LETS TALK BITCOIN

Episode 63 Money of the Internet Age

Participants: Adam B. Levine (AL) Host Stephanie Murphy (SM) Co-host Jeffrey Tucker (JT) Foundation for Economic Education & editor of Laissez-Faire Books David Menes (DM) Bitcoin Millionaire Joe the Miner (Joe) Bitcoin miner AL: Hi and welcome to Episode 63 of Lets Talk Bitcoin, a twice weekly show about the ideas, people and projects building the digital economy and the future of money. Visit us at www.letstalkbitcoin.com for our daily guest blog, all our past episodes and, of course, tipping addresses. My name is Adam B. Levine and this show is about deep conversations. Im joined by Jeffrey Tucker to talk about the future of cryptocurrency, the irony of Bitcoins biggest detractors and, as always, much, much more. Then, ever want to know how a Bitcoin millionaire thinks? David Menes joins Lets Talk Bitcoin for the first time to perform Beggars Can Be Choosers by the Bitcoin Monger, for a peek into one such individuals mindset. Finally, with the Bitcoin difficulty skyrocketing, but not as much as the price, Stephanie catches up with Joe, a newly minted ASIC miner with a lot to say about rolling the dice on buying equipment and just how important the price really is. Its a long one today, so well get right into it. Enjoy the show. *1:28+ AL: Jeffrey Tucker is a gentleman and a scholar, the current editor of Laissez Faire Books and my favorite bow tie aficionado. He joins us to talk, well Bitcoin. Jeffrey, how are you? [1:48] JT: Everythings going great. [1:49] AL: Thats good. You have no idea what Im going to talk to you about here because Ive kept it a secret. Im pretty excited to talk to you about this because I think that Jeffrey, weve actually found the future of Bitcoin and nobody knows about it yet. JT: Was it discussed at the cryptocurrency conference? [2:03] AL: It was not. I mean, it was kind of, but I think that now weve seen the firs t examples of it and its really interesting. Bitcoin, right? Neutral, stateless, cheap, fast money. The same could also be said though, about Litecoin or Feathercoin who make tweaks to Bitcoin but, ultimately, whose value is only really as good as how desirable they are to trade. This is also true of, even more innovative or unusual coins like, Freicoin which introduces demurrage features and makes it so that your money loses purchasing power over time to encourage spending. Or proof of stake based coins which kind of do the opposite and the more coins you hold, the more coins that youre able to mine because the mining comes from your

investment into the coins that you already have. The only commonality that these things do have is that the only thing that theyre good for is as money. Thats sort of a funny thing to say because we think that money emerges from commodities and that money emerges from other things that are already useful but what if useful things could emerge from money that we already have, thats already good money? What if cryptocurrency wasnt restricted to being only good money and what if instead of the value being determined by the power of the network, its determined by what you actually get for holding the cryptocurrency at distinct points in the future? The idea at this core is the idea that cryptocurrencies can be backed by private companies. Let me give you an example here for a second. Were going to do a timber harvest on the hillside that I live on. It is going to t ake out some wood for fire danger, basically. This process is going to generate enough wood to create about 100,000 cutting boards made from rare wood that comes off of our property. We know that this is a process thats going to take between three and f ive years. If we were to take those estimated production runs and then figure out what our costs are, what our spin-off time is and then create, say, WoodCoin or something like that, that starts off with a period of time initially, where anybody can mine them to initially accumulate them and then well also be mining them, as with everybody else. After a three month period of time, or six month period of time while were doing the initial financing and figuring out how to make it all work, then theres an initial release period where the thing comes out and we offer to redeem it, at say, 100 WoodCoins per cutting board. We say, we project out into the future, for the next three years every six months, the value at which we ascribe to WoodCoins relative to the thing that were backing it with, these cutting boards, will increase in value by, say, 10%. You can instil deflationary trends into cryptocurrencies by having a private company voluntarily commit, essentially making a social contract to honor it and if that social contract is believed to be, that it will be honored, then the value of it in the market should increase, right? [4:46] JT: Yeah, maybe so. [4:47] AL: We saw the first example of this. What I just gave you was a totally speculative example that deals with physical product and all that jazz. What weve seen in the last couple of months has been the release of the ProtoShares protocol, which had a very kind of difficult time but that is the first real example of this, almost like IPOcoin: thats the original name that I believe Charles Hoskinson gave to it this concept, right? What happens with ProtoShares is that if you are holding ProtoShares at the point that the company that backs it, Invictus Innovations, releases their next product which is also a blockchain product, also a new type of cryptocurrency, then it will be forked from ProtoShares. Instead of holding ProtoShares because you expect someone to want to give you more money for them later, youre holding ProtoShares because at distinct points in time you will get double... however many ProtoShares you hold, youll get whatever it is that Invictus just released on a one to one basis. [5:38] JT: Yeah, thats interesting. *5:40+ AL: Its a very different way of thinking about cryptocurrency because with cryptocurrency, like Bitcoin or Litecoin, it really is all about the network and to a large degree about fairness too. If its perceived that things happen in an unfair fashion with a currency thats supposed

to be completely neutral, then thats a very bad thing for the currency. If it happens with something thats backed by a private company, I dont know if thats necessarily the case anymore because really, the only factor in determining value is will the company deliver on their promise? Again, this is something thats being pioneered by Invictus but I really see the future of this is: you could have any company do this with any product. It works even better if you have something like software as a service, like DropBox, for example, that could create a coin that circulates and they would accept it as payment and they wouldnt even lose any money because they sell it back onto the market at whatever the market rate is. The market rate, in a free market, should reflect whatever discount theyre giving it for. [6:29] JT: Yeah. How would you compare that to what Amazons doing with Amazon coins? *6:32+ AL: Well the thing about Amazon coins is that there is no interchange. Each one is a walled garden. What Amazon has done is theyve created a little internal system very similar actually, to www.gyft.com is a gift card company thats now offering points back for buying gift cards with them. Its 1% back of the value if you spend with a credit card , or 2% back if you spend with PayPal and 3% back if you spend with bitcoin. The only difference between this and that is that in a situation where its a cryptocurrency first off, people dont earn them initially by buying them, they earn them initially by mining them, so they have a financial incentive because they got something at what they perceived to be a lower cost. It might have been a higher cost because of electricity but most people dont really thing about it like that. Running your computer is just sort of an expected cost in this day and age, it seems like. That really is the difference is what it allows you to do, is it allows you to take all of these little systems that are their own little ponds and connect the liquidity between them. In this case, right now, if I have points in Gyft and I want to spend points at Amazon, I cant do that but if both of these were running on cryptocurrencies, then Bitcoin would be the common thread that ties them altogether. Bitcoin is, essentially, the highway and each of these little private altcoins is an off ramp. Sometimes there are big developments at the off ramp and sometimes its just a couple of tumbleweeds and theres nothing really there. The point is, is that each one is connected to every other off ramp through the highway that is Bitcoin. [7:53] JT: Right. How does this compare to something like what Ripple is considering? Have you looked carefully into that? [7:59] AL: Ripple is like an infrastructure for running debt of other currencies on top of it. When you send bitcoin over the Ripple network, youre not really sending bitcoin; youre sending an IOU thats going to be redeemed at the other end. Thats why they have instant confirmations and stuff like that. Ripple, at its kind of base level from my perspective, is more about providing really fast liquidity, right? Its about liquidity between players who need a lot of liquidity and then they even up at some point. [8:24] JT: Its not that different from... well, its like a third party payment system for cryptocurrencies and other currencies. [8:30]

AL: Theyre not the only ones doing it too is the other thing thats really interesting. In a year, its going to still feel futuristic, I think, because the ways that it was built, they skipped a lot of steps. Theres another project in this space called MasterCoin, who Ive also been doing interviews with, thats kind of trying to do the same thing. Jeffrey, at their core, these are all attempts to take the Bitcoin currency system and turn it into something thats more. Weve seen this attempt before with ColoredCoins and they havent really caught a lot of traction. The idea is to ascribe smart property and the ownership of property onto actual currency or onto actual coins. Once youve got that infrastructure in place, then creating a new one for a new company is just as simple as saying OK, well heres a new one, heres the information that you need to fill out, heres the pitch you need to make, heres the guarantee you need to do and go for it, and you can do it. On the one hand, you could look at it almost like a marketing expense, right? Its as if youre putting coupons out there in the newspaper because, again, it doesnt cost the person anything except the work it takes to cut them out and bring it in and get to the store and all that jazz. At the point that you do, you can actually sell the coupons back into the market. The idea thats most interesting to me about this is the thought that the fundamentals of these cryptocurrencies can be based on things that are other than monetary fundamentals. To this point, I really had been thinking about cryptocurrency as a great solution to fix the currency problem and that was about it. Now, Im starting to think maybe this really is a solution that fixes everything. [9:51] JT: The experimentation here is absolutely essential and I think you make a compelling point and its very possible that .... Its hard for me to say that this is definitely the future but whats important is that cryptocurrency has sort of pioneered the possibility of entrepreneurship in this realm. Im fully prepared to be blown away and totally surprised by developments in the future. I dont see how anybody can say, in advance, for sure whats going to be what. I mean, I think we should have learned from Bitcoin, in particular, not that everybody has or were anywhere near this, that essentially weve lived in a market thats been devoid of entrepreneurship for, like, a hundred years. Its only now being unleashed so it would be a little bit crazy to expect that we know what the stable solution is. You know, that Bitcoin is going to replace it all and that will be the end of history. Therell be many other solutions among which things like 3rd party providers and debt based contracts and company based currencies, new forms of liquidity between companies and consumers. Were seeing a gradual evolution take place that went from a very primitive form of 3rd party payment systems that were built in the 1950s. Now theyre getting ever more sophisticated. I was at an Indian website a few days ago, that had probably something like 30 or 40 different payment options, one of which is Bitcoin. Were going to see ever more of these things but the point is, that the sanctioned system of the past that is basically a creation of the state with a handful of private companies has now been exploded into a new digital realm where theres communication across borders, where theres new forms of organising and association on a financial basis between companies all over the world and consumers all over the world. I think were just at the cusp of seeing what kind of innovations are going to be possible. All of which, ultimately, are anti-monopolistic. In other words, the current monopoly system that sort of dominates the world cant possibly survive this level of pressure. [11:47]

AL: Its been fascinating watching the price go up over the last couple of weeks with the pressure coming from China it seems like. From what I can tell, it feels like theyre about a year and a half, maybe two years behind where we are here in the Western world, as far as the general tone of the conversation thats going on there. They just happen to have a lot more people who are interested in it right now. Ive been trying to wrestle with the implications of what if $800, or $1000, or whatever level we wind up settling at what if this is the new normal. On the one hand, thats crazy and on the other hand we already saw it happen once. We saw the new normal go from being under $1 to over $100. I mean, if thats true then that means that if this is the new normal then theres going to be another new, new normal at some point in the future that will be even higher than this. [12:27] JT: Yeah. You know, its funny I was just looking at the charts this morning and I had these flashbacks to the harrowing days of, I think it was in April of this year, which seems like twenty years ago. I had only recently gotten interested in Bitcoin and it was just like right as I was kind of really getting interested and I think I was interested when it was $25 maybe and it reached up to $30 and everybody was screaming this is a bubble, right? Well, I was writing about it pretty intensely and in a few short weeks, we went from that straight up to $260. Of course, the people that were sceptics were saying this is unsustainable and indeed, it proved not to be sustainable and fell back to $80, so everybody was saying Bitcoin is dead. There were lots of publications that declared this, which amused me at the time because a fall from $260 back down to $80 still would have put it in double the territory where everybody had previously been claiming that it was a bubble. Youre right, people adapt to the price change and they assume its the new normal. It fell down to $80 and people were saying no, look Bitcoin is dead, its crashed. If you look from the point of view of the first of the year, just three months earlier, Bitcoin was $14. Anyway, the point of the chart that I was looking at this morning, if you look at the current run up and I think there is a high hit just this morning, really. The little rise and fall of this past April looks like just completely growing pains and not acting really notable at all. [13:57] AL: Right. [13:58] JT: It vanishes when we compare it to the whole sweep of whats happened. I mean, already today everybody is saying its in the bubble, its going to crash and people are ready to get out. That maybe true and theres no way to know for sure but its also equally possible that people will be kicking themselves for not having bought it at $800. [14:15] AL: Its just this what is normal and how fast can you acclimate to something being normal and is it really normal? I mean thats, of course, the other thing is that: one of the things I think has really been helpful for us actually, has been that common plaintive cry oh well, this is the end of Bitcoin. Every time theyre wrong about it being the end of Bitcoin, people are like, ok well that didnt happen again, I guess theyre just wrong. The boy who cries wolf thing kicks in after a certain point. [14:37] JT: Just this morning, I listened to this long debate between, Im not sure Id call it a debate; it was just kind of a back and forth between Stefan Molyneux and Peter Schiff. One thing I noticed about Schiff, in particular and his objections to Bitcoin is that they were sort of all over the map. He would barely finish with one objection when Molyneux would address it

and he would generate a new one. Somebody should chart this out and probably come up with 35 different problems he mentioned with Bitcoin, none of which were a decisive problem at all. There wasnt a single point that he could really hold onto and argue consistently throughout the entire debate because every point was just a little too weak, so he had to kind of keep moving on and moving on and moving on. [15:22]

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ANNOUNCEMENT: Happy holidays from Lets Talk Bitcoin. If you like the work were doing, we appreciate bitcoin tips of all sizes at www.letstalkbitcoin.com. Just as importantly, share the show with your peers and review the show on iTunes. Dont be kind, be honest. LTB reaches nearly 10,000 listeners but has less than 50 reviews anywhere I can find. Id very much appreciate your help in remedying this situation. Thanks for listening. [16:26] ______________________________

AL: Besides Peter Schiff, who do you think are the real critics out there being vocal about Bitcoin at this point? [16:35] JT: The whole Hard Money Crowd has been strangely out there in opposition to Bitcoin. Its funny to say, an opposition to because of course, it doesnt matter how much you like it or dont like it, Bitcoins going to do whatever it wants to do. Its a little strange. The other thing thats a little odd about the Hard Money Crowd is they keep comparing Bitcoin to gold. I dont know what relevance that has at all. Gold is just gold, its not money, its just gold. There hasnt been anything like money on the international level for some 40 years and its been 80 years since you could convert any dollars into gold at the domestic level. This is all basically, ancient history and mean, were talking about lifetimes ago. Theres absolute ly no chance that, unless youre just completely full of political fantasy, that governments of the world are going to somehow see to it to change their currencies from fiat back into gold, in order to establish sound money. I mean, thats not going to happen. Why does everybody keep comparing it to gold? Not only that, but its a terrible comparison. Gold is just not portable in the same way that cryptocurrency is. Its just not the thing for the internet age. [17:37]

AL: One of the big problems that come up over and over again is always this assumption that the price, even if the price is really high right now, if you actually try to sell a bunch at this price, well that would be a completely different matter. Of course, the implied assumption there is that in order to capture the value and spend the earnings that you have accumulated through speculating on Bitcoin, you have to convert it into some other type of currency in order to spend it. I mean, I think that thats really the fundamental prob lem that I see more often than not, is people just not appreciating that: its like saying to someone Ill pay you in a second, I have to go sell my cash real quick. The nomenclature just doesnt work. [18:09] JT: Yeah. You mean, the problem with Bitcoin is in order to realise your gains, you have to leave that ecosphere and enter into a government fiat currency? [18:17] AL: I think thats one of the common assumptions from people who dont actually do trade with Bitcoin. I dont know about you, I mean, I dont actually know how you use Bitcoin at all besides the very basics. I very, very rarely convert into dollars when Im going to spend bitcoin. Most of the time, Im spending bitcoin as bitcoin and sometimes its through a service that does conversion themselves. As a consumer, I dont care about that. I just care that Im able to capture the high value that I think I should be getting for it. *18:42+ JT: Ill tell you another objection Ive heard recently. It was in an audience I was sp eaking the other day, I think it was in Austin, Texas and then I read it again online somewhere. People say that the value of Bitcoin is entirely supported by its convertibility to the dollar and if it werent for that, then Bitcoin would not have any val ue at all. To me, this is looking at everything completely upside down. The point is, the value of Bitcoin comes from its convertibility to any goods and services and one of those goods is government paper money. [19:08] AL: Yes. [19:09] JT: Its not somehow that its dependent on the conversion into dollars as such. People quickly return no, no if youre going to acquire Bitcoin, then you have to buy them with dollars. Actually, thats not true. You can acquire Bitcoin with services that you render, some of the goods that you sell, you can sell anything for Bitcoin or perform any service for Bitcoin and you can bypass the dollar economy entirely and live within Bitcoin ecosphere coming and going really. This completely misses the point. I think a lot of the problems and the misunderstandings here, the conceptual difficulties people have here is that, they dont understand what it means for something to be an open source protocol living on a distributed network. Thats just too big an abstraction. People tend to think of Bitcoin as being a product being offered by a company, in the same way that a gold mining company might offer stocks or something like that, or like a stock to Amazon or something. They dont have a conception of Bitcoin as being an open source protocol that more or less, belongs to everybody that lives on distributed networks. That is, its not a proprietary company; its not an investment scheme. Its just a tool that takes advantage of cryptography and peer to peer networks and distributed networks and open sourced development models of software to achieve a kind of an ideal monetary situation, ideal for

now anyway. Thats just really difficult for people to .... If you havent been keeping up for the last twenty years and the changes and the way the world works and the way software works, then youre just going to have a hard time understanding that. The other thing Ive noticed about Bitcoin is that, its very difficult..... One of the things youll find with it are the opponents, people that are speaking out against it all the time, its difficult for them to admit what they dont know. I tweeted out yesterday show me a person who is opposed to Bitcoin and youll see a person who believes that he or she knows everything there is to know about it but, in fact, if you find a real expert on Bitcoin, you hear a real curiosity and a willingness to learn and watches the markets and follows the markets and be a little bit humble in the face of this amazing development. There is some principle that governs this but expertise, like ultimate final expertise in Bitcoin seems to be limited to those people who are dogmatically opposed to it just because they think they know things they dont. Let me just bring up too, a fascinating persistent complaint that keeps going on just because I was interviewed about this on from Wired Magazine, the other day. For some reason, Wired seems to have some editorial doubts about Bitcoin. I guess, theyve done an extensive number of articles and they think that theyve seized on one the other day. They noticed that it was deflationary. You brought this up at the beginning of this talk, that its deflationary. You cant have a money supply system thats deflationary. This is the ultimate nightmare. Its funny because I mean, I addressed this on two levels. Number one is that, the reason people are opposed to a deflationary monetary system is they think that thats a sort of a velocity killer, that as something is growing in value, people hold onto it and thats not what youre supposed to do with money. Youre supposed to spend money, your e not supposed to just hoard it and that hoarding it will cause liquidity traps, for example in old fashioned Keynesian terms. The first level of critique of that is to just observe empirically that yes, theoretically it would seem that people would be holding onto coins more if theyre growing in value just because, if you spend them now youre sor t of giving up profits you could realise later. The thing that you notice from talking to any of the companies that specialise in providing widgets online for spending bitcoins is that they boom in value when the price, in terms of dollars, is going up. In other words, when Bitcoin is becoming more valuable, they see the pace of spending dramatically increase not decrease. Were actually seeing empirically, the reverse of what theory would predict. Thats just a fact and Im just laying it out there. I just explained it just because, as Ive told the guy at Wired, the purpose of currency isnt just to hoard it forever. I mean, thats just kind of dumb. The whole purpose of currency is precisely to spend it. People need stuff and they want stuff and so they spend it. Its as simple as that. The pace of what you spend could go up and down with (??) conditions, but essentially you just think of it intuitively, a person who bought Bitcoin at $8 and its suddenly $800, theyre like Im going to use this stuff now. [23:24] AL: Right. [23:25] JT: So theres that and the second thing to observe about this whole deflationary fear is that its fundamentally based on nothing whatsoever. Its one of those kinds of fears that results from macro-economic text books, in which monetary economists lay out what they consider to be the ideal monetary system but its not actually based on any kind of fact. There are sectors of economic life that have been living in a state of deflation for twenty or thirty years. The most obvious example is computers and software. They have been falling in price for a very long time or another way to put it is that the value of the dollar has

grown, in terms of software, for thirty years now. Even some sectors of the clothing industry is the same way and other things and it hasnt actually harmed business. It hasnt led to liquidity traps and disasters for company profitability. If you go back further in time, you can look at the late 19th century when we actually did go on a government gold standard following the Civil War. We saw a continuous appreciation of the money, in terms of goods and services, all the way up until essentially until World War 1 and it also happened to be the highest gross period ever in American history. We were seeing 8-9% per annum economic growth. Theres really no evidence that somehow a currency thats rising in value is somehow harmful for economic growth. I think its just a fallacy. Were not used to it. Were not used to the fact that we can get money, hold it and then convert it later and get more for our money than we had before. Weve lived through a century of inflation, so we just dont think thats supposed to happen somehow. Probably, in a free market, it is supposed to happen. My final point on this is that Satoshi Nakamoto came up with this protocol and he threw it out there. If somebody doesnt like the fact that its a deflationary currency, then switch to something else. If you dont like it, dont use it. Ultimately, theres got to be some relationship between what people desire in a microeconomic sense and whats desirable in a macro-economic sense. [25:20] AL: The differentiating between the micro and the macro, I think, that is 100% the disconnect on this particular issue. Ive been thinking about this a lot because youre right, its a huge issue. People dont understand, they just assume that this hoarding thing is going to happen. From my experience, personally, not just with regards to Bitcoin but just broadly speaking, Ive had a variety of incomes over my life and the times when Ive spent a lot of money are times when Ive felt like I was really comfortable, like I could comfortably spend a lot of money without endangering my lifestyle at that current point. In the times when I havent spent a lot of money is when I dont have any money to spend and I dont feel like its a responsible decision for me to do that. With Bitcoin, its like I mean, the more the price goes up, the more I feel like I have the ability to spend it because I get to spend less. Thats been true for a lot of people that I know. I know that there certainly are some people who have their bitcoins on a flash drive stuck in a safety deposit box in three different banks all over the country and they never plan to touch it for ten years but I dont think that thats the majority of people because it doesnt make sense. *26:16+ JT: I think youre right to sort of rely on these intuitions. One of the things you notice about this form of economics has been conventionally taught at the economic level since about, conventionally since about 1940s, is that theres this great disconnect between whats good for the individual and whats good for society. Were always hearing about liquidity traps, for example, or the paradox of Sabien, so called. [26:37] AL: A liquidity trap in the context of the Keynesian argument that youre talking about here would be where everybody holds onto their dollars and saves them and because of that, there are very few dollars going around through the economy, and so there isnt enough liquidity, and so loans are required but theyre hard to get because nobody wants to lend, right? [26:54] JT: Right. The idea is that you might think its good for you to hold money but actually, its bad for you because the economy as a whole needs money circulating around in order to

kick-start it, to provide the grease, you know those weird metaphors that people use like grease and machines and other stuff. [27:10] AL: Right. [27:11] JT: That speaks to the, so called, paradox of Sabien. You might think its a good thing to save money. Actually, its a terrible thing to save money according to the Keynesian view. You hear presidents talk about this all the time. I remember after 9/11, George Bush was going around saying we could defeat the terrorism by going out and buying something. A lot of people had, I think, a very justified sense that maybe going into debt and squandering a bunch of money at a time of great uncertainty is probably not a good idea. The paradox of Sabien tries to tell people to do things that are against their own self interest. I think that any time you hear an economic theory that seems to drive a wedge between whats good for you and whats good for everybody else or good for society, that should be a first tipoff that theres something funny going on here. A lot of the fear of deflation really comes down to that. The Chicago Fed paper also, we should say something about that that came out. About three of four weeks ago, there was a big blast against Bitcoin and I wrote an article about it because I thought it was just hilarious. They were saying that Bitcoin was sort of a secretive, confused, highly complex currency that was controlled by a handful of developers operating in secret. As I read that sentence, I thought my god that sounds like a perfect description of the Federal Reserve, actually. [28:25] AL: That does seem to be more and more true. Whatever theyre saying, probably, theyre the ones doing it. [28:34] JT: It seemed like a massive act of Freudian projection of some sort. That entire paper was very strange. [28:39] AL: While were on the subject of central banks, the Central Bank of China, one of the governors of that, recently released a kind of cautiously optimistic statement about Bitcoin and again, it seems like this movement up in price has been largely driven by the seeming OKness of the Chinese Communist Party with their people converting Yuan into Bitcoin. That seems like its a real dangerous place, if thats what the price of Bitcoin is relying on right now. [29:05] JT: Yeah, if thats true. I dont know to what extent thats empir ically verified. [29:12] AL: BTC China has seen prices converted to US dollars. They only trade Yuan and Bitcoin. Converted to US dollars, theyve seen prices over $1,100, so most of the market right now, most of the exchanges that are seeing their price spike up, are happening through arbitrage trades that are going essentially from the US exchanges that have the lower price but you cant purchase in Yuan and then being arbitraged over to the BTC China, where it can achieve a 25% increase. [29:35] JT: I gather that China has some pretty severe exchange controls and Bitcoin has just escaped from that, right? At least, thats what people tell me. *29:45+

AL: Right. Thats been my impression, as well. Its hard to get good information out of China, it seems like. Again, the number of people who could give you good information about what the government is going to do but it seems like in the US, theres been a harder line stance where the impression has been that something, you know, they would do something about it, but maybe they actually wont do something about it. In China, the impression has been, theyre ok with it because these things have made their way onto state television and there have been a variety of documentaries, essentially encouraging people to look at this currency. Again, I dont think its possible to enforce currency controls once youve stepped away from controlled currency like the Yuan and moved into something like Bitcoin. [30:20] JT: Youve got to figure, too, that China is the ultimate situation where we have vast amount of (?? Crafty) laws. Theres tons of things on the books that exist, that are not really well enforced, that party officials themselves regret but they have no power to change them. One of the things we havent really talked about is that government is a kind of big industry, all over the world and government officials themselves, I would like to imagine that theyre all squeaky clean and wonderful and not accepting bribes and doing (??) and stuff like that but the fact is that the real business of government has an underground economy just as much as anywhere else does. Government officials need a way to accumulate wealth outside the purview of their colleagues and they need a way to receive bribes just to make things work right. In the past, you could rely to some extent on Swiss banking and that sort of thing, but thats less and less viable now. Im very interested in this idea that maybe governments around the world, individual members of cabinets, of staffs, of (?? old line) bureaucracies, will discover Bitcoin as a viable way to do business for themselves and be less likely to crack down on the private sector, just because they see so many personal advantages to it. Otherwise, its really difficult to explain how it is that China just had this laissez-faire attitude, unless that laissez-faire attitude has just become pervasive within the policy culture of Chinese government. I just dont know. *31:44+ AL: Or its worth poking the US dollar in the eye more than they care about preserving their own capital controls for the minority of people who are going to take advantage of this. I dont really know what the answer is but that definitely seems like its one of the important questions thats going to have to develop over 2014. Jeffrey, our time always goes by too fast. I look forward to continuing this conversation. Before we end it, are there any projects that youre working on right now that are new, that you want to talk about, or an ything that you want to plug? [32:09] JT: Im working on this full time now and Im developing this digital city called Liberty Me. The idea is to create an ultimate global communication network for liberty-minded people to talk about things like cryptocurrency and get good, solid information through information sharing. Theres no platform like that out there right now, so Im working and Ive got the best developers I know and the best technicians I know and using every tool that Ive got and try and put together this massive platform for this purpose, which will be a publishing platform and social network and well also be, of course, accepting Bitcoin at it. Its going to be very edgy and very advanced. Were talking about something like a Februar y 15th release and so we hope that goes well and we dazzle the world with the thing. [32:59]

AL: Jeffrey Tucker. Liberty.Me. Thank you very much for your time. [33:04] JT: Thats alright. *33:04+ ______________________________

DM: Beggars Can Be Choosers by the Bitcoin Monger of bitcoinmonger.tumbler.com performed by David Menes Who am I? What do I believe? These do not matter. I know what question you have and the answer is 1,240.2 bitcoins. I cant promise to update this re gularly, or at all, after this one but heres me thoughts on the ride so far and guesses on the future. Baby, arent you into that? Unlike some of the other early ones, I fortunately, do not have a wife. What I have is a long term girlfriend and under no legal obligation to spend any of my hoard to impress her dumb friends. Got in early, after talking about it for a week or so with her and never mentioning it again. Treat it as if it doesnt exist, check back in a year, was my thinking. She saw something about Bitcoin in USA Today and from there its been a Gestapo re-enactment in our apartment. Baby, how many did you buy? Did you keep them? Very few people know about my Bitcoin interest. I told her, at that point, not to tell her parents, not to tell her friends, no more than you would tell acquaintances you have a million in a duffle bag under the sofa. I explained that we need to continue to play the game of appearing middle class for the next year or two. Were like spies, I told her, trying to frame this in a playful way. So far, shes been good, to be honest. A relationship, no matter how great, wont stand between me and discarding the middle class, like a hermit crabs abandoning shell when the moment comes. If my hard-line stance on not selling too early ruins our relationship, thats fine. Then my potential access to other great women becomes x-1, whereas before, it was x. Thats still a lot of women. Where it will go? Im staying in for the same reasons I got in. If youve ever spent more money than you should on something that gives you pleasure, a weekend fishing trip in Wyoming, front row seats at Cirque du Soleil, whatever. You already understand this. I got in when I did with a bit more than I was comfortable with because of the very idea of Bitcoin brought me pleasure. A world where the Visa and MasterCard logo are forced to share space with Bitcoin Accepted Here. A world where bankers go to sleep at night stressed and watching their dwindling assets on the screen is a world where the rest of us can sleep well. Do I pity people who didnt get in early? Not at all. Im the guy who bought concert tickets six months out, got front row for a steal and youre the guy who bought it a month out, paid more for s**t seats. Youre still at the concert and thats what matters. That puts you way ah ead of the people who didnt buy tickets at all, who watch it on a shaky YouTube video the next day. Theyll be comfortably upper-middle class, freed from the treadmill. Ill be in Lala Land. Some people cant see. Bitcoin didnt go up 4100% in a year because of hype. Believe me, there are many who want to discredit Bitcoin and watch the whole thing tumble down. They just dont know how. You cant destroy the pious and Bitcoin is t he single most pious financial instrument humans have cooked up since the cuneiform ledger books of ancient Mesopotamia. Its going up because our world is changing. The Chinese have stopped hoarding US dollars, a shocking change in policy and many of my fellow USAers are sadly, unaware. We chant, USA, USA, until our vocal chords fry but that wont make our economic

privilege come back from the dead. The world is moving on without us. Go buy Madmen on DVD because thats the closest thing youll come to seeing another American Golden Age. Thats OK. Were still good people. We have still one of the most productive swaths of land on the planet. Well do OK but those who understand the shifts happening will do better than OK. Life changing has been misused by late night infomercials so many times, that when something actually is life changing, the sheep turn the other way and continue to munch on their delicious predictable grass. (??) Theres a coffee shop barista I go to often who looks like one of those hipsters youve seen in iPhone commercials. Shes supposed to know all about new trends but when I asked her if the shop has considered taking Bitcoin, I had to explain to her what a bitcoin was. Youve never heard of it? Really? I asked her, delighted. This is good news for the slightly less early adopters in my mind. That conversation sparked my curiosity and I spent an afternoon at the mall asking cashiers and clerks if they knew what Bitcoin was. The only person who knew anything was a young Asian dude selling tobacco vape pipes at a kiosk. Lottery logic. My background is in maths and finance, so apologies in advance for blatantly appealing to your base emotional instinct. Im going to do so anyways. Consider a lottery ticket. Youre not going to win. You know youre not going to win but you play anyways. Bitcoin is a lottery ticket you could actually win. Even if Bitcoin becomes more popular than Discover Card, which apparently still exists, it will make all of us more than satisfied. Bitcoin beggars. Im seeing more and more of these types on discussion boards that talk Bitcoin. Although, at first, it annoyed me (desperation is annoying, isnt it?), if Bitcoin werent perceived as valuable, people wouldnt be so swiftly giving up their social value and dignity in exchange for 0.5 bitcoins. The more beggars, the more confirmation that Bitcoin is money and I sometimes give, sending someone an unexpected tip for a job well done, a goody book on bitcoin wallet security, for example, or buying something from a small business that just started accepting Bitcoin. Its part of the responsibility that us early adopters must take on. What would Bruce Wayne do? Probably sit in his mansion for a year, hobbling around on his cane and put his paper wallet in a vault. Nah, bad example. In all seriousness though, there is a responsibility. The biggest threat to Bitcoin is that people wont actually use it. Have to give it a little to get a lot in return and sometimes that little tip or buying that florists arrangement with your bitcoin is the spark that converts them. You see something in their eye. Theyre a part of the club now, enlightened and they will spread the gospel to other shopkeepers. As a friend put it, youll never go broke by giving to people. Thats completely true. You only go broke when you selfishly try to make too much, too quickly with too little research or effort. I must admit, I did sell one bitcoin in a moment of weakness. I wanted money for a new laptop, the price went up significantly just after that, as if a sign from the gods. Selling that one bitcoin still f****g stings. Im not kidding. But the seeding Ive done hasnt hurt at all it feels good. (??) If it fails. If all goes to hell and my hoard becomes worth nothing, Ive been given the gift of an exciting internal life for the past few months. I wont regret any of this and reality sometimes, not always, rewards bravery. My ideology is the same. My belief in a new more fair world is the same. Bitcoin is fair. I wont get into the technical details, as you probably already know them but no bank offers you its equivalent of a blockchain to review at any time. No major currency today is as supply/demand market based as Bitcoin. Theres no wizard behind the curtain, theres just you and me hoping for a better future. One year from today, Im either back to where I was before this shared hallucination, which is completely OK, or Im in suite at the Waldorf Astoria in New York City for a three-day weekend treating my girlfriend to a bottle of champagne and giving her a

white gold necklace from Bergdorfs. Then, going to dinner at the steakhouse nearby my father took me to after I graduated college. I have this image very clearly held in my mind. I dont know you but I do wish you well. Rather than recommend anything technical wallets, websites etc., I want to ask you to watch There Will Be Blood on Netflix, if you havent seen it yet. Fantastic acting! The point where he strikes s ilver then falls down the well thats where I feel Bitcoin is at right now. We havent struck the real oil yet. *41:35+

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SM: Im here today talking with Joe, from Virginia. Joe is a miner, a Bitcoin miner, that is. I think its really interesting to get the perspective of different people who are just involved with Bitcoin in various ways, including by mining. Joe, welcome to Lets Talk Bitcoin, first of all. [42:35] Joe: Thank you for having me, Stephanie. [42:36] SM: I first met you when you contacted me through the show and you said that you were thinking about getting some Bitcoin mining hardware from KNC Miner, which is, well actually right now, its the only company that has shipped certain devices, I think its the 24 or 28 nanometer ASICs with those kind of specs. Theyve got the fastest hardware out there, right now. You didnt know that back in June when you first emailed me and you said hey Stephanie, what do you think about this? Do you think this is going to be worthwhile to get this hardware? Because, of course, at that time, it was on pre-order and also at the time, the price of Bitcoin was around $100 per bitcoin, so I wrote back and I said Well, you know, its your call, of course, but if you have the ability to do it, if youve got a credit card that has no interest for a year or something like that, it probably makes sense. It looks like KNC Miner is serious and theyre going to ship. Of course, that turned out to actually come true so, I was glad for that. [43:34] Joe: I just needed some community confirmation. The mining experience has been interesting. Im by no means a coder or an expert. Im just a regular guy who just got interested in Bitcoin and just threw my head into this and took a risk and it seemed to pay off although, in hindsight, I probably should have just bought the bitcoin. Who knows whats going to happen or what did happen. Hindsight is 20/20. Theyre making nice heaters right now because my house is really cold, so I dont have to use heat. *44:08+ SM: Yeah. That was the great thing about KNC shipping in November, as theyre just in time for the winter. [44:14] Joe: Exactly. [44:15] SM: Lets back up a little bit. I mentioned that you emailed me and asked sort of an opinion about getting this mining equipment. It sounded like you had already made up your mind that you wanted to get this equipment, you just wanted some validation or confirmation.

Tell me about your decision process? What were you thinking in June about whether I should buy this equipment? [44:36] Joe: It was a huge speculation. At the time, in June, I think Bitcoin was around $100 and it had just gone up, of course. I was thinking, its probably going to stay $100 and its difficulty remains approximately the same probably make a lot of money, but then as time went on in August, September, I got pretty nervous, difficulty going up and then October rolled around and difficultys going up and ..... *45:03+ SM: Yeah and Bitcoin price was staying the same, right? [45:07] Joe: Staying the same, mhmm. [45:08] SM: Those are kind of the two wild cards, right? The difficulty of the Bitcoin network, that is, how many bitcoins can you mine with a certain amount of hashing power and then also, what is the price of each bitcoin and that matters if youre not going to hold onto them necessarily, but youre going to use the bitcoins you mine to pay off your investment in the mining software. [45:26] Joe: Exactly. [45:26] SM: Did you actually crunch numbers and do calculations? Or did you just give a ballpark estimate? [45:32] Joe: I used a few mining calculators online. Theres a few good ones. Yeah I crunched tons of numbers, like every day, I would.... things would change the difficulty and the Bitcoin price and I would keep crunching numbers. As we got closer and closer, I got more and more nervous but things seemed to work out thanks to the Bitcoin gods and the $800 Bitcoin. [45:54] SM: So the price of Bitcoin currently has really impacted your bottom line, it sounds like? [45:59] Joe: Absolutely. [46:00] SM: You made the decision to buy this equipment and if you dont mind talking about it, how much of an investment did you make in the Bitcoin mining hardware? [46:08] Joe: Each KNC Jupiter was about $7,000, $7,100 with the Saturn to Jupiter upgrade. I had to pay a little more on the upgrade side. I had to buy a new modem, new wiring, PSUs did 1000 watt, PSUs, two of those they were $150 something each. All in all, Ive probably put about $15,000 ish into this and it seems to be a..... I seem to have got a return. [46:40] SM: OK. You put $15,000 in around June and then, now that youve received the miners, when did you actually receive the items? [46:50]

Joe: Actually, on October 14th, I was a (??day two) Jupiter owner and then I ordered another one and I got that one on October 17th. So October 14th and 17th. [47:03] SM: Yeah. So thats pretty close together. At this point now, youve been mining for a little over a month, is that right? [47:10] Joe: Correct. [47:10] SM: Yeah. OK. So were recording this on November 26th, just for anybody whos wanting to think about that. Youve been mining for little over a month and with whatever difficulty was going on at that time, and also with the current Bitcoin price, you say that youve made back your investment already? [47:29] Joe: Yes. That is correct. [47:31] SM: Wow. (Laughing) Wow. Yeah. I know KNC Miner was nervous about that because I talked to Sam Cole, one of the principals over there at KNC at the Inside Bitcoins conference in New York, in July and he said we really want our customers to make back their investment, basically, like we want this to be profitable for people and were going to do everything we can to help that happen. It sounds like it has worked out but there was also a factor in there that they couldnt control, which was the Bitcoin price. [48:01] Joe: Yes and the difficulty, of course. [48:02] SM: It seemed like they had a little influence over the difficulty because their machines were actually contributing to it quite a bit, right? There are no other companies who have single units that are as fast as theirs, that are shipping them. Its interesting because peopl e crunch all these numbers and they think well, is it going to be profitable or not to mine. Its kind of a thin margin, right? Then, something like this can happen, where theres a meteoric rise in the price of Bitcoin and then all those calculations kind of go out the window or they really need to be adjusted because nobody would have predicted the price of Bitcoin was going to rise seven or eight times. Thats interesting, so tell me about how you felt when the miners arrived on your doorstep. [48:43] Joe: Well, of course, I was tracking them and watching out the window every second wheres the UPS man? Even when he came, I was ready. I had everything in my mind and on my computer all set up. Of course, I didnt really have to have much on my computer set up. The KNCs came pretty well ready. You just plug them in and play and maybe apply some firmware and that was pretty much it. It was really simple. [49:09] SM: What software did you use to do the mining? Did it come with them? [49:12] Joe: It came with a built in CG miner. It was very well made, although the packing could have been a little better. I think some folks machines got kicked around during shipping and came over a little jumbled up with a lot of hardware errors for some folks. [49:30] SM: Yours were OK? [49:31]

Joe: One is good and the second one is a little handicapped but not too bad. I can t complain that much. [49:38] SM: What kind of speeds, what kind of hashing speeds are you getting with both of these machines? [49:43] Joe: When I first got it, it was about 550 and with firmware updates, probably around 565 and then the second.... [49:49] SM: Gigahashes per second, right? [49:51] Joe: Exactly. Gigahashes. The second one around 505 and then with firmware updates it kind of went to 535. [49:59] SM: The firmware really matters in terms of speed? [50:02] Joe: Yeah. It seemed to correct a few timing issues. [50:06] SM: Had you done any mining before this, or was this your first experience with Bitcoin mining? [50:11] Joe: Yeah. I did do some back in April, some mining on my iMac and Macbook Pro, which was pretty miniscule and just for fun. I got some USB sticks, which was just for fun, more or less, nothing really profitable there. [50:28] SM: You talking about the block erupters? [50:30] Joe: Yeah. The block erupters, exactly. [50:32] SM: Those were, if I recall correctly, about 300 megahashes per second, so those are a thousand times, no not a thousand times.... help me out here ... how much slower were those? [50:42] Joe: 300 megahashes, so it takes about three of them to get one gigahash, which was when they first came out, it was like oh wow, look at this and then all of a sudden, difficulty went boom and then everybody kind of got nothing really out of them. [50:57] SM: Right. Those are a thousand times slower than the Jupiter machines? [51:02] Joe: Oh yeah. Much, much, much slower. [51:04] SM: They must be fun to play with, Ive got to admit. *51:07+ Joe: Yeah, like a novelty. [51:08]

SM: You had done a little bit of mining before but just for fun and now, would you call yourself.... do you think that you could make a living as a miner? Obviously, you still have a day job, right? [51:19] Joe: Yeah. Im a pharmacist by day. Ive been thinking about it. KNC is coming out with another one. I dont know if thats.... [51:27] SM: I just saw that today, yeah. [51:29] Joe: I dont want to put out any bad press but unless Bitcoin price keeps going up, I dont know, Im just kind of sceptical on this one so I dont think I can make a living unless I was in it earlier, I think. Unless I was buying other companies products because other things are coming out between now and KNCs next release, so you have to keep on buying, buying and buying. I think it gets to a point for the personal individual youve got to make a decision to put the brakes on because you can get in over your head and all of a sudden and you just have a house full of mining equipment and have your air-conditioning bill through the roof. [52:13] SM: Youre running these out of your home. I know some people run them at work and get, basically free electricity, which is really their employers paying for it or maybe they run it from a college campus or something, where somebody else is paying the electricity bill. Is the cost of electricity a factor? How significant is that? [52:32] Joe: Im estimating my electric bill will probably be around $200/month, or maybe $250 and considering Bitcoin price at the moment, and the hashing power, thats really insignificant. I make that back in less than a day. [52:46] SM: Wow, thats great. *52:49+ Joe: Im not really too worried about that part. I am curious about what its going to be. I havent received my first bill yet but it should be coming any day now. The electric company is probably wondering what Im doing. *52:59+ SM: Yeah. I guess that could be a concern because its not out of this world and a lot of people who are into Bitcoin are, some might say, paranoid libertarian types but its not paranoia if youre right, right? *53:11+ Joe: Yeah, exactly. [53:13] SM: Its not out of this world to think that the cops might see a high electric bill and think is this person having a grow op, or something like that? [53:21] Joe: Another point Id like to bring up is the taxes. I actually called my CPA today. She didnt have any clue what I was talking about. I called her up and I said have you ever heard of Bitcoin? Shes like What? So, I just said Google it. I wasnt trying to.... I kind of use the analogy of digging for gold in your back yard and selling it. Thats something that Im really, really worried about: just selling on the exchanges and then the banks going

what are you doing? Im really taking a serious effort in keeping my papers and books all straight. I have a Excel file all set out with what I spent on mining and what Im selling and trying to keep it all straight and on the up and up because an honest man has nothing to hide. [54:09] SM: Its hard to know because you dont know what the rules are or what youre going to be expected to report on taxes, or whatever for mining. This is all kind of a new area so Im really curious to see how that plays out. Ive seen some ideas of what to do about Bitcoin taxes but it could be different for miners or it could be.... who knows?.... [54:33] Joe: Its kind of weird because bitcoins are already there. Were just getting them; were just going to get them. Its not like were creating them. Theyre already creat ed but theyre not solved, so to speak. It is a real grey area so Im just keeping the books right. Im going to be honest ... on the up and up and well see what happens. I just want to give my CPA a heads up now because.... [54:59] SM: Yeah. Shes got a couple of months to research it, right? [55:02] Joe: Exactly. [55:04] SM: I wonder because sometimes it can be such a thin margin on mining bitcoins, that I wonder if the taxes could make or break some people if theyre going to pay taxes on th e bitcoins that they mined. Could that put some people at a loss, or whatever. Im curious about that. [55:18] Joe: I think that if you have a small operation, its not going to be a big deal because Im using Coinbase so, know your customer rules and everything. If the information needed to be got, Im sure the powers that be could get it. I just want to be as transparent as possible with that regard. With the bitcoins that Im mining and the Bitcoin price, its hard to hide what youre making. *55:39] SM: Its hard to hide it if youre selling it, right? If youre not selling them, if youre just holding onto the bitcoins then, it doesnt seem like it would be too hard to hide, right? [55:49] Joe: True. [55:50] SM: If youre not selling it, youre not realising any capital gains, right? *55:55+ Joe: If youre holding the bitcoin, I dont think you need to report anything. I think its when you sell on the exchange, when you actually make a public transaction, I think thats when you really need to be careful. [56:06] SM: Im curious if you plan ... if the difficulty goes way up, like lets say a KNC Miner comes out with a new product, or some other company comes out of the woodwork and just makes a new product thats really, really fast and the difficulty goes way up and its no longer profitable in a couple of months, lets say aside from heating your house. Its spring,

its starting to warm up, you dont need to heat your house anymore and its no longer profitable, its costing you more electricity than youre making in Bitcoin are you still going to keep running those machines, or do you think youre going to turn them off? *56:34+ Joe: Thats something that Ive thought about and its something that I really dont know. By the time I get to that point, Ill probably make a decision but Im thinking Im probably going to run them for a little bit. If Im only making 0.1 coins a day, I think I might still do it because in ten days I can get the bitcoin. If it gets down to below 0.1 a day, I think I might have to turn them off. [56:55] SM: Below 0.1? Thats $100 right now. *56:58+ Joe: I know, exactly. Thats what Im saying. *57:01+ SM: If youre not making $100 a day, its not worth it? *57:03+ Joe: If Im not paying the electric bill, I guess its not worth it. At that point, its going to be warm enough to run the AC a little more, so you have to weigh all these factors. Youre asking beyond profitability. [57:15] SM: Actually, I do know people who have the strategy of well, I just got my 5 gigahash per second miner from Butterfly Labs a few weeks ago, even though its not really generating a lot of coin, its maybe making 0.01 or 0.0 something per day, Im still going to run it because Im just hold that bitcoin until it goes up and then able to make my money back, or whatever. [57:38] Joe: Yeah. Ill probably do that, to a degree. Maybe until 2016, when the 25 per block goes to 12.5, that could be another thing. Yeah, I have some Butterfly Labs things too. I actually, just got my last one in the mail yesterday. Im running those as well. [57:55] SM: Oh wow. Thats going to add a drop in the bucket to your ..... [58:01] Joe: A drop in the bucket. I think, like $5 a day. [58:03] SM: $5 a day invested in Bitcoin could be $50, $500 a day in a couple of years, you never know. [58:12] Joe: I know, really. Its so unpredictable. We dont know whats going to happen. *58:16+

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SM: Where do you see mining, or Bitcoin mining going in the future? Do you have any ideas? [59:21] Joe: I do have an idea in the far future. In the near future, I dont think anybody really knows. Within the next year, the difficultys probably going to level out, its going to plateau and we had a big hockey stick rise and it will even out I think after February. We have a little evening out right now, its kind of levelling off but I think its going to spike up a gain with a couple of other companies releasing and maybe level off again in the spring, then KNC again. Its just kind of like a little game they play. I think after about 2040, I think at that point, its going to be so hard to mine, I mean people.... I mean, assuming when you get to that point and everythings good and price thriving and everything, I think everybody will be mining at that point because people really wont be making tons of money on Bitcoin mining at that point because there wont be any more coins to get. At that point, well just be verifying transactions. [1:00:24] SM: The transaction fees would go to the miners, but thats miniscule compared to..... [1:00:28] Joe: Yeah. It would be miniscule and I think everybody will have a Bitcoin miner in their kitchen, at that point. Who knows whats going to happen but I think that it will be so mainstream at that point that everybody will have some sort of Bitcoin miner in their lives running in the background on such a level, like 1 nanometer chip in their phone, or whatever. [1:00:49] SM: So that would be the ultimate in decentralization if everybody had little chips in their phones and stuff like that. [1:00:55] Joe: Yeah. [1:00:56]

SM: Yeah. Im with you on that. I can see some kind of technology that gets built into devices, like Andreas likes to say you could mine with your light bulbs, or whatever. Just some kind of technology that takes unused or idle time on electronic devices and turns it into mining powers somehow. I think that would be really cool, if Bitcoin is still around at that point. Maybe, well be mining some other coin, or something else. [1:01:20] Joe: With that in mind, I thought about pointing these miners at altcoins. [1:01:23] SM: Oh yeah. Thanks for bringing that up. Tell me more about that. [1:01:26] Joe: Theres a PPCoin and theres a few other SHA256 coins out there that I could mine probably solo on a pretty good basis and the prices of those have been going up, as well. Its really amazing and scary, at the same time. [1:01:45] SM: Why is it scary? [1:01:48] Joe: Because, they just go up so fast and I just dont know what to expect in the future from these things. Are they going to crash and then come back up just kind of like Bitcoin did? Is there going to be a crash and are they going to go back up again? Who knows? Its just so unpredictable. To be specific, PPCoin I think is around $2-$4 right now. NovaCoin went up, like $17. [1:02:12] SM: Yeah. [1:02:13] Joe: Litecoin is up to $14 but of course, you cant mine that with the KNCs. I know Litecoins a scrypt basis, so I would have to get Bitcoins to buy Litecoins. As far as mining goes, I havent really researched into which altcoins to mine. I think I would just point them at the one thats most profitable at the moment. *1:02:33+ SM: How easy is it to do that? If you get a device thats set up to mine Bitcoins, how easy is it to make it mine PPCoins, or TerraCoins, or some other coin instead? [1:02:44] Joe: Its pretty simple, actually. If youre using a pool, you just change the miner configuration. For the KNCs, you can just change the line inside, in the password and just point it to your pool. To solo mine, you would just point it at your QT client. Of course, there are some other things you have to do there to get that set up but its really not that difficult. [1:03:03] SM: Have you done it? [1:03:05] Joe: I have done it but I havent gotten any coins from it. *1:03:08+ SM: So you tried solo mining? [1:03:10] Joe: I did try solo with my USB block eruptors for about two weeks and it got nothing. [1:03:17]

SM: Even with an altcoin thats relatively way less well known, or way less popular than Bitcoin, if youre using something like a block eruptor that gets a pretty decent speed I guess, maybe for the time, you still cant get a block solo mining? *1:03:32+ Joe: I calculated it out. I have nine USB sticks, so thats about 3 gigahashes. *1:03:41+ SM: Wow. Serious. [1:03:42] Joe: Yeah. When I did the calculations, its about 120ish days or so, or 160 days, I cant remember, to get a block on average. Of course, luck is a factor. I rented them for 20 days or so and I wasnt getting anything and that got me worried so like, am I doing this right? I guess theres a way you can test it. I didnt do that though, I didnt test the QT client like, what if scenario isnt working. I wasnt getting anything; I was worried it wasnt working right, so that also makes me worry about solo mining on these KNCs, whether Im doing it right or not. I think I would have to consult someone in person at a meetup or something to make sure I have all the variables ironed out. I think I could do it, Im just afraid that if I point them to solo mine, I have to wait 30 days or so, or whatever it is, to really see if its working. Its a scary endeavour. *1:04:41+ SM: Im hearing theres a little bit of unknown about whether the setup is correct but also theres an opportunity cost, right? Because you could be using them to mine Bitcoin, which you know and you can do and its straight forward, right? [1:04:52] Joe: Right. On the pools. [1:04:52] SM: Do you ever look at the profitability ratios on some of the mining pools? Some of them actually, have a display that says its 2 x as profitable to just mine PPCoins instead of mining bitcoins and then trade the PPCoins for bitcoins. [1:05:10] Joe: Yeah, there are sites out there that do a little calculation for you. Right now, Bitcoin is just off the chart profitable. Theres no way.... I mean, since the rise, other coins are not nearly as profitable. Just get bitcoins and buy the other coins and trade them on the exchanges. Before the rise, when Bitcoin was around $120, some days, PPCoin would be more profitable. There was a point where ZetaCoin was more profitable. There were a couple of days where I did mine some ZetaCoins, just for fun. [1:05:41] SM: Then did you trade them for bitcoins. [1:05:44] Joe: Theyre just still sitting in my pool. *1:05:46+ SM: OK. So you hung onto them? [1:05:47] Joe: Yeah. I didnt even pull them out of the pool. I dont even have the QT client for those. [1:05:52] SM: Right. Where are you going to put them? (Laughing) [1:05:55]

Joe: I know. I dont know what to do with them. Its just fun. Its just fun to mine. I love it. [1:06:00] SM: It sounds like fun. Thank you so much for talking about this. Is there anything else you wanted to add? [1:06:06] Joe: For people that are wanting to get into mining, I dont think its really a good point right now. I mean, this is my opinion of course. I think that if youre going to get into mining, you have to really speculate on a rise of Bitcoin price. Difficultys definitely going to go up, its going to get harder and with all these new companies coming out, you have to have your foot in the door months ago. If youre going to get in right now, its really, really difficult. I think the people that are mining already, like myself and other people with other companies with their foot in the door for January, February, actually December people are going to ship, you got to have your foot in the door. If you want to get into Bitcoin, just buy the bitcoin. [1:06:52] SM: OK. One last question about that, actually. If you had taken the amount of fiat, basically, that you spent on the mining hardware and invested into Bitcoin, would you be doing better now than if you had just bought the mining stuff? [1:07:07] Joe: I would be doing astronomically better. [1:07:10] SM: OK. Yeah, thats what a lot of people say. It wouldnt be so much fun, right? *1:07:15+ Joe: Right. Exactly and you cant have a nice story to tell. *1:07:19+ SM: Thank you so much, once again. This was great to talk with you, Joe. Now back to the show. [1:07:25] Joe: Thank you, Stephanie. [1:07:25]

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CREDITS: AL: Thanks for listening to Episode 63 of Lets Talk Bitcoin. The Future of Money, with Jeffrey Tucker, was produced by Adam B. Levine, edited by Matthew Zipkin and featured Jeffrey Tucker and Adam B. Levine Beggars Can Be Choosers was written by the Bitcoin Monger, produced and edited by Adam B. Levine and featured David Menes Joe the Miner was produced by Stephanie Murphy, edited by Adam B. Levine and featured Joe the Miner and Stephanie Murphy Music was provided by Jared Rubens

Questions or comments? Email adam@letstalkbitcoin.com Have a good one! [1:08:02]