Crypto’s Fatal Flaw: Trust, Scale, and the Economics of Blockchain

[MUSIC] If you are among those intrigued by the concept of cryptocurrency and thinking maybe some of it has a place in your portfolio, we've got an episode for you. Well, how secure is a system based on the level of trust support it attracts? And the Achilles heel of Bitcoin and Ethereum in really any form of permissionless consensus, this is just computer science, is that they're all vulnerable to what's called majority attack. Welcome to the pie, I'm your host, Tess Vigland. Economists are always talking about the pie, how it grows and shrinks, how it's sliced, who gets the biggest share. In this show, we're talking about the most pressing matters of the day seen through the lens of economics. The pie is a production of the University of Chicago's Becker-Freeman Institute for Economics. And in this episode, we're falling down the crypto hole. Now, if like me, you are baffled by the whole thing, Bitcoin, Ethereum, mining, tokens, blockchain. Well, today we're talking with one of the leading cryptocurrency economists about its future. It's a future that, if he's right, is not particularly bright or more accurately, its brightness has a vanishing point. Oh, and it's got all the hallmarks of an asset bubble. I'm Eric Boudich. I'm a professor of economics here at the University of Chicago Booth School of Business. Well, Eric, we're going to talk a lot about trust today. And to start, I'd like to ask you to compare a system that most of us know with a system I'd argue most of us don't know, don't understand. So first, we have our regular banking system. I trust that bank to hold my money, my currency. I trust that there is a government, the rule of law backing that up. So to start, where does that trust exist in cryptocurrency? Talk us through this idea of permissionless consensus. That's a great question. It's a great place to start, right? If you think about your or my ordinary bank account, we trust it for a variety of reasons. Rule of law, probably first and foremost, also the bank's reputation, technology. Also, if you think through it, would your bank have incentive rationally to steal your money? And you think, well, they'd get legally punished and they'd lose the ability to operate. I mean, a pretty profitable business. So probably it's not in their rational interest to steal your money anyway. But your trust comes from a lot of different dimensions, if you step back and think about it. We take a lot of trust in the economy for granted. It's almost like oxygen in the background that we don't even notice. But it's so essential. And it's everywhere and it comes from multiple layers. With crypto. So crypto is confusing. I think you alluded to how confusing crypto is. It's really confusing. And I like to step back. So first of all, there's crypto as a financial investing phenomenon. Let's put that aside. And then there's crypto as a technology. And then for crypto as a technology, there's really two parts. There's the the data structure and the trust model. And the data structure maybe has a little bit novel. But think of the data structure as a fancy kind of Excel spreadsheet. The trust model for crypto is really the scientifically innovative, creative, novel kind of ingenious part. But also what I'll argue is it's a it's a kill ease heel. So the trust model for crypto and we'll start with start with Bitcoin, which is first and remains the most famous and culturally important and financially valuable. The trust model for Bitcoin is that there's this large anonymous decentralized mass of computers around the world, mainly commonly maintaining a database together. And the reason they do so is that they're paid to do so. I'll come back to the details of how that works in a moment. And they're paid to do so through an economic tournament and there's and there's cryptography. So combination of economic incentives and cryptography that creates the incentive for a large mass of computational power around the world to collectively maintain a common data set. And that large mass of computational power is what gives trustworthiness to this data set. And it's really kind of astonishing when seen from some perspective. So this massive compute computational power for Bitcoin uses about 1% of the world's electricity, which is kind of maybe it's 0.8%. But it's an astonishing number. It's more than a lot of small countries. And it runs about, last I checked, about 800 million trillion computations per second. Million trillion per second? 800 million trillion computations per second maintaining the Bitcoin data structure. And it's that 800 million trillion computations per second that in a sense is what keeps it, keeps it trustworthy. Now the reason for those 800 million trillion computations per second is that the computers doing doing that work and you've probably heard the phrase Bitcoin miners are getting are getting paid. The 800 million trillion computations per second is sort of like looking for a lucky random number. And if your computer happens to find a lucky random number, you get to add the next block of transactions to the Bitcoin spreadsheet, to the Bitcoin data structure. And you get paid for doing so. And the payment for doing so for finding a lucky random number and getting to add a new block of transactions to Bitcoin. It's a little bit over three bitcoins per block, which at current market prices is worth like 300 grand. So there's this the reason for the 800 million trillion computations per second is that it does a lot of money in finding a lucky random number and getting the right to add a new block of transactions to the Bitcoin database. So is that blocks as in blockchain? Yeah, the data structure is yeah, blocks as in blockchain. So it's super confusing. By the time you understand it all, you can kind of ask yourself, okay, what's the there and we can go back to that. We'll end up chatting for 45 minutes. But yeah, blocks as in the again, there's the data structure in the trust model. The data structure, think of a transaction as Eric pays tests one Bitcoin signed by Eric. But instead of Eric and tests, it would you know, it'll all be kind of cryptographic signatures. So transaction is just someone one party sends another party money signed by the sending party. A block is a whole set of transactions, think like 2000 of those transactions. 2000 of the 800 million trillion. 2000. Let me get let me get to the 800 million trillion. And once again, this stuff's confusing. So the 2000 transactions, that would be a block of transactions. And then to make a transaction official, it has to be added to the quote, unquote, canonical chain of blocks. And again, it gets esoteric. And what it means to the 800 million trillion computations per second is looking for a lucky random number, which when found will unlock the ability to add a new block of transactions to the existing chain of blocks. There's like a layer, a level at which it is actually as confusing as I've just explained it. At a more simplistic level, think of it as there's just a spreadsheet. And there's a bunch of computers maintaining this spreadsheet and getting paid to do so. And there are some then details for how you operationalize that that Satoshi Nakamoto invented. But think of think of what the system is ultimately accomplishing is there's a database of transactions. And the maintainers of that database are getting compensated for maintaining it and agree on what the state of the database is. The phrase permissionless consensus, the consensus part is we agree on what the truth is. We agree on how much money tests has. We agree on how much money Eric has. We agree on who has what. And the permissionless part is that agreement isn't coming from, well, Bank of America says so or Troshua Bank says so or the Federal Reserve says so. That agreement is coming from this system that doesn't anybody can enter exit. Any computer around the world can add, can add computational power to the Bitcoin blockchain. And that's kind of cool. It's new and different, the permissionless part. That's really what permissioned consensus has existed for a long time. There's a lot of research on it in computer science in the 1980s. The permissionless consensus is new and that was invented by Satoshi Nakamoto. I want you to help me understand why this is trusted. I mean, when we talk about a spreadsheet, a database, all these computations that are happening in real time, why is that trusted? What is keeping cryptocurrency safe if there's nobody guarding the store? In a traditional way that we all think about, all the things that you've mentioned, the banks, the federal reserve, the FDIC, you know, whoever. Yeah, let me answer why it's trusted and then punt on, I think, an implicit question, which is why is it a value? Yeah. Let me answer the direct question, which is why is it trusted? And the reason that it's trusted is the 800 million trillion computations per second. So specifically, if I send you a transaction, so Eric sends tests one bitcoin signed by Eric, and that transaction gets added to the bitcoin blockchain, then to erase that transaction from the bitcoin blockchain is extremely computationally expensive because you would need to redo the 800 million trillion computations per second to effectively erase that transaction. And the further back in history of transaction is the harder it is to erase. So what makes a transaction, what makes the system trustworthy is that once a transaction is added to the blockchain, it's as long as there isn't a large attacker, which I'll come to in a second, it's kind of permanent. It's an inviolable or inexorable. You'll see irrevocable. You'll see a lot of different synonyms for the same phenomenon. So you have this kind of permanent record of who has what? On a computer science level, that's why it's trusted. Now why is it worth something? That's a harder question. You could sort of say, well, if it wasn't trustworthy, then it probably wouldn't be worth anything. That's true. But if it is trustworthy, it still doesn't have to be worth anything. You and I could spin up our own crypto coin. In fact, there are websites that will help us do so. There's one called pump.fund, where you can create your own crypto coin. In fact, there's a president who did that. I don't know if he used pump.fund. I got to look into the details. Yeah, you could spin up your own cryptocurrency. It would be secure in the way I just described. It'll be hard to rewrite history. But why is it worth anything? Why is Bitcoin worth anything? Short answer is I don't exactly know. I mean, I suppose you could argue the same thing for any currency, right? It's because people trust it. It's because it is what people use to buy and sell and transact, right? Yeah. I built in something there, which is it's what people use to buy and sell and transact. The US dollar, I just went to a coffee shop and bought lunch in a cup of coffee with US dollars. I expect to pay my taxes next month using US dollars. I value US dollars because I expect to be able to use them for lots of different purposes. Bitcoin, for as famous as it is, 16, 17 years on from inception, it still remains very low usefulness. So the best economic study I've seen on this, it's data that's now a few years old, I'll describe what it finds and then my kind of speculation, how it update. But it found several years ago that over three quarters of Bitcoin volume was essentially financial speculation. So 75% put as just financial speculation, not an actual transaction in the economy. And the last 25%, they were able to document that over half of that was black market activity. So you've probably read about pig butchering schemes, various kinds of online scams. Think of that or other kinds of cyber extortion as you're kind of leading case of black market activity. So there's just a small amount that might plausibly be traditional economic usefulness. And again, 15 plus years on, it's hard to find arguments that Bitcoin is genuinely economically useful. Most of the arguments are about why it might be something investors should buy because it will go up in value, which you start hearing those arguments too much. You start worrying about Ponzi schemes and bubbles. All right. So speaking of economics, one of the things that you looked into in your research is the cost of this trust that is enabled by the database, by the computations. So I'm curious if you could explain where does the expense come in here? I know you talked about the fact that it uses a lot of power for one. But for those who are not familiar with how cryptocurrency works, you know, there aren't any buildings here. There's no personnel. So how does it cost money? The heart of my paper is three equations. So let me try to in plain English describe what those three equations mean. And then that'll be a way of thinking about your question. Equation one says, if you're trying to create trust in this anonymous decentralized way, how much what I'll call trust support will there be as a function of how much money is paid by the system for trust support? So in Bitcoin, trust support takes the form of millions of trillions of computations per second. And the compensation takes the form of being awarded new Bitcoin. So the $300,000 per 10 minutes that I mentioned earlier. In proof of stake block chains, you probably heard that jargon, trust support takes the form of locking up stake in the cryptocurrency. So locking up Ethereum coins, for example. And the compensation comes again in the form of getting paid with new new Ethereum coins. So equation one is, well, how much trust support will maintain this decentralized trust? And it's going to be determined by how much money is paid to the trust support, whether that trust support takes the form of computational work or proof of stake or proof of whatever you like. So there's proof of storage, proof of memory, proof of economics. I mean, we can make one up. And that's equation one. Equation two is, well, how secure does this is a system based on the level of trust support it attracts? And the Achilles heel of Bitcoin and Ethereum and really any form of permissionless consensus, and this is just computer science, is that they're all vulnerable to what's called majority attack. This might be where I should have started our conversation is, is people here cryptocurrency and they think about cryptography, really they should think about cryptography plus an elaborate majority voting system. The vulnerability of the system is that a majority can manipulate the truth, can manipulate the record of transactions. If honest maintainers of Bitcoin are providing 800 million trillion computations per second, and then I come at the system with 900 million trillion computations per second, I can rewrite history, I can basically steal a ton of money. How much money I can steal depends on how useful the system is. That sounds like you're just leaving the bank fault wide open. You're not, yeah, so here's the metaphor. So the metaphor is at a bank, there's the bank vault, and it's expensive to breach a bank vault, right? You got to get past the security garage. You got to break the code of the bank, you got to break the lock of the vault. But the real expense of robbing a bank isn't the security guards in the vault. The real expense is that the cops are going to come after you and you're going to go to jail for the rest of your life, right? That's all in the background. That's not an expense born by any particular bank, right? The whole, you know, a city can keep all its banks secure with a single police force, where the US government can keep the whole country secure without having to have large amounts of police at every point of the border. With Bitcoin, the 900 million trillion computations per second or whatever the number is, think of it as like a ton of security guards. But if you come at the bank with more than that, you can rob the bank. So it's not quite leaving the vault open, but it's leaving the vault vulnerable to being overpowered. Now, it's expensive to overpower. You would never attack Bitcoin to steal a cappuccino. You would never attack Bitcoin to rob my bank account. And I still don't have enough money. But if Bitcoin became real deals, a part of the financial system, then it's super vulnerable to attack. There was an attack actually last week on an exchange. It was a North Korean hacking group. I don't know, the details are a little murky to me, but they stole a billion and a half dollars. Jeez. So, you know, they were a well-motivated, well-financed, attacking group, and they stole a billion and a half dollars from a crypto exchange. Now, why were they able to steal a billion and a half dollars? Again, you can't steal a billion and a half dollars by going to the local Starbucks and double spending for a cappuccino. You can steal more and more of the more valuable, the more economic throughput there is through the system. So my whole point, it's an if then, therefore, kind of argument. If Bitcoin were to become more useful, then it would become really tempting to attack. Therefore, it won't get that useful in the first place. 15 years on, it still isn't very useful. Now, it hasn't been attacked. in the kind of grand majority attack form that I've discussed in my research. But there have been majority attacks of a lot of smaller cryptocurrencies, including offshoots of Bitcoin and offshoots of Ethereum. And there have been a ton of just thefts and collapses in crypto. So I think my argument's aging pretty well. One of the other factors that you talk about is what happens if and when cryptocurrency becomes more widely used. And I know you tabulated that expense and the numbers are pretty mind numbing. So can you trace that line for us from that expense and what that is to the impact that that then has on trust? Yes. So the expense, I do simulations in my paper, like computations in my paper that they have the following, the following structure to them. If an attacker could steal x dollars, then to deter such an attack, you would need why amount of expense keeping the system secure. And I'm able to do, I do that computation for lots of different scales of attack. What I find is one of the implications of the crypto trust model with this vulnerability to majority attack is that to make the system, to keep the system secure against a 10 times larger attack requires 10 times more security expense. To keep the system secure against 100 times larger attack requires 100 times larger security expense. It's all very linear. And so what ends up happening is that as you start hypothesizing larger and larger economic uses of cryptocurrency, the costs of keeping the system secure against such an attack grow astronomical. So one of the computations I have in my paper is that to keep the system secure against an attack of $100 billion. Now, that's a lot of money. The North Korean attack last week was for 1.5 billion. So 100 billion is 60 times that. But I find that to keep Bitcoin secure against an attack of $100 billion would cost over twice the whole global economy, over twice of global GDP. It just scales terribly. And you might think, well, wait a minute. If you can steal a billion and a half, we can talk through, is there a disconnect between that computation and where we are currently? And I think it's actually harder to steal money from Bitcoin than that computation might suggest. And Parkas Bitcoin has a lot of rule of law protection built in, which is sort of kind of a grand irony to the whole whole project, right? Right. It was supposed to be completely like without any interference, any rules, right? Yeah. The premise of Bitcoin, the premise of cryptocurrencies more generally was this anonymous decentralized trust. That's what I argue is it's vulnerability, too. That will never be economically useful at scale. Never achieve trusted scale. But if you think about how crypto is currently used, most people who buy and sell crypto do so through a Coinbase account or through some other crypto exchange, Coinbase is totally protected by rule of law, right? It's SEC registered. They do know your customer, they have anti money laundering checks. If they stole your money, you could go after them and court. There's a ton of rule of law protection for Coinbase account. It's not actually the pure version of holding cryptocurrency and transacting directly on the blockchain. Coinbase is doing that for you and so it's creating some scale that way. But it's like a little oxymoronic to me. If the premise is crypto will become this great useful thing because of the anonymous decentralized trust where we don't need governments, I know I'm going to hold some of that in Coinbase. It's just kind of funny. But there are a lot of people who hold it outside of Coinbase, right? That where it really truly is just the Wild West. Well, I think most of the, if I had to guess, this is hard to get data on. But if I had to guess most, there's a lot of money in Coinbase accounts, there's a lot of money in Binance accounts and other crypto exchanges. If you hold your money in what's called a native crypto wallet, you're extremely vulnerable to theft. If someone puts a gun to your head and says, give me your password and they get your password, they can steal all your money. You have to keep your ownership of crypto extremely secret. That's called a wrench attack. Those happen all the time. How did you steal the money? Well, I took a wrench and I left the guy in the head. That's an even more basic vulnerability than my majority of tech stuff. There's also a lot of institutional investors, when they hold crypto, they black-rock ETFs. I checked had billions of dollars of volume a day. That volume takes place on the New York Stock Exchange, the NASDAQ Exchange. These are entities that are extremely supported by government and rule of law. So, it's this kind of irony to crypto at the moment where the original premise and the thing that's intellectually novel about it is the anonymous decentralized trust. Most of the volume is very, very much supported by traditional forms of trust and rule of law. But it certainly makes sense because the vast majority of us, if we want anything to do with cryptocurrency, we want some sort of assurance and most people don't understand exactly what you've been talking about here, which is this trust model, that you can't see. Right? Yeah. I think that if of your question is revealing, if we want anything to do with cryptocurrency, I think what you really mean is if we want to speculate on the financial value of cryptocurrency. Yeah, you're right. The number of people I've had say something to me, and this typically is business school alum. So think like a little bit advanced in years, but think someone more advanced in years than me. And they'll say, I have one to two percent of my portfolio in crypto, just as a diversification or it's like kind of good cocktail chatter. And it's sort of not so much that it would really hurt if it went to zero, but it's enough that it feels good when it goes up. And I think a lot of people, when you ask, do you want anything to do with crypto, they've sort of convinced themselves that that's a good idea. And there's a lot of economic interest in convincing, what, let's step back. I think there's a few different scenarios for where we are at the moment with crypto. I think one of them that is worth taking seriously is the possibility that it's a massive financial bubble. Well, if it's a massive speculative bubble, the persistence of the bubble requires more new money coming in than existing money going out. So what does that imply? First of all, it implies a strong incentive for holders of cryptocurrency to create stories that convince others to buy cryptocurrency. So this, oh, you should put one to two percent of your wealth in crypto to diversify. That's a story that can attract new money to the system. The strategic crypto reserve, right, the idea that the US government would be spending taxpayer money. It seems like not to be the case at the moment. It seems like it won't be new taxpayer money. But the idea that the US government would spend taxpayer money to buy Bitcoin. That's like the ultimate bottom layer of a pyramid scheme, right? Last buyer is going to be the taxpayer. That drove me crazy. That was kind of a bad idea. I shouldn't say kind of a bad idea. I thought that was a profoundly bad idea. I was at a conference at Goldman Sachs in June of 2022. This was after the implosion of Celsius before the implosion and three-hour-a-big crypto hedge fund, but before the implosion of FTX. They called it the first annual Goldman Sachs Digital Assets conference. Best as I could tell, the conference was about convincing institutional investors and particularly pension funds to invest some of their portfolio in crypto-assets. You know, it's like it's sort of good business, but if you see it from the perspective of there's a possibility that we're in the midst of a massive financial bubble, it becomes more nefarious. Again, that's one possibility. I don't want to put probabilities to it. I definitely think it's more than 0%. I definitely think it's less than 100%. You're not going to pin me down on a number between those two extremes. Actually, if I had to bet, I think of where we are with crypto as a mix between the financial bubble scenario and the scenario where it's actually pretty useful for black market activity. Oh, I think that's been proven over and over, right? It's used by terrorist groups. Yeah, this terrorist groups, there's the pig butchering stuff which I mentioned earlier, you know, various forms of cybercrime. So that does actually create an economic usefulness. Now that's not that's not the fantasy of crypto taking over the global financial system, but that is a use case. It's a use case government should be pretty uncomfortable with because it's explicitly criminal and counterproductive for law-abiding citizens. But that could create some baseline level of value. And then that plus a financial speculative phenomenon. That's right. I think where if I were a betting man, where I'd kind of fall. But would you bet in cryptocurrency? What I bet in cryptocurrency. I'm not really a I don't I'm not really much of a gambler. So I got a lot of index funds. I like sleep well at night. But no, I think a third possibility is that crypto gets more and more embedded with good old fashioned traditional rule of law. You know, the black rock ETF traded on the New York Stock Exchange is kind of my fun example of that. Then the question becomes, well, what exactly has the crypto part accomplished? Because you know, you started at the outset, you know, what's the wait a minute, are we just trusting a database. And if there's rule of law in the background, then like, yeah, we're just sort of. If you have money in a bank of America counter, JP Morgan account or whatever, it's money in a database. If you have money in crypto, it's money in a database. If rule of laws in the background supporting both. The differences become, you become pretty small. So I think that's another another possibility for where we might land, but that one sort of least intellectually. It's most intellectually muddled because what it what is crypto if it's ultimately intermingled with with rule of law. Right. And I wouldn't that also then depend on what the government chooses to cover. Like I mean, I, I only bank with FDIC insured banks. Does the FDIC then insure crypto? Yeah, that's a good point. Right. And that's another layer of trust in my bank account. Right. It's a rule of reputation, technology and son of all that I mentioned earlier, but also FDIC insurance. There's a lot of like Swiss cheese metaphor. You get lots of different layers of cheese and together together they, you know, a lot of overlapping sources of trust that to know one of which is perfect, but together leave you pretty secure that your money is OK. I think that that's exactly exactly right. So I want to go back to this notion of scaling that you were talking about earlier. And it, it sounds to me. So in our current system, we have banks that are too big to fail. Right. We found that out in the 2008 financial crisis. It sounds to me, correct me if I'm wrong here, that this would be the opposite of that that crypto could potentially get too big not to fail. Yeah, that's, that's fun. I think that's great. Right. Too big to fail. It's sort of, yeah, it is sort of the opposite. Right. The bigger it gets, the more vulnerable, the more tempting it is for attackers. So yeah, too big. If it gets too big, it will fail. So I guess my, the cute version of my argument is if it gets too big, then it will fail. Therefore, I won't get too big. But I think you're, you're not a more succinct statement, which is too big not to fail or too big to not fail. Well, so when you look at kind of the future of cryptocurrency and, and everything that you've laid out here, it, and even including the Trump administration, you know, establishing this strategic reserve, giving it at least a stamp of legitimacy. Does that mean that crypto could become a global trading option from what you've told us today, it sounds like no, it really can't because economically that is just not viable. Like if, if the bigger it gets, the more computations you have to have and the more you're opened up to the kind of attack that you talked about, then how, how does it possibly become a global currency? How does it possibly becomes so that big enough to survive. I think you're asking me, yeah, you're asking me a hard question. Let me, let me, let me translate your question to explain why I think it's such a hard question, which is your, you're saying, hey, Buddhist, it's 2025. Bitcoin's already using 1% of global electricity. It's already this huge cultural phenomenon. It's worth, you know, $2 trillion of market cap or whatever it's worth. It's still not particularly useful. If we were to get 10 times more useful, your argument is that we would have to consume 10 times more electricity. If we were to get 1000 times more useful, it's still, if we're 1000 times more useful, it still wouldn't be that useful. It's usefulness today. It's really quite low. Yeah. And you start to run out of room and say, like, well, what the heck is this? Where is this going to go? And that then that brings me back to like the, are we in the midst of a, may as a financial bubble? If we are, that's, that's the answer to your question is it's uncomfortable for a reason, which is that bubbles after the fact, you look back, oh, that, that really didn't make sense. That's one possibility. Here's another possibility is a little more subtle. I think it's kind of a fun one that comes out of my research. So, so you've probably heard that the supply of Bitcoins is capped. So there's 21 million Bitcoins that can ever be created. I think that's the number. And I also told you that what keeps Bitcoin secure is that if you, if you mind a new block of transactions, if you, if you're one of the 800 million trillion computations per second and you happen to find the lucky random number, you get paid with three new Bitcoins. So how can those two things both be true? Yep. You get paid with new Bitcoins, but the supply is fine. This plan is going to top out. Yeah. And, and the answer is the amount of new Bitcoins you get for solving a block decreases every once in a while, every four years it has by 2044. It's going to be less than 0.1 Bitcoins per block. So the incentive to, to mine is going to be, you know, a 30th of what it is today. Now, if the price of Bitcoin appreciates 30 fold additionally, but you know, between today and 2044, great. It's the same amount of incentive. Although Bitcoin appreciated another 30 fold, then its market cap will be 60 trillion dollars, which is more than, you know, Apple plus Microsoft plus Google plus Facebook plus Amazon plus the video. It's, you know, be at some point you run out of room. So the other possibilities that the incentive to mine Bitcoin will be a lot lower than it is today. The lower is the incentive to mine Bitcoin, a more vulnerable it is to attack by 2140. I hope I live that long, although I'm not, I wouldn't bet on that. But by 2140, the compensation will literally be zero. By that, I'm pretty confident Bitcoin will will be majority attacked. But as time passes, it gets more and more vulnerable to majority attacks. So, so there's a bunch of different fault lines developing one is as the price goes up, it becomes more and more tempting to attack. Another is as the rewards go down, it becomes in new bitcoins, it gets more and more vulnerable to attack, because it's less computational power securing the thing. Another fault line is that just as the technology for mining it matures, there's more and more old mining computers that you could use for the purpose of launching launching a mass attack. I see fault lines as kind of inevitably developing and getting more and more severe, but it's sort of like predicting an earthquake. You can't say with certainty when an earthquake can become, but you can say with some confidence like, oh, I think I think there's a vulnerability here. You can also decide not to live somewhere with that many fault lines. Yeah, that's that comes back to the portfolio thing. Yeah, I hear a lot of people say, yeah, I have one to two percent of my portfolio in crypto. And I have not I have not I've never bought crypto current. I was just going to ask you that. Yeah, I interesting. Yeah, you know, and look, if I bought Bitcoin when I first heard about it, I would have it would have gone up a lot, right? It's a that's that's the that's the nature of a. I have friends who bought early and now have a very, very nice home. Yeah, you know, being a professor is not so bad. So my life's just fine, but I'm, but no, no, so, but no, the thing is if it if again, if if it's a massive financial bubble, individually, you want to buy early and you buy low and sell high, but there's all there's someone who buys at the end and is left holding the bag of cart. What it left hold in the bag or left holding whatever the, you know, whatever the expression is, you can't indefinitely make money from something that doesn't have an undraw eye economic usefulness. And so it does just seem like uncomfortable and intention. Well, I am not going to be the one holding that bag. That's for sure. Alright, Eric, absolutely fascinating. Are you ready for a lightning round lightning round? You know, lightning, by the way, is another, I don't know, light coin is another cryptocurrency. I think they did get did get majority attacked at some point. I might have the details wrong. But yeah, sure, lightning round. Fire away. Alright, what books are you reading now or would you recommend? I'll give you one. A book I read very carefully when working on my Bitcoin project was I went back to a lot of the foundational texts in economics on the relationship between the government and the market system. So I read a high-ex constitution of liberty. I read parts of Adam Smith, wealth of nations. I read Milton Friedman reread, I should say Milton Friedman's capitalism and freedom. And if you're looking for somewhere heady to go, that's a set of books that I would recommend highly to your listeners. Now those are amazing economists, some of the greatest of all time. Grappling, especially in the case of Hayek and Friedman who are pretty anti-government, or at least certainly caricatured that way. But grappling with what is the role of government and rule of law in support of the market system. So for intellectual fodder, that's where my head first goes for this topic. For listeners who want to learn about the technology, so about cryptocurrencies and blockchains, my favorite recommendation is not a book at all, but a YouTube channel. My co-author and friend, he's a good terrific computer scientist, Tim Ruffquard. And he's one of the founders or central figures in a discipline that sort of crosses between computer science and economics. It's sometimes called algorithmic game theory. And he's got a YouTube course on the computer science principles behind blockchains and consensus. And that I just, I watch the whole thing. He's a world class scholar, he's a first-rate teacher. I wish I could teach as well as him. So that's not a book recommendation. But for those interested in blockchains and cryptocurrencies, Tim, Tim Ruffquard and his online course, Strong Recommendation there. The book, the books I've been reading for fun most recently, are I've been reading this book about Bob Dylan in the 1960s. That was the basis of the movie that came out. Oh sure. I'm going to watch the movie next, but that's been a lot of fun. And I've been going back to Kurt Vonnegut, who I think I haven't read since high school or college. But I went back to, welcome to the Monkey House and I have a stack of other Kurt Vonnegut novels on my night table that I'm looking forward to getting back into. All right. Well, speaking of college, what course changed your life as a student? Oh, that's that's so funny. I fall a freshman year. I mean, just answer your question and I get super long-winded and nostalgic about it. I am coming up on my 25th reunion. So, you know, there's been a lot of nostalgia among me and my college buddies. But fall of freshman year, I took intro to economics. I know it's surprised there. And also intro to philosophy. I think intro to philosophy, the freshman greatest hits of philosophies, you know, reading Peter Singer and the arguments around utilitarianism. Reading the brain and the vat thought puzzle or the Chinese room thought puzzle or some of the other just greatest hits of modern philosophy and thinking about them as a, as you know, an excitable somewhat naive, somewhat pretentious 18 year old. That was that was a life changing course too. So I say the greatest hits of economics and the greatest hits of philosophy or the two that change change my life. All right. And finally, Eric, if you had to make a pie with the current contents of your kitchen, what would it be? Well, pie to eat. Well, we have had an answer of a pie chart before. So a pie with the current contents of my kitchen. I mean, what about people who don't like pie? Do they have a, do they have a place on it? We're all to influence this. We are all under inclusiveness. I don't like pie unless it's a savory pie. So, yeah, I don't, I, there's so many great food steaks, but pies, pies not a pie's not my thing. All right. Well, we'll go with the pie the podcast then. Well, Eric boot has just been really fun and so fascinating. And I'm still not going to get anywhere near cryptocurrency. It's a, as I said, a lot, it's a, it's a confusing topic. It's a lot of fun. It's an intellectually rich lot of layers. Actually, so maybe it's a crypto crypto pie. Maybe I'll eat a crypto pie. There's a lot of, a lot of layers to the crypto story. And I've, I've really enjoyed it. It's been some of the most fun, fun research of my career. Well, wonderful. Thanks so much for joining us on the pie. My, it's my, my pleasure. Crypto pie. Let's raise a glass to that. The pie is a production of the Becker-Free Min Institute for Economics and part of the University of Chicago podcast network. If you'd like to keep in touch with the latest economic research from the University of Chicago, you can visit bfi.u Chicago.edu/subscribe. If you're getting a lot out of the important research shared on this show, there's another University of Chicago podcast network shows. 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