Peer-to-Peer money in a historical context – Andreas M. Antonopoulos – Reinvent Money 2015


I’m so glad to be back here, especially to
speak about Bitcoin to a very warm crowd. Thank you so much for coming today.
Did everybody enjoy lunch? Feeling a bit sleepy? All right, I hope we will make this fun,
wake everybody up, and get back to business. Let me start with a quick question: how many
people in this audience are familiar with Bitcoin? Okay, I think I saw three hands not go up. [Laughter] How many people in this audience
have bitcoin or have used bitcoin? Fantastic! For those of you who didn’t raise your hand,
find one of the people who did raise their hand, and let them show you how to use
bitcoin, or come to me after the talk. I would be delighted to not only show you how to use it,
but also give you a small amount of bitcoin to try it out. Not a whole bitcoin, but a fraction, a few millibits.
[Laughter] You can try it out and see how it works. I think it is important to experience bitcoin. Today, I want to talk about the history of money. A lot of people ask me to talk about the latest things
in Bitcoin, but really I want to talk about ancient history. I want to provide a historical context for money for
money, and why Bitcoin is important in that context. First, little pop quiz for the audience: if you think
of money as technology, as a technological system… that human civilization has invented,
how old is the technology of money? Lots of different different answers here. It is still surprising to me when people say
it is four hundred or two thousand years old. in fact, we we don’t really know how old money is.
We have yet to discover an [ancient] civilization… that didn’t have money. So we know that money is
[at least] as old as civilization. It surprises people [to learn]
that money is older than writing. When we look at the archaeological discoveries
of writing, we find hieroglyphics and cuneiform, etc. In all of these ancient forms of writing,
guess what they are writing about? Money. They are writing ledgers. In all of the ancient writing
forms we have found, they are writing about money. Money is older than writing.
Is money older than the wheel? I don’t know, but we do know
that wheels were used as money. They might be as old as wheels; perhaps the first wheel
was sold for money, or was used as a form of money. Archaeological sites going back to the Stone Age show
the presence of money in the form of shells, feathers, and beads. In fact, we can teach primates how to use money. There have been several studies where they teach
monkeys and chimpanzees how to use money. They [are taught] that a specific type
of stone can be exchanged for bananas. Then they waited to see what the monkeys
[and chimps] would do with this new information. Very quickly, they invent armed-robbery. [Laughter] They figure that if you beat up another money and
take its stones, you can exchange them for bananas. Surprisingly, the second thing they invent is prostitution. They figure out that sexual favors can be exchanged
for stones, which can then be [exchanged] for bananas. What does that tell you about the nature of money? I think the important insight is that
money is a form of communication. At a very basic level, money isn’t value. It represents an
abstraction of value, a way of communicating value. It is a language. Therefore, money may be as old as language.
The ability to communicate value is as old as language. In many ways, money has the characteristics of
a linguistic construct, so it is a form of communication. We use money to to express much
we value a product, service, or gesture. We use it as the basis of social interaction. By communicating value to each other, we create social
bonds. Money is a very important social construct. So, money is an ancient technology. Yet it is one of the technologies that is studied the
least from a historical and technology perspective. Bitcoin represents a new form of doing money. For a moment, think about how often the
technology of money has been transformed. How many different forms of money have we had? In communicating value, we exchange things
that we consider to be of equal value. [I have a goat]. I will take twenty bananas for my goat. That is not really money, as it is a barter transaction, but it is the [simplest] form of
communication about value. Then we started seeing more abstract forms of money,
which is the first major technological evolution. You exchange something that you can’t eat
(a feather, a bead, a colourful string with knots). [Maybe] it can be used for aesthetic purposes. Money taking an abstract form is the
first major transformational moment, when money stopped being about the [exchange
of goods that had] intrinsic value [as consumables], and became something that referred
to value as an abstraction. One of the most popular forms of
these abstractions was precious metals, which combined some of the most
important characteristics of money: hard to find (scarce), easy to carry (transportable),
moreso than a giant rock or barrel of feathers, divisible and subdividable, [while being]
universally valued for aesthetic purposes. That is the major second transformation in money. It took hundreds of thousands of years before
we saw the introduction of precious metals… with the beginning of the agrarian civilizations
in the Fertile Crescent region of the Middle East. The Babylonians, the Egyptians, the Romans,
the Greeks developed these precious metals. Two major revolutions in the technology of money,
and then nothing [new] for a few thousand years. Then someone came up with the brilliant idea that
[people could] deposit their gold with someone [else], someone trustworthy, and they can give me a piece
of paper that says ‘I own this much gold in the vault.’ They could trade the paper instead of
the gold because it is easier to carry. As long as I still trust that my money is in
the vault, then I have a new form of money. With every revolution in money, there is skepticism. I think this was the moment of the greatest
amount of skepticism in human civilization. For a lot of people, this new invention
of money as paper was controversial. If you think people are freaking out about bitcoin,
imagine how much they freaked out when… you told them to trade in [goods and services]
with pieces of paper instead of gold. For a lot of people, this was unthinkable.
After all, clearly this [paper] does not have value. It took about four hundred years for
paper money to become accepted broadly. Trust me, it was a big aberration [in society]. Then about 60 years ago, we saw a
new form of money as plastic cards. In fact, the first cards were paper. In the United States,
Diners Club was the first to create credit cards… which was a form of traveler’s check. When people [saw] that, they said, “This isn’t money.
Why don’t you give me some paper money?” [They slowly became accepted] and that
was another big transformation in money. Now we have Bitcoin, a pretty radical transformation;
as radical as the change from precious metals to paper. Perhaps even more radical. What is Bitcoin? The fundamental issue with describing
Bitcoin, if you use references to our existing experience, which is based on thousands of years of [trying
to understand] what money is in a physical form, how do we explain a form of money
that is completely abstract? As a token that represents acceptance in a network,
a network-centric form of money? But that doesn’t even begin
to describe what this thing is. One of the misunderstandings
I [notice] when I try to describe Bitcoin, is that people think it is simply a payment system
and bitcoin is simply a digitization of money. “It is digital money.” Well, that is kind of pointless,
because we already have digital money. You used digital money every day long before
bitcoin came along. You have bank accounts. Those bank accounts have digital ledgers.
You use bank accounts to send payments electronically. That is digital money. But bitcoin isn’t just digital money.
Bitcoin is a transformation of the technology of money. It is difficult to grasp because it is so
different from everything we knew before. I will take a different stab at it, and talk
about network architecture for a second. Bitcoin is not happening in a vacuum. It happened at a moment in history where we are seeing
transformations in fundamental social institutions. That transformation [is an era of]
great network-centric systems. Social institutions were organized around hierarchies:
democracy, banking, and education. Our social interactions were organized around
appeal-to-authority in these bureaucratic hierarchies. Something happened with the invention of the internet. More and more of these social institutions changed
from systems that were closed, opaque, unaccountable, hierarchical complex of rules, into platforms. Systems which have interfaces and APIs to access
information, flowing in and out of an organization. We went from institutions to platforms. Then we see an even more important transformation,
from platforms to [network] protocols. In the change between platforms and protocols,
there [was often] no central appeal to authority. TCP/IP doesn’t work [differently]
in reference to a service provider. TCP/IP works without context, everywhere in the world.
You don’t need to sign up for an account to use TCP/IP. You just need to use the language. Once you [transition] from a platform to a
language, all of these possibilities open up. Bitcoin is the first network-centric,
protocol-based form of money. It exists without reference to an
institutional or platform context. I will return to that in a second,
this is a really important point. We say that bitcoin is peer-to-peer money. What does that mean? It refers to an architecture
used in terms of networking and distributed systems, to describe the relationship
between participants in a system. The architecture of Bitcoin is peer-to-peer
because every participants in the network… speaks [in the language] of
Bitcoin’s protocol on an equal level. There are no “special” Bitcoin nodes [such
as masternodes], all nodes are the same. When you [send] a transaction, every peer
treats it the same. It has no [other] context, [besides the information it receives] from the network
[relating to validation of the consensus rules]. Context and state are interesting
issues in distributed systems. If you have an account with Facebook and
log in, the state is controlled by Facebook. You only have a login session.
All of the data is held by them. We call that architecture “client-server.” Bitcoin is different. Its architecture is
peer-to-peer, just like email or TCP/IP. Interestingly, we are reluctant to discuss money. [It should be] shocking that, in almost all countries,
money is not part of the educational [curriculum]. Five-year-olds have great questions about money,
but most parents find it almost impossible to answer. “What is money, Mommy? How does money work?” “Why do we not have more of it?
Why can’t everyone have more of it?” You don’t say, “Suzie, go back to your room
and study inflation like a good girl.” [Laughter] “Don’t come back until you understand the answer
to that question.” We just don’t discuss money. [It is strange] when you use a technology as the
foundation of [so many aspects] of social interaction, and yet it is a completely taboo subject. We all pretend that we don’t particularly
care about money at least not intrinsically; we have higher goals and aspirations. We use it every day, but we don’t really talk about it. It is a dirty topic, and I think the architecture
has something to do with that [perception]. You see, before Bitcoin, the previous iteration of money,
when it was issued in exchange for precious metals… stored in a vault, that represented a form of debt. That is an important concept to understand,
because it colors our discussion [of money]. How many of you have money in a bank?
None of you have money in a bank. [Laughter] Do you store physical money in a safe deposit box?
Maybe then you could say you have money in the bank. A few people say that, okay. The rest of you
have [actually] loaned your money to a bank. For the privilege of loaning your money to the bank, you
are paid the amazing sum of 0.00001% interest per year. Your bank will take your money, turn around, and loan it
to the people standing next to you for 24.99% APR. This is like a client-server relationship,
because that money only exists as a form of debt, on a ledger stored by a server that you do not control. You are simply a client and
have no control over that at all. You don’t even have basic interfaces to
that money unless mediated by the server. That is what a client-server architecture does. We have another term in distributed systems that
describes a particular form of client-server architecture, where the secondary party only has
a weak copy that isn’t really meaningful. We call that a master-slave architecture. If you think of the previous iteration of
money as a master-slave architecture, then you must ask an uncomfortable question
[about that system]: who is the slave? In a system of debt, one of the two parties is always
the slave. You are the client, you are not the server. The server doesn’t serve you, they serve themselves.
They are the master in the architecture of money. That is the architecture of money we live in, that
we use in our civilization, where you have no control, where every interaction is mediated by a third party
that has absolute control over that money. Today, if you go to the ATM and [insert] your card,
the bank may decide to give you your money back. But one day — like the people of Cyprus,
Greece, Venezuela, Argentina, Bolivia, Brazil, a [whole] list of countries over the last several decades
and centuries — you will go to the bank and discover… that the bank does not want to give you your money. They don’t need to. That is the essence of a master-
slave relationship. Bitcoin is fundamentally different. In Bitcoin, you don’t owe anyone anything
and no one owes you anything. It is not a system based on debt. It is a system
based on the ownership of an abstract token. Absolute ownership. We have an expression in the United States,
which is, “Possession is nine-tenths of the law.” Have you heard that expression? In Bitcoin, possession is ten-tenths of the law. If you control the keys, it is your bitcoin.
If you don’t control the keys, it is not your bitcoin. If you [think you own bitcoin but don’t control the keys],
you are back to a master-slave relationship with a bank. Bitcoin represents a fundamental
transformation of money, an invention… that radically changes [one of] the oldest
technologies we have in human civilization. that disrupts the architecture [of money]
into one where every participant is equal, where a transaction has no state or context other
than obeying the consensus rules of the network. where your money is yours and you control it absolutely
through the application of digital signatures. No one can censor it, no one can seize it,
no one can freeze it, no one can tell you what to do. It is a system of money that is simultaneously
transnational and borderless. We never [really] had a system of money
like that, where money can be transmitted… at the speed of light to anyone in the world, who can
participate with a device as simple as a feature phone. Bitcoin represents a technological innovation
[in money] that is terrifying to a lot of people. They will tell you that they are very
worried about criminals using Bitcoin, but the truth is, they are far more terrified
that the rest of us will. Thank you. [Applause] you wanted to Know I’m not Gonna throwing. I’m better coding go ahead If I could throw I’d be on the basketball team and not the computer programming team first of all thank you, I’ve questioned you were talking about scarce t and also about What’s sorry? What’s called again? The intrinsic value? Yes, if you look at the Definition of sound more money according to Aristotle asst He said that well he described gold basically issue, just it And he said that the intrinsic value of gold was it scarce t. Do you believe that the same thing goes for bitcoin? So as a greek I think I can say this safely aristotle said many smart things and our saddle also said many absolutely idiotic things which in the context of the time were fine But in retrospect we know better and understand more about the world around us Scarcity isn’t Intrinsic value scarce it e is a completely different attribute of money And in fact intrinsic value is a very slippery concept We haven’t had money with intrinsic value since our money was bananas because you can eat them and in fact Unless you have scarcely even the things that you might assume having forensic value. Do not have Intrinsic value in the most important aspects of life like water Have intrinsic value only when they are scarce so scarcity effects intrinsic value, but is not intrinsic value in this country and as also in my country we use fresh water to flush our toilets and that shows you exactly how much value Fresh water has intrinsically here because of a lack of scarcity You know I know that the netherlands has a much bigger problem with keeping the water out then having enough But there are plenty of places where that’s not the case Intrinsic value is not really a property of currency or money in fact Currency that has intrinsic value is not very good currency because then you might eat it instead it creates a market distortion because if you could eat your Currency at some point if the value of currency goes low enough everybody starts eating it instead of using it Although you can’t assign an intrinsic value to money my favourite example was a farmer in zimbabwe who was asked by the BBC when they were carrying a wheelbarrow full of hundred Trillion dollar zimbabwe notes stacked off and they asked them can’t you use it as fuel and They said no, not really because goat shit burns better And that was the moment that the currencies intrinsic value had degraded to the point that it was below par with goatshit Now I have news for you. There are at least 50 currencies in the world today that have an intrinsic value less than goat shit And that is the world in which we’re introducing Bitcoin a more interesting concept I think one that we should explore more is intrinsic utility Something that is useful as a currency, and I think that bitcoin Represents a moment of immense intrinsic utility it is useful it is software money money is a content type money as a service Programmable money that can be programmed to do amazing things and that provides Intrinsic utility Utility that makes it much more than just money for the internet, but instead turns it into the internet of money So intrinsic utility I think is a more useful concept Address I wanna ask yes Recognize my voice as many people do like it’s that new Yorker again okay, so the Banks are now getting into Blockchain you have nine banks creating a consortium Apparently so like they’re competing with blockchain ETC. So just what are your thoughts on? This is it is it competition. Where is it going your thoughts? Thanks? How many of you here are familiar with the concept of an intranet or have an intranet it’s work? so an intranet is the internal company network where all of the information that is out of date about the company is posted and Where you can’t use most of the interesting applications on the internet, but they force you to use it anyway? so the problem with Internet is that eventually you want to make it more useful and then you try to find a way to connect it to the rest Of the internets around to do that you use an internet and I think what we’re going to discover is that This approach of trying to take. Oh, let’s see well We told the world that we wanted to disrupt our business in fact we said we wanted to disrupt our business from the inside out because that sounds good on a marketing brochure and Then we discovered bitcoin, but that’s too disruptive Too revolutionary we want something more corporate like the word revolutionize which means the exact opposite of revolutionary It means to strip something of anything that is disruptive turn it into a safe mild bland Alternatives that kind of fits the marketing brochure and then try to pretend that is Revolutionary it’s like the difference between che guevara and a che guevara t-shirt being worn by a hipster in Brooklyn So what do they do they look at bitcoin? And they say let’s see it’s an open decentralized Borderless transparent and peer-to-peer currency fantastic could we have that’s without the open borderless decentralized Peer-to-peer and Transparent and instead add a nice dose of heavy control and turn it into a client-server model. Oh, sorry I meant to Master/slave model Block chains are going to Decrease the cost of operating Clearinghouses within the world stock Exchanges and banking systems they will replace single point of failure clearing houses and Payments networks like Swift and DTCC, and all of the other stock market Backhands in the world, and they’re going to reduce the cost of Investment banking, woohoo That’s not going to change the world and it really is a minor and boring application But I can see why it’s better than what they have today To me the equivalent is really simple When the internet came out, what did the world’s phone companies do? They designed color Fax machines Take the fax machine add color look it’s just like the internet all right next question Hi, Andreas. Thank you very much for that. Talk what what in your opinion are the biggest threats or problems at the moment in the Bitcoin Ecosystem The biggest threats or problems there are many threats I think You know bitcoin is very much an experimental technology. It’s an instance I think it’s important to separate the design Pattern from the particular implementation. We’re running right now I can give you a prediction over the next 50 years the design pattern of Open decentralized Digital Currencies based on blockchain technology will completely transform the world Whether it will use the exact same technology we use in Bitcoin today Whether bitcoin will continue to evolve as it has for the last six years very rapidly and be able to address all of the difficulties get better user interface design better security Scale to much higher levels and all of those things I don’t know I think most likely whatever we end up with will still be called bitcoin even though it may bear very little resemblance in its underlying Engineering to what we have today But it will still be an open decentralized peer-to-peer platform for money not because that’s an efficient way of doing money It’s because it’s a free way of doing money and sometimes efficiency is something you sacrifice for freedom Bitcoin is not Efficient if you want efficient you use a system, where one person is in control, and that is very very efficient Democracy isn’t very efficient either, but it sure is how better than the alternative? All right, let’s take maybe one or two more questions, okay? talking about public and private I think you that the internet is considered as a common code and do you see the bit kourin as a Public good as a private good as a common good of it or a new term And how can we use it for public goals? Well, I think that’s a really good question. I think the blockchain is a public good It is a societal construct that is not controlled by any one individual that is ruled entirely By a set of common principles and laws called the consensus Mechanism and the the rules of consensus Define what happens on the blockchain interestingly enough I think the blockchain will create a completely new form of common good that we’ve never seen before If you accept the idea that bitcoin or something very much like it will continue to exist We arrive at a place where for the first time in history We have a shared historical record that does not decay in time and cannot be changed immutable history forever We have an expression which is You know put it in stone. You heard that expression It’s an expression we use to describe the most immutable form of recording We can imagine which is to carve something in stone. Twenty years from now. We will say oh It’s as good as done. It’s like I put it on the blockchain Because we will have a much better form of an immutable History so that becomes a public good And it becomes a public good that has a scale in time that we’ve never seen as a civilization I mean if you think of what happens if the bitcoin lasts ten years and the blockchain last ten years that’s astonishing But what if it lasts a hundred years what if it lasts a thousand years what happens if two thousand years from now you can go back and do blockchain Archeology and study the transactions between Satoshi Nakamoto, and Hal Finney or study, the 2020 presidential campaign based on blockchain Transactions, this is a very important historical Artifact that we’re now creating as a civilization So yes, it is a public good You talked about properties of good money, and in the light of the news I saw tomorrow about bitpay blacklisting a transaction I Would ask you if you have worries about the phone’s ability of Bitcoin due to the trackable nature Yes, I think fungibility is one of the things that Bitcoin can Definitely improve, and I think over time we’re going to see some improvements to that but there’s already quite a few proposals on different ways to increase fungibility and anonymity if we want to preserve this blockchain technology as A good that is resistant to censorship and surveillance and control that really transforms our monetary system Makes it global makes it transparent makes it possible for the whole world to be part of it we really need to address the issue of fungibility Blacklists are inherently evil they cede control To the author of the blacklist and that control is absolute. It’s one of the fundamental problems We have in our banking system today think about it. This way. It’s now 2015 we’ve had mainstream internet for 15 years now If you look at the statistics of economic inclusion in the world, how many people have access to financial services? through this Wonderful gift we have in humanity. Which is the internet? Economic inclusion has decreased Why? Because we have found more ways to surveil control and play Geopolitical games and now we cut off entire countries from the international financial system That is not a healthy way to approach life and so I think The metric of economic inclusion is very much affected by fungibility and blacklists are antithetical to democracy They’re antithetical to freedom of expression freedom of association freedom of speech which as Principles of the enlightenment is something that we should aspire to if your government is worried about their own Citizens controlling their money the most important question you have to ask is what the hell is wrong with my government Not what the hell is with bitcoin one question okay last question Yeah This morning, Mr.. Miller Cope was telling us that China and Russia are getting a lot of gold and that The States are more or less Bypassed in this section does it mean that the United States has seen the light now and go for bitcoin? I’m I wasn’t quite sure I understood the question I’m sorry could you they they’re getting a lot of gold you said yeah the amount of gold is going to China and to Russia nowadays Yes, yeah So and the states in the western world is more get more or less getting rid of gold Mm-hmm Does it mean that they have seen the light and go for bitcoin? No, it doesn’t mean they have seen the light it means that we are now living in a world where we’re facing the most unprecedented Currency and Central banking crisis that we’ve seen since the introduction of Central banking I mean a lot of people say you know what does it take for bitcoin to succeed? how do we make sure that bitcoin can beat the banks or replace the banks or eradicate Central banking we don’t need to do that bitcoin should not be aiming to conquer or Co-opt or Force anyone to adopt anything bitcoin is often and it’s a choice. We’re not looking for governments to endorse or adopt Bitcoin that makes no sense the idea of a national currency is as ridiculous and obsolete as the idea of a national Airline or a national phone company or King? We need to get rid of these things The bottom line is that the banking system as we know it today does not need help To become obsolete it’s doing a very good job on its own When you have a giant centralized structure the biggest risk it faces. Is that by its very nature centralization introduces fragility into the system the narrower the source of decisions the more likely those decisions are they’re Disconnected from reality and we’ve seen that central planning fails and yet We accePt central planning and monetary policy as if somehow that is exempt from that rule Centralized systems are fragile and they fail on their own. There is a reason why? 21 Central Banks around the world have set their interest rates to zero for six years and Cannot seem to get out of that trap they say that currencies require control in order to be stable and yet We have unstable currencies and central banks that have lost all control Even though supposedly they have the tools So the real question we should ask is not whether bitcoin will succeed But whether we face a really substantial risk of our traditional monetary policy tools failing catastrophic Lee all around the world I just hope that when that time comes bitcoin will be there to pick up the pieces along with many other digital currencies because the world has to continue to be able to transact and Currency failure is a catastrophic event in any country. I’ve seen it in my own country in Greece I saw it wipe out my parents twice in a single generation And everybody around us, and this has happened all across the world the natural state of a state-sponsored currency is collapsed statistically speaking There are only a few exceptions, and they don’t last very long So really this is not about bitcoin winning banks are losing on their own. They don’t need any help Thank you so much. I also really like the master/slave phonology because we have now Blythe masters I think in charge of blockchain consortiums and Maybe it’s coincidence or not either though we have a few presents from you from well first of all the people here know you like slope waffle, so Guys from R. And m. They’re sitting in the front day. They’ve brought some stool butter for you. Oh fantastic Thank you so much. Thank you and we also have the Belgian Bitcoin community In the United states, it’s considered polite to open your presents Now I’m going to claim that that’s the reason why I’m doing this It’s been a while and also from the Belgian community we have here a nice basket of Belgian beers and some Thank you

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