Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Mt. Gox’s Lukewarm Wallet

Episode Date: March 3, 2014

On today’s show we’ll talk about the Mt. Gox situation, covering : the history of recent events, the Crisis Strategy Document and what it means, theories on what really could have happened as well as the outlook for Mt. Gox, Bitcoin exchanges and Bitcoin in general. In addition, we’ll talk about Neo & Bee’s opening in Cyprus and the new decrease in transaction fees. This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/009

Hi there, today's March 3rd, 2014, and this is Epicenter Bitcoin, episode 9. Mount Gox's lukewarm wallet. On today's show, we'll talk about the Mount Gog's situation, covering the history of recent events, the crisis strategy document that was leaked this week, theories on what really could have happened, the outlook for Mount Gogs, Bitcoin exchanges, and Bitcoin in general. In addition to that, we'll talk about neon bees opening in Cyprus and a new decrease in transaction fees. If you like the work we're doing and you'd like to support the show, please go to EpicenterBitcoin.com

for our tipping address. Hello and welcome to Epicenter Bitcoin, episode 9, a weekly podcast about the latest news in Bitcoin and cryptocurrencies. My name is Sebastian Quiriririo. I'm a Canadian-based user. I'm sorry, I'm not based. I'm originally from Canada and based in France. I'm a usual experience designer and developer.

And I'm also the founder of Bitcoin Talks, Lil. And I'm Brian Farleen Crane. I'm originally from Switzerland, but live in Berlin, and I run the Bitcoin Starters Berlin group, and I'm involved in a variety of Bitcoin projects. How are you doing today, Brian? Yeah, good. I just got back from a wedding.

So, well, I'm still in Switzerland, but the wedding was in the mountains, in Cloisters. and it was very interesting. So it was very interesting to see the kind of knowledge of Bitcoin there, which is something that I completely did not expect. So, yeah, let me just briefly tell you about that. So we had, you know, in the first evening I was sitting with two of my cousins and, you know, they're in their early 20s.

And, you know, I didn't know they were, they knew about Bitcoin at all, but both of them, you know, had, you know, pretty solid knowledge of Bitcoin. They both have some bitcoins. And so that was very interesting. And then my other cousin was, of course, there. I mentioned him once before. So he has a company.

They do kind of mobile tools for mobile development. Yeah, yeah. I know we bought a whole bunch of the gear. Oh, cool. Yeah. Yeah. So, of course, he knows quite a lot about Bitcoin and he accepts Bitcoin. And now the guy who got married, he has a, as this kind of a side thing, he has this restaurant together with another cousin and the friends.

So the three of them have this restaurant in Basel. And I didn't even know about this, but they're accepting Bitcoin. And they haven't done any publicity about it. And my brother was telling me like two days ago. And I was like, hey, you know they're accepting Bitcoin there? And so it was funny because I was talking a lot of people. There's just so many, like, knew about it and very interested in it. And a lot of people had like really, really positive views about it too.

And so did you do you have, are you in close contact with these cousins of yours? Yeah, we're like recently close. Yeah. So I'm going to, I'm going to put it on coin map and I'll post it on Reddit too. Okay. So they haven't done any of that. No, I was asking because maybe maybe they've been reading your newsletter. No, no, completely independently.

I know Florian reads my newsletter, the guy from the ghost lab. Yeah. But the others know, they're completely independently. And all the other cousins too. The ones who were seeing my table and they got interested, nothing to do with me. So did they know that you're involved in Bitcoin and did you head a podcast and all this? No, I don't think so. I mean, some of them knew, but for the most part, no.

That's really so much. It's in your DNA. It's in your family's DNA. Yeah, it's... Bitcoin runs through your veins. Yeah, I know. It's interesting. Cool.

So is this like, is this kind of typical in Switzerland? I don't know, since it's like known for its banking and such, perhaps it's big. Maybe there's a developed Bitcoin ecosystem there? I mean, I know there are quite a few companies here. And there is a, I think there's a fairly vibrant Bitcoin community. And there's also, there are a lot of people here who have kind of a lot of influence, I think. You know, there's, there are some, you know, for example, the Monitas guys, their company is located. here.

So these are open transaction. Then I know that if you were thinking about relocating there, then the guy who, he did Bitcoin, the Bitcoin J.S, and I think he works for Ripple. He's Stefan Thomas. So we used coins. I think he made that. He is Swiss, although I think he lives in San Francisco now. So there's quite a few.

And I also read there's a company, I think, they're producing their overall. own ATMs and they're going to launch those soon. There's an ATM in Geneva and there was one in Zurich temporarily. Yeah. So there's, you know, a bit. But yeah, it's very surprising. I totally didn't expect that. Cool.

And so what were you able to discuss with them? I mean, what kind of conversations did you have? So we just talk kind of generally about Bitcoin and with my two cousins. And then I also talk with the guy who has the restaurant. And I kind of ask him about how they do it. And I think that is a bit of a mess apparently. Okay. Because they haven't.

They haven't. I told them they should just get them payments, you know, payment process of like Bitcoin or something. Yeah, like a bit paid. I think they're doing it kind of manually at the moment. But yeah. Were they aware of the Mount Cox story? Yeah, yeah. No, people, definitely, a lot of people were aware of it.

And of course, yeah, I got to ask about it too because, you know, I end up speaking about a big point quite a lot. Yeah. But, you know, people weren't to, you know, they would just ask, they kind of open and, you know, I tell them, like, you know, obviously it's terrible. Yeah. But it's mainly terrible for the people who have,

money in there, I don't think it's terrible for Bitcoin. I mean, that's basically my view of the Mount Gogh situation. I don't think this matters in the medium term. Well, maybe we can get into it. We'll talk about that. Yeah, yeah. Just briefly, before we get into that, I'm going to be having my meetup on the 13th. So meetup number two of Bitcoin Talks, Lille.

If you're in northern France or Belgium or Paris and you want to attend, it's going to be at 9.30 on the 13th. And I'm going to be doing a talk probably about Mount Cox to try to demystify everything that's been happening and explain in simple terms what's going on. And hopefully by then we'll know a bit more. I also want to explain transaction malleability also. And maybe doing some sort of recap of the conference that we attended in Berlin. So I'm looking forward to it. And so far, I've got about 10 people. attending so far and there's still 13 days left so excited about that yeah that sounds good do you have any other talks line now no uh i do i did notice that there are some people that signed up for the meetup

that are that seem to be quite involved in bitcoin um or at least interested in it so i'm going to contact them to see if they want to do a talk yeah so far i'm the only one cool that sounds great yeah So speaking of... Yeah, Mount Cox. Actually, I don't think we should talk about Mount Cox. Let's just talk about the other stuff. Yeah. We've heard about it.

Yeah, we've heard about it so much already. Yeah, week after week. It's old news. It's old news. No, but so obviously, this has been the story on everybody's mind and everybody's been talking about it. If you listen to any of the other shows on LTV, they've been talking about it.

The mainstream media has been talking about it. Everybody's talking about this story. So we've been talking about it for the last two weeks now. First time we talked about it was in Berlin two episodes ago when we were with Yohan. And we discussed what was then, well. Yeah, it was actually the trend. Right, which... Which is interesting, because that's kind of moved into the background now.

Yeah. I... And last week, we discussed it as things were kind of unfolding, and Mark was stepping down from the Bitcoin Foundation. No, not even, no. It was just... That was this week. Yeah.

That was all this week. Maybe let's just briefly... I think we can briefly go about three-day events, and then there's still... a lot of uncertainty about what actually happened. So we can talk a bit about some scenarios. Yeah. Do some speculation.

So this week, so as we turned on our computers Monday morning here in Europe, at least, the news that was coming out on Monday was that Mark Carpell is the CEO and the CEO of Mount Cox was resigning from his position as a board member of the Bitcoin Foundation. And then later that morning, all of the tweets got removed from Mount Gawkes' account. So this kind of further fueled speculation that there was something wrong and something was going on. And we saw the price kind of adjust to that and the price kind of started going down as of Monday. And then as a response to everything that had been happening over the last few weeks, there was a joint statement that was released on the Coinbase blog. And this joint statement, when I say joint statement, so it was written in coordination by the founders of Coinbase, the CEO of Cracken,

the CEO of BitSnap.net, the CEO of BTG China, CEO of blockchain. Info, and the CEO of Circle. And so this statement sort of was meant to distance these actors from whatever violation of trust, Mount Gauks, had been involved in. Is there anything you want to say about this statement, Brian? Yeah, I think the statement's not that. Yeah, I mean, it's just them basically trying to kind of contain the negative PR. But I think when it got interesting, really interesting is the day after, you know, when they started.

So that was on Tuesday, they started halting the trading. Right. So before, you know, as we remember, you couldn't withdraw money. So you couldn't take out Bitcoins, you can take out via money, but you could still trade. And you had this weird phenomenon where you had this Bitcoin builder exchange

where it could try to basically trade around balances inside Mount Gawks against Bitcoins outside of Mount Gawks. So now they shut down trading completely. They shut down the website to one point. I think that was on Wednesday, Tuesday, too. That was also on Tuesday, yeah. later that yeah and then uh i think then it got really interesting because then we had this

document was leaked and it was called it the crisis strategy draft i think and it was it was by a guy named uh oh it goes by the kind of a pseudonym called two-bit idiot and he has a tumbler where he's been posting a lot of kind of he's been breaking a lot of the news about mount gox yeah So who is this guy, the two-bit idiot? His name is Ryan. Selix. Selix. He's a, I think he's a MBA student at MIT, and he's also involved in some sort of Bitcoin things.

But, so about this crisis strategy document, I mean, I think that is really interesting. There was so much information in there. I just want to quote one sentence. So at one point they're right in there. At this point, so right now, I mean 744,408 Bitcoin are missing due to mail-neability-related theft, which went unnoticed for several years. The coal storage has been wiped out due to a leak in the hot wallet. So this document basically tried to explain what the situation was and had kind of an action plan going forward. But of course, we didn't know before that Bitcoins have been stolen, had been missing.

It was just kind of a suspicion. And in there, for the first time, kind of a black and white, they wrote that basically all of their money, except 2,000 Bitcoins. So all of their bitcoins had been sold and that they also had a pretty massive liabilities in dollars. So the liabilities were a lot bigger than your assets even on the dollar side. So I'm reading this quote here. And what it's contradictory to me. The cold storage has been wiped out due to a leak in the hot wallet. This is funny because I, yeah, no, no, it's a great point.

So let's just explain first what cold storage is, right? So cold storage is essentially a Bitcoin, private and public. key that have been generated on a computer that has never touched the internet and continues to not touch the internet. So for instance, you can have a system on which you have a Bitcoin QT client and you can generate addresses on that system, but that system is not connected to the internet. So you can send money to that address, but to get the money out, you either have to take that coal storage and make it hot.

So by that we mean connected to the internet. or you have to use, I don't know if you can do it with a QD client, but you can do it with Armory. You can use the USB key to initiate the transaction on a computer that's connected to the internet. Take that transaction, move it on the USB key to the cold wallet, rather, sign it with a private key, and then reintroduce it onto the hot computer, so the computer that's connected to the internet. So by saying that the cold storage has been wiped due to a leak in the hot wallet, this doesn't make sense. Yeah. No, it's funny because we had the Bitcoin meetup in Berlin the same day.

And because the talk was canceled, we did this kind of impromptu Q&A session on Mount Gogh. And so at one point I was like, well, but one possibility perhaps is they didn't have a cold storage at all. You know, people were like laughing. And then that's how they go hacked. because of course you think like this gigantic amount how it would be possible but you know i mean from reading this i completely agree with you it's kind of inconsistent if it's a cold storage then how on earth would it leak yeah and it was andres nathanopoulos that said on his on his blog right after this document was released who pointed out it a leak from cold storage is a contradiction

in terms so it's either it wasn't a leak either it wasn't cold storage like you can't say that this is cold storage if it's not and you can't say it if it's a leak, if it's cold. Yeah. Let's talk also about the other things. There were some really interesting other things in that document. So there was two things I'm particularly talking about. One was this plan.

So if you look at this from my perspective, if you read this document and say, if their situation is really like this, that's a horrific situation you'll never get out of. You know, they absolutely are completely insolvent. There's nothing to salvage at this point. But if you read the document, it seems they're of a different opinion. It seems what they implied there was what we need to do now is we need to rebrand the site.

So from Mount Cox, you're going to go to gox.com. We make a new logo. And then we'll basically relaunch and it would be cool. And they also make this case that if Mount Gogs collapses, it would be horrible for Bitcoin. It would basically probably end Bitcoin or at the very least it would throw it back five years in time. So what's needed right now is that kind of major Bitcoin holders step up and put money into Mount Goggs to prevent this, which is just mind-blowingly absurd to me. So. But they're taking on a, you know, we're too big to fail kind of attitude.

Exactly. But it's retarded. It makes no sense. Yeah. But you know, I mean, you. You say it's retarded, and I agree, but if you listen to the, if you listen to the Charlie Schremert of you on LTB, this is what he says. He agrees with this. He says, you know.

I have to, I have to say, I've heard a lot of people, like sort of senior Bitcoin people, like veteran Bitcoin people, talking about the sma-goc situation. And I'm often kind of amazed on many levels. One is that they, it's true. Some of them really seem to think that there's some systemic risk of Mount Goggs. I don't see that at all. And the other thing is that they kept being really delusional that, you know, like this can be rescued and there'll be turned around and Mount Goggs will come back. And it just does not make sense to me. See, this is where our points, our opinions differ.

Because I don't think that Mount Gog's falling is the end of Bitcoin. Okay, so that kind of the usual point of view where like it's too big to fail. We need to put money into this and like make sure that it stays up because otherwise, you know, Bitcoin will fall. I don't think so. I think it's going to have certain setbacks. It's going to cost certain setbacks. I've got a blog post that we're going to put on the blog tomorrow where I, well, maybe even tonight before the episode gets released where I kind of give my opinion about this. but I don't think it's out of the possibility that they do try to rebrand as gox.com.

I mean, if they don't go to prison, there's no reason for Mark Carpellis not to turn around and start a new exchange with these 2,000 bitcoins and this other liquidated. No, no, but these are not his bitcoins. These are bitcoins of the company Mount Cox. They're not his. He can't just take those and say, okay, well, I'll take the assets, the liabilities that I'll leave in the company. That's completely criminal. You cannot do that. Right, yeah.

That's what Charlie Shrem said. He was on the Let's Talk Bitcoin. He talked about this. And it just makes no sense whatsoever. So he said, you know, actually, it was about this crisis strategy document. And he said, well, but they still have $30 million in Fiat assets. you know, they can do something of that. And that's just completely wrong because they have, well, okay, they have $30 million in assets,

but they also have $50 million in liabilities and like $700,000 in liabilities. You can't just ignore the liabilities and say, okay, but I still have some money in the bank. Does not work. So, but, let's just, let's just keep going through this timeline and we'll get back to all this. So just, you know, as kind of a hint that the, that they're actually thinking of rebranding to gox.com, it was confirmed on Tuesday that this domain investor, his name is Andy Booth, that he could, he had sold gox.com to Mark Carpellis, like, within the last few days, I think. So was it, was it that day or was it last week? No, I think it was a bit earlier. It was like two weeks ago or something. But very recently, yeah. So anyways, on Tuesday, most of you would have noticed that the price of Bitcoin just kind of plummeted.

It was trading it below 400 euros for most of Tuesday. And then Mount Cox made a statement on its website claiming that it made a conscious decision to halt transactions, right? And they also said it was to protect its users, which is really funny. So then on Wednesday, there was a new statement on Mountgox.com, which is still up on the homepage saying that Carpels is still in Japan and he's working on this. And he also posted a picture of his cat somewhere. Mark Carpels his cat says hello. Yeah, yeah. Actually, that's not on the website anymore.

It's not. or let's see no no that is still on the website you're right but there's also some kind of um oh yeah legal notice that they're starting a procedure of civil rehabilitation whatever that is okay so this is new this is from like today or yesterday perhaps March 2nd a second yeah I guess today yeah okay so it says I'm answering regarding an application for commencement of a procedure of civil rehabilitation. It's also in Japanese. Let's, yeah, let's go.

So if you keep going in the timeline, right, I mean, yeah, some other business plan was leaked. I read it. I think you read it too. It's, I mean, they don't even mention any of these problems. And it's just, you know, they talk about expanding the business and have this typical kind of startup.

Yeah. Growth rate of exponential growth rate and talk about how much money they'll make. I mean, I guess we can just, I don't think there's too much meaning to that. Yeah, but it's interesting that the business plan reads as if it was written completely independently of everything that's been happening.

I mean, it was, right? I think they, yeah, we'll go again towards what exactly is going on. And we can come back to, yeah. But then on Friday, they filed for bankruptcy protection. So that's kind of the notice, I think that's on the website too, refers to that. And bankruptcy protection, I think it's similar to in the U.S. There's something called Chapter 11.

So that's when a company sort of says, okay, we'll be insolvent. And our liabilities are much higher than our assets. That's an assayment. Yeah, you can say that. And I think the idea of it, though, is that they might have some sort of, you know, could do some kind of restructuring. But, of course, I think to do a restructuring, you'd actually have to get approval of the creditors, which seems impossible. I mean, it just seems absurd, the whole idea of restructuring here. But the interesting thing is,

We still don't know what exactly happened here. Because they in this leaked crisis strategy draft, they essentially attributed this to a transaction mailability, a related theft, which they claimed started in 2011, I think. And this is what they've been saying all along, like, since the beginning of this whole deal. They were blaming Bitcoin, the protocol. Yeah. Yeah.

they did start doing that, exactly. But the thing is, it's not so clear whether that's really true, a plausible explanation. There's a lot of questions around that and a lot of inconsistencies. And we don't know. We still don't know. So we can perhaps go through a few scenarios, through possibility of what really is going on underneath. So just in relation to the transaction liability theft scenario, if you calculate the amount of Bitcoins that would have had to been stolen in order for that to be true, like if they say that it started in 2011, that's an insane amount of Bitcoins per day.

Yeah. I mean, it's more than 700,000 bitcoins, and which now apparently is more than 800,000 after these other documents that were released. It's crazy to think that that this would have been unnoticed. It's completely preposterous. It's like, it's so absurd. It's like mind-blowing. It would be like, I've been.

living since 2011 in his house and I didn't notice how someone stole the house and it's not been here anymore. But I keep living and I haven't even noticed there's no doors and windows anymore. And it's just like that level of absurdity. And no transaction mailability also kind of implies that, you know, transaction mailability theft would probably be small. So you would have to do it repeatedly. So yeah, exactly. I mean, how on earth would that not be noticed? Now, there was apparently an automated system in place that would check to see if transactions

went through and then reissue them if it hadn't. But you'd have to assume that there was some sort of a threshold. I mean, unless they're just, that, I mean, unless the systems were developed in such a way that they could be exploited like this. Yeah, no, no, you're right. There has been some research into this, and it does look like what they were doing is that, you know, if you try to withdraw all money,

it would look for the transaction ID to check if you went through. If you couldn't find that, it would just reissue it. You even have to go back there to tell I didn't get my money, which is a very strange way of structuring any change. But then even there, how, you know, assuming they had a cold storage, and, you know, I think Coinbase, they keep like 98 to 7 or something percent off there, and you'd assume that Mount Cox would do the same. Even then, you would notice, oh, my whole hot wallet is gone, and then let's say they lose 5 percent of their bitcoins, maybe, which would be high even? Well, wouldn't they ask, why are they all gone?

Or would you just go and ring cold wallet on and then have that repeat? It makes no sense. assuming they had a cold wallet, it seems impossible that through transaction reliability, more than a few percent, let's say more than 5 percent at the very most of their bitcoins were stolen. Yeah, so what you're saying is, just like a recap, transaction malleability would have only been able to affect hot wallets. Yeah, of course. Right. But, you know, who knows? maybe they had a cold wallet.

That wasn't so cold. That wasn't so cold. Maybe it was. Yeah, no, that's true. Of course. Maybe it was lukewarm. Yeah. That doesn't seem to be possible.

Maybe a room temperature wallet. Room temperature wallet, yes. There's also some people looked at the blockchain, of course, just to find evidence of transatlantic. transaction mailability and they couldn't find any. So there's definitely a suspicion that they just try to blame it on transaction availability, but the real theft went some other way. So, but if you go through the scenario, so we wrote down five scenarios.

So this would be kind of number one, which is his, the official Mark Kerpellis scenario, which is transactional availability since 2011. We didn't notice. Now the money's gone. It seems impossible to me. But, yeah, that's what they claim at least. The scenario number two, and this is something that's been kind of on my mind for a while. I think that's a quite, I find it a pretty plausible scenario,

which is that there was a large theft a long time ago, maybe 2000. 11 or maybe not as long, maybe it was after that. And the company has basically been insolvent since then. So let's say they got 700,000 Bitcoin stolen. I don't know how many they had at the time. It may not be possible. Maybe it was later. But let's say most of their bitcoins were stolen.

Now, users wouldn't notice that necessarily. And so if only a small percent of the users withdrew the Bitcoins, you could probably satisfy that from the rest of the bitcoins that were on there. And if new users paid in more bitcoins, you know, you could basically use those to fund the withdrawals of people. Yeah. So that's, that would be possible to basically operate an exchange that's completely unsolvent for an extended period of time. Um, and it's fractional banking. Yeah, it's fractional banking.

Banks to all the time. It would also be consistent or it would also be an explanation for why it's often taking people such long times to get money out of terror. Yeah, exactly. Because if they were short of money, they might just wait until more people pay in and then once more people have paid in, they can fund the withdrawals. So, you know, people have been reporting, waiting a month or something to get their money out. So that would explain why that was the case. Of course. course, they also claim that there's been audits and things like that and how on earth one would be able to do this and not, yeah, I don't know.

But of course, if your auditors don't understand Bitcoin and you just showed him something, then maybe you can. Well, it's also been interesting though on Reddit. There's been some research. You know, people have looked, try to figure out, is this possible? when could they have been stolen? And there's some evidence, at least, that they still hold some of the coins.

So that would be inconsistent, I guess, with this. Or maybe it was just a partial theft. Maybe part was stolen 2011, and a part they kind of stole themselves now. That could also be possible. Now, wasn't there sort of a, I guess not an audit, but in 2011, some people on an IRC chat spoke with Mark and got him to perform a transaction

to verify that the funds were still there. And through blockchain analysis, we were able to determine that they still had access to those funds for at least some time after that. Yeah, that's right. So I think what happened in 2011, there was a hack. And people were wondering, is Bitcoin is Monkawks insolvent? There was a hack in 2011.

Yeah, I think there was. Yeah. And so people were worried that Mount Cox was actually insolvent at that point already. And what they did then was that they executed some transactions

from that cold storage. So, you know, he could say, okay, I'm going to send like some small amount, but with exactly that those numbers to a specific address. And so you can essentially prove that they still were in possession of those bitcoins. And I think that was about 400,000.

So, you know, very large amount. And then that also served at the time that people said, okay, yeah, they're not insolvent. And then people have tried to track down after that. What happened with those coins? Do they still own them? And on... On LTP, they talked about this on the last last Let's Talk Bitcoin episode, and they, they're a kind of scenario. They think that they should still have access to at least a portion of it.

But we don't quite know. It's not really clear from that. But at least there have been different people looking at that and exactly what you were talking, where you could basically know certain addresses at certain points, to Mount Gawks because, you know, they were funding addresses, so you'd pay in money into Mount Gawks or because they used it in different ways, you know, exchanges of certain patterns in how they use addresses, so you could figure that out. And they've used those to basically speculate that Mount Gox may still have access to a large, to large amounts of funds.

Well, just because the Bitcoins are on addresses that Mount Gawks support. supposedly controls doesn't mean they have access to those private keys. Yeah, that's a great point. That's, where did I write that down? I think scenario number five, let's get back. Let's do the other one first, and then we can get, this is a interesting one. I agree. But also, if you just like think again, like, if they had been in Solman since back then,

what were they thinking? and I think if you look at a lot of their communications, it seems to be kind of, they do seem to be delusional, just completely detached from reality. So I could totally see that they got into some complete mess, and they just did not want to face the mess they were in. So they were like,

I'm just going to keep going. You're just going to ignore this and keep going, and hopefully we'll earn it back, you know. But that doesn't sound, I mean, it's crazy to think that a company we run like this, but that's not outside the realm of possibility. No, I don't think it is. I think it's possible.

It's completely preposterous, but it's completely possible that they got their Bitcoin stolen some time ago or lost access to them and have been running on reserves, like fractional banking style for the last few years. and this is the reason why people can't get their money out on time. And, you know, because every time they're always waiting for new funds to come in. Yeah, I agree. And it's also kind of consistent.

If you look, for example, there's like crisis strategy draft, right? So if you look at just a balance sheet and you're like, this company is completely ruined. There's not the slightest bit of hope. But that doesn't seem to be the tone of that document. They're like, no, no, we're going to rebrand and, uh, and maybe convert some funds, customer funds to equity, and get some more, and then, you know, we'll already, and then we'll be fine. And if you, also, if you look at this business plan, you know,

you see this exponential growth and, you know, next year we're going to be five times higher and then the year after five times increase of revenues per factor five, et cetera. You know, if you look at those, I mean, if they actually believed those absurd plans, then, you know, perhaps they really did believe that, they did pretend to themselves, let's put it that way, and that they could get themselves out of this situation. Now, in that scenario, though, I mean, what, there's 40 people that work at Mount Cox? I don't see how that information wouldn't have gotten out somehow.

I mean, come on. Unless the people that work there are completely oblivious to what's actually going on and have no idea, which... I've seen that mentioned in places, said that Mark Carpelle is a sort of like sole solely in charge of Bitcoin funds, etc. I don't know if that's true, but that, you know, that people literally would not have a clue, you know, where they were or how they were stored, etc. It seems crazy too, but who knows, you know. Yeah, it's, yeah, I don't know. So scenario number three.

Yeah. Yeah, so you're proposing this. So some kind of government gag order and a seize of assets, perhaps in the relationship to Silk Road. I don't think this is very likely. Yeah, I don't think it's very likely either. But, you know, if you remember last year, Mount Cox did have bank account frozen by

the Department of Homeland Security with $5 million in it and you know like let's say if we think of example that Charlie Schremer rests let's not forget

in a sense Mount Cox was much close to the to the actual Silk Road thing than Charlie Schrem was in Bidinsent because Bidinsent was a way

for people to fund or to put funds into Mount Gawks and then on Mount Gox they bought the bitcoins and sent him to Silk Road. So, you know, Bid instant was one step removed from that. So it's possible that if they went after Bid instant, why wouldn't they go after

Mount Gawks? I don't know what if I mean, the U.S. government could go into can they seize assets of a company in Japan? Yeah, I don't know. I mean, I don't think it's the most likely scenario.

I think it's an unlikely scenario, but who knows? It doesn't seem completely impossible. And it would explain that the communications have been abysmal. Mostly they just not said anything or they put out these statements that don't say anything or don't make sense. Now, if they weren't allowed to talk, then that would at least explain that. But, yeah, I agree. I don't think it's a like listener. Yeah, but they haven't been not talking.

They've been talking, but they've been saying other things, and we've got these other documents that have been coming out, right? So this crisis strategy document is completely... Supposedly, they didn't want this, right? What do you mean? I mean, that was, supposedly that was leaked, right? I don't think it wasn't an official document. Okay, I see what you mean.

Yeah. But it's inconsistent. I mean, what's... Yeah, I don't believe this scenario. I don't think it's right. Okay, yeah. So scenario number four is that they never got hacked, but Mark Carballis is stealing the funds.

Yeah, so... Yeah, it seems kind of hard to pull off. Yeah, certainly. hard to pull off. Yeah, I mean, extremely hard to pull off. But, but actually, if you also think, if you think back to this crisis strategy draft thing, now that would explain that document. Because if he was trying to steal the funds, that's, that makes a lot of sense. You produce a document like that where, you know, you kind of blame it on others and you show, well, look at, look at this. They're all gone. And, um, um, you.

And of course, if he still has the funds, then that might be a way or an attempt to pull this off. But where is he going to put $350 million? Yeah, it's crazy. It would be the biggest heist since, I don't know, since the banking sector heists. Yeah. Yeah. It's crazy. I totally agree.

Yeah. But what we can also, what we could also imagine is some kind of hybrid case. So let's say they did get hacked and they were really low on funds and did have like maybe close insolvency. And there was. I think someone actually said that, you know, very sure like 90, 000, 90,000 coins are still in Monacox possession,

perhaps Marquo says like, well, this is going down the drain anyway. Why don't that just steal the rest of it? So that's, that could be possible. Yeah. I think that's not unlikely, actually. And so scenario's number five is that they lost access to their cold storage.

Yeah. So I think personally that it's not like a clear-cut scenario number one, two, three, or four, or five. I think that it's a, it may be a combination of these things. So they may have been hacks. They may have had some coinstone in a hack or a leak of their hot wallet, if you will. They may have had unresponsible management of cold storage where cold storage wasn't actually cold, but it was somehow connected to their network.

And some money may have been hacked or stolen that way. Transaction liability may have also played a part in money that they have lost. They may or not have lost access to coal storage. I think that all of these scenarios kind of put together are the... Yeah. No, so if you just go through this, so they got hacked, 2011, lost parts of their fund. Then, because they were so badly programmed that transaction mailability also kept losing funds. Then they lost access to their cold storage because Marcapital is such a mess.

But there was still some coins, so you stole the rest of it. No, I think this is true. I mean, just think about it. It's possible. It's not possible, yeah. This is a company that was founded in, what, 2010, 2011? 2010, okay. I think they became a Bitcoin, they weren't a Bitcoin exchange.

Right, they weren't a Bitcoin exchange. They were doing something else. They were doing magic card money, whatever. So they're most likely operating on sort of like legacy code. PHP. That may not be very secure, that may be badly coded. I've seen this. I mean, not at this scale, obviously, but I've worked for, you know, e-commerce sites.

And when you look at how they're coded, when you look at the site, everything looks nice and fine and everything. But when you look at the back end, you realize it's like an old version of OS commerce, and there's so many vulnerabilities that can be exploited from every which way. This is not outside the real possibility that things on the inside are badly managed, badly coded, security, no security or hardly any security implementations. things are being managed by one person, Mark Carpellis, and although he may have some technical know-how and he might be security, well, I don't know if you want to call him an expert, but somebody who's worked in security maybe hasn't implemented things. You know, this happens where you say, okay, we've got to do this. We've got to implement this security feature or we've got to implement the security protocol, but it never gets done or keeps getting put on the back burner. no I mean I don't disagree with you I think it's totally possible that multiple of these things happen yeah I think it's no I think it's not unlikely I agree I think and yeah no I think all of these

and you know even if something like cold storage losing access to cold storage I think that's not unlikely you know I mean I I set up armory and you know done backup etc and if you think about it, you know, and you have to have several years, it's certainly possible at some point. Something goes wrong and the interesting thing on the, on that scenario,

the loss of cold storage. And so I'm, I'm kind of referring to let's talk Bitcoin the last episode where it's called like gocks, gocks, where they talk about this. So the, hypothesis there,

they propose that perhaps they, you know, they put a lot of coins So I guess the coins that they used in 2011 to show that they're not insolvent, they put those in some sort of cold storage. And then, you know, they thought they were safe there. And then they may have had transaction mailability related thefts later. And perhaps that used up the hot wallet. And then they wanted to go to the cold storage, you know, to get coins out to put in the hot wallet.

And then all of a sudden, they realized they didn't have the. you know, the passwords or the private keys or the seed for the cold storage wallet. So it's also possible, of course. Maybe he lost his wallet card. His wallet card? Yeah. I've got one of these wallet cards in my hands, even the ones that were passing out of the conference. Maybe that was their coal storage and he had in his wallet and lost the card.

Yeah, or he had a brain wallet and you just forgot it. Yeah. Yeah, yeah. Or maybe his brainwold was like fart or something. Yeah, no, maybe he had like monkey one, two, three as a brain, the brainwaller seed and just someone figured that out. Yeah, brute forcing. Yeah, so it's crazy, you know, we still don't know. And I think we'll find this out, I'm pretty sure, and we'll probably find it out soon. Yeah.

I hope so, at least. I think so. I think more news is going to be coming out. We're definitely going to talk about this next week again, I think, I hope so. So if we go to the Mount Gawks site now, so there's this announcement regarding an application for the commencement of a procedure of civil rehabilitation. An overview of the situation should be published here shortly, probably on March 3, 2014. So that's tomorrow. So tomorrow we're going to be getting more information, but probably only in relation to the procedure of civil rehabilitation, but probably not actually what's going on. I think that's going to be up to Mark Carpels to tell us or more of these leaked documents to come out. Now, I just wanted to get back to this kind of restructuring hypothesis. Okay, so Mount Cox is based in Japan.

Mark is French. So is his marketing director, who is apparently running the company. His name is Gonzaga, Gé, Boucher, or no, anything. Yeah, something else. They're both French. So the company is going through a restructuring or a bankruptcy protection in Japan, so they're, they're going to be protected in some way, I think, from actually having the shut down because of insolvency.

Yeah, I don't know exactly how it works. Okay. Yeah, I think in principle, at least in the U.S., I think Chapter 11 works that way, but I don't know. So what's, let's just hypothesize here. What is to stop Mark Carpellis from leaving Japan, going to another country, with whatever Bitcoins, his customers' Bitcoins or some other Bitcoins he may have somewhere or some funds or maybe some investment fund and starting a new exchange there and restructuring Mount Gox's Cox in another country? I mean, I would put it like this.

I think the scenario of him like leaving the country. or some fancy stolen and like trying to hole up somewhere possible the scenario of him starting in the exchange is just so completely preposterous i don't even know like it seems crazy i mean it is like yeah no it's it's it's just i i absolutely think it's completely unfathomable you mean from because it because it's him no it's just because this situation is you don't start a new exchange in a situation like this

you won't have any customers and plus that I mean think of the attacks you'll be exposed in terms of DDoS and God knows what attacks I mean personal attacks too or you know it's I don't think this is

a possibility at all I think him running away from Japan with the funds and that may be possible. Yeah, I don't think that he's, obviously I don't know, but I don't think that his intention is to like run off and run off with people's money and never be seen or heard from again. Like he's, he's got a family and a kid, you know, like he'd be putting his, his life in all. also his wife's life and his kid's life in danger. But he's already done that now.

Yeah, but maybe not on purpose, maybe through negligence, but not purposefully. No, I agree. I think it's more likely that he just kind of maybe got into a really messed up situation because of being bad at his job or like running a badly designed exchange, etc. and that then you just made like tons of bad decisions avoiding dealing with it and made it worse and worse. I also just want to relate to that. I would very briefly want to talk about one thing that also this Ryan Selleck, so two-bit idiot mentioned.

And that's that supposedly for several weeks before this transaction. mailability stuff, I think. But I guess when they started, they stopped. Yeah, I don't know. But at some point, you know, when we had this crazy discrepancies where you had $600 bit stamp price, but the Mung-Ox price for Bitcoin was $200, et cetera, that he was using that to do insider trading and, you know, to basically, you know, to basically, you profit himself from that.

I don't know if that's true. Can you explain how that would work? Yeah, so he could, you know, let's assume there would still be some Bitcoin. Let's say he had some money in there. He could use that to buy Bitcoin's in a sense on Mount Gogh and sell them on BitSam. Of course, if the customers can't take bitcoins out,

or I mean, he doesn't even have to buy them, he could just take them, no. Yeah, he'd take the customers. You just take the customers, Bitcoin's and sell them on another exchange. And then maybe if he wanted to like reimburse the Bitcoin's, he could come back, he could take the money back in Mount Cox and he could buy from someone for $200 a Bitcoin.

So in a sense, then he would have arbitraged. He would have done an arbitrage. and the original Bitcoin would still be there and he would just have made the difference so that, you know, per Bitcoin, he could perhaps make $400 that way. And of course, the issue is other people can do that because they can't tear the bitcoins out of Mount Cox. But if assuming there was any bitcoins there, he certainly was able to take the bitons out of Bangkok. So he would have been able to do this. And this is something that could be extremely profitable. And I guess if he had this idea to earn back the money, maybe he was trying to do that.

Of course, it's super fraudulent and extremely messed up. It's also, I don't know about Bitcoin, but if you did the same thing with stocks or any kind of security, it's insider trading. And, you know, okay, most people, when they do insider trading, nothing happens. It's kind of standard practice in the Wall Street, perhaps. But at least in the theory, you should go to jail for them. Yeah. So that's, I guess, the question is now what will happen to Mark if he is found, this is supposing that he gets charged with something.

You know, the question is, you know, will he go to J. Dale. And also, you know, there's questions around around the short and medium and long-term future of Bitcoin. How will this affect Bitcoin in the future? Like, already we've seen this Joe Manchin guy, this senator in the U.S. that wants to have Bitcoin be banned. Like, that's what he's proposing. And so regulators are going to start like really coming down on Bitcoin, I think, within the next days and weeks, because of this whole story. Like, already the media has been just having a... I don't know if I see that negative.

I mean, first of all, I think, you know, regulators don't move very fast, right? So this is a very slow process. No, regulators don't move fast in the sense that it takes a long time for regulation to come into effect, but politicians do speak out about stuff like this. and are quite reactive. Yeah, they may speak out, but there's nothing, like, from speaking out, I mean, we've seen that, right? You just mentioned this guy who wants, like, want to expand, but from some guy saying

something to regulations a very long way. So I think, you know, let's say if you look at the U.S., there's been, I think, quite positive development in terms of Bitcoin regulation over the last six months. Now, even if people think, if some people think, if some people, think now, okay, maybe Bitcoin is doomed after all. By the time they would think of how to let that influence the legislation or the regulations of Bitcoin companies, I mean, that's going to take weeks or months. And if by the time, you know, if within three weeks we see this kind of thing has been

wrapped up, it was a big fraud, but Bitcoin's fine again, you know, the price is not dropping more, the trading's okay, all the exchanges stepping, et cetera. I don't, I don't think it's going to have a negative effect on Bitcoin. This is Bangkok story. But who knows? Yeah. You may be right. I think that it's going to have a negative effect. I mean, already it's having a negative effect because just talk to the regular person on the street who knows very little about Bitcoin and who's only heard this story in the media. I mean, I had this conversation with my mother a while ago who I spoke to and hadn't spoken to in a few weeks

and asked me about this. And her immediate response was, well, this Bitcoin thing, it's done and over with. I've had people email me and send me links to the Washington Post or Forbes saying, oh, did you hear, Bitcoin got hacked? So the perception, the public perception of Bitcoin, I think the image people will have of Bitcoin is, you know, this is going to be lasting on the public perception of Bitcoin.

I don't know if it's going to be lasting. But yeah, of course, it's a negative story, et cetera. And it's, I agree in that sense, it's negative. And it may be negative in terms of new user adoption that some people, maybe you were thinking about it, but now they're not anymore. They're scared. So I do think there's some effect, but I don't know. I don't think it's going to have a lasting effect.

Yeah, maybe I'm overblowing it. I mean, I personally, I think it's horrible for the people who have big ones in there. But that's about as far as it goes. I don't think. actually I want to mention one more thing about this whole this whole story and maybe a bit of a larger perspective so if you think what's the effect of this theft on Bitcoin

and one aspect I think is actually important is if somebody really stole 700,000 Bitcoins or 800,000 Bitcoins. Now, that's currently, I think,

is, was it 6% of the money supply? Yeah. Now, let's just think, let's just assume Bitcoin's going to be really successful.

It's going to become a major currency, a major payment system, et cetera. The Bitcoin price is going to go to, I don't know, $50,000 a Bitcoin or something like that.

Now, just think of the gigantic wealth that person now has. A criminal, of course. That's not good. So that's, I think that is actually, that's a bit worrying, you know. Because there comes enormous power of that kind of wealth too. And, you know, I rather that does not lie.

First of all, you may have a worries or may have worries in general about someone owning 6% of the money supply or, you know, let's say it'll be 4% in a few years or something. I think that's in general is, it's too high. It's worrying. But if that's some criminal, and that's a much worse. So in that sense, it would actually be the best outcome, assuming, you know, found in return to the customers, I think by a far better outcome than that they were stolen is if he lost the, access to the coal storage.

If that's truly destroyed, that's much, much better than if someone's sold them, I think. Wouldn't we have a way through blockchain analysis to see, to see large transactions come out of Mount Gox addresses and actually see if all these funds have been moved from addresses and Mount Gauks controls to other addresses? Yeah, I mean, that's what people have been trying to do, right? So, I mean, it's hard and you can sort of do things. And what some people think based on that is that they, at least some of the funds should still be in control of Mount Cox. But, yeah, we don't know.

But of course you're right. But let's say someone has those funds, spending them will be a different issue because there will be a lot of visibility. It would be like, let's say Satoshi starts moving his bitcoins. now everybody's going to have his eyes on that and that's not going to go or notice and I think we'll have the same thing here but still maybe tools will be developed

and make it possible to anonymize Bitcoins effectively I think that's quite likely that we'll see that in the next years and then perhaps they would be able to move that stolen funds and spent them and I think just in terms of justice and also in terms of who do you want to have power, I really hope that there's not some kind of some criminal who is now in possession of 800,000

Bitcoin's. But I don't just say criminal, but it might just be some, some kid, you know. I mean, well, I don't want that kid either to. And this is criminal regardless. I mean, yeah, but I mean, when you say criminal, you're, you're implying, you know, somebody in a black hood who's like a terrorist or, you know, something like that. But it could be just some kid, you know, really. I don't know. I would, I would think that there's a more professional, you know, if there was a theft, that this would have been someone really professional.

but I don't know. So just in some other kind of short, medium-term outlooks, if not regulation, what this I think really does, I think this was the intention behind the joint statement by all these exchanges, is that now we've got this horrible thing that's happened and people lost money and people are now going to hold exchanges to a higher level of accountability. So I think that, and I think you also share my opinion on this, is that we're going to be seeing some new exchanges coming into the market

with very high level of quality and transparency in terms of perhaps having access to your private keys. self-auditing, external auditing that's very transparent to all of the users. Existing exchanges are also going to increase their level of quality and transparency and accountability in this sense. And in the end, once this kind of all blows over and the smoke clears, yes, some people will have lost a lot of money. But the Bitcoin ecosystem as a whole would have greatly.

benefited from this problem or this, yeah. Yeah, I agree. No, I totally agree. I think we will see that. I think this was happening anyway, though. We saw many new exchanges raising. We see money. And for the most part, we haven't yet seen them.

They're not operational yet. Or if they are, it's kind of beta, or they have no liquidity, et cetera. So I mean, we've already seen that kind of a shift from Mount Cox style really badly, bad exchanges to more high quality, well-funded modern exchanges. So we saw that already. And I think this was going to happen this year anyway. Now, now the transparency thing is interesting. I think you're right that maybe that would not have happened. And I think that will happen.

I think you're right. So we will see maybe multi-signature addresses being implemented with Bitcoin exchanges. We actually talk on the inside Bitcoin's company with Thomas Bloomer. And he's developing technology to do exactly that. I think he has developed one. And I think coin kite, if I'm correct, they're a Canadian company. they have something where they have a, they kind of make public,

people can check, you know, are my funds there? Yeah. Through the blockchain. But I think that the distinction is, of course, you know,

you have companies that are working towards this kind of trust, higher trust, higher quality model, but now Bitcoin users and customers of those exchanges are going to have

a higher level of demand and quality. It's going to come from the bottom, is what I'm saying. That innovation is going to be pushed up from the users who are going to be demanding it. Yeah, yeah. No, I agree. And it's also something that maybe before you didn't see the use so much.

I mean, perhaps it was something that, okay, it would be nice to have that, but it's not like the main priority. But now, of course, if an exchange comes and says, look, You can audit all our books anytime you can see if our funds are here or not, et cetera. That's powerful. And I think that will be a big advantage. I think it's not trivially implement, though.

Because as an exchange, you really want to have off-blockchain trading. You can't trade on the blockchain. It's much too slow and too expensive. So I don't know how to do it, but I'm sure people will find a way. So should we maybe put this topic the rest for this week? Yes, yes. We're talking about for an hour. I mean, we could go on for quite some time.

I think we said to what needs to be said for now, and then we'll come back when we know more. Yeah. Hopefully next week we'll have more information as to what actually is going on. I don't know. So I think you wanted to talk about New and B? Yeah, that's right. So I've been aware of them vaguely for quite a while. New NB is a company in Cyprus.

And they're trying to build. It's kind of like a bank infrastructure, a bank-like infrastructure based on Bitcoin. and it's it's really cool so they were opening their first branch on one day so they actually have a physical branch it looks like a bank it looks like a regular bank branch and they've also been doing tv advertising i think they're doing a really good brand a good job branding themselves to a general audience i mean it feels like a bank you know i guess banks are good that branding themselves is this like here we are you can trust us etc so they do some of the same things

now about how they work they're called neo and b and neo and b are actually two different businesses with two different but complementary functions neo is the arm where you can have customer accounts so you can you know kind of hold bitcoin's with them and well you can also do which is interesting is that you can have your peck accounts so you would have let's say a thousand years in there and but it's a bitcoin account so the bitcoin balance would go up and down

and based on the euro price so let's say uh i don't know so if you say at the moment the price is 400 euros per bitcoin right so let's say you put in two bitcoin So you put in 800 euros, that's two Bitcoins. Now, if the price doubles, then your balance is going to be decreased to one Bitcoin. But if the price drops to 200 euros, now your balance is going to be four Bitcoins. And of course, they are doing that. So they would basically take that risk off you, the currency risk. And in that sense, they're also speculating with the Euro peck accounts that the Bitcoin price will,

Because if the Bitcoin price increases, you know, they get, they earn Bitcoins that way. Okay. So, do you understand how it works? I'm writing this down. I'm trying to figure out. So you put in, say you put in 800 euros in an account. Yeah. Okay.

The current Bitcoin price is 400 euros. So that means obviously you have two bitcoins. Yeah. If the price goes up, say the price goes up to, well, 800 euros. It's making things simple. Yeah, exactly. Price goes up to 800 euros. Now you have one Bitcoin.

One Bitcoin. Because they hold, essentially, you always hold Bitcoins in your account in a certain euro value. So in this case, you always hold 800 euros worth of Bitcoin in that account. and if it goes up, you know, they take some bitcoins out. If it goes down, they put some additional bitcoins in. Okay. So there's actual bitcoins being put into an account. It's not just numbers corresponding to whatever value.

It's not just like, here's what your euros are worth in Bitcoins. Yeah, that's a good question. I don't know how exactly it works technically. But essentially, what's the advantage of this? Well, the advantage is you can use Bitcoin now. You know, if you want to pay somewhere and they only accept Bitcoin, you can, you can use it as a payment system. So if you want to say, I want to use Bitcoin as a payment system, but I don't want to have anything to do with all this risk and volatility and this madness. Okay.

I just want to be able to pay with Bitcoin. And then this is great. Right. because you pass on the risk. They essentially, they say, okay, we'll take the volatile risk on us. You can just use the bitcoins. And so this especially gets interesting when you talk about the second part of their business. So you also get a chip and pin device like a debit card.

So you can use that. And now we come to the B size, so the other side, which is a merchant service. and they produce point-of-sale terminals that allows customers to pay with their debit card. So now they can use their Bitcoin accounts to pay the merchant. So essentially what they're doing is they're just building a payment network, a Bitcoin-based payment network. Okay. This is really interesting. And in fact, this is a sort of.

sort of thing that we need for, you know, wide mainstream adoption to occur is, you know, simple ways for you to be able to buy and sell bitcoins through a regular bank account without having to open up an account of an exchange, having the ability to use your bitcoins to pay for stuff and vice versa to be able to transfer, just, you know, easily from one type of currency to the next. This is really interesting. Yeah, no, I agree. I think it's cool. And it would be nice if just regular banks would start doing this too. Maybe they will at some point. I'm sure they will. Yeah. But yeah, there will be the last ones, right?

They will be after other companies have done it and it works, et cetera, then they may start doing it. Well, you know, I can see, like, for instance, a lot of regular kind of, bank institutions such as, like in France, like the BNP or the Societte General, these banking institutions have been there for a very long time and have large infrastructure and high costs. They've branched off and created online versions of their banks where you can essentially

just create an account online. You get a bank card. There's zero fees, but you don't have access to a physical bank and you don't have access to you don't have a like account like a personal banker. You have a call center or even worse. You have a chat that you can have access to. I can see these banks kind of getting into this. This is kind of a way for regular banking institutions through these subsidiaries

where perhaps they have much lower costs and less risk get involved in Bitcoin. Yeah. With a clientele, with a clientele that's going to be mostly just, young people, right? Yeah, yeah, yeah. I mean, Fedor Bank is a bit like that, right? In Germany, they work with Bitcoin DE, and they don't have branches. And it's very much a bank that's focused on young people who are interested in technology, you know, kind of know what's going on.

And of course, they are very, they are working with Bitcoin in a variety of ways. Hmm. How are they working with Bitcoin? So they are partnering with Bitcoin DE. So Bitcoin De is kind of like, it's not really a Bitcoin exchange. It's like a peer-to-peer Bitcoin trading site. So you can, you know, if I want to buy Bitcoins of Bitcoin De, I can go. There will be someone offering and I say, okay, I want to buy from you.

Then his bitcoins are put in escrow. And I send my bank transfer to him when he confirms I get the Bitcoin. They're the largest Bitcoin exchange type thing in Germany. And they are, you know, because this is a financial service. So they're working with Fidor for their banking license, their license. Right. Now, what Fido is also going to do is if I trade with you and we both have a Fidor account, you can trade Bikcoins instantly.

Oh, cool. right so because they just adjust balances on both sides so because they're integrated with bitcoin the e so you can adjust the bank balances to know the money's there you don't have to wait and they know the bitcoins are there so that's pretty cool and they're also interested apparently into in bitcoin derivatives and they are also the banking partner for crackin so yeah they're they're quite active yeah i'm looking at the website they seem to be quite I can't read German, but I see words like peer-to-peer credit, crowdfunding. Yeah, yeah, exactly, yeah.

Okay. And they have like their social gaming and, yeah, I don't know, but they're very progressive. Oh, seems that way. But maybe if you just say a few more things about the Cyprus thing, I think what's interesting, if you look at what they're trying to do, which is put point of sales terminal in with merchants, this is really expensive to do. So one, they have to produce those point of sales terminals,

but maybe more expensive, they have to convince all those merchants to put those in and then they have to explain how they work. This requires so much time. and so many employees. So, so it's interesting that they do this in Cyprus, which I think makes a lot of sense,

because Cyprus is a small place. So you can, you can buy TV advertisement there for a little money. You know, if you did the same thing in France, it would be extremely difficult. And that makes it, I think that makes a good decision to do things there. Well, there's actually a chance that they get some kind of,

of coverage that they actually have a decent amount of customers and they have a decent amount of emergence. And what's on top of that in Cyprus, of course, that last year there was the financial crisis and people lost huge amounts of money. And what he also had was that the banks collapsed. And what they did was they took money from people's savings accounts to pay for the disaster. So the trust in the existing backing system is perhaps lower than anywhere else in the world in Cyprus. So I think that those things together makes much more likely to sign up for a new thing. And the small area makes it much easier to sign up mergers. So I think what they're doing is something that has a chance in Cyprus,

but that would be really expensive to do in a big market. In the U.S. doing this would be, I think, it's too early for that. I don't think there's a chat. Maybe in a year from now, you could, you could do this. Right now, this would just be too expensive. Yeah, and also, like, the guy who's behind this, this NeoNB bank, he did, he was on LTV a few weeks ago.

He spoke at a conference. And this was very much kind of the vision, right, was to kind of de-structure, create something that is so far removed. from the banking, the traditional kind of banking sector in Cyprus, in which people have completely lost trust in. I think this is the kind of underlying vision behind this is to rebuild with a new type of bank. Yeah. Yeah, no, I agree. They don't do, they don't do lending, for example, yet. Maybe they will. But, yeah, it's, um, It's cool.

But yeah, so I think there's actually, if there is one place right now where I could see something like what they're trying to do work, then I think that's Cyprus. So I'm extremely interested in how this is going to turn out. And if it does work, of course, there's a chance of them scaling that to other countries. I think they do want to do that. And it will be fantastic if they can make this work. Yeah, they're in Europe. so it would be easy for them to branch off into other countries. Yeah, that's true.

From a regulatory point of view, and yeah. Okay. So just quickly we want to cover transaction fees. So we'll just cover this quickly because we're running kind of long here. So as was the case a few months ago in May, transaction fees are going to be reduced in the next version of the QT client. So right now, the minimum average transaction fee is around 5 cents of a US dollar. And this latest patch would make transaction fees reduced to half a cent.

So why this happens is because as the price of Bitcoin goes up, while transaction fees come down. And so what's interesting about this is that this gets decided from, this gets decided by Bitcoin developers, right? So Mark Hearn and company. And what we were discussing earlier just before the show is a scenario in which this would be somehow decided by the market, right? So kind of an auction where by which you can essentially bid on the price of transactions and the price of a transaction to be included in the next block. Yeah, although of course this would really have to be something that kind of goes on in an automated way

because nobody actually wants to, you know, you don't want people to have. have to think should I pay this amount of transaction or that or so there would have to be some other mechanism absolutely but the interesting the problem just right now is these core developers they got together and it's like okay we'll we'll go from there to there and it's really an arbitrary number they could have chosen some other number and they just as well and that does not seem to be It seems a much more efficient way would be if somehow the demand, you know, the number of transactions that people want to do and the capacity of the miners and those things came together and somehow a market rate would be determined. And then what you might also have is that people say, okay, it's not that important for me that my transaction is going to be confirmed quickly. So I'm going to pay less, but maybe I wait if there's a lot of demand from other people.

And some people, if they want to be, if it's a high priority transaction, they would pay more. That's just a fault. I don't know. Maybe that won't be necessary if the network is not that capacity. And you can always confirm all of them in the first block. I don't know. But it seems in general, and I think that's something people are working on as well is that there needs to be another. way of determining transaction fees.

Yeah. I think I agree with this is that when we need to figure out a way in which it's kind of embedded within the protocol and essentially the market decides what the price of the transaction fees are, it's not up for core developers to, I mean, this works for now, but as Bitcoin becomes more mainstream and more people start using it and, you know, prices go up, that's not going to scale anymore. I think that's a really important. point here is actually that right now if you look at the revenues miners generate they are the

vast majority is for mining new blocks so transaction costs are actually not that important for them right now but that's going to change in the future so if you have the you know the mining reward i think the block reward is half again, if I'm correct, in 2017. So when the block rewards go down over time, of course, transaction costs become much more important for manners. Absolutely. So then a decision like this is going to be, at the moment, I think it doesn't matter that much.

But at some point, it will. And that's just not a power that the core developers should have. Yeah. No, I agree. Okay. So maybe we should call that a show. Yeah, thanks so much for listening. It was lots of fun to do this.

And I'm sure we'll come back to this topic once again, probably next week. Most likely, yeah. Yeah. So we hope you've been enjoying the content we've been releasing from the conference. We're releasing another episode of interviews on Wednesday. So be sure to listen to that one. And then there will be two more episodes. episodes after that with talks that we recorded also.

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