Hi, I'm Max Keiser.
This is the Keiser Report.
It's all about peace and love.
Stacey?
I thought this episode was about quantum theory.
Oh, okay.
It's all about quantum theory and love.
Well, you know, everybody is always mentioning the fact that what happens when we have quantum
computers and then bitcoins destroyed.
And one theory actually I saw was that somebody suggested that we'll know that quantum computers
exist if Satoshi Nakamoto, the real one, the real Satoshi, if his bitcoin ever moved, the
million bitcoin that he mined.
That's an excellent point.
It would be a safeguard.
It would be a signpost.
It would be an indication that quantum computer had hacked into the bitcoin protocol in a
significant way.
What about all this quantum computer?
Is it here?
Are we in danger?
Is it all happening?
Is it unraveling?
It's a tweet I saw from Stacey Herbert.
And oh, that's me.
Crypto is already quantum.
Whoever looks at it observes whatever they want to see.
And this is in response to all of these regulators in the US.
You know, we have more regulators in the United States than we have intelligence agencies.
And they all want in on bitcoin and cryptocurrencies.
And they're determining what it is.
So here's a succinct tweet from Minds Fiction.
And he says crypto is considered property by the IRS, money by the Treasury Department,
commodities by the CFTC, and securities by the SEC in before CDC declares crypto a pandemic.
Isn't this fascinating?
They can't really decide what it is.
You know, all these regulatory agencies looking at it and they see it as a reflection of themselves
in some way.
There is a case to be made that it does resemble to some degree a commodity.
I've said that since 2011.
There is an emerging asset class that is none of the above.
Somebody made the comment that it's like a duck-billed platypus, right?
It's got features from all these things in one thing.
And you wouldn't think it would work, but it does work.
So it's not really any of those things.
It is a unique asset class.
We haven't seen anything new in the world of finance and asset classes in hundreds of
years really.
This is the first thing we've seen new in such a long time.
And so that's why it's so interesting to see how regulators approach this because they
don't really have the tools yet to regulate it in the way that they've come accustomed
to.
There needs to be a new agency spawned.
You sound exactly like Brian Quintez, who is a commissioner at the CFTC.
And some of your quotes are almost exactly as he recites looking at cryptocurrency.
But before then, I just want to point out that what has happened in the past week, week
and a half, is that we've seen a federal judge, a US federal judge, determine that the CFTC
can basically go after Bitcoin as a commodity.
We've also seen the SEC obviously say that all of the tokens that they look at, that
they see them as securities.
And then we saw FinCEN in the United States determine that exchanges are basically money
trans murders so that Bitcoin and cryptocurrencies are money.
So Marco Santori, who is a crypto lawyer, he pointed out that that's technically and
legally impossible for an asset to be both money and a security.
It can only be one or the other.
Right.
So it's going to be regulatory mayhem.
And as they cancel each other out, potentially, they won't work together, of course.
They'll probably just create a mishmash.
I thought you said for a moment that it was considered to be a trans murder, I heard you
say, which was interesting because it would be killing the old fiat world and ushering
in the new world of crypto, which is transforming the global finance in a big way.
It's going to have the biggest impact in countries and in regions of the world that have no formal
banking in place now.
So across Africa and other places is where the crypto revolution is really going to take
hold.
It won't be in London or New York.
Well, we'll see.
Time will tell.
And of course, part of the problem has been that while Bitcoin itself is an amazing innovation
that nobody could figure out what it is, but it is and it works, is that many of the people
who have made it big in the Bitcoin space lack the imagination to come up with their
own words and phrases.
So they use words like ICO, which taunts the SEC saying who they are the regulator for
IPOs.
So calling yours not an initial public offering, but an initial coin offering only taunts them
and says, hey, over here, come here, regulate me.
So the model for this is Skype.
The creators of Skype and they totally destroyed the long distance market in the telephony
business.
They purposely never refer to it as telephones or they use none of those nomenclatures.
Voice over internet protocol.
They just did stuff to totally avoid that and they snuck in and they established ubiquity
before the regulators could shut them down.
In the Bitcoin space, they used the word coin itself as problematic, ICO was problematic.
They shouldn't have gone with tokens as it should have been a bit token or something
token originally.
They should have avoided all the words and nomenclature referring to money from the day one.
And they would have avoided a lot of these issues.
Now I mentioned Brian Quintens from the, he's a commissioner at the CFTC, the Commodities
Futures Trading Commission.
And here's a headline from CoinDesk where he says crypto industry should self-regulate
says CFTC commissioner.
Regulations can take years to develop.
So why wait when you can self-regulate?
That's the message US Commodity Futures Trading Commission commissioner Brian Quintens delivered
to the audience at the DC blockchain summit last week.
I believe that a private cryptocurrency oversight body could bridge the gap between the status
quo and future government regulatory action.
He told the audience in his keynote address.
Quintens also suggested that a cryptocurrency self regulatory organization or an SRO could
have an impact beyond the US market and could potentially take on global significance.
He goes into all this that that cryptocurrency is actually many things and that's why so
many regulators want in on it.
But this notion that how about self-regulating?
Why not come up with your own regulations?
And part of this is that the ecosystem of cryptocurrency, while there's no one voice
to speak for Bitcoin, there's no Satoshi Nakamoto.
We don't know who he or she or they were.
There are also many libertarians and anarchists who want nothing to do with government.
So nobody wants to have any sort of regulations.
But there are obvious scams out there.
Many of the ICOs were obvious scams.
And who is within the community is going to step forward and say, we need to end this.
Look, nobody buys Bitcoin.
They escape fiat.
That's what gives it value is the crumbling fiat world.
Because fiat doesn't work, Bitcoin emerged.
And there have been attempts to bring some kind of oversight or regulatory body or type
of panel to get a Bitcoin foundation, for example, came and went.
And that didn't really work.
It doesn't.
The idea of having a centralized force in this way doesn't work.
And it's already self-regulated.
The protocol regulates itself.
It doesn't need an outside regulator to regulate it.
If somebody wants to come along and try to encourage best practices and encourage how
to get good wallets and how to protect your individual sovereignty, that's a great idea.
But the state is not going to come forward and say, here's how we're going to help you
create your individual sovereignty so you're not reliant on the state by promoting best
practices in the Bitcoin space.
So the state is not going to do that.
And all these regulators are functions of the state.
So they're not going to be helpful in any way.
A lot of people would say that getting wrecked is self-regulation.
That's the way to get regulated.
It's like you should have done your due diligence.
You sort of studied a little bit more.
Well, the markets used to be like that until 1987.
The crash of 87 brought about the plunge protection team of Reagan, Robert Rubin, Alan Greenspan.
They started buying and selling stock futures in the open market for the first time in American
history, guiding the price of the Dow Jones so that nobody had to experience a down day.
And this is the beginning of the collapse of the American economy in any way.
So you can't apply that to everything in life.
It's like Catholicism without hell.
You need the good and the bad.
You need capitalism to work both winners and losers.
You can't bail out every single bank that gets into trouble.
You can't bail out every single crony capitalist that needs free money.
You got to let the system weed out the losers, otherwise you end up with a state controlled,
state maintained price fixing regime by the state that resembles all failed such experiments
of the past.
Why not just let the free market be the free market?
Well, here's Brian Quintez and of course he is a regulator.
He's at the CFTC.
And when Quintez remarked in the interview that Bitcoin is absolutely clearly not a security,
it is absolutely a commodity.
He also said that the aforementioned agencies and others should avoid reducing the broader
space to one type of product.
In reality, it's a very broad array of innovative products that have been created.
Some are very simple.
Some are very complex.
Some have utility functions.
Some have security like features.
Some have payments associated with them or returns or ownership.
Or sure, some could have voting rights.
You get into a very murky landscape very quickly as you go through the diversity of the landscape
here.
Let me help this fella understand what's going on.
You know, here in North America, we are faced with an invasion of the tigerfish.
Not just in North America, but in Florida in particular.
In Florida in particular.
Because they released this fish that's natural to another part of the world in Asia.
It came in and it is now devastating the ecosystem.
Now Bitcoin is the tigerfish of money.
It entered into an ecosystem dominated by the US dollar fiat currency and it now is
eating it.
It's destroying it.
It's pushing it out of the way and there's nothing you can do about it.
And because it has evolved, it's a quantum leap.
We started talking about quantum physics.
Electrons, they're in one orbit or another.
There's no in-between.
You can't land on a fraction.
It replaces a corrupt, broken system with a new, better system, full stop.
You can't do anything about it.
Game over.
You can try and fumble around and waste a lot of money, but as you will, of course,
because that's your nature.
But again, to use another analogy of the frog and the scorpion.
The frog taking the scorpion over the river and he says, I'll do it, but don't sting
me.
And sure enough, the scorpion stings the frog and they both drown and the frog says, why
did you do it?
And he says, because that's my nature.
The crypto is going to be here to stay.
Regulators will try to destroy it, even though it's stupid to do so because it's their nature.
They don't have the comprehensive abilities intellectually to understand the seismic paradigm
shift that they are trying to deal with.
My God, we're already out of time already.
What?
Well, I think you mean lionfish, not tigerfish, and they have no known predator in the Caribbean.
They do in the Pacific Ocean, but not in the Caribbean.
So that is part of the problem why it overproduced.
The same thing happened up until the introduction of Bitcoin is the US dollar had no known predator.
And then Bitcoin became the- Thank you for making sense of my analogy.
Okay.
So the analogy has been cleaned up in the following way.
It's lionfish and not tigerfish.
There's no known predators, which is why they- dominance, and Fiat had no known predators
up until Bitcoin.
Is that it?
Is that what we're saying?
Exactly.
I've clarified- I've decrypted your analogy and at the same time cleaned up your code,
which had misprinted tigerfish rather than lionfish.
It's all so wonderful.
Don't go away.
More coming your way.
Stay right there.
For our World Cup 2018 coverage, we've signed one of the greatest goalkeepers of all time.
But there was one more question.
And by the way, who's going to be our coach?
Guys, I know you are nervous.
It's a huge tournament and a huge amount of pressure.
Cameraman, you have to dominate the center of the pitch.
But I'll be with you and we'll show the world a great game, the greatest game.
You are the rock at the back, nobody gets past you.
We need you to get down the wing.
Let's go.
Hello.
I'm Jose Mourinho and I'm really happy to join the RT team for the 2018 World Cup in
Russia.
Meet the special one.
Come on, drop the fish here.
Next, Jose Mourinho, the RT team's latest addition.
Make the letter, Speaker.
Is that any better, Jose?
Good.
American type of human rights is a corrupt notion.
Take the example of Yemen.
You see, there is a genocide over there going on.
Then just look who is supporting who, American and British and a number of other European
countries, they are very generous, they lend their support to the aggressor.
So what kind of human rights is that in which the life of millions of children and women
does not count?
Well, the pirate thing we kind of adopted because we were called pirates for so long.
I've been there in the small boats, next to the harpoon ships and it's scary.
Down the bus to stop his engine.
The levels of the big top fish, already 90% of it are gone and it won't recover.
We counted 15 scoops, 75 tons of tuna and they do it several times a day with a big
fleet.
So now you get an idea why the ocean is overfished.
We have to understand we cannot stay still and just be witness of the ongoing disaster.
I'm doing this because I want the future generations to enjoy the ocean how we have.
Welcome back to the Kaiser Report, I'm Max Keiser, it's time to turn to Jameson Lopp
of Casa Hodel, or Hodel, depending on how you pronounce that, Jameson, welcome back.
Great to be here.
Alright, first tell us about Casa Hodel.
Sure, yeah, so we're just going by Casa, you know, the problem is some squatter has
the Casa Twitter account, so Casa Hodel on Twitter for now.
But in general, what we're trying to do is facilitate the ability for people to be their
own Bitcoin bank.
And you know, we've been given this promise for so many years that with Bitcoin you can
be your own bank, but to be honest, a lot of people don't want to go to the trouble
of being their own bank.
So we've learned a lot over the past few years, you know, I've spent three years working at
BitGo doing multi-sig enterprise, hot wallets, and now I'm kind of transitioning to focus
on the individuals.
I think there's a gap here where, especially with the price runups over the years, we have
a lot of extremely wealthy crypto people in the space who are not doing their due diligence
to really be their own bank.
And so...
Right, so a lot of people want to be their own bank, but they're not engaging that.
It's hard to do, right?
So you're trying to come to market with a product or something that will make that easier.
So how is it the product is easier, or how?
Right, so we really want to make it as simple as having an app on your mobile phone that
you're just following wizard instructions, and we're going to enable the security by
having a three-of-five multi-sig wallet where most of those keys are going to be on different
hardware wallets.
So you'll then have your hardware wallets that you'll geographically separate and have
in different secure locations, and we'll be providing full service, best practice advice,
and you know, phone and email support if you have any questions.
Okay, so this is a startup, right here in the Raleigh-Durham area.
Well, we are all over the place.
We have people in multiple states around the United States.
Okay, so well, good luck with that.
We'll keep close tabs on it.
Let's talk about crypto and Bitcoin in the big picture here.
So 2017 was the year of Ethereum, ICOs, the Great Bitcoin Civil War, which resulted in
the summer of fork, not the summer of love.
What do you have to look forward to in 2018?
A lot more of the forking for sure.
In fact, you know, there are some people who have said that we could expect as many as
50 different Bitcoin forks as it becomes easier for people to do that.
For the uninitiated out there, quickly, a Bitcoin fork is?
What we're specifically talking about is a Bitcoin blockchain fork.
There have been software forks of Bitcoin for many years.
But the idea being that you say, you know, at a specific block height or specific date,
we are going to create a new divergent history of the Bitcoin blockchain, and everyone who
had bitcoins at that time now has the new tokens on the new chain.
And you know, you can change any of the rules of the protocol that you want to.
And that is resulted in people doing a lot of very interesting, creative things.
And this, of course, as we alluded to, created a tremendous, I would say, drama in 2017,
the summer of 2017.
And the it seemed like the forces of quote unquote good prevailed, I guess that one camp
would say, and which gave a segwit.
And as a result, now we have the stages set for a lot of development coming, lightning,
Schnorr signatures, bulletproof simplicity.
Let's talk about these, because this is really some people would argue that the crypto to
look at most assiduously would be the crypto with the best technology.
And Bitcoin seems to attract the best technologists.
And let's talk about these things.
So lightning network is, where's the status of that?
What does it mean?
We have progressed pretty far, even just in the past few months, where now there's actual
usable lightning software, where you can either run on the test net, or if you're feeling
particularly adventurous, you can actually run it on main net.
But there are definitely still some bugs in there that are needing to get fleshed out.
So we're not recommending putting actual value behind it yet.
But you can go to lightning.network and see a lot of the development and apps that people
are building.
All right.
Schnorr signatures.
So that's a little bit further out, probably be at least a year or so before we see people
actually using it.
But that's going to be a really under the hood thing, where I think the average user
isn't going to directly see much from it.
We're going to see more efficiency gains, basically, from individuals and people who
are receiving lots of transactions and then having to spend all of those UTXOs.
So it's really just a consolidation of the signatures to make the transactions more compact,
use less block space, and therefore be cheaper on the fees.
So this all kind of falls under the heading of scaling.
And this has been an ongoing debate of the Bitcoin space is not scaling fast enough.
It's not scaling the way people like it.
People create forks.
They don't like the way it's scaling.
Consider the view that it's scaling exactly as it needs to scale.
There's no fast or slow to scaling.
It's scaling as it is.
The protocol was launched in January of 2009, and it's doing exactly what we can expect
it to do, no more or less.
Is that a fair statement?
Yeah.
I mean, I spent 10 years doing web app development and specifically scaling problems in web apps.
And the way that scaling works is you become more popular and you hit some bottlenecks
that it hurts, it's painful, and that's your incentive to then make changes to make
it more scalable.
And this is a cycle that will repeat over and over, probably in perpetuity.
The way that encryption works, of course, is that it's a lot easier to create encryption
than to decrypt.
So there's asymmetry involved.
And this is part of the reason this is really the basis of the whole proof of work algorithm.
But it's also going to be said that it's a lot easier to create an altcoin or a fork
coin than it is to create Bitcoin.
In other words, you see this.
So is this an attack vector?
In your view, in other words, people can come out with lots of coins and lots of forks and
it gobbles up lots of cash on the sidelines.
And does it swamp the space?
Does it attract regulators?
Does it stink in a way that's unhealthy?
What are your thoughts?
Yeah.
I mean, it has created a branding war.
It's been a real brain drain for a lot of people in the community arguing about what
is the real Bitcoin.
Also from a technical standpoint, when I was working at Bitco, it was causing a lot of
developer drain for us having to expend a lot of resources to support various forks.
And it's unclear how the long-term viability of those different things is going to end
up.
All right.
Let's get back to our list of scaling initiatives that are coming down the road here.
Bulletproofs.
Bulletproofs is going to give us better privacy, which I think a lot of people have been waiting
to see in Bitcoin.
So we've had these various ideas for things like confidential transactions.
And then Zcash, for example, is doing their zero-knowledge proofs.
But in general, these great privacy advancements, they have a lot of bloat to them.
They require a lot of data.
And of course, with the block size being restricted, you want to use as little data as possible.
Bulletproofs are going to enable us to do these more privacy-centric signature schemes without
requiring huge transactions.
You know, going back to 2014 or so, when a lot of these altcoins came into being, it
was in response to, a lot of people believe, the scaling issue in terms of the slowness
of scaling, et cetera.
And so a lot of coins that are focused on privacy, you mentioned Zcash there, Monero,
even Dash.
Are these coins, are these developments going to essentially cannibalize those coins to
a degree?
Is there anything that can be done in an altcoin that can't be done on Bitcoin?
Well, from a long-term standpoint, technically, Bitcoin or any of these protocols can theoretically
be changed to do anything.
Of course, we've seen the social dynamics tend to make that a lot more complicated.
But I can say, for example, Monero is already working on implementing bulletproofs because
it's going to be a huge advantage to their efficiency.
Now, Litecoin, of course, brought Segwit in first.
So you can argue Charlie Lee and those guys, they pushed the ball forward in a lot of ways,
and it showed it worked.
So that was a net, I think, a positive thing that was done in this space.
Let's go down our list.
Okay, here's one.
Mimble Wimble.
I guess it's another Harry Potter reference.
It is.
It is.
And the project that's implementing Mimble Wimble is actually called the Grin Project.
And this is very exciting, cutting-edge stuff that I can't even claim to fully understand
myself.
But suffice to say that they're really rethinking a blockchain such that they're targeting
extreme privacy and extreme scalability at the same time, which we haven't seen before.
The easiest way to describe it is that a block in Mimble Wimble only really has one transaction
in it, regardless of how many people are transacting with each other.
These are all second-layer apps.
Mimble Wimble will be its own separate blockchain.
At the moment, it's just a test network.
So the name of the company is going to be Casa Hodel?
Is that the formal name of the company?
Just Casa.
It's just Casa.
We call it Casa Hodel.
Okay.
You're coming to this from what you perceive to be the number one issue for adoption, I
think, or a big issue for adoption.
And talking about adoption now, people are starting to get a bit nervous about all the
regulatory heat that's coming on.
And we've said for many years that Bitcoin to the regulators dropped dead.
That's been our message.
It's self-regulating in a sense.
And it's like another attack vector that needs to be overcome because the regulators, after
all, were regulating all the banks in 2008.
In the Genesis block, there's a note right there, Chancellor on brink of second bailout
for banks.
So Bitcoin and the regulators are essentially oil and water in a lot of ways.
Where do you think we are in this?
Are the regulators going to burn themselves out trying to regulate Bitcoin?
Because they still don't understand that some call it a commodity, some a currency, some
a security.
They can't even decide what it is.
Are they going to burn themselves out and we're going to overcome this hurdle, James?
Well I don't know if it's that they can't decide what it is.
I see it more as every regulatory agency is going to define these crypto assets in whatever
way behooves them to have the most control over deciding how certain entities interact
with them.
We're going to see a lot of regulation that is going to put some pressure on the custodians
of these assets, especially the exchanges or in the case of ICOs and tokens, whoever
is issuing these new possible securities.
And so we haven't really seen any governments try to regulate these protocols themselves.
That would be interesting to see if they actually go that far.
But I think that they at least understand that you can't regulate data or a protocol.
They have to focus on regulating specific people that are in their jurisdiction.
Right.
Hence Satoshi Nakamoto is anonymous and also we've often said many times that the exchanges
are kind of the vulnerability, the weak point in this whole process.
And so clearly this is where they're starting to attack.
And I think trends like Poloniex, which has now been bought out by Circle, which is a
huge back up by Goldman Sachs, it might portend a trend where the big banks decide to get
into this business by dominating those exchanges and then they can go to work kicking off coins
that they don't like.
Can you stay for another segment?
You bet.
All right.
Well, that's going to do it for this edition of the Kaiser Report between Axe Kaiser and
Stacey Herbert.
We'd like to thank our guest Jameson Lopp.
He is with CASA or CASA HODL, depending.
If you want to catch us on Twitter, it's Kaiser Report.
Until next time.
Take care.