Bonus: The Crypto Story by Matt Levine - Part 3

Matt's gone deep into the blockchain to break down its origins, it's possible, futures, and the current state of a technology that's showing up everywhere in industries ranging from finance to shipping too, of course video games. And we're going to be bringing his exploration to you in audio form thanks to the talents of Bloomberg editor and professional voice actor Mark Ledoff. You'll get weekly chapters of the special Crypto

issue of Bloomberg Business Week. Welcome to the third chapter of the special audio edition of the Bloomberg Business Week Crypto issue, written by Matt Levine and narrated by Mark Leadoff. Mr chapter. You can find previous episodes right here in the Bloomberg Crypto podcast feed Part two. What does it mean? Okay, then, I've described in some detail the workings of the thing bitcoin That'satoshi Nakamoto invented. But let's take a step back.

What exactly is it that he invented. The simplest answer is that he invented bitcoin. Bitcoin is a big thing. At its peak, the total value of bitcoin in the world was more than one trillion dollars. There are thousands of articles about it. It has lots of investors and fans and believers. Some of these people are called bitcoin maximalists. They believe the only really interesting and valuable thing in the world of crypto is bitcoin. Those people could stop here.

I guess there. It is Bitcoin here, though, I want to keep going. I want to talk about different ways that you might generalize Satoshi's invention. There are different ways to interpret what Setoshi was up to and what he accomplished, and each interpretation points you to a different direction. For crypto, a a store of value. A minimal generalization of bitcoin is something like Satoshi invented a technology for people to

send numbers to one another. That's not nothing before Setoshi I could have written you an email that said one thirty two point fifty one, but you'd have no way of knowing whether I had the one thirty two point fifty one on my computer, or whether I had already sent the one thirty two point fifty one to someone else. And you'd have no way of proving to other people that you now add the one thirty two point fifty one on your computer and could send it to them.

I realized that paragraph sounds very stupid, because it is you definitely have one thirty two point fifty one on your computer, as well as every other conceivable number. Computers can generate numbers arbitrarily and more or less for free. Open a spreadsheet type two point fifty one, and there you go. In a sense, the technological accomplishment of bitcoin is that it invented a decentralized way to create scarcity

on computers. Bitcoin demonstrated a way for me to send you a computer message so that you'd have it and I wouldn't to move items of computer information between us in a way that limited their supply and transferred possession. But the technological accomplishment is not the whole story, arguably not even the most important part. The wild thing about bitcoin is not that Satoshi invented a particular way for people to send numbers to one another and call them payments.

It's that people accepted the numbers as payments. There's nothing inherent in the technology that would make that happen. People might have read the Bitcoin white paper and said, huh, this is a cool way to send payments, but your problem is that you aren't sending dollars. You're sending this thing you just made up, and who wants that? Well most of them did say that initially, but lots of

people eventually decided that bitcoin was valuable. That's weird. Satoshi was like, I have invented a payment system that works great. The only problem is that instead of getting paid in dollars, you get paid in this thing I just made up. Is that cool? And enough people were like, Yeah, that's

cool that now crypto is a trillion dollar business. That social fact that bitcoin was accepted by many millions of people as having a lot of value might be the most impressive thing about bitcoin, much more than the stuff about hashing shit coins. Here's another extremely simple generalization of bitcoin. One you can make up an arbitrary token that trades electronically. Two. If you do that, people might pay a non zero

amount of money for it. Three worth a shot. No. As Bitcoin became more visible and valuable, people just did that. There was a rash of new cryptocurrencies that were sometimes subtle variations on Bitcoin and sometimes just lazy knockoffs. Shit coins is the mean name for them. To software engineers through together a cryptocurrency and gave it a logo of Doge, the talking sheba e new meme. They called it doge coin, and it was a parody of the coin boom. It's

worth a eight billion dollars today. I'm not going to explain that to you. Nobody is going to explain that to you. Certainly the guys who invented doge coin don't understand it. One of them has taken to Twitter to say he hates it. It's just like, if you're making up an arbitrary token that trades electronically, and you hope people will buy it for no particular reason, you might as well make it fun, slap a talking dog on it,

give people stuff to make jokes about online. Incidentally, here's a fun argument that was made against bitcoin early in its life. One, there's a limited supply of bitcoin. Two, but the Bitcoin software is open source and can be cloned trivially. Three, So if the price of Bitcoin gets above, you know, a hundred dollars, someone will just invent blit coin,

which will be an exact copy of Bitcoin. Four. Bitcoin is arbitrary and blit cooin is arbitrary, so there's no reason that blit coin should trade at much of a discount to bitcoin. Five. This will dilute the value of bit coin. Any sensible person would rather pay ninety dollars for blit coin than a hundred and five for Bitcoin,

since they're the same thing, but one is cheaper. Six. Therefore, there's an infinite supply of Bitcoin or things that are exactly like it, so the value of bitcoin cannot get too high. This argument turned out to be mostly wrong. Socially, cryptocurrency is a coordination game. People want to have the coin that other people want to have, and some sort of abstract technical equivalence doesn't make one cryptocurrency a good

substitute for another. Social acceptance, legitimacy is what makes a cryptocurrency valuable, and you can't just copy the code for that. That's a revealing fact. What makes bitcoin valuable isn't the elegance of its code, but it's social acceptance, another advantage that Bitcoin has over a hypothetical copycat more minors. A big, diverse pool of miners keeps a cryptocurrencies blockchain more secure than a small concentrated pool, But that security is just

an instantiation of its rodder social acceptance. All the Bitcoin miners could quit and become blitcoin miners, they just don't. A thing that worked exactly like Bitcoin but didn't have Bitcoin's lineage, didn't descend from Satoshi's genesis block and was just made up by some copycat would have the same technology, but none of the value. Two an uncorrelated asset. Here's another generalization of bitcoin. One Satoshi made up an arbitrary

token that trades electronically for some price. Two the price turns out to be high and volatile. Three the price of an arbitrary token is arbitrary. This may not sound that great to you, but it's very interesting as a matter of finance theory. Modern portfolio theory demonstrates that adding an uncorrelated asset to a portfolio can improve returns and

reduce risk. Big institutions will invest in timberland, or highway tolls or hurricane insurance because they think that those things won't act just like stocks or bonds, that they'll diversify their portfolios, that they'll hold up even in a world where stocks go down to the extent that the price

of bitcoin. One mostly goes up, though with lots of ups and downs along the way, and two goes up and down for reasons that are arbitrary and mysterious and not tied to like corporate earnings or the global economy, then bitcoin is interesting to institutional investors. There are variations. For instance, one, bitcoin is not just uncorrelated to regular

financial stuff. It's a hedge to inflation. If the Federal Reserve is printing money recklessly, the dollar will lose value, but bitcoin is in limited supply and will maintain its value even as the dollar is inflated away. Two. Bitcoin is like gold, but more convenient. The value of gold is also somewhat arbitrary and mysterious, but it's a store of value that's not tied to corporate earnings and central

bank policy. Investors who like gold should buy bitcoin. Well, those are some things that people said in practice, it turns out that the price of bitcoin is pretty correlated with the stock market, especially tech stocks. Bitcoin hasn't been a particularly effective inflation hedge. Its price rose during years when US inflation was low, and it's fallen this year

as inflation has increased. The right model of crypto prices might be that they go up during broad speculative bubbles when stock prices go up, and then they go down when those bubbles pop. That's not a particularly appealing story for investors looking to diversify. You want stuff that goes up when the broad bubbles pop. Three game stop. I'm not going to dwell on the meme stock phenomenon here.

I dwelt on it in this publication last December. But one important possibility is that the first general realization of bitcoin, that an arbitrary tradeable electronic token can become valuable just because people want it to permanently, broke everyone's brains about all of finance. Before the rise of bitcoin, the conventional thing to say about a share of stock was that its price represented the market's expectation of the present value of the future cash flows of the business. But bitcoin

has no cash flows. Its price represents what people are willing to pay for it. Still, it has a high and fluctuating market price. People have gotten rich buying bitcoin, so people copied that model, and the creation of and speculation on pure, abstract, scarce electronic tokens became a big business. A share of stock is a scarce electronic token. It's also something else, acclaim on cash flows or whatever. But one thing that it is is an electronic token that's

in more or less limited supply. If you and your buddies online want to make jokes and invest base on those jokes, then depending on your sense of humor and which online chat group you're in, you might buy either dogecoin or GameStop corps stock, and for your purposes those things are not that different b a distributed computer. Here's another very different generalization of bitcoin. In its sharpest form. It's mostly attributed to programmer Vitalic bou Terran, another colorful

character whom we won't discuss. If you're curious, there are two books by former Bloomberg journalists about the early days of Ethereum, in which Vitallic is the star but by no means the only important player. Camilla Russo's The Infinite Machine and Matthew Lisn's Out of the Ether. Bu Terran's sketch of bitcoin goes like this. One. Look, this thing you made is a big, sprawling computer. The blockchain is doing the functions of a computer. Specifically, it's keeping a

database of bitcoin transactions. Two. This computer has some fascinating properties. It's distributed. The computer's data aren't kept on any one particular machine, but spread out among lots of nodes. The blockchain creates a mechanism to make sure they all agree on what the database says. It's decentralized. Different people run the database on their own separate machines. It's secure and

final because of how transactions are encoded into blocks. It's more or less impossible for someone to reach back into the database and change a transaction from last week. And it's trust less and permissionless. Anyone who wants to can download the blockchain or mine bitcoin. The mining mechanism gives people incentives to collaborate and compete with one another to keep the database secure and up to date. Three. But it's not a very good computer. Mostly it just keeps

a list of payments. We'll be right back with more from Bloomberg Business Week. Special crypto issue written by Matt Levin a narrated by Mark Leadoff. Four. Let's do the same thing, but make it a good computer. One. Ethereum, the computer that Vitallic invented. Like Setoshi, Vitallic Buterian is widely referred to in the crypto world by his first name, is generally called Ethereum or the Ethereum Virtual machine. It's

a virtual computer distributed among thousands of redundant nodes. Each node knows the state of the computer, what's in its memory, and each transaction on the system updates that state. Ethereum works a lot like Bitcoin. People create transactions, they broadcast them to the network. The transactions are included in a block. The blocks get chained together, everyone can see every transaction, etcetera. The currency of the Ethereum blockchain is called I don't know.

It's common to call it ether, though sometimes people say ethereum and often they just write E T H. Similarly, Bitcoin is sometimes written BTC in conversation. It's mostly shortened to but whereas Bitcoin transactions are mostly about sending payments, that's an exaggeration. There is a scripting language in bitcoin,

and some ability to write programs. Actions on Ethereum are conceived of more generally, Ethereum is a big virtual computer, and you send it instructions to do stuff on the computer. Some of those instructions are send ten ether from address X to address why one thing in the computer's memory. Is a database of Ethereum addresses and how much ether is in each of them, and you can tell the

computer to update the database. But you can also write programs to run on the computer to do things automatically. One sort of program might be send ten ether to address why if something happens. Alice and Bob might want to bet on a football game, or on a presidential election, or on the price of ether. Alice and Bob, by the way, are stock characters and discussions of crypto, not interesting characters, though they might write a computer program on

the Ethereum virtual machine to do that. The program would have its own Ethereum account where it could keep ether, and it's programming logic would say something like, if the Jets win on Sunday, or if Joe Biden wins the election, or if either trades above on November one, then send the money in this account to Alice. Otherwise send it to Bob. Alice and Bob might then each send one Ether to the account, which would whirr along for a bit checking the football scores, or the election results or

the ether prize. How would it check. The standard solution in crypto is called an oracle. It's a program that will periodically query some company or website that tracks the relevant information election results, football scores, whether, etcetera, and post the answer to the Ethereum blockchain. An oracle is essentially a way to bring information from the outside world, the

real world, or just the Internet, onto the blockchain. When the program had an answer to its question who won the game or the election or is ether above, it would automatically resolve the bet and send to ether to the winner. Or you could have a program that says, if anyone sends one ether to this program, the program will send them back something nice. Something nice is pretty hazy there, and frankly it's pretty hazy in actual practice, but in concept, anything that you can put into a

computer program could be the reward here. So send me one ether and I will send you back. A digital picture of a monkey would be one possible program. And I guess it sounds like I'm joking, but for a while digital pictures of monkeys were selling for millions of dollars on ethereum. Or there's a thing called the Ethereum Name Service, or e n S, which allows people to register domain names like Matthew Levine, dot et h and

use them across various Ethereum functions. You send ether to the e n S program and it registers that name to you. You send in money, and it sends you back a domain. The standard analogy here is a vending machine. A vending machine is a computer in the real world where you put in a dollar and you get back something you want. You don't negotiate with the vending machine or make small talk about the weather while it wrings you up. The vending machine side of the transaction is

entirely automated. It's programming makes it respond deterministically to you putting in money and pressing buttons. In the crypto world, these programs are called smart contracts. The name is a bit unfortunate. A smart contract is a computer program that runs on the blockchain. Some smart contracts look like contracts. Alison Bob's bet on the price of ethereum looks a lot like a financial derivative, which is definitely a contract.

Some smart contracts look like vending machines. They sit around in public waiting for people to put money in, and then they spit out goods. A vending machine is not exactly a normal contract, but it is a transaction, and people who are into philosophizing about contracts like thinking about vending machines. But some smart contracts just look like, you know, computer programs. The concept is more general than the name.

In the Ethereum white paper, Vitallic Bouterran wrote, note that contracts in Ethereum should not be seen as something that should be fulfilled or complied with. Rather, they are more like autonomous agents that live inside of the Ethereum execution environment, always executing a specific piece of code when poked by a messenger transaction, and having direct control over their own ether balance and their own key value store to keep

track of persistent variables. There are limits. Ethereum is a distributed computer, but it doesn't have a keyboard and a monitor. It would be hard to play call of duty on the Ethereum virtual machine. But ethereums blockchain and smart contracts can serve as sort of a back end to other types of programs. Developers build dapts or decentralized apps on

Ethereum and other block chain. These are computer programs that mostly run on the web, perhaps on some centralized or cloud server, but keep some of their essential data on the blockchain. You play a computer game, and your character's attributes are stored on the blockchain. A normal program on the game company's servers renders the character's sword on your screen, but the fact that she has the sword is stored on the blockchain. One other limit is that it's a

slow computer. The way Ethereum executes programs is that you broadcast the instructions two thousands of nodes on the network, and they each execute the instructions and reach consensus on the results of the instructions. That all takes time. Your program needs to run thousands of times on thousands of computers.

Computers and network connections are pretty fast these days, and the Ethereum computer is fast enough for many purposes, such as transferring ether or keeping a database of computer game characters. But you wouldn't want to use this sort of computer architecture for extremely time sensitive, computation intensive application. You wouldn't want like a self driving car running on the Ethereum

virtual machine. You wouldn't want thousands of computers around the world redundantly calculating how far you are from hitting someone before you could break two proof of steak. This distributed computer, the Ethereum Virtual machine, takes its basic design from Bitcoin. There are blocks, everyone can see them. They are chained together, Transactions are signed with private keys, everything is hashed, etcetera.

It's just that, in addition to sending money to people, you can send computer instructions to the blockchain and the blockchain will execute them. What that means is that there are thousands of computers each running nodes of the Ethereum network, and all those computers will agree about what happens on that network, who sent money to whom, and what computer instructions executed when. The fact that Ethereum is a distributed virtual computer means that all those actual computers can come

to a consensus is about what operations executed when. And the reason this was possible is that Bitcoin showed how a decentralized computer network could reach consensus. The stuff with the hashing and the mining and the nonsens and the electricity that is Bitcoin's consensus mechanism, proof of work, or POW. Until last month it was also Ethereums. There were some

technical differences, but the basic mechanics were pretty similar. Miners did a bunch of hashes of block data, and whoever found the right hash first mined the block and got a reward. Because this was expensive and wasted a lot of resources, it demonstrated a commitment to the Ethereum ecosystem, but the waste itself was bad, and so on September, after years of planning, Ethereum switched to a new consensus mechanism. Ethereum now uses something called proof of steak or POS.

The basic ideas remained the same. People do transactions and broadcast them to the Ethereum network. A bunch of computers. In POW they're called miners. In POS, they're called validators work to compile these transactions into an official ordered list called the blockchain. Anyone with a computer can be a minor validator. The protocol is open to everyone, but the miners. Validators have to prove their commitment to the system to

mine or validate blocks in POW. The way you prove that is by using a lot of electricity to do hashes in pos The way you prove that is by having a lot of ether oversimplifying a bit. The general mechanics are one. Anyone can volunteer to be a validator by staking some of the network's currency depositing it into a special smart contract. The staked currency can't be withdrawn for some period on ethereum. You need to stake thirty two ether currently forty dollars or so to be a validator.

Two Validators get transactions as they come in and compile them into blocks. No. In fact, there is a division of labor in ethereum, where there are specialized companies called block builders that compile blocks for validators to validate. Three at fixed intervals, say every twelve seconds, one validator is randomly chosen to propose a block, and some other set of validators is chosen to review the proposed block and vote on it. Four, the randomly chosen validators agree on

whether to add the block to the chain. If everyone is doing their job honestly and conscientiously, they'll mostly agree and the block will be added. Five the validators get paid fees in ether. Six If a validator acts dishonestly or lazily, if it proposes wrong blocks, or if it fails to propose or vote on blocks, or if someone turns off the computer running the validator, it can have some or all of its stake taken away as a penalty.

I mean, that's the concept, but when I write it out like that, it sounds more manual than it is. Nobody is sitting around reviewing retransaction and agonizing over whether it's legitimate. The validators are just running the official open source Ethereum software. It is all pretty automatic, and you can run it on a laptop with good backup power and a solid Internet connection. The big outlay maybe forty dollars to buy ether. It's not hard to contribute to

the consensus. It's hard to override it, but being an honest validator is pretty easy. When we discussed proof of work mining, I said that cryptosystems are designed to operate on consensus among people with an economic stake in the system. POW systems demonstrate economic stake in a cleverly indirect way. You buy a bunch of computer hardware and pay for a lot of electricity, and do a bunch of calculations to prove you really care about bitcoin pos systems demonstrate

the economic stake directly. You just invest a lot of money in ethereum and post it as a bond, which proves you care. This is more efficient in two ways. First, it uses less electricity, burning lots of electricity to do trillions of pointless math calculations. A second, in a warming world seems dumb. Proof of steak uses to a first approximation no electricity. You're simply keeping a list of transactions, and you just have to compile the list once, not

two hundred quintillion times. The transition to POS cut Ethereum's energy usage by something like second POS more directly measures your stake in the system. You demonstrate your stake in ethereum by one owning ether and two putting it at risk to validate transactions. One risk is slashing. If you do nefarious things and other validator's notice, they can slash your steak and take away your ether. Conceptually, the bigger risk is that the value of your ether will fall

while you have it locked up. If you do things to undermine confidence in ethereum, then the value of your stake will drop. To take control of the POS system and abuse it for your own nefarious purposes you to own a lot of ether, and the more you own, the less nefarious you'll want to be. Proof of Steak can buy something like twenty times more security for the

same cost, the Talec has argued. Coming up next, you'll hear more from Matt Levin's special crypto issue of Bloomberg Business Week, narrated by Mark Leadoff staking Here's how a bitcoin minor makes money. One spend dollars to buy computers and electricity to use the computers and electricity to generate bitcoin. Three sell the bitcoin or hold them and hope they go up. Here's how an ethereum validator makes money. One

bye ether to lock it up. Three get paid fees in either that are roughly a percentage of the ether you've locked up. Currently fees are around four. There's still some computer hardware involved. You have to run software to compile and check transactions, but not much of it. Again, it can be a laptop. The capital investment isn't in computers, but in the relevant cryptocurrency. The transaction is very close. To invest a lot of cryptocurrency and then get paid

interest on that cryptocurrency. You can make it even easier on yourself. Instead of downloading the software to run a full ethereum validat or node and depositing thirty two ether, you can hand your either over to someone else and let them be a validator. It doesn't need to be thirty two either. If you have one either and thirty one other people each have one either, and you all pool your EITHER together, then you have enough to stake validate transactions and earned fees, and then you each can

have a cut of the fees. The work of validating transactions can be completely separated from the actual staking of ether, and in fact, a lot of ethereum validation runs through crypto exchanges such as coin base, crack Can, and Finance, which offers staking as a product to their customers. The biggest is a thing called leedo Finance, which isn't an

exchange but a sort of decentralized staking pool. The customers keep their ether with the exchange anyway, so they might as well let the exchange stake it for them and earn some interest. Yes interest. If you're putting crypto into a staking pool, what it looks like to you is simply earning interest on your crypto. You have one d tokens you lock them up for a bit, you get back a hundred and three tokens. The stuff about validating transactions occurs in the background, and you don't really have

to worry about it. You just get a percentage return on your money around four percent now, but maybe less after fees from locking it up before. You compare that to the passive income you might earn on, say a bond. Remember this is paid in volatile ether. Crypto has found a novel way to create yield. We'll talk about others later. Crypto has a whole business of yield farming, but this is one. You can deposit your crypto into an account

and it will pay you interest. It will pay you interest, not for the reason banks generally do, because they're lending your money to some other customer who will make use of it, but because you are, in your small way, helping to maintain the security of the transaction Ledger three gas. Another difference between ethereum and bitcoin is that transaction fees

are much more important in ethereum. The basic reason is that every transaction in bitcoin is more or less the same X sends why bitcoin to Z in ethereum, Though there are transactions like run this complicated computer program with ten thousand steps that takes longer. Thousands of nodes on the Ethereum network have to run and validate each computational step of each contract. If a contract requires a lot of steps, then it will use a lot more of

validator's time and computer resources. If it requires infinite steps, it would crash the whole thing. To address this issue, Ethereum has gas, which is a fee that people and smart contracts pay for computation. Each transaction specifies one a maximum gas limit basically a number of computational steps, and to a price per unit of gas. If the transaction uses up all its gas, if it takes more steps to execute than the gas limit, it fails and still

pays the gas fee. This deters people from sending super long transactions that clogged the network, and it absolutely prevents them from clogging the network forever. In early Ethereum, the gas fees, as well as built in mining rewards, were paid to the miner who mined a block. Since the move to POS, the built in rewards are lower because it's much less expensive to be a validator than a minor, so you don't need to get paid as much and now some of the gas fees are burned, the ether

just vanishes instead of being paid to validators. The basic result is that Ether as a whole is paying less for security under pos than it used to. There are still gas fees, though, and some of them still go to validators. And generally speaking, the more you offer to pay for gas, the faster your transaction will be executed. If Ethereum is busy, paying more for your gas gets you priority for executing your transactions. It is a shared computer where you can pay more to go first. Four

tokens one e r C twenty One. Thing a smart contract can do in Ethereum is create new cryptocurrencies. These cryptocurrencies are generally called tokens. Why would you want to do this? One reason we already talked about. One, you can make up an arbitrary token that trades electronically. Two If you do that, people might pay a non zero amount of money for it. Three worth a shot. No,

this is extremely easy to do in Ethereum. The Ethereum white paper includes a four line code snippet for implementing a token system on Ethereum. And so there's the Shiba token, a decentralized meme token that evolved into a vibrant ecosystem. It's doage coin but on ethereum easy it has a wolf paper. But there are lots of other reasons to

create cryptocurrencies. If you set up some sort of app that does a thing on the Ethereum system, and you want to charge people money for doing that thing, what sort of money should you charge them? Or if you set up a two sided marketplace that connects people who do a thing with people who want the thing done, what sort of money should the people who want the thing use to pay the people who do the thing. Dollars are a possible answer, though an oddly hard one.

U s dollars don't live on the blockchain, but in bank accounts. Ether is the most obvious answer. You've set up an app and ethereum, so you should take payment in the currency of ethereum. But a persistently popular answer is you should take payment in your own currency. People who add value to your serve should be paid in your own special token. People who make use of the service should pay for it in that token, and then if the service takes off, the token might become more valuable.

We'll discuss this idea in more detail later. For now, I'll just say that Ethereum has a standard for how these sorts of token should be implemented, and it's called e r C twenty. And when there are decentralized apps on the Ethereum blockchain, there's a good chance that they'll say they have an e r C twenty token. One essential property of an e r C twenty token is

that it's fungible, like dollars or bitcoin or ether. If I create an e r C twenty token called matt coin and meant a billion matt coins, each of those billion tokens works exactly the same and is exactly interchangeable. They all trade at the same price, and nobody wants or gets any particular identified matt coin two e r C seven one. There's another way to do a token, though. You could have a series of tokens, each with a number.

Token number one in this series is different from token number ninety nine in the sense that token number one has the number one and token number ninety has the number ninety nine. This is generally referred to as a non fungible token or n f T. The most popular Ethereum standard for n f T s is called e r C seven one, and you'll see that name sometimes. Let me quote a bit of the e r C standard.

The e r C seven twenty one introduces a standard for n f T. In other words, this type of token is unique and can have different value than another token from the same smart contract. May be due to its age, rarity, or even something else like it's visual. Wait visual. Yes, All n f T s have a numerical variable called token i D. So for any e r C SE contract, the pair contract address numerical token

i D must be globally unique. That said adapt can have a converter that uses the token i D as input and outputs an image of something cool like zombies, weapons, skills, or amazing kitties. Look how minimal this standard is despite the zombies and kitties. An n f T consists of a series of numbered tokens, and the thing that makes it an n f T is that it has a different number in its token i D field from the

other tokens in its series. If you'd like to imagine that this different number makes it something cool like a zombie or a kittie, you can go right ahead. Or if there's a computer program or an ethereum DAP that looks at your number and says, right, this number corresponds to a zombie with green hair and a fetching scar on his right cheek. Then the computer program is free to say that and even serve you up a picture of that zombie, and you are free to believe it.

We'll come back to this, it gets weird. Thank you Matt Levine, and thank you Mark Ledoff. As a reminder, if you're looking for these episodes in the Crypto Feed, will be publishing them every Sunday through December. If you'd like to read this issue in print form, you can head on over to Bloomberg dot com slash the Crypto story. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever

you get your podcast. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net or find us on Twitter. We're at Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior producer is Janet babin Our producers are Mohammed Farup and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidran. I'm Stacy Marie Shmall. We'll be back tomorrow. M