1 00:00:01,133 --> 00:00:03,966 ♪ ♪ 2 00:00:06,600 --> 00:00:08,900 NARRATOR: Cryptocurrencies. 3 00:00:08,900 --> 00:00:12,100 With names like Bitcoin, Ethereum, and Dogecoin, 4 00:00:12,100 --> 00:00:15,066 today there are thousands of them. 5 00:00:15,066 --> 00:00:17,133 But what are they and how do they work? 6 00:00:17,133 --> 00:00:18,133 JANE PAULEY: You can't hold it, 7 00:00:18,133 --> 00:00:19,933 often you can't spend it. 8 00:00:19,933 --> 00:00:21,966 FINN BRUNTON: We're looking at something that is 9 00:00:21,966 --> 00:00:23,966 20% a working technology 10 00:00:23,966 --> 00:00:27,733 and 80% a utopian vision of how society could be. 11 00:00:27,733 --> 00:00:29,766 NARRATOR: Are they a flash in the pan? 12 00:00:29,766 --> 00:00:31,633 ISAIAH JACKSON: The future of crypto is that 13 00:00:31,633 --> 00:00:34,033 99% of projects will be rendered useless. 14 00:00:34,033 --> 00:00:37,600 NARRATOR: Or a new technology that's here to stay? 15 00:00:37,600 --> 00:00:38,933 SHEILA WARREN: It's not going to vanish. 16 00:00:38,933 --> 00:00:39,933 What it's used for 17 00:00:39,933 --> 00:00:41,333 has yet to be fully determined. 18 00:00:41,333 --> 00:00:42,733 REPORTER: The art world has been 19 00:00:42,733 --> 00:00:44,633 turned upside down again. 20 00:00:44,633 --> 00:00:47,933 BRUNTON: You have built a functional replacement for 21 00:00:47,933 --> 00:00:51,133 a lot of what a credit card company or a bank does. 22 00:00:51,133 --> 00:00:53,300 NARRATOR: "Decoding Crypto," 23 00:00:53,300 --> 00:00:56,533 right now on "NOVA." 24 00:00:56,533 --> 00:00:56,600 ♪ ♪ 25 00:01:12,700 --> 00:01:14,733 NARRATOR: Revolution... Game-changer... 26 00:01:14,733 --> 00:01:15,866 I'm a millionaire! 27 00:01:15,866 --> 00:01:18,033 NARRATOR: Experiment doomed to fail... 28 00:01:18,033 --> 00:01:19,733 JACKSON: The future of crypto is that 29 00:01:19,733 --> 00:01:21,733 99% of projects will be rendered useless. 30 00:01:21,733 --> 00:01:24,500 REPORTER: The carnage in the crypto world continued today. 31 00:01:24,500 --> 00:01:26,066 It is impossible to understand 32 00:01:26,066 --> 00:01:27,900 where this is going. 33 00:01:27,900 --> 00:01:29,133 NARRATOR: There's no question cryptocurrency 34 00:01:29,133 --> 00:01:30,666 is having a moment. 35 00:01:30,666 --> 00:01:32,300 Bitcoin is a new kind of money. 36 00:01:32,300 --> 00:01:34,633 NFTs are sweeping the art world. 37 00:01:34,633 --> 00:01:37,200 CLEVE MESIDOR: Cryptocurrency is a trillion-dollar market. 38 00:01:37,200 --> 00:01:38,833 It cannot be ignored. 39 00:01:38,833 --> 00:01:40,633 NARRATOR: What is crypto anyway? 40 00:01:40,633 --> 00:01:42,033 PAULEY: You can't hold it. 41 00:01:42,033 --> 00:01:43,866 Often you can't spend it. 42 00:01:43,866 --> 00:01:46,233 Technologically, it's incredibly interesting. 43 00:01:46,233 --> 00:01:48,700 REPORTER: Cryptocurrency kiosks are appearing nationwide. 44 00:01:48,700 --> 00:01:50,266 NARRATOR: Crypto is a global phenomenon-- 45 00:01:50,266 --> 00:01:52,633 adopted by countries, 46 00:01:52,633 --> 00:01:54,666 embraced by refugees, 47 00:01:54,666 --> 00:01:56,866 and used by millions around the globe. 48 00:01:56,866 --> 00:01:59,300 Most people have heard of Bitcoin-- 49 00:01:59,300 --> 00:02:02,566 the most well-known among thousands of cryptocurrencies-- 50 00:02:02,566 --> 00:02:04,200 but find it confusing. 51 00:02:04,200 --> 00:02:05,700 JOHN OLIVER: Everything you don't understand about money, 52 00:02:05,700 --> 00:02:07,400 combined with everything you don't understand 53 00:02:07,400 --> 00:02:08,566 about computers. 54 00:02:08,566 --> 00:02:10,133 NARRATOR: It's talked about all the time 55 00:02:10,133 --> 00:02:12,533 by people who claim to be in the know. 56 00:02:12,533 --> 00:02:14,733 I'm getting into crypto, with FTX, you in? 57 00:02:14,733 --> 00:02:17,666 NARRATOR: Investors and speculators have both made 58 00:02:17,666 --> 00:02:19,866 and lost great deals of money. 59 00:02:19,866 --> 00:02:21,200 WARREN: But it's not at all 60 00:02:21,200 --> 00:02:22,366 just about money. 61 00:02:22,366 --> 00:02:23,966 It has a lot of different applications, 62 00:02:23,966 --> 00:02:27,233 many of which have very little to do with financial services. 63 00:02:27,233 --> 00:02:29,066 NARRATOR: Some warn of possible perils. 64 00:02:29,066 --> 00:02:30,466 NEHA NARULA: There's a lot of hucksters 65 00:02:30,466 --> 00:02:33,100 out there who are just trying to sell their snake oil. 66 00:02:33,100 --> 00:02:36,433 Fraudsters are buying and selling millions of dollars 67 00:02:36,433 --> 00:02:38,600 in illegal digital assets. 68 00:02:38,600 --> 00:02:40,966 NARRATOR: While others claim crypto 69 00:02:40,966 --> 00:02:45,733 is a groundbreaking technology with nearly unlimited uses. 70 00:02:45,733 --> 00:02:48,300 The Constitution of the United States is going up on auction. 71 00:02:48,300 --> 00:02:51,333 Sold-- $41 million! (cheers and applause) 72 00:02:51,333 --> 00:02:54,733 Whether it's a movie or it's our housing contracts. 73 00:02:54,733 --> 00:02:56,833 A market for climate action. 74 00:02:56,833 --> 00:02:59,666 NARRATOR: Where did it come from? 75 00:02:59,666 --> 00:03:01,400 BRUNTON: This is one of the most 76 00:03:01,400 --> 00:03:03,400 significant technologies 77 00:03:03,400 --> 00:03:07,500 to have been created by someone who is still wholly anonymous. 78 00:03:07,500 --> 00:03:09,533 NARRATOR: How does it work? 79 00:03:09,533 --> 00:03:10,833 KEVIN McCOY: It was just like, 80 00:03:10,833 --> 00:03:12,800 "Whoa, that's amazing." 81 00:03:12,800 --> 00:03:14,633 NARRATOR: Is it just hype? 82 00:03:14,633 --> 00:03:15,900 LANA SWARTZ: Crypto has been embraced 83 00:03:15,900 --> 00:03:18,600 by the mainstream, but not in a way 84 00:03:18,600 --> 00:03:21,000 that achieves any of its original goals. 85 00:03:21,000 --> 00:03:24,566 NARRATOR: Or is it revolutionizing money and more? 86 00:03:24,566 --> 00:03:26,533 It's a safe and easy way to get into crypto. 87 00:03:26,533 --> 00:03:28,900 Eh... I don't think so. 88 00:03:28,900 --> 00:03:33,933 ♪ ♪ 89 00:03:35,500 --> 00:03:40,266 ♪ ♪ 90 00:03:42,400 --> 00:03:44,133 NARRATOR: Real estate investor Vernon J. 91 00:03:44,133 --> 00:03:47,500 is trying to use a new kind of money to reinvigorate 92 00:03:47,500 --> 00:03:49,033 East New York, Brooklyn. 93 00:03:49,033 --> 00:03:52,766 He thinks crypto could be the key to expanding ownership 94 00:03:52,766 --> 00:03:55,533 in neighborhoods like this one. 95 00:03:55,533 --> 00:03:57,500 This may not be what most people think of 96 00:03:57,500 --> 00:03:59,833 when they hear "cryptocurrency," 97 00:03:59,833 --> 00:04:02,266 but some believe ideas like his 98 00:04:02,266 --> 00:04:06,466 represent crypto's true potential. 99 00:04:07,566 --> 00:04:08,866 Hey... Yo. 100 00:04:08,866 --> 00:04:10,200 What's going on brother? Good. 101 00:04:10,200 --> 00:04:11,800 Yo, this is it? This is it. Let's do it! 102 00:04:11,800 --> 00:04:12,933 Let's check it out. Let's do it. 103 00:04:12,933 --> 00:04:15,900 NARRATOR: Vernon and his business partner, 104 00:04:15,900 --> 00:04:17,866 computer programmer Akil Ash, 105 00:04:17,866 --> 00:04:19,233 plan to reclaim properties 106 00:04:19,233 --> 00:04:23,366 like this vacant lot to build affordable housing 107 00:04:23,366 --> 00:04:24,800 owned and managed by people 108 00:04:24,800 --> 00:04:27,066 who want to improve the neighborhood. 109 00:04:27,066 --> 00:04:29,266 VERNON: We hope to get community members to be able to 110 00:04:29,266 --> 00:04:31,133 invest with us 111 00:04:31,133 --> 00:04:32,500 where people from the community 112 00:04:32,500 --> 00:04:34,000 can own fractions of 113 00:04:34,000 --> 00:04:35,900 the property, can gain access 114 00:04:35,900 --> 00:04:36,966 to the income 115 00:04:36,966 --> 00:04:37,966 from that property forever. 116 00:04:37,966 --> 00:04:40,600 Each token is worth $100. 117 00:04:40,600 --> 00:04:42,733 NARRATOR: Rather than go to a bank for a loan, 118 00:04:42,733 --> 00:04:45,533 Vernon is going to use a new financial technology 119 00:04:45,533 --> 00:04:48,733 to mint something called a digital token, 120 00:04:48,733 --> 00:04:51,766 which can be bought and sold in a digital marketplace. 121 00:04:51,766 --> 00:04:54,500 VERNON: So these are the EquityCoin investors. 122 00:04:54,500 --> 00:04:55,500 So these are their 123 00:04:55,500 --> 00:04:57,233 wallet addresses 124 00:04:57,233 --> 00:04:59,433 where they get sent their EquityCoin to. 125 00:04:59,433 --> 00:05:03,233 NARRATOR: Vernon's project, known as EquityCoin, 126 00:05:03,233 --> 00:05:08,600 is a risky experiment and success is far from assured. 127 00:05:08,600 --> 00:05:12,033 If it succeeds, the community may benefit. 128 00:05:12,033 --> 00:05:14,300 We'll be able to restore this; it doesn't need... 129 00:05:14,300 --> 00:05:18,333 NARRATOR: If it fails, he and his investors could lose real money. 130 00:05:18,333 --> 00:05:20,500 ♪ ♪ 131 00:05:20,500 --> 00:05:24,433 Today, there are thousands of cryptocurrencies 132 00:05:24,433 --> 00:05:28,133 launched by entrepreneurs, coders, even artists. 133 00:05:28,133 --> 00:05:30,433 Among them are passionate advocates 134 00:05:30,433 --> 00:05:32,400 who believe their projects 135 00:05:32,400 --> 00:05:34,500 are evidence that crypto has 136 00:05:34,500 --> 00:05:36,600 the potential to address a wide range of 137 00:05:36,600 --> 00:05:37,866 society's problems. 138 00:05:37,866 --> 00:05:41,500 But that potential has yet to be realized. 139 00:05:41,500 --> 00:05:43,133 (pulls window up) 140 00:05:43,133 --> 00:05:45,833 BRUNTON: When we look at a technology like cryptocurrency, 141 00:05:45,833 --> 00:05:47,766 we're looking at something that is 142 00:05:47,766 --> 00:05:50,000 20% a working technology 143 00:05:50,000 --> 00:05:52,200 and 80% a utopian vision 144 00:05:52,200 --> 00:05:53,500 of how society could be. 145 00:05:53,500 --> 00:05:55,000 ♪ ♪ 146 00:05:55,000 --> 00:05:57,733 GRUNDFEST: The technology is several steps ahead 147 00:05:57,733 --> 00:05:59,333 of where the regulatory infrastructure is. 148 00:05:59,333 --> 00:06:01,600 ♪ ♪ 149 00:06:01,600 --> 00:06:04,066 NARRATOR: Cryptocurrencies are sporadically regulated, 150 00:06:04,066 --> 00:06:05,333 and depending on who you ask, 151 00:06:05,333 --> 00:06:09,900 many, most, or all are doomed to fail. 152 00:06:09,900 --> 00:06:11,933 WARREN: There have been accusations that all crypto 153 00:06:11,933 --> 00:06:13,400 is a Ponzi scheme. 154 00:06:13,400 --> 00:06:17,266 What I would say is that there are tokens and projects 155 00:06:17,266 --> 00:06:20,533 where the token will ultimately wind up having no value. 156 00:06:20,533 --> 00:06:21,533 I do think, however, 157 00:06:21,533 --> 00:06:22,733 there is a period of time 158 00:06:22,733 --> 00:06:24,000 in any innovation 159 00:06:24,000 --> 00:06:26,166 where you just have to figure it out 160 00:06:26,166 --> 00:06:27,866 and you're going to have to throw a lot of things 161 00:06:27,866 --> 00:06:29,400 at the wall and see what sticks. 162 00:06:29,400 --> 00:06:31,900 We're in that time right now. 163 00:06:31,900 --> 00:06:34,733 ♪ ♪ 164 00:06:34,733 --> 00:06:38,666 NARRATOR: Supporters claim crypto is superior to traditional money, 165 00:06:38,666 --> 00:06:42,433 but to understand why, it's best to start 166 00:06:42,433 --> 00:06:45,733 with a deceptively simple question: 167 00:06:45,733 --> 00:06:48,766 what is money, anyway? 168 00:06:48,766 --> 00:06:50,566 ♪ ♪ 169 00:06:50,566 --> 00:06:53,166 ELLEN FEINGOLD: Money has come in many forms throughout human history. 170 00:06:53,166 --> 00:06:54,533 And while we are all very familiar with 171 00:06:54,533 --> 00:06:55,866 coins and banknotes, 172 00:06:55,866 --> 00:06:58,066 many other objects have circulated 173 00:06:58,066 --> 00:07:00,466 and been used in exchange. 174 00:07:00,466 --> 00:07:03,500 NARRATOR: This is part of the largest historical collection of money 175 00:07:03,500 --> 00:07:05,066 in the world. 176 00:07:05,066 --> 00:07:08,433 Located at the Smithsonian Museum in Washington, D.C., 177 00:07:08,433 --> 00:07:12,700 "The Value of Money" exhibit features hundreds of objects 178 00:07:12,700 --> 00:07:16,100 representing currency from every inhabited continent, 179 00:07:16,100 --> 00:07:19,800 spanning more than 3,000 years. 180 00:07:19,800 --> 00:07:22,033 FEINGOLD: They range from seashells, 181 00:07:22,033 --> 00:07:26,200 large metal plates, clamshells, 182 00:07:26,200 --> 00:07:30,600 large stone disks often known as Rai from the island of Yap. 183 00:07:30,600 --> 00:07:32,933 Really, anything can be used as money 184 00:07:32,933 --> 00:07:35,566 as long as a community agrees to use it 185 00:07:35,566 --> 00:07:37,466 and decides on a value. 186 00:07:37,466 --> 00:07:40,666 NARRATOR: Money has existed in one form or another 187 00:07:40,666 --> 00:07:43,766 for longer than written history. 188 00:07:43,766 --> 00:07:47,066 But the fact it takes so many forms raises another 189 00:07:47,066 --> 00:07:50,700 interesting question: how "real" is any of it? 190 00:07:52,500 --> 00:07:55,633 BRUNTON: All money is collective belief, right? 191 00:07:55,633 --> 00:07:58,433 Money that you alone believe is valuable 192 00:07:58,433 --> 00:08:03,100 is no more useful to you than a language that only you speak. 193 00:08:03,100 --> 00:08:09,566 Money relies on the ability of large groups of people 194 00:08:09,566 --> 00:08:13,700 to arrive at a shared consensus about how much something 195 00:08:13,700 --> 00:08:18,566 is worth and that it will be worth that more or less 196 00:08:18,566 --> 00:08:21,233 into the future. 197 00:08:21,233 --> 00:08:23,366 NARULA: There are some elements of, you know, 198 00:08:23,366 --> 00:08:25,066 is this a good form of money? 199 00:08:25,066 --> 00:08:27,066 Can it be transacted easily? 200 00:08:27,066 --> 00:08:28,366 Can it be transported? 201 00:08:28,366 --> 00:08:29,900 Is it going to be inflated? 202 00:08:29,900 --> 00:08:31,366 But beyond that, it's belief. 203 00:08:31,366 --> 00:08:32,333 It's belief that it will 204 00:08:32,333 --> 00:08:33,333 continue to be valuable 205 00:08:33,333 --> 00:08:34,333 to people in the future. 206 00:08:34,333 --> 00:08:35,600 SWARTZ: It's sort of 207 00:08:35,600 --> 00:08:37,233 a necessary fiction. 208 00:08:37,233 --> 00:08:38,266 It's something that enables us 209 00:08:38,266 --> 00:08:39,800 to communicate, 210 00:08:39,800 --> 00:08:41,133 to have an economy, 211 00:08:41,133 --> 00:08:43,933 to make basic transactions. 212 00:08:43,933 --> 00:08:45,333 NARRATOR: History reminds us that 213 00:08:45,333 --> 00:08:49,133 virtually anything can be used as money as long as 214 00:08:49,133 --> 00:08:51,400 enough people believe in its value. 215 00:08:51,400 --> 00:08:54,966 Even in America, what functions as money 216 00:08:54,966 --> 00:08:57,633 has sometimes been quite fluid. 217 00:08:57,633 --> 00:09:00,500 In fact, for nearly a century, 218 00:09:00,500 --> 00:09:02,766 before the wide adoption of the dollar, 219 00:09:02,766 --> 00:09:07,033 people put their faith in local currencies. 220 00:09:07,033 --> 00:09:08,733 FEINGOLD: The Constitution gave the federal government 221 00:09:08,733 --> 00:09:10,400 the right to coin money, 222 00:09:10,400 --> 00:09:12,733 to establish a national mint in 1792. 223 00:09:12,733 --> 00:09:15,700 But it was silent on what should happen with banknotes. 224 00:09:15,700 --> 00:09:18,766 So instead, each of the states issued charters 225 00:09:18,766 --> 00:09:21,033 to banks and private businesses, 226 00:09:21,033 --> 00:09:22,866 enabling them to design and print their own money 227 00:09:22,866 --> 00:09:27,233 at whatever denomination and quantity that they wanted. 228 00:09:27,233 --> 00:09:29,733 And as a result, there were over 8,000 different banks 229 00:09:29,733 --> 00:09:32,400 and private entities making their own banknotes, 230 00:09:32,400 --> 00:09:35,933 and you can imagine just how wild and diverse that was. 231 00:09:35,933 --> 00:09:39,633 There's no central bank or overarching entity telling you 232 00:09:39,633 --> 00:09:42,600 you could put your faith in this and you can trust it. 233 00:09:42,600 --> 00:09:47,266 NARRATOR: Crypto is only the latest new form of money, 234 00:09:47,266 --> 00:09:50,600 and as most who've heard of Bitcoin know, it's digital. 235 00:09:50,600 --> 00:09:52,500 But since many of our daily transactions 236 00:09:52,500 --> 00:09:56,600 are already electronic and don't involve touching 237 00:09:56,600 --> 00:10:00,466 physical currency, it's reasonable to ask: 238 00:10:00,466 --> 00:10:02,633 how is this different? 239 00:10:02,633 --> 00:10:04,166 SWARTZ: We've been paying electronically 240 00:10:04,166 --> 00:10:05,566 for a very long time. 241 00:10:05,566 --> 00:10:06,766 You know, you swipe a card, 242 00:10:06,766 --> 00:10:09,000 one account gets debited, 243 00:10:09,000 --> 00:10:10,933 another account gets credited and we kind of 244 00:10:10,933 --> 00:10:12,700 don't really think about what happens under the hood. 245 00:10:12,700 --> 00:10:15,300 BRUNTON: But all of that is still doing 246 00:10:15,300 --> 00:10:17,366 fundamentally the same thing. 247 00:10:17,366 --> 00:10:18,866 It is telling a third party, 248 00:10:18,866 --> 00:10:22,300 someone who has access to a ledger, like your bank, 249 00:10:22,300 --> 00:10:25,700 that they would like to move the following units on that ledger 250 00:10:25,700 --> 00:10:27,266 from your account to somebody else's account. 251 00:10:27,266 --> 00:10:30,733 NARRATOR: Today, we've come to depend on banks 252 00:10:30,733 --> 00:10:34,000 and credit card companies to keep track of where our money is 253 00:10:34,000 --> 00:10:37,300 and manage the flow of digital payments. 254 00:10:37,300 --> 00:10:40,200 Cryptocurrencies may seem no different, 255 00:10:40,200 --> 00:10:42,433 but there's an important distinction. 256 00:10:42,433 --> 00:10:45,466 They aim to do away with the middlemen, 257 00:10:45,466 --> 00:10:48,533 like banks who may decide, fairly or unfairly, 258 00:10:48,533 --> 00:10:50,100 who to loan money to, 259 00:10:50,100 --> 00:10:53,200 and even governments, who control the money supply. 260 00:10:53,200 --> 00:10:56,800 What if we could remove all of those intermediary players 261 00:10:56,800 --> 00:10:59,533 and I could directly give you the amount that I owed to you? 262 00:10:59,533 --> 00:11:02,866 BRUNTON: How can we have a ledger system that exists just between us 263 00:11:02,866 --> 00:11:05,533 that doesn't need us to rely on an institution 264 00:11:05,533 --> 00:11:06,966 to keep track of it for us? 265 00:11:06,966 --> 00:11:09,933 If you can build a system like this that actually works, 266 00:11:09,933 --> 00:11:14,300 you have built a functional replacement for a lot of what 267 00:11:14,300 --> 00:11:16,066 a credit card company or a bank does. 268 00:11:16,066 --> 00:11:18,433 ♪ ♪ 269 00:11:18,433 --> 00:11:20,766 NARRATOR: It's not the kind of problem that would keep 270 00:11:20,766 --> 00:11:23,100 the average person up at night. 271 00:11:23,100 --> 00:11:25,233 But for some computer scientists, 272 00:11:25,233 --> 00:11:29,800 and privacy advocates, building a new financial technology 273 00:11:29,800 --> 00:11:31,933 seemed of paramount importance. 274 00:11:31,933 --> 00:11:36,966 MARK MILLER: "How often or in what system the thought police plugged in 275 00:11:36,966 --> 00:11:40,600 "on any individual wire was guesswork. 276 00:11:40,600 --> 00:11:45,866 "It was even conceivable that they watched everybody 277 00:11:45,866 --> 00:11:48,500 "all the time. 278 00:11:48,500 --> 00:11:54,200 "You had to live, did live, from habit that became instinct 279 00:11:54,200 --> 00:11:59,466 "in the assumption that every sound you made was overheard 280 00:11:59,466 --> 00:12:01,200 "and except in darkness, 281 00:12:01,200 --> 00:12:04,166 every movement scrutinized." 282 00:12:04,166 --> 00:12:08,066   NARRATOR: Mark Miller was a computer science student 283 00:12:08,066 --> 00:12:10,733 in the late 1970s. 284 00:12:10,733 --> 00:12:13,333 In the wake of Watergate and the Vietnam War, 285 00:12:13,333 --> 00:12:16,166 trust in the government was low, 286 00:12:16,166 --> 00:12:18,366 and Miller was one of many 287 00:12:18,366 --> 00:12:21,133 for whom George Orwell's classic dystopian novel 288 00:12:21,133 --> 00:12:23,500 seemed prophetic. 289 00:12:23,500 --> 00:12:29,100 MILLER: We were very terrified of the totalitarian future that 290 00:12:29,100 --> 00:12:32,000 "1984" had painted and we really 291 00:12:32,000 --> 00:12:34,833 took it on as our responsibility 292 00:12:34,833 --> 00:12:37,866 to figure out how to build a system 293 00:12:37,866 --> 00:12:40,533 that would be a tool of liberation, 294 00:12:40,533 --> 00:12:42,933 not a tool of oppression. 295 00:12:42,933 --> 00:12:44,266 NARRATOR: Universities were experimenting 296 00:12:44,266 --> 00:12:46,233 with the first networked computers. 297 00:12:46,233 --> 00:12:49,266 What had originally been designed as a Cold War 298 00:12:49,266 --> 00:12:52,233 missile defense system was laying the foundation 299 00:12:52,233 --> 00:12:54,666 for what would become today's internet. 300 00:12:54,666 --> 00:12:57,766 Though initially, only a handful of computers 301 00:12:57,766 --> 00:13:00,433 existed on this national network, 302 00:13:00,433 --> 00:13:03,900 it was already clear these interconnected machines 303 00:13:03,900 --> 00:13:07,100 were going to radically change communication. 304 00:13:07,100 --> 00:13:10,700 At the same time, networked computers could give 305 00:13:10,700 --> 00:13:13,666 governments and others new ways to monitor messages 306 00:13:13,666 --> 00:13:15,700 and spy on citizens. 307 00:13:15,700 --> 00:13:19,733 So some researchers were intent on developing a new kind 308 00:13:19,733 --> 00:13:24,800 of cryptography that would keep communications secure. 309 00:13:24,800 --> 00:13:28,133 BRUNTON: The history of cryptography for thousands of years 310 00:13:28,133 --> 00:13:31,566 is defined by one single problem. 311 00:13:31,566 --> 00:13:35,133 No matter how you make your code, right, 312 00:13:35,133 --> 00:13:38,733 the key that you use to encrypt the message needs to be 313 00:13:38,733 --> 00:13:41,333 the same key as the other person has to decrypt it. 314 00:13:41,333 --> 00:13:43,866 NEWSREEL ANNOUNCER: Here the important work of decoding messages 315 00:13:43,866 --> 00:13:45,100 whose information must be 316 00:13:45,100 --> 00:13:47,166 carefully guarded and transcribed 317 00:13:47,166 --> 00:13:48,900 with perfect accuracy. 318 00:13:48,900 --> 00:13:51,666 NARULA: Now the problem with that is 319 00:13:51,666 --> 00:13:53,833 that if anybody figured out the secret code, 320 00:13:53,833 --> 00:13:55,266 well, then you were kind of out of luck. 321 00:13:55,266 --> 00:13:56,700 They can now read all of the messages 322 00:13:56,700 --> 00:13:58,066 that you were going to send back and forth. 323 00:13:58,066 --> 00:14:00,333 NARRATOR: This is what happened 324 00:14:00,333 --> 00:14:01,733 when the Allies famously cracked 325 00:14:01,733 --> 00:14:05,433 the code of the Germans' Enigma machine in World War II 326 00:14:05,433 --> 00:14:07,566 and helped turn the tide of the war. 327 00:14:07,566 --> 00:14:11,200 BRUNTON: That was the fundamental limit to your ability 328 00:14:11,200 --> 00:14:14,433 to create secret messages for all of human history 329 00:14:14,433 --> 00:14:15,933 until the 1970s, 330 00:14:15,933 --> 00:14:19,133 when a group of computer scientists 331 00:14:19,133 --> 00:14:21,533 make a series of extraordinary breakthroughs. 332 00:14:21,533 --> 00:14:25,766 NARRATOR: The big breakthrough was figuring out how to replace 333 00:14:25,766 --> 00:14:28,133 the vulnerable single-key system 334 00:14:28,133 --> 00:14:30,900 with a novel two-key approach. 335 00:14:30,900 --> 00:14:34,966 Each side holds a pair of mathematically linked keys-- 336 00:14:34,966 --> 00:14:37,200 essentially a string of characters-- 337 00:14:37,200 --> 00:14:40,900 one shared publicly, the other kept private. 338 00:14:40,900 --> 00:14:42,933 The sender encrypts the message 339 00:14:42,933 --> 00:14:45,033 using the recipient's public key, 340 00:14:45,033 --> 00:14:47,066 the message can only be unscrambled 341 00:14:47,066 --> 00:14:50,300 using the recipient's private key. 342 00:14:50,300 --> 00:14:53,800 The sender can also use their private key to encode 343 00:14:53,800 --> 00:14:55,733 a unique digital signature into the message, 344 00:14:55,733 --> 00:14:58,633 proving that they sent it. 345 00:14:58,633 --> 00:15:00,433 The thing that's really cool about this is that I don't need 346 00:15:00,433 --> 00:15:01,800 to know your secret key. 347 00:15:01,800 --> 00:15:03,566 No one needs to know your secret key. 348 00:15:03,566 --> 00:15:07,566 It never leaves your device or your piece of paper, your home. 349 00:15:07,566 --> 00:15:09,033 It stays completely secret. 350 00:15:09,033 --> 00:15:11,000 The only thing that leaves is the public key. 351 00:15:11,000 --> 00:15:13,200 And I can't figure out what your secret key is 352 00:15:13,200 --> 00:15:14,500 from your public key. 353 00:15:14,500 --> 00:15:16,800 NARRATOR: As long as everyone's 354 00:15:16,800 --> 00:15:18,800 private keys stay private, 355 00:15:18,800 --> 00:15:22,466 secret messages are essentially uncrackable 356 00:15:22,466 --> 00:15:25,600 and signatures can't be forged. 357 00:15:25,600 --> 00:15:28,633 The trick lies in how the keys are linked 358 00:15:28,633 --> 00:15:32,433 through a type of math problem using large prime numbers, 359 00:15:32,433 --> 00:15:34,433 which is easy to compute in one direction, 360 00:15:34,433 --> 00:15:37,800 but nearly impossible to reverse engineer. 361 00:15:37,800 --> 00:15:40,633 NARULA: It's very easy 362 00:15:40,633 --> 00:15:43,100 to take a set of factors and see 363 00:15:43,100 --> 00:15:44,733 that they multiply to a number. 364 00:15:44,733 --> 00:15:46,300 It's very, very hard to take 365 00:15:46,300 --> 00:15:48,066 a large number and figure out 366 00:15:48,066 --> 00:15:49,133 what the factors are 367 00:15:49,133 --> 00:15:50,300 that divide into it. 368 00:15:50,300 --> 00:15:52,766 It would have required even 369 00:15:52,766 --> 00:15:54,300 someone with a supercomputer, 370 00:15:54,300 --> 00:15:57,033 you know, hundreds or thousands of years to try to break 371 00:15:57,033 --> 00:16:00,366 the cryptography and get access to the information. 372 00:16:00,366 --> 00:16:02,966 MILLER: That is a revolutionary change in the world. 373 00:16:02,966 --> 00:16:08,266 Up to that point, we were all kind of helpless 374 00:16:08,266 --> 00:16:13,166 against efforts by those forces that would target us. 375 00:16:13,166 --> 00:16:14,366 And now, suddenly, 376 00:16:14,366 --> 00:16:18,200 mathematics had given us this amazing gift, 377 00:16:18,200 --> 00:16:21,966 this, this tool that we could now use to communicate secretly 378 00:16:21,966 --> 00:16:26,866 in a way that even those large forces cannot corrupt. 379 00:16:26,866 --> 00:16:29,766 NARRATOR: A column in "Scientific American" 380 00:16:29,766 --> 00:16:33,033 described the breakthrough, but the actual algorithms 381 00:16:33,033 --> 00:16:38,133 remained unpublished in a paper at M.I.T. 382 00:16:38,133 --> 00:16:41,000 Miller feared the approach, known as public key encryption, 383 00:16:41,000 --> 00:16:44,133 was so powerful that the government might try 384 00:16:44,133 --> 00:16:48,100 to classify it as a military secret. 385 00:16:48,100 --> 00:16:50,366 MILLER: I saw this as a hard fork in the road 386 00:16:50,366 --> 00:16:52,400 that was bigger than me. 387 00:16:52,400 --> 00:16:53,400 And I decided 388 00:16:53,400 --> 00:16:56,100 I have to do what I can 389 00:16:56,100 --> 00:16:58,933 to make sure that this idea is not suppressed. 390 00:16:58,933 --> 00:17:04,333 So I went to the M.I.T. campus, and I hung around, 391 00:17:04,333 --> 00:17:06,766 and talked to people until finally I managed to 392 00:17:06,766 --> 00:17:09,000 get my hands on a paper copy. 393 00:17:09,000 --> 00:17:11,133 I went to a variety of copy shops. 394 00:17:11,133 --> 00:17:13,933 Never made too many copies in any one place. 395 00:17:13,933 --> 00:17:17,666 And I mailed it from a variety of mailboxes 396 00:17:17,666 --> 00:17:21,433 to home and hobbyist computer magazines 397 00:17:21,433 --> 00:17:24,066 and clubs all across the country. 398 00:17:24,066 --> 00:17:26,166 And I also gave copies of the paper 399 00:17:26,166 --> 00:17:27,766 to a few select friends of mine, 400 00:17:27,766 --> 00:17:32,633 telling them, "If I disappear, 401 00:17:32,633 --> 00:17:34,933 make sure this gets out." 402 00:17:34,933 --> 00:17:38,733 I have absolutely no idea, and I will never have any idea 403 00:17:38,733 --> 00:17:42,533 whether my actions had any influence at all. 404 00:17:42,533 --> 00:17:44,200 But the cat was out of the bag. 405 00:17:44,200 --> 00:17:48,300 NARRATOR: The paper was eventually published in 1978 406 00:17:48,300 --> 00:17:52,866 and the ideas spread like wildfire. 407 00:17:52,866 --> 00:17:54,300 The government tried to keep these algorithms 408 00:17:54,300 --> 00:17:55,833 from the public, 409 00:17:55,833 --> 00:17:59,166 but determined to fight against centralized control, 410 00:17:59,166 --> 00:18:02,766 programmers put the codes on everything from t-shirts 411 00:18:02,766 --> 00:18:06,366 to their own bodies. 412 00:18:06,366 --> 00:18:08,133 BRUNTON: Cryptographers were in the unique position, 413 00:18:08,133 --> 00:18:10,933 especially once people started getting tattoos of this 414 00:18:10,933 --> 00:18:13,033 string of characters, of being able to say 415 00:18:13,033 --> 00:18:14,666 like characters in martial arts movies, 416 00:18:14,666 --> 00:18:17,200 that their bodies were classified as deadly weapons. 417 00:18:17,200 --> 00:18:18,600 (whistling) 418 00:18:18,600 --> 00:18:20,500 What? You want a public key? 419 00:18:20,500 --> 00:18:25,500 (crowd laughing, groaning) 420 00:18:25,500 --> 00:18:26,966 NARRATOR: Some coders joined forces, 421 00:18:26,966 --> 00:18:30,666 working in loose groups to design technologies, 422 00:18:30,666 --> 00:18:32,766 including new forms of money, 423 00:18:32,766 --> 00:18:36,433 that could free people from centralized control. 424 00:18:36,433 --> 00:18:39,766 BRUNTON: We could call them visionaries, we could call them radicals. 425 00:18:39,766 --> 00:18:42,833 We could also call them weirdos. 426 00:18:42,833 --> 00:18:45,966 Eccentric, technologically sophisticated, very smart, 427 00:18:45,966 --> 00:18:47,233 deeply strange people 428 00:18:47,233 --> 00:18:49,433 who wanted to change the world 429 00:18:49,433 --> 00:18:52,266 through transforming how money worked. 430 00:18:52,266 --> 00:18:55,700 WOMAN: Ah! A Space Alien! 431 00:18:55,700 --> 00:18:59,100 SWARTZ: They anticipated that there was a coming economy 432 00:18:59,100 --> 00:19:01,933 that was going to be built around all of our data, 433 00:19:01,933 --> 00:19:05,466 the surveillance of our data that very soon we were all going 434 00:19:05,466 --> 00:19:07,433 to be living more and more of our lives 435 00:19:07,433 --> 00:19:10,100 communicating through digital technologies. 436 00:19:10,100 --> 00:19:11,600 And a crucial piece 437 00:19:11,600 --> 00:19:13,633 of this puzzle that hadn't 438 00:19:13,633 --> 00:19:15,000 really ever been fully solved 439 00:19:15,000 --> 00:19:16,000 was figuring out how to do 440 00:19:16,000 --> 00:19:17,400 money online. 441 00:19:17,400 --> 00:19:18,633 COMMERCIAL ANNOUNCER: Where will you find a world 442 00:19:18,633 --> 00:19:20,833 of ideas for your child? 443 00:19:20,833 --> 00:19:22,100 Only at eToys. 444 00:19:22,100 --> 00:19:23,166 NARRATOR: For the first time, 445 00:19:23,166 --> 00:19:24,833 public key encryption made it 446 00:19:24,833 --> 00:19:26,600 possible to securely use 447 00:19:26,600 --> 00:19:30,966 credit cards and conduct other private business online. 448 00:19:30,966 --> 00:19:32,833 Without it, online commerce 449 00:19:32,833 --> 00:19:35,266 might never have become a reality. 450 00:19:35,266 --> 00:19:39,533 But for activist coding groups, the fact that banks 451 00:19:39,533 --> 00:19:42,866 and credit card companies kept a ledger of all transactions 452 00:19:42,866 --> 00:19:44,633 opened the door for Big Brother. 453 00:19:44,633 --> 00:19:48,266 The most infamous of these groups was known as 454 00:19:48,266 --> 00:19:50,433 the "Cypherpunks." 455 00:19:50,433 --> 00:19:52,100 JACKSON: Their culture was, "Hey, we want to create privacy 456 00:19:52,100 --> 00:19:54,233 because we can see where this is going." 457 00:19:54,233 --> 00:19:55,533 They had the foresight to see 458 00:19:55,533 --> 00:19:57,266 that any big enterprise, 459 00:19:57,266 --> 00:19:58,566 there are going to be big 460 00:19:58,566 --> 00:19:59,700 companies and, and regulators 461 00:19:59,700 --> 00:20:00,866 who will try to control it. 462 00:20:00,866 --> 00:20:03,833 NARRATOR: The Cypherpunks 463 00:20:03,833 --> 00:20:05,900 mostly communicated through a mailing list. 464 00:20:05,900 --> 00:20:07,466 BRUNTON: The hard core of the Cypherpunks 465 00:20:07,466 --> 00:20:12,000 looked at digital money as a way to not just guarantee privacy, 466 00:20:12,000 --> 00:20:14,433 but as a way that they could potentially destroy 467 00:20:14,433 --> 00:20:16,933 existing governments and states completely. 468 00:20:16,933 --> 00:20:21,700 JACKSON: It was basically developers creating tools for freedom. 469 00:20:21,700 --> 00:20:24,600 And one of those tools was digital cash. 470 00:20:24,600 --> 00:20:29,433 NARRATOR: Not just digital transactions, like the banks were providing, 471 00:20:29,433 --> 00:20:32,300 but a new kind of money altogether. 472 00:20:32,300 --> 00:20:36,433 Across dozens of new forums, there were a number of attempts 473 00:20:36,433 --> 00:20:39,533 to design a system of digital cash. 474 00:20:39,533 --> 00:20:42,933 And then, on Halloween 2008, 475 00:20:42,933 --> 00:20:47,166 a new name-- Satoshi Nakamoto-- appeared. 476 00:20:47,166 --> 00:20:49,066 Enter Bitcoin. 477 00:20:49,066 --> 00:20:50,866 Called by its inventor a 478 00:20:50,866 --> 00:20:53,200 "peer-to-peer electronic cash system." 479 00:20:53,200 --> 00:20:57,100 Even now, no one knows who Satoshi Nakamoto, 480 00:20:57,100 --> 00:20:59,366 the inventor of Bitcoin, is. 481 00:20:59,366 --> 00:21:02,466 But the paper was revolutionary. 482 00:21:02,466 --> 00:21:04,566 BRUNTON: This is one of the most 483 00:21:04,566 --> 00:21:06,733 significant technologies 484 00:21:06,733 --> 00:21:09,166 in recent human history 485 00:21:09,166 --> 00:21:11,000 to have been created by someone 486 00:21:11,000 --> 00:21:13,833 who is still wholly anonymous. 487 00:21:13,833 --> 00:21:16,500 McKIE: Who is Satoshi is a question that may never be answered, 488 00:21:16,500 --> 00:21:19,066 but in actuality, that sort of 489 00:21:19,066 --> 00:21:21,200 mystique is kind of what adds 490 00:21:21,200 --> 00:21:23,500 to the allure that made Bitcoin really interesting 491 00:21:23,500 --> 00:21:25,066 to begin with, I think. 492 00:21:25,066 --> 00:21:27,133 MESIDOR: When you look at who Satoshi could be, 493 00:21:27,133 --> 00:21:29,266 I say it has to be a group of women because men 494 00:21:29,266 --> 00:21:30,600 would have taken credit a long time ago. 495 00:21:30,600 --> 00:21:31,933 (laughs) 496 00:21:31,933 --> 00:21:33,800 JACKSON: Whoever Satoshi is, 497 00:21:33,800 --> 00:21:35,333 it's amazing that they were able to fit 498 00:21:35,333 --> 00:21:38,133 all of what they wanted Bitcoin to be in eight pages. 499 00:21:38,133 --> 00:21:41,800 NARRATOR: Satoshi's paper synthesized decades of work 500 00:21:41,800 --> 00:21:45,133 by hundreds of cryptographers and computer scientists 501 00:21:45,133 --> 00:21:47,066 into an elegant whole. 502 00:21:47,066 --> 00:21:50,766 It showed how to create a digital payment system 503 00:21:50,766 --> 00:21:54,900 based on a new currency that eliminated banks... 504 00:21:54,900 --> 00:21:58,666 CROWD: All day, all week, occupy Wall Street! 505 00:21:58,666 --> 00:22:02,133 NARRATOR: ...At the exact moment the 2008 financial crisis 506 00:22:02,133 --> 00:22:05,700 shook the public trust that gave them their power. 507 00:22:05,700 --> 00:22:08,266 REPORTER: It was a manic Monday in the financial markets. 508 00:22:08,266 --> 00:22:09,666 (bell ringing) 509 00:22:09,666 --> 00:22:11,100 The DOW tumbled more than 500... 510 00:22:11,100 --> 00:22:14,900 People were like, "If the world's financial economy is, 511 00:22:14,900 --> 00:22:17,033 "you know, like taking a big hit, 512 00:22:17,033 --> 00:22:19,333 "how do we make ourselves more antifragile 513 00:22:19,333 --> 00:22:21,200 towards these things in the future?" 514 00:22:21,200 --> 00:22:23,533 SWARTZ: What Bitcoin proposed to do, 515 00:22:23,533 --> 00:22:24,966 what Satoshi proposed to do, 516 00:22:24,966 --> 00:22:27,700 was produce a kind of digital cash 517 00:22:27,700 --> 00:22:29,466 that didn't require those intermediaries. 518 00:22:29,466 --> 00:22:30,866 Instead of transactions 519 00:22:30,866 --> 00:22:35,166 going through a web of connected computers owned by banks 520 00:22:35,166 --> 00:22:37,800 and other intermediaries, it would go through 521 00:22:37,800 --> 00:22:40,966 a web of connected computers owned by the people 522 00:22:40,966 --> 00:22:42,866 conducting that transaction. 523 00:22:44,866 --> 00:22:47,100 NARRATOR: "Bitcoins" were simply "bits" of computer code 524 00:22:47,100 --> 00:22:49,266 in a digital ledger. 525 00:22:49,266 --> 00:22:51,500 Each person would hold their coins 526 00:22:51,500 --> 00:22:53,766 in an anonymous digital wallet, 527 00:22:53,766 --> 00:22:56,000 identified only by its public key. 528 00:22:56,000 --> 00:22:58,666 The holder of that wallet could only spend those coins 529 00:22:58,666 --> 00:23:01,433 by using their private key to sign the transfer 530 00:23:01,433 --> 00:23:04,133 and authorize the transaction. 531 00:23:04,133 --> 00:23:06,700 But the real breakthrough was something called 532 00:23:06,700 --> 00:23:10,766 "the blockchain"-- a technology that ensured the ledger 533 00:23:10,766 --> 00:23:13,633 hadn't been tampered with and that people hadn't spent 534 00:23:13,633 --> 00:23:17,533 the same coin more than once-- all without needing a bank 535 00:23:17,533 --> 00:23:19,800 or other central authority to keep track. 536 00:23:19,800 --> 00:23:21,433 (clacking, beeping) 537 00:23:21,433 --> 00:23:23,933 SWARTZ: The payments would instead be conducted through 538 00:23:23,933 --> 00:23:26,833 a decentralized infrastructure of payments that would run 539 00:23:26,833 --> 00:23:29,700 on any number of computers. 540 00:23:29,700 --> 00:23:33,100 BRUNTON: There's copies everywhere and all the copies update. 541 00:23:33,100 --> 00:23:35,166 As you make a change, as anyone adds something, 542 00:23:35,166 --> 00:23:37,933 as anyone does anything, everyone's copy updates, 543 00:23:37,933 --> 00:23:39,266 which means that we all, 544 00:23:39,266 --> 00:23:41,800 in a sense, together witness every single thing 545 00:23:41,800 --> 00:23:43,200 that's taking place. 546 00:23:43,200 --> 00:23:47,066 NARRATOR: The blockchain records the precise order 547 00:23:47,066 --> 00:23:50,966 of transactions-- if someone tries to send two people a coin 548 00:23:50,966 --> 00:23:54,466 when they only have one, one transaction is approved, 549 00:23:54,466 --> 00:23:56,366 the other denied. 550 00:23:56,366 --> 00:23:58,933 DASH: Well, how do you trust strangers on the internet? 551 00:23:58,933 --> 00:24:00,333 That's a hard problem. 552 00:24:00,333 --> 00:24:01,466 And that's a lot of what 553 00:24:01,466 --> 00:24:03,000 blockchains are designed to do 554 00:24:03,000 --> 00:24:04,266 is to be able to say, "We're 555 00:24:04,266 --> 00:24:05,533 all collectively anonymously 556 00:24:05,533 --> 00:24:08,233 "asserting that this copy, 557 00:24:08,233 --> 00:24:09,900 "this record of this sort of 558 00:24:09,900 --> 00:24:12,833 "database of information is the same, and it's accurate, 559 00:24:12,833 --> 00:24:14,233 and hasn't been tampered with." 560 00:24:14,233 --> 00:24:15,966 (beeping) 561 00:24:15,966 --> 00:24:19,666 NARRATOR: Satoshi's blockchain proposed an ingenious solution. 562 00:24:19,666 --> 00:24:22,266 Every ten minutes or so, a record of every 563 00:24:22,266 --> 00:24:25,066 Bitcoin transaction made anywhere in the world 564 00:24:25,066 --> 00:24:30,866 during that period is assembled inside a digital "block". 565 00:24:30,866 --> 00:24:34,366 That block is then run through a cryptographic algorithm 566 00:24:34,366 --> 00:24:37,666 called a "hash"-- essentially, a way of converting 567 00:24:37,666 --> 00:24:41,166 any piece of information into a short, unique identifier 568 00:24:41,166 --> 00:24:45,733 like a label that describes the contents of a box. 569 00:24:45,733 --> 00:24:48,200 But this is no ordinary label. 570 00:24:48,200 --> 00:24:50,700 If anyone changes the contents of the box 571 00:24:50,700 --> 00:24:52,933 by even the smallest amount, 572 00:24:52,933 --> 00:24:55,866 then the next time it's run through the hash function, 573 00:24:55,866 --> 00:24:58,100 the label changes completely, 574 00:24:58,100 --> 00:25:03,366 making it clear someone has tampered with what's inside. 575 00:25:03,366 --> 00:25:07,466 BRUNTON: Imagine a machine that you can put information into. 576 00:25:07,466 --> 00:25:10,666 Let us say "Moby Dick," all of "Moby Dick," the entire novel. 577 00:25:10,666 --> 00:25:13,600 You put it into the machine and it gives you back a little code. 578 00:25:13,600 --> 00:25:16,466 That code is the summary, the expression, 579 00:25:16,466 --> 00:25:19,166 of all of the data that makes up "Moby Dick." 580 00:25:19,166 --> 00:25:21,133 And now, if you put in "Moby Dick," 581 00:25:21,133 --> 00:25:23,866 but you have changed one single word, 582 00:25:23,866 --> 00:25:26,000 if you have altered a space, if you have removed a period, 583 00:25:26,000 --> 00:25:27,566 the code will be different. 584 00:25:27,566 --> 00:25:30,133 You're going to be able to tell that something has changed. 585 00:25:30,133 --> 00:25:34,100 With such a machine, you could then take, say, a transaction-- 586 00:25:34,100 --> 00:25:37,266 me sending you ten dollars-- you can put it into that machine. 587 00:25:37,266 --> 00:25:39,433 You're going to get back a little code that corresponds 588 00:25:39,433 --> 00:25:41,200 to all of the data about that transaction. 589 00:25:41,200 --> 00:25:45,600 That code will not be the same if you change anything 590 00:25:45,600 --> 00:25:47,966 about that transaction data. 591 00:25:47,966 --> 00:25:51,066 Now, you take that code and you add that into 592 00:25:51,066 --> 00:25:53,166 the record of the next transaction, 593 00:25:53,166 --> 00:25:56,166 linking them all into a single continuous chain 594 00:25:56,166 --> 00:25:58,400 of verification. 595 00:25:58,400 --> 00:26:01,700 NARRATOR: Each block begins with the previous block's hash, 596 00:26:01,700 --> 00:26:06,600 creating an ever-growing chain of blocks-- "the blockchain". 597 00:26:06,600 --> 00:26:10,033 Users from across the network take turns hashing blocks 598 00:26:10,033 --> 00:26:13,366 and adding them to the chain. 599 00:26:13,366 --> 00:26:14,900 The other computers on the network 600 00:26:14,900 --> 00:26:17,900 verify the block is hashed correctly, 601 00:26:17,900 --> 00:26:19,800 and update their copies, 602 00:26:19,800 --> 00:26:22,600 effectively creating a decentralized ledger 603 00:26:22,600 --> 00:26:24,433 that all users agree on. 604 00:26:26,266 --> 00:26:27,766 VIVIAN BRIGHT: That's good, Vernon. 605 00:26:27,766 --> 00:26:30,400 Oh, okay. I don't need a whole lot of water. 606 00:26:30,400 --> 00:26:32,900 NARRATOR: Today, people are using 607 00:26:32,900 --> 00:26:36,100 other decentralized systems modeled on Satoshi's blockchain, 608 00:26:36,100 --> 00:26:39,166 to try to move money beyond the control of banks, 609 00:26:39,166 --> 00:26:42,133 governments, and other traditional gatekeepers. 610 00:26:42,133 --> 00:26:45,500 BRIGHT: Okay, If I was to give you $1,000, 611 00:26:45,500 --> 00:26:47,666 what would happen with my $1,000? 612 00:26:47,666 --> 00:26:51,200 So, if you put $1,000 into, 613 00:26:51,200 --> 00:26:53,633 let's say, a $100,000 property, 614 00:26:53,633 --> 00:26:56,066 you have one percent ownership 615 00:26:56,066 --> 00:26:57,600 in that asset. 616 00:26:57,600 --> 00:26:59,633 Whatever the income is for that asset, 617 00:26:59,633 --> 00:27:02,466 you get one percent of that income. 618 00:27:02,466 --> 00:27:04,100 NARRATOR: Community property developer Vernon J. 619 00:27:04,100 --> 00:27:07,733   explains equity coin to his Aunt Vivian, 620 00:27:07,733 --> 00:27:10,133 who has lived in East New York, Brooklyn, 621 00:27:10,133 --> 00:27:12,200 for more than half a century. 622 00:27:12,200 --> 00:27:13,866 We need a light. 623 00:27:13,866 --> 00:27:14,866 And if Vernon, and this new 624 00:27:14,866 --> 00:27:16,500 money business 625 00:27:16,500 --> 00:27:18,033 is going to be the light, 626 00:27:18,033 --> 00:27:19,400 let it be the light. 627 00:27:19,400 --> 00:27:22,366 Let it be the beacon that we need 628 00:27:22,366 --> 00:27:24,800 to revitalize our community. 629 00:27:24,800 --> 00:27:25,800 (indistinct chatter) 630 00:27:25,800 --> 00:27:26,800 All right, all right. 631 00:27:26,800 --> 00:27:28,633 How's everybody doing tonight? 632 00:27:28,633 --> 00:27:29,900 MAN: Well, thank you. All right. 633 00:27:29,900 --> 00:27:31,466 NARRATOR: Equity coin has 634 00:27:31,466 --> 00:27:33,100 attracted interest online, 635 00:27:33,100 --> 00:27:34,566 but Vernon also makes his pitch 636 00:27:34,566 --> 00:27:37,466 to the community face-to-face. 637 00:27:37,466 --> 00:27:39,566 When we talk about cryptocurrency, 638 00:27:39,566 --> 00:27:41,600 when we talk about blockchain technology, 639 00:27:41,600 --> 00:27:44,466 what that does is it actually gives you a chance to 640 00:27:44,466 --> 00:27:47,200 remove the intermediaries. 641 00:27:47,200 --> 00:27:49,766 So, those banks that have been declining you, you know, 642 00:27:49,766 --> 00:27:51,600 those organizations that say, 643 00:27:51,600 --> 00:27:53,066 "Actually, no, this is not going to work," 644 00:27:53,066 --> 00:27:56,000 you have the opportunity to create this system 645 00:27:56,000 --> 00:27:57,833 where people can invest with you 646 00:27:57,833 --> 00:27:59,533 without the intermediary, right... 647 00:27:59,533 --> 00:28:00,633 NARRATOR: Because he's dealing 648 00:28:00,633 --> 00:28:02,133 with real world properties 649 00:28:02,133 --> 00:28:04,333 and needs to hold a deed, 650 00:28:04,333 --> 00:28:06,666 collect rent, and pay taxes, 651 00:28:06,666 --> 00:28:08,133 the Securities and Exchange Commission 652 00:28:08,133 --> 00:28:09,900 regulates Vernon's coins 653 00:28:09,900 --> 00:28:12,566 like shares in a traditional company. 654 00:28:12,566 --> 00:28:14,700 But he thinks crypto offers 655 00:28:14,700 --> 00:28:16,433 a more direct connection with investors. 656 00:28:16,433 --> 00:28:20,500 What I wanted to do was mix in affordable housing 657 00:28:20,500 --> 00:28:23,233 with blockchain technology and create a system 658 00:28:23,233 --> 00:28:25,933 where we can actually replace the bank 659 00:28:25,933 --> 00:28:28,866 with community. MAN: Yes. 660 00:28:28,866 --> 00:28:30,366 NARRATOR: If Vernon attracts enough interest, 661 00:28:30,366 --> 00:28:32,633 he'll launch his coin, 662 00:28:32,633 --> 00:28:34,166 joining thousands of others 663 00:28:34,166 --> 00:28:35,666 in a volatile crypto ecosystem 664 00:28:35,666 --> 00:28:38,633 where people can get rich, or lose everything. 665 00:28:38,633 --> 00:28:41,000 So this is our time, this is our time. 666 00:28:41,000 --> 00:28:44,166 NARRATOR: But all of this raises a question: 667 00:28:44,166 --> 00:28:47,566 if decentralized blockchains eliminate the middlemen, 668 00:28:47,566 --> 00:28:50,366 who runs the network? 669 00:28:50,366 --> 00:28:52,100 NARULA: Why do people even participate 670 00:28:52,100 --> 00:28:53,300 in this network? 671 00:28:53,300 --> 00:28:54,800 why do they gather these transactions 672 00:28:54,800 --> 00:28:55,933 and add them to the end 673 00:28:55,933 --> 00:28:57,133 of the blockchain? 674 00:28:57,133 --> 00:28:58,833 And how do we make sure that 675 00:28:58,833 --> 00:29:00,966 they're doing that in a secure way? 676 00:29:00,966 --> 00:29:03,766 NARRATOR: Satoshi's answer came in the form of 677 00:29:03,766 --> 00:29:07,233 an incentive system called mining 678 00:29:07,233 --> 00:29:10,700 that rewarded users who added blocks to the chain 679 00:29:10,700 --> 00:29:14,300 by granting them newly minted bitcoins. 680 00:29:14,300 --> 00:29:17,000 These "miners" group transactions 681 00:29:17,000 --> 00:29:19,733 from across the network into a block, 682 00:29:19,733 --> 00:29:21,433 and run it through a hash function, 683 00:29:21,433 --> 00:29:25,700 like the machine that created the label for "Moby Dick." 684 00:29:25,700 --> 00:29:28,166 In order for everyone's ledger to match, 685 00:29:28,166 --> 00:29:31,933 only one miner at a time can add a block to the chain. 686 00:29:31,933 --> 00:29:33,766 So how does everyone agree on 687 00:29:33,766 --> 00:29:36,300 which miner gets to add the next block? 688 00:29:36,300 --> 00:29:39,000 Satoshi's solution-- have miners race to solve 689 00:29:39,000 --> 00:29:41,266 a cryptographic puzzle. 690 00:29:41,266 --> 00:29:43,200 NARULA: A node that wants to add a block to the end of the blockchain 691 00:29:43,200 --> 00:29:46,700 actually engages in solving 692 00:29:46,700 --> 00:29:49,166 a computationally expensive cryptographic puzzle. 693 00:29:49,166 --> 00:29:51,333 So the sole purpose of this cryptographic puzzle 694 00:29:51,333 --> 00:29:54,766 is just to show that I've spent a lot of time and energy 695 00:29:54,766 --> 00:29:56,566 trying to solve the puzzle. That's it. 696 00:29:56,566 --> 00:30:00,133 The idea is that it needs to be expensive 697 00:30:00,133 --> 00:30:03,233 by some resource to compute this puzzle. 698 00:30:03,233 --> 00:30:05,066 If it's very cheap or very easy 699 00:30:05,066 --> 00:30:06,900 or very quick to compute the puzzle, 700 00:30:06,900 --> 00:30:09,300 then it won't do a good job of securing the network 701 00:30:09,300 --> 00:30:11,500 and making sure there's only one blockchain, 702 00:30:11,500 --> 00:30:13,000 one version of history, 703 00:30:13,000 --> 00:30:15,033 which is very important. 704 00:30:15,033 --> 00:30:17,700 NARRATOR: This puzzle-- called "proof of work"-- 705 00:30:17,700 --> 00:30:19,500 means miners who spend resources 706 00:30:19,500 --> 00:30:21,566 in the form of hardware and electricity 707 00:30:21,566 --> 00:30:25,033 get to add a block of new transactions and earn bitcoin. 708 00:30:25,033 --> 00:30:28,066 Start her up, Johnny. 709 00:30:28,066 --> 00:30:29,600 NARRATOR: In the early days, 710 00:30:29,600 --> 00:30:32,900 mining was a cottage industry; people built rigs at home, 711 00:30:32,900 --> 00:30:34,400 expanding the network 712 00:30:34,400 --> 00:30:36,600 and sharing their setups on social media. 713 00:30:36,600 --> 00:30:39,766 MINER: This is a little overview of what we got-- four machines. 714 00:30:39,766 --> 00:30:44,700 MINER 2: I should clear right at 2,800 a month. 715 00:30:44,700 --> 00:30:46,533 NARRATOR: Mining also is how new coins 716 00:30:46,533 --> 00:30:49,200 are introduced into the system. 717 00:30:49,200 --> 00:30:51,833 Instead of banks and governments controlling the money supply, 718 00:30:51,833 --> 00:30:56,000 it's automatically regulated by the software. 719 00:30:56,000 --> 00:30:58,366 As more coins are mined, the reward decreases, 720 00:30:58,366 --> 00:31:02,666 and the proof of work puzzle gets harder to solve 721 00:31:02,666 --> 00:31:04,866 and requires more energy. 722 00:31:04,866 --> 00:31:08,100 Giant mining farms exist 723 00:31:08,100 --> 00:31:09,900 all over the world, 724 00:31:09,900 --> 00:31:11,700 using as much power as some countries. 725 00:31:11,700 --> 00:31:13,233 JACKSON: About 30% of the mining 726 00:31:13,233 --> 00:31:15,433 done in the world is in America, 727 00:31:15,433 --> 00:31:16,666 and most of that mining 728 00:31:16,666 --> 00:31:19,400 is starting to be done in Texas, because they 729 00:31:19,400 --> 00:31:21,000 have a lot of energy. 730 00:31:21,000 --> 00:31:22,666 Also, a lot of the mining 731 00:31:22,666 --> 00:31:24,366 is done where it is cheaper, 732 00:31:24,366 --> 00:31:26,300 places like Iceland, Kazakhstan. 733 00:31:26,300 --> 00:31:27,933 China was huge in mining for a 734 00:31:27,933 --> 00:31:29,266 while and then they banned it. 735 00:31:29,266 --> 00:31:31,966 NARRATOR: With about one percent 736 00:31:31,966 --> 00:31:34,266 of the world's electricity going to crypto mining, 737 00:31:34,266 --> 00:31:37,900 some are pushing to find alternative sources of power. 738 00:31:37,900 --> 00:31:39,766 JACKSON: What's become huge now is 739 00:31:39,766 --> 00:31:41,233 hydroelectric energy, using water as 740 00:31:41,233 --> 00:31:43,033 a as a way to mine bitcoin. 741 00:31:43,033 --> 00:31:46,666 And also, we're starting to see more of the solar panels, 742 00:31:46,666 --> 00:31:48,633 wind energy. 743 00:31:48,633 --> 00:31:50,700 WARREN: Ironically, Bitcoin actually 744 00:31:50,700 --> 00:31:52,133 provides a way to think about 745 00:31:52,133 --> 00:31:54,466 standing up different kinds 746 00:31:54,466 --> 00:31:55,633 of renewable architecture 747 00:31:55,633 --> 00:31:57,033 around energy 748 00:31:57,033 --> 00:31:58,966 that wouldn't otherwise necessarily 749 00:31:58,966 --> 00:32:00,500 have capacity or the ability to be stood up. 750 00:32:00,500 --> 00:32:02,433 NARRATOR: But others don't buy it, 751 00:32:02,433 --> 00:32:05,966 particularly when considering the entirety of the Bitcoin 752 00:32:05,966 --> 00:32:09,066 mining enterprise spread around the world. 753 00:32:09,066 --> 00:32:13,633 DASH: There is a tendency to point to, in some cases valid, 754 00:32:13,633 --> 00:32:15,766 but mostly not, 755 00:32:15,766 --> 00:32:18,866 renewables as part of the energy consumption of Bitcoin. 756 00:32:18,866 --> 00:32:20,666 There are people that sort of 757 00:32:20,666 --> 00:32:22,966 wave away the seriousness, 758 00:32:22,966 --> 00:32:24,533 the gravity of that damage, 759 00:32:24,533 --> 00:32:26,033 that harm that they're causing. 760 00:32:26,033 --> 00:32:27,433 And I find it immoral. 761 00:32:27,433 --> 00:32:32,566 BRUNTON: We see the construction of a vast machine 762 00:32:32,566 --> 00:32:35,300 that might be one of 763 00:32:35,300 --> 00:32:38,500 the most purely wasteful machines ever built, 764 00:32:38,500 --> 00:32:40,200 a system that, 765 00:32:40,200 --> 00:32:42,066 that burns processor power, 766 00:32:42,066 --> 00:32:44,200 and coal and generates nothing 767 00:32:44,200 --> 00:32:46,300 but heat and the solutions to 768 00:32:46,300 --> 00:32:48,333 deliberately meaningless problems. 769 00:32:48,333 --> 00:32:52,900 NARRATOR: But early on, things were very different. 770 00:32:52,900 --> 00:32:57,333 Mining was easy, and Bitcoin essentially worthless. 771 00:32:57,333 --> 00:32:58,933 SWARTZ: In the early days, 772 00:32:58,933 --> 00:33:00,866 there were websites that had Bitcoin faucets, 773 00:33:00,866 --> 00:33:03,466 which were basically just a site you would go to, 774 00:33:03,466 --> 00:33:05,433 click on it, you know, 775 00:33:05,433 --> 00:33:07,066 create a wallet 776 00:33:07,066 --> 00:33:08,166 and it would enable you 777 00:33:08,166 --> 00:33:09,733 to just get free Bitcoins. 778 00:33:09,733 --> 00:33:12,100 ♪ ♪ 779 00:33:12,100 --> 00:33:16,166 NARRATOR: Satoshi didn't seem interested in making money, 780 00:33:16,166 --> 00:33:18,866 and in 2011 sent a final email 781 00:33:18,866 --> 00:33:20,333 before disappearing for good. 782 00:33:20,333 --> 00:33:24,500 Other early adopters saw the promise of the technology, 783 00:33:24,500 --> 00:33:27,533 and tried to generate belief in its value. 784 00:33:27,533 --> 00:33:29,033 SWARTZ: Once Bitcoin was developed enough 785 00:33:29,033 --> 00:33:31,900 to be a kind of largely functioning piece of software, 786 00:33:31,900 --> 00:33:32,966 it had to actually 787 00:33:32,966 --> 00:33:36,033 be used in order to become money, 788 00:33:36,033 --> 00:33:40,200 so one person on the Bitcoin message board said, 789 00:33:40,200 --> 00:33:42,500 "I will pay someone to-- with Bitcoin-- 790 00:33:42,500 --> 00:33:45,333 to order me two pizzas with lots of toppings." 791 00:33:45,333 --> 00:33:47,500 (keyboard keys lightly clacking) 792 00:33:47,500 --> 00:33:48,666 And someone else, 793 00:33:48,666 --> 00:33:50,600 on the other side of the country, 794 00:33:50,600 --> 00:33:51,766 ordered that pizza, 795 00:33:51,766 --> 00:33:55,366 sent it to him, and got paid in Bitcoin. 796 00:33:55,366 --> 00:33:59,800 JACKSON: He essentially paid about 40 bucks for two pizzas. 797 00:33:59,800 --> 00:34:02,466 And those 10,000 Bitcoin are well over, 798 00:34:02,466 --> 00:34:04,600 I believe, $200 million now. 799 00:34:04,600 --> 00:34:07,633 But that transaction had to happen in order to show that, 800 00:34:07,633 --> 00:34:09,433 "Hey, people do want to pay with this." 801 00:34:09,433 --> 00:34:12,333 Bitcoin is now up to $111! 802 00:34:12,333 --> 00:34:14,733 NARRATOR: But as more users joined the network 803 00:34:14,733 --> 00:34:16,266 and the price increased, 804 00:34:16,266 --> 00:34:17,633 something changed. 805 00:34:17,633 --> 00:34:18,866 The hottest investment, 806 00:34:18,866 --> 00:34:20,133 on or off Wall Street, 807 00:34:20,133 --> 00:34:22,566 are these cryptocurrencies. They are soaring! 808 00:34:22,566 --> 00:34:25,200 They began to see it less as money, 809 00:34:25,200 --> 00:34:27,833 that is as a transactional tool that you would actually use. 810 00:34:27,833 --> 00:34:30,300 They started to see it instead as a kind of asset. 811 00:34:30,300 --> 00:34:33,133 NARRATOR: Despite wild fluctuations, 812 00:34:33,133 --> 00:34:35,733 Bitcoin's value increased over time-- 813 00:34:35,733 --> 00:34:40,366 and other coins emerged on their own blockchains. 814 00:34:40,366 --> 00:34:42,900 While most chased profits, 815 00:34:42,900 --> 00:34:46,033 one early Bitcoin user saw 816 00:34:46,033 --> 00:34:47,700 a different kind of potential, 817 00:34:47,700 --> 00:34:49,200 and helped invent what would become 818 00:34:49,200 --> 00:34:51,366 one of crypto's most famous uses. 819 00:34:51,366 --> 00:34:52,700 KEVIN McCOY: I'm an artist, 820 00:34:52,700 --> 00:34:54,000 and have been an artist for 821 00:34:54,000 --> 00:34:55,766 a long, long time, but I wasn't always. 822 00:34:55,766 --> 00:34:57,033 I studied philosophy 823 00:34:57,033 --> 00:34:58,533 and literature, 824 00:34:58,533 --> 00:35:00,666 and that was my main kind of interest. 825 00:35:00,666 --> 00:35:03,700 NARRATOR: In the early 2000s, 826 00:35:03,700 --> 00:35:07,300 Kevin and Jennifer McCoy were successful digital artists-- 827 00:35:07,300 --> 00:35:10,933 their works shown by prestigious galleries. 828 00:35:10,933 --> 00:35:15,066 But unauthorized copies were appearing all over the internet. 829 00:35:15,066 --> 00:35:20,200 They realized there was no such thing as a "digital original" 830 00:35:20,200 --> 00:35:23,133 that they could actually own and control. 831 00:35:23,133 --> 00:35:24,366 McCOY: In a digital environment, 832 00:35:24,366 --> 00:35:25,866 of course, it's always a copy 833 00:35:25,866 --> 00:35:28,166 and it proliferates, you know, everywhere. 834 00:35:28,166 --> 00:35:29,966 And, you know, and so there is no original. 835 00:35:29,966 --> 00:35:34,366 NARRATOR: But Bitcoin gave Kevin an idea. 836 00:35:34,366 --> 00:35:35,366 McCOY: That system created 837 00:35:35,366 --> 00:35:37,133 for the first time, 838 00:35:37,133 --> 00:35:39,000 an idea of digital scarcity. 839 00:35:39,000 --> 00:35:42,066 All of a sudden, 840 00:35:42,066 --> 00:35:45,633 the everyday norm that you had about digital technology, 841 00:35:45,633 --> 00:35:47,400 that it's infinitely reproducible, 842 00:35:47,400 --> 00:35:49,733 that it's, everything is just copy and paste, 843 00:35:49,733 --> 00:35:52,400 that didn't apply in this case. 844 00:35:52,400 --> 00:35:55,033 If I send you my Bitcoins, 845 00:35:55,033 --> 00:35:56,666 I don't have them anymore and you have them. 846 00:35:56,666 --> 00:35:59,800 That's scarcity; it's not everywhere. 847 00:35:59,800 --> 00:36:01,433 It's only somewhere. 848 00:36:01,433 --> 00:36:03,433 And so I had this realization that 849 00:36:03,433 --> 00:36:06,733 if it was possible via Bitcoin 850 00:36:06,733 --> 00:36:10,266 to create uniqueness around currency, 851 00:36:10,266 --> 00:36:13,100 then there had to be a way that you could create 852 00:36:13,100 --> 00:36:15,966 uniqueness around a digital artwork. 853 00:36:15,966 --> 00:36:17,400 But I didn't know how. 854 00:36:17,400 --> 00:36:19,966 I'm really excited about this last pairing... 855 00:36:19,966 --> 00:36:21,966 NARRATOR: Kevin attended a conference 856 00:36:21,966 --> 00:36:24,700 where each artist was paired with a tech partner 857 00:36:24,700 --> 00:36:27,366 and given 24 hours to develop a new idea 858 00:36:27,366 --> 00:36:28,733 they'd present to an audience. 859 00:36:30,533 --> 00:36:33,133 What we want to talk to you about today is 860 00:36:33,133 --> 00:36:35,066 this idea we have of monetized graphics. 861 00:36:35,066 --> 00:36:38,933 And how we can put digital artworks in chains. 862 00:36:38,933 --> 00:36:40,000 So almost immediately after 863 00:36:40,000 --> 00:36:41,800 I was paired up with Kevin McCoy, 864 00:36:41,800 --> 00:36:43,866 he and I sat down and started sketching out ideas 865 00:36:43,866 --> 00:36:47,066 for how could you make an assertion on a blockchain 866 00:36:47,066 --> 00:36:48,866 to say that a certain digital work 867 00:36:48,866 --> 00:36:50,266 was an original, unique item. 868 00:36:50,266 --> 00:36:52,133 ♪ ♪ 869 00:36:52,133 --> 00:36:54,000 NARRATOR: After an all-night coding session, 870 00:36:54,000 --> 00:36:55,433 Anil Dash and Kevin 871 00:36:55,433 --> 00:36:57,866 announced that they had 872 00:36:57,866 --> 00:37:00,733 registered a video on a blockchain. 873 00:37:00,733 --> 00:37:03,466 DASH (voiceover): It was a segment of a video work 874 00:37:03,466 --> 00:37:06,200 that Kevin and Jennifer McCoy had created together, 875 00:37:06,200 --> 00:37:08,866 and I actually found it mesmerizing. 876 00:37:08,866 --> 00:37:10,933 McCOY (voiceover): And this was our on-stage example 877 00:37:10,933 --> 00:37:12,566 of taking this file 878 00:37:12,566 --> 00:37:14,400 and creating a blockchain-based record of that. 879 00:37:14,400 --> 00:37:16,933 We've created a system that will 880 00:37:16,933 --> 00:37:20,133 establish verification and provenance 881 00:37:20,133 --> 00:37:23,300 over digital files, digital artworks. 882 00:37:23,300 --> 00:37:26,200 That provenance is a chain of ownership... 883 00:37:26,200 --> 00:37:29,233 NARRATOR: Anil and Kevin created a record of ownership 884 00:37:29,233 --> 00:37:31,600 that would live on the blockchain. 885 00:37:31,600 --> 00:37:33,966 Whoever held the key to access it, 886 00:37:33,966 --> 00:37:35,166 owned the digital original. 887 00:37:35,166 --> 00:37:37,000 DASH (voiceover): We did pull it together 888 00:37:37,000 --> 00:37:38,266 in a couple of hours. 889 00:37:38,266 --> 00:37:40,566 So given that it was something we sort of did 890 00:37:40,566 --> 00:37:42,500 over the course of an evening and into a late night, 891 00:37:42,500 --> 00:37:44,400 it was a pretty good first version. 892 00:37:44,400 --> 00:37:45,733 Do you got 20 bucks? 893 00:37:45,733 --> 00:37:47,166 DASH (voiceover): And we sort of 894 00:37:47,166 --> 00:37:48,766 said we'd negotiate a price for it. 895 00:37:48,766 --> 00:37:50,900 (on-screen): Can I pay you in U.S. dollars? 896 00:37:50,900 --> 00:37:53,133 Sure, that's cool with me. 897 00:37:53,133 --> 00:37:54,866 I have four dollars. 898 00:37:54,866 --> 00:37:56,433 (laughter) 899 00:37:56,433 --> 00:37:58,133 Jesus! Really? 900 00:37:58,133 --> 00:38:00,033 NARRATOR: It was the first transaction of 901 00:38:00,033 --> 00:38:02,166 something that would eventually come to be called 902 00:38:02,166 --> 00:38:05,166 a non-fungible token, or NFT. 903 00:38:05,166 --> 00:38:06,533 ♪ ♪ 904 00:38:06,533 --> 00:38:09,700 Today, NFTs can act as a digital proof of ownership 905 00:38:09,700 --> 00:38:12,566 for things far beyond art-- 906 00:38:12,566 --> 00:38:13,900 from tickets to a concert, 907 00:38:13,900 --> 00:38:16,833 to membership in a club, 908 00:38:16,833 --> 00:38:20,366 operating like keys that unlock benefits to the owner. 909 00:38:20,366 --> 00:38:22,400 You can imagine rolling it out 910 00:38:22,400 --> 00:38:24,733 into a more platform-oriented thing... 911 00:38:24,733 --> 00:38:27,266 NARRATOR: But back then, Kevin's notion that it was possible 912 00:38:27,266 --> 00:38:31,233 to own a digital original didn't immediately catch on. 913 00:38:31,233 --> 00:38:32,433 McCOY: You know that 914 00:38:32,433 --> 00:38:34,866 it's new, you know that it's a novel thing. 915 00:38:34,866 --> 00:38:36,766 You know that it's... you can feel that it's important. 916 00:38:36,766 --> 00:38:38,100 And nobody cared. 917 00:38:38,100 --> 00:38:40,133 (bell chiming) 918 00:38:40,133 --> 00:38:43,400 NARRATOR: Kevin's idea may not have taken off, 919 00:38:43,400 --> 00:38:45,833 but he wasn't the only one hoping blockchains 920 00:38:45,833 --> 00:38:48,533 could go beyond Bitcoin. 921 00:38:48,533 --> 00:38:49,833 In 2015, 922 00:38:49,833 --> 00:38:52,766 a 21-year-old coder named Vitalik Buterin 923 00:38:52,766 --> 00:38:54,500 launched Ethereum-- 924 00:38:54,500 --> 00:38:56,133 a new blockchain 925 00:38:56,133 --> 00:38:58,533 designed to decentralize much more than just money. 926 00:38:58,533 --> 00:39:00,166 VITALIK BUTERIN: Ethereum community is, uh, 927 00:39:00,166 --> 00:39:03,200 I think unique in the crypto space for its diversity, 928 00:39:03,200 --> 00:39:05,566 like it's not just one community, it's, you know-- 929 00:39:05,566 --> 00:39:07,366 there's a lot of different sub-communities. 930 00:39:07,366 --> 00:39:09,166 There is something in it for everyone. 931 00:39:09,166 --> 00:39:11,433 NARRATOR: Today, Ethereum is 932 00:39:11,433 --> 00:39:14,600 the largest blockchain in the world, 933 00:39:14,600 --> 00:39:17,366 running ten times more transactions than Bitcoin. 934 00:39:17,366 --> 00:39:20,900 Like Bitcoin, the blockchain 935 00:39:20,900 --> 00:39:23,933 incentivizes users by rewarding miners 936 00:39:23,933 --> 00:39:27,566 with a currency-- in this case, Ether. 937 00:39:27,566 --> 00:39:29,833 But the range of what Ethereum can do 938 00:39:29,833 --> 00:39:32,000 goes beyond a simple monetary transaction. 939 00:39:32,000 --> 00:39:33,900 KARTIK (on microphone): We want to have 940 00:39:33,900 --> 00:39:35,900 a quick interview 941 00:39:35,900 --> 00:39:37,700 with a person who needs no introduction. 942 00:39:37,700 --> 00:39:40,266 So without further ado, let's welcome Vitalik Buterin. 943 00:39:40,266 --> 00:39:42,633 (applause) 944 00:39:42,633 --> 00:39:45,333 ♪ ♪ 945 00:39:45,333 --> 00:39:48,833 NARRATOR: Ethereum lets users create their own programmable tokens, 946 00:39:48,833 --> 00:39:51,100 using "smart contracts"-- 947 00:39:51,100 --> 00:39:53,933 instructions in the form of computer code 948 00:39:53,933 --> 00:39:55,933 that execute rules on the blockchain. 949 00:39:55,933 --> 00:39:59,333 Instead of just adding or subtracting money from a ledger, 950 00:39:59,333 --> 00:40:03,033 these "smart contracts" make it possible for anyone 951 00:40:03,033 --> 00:40:06,800 to mint a token and embed it with nearly any functionality, 952 00:40:06,800 --> 00:40:08,933 from tracking music royalties 953 00:40:08,933 --> 00:40:13,233 to encoding money with last will and testament directives, 954 00:40:13,233 --> 00:40:15,600 doing for the blockchain 955 00:40:15,600 --> 00:40:20,400 what the iPhone's App Store did for the cell phone. 956 00:40:20,400 --> 00:40:21,733 Today, 957 00:40:21,733 --> 00:40:24,500 conferences like this one in Amsterdam 958 00:40:24,500 --> 00:40:26,900 attract thousands of coders and entrepreneurs. 959 00:40:26,900 --> 00:40:29,266 MASSIMILIANO GERARDI: So the young people are excited now 960 00:40:29,266 --> 00:40:30,400 about blockchain 961 00:40:30,400 --> 00:40:33,000 and all the possibilities 962 00:40:33,000 --> 00:40:34,633 that blockchain can give. 963 00:40:34,633 --> 00:40:36,133 And I haven't seen 964 00:40:36,133 --> 00:40:37,833 this kind of excitement 965 00:40:37,833 --> 00:40:39,900 since the time of internet was born. 966 00:40:40,900 --> 00:40:42,666 NARRATOR: Because anyone on the internet 967 00:40:42,666 --> 00:40:44,766 can see and inspect the ledger, 968 00:40:44,766 --> 00:40:48,066 proponents claim blockchains like Ethereum 969 00:40:48,066 --> 00:40:49,533 can make transactions more transparent, 970 00:40:49,533 --> 00:40:53,733 and, because they eliminate the middle-man, 971 00:40:53,733 --> 00:40:55,466 more efficient. 972 00:40:55,466 --> 00:40:57,000 There's an idealistic quality 973 00:40:57,000 --> 00:40:59,066 to many of the hopes surrounding the technology. 974 00:40:59,066 --> 00:41:01,200 GUNDEEP BHAMRA: Everything which we want to 975 00:41:01,200 --> 00:41:02,366 preserve for eternity 976 00:41:02,366 --> 00:41:04,300 can and should be on the blockchain, 977 00:41:04,300 --> 00:41:08,600 whether it's a movie or it's our housing contracts 978 00:41:08,600 --> 00:41:11,166 or the way we... 979 00:41:11,166 --> 00:41:13,200 interact with, let's say, Uber, 980 00:41:13,200 --> 00:41:14,900 or rent, rent a car. 981 00:41:14,900 --> 00:41:16,500 So right now, when you have 982 00:41:16,500 --> 00:41:17,666 a paper will, 983 00:41:17,666 --> 00:41:19,000 there could be a lot of drama, 984 00:41:19,000 --> 00:41:20,300 a lot of debates between 985 00:41:20,300 --> 00:41:22,100 family members when you pass away. 986 00:41:22,100 --> 00:41:24,733 But at least if you actually do that on chain, 987 00:41:24,733 --> 00:41:26,466 on the blockchain, actually, you can actually get a say, 988 00:41:26,466 --> 00:41:29,100 and you know that it's going to be guaranteed 989 00:41:29,100 --> 00:41:30,966 to go to those people when you pass. 990 00:41:30,966 --> 00:41:33,566 MARCUS: We are enabling individuals 991 00:41:33,566 --> 00:41:35,266 and organizations to access 992 00:41:35,266 --> 00:41:37,733 a market for climate action 993 00:41:37,733 --> 00:41:39,666 in an efficient, low cost manner. 994 00:41:39,666 --> 00:41:41,733 And by bringing these existing 995 00:41:41,733 --> 00:41:44,466 certificates onto a blockchain, 996 00:41:44,466 --> 00:41:46,533 we unlock much greater efficiency, 997 00:41:46,533 --> 00:41:47,766 lower transaction fees, 998 00:41:47,766 --> 00:41:50,933 and much faster settlement times. 999 00:41:50,933 --> 00:41:52,366 NARRATOR: Most projects like these 1000 00:41:52,366 --> 00:41:55,433 are still in their early stages and not yet viable, 1001 00:41:55,433 --> 00:41:59,800 but one of Ethereum's most popular uses 1002 00:41:59,800 --> 00:42:02,066 helped Kevin's original idea 1003 00:42:02,066 --> 00:42:04,433 for putting artwork on the blockchain take off. 1004 00:42:04,433 --> 00:42:08,033 SNOOP: ♪ 2021, Snoop D-O-dub ♪ 1005 00:42:08,033 --> 00:42:09,533 NEWS ANCHOR: Now to the latest trend 1006 00:42:09,533 --> 00:42:10,566 that's sweeping the internet, 1007 00:42:10,566 --> 00:42:12,133 the skyrocketing prices 1008 00:42:12,133 --> 00:42:14,233 for digital art sold as NFTs. 1009 00:42:14,233 --> 00:42:16,400 NEWS ANCHOR 2: NFT sales now topping 1010 00:42:16,400 --> 00:42:18,366 a half a trillion dollars... 1011 00:42:18,366 --> 00:42:22,033 NARRATOR: Today, NFTs-- or non-fungible tokens-- 1012 00:42:22,033 --> 00:42:24,200 seem to be everywhere. 1013 00:42:24,200 --> 00:42:26,333 Nyan cat is, of course, a meme of 1014 00:42:26,333 --> 00:42:28,866 a cat with a Pop-Tart body prancing through space 1015 00:42:28,866 --> 00:42:32,066 with rainbows flying out of its butt. 1016 00:42:32,066 --> 00:42:33,566 NARRATOR: Most of them are registered 1017 00:42:33,566 --> 00:42:36,466 on Ethereum, where they exist as 1018 00:42:36,466 --> 00:42:39,300 smart contract tokens on the blockchain. 1019 00:42:39,300 --> 00:42:41,400 It's been surreal to go from 1020 00:42:41,400 --> 00:42:43,400 this personal collaboration with somebody 1021 00:42:43,400 --> 00:42:47,200 and a transaction that was about collecting their art to 1022 00:42:47,200 --> 00:42:49,000 the last few years, as it became 1023 00:42:49,000 --> 00:42:50,166 this big hype cycle. 1024 00:42:50,166 --> 00:42:51,800 REPORTER: The art world has been 1025 00:42:51,800 --> 00:42:53,466 turned upside down again. 1026 00:42:53,466 --> 00:42:55,900 NARRATOR: NFTs for nearly anything imaginable 1027 00:42:55,900 --> 00:42:58,600 sell through online marketplaces, 1028 00:42:58,600 --> 00:43:01,233 but even traditional auction houses 1029 00:43:01,233 --> 00:43:03,233 have gotten in the game. 1030 00:43:03,233 --> 00:43:05,333 Some of the most coveted-- and expensive-- 1031 00:43:05,333 --> 00:43:08,033 are essentially digital brands that people desire. 1032 00:43:08,033 --> 00:43:09,466 DASH: Part of what's so compelling 1033 00:43:09,466 --> 00:43:11,200 to a lot of people that collect NFTs, 1034 00:43:11,200 --> 00:43:12,866 especially when they're part of a large edition of them, 1035 00:43:12,866 --> 00:43:14,633 is that each individual work 1036 00:43:14,633 --> 00:43:18,366 is digitally identified as being unique. 1037 00:43:18,366 --> 00:43:20,633 And, you know, that has meaning to people. 1038 00:43:20,633 --> 00:43:22,800 To the fans and enthusiasts, they kind of 1039 00:43:22,800 --> 00:43:24,466 feel like they're collecting baseball cards. 1040 00:43:24,466 --> 00:43:27,833 The big one is called Bored Apes, 1041 00:43:27,833 --> 00:43:29,533 which have kind of become almost 1042 00:43:29,533 --> 00:43:31,200 a cultural brand on its own. 1043 00:43:31,200 --> 00:43:33,033 This is your ape? That's mine, yeah. 1044 00:43:33,033 --> 00:43:34,300 Well, we're debuting it. That's really cool. 1045 00:43:34,300 --> 00:43:36,300 It's like, I want something that 1046 00:43:36,300 --> 00:43:38,466 like kind of reminds me of me... 1047 00:43:38,466 --> 00:43:40,033 SWARTZ: It would be really strange 1048 00:43:40,033 --> 00:43:41,833 to see a celebrity like Paris Hilton 1049 00:43:41,833 --> 00:43:44,133 go on a late-night talk show 1050 00:43:44,133 --> 00:43:45,833 and talk about a penny stock 1051 00:43:45,833 --> 00:43:47,100 that they are investing in 1052 00:43:47,100 --> 00:43:48,166 and recommending that others 1053 00:43:48,166 --> 00:43:49,333 do the same. 1054 00:43:49,333 --> 00:43:52,233 But NFTs have become 1055 00:43:52,233 --> 00:43:54,600 a acceptable topic for late-night conversation. 1056 00:43:54,600 --> 00:43:56,433 ♪ ♪ 1057 00:43:56,433 --> 00:43:58,066 NARRATOR: The frenzy around 1058 00:43:58,066 --> 00:43:59,833 new blockchain applications 1059 00:43:59,833 --> 00:44:01,300 doesn't end with NFTs. 1060 00:44:01,300 --> 00:44:03,700 Blockchains are even being used 1061 00:44:03,700 --> 00:44:06,600 to create new platforms for cooperation. 1062 00:44:06,600 --> 00:44:09,866 Called Decentralized Autonomous Organizations, 1063 00:44:09,866 --> 00:44:11,033 or DAOs for short. 1064 00:44:11,033 --> 00:44:14,366 One was even involved 1065 00:44:14,366 --> 00:44:15,900 in an attempt to buy 1066 00:44:15,900 --> 00:44:18,033 an original copy of the U.S. Constitution 1067 00:44:18,033 --> 00:44:20,400 at an auction in New York City. 1068 00:44:20,400 --> 00:44:21,433 And the idea here was 1069 00:44:21,433 --> 00:44:22,466 a group of people came together 1070 00:44:22,466 --> 00:44:23,633 and they decided they wanted 1071 00:44:23,633 --> 00:44:25,100 to pool some funds and purchase 1072 00:44:25,100 --> 00:44:28,133 a copy of the Constitution. 1073 00:44:28,133 --> 00:44:30,500 NARRATOR: A digital collective formed on a chat group, 1074 00:44:30,500 --> 00:44:32,866 and created a token on the Ethereum blockchain 1075 00:44:32,866 --> 00:44:34,366 that allowed members 1076 00:44:34,366 --> 00:44:36,166 to contribute money to the project-- 1077 00:44:36,166 --> 00:44:38,533 and have a vote on how it was run. 1078 00:44:38,533 --> 00:44:40,033 This started about a week ago. 1079 00:44:40,033 --> 00:44:41,466 I just got some friends in a group chat 1080 00:44:41,466 --> 00:44:43,400 texting one another, they found out the Constitution 1081 00:44:43,400 --> 00:44:45,300 of the United States is going up on auction. 1082 00:44:45,300 --> 00:44:47,666 And we said we need to raise a lot of money, 1083 00:44:47,666 --> 00:44:48,933 and can we do it? 1084 00:44:48,933 --> 00:44:51,033 As soon as the money starts piling in, 1085 00:44:51,033 --> 00:44:52,333 we just got shocked that 1086 00:44:52,333 --> 00:44:53,566 people actually, like, have their faith in us, 1087 00:44:53,566 --> 00:44:55,933 and we're like, "Okay, now we have to deliver." 1088 00:44:55,933 --> 00:44:58,733 NARRATOR: Over the course of seven days, 1089 00:44:58,733 --> 00:45:02,300 nearly 20,000 members joined the DAO, 1090 00:45:02,300 --> 00:45:04,166 raising more than $40 million, 1091 00:45:04,166 --> 00:45:07,766 well beyond the document's pre-auction estimate. 1092 00:45:07,766 --> 00:45:10,733 And now, let's begin the auction. 1093 00:45:10,733 --> 00:45:14,033 Lot 1787, the Constitution of the United States of America. 1094 00:45:14,033 --> 00:45:16,400 We'll start the bidding here at $10 million, 1095 00:45:16,400 --> 00:45:19,666 At $10 million, $11 million, $12 million, 1096 00:45:19,666 --> 00:45:21,166 at $13 million, now $14 million... 1097 00:45:21,166 --> 00:45:23,466 NARRATOR: Ironically, in the end, 1098 00:45:23,466 --> 00:45:25,433 the group's transparency was a liability. 1099 00:45:25,433 --> 00:45:27,200   AUCTIONEER: At $41 million, 1100 00:45:27,200 --> 00:45:28,866 sold! 1101 00:45:28,866 --> 00:45:31,566 $41 million, paddle 411. 1102 00:45:31,566 --> 00:45:33,100 (crowd groans) 1103 00:45:33,100 --> 00:45:35,966 NARRATOR: It was outbid by a hedge fund C.E.O. 1104 00:45:35,966 --> 00:45:38,500 who could see how much money they had raised. 1105 00:45:38,500 --> 00:45:40,566 WARREN: But I think what's fascinating about DAOs 1106 00:45:40,566 --> 00:45:42,933 is they really are providing these micro experiments 1107 00:45:42,933 --> 00:45:46,533 in how do we organize and govern ourselves and our activities. 1108 00:45:46,533 --> 00:45:49,233 What we've just accomplished in the last four days 1109 00:45:49,233 --> 00:45:51,666 was (bleep) insanity. It was amazing. 1110 00:45:51,666 --> 00:45:52,866 And we have to be proud of ourselves 1111 00:45:52,866 --> 00:45:55,433 for rallying together to do something 1112 00:45:55,433 --> 00:45:56,733 that no one has done in history before. 1113 00:45:56,733 --> 00:45:59,300 And now we get to plot our next move. 1114 00:45:59,300 --> 00:46:01,733 What do we want the future to look like? 1115 00:46:01,733 --> 00:46:03,333 What do we want to build next? What do we want to do? 1116 00:46:03,333 --> 00:46:05,266 ♪ ♪ 1117 00:46:05,266 --> 00:46:06,766 NARRATOR: As thousands of experiments 1118 00:46:06,766 --> 00:46:09,433 like ConstitutionDAO take place, 1119 00:46:09,433 --> 00:46:11,666 blockchain use is skyrocketing, 1120 00:46:11,666 --> 00:46:13,533 as are the environmental costs. 1121 00:46:13,533 --> 00:46:17,200 So Ethereum engineers have been working 1122 00:46:17,200 --> 00:46:20,433 to implement a replacement for Satoshi's energy-intensive 1123 00:46:20,433 --> 00:46:23,000 "proof of work" mechanism. 1124 00:46:23,000 --> 00:46:24,800 It's called "proof of stake." 1125 00:46:24,800 --> 00:46:27,766 DANNY RYAN: When we move from proof of work to proof of stake, 1126 00:46:27,766 --> 00:46:29,100 the energy consumption of 1127 00:46:29,100 --> 00:46:31,433 the Ethereum platform will be 1128 00:46:31,433 --> 00:46:34,400 reduced by 99.95% 1129 00:46:34,400 --> 00:46:36,600 and not to grow again. 1130 00:46:36,600 --> 00:46:38,966 (beeping) 1131 00:46:38,966 --> 00:46:41,033 NARRATOR: Instead of spending costly energy 1132 00:46:41,033 --> 00:46:43,300 to solve a computational problem-- 1133 00:46:43,300 --> 00:46:46,166 and earn the right to add a block to the chain-- 1134 00:46:46,166 --> 00:46:47,933 in proof of stake, 1135 00:46:47,933 --> 00:46:50,033 the system randomly assigns the right 1136 00:46:50,033 --> 00:46:52,933 to add a block to those who already own coins. 1137 00:46:52,933 --> 00:46:55,033 The more coins a user owns, 1138 00:46:55,033 --> 00:46:57,333 the more likely they are to be chosen. 1139 00:46:57,333 --> 00:47:00,433 In this way, proof of stake makes it possible to secure 1140 00:47:00,433 --> 00:47:04,233 the blockchain without burning huge amounts of energy. 1141 00:47:06,766 --> 00:47:09,766 Other blockchains already use proof of stake, 1142 00:47:09,766 --> 00:47:11,066 but it's never been tried 1143 00:47:11,066 --> 00:47:14,633 at the scale of Ethereum's network. 1144 00:47:14,633 --> 00:47:17,533 And what amounts to a giant software update 1145 00:47:17,533 --> 00:47:19,200 could put the system at risk. 1146 00:47:19,200 --> 00:47:21,400 DASH: The classic metaphor we use in tech is 1147 00:47:21,400 --> 00:47:22,566 it's like trying to change the engines 1148 00:47:22,566 --> 00:47:23,966 in a plane while it's in flight. 1149 00:47:23,966 --> 00:47:27,233 The reason it's hard is because millions of people 1150 00:47:27,233 --> 00:47:30,100 and way more millions of lines of code 1151 00:47:30,100 --> 00:47:32,500 are relying on the system as it functions today. 1152 00:47:32,500 --> 00:47:36,033 All right we're one minute out, guys. 1153 00:47:36,033 --> 00:47:39,766 NARRATOR: Still, in spring 2022, after six years of work, 1154 00:47:39,766 --> 00:47:43,533 a test suggests the upgrade might soon be ready. 1155 00:47:43,533 --> 00:47:47,133 (cheers and applause) 1156 00:47:47,133 --> 00:47:50,066 ♪ ♪ 1157 00:47:50,066 --> 00:47:52,966 Huge questions remain about the transition, 1158 00:47:52,966 --> 00:47:55,966 and whether it will end up trading one problem for another. 1159 00:47:55,966 --> 00:47:58,266 It's more environmentally responsible, 1160 00:47:58,266 --> 00:48:00,800 but perhaps less fair, 1161 00:48:00,800 --> 00:48:03,800 since the wealthiest users will be able to stake more coins 1162 00:48:03,800 --> 00:48:07,400 add more blocks, and earn even more coins. 1163 00:48:07,400 --> 00:48:10,600 But in the meantime, as crypto technology 1164 00:48:10,600 --> 00:48:14,066 continues to evolve, the question 1165 00:48:14,066 --> 00:48:15,566 no one can answer yet is 1166 00:48:15,566 --> 00:48:17,633 will it be able to live up to 1167 00:48:17,633 --> 00:48:21,266 its decentralized promise? 1168 00:48:21,266 --> 00:48:23,233 RYAN: Ideally, these blockchain platforms 1169 00:48:23,233 --> 00:48:27,833 can help disintermediate the power that exists, 1170 00:48:27,833 --> 00:48:30,666 locked up in a handful of corporations 1171 00:48:30,666 --> 00:48:33,000 and kind of put that back into communities, 1172 00:48:33,000 --> 00:48:35,600 back into individual users, and... 1173 00:48:35,600 --> 00:48:39,866 and maybe shift the trajectory from here to maybe over here. 1174 00:48:39,866 --> 00:48:41,900 ♪ ♪ (keyboard clacking) 1175 00:48:41,900 --> 00:48:44,000 NARRATOR: Back in Brooklyn, that's the hope 1176 00:48:44,000 --> 00:48:46,233 of Vernon and his programmer Aakil, 1177 00:48:46,233 --> 00:48:48,733 who are finally ready to launch Equitycoin 1178 00:48:48,733 --> 00:48:50,866 on the Ethereum blockchain. 1179 00:48:50,866 --> 00:48:53,566 VERNON: We're going to allow for the sale of 1180 00:48:53,566 --> 00:48:57,000 10,700 tokens at $100 per token. 1181 00:48:57,000 --> 00:48:58,466 So it's $1.07 million that 1182 00:48:58,466 --> 00:48:59,700 we're going to be raising. 1183 00:48:59,700 --> 00:49:01,233 ♪ ♪ 1184 00:49:01,233 --> 00:49:02,833 NARRATOR: By selling tokens, 1185 00:49:02,833 --> 00:49:04,400 he hopes to raise enough money 1186 00:49:04,400 --> 00:49:05,966 to purchase the properties, 1187 00:49:05,966 --> 00:49:08,433 and investors hope they'll get a return. 1188 00:49:08,433 --> 00:49:11,066 Vernon believes that trust will grow as people see 1189 00:49:11,066 --> 00:49:12,833 how their interests are coded 1190 00:49:12,833 --> 00:49:14,733 right into the token's contract. 1191 00:49:14,733 --> 00:49:18,666 VERNON: Smart contracts take the rules and regulations 1192 00:49:18,666 --> 00:49:20,366 of a normal contract 1193 00:49:20,366 --> 00:49:23,500 and embed them into an automated system 1194 00:49:23,500 --> 00:49:26,066 so that both parties can adhere to those rules 1195 00:49:26,066 --> 00:49:28,200 and regulations without trusting each other. 1196 00:49:28,200 --> 00:49:30,700 It's a trustless way of doing business. 1197 00:49:30,700 --> 00:49:32,233 NARRATOR: Vernon hopes for 1198 00:49:32,233 --> 00:49:34,366 a decentralized future, 1199 00:49:34,366 --> 00:49:36,400 where crypto removes the gatekeepers 1200 00:49:36,400 --> 00:49:38,033 and levels the playing field. 1201 00:49:38,033 --> 00:49:41,566 NEWS ANCHOR: JP Morgan rolling out the first cryptocurrency 1202 00:49:41,566 --> 00:49:42,900 backed by a U.S. bank. 1203 00:49:42,900 --> 00:49:45,033 NARRATOR: But the original promise 1204 00:49:45,033 --> 00:49:47,300 of crypto may be in doubt... 1205 00:49:47,300 --> 00:49:49,733 Fortune favors the brave. 1206 00:49:49,733 --> 00:49:53,166 NARRATOR: ...As big business increasingly gets in on the action. 1207 00:49:53,166 --> 00:49:55,000 WOMAN: Get started with crypto 1208 00:49:55,000 --> 00:49:56,766 on Venmo. 1209 00:49:56,766 --> 00:50:00,000 NARRATOR: Today, nearly all crypto financial transactions 1210 00:50:00,000 --> 00:50:02,033 go through centralized exchanges 1211 00:50:02,033 --> 00:50:04,566 that enable users to buy and sell. 1212 00:50:04,566 --> 00:50:06,833 WOMAN: Binance-- exchange the world. 1213 00:50:06,833 --> 00:50:09,733 NARRATOR: They can decide which users 1214 00:50:09,733 --> 00:50:11,166 can hold accounts, 1215 00:50:11,166 --> 00:50:14,300 and can freeze funds at the touch of a button. 1216 00:50:14,300 --> 00:50:15,600 This has drawn the interest 1217 00:50:15,600 --> 00:50:18,033 of financial regulators. 1218 00:50:18,033 --> 00:50:19,866 A battle is brewing in Washington 1219 00:50:19,866 --> 00:50:22,700 over how to regulate the cryptocurrency industry. 1220 00:50:22,700 --> 00:50:25,733 We have tremendous amounts of financial regulation, 1221 00:50:25,733 --> 00:50:27,900 and some of it is there for a very good reason. 1222 00:50:27,900 --> 00:50:30,266 It's to protect consumers. 1223 00:50:30,266 --> 00:50:33,200 But preserving the ability for competition 1224 00:50:33,200 --> 00:50:34,433 and for people to innovate 1225 00:50:34,433 --> 00:50:36,200 is also very important, 1226 00:50:36,200 --> 00:50:37,700 making sure that we don't unintentionally 1227 00:50:37,700 --> 00:50:40,266 regulate into a world of 1228 00:50:40,266 --> 00:50:42,466 a few very large, powerful intermediaries. 1229 00:50:42,466 --> 00:50:44,300 I think that's very important as well. 1230 00:50:44,300 --> 00:50:49,433 The struggle to decentralize, 1231 00:50:49,433 --> 00:50:52,166 I think, is never ultimately won. 1232 00:50:52,166 --> 00:50:54,233 Every time you win it, at one level, 1233 00:50:54,233 --> 00:50:56,200 you create a, a system, 1234 00:50:56,200 --> 00:50:59,066 in which you can lose it at the next level up. 1235 00:50:59,066 --> 00:51:03,533 There's a real concern that the future of crypto 1236 00:51:03,533 --> 00:51:06,566 will look a lot like the present of the internet, 1237 00:51:06,566 --> 00:51:09,066 just kind of a re-entrenchment, 1238 00:51:09,066 --> 00:51:10,566 of the same old forms of exploitation, 1239 00:51:10,566 --> 00:51:11,966 just on new terms. 1240 00:51:11,966 --> 00:51:13,966 NARRATOR: One way or the other, 1241 00:51:13,966 --> 00:51:16,766 many believe blockchain is here to stay. 1242 00:51:16,766 --> 00:51:20,166 WARREN: You don't un-ring that bell, it's not going to vanish. 1243 00:51:20,166 --> 00:51:21,666 What it's used for is something 1244 00:51:21,666 --> 00:51:23,333 that has yet to be fully determined. 1245 00:51:23,333 --> 00:51:24,366 (phone chimes) 1246 00:51:24,366 --> 00:51:25,600 DON (on phone): Vern, Great Rising! 1247 00:51:25,600 --> 00:51:28,133 Don, what's going on, brother? 1248 00:51:28,133 --> 00:51:31,933 NARRATOR: At last, Vernon gathers his team to launch Equitycoin 1249 00:51:31,933 --> 00:51:33,966 and start raising money from the public. 1250 00:51:33,966 --> 00:51:35,800 Let's do it. 1251 00:51:35,800 --> 00:51:37,166 Let's do it. Let's go! 1252 00:51:37,166 --> 00:51:38,466 BRUNTON: I look at cryptocurrencies 1253 00:51:38,466 --> 00:51:41,766 as being the very, very early days 1254 00:51:41,766 --> 00:51:43,866 of a better technology. 1255 00:51:43,866 --> 00:51:46,533 I think, in the language of tech, 1256 00:51:46,533 --> 00:51:48,100 we are using the alpha rollout-- 1257 00:51:48,100 --> 00:51:50,366 the earliest, jankiest, 1258 00:51:50,366 --> 00:51:51,633 least-figured-out version of something. 1259 00:51:51,633 --> 00:51:55,200 T-minus three, two, 1260 00:51:55,200 --> 00:51:56,900 and one. Boom. 1261 00:51:56,900 --> 00:51:59,900 ASH: We just launched our investment packages, everybody. 1262 00:51:59,900 --> 00:52:01,566 VERNON: Boom. 1263 00:52:01,566 --> 00:52:07,100 ♪ ♪ 1264 00:52:07,100 --> 00:52:09,366 (electronic chiming) 1265 00:52:23,200 --> 00:52:30,733 ♪ ♪ 1266 00:52:37,966 --> 00:52:42,833 ANNOUNCER: To order this program on DVD, visit ShopPBS. 1267 00:52:42,833 --> 00:52:45,566 Or call 1-800-PLAY-PBS. 1268 00:52:45,566 --> 00:52:48,433 Episodes of "NOVA" are available with Passport. 1269 00:52:48,433 --> 00:52:52,166 "NOVA" is also available on Amazon Prime Video. 1270 00:52:52,166 --> 00:52:57,366 ♪ ♪ 1271 00:53:06,233 --> 00:53:13,400 ♪ ♪