Let's Find Out - From Barter to Bitcoin (from Jan. 3, 2018)

Episode Date: April 17, 2021

This was recorded three years ago after the 2017 cryptocurrency surge. It's far from comprehensive, but is a short survey of the evolution of money and the nature of what cryptocurrencies, like bitcoin and ethereum, are and what their future applications might be.

So it's really gloomy out today and I'm just inside on my computer and reading an article about Bitcoin trying to figure out the workings of it. And I figured I'd make a little video about Bitcoin and cryptocurrencies but naturally my train of thought was why not start at the beginning with the history of money, the entire history, no, I just do a brief, I thought maybe a brief video might be fun. Because for an interview, hopefully I'll put a link in the bottom in the description there to an interview. He did multiple interviews, but in particular, this not self-proclaimed, but he is pretty much an expert in Bitcoin and cryptocurrencies in general.

Um, mentioned why it looks like my house is probably on fire right now, but I just got a nice little apple, cinnamon candle rocking in the background. I was trying to find a way to put it near Einstein, but I don't want to risk spilling hot wax all over my couch and burning Einstein. But anyways, Bitcoin, yeah, so fascinating. It's... I can't properly explain it, but this guy I was talking about, his name is Andreas Antonopoulos. And he's a security expert. I think he was a computer security expert that was his nominal career for, I don't know how many years, but he looks like he's at least in his 40s. so he must have some experience but I've heard him give many talks

and I first heard him on Joe Rogan's podcast about a year ago September or November 2016 the way he's able to articulate sorry yeah I guess we got a little daisy in the background my neighbor's golden or lab barking at something she finds important so don't mind her but I don't know this guy was super fascinating to me and I would encourage you guys to go watch that if you haven't already

to get a very general idea of not only what Bitcoin is and what it can do but future possibilities of the technology, the blockchain technology, the peer-to-peer network, the distributed ledger, what all that means for the potential future of decentralized and denationalized money. But in order to get a grasp on the significance of that, we need to... to have an idea of how it came to be that we accept pieces of printed paper fancy, I'll give it that, with a little pieces of plastic thrown in in exchange for real tangible goods that people have worked very hard to create. So at the dawn of humanity, bartering was used in lieu of money to buy goods.

As early man began to rear domestic livestock, one of the earliest forms of barter, included cattle, livestock, sheep, and vegetables that were grown. So the first known currency was created by King L.I.T.S. in Lydia, now part of Turkey, 600 BC. The first coin ever minted features a roaring lion.

It's then evolved into banknotes around 1661 AD. And the concept of money, and this is a really, really brief explanation, but we'll get into it. You needed something that was more lightweight, but also rare, that couldn't be easily copied and reproduced and, of course, counterfeited. So that's, I think, how gold came to be the, really the standard upon which all currencies were originally based. but things such as seashells and what else would be I would imagine anything that's confined to well rare and confined to certain local areas but for instance you couldn't have you couldn't trade a sea shell on the seashore because they were

very plentiful but if there was a society that lived in the mountains far enough away from the ocean I'm sure seashells would be a viable trading a bartering tool or at least a placeholder a form of currency very briefly to continue our you know of the gist of the history of money as we know it currently from created a around 600 BC the coins actually evolved into banknotes in 1661 and the first credit card was introduced in 1946 I didn't realize it was that old I actually heard credit cards used to be made of paper which I imagine it looks something similar to the US

Social Security card. At least my card is made of paper. I probably should have laminated it a while ago, but I didn't. No one steals it or it doesn't get burned or actually I feel like I have it really close but anyways there's an infographic that I'm looking here looking at that gives us a little more detail. The after the evolution of the credit card was nice. 1946, so that would be 60, about 60 years until Bitcoin came around. And then you got Apple Instant, was it Apple Pay? Doesn't really say here.

Of course, as technology becomes smaller and smaller, we'll eventually be able to wear it on our hands and you know, probably eventually have some sort of barcode imprinted or inserted into our flesh. So we can just swipe our hand and pay. But that's not before Bitcoin disrupts the current way money is exchanged. Yeah, so that was a really brief overview. A slightly more detailed one because it is interesting that, early man would barter for goods that they had a surplus of and barter with goods that they had a surplus of and barter for goods that they had a surplus of and

barter for goods that they lacked and you can imagine people were still you couldn't grow everything but I'm sure there were successful specialists that were particularly good at growing wheat or cows they would barter accordingly in Egypt around as early as 9,000 BC they believe bartering began it was probably Mesopotamia bartering was first recorded in Egypt and it's kind of vague somewhere between 1,100 BC and 9,000 BC and 9,000 BC Let's see, in China, 1000 BC, people started using small replicas of goods, cast from bronze. That's interesting. 600 BC, the guy King Alates, L.A.8 of Lydia in modern-day Turkey, minted the first currency.

Largely for practical reasons, these developed into rounded. Bitcoins. Let's make that a little bit bigger there. Coastal regions around the Indian Ocean saw the use of cowrie shells for trade as early as 1200 BC. So I'd imagine that these shells were relatively rare or else you could just go along the shoreline and pick up money for all purposes. It's vaguely said, widely spread, standardized coin version of money was actually distributed throughout the Mediterranean, which actually does make sense that it would be history of money. There's a lot of articles here, Caldung to Bitcoin, barter to blockchain. Wikipedia is always good for completely immersing yourself in a topic or referencing

reading another article and then finding something in particular you can hone in on really zero in on if you want and let's see use of Romans use of bronze represents a distinction clearly in the transition of the use of the use of Ace Rude or Rough Bronze into bars that had five pound pre-measured weight to make barter easier called Ace Signatum. Boris Roman coins actually began being increasingly diluted more and more with cheaper, much cheaper metals, so that their actual value per coin, the actual amount of bronze and valuable metal. in them was increasingly very scarce. From 1290, moving on the other side of Jesus now,

1290 AD, the travels of Marco Polo to China introduced the idea of paper money to Europe. At that same time, the Floren, a gold coin minted in Florence, was widely accepted. was widely accepted across Europe, which actually encouraged international commerce. So it took, yeah, it took almost 400 years before paper money caught on. It was actually in Sweden, of all places, that the first banknotes were printed. Paper money was great for business because it could be mass produced without relying on metals.

like gold and silver, which of course in no way shape or form could be abused, right? So in 1860 now, moving up 200 years, the industry giants Western Union spirited e-money, which was enabled by, which was defined by electronic fund transfers via telegrams, via telegram. move up another 100 years. John Biggins invented the charge it card. The first credit card. I want to know what kind of credit card. It's going to say history, but it's going to give me a credit check.

Creditcards.com. Like a trusty website? I'm going to go back to Wickham. Charge. Have you guys ever heard of charge coins? I haven't. Metals. M-E

Yeah, no, that's regular I was thinking of the two different spellings of metal charge coins and other similar items were used from the late 19th century

to the 1930s they came in various shapes and sizes with materials made out of celluloid which was nerve type of plastic other types of whitish metals were usually given to customers who had charge accounts in department stores hotels and so on the charge coin usually had the charge amount account number along with the merchants

name and logo this goes to show you that nothing ever just pops out overnight it's always building something building its gradual evolution I mean, even things like relativity or Bitcoin even, they always had some sort of precursors, you know, even Darwin's theory of evolution. There was always someone who had a ridiculously similar idea, but not fully formed. And it takes people like Darwin, um, Darwin Einstein. and Satoshi Nakamoto, whoever the hell that is, who invented Bitcoin, wrote the white, Bitcoin white paper to tweak it and just make it a little bit different so that it works in a profound way.

So I just think that's really cool that, you know, the more you know about the world, the more you are able to understand that it's great. gradual evolution and maybe you'll be able to tweak an existing theory for yourself to make something really great. So in 1999 European banks began offering mobile banking with primitive smartphones. But you know what? Before that I heard in the late 80s I think that

speaking of the evolution of Bitcoin you know and other cryptocurrencies. There was actually something called DigiCash. Have you guys ever heard of DigiCash? It was essentially, to look that up real quick, it was DigiCash. DigiCash in 1999, David Chalm invented DigiCash. And transactions with this were unique because they were not anonymous due to a number of cryptographic protocols developed by its founder but it was declared in bankruptcy in 1998 subsequently sold to e-cash technologies which was then acquired by info space in 2002 it was a form of early electronic payment which required user software in order to withdraw notes from

a bank and designate specific encrypted keys before it can be sent to a recipient. This advancement of public and private key cryptography allows electronic payments to become untraceable by the issuing bank, government, or third party. That's so interesting. Bitcoin essentially built on top of the idea of using cryptography and public and private keys to put the power of the ownership of money or Bitcoin or whatever it was because it might not have had value and it's during its conception but it didn't allow a third party Bitcoin doesn't really, uh, it doesn't have a, a need, a necessity for a third party, like a bank to

act as a mediary between barterers of Bitcoin. So we've got some Indian chanters out there. I'll probably do a little more research and, and make an episode devoted entirely to Bitcoin. because, yeah, I could just elaborate on that for a while. And what I don't know, I could fill many volumes. The Euro, going back to 1999, when European Bank started offering mobile banking with primitive smartphones like Nokia, and the Euro began to circulate in 2002.

Now in 2008, contactless payment cards were issued in the UK for the first time. And it looks like in 2014 Apple Pay was announced for iPhone users to enable them to pay for things with their handsets. In 2014, maybe 2013, actually, Bitcoin entered the mainstream. Of course, there's that big scandal, and price surged up in value. And I think it hit over, it began being valued at over $1,000. And then someone hacked, there was a main, basically the story was that there was a main trading exchange called Mount Gox, which stood for Magic, the Gathering Online Exchange. exchange and the problem with that was that it was it ended up being a very practical way for people to exchange bitcoins purchase and sell them act as an exchange but people were leaving the

bitcoins that they bought in accounts or wallets that were kept by the actual exchange. And it was some owner, Jed McCaleb. I think, yeah. Or is it Mark Carpillis? I'm not sure. Who took the fall for that one? But I can't really see here.

Those guys, I'm sure. But anyways, essentially something, someone hacked it. And because with Bitcoin, you can't, you can't lose your, your Bitcoin if you own if you there's a private and a public key the public key allows people to enter that into their wallet where they store their Bitcoin in order to send it to that to your address the public key so it accepts payments now to withdraw payments out of your wallet you need to use the private key and that's something that you and only you want to have control of because anybody with control of the private key does essentially own the

Bitcoin because they are able to have the power to to move the Bitcoin at that point so it's that was a that was a bad decision on the part of people using Mount Cox as a temporary storage place for their bitcoins and granted at that time there probably weren't nearly that many Bitcoin wallets apps available for your phones which I stupidly keep the little amount of Bitcoin that I own on my phone so I'm very very rapidly very shortly in the future I'm going to be transferring my Bitcoin to a very cold

storage offline and literally going to write the string of characters on my piece of paper on a piece of paper where no internet connection can foible my my accounts but yeah someone basically hacked and stole how many bitcoins were stolen of bitcoin's a hundred and fifty worth at that time about four hundred and fifty million dollars now probably worth well 10 times that because it was worth about a thousand dollars then so um four and a half billion dollars worth of bitcoins god that was crazy yeah bitcoin technology is is going to prevent governments from printing their own money as they do this little chart I was following here skipped it was a

very crude outline of the history of money but I didn't want to make a really long video about it it skipped the foundation the creation of the Federal Reserve in the early 1900s that essentially bought bank note um bought or they call it treasury notes um forgetting what they're called He says nobody I know uses them anymore or has them. I think I got one when I was a baby. What the hell is it called? A bond.

That's it, bonds. I don't know. They bought bonds, which were essentially U.S. government guarantees to pay them money in exchange for real money at the time. So I guess they, when the government needed a bunch of liquid assets,

which means assets that you can use to buy anything with pretty much, which is we think of as just cash, money. And the government needs a lot of that. They sell a bunch of bonds or debt or obligations, promises, to give you cash in return for the money. the bonds in the future. So the Federal Reserve, do they accrue interest? I don't know. They're backed by the full faith and credit of the U.S. government savings bonds. Oh, it does. A fixed rate of interest over a fixed period of time. And they're attractive because they pay interest.

and they're backed by the full faith of the U.S. government, and the Federal Reserve began printing a bunch of money and paying, giving it to the U.S. government at interest. So we owe the Federal Reserve every time they print a shitload of money and give it to us. We owe them that money plus interest back. There's a lot that goes into it. I know but regardless I missed a lot of history but that was the gist of it essentially it began as a system of barter and the items bartering became too bartering

became so ubiquitous that it was so frequently done that the items you were bartering with were often too bulky and impractical to carry along with you and so a substitute that because usually because of its rarity and oftentimes if it was another type of metal its usefulness because you can smelt metal and make objects out if it's just a very useful tool that began to supplement or substitute the objects they represented And over time, there came a point in the... I guess it was around when money started being printed in Europe, around 14, I don't know, 1600s maybe. That banks came up with a fractional reserve system where they realized that they were holding all of this gold.

Not everybody was always coming to ask them for it. A lot of people felt they could trust the banks enough to keep their gold long term. And those people would never come and get all their gold out. They might come and get a little bit out of time. But what this meant for the banks was that they had a massive surplus of gold just sitting there doing nothing. So what did they do? They conjured up a system, an economic, a set of rules that allowed them to lend money out at a rate of interest,

which is otherwise called usury, and collect that money back in interest based on only having a fraction, generally 10% of the money they lend out. actual assets. So in other words, because they realized that there was pretty much never, pretty much never going to be an instance where a run on the bank, I don't know, I'm over-using the air quotes there, but a run on the bank would be where everybody loses faith that the bank is good for the money that their notes, $10,000. note, $20 note says its worth. And so

when you lose faith, you want to go to the source and trade your note your $20 note for $20 worth of gold because you know because you have faith that the value of gold won't ever be until that happens. The government or banks rather,

which I'm sure we're closely always tied with governments, power and money, always very close to one another. They decided that they only had to, well, based on their calculations, they only had to maintain a reserve of 10% of the gold coins relative to the entire amount that they had lent it out at interest. So if there ever was a run on the banks at any given, time only 10% of the people would get their money or 10% of the money that all their notes in circulation said that they were good for was actually able to be

reimbursed so what this means ultimately is that money gets printed more and more often loses it loses its value because the more you print money, the less lose its value. In essence, money is a function of its rarity and scarcity. So the more you print, the less scarce it becomes, the less value it has. Because everybody has it, there's not really a demand for it as much as it used to be. So essentially, Bitcoin is changing that game. And although it might not end up being the most widely used cryptocurrency

At the moment it is looking like that Bitcoin essentially is run by a math algorithm Computer-oriented algorithm that Executes in such a way that You have to randomly guess until the right combination of characters and is entered into an algorithm in which the algorithm spits out proof that the right combination of characters was entered into it and along with that proof

which is I think represented by another string of characters in turn is able to be it gets its property of being proof by being able to be entered back into that algorithm in a way to show that, yeah, I guess I really don't understand how that works. But it works as proof because it is the only key that works the algorithm and decifers the algorithm. But yeah, that's a very poor explanation of it.

But essentially, just imagine that there is a math problem that cannot be solved. The methodologically, the only method is random guessing, and it was designed that way to only be allowed to be allowed to be randomly guessed. And the ultimate characteristic of Bitcoin that gives it its value is that it is not inflationary, where that means it loses its value due to the inflation of the number of... bills or units of that currency in circulation, it actually will be deflationary because it actually won't ever print any more than about roughly 21 million Bitcoin. Um, not print, but there will never, never be distributed or dispensed, dispersed by solving the Bitcoin algorithm, more than 21 million Bitcoin.

And this happens in a series of calculated, predetermined units of time. And that Bitcoin is able to spit out, spit out the Bitcoin algorithm is able to spit out Bitcoins upon being unlocked and solved, upon which then a new algorithm is needed to be solved in order to spit out the next round of Bitcoin. And this happens roughly every 10 minutes, and I believe the algorithm is self-adjusting. So it responds to feedback based on how much computer power is actually used to solve it.

And the more computer power you use to solve it, in other words, the quicker you're able to solve it if you have a lot more computer power than you previously did, the algorithm actually acknowledges that and is aware of it, responds to it, and increases its complexity in proportion to the computer power that is currently being implemented to solve it, to maintain a constant rate of roughly 10 minutes per solution found. So that's a really brief overview of what gives Bitcoin its value and That's a very very very over simplified version. So I'll do a video on the on Bitcoin proper and

Do a little more research so I can explain it a little better. It'll help me understand it too. I guess for now. I'm gonna leave you guys going. I just realized my my camera aka my phone just died I didn't have it plugged in so right now you guys are probably watching a pretty picture or a black screen not sure which that's the future and I'm talking to you guys from the past and the future at the same time or less I hope you guys enjoyed this little rundown of the history of money and how we got there how we got from there. Battering goods, to supplements, replacements, substitutes, to creating money out of thin air based on the fractional reserve system, to using plastic credit cards, also based on the fractional

reserve system, getting money, lending it at interest, to incorporating technology. enabling us to use our phones, to keep track of our balances and pay for stuff, and ultimately store Bitcoin and purchase and trade Bitcoin and other cryptocurrencies. Road, but there's definitely a long road ahead. An exciting one too. It's going to change. There's going to be a fundamental shift I have a feeling in the way we, perceive money, especially in relation to the nations that it currently is backed by.

It seems like Bitcoin is emerging and in fact is right now a global currency. So we'll see how it's regulated in the future. This time, guys, sleep well.