Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Patrick Byrne: Bitcoin 2014 Amsterdam – Keynote by Patrick Byrne CEO of Overstock.com

Episode Date: May 22, 2014

This episode is part of our coverage of the Bitcoin 2014 Conference which took place in Amsterdam from May 15 to 17, 2014. To start off our coverage of the event, we have the keynote presentation by Patrick Byrne (@OverstockCEO), CEO of Overstock.com. Mr Byrne talked about the history of liberalism and the upcoming crypto revolution. This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/bitcoin2014-01

Hi, I'm Brian Fabian Crane and I'm here with Sebastian Guter. We just got back from Amsterdam where we attended Bitcoin 2014 conference, which took place from May 15th to 17th. It was the second conference organized by the Bitcoin Foundation and over 1,000 people gathered for three days of talks and conversations. We had the opportunity to interview many speakers and attendees and talk about their projects and perspectives. We will release those episodes over the coming weeks.

So to kick off our coverage of the event, we have the keynote presentation by Patrick Byrne, the CEO of Overstock.com. Overstock became the first major retailer to accept Bitcoin at the beginning of the year, and in his presentation, he talked about the history of liberalism and the upcoming crypto revolution. Enjoy the keynote. I'm really generous of production. Members of the Bitcoin Foundation Board, ladies and gentlemen, Cryptographers, computer scientists, finance, geeks, quants, Austrian economics theorists.

I think there's maybe a couple gangsters in the room, journalists who are trying to make sense of it all. It is a surreal honor to be invited to speak with you today, both because of who you are and because this is taking place in Holland, in Amsterdam, in the Netherlands. And I would be remiss if I did not take a moment to acknowledge a debt that historians generally overlook in my country, the United States, and in other Commonwealth, or in Commonwealth countries, a debt owed to Holland, I'm sorry, to the Netherlands. And that is, the creation myth, so to speak, in the United States is that we had these founding fathers, the Constitution was written, Declaration of Independence,

Those who know something, know that our founding fathers read a lot of an English philosopher named John Locke, who was a social contract theorist who wrote a book called Two Treaties on Government. And maybe we know that there are these people, the pilgrims, who came to our country with some notions of religious toleration and such. So we see the intellectual history of our country as coming from these two sources. What is generally overlooked in this story is the enormous contribution, our hosts, the Dutch, made to that process. And it's a story

that's generally overlooked, but I'll be touching on it later. So first I want to thank them for hosting this. And I'll tell you just for a moment. I'll spend a moment about who I am.

You may have a few months ago Water did a large story about Maine. And I'll just point out they called me in this the Bitcoin Messiah. Just to be clear, I'm not the Messiah of anything. And as much as I favor Bitcoin, I love Bitcoin. I'm really a, I'm about the crypto revolution. I'm about the cryptocurrency and other missions for this technology.

I'll also mention that, to point out, I was called the Sforge of Wall Street. I would spend hours telling you how this came about, but I just want to tell you one, I'm going to give you one, a mooseosh, out of a decade-long story. And that is, but just to give you an idea of who you're listening to, and maybe you don't want to listen, in January 2007, a very well-known and actually well-regarded hedge fund manager in New York, kind of an elder statesman of the industry, not himself a bad guy. And a fellow I had known at a distance for some years asked me to come see him. and I went to sit with them and there was a witness there and this has all been actually vetted by this journalist, this is all of the term. This very-known hedge fund guy sat me down, a big guy, and his opening words were Patrick,

you need to know, you are the most hated man I've ever known in my entire life. You used to be kind of a golden boy here on Wall Street, but now you could kill people and you would be hated like we hate you in this town. So, of course, to me, I'm interested to you, that's high praise. I mean, they can carve on my toolstone that in January 2007, I was the most hated man on Wall Street. And how I got that way actually ties in rather a deep way to what brings me here today. I apologize now if any of you, if this talk isn't what you were expecting, if you're expecting a guy to get up and talk about blockchain,

and stuff, I'm not the guy. I want to talk about the historical context in which I see the Bitcoin Revolution and the cryptocurrency revolution. Alas, for you, I can't really do that without talking a lot about history. So if you didn't expect to come to a lecture this morning, that included a lot on history and philosophy. I hope you can get your money back, but that's what I've brought. I'm going to start with discussion in two books that invite us to be.

civilizations as operating systems. One, probably known to many people here, is Snowcrash. Now, Snowcrash is kind of a cyberpunk bible. It came out in the very, came out about 92, 91, and for one thing, it's known for being really quite visionary about the direction the internet would develop, what they call the metaverse, but what we came down was the World Wide Web, even Facebook, the idea of distributed republic. This is kind of the Bible for anarcho-capitalists, if we're already those here. Means, actually the concept of a meme

that actually comes out of this book and many other things. But the real value of this book, it invites us to view civilization as operating system. You know, nobody gets all excited. There's Unix and DOS and Windows and Mac and Linux, and nobody gets, how many kills each other, which is the right operating system. It's all just,

there are other virtues and truth when you're talking about an operating system. Well, he invites us to view history the same way, that this is really that Judaism, Christianity, Islam, Hinduism, East Asian, Confucianism, these are operating systems, and history is an enormous petri dish where these different organisms

are in a Darwinian struggle to figure out what the best operating system is. And taking that a step further, a book that came out just a couple years later by Francis Fukyama, trust. Now, Fupiyama wrote another famous book called The End of History. He's kind of the last hegelian of the 20th century. But his point of trust is, his point in this is that you can view different cultures and civilizations as operating systems. to solve one central problem. And that problem is how far does trust extend in the society?

If you're in a low trust society, family-based society, China, Taiwan, Italy, his argument is that you don't trust people outside the family, which means that you don't get businesses bigger than something that a family, maybe a large family can run. And that means that you're limited to give up economies of scale, was his argument, as opposed to high trust institution-based societies where you can trust outside of your family, you can trust institutions,

you can trust things like the government, you can trust shareholder corporations and all this plumbing and mechanism that underlies the modern world, and because you have that trust in a high-trust society, you get efficiencies of scale, you get, et cetera, et cetera, and that's his argument. I'll be circling back to that.

So now, history. George Orwell said that you could imagine the future as a boot stepping on a human face over and over forever. I don't think that's true, and I don't think that's going to be true because of folks like you, but thinking of that as an operating system. That was, in fact, the family of operating systems throughout all of history until about 500 years ago more or less some variation of that operating system.

Then, something really odd happened, 500 years ago here in Spain. And of course, the Europeans among you do not need to be reminded. Once 500 years ago, Europe was a sea of Spain with an island of France in it. But this was Spain. And in these northern provinces, well, this was part of the Spanish territory, as was England, the co-monarchs, for an end and a second. Whenever I see Game of Thrones and I see Jopho, I think it was for an end of the second, this strange idea started developing in the north,

and it was a collection of ideas. Generally, philosophers called liberalism. The basic common DNA of them all was that the consent of the government matter. And started off in two places in the Spanish, empire, one was here in the Netherlands, where ideas like tolerance, pluralism, constitutional federation of free states and peace emerged. And it's hard to imagine, like some scientists prove somehow that fish don't know that they swim in water. I don't know how to prove that, but they don't know that they swim in water. We live in a modern world and it's hard to remember

what the world looked like before these ideas came along, but this was not at all, and to to people. Erasmus, the great Catholic theologian, the University of Robert Dan, is named after. He introduced these concepts like religious toleration, political toleration, and pacifism. Baruch Spinoza, the great one, from right here. And if you're, if you have time here, you should visit the National Museum and learn a bit about it. But Spinoza came up with the idea of the self, the modern idea of the self, the modern idea of the as an agent to whom consent, from whom consent mattered, and who is capable of consent that mattered in the political system. Maybe these ideas emerged here of tolerance, pluralism, and constitutionally protected freedom emerged here perhaps because of the middle class, the merchants, should mention

that also a generally historian is considered a large factor of expulsion of Jewish people from Spain and Portugal. and they came here, the best one, well, Portuguese ones came here. In fact, in the synagogue here in town, which I also suggest you visit, they spoke Portuguese into the 20th century because it had such an influence. If you were a Marxist, you might also say windmills, the invention of windmills here gave this society a great deal of cheap, abundant energy, gave it a huge advantage, competitive advantage over everybody else, and everything else I just mentioned is this ideological superstructure that came with this economic development, technological development.

But these ideas emerged here, and interestingly, a group of separatists, that would be English Protestants, who didn't believe they could reconcile with the Church of England, they came here. They came here at the beginning of the 1600s, and they lived here for about two decades in late in the late. they finally got fed up. They actually loved it here, and they learned, they learned these values. They learned that a society modeled on these kind of principles could work. They were discouraged, though, quite literally,

by the effect on their young that was had by Amsterdam. The licentious and wicked ways of Amsterdam was corrupting their young. And so they picked up and they sailed to North America, where we know them as the Pilgrims. But they actually, and we give all this credit, we think of England as the cradle of liberty, but in fact it was all conceived here. Also, John Locke, whom I mentioned,

who had such an effect on our founding fathers, he came here, sitting out in some English civil war, spent three years here, went back and wrote this famous book to treatise of government that became sort of the founding inspiration for the U.S. revolution and much that came after, at least in the British Commonwealth. So that's why I say these ideas owe such a profound debt to this country,

the cause of freedom, U.S. Constitution. That's one side. The other thing that was going on in Spain about 400 years ago, very interesting, at the University of Salamanca, A group of Scholastic, Jesuit and Dominican friars, came up with, they became the first economists. And they introduced, they discovered notions that were kind of lost and not rediscovered for 300 years. But things like the subjectivist theory of value, which we now equate with Marshall in the Cambridge School of Economics 1880s, that was actually first developed by Jesuit and by the Scholastics in Salamanca.

The possibility of socialist calculation, which is again a main theme of the second half of 20th century economics. Quantity theory of money, the equivalence of cash deposits and demand deposits. In other words, Y-fraction reserve banking isn't a good idea. The value of entrepreneurship, value of property contract, and again, a piece, an anti-imperal platform that was pretty pretty, of the days of Spanish imperialism from within Spain. Well, something funny happened to this school. They balanced these thoughts, bounced through Spain, Italy, to the eastern edge of the Spanish Empire at the time,

the eastern edge, the eastern reign, the Ostevaic, a. Austria. And they went into hibernation for about 250 years. and about 150 years ago they came out of hibernation in the form of the Austrian School of Economics and those who I met here last night

and this morning who think of themselves they say as Austrian school guys and actually all started didn't start on Austria. It started here well it started in Salamanca and I consider these two schools I consider these this generally the heart of liberalism

of liberal political forms philosophy of pro-freedom I like to call this way of thinking. Now, people always object to, well, sometimes people object to me, maybe not in this crowd. You can't hijack the word freedom. You can't say you're pro-freedom, other people are. Well, there are people among us who call in our society we call themselves progressives. And if they hijack the word progress, I think I can hijack the word freedom. to be understood in opposition to the great philosophical mistake.

And this all circles back in one more slide, I promise. It circles right back into the big point of what you're doing. But I need to describe this great philosophical mistake. Basically a virus that was introduced into the operating system of liberalism. It was introduced, and it's authoritarianism, and if the key element of the DNA of liberalism is consent to the government, for authoritarianism, its submission. The great enemy of mankind, John Jacques Rousseau, introduced it.

His book, His version of the social contract, written really unanswered a lot, makes this very extraordinary claim. So finally, basically, the control freaks knew that they had lost. The enlightenment come, and they had lost their grip on history. so they subverted it with this idea that, okay, it is consent that matters. It is the consent of the government, but not in the silly way that John Locke understood it. We, intellectual French, understand it in a much deeper way. I, Jean-Jacques-Rousseau, understand that there is something that he terms la Volenteenegener,

the general will of the people. And that is important. That is what matters, but it's not to be determined by silly voting or something. That in fact, there may only be one person among us in a nation who understands what the real will of our people is, what the real will of the nation is. And that person, as the sovereign, has need to give no guaranteed subject, no constraints, there need be no constraints on it. His will is or should be nothing but the law. This Rhodes Pierre, when he forces everyone to obey his will, it just looks like tyranny, said Bruce Fowell, but it isn't tyranny

because he's forcing people to be free. And true freedom is found in submission to this force that understands the general will understands the real historical mission of our nation, of a nation. And that's true freedom. Well, this was, Voltaire read this and wrote a famous response to Rousseau, where he said, I've received, sir, your new book against the human race, and thank you for it. One longs is reading your book to walk on all fours. I love Voltaire. Bertrand Russell was once asked, Did he have a Bible? He said, yes, I keep it over there under my Voltaire.

So Voltaire was correct, but unfortunately he didn't win the day. This became a really dominant strain in our modern political philosophy, started with Rousseau, led to Kant, who, you know, Kant was a pietist working away in Croningstberg, famously never left the city in his bare pietist study. He had one adornment, a portrait of Jean-Dac Rousseau, And in his Teutonic way, he worked out the implications of this theory in this, well, grand and teutonic way, develops the idea of, I'm a folk. I'm folk of the mission of a people. And that freedom, freedom is found in subordination to this mission, that that's true freedom.

Not the freedom that the phenomenal self looks in, which is just what you or all I want to do, pursuit of happiness. Life liberty to pursue the happiness, is how lot put it. But that's just this sort of superficial form of freedom. The true freedom is understanding the historical process you're part of and through submission to that. Hegel comes along. I never got anything at Hegel other than late stage con and some precious stuff. Marks, who takes Hegel and says famously, I'm going to take Hegel and turn him over and stand him on his feet. And he's going to take all the dialectic of Hegel, but apply to economics. And this is the real historical process that matters.

The mankind has a story. It has chapters, and the final chapters, the ultimate triumph of the proletera and such. And freedom, again, is defined as submission to that process or commitment to that process. So it's a very different definition of freedom that had emerged in Holland, England, Scotland, and then the Americas. Nietzsche, who reads like he's an individualist, cares about the individual. He doesn't care about the individual.

He's all about the Zarathustra, the individual and capital I kind of way. And Nietzsche famously dismissed this whole other tradition saying, only an Englishman cares about happiness. That's his answer to John Storkville and Jeremy Bentham, the Utilitarians, and John Locke, Life, liberty and the happiness. He says, only an Englishman cares about happiness. In other words, I, Nietzsche, I understand the real historical mission and where freedom is to be located,

again, in some sort of submission to that. Lenin, of course, for him, it's not the masses, it's the vanguard of the masses, the party, freedom. And I used to live in China and I used to debate these kinds of things with intellectuals there, who would actually maintain these points of you that what you think of is just bourgeois Western freedom. Real freedom is submission to, in our case, the Kindless Party. Of course, the third right over the gates at Dachau and Auschwitz, the signs read, Arbite Machchrad, work will make you free. Work for the German state. Work for the right. Again, this idea of submission, properly chosen submission, is where real freedom is found, how, again, I lived in China in the early 80s under Deng Xiaoping,

and I used to have these conversations, and I was in Cambodia, in the ladies, and speak with French, educated intellectuals. And it's amazing that in these kind of places, everybody knows their Rousseau. Everybody knows Rousseau, Cotte, table, the Marxist canon, of course, that the three Western philosophers, we always knew in these places, or especially Rousseau. So that is, as Voltaire, said, mankind walking about on affords.

This idea that this is how you define freedom. So the great corruption occurred from John John Dr. So. So going back to this issue of trust, where does that leave us? Well, the one vision, the vision that I think is fundamentally authoritarian, believes that we need central institutions. And it argues for certain, centralized institutions. In one form another, it's uncomfortable with institutions that are not centralized. It all comes out of that authoritarian tradition. The problem, and it's funny, this fellow himself, who wrote this is considered a conservative, Lupiano, but his, you know, he's arguing that you want high trust society, you want to live in a high trust society where you can,

where you can have robust, centralized institutions, taking for granted, of course, that we can trust those institutions. What's neglected in his analysis is the whole problem of regulatory capture. And regulatory capture is an extraordinary field in itself. It was invented in 1972, a guy named Stigler, a friend of Milton Friedman. And you just noticed that, well, society sets up regulators

to protect us from certain industries and certain things. forces. But sometimes those regulators have a tendency to get captured, to get owned by the industries it's supposed to be defending us from. There's a Marxist at Harvard named John Hansen, who argues an even deeper theory, calls deep capture, which is that it isn't just the regulators get captured by the bad guys. It's regulators and congressmen and police and journalists and judges and academics, the capture goes very deep. I started a website eight years ago called Deep Capture that explores, well, it's one, various words, is the best site on corruption in the United States, best economic investigative journalism in the United States, stuff like this, where I explore

the capture and corruption of our centralized institutions. The great problem comes down to, if I'm right, and that there is more capture occurring than is sort of generally recognized. What happens is what John Kenneth Galbraith called the Bezzle. He spoke of the Bezzle. And the Bezzle is, in a modern society, there's that you could sort of freeze time and ask every single person, what's their stake in the financial system? What do you own?

And you could add it all up, you did this much, but you look, and there's only this much. there. And the difference, and at any given time, there is this difference. And he calls that difference the bezel, which is the amount that has been embezzled from society, and none of you know it. And at any given time, there's the bezel that is growing at a fast rate or a slow rate. I became convinced about 10 years ago there was an enormous bezel in the financial system. And the two centralized institutions that I think are the sources of it, and I think 2008, a lot of different causes for 2008. But one of the causes is it was a manifest, some of this bezel bubbling to the surface.

And the two centralized institutions that are to blame, central banking and central counterparty clearing. And both of these central bank, the reason I'm so committed to Bitcoin and crypto is because crypto can solve the problem that both of these organizations are presented to society. In the case of central banking, it follows, once you have fractional reserve banking, fractional reserve bank started, was legalized in 1844, Robert Peele, in the UK. By the way, there's a wonderful Spanish economist who writes about the Austrian school and central banking that people here may be like his name's Hazelisperta Lyshoka, and he's written on the subject. But anyway, once you have fractional reserve banking, you're always going to have the elites who own the banks over-leveraging themselves. And they over-leverage themselves in one way or another, they go kaput, and they need a bailout.

They need a lender of last resort. once you have a lender of last resort, you have somebody who thinks you have a central bank, and they think they can start directing and guiding and fine-tuning the economy, the tinkerers. There's a fellow at the School of Economics who refers to, says their vision is the economy is an enormous engine, and they're like a workman with a screwdriver, and they think they can just fine-tune it and get it just right. That's their vision. The problem is, the problem with this way of viewing the world,

is we laugh at the Soviet Union, those who are old enough to remember it, for trying to run a country without prices, without real prices. They had 23 million prices being set by apparatchets in a bureau in Moscow called gas plon, gas problem or something, that they set 23 million prices the how much the screws cost that would go in this bracket, that would go in this bookchow, 23 million prices for everything in society being set by operatic. And we say, oh, how ridiculous. What a crazy way to drive around our country. But in our society, the most important price we face is the price of which we discount the future

against the president, which is to say interest rates. And interest rates are being said, both in Europe and the United States, central institutions called central banks, with names like the Federal Reserve of the United States. That's, it's, you know, we laugh at the Soviets' work, but we're doing it with the most important and fundamental price in our society. Central counterparty clear it. This sounds so dull, but it is, I think, an enormous opportunity for you crypto here, for Bitcoin or some Bitcoin like technology to emerge. This is what I'm talking about.

There's a, when you watch a movie, you're not conscious of the grips and the gaffers and the lighting guys and such. You watch the movie. When you trade in the stock market, it's the same thing. You don't, you just assume underneath it all, there's some plumbing that makes everything work. So when you buy 100 chairs of IBM, it's getting your accounts over it. Well, starting about, we went public in 2002, our company, and when you're a public company's CEO, you're out there in the mix. I'm out there with hedge fund guys, prime holders, banks, all these kind of people.

And I made, by 04, well, I quickly became aware there was a bunch of criminality going on. Didn't take a lot of genius. I was asked to take part of it. By 04, I had it pretty well mapped out. I know just who was doing it. The network of hedge funds, there was a network of about 15 hedge funds in America's Center, and I'm a guy named Stephen Poh. that were at the center of a huge stock manipulation scheme,

which included insider trading. I started talking about it publicly, and naming them by name as I just did, and I promise no one will ever sue me because none of these guys can take discovery, and incidentally, Cohen later, this whole network came under investigation, became the target of the largest federal investigation of Wall Street in history.

80-odd people who had been sent to jail. Cohen himself just paid a billion, $8.5. And it's the tip of the iceboard. I think the criminality goes far deeper than anything you yet imagined, even in this audience, on Wall Street. But the real thing that was going on that I got arguably a bit obsessed with is the whole question of clearing, clearing and settlement. You assume that there are those, that plumbing underlying the financial system,

making everything work. And let me promise you. So I got into this very deeply. It's way too arcane to go into here, unless I get the right questions. But there's far more slop in the systems that underlie the transfer of property entitled in our society than you would possibly think exists unless you were part of it. There's far, we repeat that. the systems by which property rights entitled get transferred have gotten lots of lots of

slop. There's some academic reasons for it that they thought it was okay. There's more fault. That basically, property rights have gotten digitized and securitized and hypothesized and hypothesated and re-hypothicated and netted and pre-netted and sliced, diced, and circumcised, and the systems lose track of who owns what. And this case, so I was making some very public criticism of this, 05, 06, or 7, I was dismissed as in that. When 08 happened, first thing the SEC did went and plugged several of the loopholes that I was talking about,

but there's much more there. For example, in the mortgage-back security crisis, the American Banking Association estimated in two, 2009, that of the mortgage-backed securities, which is when somebody takes, like, boldness action, take a thousand mortgages, package them into a bond and sell that, that they were, well, in general, the American Banking Association said 18 to 30 percent of the mortgages that were stuffing the mortgage-backed securities didn't exist. What was happening was people were, somebody was getting rich, Lehman Brothers or Morgan or somebody was getting ready to issue a bond.

They had expected to have the thousand, only the paperwork had been done on 750 of them. They would just go ahead and issue the mortgage-backed security anyway and stuff, replace the missing 250 with some basically IOUs with the intent of replacing them later. But everything got so far behind in the whole mortgage-back security industry before the crisis that when everything Chernobyl, the ADA, said that 18 to 30% of this stuff was just kind of phantom. That's how much slop there was in that system of chains of title. People didn't know who owned what. Now, I think this has all gotten, Secretary Geithner famously, privately made this awful comment

about we need to phone the runway for the big banks. In other words, that's what the U.S. Treasurer's done. They phoned the runway. They made it up. They made it so the banks would fill in all these potholes, of course, at the expense of the taxpayer. But the examples,

you may have heard of the MF Global scandal, a large company that melted down, $2 billion was missing. Those $2 billion of securities have been hypothesated and re-hypothicated to London for some tax arbitrage, and it would have melted down, no one could tell him going to what.

That is going on. And that's the essence of why I got 10 years ago so superfied TNT about Wall Street. Because Wall Street was doing this openly. You didn't have to scratch too hard to find out where it was going on and how much it was going on. And they were saying, well, it's okay. It's okay because of the efficient market hypothesis and stuff. Everything comes out in the wash. It's not okay.

They're wrong. They turn to have to be wrong. So that brings me to the answer. To the problem. The problem is if crypto is the answer, what's the question? And I'll close on this. What system respects the consent of its participants while undermining the centralized institutions

we've come to distrust? To me, it's the technology that's being built here by people like you, which I see as the fruition of this 500-year-old effort that started right here in Amsterdam. So, thank you for your attendance. Hope you have a good conference. I'd love to take questions. Thank you for an excellent presentation.

I feel like I have an honorary degree in philosophy just by listening and attending. So I could listen to philosophy all day long. Good. The Bitcoin audiences are famous for asking great questions. So we have people with microphones that are in the back if you want to ask any questions. I want to start though, and I want to start and ask a question of my own, though, after listening to your presentation. And I was wondering if you could explain for us and for the audience here. and the audience that's listening through Twitter and the videos.

How did your business change at Overstock when you started accepting Bitcoin? Give us an idea of, like, in a day-to-day way, what changed, what were some of the things that you experienced through customer support questions? Did you get new media attention, for instance? Yes. Well, this story is worth telling on December 19th, the journalist called me and said, I, in a long interview on other subjects, mentioned, you think you'd take Bitcoin. And I've been keeping an eye on Bitcoin for a few years.

By the way, part of my, I did my doctrine and philosophy, but along the way, I studied computation theory at Stanford, and girdle, and the math that underlies crypto. And so when Bitcoin first came along, like it sparked an interest, I recognized it as being based on the stuff I'd studied 25 years earlier. So I had this affection for it. I was waiting to see what the feds were going to do. On December 19, and they seemed to green light it around November,

or at least they said they're not going to red light it. December 19, the journalist calls me and said, in the space of an interview on other subjects, says, you're going to take Bitcoin. I said, well, maybe by the end of 2014. I just said it off the top of my head, Well, that mentioned, I started seeing God, you know, showing up in Korea, Japan, and these newspapers all over the world were reporting that I had Zend, we might take Bitcoin. So I called Coinbase and just looked them up.

They sent someone out. We have one or two conversations on the phone. They sent someone out. State date on January 2nd, they sent someone out on January 9th. We were live. So we had a fantastic experience with Coinbase. I also happen to know BitPag. I hear the same kinds of story about BitPay,

so I don't want to disrespect anybody here. But I know that those are both excellent organizations with great actors. And they got us live so quickly. And the truth is, there was no, after we got it live, well, there were two phases. One was just getting it live, and the second phase, there was three phases.

Getting it live, being able to issue returns, when customer were by a podium, when they return it, we want to give them their money back if they paid in Bitcoin and they want it back in Bitcoin. That was the second phase, and the third phase is having our international check-out process to be able to accept Bitcoin. Well, we got the first phase live in a week. We got the second phase live a month or two ago, so we can now issue refunds in Bitcoin.

I think we're still a month or so away from international quarters being able to pay in Bitcoin, which, of course, distresses me. So it was, since we got it live, it's been so seamless, having had to give it a second thought. There's been no problem. I know I sound like the commercial, but it's required no work for many of us. We've had to retrain and customer service agents on now how to issue Bitcoin refunds, but it's just a few minor things like that. We have about, so far back, I think we're coming up on $2 million worth of sales, which is nice.

We'll do a billion and a half this year, and I expect we'll do, 10-ish in Bitcoin. And that's nice. It's growing steadily each month. Did you get any new press? Oh, from the random. Yes. Well, once

we did it, and once we went live, yes, as you may have, it became this, I couldn't believe the amount of, I could not believe, you know, it paid for itself the implementation a hundred times over just by the press. And I really want to express my gratitude to the Bitcoin community.

What apparently happened was, as I hope it would happen, the early adopters out there, the Bitcoin users, started coming to our site and just as a show of support and buying a set of pillows or buying a bed. And we sold a few hundred thousand just in the first two days after getting live. Just people wanted to show their support. Excellent.

Okay, let's see if we have any questions in the audience. We'll start here. Do we have the microphone? So if Bitcoin does, my decentralized institutions you're talking about, what's the best possible scenario? What does your rosy picture in the future impact? My rosy picture of the future would be that the bezel gets squeezed out of its side, like the toothpaste, that of the two of the toothpicks, that is slowly and suddenly with no major dislocations, everything gets filled in. That would be my rosy picture.

My guess is it's hard to imagine this technology is so disruptive. It's hard to imagine it doesn't disrupt something a lot deep along the way. But you know it couldn't happen to a nice set of people. I know that it would be bad if it happens, but anything's better than the system, at least in the United States, the system of knuckleheads. We basically live in an oligarchy now in the United States. There's a wonderful economist, Simon Johnson, was the chief economist at IMF and I was Professor at MIT. And he said publicly, look, but I used to deal with it at the IMF, you know, going to Argentina or Russia or Indonesia,

and sitting across from some young bold leader, and it's always a new young bold leader, these oligarchies always get themselves, the elites leverage themselves up too much, they crack, and the government bails him out. And the IMF comes in and the government wants more money and they say, and we need to figure out, are you in Argentina, are you going to use this money to fix things? You're just going to keep on bailing out your leads. Well, I, Simon Johnson, says he, in telling you,

that's all that's happened in America, that you become an oligarchy. I think the history of the United States can be told as a war between two factions, Wall Street and Washington. And I can personally attest, having been on the front lines of this, and I knew this 10 years ago, long before it became Kapanahe, Wall Street has Washington under its thumb. And to the extent I'm actually surprised that this is all, we all didn't get outlawed a few years ago when I watched it.

Obviously, Russia and China and other autocratic states are going to do it, but I'm surprised that Washington, maybe it just got away from them. But I think that their day is really going to be, ruin. If Bitcoin or crypto takes off, if we start seeing cryptographic ways of transfer and I know there are people here like Next working on that, those other organizations, working on creating, taking this technology and applying it to capital markets, not just currency, but capital markets. I, because I believe the bezel is so enormous and is so much worse a problem than is generally understood.

I think that this kind of alternative technology is going to have a more dramatic effect than is generally understood because people don't recognize how big a problem is there. Okay, good. Let's go over here, please. Hello.

My name is David Orban, and I believe that what you said is very true regarding these computing systems that are substituting centralized systems. And crypto is just one component in this. Energy produced by solar is distributed, 3D printing and manufacturing, food production, health, learning, all are part of the same process.

And the nation state is being undermined by this. But the nation state is also reacting as an immune system trying to protect itself. So you seem to be an optimistic revolutionary. but revolutions are always started by optimists and then they become bloody. Bulls fix, take over. And what comes out of it at the end is impossible to control.

The well-being of billions of people is at stake here. What's the question? What can we do concretely to stop policymakers from making it bloody and taking over the revolution? Well, I think you've analyzed it right. I think you've analyzed it right. Listen, I have so many scars from trying to... I sat there in the halls.

The answer is nothing. I think the answer is you're not going to do anything to stop. You're not getting anything to make government, make the right choice. Let me tell you, in 0405, I had concrete data, proof. I had people involved. Diane Hoodlums from Staten Island, another Dutch name, Staten Island, who were going and willing to talk to, you know, the SEC with me, to NASDA, and explain what was going on, and to the Senate Bank Committee and House Financial Services and financial journalists in New York. I'm reminded of another Bertrand Russell story. Bertrand Russell was once famously he was in India,

and he was lecturing on Einstein's relativity, and a Hindu cosmologist stood up in the back of the audience and said, Professor Russell, you have it wrong, the universe rides on the back of a turtle. And Russell said to the Hindu professor, well, what's the turtle run on? And the guy says, the back of another turtle. And Russell says, okay, what's that turtle round on?

The fellow says, I'm sorry, Professor Russell, it's turtles all the way down. Well, listen, I went to, we had clear proof that there were these flaws in the settlement system, that there were brokers wildly misrepresenting. Basically, it was fractional reserve banking without reserve requirement. We had participants, we had data, we had economists, we went to NASDAQ, we went to the SEC. was warned, if you keep pushing this burn, you're going to become the target of a federal investigation. I said, you got to be kidding it. This isn't, you know, this isn't some schmunk country. You don't get it. I pushed it. I became the target of six federal investigations over 10 years, all of which

went nowhere, all of which cost millions of dollars, fought, they gave up, they dropped, they gave me a letter saying they were wrong, and three months later they started on their investigation. and we later used screening of information app for press to find out that there were Wall Street. Anyway, I digress. So I went to NASDAQ, the SEC,

the Senate Banking, the House Financial Services, and the New York Financial Press trying to alert them and explain to them there's systemic risk being created by this. There's deep, there's latent derivative risk that people don't understand it's there because when I'm unsettled trades, it's like a contract, it's like a type of derivative

called a contract for difference. but one with this pernicious circular effect. We could explain this, had all this data, we got nowhere. And I found it was just turtles all the way down. It's turtles, all the establishment that you think is overseeing these centralized institutions in the U.S. is called the DTCC, and expecting them to provide, to be doing their job. They're not doing this.

I mean, listen, I'm reporting from the front law. I spent 04 to 08. in this battle. And millions it became my hobby. This is how I became the Sforge Walter. Trying to expose this stuff. So I could give you some happy talk that says if there's this disruption,

this is what you can do to convince the governments. It can't. The governments aren't. They don't care. They don't understand. The people you're up against, you've got to remember, the people you're up against all have senators on speed die. And I mean, I faced this myself. I used to go in and talk to senators and they would say, I would explain everything,

and I would bring economists to explain stuff, and I would finish. The aid to the senator would tell me on the way of, you know, what you say makes sense, but every time you're here, every time you're here, Goldman Sachs is here 10 times, telling them not to listen to you. So I think I could make some happy talks, and you've got to make a difference for the government or not. I think the one thing that happened to our benefit is this got away, it got away from them.

I don't think they, it's normally aggravating how slow the U.S. federal government can be to see something and understand it and respond. But for once it helped Garza, because this came along, and I think that if really everybody had been on their game,

they would have stopped Bitcoin two years ago. It's gotten away from that and it's too late now. I don't think they can, I don't think there's anything you're going to be able to do to make, to bring this in for a soft landing. If the system, is really at its core as corrupt as I believe it is, then as Bitcoin gets adopted, it will

cause severe dislocations. I think what you're doing though is creating a robust parallel system to which people can quickly switch. And I think that's really about all you can hear. Do you have a microphone yet? Let's go back here and then up to you. Thanks for the great stage. I think as a Bitcoin user of course you expect a stable currency and Bitcoin is fluctuating very much. It's pretty volatile for the moment. And I'm from China and I see China, Chinese government has not been very supportive for dis-ocurrency and, you know, the trading volume is very big in China.

And my question is, how do you see the fluctuation rate of its currency in the future and how do you think government policies are affecting this occurrence and your business? Thank you very much. Thank you. This question, is a very smart. Thank you.

To me, to me, I'd say that these indications that is not really outlaw, I don't quite understand. The fluctuation risk, there's a saying on Wall Street,

liquidity begets liquidity. Once you start having liquid enough exchanges, it will draw, there's network effects. There's network effects that come to play. The problem is you don't have a liquid enough market now, and that's why there is this volatility. I'm kind of hugely ironic that I'm going to say this, but anyway.

We ourselves at Overstock don't expose ourselves to much of it. We trade out. We started off trading out instantly from 100% of our Bitcoin transactions. Then I felt that was kind of cheating, and I wanted to accumulate some Bitcoin. So now we accumulate about 10% of all the Bitcoin spent on our site. We're accumulating.

But the fluctuation problem is a real problem for businesses. And I think it's also going to, I was just speaking with someone earlier today who said, well, when the price of Bitcoin comes down, fewer people come in and sign up for new wallets. And then when it goes up, more people come in and sign up for wallets.

that may be, I'm sure that's true, on balance all the volatility is probably discouraging people. However, the only way we're going to get there is eventually enough early adopters adopt, and there starts being enough liquidity, and then the liquidity against liquidity, and then things should start. You shouldn't have the kind of volatility you have now on Bitcoin. But Mike, I don't follow it, like I probably should, but my understanding is the last couple months your volatility somewhat smoothed out. I would imagine just as more people buy into it

that you'll see that'll happen more. And when somebody develops, I don't know if anyone developed yet, we would use it if it were service, a way to hedge your Bitcoin risk. So they don't trade out of it so much as buy various puts and such, by forward contracts. And I don't, but I mean that's enough. I'm trying to indicate areas that would be good business for entrepreneurs to develop. One would be, and I know there are people working on it, Bitcoin version of a stock market.

Another is a Bitcoin, a derivative market where you can, a good derivative market where businesses could hedge out of, could hedge through options out of their Bitcoin risk. Third incidentally is micro-payments. I think that Bitcoin could solve. The publishing industry has been wrecked in the last 15 years. People want to charge subscriptions or they want to charge for content or they go to advertising based models. They have in real, there's very few publications who can really,

am I singing your song here or something? There's very few publications that can really charge online subscriptions. But if, what I imagine is a world where you go to a newspaper and to read some articles three cents to article, everyone's going to pay three cents to read it. And if they did that, it could save in the publishing industry. Anyway, I think those are the three real areas. three errors that if I were interested in getting and starting another company that's what I'd be doing

But as anyway, the point is as more participants come in the volatility should smooth that should smooth out Okay, we need a microphone up here please and then we have time for one more question Right right up here. I'm sorry can you stand up please? Yes, hi, I'm Brian Rehnabackson a big point So you talked a lot about dismantling of centralized organizations Now, I'm curious, is there a role for, in some context of centralized organizations are superior to decentralized systems? Or are you worried that, you know, overstop being large centralized organizations as well, will be, you know, dismantle, or replaced by decentralized applications in the future? Fair question. No, it's not that I'm against all centralized institutions.

I think that there are efficiencies that come. Every corporation, by its nature, is kind of a kind of a huge. kind of a top-down economy, there are problems when organizations get too big, they're not subject to market pricing internally. But no, I'm not against, I'm not an anarchist like some of you. I think there's a rule for government. I think there's a role for centralized institutions. But just as the left, when I was in academia, the left tended to be obsessed with the idea of market failure, guys like Paul Krugman in terms of stiglitz.

good guys, well, Stigland says, they love to explore the ways markets can fail. And markets do have natural tendencies to fail. There are certain types of goods that are not best left in the market. But you always got to ask the question compared to what. Governments have ways of failing to. There are certain standard ways that government choice fails. And one of them is through capture. And so in designing, so by the way I say this,

I'm a small little liberty guy. I'm not right way or left, but when people on the left talk about the need to have a robust muscular government that can stand up to these powerful corporations like Golden Sachs, they failed to consider the possibility that what happens when your muscular government

becomes a wholly own subsidiary of Golden Sachs. Now you've got the worst of both worlds. So I'm not against all centralized institutions. I just think in the design of institutions, we have to take more consideration of the risk of their capture. And all else being equal, you want peer-to-peer institutions where consent plays a role rather than sufficient. So thank you, John. Thank you. Can you take one more question?

Sure. Okay. All right. I'll stay here all day. I know you got a share for it. My name is John Lai, one of a company called King Green. We're developing some decentralized economies and service platform. But I'm really curious, when is Overstock going to move their shares over to the blockchain?

Funny you say that. I want to be, well, if I say this, now, I'm going to, it's going to get reported, and then it's three days from now, we have guys locked in a room eating pizza and making it happen. That's what I said to some turn, we put 40 people in a room, so it gets another door, they got it done in a week. Funny you say that.

I want to be the, I want to consider issuing a security just to get the first Bitcoin security or blockchain security out there. I'm also exploring the possibility. We're listed on NASDA, but can we be dual listed on, we can,

We can be possible in the state. You can have stock du listed on more than one exchange. You can list it's listed on NASDAQ. It's listed in Berlin. It's listed, you know, in the Bahamas exchange. I don't know why. Somebody went to also, not me. Somebody out in Bahamas went to the trouble and get it done.

I believe we could list on a blockchain account of exchange. And I have some lawyers in the stages they're talking to two different parties. And if anyone here has a technology, has a solution, all collect. But I would love to be, at the very least, to take our current NASDAQ traded security and dual-listed. And I may, I would also be interested,

but in issuing a bond or something that we could list as be the first to list this kind of security. So all that. first came out and did this people, sometimes said, no, this guy just did this stuff with Bitcoin for publicity. I'm hoping if nothing else, this talk dispelled you understand this

is a deep part of my life what you folks are doing. And I think that's an excellent note to end on, so let's hear it again for Patrick Burns. So we hope you enjoyed this episode about the Bitcoin 2014 conference. If you liked our coverage, please consider tipping us at

Epicenterbidcoin.com slash tips. You can also subscribe to a weekly newsletter at eBicentadcom slash newsletter and tune in next week for more interviews and coverage of Bitcoin 2014.