Video - Bitcoin in the Beltway The Future of Cryptocurrency

Andreas shared his knowledge on this video about how we really need digital currency to revolt against the sitting dominance of third party institutions such as banks. He then explain how to use crypto currencies as payment on the modern era.

TRANSCRIPT

Andreas: It is such a huge pleasure to be here today. I've been following Jason's work for Sean's outposts his homeless outreach and support charity and if you don't know what's Jason's been doing for the last several months, he ran from Miami to San Francisco in order to raise money for Sean's outpost, which is just such an incredible thing. I'm a geek, so I don't run unless there's a bear chasing me. So I can't imagine not only not doing 30 miles a day but doing one mile a day is a bit daunting. It's quite remarkable what Jason did for charity and he continues to do that every single day. I'm really happy to be here.

So I wanted to talk today about the future of cryptocurrency and I wanted to start by talking a bit about regulation and new ways of doing regulation. I think this is the town to talk about it, right? So there's this ongoing conversation these days about whether Bitcoins should be regulated and there are really two broad camps in this space. Some people who believe that we need more regulation in Bitcoin in order to protect consumers, in order to provide more certainty, in order to reduce risk and there are people who are philosophically opposed, fundamentally philosophically opposed to regulation of Bitcoin. On their basic moral principles, they think that Bitcoin should operate entirely as a free market without any regulation and C regulation as an alien enemy force, as a force of corruption and I fall in either of those camps. I'm opposed to regulation on purely practical terms and let me tell you why and then we'll talk a bit about what we can do next. So the reason I'm opposed to regulation is quite simple, it doesn't work, it didn't work before the financial crisis in 2008 when banks and other financial industry players took enormous risks with other people's money, despite all of the frameworks that were there to prevent exactly that from happening. It didn't work during the financial crisis when the response of regulators was not to investigate but instead to cover-up, so as not to spook the markets and to feed these behaviors with more money in order to not let them destabilize the entire economy.

And regulation most certainly didn't work after 2008 when we discovered that the mortgage market that was hopelessly corrupt and an absolute casino of greed was just the tip of the iceberg because that same behavior then translated into fraudulent mortgage foreclosures, fraud closures with robo-signing and no one was punished for that and then we discovered that the London interbank overnight rate was rigged, and the gold markets were raked, and the high frequency trading algorithmic trading markets were rigged, and the S&P 500 was rigged and the futures markets were rigged, and the hedge funds were rigged and of course then there was the big backlash where finally the prosecutors woke up and they said, this shit has got to stop and thousands and thousands of bankers landed in jail. Oh, wait that didn't happen. And so regulation didn't work, it didn't protect consumers especially the most vulnerable consumers at a time when they needed protection from parasitic capitalism and greed, it didn't protect consumers or the markets during the crisis and it didn't cause any repercussions for those who were exhibiting this behavior. In fact, if anything one could argue that the behavior of the regular -- regulatory agencies after the crisis, where they impose fines that were less than the profits made by fraud was an incentive scheme. it rewarded that bad behavior.

And so here we are today and the too-big-to-fail banks are bigger and none of them went to jail. And 25 trillion dollars of economic activity after 2008 has gone to less than 10% of the population while the rest of us are led to believe that there is no inflation unless, of course, you buy food or energy or a big proportion of your income goes to, you know, surviving. In which case, you can't make ends meet because of the horrific inflation that is actually taking place, so regulation doesn't work. And what I see in Bitcoin and in Bitcoins consensus algorithm and it's consensus mechanism, is not something that is ideologically superior, is not something that is principally perfect, is not something that I find to be the morally better choice, I just see something that works in an environment where the alternative doesn't work and so while we're having this great ideological conversation, should Bitcoin be regulated, should we regulate financial markets more or less and there's, you know, two opposing camps and there's a status and then there's the anarchists and big old juicy labels that are scary on both sides and try to divide this opinion down the middle. And to me this is like a discussion between physicians in the Middle Ages, on the one side you have antibiotics and they work, and the opposing view is bloodletting, let's bleed our patients and that doesn't work, it just kills them faster. So why are we still doing it, right? Yeah, that's not a big ideological or moral discussion, it's like this bit works and this one fucking doesn't, fairly simple.

So I'm opposed to regulation because it doesn't work. And it's not that it doesn't work because it's not done right, it's not -- it doesn't work because we're not trying hard enough, it doesn't work because of the very nature of incentives in a human society and the nature of incentives in a human society when you cut -- when it comes to centralized organizations whether you're looking at centralized financial services organizations or the centralized regulatory infrastructure that are built upon them is such that power corrupts and so why do we have regulations in the first place. The reason we have regulations in the first place is because power corrupts. This is not a new lesson, this is a lesson that my ancestors the Greeks have been telling us since three thousand years ago with great philosophical treatise on how power corrupts and absolute power corrupts absolutely and there is no more absolute power than control over money and control over money is the power that corrupts fastest and most deeply. So we know that power corrupts and so why doesn't regulation work because it cannot solve that fundamental problem, because those who need to be regulated the most are the ones who have acquired great power over the system and those are the ones who absolutely cannot be regulated because their power affords them the possibility to be above the law, to be above regulation, the very organizations that need to be regulated the most. Not little runaway penny stock Ponzi schemes, they don't need to be regulated, they're rank amateurs.

We all know the truth, we all know the truth, the biggest criminals, the biggest criminals in our economy today. Our sipping coffee sitting next to each other in Davos and congratulating each other on the great increases of the S&P 500, it's not that little penny stocks that need to be regulated, it's Goldman fucking Sachs and we all know that and they're never going to be regulated, they can't. And the reason they won't be regulated is because their great power affords them of the ability to be above the regulator's. Regulation is a solution to a centralization problem, the problem of control over people's money and we know very simply that if you give someone control over other people's money, sooner or later, usually sooner, they steal the money, it's as simple as that, they steal the money, they run away with people's money. You let someone control your money they will take your money. Your best friends sitting next to you, your business partner, you get a hundred million dollars in funding, wake up one morning your best friend has moved to Aruba with a hundred million dollars of your funding, it happens every time, the story is the same. Sometimes it's greed, sometimes it's covering up for a mistake, that's also a very common story, we bet a bit on the casino stock market it wasn't going well so we tried to hide it and double down on the bat and that didn't go so well so we quadrupled down on the bet and that didn't go so well, we octuple down on the debt and before you know it you've got Nick Leeson all over again or Mark Cappellas, same story, same exact story. Covering up for a mistake by increasing the odds until it all collapses in a pile of ashes. So if you have that problem the understanding the control over money leads the theft, the way we solve it is by creating another centralized institution, a hierarchy an organizational system of committees and individuals to watch over the first centralized system of organizations and committees and individuals to make sure they don't steal and they're just as corruptible as the first bunch. Maybe not directly, maybe they can't be bribed, in some countries, yes, you just think a big fat juicy envelope in front of them full of cash and suddenly your license has approved, your proposal is accepted your grant is granted and all goes smoothly.

In this country we do things a bit more subtle, right? In this country we use influence and persuasion, yes, but if you send us to jail, it's gonna collapse the entire economy, so how about we use prosecutorial discretion and pump some more fed money into it and don't worry it's all gonna work out. In our country here corruption of regulators is subtle, it's by indoctrinating them in the idea that's -- what's what is good for the Giants institutions is good for the economy and that applying the rule of law or justice to protect consumers will hurt consumers in the long run and if they buy into that idea they're in your back pocket forever. Regulation doesn't work because it's a centralized solution to a centralized problem and then there was Bitcoin, and Bitcoin offers us this really simple elegant solution the consensus algorithm and the consensus algorithm works by aligning the incentives of the participants directly with the incentives of the broader network, by ensuring not through regulation, not through rules, not through institutions, not through committees, not through fallible human beings but instead through the elegance of mathematical theory applied to game theory to incentives in a complex structure. The blockchain consensus algorithm ensures that cheating doesn't get you the reward and that simple elegant solution shouldn't work. It's the kind of thing that doesn't work in theory but in practice, like Wikipedia or the Internet. If you look at it on a piece of paper you think, yeah, that can't possibly work, what do you mean? Everybody can edit the articles, it's gonna be a clusterfuck.

Let's stick with Encyclopedia Britannica, we know how that works and yet in practice it does work. In practice at scale the simple elegant alignment of incentives without comes through game theory works and it worked when Bitcoin was tiny in 2009 and it keeps getting better, it's actually more effective as time goes by, so now we're looking at a multi-billion dollar economy, where miners do not cheat. Have we discovered the most honest people on the planet, no, we haven't. Is the pie not big enough to steal, of course, it's big enough to steal. The shenanigans you see in a county committee to steal a few million dollars of waste management budgets are legendary and here we have a multi-billion dollar economy and the miners and not stealing and the reason they're not stealing is because the system makes it in their best interests to play by the rules rather than against the rules because we're not trying to build a system that ask you to not be evil, we've built a system where you can't be evil because it doesn't pay and that is a better system, that is as better than centralized regulation as antibiotics are better than bloodletting and it's time to say, it's not that we don't think regulation is the right solution for Bitcoin, we don't think regulation is the right solution for anything because it doesn't fucking work and you can see that every day all around us, it doesn't work.

If it worked I'd be all for it and maybe it does work on a very tiny scale for short periods of time but in the long run and on the big scale, it doesn't work. And this isn't just a matter of philosophical or political differences because when regulation fails to work millions of people have their lives destroyed, this isn't just a matter of, hey, it didn't work, it didn't work. Yeah, it didn't work and half of America's middle class ended up in poverty, a third of the homeowners lost their homes, your college education is worth shit and no one can find a job, that's not just the little oops, that's 20 trillion dollars that disappeared. That's 250 million people who are in dire straits and have been for years and are seeing no possibility of things getting better, that's not a little oops. I'm not opposed to regulation for Bitcoin, I'm opposed to solutions that don't work and so let's look at this consensus algorithm because I think we need to realize that the future of cryptocurrencies is the future of consensus algorithms, it's the future of scalable consensus systems that align incentives with the outcomes we desire and we can take this and run with it, we can actually create better solutions for a much broader set of problems than simply don't steal the money. We've already shown it works for don't steal the money and now we can show that it works for a broad variety of other systems. I'm most excited by the startups that we see in the space that are taking the consensus algorithm system of Bitcoin and they're applying its and novel problems. Not the Federal Reserve minting of currency problem but problems about allocation of resources in a social environment and even social interactions themselves. Proof of work is just the first step. One of the more interesting developments was seen now is other forms of consensus algorithms. Like, for example, proof of resource, as a few companies working in this space and with proof of resource what you do is you take resources that are currently underutilized or completely unused. Like, for example, the disk space that's free on your laptop, the bandwidth for your wireless access point that's not being used, the CPU capability of your desktop computer or even your mobile phone, and you're saying how can we take that resource and share it.

Now I can share that today, we have the protocols, we have the software to take resources that are underutilized on personal computers and share them with others to create scalable peer-to-peer cloud computing systems. How many of you here share your excess computing storage and bandwidth? There's a lack of alignment of incentives with outcomes, you don't share them because an abundance of altruism is not a good enough reason for human behavior, that's a simple fact, it doesn't work. It works in very narrow scenarios, it works in very small local communities, it works at local scale. You can create mesh networks, you can create communes and co-ops and collaboration environments but it doesn't scale. Consensus algorithms actually gives us an opportunity to take incentives that only work on the local level and scale them up so they work on a global level. So if you were able to share your Wi-Fi and as you're sharing it, the very act of sharing mines coins in a proof of resource consensus algorithm and gives you a token that has value a token that you can then use when you're traveling so that when Mariette Renaissance to pick a random example asks you for 1499 for 100 kilobits of Wi-Fi, you can say, fuck off, I'll use the shared network instead and use some of your precious tokens that you've mined by being altruistic with incentives, to now use the resource that is common. So you mind coins by sharing your network at home, you go traveling, you use those coins to use somebody else's networks and suddenly an incentive structure that would only work if everybody was being absolutely altruistic, meaning it wouldn't work on a large scale, can work on a very large scale and suddenly in 2014 mesh networks that have been a glimmer of possibility just on the edge of horizon for the last two decades suddenly seem like they could be real and they could be happening on a massive scale pretty soon, that is incredibly exciting.

The idea that you could take cloud computing resources from thousands and thousands of underutilized PCs and set up cloud computing networks by proof of resource mining. And the reason this works or I think it will work is because consensus algorithms take an incentive structure and through the use of mathematics and game theory they align it with the outcomes that you want to achieve as a community, so if what you want to do is increase the capacity of a shared resource like Wi-Fi bandwidth and you align the incentives of a currency with that, it happens. And if it's on a transparent blockchain like Bitcoins, you don't need to regulate it. I don't need to worry about whether the FCC is going to destroy net neutrality yet again on a proof of resource sharing network because there is no FCC. I would like to believe that regulation works because then the fact that 75% of the Internet is against destroying that neutrality would be perfectly enough for the FCC to do its damn job but they're not going to because they have many, many paid lobbyists whispering into their ear that this is all about greedy Netflix trying to get more money. Well, guess what, I already paid for that Comcast connection and if I choose to download Netflix, that's my money. Netflix doesn't need to pay again, I paid you advertise 50 mega down, where's my 50 Meg it's already paid for. The FCC is destroying net neutrality because it is suffering from regulatory failure and if I had a proof of resource sharing mesh network, I wouldn't need to worry about that because net neutrality would be ensured by the combination of a consensus algorithm and a transparent blockchain. I wouldn't need regulation because the system is self-regulating, I wouldn't need to ensure that one player can't dominate the environment because one player can amass the resource to dominate the environment and if they did, the incentive would be for them to share that resource for reward rather than to use it to destroy the environment, but it goes a lot further than just out locating resources. One of the interesting experiments that were beginning to see now which I find fascinating is the concept of proof of publishing and the use of consensus algorithms to incentivize behaviors on social media, positive behaviors that build community, positive behaviors that enhance the conversation the discussion.

One of the organization's I work with disclaimer here, Let's Talk Bitcoin, is launching an ambitious project. I have no idea if this is going to succeed and I certainly wouldn't suggest that you buy into it but I think it's worth looking at just to understand what Let's Talk Bitcoin is doing with this experiment because whether Let’s Talk Bitcoin succeeds or not in this experiment. I think the experiment tells us a lot about where consensus algorithms are going and somebody else will eventually succeed here. So what Let's Talk Bitcoin is doing is creating a currency for content producers and content distributors that allows people to be rewarded by mining through publishing content so proof of publication, so if you write a good article and that article is read by many people you earn currency. You earn currency by creating conversations that are valuable to other people and it goes one step further. If you comment and enhance that discussion by commenting, you are on credits, if you provide reviews and editorial input by highlighting, up voting if you like, the good stuff and down voting the bad stuff and your editorial criteria are matched by others, so you output things that other people consistently find good and also our votes, then you're contributing to the conversation and you earn more coins, which you can then spend to consume content to read stuff, so this is going way beyond just micro payments and the ability to use currency to monetize content creation, we're talking about tying the very incentives of social participation and of quality of content directly to the consensus algorithm.

So using the consensus algorithm to incentivize exactly the behaviors that make for good community. It's not just about throwing a coin behind reddit, it's about changing the fundamental mechanism by which we organize social behavior on social media. So, yes, it would be very cool if tomorrow morning Facebook announced that they're adopting Bitcoin as a payment mechanism but if you look at this broader vision it would actually be boring. What would be really cool is if social media sites started rewarding you for blocking trolls, I would be able to supplement my income quite nicely because I have a lot of trolls and currently I'm blocking five or six of these trolls a week for free but imagine if I could do that as my job and get rewarded because I'm removing negative influences from the conversation and promoting positive influences and I'm getting rewarded simply by the consensus of the rest of the community that what I'm doing is useful, now that is a powerful form of regulation. That as a system of regulation that can work that will align the very incentives of individual behavior with the desired social outcomes for a better conversation. The vision I see for cryptocurrencies is so much bigger than currency because I see this as a way of creating self-regulating dynamic feedback loops that allow us to achieve predictable outcomes in a fully transparent environment, where you can see exactly how the behavior leads to the outcome and to the incentive structure and where people don't behave well because we told them to or because we threaten them with punishments but because the incentives to do so are overwhelming and the disincentives to behave badly in the environment are also overwhelming and that's why I'm opposed to regulation because it doesn't work and that's why I strongly in the Bitcoin consensus algorithm because it works. Thank you.

We have maybe 10 minutes for questions if anybody wants to ask any questions, I'll move this microphone if I can. There you go. If you want to come up here and ask me a question, I'd be happy to answer it.

Unknown: Hi, Andreas.

Andreas: Hello.

Unknown: Great talk.

Andreas: Thank you.

Unknown: Inspirational. That was awesome.

Andreas: Thank you.

Unknown: It sounded like in the beginning that you said that you weren't in necessarily one camp or the other meaning one end of the spectrum or the other related to regulation, that's what I thought I heard. So I was just curious as to -- can you say more about where you see that there -- there could be some regulation that would be beneficial.

Andreas: Well, I -- I said I'm not on one camp first as the other simply that I'm not taking a philosophical position of regulation, I'm interested only in the pragmatic approach, I'm interested only in the practical application of regulation. Show me an example of where it works and I think it can be useful, show me examples where it doesn't work and I don't see any need for it, I already have an example of a system that works, at scale very efficiently with very tight feedback loops and that's the consensus algorithm. So if you want to come and tell me that Bitcoin needs to be regulated, you have to put up an example of regulation that actually works that will solve problems the Bitcoin actually has, not imagined problems and not imagined solutions. I haven't seen any good examples, I'll give you some examples. If you're running an exchange and you're interacting with Fiat and that Fiat is in the traditional banking environment, I'd rather see that be subject to some of the banking regulations then just be completely Wild West, right? So if you're running a centralized organization in Bitcoin, if you're stepping outside of the consensus algorithm, taking control and having custodial access over people's private keys, you’re now outside the realm of algorithmic regulation. If at the same time you haven't gone into the realm of financial regulation, you're in this gray area in between, let's call it the (inaudible0:30:44) gox’s own, right, and in that gray area in between you're not protected by the incentives of the regulatory algorithm of Bitcoin and you're not protected by the punishments, potential punishments, at least if you're a small enough player to face punishment of the financial services regulatory environment, you're just somewhere in this gray area, which creates the maximum possibility for theft embezzlement and all the other problems we've seen, so if the choice is between no regulation and some financial regulation, I'm like, yeah, go ahead, audit their books, right. That's not a bad idea, that's not a bad idea at all. A better idea is put all that money on the blockchain, hold it under multi signature keys with escrow, use voting pools, use algorithmic proof of solvency and algorithmic proof of no fractional reserve, put it under a regulatory algorithm that actually works, that's an even better solution. So let's compare actual solutions for actual problems and not just say, well, we really need to regulate Bitcoin. Bitcoins already regulated, Bitcoin is regulated by algorithm and it's doing a hell of a better job than the SEC is doing, so if you want to suggest an alternative you'd better come with some evidence. Thank you.

Unidentified female: Hey, Andreas.

Andreas: Meghan.

Unidentified female: So the proof of publishing thing is interesting to me, that's the first time I've kind of heard of that and it reminds me of the debate of intellectual property and patents are a form of regulation that obviously doesn't work for most people, so could you kind of elaborate on how that kind of has -- is a blockchain solution to the IP discussion and, you know, establishing – well, you know, what can be published because as a writer it's difficult for me sometimes to get myself out there and at the same time I hold a philosophical position that's, you know, I don't believe in intellectual property so much, I want my work shared as much as possible but I think that's great for establishing the proof if you know who published this first--

Andreas: I think that's a great -- great question. Thank you. The intellectual property environment is another example of massively failed regulation. The original idea which is encoded in the Constitution is that Congress shall provide this form of intellectual property in order to promote the Arts, in order to create an environment where positive contributions to culture are rewarded with monopolistic control for limited times. Now limited times used to mean seventeen years, I believe, at first and that was all fine and good until Disney had its Mickey Mouse trademark and copyright over its movies running out and they didn't like that, so they went to Congress and they doubled the copyright extension and then they did it again the next time it was about to run out, and then they did it again the next time it was about to run out and they've now done it 17 times in a row until the copyright extension is 98 years plus the age of the author or the life of the author and Disney has copyrights forever. So limited times became limited unless we can pay Congress to make it otherwise and -- and essentially if you look at the facts, Disney all the time gets away with stealing other people's work, they steal from popular culture, the idea is that all work is built upon popular culture, so you take a bit, you give a bit back. They've broken that social compact, they take the Brothers Grimm, popular stories from other countries, you know, from other cultures, they take but they never ever give back and if you're one of the authors whose work has been stolen, you're gonna figure out very quickly how equally copyright is protected when you try to take on Disney for stealing your work and if you accidentally mash something of theirs up, you're gonna find out how well it works the other way. The truth is that they can get away with being above the law, so it's the exact same regulatory system failure. As a result of that we've seen this in their enormous development of open source and creative commons, a culture of sharing, which is an incredibly powerful force because it aligns the incentives of giving back to the community with the incentives of the authors but it's very difficult to monetize, so we've arrived at a situation where you can either share with the community and build on the culture and not make any money or if you're lucky enough to have a fortune 500 corporation then you can make money or intellectual property but there's no in-between, there's no other way. so John Amaro's who's playing here, for example, is doing another great experiment, which is, she launched a coin to represent contributions to her artistic output as a songwriter, so it's called Tatiana Coin. Now some people think that's silly, some people think that's not going to work and it might not, I don't know, but it's a really brave move because what it does is it says, here's a new way to monetize artistic expression and it's something that we don't see anymore. So I think consensus algorithms proof of publishing brand coins and things like that can marry the sharing economy of the Creative Commons and open-source licensing with ways to generate income and to fund arts and culture, and software developments, and content publication and writing in ways that are more effective than intellectual property regulation which has basically failed. Thank you.

Unknown: Hey, how’s it going?

Andreas: Hi.

Unknown: So I love the idea of proof of resource, I'm excited to be a participant in that, I have a lot of hardware at home as many people in there probably do but one of the things that keeps me out of it is the same thing that keeps me running it out of running a tor exit node. I'm worried a lot about legal liability, I'm worried about a knock on my door. I don't have time to go to court.

Andreas: Right.

Unknown: So how would you address that? How can we fight to get service provider lack of liability for back -- lack of a better word extended to normal participants in this, you know, proof of resource key? Thanks.

Andreas: That's a great question. I don't really know the answer to that. I look at it slightly differently which is, I run an open Wi-Fi network and I run that open Wi-Fi network not just to give back to the community but because I think it gives me a very nice margin of what the big boys call plausible deniability. Oh, I didn't go to that website, I run an open Wi-Fi node. I don't go to websites where I need to worry about that but I still run an open Wi-Fi note because what it does is it breaks the statistical pattern of my browsing habits by mixing it with the browsing habits of complete strangers who happen to stop in the parking lot across the street from my house and that's a really nifty little solution. Now does that mean I'm going to get a knock on my door? I might get a knock on my door for a million other reasons, I don't think it's going to be because of that, I do limit the bandwidth and I do ask people not to do BitTorrent when I do that. I'm not running it right now, I used to run it. I'm gonna set it up again, but, you know, there -- there have to be some limits. I think a proof of resource coin would actually make it easier for me to do that in a way that also gave me some incentives to do it. But, yeah, it's kind of bizarre that carriers can get common carrier protection and screw with net neutrality and you can't get those protections if you do it at home, that's messed up.

Unknown: Hello, good morning.

Andreas: Yes.

Unknown: I was wondering if you could elaborate on the proof of publication, like whether it'll use a custom platform, like, that it you can exchange then the content and what the, like, profit - price disparity will be for those who publish in those who then read.

Andreas: Oh, that's -- that's a great question. The details are still being worked out, LTB coin is being built on top of counterparty, which is a Bitcoin meta coin. It's basically a platform that runs within the Bitcoin blockchain that offers the ability to use the Bitcoin consensus algorithm to bootstrap other types of behaviors, so counterparty is the basis platform for LTB coin and that coin is going to be issues in certain ways, is going to then have proof of publishing attached in certain ways and then you'll be able to use it to buy content. The exact details, I think, will probably be a work in progress for the next couple of years in that, Adams plan is to see what works and if it works, keep it and if it doesn't, change it and experiment. This is very much an experiment. The -- the truth is that it's not going to be yet the primary funding mechanism for anyone but if it works the possibilities are really, really interesting.

Unknown: Hi. Many technologies have been very disruptive had started out as technologies for the people and to bring people together and like radio and telephone, they've become regulated.

Andreas: Yeah.

Unknown: As central as consensus by peer network technology is identified as a threat by centralized institutions such as Bank of America – America, what attack vectors are they going to take to try and own it or -- or squash it?

Andreas: That's an interesting question. I think the primary reason, well you're right in that a lot of technologies or even social institutions start out as great powers for egalitarianism for equalizing powers. Here's the irony, banking was a hugely egalitarian force. Before commercial and consumer banking the only people who had senior age for coins were kings, the only people who could do corporate charters were kings, the only people who could participate in venture investments with the aristocracy. Banks, consumer bank and of course consumer banking at the time was enormously stigmatized, right and was a big reason why Jewish populations were persecuted all around medieval Europe, so consumer banking in itself was an insurgent movement against the aristocratic control of money. And look where we are today, the new aristocracy of parasitic bank capitalism. These egalitarian forces start out like that gradually get corrupted, co-opted and taken over overtime and this happens again and again but the reason it happens is because of centralization. The reason it happens is because hierarchical institutions and organizations are very easy to corrupt because they substitute one source of power that's human with another source of power that's human and centralized. And -- and overtime if they start out distributed they get more and more centralized. So bitcoins consensus algorithm starts out completely decentralized and that's great, as long as it remains decentralized it is impervious to corruption. If it becomes centralized that provides control points, points where power can be applied, points that can be co-opted and those points become vulnerabilities for corruption, so Bitcoin might become co-opted if it becomes centralized. The good news is if you've opened the door to alternative currencies and consensus algorithms it's a lot easier to push another contender through that door later, so if Bitcoin did become corrupted, co-opted and centralized, we'd be right back here a decade from now disrupting Bitcoin, maybe with dogecoin or light coin or some other coin that doesn't exist yet. So, the very fact that we've started asking questions about currency and allocation of resources and the best way to organize consensus and distributed systems has given us an opening to do this disruption again and again and again if necessary. I'm quite happy to come back and disrupt Bitcoin in 15 years if we have to but I'd rather see it succeed as is and the way to do that is to resist centralization, resist centralization that's the key to maintaining Bitcoins effectiveness, really.

Unknown: Andreas, great speech (inaudible0:44:00). I'll just be brief. You made a great point about regulation and about how the problem is not necessarily the regulations of the statutes, it's the enforcers, it's the people. Now virtually everyone in this room is a potential target of the government because we might run afoul of various regulations or really run afoul of people who are envious of us or jealous of us. Everyone here in this room is a small business or entrepreneurial startup guy or something and we're all basically like the one or two percent of the population where the smart one percent we've always been made fun of, and we're society based upon individual rights and protecting the minorities, maybe we're the intellectual minority because we're smarter, what is the -- the -- the issue, where's the hope for the people in this room that if you're right on the human behavior problem or what do we do when the government has all these resources and can -- can over criminalize, can go after a guy and like Charlie Shrem and go after anyone else in this room, quite frankly, you could meet the people behind?

Andreas: The good news is that if the government comes after me or you or Charlie Shrem, we don't control Bitcoins so there's not really much they can do against Bitcoin by attacking individuals. So, I'm not particularly worried about that because I don't control Bitcoin so therefore coming after me is a gigantic waste of time. The government's and governments in general and regulatory institutions have resources, have enormous resources. They pay for those with fiat, that fiat is collapsing all around the world, it's collapsing faster in about forty countries that are on the brink of hyperinflation and massive currency crises. Most people don't realize this but we are in the middle of an absolutely historical situation, never in the history of finance have so many currencies being collapsing simultaneously, this is the largest currency crisis of two centuries. It has never happened before on this scale where thirty or forty countries on the verge of currency collapse and crises where some of the strongest currencies in the world the yen, the Euro, the US dollar and the Chinese yuan or Mme are collapsing simultaneously under immense inflationary pressures created by enormous stimulus that is failing to stimulate anything. So, I'm not worried about government's coming after Bitcoin because really personal, they're not in most cases. The truth is no one's going after us, they're still trying to see if this little thing in the corner has any possibility of creating growth as much as any danger of causing disruption. I think most people in Washington are thinking, hey, maybe this Bitcoin thing could generate some jobs. Sure as hell are being generated anywhere else and I see lots of startups in this space and at the same time maybe it's going to disrupt the banking industry but secretly thinking, well, they deserve it.

I don't think anybody's after us, quite honestly. In some of the more corrupt countries in the world, yes, there are they're directly threatened by Bitcoin, they're banning it, they’re after it, they're trying to stop ii and they have the least resources to achieve that, they have the most level of corruption which means that when they try to apply the rule of law against something like Bitcoin in a country where they don't really have the rule of law, it backfires badly. I think of these scenarios where you have these dictatorships trying to ban Bitcoin and – and the supreme leader says will ban Bitcoin but -- you know before we ban it I think we should buy some and then the general says, yes I agree, we should ban Bitcoin, I’ve already bought some. And of course the people who ban it or who have the power to be above the law are going to be the first to stuff their digital wallets with Bitcoin, just like in Soviet Russia. You know, when the hard dollar was banned, the politburo was stuffing suitcases with it. So, the leadership, the judicial, the army, the police, the generals are all stuffing their pockets with Bitcoin because it's banned, because they can get away with it and because they see that this is a dangerous thing therefore a useful thing for their own personal future so it completely subverts the very act of banning it. In fact what it does is it creates an environment where the best way to bribe a politician in a country where Bitcoin is banned is bribed them in Bitcoin. It doesn't work. I'm not worried about frontal attacks on Bitcoin, attacking a decentralized system with a frontal attack is walkable. In fact if anything it encourages diversification and evolution of the platform to become more stealthy. So, yeah, I'm not really worried, I think bitcoin is winning long before it's perceived as a threat and I think smart politicians in relatively liberal democracies like the US and I say relatively. If you think the US is a horrible fascist dictatorship you haven't actually lived in a horrible fascist dictatorship, relatively this is still we have it good. And so in countries like ours, I think Bitcoin is doing great because politicians see this as jobs opportunity, income growth and all of that means votes and campaign finance contributions, pretty soon they're going to be very focused on the campaign finance contribution and Bitcoin part and then we won't need to worry very much.

Unknown: So, as you said -- you know it's -- the important thing is really building these consensus based algorithms that have the proper incentivization structures. In terms of incentivization I wonder what your thoughts are on the structure for incentivizing people to run Bitcoin nodes. It seems to me like there is incentivization in terms of trust but of course we see a lot of debate about whether or not there needs to be direct fine incentivization.

Andreas: Well, that's an interesting argument. One of the -- it ties in very closely with a concern about centralization of mining because of ASICs because the original incentive for running a Bitcoin node was that you could mine and you could mine and therefore get a reward. So at the moment that incentive is not working for small-scale miners because ASICs overwhelmed. I have some concerns about that but at the same time there's the opposite side of the coin which is, just recently for example, in Ars Technica two days ago, they had an article about network attached storage devices being taken over by malware that was doing dogecoin mining. And so thousands of storage arrays were using their controllers to mine doge instead of find files and the directory index because it is profitable to do CPU mining. So the downside of having CPU friendly mining is that the most available resource for CPU friendly mining are botnets and compromised machines and that means, not only does it create enormous incentive structures to create malware and botnets that are used for mining but also it offers the distinct possibility of a rent to fifty one percent attack where you rent a botnet and instantly get a superior amount of hashing power to attack a currency, ASICs protect us against that. It's a double-edged sword, we have to see how this is going to play out. I think this is all a matter of -- you know an experiment in progress, we don't know if ASICs centralization is a benefit or a disadvantage, we'll see. I think it goes in cycles of concentration and decentralization as the market moves back and forth with the price but we'll see how it plays out. I – again I don't think the incentive structures are always perfect. And I think I'm going to have to stop the questions now, No. Announcement, let's do an announcement. Gate change

Jason : So everybody can still ask Andreas, what we're doing is we're having a move -- Jeff Berwick is going to be moving from Town Hall into here, so he's going to get moved out in here and stuff. So continue doing questions – yeah. No, that's fine. So just -- anyone that was going to go to Jeff's talk it's going to be right here so just stay tuned.

Andreas: Thanks Jason. All right, let's do -- let's do one or two more questions. thank you.

Unknown: So it seems like in this -- in this future world you're talking about of algorithmic consensus and things like this, there's still a currency that is fiber, right, you need somebody controls the fiber at least right now, so how do we get away from –

Andreas: Fiber you mean optic fiber?

Unknown: Yeah, fiber optic cables.

Andreas: Well, I don't think that's necessarily the case, fiber optic cables I think are really important for long-distance communications for backbones. Within a local environments like for example, this room, the bandwidth between the cell phones that you have in this room is ridiculous, its enormous and having some of those uplink into cell towers would give you an enormous amount of bandwidth. I don't think mesh networks really need backbones as much as people imagine. I don't think mesh networks are failing because of a lack of bandwidth on back gone -- back bones and keep in mind that if you had the ability to buy backbones at balk rates because you are running, you know, congested mesh network nodes then you can use the economies of scale of your buying power to -- to get into those, so I'm not too worried. I think -- I think fiber is a consideration for very, very large centralized organizations because fiber is a hub-and-spoke centralized bandwidth solution. For individuals in a highly decentralized network, wireless is much more effective so I see wireless mesh networks is more promising but we'll see, that's a good point.

Unknown: I got a quick couple things, one is a quick statement in regard to something else and that is I think that if ASICs create a situation where one person or two people were able to control the entire Bitcoin network, you destroy the social work utility and it would just switch to a different coin, free-market would take care of things but my question to you is have you been seeing in places like Argentina where they've really been cracking down on the capital controls where that's driven crypto coins as a transaction?

Andreas: Yeah, that's a great question. Argentina has probably Latin America's most vibrant Bitcoin community that in many ways rivals -- many of the rivals, many of the communities in Europe and Asia, Argentina has a very strong Bitcoin community and it's -- it's a very diverse Bitcoin community which includes both some very rich individuals but also a lot of middle class and lower-income individuals. I think what you see is that where it is difficult to explain Bitcoin in a Western world environment, like here if you talk to your cab driver or if you talk to someone in a pub or bar about Bitcoin, they’re going to say, well, yeah, but why do I need Bitcoin, dollars work fine, right. They have no conception of hyperinflation, they don't know how it can destroy the wealth of a generation or in the case of Argentina, destroyed the wealth of the generation three times in thirty years or in Greece where I grew up, you know, my parents were twice affected by massive devaluations that destroyed their wealth. If you haven't had that experience it's very hard to see why Bitcoin, right.

So, what's the saying, “in -- in complete darkness, the light shines brightest”, so in an environment where your currency is shit and your government is barely discernible from an organized crime syndicates and your bank is even worse than that, you look at Bitcoin, and the question is not why Bitcoin, the question is how do I do Bitcoin right now. And when I went to Argentina that was the question. I didn't need to explain why Bitcoin to anyone. So like -- let me tell you why it's a bad idea for governments to control your currency like, dude, twenty years ago they were throwing people out of airplanes, we know, it's okay, tell me how right now. Here you have to go through an explanation of why and so in the environments where currency controls are greatest, where the monetary systems are most corrupt, Bitcoin can thrive and it can be adopted with very, very rapid viral adoption memes because there's need, there's enormous needs. I think you're going to see one of the interesting things is once we get to a level of technology, that's down tacked enough so you can do it on SMS feature phones and Android phones become cheap enough. I think we're going to see an explosion of Bitcoin in Africa and Southeast Asia that will be similar to the explosion of cellular telephony we saw in the 80s and 90s, completely bypassing traditional banking systems.

Unknown: So, what you're seeing basically is the harder they actually try to crack down on controlling the populace the more Bitcoin actually thrives?

Andreas: Right because it creates greater need for it.

Unknown: Okay.

Andreas: Yeah.

Unknown: Thanks.

Andreas: Thank you.

Unknown: (inaudible0:58:27) It’s a really good question.

Andreas: Okay, last question of the day. Thank you.

Unknown: I just have a quick question so I'm sure most people here are aware of the recent potential threat of the fifty one percent attack on the Bitcoin network –

Andreas: Fifty one percent attack.

Unknown: So my question is how do we mitigate this risk in the future, I know there was a DDoS movement which was really not a DDoS but just don't use this service switch to something else.

Andreas: So, I've talked about this a lot and in fact I -- I've received a lot of flak and even hate and sometimes death threats for saying that I'm not worried about a fifty one percent attack -- I'm not worried about a fifty one percent attack and the reason I'm not worried about it is because there's a massive difference between a pool amassing fifty one percent of the hashing power, there's a big difference between that and control over fifty one percent of the hashing power and there's an even great difference between that, and having a reason to tweak that control of fifty one percent of the hashing power and use it to do an attack and a big difference between that and that it's being successful and an even greater difference between that and that attack being such that you can't stop it. So I think, yes, a pool amassed some amount of hashing power but they didn't control it and even if they did control it and the miners wouldn't leave the pool, they didn't use it to attack, and even if they did attack it wouldn't have been successful and even if it was successful we would have fixed it. And even if it had hit as hard, Bitcoin would have survived that's why I don't worry about a fifty-one percent attack, we're all the way over here. And the reason G hash got fifty one percent of the hashing power briefly for a few days and it's now back to thirty-five is because the market forces reacted rationally. Sometimes a bit irrationally and panicky to leave G hash because they realized that it in some circles it was creating negative impressions, like we saw these headlines, there was a headline in Wired magazine I think that said, single-player destroys the security of Bitcoin by taking over fifty-one per – Okay, wasn't a single player they didn't take over anything, they didn't destroy and can we please stop writing obituaries for Bitcoin. I've got a whole filing cabinet full of them. It's ridiculous, it's sensationalism and it distorts the reality and in that environments to show a lot of people panics but the truth is no one took control of anything, it wasn't a single player, they barely reached fifty one percent for a short period of time, and they most certainly didn't use it for an attack and if they had we'd notice and we do something about it and it wouldn't have been effective, so no I'm not worried about fifty one percent attack. Can we please stop worrying about an academic threat? If you have an old coin and you're controlling ten kilo hashes of power across your entire network, yes, you should worry about a fifty-one percent attack. A hundred (inaudible1:01:36) peda hash network is not currently something we should worry about too much, we should pay attention to it and I think that's healthy. We should diversify pool centralization, I think that's healthy. People should look into P2Pool and spread out their hashing power, I think that's healthy but there's a big difference between you know, this is slightly unhealthy behavior and probably we should adjust it and oh! my god the fifty percent attack is going to eat us all. Yeah, so that's a good question to end on. Thank you.