[ANNOUNCER] Please welcome to the stage… one of the most well-known and respected figures
in cryptocurrencies, the author of 'Mastering Bitcoin' and 'The Internet of Money' [series]: Andreas Antonopoulos. [Music] [Applause] [ANDREAS] Wow! Hello everyone, how are you doing? I am the Bitcoin guy; I am not here to talk just about
Bitcoin, but the context in which Bitcoin matters… and in which blockchains as a
technology will impact our society. When I start these talks, I'm often met
with blank stares of incomprehension. Technologies like Bitcoin are not just
disruptive, they are radically disruptive. They challenge our notions of what money is, how trust
works, and how these things can scale in the world. That is what I want to talk about today, not
the architecture of Bitcoin or blockchains, but the architecture of society and how the two relate.
You [must have] heard a lot of discussion
about exponential innovation. There is one fundamental problem with exponential
[innovation]: humans don't do exponentials. We don't. We are linear creatures. We are beginning to see the impact of
exponential innovation on our social institutions, which definitely don't [deal well with] exponentials. What are the social institutions I'm talking about? We operate society on structures that were
primarily born in the Industrial Revolution. The most powerful of those structures
is the hierarchical bureaucracy, this idea that if you want to coordinate large numbers
of people, at scale, across a city [or any] large area, across a state or nation, across a federal nation system
like the European Union or the United States…
The only way to do that is [through] a hierarchy. A pyramid-shaped [society] where you have layers
and layers over oversight and decision-making, usually concentrating to someone on the top. That structure repeats in every aspect of our social
institutions, our schools, businesses, and governments. Those structures are now failing to scale dramatically. We are living in a world where we can't
trust news, young people don't have jobs, they can't trust institutions like banks,
and they feel betrayed by governments. [People have been] disenfranchised by fake democracy.
All of those things have one thing in common: the institutions of society are failing to scale.
[Many of us] operate on the internet as one global
society, without borders. Our institutions do not. They fail to address the big problems of our era. How do you deal with the globalisation of information
when [problems are] handled by local institutions? How do you deal with law? It is a funny
question which comes up very often, especially when I start talking about Bitcoin. People [ask], "What if someone does something illegal
with Bitcoin?" The answer is simple: illegal where? Illegal in what jurisdiction? For example, selling
Bibles [for] bitcoin [is] very illegal in North Korea. Selling drugs? Legal in some places, illegal in others.
The word "legal" implies a jurisdiction.
That jurisdiction has [failed] to scale, to
address global needs [and preferences]. The first problem is architecture. We have institutions
that are hierarchical and bureaucratic. Don't get me wrong, these institutions didn't fail in the
beginning; they actually allowed humanity to [grow]… tremendously, [led to the birth of] billions of
people and raised them out of [destitution]. These institutions did a lot for us, but now they can no
longer achieve their goals. They are failing to scale. Architecture is at the core of the problem.
As a computer engineer, I look at architecture. I think about how the bits fit together, and what the
emergent properties are based on that architecture. Let's look at the architecture of social institutions
and think a bit about what that architecture does.
You may squirm a bit at this point.
What happens when you build a hierarchy? Decisions and information flow upward. Information is collected at the bottom,
gradually refined until it reaches the top. A fundamental problem with an architecture like
that, is bandwidth. I am speaking as an engineer. In a corporation or government, as you concentrate
information and decision-making at the top, you can no longer achieve the [same] number
of decisions per minute, if you like, [as it grows]. You need to address the torrent of information
coming up; eventually, you must filter more information.
[The top layer] can't absorb it all, decision-making
[becomes] poorer over time as information is filtered. This is why institutions are failing. The people making
decisions are removed from the source of information. [They are also] removed from
the impact of their decisions. If you think of representative democracy, it is
not representative and that is the problem. We see this in large corporations that fail to innovate,
for the same reason: non scalable architecture.
People try to change that by implementing… flatter [organisations] with more
lateral movement of information. At the same time, we see that in [societal institutions].
People try to devolve power to local areas. Just recently, [we have seen] a declaration
of independence by the Catalan state. These are all symptoms of the fact that, if the
organization fails to scale it will be fragmented. It will be disbanded. You will see
[more of] that devolution happening. Scale, bandwidth, and architecture…
these are interesting engineering problems. A problem with social institutions was
identified [two thousand years ago] by Cicero, [and in the 19th century by Lord Acton, who said], "Power
tends to corrupt, absolute power corrupts absolutely." The problem of hierarchy is that, it is not only decisions
and information that flow up, there is also power.
As the hierarchy becomes entrenched,
the people at the top get more powerful, [while becoming] more and more detached
from the people they're applying power [over]. Corruption [becomes] worse as the organization
[becomes] bigger [and that distance increases]. Then you have the [issue of motive]. Good people can rise through hierarchies, but
they will be tempted and corrupted by power. And they are not the only ones rising.
Sociopaths [are better at] rising much faster than them. Power in hierarchies attracts sociopaths. It is not a coincidence that many CEOs exhibit
narcissistic and sociopathic tendencies. The [position] attracts that. I'm sure the CEOs
in this room are a complete exception. [Laughter] You see this in government, in municipalities,
even in small businesses. [There is] nothing bigger than a tyrant who has a tiny bit
of power over other people and relishes that power. Hierarchies are failing to scale to meet our needs, to
absorb information, to process decisions fast enough.
Worst of all, eventually they turn bad; the point of
decision-making only furthers the goal of power itself. Power becomes the end, not the means.
We see this again and again in institutions. The bigger they [become],
the more you see that problem. What is happening in the European Union right now? I'm Greek, so I have a bit of a problem
with what happened recently, right? You have a super state making decisions, and are
quite happy to toss two or three countries to the side… in order to protect the banks of some [other] countries. Our institutions are failing to scale.
What does this have to do with Bitcoin or blockchain? [How is this related to] any of these technologies? Let me pause for a second and ask, who in this audience
has done a transaction with bitcoin or other [coins]? [Who has] experienced this technology?
Less than ten percent of the audience.
Great, [many potential] early stage adopters. Fantastic. If you are interested in trying [bitcoin], come see me
[afterwards]. I will [help you] set up your first wallet. I will give you bitcoin, but not a whole bitcoin;
I can't afford that anymore. [Laughter] What does this have to do with Bitcoin?
[What do] you hear about Bitcoin from the media? [Do you hear that] this is a currency that exists
on the internet, that is money for the internet? To put it better, what you hear from the media is,
"Bitcoin is geek money, designed for drug dealers." That is okay, the internet was "primarily designed for
pornographers." We all enjoy it anyway. [Laughter] That media narrative only plays out for as long
as you [remain] unfamiliar with the technology. Eventually you start meeting dentists, taxi
drivers, and hairdressers who use bitcoin.
You [see none of them are] drug dealers. By the third [encounter], [you realize] that
narrative isn't congruent with what you heard. The other thing you hear is, "the really important
thing isn't Bitcoin, it is blockchain technology." This is a nice attempt at white-washing the
whole thing so that banks can play with it too. Embrace, extend, adopt, and extinguish
before it [becomes] too powerful to stop. Blockchain isn't the technology behind Bitcoin.
It is only one of the technologies. [The interesting part is how] the database, the ledger
is produced in Bitcoin and other cryptocurrencies… that use a similar recipe: a completely flat,
peer-to-peer, non hierarchical network…
Where nobody knows anybody else,
where nobody trusts anybody else. We are able to engineer the emergence of an artifact,
a ledger, that records transactions everyone can [verify]. No one has the power to change them after the fact. It removes [the requirement] for trust in a person,
to a neutral construct [regulated by] mathematics. That process is called consensus. [Decentralized
consensus] is the fundamental behind Bitcoin, and all the other cryptocurrencies, as a
way to achieve trust at massive scale.
A flat network that allows us to conduct
transactions worth billions of dollars, [maybe] without even knowing who the other party is. [It is based on the] idea that we can do something
unique: use networks for governance that scales… for our new exponential innovation world. Here is the problem with networks. We can scale
information and communication, but until 2009, we had no idea how to scale trust and decision-making. The [important] invention Bitcoin [brought]
to the table, is a way to scale trust globally… just like you scale information [on the internet]. Once you crack that, you suddenly notice that
currency is the obvious application, right? Payments is the obvious app because, if you can
engineer, scale, and trust [a mathematical construct]… as a currency and payment system, you now
have something that has never existed before. A network where people can transact value across
the world, that is open to anyone for participation, which cannot be stopped, censored, or
controlled by any one [group or individual].
That model is radically different than what we have
had until now. What else can we do with it? Suddenly, all of the ideas start bursting out.
You have a structure that allows you to scale trust. Can you use it for voting? To build decentralized
corporations with tens of thousands of directors… participating in decision-making? Can you have a company with a billion shareholders
or directors, none of whom are named or known? You could have governance of fundamental [aspects]
of the internet, without [needing] to trust anyone, because you have a structure that is neutral,
mathematical, that you can trust instead.
What is really exciting and interesting
about this new technology, is not that… someone can use it to buy drugs,
or make banking more efficient. It gives us, for the very first time, just when we need
it the most, [the tools] to create global governance, global decision-making networks. [How will] it do that? The consensus algorithm in Bitcoin
is a market-based, game theoretical competition. Anybody can participate, but they [must] commit energy
as a guarantee that they [will] play fair, by the rules.
If they do play by the rules, they are rewarded,
which is why the asset part is important. If they don't play by the rules, everyone who is on the
network checking [transactions to follow] the rules… [would] reject their contribution and
all of the energy they staked is lost. So it is a game in which you [must] put
money where your mouth is to participate. [You choose which rule set to follow, but] rules are set
by the entire network, and you [must] follow all the rules. Think of it as a mathematical Constitution. How do you change [the rules]?
Through overwhelming consensus. If you want to change the rules in one of these networks,
you [usually] need [about] 95% percent agreement.
That is very hard to reach, which means
it is very hard to take over the network. [Bitcoin] took two of the 20th century's most incredible
systems of governance — networks and market forces — and [brought] them together. [Bitcoin created] a network that is flat, global, and open. You don't [need] to trust participants a priori to give them
access; you trust the network will keep them in check. This gives us a glimpse of what we could do in the
future. Governance has changed dramatically now. [When someone] comes along and suggests,
"Let's implement a new form of governance." "It will obsolete all existing forms of governments,
corporations, and social institutions." "By the way, it is not subject to any one jurisdiction.
[It is regulated by] the laws of mathematics." [They will be perceived as a kook] and
in for a tough reception. [Laughter] When I have these conversations with regulators, they
think I am challenging or questioning their authority… to regulate these systems.
[But it doesn't matter if] I acknowledge and accept
their full authority; I question their ability [to regulate]. [I question] their means, their levers,
to affect change in these systems. All the authority in the world, but none of the influence
or the power; no levers to pull, nothing to shut down. What do you ban? Prime numbers?
That has been tried before. There is a specific prime number that
you cannot possess in the United States, I think also in Canada, because
that number unlocks DVDs. They managed to ban a number. Good luck with that.
From a regulatory perspective, that is a dead end. Now we will have a very tough conversation. It requires
people to become accustomed to facing reality. "We should not have a system that allows
criminals to pay anyone they want!" Well, we now have a system that [may]
allow criminals to pay anyone they want, [because] all of us, all of them, and
everyone to pay anyone they want. "We should not have a system that can transfer value
or record information that no one can alter!" Well, we now have such a system.
should, [we can]; whether we must not, we [will]. None of that matters. Now, it is.
Let's talk about what will we do about that. Let's talk about how we will adapt to a society that
has the means to create these global structures. Let's talk about how to deal with the repercussions
of creating these global structures of trust. I leave you with a final thought, which
will throw another big wrench into that. Money has three fundamental uses: store of value,
medium of exchange, and unit of account. In the last 50 years, [most] governments in the world
have added a fourth use, which is system of control. [They] use money and the banking system
as a fully deputized arm of law enforcement…
And surveillance, in order to monitor and
control money as it flows around the world. This [nightmare] was started by Richard Nixon
in the '70s. It has reached its apotheosis. Countries are doing the unthinkable, like banning cash
overnight, as if that stops corruption and black money. That dream [of theirs], [that nightmare of ours], is over.
That dream ended on January 3rd, 2009. [It ended] with the genesis block of Bitcoin,
which contained a message within it. From 'The Times of London,' Chancellor of the
Exchequer on the brink of second bailout for banks. That message, which told us why this was created,
resonates with a whole lot of people nowadays.
But we don't yet know what impact it
will have. I think [the impact] will be big. Thank you very much! [Applause].