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Transcription of Episode 60 Everything Old Is New

Again

Participants:

Adam B. Levine (A.L.) Host

Andreas M. Antonopolous (A.A.) Co-host

Stephan Murph (S.M.) Co-host

!inn Lin"ham (!.L.) - C#$% &'t appears in *he &i't o' Bitcoin se"ment startin"

at +,:

&eor"e #ttin"er (&.#.) - Lets *al/ Bitcoin Contri0utin" #ditor delivers editorial at

1:+.

Crstal Levine (C.L.) - reads su0-headin" titles durin" editorial se"ment at 1:+.

A.L.: Hi% and 2elcome to episode 3 o' Lets *al/ Bitcoin% a t2ice 2ee/l sho2

a0out the ideas% people and pro4ects 0uildin" the di"ital econom and the 'uture

o' mone. !isit us at letstal/0itcoin.com 'or our dail "uest 0lo"% all our dail

episodes% and o' course% tippin" addresses. M name is Adam B. Levine% and

toda its 4ust o0vious that everthin" old is ne2 a"ain. 5hen 6 sa "i't-card% ou

thin/ plastic% 0ut 2ith smart phone app &'t% ou can put a2a our 2allet and

cash in our Bitcoin. 6 sat do2n 2ith &67* C#$ !inne Len"am to tal/ &i't cards

0ud"etin" in the modern 2orld% the allure o' the 0itcoin meal% and 2h spendin"

0itcoin no2 "ets ou more 0an" 'or our "i't-card 0uc/.

*hen% Coinla0 cant catch a 0rea/. Aside 'rom the on"oin" Mt &o8 drama% their

'irst internall incu0ated pro4ect rolled over in less than si8 months 2ith massive

losses. 5ould the price 0itcoin have chan"ed the 'ate o' this 'ailure9 Andreas and

Stephanie 4oin me to tal/ a0out it. 5e end todas sho2 2ith an editorial 'rom L*B

contri0utin" editor &eor"e #din"or. His proposal% entitled in'initel divided 2estand% is a ;uestion and challen"e. o0erts has 0een cro2ned. 6s this the

@apster e''ect or a hone pot9 6s a ne2 Sil/ >oad 0etter than an old Blac/ Mar/et

>eloaded% and 2hats in a name an2as9 Lets tal/ a0out it. #n4o the sho2

S.M.: So last month% 2e tal/ed a0out the Sil/ >oad 0ein" 0usted% and this "u

0ein" arrested 2ho ma 0e% alle"edl% the ?read Pirate >o0erts% the 0oss o' the

Sil/ >oad. People 2ere predictin"- relativel ;uic/l% there 2ere some Sil/ >oad

copcats that sprun" up - and Sil/ >oad% o' course% 'or an0od 2ho doesnt

/no2 or isnt 'amiliar% 2as a hidden 2e0site accessi0le throu"h *$> 2here people

mailto:george@letstalkbitcoin.commailto:george@letstalkbitcoin.com

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could connect to 0u and sell dru"s online% and various other thin"s - there 2ere%

6 thin/% 0anned 0oo/s on there% there 2ere some other thin"s - passports% 6?s%

and various ille"al stu''. So this 2ent on 'or ;uite a lon" tim%e and it 2as the

su04ect o' a lot o' media attention. *here 2ere so man 4ournalists 2ho said Ah

Bitcoin is 4ust 'or 0uin" dru"s online% 0ecause% o' course% ou could use Bitcoin

to do this. A lot o' studies sho2ed that this 2as not actuall the primar thin"that people 2ere usin" 0itcoin 'or% and 6 2ould li/e to ;uote the surve 'rom ero

Hed"e a0out a ear a"o that said thatD actuall% the most common use o'

0itcoins at the time 2as not 0uin" dru"s online% it 2as actuall donatin" them or

"ivin" them as "i'ts "ivin" charita0le contri0utions% tips% "i'ts% etc. 2ith their

0itcoins. >elativel ;uic/l a'ter the Sil/ >oad 0ust% copcat mar/etplaces started

to arise% and people 2ere in short order tradin" dru"s online 2ith these copcats.

5ell% recentl there has 0een the relaunch o' somethin" ne2. 6ts called Sil/ >oad

E.% complete 2ith its o2n ?read Pirate >o0erts% a person 2ho is o0viousl not

>oss Fl0richt% 0ecause he is sittin" in a prison cell. *his is prett interestin"%

0ecause not much more than a month later - 6 thin/ it 2as G 2ee/s a'ter the 0usto' the ori"inal Sil/ >oad - Sil/ >oad E. launches% the Sil/ >oad 'orums 2ere% 6

"uess% seied 0 the 7B6% and some admin o' the 'orums moved them to another

2e0site. 6 have to sa that 6 havent 'ollo2ed the Sil/ >oad personall 6 havent

"one on it% so all this 6 am hearin" second hand throu"h di''erent 4ournalism% so 6

apolo"ie i' there are some details missin"% 0ut this is m understandin" o' it.

*he moved their 'orum% and the 'orum prett much continues% and then there is

this ne2 Sil/ >oad site% Sil/ >oad E.% and its prett much 0usiness as usual.

Some people are /ind o' paranoid a0out this% understanda0l% 2hich 6 thin/ 6

2ould 0e too i' somethin" li/e this happened to me - paranoid that this Sil/ >oad

E. is 4ust 0asicall a hone pot% that the 'ederal "overnment has set up this Sil/>oad E. to encoura"e people to 4ump on their end and then the are "oin" to

0ust ever0od 'or 0uin" dru"s. Some people sa its le"it 0ecause this 'orum

admin 2as ver trust2orth% and the 0elieve that this ne2 site is actuall real. 6

"uess the ne2 ?read Pirate >o0erts and 0 the 2a% that name comes 'rom *he

Princess Bride% and one o' the points that sometimes "ets missed in the media is

that theres supposed to 0e a lot o' di''erent people that have the name ?read

Pirate >o0erts - and so-

A.L.: 6ts li/e orro.

S.M.:

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A.A.: @o% it is the case% 0ecause 2hat is the alternative% Adam9 *he alternative is

to "o out on the street and tr to procure the dru"s 'rom someone 2ho is

phsicall and immediatel in 'ront o' ou% and there'ore can sta0 ou% shoot ou%

ro0 ou% mu" ou% rape ou% and /ill ou. *he alternative o' di"ital mar/et place

that ma 0e a hone pot% ma not 0e a hone pot% 0ut can certainl not sta0 ou

over *CP6P is a much 0etter proposition 'or anone% so the options people haveare: ;uit doin" dru"s entirel. *hats not "oin" to happen. Bu their dru"s on the

street 2ith all o' the ris/s that come 2ith that% and all o' the death that comes

2ith that% or% 0u them 'rom a mar/etplace that potentiall is a hone pot. 5ell%

that is a ver 0i" ris/ 'or the sellers% its much less o' a ris/ 'or the 0uers - and

there'ore% 6 thin/ the 2ill 'loc/ to it and toD all other sites that o''er it% 0ecause

its 0etter than the phsical alternative.

A.L.: But its that Iall other sites that o''er itJ thin" that 6 thin/ is the point that 6

am trin" to ma/e. eloaded% and even

thou"h 6 thin/ that there pro0a0l much smaller than the Sil/ >oad% 2as thehave still 0een around lon"er than the ne2 Sil/ >oad has. So 2hat 6 am sain" is%

does the "ame start over at some point9 ust as 2ith crpto currenc% Bitcoin%

one could ar"ue% is in a dominant position 0ecause its 0een around the lon"est

its the thin" that people "ot used to% "ot attached to% and invested in 'irst - and

so% is the same thin" true here9

S.M.: 5ell% Sil/ road 2as around 'or ;uite a 2hile...

A.L.: oad enou"h to overcome the rational concerns one

mi"ht have a0out the trust that the should put into this ne2 sstem% versus the

0rand o' some other 0lac/ mar/ets that is not as 2ell /no2n9 *he thin" is% most

people 2ill not ma/e a rational ris/ assessment o' the chance o' it 0ein" a

honepot. 6nstead% the 2ill have heard o' the 0rand% the 0rand 2ill lead them to

do a search and 2ill lead them to the site% and 0ecause theve heard o' the

0rand% that 2ill overcome an o' the trust issues the have - and thats 2h it

ma/es 'or a per'ect hone pot. 6 thin/ 0rand% in the end% 2ins.

A.L.: #ven i' its somethin" somethin" so serious% li/e this9 Because i' the are

cau"ht% then 2ere tal/in" a0out 'airl serious penalties 4ail time.

A.A.:

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A.A.: 6 thin/ its a hone pot% 0ut it doesnt matter% 0ecause even i' it is a hone

pot% its still "oin" to deliver some dru"s to some users and thats 'ine.

S.M.: 6 dont /no2 2hat it is. 6m not read to ma/e a prediction% 0ut 6 2ouldnt-

A.L.: 6ll tell ou% 6 2ouldnt trust it% thats 2hat 6 mean 0 that. 6' that 2as

somethin" that 6 2anted to do% 6 2ould 0e so concerned a0out that. 6 mean% "ood

lord% its 4ust% its an invitation to "et into a lot o' trou0le.

A.A.: 5ell% one o' the 'acts that 2e have to loo/ at is: 2ho has the 7B6 prosecuted

or 0rou"ht char"es a"ainst% so 'ar% in the ori"inal Sil/ >oad% 2hich 2e /no2 2as a

hone pot 'or at least N months% ri"ht9 6' ou loo/ at the indictments that have

come do2n the pipe so 'ar% the have 0een indictments a"ainst sellers- a"ainst

some o' the 0i""est sellers% and a"ainst some o' the sellers 2ho 2ere sellin"

opiates and other% lets sa% ;uote - harder un;uote% dru"s - and 6 thin/ a lot

o' 0uers see that% and the sa 2ell the havent reall prosecuted anone 2ho

0ou"ht a small amount o' 2eedJ% or somethin" li/e that% Iand so ma0e the ris/isnt as hi"h% even i' is a hone pot% 0ecause 6m not 0uin" 0lac/ tar heroin% so

there'ore there not reall a'ter me - and thats a rational ris/ assessment% and

could there'ore 0e a valid reason 2h ou 2ould use it% even thou"h ou suspect

hi"hl that it is a hone pot% 4ust assumin" the are not "oin" to 'ocus on ou.

S.M.: o0erts has made a statement sain" that%

4ust li/e in the old Sil/ >oad - the had a polic 2here 2eapons and child

porno"raph 2ere 0anned ou couldnt 0u or sell those on the Sil/ >oad -

there continuin" that polic 2ith Sil/ >oad E.% so the do seem to have some

/ind o' moral standards% ri"ht9 5hich 6 thin/ is reall interestin".

A.L.: 5ell the mi"ht% or the are 4ust trin" to /eep continuit% 0ecause a"ain%

its a0out trin" to maintain% and 6' ou 2ant the 0rand% ouve "ot to act li/e the

0rand.

A.A.: oad pro0a0l 2as a prett earl laer -

so there in"rained in this culture% 0ut at times li/e this% 2hen 2e tal/ a0out the

Sil/ >oad% and 2e tal/ a0out 0itcoin and dru"s% 6 thin/ its reall reall important

that 2e al2as mention that the total volume o' dru"s that are transacted in

0itcoin is less than +O o' the "lo0al dru" tra''ic/in" num0ers - and its actuall

'ar 0elo2 +O. *he real currenc that people are tradin" 'or dru"s in FS ?ollarsand other local currencies% 0ut mostl FS dollars% so.

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A.A.: *he thin" a0out the FS ?ollar is that it has 'unded ever sta"e o' dru"

production% plantin"% harvestin"% processin"% distri0ution% smu""lin"% cuttin"% re-

smu""lin"% distri0ution a"ain - until eventuall it lands on the ta0le 2here ou roll

up the actual FS ?ollar 0ill and then use it to snort the dru"s ri"ht up our nose.

Bitcoin has a ver limited role vis-a-vis all o' those steps% and so its reall ;uite

ironic and hpocritical to loo/ at Bitcoin as havin" an impact reall on the dru"trade% or an real involvement in the dru" trade% other than as an e''icient means

o' transaction. *he thin" here is that all o' these ed"e cases% 2here ou are

dealin" 2ith illicit "oods or "oods that are 0anned% or 2hatever% 2here the

'riction o' the currenc reall matters are - ed"e cases 2ere "oin" to test 0itcoin

and test its relationship 2ith re"ulators% and test its relationship 2ith la2ma/ers%

and test its relationship 2ith la2 en'orcement - 0ecause this is the sharp ed"e o'

some o' the Bitcoin capa0ilities. *his is 2here some o' the Bitcoin capa0ilities

start actuall hurtin"% or ru00in" up a"ainst% our re"ulator political and le"al

'rame2or/% 0ecause its not desi"ned to tolerate these /inds o' e8ceptions% and

Bitcoin is ver much the e8ception.

(Intermisssion)

A.L.: Hi% listener. Here at Lets *al/ Bitcoin% 2e are 0uildin" a "lo0al net2or/ o'

correspondents% a0le to contri0ute on-the-"round perspective 2hen crpto-

currenc related in'ormation comes across their 'ilters. i' oud li/e to 4oin our

"lo0al conversation% send an email 2ith our name and "eo"raphic or cultural

niche to appl=letstal/0itcoin.com. ust li/e Bitcoin% the onl 0arrier to entr is

our time and "ood 2or/. *han/s 'or listenin".

(Intermission continues - ad)

7emale voice: #as?@S is the s2iss arm /ni'e 'or our domain names% helpin"

meet their customers individual needs since +N. #as?@S has 0een an

outspo/en critic o' S$PA and S6SPA. #as?@S 2as an earl supporter o' 0itcoin%

and no2 the are proud to sponsor this sho2. ?o 0usiness 2ith a compan that

shares our values. &et a +O discount 2hen ou pa 2ith 0itcoin. &o to

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(End of intermission)

A.L.: !inn Lin"ham is the co-'ounded and C#$ o' &'t. *heir smartphone appessentiall ta/es the card out o' "i't cards% and ou can use 0itcoins to do it.

!inn% than/s 'or 4oinin" us on Lets *al/ Bitcoin.

!.L.: *han/s Adam% "reat to meet ou.

A.L.: 6 havent used a "i't card% plastic or other2ise% in ;uite a 2hile% and 6 hadnt

heard o' a compan li/e ours until actuall "ot involved 2ith Bitcoin and 6 sa2

the compan li/e ours accepted it. Can ou tell me ho2 "i't came into 0ein"9

!.L.: 5e loo/ed at the mar/et 'or "i't cards a0out t2o ears a"o% and its an

un0elieva0le mar/et. 5ere tal/in" a0out +EG 0illion dollars a ear% in the FSalone% in terms o' "i't card sales% so this is somethin" 2hich-recent reports o'

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come out sa the "i't cards o' the num0er one re;uested Christmas present%

a0ove electronics and tos. People li/e it% the love to "i't o' choice% the love the

idea that the can "o and choose 2hat the 2ant in the 'avorite stores. *he

notion o' 0uin" someone an item the ou thin/% or hope% that the 2ant% and do

not have its /ind is outdated% 2ere 2a past that in todas societ% and people

have 2a more choices. *heres 2a more thin"s ou can do 2ith our mone%and 0e smart a0out ho2 ou spend it - so% 2hen oure "ivin" a "i't% "ivin" the

"i't o' choice in the 'orm o' a "i't card has 0ecome a cultural shi't 'or a lot o'

people. 5ere also seein" the theres a ton o' Iun-0an/edJ people% especiall

oun" adults - the dont have 0an/ accounts% the dont 2ant 0an/ accounts%

the dont 2ant to 0e part o' the Icost centreJ that 0an/s provide 'or consumers%

2here theres 'ees etc. etc.% so 2e see a lot o' oun" /ids as/in" their parents

send them "i't cards instead% so the /no2 that + 0uc/s the "et - thats +

0uc/s o' the can spend 2hatever the 2ant. 6 thin/ is the mer"er o' the mo0ile

smartphone revolution% alon" 2ith% 6 thin/% 2hats happenin" in 'inancial services%

alon" 2ith 2hats happenin" 'rom a social norms perspective around "i'tin"% andthat led to the 0irth o' &'t as a compan% around t2o ears a"o.

A.L.:

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2ere seein" people usin" it 'or 0ud"etin"% savin" 2e have so man stories o'

people usin" it 'or allo2ances% etc theres man 2as o' usin" it and 0ecause

theres no 'ees 2ith &'t% ever% people trust us to 0e the custodian o' their 'unds.

A.L.: Could ou descri0e to me a normal use case 'or someone 2ho is usin" "i't

2ith Bitcoin% 0ecause oure tal/in" a0out 0uin" "i't cards to loc/ in value% 0ut alot o' people loo/ at Bitcoin as i' that is loc/in" in value 0 /eepin" it in Bitcoin%

so it seems li/e 2hen oure turnin" Bitcoins into a "i't card% thats li/e a decision

to spend it ri"ht then% ri"ht9

!.L.: ust to 0e clear% 2hen 6 said loc/in" in value and savin"% some people 2ant

to 0ud"et% so the 2ant to actuall put mone a2a to2ards 0uin" some item at

a particular store. 6 thin/ the Bitcoin thin"s sli"htl di''erent% 0ecause 2e sa2 that

2ith peoples credit cards% prepament "i't cards-to "i't cards 2ill also 2a o'

/no2in" that- one "u% 'or e8ample% said that his 2i'e 2ent to Macs ever

month and he "ave her QE "i't card% and thats her 0ud"et 'or the entire

month% so she had to sta 2ithin the limit. 6nstead o' "ivin" her a de0it card to

the 0an/ account 2hich is "oal that mone in it% he said Iloo/% heres a "i't card%

thats ho2 much ou can spend per monthJ.

A.L.: *hat doesnt seem ver 'latterin" to the people 2ho are 0ein" 0ut it should

'or% 0ut 6 "uess it that solves a pro0lem% and theres a pro0lem to solve.

!.L.: 5eve "ot tons o' stories around this% 2eve "ot people 2ho% 'or e8ample%

does a0out-2e have one "u% 2ho actuall send his /ids% ever 2ee/% a "i't card-

2e emailed him and said I2ould ou mind tellin" us our stor9J - He 2as one o'

that po2er users - I2ed love to /no2 2hat ou do 2ith &'t.J And he sas% itssimple% m /ids are in colle"e% and ever 2ee/% on a 7rida ni"ht% 6 send them

mone-6 dont 2ant to send them cash. *he tell me 2hich restaurant 6 "oin" to

do% and 2here the 2ant to spend mone% 6 sent them the "i't card% and 6 /no2

this spendin" in that place. *here not 0uin" alcohol or 2hatever else the do

2ith it. *here actuall 4ust spendin" their that store% and 6 'eel com'orta0le

thats 2hat there doin".J 5ith someone 0ud"etin" the spouse% o/a% thats

/inda 2eird% 0ut people do di''erent thin"s in ho2 the 0ud"et their personal

lives% 0ut 2hen it comes our /ids9 6 thin/ its 2a more pure that 2hen ou 2ant

to "ive someone a "i't card 'or 0ud"etin" purposes-6 2ould 0e more com'orta0le

"ivin" m /id a card 2here the can spend it% and 6 /no2 2here there spendin"

it% then 4ust hell% his + 0uc/s% have 'un in !e"as.

A.L.: >i"ht. *hat ma/es a ton o' sense to me% 'or /ids. So 2hen ou see people

purchasin" 2ith Bitcoin% are the doin" this in these 0ul/ amounts 2here its li/e

this is a months 2orth o' the thin"J% or is it more% 6m at a restaurant% or 6m in a

store% and Iheres the thin" 6 2ant to 0u 6 need QNG 2orth o' "i't card to thisJ%

and 4ust order ri"ht there. Both o' those usesD cases that ou cater to9

!.L.: 5e cater more to- o0viousl% 2e sell prede'ined denominations 2hich the

retailers "ive us% so 2e cant "ive ou a "i't card 'or ei"ht 'ive dollars and

t2ent-t2o cents 0ut% ou can order a hundred dollar "i't card% and hope'ulloull spend the mone a"ain 2ithin the time 0e'ore the e8pirationD. So the use

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case% 6 thin/% 'or 0itcoin users is that 2hen ou 2ant to actuall spend ou 0itcoin

and a lot o' people are startin" to earn 0itcoin as part o' their salar 6 /no2 a

ton o' people in the 0itcoin communit 2ho sa Iloo/% 6 2ant 0itcoin as m salar%

and i' 6 2ant to spend it at that particular second% and 6m in a store% 6 2ill cash

those 0itcoins out% in-store% 'or 2hat 6 2ant to 0uJ - and the use it on the spot%

so the "et a "i't card 2hich the can redeem ri"ht there and then.

A.L.: *hats a reall interestin" phenomenon to me% 0ecause a"ain% ou use

BitPa to ena0le these Bitcoin transactions% ri"ht9

!.L.: 5e do.

A.L.: $/a% so then oure li/e a second laer o' 0rid"e compan% ri"ht9 Because

the companies that inter'ace 2ith ou dont compensate our merchants in

Bitcoin even i' the user pas in Bitcoin% oure pro0a0l compensatin" them in

dollars% ri"ht9

!.L.: 5ell% 2e have to.

A.L.: #8actl% so% thats 0asicall the same thin" that BitPa alread does% so ou

have t2o laers o' 0rid"e companies there% 0ut neither o' ou are ta/in" 'ees.

Ho2 is that possi0le9

!.L.: *hats part o' the amain" part a0out Bitcoin: 0ecause the cost o' so lo2% 2e

2ere a0le to a0sor0 processin" 'ees - and eah% BitPas recentl moved to a ver

"ood pricin" model% so theres a 'i8ed rate pricin" model 2e pa 'or month 'or all

the processin" - and as a result 2e are "oin" to 0e parsin" these 0ene'its o' the

consumers.

A.L.: So 2hat happens to the 0itcoins that ou 0rin" in9 Are those all 4ust "oin" to

BitPa and then 0ac/ onto the mar/et% or are ou /eepin" an to tr and

speculate on the 'uture value9 Because 2eve 0een tal/in" a0out this idea o'

ho2% 2hen oure tal/in" a0out a de'lationar currenc% a lot o' the 0usiness

models that ou reall have to loo/ at to 'i"ure out 2hat ma/es sense to proceed

2ith are actuall completel counterintuitive to 2hat oud e8pect in a modern

2orld% 2here oud 2ant to ma/e more mone on a sale up'ront. 6t seems li/e in

a de'lationar paradi"m% it actuall ma/es more sense to 0e cheaper% so the

people spend 2ith ou sooner% and then ou can reap the re2ard on theappreciation over time.

!.L.: *hats the idea% eah.

A.L.: So no2% 2hat happens to the 0itcoins to ou 0rin" in9 Are ou 4ust sellin"

them onto the mar/et% throu"h BitPa9 Are ou /eepin" an to speculate on the

'uture value9

!.L.: So heres 2hat 2as done to date. 5e an launch 2ith Bitcoin si8 months

a"o% and 2e didnt reall have enou"h 'undin"% 6 suppose% to han" onto the

Bitcoins% and un'ortunatel the price is "oin" up. But 2e had to reconvert those

coins to dollars to repurchase inventor ou /no2% 4ust to turn out 2ith a0usiness. 5e announced t2o months a"o thatD 2e raised 'ive hundred dollars in

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series A 'undin"% so 2e have enou"h cash ri"ht no2 in the 0usiness that 2e 2ant

to 0e sensitive to the 0itcoin communits needs% and 2e 2ant to support the

Bitcoin ecosstem% so the 0i" announcement 2e made esterda 2as that 2e are

no2 storin" all our mar"in in 0itcoin 0et2een no2 and the end o' E+1.

$0viousl% 2e need to restoc/ cards% so 2e 2ill convert the coins that 2e need to

restoc/ 0ut all the mar"in 2e ma/e% 2ere "onna "o lon" in 0itcoin% and 2ere"onna hold that mar"in in 0itcoins until the end o' the ne8t ear.

A.L.: So is this 4ust 'rom 0itcoin sales% or is this 'rom all sales in the &'t net2or/%

and oure choosin" to convert even ones that arent in 0itcoin into 0itcoin9

!.L.: @o% 4ust 0itcoin sales.

A.L.: $ne o' the other thin"s that 6ve reall 0een 2onderin" is: does the price

matter 2hen it comes to people spendin" these 0itcoins9 Sometimes% 2hen the

price is movin" around a lot% it seems li/e people are reall reticent% 2hether its

up or do2n% to sell% 0ecause the dont 2ant to 0e 2ron". Have ou noticed an

trends in terms o' ho2 people are usin" our application 2ith 0itcoin9

!.L.: So% 2hat 2eve trac/ed o0viousl% the 0itcoin price and volume a"ainst the

"i'tcard sales 6 thin/ the 0i""est pro0lem% honestl% in the 2orld o' BitcoinD

ri"ht no2 is the spread 0et2een Mt. &o8 and the other e8chan"es 0ecause

people see the Mt. &o8 prices% and then the loo/ at the e8chan"e prices% and

the tr to reconcile 2h there is a di''erence. 5hen the spread narro2s%

o0viousl% 2e do a lot more 0usiness 2hen the spread 2idens% 2e dont%

0ecause% 6 thin/% a 'e2 have the misconception that those prices are true. 6 thin/

over time% Mt. &o8 is "onna 0e less and less o' a 'actor in pricin". 6 thin/ that has

one impact on our 0usiness. *he second impact on our 0usiness% o0viousl% is

2hether or not people 0elieve the price is "onna move or not move. 5hat 2e 'ind

is% 2hen its in a stead state% 2e actuall do a lot 0etter. 5hen its movin" up%

2e do reall 2ell. 5hen the price is comin" do2n% people tend to hold. 6ts

actuall a "ood thin" 2e see that the 0itcoin users dont see price drops as a

2a o' cashin" out. *he 2ould rather loc/ in "ains on the 2a up than cash out

on the 2a do2n.

A.L.: *hats reall interestin". Are there an other metrics that oure trac/in"% or

an other in'ormation that ou can share9 Bitcoin is so decentralied thatD its

reall di''icult to "et an data li/e that% a0out ho2 people are actuall usin" it.

!.L.:

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2eird. Are there an particular 0rands that stand out as reall 0i" recipients o'

0itcoin 'unds or 0itcoin users9

!.L.: 5e dont release this in'ormation a"ain% proprietar stu'' 0ut 2e al2as

see theres an a''init 6 2ould sa the a''init to2ards brandsis less so than the

a''init to2ardscategories. So 2e 'ind 0itcoin users spend a lot o' mone on

restaurants and 'ood% more than the do on 2hat our tpical audience does. $ur

tpical audience ma 0e shoppin"% 2ine% "i'ts% retail 0itcoin actuall "oes

to2ards% o0viousl% a lot o' electronics as 2ell% 0ut 2e have a lot o' 0itcoin users

"oin" to Bur"er Kin" and >ed >o0in and all those places. *he notion o' pain" 'or

a meal usin" 0itcoins is 4ust somethin" 2hich intri"ues people. So he% ou /no29

5hatever 2or/s 'or them.

A.L.: $K% and ou pro0a0l cant ans2er this ;uestion can ou "ive me a 0allpar/

on ho2 much o' the 0usiness 0itcoin is actuall accountin" 'or9

!.L.:

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pain" cash% oure cross-su0sidisin" someone elses credit card. 5ere 4ust

sain" Jloo/% lets 4ust reinvent this 2hole retail space. 5ere "onna "ive ou "i't

cards% 2ere "onna "ive ou points 0ac/ to 0e loal to &'t and ma/e all our

purchases throu"h us% and 2ere "onna eat that mar"in% 0ut than/s to Bitcoin

theres no 'ees% so 2ere a0le to "ive ou a hu"e upside and ma/e ou /no2%

advanta"e our lives.J *hats% 6 thin/% one o' the tenets o' our compan 2ere"onna continue to 0e innovative in this space% and "ive value 0ac/ into the hands

o' people 2ho 2ant to use 0itcoin.

A.L.: As 'ar as these points are concerned% ho2 e8actl does that 2or/9 6s this li/e

so ou "et O 0ac/% and then% 2ith these points% ou 0u more o' the "i't

cards9

!.L.: A0solutel. 6t 2or/s li/e most re2ards pro"rams ou "et O o' our spend

0ac/ in points% and ou can use those points 'or a 'ree purchase so i' ou 0u

Q+ 2orth o' "i'tcards 'rom us and a particular amount% 2ell "ive ou three

thousand &'t points% 2hich is thirt 0uc/s.

A.L.: $K% so thats speci'icall 'or Bitcoin. ?o ou have this pro"ram also 'or other

pament methods as 2ell9

!.L.: 5e do% 0ut 2e "ive credit card users +O and 2ere "ivin" Papal

(unintelligible) no2 EO as 2ell% 0ecause 2ere 4ust launchin" Papal% 0ut Bitcoin

"ets the hi"hest. Bitcoin "ets three points 0ac/.

A.L.: *hats reall interestin". 6ve 0een 'ascinated 2ith this idea that it ma/es a

ton o' sense to actuall incentivie% and "ive discounts% 'or people pain" 2ith

0itcoin% 0ut 6 thin/ oure the 'irst and certainl the lar"est compan that 6ve

seen thats actuall doin" this. *hats incredi0le. So this 4ust started9

!.L.:

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there 4ust corporate shell "ames that have nothin" to do 2ith innovation on the

0loc/chain.

A.L.: *his 2ouldve 0een 0etter 'or Coinla0 i' the had 4ust invested the 'unds into

Bitcoin itsel' o' course% 0ecause this a 0an/ruptc 0ut even so% even i' the

had 2on% the must have 0een loo/in" 'or a - + times% + times% somethin" li/e

that - multiplier 'rom their investment% i' there "oin" to 0e puttin" that in

instead o' 0itcoin. *his is% o' course% another ;uestion: since this 0an/ruptc has

come to li"ht% the price o' 0itcoin has s/roc/eted. 6 2onder i'% ma0e% 0itcoin

2as Q+G hi"her at the time that the 2ere loo/in" at declarin" 0an/ruptc% i'

the 2ouldve 0een% 0ecause ultimatel% AS6C minin" is as pro'ita0le as the

e8chan"e rate% ri"ht9

A.A.: *hats a ver "ood point. 5hat 2ere sain"% reall% is that the created a

0usiness that 2as ver ver ver heavil e8posed to the volatilit in the currenc

2ell% there ou "o% thats one o' the reasons 2h it 2ent do2n.

S.M.: Actuall% Adam% 6 2ould sa AS6C minin" is less pro'ita0le than the e8chan"e

rate% 0ecause% still% ou have to invest all this mone in the hard2are% and ouve

"otta maintain it% and ouve "otta ma/e sure its runnin"% and ouve "otta

po2er it% so its not even as simple as the e8chan"e rate its li/e oure alread

startin" o'' at a disadvanta"e% and have to recoup some costs 0e'ore ma/in" an

/ind o' a pro'it.

A.L.: M point 2as that 2ith minin"% oure earnin" a 'i8ed amount o' 0itcoin%

0ased on our hashin" po2er compared 2ith the rest o' the net2or/% 0ut i' that

0itcoin is 2orth a dollar per 0itcoin% then o0viousl% theres a lot less pro'it in it

than i' its 2orth 'ive hundred dollars per 0itcoin. *hat 2as m point that the

e8chan"e rate has a hu"e impact on ho2 pro'ita0le minin" is% assumin" ou are

minin" to sell.

A.A.: Heres the 0ottom line 6 thin/ i' ou loo/ at minin" 2ith a so0er% analtical

perspective% minin" should not be profitable. @ot over the lon"-term. 5h9

Because its an almost per'ect mar/et. *he 0arriers to entr are not that hi"h% the

technolo" used it commoditied 'or the most part% or rapidl 0ecomin" so and

the di''icult is sel'-ad4ustin". 6ts desi"ned to remove pro'its% and an e''icient

mar/et should 2or/ li/e that% and i' oure o''erin" somethin" that has little

di''erentiation% or value-add over ever0od else% and anone can enter the

mar/et% then our pro'it mar"in 2ill approach ero asmptoticall% as ou stalon"er in the mar/et. Minin" should never 0e pro'ita0le. *hats ho2 it 2or/s.

A.L.: 5ell% minin" shouldnt eventually0e pro'ita0le% 0ut 6 thin/ sain" it should

never0e pro'ita0le-

A.A.: $ver the lon" term% and as an entire industr% 2hat minin" o''ers is the

opportunit to "ain some advanta"e 0 0ein" an earl adopter% 0ut over the lon"

term% and as an entire industr% it 2ill 0e barely pro'ita0le. *hats ri"ht% thats ho2

the mar/et should reach an e;uili0rium 2here it reall re'lects the value o' the

service and the di''iculties o' "ettin" into it.

A.L.: >i"ht% eah% oure "ettin" no disa"reement 'rom me on that% 0ut a"ain% itsthat core middle part% ri"ht9 5e had the 0e"innin" 6 2ould ar"ue that the ver

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ver 0e"innin" 2as the 2ild "old rush das% and o0viousl 2eve seen that come

to 'ruition% 2here the people 2ho 2ere involved at that point have 0ecome the

people 2ho are ma4or plaers in the space and "enerall ;uite 2ealth. 6

understand that at the end o' this% ou have that% 0ut 'or me its li/e the AS6C

;uestion% too. *he AS6C end"ame is that there are tin AS6Cs in ever 2ater

heater% car% cellphone% everthin"% that does everthin". 6 can see that% and thatindeed 2ould 0e somethin" 2here its 0asicall 0rea/-even% 0ecause the

hard2ares completel pervasive and a0solutel ever2here 0ut 6 dont see ho2

ou "et 'rom 2here 2e are no2% 2ith a couple o' AS6C manu'acturers competin"

2ildl a"ainst each other% to that place 2ithout a cra amount o' pro'it 0ein"

made 0 someonedurin" the interim.

A.A.: 5ell% no% its not a cra amount o' pro'it unless ou do it at volume. So

0asicall% this mar/et is no2 "oin" to 'avour those 2ho can 0rin" to 2ield ver

lar"e economies o' scale. AS6C minin" will 0e pro'ita0le% 0ut onlyat ver lar"e

scales. 6' ou can put do2n a datacentre near hdro% or near solar% or near some

other source o' electricit thats reall cheap% and ou can cram it 2ith AS6Cs that

ou can "et delivered to that datacentre% oure "onna ma/e a pro'it. But

inherentl% thats "oin" to 0e limited onl to those 2ho can 0rin" to 0ear the

scale thats re;uired and thats 'ine% mar/ets shouldnt 0e ridiculousl pro'ita0le

over time% especiall i' there not ver heavil di''erentiated. *his is a challen"e

'or everone enterin" the 0itcoin mar/et% 2hich is at this point in the "ro2th

ver 'e2 thin"s are innovative and value-"ivin" enou"h to 0e 0etter than simpl

puttin" our mone into 0itcoin and holdin".

(instrumental interlude)

&.#.: 6n'initel ?ivided 5e Stand: 5h settin" standards toda is an investment in0itcoins 'uture. B &eor"e #ttin"er.

Bitcoin has 0een accused more than once o' 0ein" ultra-e8clusive. 5ith our

mar/et cap o' E+%% 0itcoins a centur a2a% our current t2elve million in

print puts us alread hal'2a there. E+ millionalread isnRt a lot to share amon"

seven 0illion inha0itants% much less the t2elve million 2e have no2.

Fn'ortunatel% 2e have 'ar less than even that.

C.L.: *he ?read Pirates lost treasure

&.#.: $ne o' the ne2est crises-du-4our in the 'ace o' Sil/ >oadRs shutdo2n is not

onl the 'ate o' the E3% coins the 7B6 has seied% 0ut the nearl mthical hal'-

million the havent. ?espite the E3% coins the 7B6 2as a0le to ;uic/l round

up 'rom Sil/ >oad escro2 and assets% it appears that ?read Pirate >o0erts o2n

accumulated 'unds are still out o' their reach. 5ith his 2allet in hand% the lac/

the necessar encrption /es to open I?read PirateJ >oss Fl0richtRs supposed

3% B*C stash. *he lost 'ortune o' the notorious 0andit proprietor o' Sil/

>oad9 *he screenpla 2rites itsel'. 5hat% then% i' this le"endar pirate treasure is

never opened9 $ut o' a present t2elve million 0itcoins in circulation% this is

potentiall five percent of the entire supply- 'urther on% still nearl three percent

o' all 0itcoins there shallever be - and et% thatRs nothin" compared to the scope

o' the untouched ISatoshi 5allet%J an address sittin" on more than +.+ million0itcoins that have not moved in ears. 5hether or not itRs "enuinel the lost vault

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o' Satoshi him-her-their-sel'% it is nonetheless another ten percento' the pool

"one as 2ell. *hese t2o "randiose sums are one seventh o' the mar/et% no2

ta/en out o' the "ame. Add in the incalcula0le amount o' 0itcoin 2allets and /es

lost or deleted over the last three ears% and 2e could have this much all over

a"ain. *his pool is lea/in"% and it ma end up lea/in" 'aster than 2e can 'ill it.

C.L.: *he d2indlin" reserves

&.#.: Lost 0itcoins are a more un'or"ivin" haard than man o' us care to admit.

*he 2ord IlostJ con4ures up reassurin" notions o' chec/in" 0et2een couch

cushions and under 'urniture- it "ives ou delusions o' somethin" 2aitin" to 0e

'ound. oad% 0ut this 2as more an e8pression o'

consumer con'idence than the ripples o' lost coins increasin" value. $' course

hi"her values per coin are "reat 'or e8istin" o2ners and investors% 0ut i' 2e /eep

losin" coins on the scale o' Fl0richt and SatoshiRs lost stashes% the hand'ul o'

coins remainin" 2ill start to develop an ivor to2er around them... or 2ill the9

Anone 2ho /no2s their 2a around a transaction /no2s 2hat is supposed toprevent this. $ne o' BitcoinRs most intrinsic 'eatures can /eep the currenc via0le

'or the masses% 0ut onl i' our culture can em0race it in 'ull.

C.L.: *he "reat dividers

&.#.: *he immediate% o0vious reassurance is that Bitcoin is Iin'initel divisi0leJ.

5ell% thatRs actuall not true at all. 6tRs not Iin'inite%J 0ut itRs a hell o' a lot% and it

'eels "ood to sa in'inite% so 2e 2ill. Man o' ou ma alread /no2 the details%

0ut% 'or those 2ho donRt% Iin'initeJ divisi0ilit is the su0tle 0read-and-0utter o'

0itcoin transactions. Bitcoin can 0e sent in 'ractions as small as ei"ht decimal

places the o't-mentioned ISatoshiJ o' Bitcoin% the smallest chun/ oR chan"e% is .

+ 0itcoin. *hats seven eros. *he E+-million limit on 2hole 0itcoins

seems a lot less threatenin" 2hen ou thin/ o' it as rou"hl t2o ;uadrillion

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Satoshis. Compared to the estimated one trillion FS ?ollars in circulation% that

leaves us a little 0reathin" room to lose a 'e2 coins over the ears. Bitcoin needs

to scale do2n% and it needs to scale 2ith methods that suit the modern 2orld.

*he ISatoshiJ is% ri"ht no2% a 4un/ unit- a technolo"ical 0enchmar/% not a 'iscal

one. 5hile itRs possi0le 2e ma eventuall reach the scenario o' operatin" on a

Satoshi level% such a tremendous "ap could prove insurmounta0le to thethousands o' ne2 Bitcoin users arrivin" ever 2ee/. 5e alread have a crisis o'

decimal-illiterac in the innumerate-and-proud Fnited States threatenin" to hold

it 0ac/. *his is 2here the crpto communit o' the 2orld needs to 'ind /inship in

the scienti'ic. *he 6nternational Sstem o' Fnits% esta0lished in +3% set the

course 'or scienti'ic and mathematics 2or/ on a "lo0al level. &lo0al standards%

and the resultin" phase-out o' re"ional Ile"acJ terminolo" 'or scienti'ic and

chemical terms% have 0een a 0oon 'or the in'ormation a"e. Scienti'ic 2or/s

2orld2ide all 'unction on 0ase-ten metric pre'i8es and su''i8es toda% the centi-%

/ilo-% and millimeters o' research measurement are reco"nied apoliticall across

nearl all 0orders. A universal lan"ua"e that transcends 0orders should spea/volumes to an Bitcoin supporter. *he recent adoption o' milli-0itcoins 0 2allets

and users is a monumental investment to2ards the currencRs 'uture. BitcoinRs

on"oin" de'lation needs a semi-ri"id 'rame2or/ to continue scalin". *he

milli0itcoin - 0e it mB*C% em0it% millie% or else2ise- 2ill need to 0e the reco"nied

standard in the ver near 'uture. *he theoretical uB*C% the micro0itcoin% ma not

have purpose toda% 0ut it is not a lon" road to reach it. *he S6Rs ImetricJ sstem

remains somethin" o' a 4o/e in the Fnited States% seemin"l the last holdout o'

irrational 6mperial units in the modern 2orld. As a nation% it is so deepl

entrenched a"ainst S6 units that chan"e seems impossi0le - 0ut Bitcoin isnRt the

Fnited States% and plent o' its users arenRt either. Ho2ever ou vie2 our placeon the 0loc/chain- a consumer% user% mem0er% ho00ist% lo00ist% advocate% ou

name it- its in our 0est interests to a0andon local 0iases and thin/ "lo0all. @o

matter ho2 2e use (or lose) it% Bitcoin is "oin" to de'late. *o survive these

chan"es% to transcend 0orders% it has to ma/e 2a 'or these ne2 scales. 6t canRt

stand on its o2n i' 2e /eep treatin" it onl as a medium o' other 'iat currencies.

Crptocurrenc isnRt e8clusive to the erudite or the 2ealth% either itRs e8clusive

to the open-minded and the hard-2or/in"% li/e the research and technolo"

communities that set these standards. 7rom ImilliesJ to Imi/esJ to the occasional

I/ilo%J em0racin" S6 units is not onl a step to2ards BitcoinRs 'uture% 0ut a

"esture o' maturit 'or a culture that is comin" o' a"e.

(Music begins)

A.L.: *han/s 'or listenin" to episode 3 o' Lets *al/ Bitcoin. *he se"ments Sil/

>oad E.: 5hats in a name9 and CoinLa0 7ail 2ere produced 0 Adam B. Levine

and edited 0 Matthe2 ip/in. *he 'eatured Andreas M. Antonopolous%

Stephanie Murph% and Adam B. Levine. *he &i't o' Bitcoin 2as produced 0

Adam B. Levine% edited 0 Matthe2 ip/in% and 'eatured Adam B. Levine and

!inn Lin"ham. 6n'initel ?ivided 5e Stand 2as 2ritten% produced and read 0

&eor"e #ttin"er% edited 0 Adam B. Levine% 2ith additional voice 2or/ 0 Crstal

Levine. Music 2as provided 0 ared >u0ens. Tuestions or comments9 #mail

adam=letstal/0itcoin.com. Have a "ood one

mailto:adam@letstalkbitcoin.commailto:adam@letstalkbitcoin.com

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(Instrumental continues till end.)