The Ben Shapiro Show - Avichal Garg | The Ben Shapiro Show Sunday Special Ep. 123

00:00:00.000 So the real question, I think, for the banks, the payment companies, or anybody built on the legacy systems, is do you get disrupted and go to zero over the next 20 years?

00:00:08.000 Or do you embrace this stuff, go through a really, really difficult transition, and upend your entire organization, but survive to get to the other side?

00:00:15.000 Because at this point, I think it's no longer an if-this-thing-will-happen question.

00:00:18.000 It's really a when-will-this-thing-happen question.

00:00:22.000 This year's Super Bowl was nicknamed the Crypto Bowl by critics after four major cryptocurrency services made first-time appearances in the biggest broadcasting event of the year.

00:00:31.000 The ads boasted numerous celebrities, adding to the growing list of A-listers embracing Bitcoin and other cryptocurrencies.

00:00:37.000 I want to talk about why.

00:00:39.000 My guest today is Avishal Garg.

00:00:41.000 He joins to explain crypto in the most coherent and intelligible way I've heard yet, and to tell us how crypto, as we currently understand it, is just the beginning of a coming financial industry revolution.

00:00:50.000 Avishal worked at Google and Facebook, generating billions in revenue before co-founding Electric Capital, an investing firm developing the foremost leaders in Web3, a term meaning the reimagining of our existing technologies, which we'll unpack in our conversation.

00:01:04.000 Web3 especially includes innovation surrounding crypto, something Avishal has been following since 2010.

00:01:09.000 In this episode, we'll dive into the phenomenon and evaluate the naysayers and their critiques of this new alternative.

00:01:15.000 Plus, our thoughts on the government's discussions to back their own crypto coin, whether to approach crypto more as a currency or a commodity, and much more.

00:01:22.000 Hey hey, welcome to This is the Ben Shapiro Show Sundays special.

00:01:37.000 This show is sponsored by ExpressVPN.

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00:01:44.000 Just a reminder, we'll be doing some bonus questions at the end with Avishal.

00:01:47.000 The only way to get access to that part of the conversation is to become a member.

00:01:50.000 Head on over to dailywire.com.

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00:01:53.000 You'll have access to all the full conversations with every one of our awesome guests.

00:01:57.000 We'll get to Avishal in just one moment.

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00:03:07.000 Abhishek, thanks so much for joining the show.

00:03:08.000 Really appreciate it.

00:03:09.000 Ben, great to see you.

00:03:09.000 Thanks for having me.

00:03:11.000 So for a lot of folks who are watching the Super Bowl, they've been hearing about crypto for a while, but suddenly they saw a bunch of ads for crypto.

00:03:17.000 And for people who don't know anything about crypto, it sort of felt like pets.com or monster.com or the dot-com era commercials, where there are suddenly 10 ads on the Super Bowl about a thing you've never heard about.

00:03:27.000 And so you sort of wonder, is this thing worth anything or is it a giant scam?

00:03:30.000 So why don't we start with this?

00:03:31.000 What is cryptocurrency and why should people care about it?

00:03:33.000 Yeah, it's a great question.

00:03:34.000 Great place to start.

00:03:36.000 Cryptocurrency is just simply a way to transfer value peer-to-peer on the internet.

00:03:40.000 It's very, very simple.

00:03:41.000 I mean, there's a lot of technology that goes behind it, but at its core, it's just a simple way to transfer value with no intermediaries.

00:03:48.000 So how does that differ from, say, PayPal or from using your credit card?

00:03:52.000 Yeah, with PayPal or your credit card or sending money through a bank, at the end of the day, there's an intermediary in the middle, right?

00:03:57.000 There's an institution, there's a bank that sort of sits there and has a ledger and says, you know, Avital wants to transfer money to Ben, I can do that in my database and I reconcile those accounts and the money settles out.

00:04:08.000 With cryptocurrency, I can send it to you and it gets transferred on a blockchain with a bunch of computers all over the world that are maintaining that distributed ledger.

00:04:16.000 So, you know, there is a ledger there that tracks who has what, but it's done using 2020s computer science and distributed systems.

00:04:23.000 And so you don't need a bank in the middle.

00:04:25.000 You don't need a company in the middle that's deciding who has how much money.

00:04:28.000 And as a consequence of that, it makes it much more censorship resistant, and it makes it possible for people to do this.

00:04:34.000 For example, if you're a journalist in China, it may be possible to transfer money without the government stopping you.

00:04:41.000 And so there are a lot of cases where having an intermediary in the middle can create a lot of downstream consequences.

00:04:47.000 And so this is a way for people to do that and be able to transfer money without those intermediaries.

00:04:52.000 So I think for folks who've never really talked about cryptocurrency or studied cryptocurrency, the very name of it seems kind of off-putting and sounds like it is sort of black market, drug trading, because it's crypto, it's secret.

00:05:03.000 And then you mentioned the term blockchain there.

00:05:04.000 So what does cryptocurrency mean?

00:05:06.000 Why is it crypto?

00:05:07.000 And what does blockchain have to do with any of this?

00:05:09.000 What is blockchain?

00:05:10.000 Yeah, so it's funny.

00:05:11.000 Cryptocurrency, the root of that comes from cryptography.

00:05:13.000 So there's a field in computer science, which is essentially math, that talks about how to encrypt and decrypt information.

00:05:20.000 I mean, this has roots going all the way back to World War II.

00:05:23.000 And so if people have read about the Enigma machines or how the U.S.

00:05:28.000 was communicating in a secure way so that the Nazis couldn't understand what we were talking about, the roots of this stuff go back to that era.

00:05:36.000 And so it's a field that's been around for a long time.

00:05:38.000 And one of the fundamental properties of these cryptocurrencies is in order for me to be able to transfer it to you, I need to have those degrees of security.

00:05:46.000 I need to be able to do it securely so that other people can't take my money.

00:05:49.000 And so the foundations of this are in cryptography from computer science, hence the term cryptocurrency.

00:05:56.000 You're right, it can be a little off-putting or it sounds a little scary and it's a technical term and I think what will probably happen over the next decade is we'll probably stop using that term in that way because it is a little sort of off-putting.

00:06:07.000 To your question around blockchain, blockchain is just a data structure.

00:06:10.000 It's just a way to store information in these systems and you can think of it essentially as a type of a database.

00:06:16.000 It just happens to have certain properties.

00:06:19.000 There's sort of the strict technical definition that a computer scientist would use.

00:06:23.000 There's sort of the layman's definition these days, which is really a blockchain is just a way to store data in this open way where anybody can access that data.

00:06:31.000 Now, that's not to say it's not private or it's not secure.

00:06:34.000 It's just that the state of the data is open.

00:06:36.000 So, you know, if you think about we're talking about PayPal, With PayPal, I don't know who has how much.

00:06:41.000 I don't know how much money is sitting in their accounts.

00:06:43.000 I don't know if they're solvent.

00:06:44.000 There are all these questions I might ask about a financial system.

00:06:47.000 And in a blockchain-based system, essentially what we've done is we've opened up access to a lot of that data so you can run those kinds of queries in aggregate.

00:06:54.000 And so it's just a shared state that everybody in the world can read from or write to, subject to certain rules about who has access to sort of do that in a secure way.

00:07:02.000 So you can think of it just as an open database, basically.

00:07:06.000 So one of the things that's kind of interesting about this whole branch of finance is how many terms it uses from sort of different areas of life that really have very little to do with those areas of life.

00:07:16.000 So for example, when you hear about mining, when you hear like Bitcoin mining, people tend to think of actual like Snow White and the Seven Dwarves in a mine, actually digging jewels out of something.

00:07:24.000 But that actually has to do with the cryptography you're talking about, correct?

00:07:27.000 Correct.

00:07:27.000 Yeah, it's not somebody sitting there with a pickaxe, you know, in a cave, like trying to pull something out of the earth.

00:07:32.000 Yeah, it's a term that sort of, a lot of these terms do sort of have their own meanings in this universe.

00:07:37.000 In this case, all it means is you're using computers essentially to solve a puzzle, a cryptographic puzzle.

00:07:43.000 And if you happen to be one of the, if you happen to own the computer that solves that puzzle, you win a prize.

00:07:49.000 And the prize that you win is those Bitcoin.

00:07:51.000 So it's sort of like stumbling upon, you know, gold in a mine.

00:07:54.000 You happen to have sort of put your pickaxe into the earth.

00:07:57.000 In this case, of course, there's no physical pickaxe and no physical earth.

00:07:59.000 You're sort of solving this cryptographic puzzle.

00:08:01.000 And if you solve the puzzle, then you earn some Bitcoin.

00:08:04.000 And it just sort of psychologically, I think it's a little bit easier for people to get their heads around the term mining as a simplified version of what's really happening.

00:08:11.000 But yeah, at scale, it's really a cryptographic puzzle that's being solved.

00:08:14.000 So in a second, I want to ask you about broader kind of cryptography and cryptocurrencies, because there are many different types.

00:08:20.000 So let's start with Bitcoin because this is the one that people are familiar with.

00:08:23.000 So the big question that's been asked by everybody from Paul Krugman to various other sort of commentators, financial commentators, is why Bitcoin should be a thing.

00:08:34.000 What they argue is that essentially there's no value to Bitcoin It's all in people's heads.

00:08:40.000 It's not like an actual physical dollar backed by the full faith and credit of the United States government.

00:08:45.000 It's not like a piece of gold which you can trade in the world markets.

00:08:48.000 It's really just a creation almost of a false scarcity around nothing.

00:08:52.000 So how do you explain to folks what Bitcoin is and why they should care about owning it?

00:08:57.000 Yeah, well, so obviously not investment advice, but I think the way I think about this is if you look at something like gold or really, frankly, any commodity, you know, you can enumerate the properties of that commodity, right?

00:09:08.000 You can say, you know, why is it valuable?

00:09:11.000 Why do people want it?

00:09:12.000 Well, there's some fundamental utility, right?

00:09:13.000 Gold you can do things with.

00:09:14.000 You can have teeth fillings.

00:09:16.000 It gets used in electronics.

00:09:18.000 But it has a number of other properties, right?

00:09:19.000 It's fungible.

00:09:20.000 It's scarce.

00:09:23.000 You know, it's hard to forge.

00:09:24.000 It's durable, right?

00:09:25.000 It doesn't tarnish.

00:09:26.000 So you can start to enumerate these properties of gold.

00:09:29.000 And when you look at something like Bitcoin, it turns out it has basically all of those same properties.

00:09:32.000 It's easy to transfer.

00:09:34.000 It's hard to forge.

00:09:35.000 It's fungible.

00:09:36.000 It's durable.

00:09:37.000 You know, it's not going to degrade.

00:09:38.000 It doesn't tarnish.

00:09:39.000 It has a large global market where people are trading these things and it's a highly liquid global market.

00:09:43.000 I can transfer it to you easily.

00:09:45.000 So, you know, literally when you stack rank it next to something like gold, it basically has all of the same properties from a utilitarian perspective.

00:09:52.000 Now, the one property that it doesn't have, which is I think where folks like Krugman jump in is, well, it's so volatile.

00:09:57.000 How can it behave like some sort of store value or potential store value if it's so volatile?

00:10:02.000 And to that I say, well, it may be volatile relative to the U.S.

00:10:05.000 dollar today, and that volatility is coming down over time, but it's certainly not volatile compared to, let's say, the Venezuelan bolivar, right?

00:10:13.000 Or you look around the world at countries' currencies that are inflating away, and you would, in my opinion, you would much rather have Bitcoin than many of the currencies in the world.

00:10:21.000 And so it's really a question of relative to what base currency you're comparing.

00:10:24.000 I think we're very fortunate as American citizens that we have the U.S.

00:10:28.000 dollar.

00:10:29.000 But you know over time that volatility is coming down and I don't think it's so much of a stretch to say you know 5, 10, 20 years from now the volatility comes down sufficiently such that actually even relative to the U.S.

00:10:40.000 dollar it's potentially a great store of value.

00:10:41.000 And that's sort of the fundamental fork I think that a lot of people think about with Bitcoin is that one day if it actually does do that Well, when you put it next to something like gold, it's actually better in every dimension.

00:10:50.000 It's easier to transfer.

00:10:52.000 It's not just durable in the way that gold's durable.

00:10:57.000 It's permanent because it's digital.

00:10:58.000 It's harder to forge.

00:11:01.000 The markets are even more liquid because it's digital.

00:11:03.000 On every dimension that you think gold is valuable, this ends up being potentially even more valuable.

00:11:07.000 And that's kind of the fundamental thing that a lot of people in this space will sort of start with to say, wow, this is actually In a lot of ways, I think people talk about this as millennial gold.

00:11:15.000 If you look at the demographics of this stuff, the people who really seem to get it are basically people that are under 40.

00:11:21.000 And for them, if your entire life has been digital from the time you were a kid, why would you want physical gold?

00:11:28.000 Digital gold is clearly better.

00:11:29.000 So a couple of the properties of gold or currency that obviously may make them popular is the fact that, as you mentioned, they're a store of value and also that they are usable in transactions.

00:11:39.000 And right now, Bitcoin is a store of value.

00:11:42.000 I think that Krugman and Nouriel Roubini, people like that, they worry that it's not enough of a store of value, that eventually it'll go to zero.

00:11:48.000 People will drop out of it.

00:11:49.000 It'll be like owning, you know, Dutch flower bulbs way back in the 16th century but it is a store value for the moment at the very least but it seems less tradable so it's used in certain transactions but right now because it is so volatile it's difficult for companies to accept it as payment so if you're a car company like Tesla and you accept Bitcoin as a form of currency you could have just sold your car for half of what it's worth depending on what happens with the Bitcoin over the course of the next week or theoretically I could have paid twice what the Tesla was

00:12:17.000 worth depending on what happens to the value of Bitcoin so this creates a bit of a chicken or an egg problem in terms of the the growth of the number of people who are using Bitcoin so it's the idea here that As Bitcoin becomes more of a store of value against things like the dollar and against centralized government currencies, that it will then continue to be used in more and more transactions because it'll be more stable?

00:12:38.000 Or is it the other way around, that it'll start being used in more and more transactions as an alternative to the dollar because people want to be able to cut out the middleman or whatever fees are associated with that and therefore it gains in value, do you think?

00:12:47.000 Yeah, it's a little of both.

00:12:48.000 I think it depends on the market that you're talking about.

00:12:50.000 So I think when you're talking about the developed markets, it's more likely that the volatility needs to come down before people start thinking of it as a means of exchange.

00:12:56.000 And that will take some time.

00:12:58.000 And there are people working on things like the Lightning Network built on top of Bitcoin.

00:13:01.000 So even companies like Block, formerly known as Square, have invested a lot in trying to make those sorts of payment rails possible.

00:13:08.000 But I think in the developed world, it's going to take some time.

00:13:10.000 It's going to take some time for the volatility to come down for people to want to use it as a means of payment.

00:13:16.000 In parts of the developing world, you know, Latin America, Venezuela, Lebanon, Turkey, where the currency is inflating away like crazy, you would much rather move your assets into something like Bitcoin and actually transact in Bitcoin because the volatility is actually less relative to your fiat.

00:13:30.000 So I think in parts of the world this is already going to start to happen.

00:13:33.000 So in a second, Avishal, I want to ask you about government treatment of Bitcoin and cryptocurrency generally, because from what you're saying, you can already sort of see the dangers to a lot of centralized governments who could be threatened by the fact that there are currencies outside of their own.

00:13:45.000 We'll get to that in just one second.

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00:14:53.000 Okay, so let's talk about how government is treating cryptocurrency.

00:14:57.000 So we've seen a wide variety of approaches to cryptocurrency.

00:14:59.000 You can see why governments that inflate their currency, governments that have large-scale centralized control of their currency, are really worried about Bitcoin because it can end around the system.

00:15:08.000 So just over the course of the last week or so, we saw the Canadian government use the Emergencies Act to crack down on banking.

00:15:15.000 If you have a bank account and you're seeking to transfer money, for example, to the Freedom Convoy, whether or not they're engaged in criminal activity, Now the Canadian government can freeze or seize some of that money based on no actual legal ruling.

00:15:27.000 They can do this based on some sort of emergency declaration.

00:15:30.000 And the problem for a lot of these governments is that Bitcoin can end around all of that.

00:15:34.000 If you have a wallet and I have a wallet, I can just transfer you the money directly without having to work through any of the financial institutions.

00:15:41.000 And governments seem to have very little control over that.

00:15:43.000 So it's a danger for a lot of governments in terms of if they wish to prevent certain types of transactions from happening.

00:15:49.000 It's also on a value level a difficult thing for governments to handle because the simple fact is that if you have a repository of value that is then transferable, why would you use This is something that FDR recognized at the very beginning of the Great Depression when he basically centralized enormous amounts of outstanding gold.

00:16:05.000 Do you see governments, for both reasons, trying to crack down on cryptocurrencies?

00:16:11.000 Yeah, it's an excellent observation.

00:16:12.000 I mean, I think the censorship-resistant nature of it makes it very, very powerful.

00:16:16.000 And it's what has drawn so many people to it.

00:16:18.000 You know, I think to the U.S.

00:16:19.000 government's credit, they've actually embraced the fact that this is effectively a commodity.

00:16:23.000 And that's why we now have a features-driven ETF.

00:16:27.000 We have derivatives markets.

00:16:28.000 And so actually, it's a pretty robust market inside the U.S.

00:16:31.000 I think it is extremely threatening to authoritarian governments.

00:16:34.000 And so you see, for example, China banning this.

00:16:37.000 And you know, a good rule of thumb, generally speaking, is if the Chinese government tries to control it or ban it, you should probably pay attention because it's meaningful. 0.97

00:16:43.000 Like there's something real happening there.

00:16:46.000 And so, you know, for authoritarian governments, I think it is potentially very threatening.

00:16:50.000 Fortunately for us in the U.S., I think the government has actually been pretty forward-thinking and actually green-lighting Bitcoin and not trying to sort of shut it down or make it go away.

00:17:00.000 You know, the place where I think this gets even more interesting, which we can talk about, are when you start thinking beyond Bitcoin and use cases like stablecoins, where it starts to bump up against things that look like fiat currencies but are actually built on these distributed blockchains.

00:17:14.000 You know, what are the use cases for those and how might governments think about those?

00:17:17.000 I think it gets even more complex and challenging.

00:17:19.000 But fortunately for us, Bitcoin has actually been greenlit in the U.S.

00:17:22.000 So let's talk about stable coins for a second.

00:17:23.000 So stable coins are essentially bitcoins, but pegged to the value of the dollar.

00:17:27.000 So they're not free-floating currency.

00:17:29.000 When you trade stable coins, you're essentially trading a digital form of the U.S.

00:17:33.000 dollar.

00:17:34.000 The Federal Reserve has been talking about creating a Fed coin, which seems quite scary to me, frankly, because the idea that I would have a wallet with the Federal Reserve, that the Federal Reserve then gets to control, is somewhat terrifying to me.

00:17:46.000 How do you think that the government ought to be treating things like stable coins, and why do stable coins threaten fiat currencies?

00:17:52.000 Yeah, it's a great question.

00:17:53.000 I actually don't think stablecoins threaten fiat currencies.

00:17:56.000 I think if the government is smart about this, they're going to embrace it.

00:17:58.000 Now, to your point around the CBDCs, the Central Bank Digital Currencies, I think there are two flavors of that.

00:18:04.000 You know, some governments are saying, let's do this, let's upgrade the 1970s infrastructure that our banking systems use.

00:18:11.000 You know, you sort of print money and you put it into the commercial banking system and then that goes out to the retail banking system.

00:18:16.000 That actually seems pretty reasonable to me.

00:18:17.000 Like, if you're going to upgrade the infrastructure that we built 50 years ago, let's go ahead and make that, you know, modern.

00:18:22.000 Let's make it with 2020's computer science and distributed systems.

00:18:25.000 That seems very reasonable.

00:18:26.000 I think once you start getting into sort of version two of this that some governments are talking about, and some people in the U.S.

00:18:32.000 are talking about, some politicians are talking about, where you actually have a direct account at the Fed and they sort of circumvent the existing banking system and try to go direct to retail, I think that gets really risky.

00:18:42.000 Because at that point, you're talking about a much more centralized system where governments have full visibility potentially into what you're doing day to day and where your money is going and what you're doing with it.

00:18:53.000 And this is the sort of system that actually, for example, the Chinese CBDC is pushing towards, full visibility by the government 100% of the time into what you're doing, which can be very scary.

00:19:03.000 Now, I think the private markets have actually done something really interesting here.

00:19:07.000 It's taken so long for the Fed to move forward in embracing these technologies that the private markets have sort of solved this.

00:19:14.000 They've said, you know what, we can just put a dollar in a U.S.

00:19:17.000 bank account and we will issue a cryptographic token on a blockchain like Ethereum which is pegged to that dollar.

00:19:23.000 So a dollar sitting in a bank account gives you one US dollar pegged token.

00:19:28.000 And now I can send that to somebody 24-7 on a weekend and it'll get there in seconds or minutes which is far, far...

00:19:34.000 If you've tried to send a wire, far better to use these systems.

00:19:39.000 And so the private markets have kind of solved this problem already.

00:19:41.000 And so I think actually what the government should be doing when it comes to stablecoins is leaning into them and embracing them, because it's such a better system for the end user.

00:19:51.000 And actually, I mean, if you think about what is the US dollar and what role does it really play when you start thinking geopolitically and start thinking about internationally, It is a tremendous, tremendous tool for the U.S.

00:20:00.000 government.

00:20:01.000 The fact that so many commodities, so much trade in the world is denominated in U.S.

00:20:05.000 dollars means that the dollar is a tool of national security for the U.S.

00:20:11.000 government.

00:20:11.000 And so I think it's actually in the government's best interest to embrace stablecoins and actually try to push them as far into the world as we can because there's a lot of demand for dollars in the world.

00:20:19.000 You know, if you're talking about Latin America, West Africa, Southeast Asia, there are very, very large, you know, billions of people in the world that would rather have dollars than their local fiat currencies.

00:20:29.000 And now we can actually get them dollars.

00:20:30.000 We can get them dollars on their phone.

00:20:32.000 And that actually, I think, would be a tremendous tool for the United States government.

00:20:36.000 I mean, you know, if you look at what's happening in Ukraine right now or what's happening with Russia, you know, the threat that we have, the tool that we really have to push back is financial sanctions, right?

00:20:46.000 And so the ability for the U.S. to sort of have influence in the world through the dollar is a tremendous tool.

00:20:51.000 And I think if we actually embraced these private stable coins and allowed them to proliferate, it would actually be tremendously great for the United States.

00:20:57.000 And I think...

00:20:58.000 You know, some politicians are starting to get their heads around that.

00:21:01.000 The challenge is that it's scary, right?

00:21:04.000 It's a new technology.

00:21:05.000 And I think that the sort of gut reaction from a lot of people in government at first is to recoil and to say, how do we control this?

00:21:11.000 And that's sort of the starting point.

00:21:13.000 And it feels scary if you can't.

00:21:15.000 But I think if they sort of got their heads around it, I think a lot of people would say, actually, this is really, really good for us and we should embrace it.

00:21:20.000 So this does bring up some of the security concerns that people have talked about with regard to cryptocurrencies.

00:21:25.000 Security concerns like the fact that if somebody steals your password, they can basically take all your money.

00:21:29.000 There's no sort of recompense.

00:21:31.000 Security concerns about the transfer of cryptocurrencies across international borders.

00:21:35.000 The case has been made by folks who are enemies of cryptocurrency.

00:21:39.000 They suggest that it's very difficult to track or that it's more difficult to track down people who are doing it because even if you don't own the cryptocurrency directly, which would at least be transparent, You can own a computer that owns the cryptocurrency or you can have several parties removed.

00:21:51.000 What sort of security risks exist with cryptocurrency or maybe are being overstated by opponents of crypto?

00:21:56.000 Yeah, everything that you mentioned that I think opponents would say is a bug, I think is a feature.

00:22:01.000 So for example, the fact that I can now have privacy, I think is a great thing.

00:22:05.000 I think privacy is a fundamental human right, and I should be able to do what I want with my money.

00:22:10.000 Now, I think there are real questions about what happens when people move these monies internationally, or what do they do with them on the other side, and we actually already have tools for that.

00:22:19.000 We actually have You know, KYC and AML regulations that banks have to follow, right?

00:22:24.000 If you deposit a lot of money into a bank, they're going to ask you, where did that money come from?

00:22:28.000 And what are the source of funds?

00:22:30.000 And if you try to, you know, go, if you claim no income and you go buy a Ferrari, you know, probably your neighbors are going to see that and the IRS finds out, right?

00:22:38.000 Like we actually have tooling to sort of prevent these things.

00:22:40.000 So I actually think, you know, giving people back their privacy in a world where we've lost so much of that privacy over the last 25 years is actually a good thing.

00:22:49.000 And actually these systems are built in such a way that, you know, if the government wants to come in and say, you know, I need a subpoena, I have a subpoena, I think you might be doing something illegal, please show me your records.

00:23:00.000 That's a very reasonable request, you know, assuming it's gone through due process.

00:23:05.000 And these systems actually allow for that.

00:23:06.000 So, you know, not only can I have privacy, but if the government says, you know, prove to me that you did the right thing, I actually have a record of all my transactions.

00:23:12.000 And so, I think that's a great thing.

00:23:14.000 You know, when it comes to things like losing your private keys, again, you know, I think here this is a feature, not a bug.

00:23:21.000 The fact that I can self-custody my assets is tremendously powerful.

00:23:24.000 Right back to the idea of censorship resistance, the idea that I can own my own money and some bank can't just decide to shut me off for, you know, some reason, right?

00:23:31.000 And I think this cuts across the political spectrum, right?

00:23:34.000 If you're on the left and you care about certain things, you know, whether it's healthcare or whether it's cannabis, you know, the banking system shuts you off for that stuff all the time.

00:23:44.000 And you know, if you're on the right, if you're thinking about Second Amendment, if you're thinking about free speech, if you're thinking about privacy, you know, like these things are really important.

00:23:51.000 And so I think this cuts across the whole political spectrum to say, you know what, like third party companies that are opaque shouldn't just be able to decide who does what.

00:23:59.000 That seems unfair.

00:24:00.000 That seems anti-American.

00:24:02.000 And so people owning their own assets, I think, is actually fantastic.

00:24:06.000 Now, there are risks, as you mentioned.

00:24:07.000 Like, you could lose your assets.

00:24:09.000 But I think what's going to happen is that the technology, as it gets better and better, will start to address these.

00:24:13.000 And so, you know, you have password recovery options that, for example, could be social.

00:24:17.000 So let's say, you know, you have your private keys.

00:24:20.000 Perhaps you lose them.

00:24:22.000 But maybe what you've done as part of the wallet app that you use is said, you know what?

00:24:26.000 My mom, my dad, my sister, my cousin, like, these are people I trust.

00:24:31.000 And if four out of five of them all say, oh yeah, yeah, that's Ben, give him back his password, let him get access to his funds, you could actually do that, right?

00:24:39.000 So there are actually technological solutions to prevent people from losing their keys now in ways that I think make it actually usable.

00:24:45.000 So I actually think if people actually understood what was happening here, the opponents of this stuff and the critics of this stuff, they would realize that most of the things that they say are bugs are actually features.

00:24:54.000 So in a second, I want to ask you about the entrenched interests that are opposed to this, including the banking system.

00:24:58.000 We'll get to that in just one second.

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00:26:16.000 So let's talk about some of the people who have a stake in crypto not succeeding.

00:26:21.000 And here I would include what it seems to me are some of the banking systems.

00:26:25.000 So the fact is every time you use a credit card you have seven, eight different agencies that are sitting between you and the person who's supposed to receive the money.

00:26:31.000 All those are entrenched interests that are completely defeated by crypto, where I can instantaneously transfer the asset in a trustless system that doesn't require their verification.

00:26:39.000 These are some of the most powerful forces in American public life.

00:26:41.000 I mean, these are major corporations with huge dollars behind them.

00:26:44.000 You're talking about an entire banking system that works hand-in-glove with the federal government on a variety of levels.

00:26:49.000 What sort of systems are going to have to be disintermediated here in order to assure the continuation of crypto?

00:26:56.000 Yeah, I think this upends the entire financial industry.

00:26:59.000 The thought process that we've gone through, and I think a lot of people in crypto have gone through, is the realization that when money becomes digital, when it's ones and zeros, money becomes a platform.

00:27:10.000 That means you can program this money.

00:27:12.000 You can have code written around these ones and zeros.

00:27:15.000 And if you think about it, a lot of the world, whether it's payments, or wills, or trusts, or mortgages, or securities, a lot of the world is basically just a pile of money with access rules around it, like who can access that money, and then here's what you need to do with that money over the next 10, 20, 30 years.

00:27:34.000 And all of a sudden, we have ways to do that that are orders of magnitude, 1,000x better, 1,000x more efficient than these systems that the banks and payment systems are using today.

00:27:43.000 And so it's a tremendous threat to them.

00:27:45.000 It disintermediates them.

00:27:46.000 It reimagines and upends that entire industry.

00:27:49.000 And so I think over the next 10, 20 years, what's going to happen is that these much more efficient systems come along.

00:27:54.000 And for the end consumer, you're going to look at it and say, wait, I can have a thing that gives me a better interest rate, or I can have a thing that settles 24-7.

00:28:01.000 I can send money on a weekend.

00:28:03.000 It's less for me to transfer money to family overseas.

00:28:08.000 The utility is such that I think eventually the technology will win out.

00:28:11.000 So the real question, I think, for the banks, the payment companies, or anybody built on the legacy systems, is do you get disrupted and go to zero over the next 20 years?

00:28:20.000 Or do you embrace this stuff, go through a really, really difficult transition, and upend your entire organization, but survive to get to the other side?

00:28:26.000 Because at this point, I think it's no longer an if-this-thing-will-happen question.

00:28:30.000 It's really a when-will-this-thing-happen question.

00:28:33.000 If you look at the data around this stuff, for example, Uh, especially when you look at the demographics.

00:28:38.000 I mean, we talk about this as a massive, massive demographic shift.

00:28:42.000 You know, 25% of millennials own crypto.

00:28:47.000 If you look at the wealthiest millennials, 80% of millennial millionaires own crypto.

00:28:52.000 If you look at the preference for using these technologies, over a third of people under 40 would rather have crypto than stocks.

00:29:02.000 And so the usage and acceptance of these systems is going through the roof when you look at the demographics, especially when you look at young people.

00:29:08.000 And so it's an inevitability, in my opinion.

00:29:11.000 As the population grows up, as the people who are in their 20s, 30s, and 40s grow up over the next 20 years, they're going to prefer these systems.

00:29:19.000 And so as a business, I think the question you have to be asking is actually, I think, very similar to the question politicians have to be asking, which is, well, if this is coming and it's inevitable and everybody that wants this stuff is going from being 20 to being 40, and going from being 40 to being 60, and they have all the money, and they have all the power, what do you do?

00:29:37.000 Which side of history do you want to be on?

00:29:38.000 And I think the answer is very clear.

00:29:40.000 So I want to dig down a little bit with you on some of the creative uses that you're talking about with regard to blockchain technology and cryptocurrency.

00:29:47.000 Because I think people may have a fundamental understanding of Bitcoin, but then they hear other sorts of cryptos like Ethereum, and they hear they're doing creative stuff with crypto, but they don't exactly know what that means.

00:29:58.000 So, can you go into some detail?

00:30:00.000 Because it sounds like it could reach into nearly every corner of the economy.

00:30:03.000 It's not just the financial services sector.

00:30:04.000 You're talking about, for example, the legal sector, which could be largely disintermediated by this.

00:30:08.000 When you talk wills and trusts, you're talking about Yeah, I think this is going to be a massive, massive disruption.

00:30:12.000 And I think we can talk about it from two perspectives.

00:30:13.000 the money announcing this and then you have giant legal fights over how the money actually gets transferred and all of this could theoretically just end with the drop of a hat.

00:30:22.000 I think this is going to be a massive, massive disruption.

00:30:24.000 And I think we can talk about it from two perspectives.

00:30:26.000 So one, we can talk about kind of, you know, just getting your head around reasoning about how does this happen?

00:30:32.000 And then we can talk about kind of the implications on which sectors, right?

00:30:35.000 So if you start from this observation that now with Bitcoin or with Ethereum, 1s and 0s equal value, right?

00:30:42.000 And it's a bearer instrument, right?

00:30:43.000 You own the 1s and 0s and so you have the value. 0.85

00:30:45.000 And then you say, okay, well, how do I have it?

00:30:48.000 Like, what does that mean to own the 1s and 0s?

00:30:50.000 And this is where we get into the cryptography of it.

00:30:52.000 And you have a password, you have a private key that entitles you to those 1s and 0s effectively.

00:30:57.000 And you say, OK, wait, so now a set of ones and zeros allow me to control this set of ones and zeros, and that's how I know it's mine.

00:31:02.000 Well, where did the private key come from?

00:31:03.000 Like, what does that mean?

00:31:05.000 How did I get that private key?

00:31:07.000 Well, that came from a computer program.

00:31:08.000 It came from a piece of software that spit out a wallet and spit out a private key.

00:31:13.000 And it gave it to you and said, OK, now if you have this private key, you control that wallet.

00:31:16.000 Whatever money is sitting in that wallet is now yours.

00:31:18.000 And so then you say, well, What if it didn't spit it out to the screen for me?

00:31:22.000 What if it took that sets of ones and zeros and just wrote it out to disk?

00:31:25.000 It wrote it out to the hard disk and encrypted it.

00:31:28.000 What does that mean?

00:31:29.000 Well, what that means is that the computer owns the money, right?

00:31:31.000 The computer has the password.

00:31:33.000 You don't.

00:31:34.000 And the program that spit out that password is the only one that knows the password.

00:31:37.000 And so effectively now the computer owns that money, which is a pretty phenomenal breakthrough if you think about it, because what we now have There's an entity which is not a person.

00:31:44.000 There's no social security number there.

00:31:46.000 It's not a business.

00:31:47.000 It's not a Delaware C Corp or an LLC.

00:31:49.000 It's just a piece of code that lives in the cloud somewhere.

00:31:51.000 It lives on computers.

00:31:52.000 It doesn't even live in a jurisdiction, right?

00:31:53.000 It's not an American computer program or a European computer program.

00:31:56.000 It just lives in the cloud.

00:31:58.000 And it can own money.

00:31:59.000 It can own billions of dollars.

00:32:00.000 And, you know, if you think about then, well, what are computers really good at?

00:32:03.000 Like, what are the implications of that?

00:32:05.000 You know, computers and software are strictly better than humans at one thing, which is deterministically executing instructions.

00:32:12.000 And so what you can do is you can write code that executes instructions over any amount of time.

00:32:17.000 And to your point, when you start looking at the entire legal industry, when you start looking at the entire financial industry, you know, when you start even looking at things like, you know, the creator economy on the internet, so much of it is Pile of money, I need to get it to somebody, and there are rules around how to do that.

00:32:35.000 And today, we do that primarily with 20-, 40-, 50-page legal contracts written by a lawyer, and you have to pay this person hundreds of dollars and hours to construct it, and spreadsheets and email.

00:32:46.000 Just think about the amount of the trillions of dollars of transactions that happen in the financial services industry that are essentially PDFs and Excel and email and people passing these things back and forth.

00:32:55.000 And really it should be computer code because it's all the same stuff over and over and over.

00:32:59.000 So you have thousands and thousands of lawyers rewriting the same documents over and over and over.

00:33:04.000 And so once this stuff becomes computer code, not only is it that much more efficient, but it becomes reusable.

00:33:10.000 And so if you've written a piece of code that effectively serves as a will or a trust or a mortgage or security or a derivative, I can go look at that and I can actually just reuse that code.

00:33:21.000 And one of the most beautiful and amazing things about computer code is the reusability.

00:33:25.000 The reason we're able to have so much progress in software, especially in open source software, is I can look at something that somebody else has done and reuse it.

00:33:32.000 So now I'm not reinventing the wheel.

00:33:34.000 I actually get to build on top of that.

00:33:35.000 And so you get tremendous efficiency and scale.

00:33:38.000 So you can have a very small number of people actually create innovation by building on top of each other.

00:33:43.000 And this is really, I think, what powered the innovation in the internet over the last 20 years, or PCs and mobile, is the ability to build on top of each other's work.

00:33:50.000 And so I think stage one, sort of phase one of this, is going to be replacing a lot of the old infrastructure that we have and replacing the old inefficient ways of doing things, which is itself a massive disruption.

00:34:03.000 But I think phase two is going to be the creativity that gets unlocked around use cases that we haven't even imagined.

00:34:08.000 So if you go back to something like 2006 on the internet, You know, think about the ideas that people were coming up with and how counterintuitive they were, how crazy they seemed at the time.

00:34:17.000 And it was like, you know, I'm going to put everything, I'm going to put photos of myself on the internet so other people can see them.

00:34:23.000 I'm going to get in a stranger's car to go somewhere.

00:34:27.000 And I'm going to go stay at a stranger's house and they're not going to murder me.

00:34:30.000 And then I'm going to like have food delivered to me and not leave the apartment.

00:34:34.000 You know, it's like all of the craziest things.

00:34:36.000 I mean, if you go back to the 90s, literally there were checklists.

00:34:39.000 that were like, here are all the things you're not supposed to do on the internet.

00:34:41.000 Like, don't talk to strangers, don't get in a stranger's car, don't go to a stranger's house.

00:34:46.000 Literally all of the things you were not supposed to do turned out to be the biggest businesses on the internet. It was really, really counterintuitive at the time. And it would have been, I think, in 1995, almost impossible to imagine what some of those ideas would have been.

00:34:56.000 And so I look at that as kind of where we are today, which is there are some things which are very, very obvious and straightforward here, which is we're going to replace millions of lawyers.

00:35:05.000 All of a sudden, you just get massive efficiency here.

00:35:07.000 We're going to replace massive 150-year-old institutions like the banks with something far, far more efficient.

00:35:14.000 And I think the second order of effects, we're just going to figure out in the next 10 years.

00:35:18.000 As people start to realize that you can build on top of each other's work, I think we're going to unlock tremendous creativity and productivity that we can't even imagine right now.

00:35:24.000 So in a second, I want to ask you about again, those entrenched interests, because it's one thing to threaten entrenched interests that seem past their prime.

00:35:31.000 But a lot of these players are literally the biggest players in America's political life.

00:35:36.000 And we'll talk about the pushback in one second.

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00:36:54.000 Alrighty, so once again, I have to bring up here the amount of pushback that this is obviously going to receive, and not just from sort of economists who I think have been wrong about a great many things, but also just from, you know, all of these industries.

00:37:04.000 Because now you're not talking about disintermediating, you know, truck drivers in favor of automated trucks.

00:37:09.000 You're talking about disintermediating many of the people who are middle, upper, and very upper class in American society, and just telling them that their jobs no longer apply.

00:37:18.000 I mean, if you tell the entire legal profession, which has an average income, when you come out of a good college or a good law school, you're making $180,000, $200,000 coming out, and you're saying now that if you're a transactional lawyer particularly, that basically you may not have a job anymore, everything can be done by a computer, or you're somebody who's gonna work at a hedge fund, you're a quant, and now basically you're saying, well, computers might be able to just trade this stuff for you and you can pre-program all of this, and you're threatening maybe the highest IQ sector of the economy

00:37:47.000 And those people I don't think are going to take this sitting down.

00:37:49.000 The more innovative ones will adjust and they'll move along and create new things.

00:37:52.000 But until that happens, this is, you're talking about a major snag in sort of how the economy works.

00:37:58.000 Yeah, absolutely.

00:37:58.000 You know, it's funny you mention that too.

00:37:59.000 I think that the truck driver thing is a really fantastic example because I think there's, you know, this starts in crypto and AI and machine learning and a lot of these technologies.

00:38:08.000 You know, I think people have this misconception that the jobs that get replaced and disrupted are blue collar jobs.

00:38:14.000 And actually replacing blue-collar jobs is really hard because we don't have robots that have the dexterity of human hands and walking around and, you know, the human eye is a tremendously complicated thing.

00:38:23.000 And so I actually don't think the disruption happens in blue-collar jobs.

00:38:26.000 I think the disruption is actually happening in white-collar jobs.

00:38:29.000 Right, like when you have AI, they can do a lot of the things that, you know, a typical, you know, a desk worker can do.

00:38:36.000 Or if you have, you know, really we're now competing against, as desk employees in a remote first world, we're competing against every other brain in the world, right?

00:38:44.000 It's not just you're competing against in your local geography, it's every human brain in the world is now hireable and can do that desk job because it doesn't matter where you are.

00:38:51.000 So I think this is potentially tremendously disruptive to all those people that you just mentioned.

00:38:54.000 It's actually the white collar employees that should be thinking about what happens to their jobs. 0.63

00:38:59.000 And I think lawyers and bankers and financial service providers and all the people that you mentioned, I think, are much more likely to have their jobs disrupted than truck drivers.

00:39:06.000 I mean, actually, if you look at the data, there's actually a shortage of truck drivers right now.

00:39:10.000 There are not enough people to do that job.

00:39:11.000 So, you know, I think that disruption is inevitable.

00:39:13.000 And I think, to your point, the smart people are going to look at that and say, I need to be on the right side of history.

00:39:18.000 Because, you know, this is not, you know, when in technology history over the last 50 have you been on the right side of it by betting against progress?

00:39:27.000 Like if you did that, you basically, you know, you lost your job.

00:39:30.000 That was not the right place to be betting.

00:39:32.000 And I think the smart people are getting that.

00:39:33.000 I think that's true in the private sector.

00:39:36.000 You know, I think there are companies that are looking at this and saying, this is happening, and we need to get on the right side of it.

00:39:40.000 I think it's also true on the political spectrum.

00:39:42.000 Like, if you look at the smartest politicians, they're looking at the data, and they're saying, wow, a third of millennials own this stuff.

00:39:49.000 Or, actually, the richest millennials own this.

00:39:52.000 Or, you know, they're saying, you know, I was looking at the numbers this morning, you know, there's over 2,500 Bitcoin wallets that have more than 1,000 Bitcoin in them.

00:40:01.000 So when you run the numbers, what that means is that If Bitcoin gets to a million dollars, which I don't think is crazy, and it's not financial advice, but there are many people who believe that that's certainly possible, that means half the world's billionaires are going to be because they own Bitcoin.

00:40:18.000 Think about what that means for the power structures of society and what that means for politics.

00:40:23.000 And the smartest politicians are looking at that data in terms of ownership and who is going to have money 10 years from now.

00:40:29.000 Uh, and saying, I need to be on the right side of history.

00:40:31.000 Uh, and so I think the smart people are basically saying this is, you know, we, we passed the point of maybe this happens and now it's really a question of how long does it take to happen?

00:40:40.000 And if you're smart, I think you get on the right side of history.

00:40:42.000 And if you're, if you're not so smart, I think you try to fight it and you eventually lose.

00:40:46.000 And I just think, I think that's a, that's, you know, that's, you don't want to be on that side of history in my opinion.

00:40:50.000 And I think the last 40 years of technological progress show you that that's the wrong place to be.

00:40:54.000 So do you think that most of the politicians are getting it?

00:40:56.000 Because we've obviously seen over the past year or so some attempts to regulate crypto.

00:41:02.000 I mean, there's this bizarre provision of Build Back Better that was going to have significant effects on how mining was done, supposedly for environmental protection purposes, which of course is sort of overstated.

00:41:14.000 But how do you think it breaks down politically, and not between parties, but sort of as a percentage?

00:41:19.000 What most people, I mean, I know a lot of Congress people, I know a lot of senators, I can't say that when you talk about the smartest people in our society, that this group of people, there's a huge Venn diagram crossover right here.

00:41:31.000 So how do you see it breaking down politically?

00:41:32.000 Because it seems like when it comes to regulations and regulators and a lot of the people who are in charge of this sort of stuff, that actually they might be in the more aggressive camp until they're forced by circumstance to change.

00:41:42.000 Yeah, it's a great observation.

00:41:44.000 I think a couple of things are happening here.

00:41:46.000 So, you know, one is, what do ultimately most politicians care about?

00:41:51.000 I think they ultimately care about staying in power and control.

00:41:54.000 And I think demographic shifts here are sort of hitting them in the face.

00:41:58.000 And so what they're starting to say is, If the people that are aging out of the population, just by biological circumstance, that are not going to be voters in 20 years, or even 10 years, don't care about this, and everybody below a certain age does care about this, which side of the spectrum do you want to be on?

00:42:16.000 Whose votes are you courting?

00:42:18.000 And I think as the millennials go into their 40s here, the oldest millennials are now about 40, that becomes the demographic that you need to court as your base.

00:42:25.000 And so I think there are some demographic realities.

00:42:27.000 I think there are some money realities.

00:42:29.000 And if you look at, for example, the largest donor to the Biden campaign, the Biden efforts was Sam Bankman Freed, the CEO and founder of FTX.

00:42:39.000 If you look at what have been the blockbuster IPOs over the last year, you look at companies like Coinbase.

00:42:47.000 It's a $50 billion company.

00:42:48.000 These numbers are so large at this point that I think politicians are saying this is too big to ignore now, and we really need to sort of, instead of trying to fight this, we actually maybe should be tapping into these centers of power and money.

00:42:59.000 And so I think self-interest will sort of push people in the right direction.

00:43:01.000 Now, when you look at some of the legislation that's happened, I actually don't attribute it to malice.

00:43:06.000 I attribute it mostly to lack of awareness.

00:43:09.000 You know, in our experience, when we've interacted with the people that are authoring some of these bills, and we reach out, they just don't realize that many of these things have unintended consequences.

00:43:18.000 And they don't understand the subtleties of, for example, the difference between mining, you know, with proof of work or proof of stake or, you know, thinking about, you know, we were talking about you know, what is this thing? What is this smart contract that owns money? And so, you know, it's a very reasonable thing, I think, from a government's perspective to say we need know your customer and anti-money laundering provisions to make sure bad things don't happen and bad, you know, bad people don't take this money and do bad things with it. But it presents a real challenge of, well, how do you do that with a piece of code? Like, what?

00:43:46.000 What does it mean to KYC or do AML provisions on a piece of code that lives in the cloud?

00:43:52.000 And so I think there's some real challenges here in terms of how we do this.

00:43:55.000 And folks on both sides of the aisle, we've had conversations with Democrats and Republicans, and the forward-thinking people basically say, oh, Now that you explained it to me, I get it.

00:44:05.000 Now I understand why actually these provisions matter.

00:44:08.000 Now I understand why this doesn't work.

00:44:11.000 And so then they're faced with the question, what do we do about it?

00:44:13.000 Now that you get your head around that, you say, OK, I don't know what it means to KYC a smart contract exactly.

00:44:18.000 What do we do about it?

00:44:20.000 And so in our experience at this point, what we have is probably half the people in these bodies sort of have gotten their heads around the fact that this stuff really matters.

00:44:28.000 Very few know what to do about it, but it's actually, that's I think a tremendous step forward.

00:44:33.000 I think if you went back even two years, we weren't anywhere close to half the people in government understanding that this thing even matters.

00:44:40.000 So I think the next two to four years are really about the industry doing a lot of education to help people understand, and government understand, not only why these things matter, And that touches a lot, right?

00:44:50.000 That touches the IRS and how we tax this stuff, and there are things that we can do there.

00:44:53.000 I think that touches, you know, investor protections.

00:44:56.000 You know, I think our securities laws were created in the 30s, and many of them just don't make sense anymore.

00:45:01.000 And many of them are actually, you know, doing exactly the things that they were designed to prevent, right?

00:45:07.000 We're trying to have investor protections, and really what we're doing is making it so the average American can't invest in things that would actually generate tremendous wealth for them.

00:45:14.000 you know, they're actually preventing companies from going public.

00:45:17.000 You look at national security, right, and there are reasons to actually embrace this stuff.

00:45:21.000 So, kind of on any topic that any given politician might care about, this is going to touch their world and I think over the next two to four years they're all going to realize that actually embracing this stuff is the right side of history to be on.

00:45:33.000 So we're actually really optimistic.

00:45:34.000 I think there was a moment maybe three, four, five years ago where it had some of these provisions passed.

00:45:39.000 It really could have killed all of this innovation.

00:45:42.000 And I think we're now at a point where the innovation's here.

00:45:44.000 Real things are happening.

00:45:45.000 The numbers have gotten real.

00:45:46.000 And so everybody's sort of woken up and said, OK, it's real.

00:45:49.000 Now let's figure out what to do about it, which I think is actually a huge step forward.

00:45:52.000 Okay, so Abhishek, one of the things that people are talking about is how exactly this should be regulated.

00:45:57.000 And we've sort of edged around some of the regulations that have been proposed.

00:46:01.000 But there's been wide scale debate, for example, in sort of the federal regulatory structure about do you regulate crypto as a currency?

00:46:07.000 Do you regulate it as a commodity?

00:46:08.000 What do those distinctions mean?

00:46:09.000 Why should they matter to folks?

00:46:11.000 Yeah, ultimately why they matter is how much and which parts of securities law really matter here, because that has a dramatic downstream consequence on who is allowed to participate.

00:46:22.000 And one of the fundamental premises of these crypto networks and systems is that when you have these intermediaries, You have a misalignment between the people that are using the network and people who benefit from that network.

00:46:37.000 The classic example that drives it home for a lot of people is something like Uber.

00:46:43.000 The first thousand Uber drivers that really made Uber happen didn't really benefit that much economically relative to the amount of value that was created by Uber the company.

00:46:54.000 And that happens actually in a lot of cases, right?

00:46:55.000 There's sort of this misalignment between the people doing the work and the people who are getting the economic benefit.

00:47:00.000 And so the thought is, well, could you build systems where the people who are doing the work in the earliest days and creating so much of the value that makes these marketplaces and these networks and these systems work, could they benefit more?

00:47:12.000 Could they actually participate in that economic upside?

00:47:15.000 And could you create that sort of economic alignment?

00:47:18.000 And that's what happens with tokens, right?

00:47:20.000 The reason you're getting a Bitcoin when you're doing that mining is it's a reward for taking Bitcoin transactions and propagating them through the network.

00:47:27.000 What you're really doing is powering the payment system in exchange for powering the payment system and doing all that work, which previously would have taken many, many engineers and databases and buildings and retail banks and banking branches.

00:47:40.000 You get rid of all that infrastructure and replace it with some software, and so you get rewarded for doing that work.

00:47:46.000 Now, when you're thinking about the downstream consequences of that, you look at that thing and you say, well, what is that?

00:47:52.000 How do we even think about what that thing is?

00:47:53.000 Is it a commodity?

00:47:55.000 Is it a security?

00:47:56.000 Because people are benefiting and there's some sort of economic advantage there.

00:48:00.000 What is that?

00:48:01.000 And we don't really have a great framework to answer that question today.

00:48:04.000 And so what we end up doing is we end up using things like the Howey Test, which, again, these are 50-, 60-, 70-year-old pieces of legislation or case law.

00:48:14.000 And you try to apply that to something like tokens and you say, that kind of doesn't work in our opinion, right?

00:48:19.000 It's like it sort of works, but it leaves a lot of ambiguity.

00:48:23.000 And then the consequence of that ambiguity is the developers and the engineers and the founders and the entrepreneurs that are sort of taking these technologies.

00:48:31.000 And pushing them forward and creating new use cases operate in a lot of ambiguity.

00:48:35.000 And so what they end up doing is they end up creating their companies in such a way that they can actually leave the U.S.

00:48:41.000 if they need to.

00:48:42.000 Or they can shut off American consumers if they need to.

00:48:45.000 And so we're at risk of these companies creating all these really innovative new products and then just leaving the American consumer out of it.

00:48:51.000 So that the American consumer does not benefit from that innovation at all.

00:48:54.000 And potentially having to relocate their companies because of that ambiguity Outside of the US, which I think would be tremendously bad, right?

00:49:01.000 Imagine if all of the major internet companies through the 90s and 2000s had decided not to be located in the United States, and they decided to be located in Singapore, right?

00:49:10.000 And what would the consequences of that be geopolitically, and in terms of which countries' spheres of influence are you really operating in?

00:49:17.000 Or which financial markets do you do those IPOs in?

00:49:21.000 Or in which geographies are you hiring all of your engineers and training all of that talent?

00:49:25.000 Or, you know, imagine if so much of the good things that happen on the Internet just weren't available to U.S.

00:49:30.000 customers, right?

00:49:31.000 And the consequence of that, and the lack of, you know, the efficiencies that we would lose and the productivity that we would lose.

00:49:37.000 And that's kind of what we're at risk of at here, because the regulations, you know, are ambiguous sometimes, and so the founders are looking at these things and saying, I kind of don't know how to operate here sometimes, and so maybe it's better for me to just not deal with the ambiguity.

00:49:50.000 And so I think if we can sort of take a first principles look at these things and try to address what does it mean to really launch a token network?

00:49:56.000 What does it really mean to have securities laws in 2020 instead of 1930?

00:50:00.000 I think we would actually address a lot of these and I hope that happens and you know I think there are a lot of ways that that might happen.

00:50:06.000 But right now, it's pretty murky.

00:50:08.000 And I worry a little bit that the biggest consequence here is that we could end up in a world where most of these companies just move overseas.

00:50:14.000 And when we see that happen, we see founders leaving the U.S., we see people building half their teams in other places just in case they get shut down here, at least their businesses don't shut down, or being willing to shut down U.S.

00:50:25.000 customers and just not service them at all.

00:50:28.000 And I think, again, the Internet is an example here.

00:50:30.000 I think it would have been terrible if most of the American Internet companies that are here today So, I mean, geopolitically, which countries do you see as a threat to us on that sort of front?

00:50:38.000 Because Europe is pretty restrictive.

00:50:39.000 China, obviously, is way more restrictive.

00:50:39.000 for the American economy, it'd be terrible for, you know, geopolitically, I think it just would have been terrible all around had that been the case.

00:50:46.000 So, I mean, geopolitically, which countries do you see as a threat to us on that sort of front?

00:50:51.000 Because Europe is pretty restrictive, China obviously is way more restrictive, and so where do you see as the sort of alternatives that we have to worry about people relocating?

00:50:59.000 Yeah, well, so, you know, two observations there.

00:51:02.000 So one, I think if you had to pick a country in the world that's really doing this right, it's probably Singapore.

00:51:07.000 And I think Singapore sort of understands that, you know, if they embrace this, then they will bring all those entrepreneurs to them.

00:51:15.000 So we've literally had companies and founders relocate and move to Singapore because the Singaporean government is willing to fast-track their visas and is willing to give them a place to work.

00:51:25.000 And it's pretty remarkable because I think the thing that perhaps gets lost in a lot of this conversation is how young these founders are, right?

00:51:31.000 Where, you know, the internet has sort of aged.

00:51:33.000 So when you look at the founders of internet companies, you know, they're often in their 30s or 40s.

00:51:38.000 If you go to some of these Web3 companies, you know, crypto and blockchain, all these companies, they're really young.

00:51:43.000 I mean, these are like college dropouts.

00:51:45.000 This is internet all over again.

00:51:47.000 Right?

00:51:47.000 If you remember what the internet was in the early 2000s and kind of the energy that was around that and how young it felt, this is that all over again.

00:51:53.000 You go to these conferences and it's, you know, it's a bunch of 19 year olds and 21 year olds running around.

00:51:58.000 And so if you think about, you know, how mobile are those people?

00:52:00.000 They don't have, they're not married.

00:52:02.000 They don't have kids.

00:52:02.000 They don't have a mortgage.

00:52:04.000 And so if the government says to them, you can't do this here, they're just going to get up and leave.

00:52:08.000 And literally we talked to founders and that's what they do.

00:52:10.000 They just get up and leave.

00:52:10.000 They just relocate.

00:52:12.000 And so the Singaporean government really understands this and they're embracing this.

00:52:14.000 And so they're, they're, you know, pulling those people in.

00:52:17.000 Now, to the point around China, you know, I think the Chinese government, while it has made it very hard to do things domestically because, you know, what they worry about is social upheaval and civil unrest, you know, they don't want to lose control domestically.

00:52:30.000 But the Chinese government is very, very smart about embracing technology to use as a tool.

00:52:35.000 And so what they are doing is embracing this stuff internationally.

00:52:38.000 And so if you look at, for example, the central bank digital currency, that they built internally, it's a tool for projection of power.

00:52:46.000 Ultimately, if you can denominate goods and services in your local currency, if you can settle those transactions much more quickly, it's of course that they would use it as part of the Belt and Road initiative that they have, for example. It's very, very clear that using these technologies to further their aims is something that they're very good at. And so, while they may not let their citizens use these technologies domestically, they are embracing these things when it comes to projecting power

00:53:13.000 or having influence in the world. They're very, very smart about actually embracing these technologies.

00:53:18.000 So I think it's not so much that we need to worry about authoritarian regimes allowing their citizens to have access to the stuff or those companies serving those customers domestically.

00:53:28.000 It's really that these authoritarian regimes could embrace this technology and use it as a way to project power internationally.

00:53:34.000 So what do you make of sort of the image of crypto right now?

00:53:37.000 So obviously what you're talking about is really sophisticated, it's really forward-looking and innovative.

00:53:42.000 The way that a lot of people in the United States tend to think of crypto is Larry David on a Super Bowl commercial or a celebrity who is, you know, saying that they'll sell a car, maybe not sell a car, in crypto or Bitcoin to the moon, that kind of stuff, the sort of memery of it.

00:53:56.000 How do you see the image of crypto and how do you see that evolving over time?

00:53:59.000 Yeah, I think it's an okay place right now, and I think because it really has come from the fringes.

00:54:04.000 It's kind of funny, if you go back and you look at videos of the internet in the 90s, it's like Bill Gates on David Letterman trying to explain what is the internet.

00:54:12.000 We didn't even have the words to talk about what the internet was, and it seems so silly now.

00:54:16.000 It's just like, what is that A with a circle around it?

00:54:20.000 We just didn't even have the words to describe these things.

00:54:22.000 Uh, and I think that's kind of the phase that we're in right now.

00:54:24.000 We're just, we're coming up with a vocabulary to even talk about what these concepts are and it's going to take a while.

00:54:28.000 That's going to take several years for us to be able to even talk about these things.

00:54:32.000 The thing that makes me the most optimistic in addition to sort of the demographic mega shift that we're talking about where young people get it and they intuitively get it.

00:54:39.000 There's that, uh, Douglas Adams quote, if you notice it, I'm going to butcher it, but it's something like, You know, anything that's invented by the time you're 15 is just the way the world works.

00:54:47.000 And anything that's invented by the time you're 35 is innovative and interesting.

00:54:51.000 And anything that's invented after you're, you know, 50 is, you know, anathema.

00:54:55.000 That's not the way the world is supposed to work.

00:54:58.000 And so, you know, that's just sort of human nature.

00:55:00.000 And so I think that's happening.

00:55:01.000 But I think the thing beyond that that makes me even more optimistic is what we've started to see is the mainstream Culture bearers start to embrace this.

00:55:10.000 And so you're now talking musicians, artists, athletes, you know, people are looking at this and saying, wait a second, what this means is I can reach my fans directly.

00:55:19.000 You know, we talked about censorship resistance and peer-to-peer payments.

00:55:22.000 And I think the people who really figured this out that really care about it are musicians and artists, because they have all these fans all over the world.

00:55:28.000 And actually, you know, it's really unfortunate, but there are so many talented musicians and artists in the world.

00:55:33.000 And they don't make that much money.

00:55:35.000 And it's often the case that they don't make that much money because there are so many intermediaries in that value chain.

00:55:39.000 Like if you make music and you get it distributed, who makes all the money?

00:55:42.000 It's the labels.

00:55:43.000 It's not the artist.

00:55:45.000 And so those people are looking at this and saying, wait a second, I can have a direct relationship with my fans.

00:55:49.000 And there's this great Kevin Kelly article.

00:55:52.000 He was the editor of Wired Magazine.

00:55:54.000 maybe 15 years ago, you talked about your 1,000 true fans.

00:55:58.000 This probably resonates for you.

00:56:00.000 It turns out for every artist, for every creator in the world, there are probably 1,000 people out there that absolutely love your art.

00:56:08.000 And if you think about it, in the old world, you couldn't find those 1,000 people.

00:56:12.000 But on the internet, you could find those 1,000 people.

00:56:14.000 It just turned out on the internet, they couldn't really compensate you.

00:56:16.000 They couldn't really pay you directly.

00:56:18.000 It was just too inefficient.

00:56:19.000 And so the only way you could really have a business was you go on YouTube and you scale it up and you hopefully get to millions of fans.

00:56:25.000 And then hopefully you have an OK business.

00:56:26.000 Actually, if you look at the monetization rates on things like YouTube, it's just not that good.

00:56:31.000 And so with crypto and these peer-to-peer payments, actually you could find those 1,000 people and they could pay you 100 bucks.

00:56:38.000 That's $100,000, right, actually.

00:56:40.000 And $100 is not that much money for 1,000 people in the world, actually, for your true, true fans, the people that love your art, the people that love your music.

00:56:47.000 The people that would pay $250 to show up to a concert to see you live.

00:56:52.000 And that $100,000 might be more money than you would make anywhere else as a musician.

00:56:55.000 And so I think what we're starting to see is musicians and artists start to get their heads around that this is actually really useful for them, this infrastructure, the ability to pay people peer-to-peer.

00:57:03.000 And I suspect that's how this stuff will really go mainstream.

00:57:06.000 And we're starting to see that happen on the ground as musicians and artists realize that this is possible and really starting to embrace it.

00:57:11.000 So one of the things that I think is very weird about sort of the moment we're in is that people who typically have thought of themselves as advocates for the marginalized are now kind of scoffing at crypto because the marginalized are using it.

00:57:22.000 So you're starting to see, I mentioned Krugman again because I'm not sure that he's been right on an issue since trade policy since like 1995.

00:57:29.000 But he wrote a column recently specifically directed at crypto and suggesting that it was the new subprime mortgage crisis which I found hilarious since the subprime mortgage crisis was largely created by government in the first place and crypto is designed to be specifically separate from that.

00:57:42.000 But his entire premise is that crypto was bad because it made a lot of people who didn't know what they were doing vulnerable to its volatility.

00:57:49.000 He pointed out the fact that 44% of the user base was non-white which again I thought was Good thing. 1.00

00:57:56.000 But apparently that's not a bad thing, according to Paul Krugman, because there's a sort of subtle racism there, I think.

00:58:01.000 These are folks who obviously don't know what they're doing, and if this should go down, they're the ones who are going to go down with the ship.

00:58:05.000 Yeah, there's so much to unpack there, and so many good points.

00:58:08.000 So first, let's talk about the data that you just mentioned.

00:58:12.000 Yeah, it turns out this stuff over-indexes for minorities.

00:58:15.000 If you're black and brown, you are more likely to actually embrace this stuff.

00:58:19.000 And that's interesting.

00:58:20.000 You look at that and you say, well, why is that the case?

00:58:22.000 Why might these populations look at this and say, I want this?

00:58:25.000 Well, it's because when you look at the banking system, like, how do they make their money?

00:58:28.000 It's off of fees.

00:58:29.000 And, you know, rich people are not paying fees.

00:58:31.000 It's actually the poor people that are paying fees.

00:58:33.000 That's actually how the banking system is set up.

00:58:35.000 And so, of course, those people are going to look at this and say, wait a second, here's a system that is not the old guard.

00:58:40.000 It's not the people that screw me every time I go to the bank.

00:58:42.000 It's not the people that are trying to sell me products that I can't afford.

00:58:44.000 It's not the people that are charging me fees every time I try to take money out of the ATM.

00:58:48.000 Of course, I want this new system.

00:58:50.000 Furthermore, if you look at this and you say, well, why might these people be interested in these things?

00:58:54.000 It's because the existing system has underserved them.

00:58:56.000 It's not really designed to help them.

00:58:58.000 And you play that forward and you say, well, where does that happen?

00:59:01.000 I think it just blows my mind that people aren't looking at things like civil asset forfeiture.

00:59:06.000 You look at the data around how much money police seize from people.

00:59:10.000 And who are those people that they're seizing money from?

00:59:12.000 They're not the rich people that are going to get their lawyer on the phone and say, hey, what are you doing?

00:59:15.000 I'm going to sue the police department, and I'm going to take you to court, and there's going to be a PR nightmare on this.

00:59:21.000 It's poor people who can't afford to fight back.

00:59:23.000 And that's disproportionately going to skew to certain communities.

00:59:27.000 And if you look at the data, I was just looking at this the other day, it's something like $80 billion has been taken by civil forfeiture in the last 15 years, which is a crazy amount of money.

00:59:36.000 And so if you really care about these communities, you would say, well, actually, assets that you can custody yourself that the police can't seize away from you just because they feel like it seems like a great thing.

00:59:46.000 And so, yeah, it's bizarre to me that the people who should be, you know, the most embracing of this stuff, because it's helping people who are underbanked and underserved, it's helping people who are the ones who are paying the most fees, it's helping people who are having their assets seized, are the ones who are saying, no, no, no, you shouldn't be doing this.

01:00:03.000 It's totally bizarre to me that that's where we are right now.

01:00:05.000 So one of the things that I think that crypto can do and needs to do is obviously it's doing interesting work in sort of developing countries.

01:00:14.000 Obviously you saw El Salvador starting to accept Bitcoin as actual currency and to the consternation of many of its critics.

01:00:21.000 But Hernando de Soto, the economist, suggested that the biggest untapped value maybe on the planet is all of this property that is basically locked up.

01:00:29.000 This property that does not have a chain of custody and so it's impossible for it to be transferred.

01:00:34.000 It's where people build their houses, but they don't actually own the land.

01:00:37.000 There are no good records.

01:00:38.000 The local records are at the local property office, maybe, and they stopped being taken a hundred years ago.

01:00:44.000 And crypto makes so much of this possible to actually activate.

01:00:48.000 All this dead capital can become live again through crypto.

01:00:51.000 Do you see movement from developing countries on embracing this sort of stuff?

01:00:54.000 I love this.

01:00:55.000 I love that you referenced DeSoto.

01:00:56.000 What a wonderful reference.

01:00:57.000 Yeah, I mean, I think that observation is such a great one, which is that actually in many parts of the world, people just happen to be liquidity poor.

01:01:04.000 They're not asset poor, exactly for the reason that you mentioned, is they're sitting on a house and it's been inherited, sitting on some land.

01:01:10.000 that they've been cultivating livestock and agriculture on.

01:01:13.000 So they actually have assets.

01:01:15.000 It's just that those assets can't be used productively.

01:01:17.000 So I do think that over time, as this infrastructure proliferates, I think the analogy here is something like the mobile phone.

01:01:24.000 Where did mobile phones have the greatest impact in the world?

01:01:28.000 You could certainly say that they had a big impact in the United States and in Europe, but I think they had an even bigger impact on a relative basis in the developing world, where all of a sudden, people who didn't have Internet access or didn't have a phone, didn't have access to the outside world, didn't have access to basic information, education, pricing, what laws protect them.

01:01:48.000 Like all of these really basic things that people in developed markets often take for granted.

01:01:53.000 You have a supercomputer in your pocket now.

01:01:54.000 There are three billion mobile devices in the world.

01:01:57.000 It's phenomenal what's happened with mobile.

01:01:58.000 And I think a similar thing will happen here with this infrastructure.

01:02:01.000 All of a sudden, people all over the world that are not a part of the existing system will just leapfrog.

01:02:06.000 They won't have to go to a local regional bank.

01:02:08.000 They won't have to go to this thing that sort of says, oh, sorry, we're going to charge you exorbitant fees to be a part of this system.

01:02:15.000 They'll be able to participate in a global financial system that is far, far more efficient and will be able to provide capital and route capital to them because now we'll have these 24-7 global capital markets that operate at a thousand decks of efficiency.

01:02:30.000 And so I think the developed world, it will be a big, big change for us. 1.00

01:02:35.000 I think the developing world is going to leapfrog.

01:02:37.000 I think they're going to jump over the 1970s to 2020s and jump immediately into this new world over the next decade.

01:02:43.000 And I think it's going to be transformative for some of these economies.

01:02:45.000 I do want to ask you a few final questions, starting with how you got into the space, but I also want to ask you about the amazing new innovations that you're spotting in the crypto space, like the stuff that other people might not know about.

01:02:55.000 If you'd like to hear Avishal Garg's answers, you have to be a Daily Wire member.

01:02:58.000 Go to dailywire.com, click join, you can hear the rest of our conversation there.

01:03:02.000 Avishal Garg, this is all riveting and fascinating stuff, and thank you so much for joining the show and illuminating all of this for us.

01:03:08.000 Really appreciate the time.

01:03:10.000 My pleasure.

01:03:10.000 Thank you for having me.

01:03:24.000 Executive Producer Jeremy Boring.

01:03:26.000 Production Manager Pavel Lydowsky.

01:03:28.000 Associate Producer Justine Turley.

01:03:30.000 Editing is by Jim Nickel.

01:03:31.000 Audio is mixed by Mike Coromino.

01:03:33.000 Hair and Makeup is by Fabiola Cristina.

01:03:35.000 Title Graphics are by Cynthia Angulo.

01:03:37.000 Production Assistant Jessica Crand.

01:03:39.000 The Ben Shapiro Show Sunday Special is a Daily Wire production.

The Ben Shapiro Show - February 20, 2022

Avichal Garg | The Ben Shapiro Show Sunday Special Ep. 123

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