Return to Transcripts main page
Inside Man
Making 'Cents' Out of Bitcoin
Aired February 19, 2015 - 21:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
UNIDENTIFIED MALE: Bitcoin.
UNIDENTIFIED FEMALE: Bitcoin.
JAKE TAPPER, THE LEAD HOST: Bitcoin, it's all the rage, but what the hell is it?
NICK. COLAS, FMR. SAC CAPITAL ANALYST: Bitcoin is gold for nerds, if you will.
UNIDENTIFIED MALE: This digital currency, it's only online.
UNIDENTIFIED MALE: A bitcoin can be sent directly from one owner's digital wallet to another anywhere in the world without going through financial institution.
UNIDENTIFIED FEMALE: No government, no central bank. So why would you put trust in something like that, yeah.
UNIDENTIFIED MALE: People are tired to fed, tired of the yen just crashing, tired of European Banks coming in and just taking their money.
UNIDENTIFIED FEMALE: Bitcon is going bananas.
UNIDENTIFIED MALE: In this moment do I buy or sell a bitcoin?
UNIDENTIFIED MALE: In similar to how Henry Ford use the manufacturing line, the assembly line to change manufacturing. That's what bitcoin is going to be doing to financial services.
MORGAN SPURLOCK, MORGAN SPURLOCK INSIDE MAN HOST: Can I get a medium coffee.
UNIDENTIFIED MALE: Sure.
SPURLOCK: Thanks. I'm pretty much like everybody else. I mean I've heard the new stories of bitcoin, but I really don't know what it is. I've heard it's a digital currency that enables you to pay people directly without the interference of banks or credit cards or even the government. Some people say it's a way of the future that one day we'll be able to pay for everything from houses to a cup of coffee.
UNIDENTIFIED MALE: Thank you. SPURLOCK: But is the world ready to go totally virtual when it comes to payments. I'm going to figure out and put bitcoin to the test by seeing if I can live of it.
Money, money, money. It something we use every single day. But did you ever stop to think about how it works of what gives money value.
Cash used to be base on the gold standard, meaning its value was directly tied to the price of gold. But the U.S. effectively moved of the gold standard after the great depression. As a result they could print out more cash and put it in to circulation. But that also put the economy at greater risk of inflation, debt and volatile investment bubbles.
UNIDENTIFIED MALE: It was the worst day on Wall Street since the crash of 1987.
JOHN ROBERTS, CNN ANCHOR: The global sell-off triggered by Lehman Brother's bankruptcy and the "for sale" of another financial fixture in the United States, Merrill Lynch.
UNIDENTIFIED MALE: This is all about politician and greedy banks.
ALISTAIR DARLING MP, U.K. CHANCELLOR OF THE EXCHEQUER: Well, it started in American last year has not spread to every part of world.
SPURLOCK: So how do you protect everyday people against financial institutions, corrupt governments and unpredictable economic forces? Few bitcoin.
Its founder wanted to create a global currency that existed outside of central bank or government, just a person to person system that could be used instantly and internationally. And with economies constantly in flux in currencies around the world failing, is bitcoin the future of money?
So I'm try to do some digging and figure it out. And right now I'm in the heart of New York cities financial district, just a stone throw from the New York stock exchange in Wall Street. Right next to me, the bitcoin central, the hub of the bitcoin community for New York City and hopefully the people inside there going to give me some answers.
Since bitcoin is a digital currency it usually bough and sold online. But the bitcoin center is place where you could met other bitcoin enthusiast, learn how to get started and buy some face to face.
It's like a really smart guy's frat party in here. Really sweaty, a lot of smart dudes.
The center is also like a temple for the bitcoin faithful. And today, bitcoin guru Andreas Antonopoulos is here to preach.
ANDREAS ANTONOPOULOS AUTHOR MASTERING BITCOIN: Bitcoin is much more than just a currency. It is a network for transmitting value across the world without reference the nations, without carrying who the sender and who the receipt is.
This invention in 2008 created a fundamentally new concept, there's no central authority. I was in Argentina recently talking about bitcoin. And where is here in the United States I have to explain to people why bitcoin is important.
In Argentina I don't have to explain it, because just in last 20 years they've seen their entire economy destroyed twice because of hyperinflation. And in many places around the world like for example Cyprus, the government deluded with the banks to deep in to people's deposit and wipe them out. For these people bitcoin is much more than just a currency.
This is an opportunity to connect with the world economy where they can trade, they can have access to loans and credit and where they send their money to other countries whenever they want without their government stealing from them, without their banks stealing from them. That is why bitcoin can change the world. Thank you.
SPURLOCK: I'm so intrigue by the possibilities of something like this. I'm getting all rah, rah, fired up. And I want to get a wallet, I want to get some bitcoin, I want to be part of the party, signed me up.
UNIDENTIFIED MALE: Who's buying some bitcoin? Come on.
SPURLOCK: Right now, one bitcoin is valued at about $624. It just likes converting U.S. dollars to any foreign currency. The exchange rate varies depending on when you convert. But first, in order to get some digital money I'm I need a digital wallet.
UNIDENTIFIED MALE: So you want to search up Aegis Wallet. That's one of the top ones right now, install that, click that.
SPURLOCK: So now I've got my bitcoin wallet.
UNIDENTIFIED MALE: Yes. So this is a NSC (ph) chip .
SPURLOCK: OK.
UNIDENTIFIED MALE: So this is your password. So you're off the user password. So if anyone wanted to still your bitcoin, they have to steal your phone and your chips. Tap it to back of your phone. So now it's encrypting your wallet, right?
SPURLOCK: That's genius.
UNIDENTIFIED MALE: Right? So this is your bitcoin address. You think about the e-mail address too.
SPURLOCK: Yeah.
UNIDENTIFIED MALE: Where they send bitcoin through that address.
SPURLOCK: So if now, if I want to buy bitcoin here tonight...
UNIDENTIFIED MALE: Yeah.
SPURLOCK: ... what do I have to do?
UNIDENTIFIED MALE: So you're going to place a bid and it pass order from the guy right there, so he's going to match you with somebody else, that's one way to sell.
SPURLOCK: So there are people here tonight like paying cash, like giving cash for bitcoins.
UNIDENTIFIED MALE: Yeah, basically.
SPURLOCK: Awesome.
This place is no different from any other auction house. But instead of bidding on art, I'm bidding on bitcoin.
So what do I got to do to buy some bitcoins?
UNIDENTIFIED MALE: How much do you want to buy?
SPURLOCK: One.
UNIDENTIFIED MALE: One, OK. Market 627 buyers are paying that...
SPURLOCK: OK.
UNIDENTIFIED MALE: ... 634. You can say 630 right now and then you become best bid in the market.
SPURLOCK: OK, great. And let's go for 630 right now.
UNIDENTIFIED MALE: Give me a minute I'll (inaudible) it out.
SPURLOCK: OK, he's going to (inaudible) it out.
UNIDENTIFIED MALE: For 627 bid, 627 bid.
UNIDENTIFIED MALE: I had 630.
UNIDENTIFIED MALE: 630 grand (ph).
UNIDENTIFIED MALE: 33.
UNIDENTIFIED MALE: For 627 bid 630 at...
UNIDENTIFIED MALE: 41.
UNIDENTIFIED MALE: OK, 628 bid...
UNIDENTIFIED MALE: One coin, one coin.
UNIDENTIFIED MALE: 631 (inaudible). 628 bid 630....
UNIDENTIFIED MALE: Can you go at 630, can you go at 630?
SPURLOCK: I don't have idea what that means.
UNIDENTIFIED MALE: 629 bid.
SPURLOCK: I don't have no idea what they're talking about?
UNIDENTIFIED MALE: 630 (inaudible).
UNIDENTIFIED MALE: 633.
UNIDENTIFIED MALE: 633.
SPURLOCK: So I'm buying 630 from you?
UNIDENTIFIED MALE: Yeah.
SPURLOCK: OK, so not explain it to me.
UNIDENTIFIED MALE: No problem. You're got to have hit receive.
SPURLOCK: OK, so I receive this, right? Yeah.
UNIDENTIFIED MALE: I'm going to hit send.
SPURLOCK: OK.
UNIDENTIFIED MALE: I'm going to scan your Q.R. code, here.
SPURLOCK: He's scanning my code. Watch this here goes.
UNIDENTIFIED MALE: 630 was the last trade.
UNIDENTIFIED MALE: Don't move, don't move.
SPURLOCK: He's scanning my code, now his entering the amount.
UNIDENTIFIED MALE: So I'm going to sell you a thousand milibits or BTC, one bitcoin.
SPURLOCK: A thousand milibits.
UNIDENTIFIED MALE: Right.
SPURLOCK: I buy this out. OK.
UNIDENTIFIED MALE: Yeah, you can go in many decimal, it's (inaudible) of bitcoin.
SPURLOCK: OK.
UNIDENTIFIED MALE: So I can -- send you like $0.20 if you want.
SPURLOCK: Yeah.
UNIDENTIFIED MALE: OK, we're going to send it. It's leaving me, now check your wallet.
SPURLOCK: So I'm going back to my wallet.
UNIDENTIFIED MALE: It should start saying receiving.
SPURLOCK: There it is.
UNIDENTIFIED MALE: There it is. There it is.
SPURLOCK: So what it cost for you to send this to me was...
UNIDENTIFIED MALE: Six-tenth...
SPURLOCK: ... of $0.01.
UNIDENTIFIED MALE: ... of $0.01. That's pretty cheap.
SPURLOCK: Every time I wire money every month through my free checking free wire account. It cost me $25. So just sent me $623 for six-tenth of $0.01?
UNIDENTIFIED MALE: Correct.
SPURLOCK: That's incredible.
UNIDENTIFIED MALE: It is, it is.
SPURLOCK: 36, 37, 70 This man sold me my first bitcoin.
UNIDENTIFIED MALE: Sold.
SPURLOCK: I don't know about you, but tonight my mind, blown right out my skull. This whole thing is so bananas. I do -- I still don't understand it. But best part is I got some, I got some money here. I got some bitcoin tonight. I don't how to use it, I don't know really suppose to do with it. But I'm going to figure that out.
(COMMERCIAL BREAK)
SPURLOCK: Now, that I have my new and completely invisible currency, it's time to see what it can do. So today is day one of mission bitcoin. I'm going to do my best to live only of my new digital money but before I do there are few things I have to reminder.
First, bitcoin is really just like another currency the same as dollars, euros, or yen but it's global.
Second, rather than having to go through a credit card or a bank, bitcoin transactions have no middleman, the result, a cheaper, quicker and easier way to use money. Third, it's unanimous, well sort.
The identity of the user remains unknown except of for a string of random and generated numbers associated with their wallet.
So I got my bitcoin and the good news is it's actually gone up in value today. You see bitcoin like stock market fluctuates based on demand. More people are buying, bitcoin value goes up. People start selling it, value goes down. And today it's up so that's a good day. OK. Time to blow some millibits.
Hey, how are you?
UNIDENTIFIED FEMALE: Good. How are you?
SPURLOCK: Good. Do you guys take bitcoin?
UNIDENTIFIED FEMALE: We do.
SPURLOCK: That's fantastic news. I will guess that because you got this.
UNIDENTIFIED FEMALE: Yes.
SPURLOCK: That's the (inaudible) sign.
UNIDENTIFIED FEMALE: Exactly.
SPURLOCK: Then I would like to buy slice of pizza, Margherita.
UNIDENTIFIED FEMALE: OK.
SPURLOCK: And a bottle of water.
UNIDENTIFIED FEMALE: That's going to be 527 and 0.0083 bitcoin.
SPURLOCK: 0.0083 bitcoin.
UNIDENTIFIED FEMALE: Yes.
SPURLOCK: How do I do this? I send, right?
UNIDENTIFIED FEMALE: Right.
SPURLOCK: Amount to send, so I type it in there, right? Change this to bit, because you don't want $0.0083.
UNIDENTIFIED FEMALE: No. That's not enough money.
SPURLOCK: That's not enough money, no penny (ph).
Since the whole bitcoin is worth about $630 right now when I convert to a dollar value the slice of pizza cost just a fraction of one bitcoin.
OK. Here we go.
Look at that, we're living in the future, buying pizza in the millibits. So you've got to tap my tag that I got. You know what I mean? You have to put that there to my wallet. Done. Did it go through? Let's go back. See, ding, sold.
Thank you very much.
UNIDENTIFIED FEMALE: Thank you. SPURLOCK: It's so easy. Look at that. I'm the king of bitcoin.
Slice of pizza, checked. How we won a bitcoin life and I'm already winning. That was surprisingly easy but man cannot live on pizza alone, so my next stop is get some groceries.
UNIDENTIFIED MALE: Are you set?
SPURLOCK: I'm all set. We got the iPod checkout. We got the MacBook register.
UNIDENTIFIED MALE: We do.
SPURLOCK: You're already the store the future here. What's the upside for you to bitcoin?
UNIDENTIFIED MALE: In terms of comparative to credit cards, as you (inaudible) in credit cards, no charge backs. And we receive the money instantly. I'd never had a single issue probably done, in closely a thousand transactions, I'd say.
SPURLOCK: Wow. And compare that to like a credit card out of a thousand transactions, how many of those would you get?
UNIDENTIFIED MALE: 15 to 20 percent. What are the...
SPURLOCK: And that's interesting, there was a charge back or theft, or (inaudible).
UNIDENTIFIED MALE: Yeah, I mean because, you know, credit card fraud is so prevalent today.
SPURLOCK: Yup.
UNIDENTIFIED MALE: And, you know, as a small business owner you assume that risk. And so there was another option to where, you know, that was cheaper, that was safer.
Bitcoin, at this point and time is able to do that. So the total right now is 4272.
SPURLOCK: Yap.
UNIDENTIFIED MALE: That's 0.067 bitcoin.
SPURLOCK: 0.067.
UNIDENTIFIED MALE: Let me scan the QR code right here.
SPURLOCK: OK, great.
UNIDENTIFIED MALE: Done, thanks for coming in.
SPURLOCK: No problem. Is that ding, is that the money come in?
UNIDENTIFIED MALE: The little ding was letting me know that, "Hey, you send a payment. So the rest is history.
SPURLOCK: Awesome. Thanks, have a good day.
UNIDENTIFIED MALE: All right, (inaudible).
SPURLOCK: Brooklyn Bodegas always on a cutting edge. But I wondered who else in the neighborhood takes bitcoin.
Thank you, bitcoin, for making t his happen.
So far, living in the bitcoin world is been incredibly simply, but I'd be lying if I said it doesn't feel kind of surreal.
UNIDENTIFIED FEMALE: So you had a good time?
SPURLOCK: That was good.
UNIDENTIFIED FEMALE: All right.
SPURLOCK: 13 U.S. dollars. Where does bitcoin come from? Here we go. Beep. And who created it.
Back in 2008, someone names Satoshi Nakamoto released the whitepaper, the sort of manifesto outlining why bitcoin was created. It was intended to subvert normal currency and be something that couldn't be manipulated by traditional financial or governmental institutions.
The paper also outlined the programming code that would make up the structure of bitcoin, but to this day no one really knows who Satoshi really is.
In March 2014, Newsweek incorrectly said it was this guy, but if we don't know who made it, how do we know it safe and how do we know it's a safe place to put our money?
Luckily I'm meeting Dan Kaminsky, a legendary hacker for amongst thing fixed a fatal flaw in the internet.
Good to see you.
The entire internet, if anyone can shed some light on how safe the bitcoin code is, it's him.
What is the best way to describe what you do?
DAN KAMINSKY, AMERICAN SECURITY RESEARCHER: I break things.
SPURLOCK: You break things.
KAMINSKY: And then I get them fixed. I'm a hacker.
SPURLOCK: Yes.
KAMINSKY: Professional hacker. One that's called the white (inaudible). So there are people out there who break stuff and then unfortunately steal things. I go ahead and I find the flaws in the systems that we depend on, everyday life and then work together with industry and government and other researchers who make the internet a safer place.
SPURLOCK: And so when you first heard a bitcoin, what did you think?
KAMINSKY: I thought, "Wow, this is going to fall immediately." So I decided I would set out for couple of months to show where bitcoin's problems were.
SPURLOCK: And what happened?
KAMINSKY: It didn't fall.
SPURLOCK: Not at all.
KAMINSKY: No. It was really weird. Every single time I hit on something that had to be it's fatal failing, you know, they had found that before. You could sort of see in code where that had once been an issue and they had gotten rid of it. It is a beautiful system.
No, don't get me wrong, there have been problems what we called a metacode, the code around the bitcoin.
SPURLOCK: Yeah.
KAMINSKY: That stuff been happening (ph). But the core system, that core magic, the core problem that bitcoins solved that had never been solved before, remain solid. It's safe.
SPURLOCK: And is it getting safer?
KAMINSKY: I think so.
SPURLOCK: Yeah.
KAMINSKY: The technology being built to support bitcoin is new generation of metacode. There's new hardware. There's new software, not just being use for the security of bitcoin, but being able to secure a lot of the problems we have in computer security today.
SPURLOCK: Are you Satoshi Nakamoto?
KAMINSKY: I am absolutely not, and you're not the first person to ask.
SPURLOCK: How do I know you're telling me the truth?
KAMINSKY: Would this face lie to you?
SPURLOCK: Excuse me. Do you take bitcoin?
UNIDENTIFIED MALE: We don't take it. I'm afraid no.
SPURLOCK: You don't.
UNIDENTIFIED MALE: No. SPURLOCK: Wow.
KAMINSKY: You want me to grab this?
SPURLOCK: That would be -- I don't have any cash. All right.
KAMINSKY: That's all right. Thank you.
SPURLOCK: OK. So now I owe Dan launch. Bitcoin failed.
Thank you.
So if everything is this transparent as Dan says, I should be able to see how bitcoin works and how it's created.
It turns out the heart of bitcoin is a series of digital minds all around the world. And unfortunately there's one I can check out in Upstate New York.
And of course I'm living my whole life with bitcoin now, so I've got to book my travel with bitcoin. Thankfully, there are few problem sites that actually do take the bitcoin. I found one air travel site that takes it. So now I've got to book my travel from New York to Rochester. I'll put in my dates. OK.
Choose bitcoin. Type in my code. And boom. I just booked a flight with bitcoin. And I booked my hotel, with bitcoin magic coming through, right ahead Upstate. It's that easy.
Thank you, bitcoin.
(COMMERCIAL BREAK)
SPURLOCK: It's Day 2 of mission bitcoin and I'm surviving only in the virtual money for an entire week.
The value of my bitcoin has dropped a little. But even though it's down a few dollars, it's still serving me well. I got groceries, a relaxing massage and booked my travel to beautiful Geneva, New York.
There's a mining operation in town and its founder, Hayden Gill, has agreed to let me do some work and hopefully help me understand what bitcoin mining actually is.
Hey, how are you?
HAYDEN GILL, DOUNDER OF BUZZDRON MEDIA: Good.
SPURLOCK: I'm Morgan.
GILL: Morgan, Hayden.
SPURLOCK: How are you men? Nice to meet you.
GILL: Yeah, you too.
SPURLOCK: This is so not what I expected.
GILL: Yeah?
SPURLOCK: Yes.
I worked at coal mine. Like you think mine, you think that's somebody is going to underground, you know, like a pick, you know, you got a shovel, and you hear somewhere like, ting, ting.
GILL: Right.
SPURLOCK: This is not what you imagine.
GILL: No, this is how you imagine it. We got to make you a part of the team, though, there you are. One miner shirt. You're official coin miner now.
SPURLOCK: Nice.
Welcome to the new era of mining where work boots and a pickaxe are treated in for a polo shirt and a processor.
Today, I'm building a bitcoin miner. Setting up crazy powerful processors that need to be connected so they can all work together and access the bitcoin network. But what does that actually mean?
If mining for gold is the process of digging into the ground and looking for metal, with digital mining, computers are constantly digging to solve complex math problems. And just like there was a race to see who could mine the gold the quickest, there's a race to see who can solve the math problems first.
Once a miner solved the problem, they earn 25 brand new bitcoin, releasing them in the circulation. With paper money, a government decides when the print and release more. But bitcoin isn't backed by a central government or bank. In fact, from the outset, it was decided there will be only 21 million bitcoin released in total, helping to fight inflation.
Right now, about 13 million are in circulation. As the popularity of bitcoin increases, the bitcoin network automatically changes the difficulty of the math problem miners needs to solve. That means it continually takes more power and more energy to release the new bitcoin, stabilizing the rate that new bitcoin are released into circulation.
So when will all of the bitcoin finally be mined out? But it's not currently projected to happen, until 2140.
GILL: After all your hard work today I will give you the honors to fire up this rock, if you like what I'm saying.
SPURLOCK: So when I put that switch, it will start mining?
GILL: Right. These things will light up, connect online and verify the right pin and go to work. SPURLOCK: Awesome. All right, here we go.
GILL: (inaudible)
(OFF-MIKE)
SPURLOCK: Now that we set up a new miner, let's see how it's working on the bitcoin network.
GILL: This takes us over to the blockchain. And this block contain 519 different transactions.
SPURLOCK: So this blockchain thing Hayden is showing me is actually a key part of what makes bitcoin so innovative. And it ties into the work miners do.
Here is the deal. Those complex math problems the miners were doing to release the new bitcoin, also verify all the bitcoin transactions worldwide.
Remember when I bought the slice of pizza back in Brooklyn? The second I click to send on my wallet, the transaction was transmitted to the bitcoin network. It's at that stage that miners, like Hayden actually confirmed the transaction. They make sure I have enough bitcoin to pay for the slice, bundle it with other transactions and post them all to an online public ledger .
That's what the blockchain is. A record of every single bitcoin transaction, anyone on the internet can check out. And the algorithm or intense math problem that pose to the blockchain is the same one that releases new bitcoin.
The take away, instead of placing all your trusted one banker, one credit card, you're relying on a worldwide network that's based on indisputable math.
GILL: This is all that open ledger. So these are all the different wallet I.D.s pushing bitcoin to other wallet I.D.s.
SPURLOCK: Right.
GILL: These are all the transactions contained in the block. This is your real time bitcoin transactions happening around the world.
And so as this transaction just came on to the network, it's still working to be confirmed, get away from miners and come in and then get on actually link it on the blockchain.
This is what makes bitcoin so amazing. The ability of the people to transfer value without having any kind of a centralize authority to have control in this transactions.
SPURLOCK: Amazing. What do you guys brought in today? What's the total so far?
GILL: So far, today, we probably brought in about 3 bitcoin. SPURLOCK: OK.
GILL: So it's...
SPURLOCK: About 18 -- about 1,800 bucks.
GILL: Yeah. We got some money to pay you.
SPURLOCK: Nice. Because this is what I've been waiting for, see, I've actually earned some bitcoin.
What's a fair days wage?
GILL: For the hours work input in today, we'll do 0.3 bitcoin.
SPURLOCK: That's going to be like almost 200 bucks.
GILL: There we are.
SPURLOCK: 0.3, right there it is. Look at that in less than a minute.
GILL: Yup. It's like boom (ph).
SPURLOCK: Nice.
GILL: There we go. All right.
SPURLOCK: It's incredible to see how much computing power and how much energy it takes just to mind a few bitcoin. But if it wasn't for guys like this, if it wasn't for miners all around the world, then you wouldn't be able to verify all of those transactions. You won't be able to get new bitcoin. I wouldn't be able to buy the slice of pizza that I bough back in Brooklyn.
And now since I've actually earn a little bit of bitcoin today. I'm going to go see if I can spend some here in Geneva.
Do you guys take bitcoin?
UNIDENTIFIED MALE: Oh, no, we don't. I'm sorry we don't accept bitcoin here.
SPURLOCK: Can you recommend anywhere else where I might be able to go in town? This my wallet right here.
UNIDENTIFIED MALE: Cellphone?
SPURLOCK: OK, so maybe I over estimated the popularity of bitcoin, just a little bit. And in time something some of these restaurants might starting accepting bitcoin, but not until it becomes immensely more popular, which doesn't help me at all right now as my stomach is going (inaudible).
All I wish is that I could actually, like, eat bitcoin, because I'm just starving. (COMMERCIAL BREAK)
SPURLOCK: It's only been three days living off bitcoin. But right now it feels like years. I've had to take what I can get when it comes to bitcoin accepting merchants.
Around my office there are countless coffee shops and I'm convinced one of them somewhere will actually take and accept bitcoin. And good news bitcoin actually up today. I'm going to celebrate with a Cup of Joe.
UNIDENTIFIED FEMALE: Hello.
SPURLOCK: Hey, how are you?
UNIDENTIFIED FEMALE: Hey, how are you doing?
SPURLOCK: Do you guys take bitcoin?
UNIDENTIFIED FEMALE: We take what?
SPURLOCK: You guys take bitcoin?
UNIDENTIFIED FEMALE: We don't. It just seems like another puzzle to deal with.
SPURLOCK: Right.
UNIDENTIFIED FEMALE: People are like, "Oh, it's just like cash." Well then, why not just use cash?
SPURLOCK: Right. Thanks.
She's right. Cash is king. But we all rely on plastic more and more. And bitcoin is the digital way to emulate cash like transaction, it's non-traceable, peer-to-peer, and there's no middle man.
Do you guys take bitcoin?
UNIDENTIFIED MALE: No, we don't.
SPURLOCK: OK.
Getting a cup of coffee is a lot more difficult than I expected. Ironically even though bitcoin can't fuel my caffeine addiction, it can get me some way more illegal substances.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: And while we're on the topic of illegal drugs. The FBI said they had arrest today San Francisco man who allegedly run in underground website for selling drugs, documents and services.
UNIDENTIFIED MALE: The website is called the Silk Road. And Joe Vasquez says users could by anything they wanted from heroin to hitman. UNIDENTIFIED FEMALE: 29 year old Ross William Ulbricht who reportedly used the name Dread Pirate Roberts to run the Silk Road website was charge in New York district court this week.
UNIDENTIFIED MALE: Court document says Silk Road sold $1.2 billion worth of drugs and the legal services in just under three years.
UNIDENTIFIED FEMALE: Ulbricht of course has pled not guilty in all the charges being made against him.
UNIDENTIFIED MALE: The operation use a cyber currency called bitcoin which are independent of financial institution, making them hard to trace. Ulbricht also allegedly designed his site outside the regular Internet, instead seeing it up on the Tor network, a service that allows users to surf the web anonymously.
(END VIDEO CLIP)
SPURLOCK: There's the World Wide Web we know and use everyday, but it's actually only four percent of the whole internet. The remaining 96 percent is a subsurface area that can't be found through standard web searches.
After Silk Road got shutdown in October 2013, it didn't take long for new marketplaces to pop up in its place. Just a month later Silk Road 2.0 appeared on scene. Naturally I want to take a look at it. Don't you?
Hey, how are you?
CHRISTOPHER TARBELL, FORMER FBI SPECIAL AGENT: Hey, how it's going?
SPURLOCK: Good, I'm Morgan.
TARBELL: Good, Chris Tarbell.
SPURLOCK: And who better to show me around than the former FBI agent behind the original Silk Road take down, Chris Tarbell.
So I've got some bitcoin, can you show me how I would spend some if I went into the deep web and went on the Silk Road?
TARBELL: I can show you how to buy something not illegal, if you like.
SPURLOCK: Yeah, sure, done. We're going to buy something not illegal.
TARBELL: Yes, that's right.
SPURLOCK: OK.
TARBELL: This is Tor. Once you've downloaded the special Tor software from their website.
SPURLOCK: This is what I'll see. TARBELL: This is what you'll see.
SPURLOCK: So we're about to go in Silk Road 2.0. This is the new version of deep web marketplace where you can buy and sell illegal goods.
Just like any other online marketplace, you need to set up a username and password.
TARBELL: You're in that easy.
SPURLOCK: There's the Silk Road anonymous market. I cant get drunks, alcohol, apparel, art, biotech materials, books, collectables, computer equipment, custom orders, digital goods, drug paraphernalia, electronics, Erotica, forgeries, hardware, herbs and supplements, jewelry, lab supplies, lotteries and games, medical money, packing, services, writing. Writing, it's like I can get somebody to do my term paper.
TARBELL: Sure.
SPURLOCK: What is that stuff.
TARBELL: Or just old term papers.
SPURLOCK: Oh, that's amazing. I want to see what I can get in forgeries. Let see what that is. In here you can get handcraft that high quality South Carolina novelty/fake I.D.
TARBELL: It's funny on the first one, they use the picture of Ross Ulbricht.
SPURLOCK: Oh, is that who that is?
TARBELL: Yeah.
SPURLOCK: Can we go up to the prescription medication. It's 3,355 possibilities and you can get zenix, diazepam, viagra, zopiclone, valium, modafinil, oxycontin.
TARBELL: Generic.
SPURLOCK: It like they grab back. We should probably go to psychedelic. Hazenbergs (ph) got a bunch of stuff on here. You can buy MDMA, cocaine, ecstasy, LSD, top quality products from a name you can trust. If you're buying stuff like this, where does it get send? I mean do people just send this to their homes.
TARBELL: Some people do, yeah.
SPURLOCK: Really? So what can I buy if I was going to buy something let say wasn't illegal. Like if I was going to buy like a watch, something like that.
TARBELL: They have stuff on here and maybe an electrical property thief type ground you don't know. SPURLOCK: OK.
TARBELL: I could be a fake watch, you know, so...
SPURLOCK: Let's go to apparel. Let see what's in there. Just look at that, I could buy -- there's Rolex submariner and are two tone, right there.
TARBELL: That's a pretty good price.
SPURLOCK: Probably not real Rolex...
TARBELL. It could possibly be here. It could possibly be taking from someone's house earlier today.
SPURLOCK: OK, we'll let's buy watch. Send that to the cart.
TARBELL: You want to pay extra for special (inaudible)?
SPURLOCK: Of course.
Silk Road is extremely user friendly, just like the regular web, just click and buy. Except you can't use a debit card or credit card, just bitcoin.
And just like that. I'll be the proud owner of a potentially but not confirmed replica knock off. Hopefully not stolen watch. And if it's stolen I'm here with former law enforcement so it's fine.
UNIDENTIFIED MALE: Not fine.
SPURLOCK: Not fine. It's not fine. It's not fine at all.
(COMMERCIAL BREAK)
SPURLOCK: Its day four of living completely off bitcoin. And despite its value being down, I'm happy to report I'm still alive.
So far I've managed to bit myself and get myself out of the city. Not bad, right? But now I'm going to be the one thing that everyone hates the most. Pay my bills.
UNIDENTIFIED FEMALE: Hi good morning. This is Yesmine (ph), how can I help you?
SPURLOCK: Hey. How are you? I wanted to pay my Time Warner Cable bill and I want to find out if I could pay that with bitcoin.
UNIDENTIFIED FEMALE: OK. What is the zip (ph) coin?
SPURLOCK: No bitcoin. B-I-T-coin. Hey, is this News Department?
UNIDENTIFIED MALE: It is.
SPURLOCK: I got my bill and I wanted to find out if I could pay that in bitcoin? UNIDENTIFIED MALE: I don't know what that means.
SPURLOCK: All right.
UNIDENTIFIED MALE: Thanks for calling (inaudible) New York service center.
SPURLOCK: Would I be able to make a one time payment using bitcoin?
UNIDENTIFIED MALE: Using what?
SPURLOCK: Bitcoin.
UNIDENTIFIED MALE: I never heard of that. We only take like debit cards or credit cards or checking account.
SPURLOCK: OK. Well, thank you for your time.
So the bill paying world may not be bitcoin ready but there are a whole bunch of amazing random things you can buy with your bitcoin.
So silk sheets on overstock, a new profile on OKCupid, a degree at Kings College, your own private island or my personal favorite, the trip in the space on (inaudible) galactic.
And god, well some caffeine.
Are you using bitcoin?
UNIDENTIFIED MALE: Yeah, we do.
SPURLOCK: Awesome. Nice. Found one. One, right here. I would love to get cup of coffee please.
UNIDENTIFIED MALE: We take like a $25 minimum. Do you like to get launch as well?
SPURLOCK: $25 minimum?
UNIDENTIFIED MALE: Yeah.
SPURLOCK: Why do have some minimum?
UNIDENTIFIED MALE: Because it's so volatile.
SPURLOCK: Right.
UNIDENTIFIED MALE: That we can end up with, you know, kind of (inaudible). We kind of like keep a good size transaction.
SPURLOCK: Wow. That's a lot of coffee.
UNIDENTIFIED MALE: Yeah. That gets about 10 cups.
SPURLOCK: I'll take 10 cups of coffee.
UNIDENTIFIED MALE: 10 cups of coffee?
SPURLOCK: Yeah.
UNIDENTIFIED MALE: I'll run it up for you.
SPURLOCK: Likely, I'm not the only caffeine addict. I had a crew full of caffeine addicts, like look at that look at that guy. See that guy. Those people, caffeine for everybody.
UNIDENTIFIED MALE: Here you go.
SPURLOCK: All right, so I owe you 24.50.
UNIDENTIFIED MALE: 24.50 correct.
SPURLOCK: So amount to send, 24.50.
UNIDENTIFIED MALE: All right, thank you.
SPURLOCK: Thank you.
UNIDENTIFIED MALE: Thanks a lot. Enjoy your coffee.
SPURLOCK: Finally a little caffeine or should I say a lot. Bitcoin might boost small transaction piece but let's face it, that part doesn't hold water when spend 25 bucks to get a cup of coffee, but I can't blame the guy for protecting himself against volatility. So why is bitcoin so volatile?
Think about most currencies like a big ship. They got millions of people using it, so there much more stable and are able to sail through the rough seas of unpredictable times.
Bitcoins more like a small inflatable raft because it such a new currency, its user base is much smaller. And the bitcoin raft gets tossed and turned by unpredictable activity. That means the price will swing and shift pretty dramatically. But over time as more people use it, the little inflatable raft will grow into a big ship and will gradually become more stable.
Some of these fluctuations are mild but on February 2014 bitcoins suffered a massive crash.
UNIDENTIFIED MALE: One of the biggest bitcoin exchanges called Mt. Gox based in Tokyo went bust after it was revealed that hundreds of millions of dollars worth of bitcoins were missing.
SPURLOCK: In February 2014 the world's largest bitcoin exchange collapsed. And overnight 850,000 bitcoin vanished into thin air.
The total lost was worth more than $450 million. But unlike a good old fashion the bank heist, there were no fingerprints or any physical trail left behind. No one knows how the lost happened, fraud, theft, mismanagement. It could have all contributed to the collapse.
UNIDENTIFIED MALE: So what about the people who lost money? Is there anyway that they can be made whole again? There wasn't an FDIC or even a bank that they go complain to?
UNIDENTIFIED FEMALE: And for a lot of critics of bitcoin, they're pointing to this as saying, "See, we told you so."
UNIDENTIFIED MALE: Policy makers and law enforcement officials are trying to get their hands around how to regulate virtual currencies.
SPURLOCK: The lack of government oversight or regulation has been a major issue with bitcoin. Advocates of bitcoin say regulation could stifle the development of the digital currency, while other say regulation would help it become more stable and widely used. But how do you regulate a currency you can't hold or see?
Janet Yellen, Chairwoman to the Federal Reserve set a major precedent and said that bitcoin is outside the jurisdiction of the feds.
JANET YELLEN, FEDERAL RESERVE CHAIRWOMAN: It's not so easy to regulate bitcoin because there is no central issuer or network operator to regulate.
UNIDENTIFIED MALE: After a rough week bitcoin maybe facing a full out ban.
UNIDENTIFIED MALE: West Virginian Senator Joe Manchin is calling for a complete ban of digital currency.
SPURLOCK: Senator Joe Manchin of West Virginia has been (inaudible) stands, but he still believes that bitcoin needs addition consumer protection.
Senator, how are you?
JOE MANCHIN, (D) WEST VIRGINIA: (Inaudible).
SPURLOCK: Good. We're diving into this bitcoin universe.
MANCHIN: Yeah.
SPURLOCK: You've been very vocal.
MANCHIN: My concern was this -- it promotes the (inaudible) trade that goes in drugs and things like that basically were totally oppose to the society in America.
SPURLOCK: Yeah.
MANCHIN: And I thought, "Well you know what? There's no backing, there's no guarantee, there's no transparency. We have no idea whatsoever."
SPURLOCK: Yeah.
MANCHIN: How this treated? Who these people are? And what their intentions are?
SPURLOCK: So your idea was like, let's just sniff it on the butt. MANCHIN: I came right out, like I usually do, just jump down, sit in and (inaudible).
SPURLOCK: Yeah.
MANCHIN: Now, what that means that I'm not. I'm not opposed to a transparent legitimate currency.
SPURLOCK: Yeah.
MANCHIN: That has the backing and the oversight of federal government.
SPURLOCK: So what do you suggest? What do you think should happen?
MANCHIN: Well I think the Federal Reserve is basically been the best at that and they should be the ones who is working into that, in oversights, the same as they do in our own currency. And...
SPURLOCK: Our currency isn't so good these days.
MANCHIN: But at least we know it.
SPURLOCK: Yeah. We see and know how bad it is.
MANCHIN: Yeah.
SPURLOCK: Part of what I think was one of the motivating factors behind bitcoin, was the whole idea of, you know, people wanting to kind of, you know, stick it to the man.
People are, you know, it's like the man who always trying to put me down, I want to like be able to function outside of the man and outside of the government and be able to have currency where I don't to rely on that type of oversight or...
MANCHIN: Talk to the people that got taken down by bitcoin, not by the man. And a lot of times people we're attracted into this and can't afford to take that risk.
SPURLOCK: Right.
MANCHIN: So they get wiped out, they're fallen hard times because it can vanish tomorrow.
SPURLOCL: That's right.
MANCHIN: Tonight it can be wiped out and you can't find it.
SPURLOCK: Yeah.
MANCHIN: It's so hard for those of us who aren't in this (inaudible) world or in the high-tech world of Israel. So really gets your hands around this and where is going to go.
SPURLOCK: Yeah. MANCHIN: But it seems like it's not going to away. That's what we're doing for sure. And if it's not going away, the federal government needs to find a way, and give (inaudible) some assurance and security.
I can tell you, when something happens and catastrophic or somebody to a larger event, who's going to be held accountable for that.
SPURLOCK: Yeah.
MANCHIN: Can you follow me? Who's going to want restitution on that?
SPURLOCK: You want accountability?
MANCHIN: Some. There has to be some.
SPURLOCK: Yeah. Regulation issue is a tricky one when it comes to bitcoin. Would it become a much more stable currency if it was back to the same way as banks are with the FDIC? But on the other hand, that's the whole reason it was created. It was supposed lived autonomously outside of the influence of banks and government.
We'll just have to wait and see if lawmakers and bitcoiners can both be at peace. But moving forward, what is the broader future of bitcoin look like?
(COMMERCIAL BREAK)
SPURLOCK: I'm nearing the end of my bitcoin journey and I know the basics. How it works, where it comes from and what is limitations are.
I also know regulation is going to happen overnight. Maybe the only way to make bitcoin less volatile is to get more and more people to embrace it.
This whole time, all I've been doing is trying to pay for things with bitcoin.
Hey, moving on.
Maybe I really should have been trying to get more vendors to accept it.
You could download it right now and bring in somebody under the poll, supporting my own caffeine habit and pushing things into the future. Here's how easy it is. You may go there and press send, and I'll send you 3.75 U.S. dollars and go to your code right there.
UNIDENTIFIED MALE: I'm getting excited.
SPURLOCK: Sent. There we go.
UNIDENTIFIED MALE: 75 and then 0.006 bitcoins.
SPURLOCK: Look at that.
UNIDENTIFIED MALE: Right. That's sweet.
SPURLOCK: Pretty sweet?
UNIDENTIFIED MALE: Yeah.
SPURLOCK: Another satisfied bitcoin immersion, right there. Thank you very much and congratulations.
UNIDENTIFIED MALE: Thank you. Enjoy.
SPURLOCK: Brooklyn maybe bitcoin savvy, but what about the rest of the world?
Andreas Antonopoulos who speeched (ph) the bitcoin center and inspire me to go buy some bitcoin in the first place had agree to sit down with me. And best place to do that, the coffee shop that I convinced to use bitcoin.
How are you?
ANTONOPOULOS: Morgan, how are you?
SPURLOCK: Andreas literally wrote the book on Mastering Bitcoin, it's called Mastering Bitcoin. If anyone can predict the future of the digital currency, it's probably Andreas.
It seems there are a lot of people who -- just the conversations we had still willing to see bitcoin is being associated with elicit activity, you know, buying drugs, Silk Road. Look at that (inaudible) watch I bought.
ANTONOPOULOS: Very nice.
SPURLOCK: You like that?
ANTONOPOULOS: Yeah.
SPURLOCK: Genuine artificial Rolex.
ANTONOPOULOS: (inaudible) right now.
SPURLOCK: That's right.
ANTONOPOULOS: A Folex
SPURLOCK: It's a Folex. So how do you get pass that conversation? You know, what does it take?
ANTONOPOULOS: It takes time and for more regular people to be seeing -- using bitcoin for legitimate activities. It can be used by anyone, anywhere in the world, and any religion, any country, any language.
SPURLOCK: Yeah.
ANTONOPOULOS: Any culture.
SPURLOCK: Right.
ANTONOPOULOS: And that's why it's powerful to do this. It's the first form of international, transnational, non-bank and non- government money. It's basically the internet's money, the internet's currency.
I hope that you had a glimpse into how many could work in the future.
SPURLOCK: Yeah.
ANTONOPOULOS: You know...
SPURLOCK: When you talk to people and you're talking about the millibits that you're spending and how many millibits there, and you're looking at the zeros. It's crazy talk.
ANTONOPOULOS: But at the same time it's also a real robust industry with thousands of companies, millions of dollars being invested.
SPURLOCK: Yeah.
ANTONOPOULOS: And jobs, thousands of jobs, the current run rates of venture capital investments and start up companies and space is now exceeding that of the internets in 1994.
SPURLOCK: Wow.
ANTONOPOULOS: So the space is going faster than the internet was (inaudible).
SPURLOCK: Exponentially.
ANTONOPOULOS: Exponentially. And this is the third wave of the internet. You know, the first wave was website, the second was social media interaction.
You now have the possibility to exchanging value, tokens and allocating resources of creating real economic infrastructure all in the internet, but it wasn't possible before.
And so if you think of it a bit as the third wave of looking internet, you can see this is going to be pretty big.
SPURLOCK: Thank you.
ANTONOPOULOS: Thank you so much.
SPURLOCK: Maybe Andreas is right. And bitcoin will be the next big thing. It could help people around the globe transfer money more easily and efficiently but, it seems like the technology behind bitcoin is the real game changer. That can be using piece of innovation, the blockchain, could change how we run things like elections, IPOs, and lotteries.
And even if the bitcoin currency bubble burst, the technology could go down in history as one of the most important inventions of this century. It might even change the world.
But until then, I'm going to hang on to what I got. Check out the time on the Folex.
