[1:29] Kings of Crypto

Rachael: We have Jeff Roberts. He's the executive editor at Decrypt. He spent eight years at Fortune and was co-founder of The Ledger. It’s Fortune Magazine's newsletter dedicated to blockchain, cryptocurrency, and the intersection of finance and technology. Here's where I'm really excited, he just published a book in December called Kings of Crypto.

Rachael: Now, let me give you a little bitty synopsis here from Amazon. "Tech writer Roberts debuts with a page-turning account of the rise of cryptocurrency exchange Coinbase from the Y Combinator startup incubator to becoming a pillar of the larger crypto economy." This is going to be an amazing book, and he's a lawyer. Welcome to the podcast, Jeff Roberts. I feel like a huge underachiever in my life right now.

Jeff: Oh, you're too kind, Rachael. Thanks so much for having me. I've seen some of your previous guests and I feel like an underachiever.

Rachael: How do you even write a book? Where do you start writing a book about crypto?

Eric: Or, why do you start writing a book about crypto? Before even how do you start?

Jeff: Yes. I don't advise it. Books are, I discovered, a long and lonely process, but in the end, I was glad I did it. I know it came about because I did a magazine feature for Fortune on Coinbase. And I was approached, "Hey, do you want to spin this into a larger story?"

 

Bitcoin Book in Plain English

Jeff: While there had been some other good Bitcoin books out there, I had felt no one had really told it in plain English to a mainstream modern business audience. Underserved, because a lot of the crypto folks like to speak their own language just for more of a tribe than it is. And they're not the best to communicate in this stuff. So I wanted to take a crack at explaining all this good stuff in plain English, and so far so good.

Eric: There's more to it than just creating a Coinbase account, investing in Bitcoin, making millions of dollars, and then going, riding off into the sunset?

Jeff: Yes. Or, else I wouldn't be here. I would have done that rather than that, I'm trying to make a living myself.

Eric: If anybody listens to this show, we might be educating them in just that alone.

Rachael: It's the test I would love to learn. I just found out the other day at a dinner that a fellow we work with, he day trades Bitcoin. I'd never even heard of such a thing.

Eric: Half the people that work for me day trade Bitcoin, or all the coins. We were at an offsite, a management QVR and I was schooled last week. I won't give you the individual's name, I'll do it after the show. But somebody in the room, with you and I last week, day trades. He's got it all set up in Coinbase Pro and the different exchanges. And he's got his trade set up to a certain dollar amount and boom, and then he just audits them.

Rachael: That is crazy.

Eric: It's big money.

Rachael: I would love to do that.

 

The Landscape of Ransomware

Eric: You didn't really like the technical crowd. My tech crowd loves it.

Rachael: Because it seems ultra-technical now, I'm just scared to even try, Jeff. I have to tell you here. But from everything that I'm picking up though, and I think your book gets on this, is just how cryptocurrency is changing the way money is changing. I think that's a really interesting topic, kind of given the landscape of ransomware, but we'll get to that point. From your perspective, is this thing going to go mainstream or are we just seeing the beginning here? What's your perspective on that?

Jeff: I think you said something insightful now, we're so used to money being one thing. Because in our lives there's generally been dollar bills and then bank cards and credit cards, that's money. But, when you look at history, shells and stuff way back in caveman days and then pieces of gold. And then in the U.S., banks would issue their own money. There'd be JPMorgan currency and Wells Fargo currency, maybe it didn't exist there, but you know what I mean. This is just the newest iteration of that.

Jeff: Also, who controls the global unit of exchange, up until World War II, the British pound held sway and the gold standard. It's only been 50 years that the American dollar should have been held sway over and been the most influential currency. And a lot of people don't like that, especially the Chinese and the Russians. So they're trying to undermine the hegemony of the dollar. Sorry, I'm sounding all academic and stuff. Cryptocurrency is part of this narrative, of course. Bitcoin mostly got traction at first in the States, but it was a global thing.

 

A Monopoly on Currency

Jeff: But a lot of people look at it as an alternative to State based currency, which has an interesting idea in its own right. That's why a lot of governments are hostile to it. Because if you're a government, there's two things you don't want people to mess with. The armed forces, that's sort of the hallmark of the state. State has normally enforced. They also have a monopoly on currency.

Jeff: So that's why every country has got very strict anti-counterfeiting laws. If you start messing with the money supply, the government is not going to like that at all. So, that's part of what makes Bitcoin and stuff interesting and these parallel private currencies out there. You asked if it's going to go mainstream, I'd argue it is already. It's the genie back in the bottle on this, whether you like it or hate it.

Jeff: The technology is just so good. The technology in which it's based is just so much superior to how we pass dollars around right now. There's something called Fedwire and the ACH money transfer system. That's very 20th century and the cryptocurrencies are built and blockchain technology is very much a 21st-century thing. So this pure technology alone means it's just not going to go away.

Eric: I'm not a currency expert by any means. To me, if you think of just money, it is fundamental. The only reason it has value is because there is an exchange market or a place where you can trade money for something else either other money, some service, good, something of value, and it's supported by something. Is that fair?

Jeff: Absolutely. The money is not useful unless it's exchangeable.

 

[7:10] Bitcoin as the Dollar’s Equivalent Value

Eric: Okay. In the case of Bitcoin, do we need to have a dollar equivalent value or some currency equivalent value to stand up for itself at this point? I mean, when we look at Bitcoin, at least from the States, you see the dollar as the equivalent value. $53,000 per Bitcoin, 22,000, whatever it is today.

Eric: If it didn't have that, like if it was just cryptocurrency, you don't have the full faith and backing of the U.S. government or the Argentine government or something like that. I mentioned Argentina because of massive inflation, their money gets devalued very quickly or has traded in the past at times. How does it convey value, is the question I would ask?

Jeff: You say a couple of things there. I mean, you're right in that. The U.S. dollar is the gold standard or is the "dumb metaphor", but you know what I mean.

Eric: I know what you mean.

Jeff: Everyone knows what the dollar is. Argentina, not so much. I would rather take Bitcoin over, whatever currency Argentine government issues because they keep debasing it and we'll probably do it. So again, what you're pointing your finger on is the problem with Bitcoin, the volatility. I mean, what's the point of having a unit that you go to buy and you spend it in the morning. It'll buy you like two cups of coffee and that afternoon, it might only buy one cup of coffee.

Eric: Well, you say that's the problem. I've got a lot of people that work with me that think it's a great thing. They're making a ton of money on the volatility, they turn to Bitcoin.

 

History of Bitcoin

Jeff: Yes. The argument with a history of Bitcoin proponents would say to you is, any new technology is highly speculative at first. And speculators bring in enough people, so it gets more and more used. Believe it or not, even though Bitcoin has dropped from like 62,000 to 30,000 in the last couple of months alone, that's over 50%. That's compared to how Bitcoin used to be, it's better.

Jeff: In the early days of Bitcoin, it would regularly drop 90%. So it's still not something you want to put your net savings into, but there's lots of other highly speculative assets out there too. Florida real estate or micro-cap stocks or other things or emerging market stuff that you can put your money into and there'll be volatile. But people who bet on cryptocurrency seem to specially believe this technology is here to stay. And that as more and more people start to use it, it's value is simply going to keep going up.

Jeff: While we're in the midst of another spectacular crash, I've just watched this long enough. I've covered it for 10 years and I've seen enough of these crashes and that's what Bitcoin does. But each crash is less precipitous than the former one and it seems to bounce back quicker and to a higher level than before. So it doesn't mean, maybe this time is different. Maybe Bitcoin will go into a death spiral. But people have said that since Bitcoin started and the longer time goes on without that happening, the chances of that happening are decreasing.

Eric: So, what you're saying is, we're in the early days, but this is probably something you see here to last.

 

They’re Getting Serious

Jeff: Yes. People like to say, I would see early days and it is, but people are like, "Oh, it's only the first day." I see we're probably more on the third inning by now because this isn't brand new stuff. All the major banks are toying with it, like Fidelity. The big wealth management giant Boston has been running some crypto mining for five years. Central banks are all playing with crypto. So, I just think if it's in MasterCard or Robinhood.

Eric: Federal government starting to tax it or continues to tax it, but they're really getting serious. I agree with you, that shows maturing.

Jeff: Yes. You have a good point on that idea. Even my IRS form this year, yours too, the first question was, did you sell cryptocurrency? Because obviously he sees it and thinks it's worth something because they want to get it, so they want to tax it.
Eric: Interesting. So back to the book then, what inspired you?

Rachael: How do you come to a book like this and how long would it take to write a book like this? Because to your point, making it relatable, breaking it down into mere mortal understanding, in my mind, I can see this being like this labor of love for 10 years. But I would love to know, how did you get to it and what was that journey like?

Jeff: Well, you have to like your subject, because it's a sort of a labor of love. Fortune wasn't writing the great American novel and trying to bare my soul or something like that, and got through it. But Crypto and Bitcoin's a topic I like.

 

Cryptocurrency Is Cool

Jeff: Someone approached me, "Do you want to write a book about this venture capital fund?" I was like, "That would be cool, but I don't want to spend a year of my life on these people." Whereas, crypto was cool. Also, I think that's the first tip in writing a book. Like your subject enough that you want to live it for a year or more. Then the other thing is, it's just like other big tasks to break it down into small ones. Like magazine articles are daunting, but you solve that by having a really good outline, likewise for a book.

Jeff: I was fortunate to have a background in magazine journalism, which is like, oh, okay. So I just had a really good outline. Because if you go to write a long story and you don't know where you're going halfway, you're kind of after it. Likewise, with the book, it's rather than, oh my God, I got to write more words. I had a very thorough outline, so it was just kind of finding the time and the patience and not procrastinating. But yes, I know, thanks for asking. It's a really cool experience to have to do it again.

Eric: I would procrastinate to the end of time and I wouldn't know where to stop. I would constantly iterate on my own words. I've never really contemplated heavily writing a book, but I couldn't figure out how to stop, I guarantee it.

Jeff: Yes, that's an issue. Because a lot of authors have learned to turn in like 2,000 pages and the editors are like, try again. So yes, it's hard to know. I just tried to solve that by putting in all the juicy, interesting stuff.

 

[13:09] People Are Afraid of Technical Topics Like Bitcoin

Jeff: Because it has not come to this before and you want to make it. Especially for a technical topic like Bitcoin, you don't want to scare people away. Books are driven by people, they're started by people. What people love or are interested in reading is about technology. So I based my book around the people who built Coinbase, which is the first mainstream Bitcoin company. Then there's some very fascinating people. So that's what made it kind of fun to write and I hope, fun to read.

Rachael: There's definitely an interesting cast of characters, all through the whole crypto journey, and the crypto exchanges and Bitcoin exchanges. I'm really excited to see where it goes. I just thought it was interesting because I know Robinhood has been in the news lately. They're going for an IPO which I thought was really interesting. What do you think about that?

Jeff: Well, I just think the amount of people, it sounds like, both your friends and coworkers are trading crypto. I think younger generations, they trade crypto the same way they trade stock. That's in a sense, a good thing. In the past buying shares was very intimidating. I didn't get into it until I was in my 30s, because it just seems so that's something that certain types of people do it.

Eric: The whole day you had to call your broker. Before that I think you had to go in and you actually got paper stock certificates.

 

Robinhood Has Its Flaws

Jeff: Right. Now I think the advent to Robinhood has kind of democratized it. Robinhood has its flaws but it's still, I think, on balance. If it lets more people invest and saves their money at a younger age, that's going to help. Because, for me, I only started investing my money in my 30s. I wish I'd started doing it when I was 19 years old instead, I would be richer.

Rachael: Yes, exactly.

Eric: Well, unless you made foreign investments, I guess. You could argue that you saved yourself and you're good to go now, because you're smarter and will make better investments.

Jeff: Right. I didn't blow my college tuition on those coins. A very good point, Eric.

Rachael: Now, here's my favorite part of the discussion about crypto and, just the whole ransomware trend at the moment, if you will. It's the hot thing. Chris Krebs talked about the role cryptocurrency plays in enabling cybercriminals, and it should be examined. We've talked a bit about that here on the podcast as well. I think it was with Joe Uchill. This idea of, how do you de-incentivize the ransomware piece and when you have this anonymous currency opportunity. I mean, that seems pretty appealing to ransomware attackers.

Rachael: Then, imagine trying to globally regulate Bitcoin or all of these other kinds of mechanisms to try to make it a lot harder to utilize for these attacks. I mean, you're neck-deep in this world. What do you see as a way forward here, Jeff? I mean, this is a really tricky one.

 

What the Bitcoin Crowd Is Saying

Jeff: Yes, it is. I'm sort of torn because the Bitcoin crowd says, "Hey, you're just scapegoating us. Why are you picking on Bitcoin, because Bitcoin has got a lot of other uses besides ransomware?" But the truth is, a killer app for crypto is ransomware. But, it's a technology and you can't go backwards in technology. I remember, your listeners are probably familiar with us Silk Road, the massive online marketplace.

Eric: It's going way back.

Jeff: Nick Bilton has got a very good book on that, with the Dread Pirate Roberts. How was he able to do that? He pointed to three technologies. One was cheap mass cloud computing, another was Tor encryption technology, and the third was Bitcoin, which was the payment mechanism. But likewise, you're not going to get rid of cloud computing facilitates, good and bad stuff. Tor encryption does too, and same with Bitcoin.

Jeff: In terms of stocking it, part of the problem is people need to tighten up their cyber operations. The problem isn't Bitcoin, the problem is people are lousy at locking down their servers. Yes, Bitcoin does facilitate it, but there's other technologies too like Apple gift cards, Amazon gift cards. Mexican drug cartels love using those to move money around. You just load up a mule with a bunch of Apple gift cards.

Rachael: I've read about that. Yes. I thought that was bizarre, but genius at the same time, how many gift cards would that be?

Jeff: That's what facilitated the proceeds of human trafficking and cocaine smuggling and everything else. But are we going to go call Apple and to the corporates who are putting these gift cards out?

 

Bitcoin Facilitates the Crime Sprees

Jeff:  So, it's a tough one, because I do see it. Krebs is right that Bitcoins facilitate this crime spree, but Bitcoin does a lot of other things. Then you can also blame the internet for these ransomware attacks, you can blame all sorts of things. I do think this wouldn't be happening in the first place if people did a better job of locking down their cyber stuff.

Eric: What we see with cryptocurrency is, it's so fast, it's so easy, it's digital. The government is way behind. So they don't have the mechanisms to audit and to inspect like you would a transaction going through the bank. We even see this with the taxes. How many billions of dollars does the IRS not catch every year?

Eric: I forget the latest, of U.S. dollars from just straight income, when they're already getting the reports from the companies and theoretically from the individuals. So I think it's a speed and scale issue. But it's not something we haven't seen in the currency world that we lived in 5, 10, 50 years ago. It's just speed and scale in my opinion and probably understanding.

Jeff: Is that one for me, or for Rachel?

Eric: I think it was just a general comment, like playing off of what you're saying. Jeff, hey, it's here to stay, get up to speed, get used to it. I mean, this is a currency. You may love it or not, it doesn't matter. It's a currency that's in play these days and the governments of the world haven't shut it down yet, so deal with it.

Jeff: Yes, that's good.

Eric: But the adversary will use it because they can.

 

All the Crimes the Internet Is Facilitating

Jeff: But can the government shut it down? I don't know if they can. Authoritarian China has really done a lot to try to shut it down.

Eric: The U.S. is really from an inspection and a regulatory perspective, trying to get their arms around it to some extent, from what I'm seeing. But I don't think they'll shut it down.

Jeff: But also, it's a computer program. Are you going to ban me from running the software program that, primarily, is for very useful things? It's not just Bitcoin. Ethereum, the second biggest cryptocurrency, is enabling all these fantastic new applications. It's just the same sort of more panic when the internet started this. Like, oh my God, look at all this crime that the internet is facilitating, which was true. The internet gave rise to horrible, child pornography and drug opportunities and stuff. But overall, the internet was the net benefit.

Jeff: America did something smart at the time, which was to ensure that the internet was built in Silicon Valley in the US of A. And because it reaped most of the innovation and the wealth that's come from that. So likewise with crypto, I think the U.S. regulators and justice department needs to be careful. They're torn, because they want to stop the ransomware. But also, they recognize if they give up forfeit in innovation on this to Asia or to Switzerland or something, it could harm the U.S., so it's a tough one.

Eric: It's like any technology, it can be used for good or bad. I mean, go back to metals. You can make weapons with it or you can maybe make bracing structures for buildings, or do something.

 

[21:06] Technology Has Good and Bad Uses

Eric: Any technology has both good and bad uses, at least I think so, as I've observed over time. So, figure it out and learn how to leverage it. But, let's talk a little bit more about the role of cryptocurrency with things like ransomware or the black market and the like. How should we look at that? And how should we look to better understand and control what's going on? Or, is it just a ransomware problem, and there's less to do on the payment side? I believe that the payments side is really important.

Jeff: Oh, yes. The payment side is huge. You have to begin by understanding Bitcoin and Blockchain technology and how it works. And not disregarding it as this kind of evil enabling, that's enabled these terrible things and this ransomware to happen. I think that the first stop is the policymakers.

Eric: To understand it.

Jeff: It's just to understand the technology itself and then if you want to respond against it, you look for this for the choke points. Of course, these companies have risen up. Like Chainalysis that are forensic accountants and specialized in tracking payments just like banks have done before them. So, obviously they work hand in glove with law enforcement people. I think it was a Colonial Pipeline attack. They were able to actually claw back some of the ransom that was through the stupidity of the hackers, but they just didn't fit.

Eric: We'll take that win.

Rachael: We'll take that, yes. How were they able to claw it back though? That's what I always wondered. How were they able to get that back?

 

Bitcoin Is Very Transparent

Jeff: Bitcoin is very transparent as a ledger where you see it moving around. What sophisticated Russians do is they instantly transfer to a wallet in Russia and then transfer it to another offline wallet. But these bozos, they were basically exfiltrating all the data from the Colonial Pipeline and there was a lot of it. But baked into that was the ransomware instructions they had sent to the executives at the Colonial Pipeline.

Jeff: This is at least how the guy named Dmitri explained it to me and I think his theory is correct. So, within that, they accidentally baked in their blueprint, including the private Bitcoin. The U.S. law enforcement, as new ransomware units, with the FBI and others, they're frantically tracking it. Like, oh my God, there's data passing through this American server on the way out of the country. They assessed them like, there's this stuff with a private key in there. They went to the U.S. government, robbed the hackers and took it back.

Eric: I love that, the double robbery.

Jeff: It was this really well-run operation. Next time they're going to be more careful, the hackers. As explained to me, it was a franchise operation, because that's the way these ransomware guys operate. There's the masterminds who are like, "Hey, you can go rent my ransomware software for a 15% cut." Then if you see the amount they recovered, it was 85%. The missing 15% was because these masterminds, the owner of the franchise, got their money out quickly because they weren't stupid. But the franchisee, apparently, were just busy partying. They couldn't believe this had worked and didn't move the money out of the U.S. quickly enough. So law enforcement basically robbed them.

 

The Role of Money Laundering

Eric: Just like with sovereign currency, there's a role for money laundering.

Jeff: Oh, yes. Definitely.

Eric: Yes. My son loves that term, money laundering. He's like, "They wash the money?" I'm like, "Yeah, kind of." He's 13. But there's a role here. It sounds like there's a role for the government or some organizations to really look at these transactions. Look at what's happening and understand, just like you would with tax evasion or anything else.

Jeff: Absolutely.

Eric: Not that different a world. Jeff, if you were the administration, we'll talk from a U.S. perspective here.

Eric: If you were the administration, what would you focus on? How would you look at this? How much of your time is on understanding the currencies that are in use for things like ransomware and the like, versus actually defending your networks?

Jeff: That's a really hard one. The other thing you're thinking or you're worried about is, is this a threat to the U.S. dollar and how are you going to prevent Bitcoin and prep currencies from displacing the dollar? You're also going to have to think about, how am I not going to blow up all this cool innovation that's being made possible by Bitcoin and Blockchain. And some very good American companies like Coinbase and others that are producing a lot of wealth.

Jeff: I'd probably convene a council of people like Krebs, but also people like Coinbase and work on educating people. I mean, it's not going to stop until people start tightening up their systems more and arrest more, or Bitcoin makes ransomware more easy.

 

Getting Rid of Bitcoin Won’t Stop the Attacks

Jeff: But even if you got rid of Bitcoin, I think these attacks would continue and the extortion would happen in a different form. I wish I had an easy answer for you, but the first thing is, these cyber security practices across the country have to be 10 times better.

Eric: What'd you're pretty consistent on is cyber currencies are here to stay. Adopt, adapt, get up.

Jeff: Exactly. It's just liked the same panic we had over the internet and a lot of people hated the internet. It enabled new and horrible things. But they didn't recognize good things enabled and nor did they acknowledge that this wasn't going to go away. So, the same thing with blockchain cryptocurrency, it's not going away, you're not going to shut it down. It's just like the internet, in the early days.

Jeff: I guess, if you took the most repressive measures possible, sure, you could blow up servers and arrest people and take their computers. But the technology of the world wide web is just too profound that you're not going to stuff it back in the bottle. Likewise, with cryptocurrency and blockchain, is just so far superior to conventional currency from a technology point of view, that you better learn how to work with it rather than simply trying to declare you're going to get rid of it.

Eric: So, which country would you say is the most advanced as it relates to cryptocurrency? Tesla is not an acceptable answer.

Jeff: Great question. Fortunately, the U.S. and Silicon Valley are still working in semantics. A lot of the best companies are right here. Asia, the US, China, and South Korea have been very innovative in that front as well.

 

The Names That Come to the Top

Jeff: Switzerland is doing some neat things. Those are the names that come to the top. South Korea, Switzerland, China, the U.S. In terms of ransomware and using it to attack people, Russia and North Korea actually are very sophisticated.

Eric: North Korea, I don't know the scale, but they're excellent at it, because their currency is worthless.

Jeff: As your listeners probably well know, the way the North Korea army works is, you're in this shitty backwater country and you need to pay your army. Part of it is using mercenaries, like go hack the bad guys in America, and you can keep as much as you like. That's what you're facing. This sort of private-public partnership between corrupt authoritarian governments who are deploying hackers, like mercenaries, who get a share of the profits. In North Korea, that's the only way you're going to eat, so they've become very good at it.

Eric: Something about hunger motivating and driving behavior is a good one. But I was just in Turks and Caicos, a British colony, it's an independent country now, uses the U.S. dollar. Do you see at some point, some of these smaller countries that don't have their own currency or do, adopting cryptocurrency as their national currency?

Jeff: Well, it's happening right now. El Salvador's just declared that Bitcoin is legal tender there and the crypto people love that, but I'm wary of doing it. I remember Facebook was going to introduce a cryptocurrency.

Jeff: A lot of people were worried that that would go in. There's a worry that in places like Uganda, more people would use their currency instead of the national one, which could have profound destabilizing effects.

 

[29:48] Doing Away with National Currency

Eric: Well, I'm talking about just totally doing away with a national currency and creating a universal currency.

Eric: Yes. We'll use Ethereum. We've been talking a lot about Bitcoin, so I'll switch it up. Bitcoin is the currency of Turks and Caicos.

Jeff: All right. Do not do that Turks and Caicos. But I think some of the dollar back ones, there's something called stable coins, which is basically synthetic. It's like a piece of Bitcoin except it's pegged to the U.S. dollar and it moves around as easily. I think that would be a great use case for people.

Jeff: Then also you look at what China is doing with their national currency, that's partly to survey their own citizens. But they want to, with their Belt and Road Initiative, China goes into developing countries and says, "Hey, we're going to build you this port." Or whatever and then, basically to exert control over them, they also are encouraging them to use the chain of digital Yuan as payment because it's a lot easier to move money around.

Jeff: That's a larger game to dislodge the U.S. dollar as the world of monies as a means of exchange. The whole world agrees the U.S. dollar is a great means of exchange and China hates that. So, they're trying to dislodge it in part by deploying their own version of cryptocurrency.

Eric: Well, stable and dependable.

Jeff: Yes. Well, I don't know about the Chinese one.

Eric: No, I'm saying the U.S. dollar for the world to use it, it's relatively stable and dependable.

 

There’s More US Dollars Overseas

Jeff: Absolutely. There's more US dollars overseas than there is in America and that's huge to the U.S., because we can borrow money cheaply here. It's stabilizing, it's influenced. But China is doing its best to undermine that. One of the tools they're using is cryptocurrency.

Rachael: I love this whole idea of digital currency. I would love to have an implant or something in my wrist where I just scan it everywhere I go and I'm in and out, I don't have to handle dirty money. But then you hear about these people losing their external hard drive with all the Bitcoin on it and the guys digging through the trash. And he's got tens of millions of dollars on this external hard drive. I mean, are we ever going to get to a place where maybe it's a little less scary if that hard drive goes missing?

Jeff: Part of it is that, it's the same guy. It turns up every year in the tabloids and this guy lost it. And there's a landfill, that's a hard drive and a laptop. And they keep running the same damn story and you sort of wonder, what's this guy dealing with? Does he want 15 minutes of fame?

Jeff: Yes, there's stories like that. There's fewer than that. That's from Bitcoin's early days. As the technology gets a lot more friendly on how to use it, if you're comfortable with this stuff and put it on a hard drive, but don't throw it and don't throw your laptop in the dumpster. If you're not that comfortable with it, just use an exchange like Coinbase or Robinhood or something and keep it there.

 

People Bury Money in the Backyard

Jeff: It's the same way as people bury money in the backyard and then forget where it went. I have some sympathy. But after so many years passed, if you're going to keep doing this or keep putting yourself on TV as a victim, I don't know.

Eric: I got to tell you—I worry. I've got a little hard token in a safe with nothing much. A couple of thousand dollars’ worth of, I don't even know what it is at this point, to be honest with you. Anyway, it's an all coin. I've got a printout with the key next to it.

Rachael: Don't lose that. Now, my family, we hide money in the walls. So when my grandmother died, they kept knocking down walls and they found more money. She'd never turned on the air conditioner, but by golly, she had a lot of money in those walls.

Jeff: That's wasting money and all that, on savings and air conditioners.

Rachael: Exactly. But I do look forward to that day. There's so many aspects of modernization that I'm so excited about, but I think like everyone you get nervous. What if my digital currency is hacked and then it's wiped out? Then I have no money because all my money lives in this weird digital world that I may or may not have control over.

Eric: Or, who do you go to if it gets hacked? If money gets taken out of my bank and my identification has been stolen and the bank gives it to them, I at least feel like I have some kind of recourse.

 

The Legal System Is Structured

Eric: The legal system is structured to deal with that because we've been dealing with that for hundreds of years. If somebody takes my Dogecoin, where do I go? Coinbase? Hey, Coinbase, we got a problem here. I'm not sure that works.

Jeff: It doesn't and it's still a problem in Coinbase and people rob Coinbase accounts not infrequently. But the way they do it is certainly through spear-phishing in the same way like other sites hack into your Gmail. That I'm going to go to Coinbase and I'm going to rob your account. Then, Coinbase is like, "Well, that's a shame, but sorry."

Jeff: Whereas, these things aren't FDIC insured. The way the U.S. is set up is, there's been enough bank runs and banks collapsing. They stated all such that if you have a quarter-million of dollars in your savings it’s federally insured. So, if your bank gets robbed or goes under, you're okay. But I think the longer Coinbase and companies like it around, they got the reputation too. So, if they actually got hacked or robbed and then, maybe eventually they'll put in backstops for customers who are careless or unlucky to get spearfished and robbed. 

Eric: Or, some FDIC-like protections through the legislative process or the legal process, eventually. It's a maturity issue. We're just so early on, it's great for the adversary who's hammering Colonial Pipeline. Not so great for Rachel in her grandmother's house with money in the wall. She must just leave it there in some ways.

Jeff: Yes. But you're exactly right. It is evolving quickly and, as Coinbase gets more, they're putting guarantees that they won't get hacked.

 

Mitigating Against Systemic Risk

Jeff: Then the custody and storage and insurance products are evolving quickly to mitigate against systemic risk. So yes, 10 years from now, you can see like the FDIC version of crypto accounts.
Eric: Right. Is the evolution of money in the mattress or the walls?

Rachael: Right.

Eric: You put it in the bank. If you had spoken to my grandparents while they were alive, they were very wary of banks. They were farmers during the depression. The only reason they were okay, was they kept making money, because they made food. They did not trust the banks. So, we've put these protections. And then people believe their money is in the bank, they believe it's still there.

Eric: I'm guaranteeing the little I understand about money and the money supply, the majority of people still think when they put $10 in the bank, their $10 is sitting there for them when they want it back. They don't understand that the bank is actually loaning that money out and it's going all around the world. And when they come and ask for $10, it's not their $10 anymore, unless it's in a safety deposit box, of course.

Eric: I think there's maturity here. But I do see the adversaries, cybersecurity, bad actors, they've learned the system. They understand the technology better. They're able to leverage it very efficiently because they have a motive. That'd be my guess.

Rachael: Yes, absolutely. Now I know your book just came out, Jeff, but I have to ask, what's book number two? Are you already thinking about the next?

Eric: Where did my cryptocurrency go?

 

The Battle Between Countries

Jeff: I have a toddler and a new job, so I admit I'm holding off on that. But to be honest, I've been lucky. My publisher said, "Hey, when is the next one?" I might do something on currency wars and just see the battle between countries, for what the next king currency is going. That's the U.S. dollar right now.

Rachael: Well, that sounds very cool.

Jeff: The guys at the IRS and stuff, and I know some of them, they're incredibly sophisticated. Tracking this stuff and trying to kind of fight it off and protect the dollar and a lot of cool stories there.

Eric: So where do you think things are going, I mean, five, 10 years down the road. Still a huge tool of bad actors of the criminal organizations or is this the underpinning technology behind societies?

Jeff: Wow. The big question. I think cryptocurrency is here to stay. Now, the pandemic has accelerated, as both of you noted that people don't like to touch cash. So, the evolution that was supposed to take like 10 years occurred in one or two. That's the future we're going to be living. In terms of the ransomware epidemic, I think that's just going to go hand in hand. Until the country can tighten up its cyberinfrastructure, it’s going to keep getting hit.

Jeff: I wish I had an easier, more encouraging answer, but the two things are going to keep happening. Crypto is going to keep growing. The ransomware problems are going to remain until they tighten up the underlying cyber defenses. Trying to kill Bitcoin is not going to fix the ransomware problems.

 

[39:32] Bridging the Generational Gap Through Bitcoin

Rachael: Right. I'm excited. I feel like I need to go back to school though. Learn how to use this cryptocurrency thing and start getting ahead of the curve.

Eric: Definitely, there appears to be at least a generational gap here.
Rachael: Are you calling me old?

Eric: The younger you are the more trusting. No, I think you're younger than me. But the younger you are, the more trusting you are, the more willing to understand and adopt.

Rachael: That's true.

Eric: I wonder what role that has on society, is maybe if you got Bitcoin or Ethereum or Litecoin or pick any of your currency. If you got it low back in the day, you could be a multi-millionaire today just by putting some money in. In time value of money, or appreciation of the currency, I do wonder how that impacts society and how things change?

Rachael: Yes. Jeff, you said you have a toddler, are you saving for college in Bitcoin? Are you starting that account yet?

Jeff: No, but I think that conventional wisdom is, diversify your assets. I've put about 5% of my money into cryptocurrency, just because it's the same way, people put 5% into emerging market funds and stuff. It's volatile, but there's a potential for a big upside and I believe
in the underlying technology. So going up and putting your children's college tuition to Dogecoin is importing on negligence, various stuff.

Eric: Is it worse than leaving cash in your walls when you go on the show and publicly announce it. Rachel, I might pull the cash out of the walls of grandma's house and put it into some type of investment. I'm not saying Altcoins and cryptocurrency.

 

Is There Optimism for Bitcoins and Cyber Threats

Rachael: I'll just bury it in the backyard.

Eric: Just move it now.

Rachael: I always love to ask this at the end of the interview. Now that you've been around the block in the best way possible, do you have optimism though? I mean, are people going to shore up their servers? Are people going to just be better about hygiene in general and try to get ahead of the cyber threat? Or, are we just going to continue to languish here?

Rachael: I was telling Eric on Friday, I just watched Blade Runner 2049. And this inflection point of it, is just soapy and the future ahead, where we're all wearing really cool clothes, but it's dark and dreary. What do you think in the next 20 years, are we going to get this thing?

Jeff: I don't think we're ever going to win, it's such a kind of cat and mouse thing, but I don't know, just, I am optimistic. Then the number of people running like old unpatched windows servers, they bought a dock at some point.

Eric: You would think, I don't know. My kid runs around without shoes on and steps on bees and stubs his toe and he still runs around without shoes on. Maybe, he'll learn.

Rachael: That's funny. What was it? Some of the folks like averted disaster on SolarWinds, because they're patching was so far behind. And they were able to kind of escape being impacted, which is the other thing. I mean, do we just go back to the era of the stone age?

Eric: No, that's a bad excuse.

 

Do the Basics

Rachael: I was doing my 23andMe ancestry with my mom this weekend. Apparently, I'm like 2% Neanderthal or something like that. Do we just need to get back to the old ways and just go offline and see how that could go again?

Eric: I protected this organization because I did not do my job by patching my servers. No, that's not a good answer.

Rachael: Always the realist.

Eric: I agree with Jeff, do the basics, patch your systems, that is official guidance from the Forcepoint To the Point podcast.

Rachael:  Well, with that, thank you, Jeff. This has been such a fun conversation. I would love to revisit it in six months because I think there's going to be so much more happening coming. Especially when you're looking at what was in the news today, with the U.S. and NATO and the EU, all kind of coming together. It was like Australia, New Zealand, and, there's one other country.

Eric: There are five of us. Australia, New Zealand, Canada, the U.S., and the United Kingdom.

Rachael: Yes. Everyone is starting to come together, which is really interesting.

Eric: NATO.

Rachael: Right. We talk about cyber UN, about all the implications of that. But I think when we look at cryptocurrency in particular, as it's starting to get more regulatory scrutiny and nations coming together or governing bodies coming together, I think it's going to be really interesting in the next six months, for sure.

Jeff: I agree. Well, thanks everyone, it’s been a really fun conversation.

Rachael: Until next time, everybody be sure to subscribe, get a fresh episode every week. Thanks for joining us as always.

Eric: Read the book.

Rachael: Yes. Read the book, Kings of Crypto, it's on Amazon.com. Thanks everyone.

 

About Our Guest

Jeff Roberts is Decrypt's Executive Editor. A former lawyer and staff writer for Fortune, Jeff has reported on crypto since 2013. He is the author of the 2019 book about Coinbase, "Kings of Crypto: One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street." Disclosure: He owns less than 1 BTC and less than 5 ETH.