56: How To Launch Your Own Form Of Money

SPEAKER_1 (0:00)

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Joe Weisenthal (0:24)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal, managing editor at Bloomberg Markets. Sadly, I am alone today. My partner in crime and colleague Tracy Alloway is away, so it's just going to be me on today's episode.

Nonetheless, I am very excited about today's episode because we're going to be talking about money, we're going to be talking about digital money, and we're going to be talking to someone who has created their own currency. Everyone is, or most people, are probably familiar by now with Bitcoin, the cryptocurrency or digital currency that was started by someone under the pseudonym Satoshi Nakamoto. But of course, Bitcoin is not the only digital currency in the world. There are hundreds, and in the case of many of them, the creator or creators are well known.

And we have the creator of one of the new coins on the show today. It's a coin that has received a lot of attention, a lot of enthusiasm in the digital currency community. It's called Zcash, and we are going to be talking to Zuko Wilcox. He is the CEO of the company that has created Zcash, and we're going to talk about how you create a new currency, why you create a new currency, why anyone would use it, and in general, this sort of fascinating new world of digital currencies.

SPEAKER_1 (2:09)

Thanks.

Joe Weisenthal (2:19)

Zucco, thank you very much for coming on.

Zooko Wilcox (2:21)

Thank you for having me, glad to be here.

Joe Weisenthal (2:24)

Yeah, so why don't we just jump right into it? What is Zcash?

Zooko Wilcox (2:31)

It's a cryptocurrency like Bitcoin, and it's different from Bitcoin in that it adds some cryptography, it uses some improved cryptography to make it so that your transactions are not traced in the blockchain, and visible to the public.

Joe Weisenthal (2:49)

Right, so people currently think of Bitcoin as being anonymous secret digital transactions, but people say that it's not really that anonymous, that you could sort of figure out who is buying what, and you could trace purchases and transactions ultimately. Explain the misunderstanding and explain the innovation behind Zcash that allows it to be untraceable.

Zooko Wilcox (3:20)

Yeah, the misunderstanding is that Bitcoin doesn't require the use of your legal name or your home address or anything like that in order to transfer Bitcoin currency from one person to another. Instead, it just uses these cryptographic random-looking strings to represent your account identifier.

And so, in the early days, people thought of this as making it anonymous or making it so that people couldn't tell what you were doing with Bitcoin. But that's actually a mistake. It reminds me of the early days of the Internet, because IP addresses, there are just four numbers with a dot between them, right? And so, there was a cartoon that said, on the Internet, no one knows you're a dog.

People thought that it was inherently impossible for people to tell what you were doing with the Internet. And now we know that's quite wrong. And we also know that with Bitcoin nowadays, it's quite wrong, because the Bitcoin protocol leaves a complete trace of all of the transactions between all of those Bitcoin addresses.

Joe Weisenthal (4:31)

What did you accomplish with this currency and sort of the computer science breakthrough that solves this problem?

Zooko Wilcox (4:41)

So the change we made in Zcash is that the transactions are optionally encrypted using cryptography so that no one who's looking at the open public blockchain can see the details about which address the money came from, to which address it went, how much was transferred, and other transaction data, like the memo field that you write in, what the purpose of this payment is.

Joe Weisenthal (5:08)

Now, one of the reasons people are skeptical about digital currencies, or maybe they're negative on them, is they say, well, yes, there may be some justification for them, but the only thing that makes sense is for crime and circumventing governments and so forth. And then you come along and say, ah, yeah, not only have we built on top of these digital currencies, but we've even made it more anonymous, which would lead people to think that, so they've just made a currency that's even better for crime and the black market.

Is that what your currency is good for?

Zooko Wilcox (5:42)

No, that's what a lot of people sort of jump to, but that's not what it gets used for in practice. Neither Zcash, which is brand new.