Of these games. Jeff we conclude with heidi ewing and her new movie one of us. We began with an Organization Called footsteps and footsteps has been helping people transition into a more secular lifestyle. They guard it ferociously and they are not listed on the website and its a private space where people thinking of leaving come for help. And so we started talking to footsteps and took them about six months to agree that we could come and hang out in their lob e and in the inside footsteps with no camera and talk to people. And through those months and months of showing up and talking to people, we were able to find it. Jeff bitcoin, the chicago cubs and the Netflix Documentary one of us when we continue. And by bloomberg, a provider of multimedia news and Information Services worldwide. Captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. Bitcoin, the worlds first significant and most popular crypto currency set records this month. Prices soaring nearly 5900 before falling as much as 9 in the past few days. Bitcoins meteoric rise is the worldwide debate over the future of digital currency. Here to discuss bitcoin are three experts, Catherine Wood is the founder ceo and cio of ark investment management, paul viggo yeah is a reporter at the wall street journal and coauthor of the age of cryptocurrency how bitcoin are challenging the Global Economic order, and lily katz is a reporter at bloomberg news. Welcome. Paul let me start with you. Theres been a lot of bitcoin talk recently. Where is it right now . Where its at right now, i tell you its probably in oh god, catherine you probably know too, probably the fourth or fifth kind of wave of interest of this thing. Throughout its history its waxed and waned in terms of the speculative fervor and the attention in the mainstream. Certainly in terms of just price and dollars, this is the biggest move its ever had. In terms of interest, probably the biggest, i mean i dont know if you could say its totally in the mainstream but its much further into the mainstream than it has been. Catherine, is it still in hype phase . Well right now the market cap we call it Network Value of bitcoin when he include both bitcoin and bitcoin cash a little esoteric is a little over a hundred billion dollars. So its come up, its come very fast but its at a fraction of apples valuation of amazons valuation and we think its a much bigger idea than either one of those. Certainly a small fraction of the overall economy. Yes a very small fraction. I think the market cap is like 180 billion last time i saw. There are like a thousand different digital coins. It was 12 billion a year ago. So its been pretty wild the last year. The Global Economy is tens of trillions of dollars worth of value. But bitcoin is far and away the most popular. Its more than half of the total ecosystem at a hundred t if you would. E back a little bitcoin is invented in the wake of the Global Financial crises by and how . Released in the original white paper sort of announcing the concept was released in october of 2008 sort of at the height of the financial crises by something calling themselves nakamoto. To this day we dont know who that really is. Whoever that person was had been working on it before the financial crises. The christ hits. They release the white paper. January 2009, they launch the software. Its an open Source Software project. So nakamoto put the software out there for the world and anybody who want to adopt it and work on the project. So he starts in 2009, the economys in the tank, the Financial System has collapsed. The central bank had to pour in and put money into it and save it. It was kind of, not kind it was, it was geared as an alternative for the banking system. And at another time i think if he had released that paper and that idea might not have taken off but because he did it, i say he, it could be a she, it could be a they, it could be a group of people. There are all kinds of theories. Because of the timing that nakamoto chose the thing really took off first in the sort of hacker Hobbyist SoftwareDeveloper Communities and then it started to get out a little more little more, kept growing through 10, 11, 12, probably 12 or 13 it started kind of really step into the mainstream. This is one of most intriguing parts bit is the speculation over who nakamoto is. Yes. Several people came out and claimed to be but his or her identity has not been confirmed. Hasnt been outed. People have come out and said this is nakamoto and that pepper says person says no im not. Theres where you dont need a third party like a bank. They sort of conceptualize this world where transactions are cheaper because youre not going through a bank and they are more secure because these transactions are happening on the block chain which is this shared ledger of transactions. Which is why the bank dont like it which is in part why jamie diamond slams bitcoin. Sort of back tracks a little bit but theres been a lot of discussion. Lot of discussion. This actually is increasing the publics interest in it so you have jamie diamond very public figure, very wellknown along with howard marx of oak tree all negative. Interestingly the following week after jamies comment, james goreman coe of Morgan Stanley and blankline were speaking about it in a very different cone and i think its because theyre beginning to see trading opportunities. Theyre not endorsing it, theyre just saying were interested in finding out more about this because our clients lloyd in particular said this because our clients are asking bit. Yes, yes. So started introducing more folks tight which leads to the question i dont want to get too far ahead of ourselves because theres much to talk about paul but it then leads to questions of regulation and not just potentially banks and Financial Services firms being involved but the government being involved. Yes. And thats a very dense topic actually. But broadly speaking, we have a couple different moving parts there. One you have the people working on bitcoin itself and that project, another because there are crypto currencies that are like it. And initially a lot of them were very antigovernment, antiregulation, you know, the whole thing was designed as a hacker project. Were trying to go around the system and say create a network that you dont need these middle men. And then you started having businesses come in saying we could build a business on top of this and if we want legitimacy we need to be regulated. They started reaching up to the regulators. The last four or five years youve had this demic where one group is antigovernment, antiregulation and another group that says look we want to build this and bring this into the mainstream and this has value for people in their every days lives lets build regulations around this and then you have every regulator on the planet is now at the point where you have to figure out what this is and what it means to their economy and how they are going to address it. So explain this to us then because jamie diamond was very critical of it but also did say he believes the Block Chain Technology is legit legitimatet is that . So basically the concepts behind bitcoin, the concept behind the software have broadly come to be called Block Chain Technology. In this sort of broad set ideas essentially taking, creating a network where anything that can be digitized could be traded between two people directly. I have an asset i want to give you. Lets say a mortgage deed, actually. You could take a mortgage deed and i could digitize it, stick it in a transaction on this software program, send it over to you. That gets time stamped in the network. And the idea is just that its a weight, its like email actually. Its like trading emails but instead of just sending an email back and forth what im sending to you and youre sending to me is something that represents value. Thats really all the block chain is. When you get into bitcoin versus the block chain, bitcoin is this open soue Permissionless Network anybody can join, anybody can become part of it. What the banks are trying to build something they control. Because its verified publicly. Yes. Its what you were talking about before, the open ledger. What happens with bitcoin every computer on the network has a copy of this ledger and every transaction gets updated on every ledger at the same time. So that it can be verified. And that process which puts everything out into the open make it all transparent. That is actually what kind of make the banks unnecessary because previously you needed a third Party Tracking all those transactions and keeping the books. In the original white paper they talk about proof versus kroammaryt. The system we have right now is based on trust. You trust a bank to keep your mind secure. This bitcoin system is based on proof because you have these computers solving these really complex math problems to verify the transactions. It could be a mortgage, it could also be a cup of coffee. Yes it could. Were seeing more business to business these days. When people think i dont see this happening with cups of coffee, they cant conceptualize it but theres one way we have helped our investors conceptualize it. Remember when Technology Experts said voice is going to be free one day. We had trouble understanding that. I did back in the day. And of course today we have voice over ip. What this is, is money over ip. So voice over ip is free. The transmission of money over ip will be free. Again like the email analogy there. And then this distinction block chain bitcoin. When we first started studying doing research in silicon valley, we heard a lot of Companies Say i like this block chain but i dont like bitcoin. We were saying wait a minute, as we were studying this in terms of the bitcoin block chain, you cant have that unless you build it out and incentivize the miners with the bitcoin. So you cant separate them unless in jamies case, he wants a Walled Garden trusted network. He doesnt want what is called permissioned. The bitcoin block chain is permissionless. The argument on his behalf is that its too vulnerable to hacking, it cant be controlled, theres so much, theres already volatility when it comes to the prices this bitcoin to be sure. But those who criticize it say its just, its dangerous. This is the same criticism we heard about the cloud when it first came about. Everybody said well that can be hacked. Thats true, anything can be hacked. But what the cloud was an open source system. When youve got a lot of eye balls watching a system as we do with the bitcoin block chain and a lot of peoples livelihoods and businesses dependent on it. Weve got a lot of people watching it from a Security Point of view and were seeing when a hack starts the news travels really fast and its stopped. So we actually think the permissionless block chains are very robust and very secure relative to the permission ones. I think the real argument isnt even that it is vulnerable to hacking or fishing scams, everything is. You look at some of our existing architecture, well use some techie terms, look at all the hacks that have happened. Look at equifax. The systems we have built up over the last few decades are extremely vulnerable to hacking. Hacking is not the real argument against bitcoin. The real argument against bitcoin is that it is a system that authorities cannot control. They dont control the money in it, they dont control who is using it and what they are doing it for. What regulators have to figure out for themselves, somebody like jamie diamond doesnt want that because that cuts into jamie diamonds business. Regulators have to figure out is that something we have at least enough control over its not going to destroy the economy. Its not going to up end the government that we can collect taxes on it. Or are we willing to like accept some amount of for better or worse dark net type transactions. I mean bitcoin is relatively anonymous currency. Cash is a completely anonymous currency. Theres a lot going on riot right now. This is in its infancy and lots have to be figured out. Its not just the money, its the technology. Weve got three forces coming together here. Youve got Financial Services and the regulators dont want to impede the technology. They dont want to be accused of preventing the next internet. So they are stepping lightly. And were even seeing very recently, actually within the last week, scc and the cftc beginning to agree on what bitcoin versus other Crypto Assets are. Some should be regulated by the sec and some should be regulated by the cftc the commodities exchange. And other thing that we see going on from a regulatory point of view is a fear on the part of regulators in the developed world theyre going to prevent innovation so theyre stepping lightly. What do you say to the investors when they look at the volatility what is it a thousand or so all the way close to 6,000 in the span of nine or ten months. Not the first very dramatic swing up or down. Its happened. You dont think thats going to end any time soon. As i mentioned, weve sized it. Its about a hundred billion for bitcoin. That is a very small market right now. Its captured a lot of peoples imaginations. We are going to go through hypes and then shakeouts. Hypes and shakeouts. There will be regulatory news, there will be hacks. All of these things have already happened. We call this antifragile. Its being Battle Tested almost every day. China banning it, russia bang it. This is all tests bit has gone through and it dips and comes back. Its resill yept at least in the last year. Youve had it split into two currencies. You have bitcoin and bitcoin cash. People were really scared before this happened and bitcoin prices dropped and then bounced right back up. Is the big question right now how long the battle testing happens before it settles, paul. No. Because i think that is together to continue for, i mean until bitcoin is at some, assuming it gets to some point thats not going to happen any time soon. That process is going to go on for a long time. When you talk about the price, there are a couple things, yes its extremely volatile but there are people who love that kind of volatility. Theyre called traders. And they, you know, a lot of wall street traders are interested in this now because it is volatile. Because you can make money trading it and the guys who are bitcoin traders who have been doing this for a long time, they are total keyboard cowboys. They love thing. They stay up all night and trade and they tonight care if they go up or down, theyre just looking to make some money off it. Part of bitcoins attraction to that group is the fact its volatile. The other thing thats important to keep in mind when youre talking about prices, this is still a very small groups and lot are holding it because they believe its going to 10,000, 50,000, whatever price. In some ways i really think about it coin is a one way trade. Its a lot of longs in there, not a lot of shorts and not a lot of ways to short it. To some extent i think the price is, you know, its not like a mature market. Its not like stocks where stocks are going down you know people are selling because they think theres something wrong with the company. Its not quite like that yet. Weve done a study on the volatility, you can measure it. If you do it on a 12month moving average basis and i know thats, you will see it had come down quite significantly. We had compared it to twitters stock price. It actually dipped below that and it dipped below goals of volatility last year before this next round up. So the volatility has, compared to where it was in 11, 12, 13 has come down quite significantly though it is volatile. Which is a natural progression of things one would think. Sure. So really, whats the difference between buying and mining . So buying a crypto currency is just literally paying money to have a coin. Mining is i like to think of it people sitting in their basement on the computer and its called a mining computer and you have the computer run all these complicated math problems to verify the transaction happening on the block chain to digitally time stamp and make that are shes no double spending happening. You can think of it like if you have someone counterfeiting you can have two. Tell me the ditches between bitcoin in 2eubg. Because were in the Public Market and can only buy Financial Securities theres one way we can get registered export to bitcoin and its only bitcoin we can access and thats through and over the counter security called gbgt were trading in the stalk market that trades over the counter. You may know more about the fees. So the fees have changed over time for bitcoin. One of the biggest debates recently has been people call the scaling debate and basically people are concerned that Bitcoin Transactions are getting too expensive and slow. And that is actually why Bitcoin Split in two was these two sort of rival camps could not come to an agreement and the slowness of the network so they moved some of the transactions off of one network basically. If im buying a cup of coffee for a couple bucks i pay with a credit card, mastercard and very is a will take a couple points, American Express will take more. Where is the money going . Obviously the moneys going to starbucks or wherever you buy that cull cup of coffee. Who else is taking. With bitcoin initially when it was designed one feature was there was a fee. Everyone thinks Bitcoin Transactions are free. Theyre not actually free theres a very small Fee Associated with it. That fee goes to the miners. Its part of their work for processing transactions. In the early days, the capacity of bitcoin to process transactions is capped. How many can do per second. Its just a design of the network. In ther days