Video - The Currency Wars and Bitcoins Neutrality

This talk took place on December 3rd 2016 at the Coinscrum {MiniCon}, hosted by Imperial College in London, England. He speaks about Bitcoin and other digital currencies against fiat currencies.


PAUL: Thank you very much, folks; heading into the last presentation of the day. I guess we always have been privileged to have Andreas (0:00:10)


PAUL: (0:00:13) so without further ado we’ll hand over to him.

ANDREAS ANTONOPOULOS: Thank you, Paul. Thank you very much. Thank you. So this is my third Coinscrum; first time at Imperial College and this is very impressive, very, very formal this (0:00:42) Augustine Institution of Higher Learning. It’s a bit different when I do Coinscrum by this point in the evening I’d usually had to two beers and there is no beer here. So you are going to get a slightly subdued version of the Coinscrum experience but that’s okay. I’m really very happy to be here back in London as some of you may know I graduated from UCL, Imperial was our major rival university but perhaps the Imperial (0:01:16). Thank you to all the sponsors and organizers for making this happen.

So what I wanted to talk about today is currency wars and Bitcoin’s neutrality in the currency wars. You’ve probably heard me say for a while now that I believe that some of the first applications we would see in Bitcoin would relate to foreign remittances and cross-border applications such as import-export and trade because these are areas where there is an amount of friction in the traditional financial system and so systems like Bitcoin which are much more flexible could provide opportunities; especially opportunities for underprivileged people around the world specifically immigrants doing foreign remittances where they’re paying extravagant amounts to transmit through traditional channels like Western Union. Well, it turns out I was wrong – not the first time, not the last time. It’s going to happen again but let’s see why I was wrong and that’s why things get interesting.

Bitcoin doesn’t exist in a vacuum, Bitcoin is a currency and the system of payment that exist in highly competitive world of international finance that accounts for trillions of dollars of payments every single year in 194 countries and so while we’re off in our little corner designing great applications for Bitcoin something else happened which I think will change the trajectory of adoption of Bitcoin and we’re going to see some very exciting times ahead.

What has happened over the last two years is we’re now seeing a full-fledged currency war, a global currency war that started in a small way just after the financial crisis in 2008 and it started gathering speed and that currency war is going to change the trajectory of Bitcoin. So something that happened outside Bitcoin is going to change how Bitcoin deploys. And this currency war has billions of people as hostages being tossed around like pawns in a political game, in a geo-political game.

So, let me throw out some names of countries and you see if you can see something in common – Greece, Cyprus, Spain, Venezuela, Argentina, Brazil, India, Turkey, Pakistan, The Ukraine. What do these countries have in common?

MAN #1: Nice people (0:04:02).

ANDREAS ANTONOPOULOS: Wonderful people and great food but also currently embroiled in either domestic or international currency wars. And the people in these countries are hostage in these currency wars.

If you’ve been paying attention in the news recently you will possibly know that just in the last five weeks in India with less than four hours notice the prime minister Modi announced that the two largest denominations of bills, the five hundred rupee and the thousand rupee would no longer be legal tender and would ceased to be legal tender in four hours thus removing 88% of cash in circulation in a country where more than 95% of all transactions happen in cash. Where more than 60% of the population has no bank account and where 25% of the population has no ID with which to open a bank account. In my opinion this is going to be seen in the future as a natural disaster which wasn’t natural, entirely manmade; a disaster, a humanitarian disaster which is going to unfold over the next year and is going to have a very big impact in India. The immediate effect is probably going to be a loss of about 2% to 4% of the GDP of the country but the ripple effect as we’ve seen entire industries in India crawl to a halt because employers are unable to pay employees, because people are unable to buy food, because they’re unable to pay for medical care and healthcare, because they are unable to transact in any way has been an absolute disaster in the short-term and will be a continuing disaster in the long-term. Make no mistake this is an experiment that is being engaged on with 15% of humanity as experimental subjects. If this experiment is successful not by the terms of how these people fare but by the terms of whether the aims of government are achieved this experiment will be repeated. It will be repeated in many countries just like the experiment of (0:06:37) in Cyprus which export it to other countries and these experiments are accelerating. There is a global war on cash going on, we have reached that point in history where it is within the grasp, within the vision of world governments to once and for all eradicate cash. Cash being the ultimate peer-to-peer, transparent, private form of money that allows individuals to transact locally within a community is now being eradicated in favor of digital transactions on platforms that allow for surveillance, control, confiscation and negative interest rates and all of these things will follow very closely once cash is no longer part of the picture. That’s their hope. Hopefully you’re joining me in ruining that dream.

But there is another currency war going on and this is an international currency war. This is where a nation is pitted against nation using its flag money, its national currency as a trade war instruments in order to tip the trade balance and erode the national debt. In countries that are suffering from enormous debt loads they have no hope of ever paying back. And so, if you are a government and you have debt measured in the billions or trillions of dollars how do you best pay back that debt? By increasing standards of living and productivity until you can grow yourself out of it or by confiscating the savings of retirees and the middle-class, destroying a generation of workers and having them pay through shadow tax, the debt through inflation. Now we know which side countries are choosing because we’re seeing it play out again and again and again. Of course that’s not how they say it. They don’t say our plan to exit the debt is to destroy pensioners and the middle-class and create a system of shadow taxation and confiscation to bailout the banks, and bailout the government debt. What they say instead is this will eradicate black money, this will permanently end corruption and we will win the war on crime. And everybody says “Aye, that sounds like a great idea. Let’s go for it.” This promise is also always wrapped in popular nationalism. The great scourge of the emerging 21st Century is the resurgence of populist nationalism. Fascism is rising and just like the politicians wrapped themselves in the flag they also create these associations with their national flag money to wrap their money in the veil of nationalism, to wrap the policies of wealth destruction and confiscation in the veil of nationalism. If you disagree with the idea that pensioners should pay for the national debt and to bailout the banks, if you disagree with the idea that a whole generation of young people should find themselves permanently unemployed or underemployed or working in (0:10:34) jobs then you are a traitor to the nationalist ideal of solving crime and black money and corruption. You probably have some corrupt money hidden, don’t you? That’s what motivates you. and that is exactly the tone of discussion that is happening right now in places like Turkey where Erdogan announced that it was everybody’s duty as a Turkish citizen to sell their dollars and buy lira and gold in order to prop up the national’s pride where Modi in India used the same exact rationale to get everyone to suffer just a little bit because the people suffering the most have no voice, they are invisible, especially in India. And the middle-class that suffers a bit can wrap itself in the flag and go for these nationalist ideals.

In this currency wars there is one force that stands neutral as a safe haven, as an exit strategy, as an opportunity for people to say “You know what, you go ahead I’m going to opt out and that’s Bitcoin.” Bitcoin is now standing at the precipice of becoming the safe haven asset for billions of people around the world who for the first time will have the opportunity to say “I see where you’re going, I don’t believe in your nationalist bullshit, I see the exit sign I’m going to go this way” and leave and opt out from these experiments and that’s going to dramatically change the trajectory of Bitcoin. It’s going to change the technology of Bitcoin, it’s going to change the economics of Bitcoin because foreign remittance is something a government can get behind. Yes, let’s make it easier for our poor immigrants abroad to send money to this country while, you know, kind of competing with the banks to the degree we allow them through regulation. But this new proposition that some people are going to get to opt out from these crazy nationalist experiments, these currency wars is not going to be taken lightly. Bitcoin is going to represent in many of these countries a direct affront to sovereignty. And when sovereigns see a direct challenge to their rule, to their decision as arbitrary, capricious and unilateral they may be as unconcerned with the consent of the governed they may be they will apply the full force that they have in order to fight that threat. They will fail but it’s not going to be easy.

When this thing start happening the equilibrium between currencies changes. We’ve already started seeing this. If you want to buy Bitcoin in India today be prepared to pay more than a thousand dollars. The premium on Bitcoin has gone as high as a 22% premium on the price of Bitcoin in any other market. It can’t easily be arbitrage away because there isn’t big enough flow of Bitcoin into the country to counter balance the mad scramble to the exits that is happening.

The Chinese yuan has devalued six times so far in 2016 and every time the Chinese yuan devalued Bitcoin’s value went up by about a billion dollars as millions of Chinese went for the exit. Every time this happens a premium is paid but here’s the good news. Guess who arrange that premium? Those who are willing to build an exit sign and a door a little money road that leads out of this crazy experiment get to earn a 20% premium, the exchanges, the local Bitcoin traders, the offchain, offline, underground traders, those willing to take the risks to face the wrath of the sovereign earned a premium and that premium goes directly to funding infrastructure developments, liquidity, stealthiness, decentralization, evasion and all of the other things that might be necessary to allow normal people to get the hell out of the currency war. These experiments are going to position governments directly in opposition to Bitcoin not because of something Bitcoin did but because of something that governments have done themselves.

When I was growing up I really enjoyed computer games and one of my favorite computer games is a game called SimCity. Anybody played SimCity? Yeah, lots of people have played SimCity. One of the things about SimCity which was really cool is that you had full and unilateral control of the economy, right? And one of the dials you could tweak was the income tax and it was always tempting, right? Because you can just go in there and if your budget wasn’t quite balancing and if things weren’t quite going as well as you wanted in the game and you couldn’t build this as fast as you wanted then you can take the income tax for 5% to 6% and you can take it from 6% to 7%. There were consequences, of course. And so, one of the ways you learn those consequences if when you go too far. So you go from 5% to 15% and you fill you coffers because the income tax that’s flying in and you watch your population go (0:16:55) as everybody leave your city, right? Those kinds of games have a name, they’re called god games. And the reason they’re so satisfying to play is because they allow you to play god over a helpless population.

Here’s the other feature you could have in a game, you can build your entire city and then you could launch a tornado, an earthquake, a massive fire, a tsunami or even a Godzilla attack on your city. And guess what, none of those attacks were as successful at draining your city than raising (0:17:44) the game income tax.

These currency wars are worst on populations. They are a form of civil war from the government against its own people. They destroy generations. It’s estimated that already in the first few days in India hundreds of people died because they couldn’t access money for health treatments because they had to wait in line. Feeble, disabled, elderly, in line for six hours in order to withdraw thirty dollars if they own that much. Hundreds of people died in the first few days, thousands of people will die just in the next few weeks as this experiment unfolds and this repeats. Tens of thousands of people have died in Venezuela because of currency controls, because of the destruction of the monetary system. This is what happens when governments decide that the way to fight a trade war is to use the very fuel of the economy, the thing that people depend on in order to build the future for themselves as a weapon against another government and that weapon backfires and kills their own people.

They will tell you the war we are doing by encouraging people to use Bitcoin is we are traitors to our nations, we are criminals, we are thugs, we are drug dealers and terrorists. Don’t believe me? Look up what the Indian government has said just in the last two weeks about people who trade gold on the black market – terrorists, criminals, thugs. I’m just a coder, I’m just a talker, I’m not a terrorist, I’m not a thug. But if I have the opportunity to build an exit from this system then I will take that opportunity because I know who the real terrorists are and there is no greater form of terrorism than creating war against your own people by disrupting the very life blood of an economy deliberately when there is no crisis creating a natural disaster of enormous proportions simply to fight a currency war against another country. Who benefits in the end? The banks. They get bailed in. Their balance sheets in India are soaring. Their stock prices are soaring. The government, enormous increases in revenue and does that stop corruption? No. It’s fueled and absolute orgy of corruption which even in India is unprecedented just like it fueled an orgy of corruption in Cyprus and in Greece, Venezuela, Argentina and the Ukraine.

When Modi announced that the currency would not be legal tender in four hours he also announced that the banks would be closed for two days in order to prevent people from initiating a run on the banks. When the banks open two days later miraculously a significant proportion of the cash reserves they had were only in the bad notes. Somehow, some people had access to these vaults and swapped their money while the banks were closed in the billions of dollars, somehow.

If you study economics one of the fascinating aspects of economy is Gresham’s law. And Gresham’s law states that bad money chases out good money in economy. When I read this when I was studying economics as a student just as a hobby I didn’t really understand Gresham’s law and fortunately I had never seen Gresham’s law in action. We are watching Gresham’s law play out exactly as predicted in action today.

When an Indian person goes to an ATM, when a Venezuelan manages to get money, when a Zimbabwean gets hold of US dollars what did they do with that money? Did they spend it? Hell no, they don’t. They bury it, they put it under the mattress, they hide it, they save it because this is the good money and it immediately exits the economy and they take every shitty note they have, every Zimbabwean hundred trillion dollar bond notes, every Venezuelan bolivar that’s worth shit and it’s carried in wheelbarrows and weight by the pounds because nobody has time to count it. Every five hundred rupee note that is now worthless and they go to their employees and their dependents and their home workers and cleaners and the people who unprivileged in the economy and they say “This is the only money I’m going to pay you with. Here’s six months of wages in advance. Take it or leave it or you’re fired. Your choice” and they offload the bad money onto the people who then have to go and spend six hours in line to exchange this and to be asked questions about where they got this money but the evil tax official, the caricature of the government employee. And guess what they pay the government employees in for their bribes, the same bad money. So the bad money is the only money that’s circulating and the good money has completely disappeared from the economy. We’re watching Gresham’s law in action. And when they get Bitcoin they’re going to huddle, they’re going to bury that so deep to make sure that they have the good money saved for their children, for their future and they’re going to trade the bad money for Bitcoin. And now-a-days all money is bad, that’s where we’re going. Cash is being eradicated around the world, there’s a scourge but they can’t win that game because cash is something that we can create, electronic cash, self-sovereign cash, verifiable cash, digital cash, peer-to-peer cash, Bitcoin.

Remember how this is going to change the trajectory of Bitcoin deployment over the next two years. It’s going to be in direct opposition to this currency war and it’s going to be directly funded by the currency war. The currency wars are going to fund investments and infrastructures and improvements in Bitcoin in order to gradually take that small exit sign and the little wretched road behind it. And over the next few years as these currency wars escalate and escalate and escalate as they will, as they must as they failed and try again, we’re going to widen that rutted road until eventually we are offering from every economy and eight-lane Autobahn Highway exit to fuck out of their currency war for everyone to be able to take. It won’t be available for everyone at first. It will be only the richest, the most educated, the privileged, the ones who have access to this applications. But somewhere in there they’re going to take some other people with them and gradually they’re going to fund the infrastructure that is going to allow more and more people to exit from these economies. So remember that as this happens we’re going to be called criminals for offering an exit. Then we’re going to be called criminals for pointing at the exit. Then we’re going to be called criminals for simply pointing out the fact that the economy is on fire and that there is an exit and in each stage of escalation of the currency wars every act you take in opposition to the observable fact that the entire economy is on fire, every chance you give people an opportunity to head for the exits you will be the criminal and before long they will rewrite history. They will rewrite history to say that the reason the banks are failing and the reason the economy is on fire is because you provided an exit, is because Bitcoin exist. They will say that Bitcoin started the fire and at that point you must all repeat and remember the slogan that will be important ‘We are not criminals. We’re offering an exit for everybody. We didn’t start the fire. It was always burning since the war was starting.’ Thank you. Thank you.

All right. So, thank you so much. Let’s take some questions from the audience. You, sir?

MAN #2: Let’s imagine like it’s impossible that if, let’s say you would help IMF and those countries that struggled (0:28:17) if there was, you know, (0:28:24) Bitcoins in those countries would it be like, I don’t know, ideal –


MAN #2: – way to help those people because I think when (0:28:41) others they’re in trouble they’re only waiting who want to buy currency, foreign currencies but it’s not available (0:28:48) right? So we don’t have (0:28:51) they can dispatch this through Bitcoin. Let’s just mention that there was – well, what are your ideas for it?

ANDREAS ANTONOPOULOS: The solution will not be centralized. The IMF will not serve the needs of the people of these countries. Their mandate is to protect the banks, their mandate is to protect the national governments. You got to understand these currency wars are not an accident, the fact that they hurt people are not an accident. You have to ask the question, the eternal question the one that goes back to the ages of the Romans “Cui bono” who benefits? That is the question to ask. This is not an accident someone benefits by the billions, by the trillions. This is a very deliberate, very well-orchestrated wealth transfer plan and it transfers wealth from savers, pensioners and the young to the banks and the rich. This is not an accident. So if you expect someone to go “Oh, my God, we’re hurting people let’s stop doing that” then remember they’re not hurting the people they want to.

MAN #3: Like you say about the total Bitcoin relations like (0:30:10) this is nothing for global economy so (0:30:13) to buy all these mining machines and (0:30:16) stop it now or take the control which –

ANDREAS ANTONOPOULOS: No, because every time you buy it’s going to go higher and the Bitcoin valuation is 12 billion today and that’s because a million Chinese exited their economy. Just wait and see what’s going to happen over the next two years. Yes?

MAN #4: Hi, I’m also an international public speaker. I usually recommend my friends and students organizations and (0:30:42) that I work with not necessarily to use the word Bitcoin (0:30:46) disaster, the prosecution and (0:30:50) of those Bitcoin activists that they’re just creating a dark web, a dark net encryption and I see what happens to them. Well, is that a good idea? Would you – (0:31:02) some people used the word (0:31:06), they used the word (0:31:08) and they tried to be having stronger relations with regulators (0:31:13) so they wouldn’t trust them in that sense.

ANDREAS ANTONOPOULOS: It doesn’t matter. No matter what words you use, what you are doing is terrorism. That is what they are going to say.

MAN #4: With the level 39 here in London they might not see in that way. People that work specifically with (0:31:27)


MAN #4: They don’t get target that much as Bitcoin itself.

ANDREAS ANTONOPOULOS: That’s because the British economy is not being looted from the inside out yet.

MAN #4: So, (0:31:38) in India would be as equal as (0:31:40) saying Bitcoin in India?

ANDREAS ANTONOPOULOS: You can say Blockchain, you can say whatever and as long as you’re not making an impact nobody cares but once you start making an impact, when half percentage of the population exits through cryptocurrency Bitcoin, Etehreum, Zcash, whatever nobody pays attention when 5% of the population exits. Suddenly your monetary policy doesn’t work anymore when 10% of the population exits you’re heading for revolution. And so, at that point it doesn’t matter what you call it because they will certainly call it terrorism.

MAN #5: I have two (0:32:21)

MAN #6: Can you speak up, please?

MAN #5: Sorry, my apology. So I have two –

ANDREAS ANTONOPOULOS: Repeat the question, yes.

MAN #5: Thank you. And the second part is like (0:32:39) it will be political moves that the incumbents are making.


MAN #5: So, how do we actually differentiate it (0:32:53) you know, if you actually and does the system, in that sense can we be party to the (0:32:58) political that’s happening there once (0:33:01)

ANDREAS ANTONOPOULOS: As far as I am – so the first question was what about countries adopting cryptocurrency as a whole, that’s not going to happen.

MAN #5: Okay, for remittances that’s what I’m asking.


MAN #5: Yes.

ANDREAS ANTONOPOULOS: I think it’s really important to look remittances because remittances don’t go away. In fact what happens which is really interesting is that as you have a premium on the price of Bitcoin in a country because of lack of liquidity that creates and enormous incentive for arbitrage. Here’s the new slogan for remittances – if you want to transfer money from the UK to India, right? Western Union will charge you 5%, Bitcoin will now charge you minus 20% because you take it from here at 770 bucks and you sell it in India for a thousand, right? And sure, stop one person doing it, they can stop two persons doing it, they’re going to have to search a lot of luggage in the airports because people are going to start moving 20% premium paper wallets and if they start finding paper wallets people will learn how to memorize 12-world seeds and they will walk across the border with remittances. I think we as Westerners most of us live in a privilege world where the amount of pain we are required to undertake in order to adopt Bitcoin is limited, right? In Venezuela where at the moment being engaged in Bitcoin is an offence that will put you in jail for the rest of your life, right? And that’s if you escape with your life. And already two miners have been prosecuted in Venezuela they are now smuggling Antminer S9s across the border. They are setting up mining factories inside Venezuela using the free electricity to mine Bitcoin and then they are using the revenue from Bitcoin to buy food on Amazon Prime pantry, have that food delivered to an adjacent country and then smuggle over the border. So you think it’s difficult to figure out how to enter an 8-letter password if it also requires a capital letter and a symbol and all of these Bitcoin wallet is too fucking complicated and I don’t know why you people bother because I have Visa debit go talk to a Venezuelan about what they’ll go through.

MAN #5: There’s a second part.

ANDREAS ANTONOPOULOS: There’s a second part and the second part – sorry I –

MAN #5: Well, the way I’m going to describe to you is like there were possible multiple scenarios (0:36:10)


MAN #5: If you take a side you’re kind of entering a space (0:36:15)

ANDREAS ANTONOPOULOS: You don’t take sides. Bitcoin is not taking side in these currency wars. Bitcoin is going to be the Switzerland even when Switzerland is no longer the Switzerland and Bitcoin will be the only Switzerland left standing because eventually you will have gold confiscations. Modi has been very careful to keep repeating we won’t be confiscating golds. Yes, today they announced that they’re going to be doing tax audits and in those tax audits anything over a certain amount of gold even if it’s hanging off the neck of a married housewife in India who are by the way the holders of majority of gold in the world they will be confiscating it and applying a 60% tax. By the way what that actually means is that they’re going to be doing spot checks on random victims, those random victims are then going to be required to pay an enormous bribe to those very corrupt officials so they can simply walk away and corruption marches on and gets bigger and bigger. You do not take political side in this fight. This is not about being pro-Modi or anti-Modi, it is not about being pro-Erdogan or anti-Erdogan it’s about being completely neutral. Bitcoin isn’t taking a political stance here. The only political stance its taking is individual should control their own money. Yes?

MAN #7: The only individuals that (0:37:45)

ANDREAS ANTONOPOULOS: Companies are composed of individuals unlike what the US Supreme Court says, they are not people. So companies that are made of people will have to – each of the people in that company will have to find ways to take advantage of whatever technology they can get their hands on and move out. But it is going to be difficult for a lot of companies in the space and just in this space, right? Now, if you’re a gold dealer, if you’re selling jewelry, if you’re dealing with foreign exchange, if you’re selling electronic goods or anything that can be sold and bought for value and barter in any of these economies you are already an opposition to the great nationalist plan of our esteemed leaders, right? And so you’re in trouble.

Companies are going to have a very difficult time. One of the things I foresee is they were going to see much more developments in decentralized forms of trading, peer-to-peer trading, local Bitcoins, Bitsquare and other forms like that the things that can easily go underground when things get really ugly in a country, just like we see in Venezuela. There is no Venezuelan coin base it’s all person-to-person, hand-to-hand, right? Or wheelbarrow-to-wheelbarrow.

MAN #7: (0:39:08) what’s going to happen to the exchanges? Are they going to be like, they’re going to come after the exchanges obviously (0:39:31)

ANDREAS ANTONOPOULOS: Oh, they’re going to come after the exchanges but not too hard and this is one of the other fund lessons that we’ve seen play out in China which is why have they not shutdown the exchanges after six devaluations. As yourself that. First of all they tried to close their bank accounts and the exchanges started selling vouchers in grocery stores. So, instead of depositing money you’d buy a voucher, redeem that voucher and buy Bitcoin at the exchange. They just bypass the banking system completely and use the grocery stores as cash-in mechanisms which you’re going to see happening in lots of other countries but why have the exchanges not being shutdown?

The simple answer is that they can somewhat monitor the exchanges, if they shut them down all of that traffic is simply going to go exchanges outside the country that will still sell vouchers in the grocery stores of the local economy because people will smuggle in the vouchers. Also, where is the politburo going to exchange their money? They need an exchange too. The whole beauty about this that the first people who tried to get out are the people who wrote the fucking law. Yes, Paul?

PAUL: (0:40:47)

ANDREAS ANTONOPOULOS: No, just one question. Make it – pick the best one.

PAUL: (0:40:53)

ANDREAS ANTONOPOULOS: Yes, okay. So, first I was absolutely shocked, surprised and dismayed that Coinbase was rated or is about to be – no, I’m not. I mean, come on, who trading on Coinbase didn’t know that everything they were going to do is going to be surveilled by multiple people. That’s part of working with the regulated exchange means and I am a Coinbase customer. So, yes, absolutely I knew this was coming and I pay my taxes, right? Interestingly enough the story isn’t over yet. What we’ve seen so far just for those who are interested the legal insider stuff is that the initial judge who had to judge, who had to rule on the petition by the government to serve Coinbase with a subpoena accepted that petition. That doesn’t mean that it’s done. That means now the IRS gets to file a subpoena, that subpoena then will immediately face a motion to quash by Coinbase. They’ve already said they’re going to do that and then the negotiation begins, right? The IRS like any organizations that involved in litigation like this on a big scale, right, they set a negotiating position, right? Their opening request was give us everything since the beginning of time, right? And Coinbase is probably going to file a motion that says how about nothing. And then they’re going to say well, how about just these customers for a few years and then Coinbase is going to go back and say how about nothing plus something. And then after a few months of negotiations and motions and countermotions they’re going to arrive at a narrowed scope. So, it’s not over and we’re going to see some interesting legal activity in this particular space. (0:43:06) if you’re trading on Coinbase you shouldn’t be (0:43:09) on any custodial exchange on any system that has know your customer and anti-money laundering rules you are playing in the system and quite honestly if you live in a Western democracy where the system is not currently trying to eat you then maybe you should be playing in the system. Maybe that’s okay, some people don’t have that luxury. They don’t even have a Coinbase, right? And it’s – I think it’s a bit hypocritical to blame Coinbase for this if anybody was thinking that way. As for Trump and his pronouncement etc. I think this is a fantastic opportunity for many, many Americans to learn some German. And the first word I can teach them is schadenfreude (0:44:05) right? Look it up. A lot of Americans are going to be looking it up, schadenfreude (0:44:11).

MAN #8: Schadenfreude

ANDREAS ANTONOPOULOS: Yes, thank you. I can’t pronounce it very well. The joy in watching somebody else’s misfortune as their hopes and dreams of draining the swamp are crushed by the reality of a completely sold out establishment and politician. Yes?

MAN #9: (0:44:31) for all the horrible stuff banks are responsible or there are some rules (0:44:38)

ANDREAS ANTONOPOULOS: For all the horrible stuff?

MAN #9: Banks are responsible for their (0:44:40) there are some rules that they are meant to be performing so (0:44:48) some people don’t send all their money (0:44:51) don’t you see capital markets and (0:45:05) stopped functioning (0:45:09)


MAN #9: Is that (0:45:12)

ANDREAS ANTONOPOULOS: So the question was banks (0:45:15) lending and what happens if in the great stampede to the exit liquidity is drained from the capital markets. We’re going to discover just how fragile the banks are and this is the message: banks are going to get stress test and this time Bitcoin is going to be one doing the stress testing and they will fail. They will fail and that’s when they’re going to say that we lit Thank you fire, right? But that’s not the truth. The system was fragile before, the system was overcapitalized and overexerted and overleveraged before and if it is collapsing it’s collapsing because of its own policy and crime and corruption and lending practices. Bitcoin is simply an exit. You can’t blame the exit for the fire, right?

MAN #10: (0:46:02)

ANDREAS ANTONOPUOLOS: Well, there’s lots of underlying causes but this is a natural outcome of currency wars. If you try to inflate yourself out of a crisis, if you don’t clean up the (0:46:16) of the previous depression and you give everybody a big fat bonus and no one goes to jail next time around banks are going to collapse and eventually banks are going to collapse at such a scale that no one can bail them out. But that has nothing to do with Bitcoin, this was happening anywhere. And trust me I don’t want Bitcoin to play this role. I want Bitcoin to develop cool, new applications and do remittances and help people do micropayments and things like that but this is the role we’re going to play and Bitcoin is being thrust into this role because of the depravities of traditional finance and the currency wars being launched on those areas. This is not a role we’re going to choose and you don’t have a choice whether people use Bitcoin to do these things. They have enormous need and they are going to look for whatever helps them preserve the wealth of their children. So yes, banks are going to collapse because of this but that’s not our fault.

MAN #11: The economy collapses and –

MAN #12: Yes, I think the –

ANDREAS ANTONOPOULOS: But the economy does not collapse as a result. The economy collapse long before the banks collapse and to think that the banks are the economy is the fundamental mistake that’s gotten us into this mess in the first place. The economy continues. Only if you suckle the cash out and assume the (0:47:32) that the banks and the corporations that leveraged the banks are the economy do you start making these horrible mistakes. Yes?

MAN #13: (0:47:41)


MAN #13: (0:47:55)

ANDREAS ANTONOPOULOS: I spent the last six months telling people all around the world including in Europe Trump will win and nobody believed me. Yes?

MAN #13: (0:48:05)


MAN #13: (0:48:06)

ANDREAS ANTONOPOULOS: Your question is? Sorry.

MAN #13: So, you know, one of things that I think can actually (0:48:45) rather than actually self-referencing, you know, that you should remain financial services and technology (0:49:03)

ANDREAS ANTONOPOULOS: Okay, so I will agree with you and to repeat the question was this a failure of politics, was this a failure of economic and should we be looking at the root causes and looking to increase innovations through Bitcoin in fundamental financial services. Yes. When you see institutions fail usually when you see democratic institutions fail is because economic institution failed because markets failed. So it’s a cascading system. The reason that the political system in the US failed in 2016 is because the economy failed in 2008 is because the market started failing about a decade before that right, due to Glass–Steagall and various other things that happened. So, market failure leads to economic failure leads to institutional failure and gradually all of the basic institutions of society started rotting. And yes, we need to build and not just economic applications, Bitcoin isn’t just an economic system it’s also a system of markets and it is providing an honest, truthful market solution. The reason Bitcoin is being used as the exit is because it offers the real market value for your currency exchange when the other markets have been artificially shut off, right? So, if you have, you know, a body of water that’s higher and a body of water that’s lower it will flow downhill, right? If you put a dam in the way then you’re creating an artificial restriction to hold that energy up, the energy hasn’t gone away. Now Bitcoin happens to be hydroelectric plant sitting on that dam and the more higher up the water is, the higher the volume, the higher the disparity and energy the more it’s going to churn that engine. Why? Because it offers an honest path to the point of less energy and so it’s going to do that. It’s a market mechanism. And we’re going to need also governance mechanisms, right, to fix some of the other institutions that have broken – institutions of politics and society. But right now, you know, you’ve got to realize we’re facing a crisis not here in Britain but there’s a global currency crisis going on and this currency crisis is hitting nation after nation after nation. If you’re in crisis you don’t look to, you know, how to improve the opera house, right? You take out the garbage.

MAN #13: So you see that Bitcoin might (0:51:34)


MAN #13: And the next question is – what’s the next (0:51:43)


MAN #13: (0:51:58)

ANDREAS ANTONOPOULOS: So, what comes after the exit?

MAN #13: Yeah. Do you think that we will have a network of decentralized systems where –

ANDREAS ANTONOPOULOS: Yes, we will have a network of decentralized systems; yes, we’re going to have to invent new solutions to scalability problems. Yes, we are going to have to scale up Bitcoin in order to support the growth but guess where all the funding is coming from. And if you want to figure out like we have a couple of exchanges in two of these distressed countries how did they exchange funds? Well, they can’t do them on the Bitcoin Blockchain directly because of the fees, because of capacity constraints. If only they had the Lightning Network set up between them, well, today they don’t have the funds to invest in a Lightning Network but if they’re making 20% premium on the Bitcoin they’re selling suddenly they have the funding to set up a Lightning Network to get more liquidity into their market. So, one of the things that happens because of the exit is that it finances the solutions, the scalability and growth and applications and as people move into the Bitcoin economy, you know, then other smart people are going to say well, they’re there they have Bitcoin let’s give them things to buy. Let’s give them things to invest in, let’s build applications that they can use. So that funds the development of the ecosystem as a whole. Think of this as a giant kickstarter or (0:53:30). All right, in the (0:53:36)

MAN #14: Yeah. I’m a (0:53:38) you know, all these cryptocurrency –


MAN #14: – and the greatest thing (0:53:44)

ANDREAS ANTONOPUOLOS: The answers to those questions is very different, right? So, what percentages of your wealth should be tied up in Bitcoin?

MAN #14: (0:54:05)

ANDREAS ANTONOPOULOS: A percentage – a percentage that is equivalent to your understanding of how the technology works and your ability to absorb the risk that it entails which for most people is a very small percentage, right? So, to your first question what percentage of my wealth is invested in Bitcoin? I think using the word wealth is a bit of an exaggeration. I did this job for free for two years I’m still digging out of the hole of death that created so not really wealth but, you know, my small savings that I do have are invested in Bitcoin, 100%. And I actually have a tiny bit of debt in dollars still that I’m still trying to pay off so it’s more than 100% in Bitcoin.

Now, and I’d like to emphasize that again that is not recommendation to invest because I haven’t invested my money in Bitcoin. I have invested my career, my intellectual capacity, my creative energy, my passion, my work in Bitcoin. The money is the least of the investment I have made in Bitcoin and I could lose all of it and I still have everything else. You should invest as little as you’re willing to lose in a very volatile market. Now, that may mean just maybe five quid a week. I think a very good piece of advice that I’ve heard from many people is, you know, dedicate two cups of Starbucks a week or one pack of cigarettes less. Take something from a negative habit and put that into Bitcoin just to play around, see how it works, experience it, use some wallets, do some transactions and see if you like it.

MAN #14: (0:55:56)

ANDREAS ANTONOPOULOS: Absolutely it depends on which country you’re in and I’m talking primarily for this audience. If you’re in Argentina any percentage of wealth you put in Bitcoin did far better than the Argentinean money every single year in the last seven years. Even in the worst years of Bitcoin somehow Argentina’s economy was doing worse and that applies to Zimbabwe and Venezuela and a whole bunch of other places. Like if your country is experiencing 45% inflation, right, then crazy Bitcoin volatility seems like a rock-solid investment.

MAN #15: (0:56:37)

ANDREAS ANTONOPOULOS: Two more questions. All right, let’s see who hasn’t ask a question. All right, right in the middle there, behind you, sorry, and I’ll come to you next. Let’s make them quick.

MAN #16: Yeah. So, according to what you said before Bitcoin is possibly going to be (0:56:57) in the next year or very strictly controlled?


MAN #16: In some places.


MAN #16: For instance, one of these places would be China.


MAN #16: Because they are (0:57:12) so do you think they are going to try to restore the money (0:57:26)

ANDREAS ANTONOPUOLOS: That’s a great question. So, do I think mining will be controlled in China or do I think that Bitcoin might be banned in China. I think it’s extremely unlikely that Bitcoin would be banned in China. Just because every time there’s a little blip in the yuan we see like half a billion to a billion dollars formed into Bitcoin doesn’t mean that’s a large amount of money. For China that is nothing. So, it’s like you’re facing the imminent collapse of a giant hydroelectric dam, you’re not going to worry about that tiny little trickle of water in the side there that’s Bitcoin. You’re worrying about the gushing outflows of – the things they are worried about. Right now they are passing new law to restrict mergers and acquisitions. I heard this fantastic story of how Chinese companies are exiting money from the economy even though their currency controls and it came about from a conversation with a lawyer and this lawyer had been asked by a Chinese company to participate in an arbitration hearing and they said we want to do this arbitration hearing and would you be interested in participating and representing us and he said yes, okay. Who is the other party? Well, the other party doesn’t exist yet. We would like you to create the other party. We would like you to represent both us and the other party and then we would like to lose an arbitration award of about five million dollars to the other party which you will set up in another country.

When the need is great it becomes the mother of innovation, right? Legal innovation, corruption innovation etc. etc. so they have much bigger problems. Now, you will see bans in some countries. In the countries where they can’t arbitrarily effect a ban they can’t actually effect that ban in practice on the ground because where the rule of law is weak enough that a single individual without any recourse to process or opposition can simply ban a form of money then their ability to actually enforce that is probably pretty weak too because everybody below them is going to be taking bribes. So, just imagine for example, the ruling comes down and says you can’t do mining in China and that goes down to the districts and from the districts to the smaller districts to the cities to the towns and eventually some official sends a fax to the local village where they’re running a mining farm of the hydro that represents 40% to 50% of the municipal income of the entire area and they say you must close your mine. What does the local official say? We have no mines here. Or guys close it down for 24 hours. We have eradicated mining in China. Long live China and our great leader. Turn it back on, right? So, the ability to actually affect change on the ground is mediated by layers and layers and layers of bureaucracy which are more and more corrupt and the bigger the crisis the easier they are to corrupt. We’ve got to realize that these mines are quite decentralized within China and in many cases they provide a stream of corrupt money throughout every official in the area. The police works for them, the mayor works for them, the electricity company works for them. Now the electricity companies are the ones who are mining. Good luck shutting that down. So, again, it’s not as easy to do and the higher the need the more corruption and invention you’re going to have. One more. One more. Who’s got a really good one?

WOMAN #2: Me.

ANDREAS ANTONOPUOLOS: Okay, fine. But we now have very high expectations.

WOMAN #2: So, don’t you see this as something so much more than just economic and political but even spiritual work here because in essence we’re bringing (1:01:29)

ANDREAS ANTONOPOULOS: No, no, no, no. I’m not going to take political positions on spiritual issues. I see this, I see this as a very efficient form of technology that allows a system of proof of work to enable human beings to transact across great distances and that’s it. It’s as simple as that and as powerful as that at the same time. Thank you very much, everybody. Thank you.

Written by Andreas M. Antonopoulos on December 10, 2016.