And his newest book just came out eight days ago called The Internet of Money, which is a masterpiece to read. Please help me welcome Andreas Antonopoulos. Good morning, everyone.
Let's start with a quick poll here. How many of you have used a digital currency like Bitcoin at least once? How many of you own Bitcoin at this moment, or any other digital currency? Okay, we can fix that.
If you like, later on today, come find me. I would be delighted to demonstrate to you how to set up a Bitcoin wallet on your smartphone. And I will give you your first...
fraction of a bitcoin, not a whole bitcoin, and show you how a transaction works. Bitcoin and the digital currency revolution it has started is best demonstrated. and experienced than explained.
It's actually very difficult to explain Bitcoin. I've spent the last five years learning how to explain Bitcoin. That is my full-time job. Unfortunately, the developers keep making new stuff, which I then have to explain all over again. For a moment, forget everything you think you know about Bitcoin.
Forget everything you've heard about blockchain. Let's start from basics. In 2011, I heard about Bitcoin for the first time. My reaction was exactly the same as the reaction of everybody else who heard about Bitcoin the first time, including its founder.
And that reaction was, ha! Nerd money. That is probably just for gambling.
Six months later, I heard about Bitcoin again. This time, I read the white paper that launched this system. My background in computer science and distributed systems allowed me to see behind the illusion of what I thought Bitcoin was.
It blew my mind. In my life, I have now had six occasions... in which I have become absolutely obsessed with a system of technology, to the point of forgetting to eat, forgetting to sleep, and consuming as much knowledge as I possibly can. My first computer, when I was ten years old, My first programming language experience, my first modem, my first access to the web, the first time I used a web browser, the first time I downloaded and installed the Linux operating system, and then Bitcoin.
When I discovered it, I spent four months consuming as much as I could, except food. I lost 26 pounds on the highly inadvisable diet of obsession. I have not emerged from that, because I keep finding new layers of depth to understand this. The reason it is so fascinating is because it isn't what it appears to be at first glance.
Bitcoin isn't money. The blockchain isn't a system of currency. It is a platform of trust.
It is not a company, it is not a product, it is not a service you sign up for. It is not a currency. Currency is just the first application.
It is the concept of decentralization applied to the human communication of value. Because what is money? NQ told us it is an illusion, imaginary. The reason we don't grasp that is because it is so deeply embedded in our civilization. Money is one of the oldest technologies that humanity has.
It precedes writing. How do we know that? The very first samples of writing we have are spreadsheets. They are tallies and ledgers of debts owed, and money pre-existing that writing.
You might even speculate that money had an oral tradition until it needed to invent a written tradition, so writing was created for it. In the history of money that now spans tens of thousands of years, there have been maybe five major changes. From pure barter exchange to the introduction of the first abstraction of value.
Shells, feathers, beads, nuts, stones, precious metals, paper money, plastic money, and now network money. Bitcoin. It introduces a platform on which you can run currency as an application on a network...
without any central points of control. A system completely decentralized, like the internet itself. It is not money for the internet, but the internet of money. What is money? Money is a language.
Money is a linguistic abstraction. Money is a language that we use to communicate value to each other. Money simply allows us to express value, and that value may have economic consequences, but it also has other consequences. We use money to express and create social bonds, relationships, associations, and to create organization.
Bitcoin is the first system of money that is not controlled by any entity, that is completely decentralized. It introduces the very same things that the internet brought to communication. If money is speech, if money is a language, and you disconnect it from all other media, and you make it pure speech, pure content, an internet content type, a protocol designation...
Money over IP. It completely separates it from all of these previous notions of nations, sovereign issuers, institutions that control. We go from institution-based money to network-based money.
Of course, everyone will welcome this with open arms. Not a chance. What do you think they said the first time someone was presented with a gold depository certificate instead of a gold coin? They said, that's not money.
Go away. What do you think happened in 1950, the first time someone showed up at a motel and presented their Diners Club membership card and said, I'll pay with this piece of paper? That's not money. Go away. And now we're on the verge of a new transformation of money.
We're on the verge of creating the first completely global, borderless, decentralized, and open form of money. One where you can build applications, because this money is programmable. You don't need to ask anyone's permission to launch an application, any more than you need to ask permission to launch an application on the internet.
And the only requirements to... to have a successful application on the Internet of Money is two interested participants. That is your market segment, and you have an application.
A million applications will flourish. When you push innovation to the edges of the network, when you remove the requirement for permission, what happens? Exponential explosion in innovation. The application that could not be built on the old systems of money because they required permission, a significantly large market segment, and adoption by many in order to be available at all. Now, none of those requirements exist.
Anyone in the world can download an application, or use a feature phone with text messaging, and immediately acquire the same powers that institutions of banking have today. When I say anyone, that is only scratching the surface. Ironically enough, not only does Bitcoin and blockchain currency not recognize borders, it also does not recognize people. It doesn't matter if you're a person.
or a refrigerator, or a self-driving car. Throughout the history of money, ownership of currency required personhood, either as an individual or as an association of individuals in a corporation. Bitcoin can be owned by machines, software agents, and machines can pay each other.
That is not just about economic activity. It is the basis for market-based security systems. for creating bonds of authentication between devices. It's the basis of new applications that have never been done before.
Bitcoin and blockchain technology unifies the systems of money. Today we have systems... of money for small payments, systems of money for large payments. We have systems of money for payments between individuals. We have systems of money for payments between companies.
We have systems of money for payments between governments. Does that remind you of something? That's how communication used to be before the internet.
We had systems of communication for pictures, systems of communication for letters, systems of communication for short distance and long distance, and the internet came and unified all of those. What the Internet of Money does is create a single network, which can do a microtransaction... to a gigatransaction, in seconds, anywhere in the world, for any participant without permission. But if you just look at the application of money, you're missing the point.
You can take the building blocks of this platform and use them to construct other languages... that communicate value. Tokens, reward points, and brand loyalty coins.
Today, there are over a thousand digital currencies using the design pattern, the recipe of Bitcoin. Most of them are junk, some of them are not. And over the next decade, We are going to see tens of thousands, and then hundreds of thousands of coins. Some will have economic use, some will simply be expressions of loyalty and affiliation. They will represent items in the physical world, the title for a house, the controlling key for a car...
that can be transferred from one owner to another. Five seconds later, that owner can step into the car and drive away, because the car can validate the new standard of ownership. We cannot yet imagine what applications we will build around this. One of the interesting things we are beginning to observe is that money spontaneously arises... out of the social construct of Homo sapiens.
It even arises in primates. You can teach monkeys money. You can teach dolphins money. You can teach greys, parrots, money. And they will learn how to exchange abstract tokens for food.
and then use them to build social relationships. They'll also invent... Strong-arm robbery. Beat up the other monkey, take away its pebbles, eat the bananas. We see that same thing happen in children.
Toddlers invent money in kindergarten. Blocks, rubber bands, Pokemon cards, and other little tokens, abstractions of value, exchange to strengthen social bonds, express loyalty and friendship, and learn about sharing. Children will be building currencies.
Only this time, these currencies will be global, unforgeable, and scalable on day one. A few years from now, Maria will be the first to be able to build a new currency. will be launching MariaCoin in her kindergarten to compete against JoeyCoin. It won't really matter to anyone, until Justin Bieber launches Justin BieberCoin.
It happens to surpass the market capitalization of thirty nations on this planet. We are all writing horrified opinion editorials about how the world is going to hell. What's happening with this technology is astonishingly deep.
For some of the companies in this room, it's a bit scary. Banking has never been the most innovative sector in the world. There is a very careful balance between innovation and the conservative fiduciary duty that exists in banking. It must exist when you control other people's money.
Yet with Bitcoin, you don't control other people's money. In Bitcoin, I control my money. I have complete and total authority over my Bitcoin. It cannot be seized, frozen, censored, intercepted, or stopped. I can do so with almost complete anonymity.
So can anyone, five minutes after they download an application. Money has changed forever, and banking has changed forever. The idea that you can proceed in the industry of money, in the industries of commerce, and maintain the same conservative attitude that has existed now for centuries... Ever since merchants in Venice and Amsterdam started issuing depository certificates... and providing banking services, that is gone.
You cannot operate closed systems that have borders and require permission to join... at a rate of innovation that is controlled by the most conservative tendencies within your organization. because now you are competing with a technology that enables exponential growth, exponential innovation, at the edges, without permission, by anyone in the world.
And it's not about anyone in this room. Why? We represent the privileged elite.
I can go onto a brokerage account, open it up online, and be trading on the Tokyo stock market... within 12 hours in yen. That is the privilege that I have. One and a half billion people have that privilege. Six billion people can operate mainly in one currency and perhaps have some basic banking services.
Four billion people are significantly underbanked. An astonishing two and a half billion people are completely unbanked. They will leapfrog. They will never have a relationship with a bank.
Every single child born today will never have a bank account. They will have a bank app. A bank app that doesn't give them an account. A bank app that makes them a banker. An international banker in an app.
They will not be permitted... to open a bank account until they're sixteen years old. By that time, I hope they will have at least six or more years of experience with digital currencies. I would like to watch them walk into a bank branch, to have someone explain to them what three to five business days means.
It is highly likely that children born today will never get a driving license, because they will have self-driving cars, but they will also never use paper money. By the time they get to an age where they really start using money, there is no paper money. It will seem as anachronistic as a fax machine or horse and buggy to us.
Exponential innovation on a global basis, giving access to the other six billion. They have enormous need, and this system offers them a solution. It's not ready yet. It is nascent.
It is complex. It is impossible to use for most people. In 1989, I sent my first email. In order to do so, I had to compile a version...
of the Unix mail program using a C compiler and Unix command line skills. I had to set it up on the command line, type out my email, and that email was transmitted... across the great internet in an astonishing three days.
Exactly twenty years later, my mother replicated that experience with a swipe. Bitcoin today and all of the currencies built on that recipe are just at the same level... that the internet was in 1991. Only now, we have the internet. The rate of exponential growth has already started.
The innovation is growing at an astonishing rate. I spend every single day, full-time, trying to keep up with Bitcoin. Just one currency, and it's almost impossible. Do not underestimate this. Do not listen to the people who tell you that Bitcoin is just for pornographers, terrorists, drug dealers, and gamblers.
Remember that they said the exact same thing about the internet. When you give it to two or three billion people, they are not interested in those things. They are interested in sharing cat videos. Now we have an internet of a billion cat videos. When you take digital currency mainstream and give it to the four billion people who have been isolated...
from international finance and commerce, and you give them the opportunity to control their money... against despotic governments and corrupt banks that are stealing from them... You give them the opportunity to control their future, to transact with everyone in the world, to own title on their own property in a fully transferable digital token that is recognized everywhere, control over finance that cannot be seized, frozen, or censored.
They will buy food. Healthcare, sanitation, education, shelter, because that's what we do. And they will not be denied this technology. Do not underestimate where this is going.
The Internet of Money was launched on January 3, 2009. It is coming. It is coming faster than you can imagine. It is deeper than you can fathom.
It is more sophisticated than you can immediately understand. It takes years of study just to see all of the implications. And it is a gift. to the entire world, a technology that represents the sixth greatest innovation in the technology of money, the most ancient technology of our civilization. Thank you.
Should we do some questions? We've got plenty of time for questions. Christian.
What determines the buying power of the currency? How does it stabilize and what's required to stabilize it? So if I would buy some bitcoins, who can manipulate the value of that? Everyone.
The buying power of bitcoin... is determined in exactly the same way that the buying power of the euro, the British sterling, the Japanese yen, or the U.S. dollar is determined through market forces of supply and demand in international liquid markets that operate around the clock. One of the fundamental differences...
is that Bitcoin trading never ceases. It has been going continuously for seven years. The network never stops. Every ten minutes, Bitcoin's heart beats, and transactions are processed. The exchanges never close.
There is no closing price for Bitcoin. It is a rolling average. In that trading, a market capitalization of approximately $12 billion is now traded internationally. What is $12 billion for a global currency? It's a cup.
Swimming in shark-infested waters. Every trader, every whale goes in there and kicks that price around. Right now, the experience of living on Bitcoin, which I have been doing full-time for more than three years, is a roller coaster.
It is an absolute roller coaster. I have seen shifts of 20 or 30 percent in a day. And yet, if you are a trader, you are not a real trader.
If you look at the long-term trend, volume goes up, transactions go up, and volatility keeps dropping. The beauty of it is, I can't sell that to an American or a Brit. I don't need to sell it to an Argentinian. I don't need to sell it to a Brazilian. I don't need to sell it to a Venezuelan.
I went to a conference, and an Argentinian told me, I'm not worried about volatility. Our currency has volatility like this. Bitcoin has volatility like this. I'd rather be going in that direction. You don't need to tell them why.
Their government threw people out of airplanes not more than 35 years ago for disagreeing. They already know why the separation of state and money is a good idea. Volatility is relative. Any other questions? Come on.
Yeah. Let's get a microphone to you. One second.
Okay, so only one short. Sorry. Where are we?
There you are. Sorry. Thanks. Great, great speech.
Obviously, it sounded a little bit like one side of the coin. So we also read all these big hacks and, I don't know, Bitfinex. I think they stole 40% of the money. I think also this autonomous organization have been hacked and all these things.
Can you just reflect a little bit on the dark side of those aspects that might not win our full trust into this evolution? Absolutely. The steering wheel was not invented until 30 years after the automobile was introduced.
Why? Because the first automobiles had two leather straps that you pulled left or right to steer the car. They used horse reins to steer cars.
That's called skill. It means keeping a shadow of the former past in your new system, failing to see the new dimension, and replicating the past. Here is a currency that is not centralized, where your money is your money.
Your keys, your money. Not your keys, not your money. So what is the first thing we do with this new system?
We build centralized institutionals of custodial control that take other people's money and hold it for them. Well, guess what? The entire history of banking, the entire system of regulation and oversight, is based on the simple centuries-old understanding that when somebody else holds... If someone withholds your money, chances are they will run away with it. The entire system of regulation is designed to prevent that.
Yet, it still happens all the time in hedge funds, banks, and national currencies. Of course, if you replicate custodial accounts, exchanges that take other people's Bitcoin, and concentrate it, it happens again. Even worse, because there are no oversight and regulations in most of these spaces.
The answer is really simple. Stop centralizing the decentralized currency. Stop trying to replicate the banking past.
the future of money. The important thing to realize is that security in Bitcoin is an emergent property that exists because of the decentralization of control and power. If I want to hack a million customers'Bitcoin and they're holding their keys, I have to hack a million customers.
If they all give their keys to one person or one organization, then we've got a honeypot. A honeypot that attracts the attention of every hacker on the planet. Notice what has happened.
Over seven years, and with a market capitalization of $12 billion, Bitcoin is the largest cryptographic deployment in the world, the largest public key infrastructure in the world, the largest security honeypot in the world. It is not secure because it doesn't get a. It is secure because it generates immunity by being attacked all the time, 24 hours a day, by the most sophisticated attackers this planet has. environment, set up a centralized custodial exchange using PHP and MySQL, and you park a $150 million honeypot in there, you're inviting the sharks. Bitcoin banks get hacked, Bitcoin exchanges get hacked, Bitcoin has not been hacked, and cannot be hacked because there is no point of control that you can apply pressure on.
It's completely decentralized. All right, maybe one more question. Yes. Where does supply of Bitcoin come from?
And are you sure the market doesn't get oversupplied? The supply of Bitcoin is determined... algorithmically based on a geometrically declining supply function.
In the beginning, every ten minutes, fifty new bitcoins are created. Every block, the heartbeat, ten minutes, created fifty new bitcoins. This bitcoin is used as a reward in a game theory-based security model that ensures that...
every transaction is independently validated by completely anonymous actors, who have to stay... They take electricity as a guarantee of the security work they've done. If they succeed in doing the security work of validating transactions correctly, they earn, as a reward based on a probabilistic return, that reward.
Fifty bitcoin every ten minutes. That's how currency is introduced into the economy. Every four years, it gets cut in half.
Fifty to twenty-five in November of 2012. This year in July, this past July, In July, we had our second halving event, which was celebrated with birthday parties all over the world. Bitcoin's reward went from twenty-five to twelve and a half bitcoin. As a system, it is designed to have a monetary policy that is purposely deflationary, and simulates the issuance of precious metals.
It gets harder and harder to mine gold at greater and greater cost. Bitcoin is the same. The idea being that less and less is issued over time.
If you follow that geometric curve, at some point you reach the end. In the year 2141, Bitcoin is no longer issued. Twenty-one million coins is the asymptotic cap.
It will never reach 21 million coins. That is part of the protocol, an unchangeable part of the protocol. It is a rule enforced by every system that participates in the Bitcoin network.
It is meant to be sound money, but it is not the only monetary policy that exists. There are several other currencies that implement different monetary policies. The idea is for Bitcoin to serve as a very solid reserve currency for many other things. What advice do you have to give to companies here who are from non-financial institutions about how they should take tactical steps to think about experimenting with the blockchain in terms of storing value?
Understanding that it is not just currency, a platform for trust, that it can be used as a historical record of truths that can register information, that it can be used to create all kinds of... of tokens that can be exchanged between your customers, suppliers, and manufacturers. It can also be used simply as a currency for any cross-border transactions, import-export activities, remittances-based flows, paying a social... Associates and affiliates, all of the things that today are expensive, slow, and difficult, become cheap, fast, and easy when you use one of these digital currencies.
But it is still early. For now, learning about it. Here is the one important thing you must understand. You will hear a lot about blockchain.
Most of what you hear about blockchain is not the internet of money, it is the intranet of money. The intranet is where you run front page, outlook, antiquated software, and a closed enclave of your corporate backwaters... with stale content and boring apps. In the end, it is full of viruses anyway, because you can't keep it secure.
Blockchain that is not open, not public, not borderless, not open for innovation, is not what we are talking about here. And that's a really important... It may be useful if you want to run a clearinghouse between three banks, but it is not the internet of money. Thank you.
By the way, everybody who asks a question gets a free copy of my book. Come and see me in the back there. Thank you so much.