Video - Bitcoin 101 - A Free Market for Transparency The Bitcoin Revolution

When people talk about bitcoin, they talk about a revolution. The trouble is, many people can't even figure out what the revolution is. Is it really a revolution to have lower fees on credit cards and remittances? While these are big changes, they are hardly revolutionary.

This series begins to look at the bigger picture, the jaw dropping changes that bitcoin could provide. And no future may be stranger or more earth shattering than the inherent capabilities of bitcoin to provide a free market for transparency. And this isn't transparency like we are used to, this is the possibility of absolute financial transparency. Not only would it eliminate the need for the IRS, but it stands to erase corruption and improve government.


If you've heard of Bitcoin you probably soon heard about how big revolution it is. And for a lot of people they look at Bitcoin and they see what it's offering and they see things like maybe lower fees for transactions online or lower fees for remittances, or providing some banking services to the world's poor. And sometimes it's even referred that the revolution won't happen here in the United States. It really doesn't offer that big of deal. It's just slightly disruptive, indeed the revolution will happen with billions of other people who have no access to banking services.

And while this is great, all right, lowering remittance prices would be great for millions and millions of people all over the world. It's not clear that it smells like a revolution. A forcible overthrow of government or social order in favor of a new system, an uprising, right? A class struggle, something that's just a real dynamic change in the way the human fabric is put together. It's possible that maybe the word they're really looking for is disruptive, okay, in a destructive technology, it's just one that comes in and sort of replaces other technology, so Bitcoin is offering to come in and replace sort of traditional financial services with a focus on credit cards, PayPal and sort of banking fees in general. But what seems ever clear is that the idea of Bitcoin point is still poorly understood and in fact, there's a lot of red herrings out there that are disguising sort of what is going on and what bitcoin can actually do?

And one of the biggest Red Herrings of all was this whole story with Silk Road where thousands of people were able to order their drugs online and they were using Bitcoin as the exclusive payment of transfer because Bitcoin was the only system that you could get anonymity online, okay. So traditionally, if you're buying something online you have to put in your banking information, your name, your phone number and so much more, right? And usually what this involves is going into some bank and providing some sort of identification in fact no bank can legally let you deposit money without complying with the AML KYC laws and that's Anti Money Laundering Know Your Customer. And a lot of these were put in place after 9/11.

Part of the idea of this is actually anti-terrorism they don't want Americans sending money to terrorists, okay. And if they do they want to be able to track into sending money to terrorists. And as Bitcoin rose in popularity with the big Silk Road scandal of a few months ago it seems like all that was talked about was how Bitcoin provided the anonymous payment service that none of the credit cards or banks could do before. And so, Bitcoin was looked at this way of being able to do nefarious deeds online or elsewhere. And in some ways, that's a big Red Herring because, yes, Bitcoin does offer some levels of anonymity. And in fact, that's likely to even improve as the coding improves the new services for sort of tumbling your coins to hide the origin of where those coins came from and so, yes, Bitcoin already offers more anonymity than traditional services and it seems likely to improve. So Bitcoin does anonymity better than anything online, okay. There is no other way to send value online with as much anonymity as Bitcoin, but what this leaves out and why this idea is such a Red Herring I don't know what a herring really looks like but let's draw a little fish.

Why this is sort of disguising, the ideas and values of Bitcoin, is that Bitcoin does the exact opposite even better so as good as Bitcoin is within anonymity it's actually much, much better at offering something the world's never known, full transparency. And I know a lot of people who are involved in Bitcoin kind of coil at the idea that transparency could even be offered by Bitcoin. But again, Bitcoin is a tool and it really does offer a full slighter where you could have anonymity over here and transparency over here and the user because it's just an open tool can choose which direction they want to go.

Now, why is this so important? How could transparency actually equal revolutionary? How would it offer us more of a solution to understand how Bitcoin could be so different than the world before? Well, the world has been very interesting lately when George Orwell in his book 1984 imagine the world this kind of weird future where there were cameras everywhere and people were trying to hide from being seen. He never imagined something like Facebook where people would actually do the opposite themselves. You actually have people with live cams on themselves all the time, you have bloggers everybody trying to talk to the world, trying to show the world who they are. You can go to someone's Facebook page and see photos of them in the most ridiculous states of their life. Okay, doing drugs, half naked, jumping off of cliffs, making out almost everything that George Orwell imagine people would try and hide from big brother. They're offering up on Facebook for free, okay.

And Facebook is only one of the many ways that you can kind of offer yourself in full transparency to the world. There's LinkedIn and there is Twitter. And there is no evidence of this in sort of a dystopia that Orwell was talking about when he made in 1984 he actually thought that everyone wanted complete privacy and it turns out that almost nothing could be further from the truth. So, what we're getting here with these three technologies Facebook, LinkedIn and Twitter is that we're getting sort of a social transparency. And social transparency in itself is actually not very new. You have gangsters who dress like gangsters, you have religious people who dress like religious people, you have sports fans trying to tell you who they are in their shirts, T-shirts claiming everything that you could possibly imagine, your hat, your tattoos. In hindsight, it turns out that it's pretty easy to see that people were always looking for a release a way to express themselves in a way that they didn't have to talk that their transparency was just evident from their own persona. And the social transparency might also be part of the human fabric. Imagine women wearing the Christian crosses to kind of show who they are, other religions dressing to let you know what they believe in what they care about and give you perhaps, even an idea about their financial status. Okay.

So let's rewind the clock because when Bitcoin came out in 2009 again it was basically just a tool set okay. Bitcoin is a protocol for money and the idea is that it is programmable so you can do a number of different things with it. And ideally anyone could do whatever they want so if I want to create a bank on my phone I can actually program that in. If I just want to hold money and hide money I can program that in, if I want to send a transaction, say I want to send money to my son when he turns twenty-one years old I can actually program that in today and he will only be able to retrieve those funds in twenty-one-year. And so, this tool kit that was offered for program of money actually leaves open the possibility for massive intervention but also massive possibilities that the original founder Satoshi Nakamoto couldn't imagine.

And in fact, Satoshi Nakamoto, his original paper had a lot to do with sort of anger at banks' control of money and sort of the whole way cash is being handled online and he looked at this mostly as an online tool. He never imagined that it would possibly enter into brick and mortar or something like that. Okay, but in 2009 his butterfly flapped its wings in Brazil and Chaos Theory talks about sensitive dependency on initial conditions. If you put a tool out there you'll never exactly sure which way it's going to go and it seems clear that Bitcoin could run in some sort of you know say Bitcoin started here on top of the mountain. It could run into some sort of all-out war with governments and everyone arguing over rights and freedoms, anonymity and sort of freedom from government inspection. Okay. And that's something that a lot of people hold dear, but what not many people seem to consider is it might be able to go down this other side of this hill based on transparency.

Now let's look at some of the ways that maybe that might play out, right? So it's not hard to imagine that a company like Whole Foods would embrace transparency, okay. They already have right. They're always looking for new ways to show the people who walked into their store that the items they bought were organic or they were produced in sort of a an environmentally friendly way or they were produced in a way that cares about humans and it's very difficult to do that it turns out. So Whole Foods wants to prove to you that the coffee beans they bought were actually bought in adhering to a number of standards. Well, they have to basically wait for a number of seals of approval by these institutions that most people have never heard of, but with Bitcoin Whole Foods might be able to change their game entirely. And in fact, they might even be able to publish a public address or a series of public Bitcoin keys were people could do all their payments to their store through these public keys or basically and let's just for the sake of imagination imagine they just published one Bitcoin address. Okay and that Bitcoin address can be pretty ugly or they could push it to a vanity wallet and get something like one Whole Foods cares. It would be a pretty expensive public key to generate this big but and then a bunch of you know 5xD4 until you have whatever it is, the 32 characters whatever it is that the public key is okay?

And so that anyone who walks in the store who cared sort of about transparency of where their monies go. And so, a lot of consumers now who are walking in the stores actually really care where their money goes after they pay the cashier at Whole Foods and only with Bitcoin can they now go online and only if Whole Foods started using something that offered full transparency and the only technology that does it, which is Bitcoin in crypto currencies the consumer could now see where the money goes. They could see for sure if Whole Foods was sending that money to Kenya, they could see to which farms in Kenya and then the farms themselves if they also adhered to serve a transparency policy would be paying their workers to public addresses that could be followed on the blockchain and you could see the actual salaries of the individual workers. Okay?

And a lot of people are like wow no business would ever want to do this, okay. Every business needs the ability to run some shenanigans. And it's absolutely true. No business would really want to do this. But if Whole Foods for example decides not to do it, we're not going to embrace Bitcoin in this full transparency where you can see exactly where your money is going, how many organic goods we're buying, when we actually bought the organic good so if they bought me you'd actually see when the money went to the Butcher and the Butcher might have some way to put on the blockchain when he delivered the meat, okay? So, these things you might be able to incorporate in, say Whole Foods decides, nah! We're not going to go for that. Well, you can start to imagine who might any sort of smaller store that's trying to gain some foothold into Whole Foods Market would now advertise that they have more transparency. They would incorporate the Bitcoin system and they would embrace full transparency to compete with Whole Foods. And so this little store perhaps because they're offering more transparency will start to gather more and more customers. And people will feel very satisfied seeing where the money that they put in the store goes to, precisely. And this little store will now provide pressure with the increased customer on to the Whole Foods of the world and may perhaps eventually force Whole Foods to become fully transparent. Okay.

And this full transparency is something that consumers demand. Remember it's not what the business wants, no business really wants to open their books to anyone. The consumers themselves will provide an enormous amount of pressure and this could be called the new free market of transparency, something the world has never seen. And strangely in the world of Bitcoin it's not even talked about, perhaps there are so many libertarians so concerned about their privacy that they ignore this other really beautiful feature where we can make sure that people in the Third World are receiving fair salaries, we can make sure that the farm is more organic and we can make sure that the food we're eating, right? So, it all comes back to us and our children, the food we're eating is good for us and good for the world. Okay. So we could really provide this amazing feedback loop with full transparency.

Now, it's interesting to realize that Whole Foods is a very good example, but it's only one example where this free market pressure for full transparency could change the way the world works. In fact, if you start to think about charities, right? And lately in the news people talk about how much money charities bring in and how much money ends up in the hands of the people who really need the money. So, the charity provides organizational overhead. And sometimes if you go to one of the charity sites a better charity will tell you exactly how much organizational overhead they have and some of these charities have an 80% organizational overhead which is this really tragic, okay. So if you put in a $1,000 to the charity $800 go to their advertisements and then $200 might say, for example, get delivered to Africa.

Now, once that $200 hits Africa it's even harder to figure out what happens and there's no question the amount of corruption and theft of this money is so high that many insiders have suggested that the percentage of funds that arrive where the charity intends is somewhere more like 1%. And this is just an amazing tragedy on the world with charities could suddenly do the opposite, all right. They could declare that they are fully transparent. And they're going to find an amazing free market pressure because the more transparent they are the more likely they're going to get donations. So instead of accepting payments from credit cards or cash or whatever it is if they include their Bitcoin address and only receive payments by that and only pay out from their Bitcoin addresses, right? And there is some issue with having one address and all that but we're not going to worry about that is a technicality there's a lot of ways to provide sort of an open transparent wallet where all your receiving money comes in and then all your spending can go out. And these charities would be under enormous free market pressure to provide one 100% transparency of their funds and they could call the charity, charity of transparency.

And then we could see the money leave the U.S., we could see how much tax sort of in their operational overhead and I guess by the time you start using Bitcoin you're going to start to see a drop of things like 10% and then when it arrives in, say, Africa or South America or even in the U.S. somewhere, right? We'll see where the funds go because we're going to be insisting that all of the recipient on the entire chain until we actually see that the people who need the charity most are receiving their money into their public addresses. And they'll be more than happy to have a transparent address because it will mean the percentage of the charity money that actually lands in their pockets is going to go from 1%, right, to something possibly as high as 95%.

And government officials and all these people who normally get in the middle of all this money because they have control over the banking system, they have controls over how payments work in their country are going to be left out of this chain and they'll get actually have to turn around and start to plead to their citizens for this money in the form of taxation but when you plead for taxation you end up with better government. Because there's sort of an index right, there sort of a way to compare good governments and good governments actually receive more taxes than average than bad governments because they're relying on the people to give the money. But if the people are giving the money they're going to riot unless the government is providing real services. So by ignoring the sort of corrupt governments on the way in you might end up giving them some money on the way out. But then they're going to actually have to provide some services and this pressure could really be created by this free market of transparency, okay, something that people just don't talk about with Bitcoin.

Now, let's move on. Governments, right? Right now, we hear all these stuff about government needs to regulate Bitcoin. It's so terrible all this laundering, right, all this AML KYC stuff, all these a nefarious purchases, all these drug users but it turns out if the government sits back and lets this possible free market for transparency kick in they may end up in situations where it's easier to tax, right? Because as you walk down the street you will no longer want to just put your money into any company, you'll really wonder what that company is doing and there is real enormous pressure right now by consumers for a company to be good to the earth, good to the people, good to the health, right, not by poisons, not include chemicals. As you're walking down the street you're going to find almost all your purchases that you may want to make so this is this possible world right. You may walk down the street and insist that every store and every purchase that you make goes on to the Bitcoin blockchain so that you can follow what that store does with the money.

Well, if those companies are being transparent well then they have to be transparent also for the government. So, at the end of the year instead of having to provide a 1040 or a 1041E or this and that and the other thing and all this blah, blah, blah about taxes really at the end of the year the company would just have to press a button and all their taxes would just spit out. And there's no need even for the I.R.S. right because with full transparency boop! boop! boop! all taxes can be paid (figure snap) with just one button click, okay.

Now, there's another side to the government as well. And we kind of started mentioning it with how it might work in Africa or other countries but overall in the whole world there is $ 1 trillion per year of corruption. And it seems clear that the place where corruption happens the most were the greatest percentage of this corruption money is being just stuffed into people's pockets is inside the government itself. And government programs are very hard to price and they're very hard to analyze and no one wants to spend the money to set up the analysis and all the accounting, well, guess what that can all be done for free. Bitcoin offers free accounting, okay.

So all the money spent on accounting, all the money for all these crazy sort of analysis let that Rushman in sociology download the blockchain and do all the analysis you need on a laptop. Okay. These types of tools will really be available if people turn to Bitcoin as a form of transactional currency inside the government. And there's no question that transparency basically sunshine is the one thing that really tackles corruption. And corruption is just a really big problem in Europe, it's a really big problem Greece, Italy and Spain, Africa and Asia and Thailand wherever you go there's big, big problems with corruption because you pay someone but then you don't know what they do with that money.

Bitcoin follows them every step of the way, every penny, every cent, every pocket it goes to transparency in a way the world has never known. There's nothing ever been made like it. Okay. So say you're a politician and you're opening a new government program or say you're running for election, you could now claim that you're working on a fully financially transparent platform where all your programs are going to be fully transparent and indeed maybe even your own personal life will become fully transparent, people are very curious of how government officials spend their money.

Now, this is not to say that they will legally have to do it but again it's a close race one politician right. I remember when Romney didn't want to release his tax records is running and another politician is running against him and the other politician says boom here is my Bitcoin accounts, here is every penny I've made, here is every penny I've spent. He doesn't have to do it but he can offer up something that he's never been able to offer up before transparency in a way the worlds never know. And so it becomes a sort of pressure again. It's like a free market pressure for politicians to open up the account books, it's a pressure from government systems and government programs to open up the accounting and it's a really big pressure on those who want to make all their money off of corruption, bribery, treachery, stealing all kinds of funds that are sent to Africa and India and all that and they're making enormous amounts of cash and they're driving through Africa in their beautiful ATVs while the people still stay poor. Okay, so corruption is a real, real tragedy.

And a free market of transparency could take the world's corruption of one trillion a year and drop it down to hundreds of thousands. Seems unlikely but there would be certainly and a major, major drop in the amount of possible corruption that exists. Okay, we've already spoken about the Whole Foods of the world of the competitors, the Whole Foods who by using transparency would find themselves in market edge. And this idea, I mean it's just amazing how little you hear about perhaps Bitcoin's one of its most stunning revolutionary features. And most people seem to think that transparency of money is a terror but it actually can provide part of this revolution that Bitcoin might be offering. And remember it's a slider so if you don't want transparency the tools are going to get better and better and better for you to provide full anonymity of your transactions. But if you find that in your personal life you like Facebook, LinkedIn you really have nothing to hide and you might find some economical advantage or some sort of job hiring advantage to slide your slider over to full transparency. Well, then you can use that part of the tool as well.

That's it for today but we're going to continue with this idea of Bitcoins revolution and how it's really not fully understood much the way that in Runnymede in 1215 few realized when they were making the Magna Carta that clause 39 would really make the Magna Carta amazing and almost all the other clauses were just so much garbage that they basically be dumped. Few realized in 1215 that that one clause the 39th clause is sitting there, the bloody nobles in the bloody king signing this document, few realize that it would provide most of American liberties today. We're looking at a revolution of liberty okay and it's a revolution that really needs to be well understood and it's not about 3% fees on credit cards and it's not about lowering remittances by 9% those are great things. But the revolution of Bitcoin is actually much, much bigger than that. And even if Bitcoin itself fails the idea that we could provide full transparency in some of these other revolutionary ideas that we're going to talk about are going to be with humanity forever. And this all started in 2009 by a guy who was just a little bit upset at the banks and not understanding the amazing tool he was providing much as the nobles and the king didn't really understand how the Magna Carta would eventually be called the Magna Carta de liber Tatum in 1215 and would affect every country in the world in a dramatic way and provide rights to citizens and it would provide the rule of law. Okay so that's it for today. Hope you enjoy our video. Please remember to like, subscribe, comment, do whatever else you want to do and we'll catch you in the next video.

Written by James DeAngelo on February 22, 2014.