[ORGANISER] And his newest book just came out
eight days ago, called "The Internet of Money," which is a masterpiece to read. Please help me welcome, Andreas Antonopoulos! [ANDREAS] Good morning everyone!
[AUDIENCE] Good morning! [ANDREAS] Let's start with a quick poll here. How many of you have used a digital
currency like bitcoin at least once? How many of you own bitcoin at this
moment, or any other [cryptocurrency]? Okay. We can fix that. [Laughter]
If you like, come find me later on today. I would be delighted to demonstrate to you
how to set up a Bitcoin wallet on your smartphone. I will give you your first fraction of a bitcoin
and show you how a transaction works, because Bitcoin — and the digital
currency revolution it has started — is best demonstrated and experienced, than explained.
It is actually very difficult to explain Bitcoin. I've spent
the last five years learning how to explain Bitcoin. That is my full-time job. Unfortunately (or fortunately), developers keep making
new stuff which I then have to explain all over again. For a moment, forget everything
you think you know about Bitcoin. Forget everything you've heard about
blockchains. Let's start from basics. In 2011, I heard about Bitcoin for the first time. My reaction was exactly the same as the reaction of
everybody else who heard about Bitcoin the first time, including its founder, and that reaction was:
"Hah, nerd money! That is probably just for gambling." Six months later, I heard about Bitcoin again. This time,
I read the whitepaper which launched this system. My background in computer science and distributed
systems allowed me to see behind the illusion… of what I thought Bitcoin was, and it blew my mind. In my life, I have now had six occasions in
which I have become absolutely obsessed… with a system of technology — to the point
of forgetting to eat, forgetting to sleep, and consuming as much knowledge as I possibly can: my first computer when I was ten years old,
my first programming language experience, my first modem, my first access to the web, the first time I used a web browser, the first time
I downloaded and installed the Linux operating system, and then Bitcoin.
When I discovered it, I spent four months
consuming as much as I could, except food. I lost twenty-six pounds on the highly
inadvisable diet of obsession. I have not [really re-emerged] from that, because I
keep finding new layers of depth to understand this. The reason it is so fascinating? It isn't
what it appears to be at first glance. Bitcoin isn't [just] money. The blockchain isn't
a system of currency. It is a platform of trust. It is not a company, it is not a product,
it is not a service that you sign up for. It is not [just] a currency.
Currency is the first application. It is the concept of decentralization
applied to the human communication of value. What is money? As INQ [the previous performer] told us,
it is an illusion. It is imaginary. The reason we don't grasp that is because
[money] is so deeply embedded in our civilization. Money is one of the oldest technologies
that humanity has. It precedes writing. How do we know that? The very first samples
of writing we have are spreadsheets [Laughter] tallies and ledgers of debts owed,
of money pre-existed that writing.
You might even speculate that money had an oral
tradition until it needed to invent a written tradition, and so [a system of] writing was created [for it]. In the history of money that spans tens of thousands
of years, there have been maybe five major changes. From pure barter exchange to
the first abstraction of value, shells, feathers, beads, nuts,
stones, and precious metals. Then paper money, and plastic
money, and now network money. Bitcoin introduces a platform on which
you can run currency as an application, a network without any central points of control,
a system that is decentralized like the internet itself. It is not money "for" the internet but the
internet "of" money. And what is money? Money is a language, a linguistic abstraction,
that we use to communicate value to each other. Money simply allows us to express value
which may have economic consequences, but it also has other consequences.
We use money to express and create social bonds,
relationships, associations, and organisations. Bitcoin is the first system of money that is not controlled
by any [single] entity, that is completely decentralized. It introduces the very same [effects] that
the internet brought to communication. If money is speech, if money is a language,
and you disconnect it from all other media… to make it pure speech, pure content, an internet
content type, a protocol designation, money over IP. It completely separates it from all previous notions
of nations, sovereign issuers, institutions that control. We [transition] from institution-based
money to a network-based money. Of course, everyone will welcome this with
open arms…
Not a chance. [Laughter] What do you think [people] said the first time someone
was presented with a gold depository certificate, instead of a gold coin? They said: "Hah, that's not money! Go away." What do you think happened in 1950
[when] someone showed up at a motel, presented their diners' club membership card,
and said, "I'll pay with this piece of paper." "That's not money. Go away!" Now we are on the verge of a new transformation
of money, of creating the first completely global, borderless, decentralized, and open form of money. [Money] where you can build applications
because it is programmable. You don't need to ask [for] anyone's permission to
launch an application any more than you need to… ask [for] permission to launch
an application on the internet.
The only requirement to have a successful application
on the 'internet of money' is two interested participants. That is your [minimum] market segment and you have
an application. A million applications will flourish. When you push innovation to the edges of the network,
when you remove the requirement for permission, what happens? An exponential explosion of innovation in applications
that could not be built on the old systems of money, because [those systems] required permission,
required a significantly large market segment, required adoption by many in order to be available at all. Now, none of those requirements exist. Anyone in the world can download an application
or use even a feature phone with text messaging, and immediately acquire the same powers
that institutions of banking have today. When I say anyone, that is only scratching the surface.
Not only does Bitcoin's currency not recognize
borders, it also does not recognize people. It doesn't matter if you are a person,
a refrigerator, or a self-driving car. Throughout the history of money, ownership of
currency required personhood, either as an individual… or an association of individuals in a corporation. Bitcoin can be owned by machines, by
software agents. Machines can pay each other.
And that is not just about economic activity.
It is the basis for a market-based security system. It is the basis for creating bonds
of authentication between devices. It is the basis for new applications
that have never been done before. Bitcoin and blockchain technology
unifies the [various] systems of money. Today we have systems of money for small payments
and systems of money for large payments. We have systems of money for payments between
individuals, payments between companies, and for payments between governments. Does that remind you of something? That is how
communication used to be before the internet. We had systems of communication for pictures,
systems of communication for letters, for short distances and long distances. The internet came and unified all of those.
'The Internet of Money' creates a single network which
can do a micro-transaction to a giga-transaction… (in terms of the amount of bitcoin), in seconds, anywhere in the world, for any
participant without permission. But if you just look at the application
of money, you are missing the point. You can take the language, the building
blocks of this platform, and use it to… construct other languages that communicate value:
tokens, reward points, and brand loyalty coins. Today, there are over a thousand digital currencies
using the design pattern, the recipe, of Bitcoin. Most of them are junk, some of them are not. Over the next decade, we [will] see tens of thousands,
and then hundreds of thousands, of coins.
Some will have economic use; some will simply
be expressions of loyalty and affiliation. They [may] represent items in the physical world,
[such as] the title for a house [or] the key for a car, that can be transferred from one owner to another. Five seconds later, that [new] owner
can step into the car and drive away, because the car can validate the standard of ownership. We cannot yet imagine what applications
we [will] build around this. One of the interesting things we have observed is that…
Money arises out of the social constructs of homo
sapiens spontaneously, and even arises in primates. You can teach monkeys about money.
You can teach dolphins about money. You can teach grey parrots money. They will learn how to exchange abstract tokens for
food and then use them to build social relationships. They will also invent strong-arm robbery: beat up the
other monkey, take away its pebbles, eat the bananas. We see that same thing happen in children.
Toddlers invent money in Kindergarten. [Wooden] blocks, rubber bands, Pokemon cards and
other little tokens [that are] abstractions of value. They exchange to strengthen social bonds, to express
loyalty and friendship, to learn about sharing. Children will be building currencies, only this time these
currencies [could] be global, unforgeable, and scalable. A few years from now, Maria will be launching MariaCoin
in her kindergarten to compete against JoeyCoin. It won't really matter to anyone. Until, of course, Justin Bieber launches BieberCoin…
And it happens to surpass the market capitalization
of thirty nations on this planet. [Laughter] We will all write horrified opinion editorials
about how the world is going to hell. [Laughter] What is happening with this technology is astonishingly
deep; for some companies in this room, it is a bit scary. Banking has never been the most
innovative sector in the world. There is a very careful balance between innovation and
the conservative fiduciary duty that exists in banking, that must exist when you control other people's money. Yet with Bitcoin, you don't control other people's money.
In Bitcoin, I control my money. I have complete authority over my bitcoin.
It cannot be seized, frozen, or censored. My transactions cannot be intercepted,
cannot be stopped. I can do so with anonymity, and so can anyone else [within] five minutes
of downloading a [wallet] application. Money has changed forever.
Banking has changed forever. The idea that you can proceed in the
industries of money and commerce, and maintain the same conservative
attitude that has existed for centuries, ever since merchants in Venice and Amsterdam issued
depository certificates and providing banking services…
That is gone, that is gone! You cannot operate closed systems that have borders,
that require permission to join, [that limit] innovation, that is controlled by the most conservative
tendencies within your organization. Now you are competing with a technology that… enables exponential growth, innovation at the edges,
without permission, by anyone in the world. It is not about anyone in this room. Why?
We represent the privileged elite. I can open an online brokerage account and be trading
on the Tokyo stock market within twelve hours, in yen. That is a privilege that I have.
[About] 1.5 billion people [also] have that privilege. [The other] six billion people can operate mainly in one
currency and perhaps have basic banking services.
Four billion people are significantly underbanked.
An astonishing 2.5 billion people are unbanked. They will leapfrog [the old system of banking].
They will never have a relationship with a bank. Every single child born today will never have
a bank account. They will have a banking app. A bank app that doesn't [just] give them
an account, but that makes them a banker, an international banker in an app. They will not be permitted to open a bank account
until they are [at least] sixteen years old. By that time, I hope they will have at least
six years of experience with digital currencies. I would like to watch them walk into a bank branch,
[where someone tries to] explain to them… what "three to five business days" means. [Laughter] It is highly likely the children born today will never get
a driving license because they'll have self-driving cars. But they [may] also never use paper money. By the time they [reach] an age where they really
start using money, there is no paper money.
It will seem as anachronistic as a fax machine,
or horse-and-buggy, seems to us. Exponential innovation on a global basis, giving access
to the other six billion [who] have enormous need. This system offers them a solution. It is not [quite] ready yet. It is nascent, complex,
and impossible to use for most people. In 1989, I sent my first email. I [needed] to [first]
compile a version of the Unix mail program… using a C compiler and Unix command line skills. I [typed] out my email, which was transmitted across
the great internet in an [astonishingly fast] three days. Exactly twenty years later, my mother replicated
that experience with a swipe [of her finger]. Today, bitcoin — and all of the other
currencies built on that recipe — are at the same [development] level
that the internet was at in 1991. Now we have the internet, so
exponential growth has already started.
Innovation is [happening] at an astonishing rate. I spend every single day, full-time,
trying to keep up with Bitcoin. Just one currency, and it is
almost impossible [to keep up]. Do not underestimate this.
Do not listen to the people… who tell you that bitcoin is just for pornographers,
terrorists, drug dealers, and gamblers. Remember that they said the
exact same things about the internet. When you give it to two or three billion people, they are
not interested in those things [the media warned about]. They are interested in sharing cat videos.
Now we have an internet of a billion cat videos. When you take digital currency mainstream
and give it to the four billion people… who have been isolated from international
finance and commerce, you give them… control of their money against despotic governments
and corrupt banks that are stealing from them. You give them the opportunity to control their future,
the opportunity to transact with everyone in the world, to own title on their property in a fully transferable
digital token that [could be] recognized everywhere. [They can have] control over [their] finances
that cannot be seized, frozen, or censored. They will buy food, healthcare, sanitation, education,
and shelter, because that is what [humans] do.
They will not be denied this technology.
Do not underestimate where this is going. 'The internet of money' was
launched on January 3rd, 2009. It is coming. It is coming faster than you can imagine. It is deeper than you can fathom, more sophisticated
than you [will] immediately understand. It [will] take years of study just to see all of
the implications. It is a gift to the entire world. It represents the sixth greatest innovation in money,
the most ancient technology of our civilization. Thank you. [Applause] Should we do some questions? We've got plenty of time for questions. What determines the buying power of the currency? How does it stabilize and what's required to stabilize it, so if I would buy some Bitcoins, who can manipulate the value of that? Mhm, everyone.
The buying power of Bitcoin is determined in exactly the same way that the buying power of the euro, the British sterling, the Japanese yen, or the US Dollar is determined through market forces of supply and demand in international liquid markets that operate around the clock. One of the fundamental differences is that bitcoin trading never ceases. Has been going continuously for seven years the network never stops.
Every ten minutes Bitcoins heart beats and transactions are processed, the exchanges never close. There is no closing price for Bitcoin. It is a rolling average and in that trading a market capitalization of approximately twelve billion dollars is now traded internationally. What is twelve billion dollars for a global currency? It's a guppy, swimming in shark-infested waters and every trader, every whale goes in there and just kicks that price around. So right now the experience of living on Bitcoin which I have been doing full-time for more than three years is a roller coaster. It's an absolute roller coaster. I've seen shifts of 20 or 30 percent in a day and yet, if you look at the long-term trend, volume goes up, transactions go up, and volatility keeps dropping. And the beauty of it is, I can't sell that to an American.
I can't sell that to a Brit. I don't need to sell it to an Argentinean. I don't need to sell it to a Brazilian. I don't need to sell it to a Venezuelan I went to a conference and an Argentinian told me I'm not worried about volatility, our currency has volatility like this. Bitcoin has volatility like this. I'd rather be going in that direction. And you don't need to tell them why. Their government through people out of airplanes not more than 35 years ago for disagreeing. They already know why the separation of state and money is a good idea. And so volatility is relative. Any other questions, come on. Yeah? Let's get a microphone to you one second. Thanks, a great speech. Obviously, it sounded a little bit like one side of the coin, so we also read all these you know big hacks, and I don't know, Bitfinex, you know they, I think they stole 40% of the money. I think also this autonomous organization has been hacked and all these things. Can you just reflect a little bit on the dark side or of those aspects that might not win our full trust into this evolution.
Absolutely. The steering wheel was not invented until 30 years after the automobile was introduced. Why? Because the first automobiles had two leather straps that you pulled left or right to move the car, to steer the car. They used horse reins to steer cars. That's called skeuomorphic design. It means keeping a shadow of the former past in your new system, failing to see the new dimension and replicating the past. Here's a currency that is not centralized where your money is your money. Your keys, your money. Not your keys, not your money. So, what is the first thing we do with this new system? We build centralized institutional's of custodial control that take other peoples money and hold it for them.
Well, guess what? The entire history of banking, the entire system of regulation and oversight is based on the simple centuries-old understanding that when somebody else holds your money, chances are they're going to run away with it. And the entire system of regulation is designed to prevent that and yet it still happens all the time. In hedge funds, in banks, in national currencies, all the time. And so of course, if you replicate custodial accounts, exchanges that take other people's Bitcoin and concentrate it It happens again, even worse because there are no oversight and regulations in most of these spaces.
The answer is really simple. Stop centralizing the decentralized currency. Stop trying to replicate the banking past in the future of money. And the important thing to realize is that security in Bitcoin is an emergent property that exists because of the decentralization of control and power. If I want to hack a million customers Bitcoin, And they're holding their keys, I have to hack a million customers.
If they all give their keys to one person or one organization, then we've got a honeypot. A honeypot that attracts the attention of every hacker on the planet. And notice what's happened. Over seven years and with a market capitalization of twelve billion dollars, Bitcoin is the largest cryptographic deployment in the world, the largest public key infrastructure in the world, the largest security honeypot in the world and it is not secure because it doesn't get attacked. It is secure because it generates immunity by being attacked all the time, 24 hours a day by the most sophisticated attackers this planet has. And if you in that environment set up a centralized custodial exchange using PHP and MySQL and you park a 150 million dollar Honeypot in there, you're inviting the sharks. Bitcoin banks get hacked, Bitcoin exchanges get hacked, Bitcoin has not been hacked and cannot be hacked because there is no point of control that you can apply pressure on.
It's completely decentralized. All right, Maybe one more question. Where does the supply of Bitcoin come from and are you sure the market doesn't get oversupplied? The supply of Bitcoin is determined algorithmically based on a geometrically declining supply function, meaning that, in the beginning every 10 minutes, 50 new Bitcoin are created, so every block, the heartbeat, 10 minutes, created 50 new Bitcoin. This Bitcoin is used as a reward in a game theory based security model that ensures that every transaction is independently validated by completely anonymous actors who have to stake electricity as a guarantee of the security work they've done and if they succeed in doing the security work validating transactions correctly, they earn as a reward based on a probabilistic return.
That reward, 50 Bitcoin every 10 minutes. That's how currency is introduced into the economy. Every four years it gets cut in half. 50 to 25 in November of 2012. And this year in July, this past July, we had our second having event which was celebrated with birthday parties all over the world and Bitcoins reward went from 25 to 12.5 Bitcoin. As a system, it's designed to have a monetary policy that is purposely deflationary and simulates the issuance of precious metals. It gets harder and harder and harder to mine gold at greater and greater and greater cost. And Bitcoin is the same. The idea being that less and less is issued over time. If you follow that geometric curve, at some point, you reach the end. In the year 2141 Bitcoin is no longer issued. 21 million coins is the asymptotic cap. It will never reach 21 million coins. That is part of the protocol, it is an unchangeable part of the protocol and it is a rule enforced by every system that participates in the Bitcoin network.
It is meant to be sound money but it's not the only monetary policy that exists. There are several other currencies that implement different monetary policies. The idea is really for Bitcoin to serve as a very very solid reserve currency for many other things. What do you have to give to companies here who are from non-financial institutions about how they should take tactical steps to think about experimenting with the blockchain in terms of storing value? I think understanding that it's not just currency, understanding that it is a platform for trust.
Understanding that it can be used as a historical record of truths that can register information that it can be used to create all kinds of tokens that can be exchanged between your customers, your suppliers, your manufacturers, that it can also be used simply as a currency for any cross-border transactions import/export activities, remittances based flows, paying associates and affiliates. All of the things that today are expensive, slow, and difficult become cheap, fast, and easy when you use one of these digital currencies. But It's still early. For now, learning about it. Here's the one important thing you must understand. You will hear a lot about blockchain and most of what you hear about blockchain is not The Internet of Money. It is The Intranet of Money. The Intranet is where you run FrontPage and Outlook and antiquated software in a closed little enclave of your corporate back waters with stale content and boring apps.
And in the end, it's full of viruses anyway because you can't keep it secure. Blockchain that is not open, that is not public, that is not borderless that is not open for innovation is not what we're talking about here. And that's a really important distinction. It may be useful if you want to run a clearing house between three banks, maybe. But it's not The Internet of Money. Thank you. Thank you so much..
