Video - Bitcoin Privacy, Identity, Surveillance and Money - Barcelona Fablab Meetup March 2016

A talk about privacy, identity, surveillance, hierarchies and the future of network-centric private and secure money. He talks about the internet money which is Bitcoin and its relevance on the growing economy.


MANFRED: Hello, welcome everybody. Thanks for coming, truly a pleasure to see that so many have attended. The Barcelona Bitcoin community is proud (0:00:12) to announce you Andreas Antonopoulos the author of Mastering Bitcoin. Everybody who don’t know this book and who want to learn something about Bitcoin, that’s the Bible of Bitcoin. He’s network and security expert, developer, entrepreneur, co-host of Let’s Talk Bitcoin and probably the most wanted speaker for Bitcoin conferences so we are very happy that he could come to Barcelona to our meetup here. Now I don’t want to waste your time anymore and give the microphone to Thomas.

THOMAS: Thank you, Manfred. Welcome everyone I want to be very short as well. Welcome to the Fab Lab Barcelona which is located at the Institute for Advanced Architecture of Catalonia. It’s not by chance that Andreas is here, it’s actually opening – I would say it’s the very first time that we’re going to have a conference about Bitcoin at this institute that is looking into the future of architecture, the future of cities through the use of technology part of that is what we have Fab Lab as a distributed manufacturing facility so with that – I think that you’re waiting for Andreas and thank you for joining us. The stage is your, the people is yours.

ANDREAS ANTONOPOULOS: Thank you. Thank you so much for having me here. It’s been quite amazing. I am doing European tour which involves visiting seven different speaking events in 12 days, I’m a bit jetlagged. And the title for each of these talks is Thoughts on the Future of Money which basically means I didn’t want to commit to a topic until the last minute because I have several different topics to talk about so I gave myself some room to pick at the last moment based on the audience and what I want to talk about today is about the concept of neutrality, decentralization and privacy and what make Bitcoin so special. Now you’ll hear me talk a lot about Bitcoin. When I use the word Bitcoin I’m talking about the currency. I’m talking about a broader concept which is the concept of completely decentralized network based flat networks for providing trusted applications. And if you happened to have a completely decentralized flat network that can provide trust applications the most logical first application is currency. But currency is just the first step. We are restructuring society by rebuilding institutions and traditionally institutions in this world have been hierarchical. This was an invention of industrialization, an 18th century concept to allow people to organize and communicate at larger scale and it was very effective at breaking the monopolies of kings and feudal systems and it’s now run its course. Sometimes people asked me what my political positions are it’s very difficult to explain but one word captures it I think I’m a disruptarian. Now what that means is that every 30 or 40 years at least things that have settled need to be disrupted because as they settled power accumulates, they become centralized and with centralized power corruption happens. Now this isn’t a new concept. My ancestors, I come from Greece figured out that corruption happens in systems of power and absolute power produces absolute corruption and there is no more absolute power than the power of money.

We live in a world where banking was a great liberator after the 15th century. An invention that moved finance from the realm of kings to the realm of everyday people and that system liberated billions of people and then it got concentrated and it acquired power and the power led to corruption. And what we’re left with today is not a liberating system and it’s time to disrupt it and Bitcoin is one of the things that will greatly disrupt centralization of power. Why is that?

One of the things that interest me as a computer scientist working is distributed systems is the architecture of systems. Architecture is a great topic for this city. And the architecture of systems is what ultimately produces the outcomes. I’ve worked with a lot of bankers they’re nice people. They try to feed their family, pay their mortgage, keep a steady job. Among them there are a few sociopaths who inevitably rise to the highest positions of power because sociopathy is an in hierarchical systems. But most of the problems with traditional concentration of power and money has nothing to do with the people being evil. It has to do with the fact that these institutions through their shape, through their architecture produce outcomes that are not good. They produce outcomes that are not egalitarian. They produce outcomes that are restrictive. They start to express nativism, nationalism, tribalism, class structure and all of these things make the world a smaller place. In fact over the last 15 years we’ve seen the internet become an enormous power for the decentralization of communications and it has been a very liberating force. But if you look at economic inclusion and how banking works we haven’t expanded opportunity, we haven’t expanded access in fact we’re now regressing. Economic inclusion is reducing. And the reason it’s reducing is because this isolated structures of finance, their very architecture raises walls, national borders, class structures and differences in how your money and your commerce is treated. We live in a world that is increasingly global and interconnected. There’s even an emergent global culture through the internet and yet our financial systems are parochial, insular and they’re separated. If you look at it from a network perspective there are systems of money for transmitting small amounts, there are systems of money for transmitting large amounts, systems of money for consumer payments, systems of money for business to business payment and all of these are separated geographically based on borders, legal jurisdictions, nation states and so what the structure produces is separation. It means that as people we are less and less free to transact with the rest of the world. Geo-politics is affecting finance in a great way because the combination of state and money produces toxic result and we’re about to disrupt all that.

What Bitcoin’s architecture gives us is a new way of organizing the world exactly the same way that the internet flattened access to communication made every system that connects to it an equal peer. If I have an IP address my packets are treated no differently than the packets of anybody else on the network for the most part but gives voice to everyone. It gives everyone the power of the printing press on a global scale and Bitcoin will do the same by giving everyone the power of banking on a global scale. Think of it like desktop banking the way desktop printing, desktop publishing and websites changed communications desktop banking individually controlled banking with all of the power of the largest bank in the world. That’s what creates disruption.

Imagine a world where every person has the ability to not only execute transactions but create complex financial systems and instruments with asking for anybody’s permission. Simply by connecting to the network they can start a new application. Centralized systems can’t do that. In a centralized system the further out you are the less control you have and the further in you go into the system and up the hierarchy. The more control the more limited the accesses but not with Bitcoin. With systems like Bitcoin every node on the network has equal access to all of the financial services. In a centralized system if you want to build a new application two things have to happen. First, you have to ask for permission and then permission is only granted if that application can apply to very large populations and be profitable. On the internet or on Bitcoin all that is needed to start an application is two nodes, two people, two systems. They can start communicating, construct their own protocols, their own systems and that application with only two people using it is just as valid as every other application on the network.

When you look at the internet the fundamental misunderstanding is that people think that the power of the internet comes from the ability to transmit information fast. But the real power of the internet comes from net neutrality. And net neutrality is the concept that the internet does not discriminate based on source, destination or content. Bitcoin is the first financial network that exhibits neutrality. When you do a Bitcoin transaction the network doesn’t care about the source, the destination, the amount or what type of financial application it’s supporting. Simply did you pay sufficient fee to use the network resources and if you did your application is valuable.

We have interesting conversation happening in Bitcoin right now. Perhaps some of you have heard the term spam transactions. Have you heard that? What is a spam transaction? What does it mean for a transaction to be spam? I think that term is meaningless because to decide which transactions are spam and which are not you’re making a top down judgment. You are imposing in the architecture the choices of which applications are legitimate to who? Legitimate to the end user? There is no such thing as a spam transaction simply because if a transaction carries enough fee that means that the sender of that transaction felt it was valuable enough to transmit and therefore it is a legitimate transaction. This replaces the concept of controlling content by making decisions about what is good, what is bad, what is legitimate, what is illegitimate, what is a valuable application, what is not a valuable application with a simple market mechanism. If your transactions are valuable and you paid essentially a tiny fee because of the democratization of finance then your transaction is valuable and is not spam.

Starting in the 1970s we have seen the world begin to adopt digital currencies. When people called Bitcoin a digital currency they’re missing the point. The euro is a digital currency, the US dollar is a digital currency. Less than 8% of these currencies exist in physical form the rest is bits or ledgers. But the fundamental difference is that these ledgers are controlled by centralized organizations whereas in Bitcoin they’re not. You have a decentralized network, an open network. So Bitcoin isn’t a digital currency. It’s a cryptocurrency, it’s a network-centric money. I really like the idea of a network-centric money. In fact in my opinion the word Bitcoin is a terrible name. It’s just – it just sucks. I mean if you’re a designer think about it for a second. Bits which either means small or it means the person who just said that is a geek none of which is appealing to general population. And coin, a physical token of money used to describe the least physical form of money we’ve ever designed. If I could rename it I’d rename it Trustnet because that’s what Bitcoin is. It’s a network that allows you to replace trust in institutions, trust in hierarchies with trust on the network, the network acting as a massively diffused arbiter of truth resolving any disagreements about transactions and security in a way where no one has control.

So, starting in the 1970s our currencies began to be digital but this is not the same digital as Bitcoin. This started a dream for governments. The dream of being able one day to control every financial transaction of every human being on the planet in a way that everything was visible to the power structures where privacy dies, where the ability to make a transaction immediately puts you under the lens of systems of surveillance. We have been creating a system of global financial surveillance, a system of totalitarian financial surveillance throughout the world and that system which requires identification and credit checking and limited access is responsible for the fact that economic inclusion is regressing. It is responsible for the fact that two and a half billion people have absolutely no access to banking and that’s just the heads of household not counting their families and that’s not counting people who have limited access to banking in a single currency within a single border. If you count all of them really you’re starting to go into the high billions. It’s difficult to really estimate what economic exclusion means but I’ll give you a simple calculation. As a member of the privileged elite of the developed world I have the ability to open a brokerage account in 24 hours electronically and within 24 hours I can be trading in yen on the Tokyo stock market. I can be sending and receiving money anywhere in the world without really any limits. All I have to do is sacrifice my privacy and my freedom because while I can do all of those things and they’re very powerful there is some things I can’t do. I’m not talking about buying drugs, that’s not really that interesting. What I’m talking about is simple things like for example, donating to an activist organization like WikiLeaks. A few years ago WikiLeaks was completely cut off from the world financial systems simply with extrajudicial pressure applied on five major payment providers, Visa, Master Card, the banking transfer system, PayPal etc. right? And without any legal process, without any conviction and perhaps in my opinion without absolutely any crime other than revealing the truth of crime WikiLeaks was cut off the world financial system. This is now happening not just to activist organizations it’s happening to entire countries and just like that the dream of nation states to create a totalitarian financial systems has started in the ‘70s died on January 3, 2009 with the invention of Bitcoin and the mining of the genesis block.

Bitcoin is censorship resistant. You may have heard this term. You cannot control where money is transmitted in Bitcoin. It’s not attached to identities or geography. In Bitcoin surveillance of everyone is not possible and in fact is going to get much harder because privacy is increasing on Bitcoin. In Bitcoin censorship resistance is an artifact that’s created by neutrality, the architecture of a flat network without borders. The architecture of neutrality that doesn’t ascribe any meaning to source destination value is what creates censorship resistance. Privacy is very important but it’s a term that often has very deep political meaning and I like to juxtapose it to another term that of secrecy. What is the difference between privacy and secrecy? Ultimately and practically in today’s vocabulary privacy is the right of billions of individuals to not be surveiled and secrecy is the power of the very few to escape accountability to have no transparency. We live in a world where every individual transaction you do through the financial system is catalogued, analyzed, transmitted to intelligence services all around the world that collaborate and yet we have no idea what our governments do with money. The financial systems of the powerful are completely opaque; our transactions are completely visible through the system of surveillance. This world is upside down and Bitcoin writes it because privacy is a human right and secrecy is a privilege of power and we need to be in a world where we have complete ultimate strong privacy for the billions of people because that is a human right, because that is a cornerstone of the freedoms of expression, association, political speech and all of the other freedoms are very much attached to privacy. And we need to live in a world where secrecy is fickle and easily pierced where power has to face accountability because they are under the spotlight of transparency. We need to flip the system upside down. One of my favorite words is a French word (0:23:25) surveillance. It is the opposite of surveillance. Surveillance means to look from above, surveillance means to look from below. And in their dream of nation states of controlling all of our financial futures they made one major miscalculation, it’s a hell of a lot harder for a few hundred thousand people to watch seven and a half billion but what do you think happens when seven and a half billion of us stare back, when the panopticon turns around, when our financial systems, our communication systems are private and secrecy is an illusion that can’t be sustained, when crimes committed in the names of states and powerful corporations are vulnerable to hackers and whistleblowers and leakers, when everything eventually comes out. We have a great advantage because the natural balance of the system is one in which individuals can have privacy but the powerful cannot have secrecy anymore and Bitcoin is one of the first steps in that. The ability to transact across borders means that we will now be able to extend financial services to billions of people who have no access not through complicated technology necessarily.

I speak sometimes to various regional banks the ones that are not afraid of Bitcoin. They tell me things like 80% of our population is a hundred miles from the nearest bank branch and we can’t serve them, in one case they said a hundred miles by canoe. I’ll let you guess which country that was. And yet even in the remotest places on earth now there’s a cellphone tower and even in in the poorest places on earth now we see a new solar panel on a little hut that feeds a Nokia 1000 phone, the most produced device in the history of manufacturing billions of them have shipped and we can turn everyone of those into not a bank account but a bank.

Two weeks ago President Obama at South by Southwest did a presentation and he talked about our privacy and he said “If we can’t unlock the phones that means that everyone has a Swiss Bank account in their pocket.” That’s not entirely accurate. I don’t have a Swiss Bank account in my pocket. I have a Swiss Bank with the ability to generate two billion addresses of a single seat and use a different address for every transaction and that bank is completely encrypted so even if you do unlock the phone I still have access to my bank. That represents the cognitive dissonance between the powers of centralized secrecy and the power of privacy as a human right that we now have within our grasp. And if you think this is going to be easy or that it’s going to be without struggle you’re very mistaken. If you read anything about Bitcoin you will see the very same things that they said about the internet in the early ’90. It is a haven of pedophiles, terrorists, drug dealers and criminals. How many of you in this room have Bitcoin? How many of you in this room are terrorist, pedophiles, drug dealers or criminals?

You see the thing about Bitcoin is while they pushed this story every now and then someone who’s never heard of Bitcoin notices two important things. One, it’s still not dead which is always surprising because every two or three months there’s an article that says it’s dead and that’s great marketing, right? Because every time someone hears it’s dead and three months later they hear it’s still not dead they think “Huh, this thing really tends to survive.” I called Bitcoin the internet of money but perhaps we should call it the zombie of currencies. It is the currency that is the undead.

And so, the issue here is that we’re now creating a system that is threatening the largest industry in the world and that is finance and they are going to object, they are going to push back and they are going to use the most common and effective emotional tactic there is which is fear. They will treat you in such a way as if you are idiots and try to persuade you that this is something to fear and when people hear that message maybe the next day they come to one of these meetups and they meet a dentist who owns Bitcoin, an architect who owns Bitcoin, a taxi driver who uses Bitcoin to send money back to their family, normal people who use Bitcoin to give themselves financial power and financial freedom and every time that message is broken by cognitive dissonance Bitcoin wins. So all Bitcoin really has to do is survive and so far it’s doing pretty well and even if Bitcoin was attacked there are seven 750 alternative currencies built on the same design many of which are far stealthier, far more robust at least at the scale they now and who knows Bitcoin will get more robust or something else will replace it. In fact it’s ironic because in the new network-centric world currencies occupy evolutionary niches, they evolve like species based on the stimulus they have from their environment. Bitcoin is a dynamic system with software developers that can change it so the question is in which direction will Bitcoin evolve? Which environmental niche will it attempt to fit in and how will that be affected by the actions of the powerful? Because here’s one of the problems they have if they attack Bitcoin it evolves to defend itself against predators just like any species. If they attack Bitcoin’s anonymity it evolves to become more anonymous. If they attack its resilience it evolves to become more decentralized. In the end despite all of the messages of fear Bitcoin is the cuddly little bear of currencies and you do not want to kick it because as an evolution if you stomp on the little gecko it will evolve until it’s a Komodo dragon and the you can’t stomp on it.

Sometimes people asked me do you think governments will ban Bitcoin? Do you think they’ll try to regulate it (0:32:23) existence? Do you think they will attack it with denial of service attacks? And the answer is really simple because in network-centric systems, systems that are dynamic and adaptable, systems that exhibit antifragility attacks cause the system to adapt and evolve and become resistant. Think about this for just a second. I’ve been involved in the internet since 1989 and I remember very clearly in the early days when lots of articles were written about how the internet was not resilient, could not scale to do voice, was not secure and I remember times when denial of service attacks would take down Yahoo, AltaVista and even Google for hours, sometimes days. So what happen between then and now? How many times have you seen Google go down in the last five years? And so the question is have people stopped attacking Google? Oh, quite the opposite. Google can now sustain gigabits of denial of service anywhere in the world and dynamically reroute and the same applies for all internet applications. The attacks didn’t stop, the system became immune because like a human immune system if you’re exposed to a virus and it doesn’t kill you, you evolve resistance and the next time you’re exposed to the virus it does nothing to you. So will governments try to ban Bitcoin, regulate Bitcoin, attack Bitcoin? They already are, they have been almost since the beginning and Bitcoin keeps getting stronger. It’s a system that is under constant denial of service attack that is on the internet being attacked by hackers, by agents, by other systems 24 hours a day.

In security we have a really funny term which is a honeypot, right. A honeypot is a system that is designed to attract hackers. Well, what bigger honeypot could you have than a financial network that has six billion dollars on it? If you hack Bitcoin there is a six-billion-dollar reward for you finding a way to hack it. No one has collected that reward yet and it’s not because they haven’t been trying, they’ve been trying non-stop but systems like Bitcoin are resilient.

So remember that what we’re doing here is not a currency, it is a reworking of the societal systems of organization that have failed us. The 18th century system of hierarchies that does not scale to a global interconnected world is being replaced by network-centric flat architectures whether that’s the internet or any of the applications running on top of it or Bitcoin itself and currency is just the first step. When you have a network that can provide you with neutral trust you can build myriads of applications on top and you don’t even have to ask for permission. Bitcoin is much more than currency. And when I say that Bitcoin is the internet of money the emphasis is not on money, the emphasis is on internet. So, welcome to the future of money. Thank you.

We’ll do a few questions and answers but first I wanted to talk very quickly about some logistics. If you brought with you a copy of the book I will be delighted to sign a copy for you. Please see me after this talk, I’ll sit next to a table and sign book. However, this book is open source, everything I do is open source and I use a very aptly named license called The Creative Commons which couldn’t be better express than in a place like Fab Lab which is a creative commons. All of the work I do is free by attribution, share alike license which means that anyone in the world can read my book, sell my book, share my book, translate it, mess it up, turn it into a course, a video or a rock music song and all of the above have actually already happen which is astonishing.

Starting about eight months ago we embarked on a project of great significance which was the translation of Mastering Bitcoin as a resource for the community for people around the world, developers around the world for many nationality to learn how to wield this tool of power and use it to build applications. Groups of volunteers, very often just a single volunteer with a desire to learn about Bitcoin by translating my book have done me the honor of translating it into 12 languages so far and all of those translations are available for free online. You can download this book in Spanish. The translation was completed in October of 2015 as well as Hungarian, French, Russian, Japanese, Korean and soon Chinese and Catalan. The Catalan translation is nearing 50% and volunteers are working on it in order to bring this into the Catalan language. And so, for me that is the most important thing that we need to consider with Bitcoin which is this is the power of knowledge and bringing that knowledge to as many people as possible is how we create success in changing the world. Now I was just the first to write a book in this space but all of you can also participate in sharing the knowledge of Bitcoin. This isn’t my greatest contribution to the space I think the simple act of discussing Bitcoin with every taxi driver I’ve ever met, with every person in the street I’ve ever met, with everyone I’ve share a drink at a bar and on the spot within the first 10 minutes helping them install a wallet, get a Bitcoin address and giving them one or two dollars in Bitcoin so they can try it for themselves and that’s something everyone in this room can do. Now, arguably when I started giving everyone one or two dollars in Bitcoin meant them a Bitcoin. So, I have now given away more Bitcoin than I will ever earn in my life and I continue to do it to this day and I invite all of you to look at this as a community and Bitcoin is not just a community of technologist, it is a community of artists and architects and hackers and makers and singers and all aspects of culture because that’s what it means to have community and again I think nothing could express that better than our current location at Fab Lab. So, thank you very much. We’ll take some questions now.

MAN #2: Hi, Andreas.


MAN #2: Hello. As a potentially comparable technology but non-blockchain so decentralized internet, do you have any thoughts about Made Safe in the safe network?

ANDREAS ANTONOPOULOS: You know I think – so for those of you who don’t know Made Safe is a system that’s designed to create peer-to-peer cloud computing. The idea being that resources that you have on your computer disk computing networking capabilities can be shared and while sharing is something that we may be naturally inclined to do there are quite a few barriers and the idea being that if you create a system of incentives in the form of a currency for sharing disk space on your laptop or computing or other resources then we will encourage more sharing. And the interesting thing is that you don’t encourage sharing because people profit from it. But because the ability for me to share disk and earn currency then gives me the ability to buy disk computing, a networking resources from others in a way that creates the sharing economy. I think some of the first applications we’re going to see are going to be related to personal computing and personal clouds so I think it’s a very interesting experiment. I have no idea if it will work. And I certainly don’t advise in treating Bitcoin or any of the other systems that are evolving around them as speculative investments unless you really know what you’re doing because we are so early stage in this technology that the one characteristic we all share across the entire industry is crazy volatility, right? And so, if you treated this as an investment you’d better have very great courage or a lot of money, you know, as they say what’s the best way to turn – oh, what’s the best way to gain one million dollar? Start with two million dollars and trade like crazy and that’s how speculative investment works. So yes, very interested in the technology, very interested in the projects, we’ll see how it goes. Yes?

MAN #3: Thank you Andreas for coming over and I really like your speech in all your conference that you do. I really would like to ask about the power of mining centralization in let’s say a couple of countries, what do you think and although Bitcoin looks like antifragile how do you foresee that we are going to bust, go through that mining centralization power?

ANDREAS ANTONOPOULOS: That’s a very, very good question. So, for those of you who are technically minded or have been following the Bitcoin space one of the characteristics of Bitcoin from the first whitepaper by Satoshi Nakamoto was the idea that Bitcoin decentralizes power by giving one CPU, one vote. The idea being that by contributing processing power to the network you become part of the decision-making process. Something interesting happened though because the incentives once it started taking off was so powerful that people started investing in more complicated computing and soon it wasn’t CPUs but GPU, graphical processing units that were used to mine Bitcoin and that represented 100 times improvement in the ability to mine. Think of it as one GPU, 100 votes. And very soon from GPUs we went to FPGAs, Field-Programmable Gate Arrays which are systems of silicon where you can encode an algorithm and run it really fast and then we went to ASICs, Application-Specific Integrated Circuits which are basically mining chips designed to do nothing but mining. In each of these steps we saw somewhere between 100 and 10,000 fold increase in performance over the previous generation and that is the primary reason why it crossed enormous centralization in mining however that game is now over.

If you are a miner who migrated to ASICs then migrating to a system that was printed with a silicon fabrication system at 24 nanometers gave you an advantage of 10,000 times over the previous generation and you could buy those chips by making a very big order with a semi-conductor factory which means that only very few could put up the necessary capital and if you could then take that down to 22 nanometers using a more specialized silicon fabrication system you could get another massive improvement so we saw mining hardware evolving every three to six months. Literally if you set up a warehouse full of mining equipment it had a shelf life of less than six months. In six months it went from the most powerful, most profitable system of mining to being unprofitable for the level of electricity it consume and so that created even more centralization because now the ability to put down more capital every three to six months to get rapid delivery to be closely connected to silicon fabrication centralized mining and there’s centralized mining a lot in China primarily because that’s where the silicon fabrication is and there’s also some great opportunities for cheap energy. I don’t think that was the vision of Satoshi. Now, I will caution you one thing – a lot of the concern about Chinese mining in my opinion is blatantly racist. If mining had centralized in Sweden we wouldn’t be getting so upset, right? So, just keep that in mind because Chinese mining represents excellence in engineering, concentration of resources and engineering and so far the ability to deliver massive amounts of security and trust for the Bitcoin network at very low cost because of the cost of electricity. That is something we all benefit from.

But here’s where it gets interesting. As of six months ago we started seeing the fabrication of ASICs at 16 nanometers. Sixteen-nanometer technology is the cutting-edge of computer processing. It’s what you see in your latest Apple hardware device and the exponential growth of performance now hits a wall because there is nothing better than 16 nanometer technology. In computer terms we have this law Moore’s law and Moore’s law posited by Gordon Moore the founder of Intel in the ‘70s is the idea that every two years approximately computer capacity doubles and we’ve been running ahead of Moore’s law and in fact it’s been doubling in less than 18 months. That sounds really fast, doesn’t it? Unless of course you’ve spent the last five years doing a thousand times faster every six months and suddenly you’re down to twice as fast in two years. That’s a world of performance. That means that once you put those 16 nanometer things on the shelf they’re going to sit there for two years and you don’t have the ability to upgrade them and that now means that the advantage shifts from the economic power of those connected to silicon fabrication to the ability to deliver these devices as consumer devices because with the centralization of mining comes one big disadvantage. If you have a thousand terahashes in a warehouse what happens when the warehouse burns down? What happens when you lose electricity to the warehouse? What happens when you lose cooling to the warehouse? What happens when you have a problem with your investors? The centralization now makes you vulnerable to losing everything. Compare that to the possibility of having a mining chip that’s part of a toaster or water heater that’s plugged into your kitchen wall. Well, if you have instead of one system that produces a thousand terahashes you have a million systems producing one millionth of that they’re less vulnerable to disruption because if the power goes out in a whole city it only affects a small percentage of the devices out there and it may be unprofitable for now for us in the developing world but in some places in the world that’s going to become profitable to mine on the latest chips using solar energy and hydroelectric power and renewable sources that are less expensive which means that in my opinion mining centralization reached its peak in 2015. We’re going to see now – it’s probably going to continue the wave for another year or so and in July 22, 2016 we have an important event. The reward for Bitcoin blocks is divided by two, half the amount of reward. I think what that will do is it will ensure that anyone who is not mining on the very latest 16 nanometer chips becomes unprofitable and then we have level playing field. So, I’m not really worried about that. First of all because we still have great security and mining centralization hasn’t led to any of the nightmare scenarios that we have imagined in Bitcoin. And secondly because I think it was an artifact of the (0:51:24) technology to Moore’s law and now we’re done. So again, that was a long explanation I apologize because it’s a very technical topic. Thank you for the question. Hey?

MAN #4: So, we have – Kristin (0:51:43) from internet, from people online there are 90 friends online and she’s a girl from the Netherlands asking will mass adoption happen this year or any soon? (0:51:57).

ANDREAS ANTONOPOULOS: Well, that’s an easy question. Will mass adoption of Bitcoin happen soon or this year. No. That was easy. Do you want me to elaborate? I’ll elaborate a bit on that, right?

First of all we have to recognize reality, right? Bitcoin today is technologically advance system that is pursued by those who have literacy, numeracy, capital and freedom and that means that it is highly concentrated. It’s not only concentrated primarily in the developing world but it has a very problematic demographic which is it’s all white men, or at least 95% and that is going to change and it has to change. And the reason it’s going to change is because of mass adoption. Because trust me when I joined the internet in 1989 it was also all white men and today the number one demographic on the internet is a 23-year-old Hun Chinese female that is the majority of the internet population and it will be like that for Bitcoin when mass adoption happens but for the internet it took 25 years and it took the laying out of massive infrastructure. Now Bitcoin already has the internet which is why it’s going to be a bit easier. So I think we can do it in 20, we’re in year seven. I think we’re making a very good run of it but it’s not going to happen next year. We need patience.

MAN #5: Thank you Andreas for the inspiring talk. What do you have to say about other coins coming up? Do you think we’ll have a sea of coins each with its function? Ether is really popular now, smart contracts, will other coins come up? How do you see it happening?

ANDREAS ANTONOPOULOS: Yes, they will. And this is something fundamental to understand about the new world of digital currencies or cryptocurrencies or network-centric currencies is that we try to apply to them the ideas of the past and we have all lived our entire lives in a system that delineates currencies by nationality and allows them to be centralized and also to compete in a zero sum game. One currency wins only if another currency loses. What better example for that can you see than the fact that right now 24 central banks have set their interest rates to zero or negative in order to create a (0:54:47) devaluation of their currency so they can erase their debt. They’re racing against each other to the bottom and that is exactly the result you have in a closed system with strict borders but that’s not what happens with Bitcoin. The important thing to realize is that money is not its physical form. Money is a form of language. Money is the language that we use to express value to each other and money emerges in societies regardless of its physical form. It even emerges in primate societies. You can teach monkeys how to use money and they will adopt it and teach it to their offspring and they will also invent new financial things like prostitution and robbery. You beat the other monkey you take its pebbles and you get bananas. Money emerges among kindergarten children. Even if they don’t understand money they trade –tokens of money colored blocks, rubber bands, Pokemon cards it doesn’t matter. Why? Because money is a lubricant for social interaction. If you have a language with which you express value you can also express appreciation and belonging and lubricate the social connections. And if you look at money as a language then we need to rethink this idea that this a competition for who becomes the one global winner.

English is a very popular language. Did you all stop learning your local language because of that or did you learn two and three and four? In the world we have thousands of languages and though we may see some power in some of the major languages people can adapt in a way that they can use multiple languages and the language connects them to their culture. And so, when money becomes a language as Bitcoin has the idea that it will be replaced or that we’re looking to see which one is going to be the winner is as ridiculous as asking if English or Spanish will become the one global language or Mandarin. The bottom line is that we will have thousands of coins and then we will have tens of thousands of coins and most of them will have no economic value but they will have cultural significance. They will have value of loyalty. They will be representing fans or creative appreciation and some of them will be very large and have economic value. If you have a system like that what emerges and what we see in statistics and mathematics again and again is a power law or Pareto distribution just like you have 20 languages out of the world’s most popular but then you have a long tail of thousands of languages behind them, 20 artists who are some of the world’s most popular and hundreds of thousands of artists behind them and currencies will evolve in that way. We may have 20 currencies that have major economic value and fit in specific niches, smart contracts, micropayments, cross-border transactions, solid reserve etc. and then we will have tens of thousands in what is called the long tail.

So, one of the things we have to do is get rid of old thinking when it comes to looking at this medium. We don’t yet understand exactly how it’s going to be evolved and there’s a very simple reason for that. We’ve never done this before. This is the first time in history that we’ve seen this emergent phenomenon happen and you are sitting on the front rows of history. So, yes, Ether, Made Safe, bring it on. You have a follow-up? We’ll get back to you in a second. Yes?

MAN #6: Hi, Andreas. I just wanted to ask you a question about your metaphor, inorganic metaphor of the decentralized network developing our resistance to attack and it made me think of the TCP/IP technology and how that was, you know, invented to be bomb-proof so that you could just – it was like a mesh, you could blow a hole in the mesh and that information would go round the (0:59:54) the hole.


MAN #6: Although you’ve characterized the, you know, the confrontation between the old hierarchy that you described and the new decentralized world in a sort of confrontational way, you know, as a kind of confrontation what do you think of the irony that technologies will fell into public hands (1:00:19) and, you know, is it possible that there is a cooperative aspect to that confrontation as well, you know, the old hierarchy, a subconscious level will cooperate with this evolution.

ANDREAS ANTONOPOULOS: Some will, some won’t. And again I’ll over use this metaphor but if you look at what happened on the internet for their first decade or so phone companies absolutely hated it, right? So they wrote the propaganda for the media about how the internet could never replace phones, etc. etc. and today every single phone call we make especially long-distance calls are carried over the internet. The vast majority of then phone networks the same ones that resisted the internet running on top of them now run on top of the internet but what happens. Was it the largest telecommunication companies that adopted this first? No. It was actually the third tier of companies, the ones that could not compete with the large telecommunication companies. That could not compete with the capital, the access to legislatures and the marketing budget and they said “Well, we can’t play your game on your terms but we have this internet thing and we’re going to use it to beat you out of the competition.” And so, what I predict we’ll see is a bifurcation of especially the financial industry and we’re already seeing that.

When we say banks what do we mean, right? There are different types of banks. There are banks that deal primarily with consumers, that deal with checking and savings and payments for consumers. Most of the world’s regional banks are that. They do loans, they do checking, they offer currency. They’re not really bad. In many cases they offer good services. I’ve heard some conversations with very large banks from developing nations and they do not fear Bitcoin. They see it as opportunity to expand their services to populations that they can’t reach today. And then there’s the other kind of bank, the bank that really doesn’t have customers. You’ll notice that these banks are gradually dropping consumer accounts and they’re focusing primarily on investments and large concentrations of wealth and gaming the stock market on international markets where they have significant advantage and what do these banks do? They don’t fund consumers or loans because consumers and loans are not profitable and they don’t care about expanding their services. They fund oil companies to destroy the rain forest, they fund war mongers to create dictatorships and they fund other large corporations to create advantages. So, those banks are going to have a problem with Bitcoin. In fact they do and you can see it in the way they speak about Bitcoin. To them this is inconceivable. They are now going through what I called the five stages of grieve. They started with denial. “Bitcoin, go play little hackers.” Then they noticed it wasn’t going away so they started getting angry. “Hmm, Bitcoin criminals, pedophiles, terrorists, the world will end if we allow normal people to control their own money.” Next comes bargaining. “Hey, we don’t like Bitcoin but Blockchain... so that nice, open, decentralized, borderless, peer-to-peer, open innovation, open access system you built well, we can build one that is not open, not decentralized, not borderless, not open innovation and not open access that we control completely Blockchain” and they’re missing the point because those are not the features to avoid, those are the features that make it powerful and so they’re bargaining, right and I can tell you it’s not going to work because Blockchains suck at doing the things the banks want to do. Blockchains in the use of Bitcoin with a decentralized consensus algorithm are inefficient because the inefficiency is the price you pay to get freedom and if you don’t care about freedom why take the inefficiency, install a database. And after bargaining come depression and this will be a financial depression because more than 50% of the world is what they called the black market and more than four billion people are cut off. So, which economy do you want to serve with you network-centric currency? The big one or the little one that’s broken, corrupt and dying? And that in the end will be the depression stage hopefully followed by acceptance. And some companies are going to do very well in playing in the game of network-centric currencies of using it to expand access in borders and be able to trade internationally and empower people. They will be the majority. The banking system are dinosaurs. They operate on ‘70s technology and you know that dinosaurs have enormous contempt and disdain for the little furry mammals that are running around their ankles and they spent some time squashing these little mammals that are insignificant. But there’s a meteor in the sky and once the dust settles the mammals, we win.

So, this is a confrontational system but not because we are confronting anyone, it’s because we are creating opportunities that some do not want to see. When you reveal the truth at a time of universal lies that is a revolutionary act in the revolution in it is not wjhat you say, it is the fact that you go against the lies. Bitcoin is doing that on a global scale today and many of the other technologies that go with that. I don’t look for confrontation, look for inspiration and positive energy that we can create as community. The banks are really irrelevant in this conversation. All right, let’s take maybe one or two more questions. Very good. Yes?

MAN #7: I just would like to ask you about the scalability of Bitcoin, adoptions has Bitcoin (1:07:52) what are the advantage and disadvantage of each of the options that are and what’s your opinion that which of those options should the community adopt.

ANDREAS ANTONOPOULOS: Oh, that’s a very good question also a very easy one to answer. All of them. I did a talk in Prague which has been videotaped and will be videotaped. I am over 40. Ignore that. Recorded. There we go – which is being recorded and will be broadcast soon. It’s topic, the entire presentation was about scalability and why scalability is something that doesn’t get solved, it just gets pushed further out as we scale to different types of applications. And so the question, what are we going to do? Are we going to do segregated witness or raise the block limit or Invertible Bloom lookup tables or thin blocks or replace (1:08:49) or etc. etc. The answer is really simple, all of them and then we will run into new scalability problems because the moment we create space with this capacity improvements people will look at that space and think “Hey, I can do something I couldn’t do before” and then that space will be gone and that story repeats.

The internet is an example of a technology that failed to scale gracefully for 25 years. If Bitcoin manages to fail to scale gracefully for decades we’re in a very good place. So yes, we will do all of those things. The debate now has narrowed to the point of which one do we do first and is it this month or next month or this year or next year which is really just an engineering issue and is not worthy of all of the drama and recrimination that happen in this space. So yes, we will do that and I’m very confident about scaling because ultimately scaling is an engineering issue and Bitcoin has within it the capability to scale and not just that but we are seeing very, very smart people working in the development space of Bitcoin inventing new ways of improving scaling all the time and it’s not just the five I’ve mentioned, it’s like 20 proposals on how to continue to scale Bitcoin. Will it scale ultimately on its own without another layer? I don’t know that. Maybe we’ll have to do more layers on top as long as there’s trust list and decentralized I’m okay with that but it will scale.

MANFRED: Maybe I think there’s one or two questions more.


MANFRED: May be take one question from the live stream and –

ANDREAS ANTONOPOULOS: Let’s do one more question for the network.

MANFRED: Maybe here’s the last question from the audience.

MAN #8: Hi, Andreas.

ANDREAS ANTONOPOULOS: Pick one from the live stream please and we’ll do that next. Thank you.

MAN #8: I would like to know if you forecast a moment when there will be a passage between fiat currency and cryptocurrency in the world that it’s so fast that will be bloods and revolution or will be smooth these passages between the two different systems.

ANDREAS ANTONOPOULOS: That’s a great question. History doesn’t do smooth. History does punctuate the equilibrium. Spurts of innovation, disruption and chaos followed by centuries of Plato (1:11:34) followed by spurts of innovation. I think it was Nicholas Negroponte from the MIT Media Club who said “The future is here today, it’s just distributed unevenly.” The passage from fiat to digital currencies or cryptocurrencies won’t happen everywhere. It will happen in the places where the price of remaining with the currency is to lose the generational wealth of your children where the penalty of pushing against your government is violence and this gives you a mechanism to opt out where your government has taken you hostage together with the rest of the population in an economically disruptive spiral and I don’t know what will happen but I think in 10 or 15 years we will see moments where governments will try to take their populations hostage and very large numbers of that population will go “Uhh, I don’t think so.” Argentina, Cyprus, Greece, Spain and many other countries have faced currency challenges and economic depression because of currency challenges. There’s enormous interest in Bitcoin in Argentina for example, and now in Venezuela where they just arrested two miners to make an example of them after flooding the media with stories about how Bitcoin is for terrorist, criminals, pedophiles, drug dealers but the problem is that that message doesn’t change the fact that Bitcoin doesn’t have 550% inflation and when you’re faced with that balance sometimes you say “Well, I’m going to get out.” Now today, a tiny, tiny portion of the population has the means, the education, the technical infrastructure, skills and capital to escape that trap but one day will be a big chunk of the population and then things will happen very, very rapidly. Yeah, we will see that I hope in my lifetime.

MAN #4: Yeah. We have a question from (1:14:00) he make several time this question. He wants to know your opinion about centralized system on Bitcoin network requiring personal data for usage, thought or future of that.

ANDREAS ANTONOPOULOS: Yeah, I think most of my talk was about this but I’ll focus just on the revealing personal data part of it because revealing personal data is not simply a matter of totalitarian financial surveillance system, it’s also (1:14:35) economy. We already have a system for micropayments on the internet. If you want to buy any content that effectively is priced less than $5.00 the price you pay is a microviolation of your privacy. That is the micropayment system we have on the internet. You give your data to be consumed, analyzed, satisticallly correlated so that the messaging you receive is narrower and narrower and narrower, more and more conforming to the image of what Facebook thinks you want to hear, to what Amazon thinks you want to buy etc. We pay micropayments through microviolations of privacy. Our private data is the price of entry into the microeconomy and we can do much better than that because as we develop micropayments on top of network-centric currencies we can instead pay with currency while retaining all of our privacy. Bitcoin doesn’t require you to identify yourself and that is not a bug, that is a feature. In fact Bitcoin makes it very difficult to overlay identity on top of it the way the Blockchains the banks want to build are because that’s not secure. When you concentrate personally identifiable information you get hacked. We have not yet found a way to secure data. Nobody can secure data. Citi Bank can’t secure data, the large internet retailers can’t secure data, the NSA can’t keep its data in-house. The idea that some Bitcoin startup is going to start doing Know Your Customer Identification and Anti-Money Laundering, colleting all the privately identifiable information that is both ridiculous and disastrous because what will happen is that information will leak and you will lose your privacy once again. So, Bitcoin does not do identity because that’s part of the design and it’s actually a very powerful part of the design because it’s the foundation of us having privacy. Anonymity is just another word for human right. Great. Thank you very much for everything today.


Written by Andreas M. Antonopoulos on April 12, 2016.