Participants: Adam B. Levine ABL Andreas M. Antonopoulos AA Dr. Stephanie Murphy SM Jonathan Mohan - JM Marco Santori - MS J.

J.R illets - JR Lets Talk Bitcoin: E37 Meeting Mastercoin

ABL: !i" and #elcome to Let$s %al& Bitcoin" the t#ice-#ee&ly 'ourney into the ideas" people" and pro'ects (uildin) the ne# di)ital economy and the *uture o* money. e close on our *irst Au)ust here at L%B #ith an episode (urstin) at the seams. %his #ee& sa# a *lurry o* ne#s e+citedly claimin) disaster or deliverance *rom a set o* meetin)s the Bitcoin ,oundation undertoo& in the -S capital" ashin)ton D.. Bitcoin /0.$s Jonathan Mohan sat do#n #ith Marco Santori" head o* the ,oundations Le)al A**airs committee and one o* the primaries at this #ee&$s meetin)s in 1uestion to *i)ure out #hat #ent on and i* it$s somethin) *or the avera)e user to #orry a(out. Bitcoin" Litecoin" Bar(ecue.oin" Mastercoin2 3ne o* these thin)s is not li&e the other" and to#ards the end o* today$s sho# 4 spea& #ith J.R illets #ho is at the end o* a success*ul cro#d-*undin) launch a(out #hat that means and #hy everyone should (e e+cited a(out his ne# payment layer" called Mastercoin. %hrou)hout the sho#" 4$m 'oined (y Stephanie and Andreas *or a variety o* discussions" *rom the potential *or Bitcoin e+chan)es on American 4ndian reservations" to the %erracoin time-#arp attac& and #hat can (e learned *rom it" and *inally a(out physical Bitcoins and their uni1ue proposition to trade di)ital advanta)es and hurdles *or their physical e1uivalents. 5n'oy the sho#" and ma&e sure to chec& out the ne# Lets%al&Bitcoin.com in the last *e# days" Je** ,on) too& a loo& at denationali6in) money #ith Bitcoin in !aye& to Satoshi and Beyond. %uur Demeester shared his 'ourney *rom cautious interest to Minin) Ma)nate #ith An 4nsider$s %a&e on Bitcoin Minin)" and 4nvictus 4nnovations co*ounder Daniel Larimer tal&ed a(out improvin) #hat Bitcoin started to ta&e (ac&7 not 'ust *inancial control" (ut communication and identity" too. ABL: My name is Adam B. Levine. 4$m a #riter and spea&er #ho li&es to tal& a(out complicated topics in understanda(le terms. As usual" #e$re 'oined

(y the other hosts o* Let$s %al& Bitcoin: Andreas M. Antonopoulos is an e+pert in secure systems and decentrali6ed net#or&s. AA: 89:;<=>9. ABL: Dr. Stephanie Murphy is a scientist and syndicated radio host Andreas" #hat did you even say2 AA: 4 said" ?89:;<=>9"@ #hich means ?)ood mornin)@ in Aree&. ABL: 4n addition" Dr. Stephanie Murphy is a scientist and syndicated radio host. SM: !o# can 4 (eat that2 !i. ABL: %hat #or&s )ood" spea& your native lan)ua)e. %oday #e$re )oin) to 'ump ri)ht into some interestin) discussion topics su(mitted throu)h the Let$s %al& Bitcoin su(reddit that you can visit (y )oin) to Lets%al&Bitcoin.comBtal&. %his one is entitled: ?Bitcoin on American 4ndian Reservations.@ ?4 #as listenin) to a non-Bitcoin related podcast"@ says %homasCDD" ?#here they #ere tal&in) a(out the possi(ility o* avoidin) -S *ederal re)ulations (y partnerin) #ith American 4ndian tri(es (ecause they have tri(al soverei)nty. 4t occurred to me that this #ould also (e a )reat place *or Bitcoin" too. A 1uic& Aoo)le search didn$t turn up any discussions on this" so has the idea (een thou)ht o* already2 %he Bush E Administration clari*ied that ?Limitations on tri(al po#ers and sel*)overnment are *e#" and include the same limitations applica(le to states. ,or e+ample" neither tri(es nor states have the po#er to ma&e #ar" en)a)e in *orei)n relations" or coin money@ and this is important" the coin money part. %his does not seem to imply that they must ta&e -S dollars as their de*ault currency. 4n *act" the late Russell Means o* the Repu(lic o* La&ota had proposed that the nation use not *iat currency" (ut instead adopt a )old standard. ould they (e interested in usin) Bitcoins2. ABL: %his is a really interestin) use scenario 4 thin&" (ecause they$re ri)ht. 4n a lot o* places there are de *acto monies. 4n most parts o* the #orld" the local currency is the de *acto money" (ut (ecause there are these nations #ithin nations" they don$t necessarily have the same rules applied to them. So #hat do you )uys thin& a(out this" as it relates to Bitcoin2

SM: 4 thin& it$s a really interestin) idea. 4$d li&e it i* every(ody #ere 'ust *ree to use Bitcoin completely *reely. 4 can see #hy people *eel li&e this appeals to them" thou)h" tryin) to partner up #ith /ative American tri(es" and actually historically" there #as the La&ota nation and they had the *ree La&ota (an& #here they #ere mintin) silver. %hey pro(a(ly didn$t care too much a(out those rules that said" ?0ou can$t ma&e coins"@ and they also tried to succeed a(out a million times" and they did succeed a(out a million times as #ell" 'ust 4 don$t &no# i* the -S )overnment reco)ni6ed it. %here$s (een a hu)e movement *or /ative American soverei)nty that$s )one on *or 1uite a #hile" and it$s interestin) 4 #as 'ust on a road-trip and 4 #ent throu)h upstate /e# 0or&" and there #as the Si+ /ations the -nited Si+ /ations #here there #ere several native tri(es that have *ederally reco)ni6ed soverei)nty" and they$ve )ot some land that they have and cops don$t )o in there" they turn around out the (oundary" you don$t have to sho# a passport or any documents to )o in there" #hich is pretty cool" 4 li&e that. 0ou can )o in and sit do#n at a casino or a restaurant and it has a smo&in) section and a non-smo&in) section #hich you #ouldn$t *ind in the -S not that that$s e+actly the *reedom 4$d #ant to have" 4$m not a smo&er or anythin)" (ut it 'ust made it o(vious that you$re not in Fansas anymore" you$re in a di**erent place. 0eah" Bitcoins could (e a natural *it. %he thin) that 4 #ould really li&e to see more than that thou)h is *or people to not have to necessarily )o into a /ative American reservation to (e a(le to use Bitcoins. 4$d li&e to 'ust see complete *reedom o* Bitcoin use every#here. ABL: 4 don$t necessarily &no# i* #e$re tal&in) a(out needin) to )o into a reservation to use Bitcoin. 4 thin& this is more li&e: 4* you had" say an e+chan)e AA: Ri)ht. ABL: - that #as (ased out o* one o* these reservations" then they don$t necessarily have the same sort o* rules (ecause it$s technically not the -nited States. /o#" #hether or not a)ain" li&e you said" the -nited States chooses to reco)ni6e this is a di**erent matter entirely" and as #e$ve seen" companies li&e Fapochi #allet have opted not to do any (usiness #ith any -S customers #hatsoever (ecause even thou)h they$re not a -S company" the -S *inancial authorities assert that i* you do (usiness #ith any sin)le -S customer" then de facto all the rules that apply to the same people #ho run a -S company also apply to you.

SM: 5+chan)es and a vi(rant Bitcoin economy on native reservations #ould do a lot. 4t$s really interestin) in the -S (ecause there$s these American 4ndian reservations - some o* them" they$re doin) pretty #ell" there$s not much poverty7 (ut in some o* them there$s a lot o* poverty" a lot o* unhealthiness" a lot o* disease - it$s *ran&ly the places #here the *ederal )overnment has stepped in and done everythin) - #anted to mana)e everythin) a(out lives o* these people - on top o* ta&in) their land ori)inally. 4 thin& havin) a Bitcoin economy there could really (e a chance *or economic revitali6ation" especially in some o* these areas #here they really need it. AA: ell" interestin)ly enou)h" over the history o* the 4ndian reservations" even i* the *ederal )overnment doesn$t particularly li&e it" the courts have reco)ni6ed 1uite an e+tensive level o* soverei)nty in the reservations includin)" #ith re)ards to Gsomethin)G" #hich has (een esta(lished (y the Supreme .ourt in several separate occasions" (ut also in issues o* money lenders and money transmitters" and other thin)s li&e that" *ar more than a currency #ithin the reservation - 4 thin& it #ould (e much more interestin) to thin& o* the reservation as a soverei)n le)al environment *or esta(lishin) e+chan)es" *or esta(lishin) payment suppliers and thin)s li&e that #ithin the -S. ABL: Do you thin& that that #ould )et around ,in.5/ assertin) authority2 Because it seems li&e you can treat it li&e a di**erent country (ut it$s still AA: ell &eep in mind it$s not 'ust ,in.5/" you$ve )ot all these overlappin) 'urisdictions" and 4 don$t thin& ,in.5/ has (een the main pro(lem nor the *ederal )overnment necessarily" (ut the states have (een. hen you )et out o* the *ederal )overnment$s 'urisdictions" yes you do" partly" (ut not entirely" so there are some thin)s" there$s a lot o* overlap. But" 4ndian Reservations are su('ect to some state re)ulations" not all state re)ulations in the state they reside. So o*ten it$s a patch#or& o* la#s and certainly they have some soverei)nty" more so than the county ne+t door that$s not an 4ndian Reservation. 4 thin& it$s #orth a court case" and really that$s the only #ay you$ll *ind out. Start one" let them sue" don$t let them shut you do#n. SM: 4$m &ind o* e+cited a(out that idea" 4 #onder i* it$s already (een started - 4 #onder i* someone$s already doin) this.

AA: ell i* casinos #ere a )ood idea *or American 4ndians and #ere a(le to )enerate revenue *or the Reservations" 4 thin& Bitcoin 5+chan)es could e**ectively do the same thin)" (ut #ith a much more )lo(al audience" and #ith much less reliance on )eo)raphic (orders. %his should (e )reat" it$s another #ay to ta&e advanta)e o* #hat little American 4ndians )ot (ac& *rom the )overnment. ABL: %hat$s a really interestin) point" that it$s a(out the )lo(al audience relative to )am(lin) #here it$s more a(out people comin) in" (ecause 4 tal&ed a(out this #ith Je**rey %uc&er the last time #e spo&e" a(out this idea that a country li&e" say" Areece or .yprus" could choose to e**ectively optout o* the monetary system and use Bitcoin" to instead o* (ein) local or re)ional #ith" say" the 5uro" they could instead (e in the )lo(al system" #hich is o* course the Bitcoin or the cryptocurrency system. So thin)s similar to the same thin) could very much apply here #ith these little soverei)ns" and each one o* them can not only connect to each other throu)h this as a means o* doin) easy (usiness *rom reservation to reservation" (ut also to interact #ith the entire #orld #hich is very e+citin). AA: hich is in *act ho# money used to #or&. %he idea that you have a sin)le source o* money is ridiculous" and in *act over the history o* money all o* these soverei)n environments and in *act much smaller units o* or)ani6ations do#n to city states and even individual *amilies #ere issuin) currency and (ac&in) that currency in a healthy mar&et o* currencies. /o# it$s do#n to soverei)n states and it$s a healthier return to ho# money should (e in much more *ree economy. ABL: e don$t have any direct e+perience #ith this" (ut i* any o* our listeners out there are part o* a reservation or have an opinion on this that comes *rom your perspective" a(solutely #rite in: adamHletstal&(itcoin.com or come to the Let$s %al& Bitcoin su(reddit at Lets%al&Bitcoin.comBtal&. SM: 4 'ust #onder i* there$s a /ative American reservation that has a Bitcoin 5+chan)e or some &ind o* Bitcoin operation there" and they start to do really #ell #ith it" is the *ederal )overnment )oin) to see it and thin& ? e need to )et our hands on that"@ or the state )overnments 'ust li&e the lottery or even casinos #here they #ant a state-run casino in some places to )enerate revenue *or the state - i* it )ets too success*ul" 4$m #onderin) i* states are )oin) to (e li&e ? e #ant a piece o* that@ in some #ay.

AA: /othin) di**erent a(out that. 4 thin& it$s 'ust commerce li&e any other SM: 0eah (ut" could you )uys ima)ine a state-run Bitcoin 5+chan)e2 %hat #ould (e li&e )oin) to the DMI to )et some Bitcoins. 4 'ust have trou(le ima)inin) that. Gne# sectionG ABL: %hin)s used to (e simple. Bitcoin #asn$t ta&en seriously" so important companies li&e Bit4nstant #ere *ounded on a #him7 the *aintest scent o* capital a(le to cataly6e their startup operations *or months. But" thin)s are di**erent no#" and as #e move to#ards re)ulatory and )overnmental le)itimacy" the (arrier to entry *or ne# people rises alon) #ith the cost o* compliance. %he Bitcoin ,oundation is an or)ani6ation on the ra6or$s ed)e - pushin) *or le)itimacy throu)h education" yet tryin) to protect the *inancial industry *rom the crushin) (urdens that come alon) #ith it. A*ter meetin) #ith an alpha(et soup o* re)ulators and le)islators in D. earlier this #ee&" Bitcoin /0. *ounder and L%B /e# 0or& correspondent Jonathan Mohan cau)ht up #ith Marco Santori" chair o* the ,oundations Re)ulatory A**airs committee" and one o* the primaries pushin) to#ards an understandin) o* Bitcoin at the )overnment level. e 'oin them no#. JM: So" Marco" than& you *or sittin) do#n and tal&in) #ith us. 4 &no# that you$re a la#yer" (ut #hat is your involvement #ith the Bitcoin ,oundation2 MS: 4$m a La#yer in private practice here in /e# 0or& .ity" 4 represent the early sta)e technolo)y companies" more and more the di)ital currency industry" and Bitcoin in particular. As to the ,oundation 4$m the chairman o* the Bitcoin ,oundation$s Re)ulatory A**airs committee" #hich means via committee #e inter*ace #ith state and *ederal re)ulators on the topic o* di)ital currency re)ulation. e try to - at least no#" our *ocus is on education and closin) the &no#led)e )ap" and ma&in) sure that state re)ulators and *ederal re)ulators understand Bitcoin industry" the (usinesses in it" the users in it" #hat it has (een" #hat it is" and #hat it mi)ht (e since realistically none o* us really &no# *or sure. JM: 3ne day" you and a(out J other representatives *rom the Bitcoin ,oundation too& to ashin)ton to spea& #ith *ederal re)ulators a(out Bitcoin. !o# did that meetin) even come a(out2

MS: 4t #as ,in.5/$s con*erence" it #as ,in.5/$s meetin) - they called it" and they invited the Bitcoin ,oundation. %hey also invited all o* the other a)encies" re)ulators and en*orcement a)encies. %hey mana)ed to )et really a lot o* the (i))est sta&eholders in ashin)ton in the same room" so &udos and hats o** to them *or doin) so. JM: %here #ere a lot o* o* scary" three-lettered-named or)ani6ations there. ho #ere the a)encies that #ere represented at the con*erence and ho# #ell #here they represented2 MS: %here #ere a ton o* a)encies there" and li&e you said it$s somethin) o* an alpha(et soup #hen you list them all o**" (ut 4 can try to )et most o* them. ell" o(viously ,in.5/ had hosted it" so ,in.5/ #as there. 4RS #as there" ,D4." ,ederal Reserve" 3**ice o* the .omptroller o* the .urrency" ,B4" D5A" Secret Service" and the Department o* !omeland Security #as there as #ell. JM: So there #ere 1uite a num(er o* en*orcement a)encies. their ta&e on it2 hat #as

MS: As you mi)ht )uess" the re)ulators and the en*orcers each had di**erent ta&es on Bitcoin. %hey vie# Bitcoin throu)h their lenses - the re)ulators" they #ere more interested in the policy positions o* #hat the conse1uences are o* re)ulatin) Bitcoin in a certain #ay" #hereas the investi)ative *ol&s #ere interested in the nitty-)ritty methodolo)ies to *ind (ad actors" and 'ust )eneral investi)ative tric&s and tips that they could use to do their investi)ative 'o(s. 3ne o* the representatives *rom the ,oundation #ho #as there #ith me - Brian Flein - is actually an e+-*ederal prosecutor and #as a(le to e+plain ho#" say" usin) the (loc&chain" *or e+ample" ma&es investi)ation o* a Bitcoin transaction possi(le" and it ma&es it possi(le in #ays that investi)atin) a cash transaction #ould really never (e possi(le. JM: So" #ould you say that there #as more e+citement or *ear in the )roup2 MS: 4t depends on #ho #as as&in) 1uestions. Just to recap the structure o* it" there #as a(out an hourKs #orth o* presentation *rom each o* the representatives *rom the *oundation" and then #e did a(out an hour o*

ans#erin) 1uestions" some the 1uestions #ere hard 1uestions" and sometimes #e had to )ive hard ans#ers a(out #hat a(out Bitcoin is simply not )oin) to chan)e" #hat a(out Bitcoin mi)ht (e chan)ed in the *uture (ased on the communities interest in doin) so. So" some o* the investi)ators li&e 4 said #ere interested in hearin) more a(out en*orcement and the methodolo)ies and the re)ulators #anted to &no# more a(out #hy" *or e+ample" some(ody mi)ht #ant LM"MMM di**erent Bitcoin addresses i* it #asn$t to launder money. %he investi)ators #anted to (e a(le to &no# #hat they #ould (e a(le to do to *ollo# a transaction *rom Point A to Point B" really *ollo# the money" (ecause i* you &no# ho# criminal *inancial investi)ations #or& typically" they &no# #ho they$re tryin) to )et" the investi)ators" #hat the challen)e is is discoverin) #hat happened #ith the money - #ho too& the money to #ho" at #hat time" and #hat amount2 %hat sort o* thin). So" 4 have to say it #as more interest than anythin) and 4 didn$t )et a lot o* *ear *rom people" 4 thin& that it #as really encoura)in) actually" to see them as&in) intelli)ent and in*ormed 1uestions and not 'ust )ivin) &nee-'er& reactions that 4 thin& a lot o* people *eared #e #ere )oin) to )et. JM: %he *ollo#in) day" you spent almost the entire day tal&in) to .on)ressmen a(out Bitcoin2 hat #as that e+perience li&e2 !o# many did you have to tal& to" and #hat #ere their concerns and their *ears2 MS: %hat$s a )ood 1uestion. hen you run throu)h it in one day and try to loo& (ac& on it" all the conversations are distinct. 5very(ody as&s di**erent &inds o* 1uestions and has di**erent &inds o* concerns" so #hen #e #ere meetin) #ith representatives *rom conservative le)islator$s o**ices" #e #ould have one set o* concerns" and #hen #e #ere meetin) #ith more li(eral le)islators #e #ould have another set o* concerns" and #e$d have to respond to each o* them truth*ully e+plainin) #hat a(out the Bitcoin protocol is )ood and #hat a(out it is potentially (ad *or them" #e really had a *ran& conversation and 4 #as surprised to see the di**erence in levels o* understandin) and levels o* concern - some o**ices really #eren$t all that interested in Bitcoin" (ut on the other side o* the spectrum some o* them #ere really concerned a(out #hat #as )oin) on - some o* them #ere very in*ormed a(out Bitcoin" it #as a &no#led)e )ap #e needed to close. JM: hat #as one o* the tou)hest 1uestions that one o* the .on)ressman as&ed - 'ust as a *ly on the #all - and #hat did that conversation loo& li&e2

MS: 4 thin& that they all seemed to (e concerned a(out money launderin). 3ne o* the more interestin) concerns that is pro(a(ly apropo is privacy concerns - they #anted to &no# a(out use cases" they #anted to &no# a(out e+amples o* #here and ho# Bitcoin supposedly puts privacy (ac& in the hands o* consumers" and #hat are the conse1uences o* that - #hat are the )ood ones and #hat are the (ad ones2 JM: %here$s this vi(e in the community that the )overnorKs 'ust #ant to learn a(out Bitcoin" not to )et it re)ulated" (ut to &ill it as 1uic&ly as possi(le. hen you #ere there" #hat #as the *eelin) you )ot *rom them2 as it that they$re )enuinely #or&in) to)ether to )et it re)ulated" or do you thin& that there$s 'ust so much o* a lac& o* understandin) o* Bitcoin or may(e 'ust a misunderstandin) o* ho# it can (e used" or a *ear that it mi)ht (e used *or illicit means that they may 'ust #ant to &ill Bitcoin entirely2 MS: ,irst o* all" 4 don$t thin& that any(ody that #e spo&e #ith had any attention or desire to &ill Bitcoin or to eliminate it" that at least they e+pressed to us. 3ne o* the positions that the ,oundation #as very *irm on - it #as sort o* #here #e had our pivot *oot do#n - #as that people have *inally *i)ured out ho# to use the internet to send money and that there$s no chan)in) that - you can$t - there$s no stoppin) it. %he real 1uestion is" ho# do #e address it2 hat do #e do *rom here - and that #as our *irst premise" it$s not somethin) that any(ody really seemed to 1uestion and 4 thin& that people understood intuitively that this is a real" su(stantial development in the course o* human a**airs. 4 don$t thin& anyone e+pressed any real interest in &illin) it or sti*lin) it. hat they #anted to &no# #as: no#" #hat do #e do2 JM: 4 &no# you lead the Re)ulatory A**airs committee - to a person listenin) to this tal& #ho #ants to )et involved" and help this community move *or#ard as it relates to re)ulation" ho# could they contact you" ho# could they help2 MS: 5very(ody that #e$ve spo&en to so *ar in ashin)ton *ollo#ed comments and #ithin the ,oundation 4 thin& the )eneral consensus is that this #as 'ust a tremendous success *or all involved - *or those #ho #ant to )et more involved" the *irst step is to loo& into 'oinin) the ,oundation i* you$re interested in havin) a voice in the course o* Bitcoin a**airs" )enerally and speci*ically in these sorts o* meetin)s" the (est #ay to do that is to (e a part o* it.

JM: %han& you so much *or doin) this" Marco. Feep up #hat you$re doin)N MS: %han&s" 4$m happy to (e here. Gne# sectionG ABL: 0ou$re listenin) to Let$s %al& Bitcoin" the premiere audio cast providin) ne#s and insi)hts that cover the rapidly evolvin) #orld o* di)ital money our t#ice #ee&ly sho# includes analysis *or late-(rea&in) ne#s" updates on &ey technical" re)ulatory" and (usiness issues" and intervie#s #ith the &ey people drivin) the ne# di)ital economy. Let$s %al& Bitcoin o**ers sponsors an attractive #ay to reach a tar)eted and savvy audience. ,or more in*ormation" e-mail sponsorsHletstal&(itcoin.com. Advertisement: More than DMM"MMM users and countin) trust (loc&chain.in*o. 4t$s a Bitcoin #allet service" and a #ealth o* in*ormation" and is completely *ree to use. ith a (loc&chain.in*o #allet" you$ll )et the convenience o* a #e( #allet" and the security o* a des&top client. (loc&chain.in*o is also a (loc& e+plorer - you can use it to see Bitcoin transactions in real-time" chec& the (alance o* any Bitcoin address" and see many handy Bitcoin charts all *or *ree. See #hat they have to o**er today at (loc&chain.in*o. SM: e received a listener email a(out somethin) that happened a(out a month a)o" 4 thin& it$s pretty ever)reen (ecause it hi)hli)hts an issue that could potentially a**ect all di**erent &inds o* coins includin) Bitcoin" so this listener #rote in a(out a ?%erracoin attac&@ that happened recently and it$s (een re*erred to as a CLO attac& and also as a time-#arp attac&" apparently #hat happened is - some(ody pointed a po#er*ul source o* hashin) po#er at the %erracoin net#or& - and %erracoin" (y the #ay" is an altcoin" the thin) that$s di**erent or uni1ue a(out %erracoin is that it has a very short (loc& )eneration time and the di**iculty also ad'usts very" very 1uic&ly. %erracoin #ould (e a )reat e+ample o* a coin that mi)ht (e prone to this thin) that Andreas descri(ed as (ein) ?under#ater@ on your di**iculty" #here your di**iculty could )o really hi)h and then someone could pull out a very po#er*ul miner and then you could end up #ith a di**iculty that$s hi)h and not enou)h hashin) po#er to match it - and then you can$t *ind a (loc& suddenly *or a very lon) time. %erracoin has these characteristics" and apparently #hat happened is" since it$s an altcoin" it$s )ot a smaller

net#or&" some(ody points a po#er*ul AS4. at the %erracoin net#or&" )enerates their o#n (loc&chain - on this (loc&chain" apparently they also did somethin) so that the di**iculty #as a lot lo#er so that coins could (e mined a lot easier" not e+actly sure ho# they did that (ut that$s the time#arp part o* the attac&. %hen" they mined a (unch o* %erracoins on their o#n alternate (loc&chain" and then they too& them to an e+chan)e" sold them on the e+chan)e" traded them *or di**erent coins" #ithdre# the di**erent coins" and then vanished. And so #hat they had #as (asically that they mined all these coins on an alternate %erracoin (loc&chain" sold them and then disappeared" and since that #asn$t the real (loc&chain those coins never e+isted (ut they )ot the coins that they e+chan)ed them *or. Does that ma&e sense2 AA: 0es" a(solutely" sounds li&e e+actly the &ind o* attac& you can pull o** i* you can persuade nodes" and in this particular case" it sounds li&e the node they persuaded #as the e+chan)e" that this #as the consensus (loc&chain. So the e+chan)e had to (e at some point persuaded that the consensus (loc&chain *or %erracoin #as the one in #hich this particular miner had outputs to spend" and so they persuaded the e+chan)e to (e on the #ron) (loc&chain. %hat$s the dan)er o* runnin) these services" especially i* you are an outlet an o**-ramp - and o*ten *or the Bitcoin or altcoin economy" unless you$re a(solutely sure that the value is there to spend and you can source that in*ormation independently *rom multiple peers or veri*y it - ma&e sure you$re on the ri)ht (loc&chain - i* you )ive that value out" you$re the dou(le-spendee. SM: So this is a small e+chan)e that (asically )ot scre#ed in this transaction un*ortunately" it #as Bter" 4 thin&" #as the name o* the e+chan)e2 Do you thin& that this is - o(viously i* a coin has more hashin) po#er on it$s net#or&" the less li&ely an attac& li&e this is to happen" and pro(a(ly this is partly the *ault o* %erracoin (ein) a small altcoin and a ne#er &ind o* coin" and also minin) on S!AECP #here some(ody can (asically ta&e current e+istin) technolo)y. #hich is li&e a po#er*ul AS4.. and use it to ta&e a lot o* the %erracoin net#or&$s po#er and do somethin) malicious #ith it" (ut do you )uys thin& that other coins are vulnera(le to this" too2 .ould some(ody do this #ith a Scrypt coin" could some(ody do this #ith Bitcoin2 4t #ould (e a lot harder" (ut #hat can #e learn *rom this lesson2

AA: ,or a point o* re*erence" and this is a really interestin) pa)e that has (een created (y Je** Aar6i&" #ho is one o* the developers o* Bitcoin. %his is the ?Bitcoin Ro(ustness 4nde+@ - BR4Q - and #hat Je** has done here is (uilt a site #here you can see the estimated cost o* a CLO attac& a)ainst Bitcoin as o* today. And so today in order to do a CLO attac& a)ainst Bitcoin it #ould ta&e JMM million dollars. As a point o* comparison" that is hi)her than the de*ense (ud)ets o* RE countries. SM: 0es" 4 love that (ecause it compares it to the military spendin) o* all these di**erent countries. AA: So" JMM million is #hat it #ould ta&e to even attempt to launch such an attac& on Bitcoin" and then even i* you #ere a(le to do that" you$d have to *ind an e+chan)e that #as persuaded that your (loc&chain #as a valid (loc&chain and #asn$t su**iciently connected to notice that you #ere doin) a CLO attac&. Feep in mind that %erracoin e+chan)es at some point #ere only )ettin) L (loc&chain reported to it or )ettin) multiple (loc&chains reported to it #hile connected to the %erracoin net#or&" so there$s a num(er o* di**erent #ays that these types o* attac&s occur" it$s not 'ust )ettin) the hashin) po#er - you also have to persuade someone that you have the ri)ht (loc&chain. ABL: 4$m tryin) to *i)ure out ho# somethin) li&e this can (e avoided" (ecause it sounds li&e this e+chan)e didn$t necessarily do anythin) #ron)" it sounds li&e this is more somethin) 'ust havin) to do #ith" essentially" the net#or& (ein) ta&en over *or a short amount o* time as *ar as the e+chan)e #as concerned. Do #e &no# i* they #ere not #aitin) *or many con*irmations or did the con*irmations 'ust not matter2 Because this is a 1uestion - people tal& a(out Litecoin or altcoins that reduce the (loc& time *or con*irmations and say that that ma&es it so that you have *aster con*irmations" (ut my understandin) is that that isn$t necessarily true - you do )et *aster con*irmations" (ut the con*irmations are less valua(le. AA: So let$s *irst e+plain #hat a con*irmation is" (ecause 4 thin& there$s a (it o* a mis-understandin) around: there is no such thin) as a messa)e sayin) ?.on*irmedN@ - there$s no con*irmation messa)e per se. hat a con*irmation is is that another (loc& has (een mined on top o* the one your transaction is in. 4t means you$re (uried under another (loc&" that$s L con*irmation. 4* you$ve )ot E con*irmations it means that your transaction is (uried under E (loc&s" D (loc&s" J (loc&s" C (loc&s. 4* there$s P (loc&s mined on top o* your

transactions" *or someone to *a&e or dou(le spend that" they #ould have had to have (een a(le to mine a P-(loc& *or&. /o# it sounds li&e" in this case o* %erracoin" i* the e+chan)e assumed those con*irmations #ere valid" then that scammer had mana)ed to mine an altchain or a *or&ed chain #ith enou)h (loc&s to (e more than the num(er o* con*irmations #hich then persuaded the e+chan)e that this #as a valid transaction. /o# in Bitcoin" in order to )et P (loc&s ahead" you$d have to have more than CLO o* the hashin) po#er and maintain that *or P (loc&s in order to do a dou(le spend. JMM million dollars. ABL: %hat is rou)hly PM minutes under ideal circumstances in the Bitcoin net#or&" (ut in the %erracoin net#or&" (ecause it loo&s li&e they do (loc&s every E minutes - LEM seconds - *or P con*irmations there it$s only LE minutes" so is it the time2 AA: 0eah" (ut is it P con*irmations" thou)h2 So" P con*irmations is (y convention on the Bitcoin net#or& - as a vendor" or as a merchant or as an e+chan)e" i* you #ant you can say ?4 #ant LE"@ ?4 #ant S"@ #hatever. !o# many are the norm on %erracoin2 Do #e &no#2 ABL: /o" #e don$t &no# (ut 4 thin& this is the point thou)h" you #ould #ant more con*irmations in a situation #here con*irmations are less valua(le (y themselves (ecause they happen more o*ten" ri)ht2 SM: Ri)ht" so there$s not much o* a point o* havin) *aster ones (ecause you$ll 'ust need more *or security. AA: Depends on the di**iculty essentially" each con*irmation is a validation that someone did that level o* di**iculty to prove the #or&. Ri)ht2 So i* the di**iculty is lo#" your con*irmation isn$t #orth much (ecause it$s not that hard to create one. ABL: hich is a pro(lem that altcoins have (ecause they al#ays have that chic&en-e)) pro(lem #here they sho# up and no(odies usin) them so they have to (ootstrap an audience" #hich means they have a small audience" #hich means it$s easier to do these thin)s and since these thin)s can happen -- you can see there$s a circular lo)ic here that i* you )et tar)eted as an Alt-coin early on and you$re poorly positioned to (e a(le to handle this type o* thin)" it can (e really disruptive" and it seems li&e in a nutshell that$s #hat happened #ith %erracoin.

AA: %hat$s #hat happened #ith %erracoin - again. SM: 0eah" 4 #as 'ust )oin) to say this isn$t the *irst time it$s happened to them. ABL: 3h" really2 SM: 0eah" they$ve had CLO attac&s (e*ore and they$ve also had the di**iculty pro(lem too" #here they )ot too hi)h on the di**iculty" some miners dropped out and then it #as impossi(le to )et the ne+t (loc&. 4t$s (een a (i) pro(lem and it hasn$t 'ust a**ected %erracoin either" this has happened to a lot o* di**erent altcoins: ,eathercoins had a couple o* attac&s - CLO attac&s" Bitcoins had spam attac&s - pro(a(ly CLO attac&s" too - it$s &ind o* a )ro#in) pain" 4 )uess" (ut some coins are 'ust not )onna cut it - they$re 'ust not desi)ned to #ithstand any sort o* potential pressures that are in the environment o* users" some o* #hom mi)ht (e malicious and may(e %erracoin is one o* them 'ust (ecause o* the #ay it$s desi)ned. AA: %here$s t#o conclusions you can read *rom this - the *irst conclusion is that #hen you ta&e the core parameters o* Bitcoin and you t#ea& them to ma&e an altcoin" it$s not )uaranteed that you$re )oin) to come up #ith a correct set or healthy set o* parameters - it certainly sounds li&e %erracoin has *ound itsel* in an area o* parameters that causes di**iculty #hiplash let$s put it that #ay - or very (i) s#in)s in di**iculty" possi(ility o* a CLO attac&. So" one conclusion is - Satoshi /a&amoto )ot these parameters more or less ri)ht on the *irst try. %hat$s pretty impressive - and #e$ve seen that (ecause the other altcoins aren$t doin) much (etter in terms o* core parameters. %he second conclusion 4 #ould dra# *rom this is - it$s hard to (oot a currency (ecause in the early sta)es it$s very" very vulnera(le to malicious e**ects" #hich means that the net#or& *or Bitcoin and it$s resilience to altcoins is hi)her than #e anticipated. 4t$s )oin) to (e harder *or competitors to 'ump-start and (ootstrap into this environment. ABL: .an an Alt-coin that comes out no# (e via(le i* it uses S!AECP2 4* it shares the same hashin) al)orithm" the same #ay that it does minin)" as Bitcoin does" then that means that as the Bitcoin net#or& increases over time" and as miners have hard#are that$s really" really" really e**icient (y any meanin)*ul standard" (ut compared to the amount that$s (ein) thro#n at the Bitcoin net#or&. is not si)ni*icant at all" doesn$t it" li&e - you see

#here 4$m )oin) #ith this2 4t seems li&e an inherent pro(lem here. #here i* you use that same al)orithm someone can turn a sin)le unit that$s )onna devote JMM )i)ahashes o* po#er into your net#or& and your net#or& is small" that can (lo# up your currency 'ust *rom a sin)le miner devotin) a sin)le unit. But that could also (e a )ood thin) i* lots o* people do it" ri)ht2 AA: 4t reminds me o* the Red 3cean" Blue 3cean strate)y concept #hich #as a mana)ement (oo& #ritten in the past #hich #as 1uite popular - the idea (ein) that" as an entrepreneur in a (usiness" you don$t #ant to )oin) into an ocean that$s *ull o* shar&s and red #ith (lood - you #ant to *ind the chun& o* the ocean that$s (lue" that doesn$t have too many predators in it. ell" in this case" choosin) S!AECP as a proo*-o*-#or& puts you ri)ht in the shar& pool. So" may(e i* you$re a )uppy" you don$t #ant to (e there" may(e you #ant to see i* you can use the proo*-o*-#or& to carve out your o#n s#immin) pool #here you can survive *or lon) enou)h to play #ith the (i) (oys. 3ther#ise" the AS4.s #ill come and s#allo# you. Gne# sectionG ABL: e tal& a lot a(out altcoins" and #e tal& a lot a(out coins that (asically ta&e the Bitcoin protocol and *or& it" ma&in) a couple o* chan)es and )oin) in their o#n direction hopin) that they$ll catch attraction (ased on the merits that they$ve introduced. %his mornin)" #e$re 'oined (y J.R illets - he$s developed a protocol" or" 4$m not sure #hat you$d really call it - it$s almost li&e a metacoin. 4t$s not an altcoin in a conventional sense (ecause it rides on top o* the Bitcoin net#or&" (ut it ma&es some thin)s possi(le that are pretty interestin). So a)ain" 4$m pretty )lad to (e 'oined (y J.R this mornin) to tell us a little (it a(out #hat Mastercoin is and #hy it should matter to us. JR: ell" hey Adam. %han&s *or havin) me on your sho#" 4 love listenin) to your podcast - 4 thin& you$ve (een doin) an a#esome 'o(. Mastercoin - 4 came up #ith the (asics o* this in EMLL: 4$ve (een percolatin) on it *or a lon) time" and the L-sentence summary is ? e$re (uildin) a protocol layer on top o* Bitcoin"@ so you can thin& o* Bitcoin as money and you can also thin& o* it as a protocol layer. 4* you thin& o* it as a protocol layer then you can put another protocol layer on top o* it. Doin) so lets you create a ne# coin" so to spea&" that does everythin) Bitcoin does and adds ne# *eatures. ,eatures #e could add are pretty much unlimited" ri)ht out the )ate #e$re loo&in) to do a distri(uted e+chan)e (et#een Bitcoin and these

ne# currencies (ein) (uilt on top o* Bitcoin - 4 called the *irst layer ?Mastercoin"@ and then the idea is that people can (uild their o#n currencies on top o* that #ithout doin) any pro)rammin). ABL: Let$s (ac& up *or a second here. hen #e tal& a(out a layer (ein) (uilt on top o* Bitcoin or a layer (ein) (uilt on top o* the Bitcoin protocol" are there any analo)ues in other areas that people mi)ht (e *amiliar #ith o* #hat this sort o* thin) loo&s li&e" or is this somethin) entirely ne#2 JR: ell" 4 li&e to compare it to !%%P. Any time you type in a #e( address" it starts #ith !%%P" that$s a protocol layer" and it runs on top o* %.PB4P. 5very(ody listenin) to this podcast #ill &no# #hat an 4P address is" %.PB4P is a protocol layer and !%%P runs ri)ht on top o* it and uses it to accomplish #hat it #ants to do. ABL: So %.PB4P came *irst - this is important - %.PB4P #as an underlyin) technolo)y that #as neutral" and that allo#ed *or *urther protocol layers li&e !%%P to (e added on top o* it that made it more use*ul in #ays that %.PB4P #asn$t. 4s that ri)ht2 JR: 5+actly. ABL: So #hat you$re doin) here is very similar to that" (ecause you$re ta&in) the Bitcoin protocol" #hich is neutral" and you$re (uildin) a layer on top o* it" and you said that this layer then #ill allo# *or additional layers to (e (uilt on top o* it2 JR: 0eah" that$s the idea. 4$m tryin) to open the eco-system up. 5very(ody has a cra6y idea o* #hat they #ant to see Bitcoin do" and 4 #ant to provide some tools to help people do that. ABL: 3ne o* the complaints that$s (een levied a)ainst this idea" that every(ody has somethin) di**erent that they #ant Bitcoin to do" is that you$re puttin) too many thin)s into Bitcoin - that you$re ma&in) the core protocol too complicated. So it sounds li&e this is the response: ? e #on$t add to the protocol" #e$ll 'ust (uild another protocol on top that people can opt-in to.@ JR: %hat$s e+actly ri)ht" and it$s important to &eep the core Bitcoin protocol sta(le" you add somethin) li&e a ne# *eature to that and you (rea& it" that$s

a very (i) deal" and Aavin does a *antastic 'o( o* (ein) very conservative o* #hat ne# *eatures are (ein) added to Bitcoin" (ut #hen you start (uildin) on top o* Bitcoin" you can (e a lot more e+perimental" and as you said" it$s opt-in. ABL: hat is it that Mastercoin is addin) - #hat are the top D thin)s that Mastercoin is (rin)in) to the ta(le that are not possi(le #ith Bitcoin (ut are possi(le #ith this additional layer2 JR: 4 mentioned the distri(uted e+chan)e - to my &no#led)e no(odies ever done a distri(uted e+chan)e (et#een t#o cryptocurrencies" the reason #e could do that is (ecause it$s all in the Bitcoin (loc&chain. %he ne+t thin) #e$d have a*ter that #ould (e distri(uted (ettin)" so (asically you$ll (e havin) a person A #ho #ill (e pu(lishin) some data into the (loc&chain at a very lo# rate" and 4$m #orried a(out (loc&chain (loat - that$s pro(a(ly the (i))est criticism o* this pro'ect" that it adds a lot to the Bitcoin (loc&chain. So somethin) li&e once a day" addin) say the price o* )old" *or instance" to the Bitcoin (loc&chain and then every(ody in the #orld can (et on it usin) this protocol" so 4 could (et that )old$s )onna )o up" you could (et that )old$s )oin) to )o do#n" and the #hole protocol reco)ni6es the #inner. e don$t have to )o o** to Bets3*Bitcoin or one o* ho#ever many (ettin) sites there are no#" #e can 'ust use the protocol and #e don$t have to trust a human (ein) to hold our money. /o#" #e do have to trust the data source: i* the data source )ets compromised then o(viously our (et )oes south. ABL: So a data source in this conte+t #ould (e somethin) li&e a RSS *eed that #ould (e essentially *eedin) data at a *i+ed rate into the (loc&chain" and then every(ody else is (asically 'ust #atchin) that" and people #ho (et one side and people #ho (et the other side" really they don$t &no# each other (ut they (et a)ainst each other as *ar as the (loc&chain is concerned" so the (loc&chain 'ust #or&s it out2 JR: 0eah" and every(ody parsin) Mastercoin transactions pays attention to those (ets" and pays attention to #ho #ins" and then reco)ni6es the #inner as the o#ner o* the coins. So 4$m really e+cited a(out that" 4 thin& it$s )oin) to (e a )reat *eature - 4 thin& the *eature 4$m most e+cited a(out is user currencies #hich trac& e+ternal values - so i* #e already have the price o* )old (ein) pu(lished in the Bloc&chain" 4 have a scheme to set up user currencies #hich #ill trac& the value o* )old" so you could have a Aold.oin

and o#n it and have it trac& the price o* an ounce o* )old. %here$s a lot o* ar)uments a(out ho# #ell that #ill #or& - 4 thin& it #ill" and #e$ll see. ABL: ell" the (i) 1uestion #henever #e start tal&in) a(out redeema(le cryptocurrencies is - are they actually redeema(le2 Because it seems li&e in order *or somethin) li&e that to (e pe))ed" you$d either have to put up a #hole (unch o* collateral in case the price )oes #ay up or in case the price )oes #ay do#n. 4t seems li&e there$s ris& there #hich is di**icult to ameliorate unless at some point in the chain 4$m a(le to say ? ell this is my Aold.oin" it entitles me to L )ram o* )old" 4$d li&e to cash this in and have some(ody send me that L )ram o* )old.@ .an 4 do that2 JR: %he #ay people have typically approached this pro(lem is the colored coin approach" #here you have an issuer and you have this )uy that stores some )old in a #arehouse some#here" sellin) shares o* it *or people to trade" and then everyone has to trust the issuer to honor those shares. hat 4$m attemptin) to accomplish is a trust list (ac&in) usin) an escro# *und. 0ou$re e+actly ri)ht: you have to have somethin) in stora)e to (ac& this up" and essentially every(ody (uyin) it throu)h a ne# currency li&e this is puttin) their money into an escro# *und" #hich is then used to pe) the value o* that currency to the data *eed. ABL: Does that #or&2 JR: %here$s an a#*ul lot o* ar)ument a(out that" it$s never (een tried (e*ore. ABL: 3&ay" *air enou)h. So you can do the distri(uted (ettin)" you can do the pe))in) currencies to data *eeds o* prices )oin) into the (loc&chain #here are you ri)ht no# #ith this pro'ect2 4s it still in the conceptional sta)es2 4s it already out - #hat$s the time *rame on this" rou)hly spea&in)2 JR: ell" 4$ve pu(lished the complete speci*ication o* the *eatures #e$ve tal&ed a(out so *ar" so i* 4 )ot hit (y a (us tomorro# some(ody else could continue #ith it *rom #hat 4$ve #ritten - it$s do#n to the (yte level o* #hat the messa)es loo& li&e - Mastercoin and everythin) (ased on it is LMMO messa)e-(ased. %hat$s an important point. Say" colored coins - you anoint a certain num(er o* satoshis as havin) some special meanin) and you trade them around. Mastercoin is di**erent" it$s only messa)es. 4* 4 #ant to send you Mastercoins 4 have to pu(lish a certain messa)e into the (loc&chain that says ?4 trans*er C Mastercoins to Adam$s Bitcoin address"@

and then 4 have to have the messa)e in the ri)ht *ormat" and i* 4 do" everyone #ill reco)ni6e that trans*er. But 4 could use any Bitcoins to pu(lish that messa)e - it doesn$t matter #hich Bitcoins 4 use. ABL: 4 #as under the impression that Bitcoin itsel* did not have a messa)in) protocol and that there #as no real memo *ield and that it #as somethin) that users see locally" they have the a(ility to locally ma&e la(els and notes - so ho# are you puttin) in*ormation into the (loc&chain2 JR: %hat is a *antastic 1uestion. %here are other people doin) similar thin)s" and #hat it essentially involves is destroyin) a small amount o* Bitcoins in order to accomplish this. So (asically" 4 create a *a&e Bitcoin address" so it starts #ith L and it has a payload o* t#enty (ytes" and 4 can put anythin) in those t#enty (ytes" and then there has to (e a chec&sum at the end that ma&es it a valid Bitcoin address. And then 4 send a small amount o* Bitcoins" 'ust a(ove the dust threshold" #hichKs currently a(out hal* a cent" to that *a&e address - #hich are destroyed and #ill never (e spenda(le. But #e$ve 'ust put EM (ytes o* ar(itrary data in the (loc&chain. ABL: 4* Mastercoin is success*ul to the level that you #ould li&e it to (e" is that sustaina(le over the lon)-term2 Are there literally enou)h Bitcoins that this could operate *or LMM years #ithout it actually causin) a pro(lem2 JR: 4t depends on ho# you de*ine causin) a pro(lem. e$re not )oin) to run out o* Bitcoins" the dust threshold #ill shrin& i* Bitcoins (ecome more valua(le" #e have S decimal places and #e can have even more i* #e #anted them. So 4$m not #orried a(out runnin) out o* Bitcoins - the le)itimate concern is (loc&chain (loat. /o#" Mastercoin is desi)ned" hope*ully" to (e as compact as possi(le" (ut #e$re still addin) a lot o* transactions to the (loc&chain and i* #e$re #ildly success*ul 4 li&e to say that SatoshiDice #ill loo& pretty tame in comparison. ABL: And you$re sayin) SatoshiDice #ill loo& tame in comparison (ecause they do the same thin) - they destroy small amounts o* Bitcoin in order to )enerate their (ettin) results. 4s that ri)ht2 JR: 4 don$t &no# i* they destroy Bitcoins" (ut they do )et a lot o* *la& (ecause they have so many transactions. ABL: 4 see.

JR: /o#" Mastercoin is essentially ma&in) Bitcoin more use*ul. 4* Bitcoin (ecomes more use*ul" there$ll (e more transactions. 4* there$s more transactions" the Bloc&chain #ill )et lar)er at an even *aster rate #hich #ill cause even )reater mi)raines *or all the Bitcoin developers and they may 'ust leave. %hat$s &ind o* the (ad side o* this. ABL: 3ne o* the common #ays" and one o* the primary #ays 4Kve seen" is people introduce ne# coins into e+istence is that they ma&e them minea(le" (ut that$s actually not true #ith Mastercoin" Mastercoin has a di**erent scheme. JR: Because #e$ve already )ot Bitcoin minin) a#ay - Satoshi did us a )reat thin) (y solvin) the #hich-came-*irst-pro(lem #hich is the root o* dou(le spendin)" so #e don$t need to solve the dou(le-spendin) pro(lem" (ecause #e$re #ritin) on top o* Bitcoin - it already solves that pro(lem" so #e don$t really need minin). So 4 structured Mastercoin as a &ic&starter" so essentially anyone #ho sends *unds to a certain address (e*ore a certain date o#ns some Mastercoins" and then as #e (uild the protocol hope*ully those #ill (ecome more valua(le. ABL: %hen this is a currency that literally you can$t mine into" (ut you can (uy into i* you have Bitcoin. JR: 0eah. 4 created an address called the 5+odus address and 4 #as (asin) that o** the idea that Bitcoin started *rom the Aenesis (loc& and so 4 said that Mastercoin starts *rom the 5+odus address" and it starts #ith L5+odus and #e$ve raised actually 1uite a (it o* money there" almost over at the end o* this month - this is Au)ust EMLD actually" (y the time this podcast #ill (e pu(lished there #ill only (e a couple days le*t. ABL: %hat is true. So" i* people are interested in this - so" this seems speculative" even more so than Bitcoin seems speculative. e didn$t actually )o over #here you are #ith this - so you$re collectin) *unds" and those *unds are (ein) used to )enerate the ne# Mastercoins" and the people #ho contri(ute money no# #ill )et the appropriate amount o* Mastercoins. 4s there a conversion rate2 JR: e$re doin) a hundred Mastercoins *or every Bitcoin contri(uted to the 5+odus address and there$s an early-(ird (onus o* LMO a #ee&. hen 4

*irst announced this #hole thin) a(out a month a)o people #ere )ettin) a JMO (onus *or (uyin) it early and no# it$s pretty much do#n to LMM:L. here are #e #ith the pro'ect - #e$ve )ot to the point #here #e$ve (een a(le to send them. 4 have a Python script #here you can type in an address and say ?4 #ant to send C Mastercoins to this Bitcoin address"@ and it #ill tell you #hat sends you have to send *rom your Bitcoin client to ma&e that happen - and 4$ve (een usin) that *or a )ivea#ay thread - it$s a very common thin) that some(ody #ith a ne# currency #ill do these days" start a )ivea#ay thread" and 4 (ou)ht some Mastercoins and 4$ve (een )ivin) them a#ay usin) that protocol. e$ve (een doin) that since and that$s the simplest and most (asic type o* Mastercoin transaction. ABL: ,or this to )et to a position #here you *eel li&e the product is representative o* the vision that #e$ve (een tal&in) a(out here" #hat type o* time *rame is that2 4 mean" 4 don$t #ant to pin you do#n to a date" (ut 4 mean" are #e tal&in)T is this a couple o* months out" si+ months out" years out2 4s there an estimate2 JR: 0eah" 4 mean" it depends some#hat on ho# much money is raised. 4t$s (een pic&in) up lately" so it could (e that there$s a lot more money raised in the ne+t *e# days. Assumin) that it doesn$t (lo# up a lot" you &no#" 4$m not plannin) on 1uittin) my day 'o(. %hat$s a #hole other conversation" (ut 4 have three small children so that my time is limited to #or& on this mysel*. 4$m hopin) to do some (ounties" levera)in) other peoples$ time in e+chan)e *or the money that$s (een raised. 4* 4 raised o(scene amounts o* money and #as a(le to 1uit my 'o( and #or& on this *ull-time" 4 thin& #e$d pro(a(ly have the ma'ority o* these *eatures may(e in &ind o* a )hetto *orm" command-line type o* pro)rams runnin) #ithin a *e# #ee&s and *ancier A-4-(ased systems" MeI and so *orth" a *e# #ee&s later. 4$m thin&in) that )iven that 4$m not 1uittin) my day 'o( and relyin) on other people it may (e dou(le that #ith the *undraisin) #e$ve done so *ar. ABL: 3&ay" so it sounds li&e you$re *airly con*ident that you$ll have somethin) #or&a(le (y the end o* the year. 4s that sa*e to say2 JR: e already have somethin) #or&a(leT

ABL: 3&ay" 4 )otcha. UGLau)hin)GV

JR: T#ith Mastercoins. 4t #ill de*initely (e more #or&a(le and usa(le (y the end o* the year. 4$m not sure that #e$ll have every *eature (y the turn o* the year" (ut #e should have some a#*ully ni*ty stu** (y the turn o* the year. ABL: 0ou mentioned that you #eren$t )oin) to (e 1uittin) your 'o(. Do you have a team that$s )oin) to (e #or&in) on this or is this a totally solo pro'ect ri)ht no#2 4 &no# you mentioned (ounties" (ut 4 mean" as *ar as people #ho are )oin) to (e developin) this as developers. JR: 4t$s me ri)ht no# and it$s #hoever 4 recruit throu)h #hatever (ounties 4$m a(le to put out and there are some people #ho are very interested in this pro'ect and have (een )ivin) me a lot o* help" #hich is a#esome. ABL: JR" i* some(ody #ants to either )et involved #ith the pro'ect or learn more a(out it or possi(ly invest and )et some mastercoins *or themselves" is there a #e(site they can )o to or are you )uys 'ust livin) on the Bitcoin *orums these days2 JR: ell" #e are livin) on the Bitcoin *orums so *ar. !o#ever" one o* the )uys on the *orum re)istered Mastercoin.or) and it redirects to our pro'ect thread. 4* you type in Mastercoin.or)" you$ll )et to the ri)ht place and #e$re #or&in) on a (ounty *or the #e(site. ABL: JR" than& you very much *or 'oinin) us today and tal&in) to us a(out Mastercoin. 4 loo& *or#ard to seein) ho# this pro'ect develops over time. 4t seems very e+citin). JR: 4$m e+cited a(out it. ABL: UGLau)hin)GV UL%B Promo WL - SMIoice StartV SM: !i" Stephanie here. ould you li&e to turn your (oo& into an enthrallin) audio(oo&2 /eed a persuasive commercial to promote your company2 !o# a(out a narrator *or your e+plainer video2 !ere$s #here 4 can help: 4$m a *reelance voiceover artist" and since EMMR" 4$ve lent my voice to do6ens o* audio pro'ects. %o hear some e+amples o* my #or&" chec& out my #e(site" smvoice.in*o. 4* you li&e #hat you hear" 4$d love to (e the voice o* your ne+t pro'ect. Aet in touch at smvoice.in*o.

UL%B Promo WL -SMIoice 5ndV UL%B Promo WE-PSA-StartV ABL: 4n addition to (rin)in) you intelli)ent ne#s" discussions" and intervie#s" Let$s %al& Bitcoin is a(out testin) ne# models. Despite our )ro#in) audience" listener support has (een do#n" (oth in terms o* cumulative num(ers o* tips and the actual amount o* tippersT #ay do#n. 4* you appreciate the #or& #e$re doin)" the (est #ay to sho# that support is to send us tips" shop #ith our sponsors" and o* course" share the sho# #ith everyone #ho #ants to (e concerned #ith the *uture o* money. Iisit us at letstal&(itcoin.com and than&s *or listenin). UL%B Promo WE-PSA-5ndV SM: Auys" my *irst Bitcoin #as a physical Bitcoin and it #as o* the .asascius (itcoins. .asascius is one o* the *irst companies to ma&e physical representations o* (itcoins. 4t$s (asically a to&en that has some pretty )raphics. 4t$s )old-colored and on the (ac& there$s a private &ey or a code" 4 )uess" that )oes to Mt. Ao+ that you can put in and redeem your (itcoins and it$s covered up (y holo)ram *or security. 4t$s (asically a #ay to have physically-represented (itcoins and so" 4 have a so*t spot in my heart *or those" 4 )uess" (ecause that #as the *irst coin that 4 ever possessed or received. /o#" there$s more physical (itcoins startin) to come out. People have made coins that are actually made out o* silver or even )old that have Bitcoin private &eys on them and they$re someho# encoded *or security so that someone can$t 'ust loo& at the private &ey on the (ac& and ta&e the (itcoins and run. /o#" there are even physical litecoins comin) out. %here are some silver pieces that some(ody has made and they have very (eauti*ul )raphics and have a Litecoin private &ey on the (ac&. hat$s your opinion a(out physically-srepresented coins2 4 could see ho# that mi)ht (e a little con*usin) to a ne#(ie. %ell them" ? o#" there$s this )reat virtual currency and it$s all online. 4t$s *rictionless" you can send it any#here in the #orld and oh" (y the #ay" here$s this chun& o* metal that you can use to represent it.@ ABL: Ri)ht" that$s a little con*usin).

SM: 4 could see ho# that #ould (e &ind o* con*usin)" (ut on the other hand" 4 could see ho# it mi)ht also help some(ody )rasp the concept" ri)ht" or help some(ody (ecome more com*orta(le usin) it (ecause it$s somethin) they can actually hold in their hand. 3ther tal& around physical (itcoins or other coins has centered around" ?4s this a )ood #ay to do cold stora)e2 4s this a )ood #ay to secure your coins o**line2 4s this a )ood #ay to use them anonymously2@ hat do you )uys thin& a(out that2 ABL: hen 4 *irst )ot into Bitcoin" physical (itcoins #ere a(solutely the *irst thin) that cau)ht my attention and the .asascius coin #as de*initely up there. %here #as also Bit(ills 4 #as interested in. Let$s e+plain real (rie*ly ho# these thin)s #or& (ecause it is a con*usin) concept and #henever you tal& to peopleT you &no#" 4 used to (rin) physical (itcoins #ith me #hen 4$d )o some-place (ecause it #as an easy #ay to introduce it" (ut it is also the #ron) #ay to introduce it (ecause people don$t understand the #ay that they #or&. hat you$re essentially doin) #ith either a physical Bitcoin or a paper #allet or really any o* these thin)s is you$re ta&in) your #allet in*ormation" and instead o* storin) it on your computer" you$re storin) it on a physical o('ect. %he hope is that it$s stored there in a #ay that is secure so that it can have value loaded onto it throu)h a pu(lic &ey that can then (e veri*ied throu)h the pu(lic &ey" (ut so lon) as that private &ey is covered up" then no(ody can spend it. 4t means that you can easily veri*y the value #ithin the to&en" and 'ust (y loo&in) at it" you can see that it hasn$t (een tampered #ith #hich means that" it$s still up *or )ra(s. Really #hat this means" thou)h" is that #hen you )ive someone a physical in person" you$re not doin) a Bitcoin transaction as the net#or& usually does. 4nstead" #hat you$re doin) is you$re literally )ivin) them a #allet that contains an &no#n amount o* Bitcoin. So" i* you thin& a(out it" that$s a really interestin) thin). 4t means that physical (itcoins are the sin)le most anonymous #ay to spend (itcoins o* anythin) (ecause" so lon) as it$s passin) *rom hand to hand to hand" you can see this (ein) used at con*erences or somethin) li&e that. %here$s no record o* any o* those transactions in much the same #ay that i* 4 hand you a dollar" there$s no record o* that transaction. 4* #e #ere to ma&e the transaction throu)h the Bitcoin net#or&" there #ould (e a record" so you$d (e a(le to see them" (ut in a physical *orm" that$s 'ust not the case. AA: 0ou &no#" another #ay o* thin&in) a(out this - one o* the main di**erences" is the money #e$ve (een )ro#n accustomed to over our lives has (een physical money that$s )radually (een a(stracted into the di)ital realm. ,rom )old coinsK intrinsic value a(stracted" no# it$s more o* an

a(straction o* the productive capacity o* the country" per se. hen you$re dealin) #ith di)ital money in our (an&in) system" you$re really representin) the physical dollars o* the %reasury and the reserve (an&in) capacity o* the (an&s. 5ssentially" you$re representin) physical money in di)ital *orm. Bitcoin to&ens are the e+act opposite. 0ou$re ta&in) di)ital *rictionless money and you$re representin) it in physical *orm and that creates some very interestin) opportunities. %he *irst one is that you$re replacin) all o* the e+istin) protocols o* Bitcoin #ith physical e1uivalents. So" securin) your (itcoins (ecomes a physical e+ercise. %ransactin) your (itcoins (ecomes a physical e+ercise. 0ou hand them over. Accountin) *or your (itcoins is a physical e+ercise. 0ou count them. 0ou can visi(ly see ho# many there are. 4t really physicali6es not 'ust the value" (ut all o* the interactions" security *eatures" and accountin) *eatures o* Bitcoin - (ut it$s still di)ital" so you can do some really interestin) thin)s. 4ma)ine i* - let$s say you had a physical Bitcoin that had some intelli)ence in it. 0ou could have it loc&ed to your o#n private security code (ased on pro+imity so #hen you hand to another person" a (uyer" may(e" your phone hands o** the encryption &eys to their phone as the physical to&en chan)es sides and unloc&s it. So" you could add e+tra layers o* security or e+tra layers o* intelli)ence (ecause it is di)ital money even thou)h it$s encoded in a physical to&en. 4t$s (oth #eird (ut it$s also e+tremely e+citin) (ecause it opens up ne# capa(ilities *or (itcoins that come *rom the physical realm" (ut also ne# capa(ilities *or physical money that comes *rom the Bitcoin realm and creates a #hole ne# cate)ory o* money" #hich is this to&eni6ed di)ital currency that #e$ve never had (e*ore and it has its very o#n characteristics. ABL: 4t$s the local-)lo(al thin)" 4 thin&" that$s the most interestin) a(out it. 0ou can thin& a(out the di)ital version o* Bitcoin as" 1uite literally" the )lo(al version #here you can do (usiness #ith any(ody any#here #ho$s connected to the 4nternet. And then" these to&ens are the locali6ed *ormat #here they create some pro(lems o* their o#n" o* course" (ecause it$s very hard to ta&e a sealed" physical Bitcoin and send it throu)h the 4nternet to someone" (ut you can ma&e 6ero-con*irmation transactions (ecause no transaction is actually happenin). %he one thin) that people do tend to (e concerned a(out #ith these" and 4 thin& that it$s #ith )ood reason and 4$m not really sure #hat the solution is to this yet" necessarily" is the pro(lem o* - these are mostly made (y individuals. %hese are mostly made (y very small companies (ecause" a)ain" the in*rastructure hasn$t really (een there to re1uire any sort o* lar)er companies. Mi&e" *rom .asascius" still does all o* his o#n the stic&er application (y hand (ecause there$s sensitive

in*ormation there" and i* some(ody #ere to )et that and use it maliciously then you could ta&e the value o** o* it. %his is somethin) that$s really only a vulnera(ility at the (e)innin) o* the process #hen you$re actually manu*acturin) them" (ut it$s somethin) that #ouldn$t necessarily sho# up until years" #ee&s" #hatever point later that it ma&es sense to pull the value o** o* the coin. Loo&in) at other areas o* technolo)y" Andreas" are there any solutions to that type o* pro(lem #here you$ve )ot in*ormation that no human can &no# and yet" it has to (e applied durin) the manu*acturin) process2 AA: %hat$s a )reat 1uestion. Actually" Mi&e .ald#ell himsel* has already solved this pro(lem. %he solution comes #ith a proposal he calls ?B4P MMDS"@ the Bitcoin improvement protocol thirty-ei)ht #hich allo#s *or encryption o* private &eys. %he simplest case #hich #e$ve actually implemented in a sa*e paper #allet" an open paper #allet" is #here you #ant on a paper #allet to encrypt a private &ey or a .asascius coin #ith a P4/ num(er or passphrase so" unless you &no# that second num(er P4/ num(er UorV passphrase" you can$t unloc& it. %hat$s num(er one. hat$s not o(vious *rom the speci*ication is Mi&e has also proposed a multi-*actor approach to this that involves splittin) the private &ey in such a #ay that the manu*acturer only &no#s part o* the secret and can )enerate a coin" (ut that coin is useless unless it paired #ith a private component that the (uyer &no#s" and that actually essentially splits the &ey (et#een manu*acturer and (uyer and )uarantees that initial sta)e o* the process #hen it$s shipped. SM: %hat$s very clever. %hat mi)ht (e a )ood #ay to actually use physical (itcoins *or secure cold-stora)e. AA: A(solutely" and 4 thin& B4P MMDS is )oin) to (ecome a critical component o* that. 4 #ant to also push (ac& on another concept #hich is this idea that" ?4* you have a to&en" a physical to&en li&e that" it has to (e per*ect.@ 4t doesn$t have to per*ect and it doesn$t have to (e per*ect to retain its value. %he reason 4 &no# this is" (ecause a very lar)e percenta)e o* the XEM (ills that )o throu)h my hands are *or)ed and counter*eit. %hat applies also to a lar)e percenta)e o* the XEM (ills that )o throu)h your hands. 0et" #e don$t notice" and #e also don$t *rea& out a(out the value o* our XEM (ills (ecause i* you have a system en*orcement #here every hundred transactions that dollar (ill )oes throu)h a merchant" or retailer" or (an&in) teller #ho$s )oin) to use a ma)ic pen to test it and ta&e it out o* circulation

i* it$s counter*eit" you can ma&e that the part o* cost o* doin) (usiness and essentially discountin) the value (y the amount o* *raud that e+ists" #hich means that you don$t need LMMO security. 0ou only need may(e YCO security. 4t esta(lishes enou)h trust (et#een consumer" or (uyer and seller" that you don$t need to do validity chec&s at every point" so 4 don$t )et a s#ipe o* the -I pen on my XEM (ill at every retail merchant. 4 don$t )et it at every chec&-out counter" (ut it happens o*ten enou)h that the overall system is trusted. Let$s discount this idea that you need LMMO security. ,or physical circulation" you 'ust need enou)h security that the ma'ority o* people can trust it *or transactions. ABL: But" is that true *or people #ho are loo&in) at it *or stora)e applications2 Because" 4 a)ree #ith you - it$s not unusual *or temporary or event speci*ic to&en-(ased currencies to pop up. %hat$s somethin) that$s happened *orever. People don$t )enerally save money in those. People )enerally use them and then that$s it. %hey lose their value once that particular event is done or they devalue. Somethin) happens. %he point is" is that #ith (itcoins" that$s not necessarily true. 4deally" people #ouldn$t have to (e cashin) in their physical (itcoins *or the di)ital (itcoins (ecause o* these concerns a(out security. 4$ve had my coins" at this point" 4 thin&" *or a(out t#o years. 4sn$t that a concern2 AA: 4s it a concern as to #hether they still retain the value2 4 (elieve you could chec&. ABL: Ri)ht" 4 could chec&. %hat$s not #hat 4 mean. 0ou$re sayin) that it doesn$t matter to you i* a couple o* counter*eit XEM$s )o throu)h your hands" (ecause chances are pretty )ood that you$re not )oin) to (e the one that *eels the pinch #hen" eventually" they$re pulled out o* the system. .hances are pretty )ood. %hey$re not stayin) in your hands. 0ou$re not &eepin) those counter*eit XEM (ills and you$re not storin) them in (an& #here you )oin) to )et those same XEM (ills (ac&. %hey$re *un)i(le. AA: Ri)ht" ri)ht. 4t$s a transactional currency. %hat$s the *undamental di**erence #hich is that i* you use the physical Bitcoin to&ens as transactional currency" you don$t care a(out *or)ery. 4* you use the physical Bitcoin to&ens to store lar)er amounts o* Bitcoin in cold-stora)e" 4 #ould totally recommend encryption and veri*yin) the amounts are on there a*ter you$ve encrypted it" so that they stay on there" a(solutely" #hich is #here you$d apply somethin) li&e B4P MMDS.

ABL: ell" that$s e+citin). 4 didn$t &no# that Mi&e #as #or&in) on that" (ut that$s really cool" (ecause that is a pro(lem. 4 actually #or&ed on a pro'ect called ?Betcoin .hips"@ *or the this #as one o* my *irst pro'ects in the Bitcoin space that #as a real pro(lem that #e had #as tryin) to *i)ure out #ays #here #e could (e a(le to manu*acture these thin)s #ithout e+posin) it" so it$s )reat to see that there$s (een #or& done on that. U3utro Music ,ade-inV ABL: %han&s *or listenin) to episode DY o* Let$s %al& Bitcoin. .ontent *or today$s sho# #as provided (y Stephanie Murphy" Andreas M. Antonopolous" JR illets" Jonathan Mohan" and Marco Santori. Music #as provided (y Jared Ru(ens and #e actually have a *e# ne# trac&s in there that 4 &ind o* li&ed" 1uite a (it. 4* you can$t )et enou)h ori)inal thou)ht and discussion" read our daily (lo) at letstalkbitcoin.com" si)n-up *or our #ee&ly ne#sletter at theweeklybitcoin.com" and participate in our listener interaction area at letstalkbitcoin.com/talk. See you ne+t time. U3utro Music .utV