P2P Connects Us Special #2 – Cypherpunkd E5

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Welcome to another special episode of the P2P Connects Us podcast! I recently released version 1 of my new book entitled “BYOB: Using Bitcoin to Be Your Own Bank” at beyourownbankbook.wordpress.com, and in light of this special occasion I thought that for this special episode I’d take you back in time once again to the early days of bitcoin.

Hiro White of Agorist Radio interviews a cypherpunk named Mids, discussing bitcoin’s history, how bitcoin is different from previous attempts at digital currency, why bitcoin is important, and what the future might hold for this exciting technology. As with the last special episode, it’s interesting to see how much has changed in bitcoin-land, and just how much has stayed the same. Those who do not learn from history are doomed to repeat it – so relax and take notes and enjoy this trip back in time to early 2011 on Episode 5 of the Cypherpunkd podcast.

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Content for today’s episode was provided by John Light, Hiro White, and Mids.

Episode Transcripion by LTB community member bitillionaire

[music decrescendo]

[Movie]  I know you’re out there. I can feel you now. I know that you’re afraid. You’re afraid of us. You’re afraid of change. I don’t know the future, I didn’t come here to tell you how this is going to end. I came here to tell you how it’s going to begin. I’m going to hang up this phone and then I’m going to show these people what you don’t want them to see. I’m going to show them a world without you. A world without rules and controls, without borders or boundaries. A world where anything is possible.

[sound effects]

[Hiro White] Hello and welcome back to another episode of Cypherpunkd. Today we have another special guest, Mids, who is a cypherpunk, digital currency fan boy, software engineer, and is heavily into privacy and anonymity, and we are going to be covering the topic of Bitcoin Mania.

Mids, welcome to the show. Are you there?


[Mids] Yes.


[Hiro White] Thanks for coming on today. There’s so much going on on the ‘net with Bitcoin. So many people have heard of it. They don’t understand it. When it’s presented, they’re confused because it’s so much different what we think of of – gold and silver in our hands, or Federal Reserve notes, or US Dollar liabilities in our bank accounts. You going to help us out today, and give us a little background on what this is?


[Mids] Well, for me, I mean, there’s been a lot of changes. I think awhile back you had the crypto movement with PGP, you had Bittorrents, recently we had Wikileaks coming up. And I think Bitcoin is something as big or even bigger as those big changes in the past.


[Hiro White] Oh, really? Well, well – let’s get started. Why don’t you give us a very quick brief introduction? What is Bitcoin? And then we’ll spend the rest of the show answering that in more depth.


[Mids] Sure. So Bitcoin is a digital currency. It’s open-source, and distributed, so as I mentioned, like Bittorrent, there’s not a central server or a central party organ – directing everything and controlling everything, but it’s peer-to-peer, and the shared knowledge of the system, of the transactions, the history, is in a distributed database. That means it’s not possible to shut it down by closing down an organization as a government or as another evil entity. And also it allows you to spread out and to – to use it everywhere. In the Internet and possibly, as well, offline.


[Hiro White] Okay, when you say “distributed,” you’re talking about the back-end system that’s running it. But there’s another aspect of this in the P2P, and that is the client. So you’re – no – people are not just logging into a server and taking care of transactions. If you want to participate in creating bitcoins, which is another really crazy aspect of this system, we’ll get into it in a little bit – but if you want to accept bitcoins or send bitcoins to other people or purchase services on the ‘net, you need to be running this Bittorrent client, is that correct?


[Mids] Well, there are two – two ways. If you’re a – a common – a common Internet user and don’t have a deep technical understanding and are not willing to install a custom piece of software on your system, you can put a little bit of trust in a third-party that is operating a so-called Bitcoin wallet.


[Hiro White] Oh, okay.


[Mids] One example is MyBitcoin.com. There you can just login as – as – as how you would log into your banking website or to PayPal or some other system, and they take care of all these transactions for you. But if you’re more techno savvy, you can install the Windows client or OSX client or the Linux client and run it yourself on your own system and that client is also one of the servers, participating in the network, verifying the other clients, making sure that they are not defrauding you and potentially also generating new bitcoins. So there are two ways – there’s the easy way and there’s the more harder – more difficult one.


[Hiro White] Right – the easy one might be good for people who really just want to jump in and play around and get in without running their own client, as you mentioned. For the listeners, the website that you can find the project hosted at, information, and download clients, it’s Bitcoin.org.


Now, one of the questions I get thrown at me when I bring up Bitcoin is – how come this is money? I run a piece of software on my computer, why is this money?


[Mids] Yeah, that’s a difficult one. I mean – what’s money? I mean, it’s – it’s – it’s not – it’s not backed by anything, it’s – it’s basically, you can say it’s worthless, you’re just burning CPU cycles, but it’s – it’s a – it’s a shared agreement, like a shared clock, like a shared state of all the nodes participating, and slowly they are releasing, and in the end, a fixed amount of bitcoins into the network to all the participants. Just like gold, I mean there’s only so much gold in the earth and it just takes awhile to mine it all and then maybe if the gold price increases, it becomes more worthwhile to – to spend more money on mining, and it’s the same with Bitcoin. It’s slowly being released, and if you have more money to spend, you can run more servers, or what you mentioned earlier, do some mining on a big scale, and potentially make more money that way.


[Hiro White] Mhmm. Yeah, so it’s based on the fact that these numbers that are being generated – let’s start over. Bitcoins – where did they come from? Who created them? Who are issuing this – it seems that a lot of the currencies that we’re familiar with – fiat currencies – they can be multi – the supply of money can be inflated with inflation and then you have deflation, maybe the slowdown and the velocity, but it’s based on – a lot of times the true value of money that a lot of us are looking for – are aspects such as the scarcity of it, the amount can be inflated or deflated, even gold has an inflation value based upon the amount that is being mined every year. It’s just that the difficulty of mining is – and the cost and expense is so great that you don’t have the same type of inflation that you would have with Federal Reserve notes, where they can just punch in digits on a computer or issue loans against it and do the same. So in this, where – how much – how many bitcoins are out there right now? And where did these come from?


[Mids] So, so – at the moment – at the moment I think – I mentioned there’s 21 million bitcoins in total that will be mined in the end. And it goes slower, slower, more slow, and slower over time, and at this moment, I think there are like five or six million bitcoins are – are – are mined or are discovered and this discovery is – is – is – basically, it’s a race for finding the – the – the client which finds the – the – quickest solution or is the first one to find the solution to a – to a crypto – a crypto puzzle – and once it finds a solution to – to this puzzle, it – it publishes results, shares it with the other clients. And then everybody agrees on it, they sign it off, and you get this audit reel, and after that point, new clients start – start finding, discovering this – well, a new solution to the next puzzle. And the parameters are adjusted based on the rate that new – new – new solutions are found, and also the – the amount of – of coins that are found in total. But that’s not – that’s not one entity making up those rules. Those rules are forced in the software. It’s – it’s – it’s cryptography, it’s software, it’s not regulations. No external policy making. So it’s open source, I mean, you can check the software yourself if you’re interested, and you can verify that your client agrees with this.


[Hiro White] Okay, discovering these numbers – basic – essentially what you’re talking – this – what – everything you just mentioned just now is mining. So essentially you could say that all the existing coins that are out there right now have been mined by someone, and discovered just like metal in the ground. And the mining takes place based upon this algorithm that – I guess the original developer of this was Satoshi Nakamoto, and –


[Mids] Well, he claims that’s his name. Probably he’s some other anonymous fellow.


[Hiro White] Right, correct.


[Mids] It’s a big mystery.


[Hiro White] Yes, correct. I guess he originally popped up on the scene on the cypherpunks mailing list many, many years ago, even talking about this idea. And then I guess he didn’t get so much of a warm response and he disappeared and then it – recently he popped on the scene with a complete, working implementation. At least that’s the rumor that I heard of. On the Wikipedia page, they have a little blip here that says “Bitcoin is one of the first implementations of a concept called cryptocurrency, first described in ’98 by Wei Dei on the cypherpunks mailing list.” So, this guy came up with some type of an algorithm and an idea where you could search out – in using this algorithm, you could verify partic– you could create – you could search out and find certain numbers that could be verified and there would be a limited number of them. So – at the beginning, as you said, these bitcoins were being generated like crazy. I remember, early on, generating bitcoins on some of my own machines and not taking that long compared to right now. From – I heard some statement from a guy on a post saying that to generate 20-30 bitcoins on his machines would take a couple of years now. What is the rate of generation when you first got in compared to – the rate of mining for a single Bitcoin when you first started and when was that and at this moment?


[Mids] So I – I – I just checked the history of my Bitcoin client, and I installed it April 6th, 2010, so a year ago. And exactly one year ago I made my first payment, I was discovering like 50 bitcoins every day, every couple days, with just one regular laptop computer. And – at the time, I think the value was like – like a tenth of a US dollar cent, per Bitcoin.


[Hiro White] Okay.


[Mids] I mean, really, really low. I mean – I’m a – I’m – at one point, I’m a software engineer, and I got some donation from somebody from some work I did, which was two and a half thousand bitcoins in total –


[Hiro White] [laughter] Wow.


[Mids] – and at the moment, that’s like two thousand bucks. So, big change –


[Hiro White] Okay, so –


[Mids] – from a tenth of a cent to like eighty, seventy-five, to a dollar, it varies a little bit at the moment. So right now there’s no chance that with your regular PC, your regular laptop, you can – you can really mine anything within a viable time yourself. You would need specialized hardware to – to do this. But, I mean, that doesn’t – there are other ways to – to get bitcoins. I mean, you can sell your services, you can offer goods, you can buy them from the various open exchange markets. And you can accept donations like I did. I mean, it’s – I think it’s important to – to – to look at the technology behind it but really not to focus too much on it.


[Hiro White] Right.


[Mids] I mean, in the end, if you get a piece of gold, do you care where it came from and – and – and how many people in horrible conditions that – that – that mining took to get it, I mean, maybe you do, but gold is gold, and just – it’s the scarcity of it that people value. And I mean, wow, based on just the exchange rate between the US dollar and the Bitcoin, there’s a big increase in value from a year ago to – to right now.


[Hiro White] Yeah, can you – throw out – I know there are several exchanges out there and there are a couple of markets that are interesting just to watch because you can – they have market history and what’s going on with the price. It’s a nice market indicator of – market pricing of a particular asset. Do you have at least just a couple of little recommendations of some places to check out for the – for watching the prices and exchanging?


[Mids] Sure. So by far the best site is BitcoinSharks.com. And it gives you an overview of all the current exchange rates of all the public markets. And you can drill down, see the history, compare prices and get real-time updates and just like a stock ticker, or a foreign exchange ticker would show you – and – the most popular exchange market by far is Mt. Gox. M-T-G-O-X dot com. And that’s really setting the exchange rates. But there are other ones for PayPal or some for WebMoney, some more Over the Counter exchange ways, and those come and go. It’s not centralized, I mean, you’re free to start your own competing exchange market if you want, and I know there – there’s some big ones being developed – being developed at the moment. Bitcoin – BitcoinSharks.com is a great start to find the other ones and look at the exchange rates and dig into the history.


[Hiro White] Great. Thank you. On the main Bitcoin website, there is a link midway down on the page going to a list of merchants, and the list is growing, it seems, like every day – there must be close to a hundred links or something close to that on the site. All kinds of things, and some of them quite interesting that are available, from computer services and products and the – you know, goods, you can buy books, I guess there’s some people that will send you books from Amazon based on Bitcoin, so quite a few things are popping up. Have you seen any – any reliable exchangers that are doing cash mailing exchanges for Bitcoin?


[Mids] Uh – well, I should mention, I mean, I go to – I got a lot of Bitcoins myself by being lucky, by being early, so I didn’t use a lot of exchange services myself. And I know there are some credit cards to money exchangers, I think the credit cards or virtual credit cards only work in the US, or there is some limit on it – I wouldn’t – I wouldn’t be able to give any recommendations myself.


[Hiro White] Okay.


[Mids] There’s a bit on the Bitcoin.org website, there’s a forum, and the forum is really where the community is going, so you can find all the recommendations, all the discussions about reliability, customer support, potential fraud cases. You can – you can find them over there. And that’s if you want to dive in, yeah, do some – do some research yourself before spending a lot of dollars or a lot of bitcoin, one way or the other.


[Hiro White] Okay. Great. Now, why don’t you tell us some of your ideas on why – I know that you are – are very much interested in focusing some of your development time and encouraging others to really look into this Bitcoin system, not just to use it for – in the market – but in – in development, you see there’s something bigger than any of these previous or currently-being-developed and proposed anonymous digital cash systems. Why don’t you tell us your thoughts on the comparison and what you think about that.


[Mids] Yeah, so I got interested in the – in the – the cypherpunk movement well, when it was, I think, already over, or that the biggest things were already done, but that was about 2001, 2002 maybe. So I started to – to rediscover all these protocols like Digicash. Myself, I made my own digital currency and – and – and was experimenting with that for a little while. I’ve seen other cypherpunk online friends doing the same, and they’re still doing this, with, well – no big success – I mean a lot of insights, a lot of fun – but it’s all – it’s all – it’s all hobby-ism. And what’s – what’s really important, especially as a tech guy, to understand, I mean, it’s – just the source, “if you build it they will come,” it’s not true. You really need to do the branding, the marketing, you need to get the drive behind it. You need to get – to have the economy grow before anybody will use your currency. I mean, it can be super – super anonymous, but if you’re the only guy using it, then it’s worthless.


[Hiro White] Yes, correct.


[Mids] So, Bitcoin – I mean, often it’s claimed that it’s anonymous. I will say it’s more pseudo-anonymous. I mean, it’s not linked to your social security number or to your user name but there are some ways to find out. I mean, there’s one centralized audit reel, so you could do some correlations, especially if you’re – a government agency, you have a lot of – a lot of power and network resources. But it’s – it’s so much better than – than PayPal and then E-gold and Liberty Reserve and all the other ones. It’s – it’s such an improvement that I think it’s, it’s really important to focus on these – I mean, it’s decentralized, there’s no – there’s no shutting it down unless, basically, they shut down half the Internet. I mean, they have tried to do that with WikiLeaks, they have tried to do that with Bitcoin – sorry, with Bittorrent. I mean, even with PGP – with PGP they found ways around it by printing out the source code and then – and then having it on paper and scanning them on the other side. I mean, with Bittorrent, it just raises the bar. They start encrypting it, they start creating these distributed trackers to do all kinds of additional layers to it. I mean, you can’t – you can’t stop it, the technology. And it’s – I mean, from the obscure situation it was in 2008, to even a year ago, where it was basically worthless. Now it’s – after being mentioned on Slashdot, on Hackernews, on some even – I mean, last week there was – no, early this week there was a – was a – just a – banking conference where some guy just mentioned Bitcoin to all these bankers and – and – and – and – and —


[Hiro White] What’d they freak out?


[Mids] Credit cards. I mean I think they would freak out. I think there’s a big gap. I think they don’t understand it.


[Hiro White] Yeah, exactly!


[Mids] They’re not from the generation. But on the other hand, there’s this potential, and it’s huge, huge, and if you look at the exchange rate just going up, you can see where it’ll go. You can – it’s a gamble, but it’s very interesting.


And I think the most interesting thing if you look at – basically, it’s a new frontier. These – these existing concepts like exchange providers, escrow agents, online auctions, gambling, those – those services – drug sales, those kinds of things being rediscovered and being applied to this market, and I think – I mean, the traction is there, so, yeah, you can spend your time on making your own super-secure and anonymous currency that nobody will ever use or you can accept what’s here and grow from this, and I mean, it’s open-source, it will keep on improving. Maybe – maybe there will be a Bitcoin version 2, or there will be a Bytecoin, or some other clone that will – that will come after this, but I think it’s —


[Hiro White] It has momentum by itself.


[Mids] Yeah, it has momentum. And that’s very important, the viable part behind it, and that’s – that’s something that you cannot create on your own without a lot of financial backing.


[Hiro White] Right. A few comments on things you mentioned.


One of the biggest issues with a lot of these digital gold currencies and related is the chicken/egg problem of – people aren’t going to get it unless they have vendors they can spend it with and vendors aren’t going to start accepting until they – and developing for it until there’s a mass out there. And what’s happening with Bitcoin.


And that’s the reason I called the name of this show “Bitcoin Mania,” because, in many ways, that’s what is happening. These – the – the amount of publicity that is happening out there, it has grown not just because of a – a few mentions that have spread virally because of how cool it is, but it’s – it’s gone crazy because of awareness in these past – only these past couple of years of what the banksters are doing and the governments with currency manipulation and debt and central banking and all of this stuff that’s been going on. Only a couple of years ago, anyone talking about the Federal Reserve and fractional reserve banking and the value of the dollar and all this, they – they were on f—they were fringe, they were conspiracy theorists and the like. But just in the past year and a half, two years, it’s gone mainstream. So this awareness of what these guys are doing has exploded and then, at the same time, you have people looking for alternative systems or considering it and then this comes up, they’re ripe for it.


The – when they – I saw another spike in interest in bitcoins when they shut down the PayPal account and the bank account of the Wikileaks guys. And right then, again, another little spike when people are saying it’s time for something else, it’s time for something else. So – I – I really like the momentum that is happening here. And I don’t think that there has ever been anything that has spiked the interest in such a massive number of technical geeks into the – idea of digital cash or cryptocurrency or something besides dollars. This – these guys are talking about – there’s – before it was more – you know, libertarian, individualist, you know, cypherpunk, real hardcore guys, and now you have general people out there saying, Yeah, well you can take my bitcoins when you pry them from my cold, dead fingers. And most of these guys don’t have a foundation of liberty ideas in their philosophy to begin with.


[Mids] Yeah, I mean, to comment on that – I – I hang out in some of the IRC channels around Bitcoin, where Bitcoin is being discussed, where trades are being made, so I just, not really participate there, but I just smell what’s going on and try to get a feeling for the kind of guys that are using this. And it’s not all the – like the libertarian / anarcho-capitalist / cypherpunk hardcore coders, but it’s also just – the – the younger generation, the – the Swedish pirate party voters, the – the 4Chan guys – the people that are interested in the pranks of Anonymous. I mean, the Facebook generation is also looking – looking for a solution and they see. They see these problems with banks and banksters and high costs and – and governments and they – they – yeah, they – they get a connection there.


[Hiro White] Right.


[Mids] Maybe they don’t get the privacy message, but they find something that they can relate to and that is of their generation, and that is compatible with them, without anybody telling them or anybody controlling them.


[Hiro White] Right.


[Mids] That’s really important.


[Hiro White] Yeah, the new generation of users out there and developers and the like – they are used to this idea of disruptive technology. And – granted, Facebook and Twitter are in and of themselves, are not disruptive, you know, cypherpunk dreams – but what they have done is they’ve enabled and they are being used actively by millions, tens of millions and more people – what is Facebook up to 500 million or something? Do you know?


[Mids] I don’t know. I don’t use Facebook.


[Hiro White] Yeah, neither do I. But what they have done is they have opened up a new thought-process and interacting process online of P2P, and that is – it’s not just about, I’m going to a website to read a piece of news, or I have a blog. It’s – all of these people communicating and hooking up and joining groups. It’s all interactive communication between individuals. And, you know, technical people can – were already doing this with, you know, for decades on IRC and their own – you know, using their – Bit – even Bittorrent, you know, now it’s pretty popular but for many years a lot of people have been doing P2P things, but now it’s really starting – and P2P is just one aspect of a dis – these disruptive technologies. And as you mentioned earlier with them trying to shut down Wikileaks through  – one, through blocking and seizing their accounts, uh, two, trying to shut down their websites, for distributing the information through news or hosting, like with the Amazon. In this case, people see, wait a second – if I had bitcoins, they’re in my Bitcoin wallet, so how – I’ll just ask you right out – can anyone come and steal or seize my bitcoins from the Bitcoin server?


[Mids] There is no – there is no Bitcoin server. So there’s no central place to steal them from. But, I mean, there are certain risks to it, and I mean if you’re running it on your own, on your own machine. If your, if your laptop gets, gets infected or it blows up or it gets seized by the TSA, you don’t have a back-up of your Bitcoin wallet, then you will lose these coins, so – and – and right now I know that they’re working on automatically encrypting these wallets and providing some kind of backup service for this, so I’m sure that there will be more technical solutions for this to make it easier, convenient, and less, less risky to use these bitcoins.


[Hiro White] Correct.


[Mids] I wouldn’t use it as a big value store, although there is quite some investment potential, I mean, with the prices going up, maybe 10, 100%, 100 times, I mean, yeah, you might want to buy a lot of bitcoins right now but yeah, you should keep them – keep them on a USB stick and keep them – keep them – away and [indecipherable] or keep them with a third-party that you really trust to last for awhile. But I think that right now it’s more useful as a means of exchange to facilitate payments and – take, take another cur – take PayPal, I think if you sign up with PayPal, you need to fill in these pages and pages of – of private information, do phone call checks, and confirmations, maybe. I had to wait for – for my bank statement to arrive and then copy down some number, I’m not sure how it’s in the US or in some other countries, but it – it’s really inconvenient, and Bitcoin, you can download it, or you can open your wallet on a third-party service and just start accepting it without any questions asked.


[Hiro White] Right, correct.


[Mids] So the barrier to entry is – well, maybe it’s not that user friendly but there is no big paper trail. And what – earlier this week, I bought some web services – web design services from a guy in the US and it was settled within a minute, or a couple minutes, instead of sending a wire, which can take twenty days maybe, can get lost – cash in the mail can get stolen. It’s just – it’s just – it’s fast, it’s convenient, and it’s – yeah, it’s – it’s – it’s – it has a lot of – a lot of potential.


[Hiro White] This ties in very well with the show we did recently with Jonathan Logan on What Is Huwala? And listeners can find the archive on the Agorist.com website. One segment of the show, we talked about the numbers of people using the Huwala system to – who are workers in other countries, many times illegal aliens or undocumented whatever they want to call them, and they may be making a couple of dollars a day, sending home $25, $30, $50, $100 a month is a big deal for them. Sending it Western Un– wire transfer, bank transfer, they may not be able to because they don’t have the proper documentation or a relationship with a bank to do the wire transfer. And then going into MoneyGram and one of those other providers, they are going to have a huge chunk of that money taken out, and it is huge for them. If you’re talking ten bucks for a $100 transfer, and these guys are making a couple of dollars a day, you know, we’re talking days of labor just in transfer costs for these people.


Now, the number of people that are doing is huge. We’re not talking about just a couple of poor people. This is happening on a huge scale all over the world, and they’re using Huwala. This type of a system could be something that would be enabling to people who need to send money back and forth without these high transfer costs, without the bankster cartels telling them that they need to have some type of mark of the beast identification codes to do their transfers.


And – you know, we’re talking a nice – again, like many of these systems, we’re talking about honest money systems. And I encourage everyone to listen to the Huwala show, if you haven’t, after listening to this information on the Bitcoin system.


Now – back up a little bit – on the – I said –


[Mids] Can I – can I – I mean I just – there’s a – it’s a bit difficult to share, it’s a long link, but maybe you can put it in the show notes later on, but there’s like a Google Maps overlay where you can see where all the nodes are on the – in the world. So there’s a lot of them in the United States, in Canada, in Europe, but there’s like only six Bitcoin clients are detected in India, and – take – take this web design. I paid like forty bitcoins for an hour of work, which is maybe like thirty US dollars. I think there is a big market for Indian outsourcing and – if – if somebody takes bitcoins, accepts bitcoins over there or there’s a Bitcoin proxy service with them, I mean, there’s a huge market and they can bypass all these problematic —


[Hiro White] Right.


[Mids] While they cannot open a PayPal account, I believe, they have to use these Western Union, with huge percent mark-ups, big delays, and this could – this could be – a great market opportunity for them to really get global and – and establish a source of income.


[Hiro White] Oh yeah, it’s a fantastic service in the market for people that are being restricted in their trade and their money being stolen from them and – and – and restricted – restricted so that, you know, they c – people need – these money – this money that’s being sent back home is being used to feed their families, to get medicine, to invest in their local businesses, to help out in their families, you know, this is a big deal.


One thing that could happen with this – and this is one reason why I am so much of a big Huwala fan, is this idea of individuals and relat– doing business with each other locally and internationally and with the relationships that they have with people on the ground. This whole idea of a large, alternate system of value transfer, value transfer methods, can start spreading like wild flower – wild fire – when settlement can be happening not necessarily just between myself as a Huwala dealer in one country and a guy I know in another country, but anyone has access to the Bitcoin system and exchangers can become a local dealer themselves on the ground, on the ground. OTC dealer – exchanger. So, you know, if there’s already thousands of Huwala dealers – let’s say, in India, all it takes is for a couple of them to say Hey, we take Bitcoin also. Someone sends us Bitcoin, we will hand out the money locally. You come in and give us Bitcoin, we will give you the Huwala information for the transfer. So it’s just another currency that they could be using, and it could spread like wild fire because – anyone can get into this system now.


There’s not a large infrastructure. There’s security precautions that you have to take. There’s sometimes legal issues you have to watch out for. But for – if you compare the amount of money that – the amount of money that’s being taken out of the – the cost of doing a wire transfer or MoneyGram/Western Union, it’s very easy for someone to come in with a system like this and undercut them, you know, 10, 20, 30, 40, by 50 times just to do these small transactions. So there can be a – a great – as you said, there’s a great opportunity here for people who want to get into this business and the – what it will actually do for markets on the ground. I will post all of these links that you’re pasting into the chat here on the main archive when it goes up.


[Mids] Yeah, I found some connections. I mean, you mentioned over-the-counter trades. There’s a website, Bitcoin-OTC.com. And – they have all kinds of – of – of offers and, I mean, I see bids and sells for local currency, cash exchanges, even exchanging pizza for Bitcoin, and I’ve used it myself, and it’s just – at the moment, it’s just – the whites, the white kids doing it, but it has a potential of being used –


[Hiro White] I’m sorry, what did you say? Exchanging what for Bitcoin?


[Mids] Pizza.


[Hiro White] Pizza?


[Mids] Or some other gift tokens or some other –


[Hiro White] [laughter]Great!


[Mids] Amazon gift certificates. And the big thing is – I noticed – over the last, maybe ten years, around these cryptocurrencies and this digital cash, I’ve – I’ve – heard these exchange markets, these escrow services being described but only with Bitcoin I see them actually being realized, being operated –


[Hiro White] Yes.


[Mids] – being used. And that’s the big difference. You can – it’s – it’s – it’s – it’s not talk, it’s – it’s people doing it, people using it, people implementing it – but also people funding it. I mean, you have a good idea, you try to find a couple programmers or some – some – some high school kid with too much free time and you have him implement your idea, and share profits. It’s – it’s awesome.


[Hiro White] Yes, it is. It’s fantastic. Back – this stretches back to what we were mentioning earlier about the velocity of development and adoption right now. In all the years of e-gold, the number of exchangers and the number of websites that were offering information on – I don’t know that I ever saw any website that was offering – [noises] – what do you call it? Well, there was one website that was a stock exchange, do you remember the name of that, related with the Pecunix guys?


[Mids] Yeah, something very – BVCE – some obscure thing, I think it’s –


[Hiro White] Yeah.


[Mids] So it was only used for their own currency.


[Hiro White] Yeah –


[Mids] It was very small, very inward-focused.


[Hiro White] Yes, it was. And that was – that’s the only market system that I remember being out there and of any significance at all for people to go on and exchange one digital gold currency for another. The other one – just for the record, was the – the Digital Monetary Trust; the DMT guys had the Leasee system that wasn’t up for too long, but it was a type of a market system.


So in all this time, you have a couple of very obscurely used systems. And right now, I’m seeing several market systems where you can throw your bitcoins in, throw them up, and buy, sell, and exchange right now. They have charts up. You know, of the history of what’s been traded on it. You know, these literal, like stock exchange systems that are up now. It’s just stunning to see how fast this stuff is going. Bitcoin Mania.


[Mids] So yeah, last 24 hours, there was – 130,000 bitcoins being traded, being exchanged. So that’s like – 100,000 US dollars worth of bitcoins. I think that’s more than – than a lot of these crytpocurrencies have ever seen, and especially these stock markets that you mentioned earlier. Maybe they had like fifty bucks a day, 100 bucks a day.


[Hiro White] Right, right correct. You know, another thing to mention here is that some of these markets are set up so that you take your money, or your bitcoin and you send it to your account – sort of an escrow account similar to like your trading accounts that you have at many stock broker systems now. And there are exchanges happening within these systems that are with – that are separate and unknowable to people outside of those systems – so there maybe a stock exchange or, you know, a – a market – a private market where just for sake of example, let’s say that there were a million bitcoins inside of this market, and there could be tens of thousands of transactions happening between those people, and anyone watching the Bitcoin servers themselves would see zero transactions happening based on those. Because these are private transactions happening in a third-party system. The only transactions related to those that they would see is when someone was, you know, bailing in their Bitcoin or withdrawing out their Bitcoin from these systems.


That leads to another interesting thing that some people have been talking about. Fellow Traveler, who’s a developer of the Open Transactions Digital Cash System, has been throwing out a lot of interesting ideas about how some of these digital cash systems and anonymous market systems can be used not as opposed to Bitcoin, but integrated with Bitcoin. So in this example, you could – if you wanted to have 100% anonymous Bitcoin transactions, you could throw your money into one of these exchange systems and instantly gain – get a – some anonymous digital cash – Bitcoin digital cash – that is in this private, alternate currency outside of the Bitcoin system. Once it’s in there, you do all of your – you know, Chaimian digital cash stuff that’s happening; transactions are done, bam, you would withdraw back out into your particular wallet. So there is room in the future for people to integrate these – some of the best of the two systems into something, you know, something on a different level that’s not Bitcoin versus some of these other digital cash systems.


[Mids] There’s – there’s room for improvement there. I mean, it’s – certainly Bitcoin isn’t perfect. Because the way it works, these payments need to be generated, they need to be signed, they need to e confirmed by other parties, and you might only want to accept the payment if there are three or five other – other clients in the network who have signed off on your transaction. That causes delay, and at the moment, it might take maybe ten minutes, or fifty minutes, or twenty minutes, before you have enough signatures on this transaction to trust it.


[Hiro White] Right.


[Mids] So there is great room for – for other systems adapting it, doing these point-of-sale settlements, merchants integration, where they would provide you quick, quick feedback; instant –


[Hiro White] Correct.


[Mids] Instant payments. And on top of anonymity, maybe back up – back up services, I think, that’s also something that’s –


[Hiro White] Oh, that’s interesting. Yeah – you could have your wallet completely encrypted before you send it off to the back-up service, just in case something happened. Yeah, that’s great. Super.


Okay, we’re coming up on about ten minutes left in the show today, and I would like to focus on the disruptive aspect of this in terms of some of these tyrants out there that are not going to like the fact that we are sending numbers back and forth to each other. Have you seen anything on the ‘net in terms of a – a legal response or warnings? I know that recently Bernard von Neuheus of the Liberty Dollar has made the news with his conviction for creating an alternative gold and silver coin system that in the justice department comments, they labeled this as a form of domestic terrorism – anyone creating an alternative currency that could undermine the – you know, democratic values and some other newspeak Orwellian terms that they used – I haven’t seen much of a legal response or statement on this, but I can imagine that as this grows a little bit larger, there’s going to be some people looking at this and saying, Who’s regulating this?


[Mids] Well, so, the Liberty Dollar, do you remember how many Liberty Dollars were out there at the highest point? How many millions’ worth?


[Hiro White] No, I don’t. I don’t have that – I know that they’re looking at seizing six or seven million dollars of – well, they’ve already seized it, but they’re looking at completely getting full ownership of the gold and silver that was being held for minting or had already been minted, and they had seized all of the gold and silver that was in the vaults of the people who had the certificates. But I don’t know, I don’t have the exact numbers.


[Mids] Same – same with – same with e-gold and [ndc] at the time. I think it was  like a couple million worth at the time, and, but the current amount of bitcoins being issued – it’s getting there. I mean, there are six million now, and at the current exchange rate, that’s like five million dollars worth in total. So it’s – it’s getting interesting and it’s getting – it’s getting – I’m sure it’s on the radar for some of these entities, especially with – well, drug markets and other unregulated trades that they wouldn’t agree with. So it’s – it’s much more difficult to regulate because there’s not a centralized entity within the US that you can shut down, but yeah, there will be charges. And maybe one of the – one of the lead developers like Gavin, I think he’s known by name and by face and his – his phone number is there, so, yeah, I think, especially some of the – the US-based exchange providers and merchants that – that operate out in the open – they do face a risk: you never know what, especially the US, but also the European Union and other big – big bullies will – will do when they start to realize they have a big –


[Hiro White] Correct.


[Mids] A big risk here. So that’s why around Bitcoin and around all my online engagements I – I use a pseudonym, I don’t publish my real name. I don’t use Facebook, myself, I’m cautious, I use encryption, I use these – these – like – the – the – the anonymous proxy just to – to prepare. And I’m sure I’m leaking information, but I don’t want to be the lowest hanging fruit –


[Hiro White] Correct.


[Mids] And made an example of, and I think that’s important to remember as an Agorist, is that you should – should protect yourself, and not make it too easy to become an example of the IRS or some other person.


[Hiro White] Yeah, correct. The old saying goes – you don’t – in a group of people, you don’t need to be the fastest running away from the bear, you just need to make sure you’re not the last.


If you were in the government right now, I could see, looking at this, and having two actions. It’s – just to sum up some of what we just mentioned. And that is one, immediately, they want to go seize, like in Wikileaks, you heard some of the politicians, let’s take their servers and shut ’em down! Of course, they’re in an alternate jurisdiction. Two, if they would have seized their servers, they would have done nothing because the servers were just their publicity mouthpiece website. The actual information was being distributed out on P2P – you know, clients – all over the world.


So – the other – then what you heard immediately after that were actions that were just completely irrational and that is, It’s time to assassinate the guy. So – it would be interesting – we have only a few minutes here, so maybe this would be great for another show – to actually go into some of the vulnerabilities and weaknesses in this system, what could be done, and how those things can be prevented.


When you get into technical aspects, it’s easy t – easier to address some of those, but for issues like you brought up, where you’re talking about irrational responses, I can see that all the you immediate statement, or actually before a statement going out, somebody who’s doing some type of exchanges for Bitcoin being raided and their machines taken and held up as this big example of someone who’s involved as an unlicensed money transfer service and dealing with this and that. I think the demonization of Bitcoin, it’s going to come soon. Because the money changers in the temple right now are starting to become aware of it and they’re going to go running to the King as soon as they can because this going to impact their cut and the guy – and the King isn’t going to like it because it’s going to impact his cut.


So if they start taking these irrational moves, assassinating people, seizing anyone who has openly running services and the like, there’s two aspects to that.


One is – I mean, two ways to look at that.


We could look at that as, Oh man, look at this, this sucks, because these guys are cracking down and everything. The other way to look at it–


[Mids] I think it’s a confirmation that you’re doing –


[Hiro White] Yes.


[Mids] That you’re going in the right direction. That you’re having an effect.


[Hiro White] And – exactly. That’s the way I see that it needs to be looked at, just like the negative stuff that happened with the Wikileaks, is that – Look, they are impotent to stop this flow of information between people. They want to and they would like to, but they can’t. And in this case, it would be positive confirmation to the people that are involved and working in it, especially when they just – all they can do – when they don’t go in and just seize the silver and gold like they did in e-gold, all they can do is just go after the exchanger who has his head sticking up first. But one thing that is going to do from another perspective is push people to create more anonymous systems. To create exchange services that are on the ground. I mean, when they take out one big exchanger in the US, if he pops – if he starts to get up there, they may create a thousand on the ground exchangers that are doing Bitcoin exchanges using the same type of network for other contraband in the US, and those networks are moving tens and hundreds of billions of dollars a year. So the harder they – Go ahead.


[Mids] Bitcoin has set the bar on a new high level that everybody can copy and can improve.


[Hiro White] So – we’re looking at the – this: if they smash it, then they’re going to create new – like they smashed – Napster, this centralized system that had its head sticking up in the US, and out of that grew Bittorrent, and from, and history was made with Wikileaks’ distribution of information against tyrant’s wishes.


[Mids] I think they’re – they’re – looking back – I think they’re – they’re suffering for it, I think they – they might sometimes wish they hadn’t do it, because Napster, at least they could control, but now it’s just – it’s too – it’s gone out of their control.


[Hiro White] Right, exactly, that’s why I see the negative reaction on their part to be something that could propel this Bitcoin and alternative currency and awareness of it. I mean, as soon as they start throwing people in prison and taking legal and violent actions against Bitcoin users and merchant providers, you know, the publicity for that is just going to cause the system to even explode more than that. So it’s – it’s quite a fascinating and wonderful development that’s happening here.


In the chat, oh by the way everyone, you can go to the website AgoristRadio.com, we just put up a chat link, we are now on the – we also have a – a IRC server that you can log into, there’s a link there, in the future we’ll have an IRC connection method for people who do not run their own IRC chat clients. It’s hosted on the same AgoraChat channel that is found linked to on the SecondRealm, agora.interplex.net. We have about two minutes left here. Mids, was there anything you’d like to make as a closing statement?


[Mids] No, I would – I would – I would tell everybody who hasn’t done it already to give Bitcoin a try. Install it yourself, open a – or open an account on one of these third-party services. There’s a service a called BitcoinFaucets out there where you can like .5 cents bitcoins for free and to give it a try, try it out. So – you might not use it right but become familiar with this, and at one point, you will need to do this, and you can use this for your business. So be ahead of the mass and – and – and – and start getting familiar with this technology.


[Hiro White] Great, thank you very much, Mids. I hope that you would come back with us to have at least one other show on Bitcoin. I think there’s a lot of stuff that we can talk about that is beyond this basic introductory level.


Thank you, again, listeners for tuning in. You’re listening to Cypherpunkd.

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