Transcript of video lesson.
What is a Bitcoin?
…sort of universal, digital currency…
The digital currency called Bitcoin has enjoyed a rapid rise in valuation…
Bitcoin is taking the market by storm and causing controversy…
We don’t consider the virtual currency, a currency…
It’s an online currency, one not controlled by any government or any single company, even.
[00:30] “This is what we’ve been waiting for, this is the cyberchrist moment. This is when the activists that have been pushing against the FED are going to win.” Max Keiser, Journalist
In order to understand Bitcoin’s potential to revolutionize the global financial system, we must first understand what it is and why it matters.
Bitcoin is kind of like email for money, right, if you remember we use to write letters, now we do emails. We use to, you know, read newspapers now we read content online like Elite Daily. So Bitcoin is the next evolution of financial services. It means it’s just a better way to trade money, to store money [01:00] and you can do this on a Global basis. If you’re in Argentina, or you’re in China or you’re in San Francisco, it doesn’t matter, you can use Bitcoin.
It’s essentially digital gold, it’s restricted in supply, unlike say a Central Bank who can just print away every day, more money. There’s a restriction, the algorithm of Bitcoin prevents that from happening.
In the five years since it was first introduced to the public, Bitcoin’s popularity and value have skyrocketed. In 2010, a Bitcoin was valued at less than 1 US dollar, [01:30] last December the price for single Bitcoin soared to more than $1,100.
But what do you actually use them for Trace Mayer?
Well I use them to pay independent contractors that are all over the world, whether they are in India or the Philippines. I’ve used them to purchase digital products such as e-books or mp3 files.
With Bitcoin everything is mathematically provable. That the number of Bitcoins that exist, [02:00] whether they have been transferred or not. When you login to your online banking and you see that you have digits in there, like why do you trust that?
Bitcoin’s users use virtual wallets to store Bitcoins. These wallets can be managed using special applications and software that can be downloaded to phones, tablets or personal computers.
If business owners realize how simple it is to accept Bitcoin and how many advantages there are and without any disadvantages when they are using a merchant processor, [02:30] you know, more and more businesses are gonna start doing it once they realize how easy it is and there’s no downside essentially. You know, credit cards normally charge 3-5% processing fee, with these Bitcoin merchant processors like the one we’re using now Bitdaily charge 1%, there are some newer ones that charges 0% processing fee. Another thing is with credit cards it usually takes anywhere from 3-5 business days to really get the money into your bank account, which you know can be tough for cash flow sometimes, but with this, they send the money into our account the next morning. [03:00] And the third thing, which is actually really important especially for small businesses especially in the food and beverage industry is chargebacks. In Bitcoin there’s no chargebacks because it’s essentially it’s like digital cash, once it’s sent it’s sent.
But while the Bitcoin market is growing more popular in the mainstream and as more Bitcoin businesses are founded each day. The virtual currency now faces some serious hurdles that can jeopardize its long term viability.
A lot of Bitcoin people say there’s no financial crime that happens whatsoever and that’s not true, [03:30] there’s actually a lot that happens but on the other hand, it’s nowhere near what we think it is, so the US Government has done some studies and found out that not a lot of people use it for terrorist financing but the concern is when those types of people learn about it, they will start to use it for terrorist financing.
As a technologist I am not trying to build technology that satisfies one click winning [3:49] or another, I’m focusing on how can we provide choice? So that those people who want to evade taxes or be fully anonymous, sometimes I want to be fully anonymous and at the same time, [04:00] allow consumers who want to buy things from Amazon with Bitcoins that Amazon has a clear path for how they can do that from a regulatory compliance standpoint so those people who want to buy things from Amazon can.
Federal Agencies have grown concern over Bitcoin’s role in facilitating illegal purchases through a number of black market website including “Silk Road,” which was shut down by the FBI last October and because the industry has little oversight or regulation, little can be done to bring the perpetrators to justice. [04:30]
I think the most important thing is to really do your research, do your due diligence and for people who aren’t completely unfamiliar with this space it’s kind of similar to people that were investing in penny stocks in the 1920’s, see, if you don’t do your research and you start investing in financial institutions that are unregulated then you could lose a lot of money and I think there are people who are thinking of getting into the Bitcoin space that should have similar concerns. [05:00]
Mt. Gox was a Bitcoin exchange based in Tokyo that’s was handling up to 70% of all Bitcoin transactions as of 2013. Then in February 2014, the Mt. Gox company suspended trading closing it’s website in exchange service and filed for a form of bankruptcy protection from creditors. It announced that around 850,000 Bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million dollars at the time.
I think it’s sad that, that money was lost, [05:30] that it, wherever it went we don’t know but I think it can be a good thing in that, it’s an investment in the need to address this issue.
You know people compare Bitcoin to where we are today, to 1994 and the internet, where in the beginning of the internet it wasn’t secure, we had to have systems like Site Advisor or VeriSign and RSA come on, and say, “here’s how we’re gonna secure the internet and make it possible that you can actually type your credit card into a web browser and not get your credit card stolen.”
Now you have people that are increasingly willing [06:00] to fund Bitcoin companies and they want to work with regulators because there’s so much money funding those efforts that automatically kind of shifts the trend within the industry because they have more resources.
You know, the beautiful thing about technology is that its apolitical and trying to shape it direct its path as far as a political motivation I think is both disingenuous and hurts the technology.
I think we’re seeing that the US efforts are to regulate the intersections with Bitcoins, so like our payment processors [06:30] or our exchanges, where you exchange dollars for Bitcoins etc. but they seem to be of the opinion, we’re gonna not regulate the protocol itself and that makes a lot of sense because it’s the technology and the innovation that has really driven the US economy for the last 20 years. It’s the Facebooks, the Googles, the Amazons, it’s our tech industry and I think they see this as being a similar area.
There’s just, there’s a lack of healthy dialogue between the [07:00] various parties, the banking community, the libertarian Bitcoin community, the regulatory community, there’s a lot of voices in each camp, so I think trying to find some common ground that satisfies most people’s needs is really challenging.
When I first started writing book Bitcoin about a year and a half ago, I was one of the only lawyers to suggest that it should be regulated, and as a result of that I got hundreds of tweets, one day most of which were very negative, but one of which was an American tweeted out “Christine Duhaime should be killed.” [07:30]
I mean we’ve received death threats and Bitcoin is bigger than any one individual in my opinion and so that’s the philosophy I take on.
But there’s still a faction of people that really believe in Bitcoin and don’t want it to change and they’d see it as a threat when you suggest that Bitcoin has legal risks.
As politicians in Washington and throughout the world consider ways to better regulate the industry, Bitcoins most enthusiastic supporters flocked to Manhattan on April 7th and 8th, to attend a conference [08:00] that would explore the future of digital currency.
It’s the future of currency, it’s decentralized, no government controls it, no one person controls it, it’s run by the community. It will start to be accepted everywhere in 10 or 20 years.
I see it exponentially growing worldwide, I don’t think you can limit it, I think it’s limitless.
The industry sort of at an explosion [08:30] point right now, you can tell from the conference here and the amount of people that there’s a wide variety of interest not just from consumers but from merchants, from investors, venture capitalist, there’s a lot of money coming into the Bitcoin world…
The value of anything whether it’s dollars or gold and silver or Bitcoin comes from the value that people ascribe to it in their minds, so if people believe something is valuable that’s where the value comes from it’s not an intrinsic property of a dollar bill or a piece of gold it’s because people believe it’s valuable. [09:00]
“Gold is a great way to preserve wealth, but it is hard to move around. You do need some kind of alternative and Bitcoin fits the bill. I’m not surprised to see that happening.” Jim Rickards, Economist.
There are already been several millionaires made in Bitcoin, in my opinion, there will be many billionaires made in Bitcoin.
I think it’s gonna be regulated in Canada and in the US a lot more than it is now, and I think it’s going to be adopted by the major banks and will become a mainstream way in which we do financial transactions.
We might have micropayments [09:30] inside publications online where you can pay up half a penny every time you read an article, so this kind of electronic money exchanges is gonna change the world.
People are speculating that you could start seeing contracts that somehow include Bitcoin technology but who knows this is just speculation, 5-10 years from now Bitcoin could be anywhere.
Bitcoin’s either going to 0 or it’s going to a million dollars a coin. If it’s going to be successful it’s going to be worth a lot.
Five years from now, where I’d like it to be is changing the world in a positive way, [10:00] providing mobile banking to the millions of unbanked people of the world bringing up the quality of life of many people in developing countries who don’t have access to safe financial systems and an increase the standard of living for everybody globally. That’s what I’d like to see.
Bitcoin never sleeps, it’s a 24 by 7 industry and if you take a vacation you’re gonna miss it.
At the time of filming this video the US dollar denominated value of Bitcoin was $570 per coin.