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♪ ♪

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NARRATOR:
Cryptocurrencies.

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With names like Bitcoin,
Ethereum, and Dogecoin,

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today there are
thousands of them.

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But what are they
and how do they work?

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JANE PAULEY:
You can't hold it,

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often you can't spend it.

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FINN BRUNTON:
We're looking at something
that is

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20% a working technology

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and 80% a utopian vision
of how society could be.

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NARRATOR:
Are they a flash in the pan?

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ISAIAH JACKSON:
The future of crypto is that

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99% of projects will be
rendered useless.

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NARRATOR:
Or a new technology that's
here to stay?

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SHEILA WARREN:
It's not going to vanish.

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What it's used for

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has yet to be fully determined.

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REPORTER:
The art world has been

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turned upside down again.

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BRUNTON:
You have built a functional
replacement for

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a lot of what a credit card
company or a bank does.

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NARRATOR:
"Decoding Crypto,"

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right now on "NOVA."

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♪ ♪

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NARRATOR:
Revolution...
Game-changer...

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I'm a millionaire!

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NARRATOR:
Experiment doomed to fail...

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JACKSON:
The future of crypto is that

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99% of projects will be
rendered useless.

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REPORTER:
The carnage in the crypto world
continued today.

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It is impossible to understand

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where this is going.

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NARRATOR:
There's no question
cryptocurrency

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is having a moment.

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Bitcoin is a new kind of money.

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NFTs are sweeping the art world.

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CLEVE MESIDOR:
Cryptocurrency is a
trillion-dollar market.

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It cannot be ignored.

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NARRATOR:
What is crypto anyway?

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PAULEY:
You can't hold it.

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Often you can't spend it.

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Technologically,
it's incredibly interesting.

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REPORTER:
Cryptocurrency kiosks
are appearing nationwide.

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NARRATOR:
Crypto is a global phenomenon--

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adopted by countries,

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embraced by refugees,

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and used by millions
around the globe.

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Most people have heard of
Bitcoin--

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the most well-known among
thousands of cryptocurrencies--

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but find it confusing.

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JOHN OLIVER:
Everything you don't understand
about money,

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combined with everything
you don't understand

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about computers.

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NARRATOR:
It's talked about all the time

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by people who claim to be
in the know.

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I'm getting into crypto,
with FTX, you in?

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NARRATOR:
Investors and speculators
have both made

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and lost great deals of money.

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WARREN:
But it's not at all

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just about money.

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It has a lot of different
applications,

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many of which have very little
to do with financial services.

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NARRATOR:
Some warn of possible perils.

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NEHA NARULA:
There's a lot of hucksters

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out there who are just trying to
sell their snake oil.

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Fraudsters are buying
and selling millions of dollars

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in illegal digital assets.

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NARRATOR:
While others claim crypto

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is a groundbreaking technology
with nearly unlimited uses.

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The Constitution of the United
States is going up on auction.

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Sold-- $41 million!
(cheers and applause)

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Whether it's a movie or
it's our housing contracts.

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A market for climate action.

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NARRATOR:
Where did it come from?

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BRUNTON:
This is one of the most

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significant technologies

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to have been created by someone
who is still wholly anonymous.

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NARRATOR:
How does it work?

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KEVIN McCOY:
It was just like,

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"Whoa, that's amazing."

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NARRATOR:
Is it just hype?

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LANA SWARTZ:
Crypto has been embraced

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by the mainstream,
but not in a way

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that achieves any of its
original goals.

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NARRATOR:
Or is it revolutionizing money
and more?

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It's a safe and easy way
to get into crypto.

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Eh... I don't think so.

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♪ ♪

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♪ ♪

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NARRATOR:
Real estate investor Vernon J.

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is trying to use a new kind of
money to reinvigorate

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East New York, Brooklyn.

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He thinks crypto could be the
key to expanding ownership

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in neighborhoods like this one.

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This may not be what
most people think of

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when they hear "cryptocurrency,"

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but some believe ideas like his

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represent crypto's
true potential.

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Hey...
Yo.

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What's going on brother?
Good.

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Yo, this is it?
This is it. Let's do it!

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Let's check it out.
Let's do it.

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NARRATOR:
Vernon and his business partner,

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computer programmer Akil Ash,

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plan to reclaim properties

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like this vacant lot
to build affordable housing

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owned and managed by people

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who want to improve
the neighborhood.

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VERNON:
We hope to get community
members to be able to

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invest with us

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where people from the community

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can own fractions of

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the property, can gain access

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to the income

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from that property forever.

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Each token is worth $100.

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NARRATOR:
Rather than go to a bank
for a loan,

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Vernon is going to use
a new financial technology

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to mint something called
a digital token,

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which can be bought and sold
in a digital marketplace.

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VERNON:
So these are the
EquityCoin investors.

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So these are their

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wallet addresses

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where they get
sent their EquityCoin to.

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NARRATOR:
Vernon's project,
known as EquityCoin,

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is a risky experiment and
success is far from assured.

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If it succeeds,
the community may benefit.

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We'll be able to
restore this; it doesn't need...

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NARRATOR:
If it fails, he and his
investors could lose real money.

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♪ ♪

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Today, there are thousands of
cryptocurrencies

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launched by entrepreneurs,
coders, even artists.

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Among them
are passionate advocates

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who believe their projects

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are evidence that crypto has

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the potential to address
a wide range of

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society's problems.

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But that potential has yet
to be realized.

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(pulls window up)

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BRUNTON:
When we look at a technology
like cryptocurrency,

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we're looking at something
that is

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20% a working technology

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and 80% a utopian vision

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of how society could be.

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♪ ♪

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GRUNDFEST:
The technology is
several steps ahead

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of where the regulatory
infrastructure is.

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♪ ♪

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NARRATOR:
Cryptocurrencies
are sporadically regulated,

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and depending on who you ask,

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many, most, or all
are doomed to fail.

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WARREN:
There have been accusations
that all crypto

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is a Ponzi scheme.

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What I would say is that there
are tokens and projects

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where the token will ultimately
wind up having no value.

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I do think, however,

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there is a period of time

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in any innovation

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where you just have to figure it
out

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and you're going to have to
throw a lot of things

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at the wall and see what sticks.

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We're in that time right now.

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♪ ♪

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NARRATOR:
Supporters claim crypto is
superior to traditional money,

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but to understand why,
it's best to start

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with a deceptively simple
question:

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what is money, anyway?

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♪ ♪

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ELLEN FEINGOLD:
Money has come in many forms
throughout human history.

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And while we are all
very familiar with

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coins and banknotes,

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many other objects have
circulated

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and been used in exchange.

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NARRATOR:
This is part of the largest
historical collection of money

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in the world.

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Located at the Smithsonian
Museum in Washington, D.C.,

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"The Value of Money" exhibit
features hundreds of objects

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representing currency from
every inhabited continent,

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spanning more than 3,000 years.

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FEINGOLD:
They range from seashells,

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large metal plates, clamshells,

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large stone disks often known
as Rai from the island of Yap.

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Really, anything can be used
as money

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as long as a community
agrees to use it

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and decides on a value.

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NARRATOR:
Money has existed in one form
or another

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for longer than written history.

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But the fact it takes so many
forms raises another

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interesting question:
how "real" is any of it?

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BRUNTON:
All money is collective
belief, right?

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Money that you alone believe
is valuable

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is no more useful to you than
a language that only you speak.

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Money relies on the ability
of large groups of people

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to arrive at a shared consensus
about how much something

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is worth and that it will be
worth that more or less

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into the future.

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NARULA:
There are some elements of,
you know,

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is this a good form of money?

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Can it be transacted easily?

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Can it be transported?

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Is it going to be inflated?

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But beyond that, it's belief.

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It's belief that it will

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continue to be valuable

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to people in the future.

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SWARTZ:
It's sort of

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a necessary fiction.

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It's something that enables us

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to communicate,

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to have an economy,

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to make basic transactions.

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NARRATOR:
History reminds us that

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virtually anything can be used
as money as long as

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enough people believe
in its value.

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Even in America,
what functions as money

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has sometimes been quite fluid.

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In fact, for nearly a century,

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before the wide adoption
of the dollar,

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people put their faith
in local currencies.

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FEINGOLD:
The Constitution gave the
federal government

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the right to coin money,

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to establish
a national mint in 1792.

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But it was silent on what
should happen with banknotes.

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So instead, each of the states
issued charters

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to banks and
private businesses,

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enabling them to design
and print their own money

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at whatever denomination
and quantity that they wanted.

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And as a result, there were over
8,000 different banks

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and private entities
making their own banknotes,

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and you can imagine just how
wild and diverse that was.

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There's no central bank or
overarching entity telling you

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you could put your faith
in this and you can trust it.

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NARRATOR:
Crypto is only the latest
new form of money,

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and as most who've heard of
Bitcoin know, it's digital.

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But since many of our
daily transactions

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are already electronic
and don't involve touching

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physical currency,
it's reasonable to ask:

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how is this different?

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SWARTZ:
We've been paying electronically

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for a very long time.

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You know, you swipe a card,

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one account gets debited,

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another account gets credited
and we kind of

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don't really think about what
happens under the hood.

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BRUNTON:
But all of that is still doing

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fundamentally the same thing.

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It is telling a third party,

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someone who has access
to a ledger, like your bank,

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that they would like to move the
following units on that ledger

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from your account to
somebody else's account.

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00:10:27,266 --> 00:10:30,733
NARRATOR:
Today, we've come to
depend on banks

252
00:10:30,733 --> 00:10:34,000
and credit card companies to
keep track of where our money is

253
00:10:34,000 --> 00:10:37,300
and manage the flow
of digital payments.

254
00:10:37,300 --> 00:10:40,200
Cryptocurrencies may seem
no different,

255
00:10:40,200 --> 00:10:42,433
but there's an
important distinction.

256
00:10:42,433 --> 00:10:45,466
They aim to do away with
the middlemen,

257
00:10:45,466 --> 00:10:48,533
like banks who may decide,
fairly or unfairly,

258
00:10:48,533 --> 00:10:50,100
who to loan money to,

259
00:10:50,100 --> 00:10:53,200
and even governments,
who control the money supply.

260
00:10:53,200 --> 00:10:56,800
What if we could remove all of
those intermediary players

261
00:10:56,800 --> 00:10:59,533
and I could directly give you
the amount that I owed to you?

262
00:10:59,533 --> 00:11:02,866
BRUNTON:
How can we have a ledger system
that exists just between us

263
00:11:02,866 --> 00:11:05,533
that doesn't need us to rely on
an institution

264
00:11:05,533 --> 00:11:06,966
to keep track of it for us?

265
00:11:06,966 --> 00:11:09,933
If you can build a system
like this that actually works,

266
00:11:09,933 --> 00:11:14,300
you have built a functional
replacement for a lot of what

267
00:11:14,300 --> 00:11:16,066
a credit card company
or a bank does.

268
00:11:16,066 --> 00:11:18,433
♪ ♪

269
00:11:18,433 --> 00:11:20,766
NARRATOR:
It's not the kind of problem
that would keep

270
00:11:20,766 --> 00:11:23,100
the average person up at night.

271
00:11:23,100 --> 00:11:25,233
But for some
computer scientists,

272
00:11:25,233 --> 00:11:29,800
and privacy advocates, building
a new financial technology

273
00:11:29,800 --> 00:11:31,933
seemed of paramount importance.

274
00:11:31,933 --> 00:11:36,966
MARK MILLER:
"How often or in what system
the thought police plugged in

275
00:11:36,966 --> 00:11:40,600
"on any individual wire
was guesswork.

276
00:11:40,600 --> 00:11:45,866
"It was even conceivable
that they watched everybody

277
00:11:45,866 --> 00:11:48,500
"all the time.

278
00:11:48,500 --> 00:11:54,200
"You had to live, did live,
from habit that became instinct

279
00:11:54,200 --> 00:11:59,466
"in the assumption that every
sound you made was overheard

280
00:11:59,466 --> 00:12:01,200
"and except in darkness,

281
00:12:01,200 --> 00:12:04,166
every movement scrutinized."

282
00:12:04,166 --> 00:12:08,066
NARRATOR:
Mark Miller was a
computer science student

283
00:12:08,066 --> 00:12:10,733
in the late 1970s.

284
00:12:10,733 --> 00:12:13,333
In the wake of Watergate
and the Vietnam War,

285
00:12:13,333 --> 00:12:16,166
trust in the government was low,

286
00:12:16,166 --> 00:12:18,366
and Miller was one of many

287
00:12:18,366 --> 00:12:21,133
for whom George Orwell's classic
dystopian novel

288
00:12:21,133 --> 00:12:23,500
seemed prophetic.

289
00:12:23,500 --> 00:12:29,100
MILLER:
We were very terrified of the
totalitarian future that

290
00:12:29,100 --> 00:12:32,000
"1984" had painted and we really

291
00:12:32,000 --> 00:12:34,833
took it on as our responsibility

292
00:12:34,833 --> 00:12:37,866
to figure out how to build
a system

293
00:12:37,866 --> 00:12:40,533
that would be a tool
of liberation,

294
00:12:40,533 --> 00:12:42,933
not a tool of oppression.

295
00:12:42,933 --> 00:12:44,266
NARRATOR:
Universities were experimenting

296
00:12:44,266 --> 00:12:46,233
with the first networked
computers.

297
00:12:46,233 --> 00:12:49,266
What had originally been
designed as a Cold War

298
00:12:49,266 --> 00:12:52,233
missile defense system
was laying the foundation

299
00:12:52,233 --> 00:12:54,666
for what would become
today's internet.

300
00:12:54,666 --> 00:12:57,766
Though initially,
only a handful of computers

301
00:12:57,766 --> 00:13:00,433
existed on this
national network,

302
00:13:00,433 --> 00:13:03,900
it was already clear
these interconnected machines

303
00:13:03,900 --> 00:13:07,100
were going to radically
change communication.

304
00:13:07,100 --> 00:13:10,700
At the same time,
networked computers could give

305
00:13:10,700 --> 00:13:13,666
governments and others new ways
to monitor messages

306
00:13:13,666 --> 00:13:15,700
and spy on citizens.

307
00:13:15,700 --> 00:13:19,733
So some researchers were intent
on developing a new kind

308
00:13:19,733 --> 00:13:24,800
of cryptography that would keep
communications secure.

309
00:13:24,800 --> 00:13:28,133
BRUNTON:
The history of cryptography
for thousands of years

310
00:13:28,133 --> 00:13:31,566
is defined by
one single problem.

311
00:13:31,566 --> 00:13:35,133
No matter how you make
your code, right,

312
00:13:35,133 --> 00:13:38,733
the key that you use to encrypt
the message needs to be

313
00:13:38,733 --> 00:13:41,333
the same key as the other person
has to decrypt it.

314
00:13:41,333 --> 00:13:43,866
NEWSREEL ANNOUNCER:
Here the important work
of decoding messages

315
00:13:43,866 --> 00:13:45,100
whose information must be

316
00:13:45,100 --> 00:13:47,166
carefully guarded
and transcribed

317
00:13:47,166 --> 00:13:48,900
with perfect accuracy.

318
00:13:48,900 --> 00:13:51,666
NARULA:
Now the problem with that is

319
00:13:51,666 --> 00:13:53,833
that if anybody figured out
the secret code,

320
00:13:53,833 --> 00:13:55,266
well, then you were kind of
out of luck.

321
00:13:55,266 --> 00:13:56,700
They can now read all of the
messages

322
00:13:56,700 --> 00:13:58,066
that you were going to send back
and forth.

323
00:13:58,066 --> 00:14:00,333
NARRATOR:
This is what happened

324
00:14:00,333 --> 00:14:01,733
when the Allies famously cracked

325
00:14:01,733 --> 00:14:05,433
the code of the Germans'
Enigma machine in World War II

326
00:14:05,433 --> 00:14:07,566
and helped turn the tide
of the war.

327
00:14:07,566 --> 00:14:11,200
BRUNTON:
That was the fundamental limit
to your ability

328
00:14:11,200 --> 00:14:14,433
to create secret messages
for all of human history

329
00:14:14,433 --> 00:14:15,933
until the 1970s,

330
00:14:15,933 --> 00:14:19,133
when a group of
computer scientists

331
00:14:19,133 --> 00:14:21,533
make a series of
extraordinary breakthroughs.

332
00:14:21,533 --> 00:14:25,766
NARRATOR:
The big breakthrough was
figuring out how to replace

333
00:14:25,766 --> 00:14:28,133
the vulnerable
single-key system

334
00:14:28,133 --> 00:14:30,900
with a novel two-key approach.

335
00:14:30,900 --> 00:14:34,966
Each side holds a pair of
mathematically linked keys--

336
00:14:34,966 --> 00:14:37,200
essentially a string of
characters--

337
00:14:37,200 --> 00:14:40,900
one shared publicly,
the other kept private.

338
00:14:40,900 --> 00:14:42,933
The sender encrypts the message

339
00:14:42,933 --> 00:14:45,033
using the recipient's
public key,

340
00:14:45,033 --> 00:14:47,066
the message can only
be unscrambled

341
00:14:47,066 --> 00:14:50,300
using the recipient's
private key.

342
00:14:50,300 --> 00:14:53,800
The sender can also use
their private key to encode

343
00:14:53,800 --> 00:14:55,733
a unique digital signature
into the message,

344
00:14:55,733 --> 00:14:58,633
proving that they sent it.

345
00:14:58,633 --> 00:15:00,433
The thing that's really cool
about this is that I don't need

346
00:15:00,433 --> 00:15:01,800
to know your secret key.

347
00:15:01,800 --> 00:15:03,566
No one needs to know
your secret key.

348
00:15:03,566 --> 00:15:07,566
It never leaves your device or
your piece of paper, your home.

349
00:15:07,566 --> 00:15:09,033
It stays completely secret.

350
00:15:09,033 --> 00:15:11,000
The only thing that leaves
is the public key.

351
00:15:11,000 --> 00:15:13,200
And I can't figure out
what your secret key is

352
00:15:13,200 --> 00:15:14,500
from your public key.

353
00:15:14,500 --> 00:15:16,800
NARRATOR:
As long as everyone's

354
00:15:16,800 --> 00:15:18,800
private keys stay private,

355
00:15:18,800 --> 00:15:22,466
secret messages are
essentially uncrackable

356
00:15:22,466 --> 00:15:25,600
and signatures can't be forged.

357
00:15:25,600 --> 00:15:28,633
The trick lies in how the keys
are linked

358
00:15:28,633 --> 00:15:32,433
through a type of math problem
using large prime numbers,

359
00:15:32,433 --> 00:15:34,433
which is easy to compute
in one direction,

360
00:15:34,433 --> 00:15:37,800
but nearly impossible
to reverse engineer.

361
00:15:37,800 --> 00:15:40,633
NARULA:
It's very easy

362
00:15:40,633 --> 00:15:43,100
to take a set of factors and see

363
00:15:43,100 --> 00:15:44,733
that they multiply to a number.

364
00:15:44,733 --> 00:15:46,300
It's very, very hard to take

365
00:15:46,300 --> 00:15:48,066
a large number and figure out

366
00:15:48,066 --> 00:15:49,133
what the factors are

367
00:15:49,133 --> 00:15:50,300
that divide into it.

368
00:15:50,300 --> 00:15:52,766
It would have required even

369
00:15:52,766 --> 00:15:54,300
someone with a supercomputer,

370
00:15:54,300 --> 00:15:57,033
you know, hundreds or thousands
of years to try to break

371
00:15:57,033 --> 00:16:00,366
the cryptography and get access
to the information.

372
00:16:00,366 --> 00:16:02,966
MILLER:
That is a revolutionary
change in the world.

373
00:16:02,966 --> 00:16:08,266
Up to that point,
we were all kind of helpless

374
00:16:08,266 --> 00:16:13,166
against efforts by those forces
that would target us.

375
00:16:13,166 --> 00:16:14,366
And now, suddenly,

376
00:16:14,366 --> 00:16:18,200
mathematics had given us
this amazing gift,

377
00:16:18,200 --> 00:16:21,966
this, this tool that we could
now use to communicate secretly

378
00:16:21,966 --> 00:16:26,866
in a way that even those
large forces cannot corrupt.

379
00:16:26,866 --> 00:16:29,766
NARRATOR:
A column in
"Scientific American"

380
00:16:29,766 --> 00:16:33,033
described the breakthrough,
but the actual algorithms

381
00:16:33,033 --> 00:16:38,133
remained unpublished in a paper
at M.I.T.

382
00:16:38,133 --> 00:16:41,000
Miller feared the approach,
known as public key encryption,

383
00:16:41,000 --> 00:16:44,133
was so powerful
that the government might try

384
00:16:44,133 --> 00:16:48,100
to classify it as
a military secret.

385
00:16:48,100 --> 00:16:50,366
MILLER:
I saw this as a
hard fork in the road

386
00:16:50,366 --> 00:16:52,400
that was bigger than me.

387
00:16:52,400 --> 00:16:53,400
And I decided

388
00:16:53,400 --> 00:16:56,100
I have to do what I can

389
00:16:56,100 --> 00:16:58,933
to make sure that this idea is
not suppressed.

390
00:16:58,933 --> 00:17:04,333
So I went to the M.I.T. campus,
and I hung around,

391
00:17:04,333 --> 00:17:06,766
and talked to people
until finally I managed to

392
00:17:06,766 --> 00:17:09,000
get my hands on a paper copy.

393
00:17:09,000 --> 00:17:11,133
I went to a variety
of copy shops.

394
00:17:11,133 --> 00:17:13,933
Never made too many copies
in any one place.

395
00:17:13,933 --> 00:17:17,666
And I mailed it from
a variety of mailboxes

396
00:17:17,666 --> 00:17:21,433
to home and hobbyist
computer magazines

397
00:17:21,433 --> 00:17:24,066
and clubs all across
the country.

398
00:17:24,066 --> 00:17:26,166
And I also gave copies
of the paper

399
00:17:26,166 --> 00:17:27,766
to a few select friends of mine,

400
00:17:27,766 --> 00:17:32,633
telling them, "If I disappear,

401
00:17:32,633 --> 00:17:34,933
make sure this gets out."

402
00:17:34,933 --> 00:17:38,733
I have absolutely no idea,
and I will never have any idea

403
00:17:38,733 --> 00:17:42,533
whether my actions
had any influence at all.

404
00:17:42,533 --> 00:17:44,200
But the cat was out of the bag.

405
00:17:44,200 --> 00:17:48,300
NARRATOR:
The paper was eventually
published in 1978

406
00:17:48,300 --> 00:17:52,866
and the ideas spread
like wildfire.

407
00:17:52,866 --> 00:17:54,300
The government tried
to keep these algorithms

408
00:17:54,300 --> 00:17:55,833
from the public,

409
00:17:55,833 --> 00:17:59,166
but determined to fight
against centralized control,

410
00:17:59,166 --> 00:18:02,766
programmers put the codes
on everything from t-shirts

411
00:18:02,766 --> 00:18:06,366
to their own bodies.

412
00:18:06,366 --> 00:18:08,133
BRUNTON:
Cryptographers were in
the unique position,

413
00:18:08,133 --> 00:18:10,933
especially once people
started getting tattoos of this

414
00:18:10,933 --> 00:18:13,033
string of characters,
of being able to say

415
00:18:13,033 --> 00:18:14,666
like characters in
martial arts movies,

416
00:18:14,666 --> 00:18:17,200
that their bodies were
classified as deadly weapons.

417
00:18:17,200 --> 00:18:18,600
(whistling)

418
00:18:18,600 --> 00:18:20,500
What?
You want a public key?

419
00:18:20,500 --> 00:18:25,500
(crowd laughing, groaning)

420
00:18:25,500 --> 00:18:26,966
NARRATOR:
Some coders joined forces,

421
00:18:26,966 --> 00:18:30,666
working in loose groups
to design technologies,

422
00:18:30,666 --> 00:18:32,766
including new forms of money,

423
00:18:32,766 --> 00:18:36,433
that could free people
from centralized control.

424
00:18:36,433 --> 00:18:39,766
BRUNTON:
We could call them visionaries,
we could call them radicals.

425
00:18:39,766 --> 00:18:42,833
We could also call them weirdos.

426
00:18:42,833 --> 00:18:45,966
Eccentric, technologically
sophisticated, very smart,

427
00:18:45,966 --> 00:18:47,233
deeply strange people

428
00:18:47,233 --> 00:18:49,433
who wanted to change the world

429
00:18:49,433 --> 00:18:52,266
through transforming
how money worked.

430
00:18:52,266 --> 00:18:55,700
WOMAN:
Ah! A Space Alien!

431
00:18:55,700 --> 00:18:59,100
SWARTZ:
They anticipated that
there was a coming economy

432
00:18:59,100 --> 00:19:01,933
that was going to be built
around all of our data,

433
00:19:01,933 --> 00:19:05,466
the surveillance of our data
that very soon we were all going

434
00:19:05,466 --> 00:19:07,433
to be living more and more
of our lives

435
00:19:07,433 --> 00:19:10,100
communicating through
digital technologies.

436
00:19:10,100 --> 00:19:11,600
And a crucial piece

437
00:19:11,600 --> 00:19:13,633
of this puzzle that hadn't

438
00:19:13,633 --> 00:19:15,000
really ever been fully solved

439
00:19:15,000 --> 00:19:16,000
was figuring out how to do

440
00:19:16,000 --> 00:19:17,400
money online.

441
00:19:17,400 --> 00:19:18,633
COMMERCIAL ANNOUNCER:
Where will you find a world

442
00:19:18,633 --> 00:19:20,833
of ideas for your child?

443
00:19:20,833 --> 00:19:22,100
Only at eToys.

444
00:19:22,100 --> 00:19:23,166
NARRATOR:
For the first time,

445
00:19:23,166 --> 00:19:24,833
public key encryption made it

446
00:19:24,833 --> 00:19:26,600
possible to securely use

447
00:19:26,600 --> 00:19:30,966
credit cards and conduct
other private business online.

448
00:19:30,966 --> 00:19:32,833
Without it, online commerce

449
00:19:32,833 --> 00:19:35,266
might never have become
a reality.

450
00:19:35,266 --> 00:19:39,533
But for activist coding groups,
the fact that banks

451
00:19:39,533 --> 00:19:42,866
and credit card companies kept
a ledger of all transactions

452
00:19:42,866 --> 00:19:44,633
opened the door for Big Brother.

453
00:19:44,633 --> 00:19:48,266
The most infamous of these
groups was known as

454
00:19:48,266 --> 00:19:50,433
the "Cypherpunks."

455
00:19:50,433 --> 00:19:52,100
JACKSON:
Their culture was,
"Hey, we want to create privacy

456
00:19:52,100 --> 00:19:54,233
because we can see where
this is going."

457
00:19:54,233 --> 00:19:55,533
They had the foresight to see

458
00:19:55,533 --> 00:19:57,266
that any big enterprise,

459
00:19:57,266 --> 00:19:58,566
there are going to be big

460
00:19:58,566 --> 00:19:59,700
companies and, and regulators

461
00:19:59,700 --> 00:20:00,866
who will try to control it.

462
00:20:00,866 --> 00:20:03,833
NARRATOR:
The Cypherpunks

463
00:20:03,833 --> 00:20:05,900
mostly communicated through a
mailing list.

464
00:20:05,900 --> 00:20:07,466
BRUNTON:
The hard core of the
Cypherpunks

465
00:20:07,466 --> 00:20:12,000
looked at digital money as a way
to not just guarantee privacy,

466
00:20:12,000 --> 00:20:14,433
but as a way that they could
potentially destroy

467
00:20:14,433 --> 00:20:16,933
existing governments and states
completely.

468
00:20:16,933 --> 00:20:21,700
JACKSON:
It was basically developers
creating tools for freedom.

469
00:20:21,700 --> 00:20:24,600
And one of those tools
was digital cash.

470
00:20:24,600 --> 00:20:29,433
NARRATOR:
Not just digital transactions,
like the banks were providing,

471
00:20:29,433 --> 00:20:32,300
but a new kind of money
altogether.

472
00:20:32,300 --> 00:20:36,433
Across dozens of new forums,
there were a number of attempts

473
00:20:36,433 --> 00:20:39,533
to design a system
of digital cash.

474
00:20:39,533 --> 00:20:42,933
And then, on Halloween 2008,

475
00:20:42,933 --> 00:20:47,166
a new name-- Satoshi Nakamoto--
appeared.

476
00:20:47,166 --> 00:20:49,066
Enter Bitcoin.

477
00:20:49,066 --> 00:20:50,866
Called by its inventor a

478
00:20:50,866 --> 00:20:53,200
"peer-to-peer electronic
cash system."

479
00:20:53,200 --> 00:20:57,100
Even now, no one knows
who Satoshi Nakamoto,

480
00:20:57,100 --> 00:20:59,366
the inventor of Bitcoin, is.

481
00:20:59,366 --> 00:21:02,466
But the paper was revolutionary.

482
00:21:02,466 --> 00:21:04,566
BRUNTON:
This is one of the most

483
00:21:04,566 --> 00:21:06,733
significant technologies

484
00:21:06,733 --> 00:21:09,166
in recent human history

485
00:21:09,166 --> 00:21:11,000
to have been created by someone

486
00:21:11,000 --> 00:21:13,833
who is still wholly anonymous.

487
00:21:13,833 --> 00:21:16,500
McKIE:
Who is Satoshi is a question
that may never be answered,

488
00:21:16,500 --> 00:21:19,066
but in actuality, that sort of

489
00:21:19,066 --> 00:21:21,200
mystique is kind of what adds

490
00:21:21,200 --> 00:21:23,500
to the allure that made Bitcoin
really interesting

491
00:21:23,500 --> 00:21:25,066
to begin with, I think.

492
00:21:25,066 --> 00:21:27,133
MESIDOR:
When you look at
who Satoshi could be,

493
00:21:27,133 --> 00:21:29,266
I say it has to be a group of
women because men

494
00:21:29,266 --> 00:21:30,600
would have taken credit
a long time ago.

495
00:21:30,600 --> 00:21:31,933
(laughs)

496
00:21:31,933 --> 00:21:33,800
JACKSON:
Whoever Satoshi is,

497
00:21:33,800 --> 00:21:35,333
it's amazing
that they were able to fit

498
00:21:35,333 --> 00:21:38,133
all of what they wanted
Bitcoin to be in eight pages.

499
00:21:38,133 --> 00:21:41,800
NARRATOR:
Satoshi's paper synthesized
decades of work

500
00:21:41,800 --> 00:21:45,133
by hundreds of cryptographers
and computer scientists

501
00:21:45,133 --> 00:21:47,066
into an elegant whole.

502
00:21:47,066 --> 00:21:50,766
It showed how to create
a digital payment system

503
00:21:50,766 --> 00:21:54,900
based on a new currency
that eliminated banks...

504
00:21:54,900 --> 00:21:58,666
CROWD:
All day, all week,
occupy Wall Street!

505
00:21:58,666 --> 00:22:02,133
NARRATOR:
...At the exact moment
the 2008 financial crisis

506
00:22:02,133 --> 00:22:05,700
shook the public trust that
gave them their power.

507
00:22:05,700 --> 00:22:08,266
REPORTER:
It was a manic Monday
in the financial markets.

508
00:22:08,266 --> 00:22:09,666
(bell ringing)

509
00:22:09,666 --> 00:22:11,100
The DOW tumbled more than 500...

510
00:22:11,100 --> 00:22:14,900
People were like, "If the
world's financial economy is,

511
00:22:14,900 --> 00:22:17,033
"you know,
like taking a big hit,

512
00:22:17,033 --> 00:22:19,333
"how do we make ourselves
more antifragile

513
00:22:19,333 --> 00:22:21,200
towards these things
in the future?"

514
00:22:21,200 --> 00:22:23,533
SWARTZ:
What Bitcoin proposed to do,

515
00:22:23,533 --> 00:22:24,966
what Satoshi proposed to do,

516
00:22:24,966 --> 00:22:27,700
was produce a kind of
digital cash

517
00:22:27,700 --> 00:22:29,466
that didn't require
those intermediaries.

518
00:22:29,466 --> 00:22:30,866
Instead of transactions

519
00:22:30,866 --> 00:22:35,166
going through a web of connected
computers owned by banks

520
00:22:35,166 --> 00:22:37,800
and other intermediaries,
it would go through

521
00:22:37,800 --> 00:22:40,966
a web of connected computers
owned by the people

522
00:22:40,966 --> 00:22:42,866
conducting that transaction.

523
00:22:44,866 --> 00:22:47,100
NARRATOR:
"Bitcoins" were simply "bits"
of computer code

524
00:22:47,100 --> 00:22:49,266
in a digital ledger.

525
00:22:49,266 --> 00:22:51,500
Each person would hold
their coins

526
00:22:51,500 --> 00:22:53,766
in an anonymous digital wallet,

527
00:22:53,766 --> 00:22:56,000
identified only by
its public key.

528
00:22:56,000 --> 00:22:58,666
The holder of that wallet
could only spend those coins

529
00:22:58,666 --> 00:23:01,433
by using their private key
to sign the transfer

530
00:23:01,433 --> 00:23:04,133
and authorize the transaction.

531
00:23:04,133 --> 00:23:06,700
But the real breakthrough
was something called

532
00:23:06,700 --> 00:23:10,766
"the blockchain"-- a technology
that ensured the ledger

533
00:23:10,766 --> 00:23:13,633
hadn't been tampered with
and that people hadn't spent

534
00:23:13,633 --> 00:23:17,533
the same coin more than once--
all without needing a bank

535
00:23:17,533 --> 00:23:19,800
or other central authority
to keep track.

536
00:23:19,800 --> 00:23:21,433
(clacking, beeping)

537
00:23:21,433 --> 00:23:23,933
SWARTZ:
The payments would instead
be conducted through

538
00:23:23,933 --> 00:23:26,833
a decentralized infrastructure
of payments that would run

539
00:23:26,833 --> 00:23:29,700
on any number of computers.

540
00:23:29,700 --> 00:23:33,100
BRUNTON:
There's copies everywhere
and all the copies update.

541
00:23:33,100 --> 00:23:35,166
As you make a change,
as anyone adds something,

542
00:23:35,166 --> 00:23:37,933
as anyone does anything,
everyone's copy updates,

543
00:23:37,933 --> 00:23:39,266
which means that we all,

544
00:23:39,266 --> 00:23:41,800
in a sense, together witness
every single thing

545
00:23:41,800 --> 00:23:43,200
that's taking place.

546
00:23:43,200 --> 00:23:47,066
NARRATOR:
The blockchain records
the precise order

547
00:23:47,066 --> 00:23:50,966
of transactions-- if someone
tries to send two people a coin

548
00:23:50,966 --> 00:23:54,466
when they only have one,
one transaction is approved,

549
00:23:54,466 --> 00:23:56,366
the other denied.

550
00:23:56,366 --> 00:23:58,933
DASH:
Well, how do you trust
strangers on the internet?

551
00:23:58,933 --> 00:24:00,333
That's a hard problem.

552
00:24:00,333 --> 00:24:01,466
And that's a lot of what

553
00:24:01,466 --> 00:24:03,000
blockchains are designed to do

554
00:24:03,000 --> 00:24:04,266
is to be able to say, "We're

555
00:24:04,266 --> 00:24:05,533
all collectively anonymously

556
00:24:05,533 --> 00:24:08,233
"asserting that this copy,

557
00:24:08,233 --> 00:24:09,900
"this record of this sort of

558
00:24:09,900 --> 00:24:12,833
"database of information
is the same, and it's accurate,

559
00:24:12,833 --> 00:24:14,233
and hasn't been tampered with."

560
00:24:14,233 --> 00:24:15,966
(beeping)

561
00:24:15,966 --> 00:24:19,666
NARRATOR:
Satoshi's blockchain proposed
an ingenious solution.

562
00:24:19,666 --> 00:24:22,266
Every ten minutes or so,
a record of every

563
00:24:22,266 --> 00:24:25,066
Bitcoin transaction made
anywhere in the world

564
00:24:25,066 --> 00:24:30,866
during that period is assembled
inside a digital "block".

565
00:24:30,866 --> 00:24:34,366
That block is then run through
a cryptographic algorithm

566
00:24:34,366 --> 00:24:37,666
called a "hash"--
essentially, a way of converting

567
00:24:37,666 --> 00:24:41,166
any piece of information into
a short, unique identifier

568
00:24:41,166 --> 00:24:45,733
like a label that describes
the contents of a box.

569
00:24:45,733 --> 00:24:48,200
But this is no ordinary label.

570
00:24:48,200 --> 00:24:50,700
If anyone changes the contents
of the box

571
00:24:50,700 --> 00:24:52,933
by even the smallest amount,

572
00:24:52,933 --> 00:24:55,866
then the next time it's run
through the hash function,

573
00:24:55,866 --> 00:24:58,100
the label changes completely,

574
00:24:58,100 --> 00:25:03,366
making it clear someone
has tampered with what's inside.

575
00:25:03,366 --> 00:25:07,466
BRUNTON:
Imagine a machine that you
can put information into.

576
00:25:07,466 --> 00:25:10,666
Let us say "Moby Dick," all of
"Moby Dick," the entire novel.

577
00:25:10,666 --> 00:25:13,600
You put it into the machine and
it gives you back a little code.

578
00:25:13,600 --> 00:25:16,466
That code is the summary,
the expression,

579
00:25:16,466 --> 00:25:19,166
of all of the data
that makes up "Moby Dick."

580
00:25:19,166 --> 00:25:21,133
And now, if you put in
"Moby Dick,"

581
00:25:21,133 --> 00:25:23,866
but you have changed
one single word,

582
00:25:23,866 --> 00:25:26,000
if you have altered a space,
if you have removed a period,

583
00:25:26,000 --> 00:25:27,566
the code will be different.

584
00:25:27,566 --> 00:25:30,133
You're going to be able to tell
that something has changed.

585
00:25:30,133 --> 00:25:34,100
With such a machine, you could
then take, say, a transaction--

586
00:25:34,100 --> 00:25:37,266
me sending you ten dollars-- you
can put it into that machine.

587
00:25:37,266 --> 00:25:39,433
You're going to get back
a little code that corresponds

588
00:25:39,433 --> 00:25:41,200
to all of the data about that
transaction.

589
00:25:41,200 --> 00:25:45,600
That code will not be the same
if you change anything

590
00:25:45,600 --> 00:25:47,966
about that transaction data.

591
00:25:47,966 --> 00:25:51,066
Now, you take that code
and you add that into

592
00:25:51,066 --> 00:25:53,166
the record of the
next transaction,

593
00:25:53,166 --> 00:25:56,166
linking them all
into a single continuous chain

594
00:25:56,166 --> 00:25:58,400
of verification.

595
00:25:58,400 --> 00:26:01,700
NARRATOR:
Each block begins
with the previous block's hash,

596
00:26:01,700 --> 00:26:06,600
creating an ever-growing chain
of blocks-- "the blockchain".

597
00:26:06,600 --> 00:26:10,033
Users from across the network
take turns hashing blocks

598
00:26:10,033 --> 00:26:13,366
and adding them to the chain.

599
00:26:13,366 --> 00:26:14,900
The other computers on the
network

600
00:26:14,900 --> 00:26:17,900
verify the block is
hashed correctly,

601
00:26:17,900 --> 00:26:19,800
and update their copies,

602
00:26:19,800 --> 00:26:22,600
effectively
creating a decentralized ledger

603
00:26:22,600 --> 00:26:24,433
that all users agree on.

604
00:26:26,266 --> 00:26:27,766
VIVIAN BRIGHT:
That's good, Vernon.

605
00:26:27,766 --> 00:26:30,400
Oh, okay.
I don't need a whole lot
of water.

606
00:26:30,400 --> 00:26:32,900
NARRATOR:
Today, people are using

607
00:26:32,900 --> 00:26:36,100
other decentralized systems
modeled on Satoshi's blockchain,

608
00:26:36,100 --> 00:26:39,166
to try to move money
beyond the control of banks,

609
00:26:39,166 --> 00:26:42,133
governments, and other
traditional gatekeepers.

610
00:26:42,133 --> 00:26:45,500
BRIGHT:
Okay, If I was to
give you $1,000,

611
00:26:45,500 --> 00:26:47,666
what would happen
with my $1,000?

612
00:26:47,666 --> 00:26:51,200
So, if you put $1,000 into,

613
00:26:51,200 --> 00:26:53,633
let's say,
a $100,000 property,

614
00:26:53,633 --> 00:26:56,066
you have
one percent ownership

615
00:26:56,066 --> 00:26:57,600
in that asset.

616
00:26:57,600 --> 00:26:59,633
Whatever the income
is for that asset,

617
00:26:59,633 --> 00:27:02,466
you get one percent
of that income.

618
00:27:02,466 --> 00:27:04,100
NARRATOR: Community property
developer Vernon J.

619
00:27:04,100 --> 00:27:07,733
explains equity coin to
his Aunt Vivian,

620
00:27:07,733 --> 00:27:10,133
who has lived in
East New York, Brooklyn,

621
00:27:10,133 --> 00:27:12,200
for more than half a century.

622
00:27:12,200 --> 00:27:13,866
We need a light.

623
00:27:13,866 --> 00:27:14,866
And if Vernon, and this new

624
00:27:14,866 --> 00:27:16,500
money business

625
00:27:16,500 --> 00:27:18,033
is going to be the light,

626
00:27:18,033 --> 00:27:19,400
let it be the light.

627
00:27:19,400 --> 00:27:22,366
Let it be
the beacon that we need

628
00:27:22,366 --> 00:27:24,800
to revitalize our community.

629
00:27:24,800 --> 00:27:25,800
(indistinct chatter)

630
00:27:25,800 --> 00:27:26,800
All right, all right.

631
00:27:26,800 --> 00:27:28,633
How's everybody doing tonight?

632
00:27:28,633 --> 00:27:29,900
MAN:
Well, thank you.
All right.

633
00:27:29,900 --> 00:27:31,466
NARRATOR: Equity coin has

634
00:27:31,466 --> 00:27:33,100
attracted interest online,

635
00:27:33,100 --> 00:27:34,566
but Vernon also makes his pitch

636
00:27:34,566 --> 00:27:37,466
to the community face-to-face.

637
00:27:37,466 --> 00:27:39,566
When we talk
about cryptocurrency,

638
00:27:39,566 --> 00:27:41,600
when we talk about
blockchain technology,

639
00:27:41,600 --> 00:27:44,466
what that does is it actually
gives you a chance to

640
00:27:44,466 --> 00:27:47,200
remove the intermediaries.

641
00:27:47,200 --> 00:27:49,766
So, those banks that have been
declining you, you know,

642
00:27:49,766 --> 00:27:51,600
those organizations that say,

643
00:27:51,600 --> 00:27:53,066
"Actually, no, this is not
going to work,"

644
00:27:53,066 --> 00:27:56,000
you have the opportunity
to create this system

645
00:27:56,000 --> 00:27:57,833
where people
can invest with you

646
00:27:57,833 --> 00:27:59,533
without the intermediary,
right...

647
00:27:59,533 --> 00:28:00,633
NARRATOR:
Because he's dealing

648
00:28:00,633 --> 00:28:02,133
with real world properties

649
00:28:02,133 --> 00:28:04,333
and needs to hold a deed,

650
00:28:04,333 --> 00:28:06,666
collect rent, and pay taxes,

651
00:28:06,666 --> 00:28:08,133
the Securities
and Exchange Commission

652
00:28:08,133 --> 00:28:09,900
regulates Vernon's coins

653
00:28:09,900 --> 00:28:12,566
like shares in
a traditional company.

654
00:28:12,566 --> 00:28:14,700
But he thinks crypto offers

655
00:28:14,700 --> 00:28:16,433
a more direct connection
with investors.

656
00:28:16,433 --> 00:28:20,500
What I wanted to do was
mix in affordable housing

657
00:28:20,500 --> 00:28:23,233
with blockchain technology
and create a system

658
00:28:23,233 --> 00:28:25,933
where we can actually
replace the bank

659
00:28:25,933 --> 00:28:28,866
with community.
MAN: Yes.

660
00:28:28,866 --> 00:28:30,366
NARRATOR:
If Vernon attracts
enough interest,

661
00:28:30,366 --> 00:28:32,633
he'll launch his coin,

662
00:28:32,633 --> 00:28:34,166
joining thousands of others

663
00:28:34,166 --> 00:28:35,666
in a volatile crypto ecosystem

664
00:28:35,666 --> 00:28:38,633
where people can get rich,
or lose everything.

665
00:28:38,633 --> 00:28:41,000
So this is our time,
this is our time.

666
00:28:41,000 --> 00:28:44,166
NARRATOR:
But all of this
raises a question:

667
00:28:44,166 --> 00:28:47,566
if decentralized blockchains
eliminate the middlemen,

668
00:28:47,566 --> 00:28:50,366
who runs the network?

669
00:28:50,366 --> 00:28:52,100
NARULA:
Why do people even participate

670
00:28:52,100 --> 00:28:53,300
in this network?

671
00:28:53,300 --> 00:28:54,800
why do they gather
these transactions

672
00:28:54,800 --> 00:28:55,933
and add them to the end

673
00:28:55,933 --> 00:28:57,133
of the blockchain?

674
00:28:57,133 --> 00:28:58,833
And how do we make sure that

675
00:28:58,833 --> 00:29:00,966
they're doing that in a secure
way?

676
00:29:00,966 --> 00:29:03,766
NARRATOR:
Satoshi's answer came
in the form of

677
00:29:03,766 --> 00:29:07,233
an incentive system called
mining

678
00:29:07,233 --> 00:29:10,700
that rewarded users
who added blocks to the chain

679
00:29:10,700 --> 00:29:14,300
by granting them
newly minted bitcoins.

680
00:29:14,300 --> 00:29:17,000
These "miners"
group transactions

681
00:29:17,000 --> 00:29:19,733
from across the network
into a block,

682
00:29:19,733 --> 00:29:21,433
and run it through
a hash function,

683
00:29:21,433 --> 00:29:25,700
like the machine that created
the label for "Moby Dick."

684
00:29:25,700 --> 00:29:28,166
In order for
everyone's ledger to match,

685
00:29:28,166 --> 00:29:31,933
only one miner at a time
can add a block to the chain.

686
00:29:31,933 --> 00:29:33,766
So how does everyone agree on

687
00:29:33,766 --> 00:29:36,300
which miner
gets to add the next block?

688
00:29:36,300 --> 00:29:39,000
Satoshi's solution--
have miners race to solve

689
00:29:39,000 --> 00:29:41,266
a cryptographic puzzle.

690
00:29:41,266 --> 00:29:43,200
NARULA:
A node that wants to add a block
to the end of the blockchain

691
00:29:43,200 --> 00:29:46,700
actually engages in solving

692
00:29:46,700 --> 00:29:49,166
a computationally expensive
cryptographic puzzle.

693
00:29:49,166 --> 00:29:51,333
So the sole purpose of
this cryptographic puzzle

694
00:29:51,333 --> 00:29:54,766
is just to show that I've spent
a lot of time and energy

695
00:29:54,766 --> 00:29:56,566
trying to solve the puzzle.
That's it.

696
00:29:56,566 --> 00:30:00,133
The idea is that
it needs to be expensive

697
00:30:00,133 --> 00:30:03,233
by some resource
to compute this puzzle.

698
00:30:03,233 --> 00:30:05,066
If it's very cheap
or very easy

699
00:30:05,066 --> 00:30:06,900
or very quick
to compute the puzzle,

700
00:30:06,900 --> 00:30:09,300
then it won't do a good job
of securing the network

701
00:30:09,300 --> 00:30:11,500
and making sure
there's only one blockchain,

702
00:30:11,500 --> 00:30:13,000
one version of history,

703
00:30:13,000 --> 00:30:15,033
which is very important.

704
00:30:15,033 --> 00:30:17,700
NARRATOR:
This puzzle--
called "proof of work"--

705
00:30:17,700 --> 00:30:19,500
means miners
who spend resources

706
00:30:19,500 --> 00:30:21,566
in the form of
hardware and electricity

707
00:30:21,566 --> 00:30:25,033
get to add a block of new
transactions and earn bitcoin.

708
00:30:25,033 --> 00:30:28,066
Start her up, Johnny.

709
00:30:28,066 --> 00:30:29,600
NARRATOR:
In the early days,

710
00:30:29,600 --> 00:30:32,900
mining was a cottage industry;
people built rigs at home,

711
00:30:32,900 --> 00:30:34,400
expanding the network

712
00:30:34,400 --> 00:30:36,600
and sharing their setups
on social media.

713
00:30:36,600 --> 00:30:39,766
MINER:
This is a little overview of
what we got-- four machines.

714
00:30:39,766 --> 00:30:44,700
MINER 2:
I should clear right
at 2,800 a month.

715
00:30:44,700 --> 00:30:46,533
NARRATOR:
Mining also is how new coins

716
00:30:46,533 --> 00:30:49,200
are introduced into the system.

717
00:30:49,200 --> 00:30:51,833
Instead of banks and governments
controlling the money supply,

718
00:30:51,833 --> 00:30:56,000
it's automatically regulated
by the software.

719
00:30:56,000 --> 00:30:58,366
As more coins are mined,
the reward decreases,

720
00:30:58,366 --> 00:31:02,666
and the proof of work puzzle
gets harder to solve

721
00:31:02,666 --> 00:31:04,866
and requires more energy.

722
00:31:04,866 --> 00:31:08,100
Giant mining farms exist

723
00:31:08,100 --> 00:31:09,900
all over the world,

724
00:31:09,900 --> 00:31:11,700
using as much power as
some countries.

725
00:31:11,700 --> 00:31:13,233
JACKSON:
About 30% of the mining

726
00:31:13,233 --> 00:31:15,433
done in the world
is in America,

727
00:31:15,433 --> 00:31:16,666
and most of that mining

728
00:31:16,666 --> 00:31:19,400
is starting to be done in Texas,
because they

729
00:31:19,400 --> 00:31:21,000
have a lot of energy.

730
00:31:21,000 --> 00:31:22,666
Also, a lot of the mining

731
00:31:22,666 --> 00:31:24,366
is done where it is cheaper,

732
00:31:24,366 --> 00:31:26,300
places like
Iceland, Kazakhstan.

733
00:31:26,300 --> 00:31:27,933
China was huge in mining for a

734
00:31:27,933 --> 00:31:29,266
while and then they banned it.

735
00:31:29,266 --> 00:31:31,966
NARRATOR:
With about one percent

736
00:31:31,966 --> 00:31:34,266
of the world's electricity going
to crypto mining,

737
00:31:34,266 --> 00:31:37,900
some are pushing to find
alternative sources of power.

738
00:31:37,900 --> 00:31:39,766
JACKSON:
What's become huge now is

739
00:31:39,766 --> 00:31:41,233
hydroelectric energy,
using water as

740
00:31:41,233 --> 00:31:43,033
a as a way to mine bitcoin.

741
00:31:43,033 --> 00:31:46,666
And also, we're starting to
see more of the solar panels,

742
00:31:46,666 --> 00:31:48,633
wind energy.

743
00:31:48,633 --> 00:31:50,700
WARREN:
Ironically, Bitcoin actually

744
00:31:50,700 --> 00:31:52,133
provides a way to think about

745
00:31:52,133 --> 00:31:54,466
standing up different kinds

746
00:31:54,466 --> 00:31:55,633
of renewable architecture

747
00:31:55,633 --> 00:31:57,033
around energy

748
00:31:57,033 --> 00:31:58,966
that wouldn't
otherwise necessarily

749
00:31:58,966 --> 00:32:00,500
have capacity or
the ability to be stood up.

750
00:32:00,500 --> 00:32:02,433
NARRATOR:
But others don't buy it,

751
00:32:02,433 --> 00:32:05,966
particularly when considering
the entirety of the Bitcoin

752
00:32:05,966 --> 00:32:09,066
mining enterprise
spread around the world.

753
00:32:09,066 --> 00:32:13,633
DASH:
There is a tendency to point to,
in some cases valid,

754
00:32:13,633 --> 00:32:15,766
but mostly not,

755
00:32:15,766 --> 00:32:18,866
renewables as part of the
energy consumption of Bitcoin.

756
00:32:18,866 --> 00:32:20,666
There are people that sort of

757
00:32:20,666 --> 00:32:22,966
wave away the seriousness,

758
00:32:22,966 --> 00:32:24,533
the gravity of that damage,

759
00:32:24,533 --> 00:32:26,033
that harm that they're causing.

760
00:32:26,033 --> 00:32:27,433
And I find it immoral.

761
00:32:27,433 --> 00:32:32,566
BRUNTON:
We see the construction
of a vast machine

762
00:32:32,566 --> 00:32:35,300
that might be one of

763
00:32:35,300 --> 00:32:38,500
the most purely wasteful
machines ever built,

764
00:32:38,500 --> 00:32:40,200
a system that,

765
00:32:40,200 --> 00:32:42,066
that burns processor power,

766
00:32:42,066 --> 00:32:44,200
and coal and generates nothing

767
00:32:44,200 --> 00:32:46,300
but heat and the solutions to

768
00:32:46,300 --> 00:32:48,333
deliberately
meaningless problems.

769
00:32:48,333 --> 00:32:52,900
NARRATOR:
But early on, things were
very different.

770
00:32:52,900 --> 00:32:57,333
Mining was easy, and
Bitcoin essentially worthless.

771
00:32:57,333 --> 00:32:58,933
SWARTZ:
In the early days,

772
00:32:58,933 --> 00:33:00,866
there were websites
that had Bitcoin faucets,

773
00:33:00,866 --> 00:33:03,466
which were basically just
a site you would go to,

774
00:33:03,466 --> 00:33:05,433
click on it, you know,

775
00:33:05,433 --> 00:33:07,066
create a wallet

776
00:33:07,066 --> 00:33:08,166
and it would enable you

777
00:33:08,166 --> 00:33:09,733
to just get free Bitcoins.

778
00:33:09,733 --> 00:33:12,100
♪ ♪

779
00:33:12,100 --> 00:33:16,166
NARRATOR:
Satoshi didn't seem interested
in making money,

780
00:33:16,166 --> 00:33:18,866
and in 2011 sent a final email

781
00:33:18,866 --> 00:33:20,333
before disappearing for good.

782
00:33:20,333 --> 00:33:24,500
Other early adopters saw the
promise of the technology,

783
00:33:24,500 --> 00:33:27,533
and tried to generate
belief in its value.

784
00:33:27,533 --> 00:33:29,033
SWARTZ:
Once Bitcoin was
developed enough

785
00:33:29,033 --> 00:33:31,900
to be a kind of largely
functioning piece of software,

786
00:33:31,900 --> 00:33:32,966
it had to actually

787
00:33:32,966 --> 00:33:36,033
be used
in order to become money,

788
00:33:36,033 --> 00:33:40,200
so one person on the Bitcoin
message board said,

789
00:33:40,200 --> 00:33:42,500
"I will pay someone to--
with Bitcoin--

790
00:33:42,500 --> 00:33:45,333
to order me two pizzas
with lots of toppings."

791
00:33:45,333 --> 00:33:47,500
(keyboard keys lightly clacking)

792
00:33:47,500 --> 00:33:48,666
And someone else,

793
00:33:48,666 --> 00:33:50,600
on the other side of
the country,

794
00:33:50,600 --> 00:33:51,766
ordered that pizza,

795
00:33:51,766 --> 00:33:55,366
sent it to him,
and got paid in Bitcoin.

796
00:33:55,366 --> 00:33:59,800
JACKSON:
He essentially paid about
40 bucks for two pizzas.

797
00:33:59,800 --> 00:34:02,466
And those 10,000 Bitcoin
are well over,

798
00:34:02,466 --> 00:34:04,600
I believe, $200 million now.

799
00:34:04,600 --> 00:34:07,633
But that transaction had to
happen in order to show that,

800
00:34:07,633 --> 00:34:09,433
"Hey, people do
want to pay with this."

801
00:34:09,433 --> 00:34:12,333
Bitcoin is now up to $111!

802
00:34:12,333 --> 00:34:14,733
NARRATOR:
But as more users
joined the network

803
00:34:14,733 --> 00:34:16,266
and the price increased,

804
00:34:16,266 --> 00:34:17,633
something changed.

805
00:34:17,633 --> 00:34:18,866
The hottest investment,

806
00:34:18,866 --> 00:34:20,133
on or off Wall Street,

807
00:34:20,133 --> 00:34:22,566
are these cryptocurrencies.
They are soaring!

808
00:34:22,566 --> 00:34:25,200
They began to see it
less as money,

809
00:34:25,200 --> 00:34:27,833
that is as a transactional tool
that you would actually use.

810
00:34:27,833 --> 00:34:30,300
They started to see it
instead as a kind of asset.

811
00:34:30,300 --> 00:34:33,133
NARRATOR:
Despite wild fluctuations,

812
00:34:33,133 --> 00:34:35,733
Bitcoin's value
increased over time--

813
00:34:35,733 --> 00:34:40,366
and other coins emerged
on their own blockchains.

814
00:34:40,366 --> 00:34:42,900
While most chased profits,

815
00:34:42,900 --> 00:34:46,033
one early Bitcoin user saw

816
00:34:46,033 --> 00:34:47,700
a different kind of potential,

817
00:34:47,700 --> 00:34:49,200
and helped invent
what would become

818
00:34:49,200 --> 00:34:51,366
one of crypto's
most famous uses.

819
00:34:51,366 --> 00:34:52,700
KEVIN McCOY:
I'm an artist,

820
00:34:52,700 --> 00:34:54,000
and have been an artist for

821
00:34:54,000 --> 00:34:55,766
a long, long time,
but I wasn't always.

822
00:34:55,766 --> 00:34:57,033
I studied philosophy

823
00:34:57,033 --> 00:34:58,533
and literature,

824
00:34:58,533 --> 00:35:00,666
and that was my main
kind of interest.

825
00:35:00,666 --> 00:35:03,700
NARRATOR:
In the early 2000s,

826
00:35:03,700 --> 00:35:07,300
Kevin and Jennifer McCoy were
successful digital artists--

827
00:35:07,300 --> 00:35:10,933
their works shown by
prestigious galleries.

828
00:35:10,933 --> 00:35:15,066
But unauthorized copies were
appearing all over the internet.

829
00:35:15,066 --> 00:35:20,200
They realized there was no such
thing as a "digital original"

830
00:35:20,200 --> 00:35:23,133
that they could
actually own and control.

831
00:35:23,133 --> 00:35:24,366
McCOY:
In a digital environment,

832
00:35:24,366 --> 00:35:25,866
of course,
it's always a copy

833
00:35:25,866 --> 00:35:28,166
and it proliferates,
you know, everywhere.

834
00:35:28,166 --> 00:35:29,966
And, you know, and so there is
no original.

835
00:35:29,966 --> 00:35:34,366
NARRATOR:
But Bitcoin gave Kevin an idea.

836
00:35:34,366 --> 00:35:35,366
McCOY:
That system created

837
00:35:35,366 --> 00:35:37,133
for the first time,

838
00:35:37,133 --> 00:35:39,000
an idea of digital scarcity.

839
00:35:39,000 --> 00:35:42,066
All of a sudden,

840
00:35:42,066 --> 00:35:45,633
the everyday norm that you had
about digital technology,

841
00:35:45,633 --> 00:35:47,400
that it's
infinitely reproducible,

842
00:35:47,400 --> 00:35:49,733
that it's, everything is
just copy and paste,

843
00:35:49,733 --> 00:35:52,400
that didn't apply
in this case.

844
00:35:52,400 --> 00:35:55,033
If I send you my Bitcoins,

845
00:35:55,033 --> 00:35:56,666
I don't have them anymore
and you have them.

846
00:35:56,666 --> 00:35:59,800
That's scarcity;
it's not everywhere.

847
00:35:59,800 --> 00:36:01,433
It's only somewhere.

848
00:36:01,433 --> 00:36:03,433
And so I had
this realization that

849
00:36:03,433 --> 00:36:06,733
if it was possible
via Bitcoin

850
00:36:06,733 --> 00:36:10,266
to create uniqueness
around currency,

851
00:36:10,266 --> 00:36:13,100
then there had to be a way
that you could create

852
00:36:13,100 --> 00:36:15,966
uniqueness
around a digital artwork.

853
00:36:15,966 --> 00:36:17,400
But I didn't know how.

854
00:36:17,400 --> 00:36:19,966
I'm really excited about
this last pairing...

855
00:36:19,966 --> 00:36:21,966
NARRATOR:
Kevin attended a conference

856
00:36:21,966 --> 00:36:24,700
where each artist was
paired with a tech partner

857
00:36:24,700 --> 00:36:27,366
and given 24 hours
to develop a new idea

858
00:36:27,366 --> 00:36:28,733
they'd present to an audience.

859
00:36:30,533 --> 00:36:33,133
What we want to talk to
you about today is

860
00:36:33,133 --> 00:36:35,066
this idea we have of
monetized graphics.

861
00:36:35,066 --> 00:36:38,933
And how we can put
digital artworks in chains.

862
00:36:38,933 --> 00:36:40,000
So almost immediately after

863
00:36:40,000 --> 00:36:41,800
I was paired up
with Kevin McCoy,

864
00:36:41,800 --> 00:36:43,866
he and I sat down and started
sketching out ideas

865
00:36:43,866 --> 00:36:47,066
for how could you make an
assertion on a blockchain

866
00:36:47,066 --> 00:36:48,866
to say that
a certain digital work

867
00:36:48,866 --> 00:36:50,266
was an original,
unique item.

868
00:36:50,266 --> 00:36:52,133
♪ ♪

869
00:36:52,133 --> 00:36:54,000
NARRATOR:
After an all-night
coding session,

870
00:36:54,000 --> 00:36:55,433
Anil Dash and Kevin

871
00:36:55,433 --> 00:36:57,866
announced that they had

872
00:36:57,866 --> 00:37:00,733
registered a video
on a blockchain.

873
00:37:00,733 --> 00:37:03,466
DASH (voiceover):
It was a segment of
a video work

874
00:37:03,466 --> 00:37:06,200
that Kevin and Jennifer McCoy
had created together,

875
00:37:06,200 --> 00:37:08,866
and I actually
found it mesmerizing.

876
00:37:08,866 --> 00:37:10,933
McCOY (voiceover):
And this was our
on-stage example

877
00:37:10,933 --> 00:37:12,566
of taking this file

878
00:37:12,566 --> 00:37:14,400
and creating a
blockchain-based record of that.

879
00:37:14,400 --> 00:37:16,933
We've created a system
that will

880
00:37:16,933 --> 00:37:20,133
establish verification
and provenance

881
00:37:20,133 --> 00:37:23,300
over digital files,
digital artworks.

882
00:37:23,300 --> 00:37:26,200
That provenance
is a chain of ownership...

883
00:37:26,200 --> 00:37:29,233
NARRATOR:
Anil and Kevin created
a record of ownership

884
00:37:29,233 --> 00:37:31,600
that would live
on the blockchain.

885
00:37:31,600 --> 00:37:33,966
Whoever held
the key to access it,

886
00:37:33,966 --> 00:37:35,166
owned the digital original.

887
00:37:35,166 --> 00:37:37,000
DASH (voiceover):
We did pull it together

888
00:37:37,000 --> 00:37:38,266
in a couple of hours.

889
00:37:38,266 --> 00:37:40,566
So given that it was
something we sort of did

890
00:37:40,566 --> 00:37:42,500
over the course of an evening
and into a late night,

891
00:37:42,500 --> 00:37:44,400
it was a pretty good
first version.

892
00:37:44,400 --> 00:37:45,733
Do you got 20 bucks?

893
00:37:45,733 --> 00:37:47,166
DASH (voiceover):
And we sort of

894
00:37:47,166 --> 00:37:48,766
said we'd negotiate
a price for it.

895
00:37:48,766 --> 00:37:50,900
(on-screen):
Can I pay you in
U.S. dollars?

896
00:37:50,900 --> 00:37:53,133
Sure, that's
cool with me.

897
00:37:53,133 --> 00:37:54,866
I have four dollars.

898
00:37:54,866 --> 00:37:56,433
(laughter)

899
00:37:56,433 --> 00:37:58,133
Jesus! Really?

900
00:37:58,133 --> 00:38:00,033
NARRATOR:
It was the first transaction of

901
00:38:00,033 --> 00:38:02,166
something that would eventually
come to be called

902
00:38:02,166 --> 00:38:05,166
a non-fungible token,
or NFT.

903
00:38:05,166 --> 00:38:06,533
♪ ♪

904
00:38:06,533 --> 00:38:09,700
Today, NFTs can act as a
digital proof of ownership

905
00:38:09,700 --> 00:38:12,566
for things far beyond art--

906
00:38:12,566 --> 00:38:13,900
from tickets to a concert,

907
00:38:13,900 --> 00:38:16,833
to membership in a club,

908
00:38:16,833 --> 00:38:20,366
operating like keys that
unlock benefits to the owner.

909
00:38:20,366 --> 00:38:22,400
You can imagine
rolling it out

910
00:38:22,400 --> 00:38:24,733
into a more
platform-oriented thing...

911
00:38:24,733 --> 00:38:27,266
NARRATOR:
But back then, Kevin's notion
that it was possible

912
00:38:27,266 --> 00:38:31,233
to own a digital original
didn't immediately catch on.

913
00:38:31,233 --> 00:38:32,433
McCOY:
You know that

914
00:38:32,433 --> 00:38:34,866
it's new, you know
that it's a novel thing.

915
00:38:34,866 --> 00:38:36,766
You know that it's... you can
feel that it's important.

916
00:38:36,766 --> 00:38:38,100
And nobody cared.

917
00:38:38,100 --> 00:38:40,133
(bell chiming)

918
00:38:40,133 --> 00:38:43,400
NARRATOR:
Kevin's idea may not
have taken off,

919
00:38:43,400 --> 00:38:45,833
but he wasn't the only one
hoping blockchains

920
00:38:45,833 --> 00:38:48,533
could go beyond Bitcoin.

921
00:38:48,533 --> 00:38:49,833
In 2015,

922
00:38:49,833 --> 00:38:52,766
a 21-year-old coder
named Vitalik Buterin

923
00:38:52,766 --> 00:38:54,500
launched Ethereum--

924
00:38:54,500 --> 00:38:56,133
a new blockchain

925
00:38:56,133 --> 00:38:58,533
designed to decentralize
much more than just money.

926
00:38:58,533 --> 00:39:00,166
VITALIK BUTERIN:
Ethereum community is, uh,

927
00:39:00,166 --> 00:39:03,200
I think unique in the
crypto space for its diversity,

928
00:39:03,200 --> 00:39:05,566
like it's not just one
community, it's, you know--

929
00:39:05,566 --> 00:39:07,366
there's a lot of different
sub-communities.

930
00:39:07,366 --> 00:39:09,166
There is something in it
for everyone.

931
00:39:09,166 --> 00:39:11,433
NARRATOR:
Today, Ethereum is

932
00:39:11,433 --> 00:39:14,600
the largest blockchain
in the world,

933
00:39:14,600 --> 00:39:17,366
running ten times more
transactions than Bitcoin.

934
00:39:17,366 --> 00:39:20,900
Like Bitcoin, the blockchain

935
00:39:20,900 --> 00:39:23,933
incentivizes users by
rewarding miners

936
00:39:23,933 --> 00:39:27,566
with a currency--
in this case, Ether.

937
00:39:27,566 --> 00:39:29,833
But the range of
what Ethereum can do

938
00:39:29,833 --> 00:39:32,000
goes beyond a
simple monetary transaction.

939
00:39:32,000 --> 00:39:33,900
KARTIK (on microphone):
We want to have

940
00:39:33,900 --> 00:39:35,900
a quick interview

941
00:39:35,900 --> 00:39:37,700
with a person who needs
no introduction.

942
00:39:37,700 --> 00:39:40,266
So without further ado,
let's welcome Vitalik Buterin.

943
00:39:40,266 --> 00:39:42,633
(applause)

944
00:39:42,633 --> 00:39:45,333
♪ ♪

945
00:39:45,333 --> 00:39:48,833
NARRATOR:
Ethereum lets users create
their own programmable tokens,

946
00:39:48,833 --> 00:39:51,100
using "smart contracts"--

947
00:39:51,100 --> 00:39:53,933
instructions in the form of
computer code

948
00:39:53,933 --> 00:39:55,933
that execute rules on
the blockchain.

949
00:39:55,933 --> 00:39:59,333
Instead of just adding or
subtracting money from a ledger,

950
00:39:59,333 --> 00:40:03,033
these "smart contracts"
make it possible for anyone

951
00:40:03,033 --> 00:40:06,800
to mint a token and embed it
with nearly any functionality,

952
00:40:06,800 --> 00:40:08,933
from tracking music royalties

953
00:40:08,933 --> 00:40:13,233
to encoding money with last will
and testament directives,

954
00:40:13,233 --> 00:40:15,600
doing for the blockchain

955
00:40:15,600 --> 00:40:20,400
what the iPhone's App Store
did for the cell phone.

956
00:40:20,400 --> 00:40:21,733
Today,

957
00:40:21,733 --> 00:40:24,500
conferences like
this one in Amsterdam

958
00:40:24,500 --> 00:40:26,900
attract thousands of coders
and entrepreneurs.

959
00:40:26,900 --> 00:40:29,266
MASSIMILIANO GERARDI:
So the young people
are excited now

960
00:40:29,266 --> 00:40:30,400
about blockchain

961
00:40:30,400 --> 00:40:33,000
and all the possibilities

962
00:40:33,000 --> 00:40:34,633
that blockchain can give.

963
00:40:34,633 --> 00:40:36,133
And I haven't seen

964
00:40:36,133 --> 00:40:37,833
this kind of excitement

965
00:40:37,833 --> 00:40:39,900
since the time of
internet was born.

966
00:40:40,900 --> 00:40:42,666
NARRATOR:
Because anyone on the internet

967
00:40:42,666 --> 00:40:44,766
can see and inspect the ledger,

968
00:40:44,766 --> 00:40:48,066
proponents claim
blockchains like Ethereum

969
00:40:48,066 --> 00:40:49,533
can make transactions
more transparent,

970
00:40:49,533 --> 00:40:53,733
and, because they
eliminate the middle-man,

971
00:40:53,733 --> 00:40:55,466
more efficient.

972
00:40:55,466 --> 00:40:57,000
There's an idealistic quality

973
00:40:57,000 --> 00:40:59,066
to many of the hopes
surrounding the technology.

974
00:40:59,066 --> 00:41:01,200
GUNDEEP BHAMRA:
Everything which we want to

975
00:41:01,200 --> 00:41:02,366
preserve for eternity

976
00:41:02,366 --> 00:41:04,300
can and should
be on the blockchain,

977
00:41:04,300 --> 00:41:08,600
whether it's a movie
or it's our housing contracts

978
00:41:08,600 --> 00:41:11,166
or the way we...

979
00:41:11,166 --> 00:41:13,200
interact with,
let's say, Uber,

980
00:41:13,200 --> 00:41:14,900
or rent, rent a car.

981
00:41:14,900 --> 00:41:16,500
So right now, when you have

982
00:41:16,500 --> 00:41:17,666
a paper will,

983
00:41:17,666 --> 00:41:19,000
there could be a lot of drama,

984
00:41:19,000 --> 00:41:20,300
a lot of debates between

985
00:41:20,300 --> 00:41:22,100
family members when you pass
away.

986
00:41:22,100 --> 00:41:24,733
But at least if you
actually do that on chain,

987
00:41:24,733 --> 00:41:26,466
on the blockchain, actually,
you can actually get a say,

988
00:41:26,466 --> 00:41:29,100
and you know that it's
going to be guaranteed

989
00:41:29,100 --> 00:41:30,966
to go to those people
when you pass.

990
00:41:30,966 --> 00:41:33,566
MARCUS:
We are enabling individuals

991
00:41:33,566 --> 00:41:35,266
and organizations to access

992
00:41:35,266 --> 00:41:37,733
a market for climate action

993
00:41:37,733 --> 00:41:39,666
in an efficient,
low cost manner.

994
00:41:39,666 --> 00:41:41,733
And by bringing these existing

995
00:41:41,733 --> 00:41:44,466
certificates onto a blockchain,

996
00:41:44,466 --> 00:41:46,533
we unlock much greater
efficiency,

997
00:41:46,533 --> 00:41:47,766
lower transaction fees,

998
00:41:47,766 --> 00:41:50,933
and much faster
settlement times.

999
00:41:50,933 --> 00:41:52,366
NARRATOR:
Most projects like these

1000
00:41:52,366 --> 00:41:55,433
are still in their early stages
and not yet viable,

1001
00:41:55,433 --> 00:41:59,800
but one of Ethereum's
most popular uses

1002
00:41:59,800 --> 00:42:02,066
helped Kevin's original idea

1003
00:42:02,066 --> 00:42:04,433
for putting artwork
on the blockchain take off.

1004
00:42:04,433 --> 00:42:08,033
SNOOP:
♪ 2021, Snoop D-O-dub ♪

1005
00:42:08,033 --> 00:42:09,533
NEWS ANCHOR:
Now to the latest trend

1006
00:42:09,533 --> 00:42:10,566
that's sweeping the internet,

1007
00:42:10,566 --> 00:42:12,133
the skyrocketing prices

1008
00:42:12,133 --> 00:42:14,233
for digital art sold as NFTs.

1009
00:42:14,233 --> 00:42:16,400
NEWS ANCHOR 2:
NFT sales now topping

1010
00:42:16,400 --> 00:42:18,366
a half a trillion dollars...

1011
00:42:18,366 --> 00:42:22,033
NARRATOR:
Today, NFTs--
or non-fungible tokens--

1012
00:42:22,033 --> 00:42:24,200
seem to be everywhere.

1013
00:42:24,200 --> 00:42:26,333
Nyan cat is, of course,
a meme of

1014
00:42:26,333 --> 00:42:28,866
a cat with a Pop-Tart body
prancing through space

1015
00:42:28,866 --> 00:42:32,066
with rainbows
flying out of its butt.

1016
00:42:32,066 --> 00:42:33,566
NARRATOR:
Most of them are registered

1017
00:42:33,566 --> 00:42:36,466
on Ethereum,
where they exist as

1018
00:42:36,466 --> 00:42:39,300
smart contract tokens
on the blockchain.

1019
00:42:39,300 --> 00:42:41,400
It's been surreal to go from

1020
00:42:41,400 --> 00:42:43,400
this personal collaboration
with somebody

1021
00:42:43,400 --> 00:42:47,200
and a transaction that was
about collecting their art to

1022
00:42:47,200 --> 00:42:49,000
the last few years,
as it became

1023
00:42:49,000 --> 00:42:50,166
this big hype cycle.

1024
00:42:50,166 --> 00:42:51,800
REPORTER:
The art world has been

1025
00:42:51,800 --> 00:42:53,466
turned upside down again.

1026
00:42:53,466 --> 00:42:55,900
NARRATOR:
NFTs for nearly
anything imaginable

1027
00:42:55,900 --> 00:42:58,600
sell through
online marketplaces,

1028
00:42:58,600 --> 00:43:01,233
but even
traditional auction houses

1029
00:43:01,233 --> 00:43:03,233
have gotten in the game.

1030
00:43:03,233 --> 00:43:05,333
Some of the most coveted--
and expensive--

1031
00:43:05,333 --> 00:43:08,033
are essentially digital brands
that people desire.

1032
00:43:08,033 --> 00:43:09,466
DASH:
Part of what's so compelling

1033
00:43:09,466 --> 00:43:11,200
to a lot of
people that collect NFTs,

1034
00:43:11,200 --> 00:43:12,866
especially when they're part of
a large edition of them,

1035
00:43:12,866 --> 00:43:14,633
is that each individual work

1036
00:43:14,633 --> 00:43:18,366
is digitally identified
as being unique.

1037
00:43:18,366 --> 00:43:20,633
And, you know, that
has meaning to people.

1038
00:43:20,633 --> 00:43:22,800
To the fans and enthusiasts,
they kind of

1039
00:43:22,800 --> 00:43:24,466
feel like they're
collecting baseball cards.

1040
00:43:24,466 --> 00:43:27,833
The big one is called
Bored Apes,

1041
00:43:27,833 --> 00:43:29,533
which have kind of
become almost

1042
00:43:29,533 --> 00:43:31,200
a cultural brand
on its own.

1043
00:43:31,200 --> 00:43:33,033
This is your ape?
That's mine, yeah.

1044
00:43:33,033 --> 00:43:34,300
Well, we're debuting it.
That's really cool.

1045
00:43:34,300 --> 00:43:36,300
It's like,
I want something that

1046
00:43:36,300 --> 00:43:38,466
like kind of
reminds me of me...

1047
00:43:38,466 --> 00:43:40,033
SWARTZ:
It would be really strange

1048
00:43:40,033 --> 00:43:41,833
to see a celebrity like Paris
Hilton

1049
00:43:41,833 --> 00:43:44,133
go on a late-night talk show

1050
00:43:44,133 --> 00:43:45,833
and talk about a penny stock

1051
00:43:45,833 --> 00:43:47,100
that they are investing in

1052
00:43:47,100 --> 00:43:48,166
and recommending that others

1053
00:43:48,166 --> 00:43:49,333
do the same.

1054
00:43:49,333 --> 00:43:52,233
But NFTs have become

1055
00:43:52,233 --> 00:43:54,600
a acceptable topic for
late-night conversation.

1056
00:43:54,600 --> 00:43:56,433
♪ ♪

1057
00:43:56,433 --> 00:43:58,066
NARRATOR:
The frenzy around

1058
00:43:58,066 --> 00:43:59,833
new blockchain applications

1059
00:43:59,833 --> 00:44:01,300
doesn't end with NFTs.

1060
00:44:01,300 --> 00:44:03,700
Blockchains are even being used

1061
00:44:03,700 --> 00:44:06,600
to create new platforms
for cooperation.

1062
00:44:06,600 --> 00:44:09,866
Called Decentralized
Autonomous Organizations,

1063
00:44:09,866 --> 00:44:11,033
or DAOs for short.

1064
00:44:11,033 --> 00:44:14,366
One was even involved

1065
00:44:14,366 --> 00:44:15,900
in an attempt to buy

1066
00:44:15,900 --> 00:44:18,033
an original copy of
the U.S. Constitution

1067
00:44:18,033 --> 00:44:20,400
at an auction in New York City.

1068
00:44:20,400 --> 00:44:21,433
And the idea here was

1069
00:44:21,433 --> 00:44:22,466
a group of people came together

1070
00:44:22,466 --> 00:44:23,633
and they decided they wanted

1071
00:44:23,633 --> 00:44:25,100
to pool some funds and purchase

1072
00:44:25,100 --> 00:44:28,133
a copy of the Constitution.

1073
00:44:28,133 --> 00:44:30,500
NARRATOR:
A digital collective
formed on a chat group,

1074
00:44:30,500 --> 00:44:32,866
and created a token on
the Ethereum blockchain

1075
00:44:32,866 --> 00:44:34,366
that allowed members

1076
00:44:34,366 --> 00:44:36,166
to contribute money
to the project--

1077
00:44:36,166 --> 00:44:38,533
and have a vote
on how it was run.

1078
00:44:38,533 --> 00:44:40,033
This started about a week ago.

1079
00:44:40,033 --> 00:44:41,466
I just got some friends
in a group chat

1080
00:44:41,466 --> 00:44:43,400
texting one another,
they found out the Constitution

1081
00:44:43,400 --> 00:44:45,300
of the United States
is going up on auction.

1082
00:44:45,300 --> 00:44:47,666
And we said we need
to raise a lot of money,

1083
00:44:47,666 --> 00:44:48,933
and can we do it?

1084
00:44:48,933 --> 00:44:51,033
As soon as the money
starts piling in,

1085
00:44:51,033 --> 00:44:52,333
we just got shocked that

1086
00:44:52,333 --> 00:44:53,566
people actually, like,
have their faith in us,

1087
00:44:53,566 --> 00:44:55,933
and we're like,
"Okay, now we have to deliver."

1088
00:44:55,933 --> 00:44:58,733
NARRATOR:
Over the course of seven days,

1089
00:44:58,733 --> 00:45:02,300
nearly 20,000 members
joined the DAO,

1090
00:45:02,300 --> 00:45:04,166
raising more than $40 million,

1091
00:45:04,166 --> 00:45:07,766
well beyond the document's
pre-auction estimate.

1092
00:45:07,766 --> 00:45:10,733
And now, let's begin
the auction.

1093
00:45:10,733 --> 00:45:14,033
Lot 1787, the Constitution of
the United States of America.

1094
00:45:14,033 --> 00:45:16,400
We'll start the bidding here
at $10 million,

1095
00:45:16,400 --> 00:45:19,666
At $10 million, $11 million,
$12 million,

1096
00:45:19,666 --> 00:45:21,166
at $13 million,
now $14 million...

1097
00:45:21,166 --> 00:45:23,466
NARRATOR:
Ironically, in the end,

1098
00:45:23,466 --> 00:45:25,433
the group's transparency
was a liability.

1099
00:45:25,433 --> 00:45:27,200
AUCTIONEER:
At $41 million,

1100
00:45:27,200 --> 00:45:28,866
sold!

1101
00:45:28,866 --> 00:45:31,566
$41 million, paddle 411.

1102
00:45:31,566 --> 00:45:33,100
(crowd groans)

1103
00:45:33,100 --> 00:45:35,966
NARRATOR:
It was outbid by
a hedge fund C.E.O.

1104
00:45:35,966 --> 00:45:38,500
who could see how much money
they had raised.

1105
00:45:38,500 --> 00:45:40,566
WARREN:
But I think what's fascinating
about DAOs

1106
00:45:40,566 --> 00:45:42,933
is they really are providing
these micro experiments

1107
00:45:42,933 --> 00:45:46,533
in how do we organize and govern
ourselves and our activities.

1108
00:45:46,533 --> 00:45:49,233
What we've just accomplished
in the last four days

1109
00:45:49,233 --> 00:45:51,666
was (bleep) insanity.
It was amazing.

1110
00:45:51,666 --> 00:45:52,866
And we have to be
proud of ourselves

1111
00:45:52,866 --> 00:45:55,433
for rallying together
to do something

1112
00:45:55,433 --> 00:45:56,733
that no one has done
in history before.

1113
00:45:56,733 --> 00:45:59,300
And now we get
to plot our next move.

1114
00:45:59,300 --> 00:46:01,733
What do we want
the future to look like?

1115
00:46:01,733 --> 00:46:03,333
What do we want to build next?
What do we want to do?

1116
00:46:03,333 --> 00:46:05,266
♪ ♪

1117
00:46:05,266 --> 00:46:06,766
NARRATOR:
As thousands of experiments

1118
00:46:06,766 --> 00:46:09,433
like ConstitutionDAO
take place,

1119
00:46:09,433 --> 00:46:11,666
blockchain use is skyrocketing,

1120
00:46:11,666 --> 00:46:13,533
as are the environmental costs.

1121
00:46:13,533 --> 00:46:17,200
So Ethereum engineers
have been working

1122
00:46:17,200 --> 00:46:20,433
to implement a replacement
for Satoshi's energy-intensive

1123
00:46:20,433 --> 00:46:23,000
"proof of work" mechanism.

1124
00:46:23,000 --> 00:46:24,800
It's called "proof of stake."

1125
00:46:24,800 --> 00:46:27,766
DANNY RYAN:
When we move from proof of work
to proof of stake,

1126
00:46:27,766 --> 00:46:29,100
the energy consumption of

1127
00:46:29,100 --> 00:46:31,433
the Ethereum platform will be

1128
00:46:31,433 --> 00:46:34,400
reduced by 99.95%

1129
00:46:34,400 --> 00:46:36,600
and not to grow again.

1130
00:46:36,600 --> 00:46:38,966
(beeping)

1131
00:46:38,966 --> 00:46:41,033
NARRATOR:
Instead of spending
costly energy

1132
00:46:41,033 --> 00:46:43,300
to solve a
computational problem--

1133
00:46:43,300 --> 00:46:46,166
and earn the right to
add a block to the chain--

1134
00:46:46,166 --> 00:46:47,933
in proof of stake,

1135
00:46:47,933 --> 00:46:50,033
the system randomly
assigns the right

1136
00:46:50,033 --> 00:46:52,933
to add a block to
those who already own coins.

1137
00:46:52,933 --> 00:46:55,033
The more coins a user owns,

1138
00:46:55,033 --> 00:46:57,333
the more likely
they are to be chosen.

1139
00:46:57,333 --> 00:47:00,433
In this way, proof of stake
makes it possible to secure

1140
00:47:00,433 --> 00:47:04,233
the blockchain without
burning huge amounts of energy.

1141
00:47:06,766 --> 00:47:09,766
Other blockchains
already use proof of stake,

1142
00:47:09,766 --> 00:47:11,066
but it's never been tried

1143
00:47:11,066 --> 00:47:14,633
at the scale of
Ethereum's network.

1144
00:47:14,633 --> 00:47:17,533
And what amounts to
a giant software update

1145
00:47:17,533 --> 00:47:19,200
could put the system at risk.

1146
00:47:19,200 --> 00:47:21,400
DASH:
The classic metaphor we
use in tech is

1147
00:47:21,400 --> 00:47:22,566
it's like
trying to change the engines

1148
00:47:22,566 --> 00:47:23,966
in a plane while it's in flight.

1149
00:47:23,966 --> 00:47:27,233
The reason it's hard
is because millions of people

1150
00:47:27,233 --> 00:47:30,100
and way more millions of
lines of code

1151
00:47:30,100 --> 00:47:32,500
are relying on the system
as it functions today.

1152
00:47:32,500 --> 00:47:36,033
All right we're
one minute out, guys.

1153
00:47:36,033 --> 00:47:39,766
NARRATOR:
Still, in spring 2022,
after six years of work,

1154
00:47:39,766 --> 00:47:43,533
a test suggests the upgrade
might soon be ready.

1155
00:47:43,533 --> 00:47:47,133
(cheers and applause)

1156
00:47:47,133 --> 00:47:50,066
♪ ♪

1157
00:47:50,066 --> 00:47:52,966
Huge questions remain
about the transition,

1158
00:47:52,966 --> 00:47:55,966
and whether it will end up
trading one problem for another.

1159
00:47:55,966 --> 00:47:58,266
It's more
environmentally responsible,

1160
00:47:58,266 --> 00:48:00,800
but perhaps less fair,

1161
00:48:00,800 --> 00:48:03,800
since the wealthiest users
will be able to stake more coins

1162
00:48:03,800 --> 00:48:07,400
add more blocks,
and earn even more coins.

1163
00:48:07,400 --> 00:48:10,600
But in the meantime,
as crypto technology

1164
00:48:10,600 --> 00:48:14,066
continues to evolve,
the question

1165
00:48:14,066 --> 00:48:15,566
no one can answer yet is

1166
00:48:15,566 --> 00:48:17,633
will it be able to live up to

1167
00:48:17,633 --> 00:48:21,266
its decentralized promise?

1168
00:48:21,266 --> 00:48:23,233
RYAN:
Ideally, these
blockchain platforms

1169
00:48:23,233 --> 00:48:27,833
can help disintermediate
the power that exists,

1170
00:48:27,833 --> 00:48:30,666
locked up in a
handful of corporations

1171
00:48:30,666 --> 00:48:33,000
and kind of put
that back into communities,

1172
00:48:33,000 --> 00:48:35,600
back into individual users,
and...

1173
00:48:35,600 --> 00:48:39,866
and maybe shift the trajectory
from here to maybe over here.

1174
00:48:39,866 --> 00:48:41,900
♪ ♪
(keyboard clacking)

1175
00:48:41,900 --> 00:48:44,000
NARRATOR:
Back in Brooklyn,
that's the hope

1176
00:48:44,000 --> 00:48:46,233
of Vernon and
his programmer Aakil,

1177
00:48:46,233 --> 00:48:48,733
who are finally ready
to launch Equitycoin

1178
00:48:48,733 --> 00:48:50,866
on the Ethereum blockchain.

1179
00:48:50,866 --> 00:48:53,566
VERNON:
We're going to allow
for the sale of

1180
00:48:53,566 --> 00:48:57,000
10,700 tokens at $100 per token.

1181
00:48:57,000 --> 00:48:58,466
So it's $1.07 million that

1182
00:48:58,466 --> 00:48:59,700
we're going to be raising.

1183
00:48:59,700 --> 00:49:01,233
♪ ♪

1184
00:49:01,233 --> 00:49:02,833
NARRATOR:
By selling tokens,

1185
00:49:02,833 --> 00:49:04,400
he hopes to
raise enough money

1186
00:49:04,400 --> 00:49:05,966
to purchase the properties,

1187
00:49:05,966 --> 00:49:08,433
and investors hope
they'll get a return.

1188
00:49:08,433 --> 00:49:11,066
Vernon believes that
trust will grow as people see

1189
00:49:11,066 --> 00:49:12,833
how their interests
are coded

1190
00:49:12,833 --> 00:49:14,733
right into
the token's contract.

1191
00:49:14,733 --> 00:49:18,666
VERNON:
Smart contracts take
the rules and regulations

1192
00:49:18,666 --> 00:49:20,366
of a normal contract

1193
00:49:20,366 --> 00:49:23,500
and embed them into
an automated system

1194
00:49:23,500 --> 00:49:26,066
so that both parties
can adhere to those rules

1195
00:49:26,066 --> 00:49:28,200
and regulations
without trusting each other.

1196
00:49:28,200 --> 00:49:30,700
It's a trustless way
of doing business.

1197
00:49:30,700 --> 00:49:32,233
NARRATOR:
Vernon hopes for

1198
00:49:32,233 --> 00:49:34,366
a decentralized future,

1199
00:49:34,366 --> 00:49:36,400
where crypto removes
the gatekeepers

1200
00:49:36,400 --> 00:49:38,033
and levels the playing field.

1201
00:49:38,033 --> 00:49:41,566
NEWS ANCHOR:
JP Morgan rolling out
the first cryptocurrency

1202
00:49:41,566 --> 00:49:42,900
backed by a U.S. bank.

1203
00:49:42,900 --> 00:49:45,033
NARRATOR:
But the original promise

1204
00:49:45,033 --> 00:49:47,300
of crypto may be in doubt...

1205
00:49:47,300 --> 00:49:49,733
Fortune favors the brave.

1206
00:49:49,733 --> 00:49:53,166
NARRATOR:
...As big business increasingly
gets in on the action.

1207
00:49:53,166 --> 00:49:55,000
WOMAN:
Get started with crypto

1208
00:49:55,000 --> 00:49:56,766
on Venmo.

1209
00:49:56,766 --> 00:50:00,000
NARRATOR:
Today, nearly all crypto
financial transactions

1210
00:50:00,000 --> 00:50:02,033
go through centralized exchanges

1211
00:50:02,033 --> 00:50:04,566
that enable users to
buy and sell.

1212
00:50:04,566 --> 00:50:06,833
WOMAN:
Binance-- exchange the world.

1213
00:50:06,833 --> 00:50:09,733
NARRATOR:
They can decide which users

1214
00:50:09,733 --> 00:50:11,166
can hold accounts,

1215
00:50:11,166 --> 00:50:14,300
and can freeze funds
at the touch of a button.

1216
00:50:14,300 --> 00:50:15,600
This has drawn the interest

1217
00:50:15,600 --> 00:50:18,033
of financial regulators.

1218
00:50:18,033 --> 00:50:19,866
A battle is brewing
in Washington

1219
00:50:19,866 --> 00:50:22,700
over how to regulate
the cryptocurrency industry.

1220
00:50:22,700 --> 00:50:25,733
We have tremendous amounts of
financial regulation,

1221
00:50:25,733 --> 00:50:27,900
and some of it is there
for a very good reason.

1222
00:50:27,900 --> 00:50:30,266
It's to protect consumers.

1223
00:50:30,266 --> 00:50:33,200
But preserving
the ability for competition

1224
00:50:33,200 --> 00:50:34,433
and for people to innovate

1225
00:50:34,433 --> 00:50:36,200
is also very important,

1226
00:50:36,200 --> 00:50:37,700
making sure that
we don't unintentionally

1227
00:50:37,700 --> 00:50:40,266
regulate into a world of

1228
00:50:40,266 --> 00:50:42,466
a few very large,
powerful intermediaries.

1229
00:50:42,466 --> 00:50:44,300
I think that's
very important as well.

1230
00:50:44,300 --> 00:50:49,433
The struggle to decentralize,

1231
00:50:49,433 --> 00:50:52,166
I think,
is never ultimately won.

1232
00:50:52,166 --> 00:50:54,233
Every time you win it,
at one level,

1233
00:50:54,233 --> 00:50:56,200
you create a, a system,

1234
00:50:56,200 --> 00:50:59,066
in which you can lose it
at the next level up.

1235
00:50:59,066 --> 00:51:03,533
There's a real concern
that the future of crypto

1236
00:51:03,533 --> 00:51:06,566
will look a lot like
the present of the internet,

1237
00:51:06,566 --> 00:51:09,066
just kind of a re-entrenchment,

1238
00:51:09,066 --> 00:51:10,566
of the same old forms
of exploitation,

1239
00:51:10,566 --> 00:51:11,966
just on new terms.

1240
00:51:11,966 --> 00:51:13,966
NARRATOR:
One way or the other,

1241
00:51:13,966 --> 00:51:16,766
many believe blockchain
is here to stay.

1242
00:51:16,766 --> 00:51:20,166
WARREN:
You don't un-ring that bell,
it's not going to vanish.

1243
00:51:20,166 --> 00:51:21,666
What it's used for is
something

1244
00:51:21,666 --> 00:51:23,333
that has yet to
be fully determined.

1245
00:51:23,333 --> 00:51:24,366
(phone chimes)

1246
00:51:24,366 --> 00:51:25,600
DON (on phone):
Vern, Great Rising!

1247
00:51:25,600 --> 00:51:28,133
Don, what's going on,
brother?

1248
00:51:28,133 --> 00:51:31,933
NARRATOR:
At last, Vernon gathers his team
to launch Equitycoin

1249
00:51:31,933 --> 00:51:33,966
and start raising money
from the public.

1250
00:51:33,966 --> 00:51:35,800
Let's do it.

1251
00:51:35,800 --> 00:51:37,166
Let's do it.
Let's go!

1252
00:51:37,166 --> 00:51:38,466
BRUNTON:
I look at cryptocurrencies

1253
00:51:38,466 --> 00:51:41,766
as being the
very, very early days

1254
00:51:41,766 --> 00:51:43,866
of a better technology.

1255
00:51:43,866 --> 00:51:46,533
I think,
in the language of tech,

1256
00:51:46,533 --> 00:51:48,100
we are using
the alpha rollout--

1257
00:51:48,100 --> 00:51:50,366
the earliest, jankiest,

1258
00:51:50,366 --> 00:51:51,633
least-figured-out
version of something.

1259
00:51:51,633 --> 00:51:55,200
T-minus three, two,

1260
00:51:55,200 --> 00:51:56,900
and one.
Boom.

1261
00:51:56,900 --> 00:51:59,900
ASH:
We just launched our
investment packages, everybody.

1262
00:51:59,900 --> 00:52:01,566
VERNON:
Boom.

1263
00:52:01,566 --> 00:52:07,100
♪ ♪

1264
00:52:07,100 --> 00:52:09,366
(electronic chiming)

1265
00:52:23,200 --> 00:52:30,733
♪ ♪

1266
00:52:37,966 --> 00:52:42,833
ANNOUNCER:
To order this program on DVD,
visit ShopPBS.

1267
00:52:42,833 --> 00:52:45,566
Or call 1-800-PLAY-PBS.

1268
00:52:45,566 --> 00:52:48,433
Episodes of "NOVA"
are available with Passport.

1269
00:52:48,433 --> 00:52:52,166
"NOVA" is also available
on Amazon Prime Video.

1270
00:52:52,166 --> 00:52:57,366
♪ ♪

1271
00:53:06,233 --> 00:53:13,400
♪ ♪