Bitcoin: Privacy, Identity, Surveillance and Money – Barcelona Fablab Meetup March 2016


[MANFRED KARRER] Hello, welcome everybody. Thanks
for coming. It is a pleasure to see so many attend.
The Barcelona Bitcoin community is proud to [welcome]
Andreas Antonopoulos, author of ‘Mastering Bitcoin.’
For anybody who doesn’t know this book but wants
to learn about Bitcoin, this is the Bible of Bitcoin.
He is a network and security expert, developer,
entrepreneur, co-host of the ‘Let’s Talk Bitcoin’ podcast,
and probably the most-wanted
speaker for Bitcoin conferences.
We are very happy that he could come to our meetup
here in Barcelona. I don’t want to waste anymore time,
I give the microphone to Thomas.
[THOMAS] Thank you, Manfred. Hey, welcome everyone.
I will be very short [with my introduction] as well.
Welcome to the Fab Lab Barcelona, which is located at
The Institute for Advanced Architecture of Catalonia.
It is not by chance that Andreas is here.
He is actually opening [the event].
It is the very first time we are [hosting] a
conference about Bitcoin in this institute,
which is looking into the future of architecture
in cities through the use of technology.
Part of that is the Fab Lab as a
distributed manufacturing facility.
With that, I think you are all waiting… Andreas, thank you
for joining us. The stage and [audience are] yours.
[Applause] Thank you so much for having me here.
It has been quite amazing. I am on a European tour,
which involves seven different speaking events…
in twelve days, so I am a bit jet-lagged.
The [generic] title for each of these talks
is “Thoughts on the Future of Money,”
[because] I don’t want to commit
to a topic until the last minute.
I have several different topics [in mind],
I give myself some room to pick…
at the last moment based on the audience.
Today, I want to talk about the concepts
of neutrality, decentralization, and privacy;
what makes Bitcoin so special.
You will hear me talk a lot about Bitcoin. When I use
the word ‘Bitcoin,’ I am not talking about the currency.
I’m talking about the broader concept of a
completely decentralized, network-centric,
flat [system] for providing trusted applications.
If you [have built] a completely decentralized, flat
network that can provide trusted applications,
the most logical application is currency,
which is just the first application.
We [will be] restructuring society by rebuilding
institutions which have traditionally been hierarchical.
This was an invention of industrialization,
an 18th century concept that allowed people
to organize and communicate at larger scale.
It was very effective at breaking the monopolies of
kings and feudal systems, but it has now run its course.
Sometimes people ask what my political positions are.
It is very difficult to explain, but one
word captures it: I am a disruptarian.
That means every thirty to forty years at least,
things which have settled need to be disrupted.
As things settle, power accumulates and becomes
centralized. With centralized power, corruption happens.
This isn’t a new concept.
My ancestors and I come from Greece.
We figured out [how] corruption happens in systems
of power. Absolute power produces corruption.
There is no more absolute power
than the power of money.
We live in a world where…
Banking was a great liberator after the 15th century.
It moved finance from the realm of kings…
to billions of everyday people.
Then it became concentrated, [certain groups]
acquired power, and the power led to corruption.
What we are left with today is not a liberating system,
so it is time to disrupt it again.
Bitcoin is one of the things that will greatly disrupt
centralization of power. Why is that [the case]?
As a computer scientist working in distributed systems,
I am interested in the architecture of systems.
Architecture is a great topic for this city.
The architecture of systems is what
ultimately produces the outcomes.
I’ve worked with a lot of bankers. They are [generally]
nice people, trying to feed their families, pay mortgages,
and keep a steady job.
Among them are a few sociopaths who
inevitably rise to the highest positions of power.
Sociopathy is an advantage in hierarchical systems.
Most of the problems with concentrations of power…
in [monetary systems] has nothing
to do with people being / acting evil.
It is because these institutions, through their shape
and architecture, produce outcomes that are not good.
They produce outcomes that are
not egalitarian, that are restrictive.
They express nativism, nationalism,
tribalism, and [reflect] class structures.
All of these things make the world a smaller place.
Over the last fifteen years, the internet has
become an enormously [powerful tool]…
for the decentralization of communications,
a liberating force.
But if you look at economic inclusion and
how banking works [in relation to the internet],
we have not expanded opportunity or
access; in fact, we are now regressing.
Economic inclusion is [declining] because the very
architecture of these isolated structures of finance…
raises walls, [bolsters] national borders,
and class structures [where there are]…
differences in how your money
and commerce is treated.
We live in a world that is increasingly interconnected;
there is even an emergent global culture on the internet.
Yet our financial systems are
parochial, insular, and separated.
If you look at [finance] from a network perspective,
there are systems for transmitting small amounts,
systems for transmitting large amounts,
systems of money for consumer payments,
and systems for business-to-business payments.
All of these are separated geographically based on
borders, legal jurisdictions, and nation-states.
Therefore, this structure produces separation.
As people, we are less and less free
to transact with the rest of the world.
Geopolitics affects finance in a great way.
The combination of state and
money produces toxic results.
We are about to disrupt all of that.
Bitcoin’s architecture gives us
a new way of organizing the world,
like how the internet flattened access to communication
and made every system connected to it an equal peer.
The packets [from] my IP address are treated no
differently on the network than everybody else’s…
for the most part.
That gives a voice, the power of the
printing press on a global scale, to everyone.
Bitcoin will give the power of banking
on a global scale to everyone.
Desktop banking, the way desktop printing, publishing,
and websites changed communications.
Individually controlled banking, with all
the [abilities] of the largest banks in the world.
That is what creates disruption.
Imagine a world where every person has
the ability to not only execute transactions,
but create complex financial systems and
instruments without asking for anybody’s permission.
Simply by connecting to the network,
they can start a new application.
Centralized systems can’t [offer] that.
The further out you are, the less control you have.
The further in and up the hierarchy you go,
the more controlled and limited the access is.
Not so with Bitcoin, where every node on the network
has equal access to all of the financial services.
In a centralized system, if you want to build
a new application, two things need to happen.
First, you must ask for permission.
Permission is only granted if that application can
apply to very large populations and be profitable.
On the internet and Bitcoin, all that is needed
to start an application are two nodes, two people.
They can start communicating,
construct their own protocols and systems.
With only two people using it, that application is
just as valid as every other application on the network.
A fundamental misunderstanding
about the internet is that people think…
its power comes from the ability
to transmit information [quickly].
But the real power comes from
net neutrality, the concept that…
the internet does not discriminate
based on source, destination, or content.
Bitcoin is the first financial network to exhibit neutrality.
When you [broadcast] a bitcoin transaction, the network
doesn’t care about the source, destination, amount,
or what type of financial application it [comes from].
It simply [evaluates]: did you pay
sufficient fee to use the network resources?
If you did, your application is valuable.
We have an interesting conversation
happening in Bitcoin right now.
Perhaps you have heard of “spam transactions”?
What is a spam transaction?
What does it mean for a transaction to be spam?
I think that term is meaningless.
In deciding which transactions are spam and which
are not, you are making a [normative] judgement.
You are imposing choices about which applications
are legitimate. To whom? Legitimate to the end user?
There is no such thing as a spam transaction.
If a transaction carries enough fee, that means
the sender felt it was valuable enough to transmit.
Therefore, it is a legitimate transaction.
It replaces the [previous] concept of
controlling content by making decisions…
about what is good or bad, legitimate or illegitimate,
what is a valuable or not valuable application…
with a simple market mechanism.
If your transaction is valuable and you paid essentially
a tiny fee, because of the democratization of finance,
then your transaction is valuable and not spam.
Starting in the 1970s, we have seen
the world adopt digital currencies.
When people call bitcoin “a digital currency,” they are
missing the point. The euro is also a digital currency.
The U.S. dollar is a digital currency. Less than 8%
of these fiat currencies exist in physical form.
The rest is [made of] bits on electronic ledgers.
The difference is, these ledgers are controlled by
centralized organizations; in Bitcoin, they are not.
You have a decentralized, open network.
Bitcoin isn’t a digital currency.
It is a cryptocurrency, a network-centric money.
I really like the idea of a network-centric money.
In my opinion, the word “Bitcoin” is a terrible name. It just
sucks. If you are a designer, think about it for a second.
“Bit” means small or the person who said it is a geek,
neither of which appeal to the general population.
A “coin” is a physical token of money, used to describe
the least physical form of money we’ve ever designed.
If I could rename it, I would rename it “Trust Net.”
That is what Bitcoin is, a network that allows you
to replace trust in institutions and hierarchies…
with trust on the network acting as
a massively diffused arbiter of truth.
It resolves any disagreements about transactions and
security in a way that no [single entity] has control.
Starting in the 1970s, our currencies [started to
become] digital, but not the same digital as bitcoin.
This was [inspired by] a dream for governments,
of one day being able to control every transaction…
[between] every human being on the planet, where
everything was visible to [authorities in power],
and where privacy dies.
[Your transactions would] immediately be
under the lens of systems that surveil you.
We have been creating a system of global,
totalitarian financial surveillance throughout the world.
That system of limited access, requiring identification
and credit checking, is responsible for the regression…
in economic inclusion, for two and a half billion people
who have absolutely no access to banking.
That is just the heads of household, not
counting [other members of their] family.
That is not counting people who have limited access
to banking, in a single currency, within a single border.
If you count all of [the unbanked people],
you will start [counting] into the [several billions].
It is really difficult to estimate what economic exclusion
means, but I will give you a simple calculation…
As a member of the privileged elite in
the developed world, I have the ability to…
open an online brokerage account and trade in yen
on the Tokyo stock market within twenty-four hours.
I can send and receive money to / from
anywhere in the world, without any real limits.
All I must do is sacrifice my privacy and my freedom.
While I can do all of those very powerful things
[I just mentioned], there are some things I can’t do.
I am not talking about buying drugs,
that is not really interesting [to me].
I’m talking about the simple things. For example,
donating to an activist organization like WikiLeaks.
A few years ago, WikiLeaks was cut off from the
world financial system, due to extrajudicial pressure…
applied on [a few] major payment providers: Visa,
Mastercard, the [wire] transfer system, and PayPal.
Without any legal process, without any conviction, and
without any crime [besides] revealing crime [by others].
WikiLeaks was cut off from the world financial system.
This is now happening not just to activist
organizations, but to entire countries.
But just like that, on January 3rd 2009,
the dream of nation-states to create a totalitarian
financial system died with the invention of Bitcoin,
and the mining of the genesis block.
Bitcoin is censorship-resistant.
You may have heard of this term before.
You cannot control where money is transmitted in
Bitcoin. It is not attached to identities or geography.
Surveillance of everyone is not possible,
and it will become much harder [soon].
Privacy is [improving] on Bitcoin.
Censorship resistance is an artifact created
by the neutrality of the flat network architecture,
without borders, which doesn’t ascribe
meaning to source, destination, or value.
This is what creates censorship resistance.
Privacy is very important, but it is a term
that often has very deep political meaning.
I like to juxtapose it with another term: secrecy.
What is the difference between privacy and secrecy?
Ultimately, in today’s vocabulary, privacy is the
right of billions of individuals to not be surveilled.
Secrecy is the power of very few to escape
accountability and to have no transparency.
We live in a world where every transaction you [send
or receive] through the financial system is catalogued,
analyzed, and transmitted to collaborating
intelligence services all around the world.
Yet we have [very little] idea about
what our governments do with money.
The financial systems of the powerful are completely
opaque, while our transactions are completely visible,
through this system of surveillance.
This world is upside down. Bitcoin rights it.
Privacy is a human right. Secrecy is a privilege of power.
We need to [build] a world with complete,
ultimate, strong privacy for billions of people.
That is a human right, that is a cornerstone
of the freedom of expression and association.
All of the other freedoms are
very much attached to privacy.
We need to live in a world where
secrecy is fickle and easily pierced,
where power must face accountability
under the spotlight of transparency.
We need to flip the system upside-down.
One of my favorite words is French: sousveillance.
It is the opposite of surveillance,
which means ‘to look from above.’
Sousveillance means ‘to look from below.’
In the nation-state dream of controlling our financial
futures, they made one major miscalculation.
It is a hell of a lot harder for a few hundred thousand
people to watch seven and a half billion people.
What do you think happens when seven
and a half billion of us stare back [at them],
when the panopticon turns around, when our financial
and communications systems are private?
Secrecy is an illusion that can’t be sustained.
When crimes are committed in the names
of the states and powerful corporations,
they will [draw the attention of]
hackers, whistleblowers, and leakers.
When everything eventually comes out,
we will have a great advantage.
The natural balance of the system is
one in which individuals have privacy,
but the powerful cannot have secrecy anymore.
Bitcoin is one of the first steps in that [transition].
The ability to transact across borders means we will be
able to extend financial services to billions of people…
who currently have no access, and not necessarily
through complicated technology.
I have spoken to various regional banks,
the ones that are not afraid of Bitcoin.
They tell me, “About 80% of our population is a
hundred miles away from the nearest bank branch.”
“We can’t serve them.” In one case,
they said “a hundred miles by canoe.”
I will let you guess which country that was.
Yet even in the most remote places on Earth,
there is [at least] a cell phone tower.
Even in the poorest places on Earth, there is a little solar
panel on the roof of a hut which feeds a Nokia 1000,
[Nokia’s most affordable phone series and] the most
[popular phone] in the history of manufacturing.
Billions of them have shipped.
We can turn every one of those [phones]
not into a bank account, but into a bank.
Two weeks ago, President Obama gave a
presentation at South by Southwest (SXSW).
He talked about our privacy.
He said if [they] can’t unlock the phones, that means
everyone has a Swiss bank account in their pocket.
That is not entirely accurate. I don’t have a
Swiss bank account in my pocket. I have a bank,
with the ability to generate two billion
different addresses from a single seed,
to use a different address for every transaction.
That bank is completely encrypted. Even if you do
unlock the phone, [you won’t] get access to my bank.
[His comments] represent the cognitive dissonance [within] the powers of centralized secrecy.
The power of privacy as a human right is now
within our grasp, but if you think this will be easy,
or that [we will achieve it] without
struggle, you are very mistaken.
If you read anything [journalists write]
about Bitcoin, you will see the same things…
they said about the internet in the early ’90s.
“It is a haven of pedophiles,
terrorists, drug dealers, and criminals.”
In this room, how many of you have bitcoin?
How many of you are pedophiles,
terrorists, drug dealers, or criminals?
You see, even while they push this story, every now
and then someone who has never heard of Bitcoin…
notices two important things:
It is still not dead, which may be surprising [since]
an article says it is dead every two or three months…
(great marketing, right?).
Every time they are told it is dead, but three months later
it is still not dead, they think, ‘Huh, it tends to survive.’
I call Bitcoin “the internet of money,” but perhaps
we should call it the zombie of currencies.
It is a currency that is undead.
The issue is, we are creating a system that is
threatening the largest industry in the world: finance.
They will object [to our existence].
They will push back, use the most common
and effective emotional tactics, which is fear.
They will treat you as if you are idiots, and try
to persuade you that this is something to fear.
When people hear that message, maybe
they will come to one of the next meetups.
They will meet dentists, architects,
and taxi drivers who own bitcoin,
or use bitcoin to send money back to their families.
They will meet normal people who use bitcoin
to [reclaim some] financial power and freedom.
Every time that message is broken
by cognitive dissonance, Bitcoin wins.
All Bitcoin really must do is survive.
So far, it is surviving pretty well.
Even if Bitcoin was attacked, there are [dozens] of
alternative cryptocurrencies built on the same design.
They [may become] stealthier or more robust,
at least at the scale they are now. Who knows?
Bitcoin will become more robust
or something else will replace it.
In this new network-centric currency world,
currencies occupy evolutionary niches.
Like species, they evolve based
on stimulus in their environment.
Bitcoin is a dynamic system with
software developers who can change it.
The question is, in which direction will bitcoin evolve?
Which environmental niche will it attempt to fit in?
How will that be affected by
the actions of the powerful?
Here is a problem they will have, if they attack Bitcoin:
it will evolved to defend itself against predators,
just like any species.
If they attack Bitcoin’s anonymity,
it will evolve to become more anonymous.
If they attack its resilience, it will
evolve to become more decentralized.
In the end, despite all of the messages of fear,
Bitcoin is the cuddly little bear of currencies
and you do not want to kick it.
As in [the process of evolution],
[sometimes] if you try to stomp on the gecko,
it will evolve into a komodo dragon you can’t stomp on.
Sometimes people ask me, “Do you think governments
will ban Bitcoin, or try to regulate it out of existence?”
“Do you think they will [weaken] it
with denial-of-service (DoS) attacks?”
The answer is really simple. In network-centric, dynamic
systems that are adaptable and exhibit anti-fragility,
attacks cause the system to evolve resistance.
Think about this: I have been involved in the internet
since 1989. I remember the early days very clearly,
when lots of articles were written about how the internet
was not resilient, could not scale [for] voice [calls],
and was not secure.
I remember times when denial-of-service attacks
would take down Yahoo, Altavista, and even Google…
for hours and sometimes days.
What happened between then and now? How many
times did Google go down in the last five years?
Have people stopped attacking Google?
Oh no, quite the opposite.
Google can now sustain gigabits of denial-of-service
attack anywhere in the world and dynamically reroute.
The same applies for [other] internet applications.
The attacks didn’t stop; the system became immune.
In a human immune system, if you are exposed to
a virus and it doesn’t kill you, you [build] resistance.
The next time you are exposed to
the virus, it does nothing to you.
Will governments try to ban, regulate, attack Bitcoin?
They already are and have been, almost since
the beginning. Bitcoin is [becoming] stronger.
It is under constant denial-of-service attack
on the internet by hackers and [state] agents,
twenty-four hours a day.
In security, we have a term called a ‘honeypot,’
a system designed to attract [and deflect] hackers.
What bigger honeypot could you have than
a financial network worth six billion dollars?
There is a six billion-dollar reward
for you finding a way to hack Bitcoin.
No one has collected that reward yet,
not because they haven’t been trying.
They have been trying non-stop,
but systems like Bitcoin are resilient.
Remember that what we are [building] here is not
[just] a currency, but a re-working of societal systems…
that have failed us.
The 18th century system of hierarchies
does not scale to a global, interconnected world.
They are being replaced by network-centric,
flat architectures, whether that is the internet…
or any of the applications running on top of Bitcoin.
Currency is just the first application.
When you have a network that can provide neutral trust,
you can build myriads of applications on top,
and you don’t even need to ask for permission.
Bitcoin is much more than currency.
When I say that Bitcoin is “the internet of money,”
the emphasis is on the internet, not the money.
Welcome to the future of money. Thank you. [Applause]
We’ll do a few questions and answers but first I wanted to talk very quickly about some logistics
If you brought with you a copy of the book, I will be delighted to sign that copy for you
Please see me after this talk. I’ll set an extra table and sign books
However, this book is open-source
Everything I do is open-source, and I use a very aptly named
license called the creative commons
Which could it be better expressed than in a place like fablab?
Which is a creative commons all of the work I do is
free by Attribution Share-Alike
License which means that anyone in the world can read my book
Sell my book share my book
translate it mash it up turn it into a course a video or a rap music song and
All of the above have actually already happened, which is astonishing
starting about eight months ago
we embarked on a project of great significance which was the translation of mastering bitcoin as a
resource for the community for people around the world
developers around the world from any nationality to learn how to wield
This tool of power and use it to build applications
groups of volunteers
Very often just a single volunteer with a desire to learn about bitcoin by translating my book
have done me the honor of translating it into
Twelve languages so far and all of those translations are available for free online
You can download this book in Spanish
the translation was completed in October of 2015 as
well as
Hungarian
French Russian
Japanese
Korean and
soon
Chinese and
Catalan
the Catalan Translation is nearing 50% and
Volunteers are working on it in order to bring this into the Catalan language and so
For me that is the most important thing that we need to consider
with Bitcoin which is this is the power of knowledge and
Bringing that knowledge to as many people as possible is
How we create success in changing the world?
Now I was just the first to write a book in this space
But all of you can also participate in sharing the knowledge of bitcoin
this isn’t my greatest contribution to the space I
Think the simple act of discussing bitcoin with every taxi driver. I’ve ever met with every person in the street
I’ve ever met with everyone. I’ve shared a drink at a bar and
on the spot within the first 10 minutes helping them install a wallet get a bitcoin address and
Giving them one or two dollars in bitcoin so they can try it for themselves, and that’s something everyone in this room can do
Now arguably when I started to giving everyone one or two dollars in Bitcoin meant giving them a bitcoin
So I have now given away more bitcoin that I will ever earn in my life
and I continue to do it to this day, and I invite all of you to look at this as a
community and Bitcoin is not just the community of technologists it is a community of
artists and architects and hackers and makers
and
singers and all
Aspects of culture because that’s what it means to have community and again
I think nothing could express that better than our current location at Fab lab. So thank you very much. We’ll take some questions now
I
Undress hello hello as a potentially comparable technology
But non blockchain so a decentralized internet. Do you have any thoughts about made safe and the safe network?
You know I think so for those of you who don’t know made safe is a system. That’s designed to create
Peer-To-Peer Cloud computing the idea being that
resources that you have on your computer disk computing networking capabilities can be shared and
while sharing is something that
we may be naturally inclined to do there are quite a few barriers and the idea being that if you create a system of
incentives in the form of a currency for sharing disk space on your laptop or
computing or other resources
Then we will encourage more sharing and the interesting thing is that you don’t encourage sharing because people profit from it
but because the ability for me to share this and
Earn currency, then gives me the ability to buy disk
Computing and networking resources from others in a way that creates
this sharing economy
I think some of the first applications. We’re going to see
Are going to be related to?
Personal computing and personal clouds, so I think it’s a very interesting experiment. I have no idea if it will work
And I certainly don’t advise in treating bitcoin or any of the other
systems that are evolving around them as
Speculative investments unless you really know what you’re doing because we are so early-stage in this technology
The the one characteristic we all share across the entire industry is crazy volatility, right?
And so if you treat it as an investment, you’d better have
Very great courage or a lot of money. You know as they say what’s the best way to?
Turn, what’s the best way to Gain 1 million dollars?
Start with 2 million dollars and trade like crazy
And that’s how speculative investment works, so yes, very interested in the technology very interested in the we’ll see how it goes
Yes, thank Andreas for coming over, and I really like your speech and all your confidence that you do I
Really would like to ask about the power of mining centralization in let’s say a couple of countries. What do you think and?
although bitcoin looks like anti Fragile
How do you foresee that we are going to pass go through that mining centralization power?
That’s a very very good question
so for those of you who are technically minded or have been following the bitcoin space one of the
characteristics of bitcoin from the first white paper by Satoshi Nakamoto was the idea that bitcoin
Decentralized his power by giving one cPU one vote
The idea being that by contributing processing power to the network you become part of the decision-making process
Something interesting happens though because the incentives once it started taking off was so powerful that people
Started investing in more complicated computing and soon
It wasn’t cPUs
But gpus graphical processing units that were used to mine bitcoin and that represented a 100 times
improvement in the ability to mine
Think of it as one gPU a hundred votes
and very soon from gPus we went to
fpgas field programmable gate arrays which are systems of silicon where you can encode and algorithm and run it really fast and
Then we went to asics
Application-specific integrated circuits, which are basically mining chips designed to do nothing but mining in each one of these steps, we?
saw somewhere between a hundred and ten thousandfold increase in Performance over the previous generation and
That is the primary reason, why it?
caused enormous
centralization in mining
however, that game is now over if
You are a miner who migrated to asics than migrating to a system. That was printed
with a silicon fabrication system at 24 nanometers gave you an advantage of
10,000 times over the previous generation and
you could buy those chips by making a very big order with a
semiconductor Factory which means that only very few could put up to the necessary capital and
If you could then take that down to 22 nanometers using a more specialized Silicon fabrication system
You could get another massive improvement, so we saw mining hardware evolving every three to six months
literally if you set up a warehouse full of mining equipment it had a shelf life of
Less than six months in six months it went from the most powerful most profitable system of mining to being
unprofitable for the level of electricity it consumed and
so that created even more centralization
Because now the ability to put down more capital every three to six months to get rapid delivery to be closely connected to silicon
fabrication centralized mining
And it’s centralized mining a lot in China primarily because that’s where the silicon fabrication is and there’s also some great
opportunities for cheap Energy I
Don’t think that was the vision of Satoshi
now I will caution you one thing a
lot of the
concern
about Chinese mining in my opinion is
Blatantly racist if
Mining had centralized in Sweden. We wouldn’t be getting so upset
right
so just keep that in mind because
Chinese mining represents excellence in engineering
concentration of resources and engineering and
So far the ability to deliver massive amounts of security and trust of the bitcoin network
at very low cost because of the cost of electricity that is something we all benefit from
but here’s where it gets interesting as
of six months ago
We started seeing the fabrication of asics at 16 nanometers 16 nanometer technology is the cutting edge of computer?
processing it’s what you see in your
latest apple
Hardware device, and
the
exponential Growth of Performance now hits a wall
Because there is nothing better than 16 nanometer technology in computer terms
We have this law called Moore’s law and Moore’s law
Posited by Gordon Moore the founder of intel in the 70s is the idea that every 2 years
approximately
Computer capacity doubles and we’ve been running ahead of moore’s law and in fact. It’s been doubling in less than 18 months
That sounds really fast doesn’t it?
unless of course you’ve spent the last five years doing a
Thousand times faster every six months and suddenly you’re down to twice as fast in two years
that’s a wall of
Performance that means that once you put those 16 nanometer things on the shelf
They’re going to sit there for two years and you
don’t have the ability to upgrade them and
That now means that the advantage shifts
from the economic power of those connected to silicon fabrication to the ability to deliver these devices as
consumer devices
because with the centralization of mining comes one big disadvantage if you have a
Thousand Terror hashes in a warehouse
What happens when the warehouse burns down what happens when you lose electricity to the warehouse what happens when you lose cooling to the warehouse?
What happens when you have a problem with your investors?
The centralization now makes you vulnerable to losing everything
Compare that to the possibility of having a mining chip
that’s part of a toaster or a
Water heater, that’s plugged into your kitchen wall
Well if you have instead of one system that produces a thousand Terra hashes you have a million system producing
One Millionth of that
They’re less vulnerable to disruption because as the power goes out in a whole city it only affects a small
Percentage of the devices out there, and it may be unprofitable for now for us in the developing world
But in some places in the world it’s going to become profitable to mine on the latest chips using solar Energy and hydroelectric
power and renewable sources that are less expensive
Which means that in my opinion?
Mining centralization reached its peak in 2015 we’re going to see now
it’s probably going to continue the wave for another year or so and
in July 22nd 2016 we have an important event the reward for bitcoin blocks is divided by 2
half the amount of Reward I
Think what that will do is it will ensure that anyone who is not mining on the very latest 16 nanometer chips becomes?
unprofitable and then we have a level playing field so
I’m not really worried about that
First of all because we still have great security and mining centralization
hasn’t led to any of the nightmare scenarios that we have imagined in Bitcoin and
Secondly because I think it was an artifact of the race of technology to moore’s law and now we’re done
So again that was a long explanation. I apologize because it’s a very technical topic. Thank you for the question
hey, so we have castillo from internet from people online there are 90 friends online and
Cisco from the Netherlands asked it and will Mass adoption
Happen this year or any soon this is question
Well, that’s an easy question
Will mass adoption of bitcoin happen soon or this year no?
That was easy. Do you want me to elaborate? I’ll elaborate a bit on that, right?
first of all we have to recognize reality right bitcoin today is a a
Technologically Advanced system that is pursued by those who have literacy numeracy
Capital and freedom and that means that it is highly concentrated
It’s not only concentrated primarily in the development world, but it has a very problematic
demographic
Which is it’s all white men or at least 95% and that is
Going to change and it has to change and the reason it’s going to change is because of Mass adoption
Because trust me when I joined the internet in 1989 it was also all white men
And today the number one demographic on the internet is a 23 year old han Chinese female
That is the majority of the internet population and it will
be like that for bitcoin when Mass adoption happens
But for the internet it took 25 years and it took the laying out of massive infrastructure
Now bitcoin already has the internet which is
Why it’s going to be a bit easier
So I think we can do it in 20
We’re in year 7. I think we’re making a very good run of it, but it’s not gonna happen next year. We need patience
Thank you Andres for the inspiring talk
What do you have to say about other coins?
You think we’ll have a sea of coins each with its function
Ether is really popular now
Smart contracts will other coins come up. How do you see it? Yes, they will and
This is something fundamental to understand about the new world of digital currencies or Crypto currencies of network-Centric
Currencies is that we try to apply to them the ideas of the past and we have all lived our entire lives in a system
that delineates currencies by Nationality and
Allows them to be centralized and also to compete in a zero-sum game
one Currency wins only if another currency loses
What better example for that can you see than the fact that right now?
24 Central Banks have set their interest rates to zero or negative in order to create a race of devaluation of their currency
So they can erase their debt they’re racing against each other to the bottom
and
That is exactly the result you have in a closed system
With strict borders, but that’s not what happens with bitcoin
the important thing to realize is that the money is not its physical form
Money is a form of language
Money is the language that we use to express value to each other and money
Emerges in societies regardless of its physical form it even emerges in primate societies you can teach monkeys
how to use money and
They will adopt it and teach it to their offspring and they will also invent new financial things like
prostitution and
robbery
You beat the other monkey you take its pebbles and you get bananas
money Emerges among Kindergarten children
Even if they don’t understand money they trade
tokens of money colored blocks rubber bands
Pokemon cards, it doesn’t Matter why?
Because money is a lubricant for social interaction if you have a language with which you express value you can also Express appreciation
and belonging and
lubricate the social connections, and if you look at money as a language
Then we need to rethink this idea that this is a competition for who becomes the one global winner
English is a very popular language
Did you all stop learning your local language because of that so it did you learn two and three and four?
in
the world we have
Thousands of languages, and though we may see some power in some of the major languages
people can adapt in a way that they can use multiple languages and
the language
connects them to their culture and
so
when money becomes a language as bitcoin has
the idea that it will be replaced or the we’re looking to see which one is going to be the winner is as ridiculous as
Asking if English or Spanish will become the one global language or Mandarin
The bottom Line is that
We will have
thousands of coins and
Then we will have tens of thousands of coins and most of them will have no economic value
But they will have cultural significance
they will have value of loyalty they will be representing fans or creative appreciation and
Some of them will be very large and have economic value
If you have a system like that
What emerges and that what we see in?
Statistics and mathematics again and again is a power law or pareto distribution
Just like you have
20 languages that are the world’s most popular, but then you have a long tail of thousands of languages behind
20 artists who are some of the world’s most popular and
hundreds of thousands of artists behind them and
Currencies will evolve in that way. We may have 20 currencies that have major economic value and fit in specific niches
Smart Contracts micro Payments cross-Border
Transactions
Solid reserve ETc, and then we will have tens of thousands in what is called the long tail
so
One of the things we have to do is get rid of all thinking when it comes to looking at this medium
we don’t yet understand exactly how it’s going to be evolved and
There’s a very simple reason for that. We’ve never done this before
This is the first time in history that we’ve seen this emergent phenomenon happen
And you are sitting on the front rows of history
so
Yes, ether
made safe
Bring it on
You have a follow-up
We’ll get back to you in a second yes, hi andreas
I just wanted to ask you a question about your metaphor. You know organic metaphor of
The decentralized network developing our resistance to attack
Made me think of the TcP/ip
Technology and how that was you know invented to be bomb-proof?
So that you could just it was like a mesh you could blow a hole in the mansion
Would go around the edge of the hole
although you’ve characterized the
you know the the
Confrontation between the higher the old hierarchy that you described and the new decentralized world, and I sort of confrontational way
What you know as a kind of confrontation? What do you think of the irony that that technology sort of fell into?
Into public hands as it were and you know is it possible that there’s a cooperative
Aspect to that confrontation as well. You know that the old hierarchy a
subconscious level
We’ll cooperate with this evolution
some well some won’t and
Again, I al you all over use this metaphor
But if you look at what happened on the internet for the very first decade or so phone companies absolutely hated it, right?
So they wrote the propaganda for the media about how the internet could never replace phones
ETc ETc, and today every single phone call we make
Especially long-distance calls are carried over the internet the vast majority of the phone networks
The same ones that resisted the internet running on top of them now run on top of the internet
But what happened was it the largest?
telecommunication companies that adopted this first no it was actually the third tier of
Companies the ones that could not compete with the large
telecommunication companies that could not compete with the capital the access to
Legislators and the marketing budget and they said well we can’t play your game on your terms
but we have this internet thing and we’re going to use it to Beat you after the competition and
so what I predict, we’ll see is a
bifurcation of especially the financial industry and we’re already seeing that
When we see banks, what do we mean right there are different types of banks?
there is banks that deal primarily with consumers that deal with checking and savings and payments for
consumers most of the world’s
Regional banks are that. They do loans
They do checking they offer currency
They’re not really bad in many cases they offer good services. I’ve had some conversations
With very large banks from developing nations and they do not fear bitcoin
they see it as an opportunity to expand their services to populations that they can’t reach today and
Then there’s the other kind of bank the bank that really doesn’t have customers you’ll notice that these banks are gradually dropping
consumer accounts, and they’re focusing primarily on investments and large concentrations of wealth and
Gaming the stock market and other international markets where they have significant advantage
And what do these banks do they don’t fund consumers or loans?
Because consumers and loans are not
Profitable and they don’t care about expanding their services
They fund oil companies to destroy the rainforest they find they fund warmongers to create
Dictatorships and they fund other large corporations to create advantages, so those
Banks are going to have a problem with bitcoin in fact they do and you can see it’s in the way they speak about bitcoin
to them
This is inconceivable
They are now going through what I call the five stages of grief they started with denial
bitcoin
Go play you little hackers. Then they noticed it wasn’t going away
So they started getting angry
huh bitcoin
criminals
Pedophiles terrorists the world will end if we allow normal people to control their own money
Next comes bargaining. Hey, we don’t like bitcoin, but blockchain
so that
That nice open decentralized borderless Peer-to-peer open innovation open access system you built
Wow, we can build one that is not open not decentralized not borderless not open innovation and not open access
the we control completely blocked chain and
they’re missing the point because
Those are not the features to avoid those are the features that make it powerful, and so, they’re bargaining
Right and I can tell you it’s not gonna work because block chains suck at doing the things the bank’s want to do
Block chains in the use of Bitcoin with a decentralized consensus algorithm are inefficient
Because the inefficiency is the price you pay to get freedom and if you don’t care about freedom
Why take the inefficiency?
install a database and
After bargaining comes depression and this will be a financial depression
because more than 50% of the world is what they call the black market and
More than four billion people are cut off
So which economy do you want to serve with your network centric currency?
the big one or the little one that’s broken corrupt and dying and that
in the end will be the depression stage hopefully followed by
Acceptance and some companies are going to do very well in
Playing in the game of Network centric currencies of using it to expand access and borders and be able to trade
internationally and Empower people
There will be the majority
the banking system are
Dinosaurs they operate on 70s technology
And you know the dinosaurs have enormous contempt and disdain
For the little furry mammals that are running around their ankles and they spend some time
Squashing these little mammals that are insignificant
but there’s a meteor in the sky and
Once the dust settles
The mammals we win
so
this is a
confrontational system
But not because we are confronting anyone
It’s because we are creating opportunities that some do not want to see
when you reveal the truth at a time of universal
lies that is a
Revolutionary Act and the revolution in it is not what you say it is the fact that you go against the lies
Bitcoin is doing that on a global scale today and many of the other
Technologies that go with that I don’t look for confrontation
look for inspiration and
Positive energy that we can create as community the banks are really irrelevant in this conversation
All right, let’s take Maybe one or two more questions
Very good. Yes, I
Just would like to ask you about the scalability of bitcoin
What options what options has bitcoin right now?
And what are the advantage and disadvantage of its each of the audience that are and what’s your opinion that?
Which of those options should be should the community adopt?
Oh, that’s a very good question also a very easy one to answer all of them
I did a talk in Prague which has been videotaped and will be videotaped. I’m over 40
ignore that
Recorded there we go. Which is being recorded and will be brought back soon
Its topic the entire presentation was about scalability, and why scalability is something that doesn’t get solved it
Just gets pushed further out as we scale to different types of applications and so the question
what are we going to do are we going to do segregated witness or raise the block limit or
invertible bloom look-up tables or thin blocks or replace my fee or
ETc, ETc. The answer is really simple all of them
And then we will run into new scalability problems because the moment we create space
With these capacity improvements people will look at that space and think hey I can do something
I couldn’t do before and then that space will be gone and that story repeats
The internet is an example of a technology that failed to scale
gracefully for 25 years if bitcoin manages to fail to scale gracefully for decades
We’re in a very good place, so yes
We will do all of those things
the Debates now has narrowed to the point of
Which one do we do first and is it this month or next month or this year or next year?
Which is really just an engineering issue
and is not worthy of all of the drama and
recriminations and
That happen in this space
So yes, we will do that, and I’m very confident about
scaling because
Ultimately scaling is an engineering issue and Bitcoin has within it the capability to scale and not just that but we are seeing
The very very smart people working in the development space of bitcoin
Inventing new ways of improving scaling all the time
And it’s not just the five I mentioned there’s like 20 proposals on how to continue to scale
Bitcoin will its scale
Ultimately on its own without another layer. I don’t know that
Maybe we’ll have to do more layers on top as long as there’s trustless and decentralized. I’m okay with that, but it will scale
Maybe maybe I think there’s one or two questions more yes
Maybe we take one question from the live stream let’s do one more question from the network
question from the audience
Hi, I’m just
Pick one from the live stream, please and we’ll do that next thank you. I would like to know if you forecast
a moment
when there will be a passage between
fiat currency and Crypto currency in the world
That it’s so fast that will be
Blood sand revolution, or will be smooth these passages between the two different
systems
That’s a great question
History doesn’t do smooth
history does punctuated equilibrium
spurts of innovation disruption and Chaos followed by
centuries of plateau followed by spurts of
Innovation
I think it was nicholas negroponte from the mit media Lab and said
The future is here today. It’s just distributed unevenly
the passage from fiat to Digital Currencies or Crypto Currencies
What happen everywhere it will happen in the places?
where the price of remaining with the currency is to lose the
generational wealth of Your children where the penalty of
pushing against your government is
violence and
This gives you a mechanism to opt out
Where your government has taken you hostage together with the rest of the population in an economically disruptive?
Spiral, and I don’t know what will happen
but I think in 10 or 15 years we will see moments where government’s will try to take their populations hostage and
Very large numbers of that population will go yeah, I don’t think so
Argentina
cyprus
Greece
Spain and
Many other countries have faced
currency
challenges and
economic Depression because of currency
challenges there’s
Enormous interest in bitcoin in Argentina for example and now in Venezuela where they just arrested
Two miners to make an example of them after flooding the media with stories about how bitcoin is
for terrorists criminals
Pedophiles drug dealers, but the problem is that that message?
Doesn’t change the fact the bitcoin doesn’t have five hundred and fifty percent inflation
and when you’re faced with that balance
sometimes you say well, I’m gonna get out now today a
Tiny tiny Portion of the population has the means the education
The technical infrastructure skills and capital to escape that trap but one day will be a big chunk of the population
And then things will happen very very
Rapidly yeah, we will see that. I hope in my lifetime
yeah, I think the I think most of my talk was about this but
I’ll focus just on the revealing
Personal Data part of it because the revealing personal data is not simply a matter of a totalitarian
Financial Surveillance system
It’s also a market economy
We already have a system for micro payments on the internet if you want to buy any content that
Effectively is priced less than five dollars
The price you pay is a micro violation of your privacy
That is the micro payment system
We have on the internet you give your data to be consumed analyzed statistically
Correlated so that the messaging you receive is narrower and narrower and narrower
more and more
Conforming to the image of what Facebook thinks you want to hear to what?
Amazon thinks you want to buy Etc
We pay micro payments through micro violations of privacy our private Data is the price of entry
Into the Micro economy and we can do much better than that because as we develop micro payments on top of network-centric
Currencies we can instead pay with currency while retaining all of our privacy
Bitcoin doesn’t require you to identify yourself and
That is not a bug that is a feature in fact
Bitcoin makes it very difficult to overlay identity on top of it the way the block chains the banks want to build our
Because that’s not secure when you concentrate
Personally identifiable information you get hacked. We have not yet found a way to secure data
Nobody can secure data
Citibank can secure data the large internet retailers can’t secure Data the NSA
Can’t keep its data in-house
The idea that some bitcoin startup is going to start doing no your customer
identification and unti money laundering collecting all the privately identifiable information
That is both ridiculous and disastrous because what will happen is that information will leak and you?
will lose your privacy once again, so
Bitcoin does not do identity because that’s part of the design and it’s actually a very powerful
Part of the design because it’s the foundation of us having privacy anonymity is just another word for a human right?
Great. Thank you very much for everything today
you

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