent to a specific amount of gold that had an XP
1:13:53USA government-owned a tremendous still does own it but I found this tremendous
1:13:57amount of gold gold has no true value real value on you know because it's a
1:14:03rare mineral that people consider to be beautiful and etc and dollar bill was
1:14:09the us- government promising that this dollar bill represented dollars worth of
1:14:14gold
1:14:15exchanges if you wanted to hear that and that I am i understand you know there's
1:14:20a whole bunch of there's always been a political political friends that thinks
1:14:24the US-made a true mistake getting off the gold standard get back onto it and I
1:14:29owe it not that I think that that's actually a good economic theory I think
1:14:32the explanation is that it appeals to many people because it's understandable
1:14:36and was its supposedly prevents inflation there's a lot of reasons why
1:14:40people like its inflation it's a real thing it prevents printing money it
1:14:44controls governments women's game go to war is usually necessarily because they
1:14:48can't do all these things that a lot of people here and they think that the gold
1:14:53standard answer to them returning to it having the route I just think a big part
1:14:58of the appeal is that it's there's no dot dot dot step in which is what you
1:15:06have with our current system here so here's the thing that would
1:15:10fundamentally what fiat currency or like it was like a 1000 cash money what money
1:15:15proved by governments backed by governments has is that you can pay your
1:15:19taxes in it and the government pays its bills and it was doing the economist
1:15:25articles about becoming and fundamentally that's what a lot of them
1:15:28said was was it's the government to use of legal tender as a means of exchange
1:15:33not just that it establishes value you know and there's there's the extra angle
1:15:38that some people that talk about coercion the recent weeks that money is
1:15:41because you know governments have militaries in the forces to if you
1:15:44didn't accept money you know they're backed by the police say the body of the
1:15:48police military and
1:15:49you go to jail there's a penalty you know for how you use it so there you can
1:15:54get to a political argument about that but fundamentally it's when you pay the
1:16:00american government most governments you have to pay in the currency that they
1:16:04accepted the issue that currency to pay all of their bills and so that starts a
1:16:09virtuous cycle that gives it value right it's a barter system in which the
1:16:13government is the dollar bills are is a former barter we just accept the value
1:16:18of the government puts on it and the USA government least with some intervention
1:16:22allows the dollar to flow to represent what the market actually thinks it's
1:16:25worth is a means of exchange so pick which is weird because that's where you
1:16:30get them out of the box and these other exchanges as one aspect of the ecosystem
1:16:34is that is moving money in and out of it clean so it's one thing if you are a
1:16:38minor in the early days you could run like you can running like a Mac Pro and
1:16:42making coins are actually having coin suspended they might not have been worth
1:16:46damage each but you know there was some people accepting them they were you can
1:16:50use it to exchange that's what some people but you need to move money in and
1:16:53out of the system has no inherent value as more and more merchants accept
1:16:57Bitcoin which is still going on Overstock will accept Bitcoin through
1:17:01intermediaries that establishes value for it but the more you can buy within
1:17:07the system less you have to transact in and help but the exchanges exist as a
1:17:10way to take dollars and turn them into bitcoins in and vice versa up with some
1:17:16good reason I had this one or two mark andreessen
1:17:19netscape really interesting guy guy I think was was seen has not very break
1:17:25for a while about how we invest in what he did and then it all started to pay
1:17:28off and then everyone thinks he's brilliant I think he's brilliant I think
1:17:32he was so far ahead of his time as investor that it took a lot like with
1:17:37Paul Allen where everyone thought pollen was an idiot for about a decade and that
1:17:40everything he thought would happen happened you know satellite television
1:17:44and everything just about so he'll the Seahawks even won a Super Bowl so back
1:17:55to like 1985 and people that the Seattle Seahawks are gonna
1:17:59so you can see you can see that you could say look in two thousand people
1:18:02but Marc Andreessen upon we're not very smart in 2014 like in terms of where
1:18:09technology when and how they make money so Marc Andreessen wrote this piece cuz
1:18:12he's involved with base he's his Andreessen Horowitz they invest in
1:18:19between companies and it's part of part of their you know what they're into and
1:18:24I think it's it's a pretty sure it's using Vista I hate to see the wrong
1:18:28companies are so many bit because we acquit based Andreessen Horowitz put in
1:18:33twenty five million dollars as part of the show that was part of the lead
1:18:38investor with them but when $5,000,000 few months ago so I go to Queen base and
1:18:42I say I want to buy $50 with the Bitcoin and the late great ok verifies
1:18:46information do this will text you this thing you should I say I'm like this is
1:18:51okay it's like setting up a banking thing or whatever and they're like your
1:18:54bitcoins will be available like three to five business days like this its sister
1:19:00what's going on in the problem is Bitcoin despite a lot of claims I hear
1:19:05this from people who say it's incredibly liquid is not very liquid when you want
1:19:09to go into legal tender and so exchanges exist to make that happen but between
1:19:15banking regulation where a lot of these exchanges amount Cox fell afoul this
1:19:19they have to actually have to deal with certain banking laws in some cases not
1:19:23all depends how they construct themselves and there's like reporting
1:19:26requirements and whatever between that and just some aspects of like how many
1:19:31people participate in the system how you move the coins around to be able to
1:19:35exchange value without being too heavily
1:19:39exchange can't take so many bitcoins MPs so much you don't have actual legal
1:19:43tender and that would be bad change in the volatile place a bit quiet and they
1:19:49could be quite sure and maybe a run on the exchange which has happened
1:19:51essentially the same way a divided state law says that a casino must have the
1:19:59cash in the building
1:20:02as they have casino chips in circulation which makes sense right
1:20:08perfect sense if everybody in the casino all at once wanted to cash in the chips
1:20:13that they have in front of them
1:20:15casinos legally obligated have enough cash to cover and this is why the
1:20:19wonderful the FDIC is one of the best agencies we have in america I'm
1:20:25confident the former head of the FDIC I'm confident even though she did not
1:20:29get her role extolled as much she was not one of the boys in the room
1:20:32Sheila she is the reason that the entire American economy Sheila Bair which has
1:20:40left the FDIC she cut deals that prevented the USS economy from falling
1:20:44apart by keeping banks open and she made that happen and the FDIC's
1:20:492002 and 2008 right she she display everyone talking about all these other
1:20:56people she is actually the reason our economy did not collapse and we do not
1:21:01actually go into depression I'm confident history will prove that
1:21:03because the top of the people in the top name all these guys are crapping shit so
1:21:11anyway the FDIC exists as an entity because we had bank runs in the regular
1:21:15the depression happen thanks did not have enough money your money is in he
1:21:18wrote mr Thompson's house and it's it's it's the Bailey savings and loan the
1:21:23scene so what's my money doing over there so when you have a run to the bank
1:21:27banks are not obliged to keep a hundred percent of their deposits on hand they
1:21:30lend them out and make money the FDIC is the backstop and see the Federal Deposit
1:21:37Insurance Commission they said they take premiums from banks and they use that to
1:21:41have a fund that backstops certain amount of loss thanks go under and the
1:21:46FDIC's out their clothes in Bankstown it's kind of cool if you've heard the
1:21:49FDIC no it's cool I think Planet Money do they basically they show up on a
1:21:57Friday they're all dressed in plain clothes and they show off their
1:22:01credentials and they shut down and they take it over and no one of the bank has
1:22:04allowed to talk about it they spend the weekend on the books whatever it opens
1:22:07on Monday it's like is like it is like a spy operation because they do not want
1:22:13to know
1:22:14they'll come into town I understand the rent rooms in hotels now the same hotel
1:22:17they do people that do not want to run on the bank is the accounting version of
1:22:22gangster movie called the cleaner and that's what they do they do it I tell in
1:22:30pulp fiction right yeah you know we all sit here and I don't want any attention
1:22:35and no no no not Reservoir Dogs Pulp Fiction when they go look we just want
1:22:40to clean this mess up
1:22:41nobody's gonna know the better right but it's it's a 10 numbers are alleging the
1:22:48bank apart into small pieces in the top so I don't make sure but the FDIC
1:22:56backstops banks of banks don't have enough money on hand the FDIC is there
1:23:00to pay depositors up to a certain amount which is you know you're so small
1:23:05depositors never get and so people don't panic don't know we don't runs on the
1:23:10bank because people believe that the US government in the form of the FDIC will
1:23:15backstop thanks and we saw that in the 2008 crisis there is no FDIC for Bitcoin
1:23:20and maybe one will be created but when when there's a run on an operation
1:23:25exchange has some of the big win some money cash and they cannot cash
1:23:28everything out once and are not obliged to the way they run so let's get down
1:23:34like you said that the government you know and it really does annoy me in
1:23:38Marco had a good piece this week about it doesn't make any sense to talk about
1:23:42the government as a single entity and complain that the government is also the
1:23:46government is you know is comprised of of thousands of individual organizations
1:23:54from the federal to the state level FDIC is a great example of the government
1:23:59work because the main point of it is if you had to see a bank and you see that
1:24:04the bank is in the ICU and I believe it's probably not even legal they open a
1:24:09bank that part of the FDIC you can't do it like it is open I think tank that's
1:24:15all you have to do is to be like a governing regulator there's different
1:24:18choices the FDIC insurance but it seems that all of us every single citizen
1:24:23can just you don't have to worry about doing the research and figuring out is
1:24:27this bank legit is you know if I go in there and put my paycheck in deposit you
1:24:32know created checking account and put my whole paycheck in there is that money
1:24:36safe you have to worry about it just is you really mean I have to do is have
1:24:40faith in the USA government and at one point you remember for a long time the
1:24:44FDIC said she noted by the commercial on TV for bank deposits are insured up to
1:24:48the maximum $100,000 by the FDIC and then during the crisis they lifted that
1:24:53amount of forget to 19 Oakland now because there are enough people who like
1:24:58you know you're my parents other house and hundreds of thousands of dollars in
1:25:02the house which they plan to live on for the slides in the bank and more than a
1:25:06hundred grand in one account and if a bank fails you only ensured in some
1:25:11other countries they immediately lifted it to unlimited because they did not
1:25:14want any depositors to not be made whole they felt it was a better risk to
1:25:19prevent a run on the bank especially by high net worth individuals who might
1:25:22have a million bucks and then to worry about the problem of reclaiming my later
1:25:28it worked out and the limit I think that that limit was pretty old it you know it
1:25:36was like a hundred thousand dollars in nineteen fifty dollars I don't know
1:25:41which you know is a far cry from $100,000 in 2008 it's very easy for
1:25:47people who are in the age range from like 50 to 80 to 100 grand in the bank
1:25:52because of house sales basically they downsize people's parents lived in the
1:25:57Bay Area and they've got a million dollars for their house they never
1:26:00expected windfall and they might have like a tiny pension whatever they don't
1:26:05even know how to handle it so there is nothing there's no backstop and so with
1:26:09mount gods so bangkok's has all kinds of weird things you may know it started as
1:26:13they called Magic the Gathering online exchange teach you know that I did yes
1:26:22so they thought they were going to be a man and what I read the other day
1:26:27pointed out that if they'd actually invested in Magic the Gathering coins
1:26:30back when they started they would
1:26:32cards rather they would probably have a better return than what's happened if
1:26:36some cards are worth like to that so many cocks people been documenting for
1:26:43years the deficiencies in their programming their security their
1:26:47response they they had they didn't find the right paperwork her acting the way
1:26:52in the united states and the USS see is that it was five million dollars from
1:26:56them because they didn't have they were operating as essentially a kind of
1:27:00entity that they were in and they just didn't do the right work like I think
1:27:03they could have been operating as identity there are between exchanges of
1:27:06operated states that have filed the paperwork correctly so the the earth's
1:27:13tilt whole unclear what happened because they have a release enough information
1:27:19they claim they've lost what was the number it's a crazy number it's like
1:27:23seven percent of all outstanding bitcoins is $750,000 in Queens owned by
1:27:33its users and a hundred thousand its own and the issue is we don't know what lost
1:27:37means yet because we haven't done a forensics thing in Japan there are based
1:27:41in Japan for their offices where it could be they lost all the private keys
1:27:45they didn't do a good job and they didn't recover gone from the system
1:27:49right and there's some suspicion that there are potentially hundreds of
1:27:53thousands or maybe even as many as millions of bitcoins that will never be
1:27:57recovered because the private keys are lost there's no recovery process where
1:28:01they can be reclaimed so that's one concern the other is it might have been
1:28:04left someone got access one party was saying is article recently couple days
1:28:09ago about how included all the SSH he is like its private keys in its server code
1:28:17and things like that so so it's crazy so like theirs they just are not you know
1:28:25they clearly without you know alleging anything it's clear they were not
1:28:30rigorously technically technically they were not competent the other thing is
1:28:36always that and again I can verify but I saw the other day that they apparently
1:28:40the whole system that computer system they were not using any sort of source
1:28:46control software was like so so there's that save all kinds of technical
1:28:53deficiency but so one suspicion is there's a problem call transaction
1:28:57malleability that is suspected might be the cause of a really good analysis
1:29:02couple days ago that that suggested that the scale what happened it couldn't be
1:29:06so there is a flaw in between in the big Queens software clients and some of the
1:29:12implementations I understand it's not a protocol but well she said so this
1:29:18transaction thing I was talking about what should happen is I am sending you
1:29:22one between John and the transaction that my software generates which
1:29:26probably is a standard between library that the Bitcoin foundation essentially
1:29:30maintains its open source that Transocean transaction has a transaction
1:29:34and even some unique information I signed it and boom so what should be
1:29:38impossible for someone else to generate a transaction that is looks like mine
1:29:43and validated and even has the same destination so it doesn't hijack who the
1:29:49money is going to rate it just looks valid and has the same recipients under
1:29:54that should not be possible and it is in fact possible to create fake
1:29:59transactions
1:29:59transactions
1:30:00after a legitimate one is created so other parties can allegedly create bad
1:30:05transactions in there have even been denial of service attempts were many bad
1:30:09transactions are created for each good one if the bad transactions are taken up
1:30:13first they get back into the record and the problem is some software didn't
1:30:20validate whether the transaction I D had changed and if they know dorothy was
1:30:24just the idea if they notice it had changed it would have invalidated that
1:30:29transaction or some other aspect there like so so the coins are actually
1:30:33transferred but the exchange for instance this case would not recognize
1:30:38it because the transaction I D didn't match so I've done everything right I've
1:30:42sent you a coin you say never got it
1:30:45exchange say it says in go through and I look and I'm like my software says it
1:30:49doesn't look in the block the block says it was minted and you say no my chances
1:30:53never went through an ego and mount box apparently had an automated system that
1:30:58when a transaction appear to not go through they would send it again it's
1:31:02unclear how often would send it again so if you were a malicious party you could
1:31:06concoct away in transactions with Matt mountain gods to create false ones and
1:31:11get the same money multiple times but because you can't change all the
1:31:14printers you can't the seal the coins it's more away to leak money out from
1:31:18transactions that are that had some legitimate basis to start with and then
1:31:22you can sort of suck money out or people intentionally send more money than they
1:31:27meant to end the recipient doesn't even know that more money was sent so that
1:31:31was one suspicious does not appear like that the scale of it would make sense
1:31:34it's more likely they're bad security led to someone still hold the private
1:31:38keys
1:31:39well what's the solution to this
1:31:42you know how if somebody wanted to get involved
1:31:45and buy some bitcoins in have these
1:31:49I mean I guess the solution is to find a reputable and technically competent
1:31:53exchange but how how how is a normal person supposed to figure out to
1:31:58determine what is a reputable and technically competent exchange well I
1:32:04think this is what the market trying to do now is you know even though the
1:32:08valuation of bitcoins arbitrators enough people involved the system using it that
1:32:12even with Matt Cox failure and and all this stuff happening value has not we're
1:32:19talking right now to see those 60 hasn't crashed I'm talking and 20 but but the
1:32:28the the market and go from $1,000 a Bitcoin 220 you know it went from
1:32:33looking right now the current standard as we talk is somewhere in the $600
1:32:38range I actually think and again I am Bitcoin dummy but as you know I've never
1:32:46put a nickel into it and then still not tempted to but this is a curious
1:32:51observer I would actually say that that what's happened to the value of between
1:32:55in the last few weeks actually shows a significant amount of stability you know
1:33:00like going from a thousand to 600 is a pretty significant crash but not what I
1:33:05would have expected when I first heard about the mailbox and I thought well
1:33:08there goes that's the toilet flush you know bitcoins gonna drop down to $25 a
1:33:14Bitcoin should have happened if it actually made a fatal event or near
1:33:18field event is the value should have just gone off by like 50 percent what
1:33:22should happen is people will be trying to get liquidity out of it they would
1:33:25have been unable to and they would have accepted lower lower amounts until it
1:33:28was like $10 a Bitcoin and in the market collapse instead it went down like a
1:33:33five hundred and it's rebounded a bit which means that there are people who
1:33:37believe they have enough value in the system and retaining their big win in
1:33:40the system that they weren't panicked and tried to exchange around 900 and
1:33:45I've sort of avoided linking to a lot of the Big Concept they just don't
1:33:48understand it but I know that there's a lot
1:33:50of you know sort of hey this is actually a good thing for Bitcoin and then
1:33:55there's the skeptics which I kind of agree with this is no this is not now
1:33:59cops is not a good thing for Bitcoin you can argue that I I think it's it's sort
1:34:04of halfway in the middle which is no its not good that it happened i mean and no
1:34:08matter whether it was crime or just incompetent it bad either way but the
1:34:11fact that after this bad thing happened which was bad that it was relatively
1:34:17stable value wise I think should is a good thing it shows that you know
1:34:22there's a certain stability to it you have to all the volatility I think this
1:34:27was actually pretty remarkable in some of that comes now because you have
1:34:30people like the the Winklevoss twins who have put a pile of money in and they own
1:34:35it is a on a single digit percentage of their other parties and so this is one
1:34:42of the things that came out the other day I think it was a few hundred people
1:34:47on fifty percent of all the coins in which is an undue strain were big
1:34:52winners of democratizing you're like ok you know and then like he was like a few
1:34:56thousand people on 75 percent so there's this issue about always mentioned
1:35:03earlier samarkand rhesus 01 the company's you can look at and I have no
1:35:06connection to it in fact might even be seen as a skeptic because I had all this
1:35:10back and forth with Marc Andreessen who is incredibly funny on Twitter in a
1:35:13really great sparring partner by the way is really a good sport and we'll talk
1:35:17about all this stuff which is impressive as most people who have piles of money
1:35:21and think there were no everything and they don't want to talk to you but they
1:35:24don't listen he listened to the talks he's very funny and so he wrote the
1:35:27op-ed piece for The New York Times that the deal book section about why the
1:35:32Queen was so wonderful because it reduced transaction fees to practically
1:35:36nothing or nothing it would be a great thing for all these parties I i disagree
1:35:39with a bunch of his statements I rode along thinking he and I went back for
1:35:42that it was very it was elusive to me his thinking about how you make between
1:35:47the two a stable thing that this becomes part of the international banking system
1:35:52like he is not a political rabble rouser what he wants in the wake of Aussie
1:35:56vaccine
1:35:57him and the rest of the folks who are trying to make this work is they want a
1:36:02system that's outside the inefficiencies that had known as the security of
1:36:05Bitcoin is outside of the inefficiency the banking system but doesn't need to
1:36:09be above the law and not subject to regulation scrutiny they basically want
1:36:13something that makes money move as fast as email and I get that there's a reason
1:36:18so marks invested in his base that's where I put 50 bucks in no way between
1:36:23dropped in value health because I put 50 bucks worth $25 my faults like washing
1:36:28your car so corn-based is clearly a place to start because they're trying to
1:36:33do everything right and they're not trying to be chartered in a boat off the
1:36:38coast of Iceland and under somali law they're trying to do it so it's
1:36:42interesting place to start from a group that's trying to see how they can comply
1:36:46work within the system
1:36:47Quentin hardy wrote this piece based partly on market my exchange rate this
1:36:54thing for the new york times I recommend reading in which he talked about the
1:36:57rise of a kind of super rich transnational class he said I threw down
1:37:02he said he was sitting with some very very wealthy people he said if I threw
1:37:05down passports from was three or five countries all them stay like singapore
1:37:09united states whatever which one would you pick up and the guy started the
1:37:12debate which one they didn't say the country that I from the Tamil
1:37:14nationalist influence he worries in part that pic when less people become it
1:37:20takes money outside of the spirit of national influence and make it lets
1:37:24people were extremely wealthy sort of live in a cloud above the world so there
1:37:28is some of that thinking especially when you see that you know between is
1:37:32controlled by relatively small number of people there controlled by a relatively
1:37:36small number of people is one reason why the currency remains stable because they
1:37:39have the economic wherewithal to not need to pull them out of the system at
1:37:43all over
1:37:44I would say this though I mean who knows where them and you'll value of it is
1:37:48going to go right now though $600 Bitcoin if there's a limited 21 million
1:37:55that's somewhere around 12 billion dollars for ivory Bitcoin there could
1:38:01ever be human if you double that or triple it you're talking 2550 billion
1:38:08dollars now who knows maybe it'll go up tenfold twenty-fold 30 fold and then
1:38:12become more and more but as it stands a tired the entirety of Bitcoin is only
1:38:20worth ten twenty thirty billion dollars I don't see that as a global dis I can
1:38:30see why governments are in that ready to jump in and try to regulate
1:38:35brake inflation within the Bitcoin system to make the coins liable enough
1:38:40individually they can divide them into tiny pieces explain to me the actual
1:38:45bitcoins how is that how can you put $50 in the coin base and have anything
1:38:50a Bitcoin 600 bucks this is the ridiculous part so it's almost like
1:38:55owning a fraction of a share of stock at some level because be queens are only
1:38:59essentially therefore transactions I can only send you money so if I have 50
1:39:05bitcoins in a in my wallet and I want to send you 49 I have to do exchange
1:39:12transactions I actually seen you 49 and I sent myself one and this is the way
1:39:17the fact that I have to send changed myself there's a flaw in most current
1:39:21clients that makes those transactions essentially trackable and researchers
1:39:25have shown they can do this thing that even after hundreds of transactions they
1:39:29can actually trackback between city origin by unappealing all these change
1:39:33transactions see where the money went so I can send you a tiny tiny amount of
1:39:38curse of the current smallest unit is one times tend to the negative 88001
1:39:45that's called a set of sheets the basic and the protocol could easily be adapted
1:39:51to have smaller fractions or even reverses one between his ass Atocha or
1:39:57something there's no there's nothing that prevents that from happening
1:40:00without lets me send tiny amounts of money but I sent essentially the things
1:40:06people can wind up with all these wallets like you can have piles of
1:40:10Bitcoin addresses and then eventually may consolidate them so you take one
1:40:13addresses got 43 but there is one of those points 05 and you essentially pay
1:40:18yourself all of the small ones he wanted one address and has you know 750,000 so
1:40:25there is a lot of mucking around and people typically use client software
1:40:29that handles the details but the client software masks a lot of transaction that
1:40:33can leak some of the anonymity and there's also even talk about those coin
1:40:40I've heard of it i dont getting so and Ars Technica just launched our Scorpio
1:40:47dozed Wednesday oge coin yeah it's real thing it's a real thing actually is
1:40:53has value and it was a parody was launched two months ago in December 31
1:40:58three months ago december and people are investing it's big it's got different
1:41:05properties then it's it's a code for it from Bitcoin which is open source it is
1:41:10different properties including mining technique that is not consumed
1:41:13eventually the power of our son occupations it's got a non scaling
1:41:20discuss whatever is using it using something that does not require the
1:41:26scaling capabilities you need to do
1:41:28engines actions and and there's late coin which is a different standard
1:41:33standard there's something called 0 coin where one guy who's a researcher who
1:41:38wanted to create pure anonymity that you could put into Bitcoin after being sort
1:41:44of rebuffed about embedding inside that claimed he and other folks are going to
1:41:48launch a Bitcoin like currency that will allow Bitcoin like coins and totally
1:41:53anonymous coins that no two transactions can be connected to one another to be
1:41:58exchanged in so there's always an explosion of crypto currency as well
1:42:02those quite as the funniest one but has it it's real people started as a parody
1:42:08yeah and it turns out that like it's actually got some properties people like
1:42:12including the initial it's the number of very funny just like the initially a
1:42:18hundred billion coins can be mined by the end of this year but there is a
1:42:22fixed rate of five billion coins after that so there's a built-in inflation and
1:42:25it does not shrink over time you're losing me well if it is no time limit on
1:42:34how many those coins can IC IC I know it's crazy but crazy love it it's sort
1:42:40of funny and it's sort of weird but it's back to I think some of the points you
1:42:44had earlier in is that is why I like to make sure everyone listening to this no
1:42:52matter whether you're in Europe or America banking is ridiculous bank is
1:42:56ridiculous banks existed to the bank's existing structure fees from us and they
1:43:01run the most insecure system in the world the booths care system i think is
1:43:05like chip and pin is actually and why he's here but that's great for doing
1:43:08that kind of transaction but like wire transfers are totally unsecured as its
1:43:12past in the clear ATM has the ATMs have certain kinds of encryption and security
1:43:17they're really good others at a ridiculous so you can't you know when
1:43:21you can add a dollar bill you don't know if it's real what percentage of some
1:43:24number about the percentage of $100 bills and circulation the world that are
1:43:27that are
1:43:28counterfeit fraudulent yeah so the the fact is Bitcoin in systems like the
1:43:35something like it will get incorporated into the banking and transaction system
1:43:39if not into our currency system because of this property that because that the
1:43:46cryptographic nature of it prevents a whole bunch of bad behavior
1:43:50France doubles spending Prince counterfeiting it prevents legitimacy
1:43:55and ownership it's very hard I mean so people have to these exchanges and
1:44:00wallet services in stolen private keys but if you do security correctly which
1:44:04people can do then it doesn't matter she get hacked into the keys are still
1:44:09protected by another layer of passphrase and their unrecoverable by the thief so
1:44:13there's ways to do it correctly it so there is a way where instead of doing a
1:44:17credit card transaction the way we do now which is you know ridiculously
1:44:20unsecured and just do the numbers and times to do it over the phone that you
1:44:26be able to see ya so what if you know what if he's released a web based you
1:44:31know signing thing that used that let you use permit was very much like
1:44:36Bitcoin but was entirely on their system you'd love it because you said
1:44:40Verified by Visa which i think is still in use you go to the merger would pop up
1:44:44the visa window and you can check that was a secure connection and you punch
1:44:49your password into visa site and it would then confirming you are legitimate
1:44:52but your password never went to was like an extra step in that was it's
1:44:56reasonable to me that you we could change the credit card system so that
1:45:00you couldn't do a transaction over the phone in the same way that we accept you
1:45:07can't send cash over the phone right like a vial you 25 bucks I there's no
1:45:12way that I can do it right now talking to you over Skype there's no number I
1:45:15can read to you that could do it
1:45:17I think it's reasonable that we would lose the ability to call somebody over
1:45:21the phone and give them a credit card number and have it count because our
1:45:25phones more and more are computers with an IP connection that you can run a nap
1:45:32or connect to a website and do cryptographic communication will be as
1:45:39simple as you know like to factor kind of thing is I could be registered with
1:45:43different coins systems or credit card systems in my phone and I call to make a
1:45:47transaction that like great ok we like to process that can you read us the six
1:45:51digit number that's just been texted to your phone or burundi
1:45:54obese authenticator app and you pulled up and you go it's improbable blood and
1:45:58that verifies my identity or at least five stolen information is still a lot
1:46:02of information from somebody is not just a routine drive by credit card theft and
1:46:07but so there's lots of aspects of Bitcoin that I believe this is why you
1:46:11know they had a congress held hearings last year about Bitcoin in a friend of
1:46:16mine attended them and he was stunned in in the coverage indicated this is well
1:46:19how positive in interested senators instead staffers worrying and
1:46:24congressmen and women were about the positive aspects of it and the banks are
1:46:30very very interested in the regulators are interested in it they don't just
1:46:32want to prevent activity or captured taxol that's certainly part of it it's
1:46:38also that they do actually see the positive parts of having a
1:46:43cryptographically robust I didn't eat secured system that we don't have now
1:46:48into those kinda cool I did not expect to see that much openness the people who
1:46:52work or between users he the notion typically the government would get
1:46:55involved the new people coming in like andreessen the Winklevoss and so forth
1:46:59they're much more than having government involvement at a certain level to
1:47:04provide both like trust and to remove more the criminal element as well I mean
1:47:08I think like any government regulation is like almost everything in life
1:47:13everything where you know moderation is the key
1:47:17you know there's too little and there's too much and so on and the polar ends of
1:47:22politics there's always going to be people
1:47:24pushing for the extreme you know do it true you know almost anarchist
1:47:28libertarians who want almost no government regulation over every any
1:47:34aspect of life period and on the other end people you know who push for too
1:47:39much and I think you know I think Bitcoin and government regulation over
1:47:46these sort of Bitcoin in other things like it is no regard for the right
1:47:52amount of government regulation is not zero if you've ever tried to pay
1:47:56somebody in another country
1:47:58anything except through Paypal which has its own issues and problems and its
1:48:04weird actually PayPal works as well yeah because every other method is horrible
1:48:09to pay you have to pay huge piece or it's impossible takes a long time never
1:48:13gets there and there's some there's a huge thing about remittances this is one
1:48:16thing that increasing mentioned I think it's worth bringing up is that there is
1:48:19a potential benefit for poor people for the poorest people the world especially
1:48:23immigrants who live in far-flung countries from other parts of family
1:48:27there's a huge amount of money extracted when if you live in America and you say
1:48:32money back to you on something like this there's a huge fee that comes out this
1:48:36and it's it's not 10 percent I think it's typically multiple percentage
1:48:40points and then there's often banks have remittance and other views
1:48:43plus the government me take a child as well for incoming money so just like
1:48:47Voice over IP at the crack earliest Lake 1200 bps dial-up you could still get a
1:48:53voice over it or whatever like the minute Voice over IP became a real thing
1:48:57that changed the relationship between all these far-flung people and people
1:49:02were able to talk to the family and then Skype video even at low bandwidth let
1:49:06them see their families again and so there's as hundreds of billions of
1:49:10dollars in the system that are that are sucked out because each year hundreds of
1:49:14billions dollars are transferred among countries by poor people essentially
1:49:17sending money back home and there is an advantage there and in just in for a
1:49:20buddy in the show you in the middle class and above or you know things like
1:49:23the unbanked and the non-bank the people who can't or the unbanked unless bank or
1:49:29something its
1:49:30people have a hard time having a bank account because of the chemical
1:49:33imbalance or because they didn't leave that doesn't have bank right like this
1:49:38food deserts push in the us- what's your name from the great senator from
1:49:46Massachusetts has brought this up to push to turn post offices in the bank's
1:49:55let people do simple simple banking at the post offices because there is a Post
1:50:01Office accessible to everybody in low-income urban areas so it's only
1:50:10three people opposed to her existing banks commercial it's it's expensive to
1:50:15be poor
1:50:16this is a horrible thing if you're the working poor it's one the most expensive
1:50:19things one was expensive ways of life because you have to check cashing
1:50:23outfits to get your money
1:50:25excessive fees because you don't qualify for the level of things don't have fees
1:50:28you pay subprime mortgages you pay like every part of the system is designed to
1:50:32keep you down and say it's unintentional it may just be systematic is systemic
1:50:37but there's all this predatory action it's and it's it's actually a time gone
1:50:44long but the us- post offices anybody's curies Google in read about it's
1:50:50actually pretty clever because it works two ways one it would help a lot of
1:50:54people who don't have access like you said underbanked non-bank people to it
1:50:59would actually help the post office because the post office is
1:51:03self-sufficient financially they r operate on the postage that they sell a
1:51:10lot of people who are sort of opposed to the post office that day you know should
1:51:13just go private or whatever because they think it's sucking up tax money but it's
1:51:18not
1:51:18but the problem they're running into is that as the world goes digital the
1:51:22people are sending less unless mail and so that you know it's getting harder for
1:51:27them to keep postage rates low and stay in the black if they got into banking it
1:51:32would be it would infuse them with you know funds to be solving sure you know
1:51:40the post office not to get too deep to the post of a scam is that the congress
1:51:43even though it's essentially a private agency run its own funds congress forces
1:51:48them to find their pension at a level that is so far ahead the post office
1:51:53required to contribute a level that's far I have solvency and essentially no
1:51:57corporation no other part of government no steady state or federal is required
1:52:01to fund the pensions their way into the post office actually in better shape
1:52:05than it seems accepted obligated to put money away that it does not need to it's
1:52:09the weirdest thing it's it's part of the it's it's a longstanding political
1:52:13problem but but yeah be great for us to far-field there but it's there are great
1:52:18benefits to something like Bitcoin that relies on that doesn't rely on using
1:52:22physical pieces of paper or parts of the banking system that are designed to
1:52:26extract money at every step that the bars are putting the way not to not for
1:52:31sensible reasons like reducing fraud or reducing I don't know the country's know
1:52:38where my is moving to pay tax at these things in place for that but a lot of
1:52:41the banking system the private banking system is set up for the purpose of
1:52:44extracting the most bees from the most people as banks make massive profits off
1:52:49typical banking operations so bitcoins potential or things like big way would
1:52:54be to break some of the monopoly of banks holding money so you know about
1:52:59this thing called hawala rate this a longstanding transfer system ok so we're
1:53:06very long haul is a system a chain wala is then it's it's sure you've heard
1:53:15about the system it's it's it's not the storm system but it's originated a lot
1:53:21of Islamic countries and the ideas that you have people now all around the world
1:53:24but used to be traders all around this region's they have account books
1:53:28and so now you here's what you do you go to a place you live in Pakistan he said
1:53:32he got a hundred dollars to my brother in indiana and goes great and he breaks
1:53:37the thing is legit has some codes he calls it the Gunners in DNA says give
1:53:41that guy hundred bucks when a guy says okay yeah and then they transfer some of
1:53:48the some point of some reconciliation like them there is no somebody in
1:53:52burundi
1:53:53they work it out its yeah it's a lot of people involved in this I'm sure those
1:54:00abuses of with the times but it's a system it's instantaneous money transfer
1:54:05based on you know there's some sort of feel like that $101 to send $100 yeah
1:54:16it's actually it's but it's there's no other ppl she's actually very
1:54:20informative of course as you get the idea is that it's it's in in the
1:54:27communities like that even when they're spread out across the world there is a
1:54:30lot of trust because there are huge consequences because they're based on
1:54:33familial relationships or cultural ones and some countries might be killed if
1:54:39you violate the system other countries it's not clear to go to jail or not but
1:54:42you be breaking this
1:54:43outcasts lost your life from your entire community you would never be able to do
1:54:47anything so there's a social component but declined as hawala it's just done
1:54:52cryptographically so there's no trusted you can work with untrusted so there is
1:54:56a model for this actually has existed just without the cryptographic component
1:55:00a lot of people point to halt as something that's a way to bypass banks
1:55:04you bypass there are fees but you bypass all the infrastructure put in place and
1:55:08as a sort of existence proof that the system could work
1:55:11sustainably and if you take trust if the if the one who all is that you need to
1:55:16enough people to trust each other
1:55:18absolutely that you take trust up by using cryptography
1:55:22me take one last break her third final sponsor answer good friends at
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1:56:21they sponsor they always want the host of the show to make a pic to pick up
1:56:26interesting book I have 1 I've been reading about halfway through on the
1:56:34advice of my good friend Scott Simpson spiral author name rich Cohen CEO AGN
1:56:41and the book is called monsters the 1985 Chicago Bears wild heart of football
1:56:49ostensibly to look back I was just written a just-released think about a
1:56:53month ago maybe six weeks ago so it's a new book looking back at the 1985 Bears
1:56:58anybody who grew up in the eighties you remember the 1985 Bears they won the
1:57:02Super Bowl but there was more than just a football team that was the team had
1:57:06the Super Bowl shuffle that Klein oh yeah there was a great day they had a
1:57:12video that was like it was like a number one video on MTV they were in a made it
1:57:17during the season it would have William the refrigerator Perry he was like a
1:57:23three hundred and seventy five pound defensive guy who they would bring bring
1:57:27any given handoffs when they needed one yard because he was so big he could
1:57:31never fail not to get one yard huge number of colorful characters just as it
1:57:38was it was almost like that
1:57:401985 Bears were almost like the World Wrestling Federation brought to
1:57:45legitimate sports and it's not a special thing about this book is not a sports
1:57:51sports book it's sort of a port says pop culture book and again if you guys know
1:57:59anybody know Scott Simpson follow his Twitter whatever you know he's not a
1:58:02sports head my wife had to not a football fan and really enjoying the
1:58:09book really really interesting book and and it's it's just one of those things
1:58:13where I was 12 when the 85 Bears were around in it I just took him for granted
1:58:17but now hindsight in reading the book it's like it's a recall what an oddball
1:58:24crazy ass team that they were and they were also tremendously successful that's
1:58:30my recommendation they've got the unabridged version of it on audible
1:58:34check it out
1:58:35Monsters by Rick on and just in general where do you go to find out more about
1:58:43audible you want to listen to audio books here's where you go
1:58:47the URL is audible podcast dot com slash the talk-show audible podcast dot com
1:58:55slash the talk show and they'll know you got there from from this podcast show my
1:59:01thanks to check them out if you like books here one last thing I thought we
1:59:07could talk about before we sign off is no go to fail
1:59:11situation which is interesting in and of itself because it's a really i mean you
1:59:17know all security updates and security problems in the in a popular OS are
1:59:21important but this is a pretty bad and it's also so just he would be bad no
1:59:27matter what the actual nature of the bugless but the fact that the nature of
1:59:32the bug was it's superfluous line of code that said go to fail is almost
1:59:40unimaginably it is too neat rate like if you put that in a movie be like oh come
1:59:46on go to fail my initial reaction was this is absolutely a plant rate Marco
1:59:56army has to the good question which was if Apple employee I don't exactly this
2:00:01way but this is my version of it is if an Apple employee worse aborn let's say
2:00:05they were on a plant they weren't hired by the NRC to be coming up employee in
2:00:09whatever but the SAU go you not gonna do when they come with the government is my
2:00:14whatever you can we talk and you can talk about this because I would be a
2:00:19national security violation you go to jail for a huge Matt I'm a huge penalty
2:00:23felony in fact you might actually be reminded or we know god knows what I
2:00:26couldn't even though american citizens are or disappeared but more like there
2:00:30are rules now that we don't totally understand about under which people are
2:00:33charged in which the information is not become public right so someone comes and
2:00:37says whatever you need to put Atletico do with the analyzed this and you can
2:00:41tell it work if it comes up you know maybe be fired thats your problem
2:00:44whatever
2:00:46like that is not implausible scenario I have heard
2:00:52but I've read again you know a lot of this is speculation how we can improve
2:00:58it but what I've read is that the way that the NSA goes about this and it's
2:01:04sort of an open secret is that it's not so much threatening and it's not so much
2:01:09like you gonna do this or you want to but that it's an appeal to patriotism
2:01:13and that they may identify people within companies who you know and now how they
2:01:20identify them I don't know but there they do and who knows maybe you know in
2:01:25the modern era
2:01:26you know a lot of that come out of Facebook and Twitter a social-networking
2:01:33where they are you know somehow see what their interests are and try to identify
2:01:37people who are going to have a sort of pro law enforcement or pro an essay
2:01:45minds and that they appeal to them on a patriotic basis and that it's that
2:01:51there's really no coercion I mean I think maybe the only part that's
2:01:54coercive is probably the UK you know we'd like to talk to you and you can't
2:01:59tell anybody about this conversation and so that part is you know you love it
2:02:06would be that because they'd be like re just for them talking to me I'm not
2:02:09gonna make a stand because they'd find people who are very tricky though for
2:02:14the NSA spying but it makes sense to appeal to their patriotism see here's
2:02:18what we would like you to do and here's why we it would help your country here's
2:02:24you know what would be able to do know you do this it will help us because
2:02:28we'll be able to use it to identify
2:02:31you know bad guys who are planning bad things to do in the USA and that
2:02:35although I thought that was initially I thought that seem more likely but as
2:02:40it's come out if you like Marco in and his gang talked about it on my cell take
2:02:47podcast quite a bit too is that it doesn't pass the smell test in that this
2:02:52particular flaw is probably was probably a mistake because for two reason the
2:02:57point is it's extremely broad once you know about you can exploit it and anyone
2:03:02can and so the NSA doesn't get it exclusively and that seems like a big
2:03:07deal and Stephen relevant to his blog he was the longtime Peter science professor
2:03:18teacher is responsible for the tool he created one of the early tools that we
2:03:24used to use on UNIX systems in the early days to scan for stuff he's a really
2:03:27smart encryption guy very well-respected the FTC is chief technology officer
2:03:33chief technologist four-year recently and he said you know the problem with
2:03:37the sea manana si did this is just too clumsy it's too easy to spot you know it
2:03:41once you find it is gone anywhere else could get to it he said what's much more
2:03:44likely in this is why I hear on the idea that that it was just an emerging trees
2:03:52or something is that it's so it's a weird thing so I'm testing which is why
2:03:57it wasn't spotted its remember this this this has been misrepresented its not
2:04:01that it validates a certificate incorrectly bad certificates fail the
2:04:06problem is that once you've led the certificated doesn't validate that the
2:04:09key for the session was signed by that certificate so you had UK so the key can
2:04:15be any can be from any party so your earlobe and you pass along all the
2:04:20certificate stuff and everyone's happy with that they need to send a key signed
2:04:23by something else and he goes through that's very very weird exploit its very
2:04:29effective if you want to use it as you can see how quickly people came up with
2:04:33proofs to show you the the problem but his thing was relevant thing which makes
2:04:36less sense if he does something like this they put in some weird random
2:04:40number thing that they take her with something so they only they're the only
2:04:43ones who know the number that triggers it and you can't figure it out unless
2:04:46you do some deep analysis we figure there's actually a flaw in the degree of
2:04:50entropy or whatever so one key will work and they know the key right they put in
2:04:55a back door that they have the key to not that they would put in a back door
2:04:59that doesn't have a working walk they don't want everyone I mean you know I do
2:05:04actually believe that their mission I think from their standpoint
2:05:07their mission is not just to its both offensive and defensive is like they may
2:05:11want back doors but they don't want government something like this would
2:05:16seem like bill so I yeah I don't think that the goto fail bug in Apple's SSL
2:05:23code
2:05:23was planted by the NSA buying anything I do they did a very likely that they do
2:05:30have morals I don't think this is one because it's a you said they expect you
2:05:34think I do I do think that the end and say you said you know it's the sort of
2:05:40bug when you look at the source code where if you're not looking for bugs
2:05:43it's real I can see how you overlook and it's again like I I blogged about what I
2:05:48wrote about it and not to get an argument about C coding style but it's
2:05:52why I think that the no braces if statement the basic gist of if
2:05:57statements and see is if you say if this then if there's only one statement you
2:06:02don't need to Brabin curly braces and if there is more than one then you have to
2:06:06put curly braces to begin and end the block of what's going to happen if that
2:06:11conditional is true and I've always felt having been bitten about bitten by that
2:06:15laziness and almost gonna do one thing but you invented and then you come back
2:06:20to the code a week two weeks later and you've you just quick hit return your
2:06:27text editor auto indent and you write the next line it's easy to make that bug
2:06:33and once the bug is in there it's easy to overlook it but if you're looking for
2:06:39bugs that really jumps out the go to go to everybody like when it when this came
2:06:43out everybody who can program even a little bit is i whoa how would that ever
2:06:47get in there like if you're actually looking for a bug it its glaring there's
2:06:51nothing clever million reviewed it auto merge tool created this problem and no
2:06:56one looked yeah and that's the thing is I cannot comes raisin razor argument
2:07:02where that's the sort of thing that happens from a diff gone bad you know
2:07:06that it when they emerged you know the diff told gets confused by the two
2:07:13versions it's trying to merge together a lot of times you'll get a duplicate line
2:07:17like that and it just so happened but I do think I do think and it's just just
2:07:23based on the way Apple wrote the bug up in a way that they they fixed it
2:07:27days before
2:07:29during or shortly not days before but a week or two Iowa 7.1 was gonna come out
2:07:37anyway I really do think I think that Apple founded in an audit and figured
2:07:43you know figured out that it explains how the NSA was claiming to do what they
2:07:49were doing the timing is that time you suspicious though like you see the
2:07:53PowerPoint thing Apple says we are gonna go through every line coach this is what
2:07:58you really the Microsoft to this one of the reasons that Vista actually had a
2:08:01superior security model 22 Windows XP was not time it was because Bill Gates
2:08:09heat you know everything the company was doing for months to go through it on it
2:08:13and it worked because Windows Vista was much more secure allow the XP stuff and
2:08:17he never sense and it's actually outpaces Apple typically and that's why
2:08:22they're one of the reasons that exploits have moved to new applications and weak
2:08:26points like flash and things like that because Windows is more secure so you
2:08:31know in so here's another bit of time in which is interesting as well as
2:08:33researchers just found I think it's like while recording this that like there's
2:08:37another cryptographic flaw that can be exploited involves client certificates
2:08:43and TLS SLT last transaction so if you connect to web server and you have a
2:08:47client certificate which most people do not you know you get issued a client
2:08:52certificate when you log in this specific way so like a normal
2:08:56transaction you just going to get the server certificate your browser
2:09:00validates that it's accurate to make a secure connection but if you get issued
2:09:04one that stored in your browser that brought that certificate apparently bu
2:09:08reused by other people and let's be impersonated things like any other
2:09:14website in which the same certificates used they can they can use that
2:09:20certificate she wears that what what system has this but everything is parts
2:09:25actually if I know it's horrible to its a protocol layer flaw that apparently
2:09:30will not be difficult to fix but then it's gotta be rolled out but the deal is
2:09:34that there are only specific cases in which a client certificates use of some
2:09:38kind of WiFi login things where
2:09:41you know you take your username and password to login over WiFi throughout
2:09:4580221 X all those those systems are using corporations that they've got a
2:09:50flaw so it's not like a general problem using my bank but it's in the case
2:09:54especially in the enterprise where you may be out in the wild you making a
2:09:58secure connection using a client certificate that actually is the
2:10:01opportunity for Melissa's malicious interception in a way that would let
2:10:05that man the middle use your credentials elsewhere and so a lot of enterprise
2:10:11software will need to get fixed as well as web servers just to be on the safe
2:10:14side but the enterprise people will probably on it pretty fast but some
2:10:17weird again you're like did somebody in all the NSA stuff they got released it
2:10:22someone notice it seems like they have a way to do something that seems to be
2:10:26implying client certificates maybe we should go back to the protocol and then
2:10:29boom something that dates back to think they're saying 2005 and affects the
2:10:34entire protocol I know there's a lot of people out there who really do think
2:10:37that these big companies are all in cahoots that when the NSA came knocking
2:10:40and say can we come in your data center this sure come on and do it every one
2:10:44and it is not you know there's no way to disprove it right and it's good in some
2:10:49sense it's good that there's some people who are skeptical like that right but I
2:10:53I don't think it's true I actually take these companies at their words when they
2:10:57say things like no we did not allow the NSA literally physically into our data
2:11:03center and the main reason why and it's not just Apple I believe all of these
2:11:08companies is that it's it's not in their interests to lie about it if they had
2:11:13done it they could just say nothing and they could even say we're not even
2:11:18allowed to say we can answer yes or no
2:11:20they could just say that and you know and then and then leave it at that
2:11:24but by saying by denying it if they're lying about that it opens them up to it
2:11:30profound in tremendous loss of trust if it ever turns out otherwise and as we've
2:11:37seen with the Snowdon thing anything you know can leak you know there's no just
2:11:41because the NSA says you can lie about it will you can trust us you can't trust
2:11:45them to have a mistaken leak
2:11:48so I just don't see why anybody would lie about it really don't and I think it
2:11:52makes sense with the odds with what we're seeing uncovered is what they've
2:11:55done is said ok we didn't let them they say they can do it how how is that even
2:12:01part where do we need to audit to see that it would be possible for them to do
2:12:06it behind our backs without our help to do this I think that's most likely
2:12:10because if you got the NSA what they did clearly in let you know it's funny it's
2:12:16like as much as I may just like they did this is kind of this is what they've
2:12:20been tasked with doing as they went through to find all the flaws in like in
2:12:23an ideal world what would have happened since he would have found flaws and they
2:12:27would have gone through work privately with every american company to replace
2:12:31them and eventually stuff would have trickled out like something like that
2:12:34that actually would have been a really great cyber strategy was to not
2:12:38implement flaws but he working assiduously to find them maybe exploit
2:12:41them at times but also be working to repair them because that would actually
2:12:45be good for the country and for what do you make of the one that just came out
2:12:51the other day yesterday the day before where it was a very similar to Apple's
2:12:56but in the new code oh that's the way this is this is another TLS thing right
2:13:02now you don't even see I miss them so the client certificate one what is this
2:13:07one said you know that people are looking at its oddly so much more see
2:13:13her for this is the thing that makes me wonder though about them all because
2:13:17it's oddly similar to Apple's even involves goto statements but it's a lot
2:13:24it's looking at the code it's a lot more subtle though it's not as glaring as you
2:13:33can create a certificate that would be accepted even though it shouldn't be
2:13:36that funny yeah I mean I think I think what it comes down to is that there may
2:13:42be a new one it seems really bad me because Apple one I forget how many
2:13:48people have already upgraded to 7.2 iOS devices are already on 706 below is one
2:13:53of those web
2:13:55networks showed that is something like forty percent of iOS devices were
2:14:00already on 70 sex is just a tremendous uptake whereas so much stuff is embedded
2:14:09systems and routers you know all these things that don't get software updates
2:14:14are running this code and will they give you think the Fortune thing is that I
2:14:18don't think they're gonna run that code until the until the Howard you know it's
2:14:25the AC adapter burns out it's true but the new one like the click the
2:14:29fundamental one that was just found two is it has to do with his client
2:14:34certificate so it's only in specific cases where like a server in this case
2:14:40like the new one a server would accept a certificate should not so you can attack
2:14:46a site if it was running the new and you knew it so that's a symmetrical and that
2:14:50there's fewer servers update then added Linux devices and the same thing like
2:14:54client the client certificate for all of that can be fixed in a few different
2:14:57ways the Apple what is particularly horrible because you could have any
2:15:02point of intersection though like right you can create a fake session key by
2:15:06being a man the middle you can put software to router matters
2:15:11hundreds of thousands or you know if you presume that the NSA while they don't
2:15:16have access to Apple's data center or Google's let's say but let's say Apple
2:15:20AAPL has written this book so they're not and apples building at all but if
2:15:26there anywhere on the Internet backbone between that remote device like that
2:15:33your iPhone and Apple's data center anywhere in that backbone in between
2:15:40this bug opens it up for them to you know it's like a classic man
2:15:45man-in-the-middle attack right and you could do it in the country wide basis of
2:15:48your iraq someone with an Apple device and whatever you could have been
2:15:54countrywide attacks
2:15:56well I think about how centralized the internet isn't China yeah exactly right
2:16:00so this is this is when these things it's like it's not a back
2:16:03you know I don't I think the Sunni where it was an error
2:16:07it's it's a sweet I think with this highlights I think what's going to
2:16:11happen is you see a lot more bizarre testing I'm surprised that
2:16:15implementations are in more thoroughly tested them in certain things like the
2:16:20idea to create a malformed client certificate of a certain type of that's
2:16:25one weird thing like you can't test every kind of ticket but Apple's one in
2:16:30particular its like I would have thought the test we would have checked to make
2:16:33sure that when you sent into session he wasn't signed by the same certificate
2:16:37that it failed because they test for like self-signed certificates they test
2:16:41for lots of kinds of failures and someone asked on Twitter even though
2:16:45Chris pepper you know the proper proof reader in an extraordinary program are
2:16:49crisp was like will should may also sign certificates pass the test has
2:16:55acknowledged leader in the process but that was a good point is if the soup in
2:16:58a flaw in a certificate validation tons of programmers would have said why did
2:17:02my self signed certificate not generate an error there
2:17:05require signing or approvals so this one was a just the point at which most
2:17:10people who test this kind of thing or work with security didn't see it and
2:17:14that's that may be dubious but it is why I think it went underground for so long
2:17:19and clearly there gonna be some apple everyone else the world will be beefing
2:17:23up the kinds of automated testing they do whenever they make change libraries
2:17:27the sort of thing again
2:17:28yeah I definitely think so i think you know I think everybody like you said
2:17:33this is what the NSA is tasked with so you know in some sense nothing has been
2:17:38surprising with all of the NSA related leaks
2:17:42but on the other hand and knowing in your bag a reminder dennis is doing
2:17:48something like this is different than getting seen these slides it say here's
2:17:51exactly what they're doing and then you know I don't know it somehow they could
2:17:56jolt everybody system and I don't think there's any doubt that you know for
2:18:02better or for worse and I'll even and play both sides of the coin here and say
2:18:06you know there's obviously there could be some downsides to this general I i
2:18:10think that it's good news that we've woken up to this but you know who knows
2:18:14maybe you know in terms of actually doing with the NSA is tasked with doing
2:18:19an actually finding genuine bad guys planning genuinely bad things that this
2:18:26is made their job a lot more difficult because it's close gonna end up in
2:18:29closing an awful lot of these back doors
2:18:32well there's there's that standpoint there's also the lake I wish to say
2:18:35there's it's widely stated by many parties that countries like Israel
2:18:40France China so far how's that there there's back to him to quit made by
2:18:47stones at Israeli companies makes up for that make that work equipment there's a
2:18:50long held and often voiced suspicions that every country built back doors and
2:18:55stuff that ships out of the country in america where she is being more
2:18:59independent Israel even the national security apparatus is more they have
2:19:03your constitutional protections and there's more of a state of siege
2:19:06mentality there france has a different relationship between business and
2:19:10commerce corporate espionage the thing that your government assisted corporate
2:19:15espionage the big thing and China so what I was seeing if they were doing was
2:19:20constantly working to find report and release information about these kinds of
2:19:25laws that affect american companies or companies around the world that are in
2:19:29products that are shipping that we're using like that would be a better use of
2:19:31resources at some level to secure America on top of their mission have you
2:19:37know finding the flaws in exploiting that I don't know it's that would have
2:19:41more impact on business to not have you know boeing's plans ripped off Google's
2:19:44servers broken into
2:19:46yeah I do some of the other some parts
2:19:49well that's a good point to wrap up
2:19:53clan there's great show I appreciate your time when he won't tell people to
2:19:59check out to find more Glenn Fleishman well it's also follow him on Twitter
2:20:03whatever you don't think people if you're bad in life you're required to
2:20:11follow me
2:20:11well the magazines book is actually it's at the printers now shipping soon in the
2:20:18eBook version is is more or less done and we've released the PDF format to
2:20:22backers were fishing or other flavors the prison is about 1,500 acres small
2:20:27print run we have about 1150 1200 committed to backers and other people
2:20:32and you can go to the magazine dot com slash book and pre-order a copy of
2:20:39either the ebook or e book or a bundle and shipping out books probably a week
2:20:47or ten days the books will actually be in some people's hands because it's a
2:20:51future books get pretty fast I don't use digital textbooks get pretty fast and
2:20:54it's very exciting it's got wait for oil embossing on the spine and things like
2:21:01that
2:21:01exciting looks good yeah I've seen all the person of color proofs and jacket
2:21:06proof's in its gonna be a really nice looking good stories and there'll be
2:21:12something to cherish for general know it'll be nice it'll be great it's what I
2:21:16was hoping is going to have a really nice we did it we try to do everything
2:21:21right so the print version would really be something that was a keeps aiken and
2:21:24we something you would actually enjoy having a copy of as a thing as well as
2:21:27all the stories inside and i feel like i tweeted something to the effective oh my
2:21:34god you guys there's a story here there's a huge story here filled with
2:21:39nothing but shelves of printed out e-books it's amazing
2:21:44ads so many people got it and laugh but it was probably one of those you know I
2:21:50probably got more people who told him miss that it was a joke than any tweet
2:21:56here's what's the name of it here's the crazy thing about modern times we were
2:22:01doing it was actually much easier to get the book printed it to the ebook part
2:22:04wow wow part is a mess
2:22:08we ascended PDF and they kill budgetary is and squeeze in cows or something in
2:22:15the book but the election but what we're doing is we're gonna have the hardcover
2:22:20book offset print well the eBook which will be 300 pages hardcover books toward
2:22:2616th we have a bigger book because we're able to find that are and then I'm also
2:22:30producing a print on demand version will be a larger size because our hardcover
2:22:34books for my small have made a different document in InDesign that's the eBook
2:22:39version three hundred and two pages that will be available print on demand
2:22:42because it's so god damn expensive to ship overseas but ebooks are printed
2:22:47banner printed locally so people in Europe and in Canada at least we'll be
2:22:52able to get the full color but they'll be able to get an affordable version of
2:22:57the ebook as a parent mantle's ebooks are much more like print is incredibly
2:23:03easy now has a deal with the stuff I just given the PDF eBooks you like in
2:23:09there like making sausage so it really isn't a joke anymore
2:23:15books it's like an industry then there's different chains of command but it's
2:23:21like is improving my ebook we're all it's just it's all it's a weird world in
2:23:27which having giant chunks of paper wrapped in printed is easier than ebooks
2:23:32with that as well I'm glad to hear it I look forward to seeing it
2:23:36all right thank you pleasure