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Offline Stan

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This one is worth paying for a transcript!
« on: December 06, 2014, 04:31:54 AM »

This is such a good episode of LetsTalkBitcoin, I'd like to have a transcript of it that we could dice up into a couple dozen marketing products.


I wish I had time to listen to all the deep, deep content more than once.  (But maybe if I had a transcript I could take the time to study it - and produce secondary tutorial posts from it.)

Wow, what intense deep questions and on-the-fly classic answers!  There's too much here to let go to waste inside a TL;DR Premium Monster-Sized interview.  This shouldn't be limited to those with the intellectual stamina to drink from a fire hose non-stop for an hour.  We need to turn all this into digestible snack-sized hors d'oeuvres.

Would anybody care to produce a transcript for 100 BitUSD?


Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline onceuponatime

Re: This one is worth paying for a transcript!
« Reply #1 on: December 06, 2014, 04:37:23 AM »
I'll do it.

Offline Stan

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Re: This one is worth paying for a transcript!
« Reply #2 on: December 06, 2014, 04:40:00 AM »
Super!   :)
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Offline cn-members

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Re: This one is worth paying for a transcript!
« Reply #3 on: December 06, 2014, 04:47:26 AM »
we are making the Chinese version of the transcript .
« Last Edit: December 06, 2014, 05:03:07 AM by cn-members »
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Chinese Community Spokesman Account,to help the effective communication between Chinese and other members of the community.We're not translators to do regular translations , but will help with vital ones as we see fit and available at that time.

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Re: This one is worth paying for a transcript!
« Reply #4 on: December 06, 2014, 07:29:02 AM »
I'm a really fast typist. I wish I could find steady work as a transcriptionist, that would be perfect for me.

Anyway, I can do this too if you guys ever have need in the future.

Offline onceuponatime

Re: This one is worth paying for a transcript!
« Reply #5 on: December 06, 2014, 10:34:25 AM »
Beyond Bitcoin - 22 - BitAssets and the Austrians

Part One:


Arthur Falls:

It's the fourth of December. I'm Arthur Falls and this is, of course, not investment advice.

Musical interlude..................................

Arthur Falls:

Please excuse my unusually husky baritone, I hitchhiked a thousand kilometers yesterday - some of which was in the hail - coming back from The Bitcoin South Conference which was absolutely amazing. Met all kinds of interesting people, and hopefully some of them will be appearing on the show before too long.

Austrian economics is one of those impenetrable black boxes that you hear referenced occasionally but that has very little meaning for many people. Recently I was perusing Cameron Harwick's blog, "Thrica" where I periodically go to soak up some free market goodness, and I found myself re-reading a post entitled Hayek vs. Rothbard on Free-Market Money. The article and the comments elucidate many interesting and relevant ideas that can not only help us understand cryptocurrency but also show that the problem of discovering what is good money has been mulled over by brilliant people long before the cypherpunks sank their teeth into it. A clearly novel approach has been taken by the team working on BitShares. I asked Daniel Larimer to explain the roots of his idea and update us on the progress of the platform.

Musical interlude..................................

Dan Larimer:

Hello. How can I help you today?

Arthur Falls:

I know this is something you've been through a million times, and I'm going to ask you to do it again. Could you give us a good rundown of what exactly the "bitAsset" concept is?

Dan Larimer:
The "bitAsset" concept is the idea of a digital asset that has the value of any other asset - whether it's dollars, gold, silver.....  The thing that makes it digital is that it doesn't depend on dollars, gold or silver being stored in a vault anywhere and it doesn't depend on trusting any third party to redeem an IOU for these things. So, in a way,  bitAssets have all the properties of bitcoin with a price stability of whatever asset they are tracking - be it dollars, gold or silver. So you can imagine they'd be incredibly useful, and, in our case, bitAsssets also pay you a yield - a non-zero, variable interest rate if you will - that the longer you hold it the more return you get.

This yield is directly proportional to the expected growth in the underlying system. For example, for BitShares it would be the expected growth of BitShares of, say, 100% a year which is going to cause there to be a higher yield on bitAssets backed by BitShares. And that has to do with how the bitAssets come in to existence.

So we can explain how bitAssets are created relatively easily. If two people get together, and live in a country where gold is illegal - they are not allowed to own gold, but they happen to know what the price of gold is on a foreign exchange. They can both put their money into a hat and agree to one person gets the value of gold in the future and the other person gets whatever is left over. Time passes. Price changes. And one party or the other makes or loses money based on the direction the price of gold moved. This is referred to as a "Contract for Difference" and is used in many different places around the world. It is not a new concept.

It can also be viewed as an insurance policy. One party is guaranteeing another party the purchasing power of a dollar and the other party gets the leverage. If the dollar goes down they make money. If it goes up they lose money.

Arthur Falls:

And so the long position in this case, the position held by the person who is going to take away from the hat the value of the dollar at a future date

Dan Larimer:
Right.

Arthur Falls:

That person winds up with a cryptographic token representing that long position which they can trade elsewhere. Is that correct?

Dan Larimer:

That is correct. It's a (____), fungible cryptographic token.

Arthur Falls:

And you mentioned that there's interest paid to the bitAsset holders?

Dan Larimer:
Yes.

Arthur Falls:

What's the purpose of introducing that interest to the system?

Dan Larimer:

There is a large demand of people that want to take the opposite side of the bet. Those who want to bet that the dollar is going to go down, and if the dollar goes down they will make money. We need a way of prioritizing, or sorting, these people so we sort them based on price. We want to motivate them to provide liquidity so they have to buy back and close out their short position by buying back the bitUSD from the long.

We use long and short here. Short is like you've got the short end of a stick. You don't have enough. You go on to the market and buy it. Long means that you have it, you have more than enough. You don't have any liabilities.

So when we say long we mean that you hold the asset without any liabilities. When we say short it means you borrowed, you've got a debt and you've got to repay it.

So conceptually speaking a short is nothing more than someone who takes out a loan and this rewaquired to be repaid in the future. And so, we know why interest exists on loans and it exists on shorts for the same reason. So it's actually very similar to a bank. BitUSD gets interest because other people are borrowing the bitUSD in order to go short.

Arthur Falls:

You mentioned use cases for bitAssets. What were the use cases you imagined for bitAssets when you conceived of them?

Dan Larimer:

As a replacement for centralized exchanges. If you wanted to create an exchange that traded dollars vs bitcoin, but you didn't want to worry about the  government confiscating the dollar reserves of the exchange, then you would use bitUSD as your dollar-equivalent asset and you'd trade it against bitBTC as your bitcoin-equivalent asset.

Arthur Falls:

While thus insulating the source of value from being confiscated.

Dan Larimer:

Correct. Because the collateral of bitAssets is a cryptocurrency which is not a liability and has a value set on the market, just like bitcoin, your collateral is good. Therefore the derivative, the bitUSD, is good.

Arthur Falls:

You've answered part of the next question I'm going to ask. With reference to current mediums of exchange, what problems do bitAssets solve?

Dan Larimer:

Well, I've always said that the best money is that which can move money through time and space most effectively with the least losses. Gold is very good at moving value through time but not so good at moving value through space. Bitcoin, and now BitShares, is very good at moving value through space - it's all digital - but, because of the volatility, it's not very good at holding value through time.

BitAssets, such as bitGold, would give you the ability to move the value of gold through space instantly while having the price stability of gold to move it through time in a stable manner as well. This makes it the best overall medium of exchange as long as the system itself remains functional.

Arthur Falls:

Could you outline some of the ideas that inspired the bitAsset concept?

Dan Larimer:

Well, there were many ideas that inspired it. Its kind of evolved. But I would say that prediction markets were a big part of understanding it. The Bitcoin concept, the digital currency as a source of value that's completely digital, that has no counterparty, is critical to the bitAsset concept. The concept of banks that lend dollars into existence backed by collateral. All the dollars that circulate today are created when you go to the bank to borrow money to buy a house. The house is the collateral, the dollars are created backed by that collateral.

So in reality all we've done is replace the "house" with shares in the bank. Shares in the bank are more liquid and fungible. Therefore they are actually a far better collateral than a house is - as long as the bank is very conservative in how it operates. With BitShares we take great pains to make sure that it is incredibly conservative, requiring 3x initial collateral, covering when price falls by only 33%. It's a very safe system by comparison to all the existing banks out there.

So I really borrow from ideas across the board. Everything from contracts for difference to prediction markets to mortgages and bitcoin. The synthesis of those ideas creates bitAssets.

Arthur Falls:
Is this comparable to fractional reserve banking?

Dan Larimer:

I would say it's more like 300% reserve banking. Under fractional reserve banking you've got one ounce of gold backing ten gold IOU's. You've only got 10% of the collateral. If there is a bank run your collateral for your loan is only able to make people 10% whole. Under BitShares, if there is a run on bitUSD and everyone tries to redeem it at once, they can. There's 300% reserve.

Arthur Falls:
What would the effect on the price of the underlying asset, BitShares, be if there were to be a bank run on bitUSD?

Dan Larimer:

Well, let's address that because that's a complex question. A bank run on bitUSD is really a bank run on the share price of the collateral. As long as the collateral is held to be valid then there's no reason to run on the bank. It's entirely transparent. So you're not going to get the bank run mechanics of people trying to redeem their bitUSD like you would with people trying to turn in their US dollars to get their gold. But if the share price falls because there is a massive sell-off then the effect is the same as any bank run, complete bankruptcy. Or, what used to happen and still does happen many times, depositors end up with equity. You know, creditors, people the bank owes money, get equity instead of/in lieu of paying off the debt. So bitUSD holders get converted to BitShares holders and the worst case valuation for the bitUSD holder is the valuation of the collateral.

Arthur Falls:


Which is 3x its original value?

Dan Larimer:


Initially its three times. If its collateral falls in value by six times, and does so instantly, then you end up with 50% of a dollar - fifty cents on the dollar, value wise. So you can't just compare prices, you have to look at value.

So you start out with a lot of room. The collateral has to fall 66% very quickly - falling 66% over a week, not a problem. We're talking black swan - falls 66% in a day. Those are the type of events that can cause your bitUSD to be worth only what the collateral is worth.

Arthur Falls:


It's unfair of me to ask you to predict what, or to suggest what some of these "black swan events" might be but have you thought about what kind of black swan event might result in a catastrophic collapse of value like that?

Dan Larimer:


An irreversible hack of the protocol, same kind of thing that could cause Bitcoin to fall like that. A reversible hack would probably not result in that. It would get fixed with a hard fork and everyone would continue on their day. A complete government shutdown of all the exchanges, sudden, could cause a massive run. Although I believe a lot of people, uh, most of these black swan events are only likely during the infancy of a system. Once you get to the size of bitcoin it's very unlikely that you'll see massive disruptions that causes the price of bitcoin to fall rapidly. I could see it falling gradually to zero over ten years, but that's not a problem. It's only the sudden falls and there are very few things that can cause a massive revaluation of an existing technology.

Or perhaps something like a Google/Apple/Microsoft teaming up to launch a cryptocurrency could cause everything in the bitcoin space to go down. On the other hand, such a legitimacy being added to the field could cause everything to go up. So, who knows?

Arthur Falls:
Do you see monetary systems like bitAssets foreshadowed in the work of any economic theorists?

Dan Larimer:
Oh wow, that's a deep question. I would say that, uhmm, foreshadowed if you know what you were looking for, it's really been around for hundreds of years, you know, a mortgage, an IOU system, collateralized debt that has been used as money this whole time. Shares in companies have been used as money. You have digital bearer bonds, right? That's what bitcoin is. It's a digital bearer bond. It's a hybrid between registered shares and bearer shares.

You have this global ledger, but the owners are anonymous. Those concepts have been around. Lending, using stock as collateral, has probably existed now for a very long time. If you want to get to a very high level, I'd say that the recognition to all value is perceived value. That shares in a system can have value. Our well accepted economic principles that have been around in the Mises Austrian school for a very long time. So that is the foundation upon which this is built.

Arthur Falls:
Mises proposes several categories to which what we think of broadly as money might be divided. A medium of exchange, a money, and also money substitute. Do bitAssets fit anyone of these categories?

Dan Larimer:
Well, let's define some of those categories in greater detail, because they can be used as a medium of exchange. Wait, medium of exchange, money and money substitute, that's what you said?

Arthur Falls:
Yes.

Dan Larimer:
So, here he is inferring that gold is money, an IOU of gold is a money substitute, and a medium of exchange is a currency like the dollar, maybe. And in some sense if gold is money, bitGold is a money substitutue. However it's backed by a collateral, which is not an IOU so that could also be viewed as money. So, is bitUSD a money substitute? I think it's all of the above depending on which angle you take.

Arthur Falls:
It's a contractual right to something, isn't it?

Dan Larimer:
No, it's not.

Arthur Falls:
No?

Dan Larimer:
Nope. We are very adamant that the key differentiating factor between BitShares and cryptocurrencies and all the existing financial systems is that there are no contractual obligations. No one has the power to compel you to do anything in future. You can't necessarily prevent things from happening, like margin calls, but you can't even make it happen, right? So no one's contractually obligated to behave in any particular way, and yet everyone does behave in such a way that has the effect as if there were contracts. And that's the key distinction. There is no one you can sue to compel to behave in a certain way. There is no one who can die and leave a contract unfulfilled.

Arthur Falls:
Do bitAssets run a foul of Mises' regression theorem? And if not, why not?

Dan Larimer:
His regression theorem meant something has to have value in the market for some practical purpose before it can be evolved into money.

Arthur Falls:
Hmm
« Last Edit: December 10, 2014, 08:22:57 AM by onceuponatime »

Offline hrossik

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Re: This one is worth paying for a transcript!
« Reply #6 on: December 06, 2014, 04:55:15 PM »
next ~4.5 minutes. It's freaking hard :)

Arthur Falls:
Do you see monetary systems like bitAssets foreshadowed in the work of any economic theorists?

Dan Larimer:
Wow that's a deep question. I would say that, uhmm, foreshadowed if you know what you were looking for, it's really been around for hundreds years, you know, a mortgage, an IOU system collateralized that has been used as money this whole time. Shares in companies has been used as money. You have digital bearer bonds, right? Thats what bitcoin is. It's a digital bearer bond. It's a hybrid between registered shares and bearer shares. You have this global ledger, but their owners are anonymous. Those concepts have been around lending using stock as collateral as probably existed now for very long time. If you wanna get to a very high level, I'd say that the recognition to all value is perceived value. That shares aning system can have value. Our well accepted economic principles that have been around in the Mises Austrian school for a very long time. So that is the foundation upon which this is built.

Arthur Falls:
Mises proposes several categories at which what we think of broadly as money might be divided. A medium of exchange, a money, and money substitute. Do bitAssets fit anyone of these categories?

Dan Larimer:
Well, let's define some of those categories in a greater detail, because they can be used medium exchange. Medium exchange, money and money substitute, that's what you said?

Arthur Falls:
Yes.

Dan Larimer:
So, here he is inferring that gold is money, a IOU gold is a money substitue, and a medium of exchange is a currency like the dollar, maybe. And in some sense if gold is money, bitGold is a money substitutue. However it's backed by a collateral, which is not an IOU so that could also be viewed as money. So is bitUSD a money substitute? I think it's all of the above depending on which angle you take.

Arthur Falls:
That's a contractual right something, isn't it?

Dan Larimer:
No, it's not.

Arthur Falls:
No?

Dan Larimer:
Nope. We are very adamant that the key differentiating factor between bitshares and cryptocurrencies and all the distant financial systems that there are not contractual obligations. No one has the power to compell you to do anything in future. You can't necesserily prevent things from happening like margin calls, but you can't even make it happen, right? So no one's contractually obligated to behave in any particular way, and yet everyone does behave in such a way that has the effect as if there were contracts. And that's the key distinction. There is no one you can sue to compell to behave in a certain way. There is no one who can die in if contract unfulfilled.

Arthur Falls:
Do bitAssets run a foul of Mises regression theorem? And if not, why not?

Dan Larimer:
As regression theorem meant something has to have the IOU in the market for some practical purpose before it can be evolved into money.

Arthur Falls:
Hmm
« Last Edit: December 06, 2014, 05:19:21 PM by hrossik »
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Offline Stan

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Re: This one is worth paying for a transcript!
« Reply #7 on: December 07, 2014, 01:01:39 AM »
This is looking great!  We appreciate your effort!

Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline Stan

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Re: This one is worth paying for a transcript!
« Reply #8 on: December 07, 2014, 01:03:49 AM »
we are making the Chinese version of the transcript .

Wonderful!  Thank you.
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline Stan

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Re: This one is worth paying for a transcript!
« Reply #9 on: December 07, 2014, 01:04:31 AM »
I'm a really fast typist. I wish I could find steady work as a transcriptionist, that would be perfect for me.

Anyway, I can do this too if you guys ever have need in the future.

There will probably be more opportunities.  Thanks for the offer.
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline onceuponatime

Re: This one is worth paying for a transcript!
« Reply #10 on: December 07, 2014, 02:37:46 AM »
Beyond Bitcoin - 22 - BitAssets and the Austrians
Part Two:

Dan Larimer:
Right, so it's just that not everyone is familiar with the Regression Theorem.

So gold and silver have value for their electrical and jewellery properties. And then because they also, they already have that value, they can start to be used in trade and eventually they become money. Now the definition I use for money is the most marketable commodity, that which is easiest to sell - that you can sell with very little marketing cost - that everyone wants to buy, right?

Money is easy to sell. So if you view money as a good, and gold and silver as a good, how easy is it for you to sell and get full price? If you buy a computer and then resell it, there is going to be a big loss in purchasing power even if you just bought it from one person and turn around and sell it to another. But money doesn't have that property.

So, does bitUSD violate that? Well, let's ask a question. Do shares in a company represent a form of value that adds value in and of itself? Well, if the company is profitable, yes. It's an asset. It can trade. It represents a stake in a revenue stream that is a something that can exist independently of being money. BitUSD is a derivative on such an asset and it exists whether or not bitUSD is used as money. Why does it exist? Because people want to hedge. Traders want to use it. So it has value independent of its use as money.

If bitUSD becomes used globally in all transactions, then it becomes very liquid and is as good as real USD. And it becomes money in itself. So I would suggest that it does indeed pass the Regression Theorem.

Arthur Falls:

So, what really separates bitUSD, or bitAssets in general as a potential form of money, from other cryptocurrencies. Is that where other cryptocurrencies rely on a belief that in the future they will be accepted as money by another party? The bitAssets derive their value extrinsically?

Dan Larimer:

Sort of, yes. BitAssets dervie their money from the expectation there is value today - or...

The bitAssets themselves are independent. The collateral that they are based off of depends on an expectation that people want to use the services of a virtual business to perform transactions, smart contracts - or just for the very purpose of creating the bitAssets to begin with.

So, bitAssets work at any scale. You can have bitAssets at a market cap of $40million for the underlying collateral. And it can continue to work all the way up to the scale of Bitcoin, $4billion. So, whether you're in the millions or billions, bitAssets don't care. They will continue to function. And that's the main thing that makes them more useful as a currency. Because it doesn't matter how big BitShares is, a merchant can accept bitUSD  and use bitUSD. And anyone who wants to use it can use it in their own little community, whereas with Bitcoin the volatility means that it needs to get big before it can be useful as a currency. And even then it's not very useful because its like a stock.

Arthur Falls:

The relationship between bitAssets and BitShares is something new that we're beginning to see emerge from what, for want of a better word, I guess we could call the "altcoin space". And that is this idea of separating stake in a system from the medium of exchange or the token used as a medium of exchange. How do you think this is going to evolve moving forward?

Dan Larimer:
I like to use the analogy of the bank again. A bank has shares in the bank that are owned by a completely different set of users than the depositors in the bank. There may be millions and millions of depositors and probably only tens of thousands of shareholders. And that's because they have different risk appetites. They have different knowledge requirements, different use cases. So if you view a blockchain as a service-based company, a transactional service, it makes a lot of sense that there should be a separation between those who want a cut in the underlying service and those who want to use the service.

Arthur Falls:

By separating those two - the unit of exchange is insulated from the volatility of the service.

Dan Larimer:

Yes. which in turn makes the value of the service higher.

Arthur Falls:
Could you describe some of the differences between the world we live in now and a world using a medium of exchange with the characteristics of bitAssets.

Dan Larimer:
I would expect that in a future world gold and silver will be the physical representation of money; bitAssets will be the digital representation of money; and there will be no paper representation of money.

The average person will save with bitAssets because at the very least they can earn some interest on their gold and silver. Where else can you earn interest on gold and silver except bitGOLD and bitSILVER? So that's what I see the world evolving to.

Arthur Falls:
Hayek and some of these other guys often talk about this free market for money. Specifically, let's see,

"The monopoly of government issued money has not only deprived us of good money but does also deprive us of the only process by which we can find out what would be good money."

How do you see BitShares and bitAssets fitting in to this, fitting on to that framework? How do you relate bitAssets to that quote from Hayek?

Dan Larimer:
Well, he's...., What's the process for discovering good money? I would agree fundamentally, the market is at all times supreme. Even today, even with government intervention. The government is nothing but a market force, a violent entity that the free market has to work around. Companies have to weigh the cost of complying versus rebelling and they take the most economical approach.

So I've always had the goal, well not always but for the past ten years or so of my life, I've aimed to create free market solutions to secure the life, liberty and property of all. What I mean by this is that the free market is ultimately the only way that we will have freedom - through voluntary exchange in commerce. So BitShares and bitAssets provide a way to opt out in an entirely voluntary process that depends only on freedom of speech.

If you have freedom of speech to broadcast and to coordinate both prices and transactions then bitAssets can work and you can have an alternative economy and an alternative economic system that you can opt in to.  And in such a way the forces of the government, the government mandated money, can be worked around.

Many people don't realize this, but dollars aren't required. You can use anything you like as money - even in the United States. The problem is people. The average individual is not interested in thinking in terms of anything but dollars. They price everything in dollars. They know how much they're going to be paid is in dollars. Their expenses are in dollars.

BitAssets give us a bridge. The opportunity for individuals to move into a digital dollar domain without having to rely on the infrastructure of the current government systems.

******* muscial interlude and commercial*********

Arthur Falls:
When did all of this start for you? You said this started ten years ago. How did you basically find yourself on the path that lead you to start Invictus and produce BitShares?

Dan Larimer:

Well, it's been a long path. I'm a software engineer. I've been doing software development since I was in middle school. And, shortly after I graduated college I started a business. And I was fed up with politics, I was convinced the Republicans were right the Democrats wre wrong - I guess that is how I was brought up. And I set out to set up a site that would help everyone in the entire world prove it. But in order for me to do that I had to rigourously investigate everything myself. That started me down the rabbit hole, if you will.

I discovered Ron Paul, Austrian Economics, Libertarian Philosophy, and the more I learned I realized that what I thought was right before was completely wrong. It's been a very enlightening experience. So, I guess about 2008-2009 timeframe, I was trying to come up with an alternative to money. I recognized that money was a key to the control. And if we could have an alternative money that they couldn't control then we could have a chance at freedom.

That's when I googled digital money/virtual money and discovered bitcoin. I was trying to invent bitcoin and look, it was already invented. So my first thought was "Well, this can be used for digital warehouse receipts" and I started to get involved, but bitcoin was trading at like pennies and there was no way - you couldn't make a career out of it at that point in time and I had bills to pay.

But a couple of years later I noticed the bitcoin price went through the roof and I saw my $20 dollars worth of Bitcoin turn into thousands of dollars worth of Bitcoin. And then I noticed that MtGox had their funds seized, and that Bitcoin was still vulnerable to the governement seizing the bank ccounts of all the exchanges. Which sent me on a mission to solve the decentalized exchange problem and that brought me to BitShares. I evolved it over the course of a month and got to where we are today.

Arthur Falls:

I know we've covered a lot of the hurdles that you've run in to with BitShares in a prior interview. Things like how it didn't really work with mining and lead you to develop delegated proof of stake (DPOS) and all these things. What hurdles do you see in the future for BitShares, and I guess also for all cryptocurrencies?

Dan Larimer:

The biggest hurdle in the future is going to be scalability - scaling up these systems to support tens of thousands of transactions per second which requires hundreds of megabytes per second bandwidth to coordinate on a global scale. It doesn't matter the protocol, just look at number of transactions times average size of transaction. It's going to be a major challenge to scale these systems up. I'd say that is the main hurdle.

The other hurdle is regulatory. Can cryptocurrencies and systems like BitShares be relegated to the blackmarket by having all the on and off ramps either criminalized or regulated to the point that the utility of the bitAssets is no different than the utility of a bank account. We'll see. But I'd say that regulation and scalability are the two big issues of the future.

Arthur Falls:
What about adoption? I mean at the moment we're really not seeing that adoption curve that everyone's been hoping for - or that's often referred to as the reason for the lack of enthusiasm in the marketplace for Bitcoin. Is this kind of undelivered upon promise of adoption?

Dan Larimer: 
Bitcoin's adoption problem is impacted because it doesn't actually provide utility to non-believers if you will. Bitcoin was adopted by those who wanted an alternative money and wanted to create a free market where people buy and sell and trade and price things in Bitcoin. And what we have seen instead is that merchants are willing to accept people's Bitcoin just to dump them on the market and to convert them to dollars.

Because Bitcoin is expensive to buy and expensive to use and expensive to spend. You buy it, you pay a spread. You spend it, you pay a spread. And while you hold it you are at risk of volatility. It means that only speculators are really interested in holding Bitcoin. Bitcoin is unable to produce a self-sustaining micro economy.

But I believe BitShares with bitUSD and bitGOLD and bitSILVER are different because merchants can use bitUSD, hold their accounts in bitUSD. Users can buy and save and earn interest in bitUSD. Its a lot easier for people to keep their money inside the system and work inside the system.  You don't have to constantly enter and exit the system - and that's a huge difference in terms of long term adoption.

It's much easier to explain to your parents and grandparents that they should put their money in a virtual banking platform that's still dollars. They put dollars in, hold it for a year, and at the end of the year they get dollars plus interest out. That's much easier for adoption then you put money in and at the end of the year you might have 10x gain or you might have 90% loss. And that's going to dramatically affect the adoption of these systems.

Arthur Falls:
How is it going with BitShares, with bitAssets right now? I know that I've been watching it really closely and I've noticed that you guys did start off with price feeds from delegates to maintain the market price within a certain window. And I did notice that the value of the bitAssets were quite mobile within that window. How have things been going recently?

Dan Larimer:

Well our daily volume is on the order of ten thousand to twenty thousand dollars and the price at all times seems to be within 5% of the actual price. There's about a million dollars' worth of bitUSD that's currently circulating or being held. And I'd say that is a success. A million dollars out of a 40 million dollar market cap is a relatively large per cent of the value of BitShares being held in bitAssets.

We've evolved this over several months from entirely new restrictions to more restrictions around the price feed. We've increased the collateral requirements. We've added interest and we added mandatory covering; after thirty days all  people that are short bitUSD must buy it back on the market. So you are guaranteed that you are going to get a dollar's worth of BitShares out within thirty days of your purchase of the bitUSD. And therefore the spread you see is the time preference. If you want out now you're going to pay a slight premium to sell your bitUSD today. And someone else will hold it for the rest of the thirty days in order to get the full amount out.

So it's no different than any other market, any other bond. It's got a thirty day maturity. At the end of thirty days you get the full price, before then it's less than that. The thirty days is average and as the system matures in volume,  increases, the turnover rate is going to be much higher because every single day there is going to be 1/30th of the bitUSD supply that has to turn over. So, if there's a million dollars worth of bitUSD in circulation then each and every day $33,000 has to cover and as long as you are selling less than $33,000 a day on average, you should be able to get full price. If you need to sell more than  that you will have to pay some premium proportional to the amount of the bitUSD supply you want to want redeem immediately. But I suspect that most people will own less than 1/30th of the bitUSD supply and therefore for most people liquidity will be very high as the system matures and as we get more traders in the system.

Arthur Falls:
When you said there's a million dollars in bitUSD, so the collateral underlying that is 3 million dollars or 3 million dollars worth of BitShares, correct?

Dan Larimer:

Yes, approximately.

Arthur Falls:
You know, I hesitate to use the word money-supply because we're really dealing with something that is not money - that's the division between the unit of exchange and the unit of stake. BitShares is not a currency like we imagine crytptocurrencies being. It's actually a unit of stake in a system. And so it actually derives value from being locked away in the form of collateral for the bitAssets and that is where it derives scarcity.

Dan Larimer:

Yes. The supply of BitShares is relatively limited. It's really like a company. It grows only at the approval of the stakeholders and at a rate that is less than Bitcoin's rate of growth. And when it does grow it's used to fund development and produce more value for all the stakeholders.

Arthur Falls:

The BitShares platform has been really dynamic recently. There have been a ton of changes surrounding how it's been developing and the ecosystem as well, the BitShares ecosystem as a whole. Could you explain what some of those changes have been and how they have changed the original vision for BitShares.

Dan Larimer:

BitShares has been evolving in an attempt to produce the most value possible for everyone involved. The initial idea was that it all be mined. We abandoned that when we realized that mining just sent power and money to the electric companies. So we switched to Proof of Stake and a virtual mining process for a fundraiser and that allowed us to get to where we are today. But our plan had been 2 billion fixed share supply strictly decreasing and multiple competing chains implementing different features. That's how we were going to scale.

But we always try to adapt as we learn and what we learned was that competing chains divide developer resources, divide network effect and ultimately they all want to incorporate features of the other. So, I would say that we recognized that our system would be better as one, where the developer time is not divided among multiple projects. the network effect is not divided among multiple users, right? If you have ten projects with ten users. the sum of the value of the projects is going to be less than one project with a hundred users. It's just the way network effect works.

So, we re-branded BitsharesX, DNS, Vote, all in to just one platform called BitShares. We increased the share supply by 20% to bring in all the other stakeholders under one roof. And once we did that we were able to gain lots of advantages. We now have more developers focused on growing BitShares. We added the ability for the delegates to get paid, at today's market cap about $2500 a month per delegate, to fund projects. Whether its BitShares blocks or new web wallets, marketing campaigns, core features of the dev team, we basically created a perpetual funding solution for BitShares. And that is going to give BitShares a competitive advantage over all the other projects.

If you look at NXT, they've got a fixed currency supply and no ability to fund development except donations. They're in the same boat as Bitcoin. If you look at Ripple, they've got to raise funds through VCs, and they're highly centralized. If you look at Ethereum, they haven't released yet, but I am not aware of any plans they have at this point in time to allow stakeholders to vote on future funding. So they've got a large initial budget of, you know, 5 to 10 million dollars depending on Bitcoin price. And that they'll have to spend that money and when it's gone...it's gone.

So we've really solved some real critical issues about the long term sustainability with BitShares. And I think that's going to make all the difference in the world with respect to competitors.

Arthur Falls:

So the funds that are being made available to delegates, they're in the form of a monthly dilution -  or a per block dilution, pardon me?

Dan Larimer:
Yeah, it's a block reward. So delegates are elected. They have to the highest approval of the shareholders, stakeholders. And the top 101 can get paid a salary, a percent of the maximum pay. So most of the development team has the delegate campaigns going where they are asking for 100% pay. Once the market cap rises they'll probably ask for a fractional pay and reduce their pay rate. But for now, we have the ability to fund development. That's making all the difference.

Arthur Falls:
Didn't you guys recently return some of the Angelshare funds?

Dan Larimer:
Yes. We returned all the Bitshares PTS that was given to us. We returned it.

Arthur Falls:
Why was that?

Dan Larimer:
We decided that it was to our advantage to give it back. The donation was more harmful than good.

Arthur Falls:
Really? Could you explain that decision in a little bit greater depth?

Dan Larimer:

It mostly has to do with accounting, and that's all that I can say about that.

Arthur Falls:
This is actually really cool that you've managed to use  the system that you've built to actually fund the development of the platform as well. That you've managed to use the system to pay your own development team. It's incredible. You run a delegate as well?

Dan Larimer:
I don't at this point in time but I will probably be running a delegate within the month.

Arthur Falls:
Do you think it will get voted in?

Dan Larimer:
Ah, I don't think I would have any trouble getting voted in.

Arthur Falls:
Good. Well, good luck to you.

Dan Larimer:
It's the first time a developer works for the program they've created.

Arthur Falls:
Yeah. That's really cool. This is really the DAC concept emerging as a functional thing. I hadn't really thought about how you guys could, it's obvious now. I hadn't thought about you guys running your own delegates and you know, just being shoe-ins for an election at full pay - because how else are you going to fund development of the platform? It's really awesome.

Dan Larimer:
Yeah, it's great. It means it's actually independent. It's no longer any risk of it being a crowd sale. It exists with or without us. If something were to happen to me, my delegate would get voted out and someone else would get voted in. You don't have to trust anyone to hold a large development fund. You don't have to worry about multi-sig accounts and politics around how that money is spent. You just have to deal with the politics of getting elected.

But the owners and the user community out there is in control and some developers like Nicholai (also known as Toast in the forum) have been elected entirely by community support without any help of large insiders. So, we have broad community support for the development team and the dilution process.

Arthur Falls:
This is really the evolution of that concept where, yeah, where the developer works for the distributed or digital autonomous corporation, digital autonomous organization, however you like to frame it.

Dan Larimer:

Yes, distributed. It's not decentralized. Decentralized means all kinds of different things. It's really more of a distributed system. There is no central point, but distributed is more defined as positive term rather than decentralized is sort of a negative ie. not centralized. So I like distributed better for that.

It's automated, not autonomous. A lot of the processes of the system work without having users having to do a whole lot, but it's not fully autonomous. It has no decision making capability. That is in the hands of the users of the system. They are the decision makers. So, it's a distributed, automated, company, or community....

Arthur Falls:
country...

Dan Larimer:

country, cooperative - depending upon which metaphor you want to use with a "c". They all apply in their own right.

Arthur Falls:

Yeah, well, congratulations man because it's only just become...., this has been so opaque for even myself. I've followed this forever, and it's not until I actually started digging in to some of the Austrian thinkers that I got the concept of bitAssets. And then it all kind of clicked together and I am hoping that this interview can kind of elucidate it for other people, you know, in the same way that it has for me.

Dan Larimer:
Well, I hope that you can get the message out. That would be great.

Arthur Falls:
Yeah, absolutely. Hey, one more thing. Could you sum up what's taking place in the marketing segment?

Dan Larimer:
Marketing has its own life. There's several different marketing efforts going on. The community has their  self-organized system. We just had a complete re-branding. That was a large part at the request of the marketing "simplify our message". We just launched a new website with a simplified message and now we're filling in the details with Whitepapers. I'm going to be doing talks like this and interviews like this - video blogs - to describe the philosophy and the potential for what this system can be. And that's going to be marketed and directed toward those user communities, everyone from Alex Jones to Lew Rockwell, to all the youtube videos about conspiracy theories and anti-banking. Everyone who wants change in the world, who's got a libertarian bent, is going to be directed toward our philosophy and be encouraged to join as an early adopter.

We're not going to be marketing this to the masses until we've got lightweight clients with clear messaging and lots of supporting infrastructure and lots of stability. So, in the short term we are going to be forming an aggressive campaign to get the philosophy out there, to let people find out about BitShares, about me and what I stand for, and the potential it has for the future of a free world.

 
« Last Edit: December 10, 2014, 09:30:06 AM by onceuponatime »

Offline Stan

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Re: This one is worth paying for a transcript!
« Reply #11 on: December 07, 2014, 04:26:06 AM »
Nice fast job!
I assume you want your BitUSD sent to onceuponatime?
Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline onceuponatime

Re: This one is worth paying for a transcript!
« Reply #12 on: December 07, 2014, 04:53:23 AM »
Nice fast job!
I assume you want your BitUSD sent to onceuponatime?

That's my favourite account  ;D

Offline robrigo

Re: This one is worth paying for a transcript!
« Reply #13 on: December 07, 2014, 05:06:57 AM »
Nice fast job!
I assume you want your BitUSD sent to onceuponatime?

That's my favourite account  ;D

Awesome! I copied your transcription over to docs for easy reference. I think this material would definitely be wikipedia worthy. Also did some spelling corrections and formatting changes.

https://docs.google.com/document/d/1OQ9kKwAvE2z7Px0poCC-4f66avVW17mUitSDr7-fWyQ/edit?usp=sharing

Offline hpenvy

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Re: This one is worth paying for a transcript!
« Reply #14 on: December 07, 2014, 05:08:41 AM »
"I'm going to be doing talks like this and interviews like this - video blogs - to describe the philosophy and the potential for what this system can be. And that's going to be marketed and directed toward those user communities, everyone from Alex Jones to Lew Rockwell, to all the youtube videos about conspiracy theories and anti-banking."

I'm starting to put together lists of writers, websites, forums, blogs, podcasts and meetups on this exact topic on Nullstreet.
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