Participants:

Adam B. Levine (A.B.L.) - Host

Stephanie Murphy (S.M) - Co-host

Joerg Platzer (J.P.) - Cryptoeconomics expert.

Jaron Lukasiewicz (J.L.) – CEO of coinsetter

Sam Cole (S.C) - Director at KNCminer

Adam B Levine: Hello and welcome to episode 45 of let's talk Bitcoin for September 27th, 2013. Visit us at letstalkbitcoin.com for our daily guest blog, previous episodes and of course tipping addresses.

We will be at Atlanta for the cryptocurrency conference in early October for several days, if you are going to be there, be sure to check out letstalkbitcoin.com/meetup and say hi. For those of you who are unable to attend, video conference passes are available now, early bird prices end the first of October and of course both streaming passes and DVD sets are cheaper for Bitcoin. My name is Adam B Levine and today's show is about perspective.

The recent show about entrepreneurs and idealists really seemed to strike a nerve, so I wanted to offer some of the interviews that helped me form my thoughts on the matter.

Kicking things off, Joerg Platzer is a cryptoeconomics expert, one of the earliest brick-and-mortar Bitcoin businesses and one of the top contenders for the Bitcoin foundations individual board seat.

Later I catch up with Jaron - Founder and CEO of the recently out of beta Coinsetter platform and also a candidate for the Bitcoin foundations industry seat.

We dig into his background and what he thinks the future of cryptocurrencies might hold.

And finally we wind things up with Sam Cole from KNC miner, in the last of our on-the-floor conference interviews from Inside Bitcoins conference.

Thanks for listening and enjoy the show.

A.B.L: This evening, we are joined by Joerg Platzer, he is the founder of room 77, one of the first Bitcoin accepting establishments in the world and founding member of the cryptoeconomics consulting group. Joerg, thank you very much for joining us today.

Joerg Platzer: Hello, good evening Adam thanks for having me.

A.B.L. : Can you tell us a little about your background and how you got involved in the cryptocurrency space ?

J.P: I have a twenty year background - twenty five year background, in the IT business. But not working as a technician, but rather as a conceptioner or interactive branding, strategic corporate communication, I've been working as an information architect for a long time. Out of this also came a twenty year long background in the \b hacking and freaking\b0 scene in Germany , which of course led me to cryptotechnology altogether. So, I would call myself a cyberpunk fan and a cryptonerd. Cryptocurrency is a concept that I was aware of since the 90s as something that the future will hopefully bring, when Bitcoin turned up of course, it was a big moment for me, having realised that there it is. So yeah, I jumped right on it.

A.B.L: You've started a couple of different businesses and groups not that they began based on cryptocurrency , for example room 77 , that did not start as a Bitcoin focused establishment , but it has morphed into something that is tied to Bitcoin because of your affiliation. When you are looking at businesses and opportunities , what is it about Bitcoin that is an opportunity.

J.P.: Bitcoin in the first place in an opportunity for the whole of society to make things easier. Bitcoin on the other hand for specific existing business causes an advantage when it comes to accepting digital currencies or digital payments. Fast payments , no MasterCard fees , no chargebacks and so on. But it also of course brings a lot of opportunity for young entrepreneurs who with Bitcoin can change their ideas into reality much easier than going through the legacy system and so on. It will also bring out a lot of totally new business opportunities that we are not even aware of , maybe in regards to what is expected as the micropayment revolution and things like that.

A.B.L: Specifically we are talking about Bitcoin here but the question is more about cryptocurrencies that are like Bitcoin. Are there any things about it in its current iteration that make it unattractive or actually detract from the other things it offers that make it attractive ?

J.P: First of all , I would like to bring the whole discussion to cryptocurrency altogether , not only Bitcoin. Right now the biggest obstacle for businesses to accept Bitcoin is the high volatility which can of course be taken out by services like bitpay or something like that. The overall acceptance in society , the unfolding of the network effect is of course still an obstacle. There are too many people waiting for everybody else to accept it, and so it is not so easy to spread it over the world right now. We need to give people examples of how easy it is to use cryptocurrencies and what advantages it brings. Examples not in theoretical ways but in practical ways. Applied cryptocurrency , I would say.

A.B.L: I do not think I explained that question clearly enough. Is there anything built in to the Bitcoin protocol itself, not talking about protocol , not talking about legal or regulatory hurdles , but is there anything core about Bitcoin itself that you feel that the cryptocurrency or Bitcoin would be better off , if it wasn’t there ? Is there anything that makes the package worse?

J.P: No, not that I could think of , no.

A.B.L: I’d like to get your responses to some of these statements. These are not really yes or no , if you have more that you want to get into , but they are basically , do you agree with this generally or do you not agree with this. Statement A – Person to person transactions are desirable.

J.P: Absolutely yes.

A.B.L: Global markets require borderless money in order to be efficient

J.P: Of course they do.

A.B.L: Sensitive financial information is vulnerable in conventional internet payment schemes. For example, when you pay for something with your credit card and your credit card information is transmitted plaintext and stored on someone else’s server for however long , that is not an inherently safe relation.

J.P: Of course it is not.

A.B.L: These are the core things about Bitcoin that just about everybody agrees with , but then we get into these other things where it gets a bit more complicated. So , on the importance of compliance , I am going to give two different potential answers and I’d like you to tell me which one you align with and what you think of them broadly. On the importance of compliance , Statement A : Bitcoin will succeed regardless of government action or Statement B : Bitcoin must be fully integrated and compliant with financial networks to be viable in anything but the short term.

J.P: I would not go for any of these answers because if Bitcoin does not succeed we will see another cryptocurrency succeed so I cannot say that Bitcoin must succeed .If we find a fatal flaw in Bitcoin or Bitcoin will be co-opted on a political level and the beautiful things you described before would be taken out of Bitcoin. Then Bitcoin would be gone or it would be a PayPal 2.0 and then the next cryptocurrency still carrying the beautiful characteristics that you mentioned , would be more resilient against co-option or it would not have the flaw that Bitcoin might have that we do not know yet.

A.B.L: So , on cryptocurrency , broadly here are another 2 statements . Bitcoins success or failure will determine the fate of other cryptocurrencies , if Bitcoin succeeds some altcoins will succeed , if Bitcoin fails , altcoins necessarily will fail or Bitcoins experience whether successful or not , will catalyse new altcoins that adapt and learn from Bitcoin’s experience.

J.P: Statement B

A.B.L: So thinking about this from a regulatory standpoint , going back to that for a second ,I suspect that you’re going to tell me that it does not really matter what the united states does and that the united states has the ability to influence itself and what people are able to do within the united states , but broadly speaking cryptocurrency is not going to be mostly affected by them. Is that alright ?

J.P: Of course it does matter what the united states says and does because they are the leading nation of this planet in political and economic regards. In political regards in the western hemisphere and in economic regards on the entire planet. So whatever happens on the United States does influence what happens in the rest of the world. However if the united states goes completely against Bitcoin , crack down on it , illegalise it and demand the code to be changed so that I can be fully compliant to the legacy financial system would mean that the rest of the world would not adopt Bitcoin the way it exists.

A.B.L: Do you think cryptocurrency as we know it now is compatible and can live alongside the existing system of financial instruments that we have now ?

J.P: No, not on a large scale. I have been thinking about this a lot , you know the question can fiat and cryptocurrency co-exist or are they born enemies and one has to kill the other. The only way I can imagine they could co-exist would be if some certain societies , be they geographically defined or demographically defined for some reason decide that they want to live together using a fiat currency and

want to live in a society where everybody is being surveyed and every transaction is being recorded. It is hard for me to imagine that people would want to do that. But we do not know what the future brings and maybe there are societies that want to have this kind of structure because they feel safer or want to work closely together. That Is the only scenario that I can imagine in a very far future that fiat and cryptocurrency can co-exist , but these societies would probably not be as economically successful as societies around them. For me it is really hard to imagine that the fiat money that we have today and the kind of financial institutions do have a chance to survive in the long run.

A.B.L: Do you base any of your business decisions or decisions on which sides of Bitcoin or cryptocurrencies you should go get involved in based on the regulatory structure being moving forward or is it largely something you don’t concern yourself with ?

J.P: I do not concern myself with that yet , because in our normal businesses , the government and the financial regulators and the tax office are perfectly fine with the way we use Bitcoin. But of course I am concerned on how long this will go on , which is something which we really don’t know. It is going to be very very interesting how governments react in the next one or two years.

A.B.L: Yeah it definitely seems like something has to change so put yourself in the shoes of someone whose job it is to regulate Bitcoin or to try and make it compliant to existing systems. You can pick Germany, you can pick US, wherever you like. Do you think there is actually an actionable way forward to do this ? Or is it just much ado about nothing and it doesn’t really matter what’s attempted because it doesn’t work , there’s no way to make it work.

J.P: As I mentioned I don’t think there is a way that makes it work , that makes control of crypto currency possible . Of course this is a huge problem for everyone who is into regulation and you also mentioned people whose job it is to regulate , yeah they will have to come to a point where they realise that they cannot regulate this.

A.B.L: So to kinda summarize , what we have been talking about here. If I very much simplify this down it is more importance to use the system as it is , to work with the system as it is and to make the best use of it given the tools at our disposal than it is to conform to standards that already exist in the legacy currency world , be it government or whatever you want to apply it.

J.P: It is just impossible to make Bitcoin compliant to the current system. It is just not possible. That is what we are trying to do here in Germany when it comes to governmental action. That is why you read all this news and the media , like Bitcoin now legal in Germany and Bitcoin is legal tender in Germany. Which is all complete misinterpretation of what is going on here. But we are asking the government questions that make them by answering how impossible it is to put the regulatory corsets or cages that we have around this technology that makes them aware of the fact that even their legal definitions don’t make sense anymore in a cryptocurrency world because definitions of money laundering for example. Money laundering in Germany or Europe basically says whoever hides the source of money is a money launderer. But when I pay somebody , one of my employees in Bitcoin , what we do of course they are going to mix their coins , because they do not want their employer to see where they spend their money. Only because my employees do not want me to see where they spend their wages does not mean that their money launderers. So all these definitions have to be thought over and defined in a new way. And as I said that is what we are trying to do over here. Ask questions to the government and we have a very good chance over here because one of the members of the German parliament , the bundestag himself also is somebody who would like to see the central bank system abolished , so he can ask all these

questions and the government has to answer them because he is a member of the parliament so they have to answer him. And this is a very interesting process now , asking all these questions and seeing how the government struggles answering them. It brings out totally contradictory , mutually contradictory answers. And we hope that this way understanding can be established with the government that it is not going to be so easy to put this into the regulatory cages and make it compliant.

A.B.L: From a privacy perspective , you brought a really interesting point there , do you encourage your employees to mix their coins after you pay them or do they do it just because they have a privacy concern ?

J.P: I inform them and educate them in how to use Bitcoins securely and how to store them securely and how to use them and part of that is of course to let them have knowledge of the basic functions of the block chain and total transparency that the blockchain offers which is not a disadvantage of the blockchain and the cryptocurrency by the way , I see transparency as a big advantage as well. I don’t tell them to mix their coins , but I tell them that this is a possibility and what the possibilities are if they don’t mix the coins.

A.B.L: Is there any issue right now that you think that the cryptocurrency community should be focusing on at this point which is not getting enough attention ?

J.P: The elections ? *laughs*

A.B.L: *laughs* Well , let’s talk about that for a second , with regards to the Bitcoin foundation , I think they are up to 700 members right now , but that is in a community that supposedly has a couple million people or at least a couple hundred thousand. What do you think of the role the Bitcoin foundation has played to this point and do you see its value or not ?

J.P: Well , when the Bitcoin foundation started out , it was perceived as an organization sort of speaking on the behalf of the whole global Bitcoin economy and movement. This of course is a very very difficult task. I have never seen a community with such a diversity of people characters and motivations as the Bitcoin community. But that is what it was perceived as when it started out . It did come to a moment that changed a bit , so that many people rather saw it as a San Francisco or Silicon Valley or Washington DC business club , more or less catering for itself. I think these elections now are the point where the Bitcoin foundation and the Bitcoin foundation community is going to decide in which direction to go. I do not think this question is yet answered and decided. I would hope that the Bitcoin foundation, because it has very solid bases and a few very very capable people working there and putting their energy and resources in , I would hope that the Bitcoin foundation turns into something that tries to unify the whole Bitcoin community that caters globally to the whole Bitcoin economy , that would be my wish.

A.B.L: Joerg Platzer , thank you for your time.

J.P: Adam , thank you.

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A.B.L: So today we are joined by Jaron Lukasiewicz. He’s the founder and CEO of coinsetter, a new exchange that’s coming into the Bitcoin space. We have been going to a kinda interesting point from the regulatory standpoint and there have been a lot of views on how best to approach this and really how important even the question is. So , Jaron you are the kind of the prototypical entrepreneur in the Bitcoin space , so I really appreciate you sitting down to have this conversation with us. Can you tell us a little bit about you background and how you got interested and involved in the cryptocurrency space?

J.L: I worked in investment banking and private equity out of college. I think towards the end of that, I got very interested in the start-up space in general. I had already started another company with my brother and a friend of mine. This friend ended up later helping me co-found coinsetter. Really for a long time, he had been talking about Bitcoin and got me interested in it. We ended this other company that we had started late in 2012 , I was in the online ticketing industry and it was pretty obvious that at that time I wanted to do something in the Bitcoin space , so I worked really hard on putting this company , late nights. First, it was about figuring out what I wanted to do in the space and once I figured that out, also, the space was much different back then, it was much smaller, I was pretty much at that time creating a leveraging platform for play money. At least that’s what my friends thought. The space has changed a lot since then; we raised the capital earlier this year, my group of highly regarded investors. That enabled us to go out and create a quality product which is what we’ve done. We are in the final stages of putting that together and releasing it to the public. I think a big difference between what we were initially creating and what we are currently doing is whereas before it really was a leverage platform for play money and Mt. Gox was doing 10 million dollars a monthly volume at the time, now I think peoples vision of Bitcoin has become much more broader, so we are building a Wall-Street type ECM platform for Bitcoin in which it aggregates the feeds of multiple exchanges. We have our own internal high performance exchange which operates on a millisecond level and it is all about being a reliable place to trade within the US. On the other side of that is the regulatory issues which we are confronting right now. And that is something we are taking seriously. I cannot say too many specifics on it, but there is light at the end of the tunnel as far as us being able to legally operate in the US in the next few months.

A.B.L: You came to start ups, it sounds like before you necessarily came to Bitcoin. Is that right ?

J.L: Yeah. That is right.

A.B.L: Okay, so why do you view Bitcoin as an entrepreneurial opportunity? What problems does it solve, what opportunities does it present that make it attractive , as someone who came from the start up space first ?

J.L: You know , Bitcoin is a funny thing when you look at trying to start a business around it because the problem of Bitcoin from an entrepreneurial perspective is that the greatest innovation in Bitcoin is

Bitcoin , and so you have this very interesting secure virtual currency and you start to think “how can I make money out of this?” because I want to start a company and I like doing that. I think that can be a hard thing because the exchange concept is pretty obvious, becoming a payment processor is pretty obvious and people try to get more creative outside that , really it is that the payment network is the true innovation , so I think for me I first got interested in Bitcoin when I looked at it and thought that it matches with a lot of my political views , I’m interested in finance in general and it had a lot of appeal to me personally , and I knew I wanted to start an industry and worked really hard to say “What do I think is missing?” and at that time it was a great Forex platform for Bitcoin , you know I mean having to wire money to a foreign country , just with a bad looking front-end was just kind of , not a great process at the time , so I thought I could do that better and we were out on my own expectations at this point

A.B.L: So ,are there any aspects to it that make it unattractive or make it difficult to deal with from an entrepreneurial standpoint ?

J.L: Well , the regulations of Bitcoin because it changes so quickly , you have to stay on top of it. I see a lot of other exchanges come out and we’ve all seen a lot of Bitcoin companies not take their regulations seriously or early enough and they have been truly harmed by it. It really amazes me how early companies in the space didn’t even think that they would need to do AML. I think that’s pretty crazy but the space is changing a lot , you have a lot of people who are saying that Bitcoin is a way to quickly send money to your friends and has a lot of other benefits , how can I make it easily available to another person. We and other companies have kind of popped up trying to solve that specific problem and Bitcoin does provide great infrastructure to build companies. I think there is room in the space for a lot of exchanges for instance. Most people think that in exchanges are a trading platform and in five years that will not be the case. Most exchanges will be working with app developers , bank , financial institutions and other companies like that. They will be in the business of converting fiat to Bitcoin which are quickly sent somewhere else so that you can pay your friends quickly. It is really exciting and there is a lot of ventures and the infrastructure is not quite there in order to facilitate that system. In the next 5 years , this should become a very interesting thing and change the financial landscape quite a bit.

A.B.L: So I have a couple of statements here , that are basically true or false , basically if you agree or disagree. You want to expand on any of them , we can do that. Point 1 : Person to person transactions are desirable in a financial system.

J.L: True

A.B.L: Global markets need border less money , or at least benefit from border less money.

J.L: True

A.B.L: Sensitive financial information is vulnerable in traditional internet payment paradigms.

J.L: True

A.B.L: So these are things that broadly speaking, most people in the Bitcoin think are good things are about Bitcoin. There are other things about Bitcoin, the anonymous nature, the pseudonymous nature , that come up once in a while. Are there any parts of Bitcoin that you deal with as an entrepreneur despite these part, because it has other advantages?

J.L: Yeah, I think people in the space struggle a lot with the anonymous pseudonymous nature of Bitcoin.

It doesn't sound nice, but a lot of people want to have their cake and eat it too. You have people who say , Bitcoin is not an anonymous cash system and people will be able to figure out over the long run , where payments are going , but anytime people talk about that existing , they say know we can’t have that. For me, one of the great parts about Bitcoin is the fact that it tows that line. You can talk all day about Bitcoin will survive no matter what , but if Bitcoin is reviewed by banks and regulators as an anonymous cash system , it will essentially be closed out from society. It can never become a really powerful force. I am really focused on how I can pay my friends in ten minutes. There are other benefits of Bitcoin that have to separate Bitcoin companies from Bitcoin itself , so Bitcoin holding Bitcoin themselves would be privy to much more privacy than people who hold money with Bitcoin companies. So I think that kind of fits into one of the parts that got a lot of us excited about Bitcoin. It is almost a system you vote into, you make the decision to join it. If you don’t like it, you switch to another Altcoin. It is all at your own elective. The fact that Bitcoin is not strictly anonymous is a huge plus. We have seen over and over again throughout the last twenty five years that companies that are looked upon as anonymous cash systems get shut down. Even though I am an entrepreneur in this space, I am also very passionate about Bitcoin. I do not just want to see it survive, I want to see it thrive. That is what drives me every day.

A.B.L: So I have a couple of opposing statements here and am curious to which one you find yourself with more. On the importance of compliance , statement A – Bitcoin will succeed regardless government action vs Point B , Bitcoin must be fully integrated and compliant with existing financial networks to be viable in anything but the short turn.

J.L: I would side towards B , I mean , the cool thing about Bitcoin is that it is a kind of powerful force because of the distributed network. It is here to stay , but the question is how big and impactfull can it actually become. Do we want it in the corner looked upon as just a sketchy type of currency or do we want real people being able to use Bitcoin and receive all the benefits it offers , so in order for that to happen , you have to have it , at least Bitcoin companies have to comply with regulations , they have to get bank accounts. You cannot have any sorts of large sums of money flow into Bitcoin if it is not through the banking system. It will never happen peer to peer like in in-person meetings. That is what we’re trying to do.

A.B.L: You’re to be forgiven for focusing very much on the US regulatory side as you have a company doing business within that exact sphere of regulatory influence , but this is another question within the community , “How important is the US relative to the rest of the world ?” So this brings us to the next grouping. Proposition A – Acceptance or lack thereof in the US will be a deciding factor in the future success of Bitcoin. Versus Proposition B- Acceptance or lack thereof in the US will be a deciding factor in the development of Bitcoin in the US. So the differentiation there is that one implies that Us dictates and the other implies that the US is just deciding its own fate.

J.L: There is some validity in my view to US acceptance having a strong impact , but in the end I think we have it. There are very positive indicators that Bitcoin is being accepted by the government. I think even more so that the regulation it comes down to people , so what kind of people in the space , start-up companies and talking to regulators . I think a lot of what has happened in the past in the space is , a lot of people like to say that they are in active conversations with regulators and law-enforcement officials , but so far maybe they have talked to them once. It is like a great talking point. We can do a lot more , also it is about what products you create around Bitcoin. We are super focused about not launching before we are ready. I see other exchanges popping up, that are you know launching, kind of towing the line of legality and launching the jurisdictions with which they do not give licensing and that’s their decision to make. But in the end , by waiting the extra month we are looking at this like a marathon and

by doing things the last way , talking to bankers , talking to regulators , explaining to them why they don’t need to be scared of Bitcoin and it is a combination of those things that in the end, it comes down more to people and even the Bitcoin protocol. “Who is talking to regulators?”, “who is starting a business?” and so on.

A.B.L: We've been talking about Bitcoin, but there is a broader question here , not just about Bitcoin , but about cryptocurrencies , which Bitcoin is the most popular of , but is kind of getting to be a larger category. Of these two statements, which do you think is more true. A - Bitcoins success or failure will determine the fate of other cryptocurrencies, if Bitcoin succeeds some altcoins will succeed, if Bitcoin fails , then altcoins broadly speaking will probably fail or Bitcoins experience whether successful or not , will catalyze and inform the next generation of altcoins , their success or failure isn't really tied to Bitcoin.

J.L: It is a good question. Call me biased but I don’t even question Bitcoin’s existence. I think it’s here to stay and its super useful. There are obviously people who want it. So Bitcoin or virtual currencies in general like that , is something to stay. People often ask themselves,” Is Bitcoin it ? “. I think so, but I could be proven wrong , but you know when you look at it you see the money that being poured into Bitcoin specifically , infrastructure that’s being built around it specifically. You know, Bitcoin is the IP address for money. When you go back into the early days of the internet , TCP/IP , there were 20 other competing technologies that did the same thing , but TCP/IP was the technology that caught on most basically and that is what you are seeing happen with Bitcoin right now. People are very focused on the currency aspect which is a very important aspect of it , but I am focused on the network aspect , how can the Bitcoin address facilitate dollar payments and that is what we are doing in the long run. And other exchanges are doing that, so, the infrastructure , the money flowing in, the enterpreunial effort that are happening really need to believe that the bitcoin is it. Can bitcoin change possibly. Will other currencies, potentially come up, ripple's already shown that there are other options out there, that may be good for certain scenarios. Its hard to say, but i am putting my money on Bitcoin.

A.B.L: Last question, and this one is always controversial, if you don't wanna answer, you don't have to. you have worked for financial industry. You have worked for a time as a trader at J P Morgan. People question weather or not the existing financial system as it currently is, is very compatible with Bitcoin, and compliance aside. The larger question is, bitcoin and cryptocurrency represent, especially if they pick up adoption competition to legacy or government currencies, in a way that we have never seen in our lifetime, or any other generation that has. Do you think that there is a fundamental disconnect here, or there's a conflict here or they can integrate and it'll be clean.

J.L: I think the way you asked the question, how most people look at it currently, but it's the complete opposite of how we should be looking at the situation, its not " will the banking sector adopt bitcoin. The banking sector is what it is, and it has a system which works, it works terribly, but it works for them and they make money of it. In order for banking system to accept new technology, that may be better, there has to be something in it for them. Bitcoin certainly offers that, because of bitcoin address and the fact that it is really a public system, it does have value to banks that pretty much no one has seen right now. I actually just read in Bitcoin magazine, that touches upon it. Bitcoin can be its own think, holding bitcoin, its like a private Swiss Bank account. This great currency that is yours. That not all that bitcoin has to be, if we wanna know how bitcoins , how will they impact the banking system. I take more of a look at, how

does the wire system works, how does the ECH system works. What correspondent banks plays in that system. Why is it so expensive to send these transfer? Why does it takes that long? Those are the issues that are important to confronting and Bitcoin already offers to fix lot of these problems. My real goal in what i am doing is , you should be able to send a million dollar to a sketchy place in Romania and have it arrive there in a hour fully BSA compliant. It really is about free flow of money across borders at a affordable price.

A.B.L: You mentioned one million dollar amount with full compliance, it makes sense. I wonder if it makes sense about $10 transactions or $50 transactions, do you think that we will wind up a 2 Tierd system, where there is a threshold above it, where there are compliance requirement because they make sense and effective at that level. But doesn't tie up all of the lower end with this stuff, that doesn't necessarily make as much sense.

J.L: What we gonna see happen is that, its not really gonna matter how big or small transaction was, the compliance cost for bitcoin is just low. A lot of the stuff hasn't been built yet, but over the next 5 to 10 years it will be built. If you can have certainty that you are sending money to a safe bitcoin address in a foreign country, no matter where it was. There is no reason why you couldn't send money over the bitcoin protocol from your bank account to that bank account. Those are things that are definitely further out, they are possible and really exciting. Enough of us have seen how difficult it is to send money to your friends, or if you own a business, if you send money across borders, it can cost $75 just for the transacting.You think about the AML compliance that needs to go out behind them, a lot of this is just manual labor that banks are doing, and it's very prone to human error too. I kind of think about the direction that we want to take coins, is very much on that note

A.B.L: It sounds to me that from this prospective, bitcoin is actually improving the efficiency and reducing cost, and mistakes at the banks. But you are still using those banks in order to make transaction, then the bank is using this as the underlining means as opposed to like SWIFT or Wire Transfer, something like that. Is that right?

J.L: Exactly, who knows what, its not to say that other option won't even exist. Like Bitcoin might be a different transaction option, maybe. I think one question that happens in Bitcoin space is Will Bitcoin companies be forced to create reversibility in transaction. Irreversible means protocol, why are Bitcoin companies subject to reversing it? Its really hard to say at this point about how this would play out in the banking system. Just think about a world where you could send money to your friend and you could have the option between a Wire Transfer, which costs $35, an ECH transfer which cost $3 and your friend needs to set up an account on your banks's website, then it'll arrive to them in 3 days, or a Bitcoin transfer which will arrive almost immediately and is irreversible but cheap, maybe you limit that to $100 or $500. There's so much creativity that can happen here. That's why its really exciting, and its not to say that there aren't the reasons why you wouldn't want to send a reversible transaction even over the Bitcoin protocol, if its of a large sum. There are alot of argument we will be able to make to banks that will show huge value proposition to them. When i talk about these things, people are always trying to think about, when they are looking to start their bitcoin business. People are trying to think about these gimmicky ideas that, what can people buy bitcoins with, or how can i use bitcoin in this creative payments way. There's some really glaringly large opportunities here, such as could i create an escrow service, where you can transfer bitcoins from and to, denominated in dollars. I saw someone created an android app like this. That shows us a very awesome example of where this is heading, where you can carry balances in dollars, but then send money to your friends in bitcoin. As more people uses system like that, you'll have logistics companies that are similar to correspondant banks pop up, that makes this

system even smoother. It's just really exciting to me, where all this is heading.

A.B.L: In a complainent future, do people still make transactions from person to person, or do you think that complaient bitcoin transactions, in order to meet that burden of complaience can only really go through banks. Banks can use bitcoins, you can have the efficiencies over there. We won't see it use for legitimate purposes person to person.

J.L: My initial response is that there is no reason to limit ourself to the better option. Peer to peer are gonna be huge in the bitcoin space. Sending money from your bank account via bitcoin is another great option, and will kind a fit with each other.

A.B.L: Does the one preclude the other?

J.L: No, i don't think it does and that's why its so exciting. One of the unfortunate think about the backing industry is that their primary business function was to protect money, protect deposit. Now, their primary business function is to figure out where money is going and keep track of it. I leave that to every one to figure out to agree that its nessesiery or not. Thats the main reason why banking is so costly thesedays, alot of it EML complaince. Bitcoin has some option in there, that will really help smooth this system over. i am looking at thinks from banking prospective and services that we can offer to banks to make it easier for the people to send money to their friends from their bank account. The Peer to Peer side, i send money to friends n bitcoins all the time, and i prefer when they send it to me, because we all know that bitcoins are gold and i rather have them then dollar. Alot of people are doing a alot of different thinks, they all look at bitcoin in a different way.Its almost hard to predict everywhere where this will go.

A.B.L: jerem, CEO of coinsetter thank you verymuch for your time.

J.L: Thanks a lot.

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S.M: I am here talking with Sam Cole, he is one of the directors of KNCminer , which you've probably

heard about on the show if you listen before.

S.C: Hey everyone, i am one of the director of KNCminer , there are five of us in the team. There's me, and then my collegue Andreas Kenmar from KNC called Kenmar Cole. And there's another company called Alsec, which joined forces to become KNCminer.

S.M: Ok, that's where the name comes from, i see.

S.C: It is indeed, Kenemar and Cole, i am the C in the KNCminer.

S.M: I see, Cool. KNCminer as the name impies is making mining equipment.

S.C: Yea, sure. We are making ASIC mining equipment, and we are selling to general public. We are selling fully functioning devices that anyone can come and buy. We are doing quite well, we at 28 nm technology. If you look on the lead tables, we are currently at the top and we expect to be there for a while. We are open for competition, someelse might come out at us. We have got a few things to we can do to stop it. We began shipping our devices in september.

S.M: You have some varient that i have seen online, you have the video of the MARS unit, which is an FPGA miner. Do you have video of an ASIC units yet or not yet?

S.C: No, there's no videos of ASIC unit yet, our chips are currently in production, they will arrive in time. There will be another video of JUPITOR online, where we anounce the final speed and final proformence figures. Because the once on the website now, they are the minimum gurrentees. The MARS is a FPGA to prove that we could engineer a device, in this time frame on this scale. And get it assembled, produced, get it coded and get it running on mining equipment. We did that very quickly. The power of the device as its an FPGA is not as quite as good as an ASIC. We took the time now to really really get the ASIC absolutly top notch, and everything is on track. Hopefully everyone will be happly.

S.M: You have a sort of a track record to show look we can actually ship this thing of real artistship. You can actually do this and do this on a time frame. Before we take your preorder.

S.C: Exactly, the company have also sold the devices before. They've sold things to the public, they've shpped, they've have got a history of doing it for last 10 years of engineering product. This is there first bitcoin related product, but everthing is on track. The MARS FPGA prototype was never shipped, because is we shipped it to our customers in that time. It probably wouln't have given a decent return. We need to make sure that our customer get as much a return as possible, because we want them to buy again.

S.M: Your devices are named after planets, there is the Mars, which is the FPGA rig. Then there is Jupiter and Saturn.

S.C: And Mercury.

S.M: Mercury is the upagrade?

S.C: Our smallest device is called Mercury, it has one chip inside. Then we have Saturn with 2 chips, and Jupiter wth 4 chips. The reason we choose planets, is we needed to be easily understandable in multilanguages. Most of our customer are not english speaking. But they all do understand this. They all can understand a Mars , a Saturn, a Mercury, they can all talk about it. its translantryly easily into there language, its something that every one can understand. Rather than X5000 or X2000, it wouldn't work

very well.

S.M: Ok, that make sense, i can dig it. I was wondering why they are named after planets. That makes a lot of sense.

S.C: Sure

S.M: You have this news coming out. You gonna start shipping in september. Which ones shipping in september?

S.C: The good thing about product is that they all ship at the same time. Actually the Mercury is in the same size box as a Jupiter. We make a box and on the basis of payed for is how many chips go inside. Everyone is in the same shipping queue. The factory will make this many mercury a day, this many Saturn a day, this many Jupitors a day, based on what was ordered that day. And we ship them all in the same time.

S.M: So, you literarly take all the orders and then end of the month or the begining of the month or whatever. You ship them all on the same day, so people recive them on the same time.

S.C: No. if you ordered a Jupitor today, a Saturn today, a mercury today. That will put you in the queue position of whatever today gave you. After that in October, beacause you buy today you get in october. October the 2nd for example we will ship as may Mercurys, or Saturns or Jupitors as we can, based on what you purchased today.

S.M: Oh! I see, that makes more sense. After you finish you gonna ship in september and october?

S.C: Currently our shipping queue is full for September.

S.M: Ok!

S.C: That basically puts that in first, second, third week of october. Which is where we are today.

S.M: Ok! I saw an anouncement on your mailing list, about having more torriam on shipping for november, december , january, is that right?

S.C: December, January, Fabuary. We will obiously allow people when we start shipping to buy a box and ship that before we stop shipping. And then what we want is we kindly need to approach all the manufacture, everyone else. To not put to much hashing power on the network, because if no customer gets a return on a investment, no customer buy again. We don't really want that. We need each customer to buy back.

S.M: Do you think thats gonna be effective, to try to convince other manufactures not to put out hashing power. They have a big insentive to sell their products if they have them.

S.C: Sure, what i was saying is that if they wanna play we will play, if they don't we will happily continue shipping, we are happily fine. We need to give our custmer decent return, and we will do what ever we can to give them a resonable expectation of return. It is actually good for everyone, if all those manufacture play kind of nice, we are hoping that they do. They have approched us, some of them agreed today that we can talk about those sort of things, because it is good for them as well.

S.M: You are expecting a big increase in the difficulty when you start realising these device, is that right? It's kind of sound like that from the website.

S.C: Yes, it is a big increase in difficulty, there is no question about it. Nobody is under the impression that it's not gonna grow up. It is gonna get higher. We ourself are shipping enough to make it move, ofcourse. And there are other players also shipping enough to make it move. And all of us together, we all are fighting over the same pie, difficulty will grow by what ever is on the network. It's gonna get difficult.

S.M: Who'd you say is your biggest compititation?

S.C: We have compitition form everyone, from Butterfly Labs, from the Avalon Chip cells, from the DIYs, there is a new comer called Hashfast, that were on the network. If they ship in october, if they gonna release a 20 nm chip comparitive with us. They need to release quite a few GHashes or PetaHashes even to make it worth. There is compitition coming form every where. And i don't think we have see them all yet.

S.M: i am wondering if thats going to work, is there going to be flood of ASICs on the market, nobody's really gonna get a return. Like you where talking about, i am curious to see how this senerio plays out.

S.C: We are curious too, we can not gurentee return. We can do whatever we can do to try to make it happen, because we need people to get a return. All the manufacture, regardless of what they say, need people to make return, so you buy twice. We can't constantly compete for new customer that havn't got equipment yet. That's se;f defeating.

S.M:If you were just an avereage person out there,and you are thing about that should i buy ASIC miner, or should i go and buy one of these big, heavy duty mining Rigs, i am thinking about the cost, how many bitcoins am i gonna get, is it going to be worth it. Do you think that they are going to be able to make a return in 3 months, if they got there device in september, do you think in 3 months they could get a return?

S.C: We wouldn't ship a box, if we didn't think they can get a return. It would be unfair. We are not in the market for taking as much as possible, in shorter time frame its possible. We are here for the long run. We are gonna try to give every one as much a return is possible. We need our customer to make more from the Jupitors, Saturns and mercuries, then we do. Then you buy again, when we start shipping other products next year we need you to get return on them. So, you buy again. Its good forthe customers and its good for us.

S.M:You are also doing a thing where you rent out, shares of a miner, is that right?

S.C: No, we are not currently doing that, the smallest purchase from us is a mercury device.

S.M:Gotta!! There was somthing on the KNC website about the storage space, or somthing...

S.C: Hosting Space.

S.M:Hosting Space, what is that?

S.C: These miners, they require a lots of electricity to run, and people don't have that much power in the house, they don't want to host it. They just want the coin generation ability. What we are saying that we

will put in our own datacenter for you, charge you a monthly fee, and we will look after it. All of the mining power will be yours, its not ours. We will just simply host it for you, run it againt your own wallet. Its more of a mentainace running fee. But you have to buy the device first.

S.M:oh! you have to buy the device first, and then you host it. That's an important detail.

S.C: Yea, lot of people think that they can just buy an hosting contract. The hosting contract does not include a miner, they are expensive to run. It is an expensive hosting, but its an optional actually. you don't have to take it.

S.M:I see, that makes sense. Wow! All kind of other questions. These devices are for mining bitcoins, and you are selling them to regular people. There have been some people who are really worried that ASICs will tend to centralise the mining power in the hands of who ever can have a ASIC. What do you think about that?

S.C: What we have done is , we have produced what we think is the best chip size. A dollar per hash ratio that still makes sense for an average person to get involved with. As long as we can get these 28nm chips in as many hands as possible, we actually stop centralization. Beacause for someone to centralize it, they need to go again much bigger, stronger than our chip. We are trying to distribute as much as possible, so that we don't get centralization of mining, we think that's bad.

S.M:These are for Bitcoin, it's techecnically possible to mine other coins. Other cyrptocurrencies with different algorithm like the script, or prime coin algorithm. on a device thats an ASIC, but its a little different. There's not going to be that big gain in hashing power on the script algorithm for instance between graphic card or FPGA, or FPGA or ASIC. Is KNCminer thinking about making device that mine on other algorithms besides SHA256 for bitcoin.

S.C: Yep, We have previously announced it before, our next device that comes out, its gonna make along side Jupitor, Saturn and Mercuy and it will be a multicurrency device. We are gonna target as many of the coins as possible. It will currently be an reprogramable FPGA, there are reprogramable. On any daliy basis you can go to which ever interfaces, you can mine one coin for as long as you want, and then you want to change, change the interface to other coin. If a new coin comes out, hit update and download frameware from us and you can mine that newly created coin. It will do it for Script coins, SHA256 coins and as many coins we can squeese into it.

S.M:That sounds relly cool. If you need a tester, i am available. So, anything else you want to add.

S.C: No, i wish all of our miner good luck, its gonna be compititive. We really do hope that every one gets a return.

S.M:Your website one more time is KMCminer.com

S.C: KNCminer.com , and i am Sam Cole.

S.M: Thank you so much Sam. I appreciate talking with you.

A.B.L: Thanks for listning to episode 45 of Let's Talk Bitcoin. Content for today's show was provided by stephny merphy , Sam cole , Jeren from coin setter and Eon plotter. Music was provide by gerede

rubinson jazz town. If you can't get enough of original thought and discussion, read our daily blog at letstalkbitcoin.com . Sign up for our weekly newsletter at theweeklybitcoin.com . To get in touch send me mail at adam@letstalkbitcoin.com or visit letstalkbitcoin.com\talk to be directed to our listener's subrated.

Thanks for listening.