honest but hopeful. i tend to agree with a lot of what he says. i think there is a decent chance because i think bannon believes the electorate has already changed. even in the general election, hope was victorious despite obvious flaws in trump. not a perfect person. despite a lot of controversy, they elected him. i think what bannon believes is that already the longing for populism and nationalism is there. he believes it is already victorious among the base. where it has not changed is in the leadership in some parts of the provoking party, particularly the senate. that is what is driving him. >> watch sunday night at 9 p.m. eastern on c-span two's book tv.

now a discussion on bitcoin and the future of crypto currency. from washington journal, this is about 30 minutes. "washington journal" continues. host: joining us is brian knight, senior research fellow for the financial market's working group at mercatus center, and he is here to talk about bitcoin and the future of cryptocurrency. thank you for joining us today. for people like me who really do not understand this very well, bitcoin andt is cryptocurrency? is a computer protocol used to set up a peer decentralized network where you have a valuable token, a bitcoin, and a distributed ledger. one of the thing that is unique

is instead of a centralized party maintaining the database, it is maintained by all of the different computers on the protocol simultaneously. that is why they call it distributed ledger. the goal was to set up a system for payments and value transfer that really is not subject to reliance on a centralized party. host: why was this developed, and how does it work? developed by something that is a pseudonym of person or people. no one knows who they are. the goal was to have a trust was trustles exchange -- a s system of exchange. it was so people could exchange value without having to worry that the counterparty would fail or refuse to allow you to engage in that transaction. so the way it works at the base

level is the individual who accountbitcoin in their uses what is called a private transaction saying i wish to send a portion of the bitcoins to this public key, which belongs to someone else. it is often said that bitcoin is anonymous, but that is not true. you, int to come to would need to have the public key, and i would use my private key. it would not be our names on the ledger, but it would be these keys associated with us. explain the difference between cryptocurrency and digital currency? guest: you could have a currency

backed by government or you auld have something like currency used by a video game or something like that where you earn some points and can go items ort on xbox something like that. ies, of thenc integrity of the bitcoin system is maintained is you have the computer person notifying the system and checking and verifying the integrity of the system, and they're using very sophisticated methods to do so. we're joined by brian

knight of the mercatus center 'n knight of the mercatus center, and he is here to talk about bitcoin and the about digital currency. [video clip] a discussion about the potential merits of adopting a central bank in

adopting a digital itself, adopting a digital currency. it might even be a central banker or two around the globe that might go in that

orck chain, every 10 minutes so, a new block updating the debits and credits on the ledger, updated by these minors. part of the system, part of the reason why you can encourage is theto have computers computer or the note that establishes the correct block is awarded a certain number of bitcoin. in that respect, they are sort of mining the bitcoin out of the ether. there is a limited number of bitcoin, 21 million, where we have mind about 16 million, 17 million, but as time goes on, the reward increases. the rate of mining is going to drop over time. you said there is a finite amount of this. how does that work him and who

controls, bitcoin there is available? guest: it depends on the system. you can change it. reward eventually is going to go away, in which ers would charge transaction fees. host: a "newsweek" report talked mining andoin says a network that underpins the virtual currency, bitcoin, will require the world's current production within three years, according to estimates. it said the amount of power necessary to support bitcoin has increased significantly in recent months. talk about that issue a little bit. guest: sure, there are concerns about the power usage that goes into bitcoin to to be the miner

block, you have to do powerful cryptographic work, and it requires a lot of energy. the amount is subject to debate. you see fairly wildly differing estimates. that abc morern demand, the bitcoin becomes more valuable, so you spend more money to try to get them, and you will see greater drain -- the algorithm automatically updates the difficulty of mining based upon use. an increase of the coin value, it could be harder and harder to be the winning m iner. and moresee more high-powered computing and more energy usage. that the bitcoin needs become that much more expensive before

makes sense to mine. theeople drop out of system, the difficulty drops, and power usage drops, as well. whether that is sufficient is the debate, but how much energy you should devote to bitcoin, but it is not a one-way ratcheting. on the republican line from florida. good morning. .aller: yes we're having some trouble with him. david is calling from valley stream, new york, on the democratic line. good morning. thank you for c-span. i have a friend who has $1 million in bitcoin the cussing about them early on here he told me he is only -- because he bought them early on.

to take out aowed certain amount each year, and it seems like a scam. and not certain why your friend would only be limited to $10,000 a year. there are some issues with the law that there has to be some sort of reporting. that might be what is going on. buyersextent he can find for bitcoin, he can liquidate that position. isther or not there sufficient liquidity in this market is one of the open questions. about the value of bitcoin. it has exploded in recent years. why is that? guest: the folks who think we are not in a bubble will make arguments along the line that people are starting to realize the value of bitcoin and understand the future value of bitcoin, realizing it would be a valuable item going forward, and there have been changes -- japan

has changed his law to make it bitcoin andy similar assets. if you have a valuable asset and more people are coming into the market and the supply is not going of course on in my, the value is going to go up. people who have argued we are in a bubble will say most of this is driven by speculation, driven by people who see the increase and want to get in themselves on the assumption that the value is not going to go down. or that we are overestimating the potential value of bitcoin going forward. host: there is a piece titled, "do not go into debt buying it coin, you idiot." something that says people are taking up mortgages to invest in bitcoin, perhaps hoping to turn $20,000 into their entire retirement fund.

2010ints out to a guy in that if a guy without held onto his bitcoin, he would be a millionaire. guest: i would say do not invest more than you can lose. caller: i have been reading things about drug cartels and international organizations, criminal organizations, especially eastern europe and stuff like that, it is easier

for them to hide their money with this bitcoin, because there is no we can trace it or anything. it is a way for them to launder their money. there is concern that bitcoin is being used for criminal purposes. we should note a few things, one, that is probably happening, but the number one currency for illicit activity is the u.s. dollar. this is not a unique thing. there is concern that things are untraceable. i think things are overblown because of this permanent ledger . there are efforts among law enforcement and others to figure out who is linked to what account. there are concerns about privacy and whatnot.

bitcoin can be used for good or for ill. whether it is an eastern european criminal gang holding money or an afghan woman hiding money from her abusive husband, that is different. i do not think we can indict the technology as inherently good or bad, it is how you are using it. by brianre joined knight of the mercatus center, talking about rick did cryptocurrency. republicans can call 202-748-8001. democrats, 202-748-8000. demand -- independents, 202-748-8002. if you are an investor in bitcoin, 202-748-8003. let's talk about crypto jacking. the "london mayor are" has a piece that talks about someone realizing they had been crypto

jacked from using a starbucks card. websites were found to be tes tog similar code on si generate cryptocurrency without knowledge of users. bay, and others have been found to be running cryptocurrency miners. popular video sites, including some allegedly loading mining software onto visitor's computers. could you be crypto mining without knowing? guest: theoretically, yes. this goes into the broader concern. as more and more of our commerce and lives are done online and as we are more you bit -- more ubiquitously connecting, there are more opportunities for a bad actors to hijack our use computers for illicit purposes. is calling in from

anderson, south carolina, on our independent line. caller: good morning. this is a very confusing investment vehicle, at least to me. i have been blind and have some trouble hearing. i have two questions. is there an insurance a value of any kind in this? government can the tax or is there a way to get around the federal reserve. thank you. second question first. the irs has a position on bitcoin, and it is that it is property, so you should realize a gain or loss on your taxes if you use it there and it is like if you have a piece of artwork you bought for $100 in sulfur $200, you realize you are giving

of $100. it can lead to challenging issues. if you were to use bitcoin to pay for coffee and it appreciated, that would be a taxable event. the value of the distributed ledger technology concept is not inextricably linked with bitcoin. bitcoin came out and really -- shook people up as they were trying to refine the concept. we willtirely possible look back five years from now and say, well, distributed ledger has changed how we do a bunch of different activities.

it is a possibility, and i really scrutinize before making a decision on any investment. mainstream is cryptocurrency becoming? "the wall street journal" reported about a rush for the cryptocurrency etf. it says the debut of trading this week is rejuvenating efforts to list the first linked toraded fund cryptocurrency. a trio of fund companies in recent days have refreshed lands are filed for an etf that tracks bitcoin futures. a separate pair of u.s. etf's are also in registration, as is one in canada. structurebased etf analysts say, has a better

approval.win is this becoming a more mainstream method of currency? more: it is becoming mainstream, and it is the currency usage versus the investable asset usage. will find wildly divergent views on this. there are people who argue that it has failed as a currency for technical reasons and because there has not been a lot of uptake. you can look globally and will ae areas, countries with monetary or currency policy is challenging, so in the journal recently, there was an argument about how venezuelans are using bitcoin to pay for necessities, because their currency is so volatile and devalued. when we talk about how mainstream it is, the challenge is to sort of acknowledge that

it is a value and the use cases will vary depending on the circumstances. right, a call from new york on our independent line. whether it is bitcoin or any other coin, it is important to save for retirement. what is equally important is doing things that bernie sanders is fighting for, and that is creating a system where people are respected and have dignity when they do retire. systems like in europe, they do not have the homelessness and europe. people are able to retire somewhat with dignity. do you have a question about cryptocurrencies? caller: i am just pointing out that it is important to save. people are saving for retirement. that is important. money is a very important thing in our society. we need to build a system where people are even more important.

eric is calling in from brooklyn on our republican line. caller: describe how the bitcoin s are issued. to underlying economic transactions or productive transactions, creating value somehow? an opinion you have if they have any value? guest: thank you for the call. peopleument is that what want is what the value is. what is the value of the dollar or a piece of gold, other than what people are willing to pay for. as to whether or not they are tied to transactions, there are ways you can use it for productive transactions, using it as a means of payment and commerce would be one example. because of the distributed there is a lot of

interest in the possibility of efficiencies on transactions that require multiple parties to share the same record, like clearance of settlements or securities. you see a lot of follow on with different transactions in mind. you will see cross-border remittances. a stock exchange announce they are moving for a distributed ledger method. they're not using bitcoin but using their own model. it goes to show that there are potential productive transactions that can be used. host: a call from georgia on our

independent line. good morning. caller: i invested a small amount of money in ripple, xrp, and another one. about it forxrp, lightweight five cent -- like 25 cents per. andit is like 75 cents per, that was for couple weeks. about 100 clients are using it to basically facilitate financial transactions. one that might have taken to popper three days now takes about eight seconds, according -- one that might have taken two or three days now takes about eight seconds. we are seeing a broad-based rise and cryptocurrency value. a combination of a rising tide to sell boats or people paying attention to the

specificcurrencies and potential use cases and potential value, it will remain to be seen. host: brian knight for the financial markets working group at mercatus center here you can find the website at mercatu journal"'s "washington live everyday with news and policy issues that impact you. coming up sunday morning, we will discuss the upcoming vote on the final republican tax reform bill. also, set jones on the u.s. homeland over the holiday season. "washington journal" live beginning at 7:00 a.m. eastern sunday morning. join the discussion.

"newsmakers" sander levin talks about the provisions in the tax deal. measurecrats oppose the and other issues facing congress. newsmakers, tomorrow at 10:00 a.m. and 6:00 p.m. eastern on c-span. history unfolds daily. in 1979, c-span was created as a public service by america's cable television companies and is brought to you today by your cable or satellite provider. on thursday, education secretary betsy devos held a form on integration and education. this is just over two hours.