TFTC: A Bitcoin Podcast - Tales from the Crypt: Pierre Rochard Pt. III

Episode Date: November 2, 2017

Marty and Pierre round out their conversation by hitting on "where we are now", crypto hedge funds, and Bitcoin storage. Links discussed: Kyle Bass interview - http://adventuresinfinance.realvision… Cold storage guide - https://github.com/rustyrussell/bitco…

so let's bring it back here let's bring a full circle how do we articulate this to our listeners where are we right now how have your thoughts changed initially from when you first got into bitcoin to where we are now and how do you see them evolving going forward uh so the pathetic part is that my thoughts have not changed all that much uh despite getting older by the way folks i got a kid on the way now like oh congratulations that's awesome man yeah that's awesome yeah a boy and boy i found out recently um so yeah i'm getting older my thoughts are not changing um they're gonna change quickly from when i assume uh so uh but um where we are today

we're at the end of the beginning we're at the end of the beginning uh the the the very i mean the beginning of the beginning was like you know until satoshi left the middle of the beginning was i think until the what what i'll loosely call the macro hedge fund guys got interested I think that the turning point was when Kyle Bass came out and said he changed his mind. Folks- On Real Vision, if you haven't watched that interview with, who was that, Grant Williams? Yeah. You got to look it up.

It's a great one. Yeah. Go out- He goes deep into China on that too, which is very interesting as well. Fantastic podcast. We'll put it in the show notes. Yeah. And so, why is that important, you might ask?

Well, it's important because of what I'm talking about, as Bitcoin is an asset class, Bitcoin as a vehicle for speculative attacks on fiat currencies, and when the macro hedge fund guys ... So, Kyle Bass was negative on Bitcoin, as negative as Jamie Dimon is on it today. You know what's interesting, though? He was negative for all these dumb reasons. He didn't look into it as far as ... He only looked at it at face value. Yeah.

And so, it's very hard to change your opinion on an entire asset class or an asset that's as weird and as out there as Bitcoin. So, when someone does change their opinion, to me, that is a page turning. And I think that the page we turn to is a new chapter, which is the serious, what we'll call institutional money coming into Bitcoin. I think we exhausted the retail investors in the last bubble to $1,200, and that's why we had such a long period. Yeah, it was probably like an 18-month bear market. Yeah, and now we've got the folks who have multi-hundred million dollar, multi-billion dollar portfolios who are looking to put a single-digit percentage allocation into cryptos. And frankly, that is what drives the price from, you know, the bottom was $270,000, I think. And then we kind of like drifted up to $800,000, and then $1,600,000, and then $2,000, and then $3,000, and then $4,000.

It all started around this time last year, I think. I think we made the jump from like $500,000 towards $700,000 from October to November. And then around Christmas, between Christmas and New Year's, it hit $1,000 and it came back down. And then we're here now. I can't believe we're at $6,000. If you're sending Bitcoin these days, how weird is it for you? It's so weird. I got paid for that ad today, $45 worth of Bitcoin back when I was-

A little fraction of a Bitcoin. Exactly. It was like .007 Bitcoin. I was like, shit. When I was buying 45, doing auto buys of 50 back in the day, I was getting almost a quarter of a Bitcoin. It's infuriating how few Bitcoins you get. Exactly. Your dollar does not go as far as it used to.

It really doesn't. But yeah, so to me, that's the institutional phase where we have the price going up in leaps and bounds due to big fiat whales coming in. And, yeah, I think that's where we're at. I think it's going to continue. We'll continue to have momentum. We'll have a bear market. We'll have multiple more bear markets. But I think that now we're kind of in the phase of, you know, at some point Jamie Dimon comes out and says, look, Bitcoin's better than the U.S. dollar. And that's when we know that we've turned to the next page and we're in hyper-Bitcoinization. And that's, I will, I don't know if we'll ever see that day.

But if we do, I will. Well, he might not say it. He might not say it explicitly. He might not say it to us. He might say it to somebody in private. He'll say it to somebody in private. And I'm sure Janet Yellen at some point, you know, we'll be having like an old fashioned with her at some bar here in New York City.

And we'll reminisce on how late she is to the party, but how we're glad to have her anyway. I feel like she would like the Caroline bar on the Upper East Side. yeah we'll bring it there and it's a very nice bar very classy bar we could crush a couple Manhattan's there Janet let me know

let us know let us know it's on us it is on us they don't take dollars this is this is 30 years in the future

and hopefully they've got some life extension technology as well and you're here with us but oh that turned dark that turned dark I'm sorry

that's okay that's okay but uh, we're talking about hyper-bitcoinization, what I want to talk about institutionally. So we're, yes, we're about to turn the page. So we've got infrastructure getting built so these retail, or these wholesale investors can come in. Here's what I think is like the biggest piece of infrastructure that's getting, that just got put into place.

Ledger X? Ledger X. Futures markets. But they only have one day options right now, right? So, they've got put-and-call options, and they've got a day-ahead swap. Day-ahead swap, that's what I was talking about. Day-ahead swap. Now, you say, oh, they've only got a day-ahead swap. To me, that's actually the best possible swap you could get, because you're doing the runaround

around the regulatory system, which is that- Means you want it. In all practical intents and purposes, this day ahead swap, it's a derivative, it's awfully close to a spot market. It's a day away from a spot market. And really, when you think about sending cash to an exchange and then withdrawing the Bitcoins, that's going to take you like four days. Easily. Yeah, it can take you a week.

And if you don't send cash to your account first, and you just do it directly from your bank account, it takes at least a week. Yeah. At least on Coinbase. So, day ahead swap in my mind. I know that, let's be clear, it is a derivative. I don't want to get LedgerX in trouble here.

It's a derivative. It's regulated by the CFTC. It has a tremendous effect on the spot market. And it opens up the door to new institutional players. And it creates a level of the fact that LedgerX is a CFTC-blessed entity that is ... And frankly, when you look at the different regulators, the SEC, pretty hit or miss. It's a body record. SEC's shit.

Thank you. They're shit. They literally ... Look. They're very selective of what they enforce, and they don't go after what they should. Freaks. The SEC did not protect you from Enron. No.

Okay. They're not going to protect you from the next one. The CFTC, from what I've seen, is a quality regulator. The CFTC regulating LedgerX, I think, instills a tremendous amount of confidence in institutions, whether it's hedge funds or private equity or whoever has capital out there that is looking to juice their returns with a little crypto, get a day ahead swap on LedgerX, you get your Bitcoins the next day, and it is, I think, going to crack open ... I was saying we're at the beginning of this next chapter. To me, LedgerX, Kyle Bass coming around, it's huge.

And these investors are chomping at the bit. They're just waiting for these products that allow them to do this legally. They've been hyped up. They've been hyped up, and I think they have more than the fear of missing out. They got more than FOMO because they have been missing out, and they know they've been missing out,

and they just want to get in, and they don't really care what price they get in at. And I'm curious to see the slippage that happens when they do come in. Oh, yeah. How big is that going to be? The massive amount of money that's coming in. Some people are saying there's half a trillion dollars

waiting to come in. That would be five bucks. Well, okay, that gives us instant hyper-Bitcoinization. But if we have a fraction of that, we're talking about huge price moves. Yeah, and then let's get into it. Do you think these crypto hedge funds are a good idea? Why would you want a hedge fund to take custody of your Bitcoin on behalf of you and pay $3.30? They're charging $3.30.

$3.30, wow. Not $2.20, they're charging $3.30, your management fees. Folks, an expensive hedge fund is $2.20. 3 and 30. I've talked to some people starting crypto hedge funds, and their management fees are going to be 3 and 30. That's egregious. Some of the less egregious ones are doing 2 and 30, but the performance fee is 30% across the board from what I've heard. There's different considerations there.

I think that what I would call the normie case for these hedge funds is that, hey, they're going to go out and they're going to research all the altcoins for you so you don't have to do it. Those hedge funds are going to have the same experience as most altcoin investors. They're going to get burnt. Sorry for your loss. and the amount of crypto hedge funds that are being started, like the amount of conversations I've had around it.

And the best part about it, I mean, it's a little schadenfreude. What is it? Schadenfreude, yeah. A little schadenfreude. It's a good German word. But it's people that found Bitcoin earlier this year, right? When above 1,000, they're usually rich, well off, went to prep school, went to a good college, went to a Harvard and Ivy League,

and they're like, ah, they figured out this market in seven months and they're going to start a hedge fund and start. They're going to get humbled. And that's, yeah, and I'm interested to see how that plays out. Yeah, I mean, the best case scenario is that they match Bitcoin's performance, right? That's kind of the... But do you think the ecosystem could survive? Because I have a feeling Bitcoin itself will get blamed for...

Or, the failure of these funds? I think that there's been enough failure around Bitcoin and crypto that that won't be an issue. There is a case that these hedge funds are just going to be investing in altcoins and trying to make ... They're going to be prop trading. Other hedge funds are, I'd say, slightly more sophisticated in that they're saying that they're going to do arbitrage between exchanges. The problem ... I've researched this issue, too. It's like, obviously, I want to make money, so it's like, oh, well, what if I arbitrage between exchanges? The risk there is that your capital is tied up in doing this arbitrage while the price is going up,

and you're missing out on massive gains because you're trying to pick up nickels between exchanges. What do we have, a $1,000 candle the other day? Yeah. And you can get caught up in that bullshit. That's why, again, I think it was 2015, midway through, I was like, all right, I'm fucking done trading. I'm putting this stuff in a treasurer. I'm just going to keep adding to it.

I'm not going to sell any of it. I'm just going to keep adding. There's a reason there's spreads between the exchanges. It's because it's not entirely rational to be trying to capture those spreads. Markets, generally speaking, are a little efficient. So, and then I think the third kind of hedge fund is essentially a vehicle for hodling while, you know, Could you imagine paying a 30% fee for hodling, though? Well, okay, so the 30% is when you exit, right?

Yeah. When those gains are realized. That's true, that's 3%. You're paying 3% a year to hodl. So, let's call it a 3% fee to hodl. I could see that if I'm not tech savvy and this is a small, tiny percentage of my portfolio that I outsource it and I pay a 3% fee. Reasonable. Reasonable. I don't know which hedge funds are that, which hedge funds ... And then you get into the fact that they're

honeypots now they're huge honeypots for hackers and there's not just external hackers there's internal hackers and there's people who will just walk away with your money they might have been registered with the sec they might have appeared as a completely legitimate thing you might have known them you get a disgruntled you get a disgruntled system admin he's walking away with your wild dot that file look if it was easy for madoff to do it's even easier in crypto to do walk away with cash. You could buy a new identity, move to

the Bahamas, and nobody will ever see you again. I went on vacation to Bermuda. Actually, I would go to Bermuda before Bahamas. Look, if I was advising a high net worth individual on how to get involved in this space, I would actually

go cypherpunk on their ass. I would tell them, hey, look, let's set up a server in your basement. Let's put a full note up. Let's talk about server security. Let's talk about firewalls. If you want to get into the biggest wealth creation of the history of humanity, sorry, but you're going to need to bone up on the technicals a little bit, and especially if you're putting in a million dollars, because that million dollars might not mean a lot to you, it's going to be $100 million in 10 years. It's going to be a billion

dollars in 10 years. You don't even know how much wealth you're putting on that server. Do you really want it to disappear overnight? It doesn't mean a lot to you, but it might mean a lot to your descendants at some point. In that same vein, that is one of my favorite things about Bitcoin as well. One of my favorite tweets i've been sharing for like yeah the past four months this dude neil wood fine do you know neil uh i i know of him i follow him on twitter i'm an admirer of him i'm an admirer of yours as well neil but he has this tweet that i've been sharing with a bunch of people um bitcoin if it's successful will usher in the next enlightenment because it forces people

to learn things and think in a way that they've never thought before it's true and i can say this is a fact just from learning about cryptography learning about cold storage and doing cold storage myself like if this works if this experiment works our civilization is going to be better off because of it so uh i i majored in accounting and the reason i got into software development is because of bitcoin uh and so i think that that that gives us a glimpse into what Bitcoin is going to do to our society, which is that it makes it so that knowing about computers, being tech savvy, is not just going to be a competitive advantage, it's going to be a prerequisite for your ability to function in this society where cash is

stored on digital devices. And there's only so much that can be done to secure those devices, because at the end of the day, you're going to be outsourcing that work to other people if you're not doing it yourself. And I think that it's incumbent upon any of our listeners today to start thinking seriously about the fact that now is the time that you need to learn more about computers. This is 100% true. If Marty's going to give you any advice, it's start learning about computer science

and how this stuff operates. It's I, myself, I didn't start learning. I didn't learn HTML and CSS until I was 22 years old. Yeah. But if you're looking at where the world is and where it's going, it should be 100% obvious to you that you're going to need to learn. Kids are going to stop learning Spanish and French in grade school, and they're going to start learning JavaScript and Java and C++.

This is what needs to happen going forward. We live in the information age now, and this is the natural progression of where things are going. Yeah. Mark Andreessen said software is eating the world. And I think that Bitcoin is just another example of that. But to me, it's kind of the penultimate example. It's just the end all be all in software eating the world. Yeah. Because of just how huge money is in its role in our society. And I got a couple of reader emails here right in line with this topic. One topic, cold storage. So one topic I'd love to see covered on Tales from the Crypt is securely storing Bitcoin and other altcoins.

I've read 20 plus articles on the subject, and I still don't really understand what a wallet is and what I need to do and how to do it. Just thoughts. Thanks. So we're going to go into cold storage. I guess we got to start with what is a wallet, which is a very interesting question because that is basically it's just a GUI interface. that interacts with the protocol, correct? Well, I mean, we can get even more basic than that. A wallet is a set of private keys.

So a set of private keys is just several private keys. And a private key is a series of numbers and letters, capitalized and uncapitalized. And so, that is the bare bones of a wallet, is your private keys. So, the reason that securing a wallet is important is because the wallet contains private keys. And so, the private keys are what allow you to spend Bitcoins. Bitcoins. They unlock Bitcoins from a certain output on the blockchain as an input into a new transaction. I can't stress enough how important it is that these private keys, as

their name implies, remain private, and you are the only person who can access them. When we think about, a wallet is a set of private keys, and there's a variety of ways of storing numbers and letters. At one extreme, I'm not necessarily advising people to do this, but consider the possibility that it might be the right solution for you. You take a brick of metal and you stamp numbers and letters into it. You stamp your private key onto this brick of metal. The reason you do that is so that if your house burns down, that brick of metal is the last item remaining. You go into the charred remains of your house and you pick up that brick of metal

and it has a dog tag on a man shot on Iwo Jima. It has his name on it. It's akin to this. Yes. That is your Bitcoin private key, the dog tag. Would a fireproof safe suffice? Okay, so let's go to the next notch in this continuum. So you print out a paper wallet.

So basically you print out these numbers and letters on a piece of paper, or if you're paranoid about printers, you write it out. Yes, it's true. Especially printers hooked up to Wi-Fi. Printers hooked up to Wi-Fi, to Ethernet, to USB, because printers actually have memory built into it. So this really gets into how paranoid are you? How much money are you talking about? And I think as I go through this continuum, it's very important to keep in mind that these decisions depend a lot on what threats do you think there are out there for your money, and how much cost do you think that those threats are going to incur to get ahold of

your money? Alright, so you write out your private key onto this piece of paper. Piece piece of advice, laminate it. Laminate it because paper will wear and tear over time. And then you put it in a fireproof safe. There's a number of options for fireproof safes. Take a look at the rating. Maybe 30 minutes is enough for you. Maybe an hour is better. Do your research. Do your research. Depends on how flammable your house is. And also, when you're doing your research, look at putting a fireproof, they've got these briefcases, a fireproof briefcase. I call it a briefcase, but these things are like 50 pounds. And then you put it inside your fireproof gun safe.

Whoa. See, now we're getting ultra-cypherpunk here. Yeah, so, like, there's, and then, you know, you bolt down your gun safe to your basement, and, like, you can take this to the nth degree, and then, you know, how safe is your gun safe? Is it resisting someone, you know, hitting it with a hammer for an hour, or is it resisting a highly trained safe cracker for three hours? And then you really get into, like, bank security, right, like vaults, and I'm sure everyone here has seen like Ocean's Eleven and that's kind of what we're talking about.

Remember, I'm the Brad Pitt. I'm not Matt Damon from Ocean's Eleven. We talked about this in the first episode. You got a Brad Pitt look to you. I can eat and talk pretty well as well. Fantastic. There was actually a homeless guy on the Upper East Side that thought I looked like Brad Pitt,

so that's what the story's referencing. There you go. So if we want to go to an Ocean's Eleven level. Yes, you can go to an Ocean's Eleven level. Really, it's about what is the value of the bitcoins stored on those private keys. Let's dial it down a little bit. That's a little hardcore. We're talking about really cold storage here, folks. If we dial it down a little bit, we get into hardware wallets. I personally have never used a hardware wallet. Really?

I was initially very skeptical of hardware wallets because it seems like they have a target on their back. They're advertising themselves as something that you store money on. It's true. It seems like that would get intercepted in the shipment or even the creator of the hardware wallet. But I've heard so many people speak glowingly of it that I won't trash it on today's show. I'll say I own a Trezor. Yeah. I own a Trezor.

I've used Trezor. And for me, you would know better than I because you can read code and you can actually audit the code. But for me, Trezor is run by Slush, who, for those of you who don't know, he created the first Bitcoin mining pool. He's a very good dude, in my opinion, from what I can tell. And Trezor is completely open source. So, in my opinion, as a Trezor holder, that's something that can be constantly attacked and there's eyes on it at all times. since it's open source, and if there were to be a flaw, which has happened, it would be discovered

and found pretty quickly. And with the hardware, while it's, in my opinion, you're most at risk to somebody stealing it physically. So as long as you're being protected from being physically stolen, you're good. Yeah, that's a good point, because think about your home security. And frankly, this isn't just about Bitcoins.

This is about, whether it's Jameson getting swatted or you getting burglarized, have a security system, have cameras, and make sure that not only are your Bitcoin assets secured, but your family and your belongings too. Okay, so let's go to the next step, which is having ... So you've got the hardware wallet, But you could also, you essentially can have a hardware wallet if you have a laptop that is just dedicated to holding Bitcoins on it. And basically, you don't connect it to the internet. You use it as a standalone Bitcoin storage mechanism. And would you download a wallet onto a USB and upload it onto that laptop without connecting to the internet?

Or would you connect to the internet at once, download Electrum? This gets back into your paranoia, right, because at that point, if you created the wallet on your internet-connected device, arguably, might be compromised already. So you've got to think about, there are mechanisms for, essentially, you create the wallet on the laptop without it ever being connected to the internet. Just via the terminal. Yeah. You download the software. Again, lots of risks. It goes back to the conversation about understanding computers, because it's very hard to assess the relative risk of different wallet setups if you don't have a feel for what are the risks in computer information security. so yeah and it there's there's so many different complications to it what operating system are you running are you you know even like what what was a manufacturer of the laptop yeah you don't you can go down to the chip

manufacturing the chips yes that's the big thing we had with bit main earlier this year with an fleet and stuff like that yeah so our back door on the chip is there something else going on so yeah so there's the dedicated laptop And then there's just, okay, just download Bitcoin Core, put it on your desktop, and send Bitcoins to it, and whatever. So that's kind of the next step. And then you've got mobile wallets. I use Green Address. Green Address seems reasonably secure.

Okay, here's one thing. You're using these less secure wallets, whether it's on your desktop or on your mobile. people, make sure you back it up. Plenty of people have lost Bitcoins from erasing their phone or getting their phone stolen or accidentally erasing their hard drive or throwing their hard drive out that had Bitcoins on it. Back up your wallet. You're just as at much risk of losing your Bitcoins accidentally than getting hacked. Yes, that is a very good point to make. Don't only back up your wallet, back up, If you're using 2FA, back up your 2FA key as well.

That happened to me once. I got screwed. It's a lesson you only have to learn once. Yeah. Write down, like, so if you use Google Authenticator, you can physically write down recovery keys so you can get access to your codes to give you your 2FA authorization.

I just want to finish with do all of the above. Diversify, in a sense. So, yeah. Let's break it down for these freaks. What would you recommend to the average non-technical, tech illiterate, Joe Schmo, who's buying Bitcoin on Coinbase most likely, but doesn't want exchange risk? Okay. So, my first instinct is, if you've got an iPhone, you guys, of course you guys have heard about the fapning. Okay.

I know you freaks have jerked off to these celebrity pictures, and they got hacked, and they were using iPhones, and their iCloud accounts got hacked. It was a fun week. Yeah. Exhausting week. The fallout from that was that Apple dramatically dialed up the security on the iPhone. Really? And that's why there was a controversy about whether the FBI should be able to access an iPhone if the person's not putting in their PIN.

And so, like, if the FBI can't get into your iPhone, guess what? Hackers can't either. Let's not give Apple a free pass here. The last iOS update. Yeah? That password. Did you see that? Oh, that was a bug.

The password. Yeah, that's a bad bug. That's a bad bug. That's a bad bug, if you're going to have a bug. Was that iOS? That was iOS, giving away people's Apple ID passwords as their hint. Okay. But, they fixed it.

Having said that, for your average Joe out there, I think that a mobile wallet is a reasonable place, assuming you're backing up the keys, is a reasonable place to store your Bitcoins. just because Apple has put so much effort into making it secure so that you freaks are not jerking off to celebrities. And so somebody's not jerking off to your pictures at some point in the future. Yes. And so that someone is not hiring a hooker with the Bitcoins that they got off of your phone.

All right. So we're on mobile wallets. What mobile wallets do you recommend? Would you recommend blockchain.info? I've never used them. and I'm not a huge fan of them as a company. So I would advise against that. Having said that, again,

I would rather have you install three different mobile wallets that are reputable and blockchain.info, people are going to scream at me for this, but arguably reputable, right? They're VC backed, et cetera. So yeah, keep some Bitcoins there. There's Green Address,

which I think is more reputable than blockchain.info and that's the app i use personally uh and then there's bread wallet which i've used in the past before i started using green address uh and so yeah my advice is to um if and i'm assuming you're not putting more than like i don't want to sound like an asshole but more than like two grand yeah no definitely not don't put not more than two grand on your mobile wallet, that's probably not a good idea. Frankly, as good as the security is, let's play it safe here, folks. Let's say you're doing really well for yourself, you're putting away more than two grand, so you need to jump up from the mobile wallet.

And next, personally, I kind of see it as a dichotomy. It's that you're either on mobile wallet or you're on paper wallet. Really? Yeah. This is blowing my mind because I'm a hardware wallet type of guy. I know, but my view is that if I ... Okay, so here's my approach to this. And I'm giving away security secrets, so hopefully this doesn't lead me to getting hacked. but anyway

don't say it don't say it you know like download like a mainstream Linux distribution and this is like probably

too much yeah so it's too much our listeners these freaks are not gonna be able to download a Linux distribution

and do this so here's why I'll give I'll give a case for a hardware wallet yes that's fair I don't care

if I lose my treasure yeah like I don't give a fuck nobody's ever gonna figure out my pin as long as I have my private keys written down

like I can i can spin up an electrum wallet and and recover my trezor right the bitcoin and again it comes back to the physical like these hardware wallets need to be physically attacked they need to be in the physical possession of the attacker that then needs to hook it into their own computer and um yeah okay so yeah that's fair uh get yourself a trezor um and i i think that and then so okay Let's say you put up to $50,000 on there. Above $50,000, sorry buddy, you got to start learning about computers. That's just the way it is. It's 2017, Bitcoin's taking over the world, and since you're buying Bitcoins and you have this amount of money, you're

inherently intelligent enough to understand how computers work. This is true. This is true. But it's just undeniable. So once you, you know, okay, so go on Coursera. There's so many online resources now. I'm telling you, Rusty Russell, like his idiot's guide. Let's add that to the show notes. We got a link to that.

Yes, I'm going to put this in the show notes. He goes to the Unreliable Guide to Bitcoin Cold Storage. It's a funny title, but he goes in-depth. Like if you want to go like super schizo paranoia and create your private keys with a roll of a dice and create your passwords. That actually, in terms of, okay, so, hey, you freaks probably don't know this. Computers have a very hard time generating random numbers

because, as I was saying earlier, they are extremely logical systems. And in an extremely logical system, it's very hard to get random numbers. So, you get your Las Vegas casino dice that, by law, must be purely random, right? Yeah. Even though, I know you guys have had bad experiences at casinos, and you've lost money at the craps table, but those dice are honest, I'm telling you. It's one vice I'm happy I never had with a gambling habit. And so, yeah, you create your private keys using dice. um but what i what i was going to say oh i lost track oh this whole discussion is moot

because most of you are going to lose your bitcoins by sending it to a scammer okay you are going to get manipulated you are going to get socially engineered into sending your Bitcoins to a scammer. And that's how you're going to lose your Bitcoins. Not by someone tapping into your internet connection and sending you some fake data, et cetera. It's not going to be a sophisticated hack. And I saw this when I was working at BitPay.

BitPay got hacked for millions of dollars with the Bitcoins. Today, it's tens of millions of dollars worth of Bitcoins. Here's how they did it. The reason I can talk about this, and that it's not under an NDA, is that BitPay sued the insurance company that was providing cyber security insurance because the insurance company refused to cover right and this goes back to my point like uh this is you're not going to get hacked by a cyber attack you're going to get hacked by social engineering what was the social engineering attack here was the social engineering attack a bitcoin reporter won't mention his name protect the innocent here huh i don't know how innocent he was uh sent an email to the cfo of bitpay

that email said hey can you please comment on this news story and it had a link to a google doc that link to a google doc was not a link to a google doc it was a link to a phishing website that looked like a google doc and thus the cfo entered his password and his two-factor google pass his google password and his two-factor authentication and then just saw an error message and thought nothing of it so did this hacker have to use that to fa like within 20 seconds like yeah that's how it works yeah i mean he probably wrote a script that did it instantly okay you know like if he just got it like he'll have a script that will just do it okay he doesn't need to be awake and we're yeah yeah so this is this is a classic fishing and then he was in and

And so, once he was in, he just held back and watched what was going on. He logged into the Slack, into the CFO's Slack account. And he sat back and watched how money gets moved around. You know, what is the protocol? And he realized, hey, look, the protocol is really loose. All I got to do is talk to the CEO, chat the CEO, you know, Stephen Peer, and be like, hey, second market is buying Bitcoins. They need 1,000 Bitcoins.

Can you send it to this address? CEO's like, oh, okay. Sends the Bitcoin to that address. Holy shit. Wow. Happens repeatedly. They should have been focused more on security and less on Super Bowl parties.

No comment. I won't make you make one. and on that note we've been here for three and a half hours it's been a good conversation I think we're going to have to chop this up into three thank you for bearing with me as I get more comfortable with this podcasting game

thanks for bearing with me as I get deeper into this wine bottle it's gone you can't get much deeper it is gone if we did we'd break some glass here on the barstool but yeah so I think I'm probably going to have to break this up into a few episodes which I'm very happy

about um you freaks out there i want to thank you for listening i know this was a dense conversation we covered a lot uh i i tried to keep it light but i i know that i i get on to rants and this is again this is a topic that people get passionate about and you're not sitting you're not with the studio i mean but if you see pierre's passion the way he's going through these arguments and explaining this like it is visible and it's palpable it is you can feel the energy in the room and this is something again that that keeps bringing me back to bitcoin is the energy around it i don't there's some aurora around it there's definitely something happening here and like you

said you argue that it's one of the biggest things in human history yeah um i've been arguing one of the biggest things in the last 500 years but i might extend my timeline a few thousand to ten thousand years to to to accommodate that because there is a good argument to be made we're dealing with some weird stuff like i said in the last episode and the first two parts nobody's an expert on this no we're still figuring figuring out what we have in our hands folks i'm talking out of my ass all right talking out of my ass i'm making shit up as i go you're not talking out of your ass and you're not making shit up you're making very informed decisions but the sort of universe of variables that informs those decisions.

There's a lot that I don't know that I don't know. That's true. But with that being said, I want to thank you guys for joining us. Pierre Rochard, co-founder of the Nakamoto Institute, very good software engineer. Find him on Twitter, at Pierre underscore Rochard. That's P-I-E-R-R-E underscore Rochard, R-O-C-H-A-R-D. If you haven't already, get on the Nakamoto Institute, check out everything on that website, read that website from page to back, and keep learning. I mean, that's all I can ask of you freaks out there is keep trying to learn.

I assume you listening to this podcast is an extension of that, and I thank you for spending some time with us. Marty, thanks for having me on. Audience, thanks for bearing with me. Hope to be back on. Hopefully we'll get more into pegging the next time you're on. Oh, boy. I'm kidding. All right.

That's all we have for this week. Peace and love. Awesome, man. That was a while.