1 00:00:00,820 --> 00:00:03,190 The following content is provided under a Creative 2 00:00:03,190 --> 00:00:04,580 Commons license. 3 00:00:04,580 --> 00:00:06,790 Your support will help MIT OpenCourseWare 4 00:00:06,790 --> 00:00:10,880 continue to offer high-quality educational resources for free. 5 00:00:10,880 --> 00:00:13,450 To make a donation or to view additional materials 6 00:00:13,450 --> 00:00:17,380 from hundreds of MIT courses, visit MIT OpenCourseWare 7 00:00:17,380 --> 00:00:18,286 at ocw.mit.edu. 8 00:00:22,530 --> 00:00:26,140 PROFESSOR: So today, what we're going to be doing is-- 9 00:00:26,140 --> 00:00:28,840 last week, you gave us some feedback what 10 00:00:28,840 --> 00:00:30,620 you wanted to do in the class. 11 00:00:30,620 --> 00:00:33,290 We're going to go through that and talk about the readings. 12 00:00:33,290 --> 00:00:35,320 I'm going to do a little calling on you 13 00:00:35,320 --> 00:00:38,590 and helping you take the class through the readings. 14 00:00:38,590 --> 00:00:41,990 And then the six or seven things I'm going to do-- 15 00:00:41,990 --> 00:00:46,150 history of money; ledgers; fiat currency, central banks, 16 00:00:46,150 --> 00:00:49,630 and credit cards; the role of money; 17 00:00:49,630 --> 00:00:52,240 some early digital money. 18 00:00:52,240 --> 00:00:56,048 You had the Clark reading as to a bunch of failed attempts. 19 00:00:56,048 --> 00:00:58,090 All the way through a little bit of mobile money, 20 00:00:58,090 --> 00:01:01,990 all the way up to Starbucks and Alipay. 21 00:01:01,990 --> 00:01:03,880 And yet, the riddle remains. 22 00:01:03,880 --> 00:01:05,800 We're going to get really deep into Bitcoin 23 00:01:05,800 --> 00:01:07,840 in the next three classes. 24 00:01:07,840 --> 00:01:11,080 But this is to give some foundational 25 00:01:11,080 --> 00:01:16,203 bits of money and ledgers and central banking and technology. 26 00:01:16,203 --> 00:01:17,620 And then, of course, I always like 27 00:01:17,620 --> 00:01:19,300 to finish the class talking a little bit 28 00:01:19,300 --> 00:01:23,230 about why we're doing what we're doing between now and then. 29 00:01:23,230 --> 00:01:24,820 Even though the readings are required, 30 00:01:24,820 --> 00:01:25,810 I know you're all busy. 31 00:01:25,810 --> 00:01:27,790 I know that you've all got a bunch of classes. 32 00:01:27,790 --> 00:01:32,080 And like good business students and business people, 33 00:01:32,080 --> 00:01:33,040 you optimize. 34 00:01:33,040 --> 00:01:35,500 So I'm trying to give you a sense of why you might read it, 35 00:01:35,500 --> 00:01:38,260 rather than it's required, at the end of each class 36 00:01:38,260 --> 00:01:42,550 and how it fits into the course narrative. 37 00:01:42,550 --> 00:01:45,110 And then we'll do a little bit of conclusions. 38 00:01:45,110 --> 00:01:46,180 So the survey results. 39 00:01:46,180 --> 00:01:47,320 What did you want to learn? 40 00:01:47,320 --> 00:01:50,710 This is really your class, and I'm 41 00:01:50,710 --> 00:01:52,450 going to learn as much from you. 42 00:01:52,450 --> 00:01:54,950 But hopefully, we're going to cover what you want. 43 00:01:54,950 --> 00:01:57,460 So here's a list of those things that were at least written 44 00:01:57,460 --> 00:01:58,720 by two of you. 45 00:01:58,720 --> 00:02:01,420 First was technical things. 46 00:02:01,420 --> 00:02:04,600 18 of you said understanding blockchain technology. 47 00:02:04,600 --> 00:02:07,360 Hopefully, we get to that, but you 48 00:02:07,360 --> 00:02:10,840 might find that you'll want to do more after this class. 49 00:02:10,840 --> 00:02:14,890 The ecosystem and being able to have an educated discussion, 50 00:02:14,890 --> 00:02:18,500 sort of the dinner party conversation around blockchain. 51 00:02:18,500 --> 00:02:19,880 I think we'll be successful. 52 00:02:19,880 --> 00:02:21,550 But at the end of the semester, we're 53 00:02:21,550 --> 00:02:23,050 going to pull these slides up again, 54 00:02:23,050 --> 00:02:26,080 and we'll see how we did as a group. 55 00:02:26,080 --> 00:02:29,810 You all talked a lot about applications. 56 00:02:29,810 --> 00:02:34,990 How can you actually apply it, learning in the venture space 57 00:02:34,990 --> 00:02:38,803 and thinking about where it really works in the world. 58 00:02:38,803 --> 00:02:40,720 And I think we're going to spend a lot of time 59 00:02:40,720 --> 00:02:42,130 on that in the second half. 60 00:02:42,130 --> 00:02:43,870 But all throughout, we're going to be 61 00:02:43,870 --> 00:02:46,090 talking about the economics and what's 62 00:02:46,090 --> 00:02:50,670 the reality versus the hype. 63 00:02:50,670 --> 00:02:56,430 You also wanted to understand its impact on people's lives, 64 00:02:56,430 --> 00:02:58,320 the regulation. 65 00:02:58,320 --> 00:03:01,530 About six of you said something about regulation. 66 00:03:01,530 --> 00:03:05,720 I'm glad, because we're only doing one lecture on that. 67 00:03:05,720 --> 00:03:07,290 But we're going to spread it out, 68 00:03:07,290 --> 00:03:10,770 because as we talked about in our first class-- 69 00:03:10,770 --> 00:03:12,740 and I'm honored Larry's here again-- 70 00:03:12,740 --> 00:03:16,770 but we're going to always be thinking about Larry's four 71 00:03:16,770 --> 00:03:17,840 ways. 72 00:03:17,840 --> 00:03:20,610 And I see-- is it Jihei? 73 00:03:20,610 --> 00:03:23,380 What are Larry Lessig's-- 74 00:03:23,380 --> 00:03:25,500 you shook your head yes. 75 00:03:25,500 --> 00:03:29,672 AUDIENCE: I know-- let's see. 76 00:03:29,672 --> 00:03:34,920 It is code and architecture, market, law, and norms. 77 00:03:34,920 --> 00:03:36,337 PROFESSOR: You got it. 78 00:03:36,337 --> 00:03:38,670 Does anybody want to say how that relates to blockchain, 79 00:03:38,670 --> 00:03:39,980 why we're chatting about that? 80 00:03:44,700 --> 00:03:48,120 Oh, my god, I'm going to have to cold call fast, right? 81 00:03:48,120 --> 00:03:48,870 You're from R3. 82 00:03:51,790 --> 00:03:54,250 Joe? 83 00:03:54,250 --> 00:03:56,350 AUDIENCE: No, I remember we saw it last class, 84 00:03:56,350 --> 00:04:00,760 but I can't relate it now to blockchain. 85 00:04:00,760 --> 00:04:04,180 PROFESSOR: Can you relate it to anything in life? 86 00:04:04,180 --> 00:04:05,050 Maybe not. 87 00:04:05,050 --> 00:04:07,720 Alan, help your tablemate out. 88 00:04:07,720 --> 00:04:11,148 AUDIENCE: I'm waiting for my moment to shine. 89 00:04:11,148 --> 00:04:12,190 PROFESSOR: This isn't it. 90 00:04:12,190 --> 00:04:13,900 AUDIENCE: This isn't it. 91 00:04:13,900 --> 00:04:15,242 PROFESSOR: I'm having fun. 92 00:04:15,242 --> 00:04:16,450 This is what I'm going to do. 93 00:04:16,450 --> 00:04:17,649 I'm just going to have-- 94 00:04:17,649 --> 00:04:19,790 don't worry about it. 95 00:04:19,790 --> 00:04:25,040 So why do markets, code, law-- 96 00:04:25,040 --> 00:04:29,330 I can't see your name, but is it [INAUDIBLE]?? 97 00:04:29,330 --> 00:04:30,100 Yeah, why? 98 00:04:30,100 --> 00:04:32,760 Why does that relate to all this? 99 00:04:32,760 --> 00:04:36,260 AUDIENCE: Can you repeat the question? 100 00:04:36,260 --> 00:04:39,300 PROFESSOR: Jihei, you're going to repeat the question, 101 00:04:39,300 --> 00:04:40,570 because you went through it. 102 00:04:40,570 --> 00:04:45,900 AUDIENCE: So how does Larry's four forces relate 103 00:04:45,900 --> 00:04:49,655 to our topic of blockchain. 104 00:04:49,655 --> 00:04:52,680 PROFESSOR: And the four forces, again, are market, 105 00:04:52,680 --> 00:04:58,020 so business; law; code or architecture, 106 00:04:58,020 --> 00:05:02,320 call it technology; and social norms. 107 00:05:02,320 --> 00:05:03,885 AUDIENCE: So I think it's because it 108 00:05:03,885 --> 00:05:07,260 brings a new way of doing those things, 109 00:05:07,260 --> 00:05:10,940 like a new tool in order to-- 110 00:05:10,940 --> 00:05:15,680 so what I got from the reading is these ledgers already 111 00:05:15,680 --> 00:05:20,220 existed, but given that now we have big data, for example, 112 00:05:20,220 --> 00:05:25,760 then more things going on helps our society roll it out better. 113 00:05:25,760 --> 00:05:27,010 PROFESSOR: Good way to say it. 114 00:05:27,010 --> 00:05:28,390 Look, it's unfair of me. 115 00:05:28,390 --> 00:05:29,640 It wasn't one of the readings. 116 00:05:29,640 --> 00:05:31,710 I'm just saying, in everything in life, 117 00:05:31,710 --> 00:05:35,260 I find these things grind up against each other. 118 00:05:35,260 --> 00:05:39,630 I spent a lot of time in Washington in politics, 119 00:05:39,630 --> 00:05:42,930 but the markets and how the commercial enterprise 120 00:05:42,930 --> 00:05:47,280 and the economy grinds up against technology and sort 121 00:05:47,280 --> 00:05:50,940 of grinds up against the law-- 122 00:05:50,940 --> 00:05:53,670 and then, of course, just social normative behavior. 123 00:05:53,670 --> 00:05:57,480 These four forces, in almost everything one does in life, 124 00:05:57,480 --> 00:05:59,370 you will find. 125 00:05:59,370 --> 00:06:02,070 And so I just ask you to always, whether it's 126 00:06:02,070 --> 00:06:03,900 one reading or another reading, bring that 127 00:06:03,900 --> 00:06:06,750 into your thought process of this class. 128 00:06:06,750 --> 00:06:08,618 I'm not going to assign Larry's assignment. 129 00:06:08,618 --> 00:06:10,410 I didn't know he was even going to be here. 130 00:06:10,410 --> 00:06:13,710 But I've always thought it's a good discipline 131 00:06:13,710 --> 00:06:16,500 to think, OK, what are the commercial realities, 132 00:06:16,500 --> 00:06:18,180 the markets? 133 00:06:18,180 --> 00:06:23,280 What's the technology, even if it's in an earlier day 134 00:06:23,280 --> 00:06:26,083 and it's the technology of the car replacing the horse 135 00:06:26,083 --> 00:06:26,625 and carriage? 136 00:06:29,440 --> 00:06:32,330 How does government or the official sector 137 00:06:32,330 --> 00:06:36,995 put it into a set of standards that are required? 138 00:06:36,995 --> 00:06:38,370 And then how do we, as a society, 139 00:06:38,370 --> 00:06:41,420 even if it's not required, just have our behaviors? 140 00:06:41,420 --> 00:06:43,130 Those are the four forces. 141 00:06:43,130 --> 00:06:45,560 So that's why. 142 00:06:45,560 --> 00:06:47,750 I probably just failed Larry's class, 143 00:06:47,750 --> 00:06:50,220 but that's how I've thought about it. 144 00:06:50,220 --> 00:06:52,080 I did, probably, right? 145 00:06:52,080 --> 00:06:53,960 No, he's shaking his head. 146 00:06:53,960 --> 00:06:56,610 But regulation is just one of those four forces. 147 00:06:56,610 --> 00:06:58,370 And that's why I pause there. 148 00:06:58,370 --> 00:07:02,750 And so we'll have it in every class, but only one lecture. 149 00:07:02,750 --> 00:07:05,030 Money and markets, that's one of the other forces. 150 00:07:05,030 --> 00:07:06,830 Five of you said you want to make money, 151 00:07:06,830 --> 00:07:10,373 and I applaud those who said that, because own it. 152 00:07:10,373 --> 00:07:11,540 You're in a business school. 153 00:07:11,540 --> 00:07:14,030 Why not? 154 00:07:14,030 --> 00:07:16,130 But investing and trends. 155 00:07:16,130 --> 00:07:18,470 Now, there was a bunch of other miscellaneous topics. 156 00:07:18,470 --> 00:07:19,845 I'm not going to go through them. 157 00:07:19,845 --> 00:07:22,850 I kind of thought the last two were interesting-- anecdotes 158 00:07:22,850 --> 00:07:24,350 from my past. 159 00:07:24,350 --> 00:07:27,152 I'm not sure who said that. 160 00:07:27,152 --> 00:07:29,480 I'm not sure what you want to know about-- my three 161 00:07:29,480 --> 00:07:34,430 daughters, my running, or this Wall Street stuff and finance. 162 00:07:34,430 --> 00:07:38,730 And I'd like to understand hyperbitcoinization, as well, 163 00:07:38,730 --> 00:07:41,390 but I don't know who asked that question. 164 00:07:41,390 --> 00:07:42,920 I don't know what it is, so I'll try 165 00:07:42,920 --> 00:07:46,070 to figure out what hyper-- does anyone want 166 00:07:46,070 --> 00:07:47,840 to own up to that question? 167 00:07:47,840 --> 00:07:48,710 They were anonymous. 168 00:07:48,710 --> 00:07:49,950 All right. 169 00:07:49,950 --> 00:07:50,450 All right. 170 00:07:50,450 --> 00:07:55,340 So today's study questions. 171 00:07:55,340 --> 00:07:58,310 What's the role of money historically 172 00:07:58,310 --> 00:08:02,400 and in today's digital economy? 173 00:08:02,400 --> 00:08:04,670 And this is when I'm going to look for discussion. 174 00:08:04,670 --> 00:08:06,170 So does anybody want to tell me what 175 00:08:06,170 --> 00:08:11,330 the role of money-- what would be your answer to this? 176 00:08:11,330 --> 00:08:14,235 Anton? 177 00:08:14,235 --> 00:08:20,100 AUDIENCE: The medium of the transaction, and the unit of-- 178 00:08:20,100 --> 00:08:22,180 like a counting unit. 179 00:08:22,180 --> 00:08:25,660 And also, the state of the value. 180 00:08:25,660 --> 00:08:28,450 PROFESSOR: So the three classic rolls of money 181 00:08:28,450 --> 00:08:30,820 that people talk about. 182 00:08:30,820 --> 00:08:33,132 Kelly, you want to repeat what he just said? 183 00:08:33,132 --> 00:08:34,590 AUDIENCE: [INAUDIBLE] the question, 184 00:08:34,590 --> 00:08:37,179 but I think historically, it was pay off 185 00:08:37,179 --> 00:08:41,919 debts, starting and conquering various lands and wards, 186 00:08:41,919 --> 00:08:45,230 and then also funding trade wars, cutting taxes. 187 00:08:45,230 --> 00:08:51,215 So a lot of societal things that drove civilization forward. 188 00:08:51,215 --> 00:08:52,840 PROFESSOR: And what we'll discuss today 189 00:08:52,840 --> 00:08:55,990 and what it is, is that money is a social construct. 190 00:08:55,990 --> 00:08:58,840 It's something that societies came together-- 191 00:08:58,840 --> 00:09:01,930 it's hard to tell whether it was 5,000 years ago or 8,000 192 00:09:01,930 --> 00:09:04,780 or 10,000 years ago. 193 00:09:04,780 --> 00:09:09,760 Really, it's a social consensus mechanism. 194 00:09:09,760 --> 00:09:12,670 But we're going to chat about the readings in a minute 195 00:09:12,670 --> 00:09:15,490 and come back to that question. 196 00:09:15,490 --> 00:09:16,523 What is fiat currency? 197 00:09:16,523 --> 00:09:17,440 Does anybody want to-- 198 00:09:17,440 --> 00:09:21,430 Tom, you want to tell us what fiat currency is? 199 00:09:21,430 --> 00:09:22,490 It's a shame, Tom. 200 00:09:22,490 --> 00:09:24,440 See, I recognize you. 201 00:09:24,440 --> 00:09:27,730 AUDIENCE: [INAUDIBLE]. 202 00:09:27,730 --> 00:09:30,580 This is like a established currency 203 00:09:30,580 --> 00:09:34,140 by a central government, by a government that proposed 204 00:09:34,140 --> 00:09:35,932 a market or [INAUDIBLE]. 205 00:09:35,932 --> 00:09:36,640 PROFESSOR: Right. 206 00:09:36,640 --> 00:09:39,330 So you said it's a central currency, 207 00:09:39,330 --> 00:09:41,170 and it's by government. 208 00:09:41,170 --> 00:09:43,780 Anybody else want to add some things? 209 00:09:43,780 --> 00:09:45,190 Is it Kyle? 210 00:09:45,190 --> 00:09:47,230 AUDIENCE: I would just add that it's not backed 211 00:09:47,230 --> 00:09:48,452 by any physical commodity. 212 00:09:48,452 --> 00:09:50,785 PROFESSOR: So it's not backed by any physical commodity. 213 00:09:50,785 --> 00:09:51,410 AUDIENCE: Yeah. 214 00:09:51,410 --> 00:09:54,460 Really just the good faith and credit of the nation 215 00:09:54,460 --> 00:09:56,050 that issues it. 216 00:09:56,050 --> 00:09:58,050 PROFESSOR: Daniel, did you want to add anything? 217 00:09:58,050 --> 00:09:59,842 AUDIENCE: I was just going to say somewhere 218 00:09:59,842 --> 00:10:02,420 that it's not gold backed or anything like that. 219 00:10:02,420 --> 00:10:04,533 PROFESSOR: But was it always that way? 220 00:10:04,533 --> 00:10:06,200 AUDIENCE: It wasn't originally that way. 221 00:10:06,200 --> 00:10:06,908 PROFESSOR: Right. 222 00:10:06,908 --> 00:10:10,520 A fiat currency might be backed by something physical. 223 00:10:10,520 --> 00:10:13,160 Was there other-- remind me your name. 224 00:10:13,160 --> 00:10:13,660 I'm sorry. 225 00:10:13,660 --> 00:10:14,710 AUDIENCE: Josh. 226 00:10:14,710 --> 00:10:15,920 PROFESSOR: Josh. 227 00:10:15,920 --> 00:10:18,100 AUDIENCE: Specifically used to settle 228 00:10:18,100 --> 00:10:22,027 debts, specifically those to the government, so taxes. 229 00:10:22,027 --> 00:10:24,110 PROFESSOR: All right, so it can be used for taxes. 230 00:10:24,110 --> 00:10:26,402 And remind me of your name, because I can't see a card. 231 00:10:26,402 --> 00:10:26,902 What? 232 00:10:26,902 --> 00:10:27,540 AUDIENCE: Sean. 233 00:10:27,540 --> 00:10:28,420 PROFESSOR: Sean. 234 00:10:28,420 --> 00:10:31,010 AUDIENCE: So, basically, there's no inherent value 235 00:10:31,010 --> 00:10:33,270 in fiat currency. 236 00:10:33,270 --> 00:10:36,790 So basically, there's no one recognize 237 00:10:36,790 --> 00:10:39,293 that specific currency itself. 238 00:10:39,293 --> 00:10:40,210 There's no government. 239 00:10:40,210 --> 00:10:42,700 PROFESSOR: So here's a question for the class. 240 00:10:42,700 --> 00:10:46,790 Is there inherent value to non-fiat currencies? 241 00:10:46,790 --> 00:10:50,080 Because Sean's saying that maybe a distinguishing characteristic 242 00:10:50,080 --> 00:10:53,330 of fiat is it has no inherent value. 243 00:10:53,330 --> 00:10:54,063 AUDIENCE: Terry. 244 00:10:54,063 --> 00:10:54,850 PROFESSOR: Terry. 245 00:10:54,850 --> 00:10:56,320 AUDIENCE: Well, actually, the same 246 00:10:56,320 --> 00:10:58,600 applies to any commodity that's used to-- 247 00:11:02,110 --> 00:11:03,520 currency in general. 248 00:11:03,520 --> 00:11:07,720 Because it's just the scarcity of some specific resource 249 00:11:07,720 --> 00:11:13,390 and social common agreement that that's 250 00:11:13,390 --> 00:11:16,820 going to be the parameter. 251 00:11:16,820 --> 00:11:22,150 PROFESSOR: So how many people are more in line with Eric or-- 252 00:11:22,150 --> 00:11:24,040 there's not one right answer to this. 253 00:11:24,040 --> 00:11:25,930 This is a question that's been debated 254 00:11:25,930 --> 00:11:29,890 for decades or centuries. 255 00:11:29,890 --> 00:11:32,202 How many are more in Sean's camp? 256 00:11:32,202 --> 00:11:33,410 AUDIENCE: I think it depends. 257 00:11:33,410 --> 00:11:36,660 For example, gold is definitely a social construct. 258 00:11:36,660 --> 00:11:38,770 We decide that, as a human society, 259 00:11:38,770 --> 00:11:41,560 that gold is going to be something valuable. 260 00:11:41,560 --> 00:11:44,650 But if it's, like, grains that humans can [INAUDIBLE] 261 00:11:44,650 --> 00:11:47,170 and that, I think, has an inherent value. 262 00:11:47,170 --> 00:11:50,390 So I think there are non-fiat currencies that 263 00:11:50,390 --> 00:11:52,150 does have inherent values and that 264 00:11:52,150 --> 00:11:54,235 does not have inherent values. 265 00:11:54,235 --> 00:11:56,110 PROFESSOR: All right, anybody-- what's your-- 266 00:11:56,110 --> 00:11:58,030 Jihi, yeah. 267 00:11:58,030 --> 00:11:58,570 Tom? 268 00:11:58,570 --> 00:11:59,160 Tomas? 269 00:11:59,160 --> 00:12:00,110 AUDIENCE: Tomas. 270 00:12:00,110 --> 00:12:02,860 I just want to say that the [INAUDIBLE] is 271 00:12:02,860 --> 00:12:07,180 another component which the fact that it is a legal tender. 272 00:12:07,180 --> 00:12:10,630 So the government and some [INAUDIBLE] 273 00:12:10,630 --> 00:12:16,460 forced the society to use the currency, which makes more 274 00:12:16,460 --> 00:12:18,345 comfortable for people to use. 275 00:12:18,345 --> 00:12:21,490 PROFESSOR: So Tomas is saying that fiat currency is 276 00:12:21,490 --> 00:12:22,570 legal tender. 277 00:12:22,570 --> 00:12:25,060 So first, we have to discuss, what is legal tender? 278 00:12:25,060 --> 00:12:27,550 Does anybody want to knock that one out 279 00:12:27,550 --> 00:12:31,700 of the ballpark who hasn't raised their hand yet? 280 00:12:31,700 --> 00:12:33,110 No? 281 00:12:33,110 --> 00:12:34,310 All right. 282 00:12:34,310 --> 00:12:38,165 AUDIENCE: I think that's maybe my earlier comment. 283 00:12:38,165 --> 00:12:43,180 It can be used to settle debts, and specifically 284 00:12:43,180 --> 00:12:44,180 those to the government. 285 00:12:44,180 --> 00:12:46,880 So you can use gold as a money. 286 00:12:46,880 --> 00:12:48,080 It can be a stored value. 287 00:12:48,080 --> 00:12:50,160 It can be a means of exchange. 288 00:12:50,160 --> 00:12:52,490 But you can't pay your taxes in gold, right? 289 00:12:52,490 --> 00:12:53,140 You have to-- 290 00:12:53,140 --> 00:12:54,350 PROFESSOR: Is that correct? 291 00:12:54,350 --> 00:12:59,230 So 19th century, could you pay your taxes in gold in the US 292 00:12:59,230 --> 00:13:01,460 and in Britain and other countries that 293 00:13:01,460 --> 00:13:02,630 had gold currency? 294 00:13:05,400 --> 00:13:07,710 This is just a yes or no, but James? 295 00:13:07,710 --> 00:13:12,105 AUDIENCE: It's yes, but after 1970s, the paper currency 296 00:13:12,105 --> 00:13:13,480 is attached to the gold standard. 297 00:13:13,480 --> 00:13:15,960 So inherently, there is an exchange of value 298 00:13:15,960 --> 00:13:19,380 that is picked by the government or the central bank. 299 00:13:19,380 --> 00:13:22,890 So it's almost one of the same thing at that time, 300 00:13:22,890 --> 00:13:24,540 until more recent years. 301 00:13:24,540 --> 00:13:28,650 PROFESSOR: James is saying you could use gold as legal tender. 302 00:13:28,650 --> 00:13:30,300 Legal tender, again, is something 303 00:13:30,300 --> 00:13:34,770 that a society comes together and creates a law-- 304 00:13:34,770 --> 00:13:36,840 back to the Lessig four. 305 00:13:36,840 --> 00:13:39,150 Society together says-- it's not just 306 00:13:39,150 --> 00:13:41,800 a social normative behavior. 307 00:13:41,800 --> 00:13:43,110 It's a law. 308 00:13:43,110 --> 00:13:46,550 One must accept this. 309 00:13:46,550 --> 00:13:49,110 And the US and the UK and many countries 310 00:13:49,110 --> 00:13:52,370 it says for all debts, public and private. 311 00:13:52,370 --> 00:13:59,400 So a debt to the government or a debt in a store. 312 00:13:59,400 --> 00:14:01,650 We're going to get to, later, as to when 313 00:14:01,650 --> 00:14:05,040 is it true that somebody has to take your cash. 314 00:14:05,040 --> 00:14:08,610 But I'm going to hold off on that in a minute 315 00:14:08,610 --> 00:14:10,090 and talk about it. 316 00:14:10,090 --> 00:14:12,435 But I think, also, Jihei said-- 317 00:14:12,435 --> 00:14:17,430 it was somewhere between Sean and Eric, both physically 318 00:14:17,430 --> 00:14:19,980 in the class and in terms of her articulation-- 319 00:14:19,980 --> 00:14:23,580 that fiat currency might not have anything 320 00:14:23,580 --> 00:14:26,190 inherently behind it. 321 00:14:26,190 --> 00:14:30,750 But gold mostly doesn't have anything inherently behind it. 322 00:14:30,750 --> 00:14:35,970 And then some forms of currency, like grain, had more. 323 00:14:35,970 --> 00:14:38,460 So maybe it's a continuum. 324 00:14:38,460 --> 00:14:42,872 Maybe it's not black and white, 100% or 0%. 325 00:14:42,872 --> 00:14:44,580 And then we're going to talk a little bit 326 00:14:44,580 --> 00:14:47,010 about how Bitcoin fits into it. 327 00:14:47,010 --> 00:14:49,180 And our next three classes are going 328 00:14:49,180 --> 00:14:51,660 to be really into the technology of Bitcoin, 329 00:14:51,660 --> 00:14:55,020 but just a little bit of teasing out before I 330 00:14:55,020 --> 00:14:56,340 go through some lecture slides. 331 00:14:56,340 --> 00:14:58,740 Who wants to talk about how Bitcoin might 332 00:14:58,740 --> 00:15:00,960 fit into this history of money? 333 00:15:00,960 --> 00:15:04,260 And then I'm going to return to that question in about 334 00:15:04,260 --> 00:15:07,170 45 minutes and ask you again. 335 00:15:07,170 --> 00:15:09,090 Does anybody want to say from the readings? 336 00:15:09,090 --> 00:15:10,632 And you remind me your name? 337 00:15:10,632 --> 00:15:11,340 AUDIENCE: Isabel. 338 00:15:11,340 --> 00:15:12,095 PROFESSOR: Isabel. 339 00:15:12,095 --> 00:15:13,025 AUDIENCE: So with Bitcoin, it's kind 340 00:15:13,025 --> 00:15:15,090 of the same, where the value is given 341 00:15:15,090 --> 00:15:17,470 by society, except with Bitcoin, it's 342 00:15:17,470 --> 00:15:19,200 not backed by a central bank. 343 00:15:19,200 --> 00:15:22,412 So people don't think that there is an inherent value. 344 00:15:22,412 --> 00:15:24,120 But the readings pointed out that there's 345 00:15:24,120 --> 00:15:26,643 sort of that same history, except it doesn't have 346 00:15:26,643 --> 00:15:27,330 [INAUDIBLE]. 347 00:15:27,330 --> 00:15:29,340 PROFESSOR: So Isabel is saying that Bitcoin 348 00:15:29,340 --> 00:15:33,600 fits into the history of money because, like fiat currencies 349 00:15:33,600 --> 00:15:36,900 and like Jihei said about gold, it doesn't necessarily 350 00:15:36,900 --> 00:15:40,500 have any inherent monetary value, 351 00:15:40,500 --> 00:15:44,310 but it's a societal set of norms that people are accepting it 352 00:15:44,310 --> 00:15:45,720 as having value. 353 00:15:45,720 --> 00:15:48,060 But the key distinction that Isabel said 354 00:15:48,060 --> 00:15:49,380 was that it's no central. 355 00:15:49,380 --> 00:15:51,630 AUDIENCE: It's not backed by any kind of central bank. 356 00:15:51,630 --> 00:15:53,463 PROFESSOR: It's not backed by a central bank 357 00:15:53,463 --> 00:15:54,880 or a central authority. 358 00:15:54,880 --> 00:15:55,740 Alan? 359 00:15:55,740 --> 00:15:56,850 AUDIENCE: Yes. 360 00:15:56,850 --> 00:15:59,430 So Bitcoin, in my opinion, is unique, 361 00:15:59,430 --> 00:16:03,960 because I think the value of Bitcoin changes over time, not 362 00:16:03,960 --> 00:16:07,350 the fluctuation that we see like $6,000 or $90,000, 363 00:16:07,350 --> 00:16:12,360 but in terms of the utility of the coin itself. 364 00:16:12,360 --> 00:16:16,290 So today, for example, we might be able to buy pizza or coffee 365 00:16:16,290 --> 00:16:19,970 or whatever with Bitcoin, so there is an inherent value 366 00:16:19,970 --> 00:16:21,780 in terms of medium of exchange. 367 00:16:21,780 --> 00:16:25,000 And it will change as society adopts it more and more. 368 00:16:25,000 --> 00:16:29,250 So I think it's hard to define if there is inherent value 369 00:16:29,250 --> 00:16:30,160 or not. 370 00:16:30,160 --> 00:16:33,360 PROFESSOR: So Alan is raising that Bitcoin-- 371 00:16:33,360 --> 00:16:35,520 if I can put some words in your mouth, 372 00:16:35,520 --> 00:16:38,130 and tell me if I'm correct, that Bitcoin 373 00:16:38,130 --> 00:16:39,930 might have some distinguishing features 374 00:16:39,930 --> 00:16:43,830 from even fiat currency, that its value is shifting 375 00:16:43,830 --> 00:16:46,208 over time with adoption. 376 00:16:46,208 --> 00:16:48,000 Is that-- I mean, you didn't use that word. 377 00:16:51,530 --> 00:16:53,795 Please let me know your name again. 378 00:16:53,795 --> 00:16:54,862 AUDIENCE: Brotish. 379 00:16:54,862 --> 00:16:55,570 PROFESSOR: Right. 380 00:16:55,570 --> 00:16:57,730 Like British, but with an O, you told me earlier-- 381 00:16:57,730 --> 00:16:58,230 Brotish. 382 00:17:01,050 --> 00:17:04,420 AUDIENCE: Another way I was thinking of [INAUDIBLE] 383 00:17:04,420 --> 00:17:08,520 the evolution of the later technology like accounting 384 00:17:08,520 --> 00:17:11,339 and the evolution of money, along with-- 385 00:17:11,339 --> 00:17:14,200 so initially, we saw in the reading 386 00:17:14,200 --> 00:17:16,630 how it happened in the prehistoric age and then 387 00:17:16,630 --> 00:17:19,359 the advent of the [INAUDIBLE] and then [INAUDIBLE] 388 00:17:19,359 --> 00:17:22,690 later, which is kind of one of the fundamental blocks 389 00:17:22,690 --> 00:17:23,900 of Bitcoin. 390 00:17:23,900 --> 00:17:24,838 PROFESSOR: Right. 391 00:17:24,838 --> 00:17:26,380 AUDIENCE: So that is another way kind 392 00:17:26,380 --> 00:17:31,038 of natural progression of how money [INAUDIBLE].. 393 00:17:31,038 --> 00:17:31,830 PROFESSOR: Brotish? 394 00:17:31,830 --> 00:17:32,500 AUDIENCE: Yeah. 395 00:17:32,500 --> 00:17:34,042 PROFESSOR: So what Brotish has raised 396 00:17:34,042 --> 00:17:36,820 is also Bitcoin fits into the history of ledgers, 397 00:17:36,820 --> 00:17:40,480 whether it's double entry ledgers as recognized through T 398 00:17:40,480 --> 00:17:42,880 accounts or other forms of ledgers, 399 00:17:42,880 --> 00:17:47,530 that it adds to this whole long history of ledgers. 400 00:17:47,530 --> 00:17:50,440 I agree with that. 401 00:17:50,440 --> 00:17:52,690 And it's a new form of keeping ledgers. 402 00:17:52,690 --> 00:17:53,670 Alan? 403 00:17:53,670 --> 00:17:56,100 AUDIENCE: So Bitcoin is also similar to gold. 404 00:17:56,100 --> 00:17:59,022 There is an element of scarcity. 405 00:17:59,022 --> 00:17:59,980 PROFESSOR: Of scarcity. 406 00:17:59,980 --> 00:18:00,810 AUDIENCE: Yeah. 407 00:18:00,810 --> 00:18:02,748 So you cannot generate that many Bitcoin. 408 00:18:02,748 --> 00:18:03,540 PROFESSOR: Correct. 409 00:18:03,540 --> 00:18:06,082 AUDIENCE: You can only generate 50 bitcoins every 10 minutes, 410 00:18:06,082 --> 00:18:09,460 and it keeps happening every four years. 411 00:18:09,460 --> 00:18:13,120 PROFESSOR: So it seems like scarcity and ledgers 412 00:18:13,120 --> 00:18:14,410 are important components. 413 00:18:14,410 --> 00:18:14,917 Aviva? 414 00:18:14,917 --> 00:18:15,500 AUDIENCE: Yes. 415 00:18:15,500 --> 00:18:17,652 So it does have a fixed demand-- 416 00:18:17,652 --> 00:18:20,110 sorry, a fixed supply, like you said, in terms of scarcity. 417 00:18:20,110 --> 00:18:21,910 But the more we adopt it, the more 418 00:18:21,910 --> 00:18:24,740 it becomes divisible in terms of units. 419 00:18:24,740 --> 00:18:30,400 And so we can increase its use, because now you can divide them 420 00:18:30,400 --> 00:18:31,270 up to [INAUDIBLE]. 421 00:18:31,270 --> 00:18:32,270 PROFESSOR: This is good. 422 00:18:32,270 --> 00:18:35,890 So divisibility is another characteristic of money, 423 00:18:35,890 --> 00:18:41,100 scarcity, adoption as Alan said, ledgers. 424 00:18:41,100 --> 00:18:42,110 Sorry, Tomas? 425 00:18:42,110 --> 00:18:43,780 AUDIENCE: We mention decentralization, 426 00:18:43,780 --> 00:18:50,350 because this implementation make feasible the Bitcoin 427 00:18:50,350 --> 00:18:52,570 and makes feasible to implement this kind of thing 428 00:18:52,570 --> 00:18:54,680 in the decentralized environment. 429 00:18:54,680 --> 00:18:59,750 So without any central authority to design or dictate 430 00:18:59,750 --> 00:19:04,825 the supply and all the aspects of the concepts. 431 00:19:04,825 --> 00:19:06,700 PROFESSOR: We'll take one more, and then I'll 432 00:19:06,700 --> 00:19:08,033 start to talk about the history. 433 00:19:08,033 --> 00:19:09,590 Why don't we go here? 434 00:19:09,590 --> 00:19:10,632 And remind me your name. 435 00:19:10,632 --> 00:19:11,340 AUDIENCE: Alexis. 436 00:19:11,340 --> 00:19:12,090 PROFESSOR: Alexis. 437 00:19:12,090 --> 00:19:14,000 AUDIENCE: [INAUDIBLE] of like money 438 00:19:14,000 --> 00:19:17,290 and other forms of currency, even 439 00:19:17,290 --> 00:19:21,400 if it's controlled by central government or central bank, 440 00:19:21,400 --> 00:19:24,750 there's no fixed exchange rate. 441 00:19:24,750 --> 00:19:27,820 It trades extremely quickly with other types of currency, 442 00:19:27,820 --> 00:19:30,250 so I mean, it's still very different. 443 00:19:30,250 --> 00:19:33,640 PROFESSOR: So, Alexis, if I understand Alexis' point, 444 00:19:33,640 --> 00:19:38,290 it's that there's no fixed exchange rate about Bitcoin 445 00:19:38,290 --> 00:19:40,330 we're talking about. 446 00:19:40,330 --> 00:19:45,450 But couldn't we really broaden that to all forms of currency? 447 00:19:45,450 --> 00:19:47,820 I mean, what really is the exchange 448 00:19:47,820 --> 00:19:54,115 rate between an ounce of gold and a bushel of corn? 449 00:19:54,115 --> 00:19:54,990 AUDIENCE: Yes and no. 450 00:19:54,990 --> 00:19:59,430 I mean, yes, that, for example, some states do control exchange 451 00:19:59,430 --> 00:20:01,035 rates with other counties. 452 00:20:01,035 --> 00:20:02,410 PROFESSOR: All right, good point. 453 00:20:02,410 --> 00:20:05,820 So Alexis is saying yes and no, because some governments 454 00:20:05,820 --> 00:20:07,710 try to fix. 455 00:20:07,710 --> 00:20:08,910 Now back to markets. 456 00:20:08,910 --> 00:20:10,830 How well does that work when governments 457 00:20:10,830 --> 00:20:14,640 try to fix an exchange rate? 458 00:20:14,640 --> 00:20:19,080 I mean, just as a sense of the class, does that work well? 459 00:20:19,080 --> 00:20:22,710 So it sort of might work well in temporal, short periods. 460 00:20:22,710 --> 00:20:26,965 Works less well for decades on end. 461 00:20:26,965 --> 00:20:28,590 I'll take one more, and then I'm just-- 462 00:20:28,590 --> 00:20:29,550 I want to go through a couple-- 463 00:20:29,550 --> 00:20:30,675 AUDIENCE: Just one comment. 464 00:20:30,675 --> 00:20:32,363 That way you can teach hours of work. 465 00:20:32,363 --> 00:20:36,900 That's how economies define it previously, right? 466 00:20:36,900 --> 00:20:41,673 But I just want to ask, what is a ledger? 467 00:20:41,673 --> 00:20:42,840 PROFESSOR: What is a ledger? 468 00:20:42,840 --> 00:20:45,530 Very good question. 469 00:20:45,530 --> 00:20:47,530 I'm going to be chatting about that in a minute. 470 00:20:47,530 --> 00:20:53,180 But does anybody want to hit that? 471 00:20:53,180 --> 00:20:53,970 I'm sorry. 472 00:20:53,970 --> 00:20:55,375 No, over here. 473 00:20:55,375 --> 00:20:57,000 AUDIENCE: I was going to say, it's just 474 00:20:57,000 --> 00:21:01,080 a numerical record of everything recorded, in a fashion. 475 00:21:01,080 --> 00:21:01,580 [INAUDIBLE] 476 00:21:01,580 --> 00:21:03,080 PROFESSOR: A numerical record. 477 00:21:03,080 --> 00:21:04,310 I think that's a good thing. 478 00:21:04,310 --> 00:21:11,660 A ledger is basically a way to record economic activity 479 00:21:11,660 --> 00:21:16,280 or social relationships or financial relationships. 480 00:21:16,280 --> 00:21:20,990 I would say it's both a way to record economic activity, 481 00:21:20,990 --> 00:21:25,760 and it's a system of recording financial relationships. 482 00:21:25,760 --> 00:21:29,930 And while I didn't assign these readings, 483 00:21:29,930 --> 00:21:34,670 some very good academic research suggests 484 00:21:34,670 --> 00:21:38,510 that the first methods of writing and symbols of writing 485 00:21:38,510 --> 00:21:41,210 had to do with numbers and had to do with ledgers, rather 486 00:21:41,210 --> 00:21:46,400 than words and communication. 487 00:21:46,400 --> 00:21:48,920 Because it's so fundamental to society 488 00:21:48,920 --> 00:21:53,660 to record various economic transactions 489 00:21:53,660 --> 00:21:57,110 or to record the financial relationships 490 00:21:57,110 --> 00:22:00,060 amongst and between members of a community, 491 00:22:00,060 --> 00:22:02,300 whether it was a small village or when 492 00:22:02,300 --> 00:22:05,585 society burst out of villages thousands of years ago. 493 00:22:05,585 --> 00:22:07,560 Does that help? 494 00:22:07,560 --> 00:22:10,300 We'll be back to it. 495 00:22:10,300 --> 00:22:11,750 And better that you ask that here 496 00:22:11,750 --> 00:22:15,632 than in your accounting fundamentals class. 497 00:22:15,632 --> 00:22:16,950 I don't know. 498 00:22:16,950 --> 00:22:20,420 So the readings-- we've sort of talked about the readings. 499 00:22:20,420 --> 00:22:25,220 How many of you actually watched the little three-minute video? 500 00:22:25,220 --> 00:22:26,340 What'd you think? 501 00:22:26,340 --> 00:22:27,600 I mean, just as a-- 502 00:22:27,600 --> 00:22:29,160 I'm sorry, here. 503 00:22:29,160 --> 00:22:30,800 We haven't chatted yet. 504 00:22:30,800 --> 00:22:32,820 AUDIENCE: I think the broad-based message was 505 00:22:32,820 --> 00:22:35,400 that any currency, or anything, for that matter, 506 00:22:35,400 --> 00:22:38,805 has value equivalent to what the society assigns it with. 507 00:22:38,805 --> 00:22:40,430 Because the video basically just showed 508 00:22:40,430 --> 00:22:42,480 a guy who created his own currency and was just 509 00:22:42,480 --> 00:22:43,680 selling it to the public. 510 00:22:43,680 --> 00:22:46,130 And his whole claim was that it is real 511 00:22:46,130 --> 00:22:47,640 if you believe it is real. 512 00:22:47,640 --> 00:22:50,280 PROFESSOR: So it was just a nice little ditty, in a way. 513 00:22:50,280 --> 00:22:51,325 Matthew, I'm sorry? 514 00:22:51,325 --> 00:22:52,830 AUDIENCE: I would have given him $1 for it. 515 00:22:52,830 --> 00:22:54,120 PROFESSOR: You would have given him $1? 516 00:22:54,120 --> 00:22:54,800 Great. 517 00:22:54,800 --> 00:22:57,757 AUDIENCE: Seeing how much the pizzas went for. 518 00:22:57,757 --> 00:22:58,590 AUDIENCE: Who knows? 519 00:22:58,590 --> 00:23:01,710 PROFESSOR: Would anybody else have given him $1 for it? 520 00:23:01,710 --> 00:23:02,330 No? 521 00:23:02,330 --> 00:23:05,100 Oh, you would have? 522 00:23:05,100 --> 00:23:08,270 AUDIENCE: Actually, I'm working with local currencies. 523 00:23:08,270 --> 00:23:14,200 And it's kind of the same, but you can use them just locally. 524 00:23:14,200 --> 00:23:17,560 I mean, it keeps the money inside the community 525 00:23:17,560 --> 00:23:20,347 that decides to use that way of transactions. 526 00:23:20,347 --> 00:23:22,930 PROFESSOR: We're going to refer back to each of these readings 527 00:23:22,930 --> 00:23:25,000 as we go through the next 45 minutes. 528 00:23:25,000 --> 00:23:25,500 Yeah? 529 00:23:25,500 --> 00:23:27,333 AUDIENCE: I was wondering if he was actually 530 00:23:27,333 --> 00:23:29,335 breaking the law by launching his own competing 531 00:23:29,335 --> 00:23:30,670 currency to the US dollar? 532 00:23:30,670 --> 00:23:32,580 Is that a legitimate-- 533 00:23:32,580 --> 00:23:34,860 obviously, it didn't compete with the US dollar, but-- 534 00:23:34,860 --> 00:23:36,610 PROFESSOR: You raise a very good question. 535 00:23:36,610 --> 00:23:43,860 I'm not aware of any statute, federal or state, 536 00:23:43,860 --> 00:23:49,980 that says there's an absolute monopoly on forms of currency 537 00:23:49,980 --> 00:23:51,930 as there is in other things, like you 538 00:23:51,930 --> 00:23:55,890 know that slot in the door that's called the-- 539 00:23:55,890 --> 00:23:59,460 where you can put a letter through the door or a mailbox? 540 00:23:59,460 --> 00:24:02,400 There's actually a law that says that the US Postal Service has 541 00:24:02,400 --> 00:24:05,910 a monopoly, and that's why UPS is not 542 00:24:05,910 --> 00:24:10,170 allowed to put their boxes or anything in there. 543 00:24:10,170 --> 00:24:14,430 There's a government fiat monopoly. 544 00:24:14,430 --> 00:24:17,500 But you raise a very good question. 545 00:24:17,500 --> 00:24:20,970 What we've found in the last 10 years with Bitcoin, 546 00:24:20,970 --> 00:24:24,600 with really oversimplifying, is that it 547 00:24:24,600 --> 00:24:28,970 is legal to create your own form of money, 548 00:24:28,970 --> 00:24:34,140 as Bitcoin is possibly this money. 549 00:24:34,140 --> 00:24:36,453 But you have to comply with all the other laws. 550 00:24:36,453 --> 00:24:38,370 And all those other laws that we'll talk about 551 00:24:38,370 --> 00:24:40,680 in other lectures, in essence, fall 552 00:24:40,680 --> 00:24:43,200 into buckets of guarding against illicit activity, 553 00:24:43,200 --> 00:24:45,900 so the Bank Secrecy Act and all the laws 554 00:24:45,900 --> 00:24:48,930 related to anti-money laundering and terrorism finance 555 00:24:48,930 --> 00:24:50,280 and so forth. 556 00:24:50,280 --> 00:24:54,240 One still has to pay your taxes if you're gaining or losing 557 00:24:54,240 --> 00:24:58,050 on this investment. 558 00:24:58,050 --> 00:25:01,020 The Federal Reserve and other authorities around the globe 559 00:25:01,020 --> 00:25:04,110 still want to insure for financial stability. 560 00:25:04,110 --> 00:25:05,955 The fellow on the streets of-- 561 00:25:05,955 --> 00:25:07,080 I don't remember what city. 562 00:25:07,080 --> 00:25:07,770 New York? 563 00:25:07,770 --> 00:25:11,130 Selling his dollars, when Matthew bought it for $1 564 00:25:11,130 --> 00:25:13,840 and I think over here-- 565 00:25:13,840 --> 00:25:14,340 Brianna? 566 00:25:14,340 --> 00:25:15,215 AUDIENCE: [INAUDIBLE] 567 00:25:15,215 --> 00:25:16,230 PROFESSOR: What's that? 568 00:25:16,230 --> 00:25:17,100 AUDIENCE: My name? 569 00:25:17,100 --> 00:25:17,725 PROFESSOR: Yes. 570 00:25:17,725 --> 00:25:18,780 AUDIENCE: [INAUDIBLE] 571 00:25:18,780 --> 00:25:21,210 PROFESSOR: Bought it. 572 00:25:21,210 --> 00:25:23,610 The society's still going to be stable. 573 00:25:23,610 --> 00:25:26,100 It's going to be all right. 574 00:25:26,100 --> 00:25:28,350 But if millions of people were buying it, 575 00:25:28,350 --> 00:25:29,610 then people might worry. 576 00:25:29,610 --> 00:25:31,440 And then there's the third big bucket 577 00:25:31,440 --> 00:25:34,560 that we look at is investor and consumer protection. 578 00:25:34,560 --> 00:25:37,140 But I think it's allowed. 579 00:25:37,140 --> 00:25:39,043 So we'll refer to these, Joaquin, 580 00:25:39,043 --> 00:25:40,210 and then I'm going to go on. 581 00:25:40,210 --> 00:25:42,002 AUDIENCE: Can you legally pay, for example, 582 00:25:42,002 --> 00:25:45,710 salaries in bitcoin in the US? 583 00:25:45,710 --> 00:25:47,970 PROFESSOR: Yes. 584 00:25:47,970 --> 00:25:49,890 And why is it that you can legally pay 585 00:25:49,890 --> 00:25:54,380 for wages in bitcoin in the US? 586 00:25:54,380 --> 00:25:55,880 I know it's outside of the readings, 587 00:25:55,880 --> 00:26:01,960 but why do you think it is allowed in this society? 588 00:26:01,960 --> 00:26:04,190 Is it Kyle? 589 00:26:04,190 --> 00:26:06,010 AUDIENCE: Wouldn't those compensation forms 590 00:26:06,010 --> 00:26:07,775 be allowed under any contract? 591 00:26:10,470 --> 00:26:13,230 PROFESSOR: Most things-- you could pay somebody 592 00:26:13,230 --> 00:26:14,970 in these placards. 593 00:26:14,970 --> 00:26:18,000 I doubt, really, that you're going to value them much. 594 00:26:18,000 --> 00:26:20,100 But you could pay somebody in this. 595 00:26:20,100 --> 00:26:24,840 You could pay somebody in gold, euros, bitcoin. 596 00:26:24,840 --> 00:26:26,800 And there are firms that are paying-- 597 00:26:26,800 --> 00:26:31,770 usually, they're developing blockchain applications. 598 00:26:31,770 --> 00:26:37,540 And interestingly, they have to compute the value of the wages 599 00:26:37,540 --> 00:26:40,810 to do withholding taxes, because the US government will not 600 00:26:40,810 --> 00:26:43,820 accept taxes in bitcoin. 601 00:26:43,820 --> 00:26:47,420 So they figure out the fair market value-- 602 00:26:47,420 --> 00:26:49,810 and there are companies in the US that pay people 603 00:26:49,810 --> 00:26:52,420 in bitcoin who are doing development work 604 00:26:52,420 --> 00:26:54,220 around blockchain applications. 605 00:26:54,220 --> 00:26:58,300 But the taxes need to be computed and analyzed and then 606 00:26:58,300 --> 00:27:00,940 paid in US dollars. 607 00:27:00,940 --> 00:27:04,000 There was a legislative initiative in Arizona 608 00:27:04,000 --> 00:27:06,130 earlier this year where a state legislature 609 00:27:06,130 --> 00:27:09,370 wanted to have Arizona be the first state in the land 610 00:27:09,370 --> 00:27:11,980 to accept bitcoin for taxes. 611 00:27:11,980 --> 00:27:13,750 But it failed in committee. 612 00:27:13,750 --> 00:27:15,230 It didn't even get a full vote of-- 613 00:27:15,230 --> 00:27:18,340 I can't remember if it was the Arizona Senate or the Arizona 614 00:27:18,340 --> 00:27:19,880 House of Delegates. 615 00:27:24,090 --> 00:27:26,040 So just a little walk through the history. 616 00:27:26,040 --> 00:27:27,832 I was going to do a little history of money 617 00:27:27,832 --> 00:27:30,130 and have some fun. 618 00:27:30,130 --> 00:27:33,300 So in Ethiopia, people put together salt bars. 619 00:27:33,300 --> 00:27:36,210 This is not that long ago. 620 00:27:36,210 --> 00:27:40,540 Salt, as Jihei said earlier, is really valuable in society, 621 00:27:40,540 --> 00:27:42,880 and they standardize the shape and size. 622 00:27:42,880 --> 00:27:46,390 And so here's salt bars. 623 00:27:46,390 --> 00:27:48,520 We're going to get to, a little bit later, 624 00:27:48,520 --> 00:27:50,590 all the characteristics of money. 625 00:27:50,590 --> 00:27:53,410 But what else do you think a salt bar in Ethiopia, 626 00:27:53,410 --> 00:27:56,230 as opposed to maybe some other country-- 627 00:27:56,230 --> 00:28:01,320 what did it have, as well, as to why people might use that? 628 00:28:01,320 --> 00:28:02,015 AUDIENCE: Oil. 629 00:28:02,015 --> 00:28:02,973 PROFESSOR: What's that? 630 00:28:02,973 --> 00:28:03,806 AUDIENCE: Crude oil. 631 00:28:03,806 --> 00:28:05,140 PROFESSOR: Crude oil. 632 00:28:05,140 --> 00:28:06,737 All right, I hadn't thought of that. 633 00:28:06,737 --> 00:28:08,320 I'm going to keep thinking about that. 634 00:28:08,320 --> 00:28:10,640 It's not a common characteristic of money. 635 00:28:10,640 --> 00:28:11,900 But why salt bars? 636 00:28:11,900 --> 00:28:14,560 What else might it have in Ethiopia? 637 00:28:16,515 --> 00:28:18,140 AUDIENCE: Are you going to say that you 638 00:28:18,140 --> 00:28:20,005 can use salt to preserver food? 639 00:28:20,005 --> 00:28:21,630 PROFESSOR: Well, you can preserve food, 640 00:28:21,630 --> 00:28:27,060 but because it was mined, there was some scarcity, as well. 641 00:28:27,060 --> 00:28:30,260 And a lot of currencies, a lot of moneys over time, 642 00:28:30,260 --> 00:28:32,700 have that fundamental issue. 643 00:28:32,700 --> 00:28:37,750 Cowrie shells from West Africa. 644 00:28:37,750 --> 00:28:39,250 Does anyone know the history of when 645 00:28:39,250 --> 00:28:42,400 cowrie shells got really debased and stopped 646 00:28:42,400 --> 00:28:44,650 being used, from the readings? 647 00:28:44,650 --> 00:28:47,290 I can't remember if that was in the readings or not. 648 00:28:49,840 --> 00:28:52,000 They got debased when Europeans started 649 00:28:52,000 --> 00:28:55,360 to realize that they were accepted as a value. 650 00:28:55,360 --> 00:28:57,970 And it's a very sad and terrible history, too, 651 00:28:57,970 --> 00:29:00,640 because it's related to the whole slave trade. 652 00:29:00,640 --> 00:29:03,760 But that the Europeans could figure out 653 00:29:03,760 --> 00:29:07,480 that societies accepted this as something of value, 654 00:29:07,480 --> 00:29:09,880 but they also debased that currency 655 00:29:09,880 --> 00:29:12,670 and they debased the land and captured people as slaves. 656 00:29:12,670 --> 00:29:17,650 It was quite a collection of not particularly good things 657 00:29:17,650 --> 00:29:19,120 going on. 658 00:29:19,120 --> 00:29:20,955 Tally sticks in England. 659 00:29:20,955 --> 00:29:22,330 Does anybody, from the readings-- 660 00:29:22,330 --> 00:29:24,940 because there was a little bit of the debate in the first 661 00:29:24,940 --> 00:29:28,060 reading about the history of money-- 662 00:29:28,060 --> 00:29:29,740 want to chat? 663 00:29:29,740 --> 00:29:33,220 And I'll pull up the Rai stones from Yap. 664 00:29:33,220 --> 00:29:37,150 How this fits into that first reading and the debate between 665 00:29:37,150 --> 00:29:40,270 did money come from a history of barter, 666 00:29:40,270 --> 00:29:45,410 or did money come from a history of ledgers and credit, 667 00:29:45,410 --> 00:29:50,110 which is kind of a setup of that first reading? 668 00:29:52,628 --> 00:29:53,170 Any thoughts? 669 00:29:55,950 --> 00:29:58,740 Which ones of these four bits of money, early money, 670 00:29:58,740 --> 00:30:00,015 are more about maybe barter? 671 00:30:03,730 --> 00:30:08,660 AUDIENCE: There are two theories, right? 672 00:30:08,660 --> 00:30:11,170 Debt, which corresponds to this one. 673 00:30:11,170 --> 00:30:13,510 This was a way to measure debt. 674 00:30:13,510 --> 00:30:14,390 PROFESSOR: Which one? 675 00:30:14,390 --> 00:30:15,503 AUDIENCE: The sticks. 676 00:30:15,503 --> 00:30:16,420 PROFESSOR: The sticks. 677 00:30:16,420 --> 00:30:18,130 The tally sticks, yes, correct. 678 00:30:18,130 --> 00:30:20,590 Which is the second one on here that has to do with debts, 679 00:30:20,590 --> 00:30:22,645 actually, and credits? 680 00:30:22,645 --> 00:30:23,520 AUDIENCE: The stones. 681 00:30:23,520 --> 00:30:26,960 PROFESSOR: The stone, the Rai stones. 682 00:30:26,960 --> 00:30:27,770 So it's remarkable. 683 00:30:27,770 --> 00:30:32,600 The Rai stones were so heavy that on this island of Yap, 684 00:30:32,600 --> 00:30:35,940 they couldn't possibly lug it around and use it 685 00:30:35,940 --> 00:30:38,030 in a traditional medium of exchange. 686 00:30:38,030 --> 00:30:42,350 But it was viewed as, well, I have 1/6 of this Rai stone. 687 00:30:42,350 --> 00:30:43,840 You have 1/16. 688 00:30:43,840 --> 00:30:46,730 And then if I make an exchange, we'd remember. 689 00:30:46,730 --> 00:30:51,230 And the society was small enough to keep a form of ledgers, even 690 00:30:51,230 --> 00:30:55,350 to the extent that when a Rai stone was lost in a river, 691 00:30:55,350 --> 00:30:57,380 they said, you know, the river Rai stone, 692 00:30:57,380 --> 00:31:00,280 we each have this piece. 693 00:31:00,280 --> 00:31:03,850 So on the island of Yap, I can assure you, 694 00:31:03,850 --> 00:31:07,650 these stones could not be used for anything else. 695 00:31:07,650 --> 00:31:10,590 Does anyone know, because it was outside the readings, what 696 00:31:10,590 --> 00:31:11,940 made these stones so scarce? 697 00:31:15,620 --> 00:31:19,340 So Rai stones were quarried on an island about 200 kilometers 698 00:31:19,340 --> 00:31:22,940 away from Yap, so were they exceedingly 699 00:31:22,940 --> 00:31:27,970 hard to get, like gold, like mining of gold. 700 00:31:27,970 --> 00:31:31,075 What else is mined these days that might be a money? 701 00:31:31,075 --> 00:31:31,842 AUDIENCE: Lithium. 702 00:31:31,842 --> 00:31:32,800 PROFESSOR: What's that? 703 00:31:32,800 --> 00:31:34,174 Can I hear everybody? 704 00:31:34,174 --> 00:31:35,562 AUDIENCE: I'm saying lithium. 705 00:31:35,562 --> 00:31:36,520 PROFESSOR: What's that? 706 00:31:36,520 --> 00:31:37,570 AUDIENCE: For batteries. 707 00:31:37,570 --> 00:31:38,170 For batteries. 708 00:31:38,170 --> 00:31:41,450 It's going to be very difficult in the future 709 00:31:41,450 --> 00:31:43,130 for electric batteries and whatnot. 710 00:31:43,130 --> 00:31:45,010 PROFESSOR: But what's mined right now that's 711 00:31:45,010 --> 00:31:46,330 at the center of this class? 712 00:31:46,330 --> 00:31:47,220 AUDIENCE: Bitcoin. 713 00:31:47,220 --> 00:31:48,610 PROFESSOR: Bitcoin, right? 714 00:31:48,610 --> 00:31:51,970 The Yap stone was, in essence, quarried a couple kilometers 715 00:31:51,970 --> 00:31:53,230 away. 716 00:31:53,230 --> 00:31:57,770 And what debased that currency was when sailors from England 717 00:31:57,770 --> 00:31:58,270 came. 718 00:31:58,270 --> 00:31:59,530 There's a specific sailor-- 719 00:31:59,530 --> 00:32:00,790 I think his name was O'Keefe-- 720 00:32:00,790 --> 00:32:03,550 in the late 19th century, and he realized that these stones 721 00:32:03,550 --> 00:32:05,180 were valuable. 722 00:32:05,180 --> 00:32:07,555 And he went to the other island, and he started quarrying 723 00:32:07,555 --> 00:32:09,380 and came back and forth. 724 00:32:09,380 --> 00:32:12,400 And within a few years, the whole economic system 725 00:32:12,400 --> 00:32:15,010 collapsed. 726 00:32:15,010 --> 00:32:16,240 We moved to metal money. 727 00:32:16,240 --> 00:32:18,370 At first, it wasn't really stamped. 728 00:32:18,370 --> 00:32:19,240 It was just heavy. 729 00:32:19,240 --> 00:32:21,220 It was hard to quarry. 730 00:32:21,220 --> 00:32:23,310 Bronze in Rome. 731 00:32:23,310 --> 00:32:25,600 There was some China and Sweden. 732 00:32:25,600 --> 00:32:29,780 These were starting to be stamped by the official sector. 733 00:32:29,780 --> 00:32:34,090 And then we had minted money starting somewhere around 2,500 734 00:32:34,090 --> 00:32:35,020 years ago. 735 00:32:35,020 --> 00:32:36,520 And there's debates as to whether it 736 00:32:36,520 --> 00:32:40,690 started in Greece or in China. 737 00:32:40,690 --> 00:32:47,470 But where an official emblem was placed upon a scarce resource 738 00:32:47,470 --> 00:32:48,190 that was used. 739 00:32:50,710 --> 00:32:55,210 Paper money came along, in a sense, for what reason? 740 00:32:55,210 --> 00:33:01,990 Why did society first tip in to paper money? 741 00:33:01,990 --> 00:33:04,600 AUDIENCE: Because there's not enough gold to back it up. 742 00:33:04,600 --> 00:33:05,510 I mean, like because there's-- 743 00:33:05,510 --> 00:33:06,385 PROFESSOR: All right. 744 00:33:06,385 --> 00:33:08,480 One reason is not enough gold. 745 00:33:08,480 --> 00:33:10,210 I'm sorry, I haven't-- 746 00:33:10,210 --> 00:33:12,340 AUDIENCE: I think it's just easy to-- 747 00:33:12,340 --> 00:33:13,780 PROFESSOR: Ease of use. 748 00:33:13,780 --> 00:33:17,290 It's kind of heavy, especially if there wasn't gold 749 00:33:17,290 --> 00:33:19,000 and if it was copper or bronze. 750 00:33:19,000 --> 00:33:20,350 It was just heavy. 751 00:33:20,350 --> 00:33:23,590 Or if it was wheat, you'd have to put it in a storage unit. 752 00:33:23,590 --> 00:33:26,610 So the first paper monies from China 753 00:33:26,610 --> 00:33:29,140 were basically warehouse receipts. 754 00:33:29,140 --> 00:33:31,300 And I spent five years running something 755 00:33:31,300 --> 00:33:33,850 called a Commodity Futures Trading Commission, 756 00:33:33,850 --> 00:33:36,310 and so I guess I learned a lot about warehouse receipts, 757 00:33:36,310 --> 00:33:40,575 commodity receipts, where you put a commodity in a warehouse. 758 00:33:40,575 --> 00:33:41,950 And then you got a piece of paper 759 00:33:41,950 --> 00:33:44,440 that said, yes, you have that commodity there. 760 00:33:44,440 --> 00:33:46,480 So the first paper monies were basically 761 00:33:46,480 --> 00:33:49,290 warehouse receipts in China. 762 00:33:49,290 --> 00:33:54,460 Because whatever it was-- grain or gold. 763 00:33:54,460 --> 00:33:56,830 And then you had a piece of paper backing it. 764 00:33:56,830 --> 00:33:58,570 These are five pound notes from England 765 00:33:58,570 --> 00:34:00,160 and the continental notes of the US. 766 00:34:00,160 --> 00:34:04,210 But that note in China is about 700 years old. 767 00:34:04,210 --> 00:34:10,290 But between that first paper money and the 18th century, 768 00:34:10,290 --> 00:34:13,530 who do you think we're kind of the first bankers 769 00:34:13,530 --> 00:34:18,040 in the late 17th century, early 18th century? 770 00:34:18,040 --> 00:34:22,409 What craft had they been in before they were in banking? 771 00:34:22,409 --> 00:34:23,159 AUDIENCE: Trading. 772 00:34:23,159 --> 00:34:23,790 AUDIENCE: Trading. 773 00:34:23,790 --> 00:34:24,610 AUDIENCE: Trading. 774 00:34:24,610 --> 00:34:25,427 PROFESSOR: Alpha? 775 00:34:25,427 --> 00:34:26,760 AUDIENCE: International trading. 776 00:34:26,760 --> 00:34:27,810 PROFESSOR: International trade. 777 00:34:27,810 --> 00:34:29,435 They actually did something more local. 778 00:34:33,870 --> 00:34:36,560 AUDIENCE: I just talked about this. 779 00:34:36,560 --> 00:34:39,220 The ones that have lands and all the-- 780 00:34:39,220 --> 00:34:43,199 the ones that have lands and all the [INAUDIBLE].. 781 00:34:43,199 --> 00:34:44,600 PROFESSOR: Lanes? 782 00:34:44,600 --> 00:34:45,320 AUDIENCE: Lands. 783 00:34:45,320 --> 00:34:45,560 AUDIENCE: Land. 784 00:34:45,560 --> 00:34:46,227 PROFESSOR: Land. 785 00:34:46,227 --> 00:34:47,000 Land. 786 00:34:47,000 --> 00:34:49,780 No, they had something else that they were doing. 787 00:34:49,780 --> 00:34:50,606 Tom? 788 00:34:50,606 --> 00:34:51,540 AUDIENCE: Printmakers. 789 00:34:51,540 --> 00:34:52,915 PROFESSOR: They were printmakers. 790 00:34:52,915 --> 00:34:53,659 I like that. 791 00:34:53,659 --> 00:34:55,659 We're not there yet. 792 00:34:55,659 --> 00:34:56,710 AUDIENCE: Money lenders? 793 00:34:56,710 --> 00:34:57,668 PROFESSOR: What's that? 794 00:34:57,668 --> 00:34:59,870 AUDIENCE: They're underwriting insurance. 795 00:34:59,870 --> 00:35:02,937 PROFESSOR: A little bit later. 796 00:35:02,937 --> 00:35:04,520 AUDIENCE: They were doing agriculture? 797 00:35:04,520 --> 00:35:06,630 PROFESSOR: It's definitely outside of the reading. 798 00:35:06,630 --> 00:35:07,650 They were goldsmiths. 799 00:35:10,870 --> 00:35:16,110 Some of the first dominant bankers in London, 800 00:35:16,110 --> 00:35:17,960 they were small goldsmiths. 801 00:35:17,960 --> 00:35:20,850 And they took the gold, they gave you a piece of paper, 802 00:35:20,850 --> 00:35:22,560 and then they went from there. 803 00:35:22,560 --> 00:35:25,410 And then, all of a sudden, they figured out how to do credit. 804 00:35:25,410 --> 00:35:26,827 Later in the semester, we're going 805 00:35:26,827 --> 00:35:28,950 to talk about Bitcoin credit. 806 00:35:28,950 --> 00:35:31,110 It's not there yet, by the way. 807 00:35:31,110 --> 00:35:33,330 I think in the next 18 to 36 months, 808 00:35:33,330 --> 00:35:38,640 we're going to start seeing cryptolending and cryptofinance 809 00:35:38,640 --> 00:35:41,340 in the form similar to what the goldsmiths were doing 810 00:35:41,340 --> 00:35:44,706 in the early 1700s in England. 811 00:35:44,706 --> 00:35:45,522 Alan? 812 00:35:45,522 --> 00:35:49,743 AUDIENCE: Is that scalable with a finite number of bitcoins, 813 00:35:49,743 --> 00:35:50,410 in your opinion? 814 00:35:50,410 --> 00:35:51,952 PROFESSOR: It's a very good question. 815 00:35:51,952 --> 00:35:55,125 Is it scalable to lend against a finite currency? 816 00:35:58,690 --> 00:36:05,080 I think so, but it's not done yet, right? 817 00:36:05,080 --> 00:36:10,430 AUDIENCE: Yeah, because when you lend money to someone, 818 00:36:10,430 --> 00:36:12,580 I guess it could be in the form of bitcoin. 819 00:36:12,580 --> 00:36:16,190 But you lend someone dollars, they could redeem in bitcoin. 820 00:36:16,190 --> 00:36:18,810 You'd be increasing kind of the money supply. 821 00:36:18,810 --> 00:36:20,178 So you don't need-- 822 00:36:20,178 --> 00:36:21,470 you're not moving money around. 823 00:36:21,470 --> 00:36:22,100 You're actually [INAUDIBLE]. 824 00:36:22,100 --> 00:36:23,810 PROFESSOR: So this is exactly the central 825 00:36:23,810 --> 00:36:25,100 of commercial banking today. 826 00:36:25,100 --> 00:36:26,480 It's called fractional banking. 827 00:36:26,480 --> 00:36:28,022 We'll be talking about that in a bit. 828 00:36:28,022 --> 00:36:35,750 But yes, you could lend and then have a multiplier effect. 829 00:36:35,750 --> 00:36:38,140 You also had, then, banks come up and started 830 00:36:38,140 --> 00:36:39,610 to issue private bank notes. 831 00:36:39,610 --> 00:36:43,630 Private bank notes effectively a liability of that bank 832 00:36:43,630 --> 00:36:45,860 and saying it would trade. 833 00:36:45,860 --> 00:36:50,830 And the history of private bank notes is usually what? 834 00:36:50,830 --> 00:36:54,200 Good until it's really bad. 835 00:36:54,200 --> 00:36:58,160 And the history of money, a lot of private banks 836 00:36:58,160 --> 00:37:02,720 went bust in this country around the revolutionary period, 837 00:37:02,720 --> 00:37:06,110 again around the Civil War. 838 00:37:06,110 --> 00:37:08,120 And in essence, that's what we have now 839 00:37:08,120 --> 00:37:11,540 with 1,600 different cryptocurrencies. 840 00:37:11,540 --> 00:37:13,970 We have sort of a new period of a little bit 841 00:37:13,970 --> 00:37:17,240 of private currencies. 842 00:37:17,240 --> 00:37:20,600 And I only ask you to remember that as we 843 00:37:20,600 --> 00:37:24,170 start to look at ICOs, Initial Coin Offerings, and so forth. 844 00:37:26,770 --> 00:37:29,305 So ledgers-- the earlier question is, what was a ledger? 845 00:37:32,590 --> 00:37:33,670 You asked it. 846 00:37:33,670 --> 00:37:36,080 Can you remember, what's a ledger? 847 00:37:36,080 --> 00:37:39,554 AUDIENCE: It's a way to record economic transaction. 848 00:37:39,554 --> 00:37:40,910 PROFESSOR: There you go. 849 00:37:40,910 --> 00:37:44,250 Principal recordings of accounts. 850 00:37:44,250 --> 00:37:47,930 And 5,000 years ago-- 851 00:37:47,930 --> 00:37:51,320 you had a little reading on this, just a medium post. 852 00:37:51,320 --> 00:37:54,620 It wasn't meant to be a deep economic, academic paper. 853 00:37:54,620 --> 00:38:01,100 But it was to try to get the class thinking about ledgers. 854 00:38:01,100 --> 00:38:04,200 This is the personal ledger of George Washington, 855 00:38:04,200 --> 00:38:05,360 our first president. 856 00:38:05,360 --> 00:38:08,620 He was 15 years old when he kept this ledger. 857 00:38:08,620 --> 00:38:13,560 And he apparently kept ledgers until his death in-- 858 00:38:13,560 --> 00:38:14,810 let's see. 859 00:38:14,810 --> 00:38:16,020 52 years later. 860 00:38:19,250 --> 00:38:22,220 So ledgers could be kept just to record 861 00:38:22,220 --> 00:38:25,010 the transactions of the day. 862 00:38:25,010 --> 00:38:26,210 He's got one up there-- 863 00:38:26,210 --> 00:38:26,967 Mary Washington. 864 00:38:26,967 --> 00:38:28,550 It must have been a cousin, or I can't 865 00:38:28,550 --> 00:38:31,700 remember if it was his mother. 866 00:38:31,700 --> 00:38:34,822 So if they're the principal recordings of accounts-- 867 00:38:34,822 --> 00:38:36,530 and I've already sort of said this-- they 868 00:38:36,530 --> 00:38:41,780 record economic activity and financial relationships. 869 00:38:41,780 --> 00:38:45,710 Economic activity in a sense of transactions. 870 00:38:45,710 --> 00:38:50,770 Financial relationships-- what's a key financial relationship 871 00:38:50,770 --> 00:38:53,490 a ledger might record? 872 00:38:53,490 --> 00:38:53,990 I'm sorry? 873 00:38:53,990 --> 00:38:54,950 AUDIENCE: Debt. 874 00:38:54,950 --> 00:38:57,060 PROFESSOR: Kelly said it-- debt. 875 00:38:57,060 --> 00:38:59,550 And it goes back to the debate you had in the reading. 876 00:38:59,550 --> 00:39:01,887 Is money a history of barter-- 877 00:39:01,887 --> 00:39:02,970 did it come out of barter? 878 00:39:02,970 --> 00:39:05,640 Did it come out of a sense of debts 879 00:39:05,640 --> 00:39:08,370 and credit and store of value? 880 00:39:08,370 --> 00:39:11,000 For this purpose today, it doesn't really matter. 881 00:39:11,000 --> 00:39:12,870 It may have come from both. 882 00:39:12,870 --> 00:39:14,670 But know that it has both sides. 883 00:39:14,670 --> 00:39:16,360 And ledgers have both sides, too. 884 00:39:16,360 --> 00:39:19,680 And when we're talking about Bitcoin, Bitcoin, you will see, 885 00:39:19,680 --> 00:39:24,330 is a mechanism to store transactions. 886 00:39:24,330 --> 00:39:29,580 Some other blockchains, like Ethereum, stores balances. 887 00:39:29,580 --> 00:39:31,410 So even in the blockchain world, you 888 00:39:31,410 --> 00:39:35,100 will see some that are balance ledgers and some 889 00:39:35,100 --> 00:39:37,960 which are transaction ledgers, not 890 00:39:37,960 --> 00:39:40,370 to lose you and confuse you. 891 00:39:40,370 --> 00:39:45,820 It's an important part of what is blockchain. 892 00:39:45,820 --> 00:39:47,350 Some types of ledgers. 893 00:39:47,350 --> 00:39:52,100 I just mentioned one-- transactions versus balance. 894 00:39:52,100 --> 00:39:54,680 George Washington's ledger, by the way, 895 00:39:54,680 --> 00:39:56,390 I think was a transaction ledger. 896 00:39:56,390 --> 00:40:01,130 He was just keeping a list of sales and movements. 897 00:40:01,130 --> 00:40:04,700 But I haven't studied President George Washington's ledger 898 00:40:04,700 --> 00:40:06,480 close enough. 899 00:40:06,480 --> 00:40:08,637 Does anybody know enough accounting 900 00:40:08,637 --> 00:40:10,720 to tell me the difference between a general ledger 901 00:40:10,720 --> 00:40:15,180 and a subledger or a general ledger and a supporting ledger? 902 00:40:15,180 --> 00:40:18,660 I mean, I don't want to do the whole lecture myself. 903 00:40:18,660 --> 00:40:22,950 How many of you have taken accounting? 904 00:40:22,950 --> 00:40:24,090 Uh-huh. 905 00:40:24,090 --> 00:40:27,150 I taught undergraduate accounting once. 906 00:40:27,150 --> 00:40:28,660 Sorry. 907 00:40:28,660 --> 00:40:32,560 So those of you who just put up your hand who took accounting-- 908 00:40:32,560 --> 00:40:35,160 did I see, in the back of the room, did you take accounting? 909 00:40:35,160 --> 00:40:36,377 And that's Aviva. 910 00:40:36,377 --> 00:40:37,960 AUDIENCE: I'm an accountant, actually. 911 00:40:37,960 --> 00:40:39,590 PROFESSOR: You're an accountant? 912 00:40:39,590 --> 00:40:41,480 All right, all right. 913 00:40:41,480 --> 00:40:43,790 Did you pass the CPA? 914 00:40:43,790 --> 00:40:45,580 Oh, we have a Certified Public Accountant 915 00:40:45,580 --> 00:40:46,550 who's going to tell us the difference 916 00:40:46,550 --> 00:40:48,260 between a general ledger and a subledger. 917 00:40:48,260 --> 00:40:49,880 AUDIENCE: So a general ledger is one 918 00:40:49,880 --> 00:40:52,700 that records all kinds of transactions. 919 00:40:52,700 --> 00:40:55,220 Any kind of activity that takes place, you 920 00:40:55,220 --> 00:40:56,630 record in the general ledger. 921 00:40:56,630 --> 00:40:59,910 And subledgers, you can call them as like a specialization. 922 00:40:59,910 --> 00:41:03,090 So let's say if there's a salary to be paid, 923 00:41:03,090 --> 00:41:05,290 you have your salary subledger. 924 00:41:05,290 --> 00:41:07,040 But it'll also go in the general ledger, 925 00:41:07,040 --> 00:41:08,770 and the other part of the transaction's 926 00:41:08,770 --> 00:41:09,830 in the salary ledger. 927 00:41:09,830 --> 00:41:16,820 Or if there's capital or if there's new stuff that you buy, 928 00:41:16,820 --> 00:41:19,160 so all of that goes specifically in the general ledger. 929 00:41:19,160 --> 00:41:21,368 And each of them have their own specific ledgers. 930 00:41:21,368 --> 00:41:22,910 If you want to say how much you spent 931 00:41:22,910 --> 00:41:27,150 on Saturdays for the month, then you go to your Saturday ledger 932 00:41:27,150 --> 00:41:27,650 and see. 933 00:41:27,650 --> 00:41:29,750 But if you want to see, overall, how much money you've spend 934 00:41:29,750 --> 00:41:31,375 and how much has moved around, then you 935 00:41:31,375 --> 00:41:33,220 look at your general ledger. 936 00:41:33,220 --> 00:41:36,260 PROFESSOR: Aviva clearly said it better than I could have. 937 00:41:36,260 --> 00:41:37,850 Thank you. 938 00:41:37,850 --> 00:41:41,490 Now we know we have one CPA in the class. 939 00:41:41,490 --> 00:41:44,900 But the importance-- it's not just a passing note. 940 00:41:44,900 --> 00:41:48,470 The importance of a general ledger and subledgers 941 00:41:48,470 --> 00:41:50,840 is there is a hierarchy, as well. 942 00:41:50,840 --> 00:41:54,260 Subledgers have more detail, and maybe the net number 943 00:41:54,260 --> 00:41:57,080 is kept in the general ledger. 944 00:41:57,080 --> 00:42:00,770 That is at the heart of our system of banking 945 00:42:00,770 --> 00:42:05,310 and is at the heart of our system of financial markets, 946 00:42:05,310 --> 00:42:09,360 where the central bank is like a general ledger for money, 947 00:42:09,360 --> 00:42:14,490 and every commercial bank, all 9,000 of them or so in the US, 948 00:42:14,490 --> 00:42:17,530 in essence keep a subledger for money. 949 00:42:17,530 --> 00:42:19,800 But they do not have control of what 950 00:42:19,800 --> 00:42:24,680 I will call the master ledger or general ledger at the Federal 951 00:42:24,680 --> 00:42:25,180 Reserve. 952 00:42:28,450 --> 00:42:31,330 Then, a third distinction about ledger is a single entry. 953 00:42:31,330 --> 00:42:34,730 A little, young, 15-year-old George Washington 954 00:42:34,730 --> 00:42:37,610 was keeping a single entry ledger-- 955 00:42:37,610 --> 00:42:40,610 just a list of things that was going on. 956 00:42:40,610 --> 00:42:43,613 And I didn't think I was going to bore the class with readings 957 00:42:43,613 --> 00:42:45,530 about double-entry bookkeeping, because you've 958 00:42:45,530 --> 00:42:46,255 taken accounting. 959 00:42:46,255 --> 00:42:48,380 But does anybody want to tell me, other than Aviva, 960 00:42:48,380 --> 00:42:52,200 what double-entry bookkeeping-- and she'll bail you out. 961 00:42:52,200 --> 00:42:53,640 [INAUDIBLE]? 962 00:42:53,640 --> 00:42:55,920 AUDIENCE: Double-entry bookkeeping basically means any 963 00:42:55,920 --> 00:42:58,130 transaction has two places in the lender-- 964 00:42:58,130 --> 00:43:00,530 one on the credit side and one on the debt side. 965 00:43:00,530 --> 00:43:02,370 Because every transaction involves 966 00:43:02,370 --> 00:43:04,820 one person lending, whereas the other person 967 00:43:04,820 --> 00:43:08,545 is getting the thing. 968 00:43:08,545 --> 00:43:09,670 PROFESSOR: It works for me. 969 00:43:09,670 --> 00:43:11,340 Anybody else want a different view? 970 00:43:14,508 --> 00:43:16,050 AUDIENCE: In other words, [INAUDIBLE] 971 00:43:16,050 --> 00:43:20,970 asset and liability [INAUDIBLE] two sites and then [INAUDIBLE] 972 00:43:20,970 --> 00:43:23,310 to balance each other [INAUDIBLE].. 973 00:43:23,310 --> 00:43:25,500 PROFESSOR: So there's a balancing between assets 974 00:43:25,500 --> 00:43:28,020 and liabilities, and then the resulting bit 975 00:43:28,020 --> 00:43:31,740 of capitalism in it is if assets are more than liabilities, 976 00:43:31,740 --> 00:43:33,960 the rest is capital. 977 00:43:33,960 --> 00:43:36,360 So at the heart of capitalism, in a sense, 978 00:43:36,360 --> 00:43:38,190 is double-entry bookkeeping. 979 00:43:38,190 --> 00:43:41,700 And in fact, while it probably goes back a little 980 00:43:41,700 --> 00:43:44,580 over 1,000 years, when it was truly written up 981 00:43:44,580 --> 00:43:48,900 by the Italians in the 1300s, it started 982 00:43:48,900 --> 00:43:51,720 to help Europe come out of the Dark Ages. 983 00:43:51,720 --> 00:43:55,770 I mean, the commercial Renaissance of the Middle Ages, 984 00:43:55,770 --> 00:43:57,420 some would say, was in part-- 985 00:43:57,420 --> 00:43:59,180 not entirely, but in part-- 986 00:43:59,180 --> 00:44:01,540 on the backs of double-entry bookkeeping. 987 00:44:01,540 --> 00:44:04,255 So ledgers matter is my point. 988 00:44:04,255 --> 00:44:06,630 They're not going to be the heart and soul of this class, 989 00:44:06,630 --> 00:44:10,320 but Bitcoin, which is a transaction ledger, Ethereum, 990 00:44:10,320 --> 00:44:14,980 which is a balance ledger, our financial system, which 991 00:44:14,980 --> 00:44:19,713 is all set up on ledgers is a relevant sort of subtext. 992 00:44:19,713 --> 00:44:21,130 You don't have to be afraid of it, 993 00:44:21,130 --> 00:44:24,150 just as you don't have to be afraid of hashing power 994 00:44:24,150 --> 00:44:27,410 that we'll be talking about on Thursday and cryptography. 995 00:44:27,410 --> 00:44:30,520 You have to have some sort of basic sense of where 996 00:44:30,520 --> 00:44:32,980 does Bitcoin fit in, in terms of ledgers. 997 00:44:36,400 --> 00:44:37,720 I didn't feel this slide in. 998 00:44:37,720 --> 00:44:39,100 You'll find out it's blank. 999 00:44:39,100 --> 00:44:40,475 Does anybody want to tell me what 1000 00:44:40,475 --> 00:44:42,850 are some characteristics of a good ledger? 1001 00:44:42,850 --> 00:44:45,430 Because again, as you start to think about your blockchain 1002 00:44:45,430 --> 00:44:47,020 projects later in the semester, it's 1003 00:44:47,020 --> 00:44:49,600 like, what makes a good ledger? 1004 00:44:49,600 --> 00:44:53,100 I don't have any answers here. 1005 00:44:53,100 --> 00:44:55,260 AUDIENCE: The bitcoin were immutable. 1006 00:44:55,260 --> 00:44:57,940 PROFESSOR: So you want it to be immutable, maybe. 1007 00:44:57,940 --> 00:45:00,310 Thalita can you do me a favor and keep these? 1008 00:45:00,310 --> 00:45:02,000 We'll put them on the slides. 1009 00:45:02,000 --> 00:45:05,120 We'll keep the class's list, and we'll put them in the slides. 1010 00:45:05,120 --> 00:45:07,430 Immutable, I like that. 1011 00:45:07,430 --> 00:45:09,160 Anybody else want to grab something 1012 00:45:09,160 --> 00:45:10,672 which is a good ledger? 1013 00:45:10,672 --> 00:45:11,630 AUDIENCE: Time stamped. 1014 00:45:11,630 --> 00:45:12,970 PROFESSOR: What's that? 1015 00:45:12,970 --> 00:45:14,942 Time stamped, all right, so that you 1016 00:45:14,942 --> 00:45:17,540 know when you made your entry. 1017 00:45:17,540 --> 00:45:18,570 Kelly? 1018 00:45:18,570 --> 00:45:19,660 AUDIENCE: Ownership. 1019 00:45:19,660 --> 00:45:19,960 PROFESSOR: Ownership. 1020 00:45:19,960 --> 00:45:21,490 What do you mean by ownership? 1021 00:45:21,490 --> 00:45:25,850 AUDIENCE: Essentially, the receiver and the person giving. 1022 00:45:25,850 --> 00:45:28,505 So essentially, who's taking what and who's giving what. 1023 00:45:28,505 --> 00:45:30,130 PROFESSOR: So if there's a transaction, 1024 00:45:30,130 --> 00:45:33,760 the two counterparties to the transaction, right? 1025 00:45:33,760 --> 00:45:37,390 And if it's a balance, then who owns the balance? 1026 00:45:37,390 --> 00:45:39,820 I was just adding a little bit. 1027 00:45:39,820 --> 00:45:41,690 Let's see if we have a new name or face. 1028 00:45:41,690 --> 00:45:44,020 Back here, on the back table. 1029 00:45:44,020 --> 00:45:45,615 I haven't chatted with you yet. 1030 00:45:45,615 --> 00:45:46,240 AUDIENCE: Ross. 1031 00:45:46,240 --> 00:45:47,070 PROFESSOR: What is that? 1032 00:45:47,070 --> 00:45:47,703 AUDIENCE: Ross. 1033 00:45:47,703 --> 00:45:48,370 PROFESSOR: Ross. 1034 00:45:48,370 --> 00:45:49,037 Thank you, Ross. 1035 00:45:49,037 --> 00:45:49,967 Good to meet you. 1036 00:45:49,967 --> 00:45:51,634 AUDIENCE: Pleasure to meet you, as well. 1037 00:45:51,634 --> 00:45:52,217 Accuracy. 1038 00:45:52,217 --> 00:45:53,050 PROFESSOR: Accuracy. 1039 00:45:53,050 --> 00:45:55,170 So Ross says accuracy. 1040 00:45:55,170 --> 00:45:56,920 And can we take one or two more, just to-- 1041 00:45:56,920 --> 00:45:59,237 AUDIENCE: So a description of the transaction. 1042 00:45:59,237 --> 00:46:01,570 PROFESSOR: Andrew says a description of the transaction. 1043 00:46:01,570 --> 00:46:04,600 And last, Mr. [INAUDIBLE]? 1044 00:46:04,600 --> 00:46:05,600 AUDIENCE: Comprehensive. 1045 00:46:05,600 --> 00:46:06,150 PROFESSOR: What's that? 1046 00:46:06,150 --> 00:46:06,480 AUDIENCE: Comprehensive. 1047 00:46:06,480 --> 00:46:07,810 PROFESSOR: Comprehensive. 1048 00:46:07,810 --> 00:46:10,330 So all good attributes of a-- 1049 00:46:10,330 --> 00:46:12,130 characteristics. 1050 00:46:12,130 --> 00:46:16,620 Somebody's burning desire that we missed one or two? 1051 00:46:16,620 --> 00:46:17,150 Jihei? 1052 00:46:17,150 --> 00:46:17,870 All right. 1053 00:46:17,870 --> 00:46:19,180 AUDIENCE: I just was curious. 1054 00:46:19,180 --> 00:46:20,163 Consistency, maybe? 1055 00:46:20,163 --> 00:46:21,330 But I don't know if that's-- 1056 00:46:21,330 --> 00:46:22,288 PROFESSOR: Consistency. 1057 00:46:22,288 --> 00:46:25,500 Well, I think that's inside of immutability, that, in essence, 1058 00:46:25,500 --> 00:46:30,010 that it's valid, that you can't change it. 1059 00:46:30,010 --> 00:46:33,220 You can't counterfeit it and the like. 1060 00:46:33,220 --> 00:46:35,610 And what you'll find is the characteristics 1061 00:46:35,610 --> 00:46:38,250 of a good ledger is also, in some part, 1062 00:46:38,250 --> 00:46:40,290 similar to the characteristics of good money. 1063 00:46:40,290 --> 00:46:43,740 They're not identical, but they overlap a lot. 1064 00:46:43,740 --> 00:46:47,400 Payment systems-- I'm just going to say one line about it. 1065 00:46:47,400 --> 00:46:50,910 It's a method, basically, to amend and record 1066 00:46:50,910 --> 00:46:53,490 changes in a ledger for money. 1067 00:46:53,490 --> 00:46:56,170 I know it's not what you usually think about a payment system. 1068 00:46:56,170 --> 00:47:01,580 But if you go into Starbucks and buy a cup of coffee 1069 00:47:01,580 --> 00:47:05,570 and use your cell phone, aren't you really just 1070 00:47:05,570 --> 00:47:08,570 amending a set of ledgers? 1071 00:47:08,570 --> 00:47:14,580 Starbucks' ledger goes up, and yup, your ledger goes down. 1072 00:47:14,580 --> 00:47:18,090 Well, your monetary ledger goes up. 1073 00:47:18,090 --> 00:47:23,610 Your utility, your fulfillment from that latte might go up. 1074 00:47:23,610 --> 00:47:26,370 I'm talking about the financial ledger. 1075 00:47:26,370 --> 00:47:29,500 So I just wanted to ground-- when we talk about payment 1076 00:47:29,500 --> 00:47:33,840 systems, think about it's really just a way to amend, usually, 1077 00:47:33,840 --> 00:47:38,580 two parties ledgers'-- one going up, one going down. 1078 00:47:38,580 --> 00:47:43,000 Now, in an earlier time, it was handing somebody a bit of gold 1079 00:47:43,000 --> 00:47:46,060 or a bit of silver, and it was not 1080 00:47:46,060 --> 00:47:47,890 recorded on central ledgers. 1081 00:47:47,890 --> 00:47:50,280 But we already live in an age of electronics, 1082 00:47:50,280 --> 00:47:54,400 so this is really what a payment system largely is. 1083 00:47:54,400 --> 00:47:55,570 It's not entirely. 1084 00:47:55,570 --> 00:48:00,440 There's still some other ways to do finance. 1085 00:48:00,440 --> 00:48:04,070 So what were some early forms of payment systems 1086 00:48:04,070 --> 00:48:08,910 that did just that, that moved and changed ledgers? 1087 00:48:08,910 --> 00:48:11,220 They're called negotiable orders. 1088 00:48:11,220 --> 00:48:12,770 I would dare say that most of you 1089 00:48:12,770 --> 00:48:16,730 probably have not used negotiable orders of withdrawal 1090 00:48:16,730 --> 00:48:20,300 that much in the last week or the last month. 1091 00:48:20,300 --> 00:48:23,990 Has anybody here written a personal check 1092 00:48:23,990 --> 00:48:25,220 in the last week? 1093 00:48:28,560 --> 00:48:32,690 But in an earlier era, it would have been the whole class. 1094 00:48:32,690 --> 00:48:37,250 Anybody in the class not even have a checkbook? 1095 00:48:37,250 --> 00:48:38,880 3/4 of the class. 1096 00:48:38,880 --> 00:48:40,821 Larry, how's that make you feel? 1097 00:48:40,821 --> 00:48:41,404 AUDIENCE: Old. 1098 00:48:44,330 --> 00:48:48,380 PROFESSOR: But a checkbook is, in essence, 1099 00:48:48,380 --> 00:48:51,650 with a-- what do you put on a check? 1100 00:48:51,650 --> 00:48:53,390 This is all about Bitcoin now. 1101 00:48:53,390 --> 00:48:56,420 I'm not doing this just as a walk down 1102 00:48:56,420 --> 00:48:57,965 memory lane for Larry and myself. 1103 00:49:00,680 --> 00:49:03,465 What are the important pieces of negotiable order, withdraw, 1104 00:49:03,465 --> 00:49:04,857 or a check? 1105 00:49:04,857 --> 00:49:05,690 AUDIENCE: Signature. 1106 00:49:05,690 --> 00:49:07,080 AUDIENCE: Put your signature on it. 1107 00:49:07,080 --> 00:49:08,497 PROFESSOR: So there's a signature. 1108 00:49:08,497 --> 00:49:10,260 What else is there? 1109 00:49:10,260 --> 00:49:12,440 I want to get to people I haven't talked to. 1110 00:49:12,440 --> 00:49:13,180 In the back. 1111 00:49:13,180 --> 00:49:14,474 I can't remember your name. 1112 00:49:14,474 --> 00:49:15,016 AUDIENCE: Me? 1113 00:49:15,016 --> 00:49:15,830 I'm Dana. 1114 00:49:15,830 --> 00:49:19,432 You put who you're paying to, how much, and what it's for. 1115 00:49:19,432 --> 00:49:21,140 PROFESSOR: All right, so there's a bunch. 1116 00:49:21,140 --> 00:49:27,050 So a signature, a payee, how much, and what it was for. 1117 00:49:27,050 --> 00:49:28,040 What else? 1118 00:49:28,040 --> 00:49:30,560 AUDIENCE: There's an account number and routing number. 1119 00:49:30,560 --> 00:49:33,220 PROFESSOR: Account numbers and routing numbers. 1120 00:49:33,220 --> 00:49:33,970 So think about it. 1121 00:49:33,970 --> 00:49:39,720 Account numbers and routing numbers is to say, 1122 00:49:39,720 --> 00:49:44,400 in essence, what ledger is this coming from? 1123 00:49:44,400 --> 00:49:48,870 And the payee is the ledger to whom it's going. 1124 00:49:48,870 --> 00:49:50,540 And I'm sorry, Dan? 1125 00:49:50,540 --> 00:49:52,620 AUDIENCE: Also a date, and a day. 1126 00:49:52,620 --> 00:49:55,360 PROFESSOR: So there's a timestamp, a signature, 1127 00:49:55,360 --> 00:50:01,740 a payee, the payor in the form of the account number, 1128 00:50:01,740 --> 00:50:02,550 and an amount. 1129 00:50:02,550 --> 00:50:04,860 Those five are really critical, and you'll 1130 00:50:04,860 --> 00:50:07,290 find them all are going to be right in the middle of all 1131 00:50:07,290 --> 00:50:09,330 this Bitcoin. 1132 00:50:09,330 --> 00:50:11,070 And then the reason why you're-- 1133 00:50:11,070 --> 00:50:13,410 you know, some other information. 1134 00:50:13,410 --> 00:50:15,811 I'm sorry, was there something else? 1135 00:50:15,811 --> 00:50:16,436 AUDIENCE: Kyle. 1136 00:50:16,436 --> 00:50:17,364 PROFESSOR: Kyle. 1137 00:50:17,364 --> 00:50:18,739 AUDIENCE: I just have a question. 1138 00:50:18,739 --> 00:50:21,335 Would you consider something like PayPal or Venmo 1139 00:50:21,335 --> 00:50:23,782 like a negotiable order? 1140 00:50:23,782 --> 00:50:24,740 PROFESSOR: They may be. 1141 00:50:24,740 --> 00:50:26,550 They may be new forms. 1142 00:50:26,550 --> 00:50:30,800 They're certainly parts of the payment system. 1143 00:50:30,800 --> 00:50:33,350 They might not be negotiable orders to withdraw. 1144 00:50:33,350 --> 00:50:37,460 They might not be a direct authorization 1145 00:50:37,460 --> 00:50:42,230 for a bank with one ledger to move money to another ledger. 1146 00:50:42,230 --> 00:50:44,930 They might be moving it on their own ledger. 1147 00:50:47,760 --> 00:50:50,040 You're asking the right question. 1148 00:50:50,040 --> 00:50:52,310 So some early money that we already talked about that 1149 00:50:52,310 --> 00:50:54,020 was ledger where the tally sticks 1150 00:50:54,020 --> 00:50:55,610 in England and the Yap stone. 1151 00:50:55,610 --> 00:50:59,200 These were ledger types and forms of money 1152 00:50:59,200 --> 00:51:00,510 and was kind of interesting. 1153 00:51:00,510 --> 00:51:05,420 So ledgers didn't just come with electricity and computers. 1154 00:51:05,420 --> 00:51:08,230 So now let's get back to fiat currency, the heart 1155 00:51:08,230 --> 00:51:09,230 of the earlier question. 1156 00:51:12,050 --> 00:51:13,730 We already talked about it, so let's see 1157 00:51:13,730 --> 00:51:15,650 how the professor did, because you already 1158 00:51:15,650 --> 00:51:19,160 said some of the things that you said were fiat currency. 1159 00:51:19,160 --> 00:51:24,210 One, social and economic consensus. 1160 00:51:24,210 --> 00:51:27,740 I'm in the school that it's just part of the history. 1161 00:51:27,740 --> 00:51:31,280 It's not that different than everything that came, 1162 00:51:31,280 --> 00:51:34,100 even though it built on that promissory note from China 1163 00:51:34,100 --> 00:51:39,020 700 years ago and the private bank notes and the goldsmiths 1164 00:51:39,020 --> 00:51:40,730 in the 1700s. 1165 00:51:40,730 --> 00:51:44,810 But ultimately, governments took control. 1166 00:51:44,810 --> 00:51:47,360 It represents central bank liabilities, 1167 00:51:47,360 --> 00:51:48,290 and that's important. 1168 00:51:48,290 --> 00:51:51,890 It's a liability of a central bank. 1169 00:51:51,890 --> 00:51:53,250 It's not an asset. 1170 00:51:53,250 --> 00:51:56,610 It's their liability side. 1171 00:51:56,610 --> 00:51:58,250 But it's also-- guess what? 1172 00:51:58,250 --> 00:52:00,870 There's a second form of money. 1173 00:52:00,870 --> 00:52:04,670 And that's when you have a deposit 1174 00:52:04,670 --> 00:52:09,330 in a bank, that's a liability of a commercial bank. 1175 00:52:09,330 --> 00:52:12,780 Central bank is the top gold standard, in a sense. 1176 00:52:12,780 --> 00:52:15,540 Using the word gold, but it's the top ledger. 1177 00:52:15,540 --> 00:52:19,360 Commercial banks are like subledgers, in a sense. 1178 00:52:19,360 --> 00:52:20,200 Please, Alan? 1179 00:52:20,200 --> 00:52:20,360 AUDIENCE: Sure. 1180 00:52:20,360 --> 00:52:21,735 I'm not an economist or anything, 1181 00:52:21,735 --> 00:52:25,140 but what does it mean for a coin or a note 1182 00:52:25,140 --> 00:52:26,840 to be a liability of the central bank? 1183 00:52:26,840 --> 00:52:29,710 What does that actually mean? 1184 00:52:29,710 --> 00:52:33,030 PROFESSOR: So before I answer, does anybody 1185 00:52:33,030 --> 00:52:36,600 want to try to answer what it is? 1186 00:52:36,600 --> 00:52:37,100 Eric? 1187 00:52:37,100 --> 00:52:41,210 AUDIENCE: Liability is basically an obligation to, in this case, 1188 00:52:41,210 --> 00:52:44,036 pay someone an amount. 1189 00:52:44,036 --> 00:52:46,460 PROFESSOR: So because it's a social consensus, 1190 00:52:46,460 --> 00:52:51,110 it's a very good question that Alan asked, is what does it 1191 00:52:51,110 --> 00:52:53,930 mean to be a liability of a central bank 1192 00:52:53,930 --> 00:52:58,490 when it's just the currency in our pocket, right? 1193 00:52:58,490 --> 00:53:00,950 This Federal Reserve note, this says 1194 00:53:00,950 --> 00:53:02,450 Federal Reserve note on it. 1195 00:53:07,175 --> 00:53:08,495 We can pass it around. 1196 00:53:08,495 --> 00:53:09,120 I'm not afraid. 1197 00:53:09,120 --> 00:53:10,920 It's only $1. 1198 00:53:10,920 --> 00:53:12,400 Right? 1199 00:53:12,400 --> 00:53:15,630 If you want me to pass around 20's, then I want them. 1200 00:53:15,630 --> 00:53:19,260 But it says Federal Reserve note, right? 1201 00:53:19,260 --> 00:53:21,825 So it's a liability of the commercial bank. 1202 00:53:24,620 --> 00:53:27,740 In an earlier day, it said you could exchange it 1203 00:53:27,740 --> 00:53:28,585 for gold or silver. 1204 00:53:28,585 --> 00:53:30,710 AUDIENCE: Right, so that's what I don't understand. 1205 00:53:30,710 --> 00:53:34,130 PROFESSOR: By the 1930s, for retail deposits 1206 00:53:34,130 --> 00:53:37,430 in the middle of the Depression, President Roosevelt 1207 00:53:37,430 --> 00:53:38,930 said, no more. 1208 00:53:38,930 --> 00:53:41,120 You cannot redeem gold and silver. 1209 00:53:41,120 --> 00:53:43,340 And then President Nixon, in the 1970s, 1210 00:53:43,340 --> 00:53:47,360 said in the official sector that he was going off of the-- 1211 00:53:47,360 --> 00:53:50,450 until that point in time, other governments 1212 00:53:50,450 --> 00:53:53,420 could redeem in gold. 1213 00:53:53,420 --> 00:53:57,090 But when paper money started, it was not backed by gold. 1214 00:53:57,090 --> 00:53:59,450 We had a period of the gold standard. 1215 00:53:59,450 --> 00:54:00,650 We were on and off of it. 1216 00:54:00,650 --> 00:54:06,560 We fell off of it during World War I. We went back on it. 1217 00:54:06,560 --> 00:54:08,690 It would be a false narrative to say 1218 00:54:08,690 --> 00:54:11,390 that we were on the gold standard for our first 140 1219 00:54:11,390 --> 00:54:13,190 years. 1220 00:54:13,190 --> 00:54:15,380 I just wanted to clear that up. 1221 00:54:15,380 --> 00:54:18,170 I mean, we sort of went on the gold standard, we went off, 1222 00:54:18,170 --> 00:54:21,180 we went back on, and so forth. 1223 00:54:21,180 --> 00:54:23,760 But it is a liability on the books and records. 1224 00:54:23,760 --> 00:54:27,870 So it is a matter of accounting in double-entry bookkeeping. 1225 00:54:27,870 --> 00:54:29,670 I will show you in a minute the balance 1226 00:54:29,670 --> 00:54:31,410 sheet of the Federal Reserve, and I'll 1227 00:54:31,410 --> 00:54:32,610 come back to this question. 1228 00:54:32,610 --> 00:54:33,360 Is that all right? 1229 00:54:33,360 --> 00:54:35,610 AUDIENCE: Can you clarify what is the bank liable for? 1230 00:54:35,610 --> 00:54:38,550 So before, it gave me $1, and I could go to $1 1231 00:54:38,550 --> 00:54:39,842 and get back the gold, right? 1232 00:54:39,842 --> 00:54:40,550 PROFESSOR: Right. 1233 00:54:40,550 --> 00:54:44,010 AUDIENCE: Now, what are they liable for now? 1234 00:54:44,010 --> 00:54:45,780 PROFESSOR: It is, in essence, a social-- 1235 00:54:45,780 --> 00:54:48,488 it's the first point. 1236 00:54:48,488 --> 00:54:49,530 I'm going to separate it. 1237 00:54:49,530 --> 00:54:54,990 The central bank is liable that they will move on its ledgers 1238 00:54:54,990 --> 00:54:57,820 if you want to move that to somewhere else. 1239 00:54:57,820 --> 00:55:00,750 So you could take that physical $1 in and say, 1240 00:55:00,750 --> 00:55:03,060 I want to deposit this in a bank. 1241 00:55:03,060 --> 00:55:06,300 And they have to record it on the ledger of that bank. 1242 00:55:06,300 --> 00:55:08,370 That is what they are-- 1243 00:55:08,370 --> 00:55:11,340 and the US government, which is technically 1244 00:55:11,340 --> 00:55:13,530 separate from the central bank-- 1245 00:55:13,530 --> 00:55:16,510 or the UK government or the Chinese government. 1246 00:55:16,510 --> 00:55:19,440 they're all technically separate from their banks-- 1247 00:55:19,440 --> 00:55:22,790 People's Bank of China or the Bank of England. 1248 00:55:22,790 --> 00:55:24,790 Their governments are saying they will accept it 1249 00:55:24,790 --> 00:55:28,240 for payments against taxes. 1250 00:55:28,240 --> 00:55:30,660 So there's a set of social constructs. 1251 00:55:33,273 --> 00:55:35,690 I'm going to just go through this to answer your question. 1252 00:55:35,690 --> 00:55:39,450 It relies on a system of ledgers, 1253 00:55:39,450 --> 00:55:42,797 and it's an integration of those ledgers between the banking 1254 00:55:42,797 --> 00:55:44,130 system and the commercial banks. 1255 00:55:44,130 --> 00:55:49,100 In the US, we have about 9,000 commercial banks. 1256 00:55:49,100 --> 00:55:50,870 And what the Federal Reserve is saying-- 1257 00:55:50,870 --> 00:55:53,270 but it's true about the People's Bank of China. 1258 00:55:53,270 --> 00:55:57,500 It's true about the European Central Bank. 1259 00:55:57,500 --> 00:55:59,330 Each of these central banks are basically 1260 00:55:59,330 --> 00:56:03,470 saying, if you bring your paper money in, 1261 00:56:03,470 --> 00:56:07,760 we'll record it on the ledger of a commercial bank. 1262 00:56:07,760 --> 00:56:10,030 And you can pay your taxes to our sister 1263 00:56:10,030 --> 00:56:13,820 over here called the government. 1264 00:56:13,820 --> 00:56:15,550 I'm sorry to let you down. 1265 00:56:15,550 --> 00:56:16,850 It's not more than that. 1266 00:56:16,850 --> 00:56:17,390 Sorry, Alan. 1267 00:56:17,390 --> 00:56:18,890 AUDIENCE: I have a potential answer. 1268 00:56:18,890 --> 00:56:19,932 I might be totally wrong. 1269 00:56:19,932 --> 00:56:20,848 PROFESSOR: Please, no. 1270 00:56:20,848 --> 00:56:22,940 AUDIENCE: I think it's a legal and sustainable way 1271 00:56:22,940 --> 00:56:31,250 to conduct a Ponzi scheme with a proper Ponzi scheme, where 1272 00:56:31,250 --> 00:56:33,890 the value will increase by 1% to 3% 1273 00:56:33,890 --> 00:56:39,290 if the central bank reaches the goal of inflation. 1274 00:56:39,290 --> 00:56:41,750 PROFESSOR: All right, any other points of view on that? 1275 00:56:41,750 --> 00:56:44,990 I saw-- I'm not sure of your name. 1276 00:56:44,990 --> 00:56:46,860 Oh, no, you don't want to say anything? 1277 00:56:46,860 --> 00:56:47,360 No? 1278 00:56:47,360 --> 00:56:48,827 All right. 1279 00:56:48,827 --> 00:56:50,660 AUDIENCE: I think I'll go back to point one. 1280 00:56:50,660 --> 00:56:53,920 It's a construct that someone would give you something. 1281 00:56:53,920 --> 00:56:57,010 So your dollar with the central bank, the central bank 1282 00:56:57,010 --> 00:57:00,700 owes you that dollar's worth of whatever you desire. 1283 00:57:00,700 --> 00:57:02,800 And someone will happily take that dollar 1284 00:57:02,800 --> 00:57:05,520 from the central bank and give you the goods that you want. 1285 00:57:05,520 --> 00:57:08,770 So it's a roundabout way of-- it's 1286 00:57:08,770 --> 00:57:14,358 a way of transacting something, whatever value that dollar has. 1287 00:57:14,358 --> 00:57:16,150 AUDIENCE: It's also central bank liability, 1288 00:57:16,150 --> 00:57:18,860 because whenever the government has sovereign debt, 1289 00:57:18,860 --> 00:57:21,200 it can't just issue new notes. 1290 00:57:21,200 --> 00:57:22,303 It's liable. 1291 00:57:22,303 --> 00:57:24,470 So that's why it's a liability, because you can only 1292 00:57:24,470 --> 00:57:26,680 issue notes against a certain amount of reserves 1293 00:57:26,680 --> 00:57:27,730 that you carry. 1294 00:57:27,730 --> 00:57:30,820 So that's why you refer to it as a liability. 1295 00:57:30,820 --> 00:57:34,660 Because you can't just issue new notes whenever you need them. 1296 00:57:34,660 --> 00:57:36,870 You can't just make new money out of thin air. 1297 00:57:36,870 --> 00:57:38,970 So you're liable for every new note. 1298 00:57:38,970 --> 00:57:41,350 PROFESSOR: I'm going to take one more comment on this 1299 00:57:41,350 --> 00:57:42,870 and then give a couple more things. 1300 00:57:42,870 --> 00:57:44,120 Eric? 1301 00:57:44,120 --> 00:57:46,060 AUDIENCE: The currency is actually 1302 00:57:46,060 --> 00:57:49,390 a small part of the total reserves of the Federal Reserve 1303 00:57:49,390 --> 00:57:50,320 System. 1304 00:57:50,320 --> 00:57:53,230 I think maybe the bank reserves are maybe 1305 00:57:53,230 --> 00:57:56,470 a more applicable application, because a bank can actually 1306 00:57:56,470 --> 00:58:00,580 require the Fed to print money by making more loans. 1307 00:58:00,580 --> 00:58:03,910 So in that way, there's this mechanism 1308 00:58:03,910 --> 00:58:06,050 to ensure that liability [INAUDIBLE].. 1309 00:58:06,050 --> 00:58:08,330 PROFESSOR: I'm very pleased with this discussion, even 1310 00:58:08,330 --> 00:58:13,180 Alan's contributions about the schemes. 1311 00:58:13,180 --> 00:58:14,620 This is the debate. 1312 00:58:14,620 --> 00:58:16,540 If Jay Powell were here-- how many of you 1313 00:58:16,540 --> 00:58:19,550 know who Jay Powell is? 1314 00:58:19,550 --> 00:58:20,755 Who's Jay Powell? 1315 00:58:20,755 --> 00:58:24,030 AUDIENCE: It's a lab. 1316 00:58:24,030 --> 00:58:25,270 PROFESSOR: Jay Powell. 1317 00:58:25,270 --> 00:58:25,770 No. 1318 00:58:25,770 --> 00:58:26,790 Who's Jay Powell? 1319 00:58:26,790 --> 00:58:27,750 AUDIENCE: Head of the Federal Reserve. 1320 00:58:27,750 --> 00:58:29,375 PROFESSOR: Head of the Federal Reserve. 1321 00:58:29,375 --> 00:58:30,540 Thank you. 1322 00:58:30,540 --> 00:58:32,940 Sorry. 1323 00:58:32,940 --> 00:58:36,210 But if Jay Powell were here, he'd 1324 00:58:36,210 --> 00:58:39,930 have a laugh along with what Alan just said, 1325 00:58:39,930 --> 00:58:44,220 but he would say, also, the liability 1326 00:58:44,220 --> 00:58:46,860 is a social liability, as well. 1327 00:58:46,860 --> 00:58:49,380 That a central banker, to their core, 1328 00:58:49,380 --> 00:58:51,810 believes what they are trying to do 1329 00:58:51,810 --> 00:58:57,630 is ensure for the stability of this social thing we call money 1330 00:58:57,630 --> 00:59:00,030 and to make sure that it doesn't get debased 1331 00:59:00,030 --> 00:59:03,330 and it has some value. 1332 00:59:03,330 --> 00:59:06,330 So it's accepted for taxes, we talked about. 1333 00:59:06,330 --> 00:59:08,770 Notes and coins are legal tender for all debts, 1334 00:59:08,770 --> 00:59:11,050 public and private. 1335 00:59:11,050 --> 00:59:16,520 I walk into a Starbucks and I say, I'd like a cup of coffee. 1336 00:59:16,520 --> 00:59:22,210 Here's my $5 or whatever it costs these days. 1337 00:59:22,210 --> 00:59:23,740 Does the person behind the counter 1338 00:59:23,740 --> 00:59:25,250 have to brew the coffee? 1339 00:59:25,250 --> 00:59:26,620 Is just a yes or no? 1340 00:59:26,620 --> 00:59:27,220 Can I see? 1341 00:59:30,170 --> 00:59:32,400 Who wants to go for it? 1342 00:59:32,400 --> 00:59:35,340 There's a no from Christopher. 1343 00:59:35,340 --> 00:59:36,630 What, Chris? 1344 00:59:36,630 --> 00:59:37,710 There's a no from Chris. 1345 00:59:37,710 --> 00:59:39,880 Who agrees with Chris? 1346 00:59:39,880 --> 00:59:41,550 OK. 1347 00:59:41,550 --> 00:59:43,050 They brew a cup of coffee. 1348 00:59:43,050 --> 00:59:44,700 I go to the other side of the counter. 1349 00:59:44,700 --> 00:59:47,660 The coffee's sitting there. 1350 00:59:47,660 --> 00:59:51,800 Now, do they have to accept my $5 at that point? 1351 00:59:51,800 --> 00:59:53,650 Yes. 1352 00:59:53,650 --> 00:59:57,220 Before they brew the coffee, nobody has to take dollars. 1353 00:59:57,220 --> 01:00:02,460 But once a debt is established, they've produced the good, 1354 01:00:02,460 --> 01:00:05,280 they've provided the service, they have to take it. 1355 01:00:05,280 --> 01:00:06,810 Just a small, little thing. 1356 01:00:06,810 --> 01:00:08,610 That's what legal tender is. 1357 01:00:08,610 --> 01:00:10,350 And so there's many establishments 1358 01:00:10,350 --> 01:00:13,080 around the globe that are basically 1359 01:00:13,080 --> 01:00:17,100 now putting little signs out, we don't take Swedish krona. 1360 01:00:17,100 --> 01:00:18,210 We don't take this. 1361 01:00:18,210 --> 01:00:22,530 We don't take that in paper form. 1362 01:00:22,530 --> 01:00:24,410 They'll still take it electronically. 1363 01:00:24,410 --> 01:00:27,210 And there's a new little bit of definitional thing 1364 01:00:27,210 --> 01:00:29,810 going on about legal tender. 1365 01:00:29,810 --> 01:00:31,480 There's also some unique tax treatments, 1366 01:00:31,480 --> 01:00:34,390 but I'm not going to go through the currency. 1367 01:00:34,390 --> 01:00:37,060 So central banking and money we talked about a little bit. 1368 01:00:37,060 --> 01:00:39,250 This is a kind of chart that I borrowed 1369 01:00:39,250 --> 01:00:42,670 from somebody else's paper. 1370 01:00:42,670 --> 01:00:45,235 But the central banks at the top is at the center. 1371 01:00:48,090 --> 01:00:50,800 And if Alice and Bob-- and we'll be talking about Alice and Bob 1372 01:00:50,800 --> 01:00:54,270 in Bitcoin time, so you can pull this chart down later-- 1373 01:00:54,270 --> 01:00:58,330 want to transact and they're at the same commercial bank, 1374 01:00:58,330 --> 01:01:00,940 Bank Number 1, then commercial Bank Number 1 1375 01:01:00,940 --> 01:01:05,020 has to change their ledgers, moving money from Alice to Bob. 1376 01:01:05,020 --> 01:01:08,230 In essence, if you're both two people at Bank of America, 1377 01:01:08,230 --> 01:01:12,390 you can move your balance at Bank of America. 1378 01:01:12,390 --> 01:01:16,580 But if you're at Bank of America going over to Citicorp, 1379 01:01:16,580 --> 01:01:22,940 then something has to go between two ledgers, Bank of America's 1380 01:01:22,940 --> 01:01:24,830 ledger and Citicorp's ledger. 1381 01:01:24,830 --> 01:01:30,730 And the only way to transact between two banks' ledgers 1382 01:01:30,730 --> 01:01:34,260 is some balancing act has to happen 1383 01:01:34,260 --> 01:01:38,650 at the top ledger, called the central bank. 1384 01:01:38,650 --> 01:01:41,163 And later, when we talk about payment systems-- and I'm 1385 01:01:41,163 --> 01:01:43,330 going to use this slide again later in the semester. 1386 01:01:43,330 --> 01:01:45,940 That's why I'm not going to spend as much time now on it. 1387 01:01:45,940 --> 01:01:48,720 We're going to talk about ledgers. 1388 01:01:48,720 --> 01:01:50,980 And when you move money between two banks, 1389 01:01:50,980 --> 01:01:53,470 it's all within one closed system-- 1390 01:01:53,470 --> 01:01:59,510 that country's or that society's central banking system. 1391 01:01:59,510 --> 01:02:02,180 But then it gets really a little bit more iffy 1392 01:02:02,180 --> 01:02:05,450 and woolly when you're moving from one currency 1393 01:02:05,450 --> 01:02:06,485 to another currency. 1394 01:02:09,110 --> 01:02:13,670 Because how do you make two closed ledger systems operable? 1395 01:02:13,670 --> 01:02:15,680 Not for today, but we'll go through 1396 01:02:15,680 --> 01:02:21,960 that later when we do payment systems and the like. 1397 01:02:21,960 --> 01:02:24,110 The central bank, the US central bank-- this 1398 01:02:24,110 --> 01:02:26,610 was the only good slide I could find, which was about a year 1399 01:02:26,610 --> 01:02:27,480 old. 1400 01:02:27,480 --> 01:02:30,540 Its liabilities and assets are about 4 and 1/4 trillion 1401 01:02:30,540 --> 01:02:32,880 dollars, $4.3 trillion. 1402 01:02:32,880 --> 01:02:36,990 $1.7 trillion of that is in currency. 1403 01:02:36,990 --> 01:02:39,060 Do I get my $1 back, by the way? 1404 01:02:39,060 --> 01:02:40,950 I mean, my liability. 1405 01:02:40,950 --> 01:02:49,260 So $1.7 trillion of those greenbacks are in circulation. 1406 01:02:49,260 --> 01:02:52,650 And remarkably, even though half of you 1407 01:02:52,650 --> 01:02:55,020 probably don't use cash that much, you don't even 1408 01:02:55,020 --> 01:02:59,080 have checking accounts, the amount of cash in circulation 1409 01:02:59,080 --> 01:03:01,000 is growing faster than the economy 1410 01:03:01,000 --> 01:03:04,250 in most developed nations. 1411 01:03:04,250 --> 01:03:07,800 Why do you think that is? 1412 01:03:07,800 --> 01:03:10,210 What probably one word? 1413 01:03:10,210 --> 01:03:14,050 AUDIENCE: The amount of 2008 crisis [INAUDIBLE].. 1414 01:03:14,050 --> 01:03:16,064 PROFESSOR: Oh, that's more than one word. 1415 01:03:16,064 --> 01:03:16,830 AUDIENCE: Trust. 1416 01:03:16,830 --> 01:03:17,538 PROFESSOR: Drugs. 1417 01:03:17,538 --> 01:03:18,540 AUDIENCE: Trust. 1418 01:03:18,540 --> 01:03:19,980 PROFESSOR: Oh, trust. 1419 01:03:19,980 --> 01:03:23,130 I thought you said drugs. 1420 01:03:23,130 --> 01:03:24,030 Trust. 1421 01:03:24,030 --> 01:03:25,710 Well, it does have to do with trust, 1422 01:03:25,710 --> 01:03:28,140 but it also has to do with drugs. 1423 01:03:28,140 --> 01:03:31,410 Paper currency is a wonderful method 1424 01:03:31,410 --> 01:03:35,860 of money laundering, drug running, and a store of value. 1425 01:03:35,860 --> 01:03:38,490 So there's certain segments of our economy and segments 1426 01:03:38,490 --> 01:03:40,590 of the worldwide economy that does not 1427 01:03:40,590 --> 01:03:45,230 want to be in the electronic banking system. 1428 01:03:45,230 --> 01:03:47,100 I'm going to slip through these quickly, 1429 01:03:47,100 --> 01:03:50,520 but there's another piece that we need for this whole class 1430 01:03:50,520 --> 01:03:54,480 and for the semester is credit and credit intermediation. 1431 01:03:54,480 --> 01:03:56,160 But just a little thing-- 1432 01:03:56,160 --> 01:03:59,940 credit cards started only 60 or 70 years ago, 1433 01:03:59,940 --> 01:04:03,720 but they go back to a book a little over 100 years ago. 1434 01:04:03,720 --> 01:04:05,910 The word "credit card" is used 18 times 1435 01:04:05,910 --> 01:04:12,360 in this book, where a science fiction writer in 1887 said, 1436 01:04:12,360 --> 01:04:15,270 what would the world be like in the year 2000? 1437 01:04:15,270 --> 01:04:18,090 And it was the first use of the word "credit card." 1438 01:04:18,090 --> 01:04:21,930 And he said that society would have a form of money, 1439 01:04:21,930 --> 01:04:24,120 and you would have credit against it. 1440 01:04:24,120 --> 01:04:26,010 And it's a fascinating thing that somebody 1441 01:04:26,010 --> 01:04:27,750 could be that visionary. 1442 01:04:27,750 --> 01:04:29,730 But there were merchant cards starting, 1443 01:04:29,730 --> 01:04:32,820 so maybe he wasn't so visionary. 1444 01:04:32,820 --> 01:04:37,440 Oil companies in the 1920s, charge cards were starting, 1445 01:04:37,440 --> 01:04:39,870 but they were single-merchant cards. 1446 01:04:39,870 --> 01:04:43,830 You could have credit from that merchant. 1447 01:04:43,830 --> 01:04:47,160 In 1946, in a bank in Brooklyn, a guy 1448 01:04:47,160 --> 01:04:50,140 named Biggins started with that. 1449 01:04:50,140 --> 01:04:51,970 That was the first real charge it. 1450 01:04:51,970 --> 01:04:58,530 You could charge things in a few dozen places in Brooklyn, 1451 01:04:58,530 --> 01:05:00,660 literally. 1452 01:05:00,660 --> 01:05:02,580 And then, all of a sudden, it took off. 1453 01:05:02,580 --> 01:05:05,078 Diner's Club started in the early 1950s. 1454 01:05:05,078 --> 01:05:07,620 They found that they could get a bunch of restaurants to say, 1455 01:05:07,620 --> 01:05:11,460 wouldn't you want to extend credit, and we'll back it? 1456 01:05:11,460 --> 01:05:14,340 American Express in the mid-1950s. 1457 01:05:14,340 --> 01:05:16,500 And then, finally, in the mid-1960s, 1458 01:05:16,500 --> 01:05:19,680 Bank of America, which at that time was a California bank, 1459 01:05:19,680 --> 01:05:23,280 figured out they would create a co-operative 1460 01:05:23,280 --> 01:05:27,590 with a bunch of other US banks to extend credit. 1461 01:05:27,590 --> 01:05:30,390 And the credit boom took off. 1462 01:05:30,390 --> 01:05:33,360 And what was interesting, the laws to regulate all this 1463 01:05:33,360 --> 01:05:36,630 didn't come until the 1970s, at least in the US-- 1464 01:05:36,630 --> 01:05:39,570 the Fair Credit Reporting Act and all the other laws. 1465 01:05:39,570 --> 01:05:42,780 There's three big ones in the 1970s. 1466 01:05:42,780 --> 01:05:46,050 I go to conferences sometime and talk about Bitcoin regulation, 1467 01:05:46,050 --> 01:05:49,140 and they say, well, why can't the government solve this now? 1468 01:05:49,140 --> 01:05:53,280 I sort of remind them that it took 15 to 20 years from 1469 01:05:53,280 --> 01:05:57,420 the introduction of credit cards kind of in the early to mid 1470 01:05:57,420 --> 01:06:01,110 1950s and the real take-off in the 1960s-- 1471 01:06:01,110 --> 01:06:06,900 it was 1974, 1970, '77, the three big credit laws. 1472 01:06:06,900 --> 01:06:10,080 So if you're going to be an entrepreneur in Bitcoin, 1473 01:06:10,080 --> 01:06:12,660 know that it could be 15 years until there's 1474 01:06:12,660 --> 01:06:17,910 some cryptolaws in the future. 1475 01:06:17,910 --> 01:06:20,940 That was the processing machine from the 1950s. 1476 01:06:20,940 --> 01:06:24,050 I made it too small, sorry. 1477 01:06:24,050 --> 01:06:26,570 Visa made it better. 1478 01:06:26,570 --> 01:06:29,300 And then, of course, that's what we all see today, 1479 01:06:29,300 --> 01:06:32,550 how your cards get processed. 1480 01:06:32,550 --> 01:06:35,030 So the role of money we've talked about. 1481 01:06:35,030 --> 01:06:37,220 So I'm going to skip over that. 1482 01:06:37,220 --> 01:06:39,590 But now the characteristics of money. 1483 01:06:39,590 --> 01:06:42,020 What makes a good money? 1484 01:06:42,020 --> 01:06:43,760 We talked about some of this earlier. 1485 01:06:43,760 --> 01:06:48,380 It's durable, meaning that that salt cube wasn't the greatest, 1486 01:06:48,380 --> 01:06:51,650 because if a lot of rain came, that would wash away. 1487 01:06:51,650 --> 01:06:54,460 Gold and silver, metals, are durable. 1488 01:06:54,460 --> 01:06:55,670 They're portable. 1489 01:06:55,670 --> 01:06:57,500 The heavier it is, the less portable 1490 01:06:57,500 --> 01:07:01,970 it is, and that's why gold was a better money than silver. 1491 01:07:01,970 --> 01:07:02,780 You could move it-- 1492 01:07:02,780 --> 01:07:05,800 and better than copper and bronze. 1493 01:07:05,800 --> 01:07:07,460 It was divisible easily. 1494 01:07:07,460 --> 01:07:11,240 You could slice things up. 1495 01:07:11,240 --> 01:07:13,280 Uniform and fungible. 1496 01:07:13,280 --> 01:07:15,990 And anyone who's who down the rabbit hole on this stuff, 1497 01:07:15,990 --> 01:07:18,560 if you really want to learn about money, 1498 01:07:18,560 --> 01:07:24,480 read about Crawford versus Royal Bank in 1749. 1499 01:07:24,480 --> 01:07:28,170 There was a gentleman at the early part of paper money 1500 01:07:28,170 --> 01:07:34,790 that mailed two 20-pound notes, and he wrote his name on them. 1501 01:07:34,790 --> 01:07:39,750 They got lost in the mail, and he took the banks to court 1502 01:07:39,750 --> 01:07:43,280 to say, those were mine, when they were found. 1503 01:07:43,280 --> 01:07:47,390 And there was no law in Scotland or in England at the time 1504 01:07:47,390 --> 01:07:48,720 as to what to do about it. 1505 01:07:48,720 --> 01:07:52,430 But if you lose or somebody stole a piece of art, 1506 01:07:52,430 --> 01:07:54,450 you get it back. 1507 01:07:54,450 --> 01:07:57,360 And the law was settled in 1749 that you actually 1508 01:07:57,360 --> 01:07:59,730 don't get your money back. 1509 01:07:59,730 --> 01:08:02,670 Does anybody want to guess as to why the courts-- 1510 01:08:02,670 --> 01:08:04,940 it was a matter of first interpretation. 1511 01:08:04,940 --> 01:08:10,550 The courts had no jurisprudence on this before 1749. 1512 01:08:10,550 --> 01:08:15,230 Why did the courts decide that a piece of art 1513 01:08:15,230 --> 01:08:17,479 was different than currency? 1514 01:08:17,479 --> 01:08:19,880 And it goes to the fundamental of what 1515 01:08:19,880 --> 01:08:22,670 money is, fiat money is. 1516 01:08:22,670 --> 01:08:25,490 Anybody want to take a guess as to why the courts-- 1517 01:08:25,490 --> 01:08:27,071 they could have gone the other way. 1518 01:08:27,071 --> 01:08:29,529 AUDIENCE: How could you tell if someone really owned money? 1519 01:08:29,529 --> 01:08:30,612 How could you [INAUDIBLE]? 1520 01:08:30,612 --> 01:08:31,850 PROFESSOR: He signed it. 1521 01:08:31,850 --> 01:08:36,240 Actually, the facts were clear it was the currency he signed. 1522 01:08:36,240 --> 01:08:38,609 I'm just helping you out so that-- 1523 01:08:38,609 --> 01:08:42,220 that's a good point, but he signed it. 1524 01:08:42,220 --> 01:08:44,350 AUDIENCE: It can't be used as a medium of exchange 1525 01:08:44,350 --> 01:08:47,492 if it doesn't belong to the person [INAUDIBLE].. 1526 01:08:47,492 --> 01:08:48,909 PROFESSOR: In essence, if you were 1527 01:08:48,909 --> 01:08:51,340 to go back and read-- there's some history on this, 1528 01:08:51,340 --> 01:08:54,298 and read the court cases. 1529 01:08:54,298 --> 01:08:55,090 This was the point. 1530 01:08:55,090 --> 01:08:56,500 The court basically said, we have 1531 01:08:56,500 --> 01:08:59,710 to make this a medium of exchange, 1532 01:08:59,710 --> 01:09:01,000 the greater social good. 1533 01:09:01,000 --> 01:09:02,770 It has to be fungible. 1534 01:09:02,770 --> 01:09:08,620 And the Royal Bank of Scotland was, of course, kind of 1535 01:09:08,620 --> 01:09:12,109 closer to the courts than this gentleman, Crawford. 1536 01:09:12,109 --> 01:09:15,717 But the banks were also saying, we can't keep track of this. 1537 01:09:15,717 --> 01:09:18,050 So it was a mixture of the two, but it made it fungible. 1538 01:09:18,050 --> 01:09:19,330 Eric? 1539 01:09:19,330 --> 01:09:21,478 AUDIENCE: Was it those specific notes 1540 01:09:21,478 --> 01:09:22,770 that he had signed [INAUDIBLE]? 1541 01:09:22,770 --> 01:09:23,437 PROFESSOR: Yeah. 1542 01:09:23,437 --> 01:09:24,143 Yeah. 1543 01:09:24,143 --> 01:09:25,060 AUDIENCE: [INAUDIBLE]. 1544 01:09:25,060 --> 01:09:28,060 PROFESSOR: And in 1749, they all had serial numbers, 1545 01:09:28,060 --> 01:09:30,910 and they were signed in a way that not today. 1546 01:09:30,910 --> 01:09:34,359 Of course, they're acceptable, and they're stable. 1547 01:09:34,359 --> 01:09:36,550 And we're going to talk a lot about the last point. 1548 01:09:36,550 --> 01:09:38,740 They're stable because they're hard to mine, 1549 01:09:38,740 --> 01:09:42,740 and Bitcoin has that embedded in it, as well. 1550 01:09:42,740 --> 01:09:45,319 The design of money is really important, as well. 1551 01:09:45,319 --> 01:09:46,850 You can make it a token-- 1552 01:09:46,850 --> 01:09:49,580 a token is like something physical-- 1553 01:09:49,580 --> 01:09:51,649 or account based. 1554 01:09:51,649 --> 01:09:55,440 We're of course now living in a world of account-based money, 1555 01:09:55,440 --> 01:09:56,780 and it's digital, not physical. 1556 01:09:59,445 --> 01:10:01,070 It can be issued by the private sector, 1557 01:10:01,070 --> 01:10:04,070 just like banknotes in the 18th century, 1558 01:10:04,070 --> 01:10:08,040 or private sector like Bitcoin, or it can be central. 1559 01:10:08,040 --> 01:10:10,920 It can be widely acceptable or just wholesale. 1560 01:10:10,920 --> 01:10:13,448 There are forms of wholesale money. 1561 01:10:13,448 --> 01:10:15,240 One of the biggest forms of wholesale money 1562 01:10:15,240 --> 01:10:17,490 is the central bank's reserves are only 1563 01:10:17,490 --> 01:10:21,050 available to the commercial banking system. 1564 01:10:21,050 --> 01:10:23,090 We're going to study this money flower later, 1565 01:10:23,090 --> 01:10:26,630 but I put it in the slides because this-- 1566 01:10:26,630 --> 01:10:28,880 I didn't create this flower. 1567 01:10:28,880 --> 01:10:30,740 You have a reading later in the semester 1568 01:10:30,740 --> 01:10:32,870 from the Bank of International Settlement that 1569 01:10:32,870 --> 01:10:35,060 has this money flower in it. 1570 01:10:35,060 --> 01:10:37,640 But it's basically across these four things-- 1571 01:10:37,640 --> 01:10:40,250 is it token our account based, physical or digital, 1572 01:10:40,250 --> 01:10:43,130 private or central, or widely accessible? 1573 01:10:43,130 --> 01:10:47,030 And then all monies fall into one piece of this money flower. 1574 01:10:47,030 --> 01:10:50,420 There's a Professor Garrett that came up with this flower, 1575 01:10:50,420 --> 01:10:53,480 and there's an optional reading later in the semester from him. 1576 01:10:57,470 --> 01:10:58,820 You had a reading from Clark. 1577 01:10:58,820 --> 01:11:02,560 There's not enough time, but all this stuff failed. 1578 01:11:02,560 --> 01:11:04,640 Does anybody want to give me a flavor for one 1579 01:11:04,640 --> 01:11:07,340 or two reasons why a bunch of digital cash failed? 1580 01:11:07,340 --> 01:11:08,900 Did anybody read the Clark reading, 1581 01:11:08,900 --> 01:11:10,430 the history of some DigiCash? 1582 01:11:10,430 --> 01:11:11,990 Oh, Alan read it. 1583 01:11:11,990 --> 01:11:13,930 Anybody else read it? 1584 01:11:13,930 --> 01:11:14,430 Over here. 1585 01:11:14,430 --> 01:11:15,215 I can't remember-- 1586 01:11:15,215 --> 01:11:15,840 AUDIENCE: Zhan. 1587 01:11:15,840 --> 01:11:16,230 PROFESSOR: Don. 1588 01:11:16,230 --> 01:11:16,965 So what did you-- 1589 01:11:16,965 --> 01:11:17,590 AUDIENCE: Zhan. 1590 01:11:17,590 --> 01:11:18,070 PROFESSOR: What? 1591 01:11:18,070 --> 01:11:18,690 AUDIENCE: Zhan. 1592 01:11:18,690 --> 01:11:19,170 PROFESSOR: Zhan. 1593 01:11:19,170 --> 01:11:20,550 Zhan, what did you take from the reading? 1594 01:11:20,550 --> 01:11:21,630 Why did these all fail? 1595 01:11:21,630 --> 01:11:24,852 What's the one or two biggest reasons they failed? 1596 01:11:24,852 --> 01:11:26,310 AUDIENCE: Most of them still relied 1597 01:11:26,310 --> 01:11:28,433 on kind of some form of a central authority. 1598 01:11:28,433 --> 01:11:30,350 PROFESSOR: All right, they relied on central-- 1599 01:11:30,350 --> 01:11:32,700 DigiCash certainly did it, David Chaum's case, 1600 01:11:32,700 --> 01:11:34,270 and some of the others. 1601 01:11:34,270 --> 01:11:35,250 Any other big reason? 1602 01:11:35,250 --> 01:11:37,133 Alan, did you have-- 1603 01:11:37,133 --> 01:11:39,300 AUDIENCE: There wasn't enough adoption by merchants, 1604 01:11:39,300 --> 01:11:39,840 I recall. 1605 01:11:39,840 --> 01:11:41,840 PROFESSOR: Definitely not adoption by merchants. 1606 01:11:41,840 --> 01:11:42,570 Very good. 1607 01:11:42,570 --> 01:11:43,830 Third reason why they failed? 1608 01:11:43,830 --> 01:11:46,005 One that's at the core of what Bitcoin solved. 1609 01:11:49,513 --> 01:11:51,680 AUDIENCE: Incentivizing like a decentralized network 1610 01:11:51,680 --> 01:11:53,632 to keep that ledger, maintain the ledger. 1611 01:11:53,632 --> 01:11:55,590 PROFESSOR: All right, incentivizing the ledger. 1612 01:11:55,590 --> 01:11:57,028 Behind Eric. 1613 01:11:57,028 --> 01:11:59,320 AUDIENCE: They couldn't solve the double spend problem. 1614 01:11:59,320 --> 01:12:00,195 PROFESSOR: That's it. 1615 01:12:00,195 --> 01:12:02,190 Couldn't spend the double spend problem. 1616 01:12:02,190 --> 01:12:04,790 Could a currency be spent not just once, but twice? 1617 01:12:04,790 --> 01:12:06,930 So there's four things that were raised. 1618 01:12:06,930 --> 01:12:09,660 Four things about centralization, the double 1619 01:12:09,660 --> 01:12:11,010 spend. 1620 01:12:11,010 --> 01:12:13,020 They couldn't get merchants to adopt it, 1621 01:12:13,020 --> 01:12:16,410 and there was couldn't-- some form of consensus as to what 1622 01:12:16,410 --> 01:12:17,563 the ledger was. 1623 01:12:17,563 --> 01:12:19,230 I'm going to flip through these quickly, 1624 01:12:19,230 --> 01:12:21,150 but digital and mobile money did happen. 1625 01:12:21,150 --> 01:12:22,620 We were asked about PayPal earlier. 1626 01:12:22,620 --> 01:12:25,160 It was 1998. 1627 01:12:25,160 --> 01:12:31,370 In Norway, Ericsson and Telenor had the first mobile app. 1628 01:12:31,370 --> 01:12:35,600 And it was to get movies on your mobile phone. 1629 01:12:35,600 --> 01:12:38,450 1999, Alipay comes along that we'll 1630 01:12:38,450 --> 01:12:41,240 talk a lot about when we do payments later. 1631 01:12:41,240 --> 01:12:44,630 And of course, M-Pesa that we talked about a little last week 1632 01:12:44,630 --> 01:12:50,530 in Kenya, where Safaricom noticed that a bunch of money-- 1633 01:12:50,530 --> 01:12:51,460 near money. 1634 01:12:51,460 --> 01:12:55,330 It was mobile minutes that was being used as money in Kenya, 1635 01:12:55,330 --> 01:12:58,045 and now there's 20 million users of that. 1636 01:12:58,045 --> 01:12:59,920 And of course, there's a bunch of regulations 1637 01:12:59,920 --> 01:13:02,950 now and so forth. 1638 01:13:02,950 --> 01:13:06,000 Starbucks started in 2011. 1639 01:13:06,000 --> 01:13:09,510 And then, of course, it's now off to the races 1640 01:13:09,510 --> 01:13:11,050 in mobile money. 1641 01:13:11,050 --> 01:13:13,200 One of the key things about mobile money 1642 01:13:13,200 --> 01:13:15,690 we will discuss and learn together 1643 01:13:15,690 --> 01:13:17,670 is the question each one of these 1644 01:13:17,670 --> 01:13:21,510 is, where is the stored value? 1645 01:13:21,510 --> 01:13:23,030 And I have to tell you, sometimes 1646 01:13:23,030 --> 01:13:26,270 I get quite confused when I research a new app. 1647 01:13:26,270 --> 01:13:28,670 Are they storing the value? 1648 01:13:28,670 --> 01:13:34,110 Or are they just a processing provider to move-- 1649 01:13:34,110 --> 01:13:35,910 as we said earlier, payment systems 1650 01:13:35,910 --> 01:13:39,370 move and change and amend other ledgers. 1651 01:13:39,370 --> 01:13:42,900 In a number of these, like M-Pesa, initially they 1652 01:13:42,900 --> 01:13:44,380 were storing the value. 1653 01:13:44,380 --> 01:13:47,310 And mobile apps Starbucks stores the value. 1654 01:13:47,310 --> 01:13:51,390 But many of them are just applications, computer code, 1655 01:13:51,390 --> 01:13:54,380 to move the ledger somewhere else. 1656 01:13:54,380 --> 01:13:57,190 But the riddle remained. 1657 01:13:57,190 --> 01:13:58,960 You remember that riddle-- 1658 01:13:58,960 --> 01:14:03,300 how to move money peer to peer without a central authority. 1659 01:14:03,300 --> 01:14:07,890 And that's what I'm asking for next class, Thursday, 1660 01:14:07,890 --> 01:14:11,380 to actually read. 1661 01:14:11,380 --> 01:14:16,140 I wouldn't wing it, and I wouldn't be afraid of it. 1662 01:14:16,140 --> 01:14:19,170 Satoshi Nakamoto wrote a paper that everybody 1663 01:14:19,170 --> 01:14:21,500 in this class-- if you're at MIT, and a few of you 1664 01:14:21,500 --> 01:14:23,380 are at Harvard. 1665 01:14:23,380 --> 01:14:25,650 I'm telling you, you can read it. 1666 01:14:25,650 --> 01:14:28,200 You'll understand maybe 1/2 to 2/3 of it. 1667 01:14:28,200 --> 01:14:29,820 It's not deeply technical. 1668 01:14:32,840 --> 01:14:35,250 And it's only eight or nine pages. 1669 01:14:35,250 --> 01:14:37,820 I've also assigned National Institute 1670 01:14:37,820 --> 01:14:42,720 of Science Technology, about 20 pages of reading from NIST. 1671 01:14:42,720 --> 01:14:44,913 The question is whether that's Bitcoin. 1672 01:14:44,913 --> 01:14:46,830 I'm going to skip through the study questions, 1673 01:14:46,830 --> 01:14:48,390 but the study questions are really 1674 01:14:48,390 --> 01:14:51,960 about cryptography and how append-only timestamping. 1675 01:14:51,960 --> 01:14:54,570 We are going to get into the nitty-gritty over three 1676 01:14:54,570 --> 01:14:55,620 lectures. 1677 01:14:55,620 --> 01:14:59,430 I couldn't commit the whole course, the whole semester. 1678 01:14:59,430 --> 01:15:00,840 But I think three lectures-- 1679 01:15:00,840 --> 01:15:03,020 Thursday and the two next week. 1680 01:15:03,020 --> 01:15:05,400 Anytime you want to come to see me-- 1681 01:15:05,400 --> 01:15:08,430 Sabrina is somewhere here on the floor, who's 1682 01:15:08,430 --> 01:15:13,320 one of our TAs, who's a computer science master's student 1683 01:15:13,320 --> 01:15:15,390 and knows more about all of this. 1684 01:15:15,390 --> 01:15:17,280 Madores, who was here last week-- 1685 01:15:17,280 --> 01:15:19,860 I don't know if Madores is here, who's part of the Digital 1686 01:15:19,860 --> 01:15:21,750 Currency Initiative. 1687 01:15:21,750 --> 01:15:23,520 Over three lectures, we're going to try 1688 01:15:23,520 --> 01:15:26,760 to work through what's the cryptography, 1689 01:15:26,760 --> 01:15:29,170 and why does that matter? 1690 01:15:29,170 --> 01:15:31,910 How does the time stamping happen? 1691 01:15:31,910 --> 01:15:34,500 How's this look like money, and how are the transactions kept? 1692 01:15:34,500 --> 01:15:35,000 Yes? 1693 01:15:35,000 --> 01:15:36,607 You get to close it out, almost. 1694 01:15:36,607 --> 01:15:38,357 AUDIENCE: Can you just answer the question 1695 01:15:38,357 --> 01:15:41,440 posed about the longest running blockchain? 1696 01:15:41,440 --> 01:15:43,440 PROFESSOR: I can answer that, but the assignment 1697 01:15:43,440 --> 01:15:45,054 was to answer it by Thursday, right? 1698 01:15:45,054 --> 01:15:46,012 AUDIENCE: Oh, Thursday. 1699 01:15:46,012 --> 01:15:46,512 OK. 1700 01:15:46,512 --> 01:15:48,690 PROFESSOR: So by Thursday. 1701 01:15:48,690 --> 01:15:49,800 What's your first name? 1702 01:15:49,800 --> 01:15:50,190 AUDIENCE: Caroline. 1703 01:15:50,190 --> 01:15:51,023 PROFESSOR: Caroline. 1704 01:15:51,023 --> 01:15:53,023 Did I say I was going to answer it today? 1705 01:15:53,023 --> 01:15:53,940 AUDIENCE: [INAUDIBLE]. 1706 01:15:53,940 --> 01:15:55,740 PROFESSOR: Oh, did I say today? 1707 01:15:55,740 --> 01:15:58,830 No, is there a mutable record of what I said? 1708 01:15:58,830 --> 01:16:02,220 I'll answer it now if you want. 1709 01:16:02,220 --> 01:16:05,915 Does anyone have the answer in the whole class? 1710 01:16:05,915 --> 01:16:06,540 AUDIENCE: Yeah. 1711 01:16:06,540 --> 01:16:10,720 It's a service called Surety that Gillespie 1712 01:16:10,720 --> 01:16:16,570 begun working in 1995, was a timestamp 1713 01:16:16,570 --> 01:16:19,440 service for digital documents. 1714 01:16:19,440 --> 01:16:21,870 And the way they did it was use a hash 1715 01:16:21,870 --> 01:16:28,110 function to create a seal with a timestamp on the document. 1716 01:16:28,110 --> 01:16:32,280 And then present the weekly batch of seals. 1717 01:16:32,280 --> 01:16:35,400 And they actually published it in the New York 1718 01:16:35,400 --> 01:16:37,320 Times [INAUDIBLE]. 1719 01:16:37,320 --> 01:16:40,380 PROFESSOR: So Caroline, it's good to raise the question. 1720 01:16:40,380 --> 01:16:42,730 I thought it was for Thursday, but thank you. 1721 01:16:42,730 --> 01:16:48,000 Stewart Haber, a cryptographer, and a colleague 1722 01:16:48,000 --> 01:16:51,330 at Bell Labs in the early '90s, said, 1723 01:16:51,330 --> 01:16:55,267 how do we notarize information, digitally notarize? 1724 01:16:55,267 --> 01:16:57,600 And we're going to be talking about this Thursday a lot. 1725 01:16:57,600 --> 01:17:02,590 They used a cryptographic method called hash functions. 1726 01:17:02,590 --> 01:17:06,640 And they were just trying to notarize information. 1727 01:17:06,640 --> 01:17:08,760 And by 1995, they took-- 1728 01:17:08,760 --> 01:17:09,760 they were entrepreneurs. 1729 01:17:09,760 --> 01:17:12,250 They created a company called Surety. 1730 01:17:12,250 --> 01:17:15,640 And once a week, they published, in the New York Times-- 1731 01:17:15,640 --> 01:17:17,200 and they still do it. 1732 01:17:17,200 --> 01:17:18,700 You can get a New York Times-- 1733 01:17:18,700 --> 01:17:20,800 I believe it's on Saturday or Sunday. 1734 01:17:20,800 --> 01:17:24,220 And they take-- it's in the classifieds section. 1735 01:17:24,220 --> 01:17:27,100 And they have the hash function, which you'll read about 1736 01:17:27,100 --> 01:17:28,690 between now and Thursday. 1737 01:17:28,690 --> 01:17:33,530 They have the hash of all the pre-existing information. 1738 01:17:33,530 --> 01:17:36,730 And so they timestamp it by using the New York Times, 1739 01:17:36,730 --> 01:17:38,760 and they use cryptography. 1740 01:17:38,760 --> 01:17:41,037 And it's currently 23 years in running. 1741 01:17:41,037 --> 01:17:42,704 AUDIENCE: So that's the longest in terms 1742 01:17:42,704 --> 01:17:46,810 of time, not the longest with how many ledgers or how many-- 1743 01:17:46,810 --> 01:17:48,970 PROFESSOR: Correct, because Bitcoin 1744 01:17:48,970 --> 01:17:52,180 is about 550,000 blocks, and this would be 1745 01:17:52,180 --> 01:17:55,810 whatever 23 years times 52 is. 1746 01:17:55,810 --> 01:17:57,530 Longest in time. 1747 01:17:57,530 --> 01:17:58,120 Thank you. 1748 01:17:58,120 --> 01:18:00,630 I look forward to seeing you.