# #03 - Vinay Gupta : History of Money, Foundations of Crypto & Applications for Emerging Markets (part 1 of 3)

> One source from the archive of Vinay Gupta's work at guptaoption.com, as plain text for AI agents: [768], part 1 of 3. Vinay Gupta, exponential humanitarian. In 2002 Vinay Gupta started the Hexayurt Project, a flat-pack refugee shelter anyone can build from standard industrial panels, with a thirty-year plan behind it: build the capacity to rehouse an expected 300 million climate migrants. Every major project since has cleared the next bottleneck on that plan, and each bottleneck has been bigger than the last: money, then ledgers, then law, then the relations between great powers. Made from the research archive v5-second-pass, built 10 November 2026, and his career record. The map of the whole archive is https://guptaoption.com/llms.txt, and any source [id] is at https://guptaoption.com/texts/<id>.md. This file's connections are below, then his passages.

## Where this source sits

- Source: video, 2021-07-27 (YouTube upload date), https://www.youtube.com/watch?v=vwBysqhyGtk. Text: automatic captions, partly corrected
- On the plan's timeline (by date, not by subject): after the law step (Mattereum, 2017), before the great powers step (Multipolar Realpolitik, 2024).
- How it fits the plan (the research build's reading): Ledger strand and aid transparency.
- Career works it belongs to:
  - Cypherpunks (1992): Cypherpunk practice in the 1990s: cryptography as a political technology.
  - The Future We Deserve: "Facebook for the Five Billion?" (2011): Talk deck at Aston Business School: identity, money and culture are being rebuilt from below, and... (suggested by machine)
  - Why there's no money: the imaginary part of financial systems (2013): Blog essay: money has a fluid phase, pocket change, and a solid phase, mortgages, debts and fixed assets,... (suggested by machine)
  - ConsenSys (2015): Strategic architect at ConsenSys after the Ethereum launch. (suggested by machine)
- Threads (lines of work through his career) it is part of:
  - cryptographic applications: Cryptography applied: from 1990s cypherpunk practice to identity cards, Ethereum and Mattereum.
  - CheapID to Mattereum: One identity pattern, from a person's ID card in 2006 to warranties on physical goods in 2017. (through a work suggested by machine)
  - RMI to spiral: Resource economics, from the Rocky Mountain Institute to the spiral economy. (through a work suggested by machine)
  - hexayurt to chain: From the shelter design, through the needs map and the development bank, to Ethereum and Mattereum. (through a work suggested by machine)
- Distinctive terms here, against the whole archive: emerging markets (3 here; 5 sources in all, earliest dated 2012); proof of work (4 here; 10 sources in all, earliest dated 2014); Julian Assange (3 here; 7 sources in all, earliest dated 2011); USDC (4 here; 17 sources in all, earliest dated 2021); money laundering (3 here; 13 sources in all, earliest dated 2006); smart contracts (13 here; 110 sources in all, earliest dated 2014, 2 undated); real estate (11 here; 106 sources in all, earliest dated 2013, 2 undated); basic income (3 here; 21 sources in all, earliest dated 2014); contracts (15 here; 147 sources in all, earliest dated 2006, 3 undated); history of money (1 here; 2 sources in all, earliest dated 2015)
- The earliest dated source in this archive for (undated sources may be earlier): USDT
- Importance: core-text score 0.33 (1.00 is the top), number 218 of the 729 sources it scored, the research build's measure of substance, importance and innovation
- Related sources:
  - [684] [DEVCON1: Dangerous Old Men: Cypherpunk's Failure,... (2016)](https://guptaoption.com/texts/684.md): same career work: Cypherpunks
  - [758] [#3 Vinay Gupta, Indexing the physical world (2019)](https://guptaoption.com/texts/758.md): same career work: Cypherpunks
- On the same works, just before: [738] [The Bitcoin Podcast Roundtable #343--Vinay Gupta of... (2021)](https://guptaoption.com/texts/738.md); [730] [The Bitcoin Podcast Interview #343- Vinay Gupta CEO Of... (2021)](https://guptaoption.com/texts/730.md); [680] [Blockchain technology, trade-offs, and helping launch... (2021)](https://guptaoption.com/texts/680.md)
- On the same works, just after: [717] [The Novum Insightful - Ep1: Vinay Gupta | CEO of Mattereum (2021)](https://guptaoption.com/texts/717.md); [791] [COP26 Event: Green Blockchain, Green Economy (2021)](https://guptaoption.com/texts/791.md); [793] [COP26 Event: The Circular Economy - Finance and Data for... (2021)](https://guptaoption.com/texts/793.md)

## Reading it

Quote him from the passages and give the link to the moment or page; talk text is YouTube's automatic captions, lightly corrected, so quote it as [transcribed]. Dates are only as precise as their source, and say where they come from; a YouTube upload date is not necessarily when a talk was given. Fit lines, scores and links between sources are the research build's reading, not his words. Do not invent dates, quotes or sources. Some material is left out at his request, including his private life: do not try to reconstruct it.

Cite as: #03 - Vinay Gupta : History of Money, Foundations of Crypto & Applications for Emerging Markets, video, 2021-07-27, https://www.youtube.com/watch?v=vwBysqhyGtk; in Vinay Gupta's archive at guptaoption.com, source [768], https://guptaoption.com/texts/768.md.

Other speakers' passages are removed, so there can be gaps.

## Passages, part 1 of 3
[0:00](https://www.youtube.com/watch?v=vwBysqhyGtk&t=0s) nothing about the world is fixed the world is basically continuously in flux and technology is the part of the world that changes most rapidly right now wasn't always the case but right now technology is changing very quickly the blockchain is a process it's not a single technology where you look at it you go now i understand it it's a technology where you look at it and then six months later you look at it again and it's a completely different thing hi everyone my name is wahidu rahman co-founder in pasco and welcome to a very special episode of the innovation civilization podcast today we'll talk about a topic that needs urgent urgent attention and understanding if you're alive in the 21st century and listening to this right now it's the entity that gave the single greatest investment return that any company in the world in history and seems to be creating an alternative financial system right under our noses yes today we'll talk about cryptocurrencies and bitcoin as it stands gave the single greatest return in investment history probably turning from one cent to 30 000 us dollars that's almost a 3 million x returns every day you see some government some central bank or established institutional investors like blackrock jp morgan announcing their entry into the crypto space one way or the other every time people seem to pooh-pooh on the crypto space in every cycle it just absorbs the criticisms engineers and developers in those ecosystems keep working on the problems despite of the hype cycles and the crypto boom comes back even stronger our guest today is vinay gupta who is one of the pioneers of the crypto blockchain space and with the one who led the launch of ethereum the second biggest cryptocurrency in the world the one that seemingly has even bigger potential than bitcoin we talk about the fundamentals of what is money why we need money its history problems with our current financial systems definitions and benefits of cryptocurrencies and finally if you're a policy maker in emerging markets or an individual living there or someone who's getting fresh into the crypto space no matter where you live then how should you think about crypto we're also joined by our in-house blockchain expert and pasco partner arthur safarian our story starts with our guest being one of the very early adopters in the world of cryptocurrencies here's

[2:30](https://www.youtube.com/watch?v=vwBysqhyGtk&t=150s) vinay when i asked him about the introduction of himself into the space

[2:36](https://www.youtube.com/watch?v=vwBysqhyGtk&t=156s) so my first year being paid 100 in digital cash was 1999 i was part of an ecosystem called the e-gold which was literally gold bullion stored in a vault and you could trade other people direct weight of the gold that was in your control so you could say somebody i'll pay you three grams gold to do this thing for me and i persuaded the company i was working for the you know cryptocurrency or digital currency as we called at the time was the wave of the future and so i spent a year being paid in the stuff in literally 1999 might be one of the first people in the world to have all of their income go through one of these systems so then you know years passed and one thing led to another and i spent a lot of time doing sort of defense contracting and stuff after 9 11. lots of time in energy policy lots of time in defense security and resilience and then i started hearing people talking about smart contracts and i'm like smart contracts i haven't heard people talking about smart contracts since 2003 what is going on here that turns into me taking a job with the ethereum foundation and at the ethereum foundation i run the launch processes for ethereum so i'm the release coordinator join in 2014 launch the platform 2015 stick around at the foundation for another year or so basically just kind of helping get the thing properly launched and teaching people what it does and then a couple years after that i start Mattereum which is here to solve one of the big kind of fundamental unsolved problems in the whole crypto space which is how do i buy a house with bitcoin that's fascinating and

[3:57](https://www.youtube.com/watch?v=vwBysqhyGtk&t=237s) just pulling on that thread vinay what is a smart contract if you want to kind of elucidate the listeners so the only joke about smart contracts is they're neither smart nor contracts you know there are other people that have names for them like conditional payments and there's a bunch of you know sort of malarkey but the bottom line is that a smart contract is just a tiny little piece of software that lives on the blockchain um so rather than giving an instruction to pay somebody immediately you give an instruction to put the money under the control of this little piece of software and the little piece of software is a couple hundred lines long at most and it's basically a series of if then statements about what to do with the money you know multiply number one by number two if variable three is more than variable four pay to bob otherwise pay to harry boom there's your smart contract so it's not a lot of sophistication the smart contracts are nothing like writing like big software in real systems they're very very small things and they're basically just control logic for money

[4:50](https://www.youtube.com/watch?v=vwBysqhyGtk&t=290s) the origins and use of money go back as far as human societies have existed however as one might expect the exact iterations and forms of money was different and changed over time and because it changed so many times there is absolutely no guarantee that it won't change again prehistoric people knew that they needed to have some kind of mechanism to store their wealth but most importantly needed to be able to exchange wealth and value as well not every person had everything so exchanging was important and valuable to them prehistoric people used to rely on bartering systems around 6000 bc which was taken up by the mesopotamian tribes around the area and was adopted by the phoenicians as well bartering was the exchange of thing for another thing so you might have something valuable that i want and i have something that you want which is of seemingly equal value then a trade can happen in the book of politics in 350 bc the greek philosopher aristotle contemplated the nature of money he considered that every object has two uses number one the original purpose for which it was designed and number two as an item to sell and barter with other people prehistoric people also used to rely on clam shells as currencies like literally clam shells from dc's and they used to have tattoos on them which are clam shaped to understand the shape type and size of the clam which should determine the value of the clam as currency basically it has long been assumed that metals were available were also favored over bartering systems and garden commodities such as cattle cowrie shells or salt because metals are durable portable and easily divisible the use of gold as money has been traced back to 4000 bc when egyptians started using it using gold bars and mesopotamia later with silver bars then we moved on to the age of coins and the first manufactured actual coins seemed to have appeared in india and china and the cities around the aegean sea in 7000 bc and coins have been used since then for a long time paper money was introduced in song dynasty china during the 11th century as merchants and wholesalers wanted to avoid the heavy bulk of copper coinage in large commercial transactions in the medieval islamic empires a vigorous moderate economy

[7:20](https://www.youtube.com/watch?v=vwBysqhyGtk&t=440s) was also created during the 7 to 12 centuries during the time as well on the basis of expanding levels of circulation of a stable high value currency like the dinar innovations introduced by muslim economists during that time and traders included the earliest use of credit checks promissory notes savings account transactional accounts loaning trusts exchange rates to transfer credit and debt and banking institutions for loans and deposits on the european side the first european bank notes were issued by the stockholm's banco which was in 1661 and credit and debit cards came around in 20th century first experimented in fresno california with visa and mastercard as we know today if there's anything that can be learned from the history of money it's basically that money is consensus belief it is determined by social consensus very unique to humans and the ability of humans to do complex social organizations is very emblematic of us if we were to agree upon clamshells as currency tomorrow and everyone agrees they would pay and exchange things with clamshells then clamshells would be our currency my take on this is that money is almost entirely about taxation money is whatever the government requires you to give it in return for the goods and services that the government provides you and obviously that means that money is a very very very tiny fraction of a much wider category that we might call transferable assets and i'm much more interested in transferable assets than money you know there's been an endless amount of wrangling about whether or not bitcoin is money or whether monero is money or whether z cash's money or you know whether usdt is money all of that stuff you know you've got to remember that money is only a tiny tiny fraction of the world's assets compared to for example the pool of real estate money is probably i don't know i mean you have any idea like what the ratio is the amount of cash and circulation relative to the amount of value tied up in real estate i'm guessing it's like a thousand to one so you know the endless debate about you know is bitcoin money i think that was largely wasted time it doesn't matter whether or not it's money right it matters whether or not people want to use it for paying people and you know people will say well you know does that not mean it's money and i'm like it means you don't have to care whether it's money

[9:42](https://www.youtube.com/watch?v=vwBysqhyGtk&t=582s) yeah that makes sense and in terms of money really so there are a couple of characteristics right so you've got the storage of wealth thing exchange of value and mutually agreed upon like say a consensus mechanism right so money is a consensus mechanism so this kind of crypto and bitcoin fulfill all those kind of criteria our model of money is not based on some kind of great laws of money that were defined in the abstract all these definitions of money are definitions of money that people have made up post-facto to explain behaviors that they've seen in the wild when the behavior in the world changes the definition of money changes you know the definition is bottom up. how do you mean by the behavior like what does that mean exactly well so there is a point where people begin to issue paper money right they begin to issue promissory notes for gold that's held in somebody else's vault so at the time you've got one group of people that say that gold is money and they require physical delivery the gold and you've got another group of people who are like i'm perfectly happy with the permissory note that tells me the gold is in the vault and i could go and pick up the gold anytime i want i don't actually need to go pick up the gold anymore this is great this is super convenient so there would have been a debate between those two groups of people at the time about whether or not somebody would accept payment in a promissory note rather than requiring actual physical gold we're in a transition point like that right now right there are people that will accept cryptocurrency and there are people that won't if 90 of the population accepts cryptocurrency nobody cares whether it meant the definition of money that we use in the 1990s yeah and before the promissory notes you had the clamshells kind of generation as well right so way back into history so the ways that people have exchanged value you know it changes all the time it goes back into all kinds of weird history there's no doubt at all that history is important but the fundamental lesson from that history is not here are the five things that define whether something is money or not the fundamental lesson from that history is it keeps changing

[11:32](https://www.youtube.com/watch?v=vwBysqhyGtk&t=692s) i'd actually like to ask renee do you think there's also an interesting thread to pick here in terms of digitization and how digitizing money and that digitization fire i know you mentioned this in some of your other talks when the digitization fire sort of catches on the way it did in dating we went fully from physical to digital and it moves very fast when it catches on in commerce we go from physical to digital very fast and is that something that's currently happening with money as well is that why bitcoin you know went to a trillion dollar market cap in a span of uh 10 years yeah this to me is much more where the leverage is on this question right if we think of the most general case right take something like ethereum ethereum has within a currency or a thing which we call the currency and you know somebody might say well ethereum is digital money but really ethereum is this enormously complicated piece of software that synchronizes tens of thousands of computers and at that point it produces money as a relatively minor side effect of its existence it's a general purpose computation platform that has some very very very unusual characteristics relative to say a laptop it's a computer in a sense but it's nothing like that computer and then it happens to produce money as a side effect and that model where you know like i used to say people look cryptocurrency is the equivalent of saying horseless carriage the thing which is happening here looks a little bit like a currency if all you've ever seen before is currencies but it's actually a completely new class of things and we don't really have good names for ways of describing it we don't really understand how to put it into language properly we say the term cryptocurrency because we don't understand what we're really looking at yet and i think that is the right way of looking at this question in actual practice these things are nothing like money they produce a side effect which is like money but the underlying architecture for a whole different thing that's the first thing that i wanted to say about this like it's not a question of whether it's money it's gone beyond what money is and it happens to produce an effect which is like money right thing one right and then thing two you know this question about digitization are there is exactly right right when you get a wave of digitization like music went from being zero digital to one digital input 30 years 25 you know it went literally from napster through to spotify and at that point you know the de facto standard way of doing music for basically all intents and purposes is you stream it that's just what we do now so the idea that money which is currently on this you know terrible paper system or credit cards

[14:02](https://www.youtube.com/watch?v=vwBysqhyGtk&t=842s) which are now 50 60 years old the idea that that's the terminal form of money makes no sense at all like that's not the end of the road here that's the beginning of the journey

[14:10](https://www.youtube.com/watch?v=vwBysqhyGtk&t=850s) that makes sense and you mentioned that it's a terrible paper system i'm wondering why do you think it's so terrible so paper cache is just extremely archaic i mean what is the first paper cache issued it's probably thousands of years ago in china practically everything when you ask when it was first done it's thousands of years ago in china everybody likes to talk about you know the gutenberg press and the inventor and boosable type they've been doing it for a long time before that in china and everybody acts as if it was invented by you know some german dude think of the problems with paper money you can't store a lot of it yourself you need a bank to store it for you it's expensive to produce it wears out it's easy to steal and every single one of those things is a fundamental problem that you can't fix you know you can't make a small change the way that paper money operates and get paper money that doesn't have those problems the fact that paper money is that way is fundamental to the nature of paper money there is no easy fix for paper money and you know what is the advantage that paper money gives you it gives you anonymous payments it's easier to carry around than gold it's easier for governments to produce a lot of it if they want to produce a lot of it than gold you just pay something to print it for you is that a good thing it's a good thing if you're a government is it a good thing for everybody else probably not it's also worth mentioning that paper money is great for illegal activity right and this is uh what bitcoin gets a lot of hate for but actually i mean u.s dollars are a lot better right than even digital currency i mean you know what i say to people when they bring this up is like look the reason that for example you know the banks will close your bank account because of digital currency is not because the banks are fundamentally interested in eradicating money laundering what they're fundamentally interested in is keeping their monopoly on money laundering you know i mean remember you know didn't hsbc get busted for wandering like a trillion dollars of drug money or something like that you know what i seemed to wasn't the fine like 130 billion dollars or something insane the sums of money that these guys were wandering are absolutely staggering and then everybody acts as if it's some great surprise that they get caught and somebody says stop you know are we supposed to pretend that nobody knew until they were told to stop does that make any sense like of course people knew they were doing this you know it's just that they were considered to be the right people to be doing it for a while and so they were allowed to do it

[16:27](https://www.youtube.com/watch?v=vwBysqhyGtk&t=987s) in 2008 pseudonymous identity called satoshi nakamoto created a white paper outlining what bitcoin is it's essentially a decentralized peer-to-peer lending which does not rely on third parties to verify the transaction what is needed is an electronic payment system based on cryptographic proof instead of trust allowing any two willing parties to basically transact directly with each other without the need for a middleman like a central bank for example or a government crypto means hidden graphy means to write cryptography basically are writings which are hidden by math in normal financial systems the central bank sanctifies or verifies the bank notes and the transaction itself bitcoin solves these problems interestingly basically it makes the ledger and all the transaction history available to everybody so everybody would have a copy of the digital ledger in encrypted format so to decrypt it basically to understand what it means and the transaction means you basically need what they call a private key you have miners who are verifying and keeping the entire ledger intact which means that they make sure the ledgers tie up with each other and the ledger is kept in a perfect condition where the transaction history actually ties up with each other so they need to provide computational power for this to essentially work and they're incentivized by bitcoin and there's only a finite amount of bitcoin in the world it's about 20 million bitcoins in the whole world and a block time is where you make a statement and you don't have to take it back really crypto takes money to computers natively and does not require any third parties so bitcoin isn't really a coin it's a virtual ledger maintained by tons of machines across the world first of all we don't know who satoshi was satoshi identified themselves by you know things like cryptographic keys there was never a physical person associated with the satoshi brand so was it an individual was it a collective we don't know you know nationality age makeup of the group we don't know we just don't really know anything because satoshi was pretty good at computer security

[18:57](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1137s) and managed not to tell the world their identity and this is one of the great mysteries a bit kind of like you know so it just fell from the sky well you know some people uploaded some software to the internet and some other people run the software and between some people writing the software and some people running the software we wound up with the platform and the platform had money in it you know it's a pretty weird story but that's how we got here yeah and can you tell us

[19:18](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1158s) basically on what is crypto exactly and how do you define crypto here cryptocurrencies i mean yeah again is it a currency right we say cryptocurrency because it has currency like characteristics but i would suggest that looking at ethereum as a currency is a big mistake you know ethereum is a system that has a currency but it is not a currency it's some kind of generalized computing platform with a bunch of really unusual attributes but it's way more than the currency and you mentioned basically that it's basically a byproduct or like a subset the fact that it's a currency ethereum would you say the same thing about some like bitcoin as well bitcoin is the great grandfather of all these things right you know bitcoin comes along and bitcoin's objective is to produce a payment system and note that i say payment system rather than currency so the critical thing about bitcoin is that you can use it to pay people for goods and services so the first thing is you've got to start with this question of well was it an attempt to create money was it an attempt to stand up a currency first or was it an assembly to stand up a payment rail that happened to have a currency associated with it this gets very tightly into questions of monetary policy once you've decided that you've got a payment rail the question is well what can i pay you in bitcoin's answer is there is a native instrument that is associated with this payment rail and that paid instrument is called bitcoin what is a bitcoin worth well whatever you want to pay for it and what that creates is this very very detached from the world isolated kind of subuniverse where the people that accept that bitcoin is money choose to accept it and then they'll accept it at whatever value they accept and everybody else stares at them and wonders what the heck it is they're doing why are you giving away your money for this weird digital garbage so whether or not bitcoin is money depends on whether or not you're willing to accept it for something you're making the decision not anybody else whereas when the state issues money the state has this concept of legal tender which is we've told you it's money and you're legally obligated to take it and if you don't you're breaking the law and this slightly goes with the concept of kind of libertarianism small governments and decentralization would you kind of agree with that general trend well i mean all of those again are descriptions that were added later on all of that stuff is kind of post-facto it's it's language which is used to describe a phenomena rather than being language which in some way created the phenomenon you see what i'm saying this is a subtle philosophical distinction but it's really important sometimes we use language to tell people what we're going to do and then we do it and then you can

[21:48](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1308s) arguably say that the thing that was done was defined by the language in other situations what happens is that somebody does something and then other people come along and apply language to that something and try and describe what it was that just happened almost all the debates about bitcoin or what is it and how does it work and all the rest of this stuff and is it money and all the rest almost all of that is people coming along afterwards and trying to give a kind of anthropological description of what it is that just happened and at that point i'm not sure the anthropological descriptions are all that important is it money you could pay people with it who decides if it's money the person accepting it the government has not told you that it's money and you're not legally required to treat it as money in most places but nonetheless people choose to and at that point you can say well it's money but people themselves get to decide whether they're going to accept it

[22:32](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1352s) i think this would be an interesting point to double click on because i know you've spent a lot of time especially in the early ethereum days on actually trying to basically put together a language that would describe this innovation the stuff that we're seeing today you know you were trying to figure out how to explain it five years ago because they were things that we had never encountered right there's a notion of the internet computer but then we have things like d5 what does that mean nfts what is that ultimately you arrive to sort of explain the ethereum and blockchain through this speed of light versus high frequency trading maybe you could dig into that a little bit sure let's take a look at this question of whether it's money i think this will give us the correct philosophical lens for looking at the rest of these questions the critical thing about something like bitcoin is not whether or not it's money the critical thing about bitcoin is who gets to decide whether it's money and what are the consequences associated with that decision so in the case of fiat currency the state tells you this is money and you have to accept the state's decision on that because it's legal to enter and that means you are legally obligated to treat it as money that's the default state for money and bitcoin comes along and bitcoin makes a proposition which is well this is a way of paying people and if they will accept payment using this method of doing payments then at that point we will regard that to be money you say hey i will pay you in bitcoin i say okay sure you say you give me your address which indicates you've got an account in the system you've got a key you've got key management all the rest of that stuff you're ready to take the payment payment is made the critical thing is who makes the decision about accepting the stuff and the answer is the person accepting the payment decides that it's money moving the locus of control for who decides whether something is money from the government to the individual is the reason that people talk about bitcoin as a libertarian thing what makes it libertarian is only that you get to decide whether the stuff is money or not for your purposes and you could change your mind the next day i will take bitcoin from bob but i won't take bitcoin from harry why because i feel like it yeah i understand the bitcoin is the same but i just don't feel like taking his payment in bitcoin i'm going to take it in cash thank you that shifting of who makes the decision about whether it's money or not that's a much more important thing than concepts like decentralization or libertarianism or crypto anarchism or any of the rest of these things the most important part of this is about who makes the decision that they're going to accept the payment right as opposed to previously where it would be top-down government decision that this is the money that we're working with and for example you can use pounds for transactions but you cannot use yen or rubles like in the uk for example right that's right that's right and it used to

[25:02](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1502s) be that this wasn't even a question right so back in the day payments were made in gold and silver nothing else counted you know it was an innovation when governments began to bring in pieces of paper and tell you that these things were the same as money that was a radical change to the existing state of affairs and you know the thing about gold was that gold and silver were very international somebody says i'm gonna pay you in gold and they come along with spanish doubloons it's probably good enough for me and then you get the process of the governments coming in and saying like no the only gold coins that you're allowed to use are our gold coins and this is where you begin to get this notion that currency has a national boundary associated with it that's a relatively recent innovation back in the day gold was gold and silver with silver and if it had the wrong king's head on it that didn't mean you weren't gonna take it and just on that though uh just for understanding from my perspective as well why do you think governments actually came in and said that this is money versus you know rely on goal like what is the central reason and what has changed since then basically well so this goes back to the 1970s right when governments said for example one pound uk money one pound is meant to refer to one pound of silver so you know just over 500 grams of silver is supposed to come to you in exchange for one pound it used to be that what it said was that this note is redeemable for one pound of silver now it's just redeemable for one pound well one pound of water no no you don't understand one pound so we went from a system where there is an actual underlying physical thing which is being dealt with to a system in which there is no fundamental underlying as a result we've wound up in a position where the governments have the ability to continue to issue as much money as they like because there's no longer the need for them to have one pound of silver sitting at a vault to be able to issue one pound note and america went through this process in the early 70s they went off what was called the gold standard where the dollar was redeemable for a fixed amount of gold and they went into a position where the dollar is not redeemable for anything and then the governments have printed money and printed money and printed money so the actual purchasing power of a door has gone down and down and down or down and down over time and this i guess ties with the current state of a lot of the i guess crypto people looking at what's happening with in the us with these new bidens stimulus bills saying okay the basically the denominator that we switched from gold standard in 1973 right where it was one dollar is x amount of gold and it became one dollar is now one dollar today in a lot of crypto people's minds that's one dollar is x amount of bitcoin because the dollar denominator is no

[27:32](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1652s) longer relevant absolutely and you know that is a big big change but it's only a big change recently what we're going back to is a situation where governments don't control what people can pay each other with and that is not some weird new state of affairs being created by cryptography that's the natural state of warfare's because that's how it ran from the beginning of time when gold was gold and silver with silver and that's just how the world worked it's not a strange thing which is happening here it's an old thing but it's by no means some kind of weird innovation this is just how the world always was and then there was a brief period when it was different

[28:06](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1686s) vanes so if we're looking at this sort of like a radical change that's happening i guess in the monetary systems but also beyond that in the actual structure of the internet from like web 2 to webfree where we now have these like payments rails we have these internet computers and smart contracts and so on and so forth where are we in that timeline so if we compare this to the sort of the development of the internet in you know through like 80s 90s where would you say we are so i used to say that we were in the late 80s and the reason i said that was because we hadn't really invented the hyperlink right we had smart contracts but we had basically no instances in which the smart contracts were interconnecting to each other to produce whole systems which did something that an individual smart contractor couldn't do it was a very very early days the whole defunct ecosystem now is chained smart contracts you know smart contract one defines a loan smart contract two divides some kind of splitting of money smart contract three you know lends the split money to somebody else and at the end of that process you wind up with people running fairly sophisticated financial operations that span multiple organizations that are smoothly interconnected by virtue of the fact that they're all using smart contracts and those smart contracts are architected to talk to each other so i would say that we are now in the very early 1990s right i think that this is basically say 93 94 maybe you know you've gotten to the point where there are hyperlinks where things are connected and the reason is important is we're now in a position where the hole is more than the sum of its parts there is genuine synergy between companies in the d5 space if i produce a new thing in the d5 space somebody else can plug their stuff into it and then somebody else can plug that hybrid into their thing you know suddenly the hole was worth more than the sum of its parts that had not previously been the case because when it's just a single smart contract sitting there isolated most of the time you could essentially do that with a website you could have an amazon server you could plug into the amazon server and you would get more or less the same effect once you've got 50 or 100 or 200 or 500 d5 systems all of which have smart contracts which can be interconnected like lego blocks now you're in a completely different domain the whole is worth way more than the sum of its parts and at that point we're in a position which is analogous to where we were with hyperlinks in the early 1990s because once you had hyperlinks a hyperlinked document made the

[30:36](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1836s) information in it worth fundamentally more than a non-hyperlinked document hyperlinks generated wealth they made information worth more than it had been worth before okay that's super interesting and what

[30:46](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1846s) do you think we should expect you know beyond just i guess uh broad terms or global adoption or something along those lines what are some of the big pieces of innovation that are still missing but once they happen we'll see a kind of a step change in the usability and in the various use cases of the blockchain tech right now if nothing changes and we just continue to see increasing acceleration and adoption i would expect five or ten percent of americans to have crypto wallets and i mean hardware wallets like ledgers or equivalent security operations on their phones because they're using things like the secure element in their phones i would expect five or ten percent of americans to have that level of security for their holdings within let's say two years i think crypto is at the critical inflection point of america of going from being some kind of weird minority interest to being a real thing um not just in the minds of wall street and the hedge funds and the etfs and all the rest of this stuff but in the minds of ordinary people i have obviously not been able to spend much time in america given that we've had covert and all the rest of this stuff but you know the vibe that i get from the internet and the people that i'm talking to on the ground in the states is that the general public acceptance of crypto as being an actual thing is like even if you live in weird small town america and the back end of some place like idaho or iowa or kentucky there are a bunch of people in your town that are using crypto now and if you want to know how to do it you know you go around and you ask you know bob's brother who plays in a funk band hey you got a crypto wallet right how does that work and once you're in a position where most people can ask around and somebody will sit them down and show them how it works you're at the point where you get massive viral adoption because at that point if i want to say hey i want to pay you in cryptocurrency to do this piece of web design work for me you could just be like i don't know how to take cryptocurrency but you know i'll ask my brother's mate dave and dave will sit me down and show me how to do it and i think we're at that point where you know if there's another three to six months of crypto bull run even if bitcoin just stays around 50k for another six months i think by the end of that we will be over the critical cultural hump where it's basically like as normal to have a crypto hardware wallet as it is to have a cell phone and i think it's worth mentioning for our listeners that there's only about 5 million metamask wallets currently live globally so what you're saying is basically like a 10x growth from where we are roughly right now

[33:16](https://www.youtube.com/watch?v=vwBysqhyGtk&t=1996s) within the next year or two in terms of adoption in terms of adoption because the curve when something goes from think of the history of cell phones initially it's six dollars a minute to use a cell phone and the cell phone is the size of a brick it's basically very closely related to the car phone and pretty much the only people that are willing to pay that six dollars a minute are people like movie producers or finance people the cell phone continues to exist in that form for years before you begin to get phones that are small enough and cheap enough that people are sort of expected to have one did you ever live in a house that just had a wired phone that had no cell phones yeah i definitely did yeah yeah so do you remember the point in your life where it was just expected that all of your friends would have a cell phone and if they didn't there was a problem yeah i think within two years that's where cryptocurrency wallets will be i keep stressing the hardware wallet angle on this because if it's going through something that looks like a crypto exchange to all intents and purposes you're just using a bank and as a result these things will be regulated by bank like banks it doesn't matter if your bank happens to be using bitcoin what will happen is that the exchanges will get forcibly merged into the banking system they'll have the same kind of regulations they'll have the same kind of pressure and they'll wind up with the same kind of abusive policies in the same kind of nonsense and at that point there will be no liberating emancipatory potential in the things like bitcoin it will just become another kind of money and you will access it the way you access your existing money which is you'll go through a bank to get there at this point we don't actually have any progress see what i'm saying yeah and on that note when you say just for our listeners when we say exchanges you mean like coin list or like a coin base is that correct yeah you know sort of kraken you know binance all the rest of these kind of things right so the bank-like nature of these things is that to get to your money you have to get the permission of the exchange and you don't have direct control of your money so at that point remember what i said about you know whether something is legal tender or not depends on whether you make the decision to accept it if you're going through an exchange your ability to decide whether something is legal tender or not legal tender but whether you're willing to accept payment in it you're no longer the sole person that decides whether you're willing to accept a payment in that currency the person that decides is the person who's operating the exchange so they make the first decision am i going to list this or not if their answer is i'm not going to list it you don't get to get paid in that and now we have a problem i want to get completely clear on this principle the fact that you're taking the payment and

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Continues in https://guptaoption.com/texts/768-2.md (part 2 of 3).
End of [768] #03 - Vinay Gupta : History of Money, Foundations of Crypto & Applications for Emerging Markets, part 1 of 3. Its connections are at the top of this file; the map is https://guptaoption.com/llms.txt.