 I was very impressed with Prague last year, and I was very impressed because there was a lot of thinking going on about what should we do, what's the point here, and how could this thing go wrong, and how could we learn from the dot-com guys that seem to have screwed things up? The Internet guys or those guys in the financial crisis, how did they screw things up? What can we learn from to grow from? And I'm taking that as the starting point for this talk to try to suggest something you might want to think about and look at anew. I'm going to talk about money, debt, and smart contracts. But the Internet Archive, you think, well, gosh, what is this Internet Archive? It's a non-profit in San Francisco. We're kind of wikipedia-ish but a lot smaller, and the idea is to bring universal access to all knowledge. So that's probably, you know, if you know of me at all, I started and run this organization and you should please come and visit us in San Francisco. We have open lunches, all sorts of fun things. But if you don't know of the Internet Archive, you may know of the Wayback Machine, which has old webpages and to try to preserve the memory that has come before on the Internet. I may be here because I hang out with smart guys and sort of Internet pioneer sort in terms of the Internet Hall of Fame. And that's probably why I got, or maybe it's the decentralized web. Can we make the worldwide web work without having reliance on any particular piece of hardware being up or down? Can we make a peer-to-peer back end for the web to really help try to support the promotion of locking the web open? I'm expert in all of those things, so I'm going to talk to you about something I'm not an expert in, and actually I know who I'm talking to, the experts in this, but I'm hoping I'm going to give you a new perspective in the area of debt. My story starts by my having won the Internet lottery. I sold companies. I became artificially wealthy and I was trying to figure out what the heck is money. So I started reading books, and my favorite book from that era was called Frozen Desire. So this guy, James Buck, and he goes over the history of money, and he goes and says, what is money? It's frozen desire, and he talks all about money, money, money, and how it works, and how you finance debt, wars, and on and on. It's a very interesting book, but it occurred to me. It's like, no, no, maybe it's not really money that's the important part. Maybe it's debt. Maybe it's debt. And it turns out that money and debt mostly create each other. And I'm going to stay on this for a moment because I think it's going to be important in our crypto world. Almost always, even in the crypto and the crypto communities, they talk about money, like gold and things like that, where it doesn't go into, there isn't debt. If you take like currency, the American currency, or any of the world currencies, about 5% is money, and the rest is money and debt create each other. The way that you get more money is you create debt obligations. If you go and say, well, I'm against being in debt, really what you're saying is I want somebody else to be in debt because if I have money, somebody else has debt. They create each other. They exist in a one-to-one relationship almost, except for about 5%. That is, I find, very interesting. So whenever I hear of these bankers or these economists going on and on about, we want to increase liquidity out there. But they really want to increase the money supply. Just try out a thought experiment. Whenever they say money, just insert the word debt. And you will also understand what they're saying and actually much more precisely when they say they want to increase the money supply, they want to increase the amount of debt supply. They want to go and liquidity, more money out there, they want more debt. So what debt is, and it's always debt with interest, it's a slope. And money goes from debtors to creditors, it's a slope. You can change what the slope is, and you can change how much there is. And when they're trying to increase the money supply, they're trying to increase the amount of debt. So that just increases the amount that's going from debtors to creditors. And then there's interest rates where you can go and tilt it the slide more. But it's all going one way. I'm not saying that debt is bad, it just is. That debt exists, and it has existed for as long as there has been writing, which I'll get to in a minute. So if you're trying to look for lines of control and trying to predict how the future will hold, I always try to figure out what's the root causes out there. I would suggest don't follow the money, as they said, in all the President's Men famous movie about the Watergate investigation. Follow the debt. Follow debt. Who's obligated to whom? That's going to be the more important part of how all of this works, and is that I would suggest be the most indicative of what's going to happen in the future. At that point, a book came out called Debt, the first 5,000 years by David Graber. This is the most important book I've read in the last 20 years. It blew my mind. It basically chopped pillars out from underneath my whole belief system. This guy basically wrote across the 5,000 years history across the whole world. It's kind of an amazing book, and tried to detail the history of debt and how did it work in different cultures. And it works very differently in different cultures, and there's a lot more possibilities out there. A brilliant man, a wonderful read, highly, highly recommended. But it basically goes on this structure of how does debt evolve and how does obligation? Let me define debt precisely. Debt is quantified obligation. So there's obligations we all have to our friends or mothers, but quantified obligations is debt. And another characteristic of almost all debt is it's transferable. So it's transferable actually by the creditor. The creditor can give it to somebody else. So you might be in debt to somebody, and then they suddenly put it to somebody else, and now you're in debt to somebody else. It's a really peculiar device, but I highly recommend this book in terms of how does value exchange move among people. And you guys are all in this field, so recommend it. So basically I said, all right, if that's what's crushing our people, we now had the, it was 2008, there's a housing crisis. The people at the Internet Archive were having real trouble because of rent. I tried to figure out why was rent so high? It turns out it was debt service on the apartment buildings. If you could make debt-free apartment buildings, you could have rent that's one-third of market-based rent. I said, great, why don't we go and try to make debt-free housing happen by going, having a structure, I need to be able to credit a bank. So I created a bank, created a credit union called the Internet Credit Union, and we ran it for a while, and boy, the regulators really, really didn't like it. Boy, just go start a bank. Yeah, they basically didn't want us around, so they crushed us out of existence. And unfortunately, Trade Hill, which is a Bitcoin company, because we were the only credit union that would go and deal with them. When they crushed us out of existence, they went out of existence too. So I learned a lot about how the banking system worked, and it is really that bad. If you think it's bad, you're right in terms of how electronic funds transfers work, ACH transfers, it's insecure, it's fraud-written, it's a real problem. So we tried to do a bank, but that didn't work. We were very early in Bitcoin. At the Internet Archive, we basically paid our employees in Bitcoin. This, I think, is a picture of the first Bitcoin ATM. It's an open cash box with a wallet. So you basically can just go and change your money back and forth to the Bitcoin. Okay, a lot of the Bitcoin people didn't like it because it trusted people, but anyway, it worked. And so that was part of our exploration with Bitcoin. And then this book, this is where David Graber got his ideas on the early part. And here I think it's where things are going to get interesting for you. The title of this is, and forgive them their debts. It's a line from the Lord's Prayer. And forgive them their debts and they will forgive their debts against you. And they meant it literally that basically this is a history book of what happened during the Sumerians, Babylonians, Akkadians, basically the Bronze Age near East, how their financial system worked. They were the first to invent debt with interest. With debt with interest, what happens is you slide things from debtors to creditors. The debtors become everybody. They lose their farms. They become in debt. They leave the land. They end up with their wives and children as debt servants and basically society breaks down. If you allow this to go too far, it breaks down and it breaks down quickly. So what they invented was a debt forgiveness system. Every 25 to 50 years, they would basically go and declare debts gone. They wiped the slate clean. That's a literal term. They were on slates. The Sumerians wiped the slate clean and you were out of debt. It usually came with the beginning of a monarch. A new monarch would come in and say, you're all out of debt. You don't owe the government any money. You get your farms back so people could move back onto their farms. The children and the wives are released from their servitude, their debt servitude. And they would do this every 25 to 50 years. If they did not do this, then the society would go exponentially more and more unequal until people revolted and there was civil war. Every civil war for 3,000 years was a debt war, according to this scholar. Interesting. I'd never heard this. So the Hebrews developed a system called jubilee. jubilee is every 50 years there would be debt forgiveness and you would go and let people have their lands back. You would go and take things away from the oligarchs and give them back to the peasants. Can you imagine that now? But if you don't do this, bad things happen. So let me, you know, you say, gosh, I haven't heard that before. Maybe you have, but it was new to me. There were some things that were very interesting to me in grinding this idea home. And I'm going to then come back around how it works in Ethereum. The Liberty Bell was a famous thing in the Liberty Bell of the United States, founding of the country. It says, proclaim liberty out throughout the land and the inhabitants thereof. The rest of that line is actually Leviticus 2510. And it says, and it shall be a jubilee unto you. Each of you will return to your family property and your own clan. So what liberty meant in the early part of the United States was freedom from debt, was freedom from these obligations that they were escaping in other lands. Okay, another one, the Rosetta Stone. We know the Rosetta Stone is how we broke hieroglyphics. We understand hieroglyphics. Do you know what it said? You know what the proclamation was? It was a government proclamation. Okay, you guessed it. It was debt forgiveness. It's basically structured debt forgiveness. That was what was worth carving in stone and distributing it out through the Empire during the Ptolemaic period. So we see it starting to be again and again. Jesus is in his first sermon in Nazareth. Okay, I'm not a Bible thumper guy here, I'm just a historian. Jesus in his first sermon coming back to Nazareth, he declared a jubilee year. He declared, there's this guy who basically said, all you oligarchs have to give all your money, basically back to the people you've shafted out of all of that over the last 50 years. And it's not just me interpreting this. It's actually, this is from the Vatican, little footnote. This is what it is Jesus said. And that's enough to get you killed. So if you go forward a bit more to the Spartans. The Spartans had real troubles with wealth inequality. And there were two Spartan kings that promised reform, they were killed or exiled. So they basically said, yes, we're going to basically do debt forgiveness, land redistribution that will work. If you don't do this, things collapse, Sparta collapsed. And the United States is in this process of basically at war with itself, with massive wealth inequality, yet we have not really broached the subject of debt forgiveness. So debt with interest, the lesson out of this is if you do not have a reset mechanism, it leads to societal collapse and civil war every time. It's a way of interpreting the Maoist revolution, the Bolshevik revolution. Take away any ideological terms, just think of it as just how do you go and equalize after you've ended up with massively unequal wealth inequality. So what, why am I talking about this here? Will crypto, you guys are designing a new system, it's a beautiful system, it's based on math, it's not based on regulation, it's got all sorts of interesting properties, I love it, been involved in it, terrific. Will crypto be different? Well, whenever I read this wonderful book, Digital Cash by Finn Bolton, that's a wonderful book about the history and the dreams of cryptocurrencies, and it never talks about debt. In fact, I've talked to several people here and they say, well, it can't happen with Bitcoin and it can't happen with Ethereum, I suggest it can and it will because if it evolves into this, such that 95% of the money out there in the world is matched with debt. 5% is sort of the Bitcoin equivalent. So I think there's at least a major possibility that there's going to be lending and there's going to be derivatives and the like that are going to hang on to this. And one of the things, the reason why we're going to get that is because of smart contracts. Smart contracts allow you to quantify and enforce certain obligations. So actually I would suggest the Ethereum community, you guys, we guys, are building the actual mechanisms that we're going to be able to do this type of thing. But the weird thing about it is there's almost no reset button. We think of regulation is bad, government is, they screw things up. Well, they have been a bit of a reset button, boy have they screwed things up and often they're working for the wrong people for all the wrong reasons, there's issues there. But if we make a system that is debt with interest that has no reset, then at least historically we can run into some severe, severe problems. So that's the basic point of this talk is to say that the evolution of money begat debt, money and debt begat each other. That debt with interest goes exponential. If there's no reset mechanism, then there's societal collapse and civil war. Basically you have very few winners and lots and lots and lots of losers. And that's not a very stable environment. I wonder and I just posed to you that as we're designing a next generation internet money, how money and value is exchanged with smart contracts, that the debt system is something we can't just go and say, oh, well, we'll just won't do it, because it will probably be built in some way. How do we go and build our systems that will serve a large number of people over time? I look at the microfinance system where it was like, hey, isn't it great? Let's go and put a lot of poor people in debt. So they did. That's gone really wrong in a lot of circumstances. And there's in cases of India going and giving peasants the right to not pay back their debts in microfinance because they were committing suicide at such a higher rate. So even these systems that seem great at the time, they're awesome, they have some downsides to them. I speak to you as an internet pioneer. It didn't all turn out quite the way we thought it would. And so let's go and see if we can learn from those things, but also what are the precursors to the systems that you're building? What should this mean for Ethereum? I don't know the answer to that. Really I don't. What I wanted to do this, and I really appreciate your time, is for you to think it through a little bit. Spend a shower on it. Spend a commute of just sort of, okay, what does this mean in terms of debt? And how can it go out of control? How is the system that I'm doing kind of locking in a set of losers that may be exponentially increasing? When I hear somebody really enthusiastically saying I'm going to go and make better for billions of people, just go and look at it again and go and say, well, is that true? How did it play out before when certain other people have said the same things? It's not to say we shouldn't do it. It's just our chance now. It's early enough. People like you guys that are building these systems, we can do something about it. Let's not come to regret what we are building now. Thank you very much. I have 26 seconds for a question. Yes. What's the precursor for debt forgiveness now? Desperation. Usually, it only comes about when people are really desperate. We had a chance in the United States when the housing debt happened and we could have gone and forgiven the housing debt and kept people in their homes. We bailed out the banks. We didn't bail out the homeowners. And now a lot of those homes are now owned by Berkshire Hathaway. And they're rented back to those people. So it's a level of desperation. It's going on right now with student debt in the United States. Yes. So I will read the books, but I was wondering if you could give us a little summary, though, from the perspective of the people that are holding all of the debt and it's getting forgiven. This is a terrible thing. And you were saying the Spartan kings, two of them were killed and so forth. So what sort of, how does a society get to a point where it does this non-civil war, peaceful forgiveness of debt? What are the conditions that make that happen? In the United States, in the early 20th century, well, in the 20th century we had the Bolshevik revolution, the Mao Revolution. In the United States we had the New Deal. The New Deal, the oligarchs hated the New Deal. The New Deal of FDR, there was a 95% incremental tax rate. My grandfather complained that if he made another dollar, 95 cents if it went to the government. He hated it. He did just fine. Don't cry for my grandfather. And so this is what the United States did is they basically taxed their way into restoring a middle class. We had a gilded age and we crushed it. The United States, I grew up with, sorry, had a middle class. The United States I live in now, it's disappearing. It is horrible. And it erodes. You can do it without a civil war. You can just do it by having somebody powerful enough that wants to preserve society and keep people from all moving away from their lands, which is sort of what's going on now in the United States. Thank you.