Video - Fighting for Bitcoin Neutrality Q And A with Andreas Antonopoulos

The number of Bitcoin users around the world is growing at a lightning pace. This Meetup Group is designed for Bitcoin users, merchants, monetary exchange dealers, developers, and consumers -- anyone who's interested in the success of the new totally anonymous digital currency called Bitcoin. Additionally, it acts as a mutual aid society, and a business networking group.


ANDREAS: I want to talk a bit about a couple of topics that I find interesting in Bitcoin today since I am here you may interrupt me as much as you want while I am talking and make it interactive. So, the first topic I want to talk about is Bitcoin neutrality and together with that we’re going to talk about resetting our expectations as to the trajectory of Bitcoin. So, first of all Bitcoin neutrality what does that mean?

My theory is that the most important characteristic, actually the greatest features of Bitcoin come from the fact that at the fundamental level is the protocol that is neutral – neutral to sender, neutral to recipient, neutral as to the contents of the transaction. We’ve had a network like that before it’s IP and it worked pretty well because it was neutral. The dumb pipe approach of the internet allows to do innovation in the edges, innovation without permission and innovation without changing the underlying protocol so, that’s already happening on Bitcoin and if you think about it carefully all the interesting things that Bitcoin is able to do actually *00:01:37 from this core principle of neutrality.

If you look at Bitcoin not as a coin but as a protocol, as a network, as an open standard the core Blockchain technology is a bit like the internet protocol. It is a base address-to-address system. Essentially, it’s a Layer 3 protocol and on top of that we’re already building applications. Currency is only the first application that we’re building on top of the Bitcoin protocol. If you study some of the things that are coming along like Mastercoin you will find that there are some very, very interesting things with the protocol to elevate it a couple of layers up . So, if Blockchain is IP then within each transaction transaction is the transmission control protocol, the TCP. The transactions allow you to specify the contents of the transaction as the Blockchain and with a couple of neat trick Mastercoin by *00:02:38 special addresses was able to take more layer above and like or http creating another layer of protocols involving basic capability of Bitcoin. Why does all this matter?

It matters because Bitcoin is not a coin and Bitcoin is not a currency and we’re going to spend the last 10 years fixing the basic mistake in Bitcoin because all of the words are wrong. We don’t have wallets, we don’t really use keys other the way we consider the terms of cryptography and there are no coins so it’s a very poorly named system. I would have preferred it if we called it Mynet that way Mynet that will be more accurate because already we have –– as new people come into this currency we have to explain to them why Bitcoin is so much more important than just a coin, this is our coin and we have even started so there’s a lot of explaining to do.

So, Bitcoin neutrality is extremely important because all of the capabilities that are built on top of Bitcoin depend on the protocol to be completely neutral to sender and recipient. IBM an analyst coined the phrase which is on the Blockchain of and this is really important insight because just like the internet it speaks to the ability to innovate without permission. It speaks to a fundamental separation of identity and and on top of that we could build a lot because that core principle allows us to have a flexible network that provides a layer that’s transparent in layers above and on top of that we could build a lot more. So, Bitcoin is the first app, currency is the first app on the Bitcoin network. We have barely started. When we Bitcoin in the press the common metaphor is that Bitcoin is like internet in 1995. And I was on the internet in 1989 and I can tell you Bitcoin is not like the internet in ‘95. Bitcoin is like the internet in 1991. We don’t have , we don’t have DNS yet, we don’t have web. We’re going around with lesser IP address in our wallet and using Archie, Gopher and Usenet as the applications. That’s where we are in terms of Bitcoin. We’re still the obscure awkward base and that’s fine because that means we have a lot of work to do before you can fill this to the consumer.

There’s a really interesting video going around showing Good Morning America and they had discussion about the internet in 1994 and you have this three *00:05:34 actors spending about 15 minutes trying to decide whether the @ sign is browse at or if it’s an e-mail or the internet and what the hell is dot com thing again is and this is in 1994. So, relax we’ve got plenty of time *00:05:51 going mainstream until we fix a few basic problems but here’s the lessons we can learn from internet and apply them to Bitcoin. The first thing is this neutrality that’s build into the core protocol will be attacked and will be attacked almost immediately by everyone building things on the layer above who wants to *00:06:14. The internet started as a 1920 network. It’s not that much of a 1920 network today. Unfortunately, the core principle of neutrality has been massively diluted and we are on the verge of losing it and I want to caution you all because the exact same thing is going to happen to Bitcoin. So what does it mean for Bitcoin to not to be neutral?

For Bitcoin to not be neutral it means that some of the protocol started caring about whose address or who the destination is or what the content of their transaction is and if we allow that process to start it’s going to ruin Bitcoin for all of us. So, pay attention. Pay attention to the critical signs. Most important thing to note is when they come to take away Bitcoin neutrality they’re not going to phrase it in terms of breaking Bitcoin. They’re going to phrase it in terms of fixing Bitcoin, making it harder to steal Bitcoin, making it easier to reverse theft of Bitcoin, making it easier to stop criminals from using Bitcoin by infiltrating the addresses. Resist. We cannot allow them to break Bitcoin neutrality because even if they break Bitcoin neutrality the system, the network, the currency devolves into being just another fiat. And I don’t want that to happen because Bitcoin is just not another fiat. Bitcoin is the 193rd currency in the world. Bitcoin is the first supranational currency now we’ve never done that before.

So, the second part of my talk you can understand the words neutrality and you can understand why we should keep neutrality is to adjust your expectations. I think we have some expectations that Bitcoin need to be adjusted and adjust it in a more aggressive manner. So in the last few weeks something remarkable happened BTC try and went from a low percentage of the total volume to doing somewhere between 80,000 and 90,000 Bitcoin a day where you split it at about 50%–55% global volume. That is hugely significant. Basically, the geographic center of Bitcoin just shifted 15,000 miles to the east and landed somewhere in middle of Southeast Asia *00:08:50 three and a half billion people live in that one corner, right? And so, the reason I’m saying you should reset you expectation is because we’ve built as a fad, we’ve built it and we’ve developed it most here in Silicon Valley where there is no social or political problem that we don’t think we can solve with technology. *00:09:16 but also necessary for innovation so it kind of work but it’s no longer about us, it’s no longer about white male, English-speaking users of Bitcoin. As of four weeks ago the average Bitcoin user shifted to *00:09:38 Han Chinese man and that’s a great thing, right? That’s a really important step to the development of this currency. So, if you look at Bitcoin and you think well, this is going to play out over the next 10 or 15 years reset your expectations. Bitcoin is going to play out over the next three years. It will either die in those three years or it will survive. And if it survives it will explode across the globe. It will explode across the globe and this little explosion of adoption will happen in different countries as people see the relative utility of the supranational currency completely *00:10:20 and it will happen here last. Why? Because we guided it. We have the only world reserve currency and that’s a really great thing to have. But there are 191 other places that don’t have a world reserve currency and whether their currency sucks as it does in so many countries, whether the government sucks or their political system sucks and they see Bitcoin as a possible solution or whether they recognize that perhaps the world reserve currency that’s controlled by math and not people is a better proposition. Either way we’re going start seeing movements of national adoption. China was the first.

What’s really significant about understanding China is that this was not an accident, this was not a coincident. If you’ve been paying attention the last four months there have been four documentaries in the Chinese TV talking about Bitcoin. So if you think about it from our perspective you think great, they went out, they know the story *00:11:30 and say “Hey, let’s talk about Bitcoin” and that was on the chain until someone in the Chinese TV said “Yes, I like the topic let’s put it on the air.” That’s not how things happen in China. It pretty much work exactly the opposite way. Somewhere at the top of the political system said “Well, there’s one world reserve currency and it belongs to our greatest competitor and there’s this other thing that’s based on math and we can do this to pull *00:11:58. Start playing documentaries, please” and that’s what happened. If you get the documentary of Chinese TVs it is not despite the leadership. It is because and entirely endorsed by the leadership. This is a political move and it is very poor political move because it means that China is now beginning to bet that Bitcoin will have less disruptive influence within China and more disruptive influence to the global reserve currency status of the US dollar. There are 191 other countries that made the same calculation and guess what, they all have the same Ethereum mine which says if we have one currency that’s controlled by people and one supranational currency that’s not controlled by anyone the supranational one is better. Yes?

MAN #1: So, if we’re following your narrative ––


MAN #1: –– that would say that the government of the United States is going to do everything in its power to destroy Bitcoin because it’s a national security and we should give *00:13:06

ANDREAS: Will the United States government do everything in its power to destroy Bitcoin? At first, yes. *00:13:14 situation right now which is *00:13:17 the terrified and the ones who are not yet terrified don’t want *00:13:22 but will soon be terrified because if you are the type of bank or government that funds your assistances through war and *00:13:31 and controlling the flows of money then the currency that you can control is *00:13:38 so absolutely this is becoming a very serious strategic aim now but it doesn’t matter cats out of the bag. Bitcoin is unstoppable. Externalities cannot stop Bitcoin. Right now the only scenario that can result in Bitcoin failure would be a long running bug that reveals keys in a way we don’t notice and don’t notice for a long time; that could destroy Bitcoin. Take the Android secure random implantation that revealed a few dozen keys because it used improper initialization of random *00:14:18. If that go on for a year unnoticed and compromised 60% – 70% of the keys on the Blockchain that will kill Bitcoin; that can kill Bitcoin. Absent of that however there are very few forces that can stop the currency that’s now gone global. So, just to save time the American government perhaps does become worry about this it’s too late because China happened. Yes?

MAN #2: Do you think that people who purchase Bitcoin feel like Coinbase or any other exchanges that *00:14:55 in person as an individual that these individuals will be targeted?

ANDREAS: Do I think that individuals purchasing Bitcoin will be targeted? Absolutely not. No. I think the –– I think the type of *00:15:10 would be much more subtle than that and it won’t come to traditional banking and bank *00:15:17 system. I don’t think consumers of Bitcoin have anything to fear at all. I’m not taking *00:15:22 or across borders and I am keeping my nose clean because I have a public profile but other than –– you know a handful of people *00:15:31 public profile in Bitcoin nobody has to worry about Bitcoin being enlisted, not here. In fact a legal fight against Bitcoin is extremely unlikely at that level and the reason is because it’s very likely that they might lose such a legal fight. There are certain principles in the First Amendment that would allow you to use a currency of your choice and that’s impressive legal moment because losing that then establishes firmly, neatly the right to your currency *00:16:06. Another question. Yes?

MAN #3: Just *00:16:10 your observation of China *00:16:12 fairly in similar situation ––


MAN #3: –– where Russia Today Max Keiser seems to be very *00:16:18 and ––

ANDREAS: Right. Russia Today has now *00:16:23 hours and I’ve been on Russia Today four times talking about Bitcoin and I have only been on US television stations once or twice. It’s a very different environment. Again it is cynical, calculated, political, nasty and works in our favor *00:16:44.

MAN #3: Yeah. And Russian PayPal what money they got *00:16:48

ANDREAS: So, let’s talk a bit about international adoption because this technology is the network neutrality. There is this weird assumption that we’re going to adopt Bitcoin here first. Why? Because we have the technology because we’re modern, enlightened people who are cutting-edge in technology within the Silicon Valley after all we must be enlightened so we’re going to adopt Bitcoin first and it’s going to start here and that assumption is entirely wrong. The reason it’s wrong is because there are four basic preconditions to adopt Bitcoin and while we have all of them we lack the most important which is incentive. So, the first one is the market utility of Bitcoin versus your local currency. The second one is that Bitcoin is neutral towards your religion, language and culture, right? You can’t adopt something that offended your religion and that’s pretty, you know, actually Bitcoin is Sharia compatible, is compatible with the Jewish religion and the celebration of Sabbath, you can use Bitcoin in certain place to be compatible with most agriculture. The third precondition is infrastructure and that starts with electricity, not the internet but electricity and smartphones and various other things and the fourth thing is fear, right? If I hold Bitcoin in North Korea I die so I’m not going to adopt Bitcoin in North Korea. So you must find that special tipping point where marginal utility of the currency is great enough, the infrastructure is there, it’s not offensive to your culture and you’re not terrified you’re going to get shot for owning Bitcoin and while we may think that those things are strong here the most important one which is marginal utility versus your currency is completely missing. Bitcoin is not better than the US dollar. Sorry to say it’s not. It might be in five years without a doubt. It’s on the trajectory it’s going to overtake the US dollar. But if you were to stack right 191 national currencies in terms of utility, value, attractiveness Bitcoin probably meets 50 or 60 right off the back but the US dollar is at the top. You can use it in any country in world. It has value because everybody wants for their services. It is accepted by everyone everywhere. You don’t have to convert dollars into foreign currency when you travel, right? No other country has to do that. You can’t show up in somebody else’s country and say “Hey, this is nice *00:19:35 you have here. I have a Canadian money will you take it?” No, they won’t. But if you show up in the middle of *00:19:41 Hungary in Budapest as I did with dollars they’ll take them. They’ll take them at three times face value. So the point being dollars do not win or rather Bitcoin does not win over dollars. So there are 190 other countries and for most of those countries, the people who live there are accustomed to a very different financial situation than we are. Their government regularly steals their money, regularly inflates their currency into nothing and they also have to be using multiple currencies. They are comfortable with *00:20:15. Frankly, they’re comfortable with bribing the officials they need to bribe to get around problems. I have lived like that in Eastern Europe and it’s a normal part of life. By the age of 14 I knew how to exchange money on the black market, right? Tell me how many Americans still have to exchange money on the black market? See, that is an adoption itself *00:20:40 right there. Do you have a question?

MAN #4: Yeah. So, China owns like has one of the biggest US dollars reserves?

ANDREAS: China has the biggest US dollar reserves, yeah.

MAN #4: So, why would China be *00:20:53 for Bitcoin if ––

ANDREAS: Because they have to have those dollars reserves stored by oil and if they could avoid having those dollar reserves they would quite honestly because it cost them geopolitically far more in terms of money. So the problem is that China has to use the currency for practical reasons but for strategic reasons their use of that currency underpins your lifestyle and without their use of that currency bye-bye American lifestyle. We simply can’t afford it. Yes?

MAN #5: You said that Bitcoin would be adopted last here in the US because we’re the world’s reserve currency.

ANDREAS: It might be adopted but it will not block the dollar off its pedestal.

MAN #5: But if –– but one thing that Bitcoin is very good at is allowing *00:21:48 across international borders ––


MAN #5: –– freely and at very fine granularity without getting corporate taxes or other types of uncomfortable *00:21:57. If that were true to a much wider scale than it is today do you think that would accelerate adoption here in the United States?

ANDREAS: It will accelerate adoption here. So what we will see in the US is outside-in adoption. What we will see is US companies using Bitcoin to interact with their international partners because they have adopted Bitcoin faster than we see it here. Honestly I do think that’s going to be the case. Already the regulatory environment is highly hostile, negative environment is very difficult so you need these compelling reasons otherwise Bitcoin is just a fad to us from the business perspective unless you’re investing it as an entrepreneur it doesn’t really make sense. And forget the cupcake companies that said that we take Bitcoin and yes a million people in a Washington Post write-up, you can only do that the first year. Afterwards, you know, you can’t really accelerate that adoption without having a compelling advantage. So, let me talk about two major applications Bitcoin as a currency are today, the two killer applications are two massive flows with international money. First one is foreign remittances and the second one is capital flight and *00:23:06 how Bitcoin is adopted *00:23:09 balance each other out. If we try to start using Bitcoin to send money from here to other countries essentially replacing Western Union and allowing itinerants and migrant workers to send money home the problem is you run out of Bitcoin buyers on the other end pretty soon. What you need is people willing to buy large amount of Bitcoin and fortunately they exist. They are the rich *00:23:35. So what you do is for every 10,000 buyers on this end you find one rich person on the other end who’s trying to run away from currency controls and those two flows balance out. If we start those flows up in a couple of different countries you will see Bitcoin accelerate beyond what we can even imagine right now *00:23:58 and almost all of that has to do with international adoption of Bitcoin. It is accelerating like you cannot imagine so it’s already not about us. You have a question?

MAN #6: Yeah. First, a great summary you made analysis and *00:24:13. So, what are your thoughts on Bitcoin becoming –– so right now we’re obviously a very speculative *00:24:24, it’s a very speculative thing and maybe soon it becomes stored values and stored –– what are your thoughts on the legitimacy of Bitcoin becoming transactional currency and what you see the scenarios are because Bitcoin now obviously would compete very well *00:24:41 the infrastructure where transactional currency exist?

ANDREAS: Bitcoin now functions as well as Usenet before DNS functions. It was better than everything that came before it’s that we will *00:24:54 to reverse consumer adoption. We have a long way to go for that. But in terms of legitimacy, *00:25:01 I don’t give a damn. I do not give a damn about legitimacy of Bitcoin in the eyes of anyone because Bitcoin doesn’t need legitimacy. Bitcoin is a solution to an actual problem and it works and it is unstoppable technologically so we don’t need permission from anyone. And if we are worried about legitimacy here you have to realize that in many countries it’s a so much bigger problem and yet they’re not worried too much about it. So, I think that’s very much of preoccupation in the American environment. Yes?

MAN #6: Yeah, great point. I think legitimacy is wrong with *00:25:44 I would say maybe the utility of Bitcoin as transactional currency. I mean ––

ANDREAS: So *00:25:50 –– that’s a very good point. So, Bitcoin as a currency has two aspects. One is as a transactional or exchange mechanism to exchange value. The other one is the score value. Today Bitcoin is used almost entirely as an exchange value for those who see it for payments and it’s used as a speculative instrument is the score value, it is a wild, wild casino, right? for those who are interested in speculation. As an exchange value Bitcoin is poor at the moment and part of the reason it is poor there’s two reasons. One is the exchange rate and the other one is the volatility among international currencies. I mean you can’t see it yet *00:26:36 price. How much is Bitcoin today? Yeah. Well, let’s ask one, two, three, four, five, six, seven, eight, nine different exchanges and then notice the spread, right? Three, six, at the top, two-thirty at the bottom. All right, that’s $56.00 spread. Ridiculous. Right. So why can we have $56.00 spread? Well, as always it’s the assholes. Bitcoin’s working fine. If you want to do arbitrage between these exchanges you can easily move Bitcoin and in fact during the *00:27:14 what we saw is a gap between MtGox and Coinbase is almost nothing because as soon as Coinbase price are closed people started moving Bitcoin out to MtGox and a lot of people who got a hangover are already gone. Now it’s increasing again. What this represents is not a difficulty in Bitcoin but difficulty in moving dollars between exchanges.

MAN #7: *00:27:36

ANDREAS: *00:27:37 permanently dollars.

MAN #7: Yeah.

ANDREAS: You don’t see *00:27:41 it’s a much, much *00:27:43. So, at the moment if you want to use Bitcoin transactionally you have to hold it like a hot potato for the minimum amount of time you have to minimize the exposure to ultimately in exchange for IP contractors. You know I managed to persuade people in *00:28:05 or contractors to accept Bitcoin. It was a difficult conversation. They have a long history and in their history every time a white man came to them and try to show them a new type of currency it was usually crappy beads and they usually had smallpox on. So you can imagine the type of response you get when you look the contractor and say, “Hey, I got fake money. You want make money?” They look at you and they say, “Yeah, white boy because we tried before and we still remember” especially in India I’m half British so I have to tread carefully. Anyway, the trick was once I was able to persuade someone to take a bonus payment, not their main payment, a bonus payment because then they didn’t have to lose *00:28:56 Bitcoin on the other end well they realize instead of paying 5% fee to PayPal they made a 5% premium on local Bitcoins. Just like that the conversation changed. And so these types of little tipping points are going to happen all over the world. So when I’m saying reset your expectations the other thing I think we need to understand is that humans don’t think on linear scale –– sorry, think on a linear scale, they don’t think on algorithmic scale. We have great difficulty appreciating exponential growth in any technology. In any aspect of life we don’t realize what happens when you had exponential growth. Our brain is unable extrapolate that play at least not *00:29:41. Bitcoin doesn’t have a linear growth path. It simply does not have such profile. It has two growth path –– one, it dies and because of a horrible bug or something like that at which point a thousand altcoins rush in to fill the gap and we reboot and start again with a new name *00:30:03 and the main technology to go anywhere. Scenario number two, Bitcoin survives and by surviving it thrives and in that scenario we’re looking at very significant adoption within the next two to three years. This isn’t a 10-year game. You know when the *00:30:24 say 400 billion valuation is thus out of the question. I think they’re being conservative because we keep thinking of it as a stock and our brain *00:30:36 wrap around the idea okay, so three hundred and sixty-seven now. Have you ever bought stock for $100,000 *00:30:45? Have you seen a stock listed $400,000? 

MAN #8: Yeah *00:30:51

ANDREAS: Okay, most don’t do that. Why not?

MAN #8: *00:30:57

ANDREAS: They split, exactly. Because there is a psychological barrier too high prices sucks, right? And so if you are an outlier a couple *00:31:08 above all the other stock prices people don’t buy you just because of the psychological factor unless *00:31:14 exception but we can’t do the stock split, we can only do division with Bitcoin. So if you think of it from that perspective $100,000 Bitcoin is not at all weird. It is absolutely doable because we’re not going to split we’re just going to keep going. The important thing to realize at four billion dollar valuation Bitcoin is a smallish stock and a pinky currency. Four billion is not a monetary base for a currency. Four billion is monetary base for a penny stock. We have a long way to go. So 400 billion valuation for the first supranational currency that actually helps fulfill certain strategic goals to some *00:32:03 nations on earth? Easy unless, of course, we die on the way there. So those are the two scenarios, you know, Bitcoin collapses in a spectacular crash primarily because of an internal bug *00:32:17 situation or it becomes a currency and as the first supranational currency valuation cannot be any less than 400 billion dollars. Does this make sense? So *00:32:30 to say that I think conservative. I have been consistently trying to reset my expectations to the *00:32:36 of Bitcoin and the reason *00:32:38 is because we have no historical power to do this and that’s a very important concept. We’ve never done this before *00:32:47 this has never been done in the history of humanity. And so, if we do it it’s all new. We don’t have any other legal tools to look at Bitcoin as a stock because it’s not stock. It is an asset class. What type of asset class? A cryptocurrency asset class. And how do cryptocurrency asset classes behave? I have no clue. Maybe it’ll take years to answer that and not knowing it. Yes?

MAN #9: So, one of the things that’s happening like governments and exactly the thing is that right now there are *00:33:26 in the United States if I want to transfer more than $10,000 out of United States, key point is $10,000 Bitcoin bank account that’s a problem for US citizens.

ANDREAS: Yes. If you have more than 10,000 and try to transfer more than 10,000 you’ve a lot of problem.

MAN #9: Bitcoin *00:33:41


MAN #9: So –– and there are various other forces out there they’re saying that Bitcoin needs to be regulated, why do you see that happening?

ANDREAS: I think all those *00:33:52 will continue to say Bitcoin needs to be regulated and they will be as successful in regulating Bitcoin as they have been in ending piracy, *00:34:00, prostitution and free speech.

MAN #9: So, how ––

ANDREAS: And what happen?

MAN #9: –– how *00:34:07

ANDREAS: So how can I –– countries that are currently having currency controls will adapt or they will not adapt but Bitcoin happens and there is no question of it unhappening so that’s what a supranational currency does and that’s why I’m saying reset your expectation because *00:34:32 accelerator it provides in times of crisis is incredible. If the 2008 crisis happens today Bitcoin would be like center stage across the world and the most massive capital flight you’ve ever seen, we’ve all ever seen. And as Argentina is deterring all the break sitting on top of a large educated, literate, infrastructure connected, electricity connected, smartphone-only population they’re about to jump ship and when they do it’s going to be big and you’re going to see these little explosions out across the world. China was first. India is following very closely behind because of serious problems with *00:35:20 problems. Most of Latin America has seen all this happen for 30 years what they didn’t have is the Red Cross of currencies to power zoom in and take them all the way to safety. Now they do. So under these circumstances all you need is attributing the fact to occur country after country after country and it’s not going to happen as a national adoption. No government is going to adopt Bitcoin. Okay, maybe single *00:35:48, maybe in five, ten, fifteen years some country might be brave enough decide oh, fuck it everybody stop Bitcoin anyway *00:35:56 currency, right? That’s not how it’s going to get adopted. How it’s going to get adopted is that we are already making Bitcoin the currency of our country, the internet. That’s the country that adopts it as a currency. What it means is that we can now have as a country the internet we can have our own currency and we can connect with everybody else in the world who has our own currency and just ignore them, just completely ignore them and that’s also going to happen in my mind because you’re going to see these communities in Bitcoin emerge in different countries that isolated the pockets *00:36:36 here, you know, 10% of the populations there etc. some remittances, some capital flight and overall that will bubble up until Bitcoin is a viable supranational currency and then everything accelerates. Okay, let’s see –– let’s go with him.

MAN #10: Yes, sir. Well, I mean everything you’re saying sounds great but I have to come back to the fact that it’s *00:37:01 in the survival interest of United States government to kill this *00:37:08 and they have been successful in the digital piracy but they’ve been doing a pretty good job keeping it to a *00:37:19 I read something they’re going to have education in the elementary schools now.

ANDREAS: About piracy?

MAN #10: They are trying to tie *00:37:28

ANDREAS: *00:37:28

MAN #10: *00:37:29

ANDREAS: You see the reason piracy is dying today is because of Netflix because we have viable ways. I download *00:37:38

MAN #10: *00:37:38

ANDREAS: When it comes to *00:37:39 viable ways to download a content we do it our own way. So what they did was they pivot it, co-opt it and gave the consumers what they wanted so consumers backed off piracy. That’s what happened. *00:37:51

MAN #10: *00:37:53 in the war of drugs it’s still is an instrument for social oppression for lack of a better term, there’s a huge community of people whose only job is to maintain that infrastructure.

ANDREAS: Absolutely.

MAN #10: And they can do the same thing here.


MAN #10: They can make it difficult. They could say, “Look, they could tie the silver which they ––

ANDREAS: Promise you get really, really nasty and our government will gets really, really nasty and certain people in the Bitcoin say *00:38:17 certain people they will get really, really nasty in the end it will work because the bigger power ––

MAN #10: *00:38:27 on the way that’s what I’m saying.

ANDREAS: Yes, but we’re talking about different scales. So my basic *00:38:33 is this –– if you have a decentralized system and it competes against a centralized system even with interference, a heavy interference the decentralized system wins every time. Why? Because it delivers more value to everyone in network than centralized system. Every time in every decentralized system that has been the case. So I’m not really worried because at the end of the day what you don’t realize is that as we fund Bitcoin we defund the governments. That’s an important consideration. Yes? Actually, I’m taking some questions here *00:39:09.

MAN #11: About the governments in the emerging markets for example in Mexico, I’m from Mexico we move towards *00:39:20 remittances and you’re speaking about capitals flying away from Mexico *00:39:26 can be adopted by criminal groups and that also can be ––

ANDREAS: Criminals use money, yes.

MAN #11: Yeah, and also the second option is to create a domestic ecosystem –– so my question is what kind of analog offline forms are on ––

ANDREAS: A good question. What kind of analog offline forms of Bitcoin?

MAN #11: And can we –– can we –– yeah.

ANDREAS: So, this is the key which is that we can last. I mentioned before essential criteria for adoption and how in those countries you have this tipping point which is looking for one *00:40:03 event, one financial crisis, one *00:40:06 government who are scared, one fascinating story to explode, right? So, we can’t wait for the world to uptech to the level that Bitcoin is. It will but we also need to downtech Bitcoin to the level of the world’s and that means among other things using tamper-proof unforgeable paper wallets that are traded at face value off Blockchain essentially providing physical tokens of Bitcoin that are redeemable eventually in theory ––

MAN #11: That’s *00:40:42

Andreas: –– on the Blockchain but can be traded without electricity, without internet activity, face-to-face as a physical token. We are going to bootstrap a paper currency from Bitcoin. Yes, we will have to otherwise it’s not going to work *00:40:57

MAN #12: For the sake of the argument can I play *00:41:01

ANDREAS: Please go ahead.

MAN #12: *00:41:04 the argument we had we really need to be concerned about Bitcoin neutrality ––


MAN #12: –– losing that. Now I would like to ask what about this whole fiasco with inputs that *00:41:15 trade fortress and, you know, the idea of 4,100 Bitcoin being taken from *00:41:21 wallet the idea that different actions like that in the past where there’s an incentive for submitting *00:41:28 and there’s a high incentive to get away with it with the powers in place being trying to promote mechanisms that you say were actually killing Bitcoin neutrality is *00:41:38

ANDREAS: Yes. Bitcoin neutrality killers are going to be coming wrapped up in a *00:41:43 that says antitheft measures on it and you must walk past that to recognize what is it. Unfortunately that’s pretty difficult to do and you have to persuade the core developers to do it and they understand that this is not the way to go. You basically have to invert the Bitcoin system from a credit push to a debit pull and then you turn this into dollar.

MAN #12: No, no that’s not my point. My point is that like this act of more things being made to make Bitcoin different one improved upon, won’t that concern increase adoption or increase trust and cause, you know, more people to adopt it, you know, reverse? I would think that it seems like doing –– like taking away Bitcoin neutrality with increased awareness and increased trust globally like ––

Andreas: Yes, when we take away Bitcoin neutrality and return to PayPal, we’ve already seen that play out. We saw PayPal start out as a pure point-to-point email based, no hassle, no fuss payment system and then in order to survive they have to give up all of those principles until they became Visa. All we have to do in Bitcoin is learn from that *00:42:51. Now there’s one good thing which is because it’s traditionally consensus system you can hard-press to actually get enough people on board to that change. And here’s the good thing. I am not talking about to get the entire network being neutral. You don’t need the entire network to be neutral. You only need the core protocol to be neutral. On top of that you want to build fascist coin, you want to build government coin, you want to build NSA coin, go right ahead and I will fight for the principle of neutrality that your NSA coin gets forwarded on the network. I will buy *00:43:26 but that’s my personal choice. Yes?

MAN #13: So, on the topic of neutrality *00:43:33 you said that we have to fight to keep Bitcoin neutral ––


MAN #13: –– to keep it like *00:43:39 but in the last topic you talk you’ve been talking about how it’s kind of unstoppable. What do you see is the consequences of people not fighting hard enough for neutrality?

ANDREAS: What are the consequences of people not fighting hard enough for neutrality is fragmentation. It’s not that Bitcoin will be stopped but it will be fragmented into other coins that operates only within islands *00:44:00. So what it means is that in some places in order to use Bitcoin you’re going have to pass through the Great Wall of China and all of your transactions are going to go against a the great ledger of China and that’s no longer neutral protocol. And so the danger is that they’re going to kill Bitcoin neutrality itself and then fragmented into a thousand coins that have varying levels control.

MAN #13: I mean doesn’t fragmenting it kill one of the utilities like ––

ANDREAS: Fragmenting utility, utility for fragments. And this points up another important point. In 1984 I believe Bob Metcalfe said the value of a network increases exponentially with *00:44:42 to them. Take that law and apply to Bitcoin and think carefully about what the value of the network means. If Metcalfe is correct the network effect on Bitcoin is the most powerful network we’ve ever seen because it is a network effect that has actual value and that value is instantly redeemable. And so if the addition of a node on the Bitcoin network increases exponentially the value of that network which is currently about four-point-some-billion that is a very different implications than Bob Metcalfe had thought. He was speaking *00:45:22 when he said the value. I don’t think Bitcoin is Bitcoin is *00:45:26 so we need realize the enormous power the network effect has in Bitcoin. I think altcoins are a very important part of the ecosystem because they are our testing lab, they are where we both developed the features and learn the worst possible outcomes of failures like TeraCoin ending up with an unsolvable difficulty like first collapses that happens to other altcoins etc. So we learn horrible lessons from the altcoins’ boss. The chance of an altcoin unseating Bitcoin is *00:46:05. There is a chance and I think very likely that in the future we will have 193 national currencies and fortified the supranational cryptocurrencies coexisting. Perhaps Bitcoin, perhaps another *00:46:22 transactions rapids and is measured based on proof-of-stake of Bitcoin, I see Bitcoin becoming the reserve currency for all the currencies to be build on as this new currency is redeemable to the bearer for Bitcoin eventually, right? I see a world with four, five currencies, cryptocurrencies because it’s ridiculous to think that one can solve everybody’s problem that doesn’t happen. But at the same time the chance of a currency unseating Bitcoin is very slim. Bitcoin has to fail and stop. It cannot be brought down by something better because the network effect is huge. Now, the *00:47:00 the Blockchains as a better coin and take advantage of the entire network effect while creating a new layer. So, today you see the model where Bitcoin stands as one model and then others are forked at the same layer and the external networks. Compare that to TCP/IP at the time it was competing against ATM *00:47:26 and a bunch of other protocols that we don’t remember anymore, right? What we need is to make the exact same transition which is except that core currency, the core Blockchain has network effect and then build other layers above it. So it’s not about building the ATM protocol in competitions to IP. It’s about building http protocol on top of. That’s what we’re seeing with Basketcoin, that’s what we’re seeing with Invictus, that’s what we’re seeing with a lot of these coins that are coming along Zerocoin as well they’re *00:47:59 the blockchain. So if you’re developers who is in altcoin you have a very difficulty choice. You have to decide if you’re going to take a plunge, fork off and *00:48:08 or if you’re going to try and find a way to leverage the Blockchain to have effect. I don’t know the stock has time for this.

MAN #14: *00:48:17

ANDREAS ANTONOPUOLOS: *00:48:18 Just keep going until we *00:48:21 all right. Okay, question. Yes, go ahead.

MAN #15: So, if you look at Bitcoin as a network there are *00:48:29


MAN #15: Bitcoin has something similar called Bitcoin *00:48:38 and ––


MAN #15: And the government has *00:48:42 and spend enough money to build *00:48:46

ANDREAS: Yes, people can do a 51% attack for a short period of time.

MAN #15: So ––

ANDREAS: Not *00:48:55 time.

MAN #15: Not *00:48:56

Andreas: So, here’s *00:48:58 51% attack and the more recent one which is *00:49:03 which actually is a shortcut that allows you to access similar attack by not forwarding blocks where you can execute it with perhaps 25 or even some has suggested down to 15% of the hashing power on the network would be sufficient *00:49:19 trying to break. There are two possibilities here. One, the miners who are already in the Bitcoin network decide this is a better way to money and two, that someone who doesn’t hear about making money decides *00:49:33 in currency. Number one won’t happen. And it won’t happen because there is no scenario game theory that where it makes sense to *00:49:41 and take out the wallet. Well, you can just stick around play the robbery and get arrest and this applies to selfish mining as well but it has to be non-selfish and stupid play. Yes, number two this evolves –– so for number two the issue here is that in order to execute a hashing tie on the network you would have to first procure the hashing permit without anyone noticing. You would then have to decode the hashing permit without anyone noticing and then you would have to turn it on all the *00:50:16, right? How long that last? Here’s the problem. I have with a 51% I’m not worried about 51% attack, I’m worried about 51% attack fixed. Back to the point of network neutrality because the easiest way to fix a 51% attack is to say, “Hey, all these IP addresses are DSH. Fuck them, that’s filterable” and if you do that you just broke Bitcoin neutrality. *00:50:46 so I’m much more worried about the fix than the online thing. Fortunately the developers have been discussing this for a very long time and their strategy is much more nuance than that because online pools of mining today are effective because we’re still in the massive transition from CPU to ASIC mining and some point when the vast majority of all miners have ASIC the benefits of participating the pool start permission and costs the participating pool *00:51:23. So what we’re going to start seeing I think is a reduction in importance of pools and more fragmented approaches to mining. But again, here’s the other big reason 51% attack won’t work is because you have to wait until the network stabilizes and right now we’re doing this, you know, *whoosh so I go out and buy all hashing gear to do a 51% attack and by the time it’s delivered I thought I’ve got myself a 5% attack and I need to buy more gear.

MAN #16: You secure Intel *00:52:04

ANDREAS: Yes, of course, to secure a *00:52:07 you start printing million, million *00:52:09

MAN #16: *00:52:09

ANDREAS: Yeah, but it is that the reason 51% attack is very difficult to pull off is exactly the same reason why say, Warren Buffet had come along and basically buy the stock by dumping it and making it cheap because what happens is the actors’ actions affect the market which then affect the actors’ actions. So if you go and start doing a 51% attack the problem is you can’t do it in one go, right? You’re going to turn it on. As you turn it on you’re going to drive a difficult job and pretty soon you’re competing against your own mine.

MAN #16: Right.

ANDREAS: I mean it is very difficult in practice to pull something like this off and, you know, well, I’ll say I’m not worried about it *00:52:57 possibility, it provides for great computer science analysis. Yes?

MAN # 17: So, we all know about the technological vulnerabilities, 51% attack *00:53:10 what I’m wondering more about is sort of the more sociological vulnerabilities. Here’s a lot of other currency stocks that we that don’t know understand, we don’t know how cryptocurrency asset behaves but I suspect that we suspect subject to the same problems as market cornering and, you know, other avenues of centralization.


MAN #17: So, what potential, what risks of centralization do you see as *00:53:35 Sergei points out last week or new cryptocurrency ––

ANDREAS: So, with centralization and kind of market effects that can damage currency rather than ––

MAN #17: Social technical effects.

ANDREAS: Social effects, yes. Part of the reason I felt confident about Bitcoin is that a lot of these market effects and manipulations depend on either scarcity based or scarcity of access to the analysis so you don’t have to be 30 feet closer to the fiber drop so you can get those two milliseconds, two nanoseconds of latency and get that *00:54:14 or you have to be able to manipulate markets politically for example, *00:54:20 in order to really do market manipulation. The point is market manipulation works less and less and less the better the market works because it actually takes up manipulation and turns into market information and makes it obvious to everyone. So, inefficient markets are easy to manipulate. Bitcoin is one of the most efficient markets we have because it consists of feedback loops that are almost instantaneous and completely public. We have never had a global transactional market as transparent, as efficient and as clean as Bitcoin which, by the way, is why you can’t make any money by mining. So this is the bizarre thing mining is currently unprofitable, right? You look at that what do you see? You see global market? I see a beautiful market because in efficient markets where you have very little differentiation among competing products and the only competition you have is on price or effectively, you know, what you’re willing to invest or ASIC mining implemented. The profit margin you’re able to extract in the market which is rapidly being saturated by new entrants rapidly produce zero, right? And so in efficient market the early adopters make money as the middle adopters lose a bit and the late adopters lose everything. In fact we fund the early adopters. That’s how efficient market works. So the fact that mining is unprofitable right now is a very good indication that Bitcoin market is working so tremendously efficiently that it is –– it is impossible to generate money from an activity that doesn’t really generate that much value. Compare it to the 8% of GDP that the US financial industry extracts from the economy producing an inferior, broken and politically corrupt product. The only way that financial services can go in the 1990s 4% of GDP to 8% of GDP today is the corruption. So those parties would be manipulated because of oppositions and so I’m very confident that these markets made that so obvious that it’s much harder to do. To bypass them is just much harder. Let me see, any questions from this side? Okay, go.

MAN #18: So, I’ve heard people say they want to calm down the Bitcoin *00:56:56 what do you see that is –– is it the only ––

ANDREAS: *00:57:00 the Bitcoin volatility by introducing derivatives. I do think that having better options, capabilities and ability to hedging essentially due to risk is a very important feature the gaps we made. If I am interested in using Bitcoin for a large value transaction and it’s not instantly now but sometime in the future I think that risk is very difficult to do today, right? So if I’m buying apartments in Argentina and I have to sit on that money for two weeks oh, boy am I in trouble Bitcoin is not a receivable currency to do that. So that point would be really nice if I get stock price on a *00:57:44 sometimes in the future and of course that will produce volatility. But I don’t see volatility is the problem for two weeks. The first is that the volatility we experience today is an absolutely essential aspect of a nascent tiny currency that is being adopted in *00:58:04 all around the world. I think of it as we’re all in this moon zodiac riding next to the US dollar titanic. Sure, they have a smoother ride we’re bouncing up and down on the waves but that’s because we’re zodiac. The important thing happens when they try to turn and can’t and we can. So the volatility we see in Bitcoin today is expression of the personal *00:58:33 responding to gross first adoption and that’s how it should be. I’m not worried. The other reason I’m not worried about is because it only appears volatile to us. Ask an Argentineans if they think Bitcoin is volatile.

MAN #19: The market plan about derivatives if the derivatives can also be *00:58:52 market and to make money off them in relation to ––

ANDREAS: Derivatives should be used *00:58:56 market if it can restrict access provided by business or politics, right? So for example, in New York one of the jobs I’ve done in the past is network *00:59:08 and the systems I’ve worked on were I am concentrating only in systems connected with *00:59:13. The interesting thing is this has nothing to do with Wall Street. The only thing that matters is how far you are from 60 Wisconsin which is nowhere near Wall Street. It’s like several couple of miles up north on Manhattan. Why? Because that’s where the fiber *00:59:32 that goes into the stock exchanges, right? So, if you could get two cabinets away and –and what they’re doing now in these high-frequency training environments is they put a cabinet right next to it and your cabinet across the room, you have the same fiber work. The guy who’s right next to it has an oil fiber *00:59:51 just to ensure that the latency is fair to a nanosecond. Now, that’s a good thing because it stopped that *01:00:00 manipulation but *01:00:02 can be manipulated primarily if markets are not efficient. I think we’re going to create more volatility for Bitcoin sure, I’m sure absolutely. I’ll take that one.

MAN #20: Yes. You see that the *01:00:18 pseudonymous are not totally anonymous as a problem for adopting.

ANDREAS: The fact that Bitcoin is anonymous or it’s not anonymous? It’s pseudonymous. Yes.

MAN #20: Not truly anonymous, yes.

ANDREAS: Bitcoin is not even close to being anonymous. Bitcoin is loosely pseudonymous.

MAN #20: Do you see that’s a problem for adoption? For example, the Argentineans you say their government cracks down. They’re trying to use it and they’re tracking down people because they can track them by tracking Bitcoin and likewise people probably don’t like it when neighbors can track, you know, what they bought on or, you know ––

ANDREAS: So, anonymity of Bitcoin that’s a really important topic. Bitcoin is not anonymous. It’s much, much worse than that. Bitcoin offers the false sense of anonymity without actual anonymity which can actually put you in a very dangerous situation. Bitcoin is loosely pseudonymous which means that if you follow the perfect operational security you may be able *01:01:19. So I wish if we can learn from the internet when it comes to random and security and encryption is that what matters most is not blocking the ability the power user has but what capabilities are done by *01:01:39. On the internet we can see the parallel of illusion of e-mail encryption and the web encryption as compelling arguments to that. E-mail encryption failed and it failed not because we don’t have the tools. I have PGP I can send you encrypted e-mail you can send me encrypted e-mail. The problem is I also have a couple of master’s degrees in computer science and so I can use PGP. On the web however what we have is when you go to, you know, you get SSO, you get SSO whether you like it or not. In fact you can’t do it without SSO, you can’t turn it off. You didn’t make a choice as a user. That security is what I care about. So the issue of how we do security on Bitcoin and how we do *01:02:28 Bitcoin is not about doing technologies that I as a power user or as an activist or as a revolutionary will try to use to evade my government. The issue is I need to be hiding behind a wall of noise and that wall of noise is every other user of Bitcoin doing a much smaller scale level of anonymity that ends up saturated the network with anonymity. So, in order to be successful in protecting Bitcoin security we have for example something like CoinJoin inside every clients all by default until these addresses are relevant. It’s *01:03:06 as I’m saying we live in a creepy asshole. These addresses are, you know, they’re horrible, right? They’re a geeky curse that is trained for adoption. However, the network protocol, the neutral protocol underneath like IP addresses is robust. What we need to do is build protocol layers above it like Thor, right? that allow us *01:03:30 to see the origin and destination of those addresses. CoinJoin is one of those projects, there’s a bunch of others doing the same thing and again what’s important is not what the power user does. What’s important is what the everyday user does because that’s who the power users go to hide behind. If I’m the only one encrypting on the network they will come for me, simple as that. If everyone is encrypting on the network they have to come for everyone and they don’t *01:03:56.

MAN #21: Do you see some of that code made into the core *01:04:03 code?

ANDREAS: Do I see some of that code to be *01:04:06

MAN #:21: –– useful and needs to be used by pretty much everybody, right?

ANDREAS: I think we are on the cusp seeing the deprecation of core class and we want to see that. Already we’re making the hardware *01:04:21 never have had wallets. We needed a wallet, we needed to have a wallet but wallet should not be part of the core implementation. Wallets are an application. I’m much more interested in *01:04:33 so I don’t want the core development team to make decisions like that. I want them to *01:04:39, the core protocol neutral, fast, efficient, liberal and light and then leave everything else for layers above it. That’s how we make it successful *01:04:49. All right, let me take a couple more questions and I’ll need to have a drink.

MAN #22: All right. I’ve been very interested in how you did *01:04:58 the way the country, the community *01:05:01 adopt Bitcoin. But how do you define adoption?

Andreas: So yeah, how do I define adoption? It’s a really good question. I define adoption relatively conservatively. I find adoption as according to which people are comfortable using Bitcoin not in day-to-day setting but at least for the exceptional circumstances where it’s necessary. That’s what I’m most interested in as the first step because well, honestly I don’t expect full adoption to have that happen as fast as I’d like to happen. I am impatient when it comes to futurology and so –– I’ve been on the internet since 1989, my mother joined the internet a year ago and only because I gave her an iPad that actually made it possible *01:05:46, right? So how many years to that full adoption? That’s 14 years. And so when does my mother use Bitcoin? Probably not going to happen. When does my mother use Bitcoin for real estate transaction? That’s a different question. With my help? That’s a different question, right? So that’s what I think the adoption. Quite honestly I think also Bitcoin is a generational thing. What we’ve done is we take it a generation or *01:06:21 stolen all their jobs, destroy their future and give them Bitcoin. Uh-oh, just wait for it. I mean this is where it’s going to happen it’s going to be an entirely a generational thing because if that generation adopts Bitcoin the world has changed and it doesn’t matter for us and apparently my mother probably *01:06:44. It’s okay, they still don’t *01:06:47. All right, let me one more question to cover up. Okay.

MAN #22: So, get back to what you said about your mother finally adopted Bitcoin, a lot of people are I believe they will end up looking to traditional financial institutions like banks to hold their Bitcoins and trust.

ANDREAS: Absolutely.

MAN #22: We’re moving a lot –– I think that these kind of things are going –– may end up having a great deal of control how Bitcoin shapes up.


MAN #22: That’s people are using Bitcoin instead of their own posted wallet.


MAN #22: These are really things that ––

ANDREAS: You only use in Comcast and they’re on the internet.

MAN #22: Right.

ANDREAS: And guess what, it pop off the internet and I remember *01:07:29 truly peer-to-peer and we were doing peer *01:07:33.

MAN #22: This is *01:07:34 avenues towards centralization ––


MAN #22: –– that I think we face. What other avenues then simply trusted wallets do you see?

ANDREAS: Well, you know I would like to tell you that, you know, the moment Bitcoin was born the banks started dying and just didn’t know it but the truth is that they’re smart enough to pivot and co-opt Bitcoin like *01:07:55 business. So I expect a few of them those most heavily invested and *01:08:03 drop practices on sustainable business models or simply obsolete business models to suffer greatly until they find the way of the dodo just like *01:08:12, just like blockbusters because what the BBC didn’t die, Time Warner didn’t die they managed to pivot, co-opt, adapt to survive and so Western Union is in deep trouble. They recently published a paper and they said Bitcoin is not ready for prime time. I totally agree. When Bitcoin is ready for prime time the question you will ask is Western who? Western Union is going to go with blockbuster unless they pivot very hard, very soon. But Bank of America and Citi Bank? No, they’re going to co-opt and adapt, they’re going to offer fractional reserve Bitcoin banking for secure and reversible probably with insurance schemes. The important question is will they be able to change the underlying protocol because as much as Comcast *01:09:08 they didn’t manage to break *01:09:11 net neutrality not completely and you know why I know that? Because Bitcoin happens. Bitcoin is the proof that the internet is still able to provide innovation without permission *01:09:26. And if we can maintain that one more layer of protocols up now in the interest of money and maintain the progress of neutrality of innovation without permission of innovation *01:09:38 then they can co-opt all they want but fundamentally they will be playing on our turf and that’s what change *01:09:50. Okay, thank you very much.

Written by Andreas M. Antonopoulos on November 17, 2013.