Original subtitles

[Voiceover] Look closely.

What do we all have in common?

No matter what corner of the world you live in,

You need food, water,

shelter and money.

Half of every transaction involves money,

in exchange for goods or services.

Stocks, a loaf of bread, illegal drugs,

You gotta pay for it.

We spend much of our live chasing money

to make a living,

and accomplish our dreams.

But it's also an instrument of destruction.

Some might say evil.

Driving criminals to lie, steal and even murder.

- The existing banking system,

extracts enormous value from society

and it is parasitic in nature.

- [Voiceover] Money is a catalyst for the worst

and the best of human endeavor.

Before civilization,

we created currency.

Fuel for wars.

The path to power.

Champion and enemy of innovation.

Money is so integral to our society,

and our global economy,

that its true nature remains a mystery to most.

This is the story of money.

Perhaps the end of money as we know it.

No matter how fat your bank account,

or how thin your wallet.

To us it's all cold, hard cash.

There are some who want to kill it.

Get rid of it.

Burn your dollars, your euros, your yen,

and transform every penny you have,

into ones and zeros.

Digital currency entrusted to the web

and computers spread across the planet.

Magic internet money.

It's called cryptocurrency, Bitcoin.

Invented in secret,

it was a gift to the world.

- It's not just a currency,

but it's actually programmable money.

- [Voiceover] A potential curse on bankers.

- I mean, there's nothing

that the big banks or politicians can do to stop it.

- [Voiceover] Breaking every governments grip

on money supply.

- What the internet did for information,

Bitcoin is doing for money.

- Could it be the new gold?

- No, you have to really stretch

your imagination,

to infer what the intrinsic value of Bitcoin is.

- Regulators, the Federal Reserve, the banking system,

at least understand this is a thing

that they have to take seriously.

- This going to change the economic culture.

- Bitcoin could be a micro-economic miracle worker

and it could be a macro-economic wrecking ball.

- [Voiceover] Is Bitcoin the currency of the future,

a Godsend for criminals,

or a recipe for financial disaster?

If you trust your money just as it is,

we have a little story to share.

(dramatic instrumental music)

Once upon a time there was a big party,

with everyone standing around the punch bowl, drunk.

Politicians credited the strong economy

to their wise decisions.

Businesses jumped into new profitable markets,

ignoring risk.

If fact the experts said there was no risk.

Then, troubling market data from minor countries,

spooked the markets.

Rumors spread.

More bad news rattled housing prices,

at the heart of the financial world.

A major bank went insolvent.

Investors and businesses made a run

on the other banks,

demanding their cash deposits.

The largest financial institutions

in the center of the modern world were frozen.

Assets were seized,

banks foreclosed.

A credit crunch threatened the entire world economy,

and then finally,

the government stepped in.

The largest bank bailout ever.

Swift action by the head of state had saved the day.

Remember that?

No you don't.

It happened 2,000 years ago.

Rome, 33 A.D.

Ground zero for the first recorded liquidity crisis

and government bailout in history.

The largest empire the world had ever seen,

was brought to its knees by a banking disaster.

Emperor Tiberius used money from the National Treasury,

to bail out the country's troubled banks and companies.

History may not repeat itself,

but it certainly rhymes, badly.

People in power and their money,

have always been at the very center of it.

(violin instrumental music)

The story of money

is as old as civilization itself.

When we lived in small tribes,

keeping track of debt was easy.

You owed somebody a load of firewood.

A neighbor owed you a piece of meat.

Credits and debits were kept in your head.

A mental ledger.

- Currency's a language that allows us

to express transactional value between people.

It's technology that's older than the wheel.

It's as old as fire.

- [Voiceover] When humans wanted to trade

outside their tribe or village,

they needed something,

everyone could agree had value.

Something scalable.

Enter commodity monies.

There were many kinds,

but each had to embody

the same five characteristics.

A commodity money is relatively scarce,

easily recognizable,

can be cut into smaller pieces.

You can substitute one piece for another of equal value.

And you can carry it around without too much trouble.

In ancient Rome, it was salt.

The Aztecs used Cacao beans.

It was whale teeth on Fiji.

Yak dung in Tibet.

Shells in Africa and China.

Grains, metal, ivory, rare stones,

leather, fish.

If it had the five characteristics of commodity money,

someone probably used it as currency.

- And then you ask,

what value did these currencies have?

If you go into a primary school,

you'll see children exchanging rubber bands

and Tamagotchi and Poke-man cards

and baseball cards and sweets

and candy and any other form of currency.

People invent currency,

when they have no other currency.

And now they're going to invent digital currencies.

- [Voiceover] But commodities that aren't durable,

are a lousy store of value.

A bad Cacao crop,

or a huge new salt discovery,

can throw your currency

and economy into turmoil.

A more stable system was needed.

About 2,500 years ago,

the first metal coins were minted in China,

and in what is now Turkey.

These coins shared the same five characteristics

with commodity money,

but were also very durable.

In some cases,

coins are the only thing left

of entire civilizations.

- Money does not originate with governments.

Money arises naturally,

as markets begin to develop.

And as people with a division of labor realize,

that if I have eggs,

and you have a cow,

we may need some medium of exchange,

in order for you to buy my eggs,

or for me to buy your cow.

- [Voiceover] Coins were an objective

and universal unit of account

and they allowed people

to buy and sell goods

over vast regions.

The market economy was born.

Coins worked,

but only if people trusted

that the king or emperor,

who issued them,

wasn't cheating on the metal content.

Using coins also meant,

that an authority now controlled the supply

of your currency.

Money and political power,

were inextricably linked, centralized.

Minting coins in a steady and predictable manner,

allowed economic growth and stability.

The Wu Zhu coin in China,

retained its value for 500 years.

In Constantinople, the solidus

lasted for 700 years.

- But in those times,

the coins didn't have the milled,

this sort of milled edge.

They were flat,

and what used to happen,

was as coins were passing from people to people,

people would cut little bits off.

And in fact,

some of the taxation that the kings would do,

would actually be take one eighth

of the coin off.

- [Voiceover] Taxes built castles,

and financed military campaigns,

expensive hobbies.

Soon, royal mints were substituting cheaper metals,

for silver and gold.

This is called debasement.

And Europe's kings made a habit of it.

The currency of France was debased every 20 months,

for 200 years.

If no one can trust the gold or silver content

of your coins,

how can you trade with other countries?

International merchants found a solution.

They recognized that one persons debt,

has value.

It can be traded or transferred.

When those IOU's came from reputable sources,

they could be used as a form of money.

Paper money.

This money was not based on hard commodities,

or metal, but instead,

on someone's promise to pay.

Merchant families like the Medici,

in 15th century Florence,

acted as clearing houses for these IOU's.

It worked like this.

An English trader ordered a shipment of Italian cloth,

from the Medici for 100 gold coins.

His promise to pay the Medici was put on paper.

Meanwhile, the Medici owed 100 gold coins,

to another trading partner,

for delivery of wine from France.

The parties didn't go to the expense

of transporting and exchanging gold coins.

Instead, the paper was transferred.

Everyone agreed that the paper had value,

100 gold coins.

But only because the everyone trusted the Medici,

as solvent middlemen.

They had created a paper money machine.

Within a few generations,

they rose from low crime

to high finance.

Their great wealth,

helped fuel the Italian renaissance

and elevated the family

to levels of enormous political power.

The power to marry into royal families

and get elected as popes.

The ties binding money to power, politics

and influence now ran through church and state.

Merchants had proven that creating paper currency

could be wildly profitable.

Goldsmiths wanted in on the action.

- Imagine it like this, if the goldsmith had seen

over a period of time that some

of the coins he is storing for people were gathering dust.

The people who own them, don't need them right now.

So what if I go and lend them out into the community

and I charge them interest on this loan.

So he starts out lending some of these gold coins

and then later he realizes, actually people

don't even want the gold coins they just want the piece

of paper that says that the gold coins are in the bank

and with the goldsmith.

So I can now make a loan with these pieces of paper.

And whatever I write on the piece of paper,

as long as the people trust me, they'll trust the paper.

And effectively the goldsmiths, the early day bankers,

they had literally acquired the power to print money.

- [Voiceover] More and more such private paper money

from merchants and banks circulated

and began to rival the crown's coins.

The power inherent in controlling

and issuing money began slipping away from the rulers.

They couldn't tax or de-base this new kind of money.

But they had bigger ambitions than ever with trading posts,

colonies, and empires that now stretched across the globe.

For centuries, European countries

would take turns building massive fleets

and waging war on each other to rule the world.

(yelling)

- Government wanted to take the people's money

in order to finance its wars.

That's essentially the history of money.

Money and warfare go together.

- [Voiceover] War is expensive.

One year's income taxes simply aren't enough.

Kings and queens had to borrow money against future taxes.

They needed a ground breaking financial innovation,

government bonds.

The loans came from rich merchant families and goldsmiths,

who by now had become powerful financiers and bankers.

Sovereign debt and deficit spending had been born.

(upbeat instrumental music)

In 1694, the bank of England was established

to fund a war against France.

England's central bank was privately owned

and granted the monopoly to issue banknotes,

paper that could be redeemed for an equal amount

of gold from the government's coffers.

The central bank soon also managed the entire debt

of the crown.

- Money has been a tool of sovereignty for centuries.

Being able to issue currency gave you the power

but it also gave the value to that monetary supply

by backing it with the force of state

with essentially the debt of state.

- [Voiceover] When the U.S. won independence from Britain,

the first article of the new constitution

gave congress the exclusive right to "coin money".

This currency's value was tied to gold in government vaults.

From 1781 until the panic of 1907,

the financial system of the U.S. was an economic Petri dish.

Brief central banks, state banks, private banks,

private currency, government currency,

depressions, strong growth, recessions,

regular boom and bust cycles.

- The long term, as far as capital is concerned,

people want predictability,

people want stability.

From the back of that they can plan

and it is very hard to plan in the long term

with it such a evel of volatility.

- [Voiceover] In 1913, bankers and politicians decided

that it was in the country's best interest, and theirs,

to have a permanent central bank.

They created the Federal Reserve.

Among its jobs, expand or contract the supply

of a single national currency,

the Federal Reserve note.

The dollar was tied to gold and strategic control

of it would avoid booms that lead to busts.

At least that was the plan.

Then came 1929.

(yelling)

The great depression would have a profound effect

on monetary policy worldwide.

- [Roosevelt] I shall ask the Congress

for the one remaining instrument to me the president,

broad executive power.

- [Voiceover] Soon, the Fed had printed nearly all the money

it legally could to pump life back into the economy.

It needed gold to fire up the mint.

So in 1933, President Roosevelt issued

a controversial executive order,

forcing all U.S. citizens to sell their gold

to the Federal Reserve at a fixed price,

or go to prison.

The Fed offered far more cash

to foreign governments for their gold.

Many jumped at the offer.

Gold flowed in,

and dollars spread across the globe.

World War II devastated nearly every major economy,

except the United States.

The military and industrial juggernaut emerged

as the global financial super power.

The dollar had become the world's most stable

and trusted currency.

Other countries pegged their currency to the dollar,

which could still be redeemed for gold.

In fact, the U.S. owned more than half

of the world's gold reserves.

In the next few decades,

more dollars flowed to foreign countries.

Governments began debasing their coins

with cheaper metals and printing more

of their own currency than they had in gold.

The bond between precious metals and paper currency

was cracking.

- This is a 1966 50 cent piece.

It was the last coin in regular circulation

in Australia to contain silver.

It contains 80% silver,

so in 1966, this was 50 cents.

Nowadays it's 8 dollars, roughly,

in silver alone.

- [Voiceover] By 1966, foreign nations had had enough

of the U.S. collecting gold and printing cash.

And they had more value in dollars than the U.S.

had bullion in its vaults.

They demanded gold in return for their paper dollars.

Arguments about the value of the dollar

versus their currency ensued.

In 1971, President Nixon settled the matter.

He severed United States' currency from the gold standard.

- I directed Secretary Conelly

to suspend temporarily the convertibility

of the dollar into gold or other reserve assets

except in amounts and conditions determined

to be in the interest of monetary stability

and the best interest of the United States.

- [Voiceover] Never again could anyone legally demand

U.S. Government gold in exchange for paper dollars.

For better or worse, the dollar was now backed solely

by the full faith and credit

of the United States Government.

The wealthiest nation the world had ever known

would bet its future on a single word, trust.

- People have this mythology of money

that is based on very little fact.

And one of the nice things about Bitcoin

is that it forces people to start to ask questions

about the fundamentals of money.

- A Bitcoin is an attempt

to adopt the advanced computerized system

that we have, the internet,

to resurrecting to what money used to be all about.

(upbeat instrumental music)

- I think our dollar policies our monetary policies

our fiscal policies have absolutely created

a nation of debtors.

Not just personal debt, not just corporate debt

but government debt, you have to look

at those all together as one big thing.

What is the wealth of the nation?

Well, the wealth of the nation is a gigantic hole

of money that we owe to the rest of the world,

that is never going to be paid back.

- [Voiceover] Today the United States pays more

than 400 billion dollars in interest

to its creditors, every year.

When a government spends more money

than it collects in taxes,

it simply borrows more or it creates more.

At one time, every piece of paper money

was backed by gold.

Remember, for every 20 dollar bill,

there was $20 worth of gold in a government vault.

Not anymore.

Today, governments create currency

by first creating bonds or treasury-bills.

These bonds are sold in the market,

generating funds for the government that issued them.

Large banks buy U.S. bonds to flip them,

selling them to the Federal Reserve at a profit.

This is the magic money machine.

You see, the Fed is America's central bank.

But it doesn't have any money,

no cash on its balance sheets.

When a bank buys a bond and takes it

to the Federal Reserve, the Fed simply says

"thank you Mr. Banker,

"here's the principal and some profit."

(ching, ching)

New money isn't exchanged,

it simply appears on the bank's accounts.

Magic.

For 100 years and counting,

the precise mechanisms of these bond purchases

have remained a secret.

Here's where it gets really interesting.

The Federal Reserve is not a Government agency.

It's a private entity and its shareholders

are banks which earn a dividend.

As much as 80 billion dollars per year, total,

are paid out to some of the very same banks

that sell the Government debt to the Fed.

Which banks?

Don't even bother asking.

That's also a secret.

In other words, the magic money machine answers to no one.

The Fed also sets the bar for how much interest you pay

for a car, home, or business loan.

- The Federal Reserve has been given the impossible task

of trying to run the credit

and monetary system

as though we are the Soviet Union.

It's the central planner for the key aspect

of capitalism which is how money

and credit is allocated.

The Federal Reserve, on balance,

does not help the economy.

On balance, it hurts the economy.

And it's bound to make mistakes

even with the best of intentions.

- [Voiceover] The Fed is also supposed to boost employment

with low interest rates.

Encouraging people and businesses to buy more goods

and services.

- Governments getting involved in money

is a good thing, and it's also a bad thing.

It's a good thing because money

is the arteries of the economy,

the blood supply of the economy.

Markets are subject to

bouts of euphoria and despair.

And it makes sense for governments

to back currency and to manipulate it.

Moving the money supply up and down

s the most powerful way to sedate

that boom and bust cycle.

- [Voiceover] Manipulating the supply of money

has short term and long term consequences.

(instrumental music)

Central banks aim to create new money carefully,

strategically and very, very slowly.

Releasing more money into the economy

cause prices to rise, ideally by 2% every year.

That's supposed to foster economic growth.

But, 2% inflation means the buying power

of one cash dollar in your pocket today,

will be 98 cents next year.

And less nearly every year to come.

- Since 1913, when the Federal Reserve took over

the United States dollar,

we've seen that the United States dollar has decreased

in value 98%.

Inflation is a far higher tax

because on your income you pay it just once.

If inflation is 2%, you're paying a 2% tax

on your net worth every single year.

Your net worth that you held in currency.

- [Voiceover] So, what does that mean?

If you earned a dollar in 1913,

you could buy 16 loaves of bread.

Today, a dollar barely buys you one.

That's not a quaint notion of how cheap things used to be.

It's proof that the value of your cash

is slowly withering away.

That one dollar invested at 2% in 1913

would now be worth 7 dollars and 24 cents.

More than a 600% return versus a near-total loss.

- The U.S. dollar has gone from being worth one dollar

to now being worth about 4 cents,

so that's 96% of its original value.

That's a direct result of government control.

- [Voiceover] Governments don't create money

from thin air all alone.

You play a key role in the magic money machine.

- It's not really the central banks that are the problem.

They are part of the problem.

But the real problem is that we've given the power

to create money to the same banks

that caused the financial crisis.

- [Voiceover] We put our paychecks and savings

into a bank account and draw from it as we need it.

The banks are the custodians of our money, right?

Wrong!

It is now the property of the bank,

on their balance sheets.

They can do just about anything they want with it,

for example create new money.

Here's how, your bank account shows 100 dollars,

but the bank only holds three and loans 97

to Bob to buy something.

In the bank's computers, you still have 100 dollars

in your account.

But Bob now has 97 dollars

of new virtual money in his account.

Just digits on a computer screen.

There's no cash, no gold, or anything else

backing up the new numbers in Bob's account.

Just his promise to pay it back.

This is new money created as debt.

When those 97 dollars are spent, say in a shop,

the shop owner deposits it into another bank

and it is lent out again and again and again.

And each of these people have numbers

in their accounts showing that they own this money.

So your original 100 dollars has multiplied,

now there are over 3,300 dollars in the system.

This process of loaning out far more money

than a bank actually has, as cash on hand,

is called fractional reserve banking.

- In the U.K., 97% of the money that exists,

is just numbers in the computer system.

And those numbers have been created by the banks.

- [Voiceover] Banks earn untold billions in interest

every year by creating and lending virtual money.

What's more, banks don't even need your deposit

to create new money.

If they consider someone credit-worthy for a loan,

they can put new magic money into his or her account,

and start charging interest.

- So, reporters talk about Bitcoin

as though it's the first digital currency.

But actually we use digital currency

every time you make a transaction

through internet banking, or your bank card.

Actually it's not only digital currency

it's digital currency that is created by

the banks, essentially, out of nothing.

- [Voiceover] In other words, all new money is debt.

This is the part of money creation

that isn't taught in economics class.

Money in paychecks, bank accounts,

401ks, that loan to Bob, credit card debt,

your homeloan, all began life as virtual money

created by the banks.

The entire system is based on trust.

Trust in the bank's solvency.

Trust in the debtor's ability to repay their debt.

If all bank customers demanded just 3%

of their deposits right now, in cash,

this "run on the banks" would reveal the truth.

Almost none that paper currency you think

is in your bank account exists.

It never did.

(birds chirping)

Remember the drunken party?

(rock instrumental music)

Our financial crisis had everything

to do with virtual dollars.

Too many people, with very little income,

borrowed a lot of money they could never repay.

But the banks didn't care.

They didn't have to.

They quickly made and sold shaky loans

to someone else, for a profit.

- And I got them all approved.

- Hey!

(laughter)

- Apply now.

- [Voiceover] Selling bad loans was a good business,

until the whole thing blew up in a global financial crisis.

The magic money machine destroyed 30 million real jobs.

The United States alone lost 16 trillion dollars

in household wealth.

And the banks foreclosed on more than 1 million homes.

(angelic instrumental music)

Selling subprime loans and betting they will fail,

may not be sacred, but it is lucrative.

As much as a quarter of our best and brightest

are being lured by the siren call of the money machine.

Instead of science, engineering,

or medicine, they chose a career playing with,

betting with, other people's money

to get rich quick.

Very rich.

And sometimes, they take shortcuts.

♪ Get by on a nickle and a dime,

♪ Money has a funny way of bringing us down

♪ They say it makes the world go round and around♪

- My ancestors in Greece talked

about the corrupting influence of power.

And nothing has changed in these 3,000 years.

When you give control of a massive amounts of money

to a few individuals, they will take advantage

of that control.

♪ Oh, oh, oh♪

- Banks today are factoring in fines

and money laundering and all the rules that they break

into their cost of doing business.

JP Morgan is today coming out and saying

that Bitcoin is not a legitimate way of doing business.

Banks today are tied into a system

that is completely rigged to basically harvest money

from the entire global economy

and pump it into the hands of the very few.

♪ Don't get consumed by your greed

♪ La la la la la la♪

- The existing banking system is cozy.

Its captured the regulators, it extracts enormous value

from society without delivering anything in return

and it is parasitic in nature.

- The banks play a very pivotal role in an economy.

You look at any successful economy it has successful banks.

There is a very close correlation with banking profits

and the economy as a whole.

- [Voiceover] In Medieval Europe, a banker

who couldn't repay depositors was hanged.

Today, that same banker would get bailed out,

paid bonuses and enjoy some tax benefits, too.

To date, no senior U.S. banking executive

has been charged for selling the bad loans

that fueled the great recession.

In December 2014,

Just 6 years after the last banking crisis

brought the world to its knees,

a Congressman snuck a last minute provision,

written by Citigroup into a crucial funding bill.

The provision allows the largest U.S. banks

to once again make risky derivatives bets

with bank deposits.

But no need to worry,

if the banks implode again, lost deposits must be paid back

by U.S. taxpayers.

(bell rings)

Today's financial innovators package assets

in ever more complex ways, slicing, dicing,

securitizing, always using someone else's money.

They sell debt, transfer risks, leverage bets.

That's what they call innovation.

- When you're talking about financial innovation,

Bitcoin certainly is a very good example

of innovation, but there's also been

other innovations that people,

a bit closer to the world of finance

would cite as good examples.

An example of that would be the original swaps market,

from there moving on to the credit default swap.

It is an excellent example of financial innovation.

But also if it's used incorrectly,

it can create a lot of problems as we've just seen.

- [Voiceover] History teaches that the most revolutionary

and disruptive innovation nearly always comes

from the fringe, not from corporate cubicles.

True innovators see the world differently.

They see the big picture.

Creating new products and entire systems

that lead to new industries.

Steve Jobs called them the "square cogs in round holes".

- It's unsurprising that new innovations

always come from a niche group of early adopters

because it is inherently very hard for many people

to realize the benefits of new technologies.

In 2011, most Bitcoin community people

were either

people from the technology space, the geeks and hackers,

or people from the traditional financial industry.

There are even some bankers and hedge fund traders

using Bitcoinica at that time as well,

which was really surprising to me.

- [Voiceover] A radical new idea is often met

with skepticism, ridicule, even hostility

from those who stand to lose most from its success.

Case in point, the automobile.

In the late 19th century, Karl Benz

and others built the first cars,

contraptions that could threaten the stagecoach

and railroad industries.

These "self-propelled vehicles'" or road trains,

would certainly scare horses, injure people

and damage roads.

Cars, the railroad barons said, were just too dangerous.

And to protect us, they used their power

to pass a law in 1865.

It required every automobile in England

to observe a four mile per hour speed limit

and to be operated by a crew of three,

a driver, an engineer and a flag man.

This heroic flagman walked in front of the car

to warn fellow citizens of the coming danger.

The railroad tycoons, the lawmakers,

the self-appointed gatekeepers used regulation

to stifle innovation.

But they didn't invent the flagman.

He's been around for a long time.

For centuries, very few could read.

Books were copied by hand.

The people in control, political

and religious leaders, wanted to keep it that way.

And they greeted Johann Gutenberg's printing press

with licensing laws, publishing bans, taxes.

In some parts of the world, printing was a crime,

punishable by death.

After all, they were just protecting us

from dangerous ideas.

Before the printing press, there were

an estimated 30,000 books in all of Europe.

50 years later, there were 10 million.

As Gutenberg's invention flourished,

the Dark Ages withered.

Progress couldn't be stopped.

But the flagman never stops trying.

His masters set him loose on each

of these innovations

because they threatened someone's profits,

someone's control.

But remember, this is a story about money.

What if a technological innovation allowed anyone

in the world to be their own bank,

to create a currency free from taxes and banking fees?

The U.S. Constitution forbids citizens from printing

or minting their own currency, competing with

or undercutting reliance on the U.S. dollar.

In 1998, Bernard von Nothaus decided

to test the resolve of the federal government.

- The Liberty Dollar was available in gold,

silver, platinum, and copper.

It was available in three forms, both in specie,

in other words, gold and silver,

in paper, as warehouse receipts and in digital form.

Obviously, the government didn't like it.

They arrested me and convicted me

of counterfeiting, fraud, and conspiracy.

And I’m currently awaiting 22 years sentence

in federal prison.

- [Voiceover] Lesson learned.

- At a hacker's convention in Netherlands,

there was a young hacker there

who used the alias of Satoshi Nakamoto,

and he talked to a friend of mine

and he identified the Liberty Dollar and me

as inspiring him to create a new currency.

- [Voiceover] Bernard von Nothaus's arrest

for creating "private money",

may also have inspired Bitcoin's inventor

to keep a lower profile,

publishing the invention under an alias

and vanishing.

- Part of me is interested to know who Satoshi is.

Maybe that's part of the mystique of the story,

it's completely irrelevant to the functioning of Bitcoin

because we have the code to read.

But it would be kind of fun to know.

- Who is Archimedes?

Who is Euclid?

We don't know.

We don't know if Euclid was one person or multiple people?

And you know what?

It doesn't matter.

Euclidian geometry works

whether I know who Euclid was or not.

Whether Euclid was a moral and good person.

Or whether he was a corrupt plutocrat and a bastard.

Science and mathematics have essential truths

that stands alone irrespective of its inventors

and irrespective of their motives.

Well, Bitcoin is a system based

on mathematical truths.

And these mathematical truths stand alone.

We can read the source code in Bitcoin

and understand it and it will be true

whether Satoshi Nakamoto is a man, a woman,

a collection of individuals, a government agency

or aliens from the future.

- [Voiceover] Bitcoin is digital currency

and computer software.

Capital B Bitcoin is the shared code

that creates a global payment network,

using computers connected to the internet.

Bitcoins are virtual currency.

Digital money created, stored and exchanged on that network.

But unlike virtual dollars created by a banker,

this new currency was created with math

by an anonymous inventor.

Bitcoin is an open-source software protocol,

like much of the code supporting the internet and email.

Open-source means anyone, everyone can use the protocol.

No one person or company can control it.

Every change to the software is public,

open and transparent.

The code was first developed by Satoshi.

Then there were dozens, now hundreds

of programmers constantly collaborating

to improve Bitcoin's features and security.

So what makes Bitcoin a breakthrough?

It tackles an ancient human dilemma

and solves a computer science problem.

Any shared information, or data

can be flawed, corrupted.

Anything can be faked.

How do we know that what we're receiving can be trusted?

- In our traditional mindset,

it's very important to know who is behind

this currency because their reputation

is significant in knowing that our funds

in the true wealth is actually safe.

- [Voiceover] In finance, we rely

on trusted third parties like banks,

credit card companies, remittance services.

They keep track of money as it moves

from one account to another.

And they charge us handsomely for it.

We trust that their digital ledgers of credits

and debits balance.

A financial system that cuts out these middlemen

could be faster, cheaper

and more secure.

But Bitcoin is digital.

Music and movies are easily pirated, copied, stolen.

How can a digital currency retain value

if anyone can make a million copies?

The answer is at the core of Satoshi's invention.

A Bitcoin is not a file on a computer.

It's an entry in the publicly- distributed database

called the blockchain.

Just as the Medici kept a ledger of credits and debits.

Today's banks record each transaction

as a plus and minus in their ledgers.

Now we call them databases.

Bank accounts are replaced by a digital wallet

that you alone control.

Bitcoin's ledger is the blockchain.

A record of every bitcoin in existence

and every bitcoin transaction ever made.

It always balances because no bitcoin ever leaves it.

When a bitcoin is "sent" from one digital wallet

to another, what they are really sending

is control over that part of the database.

Code that is a unique key for the new owner.

As the network processes transactions,

it constantly synchronizes the one ledger

across the global network.

Each computer, or Bitcoin miner,

has a complete and identical copy.

And because the blockchain is public,

it cannot be controlled by any one person or computer.

Owners of the Bitcoin mining computers

are rewarded with new Bitcoins for processing transactions

and keeping the network secure.

In other words, the Bitcoin network replaces banks

and bankers.

Today, the combined computing power

of this global network is greater

than the 500 biggest supercomputers combined,

times 10,000!

And because every transaction is verified

and recorded by the network,

a bitcoin cannot be forged.

Digital currency cannot be debased with cheap metals,

or printed by the billion at will.

Too much currency can unleash a monster,

skyrocketing prices, trillion dollar bills

that can't buy a loaf of bread.

- There is a big movement in the U.S. demanding

that the Fed be audited so

that we can find out what they are doing.

Nobody really knows how many dollars

are in existence for example.

Ben Bernanke created several trillions

of dollars over the last several years.

But nobody really knows where they landed.

- At any time for any reason,

the central banks can print as much money as they want.

They call it fancy things like quantitative easing.

And when they do that it makes the dollar

or euros or yen that you and I have worth less.

So if the world starts using bitcoin as their currency

it can't be controlled by central bankers or politicians.

- [Voiceover] Remember, central banks create money

to boost the economy and try

to pull it back out before inflation heats up.

But no one knows how much magic money global banks

are creating to boost their profits with questionable loans.

- Bitcoin is completely the opposite.

It's totally transparent.

You know exactly how many exist.

- [Voiceover] The computer code behind Bitcoin

has a built in brake pedal,

cutting the creation of bitcoins

in half every four years.

This ensures a transparent controlled scarcity

and ultimately limits the total number of bitcoins

to 21 million.

No lobbyist, no politician, no banker can create more,

or change the mathematical rules dictating their creation.

- Advancing accountability.

And that's something that's the most exciting about Bitcoin

and technology behind it.

Is not so much that it will supplant the dollar

or that it will supplant government itself.

But all of a sudden there is a competitor to government.

And that government itself now needs

to look over its shoulder more than it did.

- [Voiceover] This new digital currency

can be purchased online with a credit card

or in person with cash.

And it has the five key characteristics of money.

But is it a store of value?

Is it stable or will it diminish over time,

like a commodity rendered useless, or a crop that fails?

The ultimate power of a cryptocurrency

is unleashed by mainstream adoption

and an ever-growing volume of transactions.

- With bitcoin, the currency is being created

much more slowly than other currencies.

And the effect of that has been

to turn it into what is essentially a speculative asset.

If you ask a lot of Bitcoin enthusiasts

whether they are spending the currency, they're not.

They're sitting on it and waiting for the price to go up.

It isn't a currency if you don't use it to pay people.

The point is that the average person is quite happy

to walk into a bar and hand over a five dollar note

in order to get a drink.

So you've got to realize that most people

are happy with the money system they have.

- [Voiceover] If most people are happy with cash,

they're in love with plastic.

In the U.S. two-thirds of in-person sales

are done with debit or credit cards.

That plastic is a 60 year old technology,

created by a middleman.

Never designed for the internet.

Each transaction requires personal data

like your name and address.

Credit card databases are regularly hacked

with fraudulent purchases charged to your account.

Criminals buy and sell stolen credit cards

by the thousands in dark corners of the internet.

In some parts of London, one-third

of all online credit card transactions are fraudulent.

Card issuers don't hold you responsible for fraud

but protection comes with a price,

2 to 4% in fees.

That's 50 billion dollars a year.

- The issue with credit cards

from the merchant's perspective

is there's a lot of risk.

If they a take a credit card, there might be a chargeback,

there might be fraudulent purchases.

In fact there are hundreds of billions

of dollars every year in fraudulent purchases.

- [Voiceover] A bitcoin purchase is done for pennies

but there are no protections.

If you lose your passwords,

or are fooled into paying the wrong person,

you can never get your money back.

It is like digital cash.

For a seller, this means no chargeback risks.

For an e-commerce companies like Expedia or Overstock,

cutting credit card fees can double their profit margin.

- You could not miss the point more effectively

than by thinking of bitcoin as a currency

and payment network that will make shopping easier

for the first world.

Bitcoin is about everything else, everywhere else.

- [Voiceover] There are 2.5 billion people

without a bank account.

With Bitcoin, a mobile phone with an internet connection

is now a bank, with access to the global market place.

- What happens when Bitcoin services

and infrastructure and Bitcoin wallets

and payment processors start going into these countries.

These people will be able to gain benefits

from trade where they could not previously.

These people will be able to send money home,

international remittance, which is one

of the major pain points of the current financial system.

- Here, if I send 100 dollars.

With banks it's going to cost me 20%.

Western Union's going to cost 10%.

Other options that are competing with Western Union

are still going to be about 5%.

And if you are sending to really remote areas

it's going to be anywhere between 15 and 30%.

- So in terms of money remittances

it is going to be a game changer using Bitcoin.

You do not need a bank account.

You just need an internet connection

and a wallet to get set up.

It's a tool to give people an access

into the global ecosystem and give them a promise

for an economic future and specifically provide a way

for them to not be dependent on a government

that could shut down their bank accounts

or even could go into their bank accounts

and take out finances.

- Goldman Sachs came out with a report

and they basically looked at

if you were to replace all transactions globally,

so FX, bank to bank transactions

with the Bitcoin protocol and still charging 1%, mind you,

it would save the global economy 200 billion,

not million, 200 billion dollars a year

in saved transaction costs

which ultimately goes back into the hands of the consumer.

- [Voiceover] An international wire transfer

can take up to four days.

Yet the internet allows us to instantly

and globally share text, pictures, videos,

anything digital.

Why not money?

Money, which, we now know only exists

as digits in a bank's database?

- Wouldn't it be great,

if you could send Bitcoin transactions

just simply via a tweet?

For example, you would say @theendofmoney

one dollar worth of bitcoin and so we built just that.

All you have to do is to hashtag it with tippercoin.

Press send.

And our twitterbot will process the transactions,

notify you and give you a link and this will allow you

to either withdraw your bitcoins or send it to someone else.

- With Bitcoin, you can send one dollar

or 1,000,000 dollars worth of value anywhere in the world.

You can do it for free

or you can pay the Bitcoin network fee,

which is still just around a penny.

And there is nothing that the big banks

or the politicians can do to stop it.

- [Voiceover] A cryptocurrency that can only be created

and transferred with computer networks

may be the next step of the digital revolution.

The rise of machines.

Self-driving cars, drones,

robots that rely less and less on humans.

- What I often think is that the future of Bitcoin

or digital currency from a broader perspective

is really about machine to machine payments.

So by the time you have an un-manned taxi driving you

around New York, and then going to power up

at an unmanned power station,

or going to get repairs at an un-manned auto shop.

You'll see the machine to machine payments done

with some sort of digital currency.

- We actually built this world that we live in

over the last two or 300 years.

We made some mistakes.

We've learnt to make things better.

The idea that there is this magic key

that if you just sort of stop doing a few things,

that they'll be perfect order that will settle,

is a very childish,

ideological delusion

in my opinion.

But that's not to say

that Bitcoin isn't an exciting thing.

It's an terrifically exciting thing.

But we have to try and engage with it

with working minds not with magical thinking.

- People are suggesting that it's going

to be another world currency

rivaling the dollar, or the euro, or the yen.

I think that's not going to happen.

I prefer to trust the banks or the central government

compared to the Bitcoin is because someone is accountable.

Whereas with the Bitcoin it is completely deregulated.

There is no central control.

There is no one held accountable.

It is a free float, purely demand and supply driven.

- So, clearly, this is not a currency.

Currencies don't behave like this.

But what this is is a high-risk, speculative commodity.

- So, for the entrepreneurs, the bankers,

the governments and anyone else studying

and watching Bitcoin, all I have to say

is that there will probably be a lot of volatility

in an upward trajectory and to buckle up.

- [Voiceover] Criminals, scam artists, bad actors,

are drawn to any kind of money like a moth to a flame.

- Silk Road was a marketplace that was online.

it existed in the underground web.

Now this marketplace allowed people

to sell things that were illegal to governments.

- [Voiceover] Fake ID's, pirated music,

bibles in North Korea.

Are cryptocurrencies inherently bad

or just the newest tool to acquire the forbidden?

- Porn is illegal in Iran.

Well, there was a few percentages of sales

on Silk Road was to sell porn to Iranians.

Now, a much broader one,

that gets a lot of press for the guys at Silk Road is drugs.

- I've been doing research over the past couple of years

into the online drug marketplaces

in the Dark net using TOR and Bitcoin

as technologies to enable illicit drug transactions.

We did a global survey of drug users

and we had over 20,000 people respond

to that and the majority of those people

were buying traditionally illicit drugs.

Ecstasy, cannabis.

The F.B.I. brought down Silk Road.

It certainly hasn't stopped the trading

of illicit drugs online.

- A lot of people want to criticize Bitcoin

for the use for illegal things or illicit things.

But if you look at it, the most popular currency

in the entire world for doing bad things is the U.S. dollar.

- If you think of Bitcoin as a platform instead

of a currency then you really begin

to see the potential it has.

- The ledger which cannot be forged,

it cannot be changed and is universally accepted is Genius.

There will be Bitcoin technology forever

and it will have applications for years to come.

- [Voiceover] Creating a secure, global payment system

may just be the beginning.

Patents, contracts, land titles,

proof of ownership can be baked into Bitcoin.

Securely held in the public ledger.

- I read up more about Bitcoin.

I played with the source code.

I built some things that I realized,

this is a actually a very, very powerful protocol.

It's not just a currency but

it's actually programmable money.

- [Voiceover] The digital age has fundamentally

changed the world.

We have embraced digitized music, film,

medical records, communications, the internet.

The free exchange of information

and currency can fuel revolutions,

help in a disaster.

But our money is shackled to the 20th century,

manipulated by governments and banks.

The champions of Bitcoin ask us

to imagine payments without a middle man.

Investments without a broker.

Loans without a bank.

Insurance without an underwriter.

Charity without a trustee.

Escrow without an agent.

Betting without a bookie.

Record keeping without an accountant.

Global, secure, nearly instant

and free.

Is it fantasy or the future

of money and commerce?

(intense instrumental music)

- I love bitcoins.

I'm really into bitcoins.

♪ Well Satoshi Nakamoto

♪ That's a name I love to say

♪ And we don't know much about him

♪ But he came to save the day♪

If you don't know what a Bitcoin is, right,

usually the way people describe it

is a digital cash.

It's money for the internet.

♪ Bitcoin as your going into the old blockchain

♪ Oh Bitcoin, I know you're going to reign, gonna reign.

They were like, "oh, I love my bank."

I'm like, "really?"

You ask a banker, "you know what's two plus two?"

He's like, "well, I can tell ya but there's a fee."

(laughter)

♪ Down the road it will be told

♪ About the Death of Old Mount Gox

♪ About traitors trading alter coins

♪ And miners mining blocks♪

Now Bitcoins is a new technology.

I like to say it's banking (mumbling)

All of the convenience, none of the evil.

(laughter)

♪ Oh Bitcoin, as your going into the old blockchain

♪ Oh Bitcoin, I know you're going to reign, gonna reign

♪ Till everybody knows, everybody knows♪

You know when I go in line

and I buy like, I don't know, a pair of socks.

If I pay with a credit card

I'm just buying socks.

Right, if I buy those socks with bitcoin,

it's a revolution.

(laughter)

I am sticking it to the man.

♪ Oh Lord, pass me some more♪

There's always people who are not ready

to get into the new technology.

You know, like when the internet came out,

there was people going,

"nah, I don't think this is going to be popular."

(laughter)

And then e-mail came out and people were like,

"nah, this isn't gonna catch on."

And now Bitcoin comes out,

people are like, "I don't think,"

I'm like, "aren't you sick of being wrong?

"Get on this train."