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Participants: Adam B. Levine (AL) Host Andreas M.

. Antonopolous (AA) Co-host Stephany Murphy (SM) Co-host David Schwartz (DS) Chief Cryptographer at Open Coin

Music plays. AL: Coming upon todays show COLD Wallets What are they? How do you use them? Hidden features of Bitcoin, I talk Ripple with David Schwartz, chief cryptographer at Open Coin and after our conversation I think I get it and you might too. The power of exchanges and Bitcoins AOL moment. Is apple acting rationally or are they just scared? We talk motives, Walled gardens and the amazing features of the Deflationary Business Models AL: Hi and Welcome to Lets Talk Bitcoin. Show for anyone interested in Cryptocurrencies and the future of money. My name is Adam B. Levine, I am a writer and speaker who likes to talk about complicated topics in an understandable terms. Lets Talk Bitcoin is my attempt to do just that. In doing so improve the understanding of cryptocurrencies and why they represent the future of money. Joining me ongoing quest of clarity Andreas M. Antonopolous is an expert in secure systems and decentralized networks. AA: Hi AL: Dr. Stephany Murphy is a scientist and Syndicated radio Host. SM: Hello. AL: Thanks for joining me again today, guys. We are recording this on Tuesday the 14th of May . This is actually going to be the content for two shows because we are going to be at the Bitcoin conference 2013 in San Jose at the time of we would normally be recording the show. Actually, we are recording the show there are too, I just not going to have a computer with me to edit and release it. So, we doing this all in advance. You guys excited about the show? SM: I cant wait. I am really excited and we are not even going to miss our normal recording time. There are going to be some extra bonus features will be meeting each other in person for the first time, also be doing some listener meet-ups.right? AL: Yup. Listeners meet ups, and meeting each other for the first time both those things are in the agenda and frankly its pretty exciting. I get to say a month ago I was not planning on going to the Bit coin conference now we are absolutely booked for the entire time over there. So, if you would like to meet us while, we all are actually at this conference. We are having a meet up on Friday in San Jose at a Gordon Biersch. You can find all the details of the meet up at noon on letstalkbitcoin.com and then we

are also planning to do a meet up on Saturday during the show itself. We have got just a ton of listener mail. As we have been going through this there are only so many shows in a week. And a lot of these questions take some time to answer. So we wanted to take some time today with this show to get through lot of these backlog questions. So first question come to us from Wolf Gang says, hi adam thanks for doing such an awesome job. You are welcome. Could you explain Cold Wallet in your show? - Wolf Gang. This was a good question. We have talked about cold storage but thats is little bit of an abstract concept for somebody who is not necessarily used to using bitcoin and the Cryptocurrencies yet. The 30 seconds elevator pitch is Being able to put your Bitcoins somewhere where they are simply inaccessible to anyone attempting to access them from the internet. Whether it is you, or someone else doing it for malicious purposes. I have a friend whose technique for doing cold storage is quite literally to take the physical bitcoin that he purchased year ago and to keep them in his freezer. Because again you know it doesnt matter where you keep them it only matters that they are inaccessible unless someone in real life goes there, you know accesses the information which in this case is the coins and takes them, essentially redeems them through online interface. Lacking that completely inaccessible and thus they are very safe relative to keeping bitcoins in an online presence. Right. What do you guys think about it? SM: Thats funny about the freezer story because I think a criminal, they are going to bust in to your house and try to take gold or physical bitcoins or whatever, the first place they are going to look is the safe, but you know the obvious places. The freezer is not obvious and its also fun, good for him. AA: Given to the news certain Congress people who put stacks of cash in their freezer. I think its now on the list. The Freezer ,the pantry, various of the common hiding places are probably going to be looked at. One way to think about the cold storage is to compare to the drop boxes for cash that you see in stores. Where cashier can take a bundle of cash, roll it up in a tube and to drop it on a shoot and essentially thats a one way in, no way out system. Bottom of the shoot there is a safe and you can easily open it. Cold storage is essentially the same idea, only what you are trying to do there is make sure that the only keys, that are ever online are the public keys. You want to make sure private keys are both generated securely and never ever go online. Never go on a computer and stay permanently offline either on paper or portable media. That way essentially you have a one way method of depositing money into cold storage and no way to withdraw unless you have physical access to the private key. Part of the technique or process for maintaining that security is that, the moment you bring that money online you destroy those keys. So, you essentially sweep all of it online and destroy those keys. If you ever take Private Key online, it is no longer cold storage. You just made it hot. You have to make sure you dont reuse that particular key combination. Paper wallets are probably the best example of cold storage I would certainly highly recommend that approach keeping the vast majority of your money away from computers. What we see is that, most of the hacks are really compromising peoples computers with Trojans and Keylockers. Not compromises of the Bitcoin System. AL: Now another context we hear about cold storage a lot of times is one exchanges are talking about. Exchanges are really anybody who is holding bitcoin value for people. Since, there have been hacks that are resulted in very large amount of value being removed from these services, now there is a claim they keep cold storage. Andreas, what is that look like if you are running an exchange or some other service

that actually holding value are they doing the same process where they are keeping them in completely offline wallets. And as soon they are redeeming any of them they destroy the keys. How is that possible to do it still making it accessible from an online interface? AA: Well, it really isnt accessible from an online interface. Essentially what those companies should be doing or what they are most likely doing. Rather than Paper wallets they are using a computer that is offline and that has a complete copy of software and is used to sign transactions for withdrawals. Essentially what these organizations do is, that they have sweep feature. If you have used a brokerage account you may be familiar with this idea. Everyday any unused cash you have in the account is swept into a savings account to get more interest. In this particular case, what these organizations do is that they maintain a small balance in the hot wallet and essentially thats the operating cash flow. The rest of the money or as much as can is swept either continuously or say nightly into the offline wallet. The problem is such as if you are running an operation with lot of transactions you cannot do that with paper. Essentially we are talking about an offline computer, whenever they want to bring back the money online; they have to sign transactions on that offline computer and then carry the sign transactions online, without ever taking the keys online. Thats the different way of doing it. Essentially you have the signing mechanism that is offline. Not just the keys. <Music> AL: Next question comes to us from the listener Joe Love he says So, I was watching the old video on YouTube about the Bitcoin protocol and alts distributed contract options built in. I remember when tried to send my music to copyright office a while back the cost was $35 now its $115 I believe. Most artists besides Mr. Nakamoto, yes he is an artist want to be recognized and have a way to manage safely their rights online. The Creative comments system is going in the right direction but things need to be extended so it could be easy for all type of art, digital or otherwise, to be attached to its creator and recognized worldwide platform. Licensing your creation and managing it should be included. The question here is, with the Blockchain for Bitcoin or any other Cryptocurrencies being essentially a distributed ledger of who owns what? With the time stamps set up, its possible to use it as a registery for all type of items . We have talked in the past about using as a registry for property and we talked in the past about using in as a registry for Domain names through Name coin. But there is no limit about to how far we can go with that concept? Is this something that can seen in the near future as a killer app for bitcoin? How big of a deal do you think potential is? SM: I guess, you are talking about the idea of sort of smart property and determining who owns what? I dont think most people understand it or perhaps ready for that. Im not sure how far that goanna go, but I know people will figure it out, thats the whole thing is about bitcoin is, its decentralized. AA: We got two mechanisms essentially for doing this. If you think about Bitcoin more broadly, there are really two parts of this, that help us deal with digital asserts. The first one is the distributed ledger. Essentially that gives you the proof of record, a global distributed record that allows you to say at this point in time, everyone agrees that I was the owner of this particular asset and you can do that with the digital signatures. The other big advantage is the fact that, everyone has the public key infrastructure

built into bitcoin with their addresses. Through the client you can sign a specific message so one thing you can do for example lets say you have music or you have written an article you want to Copyright, or you want to prove that you have say software code development created at certain time. You could sign the digital assets and then simply put just the signature, just the # in the Blockchain signed by your public key and then you could not only prove this asset existed at a specific time but also that you had ownership of it and then prove that again by signing something else same public key to show that you own that key. It does have some tremendous opportunities for showing ownership of digital assets. Essentially this is the proof of stake, not a proof of stake in Bitcoin but a proof of stake in Digital intellectual property. I dont know you guys remember I think in the Genesis block there is a headline from The New York Times, which is used to anchor it in time. AL: I was not familiar with that. AA: Its like holding up a newspaper in a photo to show that this photo was taken, at you know on or before a specific date. AL: Right its like a Decentralized Notary system almost in that way. AA: Exactly. BIP 11 which is the bitcoin improvement proposal 11 which allows for m or n signatures. What you can do there is 2 out of 3 signature structure where not only do you have the original asset owner signing the asset but then you have third party certifying that asset was say displayed. This is a true notary system as we would know it. SM: You forgot to say that Joe Love said that I have the Sexiest voice in the Bitcoin world and it was scientific fact. AL: Stephany Murphy is available for voice over work, you can find more information letstalkbitcoin.com in the host Bio section.

Music plays. DS: My name is David Schwartz., I am the chief cryptographer at open coin the company behind the ripple payment network. Very similar to when people were first introduced to bitcoin. Everything connects to everything else. So, you start talking about what a Bitcoin is and you mentioned mining and the person know what mining is, so all of sudden you have piled confusion on top of confusion. But there comes a point where the person just suddenly gets it. Because just like the concept, if you dont understand them, then confuse each other and if you do understand them, then you reinforce. You reach a certain threshold, just like a Critical mass. When you hit that, all of a sudden the person starts to get it. Like Oh, thats why this and thats why that. And then all of a sudden they kind of had this coherent view. It is harder to get that with ripple then bitcoin but once you get it then, everything just sort of starts to make sense.

AL: Usually there is like a 30 Second Elevator speech. I figure for ripple its got to be a 90 second one. You want to give me that. DS: Jed Mccaleb, put it as FREE PAYPAL as a shortest possible Elevator Speech. I dont know that I can do better than that. Of course its not exactly Paypal and its not exactly free either. To some extent of course, as any Elevator speeches its going to be, its misleading. But the idea was create the open payment network and by payment, I mean the ability to send money between people. AL: The way that I understand the ripple system is working there are hubs and there are spokes, and at the end of the spokes you have essentially people and those people can connect to other people, but ultimately most of the transactions have to rub through the a hub, in order to get to those people. Is that right? DS: We expect so initially, its kind of the way to bootstrap to a future world. Bitcoin has the same problem like everybody in bitcoin then bitcoin would be great. But everybody doesnt use bitcoin yet. So, its like how do you get from here to there? We have a similar issue where everybody use the network paying them would be very easy but they dont get. We have a bootstrapping method called gateways, the way gateway works is pretty simple. You hand money to a gateway, so you give them, let say US dollars or you give them any currency and then they create a balance in the ripple network that essentially says, this gateway owes Adam $500. Now the gateway makes its business practice to enter into what we call a redemption agreement. This essentially means, if you have the balance at the gateway and you said the gateway, I want to redeem this balance then, they give you the actual currency. So, what that means is, if a gateway is a reliable business then its balances will have value approximately equal to their face value. So, one of our gateways right now is Bitstamp. If Ripples says, Bitstamp owe you a $100. Ripple will put US$100 in your Bitstamp account. Which you could use to buy Bitcoins or you can withdraw as cash. So Bitstamp balances are essentially as good as cash. If you use Bitstamp as your gateway and I want to pay you a $ 100 on the ripple network, I make Bitstamp owe you a $100 and you consider that as payment. Its sounds complicated but its really the same way as the checks and Credit cards work. When you mail me a $50 check what you are doing is you are making my bank owe me $50. I consider you paid me $50. AL: That makes sense to me. Now ripple has its own; currency the XRP. But thats not what you actually transacting. In general, like you said you transacting USD value or transacting bitcoin value. I was aware of ripple before it went through its reinvention and that didnt used to be a currency associated with it. Can you explain to me what the XRP actually does? AA: The network can only accommodate a finite number of transactions in a finite amount of time. So if there is a particularly heavy usage of the network where someone intentionally flooding with meaningless transactions. Lets just say passing balances back and forth between the same groups of accounts. You need some way to limit their ability to prevent illegitimate transactions taking place. So XRP was created to pay transaction fees. The transaction fee normally is extremely small in the amount of penny. But if the network is little the transaction fee will rise until the level of transactions reach something network can accommodate. So someone is trying to attack the network with non sense

transactions they have to put more XRP behind each transaction that legitimate users willing to put behind single transaction. Otherwise the legitimate users win . Someone wants to attack network and sustain an attack for a period of time, then they will burn through XRP. And of course they have an only finite amount. AL: Do you buy XRP? Is there an exchange XRP where they are going to be sold? Is there an exchange rate? DS: One of the things ripple needs in order for the gateway scheme to work is it needs a robust system of exchanges. Because, if you only accept US dollars at a gateway, lets say, near where you live I like to transact in Israeli shekels at a gateway in Heifer or something, we need some way to make payment between us work. So, Ripple has built in a robust system of exchanges between arbitrary pair of assets. You can exchange US dollars at Bitstamp for Israeli Shekels or whatever and that includes XRP as well. There are markets inside; ripple to exchange XRP for bitcoin, or US dollars or any other currencies. The rates are purely set by supply and demand. AL: You said that right now, its relying on couple of specific hub. Is it one specific hub or several other? DS: There are 5 right now. AL: You call them gateways, right? DS: We call them gateways. Lots of people are looking to start them. AL: Another project that Im tangentially aware of is Open Transactions. Open Transaction is built on a system of federated severs, where everybody is kind of equal and there is no superior server they all running alongside of each other and you can participate anyone that you want. What are the comparisons with Open Transactions and ripple, if any? DS: Well, first let me say that inside the system there is nothing magic about the gateway. What makes it gateway special is that what it does outside the ripple network. Its balances will tend to have more value to more people. Because they make it their business offering to redeem balances for anyone. But anyone who has a balance that has some value, as long as it has value it can be transacted. But answer for your question about open transactions is there are lot of differences between Open Transactions and ripple. We looked it open transactions and comparisons to ripple. The big difference is this, in open transactions nodes have to actively performed transactions. So you cant as easily have the public state of the network. So, because of the state of the network is public, if I want to make a payment to you I can look at the exchange offers, I can look at the available liquidity in the network and I can very easily find the cheapest path to make a payment to you. In open transactions I would have to go around to different servers and get codes, and then the transactions can really be atomic they are working on it but they are not quite there yet. So, if part of transaction succeeds in the second half fails. I can wind up with something that I was going to trade to pay you, but now I cant trade it, so now I wind up some asset that may be completely valueless.

AL: Time is in back in to; where this meets to Cryptocurrency. The system as it stands right now is one that allows transaction between various people, because essentially everybody as participating in the same system. Everybody trusts everybody else because there is a path of trust leading. Its kind of similar way to Hauula. Right? DS: Similar, I should point out that this pathway only exists instantaneously when payment is made, payments are atomic in ripple. AL: When you say payments are atomic in ripple, what does that mean? DS: It means entire payment either succeeds or fails, If I am going to pay you $50 either I pay you $50 or nothing happens and that means there is no way I can wind up getting stuck with some asset that I shouldnt choose to hold. In other words when you create an account in ripple one of the first things that you will typically do is, youll say, for example, I want bit stamp to hold you US dollar balances for me. The only way someone can pay you US dollars, unless you change something is by making Bitstamp owe them to you. So, you are never trusting someone you didnt choose to trust. AL: So, the person who is transacting with you has to sends the value of something that you have already approved. DS: They have to buy something, or trade for something that you want. If I only trust Bitstamp to hold US dollar balances for me and you want to pay me US dollars. You have to find somebody who will offer you a balance at Bitstamp in US dollars and then you can give that to me in an atomic operation. Now, for that to work that means Balances has to be liquid, otherwise payments will frequently fail. To prevent these transactions to be failing, we expect people provide liquidity at some cost between different pairs of currencies or between currencies in XRP. So, right now there is the robust exchange for example, between bitcoin and Bitstamp, and US dollars and Bitstamp or between USD and Bitstamp and XRP. So people want to make a payment the system finds the path through these exchanges so you can hold the asset that you trust and I can hold the asset that I trust nevertheless we can make payments to each other. AL: Do we know each other in this scenario. Like if I am trying to buy XRP from Bitstamp then have we arranged in advance or am I just going and saying I would like to buy XRP in the system is matching me up with you because you would like to sell XRP? DS: Thats a separate case I was talking about the payment case. But in exchange, if you have an asset and you want some other asset you can actually make payment to yourself and the system will find a payment path through whatever exchanges provide the best rate at that time. Thats another important thing to understand about Ripple, it is also a sort of path finding or match making system. So people can say I have this but Id rather have this. I have USD but Id rather have bitcoins. I have bitcoins and Id rather really have Israeli shekels. And then you can wait for somebody else who need to make a payment to, then use that offer to make their payment. And because the ledger data is public anyone can find anyone elses offer and take it automatically without any need to arrange anything with that person or for that person to be online at that time.

AL: Basically you just need to trust ripple network right. Is that what you are saying? DS: You only need to trust gateways that you chosen to trust hold balances for you. And you need to trust the ripple network itself will operate as it supposed to, there are obviously lot of safeties on the ripple network operating, so it works as it supposed to. For example, every validator that operates on the ripple network signs every ledger and that is publicly disclosed and what we also do is, when a transaction supplied to the ledger, we create something called the Transaction Metadata, which is the record of every changed to the ledger that the transaction made. You can always tell if there is a change to the ledger there should be a signed transaction just to find that change and whose Metadata documents exactly how it changed the ledger. AL: Bitcoins and Cryptocurrencies, one of the things that they offer most of time, is the ability to be said anonymous, which is to say to have some sort of identity but not necessarily to have your real identity. Is that still present in ripple or is that is sacrificed in order to enable this trust system. DS: It depends what you want be able to do. There are necessary tradeoffs. You can hide your identity but then you dont build the reputation, so, if you are trying to participate in things like community credit where people actually extend credit to each other, its very hard to be anonymous because you dont lend money to someone if you dont know who they are. But if you are just trying to make payments there are number of ways that you can operate as anonymously as Bitcoin. AL: Well, I guess really asking about it thats I obviously that doesnt work in trust scenario. What I am talking about is persistent identity, where you have the ability like you know OTC is the good example of this. People often times do not use their real name there but through conducting trades and conducting commerce they build up reputation which is then tied to that specific you know fake name but its got real reputation behind it, so when you say anonymous do you mean thats is that your real name or anonymous as in you have to build reputation on A Name. DS: If you expect people to extend trust to you then you have to build reputation on some name that people willing to trust. People are more likely to trust, on a Real Name then on a Non Real Name. But you dont need any trust to transact in ripple, thats the kind of problem that the gateways solve. Everybody can trust the gateway, which ever gateway they choose to trust and they dont have to trust each other. AL: Who runs the gateway in this scenario? Whats the prototypical type of business or individual whos going to be running one of these things? DS: It goes from the smallest individuals to the largest companies; we are hoping in the future that people will be have as many choices as possible. Including financial institutions, possibly regulated assured by the federal deposit insurance will be nice. Its going to be the whole range of things, my favorite gateway we have one guy, he uses the pseudo name TTBIT, he runs a gateway semi anonymously and he has a bunch of silver dimes, thousands of them and he is introduces silver dimes as currency on ripple. Just because he issues balances in silver dimes which are bought and sold on the

ripple network and then you can redeem your balances in silver dimes by transferring to him and he will mail you a box of silver nuts. AL: So what happens if he doesnt? DS: Thats exactly the thing, the gateway can fail and if you choose to trust a gateway that fails. You may wind up with a balance that you cant redeem. Thats the responsibility that you have when you use ripple the people you choose to trust can betray you. You cant be betrayed by someone you didnt choose to trust, but if choose to trust somebody and they dont follow through commitment outside the ripple system. Then you can wind up losing money. The ripple system can enforce commitments inside the ripple system. So if you have a commitment to redeem inside the ripple network it can be forced. If its a commitment outside the ripple network where they actually send you a check or silver dimes, obviously nothing the network can do to compel them. Thats the trade off to allow ordinary currencies like dollars to behave like bitcoins. You get these irreversible transaction, you get pseudonymous transactions, you get instantaneous confirmations, you get a distributed network but the trade off is that it cant move the actual dollars like it can move actual Bitcoins. AL: Why do think this is better than Bitcoin? Or just a pure Cryptocurrency, lacking one of these systems? DS: I dont think thats really a particular good comparison. AL: What is a good comparison? Is there a good comparison? DS: The comparison that I really like is pre internet email to internet email. And thats not going to compare Ripple to Bitcoin. Its going to compare Ripple to things like VISA and PayPal. So, in current payment networks you have what you had in the email in the 90s. If you owe an AOL email you could easily email other people who are in AOL, but you couldnt easily email people who are on CompuServe. There are various different ways that you could get between ones system and another, but you have to know what the other person was on, you have to find these paths. Today email is purely federated. You dont even have to care what system somebody uses, you dont care if they use Gmail or if they use some other protocol. They all work together because, there is a protocol for moving email from one system to another. We see ripple as being a glue to hold all payment systems together and what that means is that the payment system will decide what gateway to use or be their own gateway and the payment and the exchange will takes place inside ripple. So, lets say PayPal decides to federate with ripple and some other payment network are decides to federate with ripple. If you are the user of one of those networks you can say that you want to pay that say $50 some one or another payment network entirely. And that two payment networks will negotiate the payment over the ripple network, you push the button and you can make the payment just as easily, as if you are paying someone else inside the same network. AL: Its not a person to person trust system, its person to trusted node system and then everybody else to trust that node also participates in that system in the same way.

DS: Right now we see gateways as the way to get from here to there, because everybody is not going to trust everybody else immediately. You dont have these person to person trust networks. But I am hopeful that in the future people will be more open about the finances it wont be like a dirty secret. Lets say you need to buy some groceries and you dont have the money to pay for them right now, what you would normally do is you would put that on the Credit card and then you have to pay interest and you have all this downsides. There are probably people who would happily lend you the money to pay for groceries if they knew you needed it. But there is no social way for you to go to all your friends and say hey, I am a little short of money right now can you lend me 50 bucks for a week. Its extremely awkward to do that. But people could pre extend you that credit and you could draw in that credit available and settle it completely electronically without have to go to that person and then hand them $50 and hand you $50 bill. It is possible we might see community financing, we must see person to person financing. I would love to see ripple change the way people make about money in that way, as a social resource for people to draw in each other and because there is a counting of the balances between people, its fair. So, instead of me landing you $50 and you giving me nothing until you pay me back the $50, I lend you $50 and you give me $50 sort of IOU, and I consider that IOU equal in value to what I gave you, so it is an even exchange. And then I can settle that IOU inside the ripple network, I can use it to take an IOU that you have and that I can give that back to the Owner. It is essentially allows interpersonal credit to operate as a currency. I dont see people doing that in the short term, but I am hoping that if ripple catches on it payment network that this person to person credit relationships to which Ripple make possible, will take over. AL: What happens, if someone for whatever reason pays that IOU. Didnt you essentially create money that is now floating around in the system that functionally doesnt have any exit? DS: Lets say Ive extend $50 credits to you and you draw on all that credit to you so what happens right now is, I have internally in ripple $50 balance. Now you can no longer draw in that credit line because you maxed it out . But I can draw on that IOU essentially that you have given it to me. I can trade that for any IOU that you hold. I can use that as a payment to somebody else. Meanwhile you have no access to people who trust me because our credit limit is maxed. Now if, I am going to trust you for $50 and you want to max out that credit line and thereby have no more credit with me and I have full access to spend those IOUs in your network and you have no access to mine. Then thats essentially what I have decided I am willing to settle for when I extended that credit to you. AL: But doesnt the system have to settle eventually? DS: It can settle automatically within the system, if you have any asset that I want then I can trade the IOU for it. AL: So basically, these personal credit limits are about functionally limiting the potential loss and liability. Is that right? DS: Exactly.

AL: Ok, So then the idea is that I pay you back the $50 and you say, wow that was a successful transaction and your new limit is $75, something like that ? DS: I could extend it if it makes some sense to me. AL: Ok, if it make sense. DS: Yes, exactly. AL: Ok, but you could limit or downsize as well. But again I dont understand how does the network reacts if I disappear from the network and that $50 IOU is floating around but there really not much hope that its going to be paid. Does it disappear from the network? Does it become invalidated? Does it sit there and kind of add to the pool and not to be reckoned or? DS: So the scenario what have to be is going to be, you dont want the asset thats of any value to me. So essentially I have given you $50 credit and you borrowed up to that limit, so now you owe me $50. You dont have anything of any value that I can trade that for. So, at that point the I IOU will essentially (the balance) sit there forever. It will sit in the system indefinitely but I can write it off, and the way I would write it off is essentially by paying you $50 which would cancel out that back. A lot of people are excessively concerned about people winding up with balance that has no value and thereby losing some money. Yes, that of course can happen, but think about this. If a friend called you up on the phone and told you that they need some help moving, you probably go and help them move. There is a cost associated with that, they have to pay somebody to move and that would probably cost some $50. Think about that extending the credit as another way to help that friend. AL: Right, I get that argument for it, but the thing that comes back to me is that we focus on the Cryptocurrencies; a lot of these trust related systems dont really exist. Its all about reality. And so when we start getting into this room of IOU and things like that; it kind of makes me little bit curious. So, I mean, it seems like the IOU is to facilitate fast transaction. Is that right? Is it to facilitate fast transfers of money? Essentially you can send dollars through the conventional system in a fast and secure way. But you can through this as long as theres a certain amount of trust involved. DS: Right and thats how all payment systems for fiat currencies like dollars work. When I mail you a cheque IOU gets transferred from my bank to your bank. If I send money by Western Union or PayPal, the phase of the transfer that moves money between you and me is the shift of an IOU. AL: So Ripple doesnt care what it you are transacting is and in fact its better if there are more people transacting more things, because it broadens the pool of assert available. Right? DS: Absolutely. AL: So then really, its a currency agnostic platform thats basically just about, being able to route value or whatever kind you want into whatever kind you want to wherever you want.

DS: I think you found the Elevator pitch. Thats exactly right. Its about currency choice and currency freedom that you can get paid in dollars and you can hold gold. When you need to buy groceries for dollars you can sell your gold immediately for dollars and just when you need to make that grocery payment. AL: If I give you an IOU for $50 and I have a couple of $100 worth of bitcoins sitting in my account, then that IOU isnt just claim to me for dollars but its for whatever the relative value of that IOU is, in whatever it is that I am holding. DS: Well, it cannot redeem across currencies automatically because someone has to set the exchange rate and I wont force you to accept somebody else exchange rate. AL: But I mean in these circumstances you said that, the situation when an IOU goes unpaid forever, is one way there are on no assets. So does that mean that as someone holding the IOU, you would have the control to be able to say that, you havent paid me back in this amount of time, So, I am going to take payment in form of Bitcoin? You are saying its manual, so how manual is this process? DS: You cant take a cross currencies because you cant force a person to accept the exchange rate they havent agreed to accept. You can force a claim within the same currency. One of the invariance in the system is that you always have to accept your own balances at the face value. So if you owe me $10, you have to accept that as worth $10 and I can claim in some asset worth $10 from you. But it wont operate across currencies unless you are willing to transact across currencies.

AL: Is that a setting or a full transaction setting? DS: Its a setting that you have to make and meet. AL: Ok. DS: And I dont think people would want to maintain exchange rate on a regular basis because the exchange rate between currencies change. So, unless you are a person who actively likes to do specific cross currency transaction. Its not reasonable for you to maintain a particular exchange rate. So, the more likely scenario, if you owed me $50 and I want to claim it, then I would claim some asset worth $50 which I would then exchange in the process of making a payment to myself. So if I wanted to get bitcoins for that, I would give you back the $50 that you owe me in exchange for some $50 asset which I would then exchange for bitcoins or something else that can be paid to me. And the key to making this usable for people is making it easy to do within the client which is one of our big priorities. Anyone who has used our client can tell you its not the easiest thing in the world to use and these more advanced users, while they are fully supported by the networks and servers. A client to allow the people to easily perform these transactions is something we are actively working on. We are on an open bidder.

AL: You are an Open bidder. So, if people want to get involved they can go to Ripple.com ADVERSITMENT If I showed you a website where you can easily purchase electronics from the worlds largest distributors with Bitcoins at 0% mark up. Would you think its too good to be true? Good news its real. And its at bitcoinstore.com. Choose from half a million items, save money over Amazon and new egg and convert your Bitcoins to real world items. You can even buy with privacy, all they need is the shipping address. But dont take my word for it, see for yourself at bitcoinstore.com

AL: Lets Talk Bitcoin is funded by your donations. Episode 6 so far total is 1.56915 Bitcoins, from a total of 15 donors plus 9.5 Litecoins which we started accepting this week at listener request. Thank you very much. Please remember that even if the amount you donate amount is small, with Cryptocurrencies and growing audience it adds up fast. If you are brand new to Bitcoin and would like to know learn more about how it works in detail, please visit letstalkbitcoin.com/learn to be directed to the Bitcoin Education Project, which I highly recommend. If you wondering what we look like or want to correspond directly or want to learn more about either myself , Andreas or Stephanie, check out the meet the host section of the site. Hosts have individual Tip Jar on there pages. So, if youd like to make sure you are rewarding the right individual, thats your destination. Except for Andras he doesnt want to dirt your money. And of course the show is nothing without knowledge. Please share Lets Talk Bitcoin to anyone you think should or would be interested in the future of money. Lets Talk Bitcoin is released under an open source license, that allows for non commercial clipping, remixing and posting in any of the format or to any sites you want, so long as you include link to our site letstalkbitcoin.com. We are also actively recruiting both on and off air talent for this and other shows to come. Once again if you are interested please contact me at adam@letstalkbitcoin.com

AL: The next piece of mail comes to us from David. He says, If possible I would love you guys to discuss the topic of power of Bitcoin exchanges. There seems to be a herd mentality causing everyone to flock to the biggest the biggest Bitcoin exchange Mt. Gox These people are probably assuming that doing business for market leaders is the safe thing to do. This is a bad situation for the obvious reason that we are able to witness in the past few weeks. Most of the bitcoin takers and exchangers are locked on to the Mt.Gox or to broker ticker, which give them tremendous weight in determining the bitcoin values and makes Bitcoins very vulnerable to market manipulations. Until newer or better players systems will rise, it would be good to educate the public that they should choose other small exchanges, so that the value, even in the future should not be determined by the components of a single exchange. This is a hard topic that we address honestly because even though Mt. Gox is not a really good option, I dont know if any other is good either. We have seen a number of exchanges that have become vulnerable over the last few weeks that were thought to be good players. Vicrorex was thought to be a pretty major player and they were hacked.

SM: I used Vicrorex as well as BTC, because those were the 2 exchangers that traded lot of crypto currencies besides bitcoins and Vicrorex was back up the next day after that hack. I didnt really hear too much about it . It happens you know, exchangers get hacked and they also get DDOSed and then, such is life in the bitcoin world. None of them are very stable but occasionally comeback online and you kind of just roll with it, that where we are right now. AL: So, Do you think there are better options out there if somebody wants to you, say you move $5000 into the market? Is there a market beside Mt.Gox where thats like a feasible process in a meaningful way? SM: No. its really difficult to do that. If I want to make a large Bitcoin buy I would try to find a friend or individual to sell to me that I trusted. But, I realize everybody has access to that type of connections and maybe thats one of the reasons the Bitcoin community is so social to know each other. Because they want to have people to trade Bitcoin with, and there arent lot of options for people who dont have connections. AA: But thats the best recommendations Stephanie, absolutely. I think the answer to this listeners question is. There are no good exchanges; we are operating in the field where, one eyed man rules the blind right? In this particular case there are no good exchanges. All of the exchanges are really susceptible to the same kind of attacks. And any kind of attacks centralization is bad. Two things, One, we wait until more and more exchanges arise and not trust any one of them. Good security practices means, keeping as much cash off the exchanges as possible, only putting cash in, that you would need to trade and as soon as you are done, moving it off the exchanges. Using two factors authentication, trading only from live CD booted machines, or from machines that are not used for day today internet access. Because those tend to get compromised quite easily, all of those ideas. At the end of the day our best chance is having lots of exchanges not 1 not 2, but 100 or 200 distributed around the world and using local connections, when things get weird. On these exchanges, either due to high volume or high volatility, those are the moments when you cant really trade or those are the moments when you really need to trade. If there is a crisis of confidence in Bitcoin, local trading will only be the option. If there is a crisis of regulation in bitcoin, local trading will only be the option. We needs to also keep the fundamental alive that means participating in the bitcoin Web Of Trust and OTC markets, participating in the local bitcoin exchanges, something like what you described last week, which was the Satoshi open market? SM: That would be satoshi square in NYC. They are saying they wanted to mimic buttonwood, which is the start of the stock exchange in NY or something. AA: Exactly. Satoshi square code word buttonwood. And that is the exactly kind of attitude we need going forward. Local distributor grass roots infrastructures or bitcoin and other Cryptocurrencies exchange, is the most resilient, the hardest to a temp. down, to attack, to steal from, to DDos. Probably the best option we all have. Make contacts get to know people. SM: That doesnt sound so bad.

AL: As you move forward, in this process, do you think that exchanges are the future of how we are going to be trading bitcoins, say 2 years from now, do you think that, I am not even talking about which exchange, any exchanges or do you think this is just a problem that has to be solved by, same as cashes. People dont go to exchanges in order to buy cash. People go to exchanges in order to trade currencies. So what do you think the end game solution for this, if we can speculate? SM: Thats a great question Adam. I am kind of wondering if there will be some huge and entrenched member of the legacy banking system. We can make a lot of money if we get into Bitcoin trading. And they have already have structure in place to comply with the anti-money laundering statutes in the US or whatever. So, they put up an exchange and it becomes the most powerful because thats the only one been left alone. I dont see that really meeting the need of the customers either. That could be a bottleneck, in terms of freedom that comes with Bitcoin because in a way that would tie it to the legacy banking system. I hope to continue that be a lot of different exchanges and I hope they can find some way to be left alone by this regulatory structure. Thats what I really see as the limiting factor. AA: The closer we get to the legacy banking institutions and the legacy banking regulators, and the financial regulators, the further away we get from some of the Bitcoin fundamental benefit and principles. The problem here is that, if such a player arises, when such a player arises, theyll very quickly start implementing practices that are odious to users. Theyll start freezing accounts, theyll start acting capriciously. Theyll start basically screwing their customers, just like legacy banks, which are really good at doing that. Yes, its going to happen. But I think it will be smart for people to also develop alternatives. My desire is to see a massively distributed exchange that allows, distributed order matching on a global scale. So, you have hundred front ends that are fiat conversions but then behind the scenes you are doing order matching on a global scale without a center point of failure. That may not happen, its a matter of both development and process. You know this really points to the level of maturity bitcoin in the stage we are, and its history. I compare this stage in history of bitcoin, really to the pre black Monday, pre AOL stage of the internet. In the early 90s AOL and CompuServe figured out they couldnt resist the internet anymore that black Monday AOL dumped 11 million AOL users on to the internet and flooded the internet with nubs. From that moment, lot of things changed. You saw the adoption of network address translation, no direct routing, a lot of peer to peer routing agreements started falling apart, lot of the net neutrality started falling apart. It brought a completely different type of user who wasnt interested in some of the basic principles of neutrality and fair routing. I figure that we havent had our AOL moment on bitcoin; it will bring a lot of credibility and mass adoptions and lot of wealth really to bitcoin. But it will also change the fundamentals. Having other outlets is very important. AL: One of the ways that Ive been really, enthusiastic about and kind of disappointed to see how development to see hasnt been developed more, is the idea that you could sell bitcoins in a very similar way at a retail location that people sell gift cards now? Because, functionally its the same thing you dont have to preload them. I think its that sort of retail availability thats going to enable most people to get involved. Because no matter what you do, no matter how the exchanges are. As we get closer to that compliance goal, it just becomes the higher barrier to entry. I mean how many people in the world

are investing in stocks? Relative to how many people investing you know something they can buy at the store? I bet you that, the numbers are pretty substantially different. And a lot of it is that barrier to entry. So, ultimately thats what I would like to see. I would like see exchanges serve the purpose, I feel like they do good job at, which is exchanging currencies for other currencies and bitcoins. For just this straight up purchase of bitcoin we need retail solution at the end of the day. AL: One of our favorite authors is here on show, Jon Matoni wrote a story for Forbes titled Why Apple was afraid of bitcoin and basically his primus is that when Apple rolls out a new solution. Like lets talk about maps for example, when they roll out maps, what they like to do is they like remove any competitions, which they think is viable competition from their market place. Because really theyd rather let you use their app and pay them or even not pay them just use it, rather than using someone elses. We have now seen this basically happen in bitcoin, where Apple come out with a payment solution called Passbook; they at the same time throw out the Blockchain wallet and there was another wallet that was on there. The thought here is that, Apple really has no incentive to want to give a platform to bitcoin. But is it actually a concern. Or do we think that Apple over reacting to this or logic move on their part? SM: To me it seems like jealous, scared move. I think it was really accurate of Jon Matoni to say that they are scared because clearly they are trying to kind of cut out the competition and but ultimately I dont agree with that strategy. I think there are lots of different payment solutions that can work for different people they are all gonna have advantages and disadvantages. Bitcoin, obviously if you are listening to this show, it has a lot of advantages. And probably would want to use bitcoin apps on your Apple phone. I just think this is going to hurt Apple to be not friendly and not say the more the merrier. As far as their Apps that are on their phone. AA: I dont think they are really scared, honestly I think this is simply a matter of control and profit. Apple is the Walled garden environments and they keep their gardens walled for two primary reasons, one is because, it keep all the money on the inside and the other is because, as part of controlling the user experience from the hardware all the way through the software. They can ensure a relative level of standardization and homogeneity in the user experience. Now quite honestly, I think Apple will be of the last large company to adopt bitcoin, only after they will be enable to Applise it. Design out some of the quirks and add a nice user experience around it. And theyll only do that when its inevitable. If you look at Apples strategy and its over all appearance behavior. I think its as likely to adopt Linux as it is to adopt Bitcoin. Its not really in its personality, to have something like Linux underneath the terminal window and took all the power and wrap the nice interface around it. One day thats going to happen with bitcoin too, but right now Bitcoins goal are antiseptically to Apple, Bitcoin is about empowerment and distribution, apple is about centralization and control, and make everything pretty and easy to use. SM: Yeah. May be its not like an avert fear that, bitcoin is going to bring down Apple or anything like that. I dont know, I just get this sense of like jealousy, its like a jealous lover. Like, if I cant have you then, no one can. AA: Jealous lovers are control freaks right.

SM: Yeah, Absolutely. Thats a good enough analogy to use. What do you guys think of the explanation given by Apple? They send these notifications to app developers, saying Apps must comply with any legal requirements in any location they are made available to users. And its the developers obligation to understand and conform to all local laws. Now do you guys think every App conforms to all local laws, which are on apple phone as it is? Do you guys think any local laws prohibit bitcoin on your phone? I mean thats sounds like BS to me. AA: Its complete BS to me. The bottom line is that, Apple will apply the rules arbitrarily and capriciously to get the result they want. The result they want is control over the environment. And this is true across the entire environment of the Apple store. If you look at the way they control the Apps, the things you see about the security of the Apps etc. Essentially they are applying control over keeping us secure environments and an environmental quality for the users but the decisions are made transparently to promote Apples business Model, Apples own applications, and Apples partners. This is very different environment from Android. Essentially you have a choice, you can go to the close walled garden, which is all very controlled. You can pretend to believe that they are doing for security and perhaps benefits from the control. But, if you really want to take advantage of something like bitcoin. Then you are probably the kind of user who already use android or if not. You should be. AL: Stephanie, the fear metaphor is not actually a bad one here. But I am not sure that its for the same reason. I dont know that its necessarily jealousy so as long as in validation of the business model. Because part of the reason why it is important for the payment system entirely enclosed. Is apple takes 30% of every transactions happen on their network. Whether it be processing an application, buying an in game content within or in App content through that service. Apple has a means to collect it; because all the transactions pass through their system. Bitcoin doesnt do that. Doesnt really enable that? So, unless they set up some sort of jerrying system, where you werent sending it straight to the content provider instead you are sending it to an address generated by Apple, who then sends on some proportions to the provider. Then you can see this problem, is real problem for them, because it turns right now a very profitable revenue stream for them, to one where, if an App developer wants to collect additional 30%, then they would otherwise. Then they just integrate Bitcoin, instead of Apples payment system. It seems to me that Apple cant let this happen, until it becomes so pervasive that they are missing out on a substantial portion of business. SM: Do you guys think this is going to hurt bitcoin. AL: No. AA: No, not at all. Its going to hurt Apple in the long run. Because theyre going to be late in adopting it. But, I would agree with that. At the end of the day, Apple is also applying Greshams law internally, that says the bad money will crowd out good money in an environment and from their perspective Bitcoin is the bad money, its the one they dont control. And quite honestly, if you are an App developer and you have a choice between using Apple money and 30 % cheaper Bitcoin money, thats much more available and much easier to monetize. Well Of course you are going to use bitcoin. And what that will do is that it will create a permanent and continuous suck towards Bitcoin and away from Apple money. They can see

that, they are not missing that point. It is very much a defensive move to protect the business model rather than fair. AL: This 30 % thing keeps coming up; its not specifically on the Apple topic. I think we should address this on the air at this point. Bitcoin, by cutting out all of the intermediary on it and because of its inherently deflationary nature, has an really Interesting fact, on how, if you are going to run a business, you want to run business. Andreas, this is something that you have been talking to us about, internally in the show. It took me a week to understand what you are talking about but now as I applied to my own business model. Holy Crap. That could be the killer App for Bitcoin. The stuff is just substantially cheaper in it, because the currency is deflationary. So, I have given high level overview here. Why didnt you give us the details? AA: We traditionally operate business in Bitcoin, the way we operate traditional businesses because thats what we know. The problem is that the basic matrix for evaluating success of a business, I believe is different in Bitcoin. In traditional fiat currency, that is inflationary, you want to take profits out and postpone cost through depreciation. So, the most important things for a business like that are Profit margin, and overall cash flow and balance sheet. With Bitcoin its very different. I consider it essentially a conversion engine. That converts fiat into bitcoins. If you have a business that sells a product, and you buy the materials in dollars, then sell the products in bitcoins. Even if you are making 0% profit margin, a 100% of the cost, even the sales tax and the shipping cost gets converted from Dollars into Bitcoins through that business. If you do accept that its a deflationary currency, then infact the matrix of the successful Bitcoin business, might be conversion rate and gross revenue, not profit margin. That leads to a different incentives, infact you might want to drop your profit margin, if that will generate volume, because volume is what matters not the margin. AL: My Background is in Sales and Brokering. And one of the commonalities there is that the profit margin that a broker often sees, when they dealing with the specific item is somewhere between 20 and 40 %, most of the time. Thats for a situation when you are not really ever touching the product, and you dont really have any meaningful cost. One of the businesses which I am working on is Bitcoin packaging. Which will eventually be a way for people, who have businesses they run, primarily of the bitcoins to purchase packaging for their various business needs with bitcoin. With that project what we are looking at is doing two parallel stores, one that offers the USD price and one that offers the Bitcoin price. And the difference between the two is about going to be 30 %. What it let you do is that, is it lets you show the difference in cost Vs values of these two different product. Ok. You can buy this way, thats money that we have to do something on an active basis because if we just leave it as money, then it doesnt do anything. You know, it gets to be less valuable overtime, there is no real chance for appreciation, if you put it in a bank, and there is not any sort of meaningful gain from that. On the other hand, if you are willing to pay just as costs in bitcoin and we dont have to sell those bitcoins, because we have operating capital to allow that sort of float. As time goes on and deflationary curve kicks in, every Bitcoin that we have earned earlier in the process; rises in value along with rest of the currency. So, you wind up with the situation, where may be for the first year you know you are breaking and you are not profitable, or whatever. But over the course of that time every single one of your sales grows in values, you know retractably. It lets you do it, while offering the incredible discount that simply isnt achievable under any

sort of other scenario. And it gets around that problem of people not wanting to buy things now. Because its not worth getting a 5 % discount, if you have to spend bitcoins that you think will be worth more in a month, 2 months, or a year. AL: Thats just looking at the basic aspect of the deflation. You have to add another aspect to it. The Bitcoin economy is only about 1.7 billion dollar. So, its valuation currently is really reflection of the size to the market, more so that the volume of the transactions that are occurring. What that means that if you invest your money into bitcoin adoption and promoting the success of Bitcoin. You externalize that into the community and then you reap the benefit in the form of higher valuation for bitcoins. Because its such a small economy reads the benefits of the higher valuations. So at the early stages it absolutely makes sense to promote adoption of the currency as one of the main ways of making revenue and profits in this market. And thats great, because what it means is, bitcoin is viral. SM: I really like that approach. I think thats win-win for everybody. I guess theres another factor too. Because you are going to accept Dollars and convert those into bitcoins, there must be some cost for doing so. But what you really are doing when selling you services for bitcoins is, doing that conversion directly, if its something that you are going to do anyway. So, you save on any transaction cost to converting Dollars to Bitcoins in the first place. AL: Yes, Infact even if you use a payment processor, as I do in some of my businesses, the type of rate I am paying is 0.99% and essentially what I am doing is I am converting dollars in to bitcoins with 0.99% transaction fee. And that lower then what I get, once you add up all of the cost moving in and out of an exchange. SM: I have a little experience with this to, if somebody buys a voice over services from me in bitcoin, a substantial one too. To me that transaction makes a ton of sense, just like you are saying Adam for all those reasons that we have just talked about. AL: One of the biggest exchanges in the bitcoin environment, if you think about that way is Bitpay. And there are not an exchange Tony has definitely figured out a very good business model because Bitpay its revenue in Bitcoin and thats a fantastic way to essentially generate an exchange through retail. AA: If you havent heard, the Humble Double find Bundle now takes Bitcoin. So what is the Humble Bundle? Its a collection of games which are available for whatever price you want to pay, on a donation basis as part of the gift economy. The beauty of it, is that they now take Bitcoin. And the secondary beauty of it is that they funnel some of that money toward Electronic Frontier Foundation, a really useful organization for Bitcoin in my opinion and one that doesnt currently take bitcoin. So, you can both get some great games, you can support Indi game designers. And you can nudge EFF into really seeing the value of Bitcoin donations, thats the Humble Double Find Bundle. AL: But, its the Humble Bundle in general that started accepting. This is the first bundle to roll out. What this service actually does is that they usual take somewhere between 5 and 7 independent game titles. They negotiate directly with the developers that produce them and then they put them on here and let people pay whatever they want. So, one of the interesting things is this that usually the numbers that

you see high end of the bundle are $200,$300 or somewhere in there, but for this time because they accept Bitcoin people threw all kinds of money at them. We got at the top contributor is satoshidice.com for the win $2500, the next one below that at magical tgox which is AA: Fellows thats Mt. Gox for you. AL: Is it Mt. Gox or Mount Gox? SM: Pronounced Mount Gox, but of course it comes from, Magic the gathering online exchange. AA: Got a email from someone about that, we should get our terminology right, I thing Mt. Gox, the way they have put the dot is that they are trying to make it. AL: So, the Top 5 are all above $1000 for this bundle that they attempt to sell for around $10 or $8, is like the standard range that they get for something like this. The average purchase price right now is $7 and 11 cents on windows and $10 and 28 cents for Mac users $14 and 43 cents for Linux users. You have got these larger donations coming in from the bitcoins. I think thats great. It shows these developers that there is not only a backlog of users, who to want to be able to spend bitcoin in just any sort of variety of ways, certainly on Games and certainly in this sort of capacity. It also lets them eliminate their cost, because again before this the primary way to pay them is with PayPal, you got fees in there, so you cant do things that are too inexpensive. Id like to see this model taken down to almost down to per game basis. Because you could do that with bitcoins, you could have game available for 50 cents if you want to spend 50 cents and is like not a big deal. So, you can take what has to be a bundle because of the payment processing element and instead turn into a cart menu, just because that you dont have that cost. SM: This brings up really important point for me when I think about Bitcoin and how it relates to charities or like nonprofit organization. I have got this panel at the Bitcoin conference about Non profits. One of the question that came up, I am going to be asking to the panel is Do you think you got more support in general, because you accepted Bitcoin? Are there people who would support a charity, who wouldnt normally support it, but since they accepted bitcoin they are go ahead and throw some support behind them? Do you guys ever have that experience, being bitcoiners have you ever supported an organization or a cause that accepted bitcoins, simply because they accepted bitcoin and that was enough to put you over the edge. AL: Last week, we did an interview with Michael Hill from Cyprus, he was collecting Bitcoin donations for setting up a forum and he was going to use it for printing materials or flyers and things like that. And you know it was really easy for me to send him 0.22 or 0.25 of a Bitcoin, to the tip jar we had imembeded in the show post and that was really really easy. Thats something that if I was sending money over PayPal I couldnt really sent in that Small amount. We dont have to worry about the currency conversion; we talked about this before its that low barrier to entry thats makes it possible to do really whatever you want, as far as the small donations go. Just from the shows perspective, we got the donation 0.002 while we are doing the show and that is something where. This is the person you want to give us the value for

the value we are giving, wasnt able to or not willing to give us 0.001 of a bitcoin but it doesnt matter. Because there is no cost for us to accept it and there is no cost for him to send it. AA: There are three effects here that are combining to make this incredibly environment, the first one is the very low friction for transactions and the ability to do micro transactions. The second one is the kind of illusory effect that you are paying less than you think you are, 0.5 Bitcoin doesnt like much, but I dont think most people $50 bucks charity just like that. They might give o.5 bitcoin as charity. The third fact is really that you have the early adopters of bitcoin are self selected group. They are idealist, they believe in the Bitcoin experiments and they have become the new patrons of bitcoin. Essentially we are experiencing the Bitcoin renaissance. And you have a lot of self selected millionaires and billionaires in bitcoin, who are able to become patrons of both ventures and innovations but also the patrons of the art and patrons of the charity. SM: Yeah, that brings up the point about the microtransactions too. I mean that .002 Bitcoin, might not be worth much now but if we hang on to it, perhaps that would be a great way to grow organizations down the line, if it appreciates. AA: The deflationary effect works to the benefit of the charity. AL: I think that its to our determent to try and say that this is happening because of the early adoptions, I think that you are right that early adopters play a huge role in it. But I think its more of a cultural role than anything else, by showing this generosity, because we have got donations from people who bought bitcoins after listening to the show. So clearly, they are buying in these high prices. For them 0.5 is really is 50 bucks. AA: Perhaps I should explain that, I believe that we all are early adopters. AL: That a good point. Illigible AA: Yes absolutely. I would consider a late adopter is a people who would join Bitcoin 3 or 4 years from today. At the moment we are all early adopters. And we are all magnanimous in our bitcoin AL: Thats why its so important for people who are interested in right now and who do understand the system. To really be proactive and helping other people to understand it, because if you are in it, you know it takes a while to get it. Its kind of complicated and its counter intuitive to a lot of the ways that to think. Perusing to our conversation in episode 6 I have now started the Napa valley Lets Talk Bitcoin meet up, where we are gonna try and have.. Yea, its gonna be interesting. And pretty immediately I was reached out to, by a winery in Unot Field. Hey, we have heard about the Bitcoin thing and how can we help. And probably gonna wind up using the room over the winery, for the first meet up. But the point is that its that type of grass roots local connections ultimately going to be the most valuable. That is where you not only find friends and companions, but you will also find business partners, youll also be able to be educate yourself that you really can otherwise. Because these interactive conversations that we have during the host segments of the Lets Talk Bitcoin are almost more about learning from

each other, we dont prepare for the show in the way that lets us know what the other person might be saying. This is really natural back and forth and as you hear the perspectives coming from everybody else, it really helps you kind of complete the mental jigsaw puzzle that bitcoin is. And fill in the blanks. SM: Yeah. From my perspective I just get such a kick out the feeling, of sharing value with somebody else like if I find value in something that I get for free, I really want a way to find express my gratitude. So, that its one of the reasons that I really love not only charitable giving but also giving bitcoins, because its so easy to do that. Not only that, but there is there a survey that said that the most common use of Bitcoin was for donations. Do you guys remember that, it was like an online Survey? Totally unscientific survey, but people said that most common use was for donations. I actually really believe that, because I dont think that I am unique in that regard. People want to give back value, when they get value and part of the value that I get is just also knowing that there are people who use bitcoins or there people who are sharing my excitement about bitcoins. I get like another emotional pay off from doing transactions with them that involves bitcoins. So, its like circle of love, in a weird way. AL: Totally agree. AA: Its all about the community. I got some breaking news. Doula has ceased transactions with Mt. Gox, and the email is shocking. You are receiving this notice because our systems have indicated that you have processed and completed a the real time Doula to Doula payments to Mutum Sigillum LLC Mt. Gox, within the past 24 hours. Due to recent court orders received from the department of homeland security and US court district court for the district of Maryland. Doula is no longer legally able to service unable to service Mutum Sigillum LLC account. This is the courtesy email encouraging following OP on any uncompleted orders with Mutum Sigillum. As Doula is unable to move money to and from Mutum Sigillum LLCs Doula account. Doula is not a party to this matter, nor does it have any information or future insight into this situation, we strongly encourage those with questions to contact Mutum Sigillum LLC. Note: Doula requires a court order before honoring requests such as Seizing funds or revoking access to an account. Apologies for this inconvenience. AL: Huh. I guess my response to that is, Oh! SNAP!! SM: Yeah, thats about right. AAL: I guess thats what we are waiting for, right? The other shoe just droped. Some one more knowledgeable about the legal systems, perhaps get some insight coming out of the US district court for district of Maryland. AL: And the department of Homeland Security more relevantly, I mean that is unusual. SM: They are probably trying to protect us from those dirty bitcoin terrorist, right? AA: Right. AL: Or something.

AA: By protect us, you mean Goldman Sachs. SM: Right, well ofcourse. They have the best interest at heart. AL: Thats all the time we have for today. Thanks for tuning into episode 7 of letstalkbitcoin. Whether you liked, loved or hated the show. We want to hear what you think. Please send listener feedback, comments or questions at adam@letstalkbitcoin.com . If you are like me and just cant get enough information on prospective on Bitcoin. Check out our daily newspaper at dailybitcoin.com where youll find the best news presenting articles and argument from all sides of the issue. Thanks to Andreas M. Antonopoulos, Dr Stephanie Murphy and David Schwartz, for providing contents for the show. Music for this episode Jared Rubens. You can find links to the songs we use and open source artist to make them at letstalkbitcoin.com/music . Stay tuned for Episode 8 of Lets Talk Bitcoin, releasing early on Friday 17th of May. Featuring a report from our new correspondent Asif Punjwani and the tax question. Are you a miner? Do you pay it? We talk ideology and reality. Music plays