Video - Bitcoin for Beginners
This is the first part of a talk which took place on February 22nd 2017 at the inaugural Bloktex Conference pre-event, hosted at Technology Park in Kuala Lumpur, Malaysia. He speaks about Bitcoin in both technical and economical perspective.
MAN: An expert on cryptocurrency and ladies and gentlemen, without further ado please help me give a warm Malaysian welcome to Andreas Antonopoulos.
ANDREAS ANTONOPOULOS: Thank you very much. Thank you. Hi, everyone. Good afternoon. As-Salaam-Alaikum. It’s a real pleasure to be here. It’s my first time in Malaysia. I’ve not been in Kuala Lumpur for less than 24 hours and I’m enjoying it a lot very much so.
This is my latest book it was published in September. It’s called The Internet of Money. People often find that this is a difficult topic to understand, Bitcoin is a difficult topic to understand and I published two books on it. The first book Mastering Bitcoin, which is over there, is for software developers, engineers, technical people. How many people here are software developers, engineers, technical, anyone? Okay, so five people in this room can read that book. It explains how Bitcoin works and you can probably read the first three chapters before you get into the very technical stuff and from that point on it it’s a bit challenging. It’s challenging not because I aim it to be challenging but because Bitcoin is a complex subject.
Now, for everybody who is not a developer the reason I publish that book The Internet of Money is this isn’t about how it works. This is about why it matters. And it’s a collection of eleven of my talks delivered in this format and it explains the philosophy of money, the implications of Bitcoin on society and it’s a book for everyone. It’s the book I gave my mom to read and she doesn’t understand anything about computers or money. So, that’s a good start.
Great! So, before I get started I’d like to get a feel for the people in the audience and get a bit of an understanding of how many people are familiar with these technologies that we’re going to be discussing today. So, by show of hands let’s start with the narrowest which is how many people here own Bitcoin? Okay, someone did a good turnout for the community. Hi, thank you for coming. Hi, thank you for coming.
How many people have seen or conducted a transaction in Bitcoin but don’t own any – have just experienced it? Okay, just a few. Very good.
And, how many people have never conducted a transaction, have no idea what Bitcoin is or how it works and are new to this topic? Great! Now, that was about maybe 30 people I would say.
Now, for those of you who are new to this topic what I’d like to suggest is that whether you understand or not what we’re discussing today and please ask your questions I want to hear even the most basic questions about Bitcoin because I believe those are the most powerful questions.
After we’re done with the presentation, after we’re done with the Q&A I would like to see as many of the people in the audience who have never experienced Bitcoin to either install a Bitcoin wallet on your mobile device and someone in the audience will give you for free some Bitcoin. Not a whole Bitcoin, a fraction of a Bitcoin just so you can see how a transaction works and then you can turn to your friend who just started and exchange Bitcoin with them so you can experiment with this. I can assure you it’s entirely legal, it’s very easy to do and it will allow you to really experience this technology which is much easier experienced than it is explained.
So, let’s try the next question. How many people in this audience who have Bitcoin have Bitcoin on their mobile devices are willing to help people install a wallet and give them one or two dollars? I will. Look around, the new people look around who’s raised their hands. Find these people after the Q&A ask them to give you a small amount of Bitcoin and help you set up a wallet. Don’t be shy. I will be happy to do it myself. All right, with that let’s get started with Bitcoin basis.
In October of 2008 on an obscure, anonymous mailing list called the Cypherpunk mailing list an anonymous participant using the pseudonym Satoshi Nakamoto announced the publication of a paper and said I think I have solved a problem in computer science. I have found the way to create a system of electronic cash that is direct between people. Peer-to-peer as we use the term in computer science and this system of electronic cash I’ve written a whitepaper and I have implemented it in software and on that day Satoshi Nakamoto published the whitepaper. You can download it online it’s available at bitcoin.org you can do a search for it, the Satoshi Nakamoto whitepaper or the Bitcoin whitepaper. And in nine pages Satoshi Nakamoto described in detail and in ways that predicted many of the things that happened over the next seven years. What Bitcoin was and what Bitcoin could become and how it would work. But he didn’t stop there or she didn’t stop there or they didn’t stop there because we don’t know if Satoshi Nakamoto is a man, a woman or a group of people or an alien being from the future. Okay, probably not that last one.
Satoshi Nakamoto then published a software and invited people to participate in running a network and this gives you the first hint as to how Bitcoin works. Bitcoin is software. Bitcoin is an application among other things. You download this application, you run it on your computer. You can run it on a laptop, you can run it on a desktop perfectly on a computer that’s permanently connected to the internet. It uses quite a bit of RAM and disk space right now but in those days it was very lightweight. And if you run this program it reaches out on the internet and it finds other people running this program. you don’t know who these people are. It doesn’t reach out to specific people, it creates a random mesh network what we called a peer-to-peer network where every participants in the system is equal. There is not special computer they’re all just talking to each other. It creates what in network terms you’d call a crowd. So randomly reaches out and connect to various other computers running the Bitcoin software and together they create a network and that network is used to exchange and propagate transactions. These transactions are encoded in a digital format they contain information about the transfer value and the authorization to transfer value between participants. Nobody controls this network and this is a critical concept. Nobody controls this network. You can be running one of these computers you do not control this network. You run one of these applications it connects to other people and you run another one of these applications and it talks Bitcoin to the other computers that are talking Bitcoin but no one is in control, no one is in-charge. Just like when you’re running a computer that speaks on the internet and communicates with other computers on the internet. No one is in control if you interact directly between these systems.
That network started on January 3, 2009 and on that day the world changed. For the first time in the history of money, in the history of trust, in the history of institutions, in the history of humanity a system that is completely independent of authority, is completely independent of institutions, a system that develops trust as the result of collaboration, communication and computation through cryptography was born. This system allows people to exchange value, to transmit money and this money is called Bitcoin. So, Bitcoin is the application, it’s the software that you run on your computer that communicates with all of the other computers running the Bitcoin software.
Bitcoin is the name of the network that runs the Bitcoin network which is the collection of all of these computers. Some six and a half thousand of them around the world anywhere there is internet are the ones we know that advertize their presence several thousand more that don’t and tens of thousands that simply listen onto this network without actively participating, the Bitcoin network. And all of these is an infrastructure that is used to create and transmit value in the form of transactions, expressed in a new currency, the Bitcoin currency and the Bitcoin currency is unlike any other form of money we have ever seen before.
First of all as a form of money it does not exist in physical form. It is the combination of a trajectory we’ve seen in human history. Over thousands of years money has become a more abstract form of value. You start with very, very tangible forms of value, commodities, a goat, a banana, a pineapple. These are very poor forms of money because you can eat them and they rot or die and they can be lost. They’re not very good forms of money because they are the thing of value.
We went from that to gold, precious metals and stamped coins these are better forms of money because you cannot eat them, they do not die or rot. They do not represent the value itself, they are not the value. And this is an interesting concept money is not the value building itself. Money is the thing you exchange for the valuable thing itself. The reason bananas are not good money is because bananas are the value you’re trying to get. Money is the thing you exchanged for bananas that has no value in itself. It is simply a symbol, an abstraction. It represents something that can be carried, that I can give to someone tomorrow and they will probably give me bananas. They future promise of value is the essence of money.
So the essence of money is the ability to have an abstract token that in itself is immutable, unforgeable, eternal, maintains its value and represents the exchange of value in the future as a promise.
And over time these things have become less and less physical and more and more abstract. Why? Because people don’t like changing. And if you tell someone I am not going to give you bananas for the work you did, I am going to give you a shiny gold coin but don’t worry you can use this to get bananas. They look at you and they say “I’ve always had bananas for my work I think I would like to have bananas, not this yellow thing.” A hundred years later they now believe the yellow thing is valuable and then you tell them “Now I’m going to give you a piece of paper instead of the yellow thing but don’t worry you can still convert this into bananas” and most people say “I don’t think that’s real money I want the yellow thing” and the world moves on. And eventually we change and we say, “You know what you won’t get the piece of paper either, you won’t get the coin. You will go and look at numbers on a page or on a webpage and that represents the amount you have in the bank but don’t worry you can still use that to acquire food, products, services it really is money. You can’t touch it, you can’t see it, it’s just a number.” And finally, we arrived at Bitcoin.
Bitcoin has no physical form, it doesn’t exist in any way. It is entirely intangible, it cannot be touched. It is simply a digital form of money but it is a digital form of money that is entirely different from everything we’ve seen before. What it does that is different is that it is not a form of money that is recorded in the database or records of the company. It is not a digital form of money that represents a debt owed to a central bank or government. It is not a digital form of money that has been issued by a sovereign, a central bank, a nation, a king. It is a form of digital money that has been issued through complex and energy-intensive computation on the internet. It is recorded simultaneously on every computer that participates in the Bitcoin network, it’s validated independently by every computer that participates in the Bitcoin network. Cannot be forged, cannot be counterfeited, cannot be censored, cannot be seized or frozen. Can be transmitted anywhere in the world as information, can be verified independently by anyone who receives it and is not controlled by anyone. Its value is not controlled, its issuance is not controlled, its ownership is not controlled. It is direct from one person to another person with no intermediaries.
If I use my mobile phone to make a Bitcoin payment to someone in this room I am creating a digital transaction that recognizes the fact that a certain number of Bitcoin that the network knows belongs to me through the proof of my digital signature. I have authorized the transfer of that value to another owner of Bitcoin who will then be able to control that Bitcoin through their own digital signature, through their own cryptographic key. Now, you don’t need to know anything about digital signatures or cryptographic keys. When you use Bitcoin you see an application on your mobile device or on your desktop. This application tells you you have three Bitcoin. It allows you to enter the address of a recipient which is a number just like an e-mail address. It allows you to select an amount of Bitcoin you wish to transact and when you click “send” on your application it uses the digital signature and private key that is embedded in your device to create and sign a transaction that is advertized to the entire Bitcoin network and says “I have transferred this value” and then the entire network now knows that this value belongs to someone else. They don’t know who this someone else is. Nobody knows.
When you do a Bitcoin transaction it is not related or attached to identity. You do not need to create an account. You do not need to register. You do not need to provide ID or name or location or address, age, gender, race, religion, nationality, nothing. You don’t even need to be human and you laugh but it is true. Bitcoin enables for the first time in human history non-human entities to actively control and own value which is bizarre because we’ve never had that in any legal system in the world. We have the legal fiction of corporations and corporations can own value but corporations can only exist as associations between living human beings. In Bitcoin a software agent that is not owned by anyone through the use of cryptographic can own and transact in Bitcoin internationally. This creates some very interesting and also very disturbing possibilities for the future. Artificial intelligence systems can own and control money without any living human being involved. You can have corporations that have no directors, no living humans in control that are controlled entirely by software.
Back to people though, if you are a person who has installed a Bitcoin wallet you must pass a complex test in order to install the software. You must be able to download an application. That’s it.
Now, if you happened to own an iPhone you must remember your iTune’s password in order to install an application and so far I have found that this is the most difficult part of becoming part of the global economy of Bitcoin is remembering you iTune’s password. But if you can do that, if you can access the Google Play Store, if you have basic familiarity with mobile applications, if you can download an exe on Windows and install it, if you can double-click a mouse, that’s it. You don’t have to provide your name, your e-mail address, you don’t register or create an account, you don’t have to proof who you are, where you are or show that you are worthy. You do not have to have a credit score, you do not have to be authorized. This is something that is entirely different from every system of money we’ve ever had before.
Now for the internet generation this is a very familiar concept. When you open a browser and you start using the web do you have to register or get a license to use the web? Do you have to create an account to visit Wikipedia? No. The only requirement is that you are able to download, install and operate a web browser.
There was a time when the idea of allowing every human to be able to communicate without borders or censorship on the worldwide web was terrifying to people. To some people it still is terrifying. Most of the younger generation find it liberating in a global sense. Bitcoin does that to money. What happens when every human being on the planet through the simple act of downloading and installing an application can become a member of a global economy without borders, one that allows people to transmit and receive money at will anywhere in the world 24 hours a day, uninterrupted for the last seven years. With this they do not depend on the amount of money you’re sending but pay simply for the capacity you use on the network. You can transmit a Bitcoin transaction for about one dollar and it doesn’t matter if you send one or a hundred thousand dollars you still pay one dollar. It doesn’t matter if you’re sending it from here to another province in Malaysia or if you’re sending it from here to the opposite end of the planet. It doesn’t matter if you are an individual or corporation or if you’re sending it to an individual or corporation. It doesn’t matter if you’re sending it to someone who is rich or someone who is poor, you can.
Bitcoin changes the way we approach finance completely but that’s just the first layer because the technology that makes Bitcoin possible, that allows two people from opposite ends of the planet to securely transact with each other without knowing each other and without trusting each other opens up an entire range of applications that we haven’t yet imagine. Bitcoin is not just money for the internet. Bitcoin is a platform. The technology that Bitcoin uses, a combination of the Blockchain which is the global transaction ledger that records every transaction, the decentralized consensus mechanism called Proof of Work that allows security on the Bitcoin Blockchain, the open system of access that allows anyone to participate without barriers and it’s borderless and neutral nature that make it possible for anyone to participate regardless of who they are. Where the only thing that matters is whether a transaction is valid, not who is the source or destination, not what is the amount. These fundamental building blocks that make Bitcoin possible open the door to dozens and then hundreds and then thousands of applications of trust. At its core Bitcoin represents the replacement of trust through institutions to trust through networks.
For centuries human society has been based on the fact that in order to coordinate the activity between large numbers of people we have to have something to trust and until now the best answer to that problem was institutions. Collections of people, government but rules and policies with oversight transparency and accountability built into the rules run by humans in order to create centers of trust through tradition, through reputation, through longevity. Institutions of trust are failing. They’re failing all over the world. They’re failing when they are newspapers, they are failing in political institutions, they are failing in numbers of ways and the reason they are failing is because they represent systems of scale for industrial societies and we are no longer industrial nation state societies. We are now information societies of global scale that collaborates across borders at massive scale. We are now solving problems that affect not 30 million people in one country but seven and a half billion people on one planet. And for problems of that scale and collaboration at that scale traditional institutions do not work. They fail to scale. They’re not evil, they’re not deliberately corrupt, they simply failed to solve the problems of a global society.
And yet during that very time that we see these institutions failing we have seen the emergence of new systems of governance, of new systems of global collaborations, systems that do allow us to collaborate, communicate and solve problems at scale. And the first of those systems was the internet and with that we see the first system of communication that transcends nations, that transcends borders that allows anyone everywhere and anywhere to communicate.
Bitcoin represents that happening to money. It represents a metric network-centric system of money that is beyond the nation state. A network-centric system of money that scales and allows people to collaborate on a global basis, that allows anyone everywhere and anywhere to participate in a global economy without barriers, without (0:29:12), without ID, without credentials. Simply through the act of running software and that will change the world. Thank you.