[00:00:06] Viktoriia Miracle: Hello. Hello and welcome back to happy time happy money podcast and I'm your host Viktoriia Miracle. Today we have our guests, Joshua Scigala. Scigala, Joshua is a crypto veteran and the co-founder of Vaultoro the answer to collapse of the biggest Bitcoin exchange in 2014. Which filed for bankruptcy and lost its investors over 450 million.

[00:00:37] Losing his as mess on in the collapse Vaultoro was born in 2015, building the first Bitcoin gold exchange to offer a fully transparent trading platform that protects people assets in physical gold bullion. Those days, Joshua is also working on a solving inflation by working on a new stable coin protocol called the standard DAO. The standard that will enable people to generate stable coins its not too fiat, but collateralized by gold bullion, bitcoin and ethereum.

[00:01:20] So small, but I, I made it through. Hi and welcome Joshua.

[00:01:26] Joshua Scigala: Hi Viktoriia. It's a pleasure to be here.

[00:01:28] Viktoriia Miracle: Its a pleasure to speak such a veteran in, you know, in the crypto industry. As some, as we were like, so many of us are just a year or two, three, but it's so, so I'm so eager to learn from you and to, for you to share, what do you know about it? Everything. But before that, we, I would love to dive deeper more on you and your story on how you started.

[00:01:49] Why was it so interesting for you in 2014 and how the whole thing happened for you?

[00:01:56] Joshua Scigala: Well, yeah, I mean, actually it was 2000 late, 2010 when I first heard about it and it, it came across my paper because I was trying to solve the similar problems already in a site that I had back in, early two thousands just often, 2002 around about then I was working on a site.

[00:02:17] The first site where people could swap clothes, mainly women could swap clothes. So I was always fascinated with alternative, economies. And as this swapping site came out, I realized it was a really swapping as a really terrible way of doing commerce because if, my wife really loves that, that jacket of yours, Viktoriia, but you look through her wardrobe and you're like, I don't like anything you have then the deal falls through.

[00:02:45] So but there's a whole marketplace, right? So you might, my wife might like your thing and, but maybe she could give you then a token or a credit and you could then use that in other places. So we're back full circle to money. And so I was already looking at how to have, Digital currency during that time.

[00:03:08] And I found what the cypherpunks were doing and they were the ones that were inventing all the, the, the building blocks that became Bitcoin. And they were in this small little nook of the internet, which is weird and crazy full of mathematicians and cryptographers, and they, and they couldn't solve the single problem, which was how do you have digital scarcity?

[00:03:32] How do you solve the double spend problem. And so the double spend problem is like, basically, if, if I send you an MP3, I don't know how you're going to make a copy of it and then send it back to me like that's just weird in the digital space, right? You're like, no, of course not. You just send it and you have a copy.

[00:03:50] Dory has a copy, you know, it's fine. But to have true money, you need to have solved that problem. Where when I send you an MP3, I don't have it anymore. And you absolutely know that I don't have it anymore, but instead of an MP3 its some money. And, and so, so I was, I thought, oh, it's an unsolvable problem.

[00:04:15] I'll give up, I'll work on some other stuff. But I kept my ear to the train track, you know, listening for sounds that maybe someone's Sabia. And then, yeah, like 2010, the white paper came across my table and I thought, my God, she solved the problem. Here it is. This is it, situation I've discovered the the, the holy grail of the digital currency and not just digital currency, because most money is already digital, but a decentralized digital currency, a way of having money, read digital assets, the copy copied, but that isn't part of the state isn't generated by government or corporation.

[00:04:58] So for the first time we have the separation of money and state, and this is a huge philosophical advancement, just like we had the separation of church and state. This was a big move forward in, in just a human philosophy that, that I, I felt the same way about this. And yeah, I've been diving down that rabbit hole of, ever since, nine and I'm working on things.

[00:05:27] Viktoriia Miracle: Yeah. I was a little frozen, but nobody cares because

[00:05:33] I can't hear you for sure. Yeah. I froze my intro and a little bit, but, so that is interesting because it's all I came out from, again, problem solution, right? The whole thing's about problem solution and he created beautiful solution for people that it started to come across. And how did you start at your why did you chose gold and, you know, in Bitcoin?

[00:05:57] Like why, why is that combination?

[00:05:59] Joshua Scigala: So, so what, what most people don't understand is that when you put money in a bank, it's not your money anymore. It now legally belongs to the bank. That's why you're a creditor you're, you're, you're giving them money and they promise to pay you back. And most of the time that works out, most of the time that's great. You go to the ATM and the money comes out, right. But as we saw in 2000, the nights, sometimes you have issues and people on, like in, in Greece, they, all of a sudden they couldn't take money out of the bank and we will see this happen again and again and again, cause its happened over and over again in history.

[00:06:35] So, so when, in, in the very first Bitcoin exchange was called Mount Gox and it was a very, it was a very sort of tacked together exchange that someone built. We were just a weird little community that didn't really know what we were doing back then. You know, we just thought, wow, we're revolutionaries in the cryptos in this space and we're going to take over the central banks. But this exchange Mt. Gox was the very first exchange. And it really, it wasn't transparent. So nobody knew how many. So when you send your Bitcoin in, is it still there? Has it been hacked? We don't know. It's just the same thing as a bank, you go to click withdraw and your Bitcoins come out until one day they didn't, they did, they stopped coming out.

[00:07:25] And, and so once when that happened and, it was I forgotten how many, it was a lot, it was near a million Bitcoin or something like that, which was in, in his exchange, which is in, you know, the multiple of billions of dollars now. And, and so my first, and this was actually part of a string of different centralized services that we're just running off with people's money or we're being hacked. And I got really mad at that because it was like, man, you guys are ruining this, this total revolution that's happening now. We don't need to stand in front of wall street and go, oh, wall street. Like we just, you don't need to beg for change. You just build something better.

[00:08:12] And, and leave the old thing to be obsolete. And, and, and that's how you have true change. And here we have this thing, that's truly change, in the world and, and these greedy people are just screwing it up for everyone, because at the time you'd see headlines, like the CEO of Bitcoin runs off with everybody's money because the media didn't even understand Bitcoin at that stage.

[00:08:35] And so I was like, this is enough. I'm going to build an exchange that is ultimately transparent. Where people could always check this assets because the blockchain is transparent. And I can talk about what the blockchain is, later, but we then, we then worked on how, how do we, how can we make an exchange that, that is also backed by another rare asset rather than using Fiat?

[00:08:58] So when that box went collapsed, a lot of people also had, US dollars on that exchange, but because they had us dollars, that is actually on the books, of the exchange. So that meant liquidators came in, they took it out for themselves and the liquidators have been, and the lawyers have been gobbling up and having, you know, eating on that, on those funds since 2013, 14.

[00:09:24] So, so what you want to do is, gold can be, is a good, right? It's like a car or a couch or anything else. You can have what's called a bailment contract, which means that this gold belongs to you, but I look after it. So I look after it in this high security voting facility and not just that the bank account is only insured to a hundred thousand dollars euros here.

[00:09:51] I think it's two $50 in, in America. Gold can be insured to however much you've got, because it's a physical good. If you've got $16 million worth of gold, you can ensure that 60 million worth of gold and you can probably order it. You can count it. Whereas if you have money in a bank, you don't know what the bank's doing with that money.

[00:10:10] Where, what are they double? They've bought this and weird instruments over here, and they're in fractional reserve, which. They have only a tiny amount of money compared to how much they owe and there's all these funny business with banks. So it's a really simple model. You come in with Bitcoin, you trade it for gold.

[00:10:28] And then when you want to, when Bitcoin drops in value, you buy back Bitcoin and you trade between the physical thing that sits in a high security voting facility in Switzerland, Zurich. You know, it's a great boat country. It's been through two world wars and state, fairly neutral. So, so yeah, that, and that's where that came from and yeah, we've been going ever since.

[00:10:48] Viktoriia Miracle: Wow. That's amazing. I love it. I love that you were solving that also kind of bullet volatility problem, because if you see like things are going down, you can like move your assets to a gold, then you feel more secure, right. We all know gold. We all feel more secure.

[00:11:03] I mean, nothing is secure, but it does give us the safety feeling because we know it.

[00:11:08] Joshua Scigala: And yeah, we can't get gold anywhere.

[00:11:12] Viktoriia Miracle: Exactly. And you know, you also touched on right. When you were sharing that the magazine were saying, oh, the CEO of Bitcoin, right. But it's decentralized, there's no CEO and let's dive into more of like, what is it, what does it mean?

[00:11:27] What is a blockchain and what does it mean decentralized?

[00:11:30] Joshua Scigala: Yeah, so a blockchain. If you think of a ledger, a ledger is a book and you write in, transactions that might've happened, right. And all the blockchain is, is a public ledger that everybody can write in. And every 10 minutes that ledger closes and it, and a new one opens up.

[00:11:51] And the first line of the new ledger is that, is the, the number of this ledger basically. The hash, the hash of this ledger. And so every 10 minutes there's a new hash and a hash function is a mathematical process. It's a one way mathematical function. That, that, what that means is that imagine you have the box and you can stick anything in this box, let's say a word document.

[00:12:23] And out the other end will come a string of, of 124 characters, random gobbledygook, but it's, it's unique to this, this, word document. If you change one full stop to a comma and put it through that box again, a whole different string will come out. So why that's useful is that you can, in 10 years time, let's say you have that document and you need to go to court.

[00:12:46] You can, if the courts got the original hash, you can hash it again through the same box and go look, I have never changed this document because the exact same hash came out and it's a one-way function because you can't take that, that string of numbers, put it the other way and recreate the document that doesn't work.

[00:13:02] So, and it's a funny function because he can stick the library of Congress, like the whole, so much data through the same box. And you still only get a 124 character string up. And I was just going a bit deep dive for you for your audience. But what that means is that, to create that hash, that, that fingerprint basically if that document, there needs to be some computation. And so the blockchain works with a lot of computation. A lot of your users would have heard of mining. And that's what that is. It's compute it's, it's, it's, computing, those hashes. And basically what you're doing is taking that book, that ledger you're hashing what's in that book and you're taking that hash and putting it as the first entry of the next book.

[00:13:43] So, and then, and then if you want to change an entry in this, you actually have to. Quickly. Well, you do the same computing power and there's just so much computing power in the world that you could just never do that. In fact, I calculated it about a year ago that if Google wanted to point every single bit of computing hardware that I had on Earth, including every work as mobile fund and all that servers and everything, you, you wouldn't even add 1% hashing pallet to the network. That's how powerful this network is. So to beat, to rewrite that ledger, you have to have 51% of the entire network, and Google, all of Google couldn't even get 1%. So it's a very, very secure network and nobody owns it and everybody owns it.

[00:14:32] It's a, it's a, it's a very obscure thing. And weirdly enough, it's kind of its own perpetual motion machine because now that it's running for the first time we have a computer program algorithm paying humans to go and put mining equipment and to create energy, to pump into this network to secure. So you've got an algorithm paying humans to secure the autonomous and amazing.

[00:15:02] Viktoriia Miracle: Yeah. That, and that's, what's created so many more new jobs in the world and that's what I've already created. So many new jobs in the world and new professions and new, just a new industry. It's like decentralized finance.

[00:15:15] What do you think was your, in your opinion, what is lacking in our current stage of building fully decentralized finance?

[00:15:25] Joshua Scigala: So Bitcoin I'm pretty sure everyone knows that Bitcoin is very volatile. What does that mean? That it's price goes. Yeah. And why does the price go crazy? The price goes crazy because it's in, what's called a price discovery phase.

[00:15:40] So it's the new technology, most new technologies go through this phase that, you know, you invent some weird thing and you're like, bring it to market and everyone's speculating on what this thing's really worth. So gold has had like 5,000 years of this price discovery time. So now it's, it's fairly stable yet.

[00:16:01] It's not super stable, but it's fairly stable compared to Bitcoin. Whereas Bitcoin, like this could be the whole future of money one minute. And the next minute, trying to just ban Bitcoin on its terms, it's bloomed and its tanks down, right? So people are trying to figure out, Hey, how safe it is, how secure it is, how, how usable it is, all of this stuff.

[00:16:23] And over the, over the years, it'll start to hopefully become more stable. But we're very, very early on in this time. And so, so I think what's missing a stable algorithmic stable coins. We have these stable cryptocurrencies that are pegged to the dollar, but it's like old school finance has come in and gone.

[00:16:45] Hmm let's let's take over from this. But what they do is they say, Hey, I've got a dollar in my bank account and I'm going to issue a token that represents us dollars. So whenever you come back to me with this token, I promised to pay you $1 and wow that sounds very much like a bank because that's exactly what banking was.

[00:17:05] Right? Original money, paper money. Where does that come from? It comes from. People used to carry around a lot of gold and silver will silver because that was for the people. Gold was more for elite and they carry on this heavy server and they go to the markets and they go get it, get the watermelon here and put this big bag.

[00:17:26] It's very heavy. So what, what they would do is that we take the golden silver to a vaulting facility, the vaulting facility, would it give them a receipt saying you have 1000 grams of silver in our vault. Here's the receipt. Thank you very much. You can bring this receipt back anytime and claim your goal and eventually what people did is instead of going back to the vault, they would actually just trade these receipts in the marketplace. And, and, so that was very light. It was wonderful until the bank has thought, well the vault operators thought, wow, we could just print. No, not everybody's going to come back at once and take their gold. So we could just print more receipts. And we just stopped lending gold to people gold, but lending receipts, and asking for interest for gold, that doesn't exist.

[00:18:15] And they got so rich from this, that, that they would have castles in the states that even, you know, Queens and Queens couldn't afford. And and so, and then you have the French revolution where the people got wind of what was happening and they started cutting off bankers' heads and the voting, whoa, whoa, whoa, can we stop cutting off the heads?

[00:18:36] This is too much. So I tell you what you guys are talking to the, you know, the plebs, you guys, let us continue doing this and we'll give you a little cup of it. So, and that's where interest payments come from. So, so this sounds very much like what's happening now with these, these stable coins where you have this company saying, Hey, we'll, we'll hold the boner here and give you the token and you can do fun stuff on the internet.

[00:19:04] But how many tokens are they creating? Are they just creating tokens out of thin air and then buying raw numbers like bread Bitcoins? Cause there's only 21 million of these things where there's infinite tokens that they can create. So it's a very dangerous. It's a dangerous section of, of the whole crypto sphere.

[00:19:24] And, and so what we're creating with the standard is, is a way to, to create a decentralized stable coin, a mechanism where you have stability. But, but it's fully backed by gold and crypto and this is another thing. So, excuse me.

[00:19:45] Viktoriia Miracle: How is the, how it's going to work out if it's backed by crypto then? But crypto is very volatile. Like I understand the gold, but how is it working with crypto?

[00:19:56] Joshua Scigala: Yeah. So, so in, a little like about two years after logging a voter exchange, a young kid called Vitalik Buterin came up with this concept for Ethereum and, and we were like, that'll never work to tell, like you're an idiot.

[00:20:14] This is foolish and it, and it works. It was amazing. This little whiz kid came out. I mean, there was a bunch of people, but, so, so what, what Ethereum did was create this concept of a smart contract? Well, actually it's an old cypherpunks concept, but he, he actually created it. Now a lot of people worked to smart contract.

[00:20:39] It's a fancy word for a computer program. Really? The difference between a smart contract and the computer program is that a smart contract, a computer program runs on one single computer. You boot up your computer and you run it. The trouble is if you put money into your computer and it has a virus on it, or hack has taken it.

[00:21:00] You don't know, you don't know if the output is correct. You don't know if a hacker is like, said, send that money to me instead of the, the, I dunno, the cleaner or whatever, the smart con, whatever the program is meant to pay. So what a, what a smart contract is instead is thousands of computers running the same program.

[00:21:21] And 51% of the computers have to have the same output because then a hacker would have to hack thousands of computers rather than the one. So now instead of a computer program, it's a smart contract. And, and so what we're doing is allowing people, let's say with Bitcoin to send Bitcoin into a smart contract and it, and it holds, it holds your, your theorem, let's say.

[00:21:49] And because you've, let's say you put in a thousand euros or dollars worth of Ethereum. What you can then say, okay, this smart contract will let you withdrawal or generate 50% of that value as a stable cryptocurrency. So inside this contract, this stuff's going up and down. As long as it doesn't drop below 50% of the value.

[00:22:14] In which case you get to keep the dollar and this thing gets liquidated and people buy it up. But if it stays above, you'd never get to, you never have to sell your crypto, but you get to borrow money from yourself instead of a bank and be able to buy a car. In fact, I bought a car or a beautiful car.

[00:22:32] For that, in exactly in that way, I put a theory and into a smart contract, it's called over collateralized, meaning the collateral that you put into the smart contract is more than the value you're taking out and that difference between where you took out and how much extra you've got that value.

[00:22:49] It can be as volatile as at once in there, as long as it doesn't drop below that, because then other people have to come in and buy that. And there's a whole bunch of stuff that happens, but this is how self lending happens. So we can remove banks out of the system while having stable cryptocurrencies backed by rare assets provable, because everybody can see into these smart contracts.

[00:23:13] It's a, it's a total transparent ledger and imagine now there's $10 trillion worth of gold buillion around the world, 5 trillion, which said, in private hands. And, I just, Viktoriia, I'm sorry. I go on and on. I don't let any,

[00:23:31] Viktoriia Miracle: I think you're going in with a very good order of explaining things and it works.

[00:23:38] We will have to wrap up soon, but to finish your thought, I'm curious.

[00:23:43] Joshua Scigala: I'll finish my thought.

[00:23:45] People banter around the world, billions, and a lot of people banter now around the word trillions. And I just want to give you a listeners a bit of perspective of what those numbers mean, because I think. I think people lose touch. They can't comprehend how large these numbers are. So a million, if you counted a million seconds, it would take you 11 days to count a million seconds ago.

[00:24:12] One, two. Okay. You'd be there for 11, 11 days. Right? If you counted a billion seconds, you would be there for 32 years. So instead of 11 days, you're there for 32 years. If you can't add a trillion seconds, you're there for 32,000 years. And so when like the national debt, oh, we're going to print another trillion dollars in like being gone online and.

[00:24:47] I've just gone back to go thing is 10 trillion and 5 trillion gold. So what we're doing is allowing people to tokenize that goal, to enter smart contracts by stable things that are pegged to like the dollar, the Euro, the yen, all sorts. And the good thing then is you're creating your own gold standard effectively.

[00:25:05] We don't need to wait for governments to create a gold standard. We can create our own and that's, that's what the, that's what we're doing at The Standard IO.

[00:25:12] Viktoriia Miracle: And that I think that's brilliant. This is a such a great solution at all, you know? Yeah. When it doesn't go down much, but we all know crypto it's very volatile but I feel like when there is a Bitcoin and Ethereum, it's already kind of more, more, we know the value of it.

[00:25:29] It probably, I don't know if it's going to go down to zero and nobody knows, but hopefully, hopefully . Yeah, exactly. Well, thank you so much. It is such a great breakdown. I feel like I was just listening and I love how easy you can explain things that are, you know, people are trying to explain in like 30 minutes, what a smart contract, or like what is a blockchain or what all the stable coins idea. So thank you very much. That was very valuable. And, how our audience can find you in where the can get on with your creations?

[00:26:08] Joshua Scigala: Thanks, Viktoriia. Yeah, you can just go to thestandard.io. You can find us at vaultoro that's vault, like a gold vault and oro, which is Spanish for gold vaultoro.com.

[00:26:20] You can find me on Twitter. At jscigala, which was J and then S C I G A L A as my Twitter handle. And yeah, I talk all sorts of crazy, crazy stuff on there and, you teach people the latest.

[00:26:37] Viktoriia Miracle: Awesome. Thank you very much. Thank you very much for coming on and if you are listening or watching this on YouTube, just definitely give us a like or comment or any sorts of appreciations.

[00:26:47] We appreciate it very much and stay tuned. I'll see you next week. Bye Joshua and bye everybody.

[00:26:53] Joshua Scigala: Thank you. Bye.