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December 7, 2021 73 mins

Robert is joined by Sofiya Alexandra to discuss cryptocurrency.

FOOOTNOTES:

  1. https://www.vice.com/en/article/y3dyem/investors-spent-millions-on-evolved-apes-nfts-then-they-got-scammed
  2. https://web.archive.org/web/20210910175831/https://www.evolvedapes.com/mint
  3. https://www.theverge.com/2021/3/20/22334527/nft-scams-artists-opensea-rarible-marble-cards-fraud-art
  4. https://amycastor.com/2021/03/14/metakovan-the-mystery-beeple-art-buyer-and-his-nft-defi-scheme/
  5. https://davidgerard.co.uk/blockchain/2021/03/11/nfts-crypto-grifters-try-to-scam-artists-again/
  6. https://davidgerard.co.uk/blockchain/2018/04/05/debunking-but-bitcoin-is-like-the-early-internet/
  7. https://digiconomist.net/ethereum-energy-consumption
  8. https://www.natlawreview.com/article/art-and-money-laundering
  9. https://www.artandobject.com/news/how-money-laundering-works-art-world
  10. https://www.forbes.com/sites/forbestechcouncil/2021/06/29/nfts-and-the-missing-layer-of-utility/
  11. https://venturebeat.com/2019/11/19/arm-treasure-data-the-most-popular-games-arent-necessarily-using-lots-of-microtransactions/
  12. https://www.inputmag.com/culture/wanna-buy-a-475-dollar-nft-ticket-to-see-that-beeple-nft-artwork-in-person
  13. https://www.theverge.com/2021/8/31/22650594/banksy-nft-scam-pranksy-ethereum-returned-duplicates-art
  14. https://www.wsj.com/articles/scammers-see-new-frontier-in-nft-art-11629896400
  15. https://thenextweb.com/news/a-brief-history-of-mt-gox-the-3b-bitcoin-tragedy-that-just-wont-end
  16. https://www.bloomberg.com/crypto
  17. https://blockonomi.com/mt-gox-hack/

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Delauded. I'm Robert Evans. This is Behind the Bastards, a
podcast that has always opened by me shouting out the
name of my favorite painkiller, Delatted. Oh it's good stuff.
Because I'm hopeful because Sophia just got mailed a bunch
of knives by our fans, and now I'm kind of
hoping that some fans will send me a bunch of

(00:22):
Delatted anonymously in the mail. Can we also say that
Mama loves Darva st Darvasset Dad's the good ship. Yeah,
that I And honestly, I can't think of a better
idea during a time in which a lot of people
are dying from fitneal overdoses and tainted pills than asking
strangers to send us random medication in the mail. That's

(00:45):
just good thinking again. Podcast Daddy and Podcast Mama love
to gamble. Everyone knows we like to roll them bones. Baby.
I got a coffee cup and eat the rich coffee cup.
It's actually sitting next to me right now from a
fan recently. But it came in packaging that I've never
seen the packaging made since in retrospect. But it was

(01:09):
like a rounded a box with rounded edges made entirely
out of styrofoam that was like taped up and had
very official looking labels on it, and it looked like
the packaging you'd put in through like a vial of
of medication or like like bacterial samples or something. So
I was looking at this package like should I open this?
What the fun is in this thing? And it just

(01:32):
these knives. I was like, Oh, this could really be
a terrible package to open. Most of these did not
have names on them, and I respect that because you know,
the government doesn't need to know what we sended to
each other. Anonymously send your favorite Creators weapons in the mail.
That's these knives were amazing. I just did a little

(01:53):
tour of the knives. Robert, there's that amazing US Marine
corpninek bar. Yeah, that's a good knife. You can ship
up with a k bar. That's the kind of knife
if you get to like jab your way outside of
a car, nice as leather holster, Like, yes, I love it,
Thank you so much. Someone sent a tiny miniature knife

(02:16):
for like a little baby knife for sting babies having
little little fetuses. Yeah, take it from a fetus knife
and loves it. Yeah, that's a kind of knife that
like like babies young enough to be legally aborted in
the state of Texas would use in a knife fight, yes,
to try to fight the people that will not give

(02:36):
their mothers rights. Yeah, yeah, I got too loose knives
that came with a collection of other things, like a
bag of mazza and you know, yeah that was weird.
I love that guy. Yeah, so just like some some
maniac in a Midwestern states sent you a sack with
loose knives, mazza, a cigarette. It was incredible. Hey, it

(02:58):
was multiple notes. Yeah, it was a sweet and told
me to take care of myself and my friends and
family with these loose knives. And now that is the
name of honestly my new band, Loose Knives. When you
walked me through that us through that package, that is
the proudest I've ever been of my fans. That was

(03:19):
that was an incredible way to send a gift to somebody.
Just loose knives with a cigarette in a sack, one
rolling paper and a single matches Yes, matches please, thank you.
What a hero. Someone sent me lavender bath products along
with a tiny knife that goes on my keychain. Someone

(03:43):
else sent me and like a key that I can
sneak into an airport and specifically said this doesn't this
isn't visible on X rays. God, that's some queen ship. God,
thank you. That's you know, having when people when people
send you stuff like that in the mail and just like,

(04:03):
here's how you can smuggle a knife on an airplane.
Stranger that whose content? I like, that lets me know
that we're reaching the right demographic scene, you know, absolutely
absolutely beautiful. I was telling Robbert before this, I was like, Yeah,
I used to fly with a knife in my purse
all the time on airplanes, and not because I was
like trying to prove a point or anything. I just

(04:23):
always carry a knife and I would forget to take
it out before I flew and they never got it.
It took me like fifteen times of flying before finally
someone was like, is that a knife? And I was like, oh,
shit is and then I lost it. But now I
have a k bar, So fuck them and make sure
you check the k bar. They will probably find that

(04:45):
I won't fly with that one. That's just for local stabbings. Okay,
that's for locals. That's good. Yeah, you need to have
you need to have like like not every knife is
suitable for stabbing people in every situation. Like if you're
going to shank somebody in an airport bathroom, that's past
security want the knife exactly exactly. But at k bar,
you know, it's it's it's for a different thing. It's

(05:06):
a different kind of vibe, it's a different kind of
you know, stabbing. The k Bar is the knife that
like if you have to uh in in the style
of a parable of the sower, hike on foot from
southern California to Oregon in order to save yourself during
the climate apocalypse and crash in my compound, that's the
knife you take with you to stab people on the road.

(05:29):
I was thinking more of like Cheryl straight strads like
wild you know, like I'm on the doing the Appalachian Trail.
You know, maybe I stabbed something to eat. Maybe I
stab a man who wants to get in this pussy.
You know, you never know what happens, and you can
eat him too, you know, you think I would stab

(05:50):
a man without eating him. Robert the part first while
it's still beating. Everyone knows that that's how you and
then we slice up as butt cheek meat. That's the
best meat into some steak tartar human cheek because like
beef cheek is delicious. I imagine people's cheeks would be

(06:11):
pretty good too. Um. I don't think they have as
much like fatty loveliness, but probably they're not bad. Yeah,
they're probably probably like you know, when you eat like
a fish head and you get like all the parts
out of the head and they're like delicious. I mean,
we should probably ask one of our fans to just
send please do please send us, Sophie, come on, you should.

(06:38):
You should talk about doing even you said cut what
Robert just said for safety reasons. So Robert, we're already
getting sent knives that you vary more we are could
be used in a nine eleven, and I feel like
you could do with some of these. Say sure, that's

(07:01):
enough for us. We don't need to encourage. You're right,
we can get our own exactly. That's what the knives
are for. And in the meantime, my k bars for
like local stabbings, like your farm to table kind of
farm to table stabbing, yeah, and then the other kind
of stabbings that are like more, oh, you gotta travel

(07:22):
to stab who you want. That's what my little airplane
knife is for that's good. None of this has anything
to do with what we're talking about today, which is cryptocurrency. Cool. So, Sophia,
I never planned to do an episode on n f

(07:42):
T s or cryptocurrency, UM, because I think it's all
very silly. I am. I'm not a believer in any
of this stuff. But over the last couple of weeks,
in spite of myself, I've I've gone down a rabbit
hole specifically inspired by some n f T scams that
have recently come to light that I just found absolutely fascinating. Um.
This is not going to be an episode about a
specific bastard, and to be honest, even like the victims

(08:04):
here are not people who really feel that bad for
UM because they're gambling with money that only exists because
it destroys rainforests. Basically like it's like cryptos. I think
mostly bad, UM. But this show primarily functions by me
getting interested in something and then reading about it. And

(08:25):
this week I didn't want to read about Peter teal
or or some sort of genocide Cichesco or whatever. UM.
I wanted to read about cryptocurrency, so I did UM
and the person you can blame this episode on. Is
David Garrard or David Girard, who wrote a book called
Attack of the fifty Foot Blockchain. UM. David is a
senior Wikipedia editor. He's volunteered spokesperson for Wikipedia. He's also

(08:49):
an author and a crypto expert who is a no coiner,
which is somebody who doesn't is involved in the cryptocurrency world,
often reporting on it, but does not actually hold any himself.
And he doesn't hold any because he seems to pretty
much think it's all bullshit. UM. He is widely despised
in the cryptocurrency community, but as far as I can tell,
he is very knowledgeable UM, and he's a good writer.

(09:11):
I recommend the book heavily. UM. He's also pro some
of the fundamental ideas that are behind cryptocurrency, which I
actually kind of am as well. At the beginning of
his book, he cites a quote from Bitcoin creator Satoshi
Nakamoto's original manifesto or white paper, whatever you wanna call it,
laying out Nakamoto's basic goal of the Bitcoin project. Quote,

(09:34):
a purely peer to peer version of electronic cash would
allow online payments to be sent directly from one party
to another. Without going through a financial institution, so you
can see, like, right, just that basically if you take
out everything that's happened since if someone were to like
tell you that idea, you know back in two that's
five or whatever. Hey, this is what I want to make.
That's not unreasonable, right, Like maybe that's just the libertarian

(09:55):
in me, but like I get why you would want
that real quick. We did not do an intro, did we?
Why would we do an intro? We didn't intro. We
talked about knives. I just wanted to make sure Sophie's
faces were all converted. Everyone knows who you are, Sophia Alexandra.
Normally we talk about horrible, dead baby things, but this

(10:18):
week we started by talking about knives and cryptocurrency. Yeah,
and then you said, I look, you lured me here
under false pretenses. Um, I thought there would be dead babies. Instead,
you were like, we're talking about n f T s
and I'm like, oh, no, titties, how about this? You
were like, that's not what n f T stands for.

(10:40):
Cryptocurrency is incredibly environmentally wasteful. Every individual popular cryptocurrency uses
more electricity and im it's more carbon per year than
many nations. That leads to horrific climate change, which kills
a shipload of babies. Tens of millions of babies are
going to die. Additionally, every year is the world were

(11:00):
warms and you feel better, Sofia, I guarantee there are
mountains of babies being killed by this, mountains of them.
I don't believe it, Sofia, I I will, I will
for the for the next year. Every time there's a
horrible natural disaster that affects babies, I'm gonna send you
a picture. I'm gonna go to tiny baby hurricane. Yeah,

(11:23):
a little baby hurricane. Hurricanes that just affect in I
see you warts. Oh, we're nick you all with tiny's.
We've scotten all the incubators, tropical storm, widow, bitty baby. Yeah.
I don't think anyone's sending me knives after this, No, Sophia,
But like so okay, cryptocurrency the basic idea like that

(11:45):
Nakamoto was going for behind bitcoin, that's doesn't sound entirely
unreasonable to me. A way for people to send electronic
money directly without using a bank or without like you know,
involving a government, right Like I don't have a fun
the mental issue with that idea. In fact, I think
there's there's reasons for which it could be value valuable.
Now I'm it was a libertarian most of my life.

(12:08):
I'm kind of more on the anarchistic spectrum now um,
and I don't really like large, powerful, centralized institutions. So yeah,
so you could see like if someone were to again,
if bitcoin wasn't a thing of all of the ship
that's happened, wasn't a thing someone said, Hey, I'm working
on this idea, you might have thought like, oh, that
that sounds like a neat experiment to dry, it's worth
giving a shot. Um. One of the other things that

(12:31):
Nakamoto was talking about that a lot of early people
who were into cryptocurrency talked about was the promise that
it would provide an option for people who are unbanked,
which is folks who for a variety of reasons, maybe
their location, the nation that they live in, you know,
the level of poverty that they have, whatever, and maybe
the fact that, like there's a lot of people in
places like India who don't legally exist because they were

(12:52):
you know, of where they were born. There's just nobody
like keeping track of people there. Um, Like their identities
often like tied up in the community that they live
in rather than like a bunch of government documents. Um.
So a lot of these people aren't going to be
able to have an account with a financial institution. So
one of the ideas was that, well, if you have
some sort of electronic currency that doesn't rely on a
government or a financial institution, it would provide an option

(13:15):
for those people. Um, and specifically an option to do
like micro transactions, so like sending small bits of money,
you know, from one place to the other. Um. None
of this has wound up happening. Cryptocurrency does none of
this Like absolutely not. Well I was going to say
that's the thing is if that's what it was, that
would be tight. That's not what it is. And um,

(13:37):
it's kind of like when I read about that ship
that was like an independent nation and you can buy
your like thing on it with crypto and then it's like, oh,
we didn't realize how hard it is. It's actually very
hard to do this savership and a government and uh infrastructure,

(13:59):
but you're in ownership. Oh fuck. So yeah, the idea
like sure, that's cool, but you did not think through
anything like eating or shipping for the laws of the
sea or what it takes to actually operate a boat
of that size. So I actually really like that you

(14:20):
brought that up, and the story for people who aren't aware,
there's actually a good article about it. Um a bunch
of like libertarian crypto nerds bought a cruise ship at
the start of the pandemic um and sailed it off
the coast of Panama in an attempt to create an
independent nation there. And we're basically like selling bunks on
the ship. And the idea was that would be like
a perfectly free country. But for one thing, you can't

(14:43):
be perfectly free living in a tiny room on a
cruise ship. Like people weren't even allowed to have like
microwaves in their room. They didn't have their own kitchens.
They were alliant top Like if just there would have
been a to be able to do this in a
way that is safe. So you be like, okay, we
have to be safe. They're like, you can't have a

(15:03):
micro raven whatever, which is like hilarious when you're like,
this is the freeest you'll ever be for you can
never cook again, and to freedom, Like I love the
movie Pirate Radio. UM I think that's one about those
people who live on that boat that do a pirate.
That's my dream. I would love to live on a
big boat with like twenty something of my friends and

(15:25):
run illegal media stations. That sounds like the coolest thing
you could possibly do. Everybody has British accents and everybody's
very British. It sounds it would be rad as hell.
But obviously, um the idea. Anyway, what's the reason I
think that it's good that you brought this up is
that it's a perfect example of what has happened with
a lot of cryptocurrency. We'll talk about this a little

(15:45):
more in a bit, but like all of these people
are good at one thing and it makes them think
they're good at a bunch of other things, or at
least they could figure it out. Like these crypto nerds
were like really good at making a bunch of money
in cryptocurren In other ways, like a lot of them
were business owners. You know, They're the kind libertarians who
did have a skill. They made their money doing something, um,
and they were convinced use that like, well, how hard

(16:06):
could it be to like operate a cruise ship or
just I'll be able to hire somebody to operated how
complicated could the laws be? And it's like, well, it's
a nightmare. And it's the same thing with crypto people
of someone that decorates their house nicely and it's like,
let's just flip houses. And then they're like, oh no, yeah,

(16:27):
not understand how to do that. I just know how
to buy ship off of Wayfair and my bad and
should not have tried to be an hd TV person
you've seen. I've seen a lot of the same thing
in like the pot industry because I was I was
living in and around pot farms during the height of

(16:48):
the marijuana gold rush in California. A lot of people
who like would get in and try to start farms
whould like made a bunch of money doing something else,
something in business or whatever, like in the tech industry,
and like, well, now I'm just gonna like I'm gonna
be a pot farmer. And I didn't realize that, like
because they've grown like a couple of plants in their

(17:08):
house or something in it Like it's like no, no, no.
Actual pot farming is one of the hardest things you
can possibly do um and it it necessitates very close
contact with incredibly date coustic. Even if you're like organically
using pesticides, you're basically spraying sulfur in amounts that you
have to wear like a fucking tip exit Like it's
it's hard. And all these people like crashed and burned

(17:29):
because they had no fucking clue what they were doing
and they couldn't physically handle the demands of running a
farm because farming is hard. It's like a lot of
these people love to think it is easy from the outside. Yeah,
it's it's a human problem. It's not just a crypto problem. No,
everybody thinks something that you don't know shit about from
the side, or like this ship is easy. The utopian

(17:53):
kind of socialist and anarchist communities that I have a
lot of you know, love for, but like a lot
of people who were like city kids talking about their
dream of like buying land and operating a farm, and
like I'm farming about an acre right now, um, and
I'm not. I the people who are engaged in the
project with me have been doing it a lot longer,
and I'm much better it than I am. And even
the little bit that I'm doing is like this shipload

(18:15):
of work, and that's like a little bit of land,
not even trying to be fully self sufficient, like it's
all it's this thing people do is like I don't
I I think that this thing sounds fun. How hard
could it possibly be? Oh no, it's a problem. Um.
The issue is that, like same with a homemaker problem.
It's like the idea these you know, a lot of

(18:36):
these men have been like, oh, well, like all you
do is fucking stay at home and take care of
the kids in the house. How hard could this be?
And then like you know, COVID happened and they had
to do it for a little bit and they were like,
oh my god, what you do as hell? And it's like, yeah, bitch,
everybody's job is hard. I don't know what you think

(18:58):
an easy job is? Just being rich? I would say,
like being I think I could be a CEO of
literally any company and do just lot a job. That's
like no, that's like, uh, like what the royalty is
in Britain. You know, yeah, I could Queen of England.
You know. Yeah, I could be a pretty good pope too,

(19:20):
I think. But yeah, anyway, you be the pope and
I'll be the queen. Absolutely, we can finally destroy the
Church of England can't. So the issue here, like this
is the thing we all do underestimate how difficult things
that we don't have experience with our um It's done
in Krueger stuff and like, for example, if you and

(19:42):
your friends buy five acres of land and realized farming
is much harder, you have two options. Either you give
up or you actually get better after a while. I
didn't eventually figured out either way. The worst case scenario
is like, oh, I made a mistake, and this is
harder than I thought it was. If what you're trying
to do is completely recreate a financi shull system, the
mistakes you make will be things like, oh, I've been

(20:03):
illegally selling unlicensed securities. Oh, I've been illegally operating as
a money transmitting like organization without any of the proper paperwork.
And now I found out that I've actually been committing
numerous felonies. Oh, what I've been doing for years is
actually embezzlement. And I was unaware because I don't understand
any of these financial regulations, and I just thought it
was easy to to to recreate all this. I thought

(20:26):
that because it was cryptocurrency, there's no laws around it,
and actually it's all still regulated the same way the
rest of the economy is UM and I've been committing
numerous crimes, which is why a lot of these guys
go to jail. UM. A lot of the big crypto
dudes UM either go to jail or flee the country
because they either learn or yeah, anyway, this is what
we're talking about here. UM. So at the moment, at best,

(20:50):
bitcoin is an extremely volatile speculative commodity that uses an
ungodly amount of electricity and it is a huge pain
in the ask for most people to use. It is
not freed any individuals from alliance on centralized bank type businesses.
In fact, part one of the things that everyone gets
excited about is like bitcoin's dollar value, you know, shoots
up regularly to a high level. But like you're still excited,

(21:10):
Like it's worth a lot of US dollars right, Like
it's it's a money making scheme to get people rich
in actual currency, and the people I know who are
smart in crypto have done that. I have a friend
who when bitcoin was like five hundred bucks of bitcoin,
he was moving to Europe and he put a lot
of his money into bitcoin, with the idea that like,

(21:30):
well I'll move to Europe and I'll sell it for
euros and I'll avoid a lot of transfer fees for
doing that. Um. And he just kept some of it
in there as the price shot up and he did
very well. But his goal was always like, well, I
don't I think this isn't like you know, a gamble,
right like, and he's someone who enjoys gambling, and that's fine,
Like if if you want to gamble. I don't have
an issue with gambling obviously, like we do we sell

(21:53):
sports betting and stuff. I have no moral problem with gambling. Um.
But it's not a function currency in any meaningful way.
It just isn't. It's um again at best, like a
very volatile kind of investment type thing. UM. Also, I
gotta say, with like the environmental footprint that all of

(22:14):
us are making every day, that's just so fucked up.
And with corporations not giving a ship and not changing anything,
and the government not giving a ship and not changing anything,
it's like, I mean, I understand trying to make money,
but I just feel like making money from a thing
that you know, destroys the environment is like another level

(22:36):
of like making you feel bad, and it's like, yeah,
all late stage capitalism makes you feel bad and participating
in it. But if you know that there's no value
to what you're putting money into, and the thing they're
putting your money into is just made up so that
people could make money, and then while it's made up,
it's just making the environment worse. Just feeling is one

(23:00):
of the things about it. I think if when you
first got into it, especially if you got into it
when it was not worth much, the environmental cost wasn't much,
it hasn't always been as bad at So the way
that bitcoin works, right, the thing that gives its scarcity
um like when you're mining it. When you're doing it
like is you're basically it. Computers mine it by having

(23:20):
to do a bunch of calculations. It's called proof of work, right,
And and the longer time goes on in order to
keep the thing at a steady rate, while processing power increases,
the calculations get harder. So at the beginning, very little
power comparatively was used to mind bitcoin, but it just
it gets hard, like the the math the computers have

(23:41):
to do gets harder and harder and harder over time,
and that increases the amount of electricity that bitcoin like requires,
And I don't think a lot of people thought about
it at the time, especially since, as we'll cover, this
was just kind of like one of a at the start,
was one of a couple of different crypto things people
had tried and like in two thousand ten. And I
don't think anyone could have guessed that bitcoin would eventually

(24:03):
be drawing more power than dozens of nations like it,
just because it didn't start that way. It was kind
of like and when Satoshi Nakamoto created it, it was
like an experiment, like I don't even think in his
mind it was going to be the final product, the
actual cryptocurrency he wanted to create. It was like, let's
see if this works and then maybe iterate. Do you

(24:23):
think do you think that like the idea that it
could possibly become that was even something that people thought
through all the way. I don't think so, because there's
a number of things that are really really like the
atom bomb, were like you didn't know that that's what
gonna was going to happen, but then it did and

(24:43):
it was fucked. Yeah, there's a bunch of things they
would have done differently like Nakamoto and the like. The
people who were kind of like getting it off the ground,
I think would have done differently if they've known how
successful it would be. For one thing, one of the
reasons bitcoin like can't work as a global currency is
that there is a hard cap on the number of
trans actions worldwide that can ever occur. There can never
be more at present than seven Bitcoin transactions per second

(25:07):
planet wide, which doesn't work. It's a it's math ship,
like I I don't understand the math, but that's the
way it works. And people have proposed different ideas for
like expanding the number of of bitcoin transactions that can
that can happen. There's kind of like ways to basically
change the code at a fundamental level, but it hasn't
been done. And this handicap means that as bitcoin has

(25:29):
gotten more popular, it has gotten more expensive just to
make a transaction. So you have to pay because it
takes like power and stuff in order to like even
start a transaction, and you never entirely know when the
transaction is going to happen. About twenty of them just
get like canceled because there's this massive like blockage in
terms of actually getting because you have to you have

(25:51):
to actually like enter transactions onto the blockchain, right. That's
the whole thing about bitcoin is it's on this thing
called the blockchain, which is this persistent record of every
bitcoin transaction, and only so many transactions can get written
to the blockchain at a given point in time, so
it's about seven a second right now, um, which makes
it a huge Like you can't one of the people

(26:11):
talk about bitcoin being used for drugs, and it is,
it has been on like the Silk Road and stuff,
but it's actually like it's it's a thing where individuals
will like buy amounts of drugs with it, but drug dealers,
like big name people like hate would never enjoy it,
like use bitcoin for this because you don't know that
the transaction is going to go through. You don't know
when it's going to go through. So wait, let me

(26:33):
ask you this is it just like if there's uh,
it's like trying to get tickets to like hot show
or something into ticket Master or whatever the funk, and
there's like a lot of real yeah yeah, it's you
get it in that exact moment, you get your thing,

(26:54):
and if you don't, like, you don't yeah, yeah, it's
kind of like that. It's very and again this is
because number one, when it was invented, I don't think
Nakamoto had any idea that it would ever be this popular,
and it was not. They hadn't thought all this out right,
because it's a new thing. And the problem is that
you have any time you invent a new thing, that

(27:16):
you think, what's the least that could happen with it?
And what's the most that can happen with it? Do
you think so? I don't think necessarily you do if
you're the kind of person who just thinks this stuff
is neat, like if you're the kind of math, brain
engineer type person who just enjoys the intellectual problem of
a cryptocurrency. He thought through a lot. There's things about

(27:36):
bitcoin that are very smart. There is a reason it's
been as successful as it is and is used as
widely as it is. There's a reason why of all
of the different cryptocurrency projects that have existed over the years,
bitcoin is the biggest one. There were things that he
did right, but it's also like a guy trying to
dream up basically a whole new economic system. It was
always going to be incomplete and like, but I guess, Like,

(27:59):
I mean, it's like any kind of and forgive me
for making this a science fiction comparison, but it's like
any science fiction thing right where it's like, oh, it
starts off real good, but like you've got to think about,
like right, like all the best things that could happen
and the worst things that could happen. So I feel
like a lot of times, um, I don't know if

(28:21):
I buy that these like hyper smart people didn't think
about what could happen, because I just think that they
did and they were like, oh, whatever, we'll worry about
it later. Yeah, I mean maybe I don't know. And
I'm not trying to say that in like a negative way.
I'm just trying to think, like maybe the excitement of

(28:42):
inventing this thing makes it so that even if you
consider what the possibility of the end game is, you're
just like, oh, I don't care because this is so exciting. Yeah.
I think that's a big part of it. I think
it's it's nerds being excited about a thing. It's like
all of social media, it's kind of the same thing,
where like they no one thought through what might happen

(29:04):
because they were so excited about like, oh, can we
make this work? Um? And can we get people interested
in this thing? And that was a more important question
than like, hey do we do we think we might
need to be able to do more than seven transactions
a second worldwide for this thing? Hey what if it
winds up using more power than multiple entire nation's worth
of people, um and and burning down rainforest in order

(29:27):
to exist? Like and again it's also bitcoin get started
in two thousand nine, right, Like the technology is in
such a different place then that I don't think they
don't think they necessarily thought, oh, dozens of different like
Chinese corporations are going to buy massive mining rigs that
are powered by coal plants in order to like mine
more bitcoin. It was like it's it's a guy on

(29:48):
a project in two thousand nine. You can't that's a lot.
That's a lot to envision, and we'll talk about like
why because the fundamental problem in a lot of ways
with bitcoin is that, rather than it being what it
should have been, was like, oh, here was an experiment.
Here's the ways in which it was successful, here's the
ways in which it's failed. Let's try a new thing.

(30:10):
It's still like the thing in cryptocurrency, the biggest thing,
and people are and it's because people are ideologically invested
in it, and that is a problem because it's obsolete,
it's bad, it's it's heavily flawed in a number of
ways and shouldn't still exist, like something better should have
come along. But people are ideologically committed to bitcoin, and

(30:32):
that's a problem, and we'll get to that problem. One thing.
I know we have to go, we have to promote
some goods and services, but really quick before we go,
I just want to say that, you know, honestly, some
of this is like reminding me of what it's like
to be a stand up right when you're like trying
jokes out and in the beginning, it's like sometimes you'll
say some stuff that ends up being reckless and not

(30:54):
something that like you fully thought the implications of, or
you know, you fully understood was going to be actually
what you were trying to say, because you're just trying
to say it to figure out what you're saying. And
that's sometimes is what happens. And I think like the
differences is like when you decide to let other people,

(31:15):
when you decide to commit to that, or when you
decide to whatever. But like, no one's blameless. There's jokes
that I know I've done that are like shitty before
I got to the like the final version of the joke.
But I guess it's just so scary that the not
final version of a joke for these people is on

(31:36):
the scale that ruins rainforests and countries, and I think
is wild. And I think the only thing I can
compare it to is being like someone like Dave Chappelle.
You know, we're like, you put out a big as
special that's just like you being like I am a
committed transphobe, and then the Dave Chappelle of currencies. Yeah,

(32:01):
and like Dave Chappelle, it was cooler in two thousand nine.
And my heart is breaking. But all right, speaking services
Dave Chappelle, you know who doesn't create transphobic comedy specials.
It's going to be an ad for Netflix. Oh, well

(32:26):
here's Netflix. Oh we're back. So from the beginning of
so again, I think there's there's some some neat promise
and some of the ideas that inspired people behind cryptocurrency,

(32:48):
But one of the issues with it is that from
the beginning it's been primarily an ideological crusade rather than
a quest to actually develop something that's inherently practical. Um
In the book Attack of the fifty ft Blockchain, Gerard
Gerard quotes Roger Vere, who was an early cryptocurrency advocate,
as saying, at first, almost everyone who involved did so
for philosophical reasons. We saw bitcoin as a great idea,

(33:11):
as a way to separate money from the state. Now,
Gerard goes further, explaining that much of the ideological justification
for crypto as it exists is tied to what's called
cyber libertarianism. And here's how he defines that quote. Computer
programmers are highly susceptible to the just world fallacy that
their economic good fortune is the product of virtue rather

(33:32):
than circumstance, and the fallacy of transferable expertise that being
competent in one field means they're competent in others. Silicon
Valley has always been a cross of the hippie counterculture
and iron Rand based libertarianism, this cross being termed the
Californian ideology. Cyber libertarianism is an academic term for the
early Internet strain of this ideology. Technological expertise is presumed

(33:55):
to trump all other forms of expertise e g. Economics
or finance, let alone softer sciences. I don't understand it.
But it must be simple is the order of the day.
And that's that's the issue here, is what we're talking
about a little bit earlier. Um and obviously at this
point because the standard. But it's simple. It's kind of

(34:17):
like a motto for me and my twenties dating men. Yeah,
and that's not a bad motto for dating for dating men,
especially especially men in your twenties, because we we we
tend to be pretty simple. Um. But so it's worth
noting here that a lot of people who use crypto

(34:37):
now because there is so much money in it, right,
are just are gamblers or or scammers, not particularly believers
in the ideology. When we're talking about the ideological part
of crypto, it's it's it is the backbone still of cryptocurrency.
It's a lot of the people making stuff. It's a
lot of the people who are like the loudest evangelists. Um.
But most of the people who make a lot of
money off of crypto aren't you know, believers in anything.

(35:02):
There in a lot of cases just scammers. There are
people committing serious financial crimes to get rich themselves by robbing,
robbing people into frauding them in mass and that is
a huge amount of cryptocurrency. One of the things about
it is because there's no state, there's no bank, there's
no protection. So like, one thing that can happen is
if you're doing a bitcoin transaction and you like type
in the address you're sending it too wrong, that money

(35:23):
is just gone. Um. It's like if every like if
if every uh if every transaction you made was an
even worse wire transfer basically, I mean I've done that
on Venmo before, where you send money to someone who
you thought you were sending you too, but it's not
the right person, I mean has no decency to give

(35:45):
you money back. But this ain't gonna happen with your
cryptocurrency ship no. Um. Now, one of the things that
is frustrating here is that like you have these these
true believers in the ideological promise of crypto currency, and
they provide cover for a lot of the scammers, often
not intentionally, but like the fact that there's these people

(36:06):
saying no, this is like a crusade and we're we're
separating money from the state and this is good, and
a lot of people are able to cloak themselves in
that to steal tens of millions of dollars um and
and it's it's very profitable to do that for the
true believers. The quest for a currency free of central
control goes back decades. Cryptocurrency is actually a lot older
as an idea than you might guess. In fact, PayPal

(36:27):
was actually founded with the understanding that it would be
a perfectly anonymous way to send and receive money without
government oversight. In Peter Teal told his employees that thanks
to PayPal, quote, it will be nearly impossible for corrupt
governments to steal wealth from their people through their old means. Now,
Teal wound up underestimating governments well and his own greed,

(36:51):
because once Teal gets rich, he stops saying ship like this,
and he moves on to found the most powerful surveillance
company in the world, spying for the federal governments on it, said,
multiple federal governments on its citizens. So like again, a
lot of these people, even the ones who are ideological,
are absolutely willing to like turn on a dime if
there's money in it. Now. Digital currency, though has a
long history. Philosophically, the idea seems to have originated from

(37:14):
a fellow named David Chaum, who was a computer scientist
and a cryptographer. In nineteen eight two, Choum wrote a
paper titled computer Systems Established, Maintained and Trusted by mutually
suspicious groups. This was a thought experiment on how to
create a trustless form of digital currency. Bitcoin is trust less.
The blockchain, all blockchain cryptocurrencies are trust less, and trustless

(37:36):
means that you cannot fake either the currency or the transactions. Right.
It's very it's not entirely impossible, but it's very difficult
to fake a Bitcoin transaction, right, or to fake a
bitcoin because of the sheer amount of math necessary in
order to like make one essentially, and the blockchain is
very close to an unalterable record of transactions. So that's

(37:59):
what makes it trust list, right. You don't have to
trust somebody that like the transactions happening and going through.
It's indelibly recorded on this thing. Um. So nineteen eighty
two is when we kind of have the first person
developed the idea for what becomes the blockchain. It's a persistent,
unfalsibifiable record of transactions. Now, Chom did try to create

(38:21):
his own cryptocurrency in nine with a company called digit Cash,
in a thing called e cash. E cash was supposed
to be perfectly anonymous. I'm sorry. Both of those names
are so nineties. I know, it's incredibly nineties this. I
imagine he was wearing Jinko's the entire time, and and
one of those like Skully from X File suits with

(38:41):
the huge shoulders. Call. Yeah. But also, do you remember,
um that l A l A Styles or l A
gear Gel? Do you know what I'm talking about? Yes?
What was it called? I know what you're talking about.
Are going to google it during the break. But it
was all like Neon colors, a little bubbles in it,
and you would put it all over your ship. That's

(39:03):
the equivalent of this. Hell yeah, yeah, that's exactly it.
It's the cryptocurrency equivalent of that weird s we all
drew on our our binders when we were in middle school.
Um for a weird reason like shout out millennials. Yeah,
like kind of like a dollar sign but not but

(39:24):
also why you know, we loved it. We did, We
absolutely did so. E cash was supposed to be totally anonymous,
and the idea of a currency that's transactions couldn't be
tracked by a government enticed a lot of powerful people.
Um and there were significant money put behind digit cash
and e cash. David Marquat, who is the co founder
of the venture capital firm August Capital and a former

(39:46):
Microsoft market what is like a kum quat or like, yeah,
it's m A r q U A r d T. Yeah, yeah,
that's a that's like our red kum quat for sure.
It's like a red kum quat that gives ten million
dollars to vid Choum's cryptocurrency. Also, a kumquat is what
I call your girlfriend? Now, wow, very respect, Can we

(40:09):
get hr on the line, Sophie prove this fucking message.
So only one bank agreed to use the cash. They
implemented it from micro payments. They were in like Missouri.
The system is not the bank is less populism. I
was in middle school. Um And, yeah, the system was

(40:33):
not popular. It was dissolved after three years. It just
didn't like catch on in any way. David blamedless on
the fact that the Internet had gotten more popular in
the late nineties and the ideological and privacy obsessed nerds
that he'd written his white papers for were not the
bulk of the Internet anymore. Quote As the Web grew,
the average level of sophistication of users dropped. It was
hard to explain the importance of privacy to them. Most

(40:55):
people are like, why do I need to learn how
to use a whole new, weird digital money thing in
ready to keep my transaction secret? And you know what,
To be honest, I'm sure like the if you wanted
to give him the actual like the drug dealer answer like, no,
I care about privacy. That's why I use fucking cash.
There is a perfectly anonymous way to transactly. It's that's

(41:18):
why drug dealers do everything in cash. That is like
the funniest thing about this is like, because they're all
such fucking nerds, It's like we have to have a
way to like, you know, make transactions that uh, nobody
can tracks. Yeah, you can just use cash. Stop reinventing
the wheel, you know what. It remins me that old
chestnut about how America spent like so much money developing

(41:41):
a pen that could write upside down in space and
Russians just use a pencil. I don't know if that
is that one. I don't know if it's real, but
I'm just saying that's like that old chestnut. Yeah, yeah,
you see that a lot. Now there is I will say,
as somebody who used cryptocurrency buy drugs over the internet,
there is one realistic use case for the anonymous currency,

(42:04):
which is that if you're trying to buy illegal drugs
through the internet, you can't use cash, right, you do
need an option for that, And and some of these
people attempted to provide that. In some weird libertarians tell
your girl what kind of drugs you buy. I'll get
to that. I'll get to that. In ninet, some weird
libertarians invented e gold, which was supposedly an anonymous digital

(42:26):
currency backed by actual gold, so it was on the
gold standard. But it was crypto, which, to be honest
at least makes more sense than like bitcoins, based on
like the scarcity of being able to perform hard math
calculations thing I don't know whatever getting someone to send
you gold in exchange for your crypto though, well yeah,
I don't know that that ever happened. But like modern cryptocurrency,

(42:48):
it was way less anonymous than its founders claimed. The
gold handed over their records to law enforcement when requested. Nevertheless,
it was popular for more than a decade among people
who wanted to buy drugs over the internet from shady
Canadian pharmaceutical websites and needed some hint of deniability about it.
I can confirm that the gold worked pretty well for
this because, um allegedly, people I may or may not

(43:08):
have known slash bin used it to purchase things like
two C I and five M E O M I
P T and two C T seven and two C
T E and all sorts of fun shogun chemicals over
the internet. Wait wait, wait, what can you tell the
lay woman what that is? They're different hallucinogens that a
guy named Alexander Shulgin invented and tested on he and
his wife and wrote books about. And they're pretty rad

(43:31):
for the most part. How how do they relate to
mushrooms and or acid? Well, some of them are flinn flamin's,
which I believe mushrooms are fine flamine too, So some
of them actually are like some of them are kind
of like synthetically similar to mushrooms. Some of them are
very different, Like two ce I is like nothing else
I've ever experienced they're just chemicals that it's very visual

(43:51):
in a way that like it's visual in a way
that like when you watched like how acid and stuff
is depicted on TV. It's not actually lie that acid
isn't like the but I'm asking is it more like
That's what I'm explaining, So you know how like when
TV shows are trying to depict an acid trip, they
always show like all these psychedelic, weird colors and strange

(44:13):
visuals that like, you don't really get on acid, Like
I don't have a lot of open eyed, massive hallucinations
of things that can happen on enough to see I like,
it's really potent visual hallucinations. It's rad. I love to
see I And if you mix two, see I and
H seven to eight hours, So like a good mushroom

(44:36):
trip or acid trip longer than mushrooms, a little shorter
than acid. Mushrooms always take forever to get out my system.
I think everybody is different. But yeah, yeah, usually mushrooms
for me about three or four hours. But um wow, okay,
yeah lucky yeah, um but yeah, I love it. Anyway.
I have a lot of fondness for Eagle because it

(44:56):
brought a lot of wonderful drugs into my life as
a as a as a kid. Um. Now that said,
it didn't last very long. It was actually shut down
by the government in two thousand nine because the people
running it had stopped getting the kind of licenses you
need to transmit to be like to transmit money over
the internet. Basically. Um again, it's this like they didn't
believe they needed those licenses from the government, and the

(45:17):
government said, well, yeah, you do. So. Liberty Reserve, which
operated from two thousand six to thirteen, was another attempt
to make it possible for people to buy things anonymously
over the Internet. The goal of all this and an
anonymity was for some people just a matter of principle.
They weren't actually doing anything sketchy, They just didn't want
the government to know what they were doing. But for

(45:38):
a lot of folks, man, yeah, I get that, I do. Um.
That said, for a lot of folks it was a
matter of wanting to buy illegal firearms, child pornography, or
drugs sometimes all three. Liberty Reserve was shut down when
child pornography into the rug cat that's not air, but

(46:01):
it is one of the things you would use untraceable
money for like, those are kind of the Big Three. Okay,
I share you, but I want you to go like,
I'm not drawing a moral equivalence between them. I'm just
saying that, but I just don't want them to be
in the same sentence. I'm offended as someone that just
wants to have a good trip. I mean, that was
one of the things children that is not the same vibe.

(46:25):
And even the Silk Road guy was like, well, I'm
not gonna let people sell child porn on the Silk Road.
You can hire hitman to murder people. But like, we're not.
We have we have standards of boundaries. Things that was
full on adults, full as adults, but when it comes
to babies, no, you save that for Robber and Sophia,

(46:48):
you know. I mean, but we won't molest him, just
kill him, just kill him. Obviously we're not monsters. We're
not monsters. Yeah, absolutely so. Liberty Reserve was shut down
when its founder was imprisoned for twenty years for money laundering.
Now there's more to crypto history than that, but most
of what you need to know after this point is
that in two thousand seven, Satoshi Nakamoto started working on

(47:09):
bitcoin he was still following David Chaum's dream of a
perfectly anonymous yet trustless digital currency. Bitcoin was also supposed
to be like, you know, anonymous, um or what was
supposed to be anonymous. That's the reputation it has. Two
people say like, oh, bitcoin transactions are anonymous. They're not really,
And in fact, because of the blockchain, they're often very

(47:29):
close to the opposite of anonymous. Every transaction is registered
indelibly forever on an immutable chain. Um. So, Like one
of the things about this is that there you could
there is a way to do uh, totally anonymous bitcoin
transactions if you number one, if you mind the mind
it on your own computer and get a bitcoin and
you you know, are reasonably secure with your machine, then

(47:52):
people would see the transaction where it was going, um,
but they wouldn't necessarily know that it was your bitcoin. Also,
some people buy bitcoin, like in person, like just hands
someone cash for a hard drive with bitcoin on it.
That's fairly anonymous, But the transaction itself is not anonymous.
It's literally the opposite. Everyone including the FEDS, can see

(48:12):
where bitcoin is going, you know. Um, so if they
know somebody is a drug dealer or you know, uh,
doing something else illegal and they see bitcoin coming to
him and they can see that you owned that bitcoin,
then they know that you were paying that person you know. Um.
Now the other thing is that one of this is

(48:33):
again part of the big selling point that the blockchain
is is immutable, that everyone can see every transaction, that
is what makes it trustless. But it's actually not true
that the blockchain is immutable. UM. The blockchain is decentralized.
So it's basically what makes it supposedly immutable is that
all of the different computers with the blockchain on it
are constantly sharing the blockchains and as long as they

(48:55):
like most of them agree, that's the blockchain. Right. So theoretically,
if you have enough computers operating to make up more
than fifty one percent of the computers with the blockchain
on it, kind of doing this decentralized sharing of the blockchain,
you could change the blockchain. Um. And there are some
there are some groups with potentially the power to do this.

(49:17):
I mean maybe it's happened because there are these now
big mining consortiums that you know, operate hundreds of thousands
of computers mining bitcoin, and theoretically they could actually modify
the blockchain if they got like together enough people with
enough of a goal to do that what to like
alter I don't know, yah, like to to either remove

(49:38):
transactions or too. Like you could you could funk around
in a bunch of different ways if you if you
had fifty one percent of like the computers that were
kind of involved in this big distributed conversation, like there's
all sorts of ship you could get up to um.
But yeah, this is a little more detailed than is
necessary to understand the grift nature of crypto. Because that's

(50:00):
because my eyes glazed over, or because my eyes glaze
over when I get too much into the tech stuff,
or because Sophie literally fell asleep and I could just
read her hat and nothing else. Oh yeah, she did
fall asleep, So get out. We're talking about the blockchain.
You must have said the word blockchain in the last

(50:21):
paragraph fifty two times. I am as frustrated by this
as you are. But I'm setting up all this background
because I want everyone to understand what an enormous, ridiculous
grift that cryptocurrency has become since it got very popular.
Because this story is funny, and instead of hashing out
more technical details, I want to talk about Mount Cox. Now. First,

(50:44):
you've got to take an ad break, buddy, No, I
refuse to. You have to, because I'll use one of
my new fucking knives on you to get stabbed by you.
Good look, motherfucker. I got at least five of them.
All right, Well here's you know who won't stab you
these goods and services, boy spoilers, they might. All right,

(51:14):
we're back and we're telling the tale of Mount Cox.
Have you heard of Mountain Cox? Probably not? But what
do you mean? Everything you say sounds like a bit
Mount Cox was the first big bitcoin bank Mountain Docks, sorry,
Mount Cox. It was the first big bitcoin bank. So

(51:36):
at one point, like a huge chunk of the bitcoin
being actively traded. I think a majority of it was
like going through Mount Cox. It was the big bank
in the bitcoin world, which obviously the whole thing is that, like,
you're not going to need a bank. But the problem
is that without a bank again, if you like miss
type and address, your bitcoin just disappears forever. Like you

(51:56):
have no security whatsoever. You have no safety. There's no
way to um actually protect your money in any meaningful way.
It can be hacked or stolen from you. So people
started using exchanges, which are basically banks, because they wanted
the security that banks get, which is very funny because
the whole idea was like, we have to get away
from you know, horrible banks, and then like we wound

(52:18):
up reinventing banks, but because it's crypto, they wound up
reinventing banks, but much worse. So Mount Gox is the
first big bitcoin bank, and its origin is hilarious. In
two thousand seven, a nerd named Jed Mcalp purchased the
domain mount Gox mt g o x dot com for
his Magic the Gathering card trading website. Mount Gox stood

(52:40):
for Magic the Gathering the Gathering online exchange. In fact,
it was not called mount gox at all until Magic
the Gathering proved less profitable than Jett had hoped, and
so he like he he basically like stopped running the website.
But then in two thousand ten, there's a bunch of
articles on bitcoin. This is kind of the first big
boom period that bitpoint coin has. So he reads a

(53:03):
bunch of these articles and he's like, oh, I bet
I could make a bunch of money off bitcoin, and
his his girlfriend likes the name of the what like
the U R L of the website he has, So
he just decides to relaunch his Magic the Gathering Online
Exchange as Mount Gox, a bitcoin exchange, and the hope
that like, oh that sounds like authoritative enough. I remember

(53:23):
like on something awful following this as a kid in
people being like when they realize the giant bitcoin bank
was named after Magic the Gathering Online Exchange, Like, what
the funk are you people doing? Like, wait a minute,
this takes a little bit of the legitimacy out of
this money. Oh yeah, and it's it's not legitimate at all.
It turns out, so it was not long before Mount

(53:43):
Cox was the place to trade bitcoin. It is highly
possible that no other part of this story would have
occurred without Mount dox Um, because again, bitcoin is a
giant pain in the ask to do on your own.
This whole like have no bank, just peer to peer
with no middleman is a huge pain in the ass.
That's super dangerous and like frustrating and annoying for people
to do. And one of the things that's annoying about

(54:04):
it is so all of the transactions that bitcoin has
ever been involved in. Our stored on this ledger, right,
the blockchain, well, as time goes on, that means it
gets bigger, right, Like by definition, the blockchain is always
getting longer, and so by like two element of twelve,
it's like a hundred something gigabytes which you have to
keep on your computer if you want to do the

(54:25):
transaction without. I know, it's such a pain in the
ass everything unlike your phone starts running out of room
and you're just trying to take photos like a meaningful occasion,
and then you're like no, and it's like that for
your money. I don't know what's more important, you know,
my Nanna's birthday or these Margarita's with the girls by Nanna. Yeah.

(54:52):
The genius of cryptocurrency is that it's provided us all
with a way to to take that feeling you get
when your phone doesn't have space to take more pa
pictures and apply it to spending money. I don't like this.
It makes me feel as irresponsible about money as I
have always been. Yeah, so Mountain Cox becomes huge, um

(55:15):
and it allows for bitcoin to expand massively. Because now
it's not a pain in the ass, people can basically
trade it like it. Also, it kind of allows commodity
trading with bitcoin, right, Mountain Cox is where a lot
of that starts because before it had been so decentralized.
Now there's this exchange. You can see the price of
bitcoin and like how it changes, people can short sell
and whatnot. It allows bitcoin to expands like my Cox. Yeah,

(55:45):
well that is what where the story is going. Actually,
because the spoilers Mountain Ox drops all of the bitcoin
that it's sticks story, drop it like drop it like
Mountain Cox is a bitcoin or the price of bitcoin
grows steadily over the next year or so, um, And
Micaeleb was smart enough to realize after a couple of
years of this that the platform had become something much

(56:07):
more than just a hobby and that he was doing
like again, the starts is like, oh bitcoins neat, Like
let's see if I can set up in exchange to
trade it, and very quickly he's dealing with like millions
and then like tens of millions of dollars and it's
basically like kind of unlicensed trading securities and operating a bank,
which is illegal. So Macaeleb, being a smartt is like
I should probably get the funk out of this, Like

(56:28):
this seems like it could be a problem for me,
and I maybe didn't entirely anticipate what what what was
going to happen here. Now he also had a problem
and that tens of thousands of bitcoin had gone missing
or been stolen from Mount Cox and he hadn't told anybody. Um,
so he was basically like using new funds that were

(56:50):
brought in to pay people out that had had the
stolen bitcoins and the hopes that maybe would noticemids. It
is a Pyramids game, like it keeps happening, Well, please
ask And mckayl is a really sketchy guy. I can't
say that he was like actually had stolen those but
like I don't think we really know what happened to

(57:11):
those bitcoin, but he was definitely like bitcoins fed off
from the back of a truck, but we do know
is whoops. So the same year that happens, he sells
mount Gox to a guy named Mark carpelz Um and
he doesn't tell him until the sales don't like, oh yeah,
like sixty bitcoin are missing. You gotta keep playing this

(57:33):
like shell game tied that from everybody heads up, gotta
drop it like it's hot. Now Mark Mark car Pauls
is also a shady motherfucker. He'd been convicted of fraud
himself a couple of years earlier, so, like again, none
of these victims are particularly sympathetic people either, but Carlo
is it's a bad deal for him, and so by

(57:56):
the time he becomes aware of the fact that a
lot of the bitcoin the bank had been holding had
been stolen, he basically agreed to assume all liability for this.
As he continued to run Mount Guy's it's very funny,
most like buying a cruise ship for your crypt donation
and then realizing, oh fuck, a lot is involved with

(58:16):
running a cruise ship, and it's hard to be a bank.
And as he's running Mount Cox, not only is he
having to deal with like the fact that sixty bitcoin
are missing that he's trying to like cover in a
variety of ways. He keeps getting hacked, the bank keeps
getting hacked, and more bitcoin keeps getting stolen because of
like errors in the coding and stuff. People are just

(58:38):
siphoning take thousands and thousands of big bitcoin. So when
he realized like tens of thousands of more bitcoin had
been stolen, he panics and he takes the bank's assets
offline and he puts them into what are called cold wallets.
So a hot wallet is a is a crypto wallet
that's online, right, and that means you can use it
anytime you want to trade the money, but it also

(58:58):
means that like a hacker could potentially get it, and
if they get your wallet, they just have it and
there's no way for you to get it back. It's
just gone forever. Um. Cold wallets are just like basically
just storing the files that are the cryptocurrency offline and
something not connected to the internet, which is obviously the
safest way to store it. But this again leads to
this because he's unwilling to take any of these cold

(59:20):
wallets and put them back online. Leads to this Ponzi
scheme situation where like he's trying to bring in new
money as quickly as he can to pay out the
old money, so nobody notices that huge amounts of bitcoin
have been hacked. The other problem is that I think
when the hack first happened, it was like tens of
thousands of dollars worth of bitcoin, but the price of
bitcoin increases so much so that eventually it goes from like, oh,

(59:43):
we're short like a hundred thousand or a couple hundred
thousand dollars to like, we're short hundreds of millions of dollars.
Like the problem expands exponentially over time because every time
the price of bitcoin increases, he's in the hole for
more money. Um, it's got a temperature. Um so he

(01:00:08):
uh this So yeah, this is a bad situation. And
for like the last couple of years he's running Mountain Cox.
The bank is basically bankrupt and he's just like keeping
it alive with nothing but lies. Um. So I'm gonna
quote from a write up in the next Web here.
On February four fourteen, coin Desk held a poll to

(01:00:29):
find out how many mount Cox users had experienced withdrawal issues.
In some cases, users still hadn't received their funds even
weeks after they had requested withdrawal, which is great, way
better than a bank to ask to withdraw your money
and not be allowed to for weeks because it all
cuts stolen a Bitcoin talk form threat, a master over
chase could never All those banks will do is destroy

(01:00:52):
the entire global economy by gambling on real estate money.
Anytime you want, please don't please, don't take us making
fun of how dumb bitcoin banks are the endorsement of Chase,
no or of any bank. Actual banks are dumb. It's
just a marker of how dumb the crypto banks are,
that they're even dumber than regular banks, although obviously less

(01:01:16):
toxic because when mount Cox collapses spoilers, it does not
sink the entire global economy and leave tens of thousands
of people homeless. So here, that's that's good. Uh, good stuff.
On February seven, two fourteen, mount Cox canceled all bitcoin trading,
froze accounts, and took a step back to take stock

(01:01:37):
of what was actually going on. Ten days later, the
exchange published a statement it claimed it had rectified the
situation and that it was now on course to correct
customer losses and resume trade. But by the end of
the month, Mark Mark Carpellez had stepped down from his
role at the Bitcoin Foundation and the firm's fate was sealed.
It disclosed over seven hundred and forty thousand of users
bitcoin two point nine billion dollars into day's value, had

(01:02:01):
been stolen in a hack that it claimed had been
ongoing for years. At the time that amount was valued
it around half a billion dollars. On February fourteen, the
exchange accepted its fate and filed for bankruptcy in Tokyo.
It would also file for bankruptcy in the US later
in March. Now bitcoin again had kind of sailed in

(01:02:22):
this legal gray area, hadn't gotten a huge amount of
government attention. That changes because like as silly is, like
crypto is to you know, people in the feed or whatever.
When half a billion dollars goes missing, law enforcements going
to be like, well, okay, wait a second here, what
what happened here? How did you lose half a billions?

(01:02:43):
Being like yeah, so this creates a problem. Um, and
there's like well look into yeah, and there's After eighteen
months of like lawsuits and attempted like courts try to
restructure the bank to get people some of their money,
Carpelis Is eventually arrest on embezzlement charges in August of
two thou fifteen. UM authorities claim that he manipulated Mount

(01:03:05):
Cox's computer programs in order to alter its balance sheet
to artificially increase funds in one of its accounts, So
he was not his embezzlement was not him stealing money
from mount Cox. It was him like lying about the
money that was there in order to deal with the
fact that there's this massive hole in it. Meanwhile, the
founder of mount Cox has gone on to create a
couple of new different kinds of cryptocurrency and like continues

(01:03:25):
to do that side of the grift. It's very funny. Um,
in the end, find out what the names of the
currency are, because with mount gox is a starting point,
I'm just excited to see where it goes. They're forgettable,
to be honest. Are they like the nineties names of
like e cash or did you like coin? Whatever? I

(01:03:46):
don't know. They're not They're not very exciting. Um. I
can find them for you in a little bit if
you like. Okay, So if they're not good, I trust you.
In the end, mountain Gox lost about six percent of
all bitcoin in existence at the time. In imagine if
a bank disappeared six percent of the world's money supply. Like,

(01:04:07):
it's very funny. Some of it was later recovered, but
more scandals followed. Um. And and that's so. And there
have been like other exchanges, like a bunch of like
there was one exchange that had a map because they
keep getting hacked. Right, So there was one exchange that
was based on an exchange that had initially been coded
by a sixteen year old Chinese kid um and people
liked it because it had a good user interface, but

(01:04:29):
it was really bad code and it was never meant
to deal with like hundreds of millions of dollars in transactions.
But that's what happened, and there were a bunch of
exploits and hackers stole like tens of thousands of of
bitcoin and like made away with millions. And what that
exchange did was tell everybody, Hey, so that we can
make whole the rich people who were robbed, we're taking

(01:04:51):
thirty seven percent of everybody's bank account, Like you just
have to accept. Like they're all like like horrible griff
Like all of these fucking exchanges. Um, some of them
have gotten better now, but Mark, yeah, I mean, if
you're being totally fair, like you could be like, well, yeah,

(01:05:13):
a lot all of the early bitcoin exchanges and crypto
exchanges were giant horrible grifts. But like, look at what
banks were like in like the eighteen eighties, where they
would just like run out of their client's money and
everybody would be fucked and there would be runs on
the bank. It's like, yeah, yeah, that is fair. Like um,
the problem is, like, to what benefit are you recreating
the financial system and all of the problems inherent in

(01:05:35):
creating an entirely new financial system. I haven't found anyone
who's actually been able to give a thing good that
they're doing. If anybody did, yeah, um so uh. In
two thousand fifteen, a new cryptocurrency, Ethereum is released. Um
Ethereum is much more advanced than bitcoin um and it

(01:05:55):
can handle like more transactions. It's it's you know, it
was made like almost a decade later. So there's a
lot of things that about Ethereum are smarter. It's main
claim to fame, which are called smart contracts. And a
smart contract is basically a program that is stored on
the blockchain that executes UM when you like, do a
trans Yeah, it's it's like a program that you like

(01:06:19):
store on the blockchain and so it can't be changed
or altered. And the idea behind this is that you
could use these to make perfectly equitable contracts. Like one
of the marketing terms is like, hey, imagine if a
musician could actually hold a record account company accountable to
the contract they signed because it's immutable and it's on
the blockchain, everybody can see it. The problem is that
number one contracts are only as good as their coding,

(01:06:41):
so if they're coded wrong, then the whole thing could
be a disaster. The other thing is that, like, well,
the problem with inequitable contracts isn't that like they're hidden.
It's that the people who write contracts are able to
like have lawyers that can write them in ways to
funk people over, and you maybe don't understand it. And
there's no reason why ethereum. Smart contracts would suddenly render

(01:07:02):
someone immune to a record company having more resources to
figure out how to fun people over on a contract.
It just doesn't make a whole lot of sense. Um.
The other problem is that, like, as you know, in
the entertainment industry, often you have a contract and then
you have to renegotiate and like change it later, and
because it's immutably on the blockchain, that's kind of hard
to do with smart contracts. They're not very smart, is

(01:07:24):
the problem. Um. You could argue that, like an agreement
you make with human beings that a company you work
for and have a contract for is much smarter because
you can go to them and say, like, hey, actually,
I want to change this part of my contract. Can
we alter that and then sign a new contract, which
I've done, Like I know a lot of people who
have not that. Like there aren't horrible like abusive contracts

(01:07:45):
that's constant, but like it is. I I don't think
the way Ether is trying to do it as any smarter.
And obviously most of what smart contracts have been used
to do is create automatic Ponzi schemes um and like
like like Ponzi schemes that execute automatically. It's like matters
of code. Um. There's a ton of different ponzis and
in fact, like people knowingly get involved in Ponzi schemes

(01:08:07):
in the crypto world in the understanding that like, well,
if I'm early enough, then I'll make some money off. Yeah, exactly,
as long as I'm the one getting sucked over and
I'm fucking someone else over rest American way, yep, yep.
And there's a bunch of like there have been cases
with these smart contracts where like the coding of the
contract is bad um and it creates an opportunity because

(01:08:28):
there's a hole in the coding for like hackers to
steal millions and millions of ether or whatever. Um. And
this has happened a couple of times. And when it's
happened in like influential people, like people who had helped
make ethereum like lost money, UM, they actually were able
to create correct those errors. Like it's the thing I
said where if you have like a high enough amount

(01:08:49):
of the processing power, you can alter the blockchain basically
um ship Like that has been done when like the
whales lose money. UM. It's just not going to be
done if you lose all your money because you're nobody um,
which is cool. So you're you're recreating the part of
the financial system wherein the rich make all the rules
and get to change the rules if they lose money um,

(01:09:09):
which is also fun. Now you'll know that I have
not talked a lot about the environmental consequences of cryptocurrency.
We'll talk about that a bit, UM. But even without that,
like if you separate the environmental consequences, it's just all
such a giant, obvious, fucking scam. And to make that point,
I want to talk about the case of Bitcoin Savings
and Trust, which was created by a guy who went

(01:09:32):
online by a name inspired by a Jimmy Buffett song,
Pirate at forty. So this guy who's creating Bitcoin Savings
and Trust identifies himself as a pirate, which is going
to be meaningful in a minute. So Pirate at forty No,
not anymore for sure. Um. He promised huge returns on

(01:09:55):
people's investments, and he collected as much as half a
million bitcoin worth five of point six million dollars at
the time, and worth like all of the money in
the world now. Any reasonable investor would have known that,
like the rate of return Pirate at forty was promising
marked him out as a scammer. But this was bitcoin, um,
and people didn't think that way. Uh. There were folks

(01:10:17):
who called him off online and like forms and stuff,
and they were downvoted essentially um and lost online clout
in the community for being negative about what was obviously
such a great investment opportunity. Why are you why don't
why are you being negative about crypto bro? Like, we
don't need that kind of thinking here. Uh. In the end,
this very obvious ponzi scheme wound up in control of
seven percent of all bitcoin and circulation at the time,

(01:10:40):
um and it was a giant scam pirate at forty
Like disappeared with everybody's fucking money. UM. Now he was
caught in this case because again, these people are now
committing financial crimes large enough for Like to be paid
attention to um And some of the money was returned,
but this was just the start of what would prove
to be a long chain of bitcoin crimes and incompetence.

(01:11:01):
Bid O Matt, at one time the third largest exchange
for bitcoin, existed for months before it was revealed that
they had kept the site's whole wallet file, which is
all of everybody's money, on an Amazon Web Services cloud
file that did not have a backup and was set
to ephemeral, so if it was restarted, if the servers
were restarted, the wallet was deleted and everybody's money disappeared forever,

(01:11:25):
which is exactly what happened in July of two thousand eleven.
My bank forgot to have a backup of our money.
Sorry guys, my god. Bitcoinka was the project of a
sixteen year old who was pretty good at coding and
tried to make an exchange. It collapsed in two thousand twelve,

(01:11:45):
without any database backups. All its remaining funds disappeared after
a series of hacks due to the fact that the
admins used the same password for Bitcoinica that they had
used for mount Cox, which had been hacked months earlier,
revealing the password and allowing hackers to eel everything. I
could go on, stupid, why would you have a teenager
do this well? And this this this this bit bitcoin

(01:12:07):
which collapses the code that it was made by this
teenager for it was then used by that other exchange,
the one I told you about that got robbed and
took thirty seven percent of everybody's money. Like, it's such
stupid fucking bullshit. It's such stupid fucking bullshit. And you
know what else is stupid fucking bullshit, Sophia. These goods
and services no in f t s. And we're going

(01:12:30):
to talk about n f t s in part two
of this episode, but for right now, I want to
talk about something that's not bullshit, Sophia. You're plug doubles. Wow,
thank you so much. You're welcome so much. Find me
on Twitter and insider on Twitter, Sophia, Sophia, you could

(01:12:50):
listen to my two podcasts, Private Parts Unknown about love
and sex around the world, and for twenty de Fiance
with Miles Gray Where Are we um Do Stone recaps
of Fiance Hell yeah, hell yeah. And you can find
me on bitcoin dot scam where I am. Just send

(01:13:16):
me three d and fifty dollars and if everybody does that,
I will give you, guys Robert coin. Uh your hearts,
so no exchange necessary. You don't have to have an exchange.
It's in your heart. You just know. You send me
through in your fifty bucks, You've got a Robert Coin.
And then I'm gonna retire. I'm just gonna go. That's

(01:13:40):
the episode.

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