On The Brink with Castle Island - Douglas Jackson - Lessons from E-Gold (EP.52)

Episode Date: March 16, 2020

Douglas Jackson, the founder of E-gold, arguably the first widely-used electronic medium of exchange, appears on the show. In this episode we discuss:  - Douglas' motivations for starting E-gold - His disagreements with his cypherpunk contemporaries - Why private monetary issuers might be more responsible than public ones - The challenge of creating an open payments system which is also compliant - His critiques of stablecoins and native-unit cryptocurrencies

What's up, everyone? This is on the brink with Castle Island, and I'm Nick Carter. So this is the second episode in our short series on crypto dollarization. The objective of this series is to explore the potential for the cryptocurrency markets to be an effective distribution method for regular old dollars. So-called stable coins are an early example of a system in which dollars might be distributed directly to end users around the globe with no requirement for trusting local institutions like the banking system or the government. We're talking about potentially reprivatizing the issuance of money and perhaps returning to something that looks a bit like the free banking system, but on a bigger global scale and in a digital format. So I have this burgeoning hypothesis that

Dollars in cryptographic form might be a near-term killer app, so to speak, for crypto. And I think the implications of this possibility are under-discussed. So for this series, I'm interviewing practitioners, economists, and journalists about the prospects for crypto-dollarization. And this is the second installment. I'm really, really excited to kick off this miniseries. I have some amazing guests lined up, and I hope that you find it as interesting as I do. Now, this story in particular isn't about dollars per se, but it is about privately issued digital money. In fact, it's about the biggest pre-Bitcoin digital monetary system.

So for those of you who don't know, Egold was an experiment in digitizing a monetary system, which began in 1996, lasted through the dot-com bubble, and ran through about 2009. So it was founded by Douglas Jackson, who gave up his oncologist career. to pursue the idea. Douglas has kindly agreed to appear on the show today to tell me the story firsthand. So I started researching Egold a couple months ago as I got interested in these pre-Bitcoin digital cash schemes. And E-gold was really the first digital monetary system to get mainstream usage even before PayPal took off. At its peak in 2005, it had several tons of gold bullion held in its vaults, and it was intermediating over a billion dollars worth of transactions on an annualized

basis. Now, today, Egold is held up as a cautionary tale among Bitcorners, and it's normally uses evidence for why total decentralization is necessary at the system level. Douglas Jackson actually contests this interpretation. In fact, he takes issue with the way Egold is characterized in the press and among bitcoinsers. So I wanted to hear that. I wanted to hear that. from him directly on the topic. I think it's really important to take lessons from these pre-bitcoin private monetary systems, but it's also important to get them in an unfiltered way, directly from the entrepreneurs themselves. So today I get the whole story from Dr. Jackson. We also dig into his very well-developed views on what a private monetary system should look like,

and we get into his critiques of the original cypherpunk movement, which he intersected with at the time. and the current crypto phenomenon, including the stable coins, which look a little bit like eagold successors. So this was an absolutely fascinating interview, and I'm really grateful to Dr. Jackson for agreeing to appear on the show and for being so patient with me. I really think you listeners will enjoy this one. There is a ton of info in here, which isn't really present in the historical record, so I'm really excited to share it with you all. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep.

The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easing. You print a couple trillion dollars, and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. All right, welcome back to the On the Brink podcast. I'm your host, Nick Carter. Today we have a very special guest.

We have Douglas Jackson, who is the founder of Egold, which was a pre-Bitcoin digital cash project. Indeed, one of the most successful early internet, would you call it a digital cash project or a alternative monetary system? We thought of as just privately issued money. Digital cash at the time, you know, it's a term of art that referred to pretty specific type of products. Like in the 90s, primarily that was like David Choms' e-cash, done by DigiCash.

Okay, yeah, that's fair. Okay, so privately issued money with digital characteristics. Anyway, welcome to the show. It's an absolute pleasure. to have you on. Thanks so much for appearing. Well, thanks for having me. I really appreciate this. Looking forward to it. So I was familiar with Egold, you know, it had been discussed, you know, a fair amount, you know, by Bitcoiners in context of the, you know, the reasons, almost as a cautionary tale,

actually, in terms of, you know, the potential dangers of what the government can do when it's kind of monetary privilege is threatened. But I'm, I'd never looked into it deeply, and then I was actually researching for another podcast, and I decided to take a serious look at Liberty Reserve, Egold, DigiCash, all of the internet money schemes which were actually deployed in the 90s and 2000s. And I was shocked to find that EGold really had early critical mass even before PayPal online, lots of usage, ultimately billions of dollars. in transactional usage at its peak.

And I had this enormous blind spot. I had no idea that it reached such a critical mass. So that was an education for me. And then I looked into it. And it kind of ends in maybe controversial or unfortunate way. And I figured who better to get in touch with than Douglas Jackson, you know, the guy behind it all.

So I just really wanted to give you chance to talk about the history so that, you know, my audience can learn directly from you what transpired. And then, of course, give you a chance to set the record straight in terms of, you know, the way that Eagle has been characterized in the press. So I thought it would be interesting to just go through the history of Eagle, you know, what inspired you to start the project and and how it got started back in in 96. Terrific. I appreciate that. And yes, it's interesting that you bring up the cautionary tale aspect.

There's certainly, I think it's important to describe some of the lessons learned from the entire experience. But going back to the very beginning, we're talking about 1996 when the Internet was first becoming a commercial reality. In other words, when it was, it was becoming. becoming possible for anybody in the world to offer their goods and services to a global market. And so the problem that existed at the time was it was very difficult to be paid. It was more or less a financial inclusion difficulty.

The principal payment method at the time was credit cards, and to qualify for a merchant credit card account was very difficult, required high credit rating, existing relationship with financial institutions. It was a bar that many people couldn't surpass. So my goal, at least most approximately, was to simply offer a payment mechanism that would enable anybody in the world to receive payment that would settle immediately with finality at extreme low cost. Now, to do that, it was necessary to have some sort of a medium, though. There had to be, you know, what is the medium of exchange that's changing hands from payer to recipient.

So for that respect, I felt like it was important to try to achieve the same sort of freedom from default risk that a, as if you had an account at a government central bank. In other words, I wanted to avoid what I perceived as the risks of bank deposits. And so those constraints of trying to achieve freedom from default risk, finality of settlement, those posed a sort of funnel that led to the choices we made on system logic and design. And we talked about this a little bit yesterday. So instead of your motivation being to digitize gold and allow it to be transferable on the internet, it just so happens that you had to use gold due to your objectives behind the system having the reserve

asset be no one's liability. Yes, that's exactly correct. As we discussed yesterday, if you look at like the Federal Reserve or the Treasury and their report of reserve assets, it's a small subset of what they hold on their balance sheet. In other words, the bulk of what they hold in terms of assets backing their monetary liabilities are securities, things like treasury bonds, a whole lot of mortgage-backed securities, but at the core of it, they have what they think of as the reserve assets, the most money-like assets. Well, in their case, there's only four things that qualify. And it would be a reserve position with the International Monetary Fund. It might be SDRs, which is a special asset that circulates only within the IMF. It could be a deposit

account with a foreign central bank, or it could be gold. And so of those possibilities, the only one that would have made sense to us, the only one that had an infrastructure that was accessible to us was gold. And in fact, that infrastructure was very convenient because there was highly sophisticated arrangements have been worked out over the decades to meet the needs of government central banks, of international gold banks. And so there was so-called good delivery. standards that covered everything from how you would know a bullion bar was genuine to excellent custodial arrangements. All of that existed and it was accessible to us at basically wholesale type costs. So we didn't have to reinvent the wheel. But yeah, a fundamental point was we

used gold because it was expedient. It was a means to an end. But e-gold was never a gold thing. And I think that's an important distinction. Like if we get into, look, looking at some of the followers or the would-be competitors, it brings up some important contrast. And the gold that you held on deposit, where were you custodying that? Well, I should make a distinction between our first three years because there was a continual evolution, you know, as this system, there was some crude elements to begin with. and there was further insights and refinements. So I'm going to describe the arrangements that we had from 2000 onward.

That was when we finally were able to gain access to the good delivery system, and we were storing at that time in London and Dubai. Okay. And so prior to that, I guess you weren't big enough to engage with the LBMA or the kind of good delivery. We weren't big enough and we just didn't have the appropriate introducers. Like to be able to access the dealers that deal in good delivery gold or to be able to have an allocated account at one of these repositories, it requires a great deal of due diligence

and we were just too much of an unknown initially. And so your revenue model was pretty interesting. So you didn't charge users fees for gold. You were custody. I guess it cost you something to custody the gold with third parties, but you didn't pass that on. Your revenue model was just transaction fees on transfers. Not exactly. No, we did have two fees.

The transaction fee, which was born by the recipient of payment, we called that a spend fee. That was our principal source of revenue. But there was an account maintenance. fee. Okay. And the proceeds of that did help to defray those storage costs. That account maintenance fee was sort of like the equivalent of a negative interest rate. It was, if I recall, 1% per annum calculated according to somebody's average daily balance over, and it was taken on a monthly interval. But yes, we didn't really think of it as a storage cost, but certainly that revenue It was what covered, it did in fact cover our storage costs.

It's interesting that the debate over negative interest rates now, the canonical example, is a fee that you pay someone to store your gold in the kind of medieval era kind of thing. So it's interesting to see the historical rhyming there. And so Egold, it was, it didn't really take off until the early 2000s, I guess, right? I mean, that's correct. Yeah, like I didn't know anything about marketing. And this was truly a sort of build it and they will come type of a thing. And so I put it out there, but didn't really know how to promote it.

There was no social media to speak of at the time. There was mailing lists. And I knew there was interest in electronic currency and related developments with the cypherpunks. So I did certainly hang around on the cypherpunk mailing list. And I was somewhat more active on related lists, such as those that were administered by Bob Hettinger in the late 90s. But by one means or another, people did start to come. So as early as spring of 1999, the Financial Times had correctly reported that we were the only electronic currency to achieve critical mass on the Internet. And by 2000, an exponential growth pattern was becoming apparent.

Like as late as February of 2000, I think we'd only settled 50,000 transactions cumulatively. Right. But two months later was up to 100,000. Six months later, we'd pass the million mark and things were more or less off to the races. I guess your growth was constrained by the adoption of the consumer internet. you know, there wouldn't have been anyone to use Egold before, you know, I guess 95, 96. Well, and the reason 96 was so important was that was when I felt like it, that was when it first became possible.

Like the missing ingredient prior to that time to do something like a payment system or even a, any financial system external to the banks, there was three sort of of requirements that you would need to do it as a private actor with modest capital. There's certainly the computation aspects because in the old days, and of course you could have an army of scribes setting there at their ledgers, but that would be an expensive proposition. There's also a great deal of data to be recorded, and of course that had been made possible both of those by low-cost computing. But the missing ingredient had been secure communications. The thing that changed in 1996 was that's when Netscape began to offer SSL, I think it was version two, in their browsers.

All of a sudden, now you had a client program that was widely installed that was maintained by big companies with deep pockets that was virtually free that solved that sort of communication problem. And so I think that was, that's what struck me that as I was thinking about. what was needed and how to accomplish that, that's what made me feel like I needed to just go ahead and do it myself rather than trying to explain it to some other entrepreneur. Oh, that's fascinating. So because I didn't have in my head the idea that Egold had relied on any cryptographic innovation the same way that, you know, maybe Digi Cash did or further down the line, Bitcoin. But I guess this SSL in browser incremental innovation really did facilitate your system.

Yeah, it was absolutely essential, but that was also like my major sort of point of departure or disagreement with the cypherpunk community. At that time, everybody regarded the future of money as involving financial cryptography in a particular digital cash. And David Chom's digit cash or e-cash was regarded as, again, the, the future of money. But it relied on, you had to install a client, like the client program I felt was rather rickety

and poorly maintained. It was difficult for a normal person to deal with it. And so the point that I'd made, and I made this on one of the cyphepunk related lists, was that the emergence of SSL had sort of invalidated a rationale for bothering with a special client type program. But when I said that, and it was in a post called debunking e-cash, and there was probably some arrogance to it. I was people back then, it's always been a challenge for people to be civil

on the internet, and I was probably as obnoxious as anybody else. But that post, it really elicited or evoked a lot of cyberpunk gnashing of teeth and the responses that have become familiar of like, oh, you just don't get it. But the fact the matter was, you know, like within about 18 months, 18 months to two years after saying that, I mean, Digi Cash was gone. They had burned through more than $20 million dollars of other people's money. And that was about the time then that we were getting critical mass. I mean, one of the assertions that I'll be trying to defend in our discussion, if I had the opportunity, is to suggest that the emergence of e-gold was the thing that kind of put this this financial

cryptography emphasis onto the back burner like it they never it never went away like the whole time that we were out there there was one crypto scheme after another but while we were online nobody cared um in essence like even the cypherpunks wouldn't eat each other's cooking. Most of them or many of them had Egold accounts. And as long as we were online, nobody could really get a foothold. I would claim that when Egold departed from the market, that was the thing that allowed sort of the foundational myth and created the space for Bitcoin to emerge. Again, that's a big claim and we may need to pick that apart a little bit and to try to defend it.

That's fascinating. So your view is that Egold kind of sucked the air out of the room in terms of the cypherpunks trying to create their digital cash systems because Egold was in production, didn't rely on financial cryptography as much, and it worked and had usage. Yeah, because I mean, and everything really involves financial cryptography. It's just that it's not front and center. I mean, it's built into even the product that we're using right now to, you know, to communicate. I see we're at HGTPS, you know, Zoom, et cetera.

So it's virtually ubiquitous. But it's, I guess the point there is that my disagreement with that community was always that the deficiencies and problems that exist in money and payments are not fundamentally a problem of tech. And it's the same thing like when you have a good fintech idea, that's not principally about the technology. It's about a good business model of identifying a problem and coming up with a useful way of addressing that problem. And the technology always follows. And that was always my beef with that community where it would sort of start with, here's some really clever tech. Let's figure out what it's good for. Let's backfill and find some rationale for its usage.

That was not the approach that we took. It was to identify, well, we think there's some problems with money the way governments issue it. We think there's some problems with payment systems the way the credit card companies proceed. And so we wanted to address those monetary and those payments issues. And as long as we were providing some sort of a reasonably

adequate solution, the need, there was, there was not a need for these other type of products. Did you see Egold as more of a monetary system, a monetary alternative, or as a payment system? Because it kind of did both. It did both. And it was impossible to separate them. And it had to be a sort of a coherent mingling of the two because I did have concerns with

government issued money, particularly the discretionary nature. And some of this goes back to sort of, you know, standard. libertarian concerns about central planning and so forth. But the thing that struck me at the time was that because there is a sort of a bias towards accommodation, monetary accommodation, towards stimulus, the concern is that at some point discretionary monetary systems go overboard with excess, you know, become like a ratchet, like an engine of debt accumulation. And so I felt like if you have a private,

sector entity, such an entity can be bound by contract more effectively than governments ever can. And so it can be a predictable sort of thing. You can hang your hat on. And the particular model that we were doing, like the contract, it already is something that exists in government monetary institutions. Like some monetary authorities are set up as something that's called a currency board. And a currency board is contractually bound to maintain a hard peg with some sort of an outside anchor asset. So as an example, the Hong Kong Monetary Authority, they anchor the Hong Kong dollar to the U.S. dollar at a fixed rate. And so it becomes a mechanical process of regulating the money supply and so far. So in that respect, we were simply an orthodox currency board

that was pegged to gold. But we had some additional distinctions to distinguish us from like the way a government would approach that. The big distinction was that all of the government monetary authorities, whether they're a currency board or a conventional central bank model, they are nevertheless banks.

And so their asset portfolio is chock full of remunerative assets, that is assets that pay interest, primarily securities. We felt like if we want to have freedom from default risk, we can't do that thing of holding interest-bearing securities. There's various well-identified risks that goes with that. So that's why we wanted to have a stored physical commodity.

So in that respect, we felt like we had a, well, we did have a stronger balance sheet than any government central bank, even though it was, you know, much smaller. So in a sense, your approach to monetary policy looked like some of the countries that had, in the pre-Bretton Wood system, that had a currency backed by gold. Although I guess the difference is that ultimately that was just a promise, and then it didn't materialize in many cases. And that's a good point because oftentimes when people would start to hear about what we were doing, they would immediately have this reflex of thinking that it was some sort of a rehash of the gold standard. And it simply wasn't. In fact, the deficiencies of the gold standard were part of what prompted us to do things the way that we did.

Because the gold standard was like this gentleman's agreement between sovereigns. Right. Which, of course, when it becomes inconvenient to, you know, to abide by those sort of things, like when you want to finance a major war, that all goes out the window. It could be either suspended or it could be abrogated altogether. But even when it was functioning, it had some real, real built-in weaknesses that I think made it non-viable. I think the issue there was that the base money, and when I say base money, like, Let me define two terms.

Like in modern monetary systems, base money is the direct liabilities of the monetary authority. It's the most basic, it's where the buck stops. So for instance, in the United States, with the Federal Reserve System, the cash that we have in our pocket, well, that's on the balance sheet of the Fed as a liability. That's the only kind of base money which we can access. it exists in another form as well, it exists in its electronic form as deposits of the government central bank. Now, so base money is as money like as you can get. But then broad money is things like bank deposits, where you have a liability that's, it's not on the, it's not on the

central bank's books, it's on the bank's books. Yeah. And so you see the deposits on the liability side and it's backed by their their asset portfolio of loans and so forth. Now, under the gold standard in many countries, including the United States, the most, the base money was gold coins. Gold coins, though, have always been problematic. I mean, they're really terrible as a transaction medium for routine type of purchases. One aspect is that they embody too much value, like even the smallest sort of gold coin that's practicable would be so much value that it would like exceed a the average family's median income you know like a single let's say a tenth of an ounce coin might be nearly a week's worth of median income but yet you had something that was indivisible it wasn't

perfectly fungible and as a result you know you had a base money that was virtually useless for transactions. So what people would naturally do was they would want somebody else to to hold it and issue liabilities that were perfectly divisible and much more readily transferable. But as a result, you know, you end up with, you know, I think it's the inadequacies of bollion coins that impelled banks to exist, banks as we know them, to exist. But on the other hand, you then have that the instability which is always characterized banking where you you have a business that is built on a what's called maturity transformation in other words there's there's demand deposits where you know somebody is entitled to to to to draw out you know the money

and base money form like a deposit is simply an obligation to pay um pay out base money either at maturity or on demand. But of course, there's never that ability to honor all those claims at once. And so for long periods of time, you can sort of bank on the fact that not everybody's going to want their money at once. And those demand deposits are a stable source of funding for the bank. But periodically, that would fall out of bed. And so, yeah, so those were the kind of problems with the gold standard. You know, you still had the instabilities and so forth of banking, but you also had this fact that a government could simply ditch it when it became inconvenient. Now, there had been a relatively recent example of this type of thing, which had

occurred in Argentina, where they had gone through a terrible period of inflation and so forth, and so the solution that had been adopted was a currency board with a hard peg to the US dollar. But sure enough, they could not bind subsequent successor regimes. So what happened is somebody else came into power. They needed some stimulus and they ditched the thing. That was in the 90s? Yeah, I think the early 90s might have been around 92. I should probably look it up before I make reference to it. And I believe that they just recently have defaulted on their sovereign debt. Yeah, I mean, it's sad. Argentina's, It's sad with their monetary history in general.

But our sense was that if you have a private sector entity, they can be bound to contract. And you can bring legal action against them if there is some sort of a default or some sort of damages. Whereas when governments have repudiated those obligations, you never have any recourse, legal recourse. Like, you know, there was cases after the Civil War where people were damaged by the sort of fiat money that was used for a time there. And basically nobody was ever able to recover damages. Yeah, it seems to me that the disincentive for governments not to misbehave or default on their obligations is simply the threat of lower subsequent investment, which is not a strong. strong enough disincentive, I guess. And I'm not proposing, you know, that governments stop doing what they do.

They have their own sort of, you know, needs and requirements. And so like what we were setting out to do was, was not to, you know, induce some sort of reform or change in government money. That's their business. They can handle their affairs however they see fit. And if they feel that they need to modulate economic conditions in a country, I'm not going to it's none of my business what they do. We did want to provide though an alternative.

And so over the first few years of our existence, we were sort of developing this notion of an alternative global currency. That was really what we were trying to accomplish. And when I say alternative global currency, like I'm going to contrast that with, let's say a capital G, capital C global currency. Like when people hear that term, they think of something like the Euro only on a global basis,

where it's coercively imposed, at least on the people that didn't want it. That's not what we had in mind at all. We wanted to have something that circulates alongside government-issued money and plays a complementary role, you know, that does the sort of thing that no particular nation's money is as well-suited for. And so, and where that comes into play, especially, and this continues to this day, is international payments, especially cross-currency payments. Everybody knows that the U.S. dollar is the dominant reserve currency around the world, and it would be very difficult for anybody to sort of challenge that. It's useful because of network effects and the reasons

for that to continue. But nevertheless, it cannot really function well as a global public good. And the reason is that they have to respond to domestic imperatives. But what ends up happening is referred to a spillover effect or a sort of a whip saw that occurs

such that when U.S. policy calls for a strengthening of the dollar or if interest rates are rising, that sort of thing, you get a reversal of capital flows that might have been flowing into a rapidly growing economy, let's say like in the last few years, Turkey or Brazil, where all the sudden, when the dollar starts to strengthen, there's an abrupt reversal, there's capital outflows, and it throws other economies into turmoil. So again, one of our purposes in this was to have something it's predictable where we have no monetary policy, we simply have a contract.

And I guess that tension is what is referred to as the Triffon dilemma. Is that right? Yes. Well, Triffon dilemma, I'm not an economist, by the way. So, you know, it's possible for me to misspeak on some of these things. But there's, there's, it's, the Triffon observation was sort of looking at the tradeoffs, on the one hand, if you are the country that issues the dominant reserve currency, there's sort of the exorbitant privilege aspect. The exorbitant privilege means that other countries, which may be poorer, are more or less financing your high level of consumption and so forth, which in some ways seems kind of like not fair, because that country can basically mobilize its debts as money that's used.

all around the world. They can even buy imported products with money that's based on their own debt. But the flip side of that, that's where some of the Triffin sort of burdens coming to play, because by being that currency, that means you've always got capital inflow, sort of a capital account surplus that has to be met by a current account deficit. And so what that comes down to is in terms of trade, it tends to disadvantage the country that has the reserve currency. And certainly in the United States, in the last several years, there's been a great deal of concern about trade imbalances, you know, there's been the trade wars and so forth of these efforts to try to bring trade deficits down, but nothing would bring a trade deficit down more

than if there was some sort of burden sharing in terms of some other vehicle, some other medium being used to a greater extent as the international reserve asset and medium of settlement. So I think like even at the present, like the Treasury probably welcome some decrease in that burden as long as it's not some other sovereign that's stepping in and becoming dominant. In other words, I think they'd be happy to play a lesser role, but not if it's Renminbi or Euro that is that is supplanting the dollar. Yeah, it's interesting because the dollar, you know, I guess what is it, the dollar counts for something like 70% of international trade, even if the counterparties are not U.S. based. So, you know, it's really, really dominant. And so there are costs, as you describe, but there's also strategic usefulness, you know, like the U.S. will weaponize SWIFT and the fact that the international banking system, most of those, you know,

flows tend to go through New York in some capacity at some point. And, you know, instead of engaging in outright warfare with countries, they will use sanctions, which leverage the centrality of the U.S. in the global financial system. So there's also a strategic reason why they would want to retain that power. Yeah, and that's a difficult one. Because that power is being exercised more and more, it's led to quite a bit of tension. You know, it's led to active discussion of looking for some sort of an alternative. Like the outgoing Governor of the Bank of England, Mark Carney, at his Jackson Hole address a few months ago was sort of pointing out the desirability of some sort an alternative. In his case, referred to something called a synthetic hegemonic currency or an

SHC, which is a little bit of a fingernails on the chalkboard, scary sounding thing. But yes, there's a great deal of discussion now to developing some sort of an alternative, both in terms of the medium, but also in terms of alternative platforms. in relation, of course, to the Iranian situation. The Europeans had put together a special purpose vehicle, I think it was called Instex, to try to have an alternative. And this has been done, it's been done on a regional basis over and over to try to find some alternative. But none of them have done very well. Now, I should say also that, like, you know, our goals, because I do, I am trying to organize,

a company to serve as the successor to Egold, something that implements all the lessons learned from both 10 years of operational experience, but also the very important lessons that came out of its legal, the legal case. But the goal of that would not be something that stands in defiance of, you know, it would be very foolish. You know, if that was setting up to claim to be able to you know, enable entities to to evade or circumvent sanctions. So just rewinding a little bit. So one one reason I found your story so compelling was because you walked away from, you know, pretty lucrative medical practice. You were an oncologist and you gave it up in order to pursue this dream of creating eagold. So I just wanted to, you know,

know, to ask you, what was it like making that transition? And was there like a catalytic moment where you just realized this was your calling? It's a good question. And it's in some ways, it's actually hard to remember my state of mind from more than 20 years ago. Yeah. One element that I do recall was a sense of duty where I felt like I had some insights that needed to be implemented and they were difficult to convey to other people. And that's what made me feel partly like, well, let's just go and do it. It'll be easier to understand once it's out there and if indeed it's valid and effective, then I don't need to explain it to anybody. So there was that sense of duty. I've made reference in various places to a work that I read the rationale for

central banking where right and and we talked about it a little bit where the idea was that there's always been this sort of there's been the absence of some sort of an automatic automatically self-correcting mechanism for metering things like like the money supply and and the and credit cycles and so forth so it occurred to me and this this was something that it took several years for it to sort of mature was there would be possible to have a mechanism in place that would enable sort of the harnessing of collective wisdom to create a tight feedback loop such that people would determine the money supply and the availability of credit. I go into that in some detail in a blog post from several years ago on the bettermoney.com

site. I think it says something about the Gordian knot or something. But that has always been a goal is to try to have an automatically self-adjusting money supply that rather than amplifying some of these credit cycles would tend to attenuate them. So the idea there is something like replacing the Federal Reserve with an algorithm, which, where, the rules are very clearly defined and still seeks to grow the money supply in concert with the growth of the economy, but doesn't do it in a kind of arbitrary and capricious way or potentially even a politically non-independent way, which is what, you know, many people would accuse the Fed of. Well, but you may have misspoke. You said replace the Fed. I guess, and we're not trying to replace

anybody, although I would imagine, I could imagine the circumstance where if we had, if we were to emerge to a sufficient scale and this sort of feedback mechanism was sufficiently powerful and pervasive, I could imagine a sort of an entrainment effect. And when I say an entrainment effect, you may recall the term bond vigilantes, which was used sort of in the late 90s. The idea of the bond vigilantes were if there was sort of sloppy monetary policies or excessive fiscal policies, the bond vigilantes would buy or sell and interest rates would sort of rise if they felt that there was unsound policies. So the entrainment effect that I could imagine, and this may sound rather pie in the sky, but if there was a sufficient installed base of users and so forth,

that if there was, in fact, excess accommodation or overly easy monetary policy, something that was not sustainable, the idea is that the exchange rate of a national currency relative to e-gold would begin to change. Or that if there was some unsound fiscal policy, that interest rates would start to tick up very quickly. And so as a result, like some of the, although, whether we continue to be discretionary management of the money, some of the major indicators, you know, like external benchmarks would be more closely followed, would be the exchange rate

relative to e-gold. So by creating a free market alternative to sovereign currencies, you would allow potentially a feedback in the form of market prices to be, those signals to be created to show the market's honest opinion of what the sovereigns were doing. Yes, that's correct. And it especially becomes critical with respect to interest rates. Up until, well, I'd say up until eGold, it was never possible for somebody to be, to truly have their independence to, from the banking system. Like, if you wanted to have access to remote payment, you know, payments that are something other than, you know, shoving cash across the counter,

those were always mediated by the banking system. And so with Egold, it was the first time it was possible to have really quite efficient remote payments like, you know, immediate settlement, finality, and very low cost, so that you had a choice. You know, you did not necessarily have to loan your money to the banking system. And in fact, you could look at it more like an, And like the way you would an investment on a risk and return sort of basis is like, are they offering me a sufficiently sound business proposition that I'm willing to loan them my money?

And that ability to potentially withhold your money from the banking system, that's a whole new thing in history. Right. That would, you know, I think dictate the availability of credit. That's ultimately, you know, economic actors, whether they're individuals, firms, you name it, they're the source of credit. But when it's mediated through the banking system, there is a sort of a bias towards ever expanding credit. The very fact that you have to loan your money to the banks creates a greater availability. And so it's virtually impossible to know things like what is the natural rate of interest. I mean, the term is used, but it's an abstract hypothetical concept.

I think that if people were able to sort of exercise their discretion in that fashion, it would become a real and observable type of thing. So just returning mechanically to the system design for the listeners who may have never used EGold, how did a user actually engage with the system? How did you get started on it? It's a good question. And one of the problems that we had, like one of the dumb things was it was way too easy. Basically, you could, you would sign up, provide your contact and identifying information.

And then immediately you had full privileges on the system. That meant that you could receive a payment into your account. And of course, if you had some money, then you could make a payment. How did you onboard people? a bank wire bottle? Well, this changed over time. And it was a critical, there was a critical turning point. At the very beginning, when things were still in their most crude state, we did not have a separation.

In other words, at the beginning, there was one company and you, it would buy and sell the eagle. In other words, the same entity that was performing the settlement of payments was also the one that was buying and selling the money. We called those transactions in exchange and out exchange. One of the most important things that we came to understand in the first few years was that we had no business combining those functions. And indeed, no government monetary authority combines those functions. Like if somebody wants, let's say, a quantity of dollars, what they don't do is go to the Federal Reserve and buy them. If you want some quantity of an existing money, what you do is you receive a payment from somebody that has some. And so with all brands of real money, the business of currency exchange is separate from the core functions of the monetary authority.

Those core functions, which must be protected, are basically, the issuance of the money and the settlement of transfers. So the really critical change that we affected around 2000, and the thing which really set the stage for sort of have its first blast off in terms of exponential usage was we introduced a separation of roles such that the exchange markets was done on an independent, basis by independent providers. And so at that point, at all times, like the way that you would require money or you'd get

started is, as with any other type, you receive a payment. But of course, there's a category of these payments where it involves an exchange transaction. Now, this is going to sound pedantic, but let me make a day. distinction because of something that comes up, it's a misunderstanding, and was even something that was purposely misrepresented in the legal case. The only transaction that we dealt with with the Egold system was called a spend. And a spend is a transfer on the instruction of the payer to the recipient. So the payer's account decremented, the recipient's account is incremented, and

That's the only thing that we do is that that P to P type of payment. But people would sometimes think, you know, like, well, gee, well, people don't have this money. They have dollars or they have some other type of money. So they would imagine a sort of a composite transaction that starts with dollars where you have to then exchange it for e-gold. And then you move the e-gold and then the recipient exchanges the e-gold for their local currency, whether it's dollars or something else. But no, that was three separate transactions. And so we wanted to, you know, to make it perfectly clear that any exchange is done by an exchange provider. But anyway, so the person that wanted, the challenge there, of course, is initially nobody has any of the money.

So the first transactions always are going to be exchange type of transactions as it's distributed. Let me sort of back up there and make an analogy. This is something that any new brand of money would face. And in fact, it's the case even with government issued brands of money. Like if we go back to the euro as an example, it was introduced into circulation via a currency exchange process. Like prior to that, people had their lira, their francs, their Deutschemark, and so forth. there came a certain date certain where all that was swapped for Euro.

And this was this was accomplished by the banking system. So the banks were tasked with, you know, swapping out those, redenominating the deposits. This was something that was done at a fixed part, you know, where they couldn't capture the normal exchange spreads and revenue from currency exchange. And it was something that ended up costing the banks tens of billions to, to accomplish.

This, the euro transfer process? That's with the euro, yes. Now, Egold was the first currency that was ever introduced into circulation entirely by voluntary currency exchange. In other words, there was demand for the money, and there was a whole lot of providers that went into business to sort of meet that demand and compete for that exchange business by offering, you know, supporting different currencies. different levels of liquidity and so forth.

So yeah, there was a lot of exchange and for many people, the first time they got a balance of e-gold might have been through the exchange market. So that, yeah, that makes sense. Instead of logging or creating an account and receiving a payment from someone who already had e-gold. But as time went by, more and more people, because, you know, like when you look at like who had the real problem with payment systems. The problem has always been for somebody that needs to be paid.

That's always been the difficult thing. And so there have been systems that were that had, because there was multiple like this part of our development was during the dot-com bubble. So there was tons of other sort of alternatives that were being proposed. And many of them were focused on the needs of the payment recipient to have, you know, non-reputable payments, lower chargeback risk, something where they have faster access to the money, all of these type of things. But then the thing that made us distinct was if somebody's going to be able to receive payment in that fashion, there has to be some cohort of people that have the wherewithal to pay them. And that was one of the cool things about e-gold was because people had such a cultural affinity for gold as a sort of store of value.

there were prospective payees or payers, you know, who just for their own head noises or whatever motivations would hold balances of our money. And in fact, what tended to happen was people that held balances were eager to, you know, like show their friends or counterparties how it worked. And they would, they'd be looking for places to spend it. Right. Which was a very interesting phenomenon. Yeah.

Yeah, the same thing happened with Bitcoin, I guess, as well. That was, you know, is definitely there's more of a demand to find places to spend Bitcoin than there were merchants that accepted Bitcoin, especially in the early days. Now, in terms of describing that our fundamental transaction, though, there is something that we had done that was, I think, rather innovative and which really made things easier of facilitated growth of the system. technically what we called it was decoupling the numerare. But what that meant was we had a native unit of account for the money.

And that was grams and decimal fractions. And we had done that to make it very clear that we were meeting our obligation, which was that every gram of our money had to be backed by at least one gram of good delivery gold on a fine content basis. Right. But that was not a good unit of account for transactions. Like people already, you know, they had their price list, they had their catalogs, they had their pricing, whether it was in dollars or euros or yen or whatever. And so it would have been silly for people to price their goods and services in our native unit. So by decoupling it, it meant that the standard transaction would be something like, well, pay this person, you know, 25 U.S.

dollars worth of e-gold. And then the system would maintain reference exchange rates that would enable a calculation to, you know, determine, well, how much that was. We would send back a preview indicating, all right, you said, 25 U.S. dollars' worth on this reference exchange rate, that would be this exact amount of the money. Are you good with that? And if that made sense to them, then they would commit. This both facilitated its ease of use at the time. But it also has a significance going forward. If we are able to reoperate operationalize, it addresses some of the concerns that are being raised in relation. Well, government central banks these days are very focused on both the, you know, the opportunities and risks of private monies.

They've especially sort of freaked out since Libra had announced its plans. Yeah. But this, you know, our conservation of, of, you know, of pricing units that government's already accustomed to and that populations are used to dramatically reduces the risk of displacing domestic currencies from their proper role. Yeah, I guess that was one of the big critiques of Libra is that they were proposing to create an entirely new unit of account, which would be a function of the value of the basket of. sovereign currencies, which I guess people claimed would be user hostile because it would force them to price things with a new unit that they weren't used to. And odds are, if they ever do become operational, I mean, they'll do the same thing that we did where they don't compel pricing in their native unit of account, but it's not clear.

Like a lot of the details of Libra remain sketchy, and personally, I'm not certain that they're ever going to see the light of day. Right. Yeah. They've definitely had a lot of struggles. So returning to the historical record, you know, in 2004, you started surveilling the system to determine whether the users were using it for illicit activity once you got tuned on to the fact that there were some insolubrious elements using the system. Is that right, the chronology there? Well, we began much earlier, like the first time that we had knowledge of somebody using Egold for an improper purpose was back in 99. And at that time, we began to build up an internal investigations capability, which was necessary because we interacted with law enforcement in innumerable jurisdictions. And so there was a continual sort of an evolution both in the approach that we took towards illicit usage and in the countermeasures that we employed.

And again, this is an important aspect of the lessons learned. Like the dumb idea that I had initially was that if there was misuse, our responsibility, was to respond to lawful requests, such as for transaction records or investigatory information. And it did not occur to us that it was our job, at least initially, to try to prevent these type of things. I mean, that was the biggest mistake of the Egold system was we, over time, although we developed extremely sophisticated and capable mechanisms for detection, interdiction, investigation, and resolution of these type of things, what we should have done was to have the measures in place to prevent it in the first place. And the measures that would have prevented it in the first place are largely the conventional

sort of elements of an anti-money laundering program. And so, for instance, I described that it was too easy to establish an account. like in less than a minute, somebody could establish an account with full privileges and be receiving payment. Well, that's really handy in terms of low friction, but it's not the appropriate way if you want to, if you want to keep bad guys away. Instead, the way the banks do it is wholly appropriate, where you have a, a, you start with a sort of a universal CIP or a customer identification program where you verify identities,

Then you put somebody through some degree of risk-based sort of due diligence, which results in determining what's the appropriate level of system privileges to provide. And then in some cases, you would do extended or enhanced due diligence, like if you're onboarding a financial institution or some other type of a higher risk user. this then has to be paired with transaction monitoring where you do detect these type of things like all the things that we didn't think that that was our job we thought that banks were doing those things or credit card companies were doing those things primarily out of loss prevention you know where since they didn't want to be left holding the bag they had to know who their customer was like our initial attitude was Because like if somebody provides incorrect contact information, they're not hurting anybody but themselves.

Because people bobble their passwords or people, you know, even smart people will sometimes lose track of and need to regain access to an account. And so if they thought they were being really tricky and gave us incorrect information, well. There was a risk of loss. Yeah. They can't get hooked back up to their account. So anyway, the point that I wanted to make there is that that was one of the most important lessons learned. Now, in terms of that evolution, there was stage after stage of like figuring out appropriate response to, you know, to some of these abuses. And so that continued to sort of escalate so that it really went into high gear. year in 2005. One of the problems that we'd had in the earlier years was there was times that we

would detect something and we would approach law enforcement to try to get assistance or guidance on what to do. Because as a for instance, one of the challenges that we had was determining the issue of whether you freeze an account. And let me try to drill down on that a little bit. let's say that you have a bank and they are they they they have concerns about a customer and they decide to get rid of that customer what's pretty easy for them to close the account they can simply notify the person hey we're closing your account next week and then they mail them a check yeah well you can mail someone gold in an envelope right well yeah i mean like e gold only existed on our platform it goes goes, it went round and round, but, you know, there was no way for external value to enter it or

for value to go from inside to outside. So there was no such equivalent. And you didn't have a redemption method to get access to your, you know, bullion claim? Yes, but that necessarily needed to be restricted to, you know, specific institutions that we, that we thought of as primary dealers. And the reason it had to be restricted in that fashion is if you're dealing, you're dealing with the good delivery system, they absolutely do not want to be doing retail-ish type of things. They're not going to take delivery from the outside world, and they're not in the business of making delivery, especially the 400-ounce bars, you know, like they use for London good delivery. Like they only want to deal with well-bedded sort of counterparties. So yes, there was redemption, but it was as remote from the end user as balance sheet operations

or open market operations with the Federal Reserve. You know, you just don't get involved with that. They do that with specific well-vetted counterparties. So I guess the long and short of it is you did not intend EGold as a quote-unquote censorship-resistant payment system the same way that crypto enthusiasts will talk about their sensor-resistant. systems. No. Like for instance, there's like the issue of anonymity where people can sort of romanticize that and think that it's, you know, that there's virtuous reasons for people to want to have that in relation to privacy. The sad fact the matter is that early adopters of any of these systems,

you will get bad actors. And this wasn't just us. This was everybody. like PayPal, you know, was just deluged with this sort of problem, you know, what Peter Thiel had referred to as a tsunami of fraud. Well, I guess it's like an adverse selection problem whereby if you create a new, unencumbered digital payment system, it's the people that have the extreme need for that, which will adopt it first, which is in many cases like criminals or money launderers, right? Yeah. And so that was like one of the most important lessons that we had was, okay, if when we come back up, how do we introduce things where it's buttoned down from the very beginning, you know, like, like avoid the bad actors. And we have some very good strategies in mind for, you know, how to pick up where we left off, only where we're preventing these things in the first place, which makes it, of course, much more appealing. Like if you become some sort of a, if you're perceived as some sort of a ghetto where illicit things are happening, that's a real turnoff. You know, if like a publicly traded company, for instance, is not going to have an account on a system that's perceived as a place where bad things happen.

Right. Right. So looking at the history, so you gave various government agencies information, you know, in some ways like, Some people will describe it as in the later stages as a honeypot for fraudsters because you were, you know, effectively giving information on suspected bad actors to government agencies. But even despite that, you were still rated by the DOJ in 2005. This gets into some complicated questions. Fundamentally, the thing that's rather perverse about that was that we have, had always been seeking engagement with law enforcement and in fact, you know, had probably,

I think we probably investigated and interacted and complied with subpoenas more than a thousand times. Right. Before that. But we'd always sort of had an issue with the Secret Service. It was evident as far back as maybe 2002. In fact, there was even some strange stuff that happened in 2001 where they were sort of a standout, like with many of the other agencies, we had an ongoing relationship where we would try to like work with either well like with with the agents so they could give good subpoena right in the words so that they know how to craft their subpoenas to get the maximally useful um knowledge and also to perhaps do things in a somewhat more interactive fashion it was always different with the secret service they had sort of like a

a different corporate culture that that didn't play well with others. And it wasn't just, I mean, it would show up even in terms of their relationship with other law enforcement agencies where it was sort of like a competitive type of a thing where they might like take cases that they got wind of, even if there was some very carefully constructed long running operation, they might blow it just to grab the headline or something. Wow. Like even law enforcement agencies in other countries that we worked with would remark on, you know, how they hated to work with. United States Secret Service. But the thing that's weird is, you know, if somebody felt that

we should be doing things differently, we were highly amenable, you know, to, you know, like there was, there was a great deal of regulatory uncertainty where we would have welcomed, you know, if somebody would have said, hey, like, we don't like this. I mean, even if there'd been a matter of like a cease and desist or something, we would have simply complied with the law. But the first time you find out that somebody has a beef with you is when they perform an asset seizure, that seems like a not, like not the right approach to take. Yeah, yeah. So some people might be wondering why the Secret Service was even involved here. I guess something people don't know is that they cover currency, minting issues, counterfeiting, and so on. So I guess from that perspective, they saw you as a monetary competitor. to the U.S.? No, and that's the thing.

This is where it starts to get weird and where we get into some of the sort of the foundational myth that went into the blockchain community. It is widely believed that the United States lashed out against Egold because they didn't want some sort of competition

against the United States dollar and it's further believed then that they shut down the system. And in fact, neither of those things happened. Like in terms of, you know, like this, this theme of, oh, we don't want competition against the almighty buck. I mean, I was there. I lived this, you know, for years. It never came into play. And in fact, it was explicitly even addressed in court hearings and documents. Like the question, you know, had come up. The judge had put the prosecution on the spot with a direct

question of, do you want to shut down Egold? And the answer had been, you know, like, they had to say, like, well, no, that's not what, that's not, that's not our intention. Right. And in fact, if you look at some of the judge's statements at the end of the case, she went out of her way to say things like Egold conceptually is not illegal. The outcome of the case was quite remarkable. Winner's a, winner's a conviction of a financial crime. It's not uncommon for, like, the principles to be either banned from an industry for a period of years or even for life. Like recently, there was a senior Wells Fargo executive who had a lifetime ban. But instead, in my case, both the plea agreement and the sentencing, like the plea agreement was

set up essentially as a blueprint to show like this is the list of things that would need to be done, conduct this business as a licensed financial institution in the United States. And it was very straightforward and it was very reasonable sort of requirements. It gave real clarity and it's something that we then set out to implement. But she also, you know, had sort of like, whereas the sentencing guidelines for these things we pled guilty to, they would have called for more than a decade of incarceration and multi-million dollar fines with the licensing. Oh, so is the licensing charge not money laundering or?

Well, I mean, everything gets a money laundering charge thrown in, and there's a reason for that, like all white collar crimes virtually will have a money laundering charge thrown in for reasons that I could describe. But the case was really all about 18 U.S.C. 1960 operation of a money, unlicensed, money-transmitting business. But instead of, you know, going to prison for a decade, there was no incarceration. In effect, I was sentenced to continue to run the company and to implement the steps that have been identified as necessary to go forward. Like here's what she said in her sentencing memorandum.

Now that legal issues are resolved, he has committed E-Gold and GSR to a vigorous compliance and oversight program, which could only succeed if he were there to head the companies. Right. Since there's no reason to shut down Egold and GNSR and every reason to have them come into legal compliance, a sentence of incarceration for Dr. Jackson would be counterproductive. That's a rather remarkable thing. I can't. I'm unaware of any other case where, you know, where somebody is sentenced to continue to run a company. And like the unfortunate fact, though, was there was a catch-22.

that I don't think the judge, you know, was aware of, but the fact was that, you know, having pled guilty to this automatically made us unlicensable. Unlicensable from the MSB perspective? Yes, because the way this works, and we didn't really understand it well until the court case, we didn't realize, and we should have, but we didn't, we didn't have good legal advice. we didn't understand the importance that MSBs are regulated by the states. And in particular, a thing that we didn't understand was that the only way, practically speaking, to know if you are a money transmitting business is to approach every jurisdiction where you might have customers

and seek a determination as to whether licensing is required. Right. And so, and in relation to that, like in later years, we did in fact have a sort of a, there was a, we'd subsidized, when it was clear that we couldn't come back up and operate, we'd gone back to drawing board, we'd redid everything to, you know, both upgrade the tech to something infinitely scalable, but also especially to to integrate all these compliance and other safeguards. and we had licensed that to a third party in the United States, conditional on them raising adequate capital to operate. And they then approached 36 states with the E-Gold business model and received either a determination that license wasn't required or received licenses without half and half.

And so it was fully possible to do this. It just wasn't possible for us to do it. And it was strictly because of, you know, having pled guilty to a to a financial crime. Like many of the state regulators have discretion on a wide variety of things where they can sort of waive certain disqualifying things. Like if I, if I merely murdered somebody, you know, I might have been able to get licensed. But the thing that they had no power to waive, especially in the state of Florida, was having pled guilty to, you know, to operation of unlicensed. money transmitting business. And in the Wired story, it was mentioned, I believe, that the requirements for money

transmitting businesses became more onerous in the wake of 9-11 and the Patriot Act. Is that something that you would describe as accurate? I don't know how onerous. I think they're actually pretty reasonable requirements. So even though you ultimately, you ultimately. ultimately were basically shafted by the system, you still feel that it's reasonable. Yeah, because they're the same sort of things that protect you from abuse, which also then preserve the reputation integrity of the system.

And so, yeah, I wish I'd succeeded in implementing those measures considerably earlier. And in fact, we had first established sort of a design and requirements for a very interesting interesting, federated identity type of a combination of identity verification, so forth, as early as 2000. But we weren't very well capitalized, and we were in a mode where too often, you know, we're sort of combating whatever the mortal threat du jour is, whatever attack were under that could put us out of business, and it was hard to marshal the resources, you know, to put that plan into action.

So there was like three different times in the course of the five years where we had sort of refined those requirements. It was called valid user. And we finally got into the point in 2005 where it was really, it was really slick requirements. And we were approaching contractors. There was an IP firm, an IT firm in India that was really excellent at creating like bank software and so forth. So we were finally going to contract with them to get to get that thing done. And that's the money that was seized. You know, so.

Yeah. And we'd even petition them like, dudes, you know, we're, we're a few days from pulling the trigger on this thing that I think you would like very much, you know, in terms of us, you know, conforming to what what we think the United States likes. And, you know, basically that the particular counterparty from the government in that one basically said worst effect of, well, I'll be damned, you know, if we're going to give you the money to build a, you know, compliant system, which seems, you know, a little bit perverse. Yeah, yeah. So one thing I was curious about was, you know, Egold story is somewhat intertwined with Liberty Reserve. and they're often discussed in the same breath now in the historical record. I don't think we should be. Yeah, yeah, that's what I was going to ask, basically. You probably view them as very distinct in their intentions and motives.

Absolutely. I mean, because we knew those people, and they had been trouble when they were involved with Eagle. They had one or more exchange services. it finally got the point where we expelled them from the system. And it was clear to us that as we got better and better at sort of banishing, like identifying and banishing categories of bad actors, that their business model was essentially to create a system to welcome them into theirs. Like they seem to build on the people that we managed to expel from e-gold.

Yeah, so I guess something people don't know is that, as you say, the founders of Liberty Reserve had been running a third-party exchange for EGold. So I guess you kicked them out. And then at that point, they created a somewhat similar system, but with virtually no restriction on usage types, no KYCE or AML. And, you know, I guess the Liberty Reserve story ends in a much, well, a much worse way for the founders and that the founder of Liberty Reserve is serving out a 20-year jail sentence now. Yes. Well, and I think it's to the credit of the justice system, you know, although there's there's things that made me unhappy obviously in our case, nevertheless, you do have judges who have a, who are good judges of character, like who will you know, despite sometimes the impediments to understanding what's really going on, they can still pretty much divine oftentimes if who the bad guys are. And I guess the fact that you had been proactively surveilling the system and collaborating

with law enforcement was kind of testament to the fact that you did not intend Eagold as a money laundering service. That's correct. I mean, and she went out of her way to make repeated references that there was not criminal intent. You know, like you said things like no doubt that Dr. Jackson has respect for law and the intent was not there to engage in illegal conduct. You know, she pointed out that we had bad legal advice on the question of whether or not

the businesses needed to be registered and licensed, you know, that she pointed out that she had bad legal advice on the question of whether or not the businesses needed to be registered and licensed. she exerted herself a great deal, try to mitigate the damage of having approached this as a criminal matter. So one thing you said earlier was really interesting in that you think that the timing in terms of the creation of Bitcoin and the dissolution of Eagold is actually not coincidental. Can you expand on that? Yeah, and I'm not the first one to say that. You know, like John Motonis, who I've known since I guess the late 90s,

when he was chairman of the Bitcoin Foundation, he'd expressed something along this line in his Forbes article of Bitcoin prevents monetary tyranny. So he said it, like the timing of Bitcoin's appearance and subsequent growth is no accident either. And he describes it as a reaction to basically the Egold case. Like he concludes that section by saying, and he's saying this erroneously,

But, you know, as part of what I think is the foundational myth for Bitcoin, but he says, we can see from the case against digital money provider Egold that an efficient challenger to the provision of a stable monetary unit will not be permitted, really. And that was what everybody wanted to believe was that, oh, yeah, since the government did this to Egold, you need to come up with the system that can defy the government. Right. Yeah, that's, I mean, that's absolutely part of the foundational myth. of Bitcoin for sure, spot on. Yeah, and it's and it's sort of like there was lessons we learned. That wasn't the lesson. You know, like we learned the lesson, which was, hey, here's how we can do this. So it would be wildly successful, but not, you know, like not at all conducive to people

trying to abuse the system. We never got a chance to implement that. And then instead other people derived entirely the wrong lesson of, oh, well, you can't do this, you know, as a licensed institution, you have to do it as some sort of outlaw thing. And that's, you know, like the result has been, I think, a lost decade of like unprecedented malinvestment and rampant criminality. So do you think that there is scope for a payment or financial or monetary system for that matter, which, you know, seeks to, you know, allow individuals to make transactions outside of the purview of the kind of regulated financial

system? I mean, I can think of a lot of examples of behavior which aren't strictly illegal, which are still, you know, kind of blackballed from the financial system as it exists today. It's a tough question. Like, my approach to it is as a business. You know, I want to have a successful business and, you know, there's certain things where it's just like, why bother with them? You know, if they're perceived as unsavory, just, you know, exclude them in your terms of use. Now, but that's a different question, let's say, for instance, than privacy. You know, what, what does privacy mean? Like, because there's, there's been a lot of discussion of the difference between privacy and anonymity, for instance. Right. Privacy, you know, means that, you know,

your information is not being sold to other people to shove ads in your face is essentially what it means. Like the way Egold was done was we knew an incredible amount of stuff about our customers. And it's why we were so effective in terms of like investigations and so forth. Like we had what I called a God's Eye view that would enable us to find like the toughest criminals in the world. And some of those were like, for instance, Carter's, like people that were doing credit card crime. Yeah. All of these guys, they had bank accounts, they had credit card accounts, they had PayPal, they used money transmitting services like Western Union. In fact, they might have used your credit card and your bank account.

I mean, these were bad actors that knew how to, you know, to, you know, to defeat those type of systems. But the career-ending mistake for some of them was when they believed that Egold was criminal-friendly and it would matriculate to the system and try to do something cute there. There was no place to hide, you know, because with us, if there was any transaction activity, it was like touching a spider web, you know, where you have a permanent sort of discoverable linkage to the flows of value in every direction. like everybody you've interacted with and everyone they've interacted with, there's a permanent record of this type of thing. But the other thing that made it so powerful was it did not have the siloing of certain systems like, like for instance, Swift or card networks. And by that I mean, let's say that you go and you put your card in the machine at the grocery store or at the Starbucks or whatever.

the card network, they've got enormous information in terms of transaction activity. What they don't have is all of the identifiers. That's sort of done by the various participant banks. And so identifiers live one place. The sort of forensic scruff that might come out of your interaction with that bank of things like, you know, IP numbers or user agent tags like from your browser. all that sort of thing, they all live different places. Whereas with us, this was all assembled in one spot,

which made it possible for us to track down the really hard cases. And we would of course have that capability in the future, but the more important thing is to take advantage of what we learned about how people abuse systems to create the mechanisms to deter it and frustrate it in the first place. It's much easier and much better for your reputation

if the bad guy simply goes, someplace else to abuse. So what do you make of any of these digital payment systems in, you know, authoritarian or totalitarian states with, you know, China being a good example where cash has been really discouraged and it's actually considered rather odd to pay with cash if you're in Beijing or Shanghai? And instead, users are funneled towards these identity links. to payment systems like AlliePay or WeChat, you know, lots of human rights advocates would say

this is a way to actually, and you know, they're kind of paired with these social credit schemes as well. So, you know, the common claim in the West is that this is granting the government too much surveillance and power. And, you know, in granting them access to the finances of normal individuals, it grants them a hitherto, you know, unseen level of control and power. I mean, do you think that there is a middle ground in terms of administrating these payment systems and like the level of surveillance? I might have personal opinions on the merits of some sort of a system that stands in opposition to official controls.

but it's not really a practical consideration for me. You know, like if I'm going to bring another system into operation, quite frankly, it's not going to support usage in any jurisdiction where it's not approved. And so it's kind of, it's sort of a moot question for me. You know, like people might think like, oh, well, maybe you could go in and sort of, you know, put your finger in the eye of the Venezuelan regime by giving people recourse to something, you know, that's not under their control.

it's like, nope, not going to do it. I'm sorry. I'm not going to bring it up in Venezuela, unless we have the approval of the existing authorities. I'm not going to come up in China, you know, unless China, you know, authorizes it and so forth. So although I'm sympathetic to some of those discussions, they're not practical for me. Understood. So then returning to the crypto industry, you say it's been a lost decade. I think I would absolutely agree that there's been a huge amount of malinvestment. I also think the existence of like the quote unquote blockchain and the technotopian nature of the system has also made it, has made regulators like reticent to actually engage or to enforce. Do you notice an inconsistency between the way you were treated

by regulators and then the way that the crypto industry has been treated? to almost a more hands-off approach? Yeah, there's been a very definite difference in that respect. And part of this is the success of what I think of as the cool kids, you know, in getting positive, positive press and sort of this patina of being a more hip thing. So you end up having things like regulators, you know, who or legislators, you know, who, or legislators, you know, who, who, hope to attract some of this jazzy fintech stuff into their district. But there's also the phenomenon that's always been a cypherpunk characteristic, you know, this, you just don't get it

thing. This is fundamental to an emperor's new clothes or in this case and the cool kids new clothes type of a phenomenon where somebody who thinks like, well, it seems like there's this flaw or there's that flaw or this part that doesn't make sense, they're made to feel stupid, you know, like they'll be given some sort of a question. So people don't have the confidence necessarily to point out that like, hey, wait about that the emperor's naked. And this especially would be the case in terms of making a monkey of legislators and things like congressional hearings and so forth where, you know, you can sort of target the pitch

to like in the area of anonymity, you know, where in some venues that they're not looking at, you'll point out how you're hardening the anonymity and so forth. But when you talk to the legislator, you're emphasizing, oh, there's transparency and openness and everybody can see it. And it's like, it's nonsense. You know, but they don't know enough. It's like it's not their day job, you know, to truly have the expertise to be able to drill down on this sort of thing. Plus, there's this phenomenon that once it started to, once the casino got underway,

that is, once people started to bid up cryptocurrency. currencies, this was judged to be sort of an indication of validity or of success. Right. Like there was the precise thing and sort of the analogous thing that had happened back during the dot-com bubble, and it's still present to a significant degree, is that there's some entities that are really good at raising money. And that's treated as sort of an indicator of business success. But that's not an indicator of business success.

You know, it's if you have a sustainably profitable business model, that's what business success is. But the analogy here in the crypto world has been, well, if it gets bid up and if there's smart money coming into play and so forth, like all these people can't be wrong. And the very fact that's being bid up to $10,000, $20,000 per BTC, you know, is some sort of an indication of success. I simply disagree. You know, like, if anything, the efficiency of payments went the wrong direction. And so I feel like that's what I mean when I talk about a sort of a lost decade, where we were on the verge of a breakout in 2005, 2006. I think when we walk back in, I think there's a reasonable likelihood that our emergence

would be the thing that would cause this thing to collapse. So that's pretty interesting because I, I kind of maybe naively figured that you, you know, share a lot of goals with, call them the crypto enthusiasts or, you know, or even just to be more narrow about it with Bitcoiners, you know, because your critiques of the monetary system are definitely shared by Bitcoiners, I would say. So I kind of figured that you would see some, maybe some of the value in what's been built in the crypto system. Well, and don't get me wrong.

I mean, there are some of the people from that community that I truly admire, you know, like I regard Phil Zimmerman, you know, as having been a genuine hero that took, you know, great risk to bring strong cryptography to the world. Right. But it's, but it's, it's when you get into the, the monitoring payments area where I feel like things are all wet and I, and I always have, like as far back as, like I did a talk in London in 2001 that was in reaction, you know, to, for instance, what I regarded as the monetary errors, you know, of the community, the idea that the scarcity of a unit is sufficient, you know, for it to be accorded value. Oh, that's fascinating. So, so this idea actually predated Bitcoin, I guess, that you could create a native internet digital cash peg to nothing and it would just spontaneously acquire value. Oh, yeah. I mean, that was that was pervasive at the time. I mean, let me,

me pull up this and part of it was, you know, we tried to hire one of the really, you know, gifted cypherpunks to be our chief technology officer. And so I got a lot of discussion, you know, of the gaming insight that people in the crypto community felt like the original flavor of digit cash had been a successful proof of concept. The original flavor of digit cash, which was called, I think, Cyberbox. In other words, it was an unbacked kind of a thing. And at least between the cyberpunks, they took, you know, a lot of pleasure. And I thought it was really neat to sort of click this back and forth to each other.

And they regarded that as success. And so there was still that belief that scarcity, like the talk I'd done was e-currency, is it about technology? And it was specifically addressing that. where I indicated that cyphepunk conventional wisdom was that money equals digital information or numbers that are money and that scarcity equals value and that superior currency just meant superior technology for transferring the bits. That was what I felt like, you know, was a pervasive attitude at the time. And so.

Well, it's still it's still pervasive, right? I mean, it's been 20 years. and that's the orthodox view, I would say, in crypto land. Yeah. Well, I've always differed from that in terms of my focus is on monetary liability. You know, when I think of a currency, it's in terms of the balance sheet and how strong that balance sheet is. And where the rubber meets the road is let's talk about like if there's a fluctuation

in demand for a particular medium. If it's an unbacked cryptocurrency and there is a decline in demand that can only adjust by having a decline in its value. So like its price, its exchange rate drops. And in fact, if there was a sufficient collapse in demand or a panic or something the equivalent of a run, you know, there's nothing to keep it from going to zero. Whereas with e-gold, if there was a decline in demand or a, or a decline in demand or a run, you know, it could, there's nothing to keep it from going to zero. If there was a decline in demand or a run or any of those type of things that happened, the value of Egold did not deviate it. It continued to be to closely or practically, you know, to perfectly track the value of gold.

But what happened was that the mountain circulation declined. There was an orderly way for it to be redeemed out of circulation so that it, you know, it could have gone all the way to zero without anybody, you know, taking any sort of a loss in terms of its relative value compared to gold. Here's a question. So although you are definitely a skeptic of the crypto industry, even before the word cryptocurrency existed, would you concede maybe that some of the externalities of the growth of Bitcoin are potentially good as far as your perspective goes?

So specifically, Bitcoin, its growth has subsidized the creation of, you know, ways for individuals to store value in the form of information. So this has become a mainstream idea. And there's lots of interesting new custodial mechanics around that, which exists as a consequence of this. And then the other externality would be just popularizing the notion of a non-sovereign currency, which I think you would align with. So do you consider those to be potentially positive externalities?

No. In terms of increasing awareness of a non-sovereign currency, it's led to a lot of confused discussion and improper reactions on the part of regulators around the world. And so, for instance, there was a time where there's the possibility. Let's say that something is going to emerge and becomes a de facto reality, and then there's adjustments that are made as people realize that the existing legislation and so forth doesn't really, didn't really contemplate something like that.

that. And so some appropriate adjustment occurs and and and and and and and and and and so forth what's happened as a result of all this noise has been that you know, stampede of sort of ill-conceived regulation around the world varying from, you know, a ban on on on on certain things like for instance it leads to confusion of sloppy words like, oh, well, we don't want to have virtual currency or, um, or, or where everything is regarded as a cryptocurrency. So I think it's made it much harder to have a reasonable discourse with regulators in many countries

because they group together certain innovations improperly. You know, like they can't distinguish a crypto from some that is very, you know, that has a high degree of safety and soundness. But then there's also the tech issue where I think, you know, even the most fundamental technical aspects, are inferior with both blockchain or the more recent sort of directions towards DLT and so forth.

They started with the wrong premise, which makes it very hard to migrate in a direction of greater efficiency. Now, let me let me say what I mean a little bit there. Like with blockchain itself, clearly the movement more recently has been towards private sort of networks and moving away from all the canonical elements. of a blockchain, of blocks, you know, of cipher blockchaining, and especially this notion that all nodes contain a copy of everything. You know, so people are hastening to sort of bury that. So, like, it's not uncommon to have, like, so-called blockchain companies now that just don't do blockchain. I mean, Hyperledger is moving very much away from it. The R3 folks are, you know, they raised money for blockchain. When it's enthusiasm, but more.

and more of other stuff. It's like, where's the blockchain? You know, it's not there anymore. And so, but the part that still remains, even with these private networks, that is a crippling sort of a legacy from having started as blockchain, is this ridiculous notion of a consensus mechanism to the extent that it's still conserved. I think the consensus thing, I think it's the most invalid part of the whole notion. Because let's look at it. You know, with any one of these systems, systems, what you're trying to establish in terms of persisting the data is you want some sort of an immutable sequential record. Sure. And then there's the question of if you're going to append, whether it's a transaction or an event or something to it, it's a question of like where the consensus often comes into play is, oh, well, should this record be appended?

Yeah. Well, why on earth do you need, you know, the consensus of mutually distrusting parties? on that. You know, like, why not just have a straightforward, you know, logic in the application of, oh, does it conform to system rules? Is it like so-called, you know, like a legal transaction according to how the system's configured? Then bang, you append it. I can give you the answer that the crypto folks would say, which is that they're, you know, in a distributed system with no one, quote, unquote, in charge, you need to find a way to order transactions and not have lots of reordering, which is why Bitcoin has the proof of consensus to make it very costly to interfere with the order of transactions.

And the issue there comes down, though, to this sort of this fetish of avoiding trusted third parties, which by the way... Fetish or not, that's definitely the reason for it, yeah. Yeah. The issue there is like, it's twofold. One is, what is it we're so afraid that this third party is going to do? And the other is, aren't there better ways of eliminating the need to trust? Now, in terms of what is it we're afraid they're going to do,

like the only thing that Satoshi Nakamoto had brought up, if you go back to the introduction of his paper, like the only real world problem that there's even passing reference to is payment repudiation. You know, and it's like, well, that's not due to some technical deficiency of systems. Like credit cards don't have chargebacks because they haven't figured out the tech of how to avoid that. Like, no, they do it on purpose. It's part of the business model, since it's a credit-based system to try to preserve both the processors and some of the member banks from loss. It's just built into it.

That's how they designed it to work. But if you're trying to eliminate trust, and this is what we did with our sort of institutional arrangements, we wanted to come up with a, you know, a roles-based system where it makes it impossible for any single actor or even sometimes groups of several actors in collusion to subvert the integrity of the system, or if something were to occur, to profit from that. And so you systematically simply go about looking at, well, what are the various risks? what could go wrong? And of course, the most fundamental core is, you know,

how do you make sure that there's not an overissuance of the liabilities relative to the assets? Or how can you be sure that there's not an improper release of assets that would lead to the same sort of an effect? But then you work outward, you know, to look at all the other type of risks. Like, for instance, how do you prevent, you know, money from being, you know, coercibly sent to the wrong party? all these type of things. And you just, you build sort of business rules, institutional arrangements and internal controls

that systematically address these things. I guess the one response I'd have to that would be, you know, imagine Bitcoin was created by a single node, you know, a single corporate entity. And instead of having proof of work, they just ordered all the transactions on, according to like some sort of first seen rule. So everyone could know that there would be no. spending and, you know, a chomium you bank, I guess. You know, in that case, like the moment that, like, you know, probably the Silk Road happened, that company would have just been shut down.

So that would be, you know, my response is, well, if you want to enable, you know, free transactions, like truly free non-state transactions, then you have to make this, like, very, very considerable tradeoff in terms of decentralization and so on. Well, and on this question of centralized versus distributed, like the goal that I try to implement is something that is centrally distributed, highly distributed, but centrally administered. In other words, where you have some sort of a party that is responsible, you know, and that's especially desired when something goes wrong, and things always go wrong. You know, like, for instance, the issue that we briefly mentioned earlier,

if somebody loses access to their value, you know, like, for instance, you bobble your means of accessing your, you know, an address that you control, who do you turn to? Who's going to help you there? Or if there is some sort of criminal abuse, you know, who's responsible for dealing with it? And so forth. And so, yeah, so I see the central administration as being, you know, the person that is responsible for that, whether it's in interfacing with regulators or law enforcement or with customers. But on the other hand, the highly distributed thing, well, everybody makes highly distributed systems these days. Right. You know, like the idea that there's some sort of a single point of failure built into mission critical systems, like, that's what engineers are all about is identifying potential single points of failure and avoiding it. It's a red herring, you know, to try to, if anything, the sort of distribution, the distributed model of many of the blockchanges is sort of a throwback in terms of not being as effective in terms of distributed computing.

I mean, just basic architectures, you know, of how you make a high capacity, low latency type of a distributed system. Yeah, I don't think they, you know. you know, strictly speaking, optimized for latency. But yeah, you're absolutely right. But yeah, so I guess my question would be, you know, lots of the current crop of stable coins, including gold-backed stable coins, kind of cosmetically resemble what you built with e-gold. But I also gather that you don't really like the current instantiation of stable coins very much. No, even the term, to me, has certain connotations.

like anything that would be content to allow itself, you know, to be thought of as a stable coin is suspect. Now, let me start with sort of the origin of the term. I think stable coin as a term of art came into usage with Tether. Now Tethers model was to sort of be a way station in the casino. So that for instance, if something has- That's a good way to put it, yeah. Yeah, so they've, they feel like they've got a real,

paper capital gain, but they want to temporarily park it somewhere else. Like, ideally, they'd want to turn it into real dollars or something. But the problem with that, of course, is that if you have a capital gain, they might want to try to keep it unreported. So the thought was that, well, if you have something that's dollar-like, I can park it there for a while, and maybe I also don't have to report my capital gains. Well, that's a terrible model. Now, even then the the terminology, you know, like the idea of, I won't get into my problems with stable or my problems with coin, but I think those are both kind of ridiculous too. So many of the next generation are basically people that were trying to get some of that tether piece of action. Yeah. It's like, yeah,

that doesn't seem like a real worthy type of thing. They were making a ton of money on the net interest from a few billion in deposits. Yeah. So they set out to do something where it's not like a better mousetrap for payments and commerce, but rather it's to have something that's embraced by the various crypto exchanges. And then as you just made reference to, it becomes a question of business model where, you know, when you think of, you know, if you're putting together a monetary and payment system, there's essentially three ways that you can generate your revenue. You can do what I think of is the exchange thing where you're buying and selling your stuff and trying to essentially capture some sort of a spread in doing that. But I feel like that's a risky business

to be in. We had experience when we were performing exchange. And I think it's something where the monetary authority would do well to insulate themselves from those risks. But then as you're describing with tether, the other way to generate revenue would be from your, from your asset portfolio, from holding interest-bearing type of assets. Well, from my standpoint, if I'm trying to achieve something that offers perfect freedom from default risk, I can't have that. I'm going to have assets that offer that entail no financial risk, and that means I can't be holding bank deposits or securities and that sort of thing. So the only way that's really left to, you know, that I think is a safe and appropriate way for such a system to generate revenue

is through fees, transaction fees and so forth. But the other thing that so many of the stable coins do is that they're sort of piggybacked on top of one of the public blockchings. Like especially with the ERC 20 tokens and so forth that have proliferated. I think there may be there may be more than 100,000 different ones around at this point that circulate on top of the Ethereum blockchain, where you have a sort of a dependency on the viability of that underlying blockchain, that to me is a single point of failure that's really unattractive. Now, then when you have an entity, like, so there's, that's my problem with stable coins, so to speak in general. But then, like, the one that's really got everybody, like, countries and so forth

quaking in their boots, is the prospect of Libra, which people think of as sort of like the, you know, the mighty beast of stable coins. Libra, I think, has its own problems, where it has those same deficiencies that I, that I described with other stable coins mirrored with the fact of, like, you know, this is something that's more or less Facebook is behind it. Yeah, yeah, with the consortium just being kind of like cosmetic and like ultimately Facebook really has control over the parameters right now. Yeah. And, you know, this isn't the first time Facebook has set out to do something like this.

Several years ago, like they had done their first foray when there was a, there was a sort of period of enthusiasm for so-called virtual currency. And so they had come out with something called Facebook Cravehury. credits and it really bombed and it's gone down the memory hole. I don't, you know, when you see all this discussion of Libra, hardly anybody brings up, you know, how dumb or ill-conceived Facebook credits was and what a failure it was. But now, you know, we have them coming around a second time getting on sort of the blockchain or DLT bandwagon and you have to question like, well, why?

You know, like this isn't really their business. their business is in exploiting people's contact and personal identifying information, you know, so they can sell it to goodness knows who, whether it's advertisers or people that manipulate public opinion and so forth. Like if they're in the business of exploiting your personal information, does that have nothing to do with why they think they now want to have, you know, this sort of a currency? And I find it very hard to accept the idea that it's going to have genuine enforceable safeguards that prevent the exploitation of personal information. I think I could give you the, I'm not an apologist for Libra by any means.

I mean, I don't have a Facebook account and I don't like Facebook. But I think I could give you what they might say in response or at least the rationale for why they want to create Libra. which isn't necessarily so sinister. I mean, basically, I think they are in the business of just monopolizing your attention and keeping you within their silo, which if you look at their acquisitions, they bought Instagram and WhatsApp. So, you know, three of the or four most use apps might be owned by Facebook. So I think they have a strong incentive to try and keep users within that walled garden, you know,

and not just in terms of organizing people's lives, but also being their like central, you know, repository for commercial activity. So, you know, Instagram is actually pretty popular, like shopping and e-commerce platform. You could imagine how they might integrate Libre into that. And then, you know, now you're indexed at Facebook, not just for your, like, social activities,

but also for your job, like if you're a small-scale merchant. So I think it just goes, it's part of their trend of just trying to capture and monopolize your attention entirely. Well, and you may be correct. I mean, that's a well-considered view. I can't say that I think that's perfectly plausible. I hope that I get a chance to compete with them. Yeah, yeah, yeah, competition is good for sure.

So on the topic of e-gold, one thing I really liked when I was looking into it was the fact that you had these really granular disclosures and high-quality data about the nature of the e-gold economy, basically. And from what I recall, you actually had audited statements of how much gold you had in reserve as well, right? Yeah, so we had a terrible time trying to get and retain an auditor. I don't know why it was so hard. We'd approached all the big firms and it's hard to get an auditor. But the point of the transparency, yeah, we did the basic transparency, what we called examiner from the very beginning. I mean, as far back as 1996 within a week or so of launch, we had examiner.

And part of the idea of that was to make the system very easy to audit. Like the hope, especially as we got up to around 2000, was that we would have more financial institutions participating. And so, including some of the ones who might store gold at the same facilities that we did. So what we wanted to have was, like in the later versions of examiner, like by the turn of the century, you could drill down to the particular bar so that you would see the distinctive serial numbers, markings and so forth. Yeah, yeah, I found an archive screenshot of it with all the different good delivery bars iterated and laid out. And the idea of that, in addition to just general transparency, was that let's say that we had a bank that stores at the same facility,

we wanted to give them the right to go in on demand and have the repository tear down the stack and produce that bar. I mean, that is the most airtight kind of. a spot check to reinforce conventional audit that I think could be imaginable. So that was part of the logic. And then the other of like the detailed breakdown of usage was to partly to just, you know, give third party like it gave the ability of metrics from from third parties that could discover interesting things about the system. Yeah.

So I loved that actually. I wonder if you still have the data. So in fact, I started a blockchain analytics company called Coin Metrics, which had this exact same idea. Like there's interesting potentially economic data that we can extract from the ledger. If I think if I had been around in 1996, I might have tried to do the same thing for Egold. Just because I find it absolutely fascinating to have transparency in a monetary system, it kind of gives you the ability to evaluate its traits and its characteristics. just as an outsider. So I thought that was so cool that you had that way back in the day.

And there were some third parties that would like set up an algorithm to like do a capture of the data, you know, like every 10 minutes or every half hour so that they could do their own sort of analyses. These days, although the data still exists, it's not mounted on a database where I'd be able to access it. And when I need to see historic information, I just go to archive.org and pull up whatever snapshots they happen to have captured. Okay.

So there is still someone there. Yeah. Do you know off the top of your head what the peak kind of monetary base of Egold was and the kind of the peak one year turnover in terms of transactional usage was? Yes. As of 2006, we had just passed the official gold reserves passing, or backing. either the Canadian dollar or the Mexican peso. We've gotten up to 3.6 metric tons.

At that point, the turnover, like our velocity, year in and year out, tended to be in the mid-30s. You know, there's where the entire money supply would turn over more than 30 times per year. And around the time that Secret Service had impacted the system so badly, our annual turnover, that is like the volume, of transactions was 3 billion U.S. equivalent.

You know, what's interesting is I just ran those stats on the most popular stable coin systems in operation because you can just, you know, take the data off the ledger, and they all have a velocity in about the 30 to 50 range. So it's interesting that across decades, these systems sort of end up having similar characteristics. Although I think with, it's hard to compare apples to apples. just in the standpoint that so much of the usage now is simply for speculative trading of, you know, like trying to capture when these things go up and down. Yeah, that's fair.

Yeah. And the stable coins in practice are used for settling payments between exchanges for the most part. Yes. You have the honor of having created probably the first, like the first widely used, like internet currency, I think. You know, DigiCash didn't really have much usage. and you proceeded PayPal, right? That's correct.

Yeah. I mean, at the time we were coming up, like we started with less than a million in terms of capital, and most of that came out of my pocket. Concurrent with our first years, more than 300 million had gone into all sorts of payment schemes. You know, there was things like beans and flus. Pepper coin. eBay had its own thing called Billpoint. Citibank had something called C2.

I mean, there was a lot of these things, but by the fall of 2000, by around November, we were processing of greater volume of transactions every month than all of those others combined had done cumulatively. I mean, that was just crazy. There was one called Cybercash,

which had a thing, which I think they called Cybercoin, where many, many millions went into it And when it went when it was defunct, you know, they sort of joked that like the half dozen people who tried it really thought it was grand. So here's maybe a parting question. So knowing, you know, if in 1996 you had known that this would end in such difficult circumstances, you know, in 2008 or I guess it ended slowly between 2008 and 2013, would you do it again? Yeah, but I'd do it smarter. I mean, that's the problem with, you know, sort of counterfactual, you know, replaying history.

If only I knew then, what I know now. Yeah. Yeah, I'd have certainly done it, but I would have done it smarter. I would have, you know, conserved the good parts because it was a number of good parts, but I would have avoided, you know, the naive things that ended up, you know, leading the destruction of the system. And where can people follow you now? Where would you direct people to follow your work? I'm sort of in stealth mode at the moment. Like the new company that we're developing, again, like described, it sort of implements the lessons learned, but it also extends beyond just the

P-to-P sort of RTGS platform that we had before to have a much more sophisticated way of interacting with the banking system. And so for fear of divulging what amounts to secret sauce, we're just not maintaining a public presence. And it's also to facilitate discussions with central banks, with big banks, with regulatory authorities, where you're not going to have their confidence to be able to communicate in a frank way

if we're out there exposing discussions in public. Okay, well, so, you know, most people will direct listeners to maybe their Twitter profile, but I guess you don't have one. So we can read it at that. Yeah, I'm afraid I'm pretty stealthy. I mean, there's contact information on bettermoney.com that's still. That's how I found you. Oh, very good.

Well, Douglas, this has been an absolute pleasure. Thank you so much. I learned a ton, and I think this is going to be really useful, just historical resource. So thank you. And thank you, Nick. I really enjoyed it.