What to know about blockchain, exchanges, and the companies reinventing money.

Insights: Cryptocurrency

 [MUSIC PLAYING] ROBERT HACKETT: Cryptocurrencies are a kind of virtual money. It operates a lot like cash and you can use it online anywhere in the world. A lot of people are familiar with Bitcoin, but there are actually a lot of other different kinds of cryptocurrencies out there. There's a Ripple, there's Ether, Litecoin, Z-Cash, Monero, and I could go on. There are lots and lots of these. Most of the cryptocurrencies are scams. People will create a rip off of Bitcoin and then they'll get people excited about it. Say hey, everybody should invest in this thing, it's going to go up in value over time. And then they just try to get rich quick. But some of them actually have some really interesting qualities and features that separate them from Bitcoin. A lot of people also think that Bitcoin let's you remain anonymous. That's not exactly true. It actually gives you a pseudonym, an alias to operate under, and some other cryptocurrencies are taking this and trying to solve that problem by making it truly private and truly anonymous. Monero mixes a bunch of transactions together so that you can't see who is getting paid what. And then there's also Z-Cash, which uses some cutting edge cryptography to encrypt the data so that people can't see what you're doing, who you are, how much you're paying, where the money is going, things like that. Another cryptocurrency that's been getting a lot of popularity lately is called Ether. This is a much more flexible kind of system. It allows people to write apps on top of it. Imagine being an investor and you want to put your money into some sort of investment vehicle and what Ethereum allows you to do is, instead of having banks and lawyers figure out all the contracts and all of the money arrangements in between the parties, Ethereum lets you code that actually into a computer program so that when some milestone is hit, you get automatically paid out. It's written in the math. Cryptocurrencies allow you to cut out the middleman so say, I'm here in New York and I want to send some money to somebody over in Africa. If I do that, I won't have to pay a third-party, a middleman like Western Union or something, to facilitate that payment. So it's much cheaper that way. Some people who believe in Bitcoin and other cryptocurrencies, they invest in it sort of as a hedge against the global economy. We saw what happened back in 2008-2009 when the financial system collapsed and all of these banks went under and they had to get bailed out by governments. So instead, they back digital currency that way in case something like that happens again, you know, maybe that'll shoot up in value. When it comes down to it. These digital currencies are bets. You're gambling with your money. You know, the value might go up over time, you might make money on it. Or it could crash and burn and you could lose everything. So make sure you only spend what you're willing to lose. 

Insights: Cryptocurrencies 101

Uncategorized

Cryptocurrencies 101

While Bitcoin is the most known cryptocurrency, there are many others. (March 2017)

currencies are a kind of virtual money. It operates a lot like cash, and you can use it online anywhere in the world. A lot of people are familiar with Bitcoin, but there are actually a lot of other different kinds of cryptocurrencies out there. There's a ripple there ether, light coin, cash Manero and I could go on. There are lots and lots of these. Most of the crypto currencies are scams. People will create a rip off Bitcoin and then they'll get people excited about it. Say, Hey, everybody should invest in this thing is gonna go up in value over time and then they just try to get rich quick. But some of them actually have really interesting qualities and features that separate them from Bitcoins. A lot of people also think that Bitcoin let's remain anonymous. That's not exactly true. It actually gives you a pseudonym and alias Operate Under and some other cryptocurrencies are taking this and trying to solve that problem by making it truly private and truly anonymous. Manero mixes a bunch of transactions together so that you can't see who getting paid what and then there's also the cash, which uses cutting edge cryptography to encrypt data so that people can't see what you're doing, who you are, how much you're paying, where the money's going, things like that. Another Cryptocurrency that's been getting a lot of popularity lately is called either. This is a much more flexible kind of system. It allows people to write app on top of it. Imagine being an investor and you want to put your money into some sort of investment vehicle, and what the Syrian allows you to do is in. Instead of having banks, lawyers figure out all the contracts and all of the money arrangement between the parties, the Syrian let's code that actually into computer program so that when some milestone is hit, you get automatically paid out. It's written in the math cryptocurrencies allow you to cut out the middleman. So say I'm here in New York and I want to send some money to somebody over in Africa. If I do that, I won't have to pay 1/3 party, a middleman like Western Union or something, too. Facilitate that payment so it's much cheaper that way. Some people who believe in Bitcoin and other cryptocurrencies they invest in it sort of as a hedge against the global economy. We saw what happened back in 8 4009 when the financial system collapses and all these banks went under and they had to get bailed out by governments. So instead they back digital currency. That way, in case something like that happens again, you know, maybe that'll shoot up in value when it comes down to it. These digital currencies are bet you're gambling with your money. You know the value might go up over time. You might make money on it, or it could crash and burn, and you could lose everything, so make sure you only spend what you're willing to lose.

 JEN WIECZNER: Cryptocurrency has become a major topic for investors in the last few months. We're talking about things like Bitcoin, Ethereum, Litecoin, and a whole bunch of other new digital currencies. The price of Bitcoin for 1 has risen more than 300% over the last year. It's doubled in 2017 alone. Ethereum, on the other hand, is up 2000%. Needless to say, investors are pretty excited about investing in cryptocurrency. But they need to be wary. Here are three things to know about investing in cryptocurrency. Cryptocurrencies are much more volatile than stocks, or bonds, or any of the assets investors are typically used to investing in. They need to be aware that they can go up 25% in a matter of minutes or hours. Or they can crash, which is extremely common. Beware of scammers, especially now that Bitcoin and Ethereum had become so much more valuable. Hackers are going in attacking investors, getting into their accounts, even a few exchanges have been hacked. Even though cryptocurrencies are much different than the typical assets investors are used to investing in stocks, you still need to pay your taxes on them. The IRS is now going after some investors who have made big profits in these cryptocurrencies like Bitcoin and Ethereum but who haven't paid their taxes. In fact, only 800 people reported their gains in Bitcoin last year to the IRS. Some billionaire investors have put as much as 5% or 10% of their own net worth into cryptocurrency because they say it could be the next big thing, potentially even bigger than the internet boom. And we're not talking just the dot-com boom and bust but everything that came after which has made investors very, very rich. Of course, some investors think that there could be a bubble in the meantime. And it could be even bigger than the dot-com bubble. 

Insights: The Risks of Investing in Cryptocurrency

You could be taking risks with your money. 

The Risks of Investing in Cryptocurrency

If you’re planning on investing in cryptocurrency, check out these 3 risks you could be taking with your money. (July 2017)

currency has become a major topic for investors in the last few months. We're talking about things like Bitcoin, ethereum, light coin and a whole bunch of others. New digital currencies. The price of Bitcoin, for one has risen more than 300% over the last year, doubled in 2017 alone. A serial, on the other hand, is up 2000%. Needless to say, investors are pretty excited about investing in crypto currently, but they need to be wary here. Three things to know about investing in crypto currency. Crystal currencies are much more volatile than stocks or bonds or any of the assets investors are typically used to investing in. They need to be aware that they can go up 25% in a matter of minutes for our or they can crash, which is extremely common. Beware of scammers, especially now that Bitcoin and a Serie uM have become so much more valuable, the Packers are going in attacking investors getting into their accounts. Even a few exchanges have been hacked. Even though crypto currencies are much different than the typical assets investors are used to investing in like stocks, you still need to pay your taxes on them. The IRS is now going after some investors who have made a big profit in the crystal currencies like Bitcoin and cirie, um, but who haven't paid their taxes. In fact, only 800 people reported their gains in Bitcoin last year to the IRS. Some billionaire investors have put as much as five or 10% of their own network into crypto currency because they say, it could be the next big thing, potentially even bigger, then the Internet boom. And we're not talking just the dot com boom and bust, but everything that came after, which has made investors very, very rich of pour. Some investors think that there could be a bubble in the meantime, and it could be even bigger than the dot com bubble.

[MUSIC PLAYING] HESTER PIERCE: My desire is to see capital flow to the places where it can be put to its best and highest use, and that requires investors get information that they need to make the decisions about what they think where they think their money will be put to best use. JEFF ROBERTS: But can you do this is without a new act of Congress? I know I think also the FCC has got its tool box and it's not really built for the crypto world. So they have to obey the laws that are written. I mean, is there more the agency could do with the existing laws, or do we need Congress to step in? And if so, what's the first thing Congress should do? HESTER PIERCE: Well, Congress is my boss, so I don't tell it what to do. But I think that we should remember there are securities laws are-- they've been around for a while, and they're fairly flexible, and they're designed to be able to accommodate and adapt to new types of technology. That said, so I guess I went into this when I first took the job on and started thinking about how the securities laws apply to crypto. I thought, we don't really need to do anything new. We just need to apply the laws that we have and they can accommodate cryptocurrencies as they do other things. But as I thought about it more, I really do think that a safe harbor approach might be the right approach in this space. Where you would say, here's what you need to tell people about what you're doing about the project. Here are the types of things that people investing in crypto projects want to know. And if you comply with these things and you tell people these things, then you can go ahead and you can issue these without having to worry about the whole panoply of securities regulations. And so that is something that Congress could direct us to do. We have the authority to do it on our own. But sometimes when we don't act, Congress does act, and tells us, we want you to be able to do something like this. I'm eager to have this new technology be tested. And I love seeing different formulations of it popping up. Facebook has most recently come out with a formulation of their version of a cryptocurrency. I have not personally talked to Facebook about what their plans are. I've read their white paper-- not they have a full technical white paper, which I haven't read, but I've read their broad white paper and it contains some of the aspirational vision that I think is possible for cryptocurrency. I mean, one of the things that excites me about it is that it's really a way to bring the world together so that people can collaborate from all across the world and get paid for their contributions to projects in ways that they're actually-- it doesn't involve complicated currency transactions. Everyone can get paid with the same currency. So it's almost like the money to go along with the internet. And I think that's where the potential value of cryptocurrency lies. There are other potential uses, but that's one value I see in it. And so Facebook, it's not surprising in some ways that they have thought, how can we take advantage of the user base that we have all over the world? It's not surprising to me that they're thinking about that kind of thing, because they do have such global reach. But again, it's not something that I've spoken with them about. And we'll see what happens as they have conversations with regulators, which I understand they're doing now. JEFF ROBERTS: One point of contention in the hearing this morning was the way Libra set up its Swiss foundation, which I think some of the senators were hammering Marcus on, saying, what are you doing overseas? But I've also heard that the American legal infrastructure just isn't built for something like this. And this is Switzerland is just simply a better option, which raises the larger question-- is America's forfeiting some innovation to places like Switzerland or Asia? Or are these places just sort of run and gun and bad news? HESTER PIERCE: Well, I think that's one of the worries that I have. I want to make sure that this country is the most open innovation of any country. And one of the problems that you have when you have an established regulatory system that's been in place for a while is that we're pretty slow to move. And so we've got people at the FCC who are working intensely on these issues, and they're thinking about the proper approach. But as you can see with the way our guidance is sort of trickling out, it takes us a really long time to make a decision. And it takes us a really long time to issue anything. So we're not that nimble. Regulators just tend not to be nimble. We're inherently conservative because we worry about something going wrong and someone coming back and blaming us when things go wrong. And certainly that happens. And so it's no surprise that people are conservative. That said, other regulators in other places have taken a different approach. And I think they're seeing innovators come to those places because they feel more comfortable there. And they feel there's certainty there. So one, yes, I worry about the innovation leaving our shores. And I also worry about US investors being precluded from participating in those projects, because it's easier just to say we don't want any US investors just to avoid having any interaction with the regulators here. JEFF ROBERTS: Hester, you're a lawyer, but also an economist. Just like to go to the real big picture stuff for a second, because I find it interesting, this notion of new non-sovereign currencies out there. And there's also debate of countries like Russia and China are trying to get away from the US dollar because the US dollar is one of the country's greatest assets. Lets us borrow cheap, it's the sort of a strategically powerful thing to have. Do you think blessing these sort of like non-sovereign currencies could risk accelerating the move away from the US dollar? HESTER PIERCE: Well, I should say I'm not an economist. I'm a wannabe economist. I did major in it in college but don't have a PhD because I'm not good enough at math. But if I were an economist, I certainly would not be a macro economist. I would be a micro economist because I think micro is what matters. And so that's how I approach these cryptocurrency issues. I think the micro payment aspect that the fact that individuals can decide to interact with one another using a cryptocurrency is really powerful for individuals that they're able to control that. And it's-- the decentralized nature of how these projects work I think is really interesting, because it's a way for people to collaborate and be rewarded for their collaboration and their contributions. So I think it challenges a lot of notions that we have, existing notions that we have about how lots of things work. And I think one of those things is if people can figure out a way that's very efficient for them to contribute and be rewarded for their contributions they're likely to gravitate toward it. I am free market. So I think people should be able to decide what is most efficient for their transactions. 

Insights: SEC Commissioner Supports 'Safe Harbor' Approach to Cryptocurrency

Hester Peirce thinks US regulators should offer guidelines.

SEC Commissioner Supports Cryptocurrency

"Crypto-mom" Hester Peirce thinks US regulators should offer guidelines around cryptocurrencies.

My desire is to see capital flow to the places where it can be put to its best and highest you and that requires investors get information that they need to make the decisions about what they think, where they think their money will be put to better use. But can you do this? Is that a new act of Congress that No, I think also, the SEC has got its its toolbox, and it's not really built for the crypto world. So you know they have to obey the laws that are written. I mean, it's in where the agency could do with the existing laws. Or do we need Congress to step in? And if so, what's the first thing Congress should do? Well, Congress is my boss, so I don't tell it what to do. But I think that we should remember their securities laws are they've been around for a while, and they're fairly flexible, and they're designed to be able to accommodate, um and adapt to new types of of technology That said so. So I guess I went into this when I first took the job on and started thinking about how the securities laws apply to crypto. I thought, you know, we don't really need to do anything new. We just need to apply the laws that we have and they can accommodate crypto currencies as they do other things. But as I've thought about it more, I really do think that a safe harbor approach might be the right approach in this space where you would say, Here's what you need to tell people Tell people about what you're what you're doing about the project here, the types of things that people investing in crypto projects want to know. And if you if you comply with these these things and you tell people these things, then you can go ahead and you can issue these without having to worry about the whole panoply of securities regulations. And so that is something that Congress could direct us to do. We have the authority to do it on our own, But sometimes when we don't act, Congress does act and tells us No, we want you to do something like this. I'm eager to have this new technology be tested, and I love seeing different formulations of it popping up. Facebook has most recently come out with a formulation of their version of a Cryptocurrency. I have not personally talked to Facebook about what their plans are. I've read their white paper, not there. They have a full technical white paper, which I haven't read, but I've read their their broad white paper, and it contains some of the operational vision that I think, uh, it is possible for crypto currency. I mean, one of the things that excites me about it is that it's really a way to bring the world together so that people can collaborate from all across the world and get paid for their contributions to project in ways that they're actually, you know, it doesn't involve complicated currency transactions. Everyone could get paid with the same the same currency. So it's almost like the money to go along with the Internet. And I think that's where the potential value of crypto currency lives that you know there are other potential uses, but that's 11 value I see in it. And so Facebook. It's not surprising in some ways that they have thought, How can we take advantage of the user base that we have all over the world? It's not surprising to me that they're thinking about that kind of thing because they do have such global reach. But again, it's It's not something that I've that I've spoken with them about, and I will see what happens if they have conversations with with regulators, which I understand they're doing now. One point of contention of the hearing this morning was the way labors set up. It's a Swiss foundation, which I think some of the senators were hammering Marcus on saying, You know, what are you doing overseas? But I've also heard that the Americans have legal infrastructure, just isn't built for something like this. Switzerland. It is simply a better option, which raises the larger question. Is America's forfeiting some innovation to places like Switzerland or Asia? Or, you know, are these places just sort of, you know, running gun and bedding is Well, I think that's one of the worries that I have. I want to make sure that this country is the most open innovation of any of any country and one of the problems that you have when you have an established regulatory system that's been in place for a while that were pretty slow to move. And so, um, you know, we've got people at the SEC who are working intensely on these issues, and they're they're thinking about the proper approach. But as you can see with the way our guidance is sort of trickling out, it takes a really long time to make a decision, and it takes a really long time to issue anything. So we're not that nimble. Regulators just tend not to be nimble, were inherently conservative because we worry about something going wrong and someone coming back and blaming us when things go wrong. And, um and certainly I that that happens. And so so it's no surprise that people are conservative. That said, other regulators and other places have taken a different approach, and I think they're seeing innovators come to those places because they feel more comfortable there and they feel their certainty there. So one Yeah, I worry about the innovation leaving are leaving our shores, and I also worry about U. S investors being precluded from participating in those project because it's easier just to say we don't want any U. S. Investors just to avoid having any interaction with the regulators here as your lawyer, but also an economist would like to go to the real big picture stuff for a SEC. Wanted interest in this notion of new, non sovereign currencies out there. And there's also debated countries like Russian Shine are trying to get away from the U. S. Dollar because U. S. Dollars when the country's greatest assets let's borrow cheap. It's sort of a, you know, a strategically powerful thing. Tohave. Do you think blessing these sort of like non sovereign currencies could, you know, risk accelerating the move away from US dollars? Well, I should say, I'm not an economist. I'm a wannabe economist. I did. I did major in in college but don't have a PhD because I'm not good enough at math. But if I were an economist, I certainly would not be a macro economist. I would be a micro economist because I think micro is what matters. And so that's how I approach these crypto currency issues. I think the micro payment aspect, the fact that individuals can decide to interact with one another using a Cryptocurrency, is really powerful for individuals that they're able to control that Andi, It's the decentralized nature of how these projects work, I think is really interesting because it's a way for people to collaborate and be rewarded for their collaboration and their contributions. So I think it challenges a lot of notions that we have existing notions, um that we have about how lots of things work. And I think you know one of those things. If people can figure out a way that very efficient for them Thio contribute and be rewarded for their contributions, they're likely to gravitate toward it, you know? And I am free market. So I think people should be ableto decide what is most efficient for their transactions.

[MUSIC PLAYING] ZOOKO WILCOX-O'HEARN: Blockchain is like an Excel spreadsheet that anyone in the world can add information into it. You have three columns-- the sender's address, the recipient's address, and how much money they're sending. And whenever you want to make a transaction, you append a new row that says this address will send this much of its money to this other address. The problem that I'm most concerned about is that the history of all those transactions is visible to everyone in the world, and so if you actually rely on that for your real life, like if you get paid in that kind of ledger, and then you go buy coffee, you'll be revealing to the coffee shop owner what your salary is. Every time you transact with anyone, you're exposing more and more of the history and your behavior to more and more people or to everyone. So in Zcash, we approach that by using encryption. ROBERT HACKETT: Zcash is a virtual currency, sort of like bitcoin. In fact, a lot of it is ported over from bitcoin's codebase with one pretty big difference. And that is the fact that Zcash uses encryption to conceal payments on the blockchain. ZOOKO WILCOX-O'HEARN: Well, all the important information today is protected by modern encryption. And we use the same style of modern encryption in Zcash to protect the information about who's transacting with whom and what they're doing. ROBERT HACKETT: The interesting thing is they employ a mathematical technique called zero-knowledge proofs in order to make this ledger still auditable. ZOOKO WILCOX-O'HEARN: We can prove to everyone that a certain transaction moves money that was correctly, like, legitimately owned by the owner. It wasn't, like, fraudulent. And we can prove that without revealing what's underneath the encryption. So it proves a fact about an encrypted data without opening the encryption. And so the only reason we need zero-knowledge proofs in Zcash is to allow us to have encryption and also to have a ledger filled with only valid transactions. SAMUEL CASSATT: There are lots of reasons why I might want to be able to prove to someone that I know something without them seeing exactly what it is. You might want to pay your daughter for a medical bill. I want to do it maybe over blockchain technology, and you don't want your neighbor to see it. Using zero-knowledge proofs allows us both to understand the contents of our transaction without displaying the contents to other parties. JAMIE DIMON: There will be no currency that gets around government controls. SPEAKER 1: Anybody here want to take an opposite view? ROBERT HACKETT: So Jamie Dimon, the CEO of JPMorgan Chase, has been pretty vocal about his distaste for cryptocurrencies. He's called bitcoin a fraud. That being said, his company is working on blockchain technology, which is a really promising new way to create databases in very simple terms. ZOOKO WILCOX-O'HEARN: JPMorgan and the Zcash company, my company, are in a technology partnership. They asked us to work with them to add the Zcash-style encryption into the JPMorgan enterprise blockchain. ROBERT HACKETT: Quorum, which is the blockchain that JPMorgan Chase has built, it does not use open cryptocurrencies like bitcoin or like Zcash for that matter. What they've done instead is they've taken some of the privacy technology that Zcash has developed and incorporated in their cryptocurrency, and they've stripped that out and basically put it into their blockchain system. ZOOKO WILCOX-O'HEARN: It's a great data point showing why privacy is important, which is that privacy is necessary for business because JPMorgan and the other makers of enterprise blockchains are trying to make a technology that is fitting for various enterprise use cases. And over the past two years or so, all of the people in that whole industry-- the whole blockchain industry-- have come to realize that privacy is a strong requirement. It's an absolute showstopper. AMBER BALDET: You can't run a financial marketplace-- a real financial marketplace-- where everybody knows what's going to happen in the future because literally, what you are trying to trade on is expectations about the future. So the more that that information is known in advance, you end up with kind of the Heisenberg uncertainty principle of financial markets, like it exists too quickly. So privacy is integral to having functioning markets. SAMUEL CASSATT: If I am JPMorgan and I'm conducting a trade with Goldman Sachs, I don't necessarily want Santander to see my trade or vise versa. While they might want certain parties, like regulators for instance, to see the trade, they don't want their competition to see the trade. ZOOKO WILCOX-O'HEARN: It's also necessary for business for consumer protection reasons. If you're running a large business and taking care of a lot of people's personal information, you can't risk leaking that to the world. There's also regulatory requirements like the Health Information Protection Act, and the Child Online Protection Act, and things like that, which specifically require that you protect information as part of your business. ROBERT HACKETT: Zooko is a longtime cypherpunk, which is sort of a term that encompasses somebody who's part activist, part coder. They tend to be pretty libertarian in their views and have really, really strong respect for privacy. And they try to take these into the technologies they build. If you spend even a little bit of time with Zooko, as I had the pleasure of doing this fall for writing the story, it becomes clear that he's not motivated by material gain. He's definitely more of an idealist. Certainly working with JP Morgan is a good business opportunity for his company Zcash, but you get the sense that Zooko wouldn't be working on this project if he didn't feel as though it had some great potential to benefit society at large. ZOOKO WILCOX-O'HEARN: Do you know the story of the encrypted love notes in the blockchain? SPEAKER 2: I don't. ZOOKO WILCOX-O'HEARN: Very shortly after Zcash launched about a year ago after the blockchain launched, a young woman of my acquaintance said she had received a Zcash payment of a tiny amount, and in the encrypted memo field, there was a document. It was tickets to an event that she and her boyfriend had been talking about going to. So it was an encrypted love note in the blockchain. And that actually exists. Now, I've never seen it, but I take her word for it. Only the sender and the receiver can see it, but it's in the Zcash blockchain. SPEAKER 2: That's beautiful. ZOOKO WILCOX-O'HEARN: Encrypted love notes in the blockchain. 

Insights: What Does It Take To Be A Bitcoin Rival?

Zcash could reshape the financial system.

What Does It Take To Be A Bitcoin Rival?

Zcash could reshape the financial system in ways Bitcoin couldn't. (December 2017)

Blockchain is like an Excel spreadsheet that anyone in the world can add information into it. You have three columns, the sender's address, the recipient's address and how much money they're sending. Whenever you want to make a transaction, you opinion you row that says this address will send this much of its money to this other address. The problem that I'm most concerned about is that the history of all those transactions is visible to everyone in the world. And so, if that if you if you actually rely on that for your real life, like if you get paid in that kind of ledger and then you go buy coffee, you'll be revealing to the coffee shop owner. What your salary. Every time you transact with anyone, you're exposing more and more of the history and your behavior too more more people or to everyone. So in ze cash we approach that by adding by using encryption. The cash is a virtual currency, sort of like Bitcoin. In fact, a lot of it is reported over from Bitcoin's code base with one pretty big difference. And that is the fact that Z cash uses encryption to conceal humans on the block chain. All the important information today is protected by modern encryption, and we use the same style of modern encryption and the cash protect the information about who's transacting with whom and what they're doing. The interesting thing is the employee a mathematical technique called zero knowledge Proof. In order to make this ledger still auditable, we can prove to everyone that a certain transaction moves money that was correctly like legitimately owned by the by the owner wasn't like fraudulent. And we can prove that without revealing what's under neath the encryption. So it proves the fact about encrypted data without opening the encryption. So the only reason we need your knowledge proofs in cash is to allow us to have encryption and also to have a ledger filled with only valid transaction. There are lots of reasons why I might want to be able to prove to someone that I know something without them seeing exactly what it is you might want to pay your daughter for a medical bill. I want to do it. Maybe over blocking technology, you don't want your neighbor to see it. Using your knowledge, Chris allows us both to understand the contents of our transaction without displaying the contents to other parties. There will be no currency that gets around government control. Anybody here wanna take a a, uh, an opposite view. So Jamie Diamond, the CEO of J. P. Morgan Chase, has been pretty vocal about his distaste for crypto currencies. He's called Bitcoin fraud. That being said, his company is working on Blockchain technology, which is a really promising, a new way to create databases in very simple terms. J. P. Morgan and the cash company, my company, are in a technology partnership. They asked us to work with them toe add the cash style encryption into the J. P. Morgan Enterprise Blockchain Quorum, which is the Blockchain that J. P. Morgan Chase has built. It does not use open cryptocurrencies like Bitcoin forelegs e cash, for that matter. What they've done instead is they've taken some of the privacy technology that cash has developed and incorporated in their crypto currency, and they've stripped that out and basically put it into their Blockchain system. It's a great data point showing why privacy is important, which is that privacy is necessary for business. J. P. Morgan and the other makers of enterprise block chains are trying to make a technology that it's fitting for various enterprises use cases. And over the past two years or so, all of the people in that whole industry, the whole block chain industry have come to realize that privacy is a strong requirement. It's an absolute showstopper. You can't run a financial marketplace, really finance a marketplace where everybody knows what's gonna happen in the future, because literally, what you are trying to to train on his expectations about the future. So the more that that information is known in advance, you end up with kind of the Heisenberg uncertainty principle of financial markets like it exists to quickly, so privacy is integral to having functioning market. If I'm J. P. Morgan and I'm conducting a trade with Goldman Sachs, I don't necessarily want uh, I'm there to see my trade. While they might want certain parties like regulators, for instance, to see the trade, they don't want their competition to see the trade. It's also necessary for business for consumer protection reasons. If you're running a large business and taking care of a lot of people's personal information, you can't risk leaking that to the world. There's also regulatory requirements like Health Information Protection Act, the Child Online Protection Act and things like that, which specifically require that you protect information is part of your business is a long time cipher punk, which is sort of a term that encompasses somebody who's part activist, part coder. They tend to be pretty libertarian in their views on have really, really strong respect for privacy. They try to take these into the technologies they build if you spend even a little bit of time with Zuko. As I had the pleasure of doing this fall for writing the story, it becomes clear that he's not motivated by material gain. He's definitely more of an idealist. Certainly, working with J. P. Morgan is a good business opportunity for his company's cash. But you get the sense that Zuko wouldn't be working on this project if he didn't feel as though it has some great potential to benefit society at large. You know the story of the encrypted love notes in the Blockchain. Very shortly after the cash launched about a year ago after the Blockchain launched, a young woman of my acquaintance said she had received a cash payment of a tiny amount. And in the encrypted memo field, there was a document. It was tickets to an event that she and her boyfriend have been talking about going to sew. It was encrypted love note in the Blockchain and that that actually exists. I've never seen it. Um, I take her word for it only at the center, and the receiver can see it, but it's in the cash box Encrypted love notes in the water.

 AARON WRIGHT: The reason, I think, you're hearing so much about blockchains, and cutting through a lot of the hype and noise that you may have heard about over the past couple of days or the past weeks and months, is that blockchains are really a novel data structure. And fundamentally they enable folks to coordinate social and economic activity, even though they're located all across the globe. And they enable folks to do that with less of a need for central intermediary. And this is pretty profound, right? Blockchains are tamper resistant data structures. They're networked, but they enable folks to reach consensus, to reach a common state, a common point in time, depending on the blockchain based network that you're a part of. And because of these characteristics, we've seen quite a bit about new digital assets that are being formed-- Bitcoin, Etherium, Ripple. They're all using a blockchain as this backstop in order to keep track of who owns what at what point in time. And that's really, really interesting, and that's really profound. But I think the bigger picture and what we're really thinking about and talking about here is an analogy to the internet. When the internet really was born, it helped turn communications and other ways of communicating with one another into information, information that could get zipped across the globe. And when did that, we were able to effectively turn all this information into email. With blockchains, we're doing the same thing, but this time with assets using a related technology called the smart contract. Smart contracts are really important technology. They help us define the metes and bounds of these digital assets, rights, obligations, and the way that these assets can be owned and transferred. And because of that, and this is critical, we now have the ability to implement in the digital world something that's akin to property rights. We didn't have property rights online before the birth of blockchain technology, before the implementation of smart contracts, and now we have that. And lots of the problems that we see online are in part due to the fact that there is no property rights regime. And blockchains enable us to do that, and enable us to do that in a way that is not necessarily tied to one central government. And increasingly, the rules related to these assets are being defined by these blockchain based networks and by the code itself. So instead of only having to grapple with the rule of law at this point in time, we also are increasingly going to have to grapple with the rule of code. 

Insights: How to Regulate Blockchain

It was intended to operate beyond government control.

How to Regulate Blockchain

Early blockchain advocates envisioned a technology that operated beyond the control of governments. (June 2019)

The reason I think you're hearing so much about Blockchain kind of cutting through a lot of the hype and noise that you may have heard about over the past couple days or the past weeks and months is that block chains are really a novel data structure, and fundamentally, they enable folks to coordinate social and economic activity even though they're located all across the globe. And they enable folks to do that with less of a need for central intermediary. And this is pretty profound. Block chains are tamper resistant data structures, their network. But they enable folks to reach consensus to reach a common state, a common point in time, depending on the block chain based network that you're a part of, and because these characteristics we've seen quite a bit about new digital assets are being formed Bitcoin the Syrian ripple they're all using a Blockchain is kind of a backstop in order to keep track of who owns what it will point in time, and that's really, really interesting, and that's really profound. But I think the bigger picture and what we're really thinking about and talking about here it's an analogy to the Internet when the Internet really was born, it helped turn communications and other ways of communicating with one another into information information that could get zipped across the globe. When we did that, we were able to effectively turn all this information into email with box chains were doing the same thing, but this time was at that, using a related technology called a smart contract. Smart contracts are really important technology. They help us define the meats and downs of these digital assets rights, obligations and the way that these assets could be owned and transferred. And because of that and this is critical, we've we now have the ability to implement in the digital world something that begins a property, right we don't We didn't have property rights online before the birth of Blockchain technology before the Implementation smart contract. And now we have that. And lots of the problems that we see online are in part due to the fact that there is no property rights regime and Blockchain enable us to do that and enable us to do that in a way that is not necessarily tied to one central government. Increasingly, the rules related to these assets are being defined by network and by the code itself. So instead of only having to grapple with the rule of law at this point in time, we also increasingly gonna have to grapple with the rules code.

Insights: 5 Things to Know About Facebook’s New Cryptocurrency Libra

5 Things to Know About Facebook’s New Cryptocurrency Libra

It will be available sometime in 2020. (June 2019)

 JEFF ROBERTS: Facebook Libra, we've had people on stage can't come. And I'm sure you guys have some opinions. Let's go into it. Is it going to work? Chairman, you want to start? JEREMY ALLAIRE: Sure. I think you have to kind of break it down into a couple of pieces. So one is-- as a kind of third-generation blockchain, how does it compare to other third-generation blockchains, like the next versions of Ethereum, or new platforms like Cosmos, or Algorand? There's a lot of competition in that space. I think, broadly, the crypto ecosystem is interested in permission-less platforms that allow anyone in the world to participate, any developer to participate, to build things. And so there's a real question I think of whether a model like this can really encourage that level of open collaboration. So I think that's one question. And I think the overview that has been published by the Libra Association is aspirational with respect to that. But it's also very clear that this is going to be pretty tightly managed, pretty tightly controlled, pretty tightly scoped. And I'm not convinced in the short term that that's going to be attractive to developers. AMBER BALDET: I think in order to figure out if it is going to be successful, we would really need to understand what the ultimate goal was. And it's not entirely clear to me whether they're attempting to compete in the cashless payments space or in the public cryptocurrency space, which are really two very different things. I think something that is relatively assured if we look at the-- their other pushes to provide say subsidized internet access in emerging economies that if you were to tie that to something like a payment rail that you get all that kind of primary payments data, married to a social graph, that's very powerful. And so we shouldn't forget about the underlying data play there. JEREMY ALLAIRE: If you look at what Tencent has done in China with 700 million, 800 million people, they've revolutionized the way the economic interaction happens. You can imagine what that looks like on a global scale. I think the other, though, is a deeper issue. And this gets to Zuck's recent speech about privacy, which is this issue with centralization on the internet that internet companies-- certain internet companies are perceived to have too much power that they aggregate too much customer data. And there's this desire to shift more to a decentralized architecture. And I actually think this is a little bit like Bill Gates in 1995 saying, "we're going all-in on the open internet and betting on the open roads--" if you remember the essay from Bill Gates. And I think that this is a little bit of Zuck doing the same thing saying, we're betting on decentralization. If you read the Libra paper closely, you'll see it's aspirational to build identity protocol layers for self-sovereign identity, for the ability for individuals to control their own data. And you can imagine how that could interact with messaging platforms, financial platforms, other things. That's much more aspirational, I think. Payments is an initial use case. But the much more decentralized private way to exchange information is ultimately, I think, the end goal. 

Insights: Financial Pros Weigh In on Facebook's Libra

What are they trying to do with a digital currency?

Financial Pros Weigh In on Facebook's Libra

What exactly is the social network trying to do with a digital currency?

Facebook liberal. We've had people on stage, can't calm. And I'm sure you guys have some opinions. Let's go into it isn't gonna work. Jeremy will start. Sure. You know, I think you have to kind of break it down in a couple of pieces. One is, you know, as a kind of third generation Blockchain. How does it compare to other third generation Blockchain Like the next versions of the theory Amore new platforms like Cosmos or Hallorann? There's a lot of competition in that space. I think broadly, the crypt of ecosystem is interested in permission. The platforms that allow anyone in the world participate any developer to participate, to build things. So there's a real question I think, of whether a model like this can really encourage that level of of open collaboration. So I think that's 11 question. And I think the the overview that has been published by the Labor Association is aspirational with respect to that, but also very clear that this is gonna be pretty tightly managed, pretty tightly controlled, pretty tightly scope. Um, and you know, I'm not convinced in the short term that that's gonna be attractive to developers. I think in order to figure out if it is going to be successful, we would really need to understand what the ultimate goal was. And it's not entirely clear to me whether they're attempting to compete in the cashless payment space or in the public Cryptocurrency space, which are really two very different things. I think something that is relatively assured if we look at the other pushes to provide state subsidized Internet access in emerging economies, that if you were to tie that to something like a payment rail that you get all that kind of primary payment data married to a social graph that's very powerful and so we didn't forget about the underlying data play there. If you look at what 10 cent has done in China with 700,000,800 million people, they've revolutionised the way the economic interaction happens. You can imagine what that looks like on a global scale. I think the other there is a deeper issue and this gets to recent speech about privacy, which is yeah, this this issue with centralization on the Internet that Internet companies, certain Internet companies, were perceived to have too much power that they have the aggregate too much customer data and their desire to shift Maur to a decentralized architecture. And I actually think this is a little bit like Bill Gates in 1995 saying We're going all in on the open Internet and, you know, betting on the open road. If you remember the essay from Bill Gates, and I think that this is a little bit of Doc doing the same thing they were betting on decentralization. If you read the lever of paper closely, you'll see it's aspirational to build identity protocol layers for self sovereign identity, for the ability for individuals control to control their own data. Um, and you can imagine how that could interact with messaging platforms, financial platforms, other things that's much more aspirational. I think payments is an initial use case, but the much more decentralized, private way to exchange information is ultimately, I think the angle

[MUSIC PLAYING] MARIE WIECK: We really have been engaged at IBM and blockchain for almost five years now because we see it as a fundamental way to build trust and transparency in all types of industries, finance being one of them. And in particular related to finance, cryptocurrency isn't what our value proposition or what we think the real belief is, it's in creating a digital economy where you can link goods and information and transform these processes. But to have that exchange of value for all these different networks, you need a public network, you need a connection point for that exchange. So we've been operating, when it comes to digital money, in three different areas. There are transactions occurring bank-to-bank, particularly central banks with the goal of digital fiat currency, which we think is the ultimate endpoint, and our work with CLS on payment netting for those top rails of all the currencies is a good example. We also see people going direct, B2B. So we're working with Visa on their B2B connect and how they're using that for direct exchange between businesses for effects so you take out some of that friction in those transactions. And the most underserved, I think we all agree, are the consumer-to-consumer-- remittances, sending money back home to the Philippines or wherever you want to do that, and in order to get that kind of value proposition, we've invested in World Wire, which is live with a test net connecting almost 50 different currencies, so that you can, whether it's for a stable coin or whether it's just as a bridge token between two currencies, get that friction out of the system and enable a real-time clearing and settlement. 

Insights: How IBM Is Using Blockchain and Digital Currency

How IBM Is Using Blockchain and Digital Currency

A discussion with Marie Wieck of IBM. (June 2019)

way really have been engaged at IBM in Blockchain for almost five years now because we see it as a fundamental way. Thio build trust and transparency and all types of industry finance being one of them and in particular related the finance. Crypto currency isn't what our value proposition or what we think the real belief is. It's in creating a digital economy where you can link goods and information and transform these processes, but have that exchange of value for all these different network. You need a public network. You need a connection point for that exchange. So we've been operating. When it comes to digital money in three different areas, there are transactions occurring bank to bank, particularly central banks, with the goal of digital Fiat currency, which we think is the ultimate end point. And our work with pls on payment netting for those top rail of all the currency's is a good example. We also see people going direct me to be so we're working with Visa on there be to be connected and how they're using that for direct exchange between businesses for effect. So you take out some of that friction in those transaction and the most underserved, I think we all agree, are the consumer to consumer Remittances, sending money back home to the Philippines or wherever you want to do that and in order to get that kind of value proposition, we've invested in World Wire, which is live with a tough nut connecting almost 50 different currencies so that you can, whether it's for a stable coin or whether it's just as a bridge token between two currencies, get that friction out of the system and enable a real time clearing and settlement.

[MUSIC PLAYING] TYLER WINKLEVOSS: Companies who build on top of things like Bitcoin should have regulation that's thoughtful, that doesn't stifle innovation. So that's kind of the message, and a lot of people believe in the dream of crypto, but they just don't know how to engage in it without getting burned. And we're here to say that Gemini is a place you can do that. SPEAKER 1: So who's the audience exactly? Are you targeting retail Bitcoin buyers or companies or regulators or everyone? TYLER WINKLEVOSS: Pretty much everybody. Yeah, that's right. And the people who want the same protections when they deal in crypto as they do if they open up a bank account or they trade security like a share of Apple, we're trying to say that we have the same standards of licensing compliance safeguards and consumer protections at Gemini as you would be afforded in other financial markets. JEN WIECZNER: You have slogans like crypto without chaos. And you're talking about a revolution. I mean, was there-- were you noticing problems or something that was different about you versus other companies, problems that you were trying to solve or ways that you thought you could differentiate here? CAMERON WINKLEVOSS: Yeah, I mean, I think, unfortunately, there's still a perception that the crypto is a bit of a wild, wild west. And I think we haven't done ourselves too many favors historically. There's been Silk Road, and that took years to get out of the headlines. You couldn't read an article without reading something about illicit activity and this idea that Bitcoin was truly anonymous, which it's not. And it's taken years to sort of shake that image. But there are places like Gemini that are doing-- building in a regulated fashion. We're a New York trust company, which is one of the oldest licensing frameworks in the world. And we have the safeguards and protections that any financial institution has, so getting people aware of that aspect. SPEAKER 1: Is part of the problem, though, you want rules like regulations. But I mean, I know Jen's wrote a couple stories on the state of the New York regulators and the bit license, which, frankly, seems to be a boondoggle. Is it possible that regulators are part of your problem as well? CAMERON WINKLEVOSS: So from what we see-- TYLER WINKLEVOSS: We don't think so. CAMERON WINKLEVOSS: Yeah. TYLER WINKLEVOSS: They're actually the reason we have a business. Because without a license, you can't get a banking relationship and you can't accept deposits of Fiat, so you can't start your company. So we think that regulation has been a big boon to New York. It's brought in a lot of companies Gemini is a New York company, not for any other reason, but because there is a licensing framework. And we could become a trust company. We would have gone to Alaska if that was possible, but it wasn't. So. We chose New York. So we think regulation has been a big win for New York state. JEN WIECZNER: Are you calling for more regulations, or what other kinds of rules or guidance would you like to see from the SEC and other regulators? CAMERON WINKLEVOSS: Well, I think the idea is thoughtful regulation. So we've been working on the virtual commodity association, which is an SRO, to help self police virtual commodity marketplaces and bring best practices from the equities world and the derivatives world into the crypto world. So we're not reinventing the wheel. We're just taking these safeguards and protections and bringing them into the world of crypto. So that's the idea. SPEAKER 1: I'd like to look forward a little bit since through the bubbles popped, we're seeing some green shoots. And one of them is a stable coin. So I think the Gemini stable coin's got some traction. Do you want to sort of explain the appeal of that? I mean, why hold a stable coin? CAMERON WINKLEVOSS: Yeah, the idea with the Gemini dollar is that we've brought dollars onto the blockchain. So dollars are a pretty good use of payment to buy things. When you buy things with Bitcoin, you could be overpaying, underpaying, depending on how much the price rises or falls. And we've overpaid for things before. TYLER WINKLEVOSS: Yeah, we've made that mistake. The Bitcoin Pizza was bought for 10,000 bitcoin, which was $20 eight years ago. And now it's, like, a $50 million pizza. So you don't want to make that mistake. CAMERON WINKLEVOSS: It's a very good pizza. TYLER WINKLEVOSS: So the Gemini dollar allows you to buy things and spend things in cryptocurrency without worrying about that volatility risk of overpaying on things. SPEAKER 1: What, you mean just buying other cryptos, or do you mean buying well off assets? TYLER WINKLEVOSS: You can buy other cryptos. You can take other exchanges in trade. You can also use it for decentralized applications. If someone creates Uber on the blockchain, and all of a sudden, you can interact and hire someone to pick you up and pay-- and it's just a currency for cryptocurrency. And a lot of the cryptocurrencies we've known historically, like Bitcoin or even ICOs, they don't really make for good currency. You don't go to Starbucks and bring a bar of gold in and pay for your coffee. You bring dollars in. And so we brought dollars onto the blockchain with the Gemini dollars, so that you can actually buy your cup of coffee now with cryptocurrency. JEN WIECZNER: Do you think Gemini might ever consider diversifying beyond cryptocurrency, into other assets like the stock market or more traditional things? CAMERON WINKLEVOSS: We've definitely thought about it, and we continue to think about it. I think crypto native tokens will probably always be a Gemini thing, but we do virtual commodities today. So Bitcoin and forks at Bitcoin, they fall under the legal framework of a virtual commodity. But virtual security tokens is a real thing, and those backed by sort of real assets, I think there's a bright future there. So we may move into that, but straight up equities, probably not anytime soon. 

Insights: Cameron and Tyler Winklevoss On How To Regulate Cryptocurrency

The brothers launched the 'Revolution Needs Rules' campaign.

Cameron and Tyler Winklevoss Want To Regulate Cryptocurrency

The Winklevoss brothers have launched the 'Revolution Needs Rules' marketing campaign to educate consumers about their product. (January 2019)

companies who build on top of things like Bitcoin should have regulation. That's thoughtful. That doesn't stifle innovation. So that's kind of the message. And a lot of people believe in the dream of crypto, but they just don't know how to engage in it without getting burned. And we're here to say that Jim is a place you could do that. So who's the audience? Exactly you targeting you know, retail Bitcoin buyers or companies or regulators for everyone? Pretty much everybody. Yeah, that's right. In the people who want the same protections when they deal in crypto as they do if they open up a bank account or they trade security like a share of apple, we're tryingto say that we have the same standards of licensing, compliance, safeguards and consumer protections at Gemini, as you would be afforded, and other financial markets. You have slogans like crypto without chaos and you're talking about a revolution. I mean, was there were you noticing problems, you know, or something that was different about you versus other companies. Problems between us solve our ways that you thought you could differentiate here? Yeah. I mean, I think unfortunately, there's still a perception that the crypto is is a bit of a wild, Wild West, and I think the crypto hasn't we haven't done ourselves too many favors. Historically, there's been Silk Road, and that took years to get out of the headlines. You know, you could read an article without reading something about illicit activity and this idea that Bitcoin was truly anonymous, which it's not, and it's taken years to sort of shake that image. But there are places like Gemini that air doing building in a regulated fashion, where New York Trust Company, which is one of the oldest licensing frameworks in the world, and we have the safeguards and protections that any financial institution has so getting people aware of that aspect. It is part of the problem, though. You want you want rules like regulations. But, I mean, I know Jen's bro. Couple stories on the state of the New York regulators bit license, which, frankly, seems to be a boondoggle. Is it possible that regulators your party a problem as well So way, don't they? Yeah, they're they're actually the reason we have business, because without a license, you can't get a banking relationship and you can't accept deposits of Fiat so you can't start your company. So we think that regulation has brought has been a big boon to New York. It's brought in a lot of companies German eyes in New York company, not for any other reason but because there was a licensing framework and we could become a trust company. We would have gone to Alaska if that was possible, but it wasn't so. We chose New York. So we think regulations been a big win for New York state. Are you calling for more regulations or what other kinds of rules or guidance would you like to see from? The SEC and other regulators will think the idea is thought for regulation. So we've been working on the Virtual Commodity Association, which is an S R. O, to help self police virtual commodity market places and bring best practices from the equities world in the driver's world into the crypto world. We're not re inventing the wheel. We're just taking these safeguards and protections and bringing them into the world of crypto. So that's the idea. I'd like to look forward a little bit since they're the bubbles popped. We're seeing some green shoots and one of them is stable coins. I think you need a nice, stable coins. Got some traction? Do you want to explain the appeal of that? I mean, why? Why? Why hold a stable point? Yeah, The idea with the Gemini dollar is that we brought dollars onto the block chain, so dollars are pretty good use of payment to buy things. When you buy things with Bitcoin, you could be overpaying, underpaying depending on how much the price rises or falls. And we've overpaid for things. Yeah, we've made that mistake. The Bitcoin pizza was bought 10,000 Bitcoin, which was $20 you know, eight years ago. And now it's like a $50 million pizza. You know what A very good. So the Gemini Dollar allows youto buy things and spend things on, you know, encrypted currency without worrying about that volatility, rest of overpaying. But you mean just blind. Other cryptozoology means you can You can buy their kryptos. You can take the other exchanges and trade. You can also use it for decentralized applications. If someone creates uber on, you know, the Blockchain and all of a sudden you can interact and hire someone to pick you up and pay. And it's just a currency for Cryptocurrency and a lot of the Cryptocurrency we've known historically, like Bitcoin or even I suppose they don't really make for good currency. You don't go to Starbucks and bring a bar of gold in and pay for a coffee you bring dollars in. And so we brought dollars on the block chain with Gemini dollars so that you can actually buy your cup of coffee. Now with Cryptocurrency, do you think Jim and I might ever consider diversifying beyond crypto currency into other assets like the stock market or, you know, more traditional things? We've definitely thought about it. We continue to think about it. Um, I think Krypton native tokens will probably always be a Gemini thing, But we do virtual commodities today, so Bitcoin and forks the Bitcoin they fall under the legal framework of a virtual commodity. But virtual security tokens is a real thing, and those backed by real assets. I think that there's a bright future there, so we may move into that. But straight up equities, probably not any time soon

Insights: Cryptocurrency

Insights: Cryptocurrencies 101

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While Bitcoin is the most known cryptocurrency, there are many others. (March 2017)

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