 Welcome. Hello, everyone. It's so awesome to be in Amsterdam. This is my second time during a conference in the Netherlands. Last time I was in Rotterdam. But this is my seventh time visiting Amsterdam, one of my favorite cities in Europe. Really, really happy to be here. How many of you have Bitcoin? Okay, so this is a complete beginner's class, right? How many of you do not have Bitcoin yet? All right, now look around you. The people who raised their hands, everyone helped them get some Bitcoin today, right? So we had about a dozen people maybe who did not have Bitcoin. You are surrounded by the highest concentration of people with Bitcoin that you will ever find in the Netherlands. And so this is your opportunity, right? And I'm sure many of them will be happy to give you some so they can try the technology. And if not, I will be happy to give you some so you can try the technology. So I'm here to talk about a payments technology that is really important. It's a fundamental part of who we are as a human civilization. It's an instantaneous person-to-person direct payment technology with no fees, no surveillance, no control that works for any product or service, and which has had very wide adoption for approximately two to three thousand years. And that that is cash. You've heard of cash? Yes, cash is the ultimate peer-to-peer technology, right? It's direct between people. When you make a cash transaction, there's no corporation involved, PayPal, Express, nobody else, just you and the person you're dealing with. It allows you to have local commerce in your community. It is instantly identifiable, unforgible, portable, easy to use. It's faster than those chip and PIN cards where you have to like remove card now. No, no, still wait. No? Remove card now? Now remove card. Yeah. Well, cash is faster even than that, right? So we've advanced technology by 3,000 years, and now it takes longer to make a payment with a chip and PIN card. Cash is about people connecting with other people. But cash has one small disadvantage, and that's you can't email it to the other side of the planet. And that's where Bitcoin comes in. Because Bitcoin isn't a payment network. Bitcoin isn't a credit card system. Bitcoin isn't a system of credit. Bitcoin isn't a company. Bitcoin isn't an institution. Bitcoin is an electronic peer-to-peer system of digital cash. And just like cash, that means the value is in the Bitcoin itself. It's not a promise. It's not a debt. It's not a credit. It is value itself that you transfer. And you transfer it directly to other people without intermediaries. It's near instantaneous. It has very little fees. There's no other companies or institution involved when you transfer Bitcoin. It's a system of pure electronic cash. Why is that important? It's important because we are gradually marching into a world where cash is going to get banned. We're already seeing this in Europe. We're seeing it in parts of Asia. There's discussion about it in the United States. They'll start with, you can't do transactions over 3,000 euros. Then they won't update that for inflation for 40 years. Or maybe they'll lower it. Then it'll be 1,000. Then it'll be 500 euros. Eventually, the only people who use cash are criminals. Well, the criminals that have not been able to get a banking license because they use wire transfers. But cash is going to gradually disappear from our world. And this is a problem. This is a big problem because cash today is the only way that we can pay each other except for Bitcoin. If I wanted to buy you a cup of coffee, how many of you take Visa as an individual? No? You didn't bring your chip and PIN devices? No? How can I pay any of you in this room that doesn't involve a corporation being part of that transaction? The magic about peer-to-peer cash, or peer-to-peer Bitcoin, is that it's not peer-to-corporation to corporation to corporation to peer. It's person-to-person directly. That means nobody can sit in between and say, I don't think you should really buy that with your money. I don't think you should fund WikiLeaks, or an environmental movement, or an anti-fascist movement, or whatever else you want to decide to spend your money on. That's a bit of a problem for me, because I didn't invite these corporations to be part of my life, and yet here they are in every transaction, in every interaction I have with another human being today, unless I use cash. I'm inviting a multinational corporation to be part of my transaction, to express an opinion about whether that transaction is the right transaction, to hold on to the money for 30 days, just in case there's fraud, to charge 2% for that privilege, and then maybe eventually pay the coffee shop owner, or not. In Greece, not. In Cyprus, not. In Argentina, Brazil, sometimes not. In the Ukraine, not. When you invite corporations to be part of the human transaction, you take the concept of local community and you destroy it, because suddenly you've invited an unwelcome guest, and that gives them enormous power. So we have a future in which cash will disappear, and now we have two choices. The future will be digital money. This is inevitable. The form of paper money we see today, if you have children under the age of five, they will only see in a museum. As adults, they will experience cash only in a museum. This is inevitable. Now, the question is, what kind of world do we want to live in? Do we want to live in a world where we have a system of money that involves person to corporation to corporation to corporation that's restricted within the borders of one country, where a whole number of intermediaries get to see exactly what you spend at all times during the day, and when they get hacked, everybody else gets to see that too. And your money is under constant surveillance. You go to the wrong protest. You participate in the wrong political party. You express the wrong idea. Oh, your money disappeared just like that. Then you have to prove your innocence to get it back. In the United States, we call that civil asset forfeiture. I don't think that's very civil. It seems pretty uncivilized to me. Take my money and don't tell me why I have to prove my innocence. This is going to be part of our future. And this is an extremely dangerous future. Money is a form of power. It's a form of language. When we have a transaction as people, we are communicating value to each other. The problem is that if you introduce someone else into that conversation, sometimes their primary role is to go, shh, you can't express that kind of value to that kind of person. And that's an enormous amount of control to give someone else. Maybe you trust your government today. How many elections until you don't trust your government? What could possibly go wrong? I come from the United States. We're watching something go very wrong right now. Europe certainly has that history of understanding how someone may be elected and maybe that's the last election they have. And then democracy goes down the toilet. We've seen this happen again and again. What happens when you give that government power of all money, all transactions, all interactions between people? Power corrupts. Absolute power corrupts. Absolutely. There is no more absolute power than control of a finance. Bitcoin is peer to peer electronic cash. And it has this simultaneously global, borderless, uncensurable, and mathematically neutral to source and destination. It's the best form of cash we've ever had. It's enormously empowering. If you think this is just about money and whether you get paid and rich people versus poor people, it's not. It's about taking control, individual control, again, of the power to express value to others, to engage in a community, to trade with others without inviting into that conversation powerful corporations and governments that get to tell us whether we can or cannot spend our money. Bitcoin is not about money. It's about liberty. And money is just the form in which we express liberty in many of our social interactions. So let's do a very quick lightning Q&A. And if you have any questions, especially the beginners among you who have never experienced Bitcoin before, you're interested in understanding more about it, I'll take the introductory questions, and then we'll go into a session about security. Who wants to go first? And you have to come stand over here. Anyone, please, come on. Questions about Bitcoin? Yes, please. I have a question about the currency in itself. So if we take a currency like dollar, what we use dollars because we trust the US, and then we use their currency to make a transaction. So what's the analogous for Bitcoin? So what gives trust to Bitcoin as a currency? That's a great question. So what gives trust to Bitcoin is two things. One is the algorithm that controls Bitcoin itself. And that algorithm you can study, you can read, it's open for everyone to study, and it's very accessible. All you need is a higher-level computer science degree, maybe a master's or a PhD in distributed systems, you know, something like that. Okay, you're not going to study that. But the point is that thousands of people do study that, and they look at this algorithm and they say, okay, this algorithm is secure, it's neutral, it works based on certain established mathematical principles, and in order to change it, everyone who's participating needs to agree, which makes it very difficult to change, in fact. And that's a good thing. The second thing you're trusting is that Bitcoin has two or three important characteristics that make it valuable. One thing is that it is rare, it is scarce. And the reason it's rare is because the algorithm imposes an upper limit of 21 million coins. So you cannot just create infinite amounts of Bitcoin. It's created a very specific rate. And when something is rare, and it has demand, that creates value, just basic fundamental economics of supply and demand. Secondly, in order to create it, you actually need to expend real-world resources, and that's energy that is involved in securing and creating Bitcoin. And that provides another basis. So you could say, well, Bitcoin is backed by the full faith and credit of the internet, and the economy that it contains as Bitcoin is becoming more and more the currency of the internet. And that's when it comes to a very fundamental choice. What do you trust more in your life? The Federal Reserve of the United States, the European Central Bank, or the internet? I generally see a very clear distinction. Almost everyone I know under 30 says, fuck the banks, I trust the internet. And a lot of people over 30 are still kind of willing to trust the banks a bit. It's a generational thing, and I think it's changing pretty fast. Yes. Andreas, once you made a point, I think I heard you say something about the layering of Bitcoin, where you've got the Lightning network on top. And I think you made a point, at one point, saying that it was kind of a hybrid, so that Lightning represented a kind of proof-of-stake aspect. Was that an argument you would make? Yes, Lightning does incorporate some elements of proof-of-stake, because in order to create a Lightning network, Lightning is this overlay network that allows you to route transactions over Bitcoin as a second layer, very, very fast at very, very small amounts. But in order to do that, you have to build channels, those channels lock up money, and if you engage in the Lightning network, effectively, you earn fees. So lock up money to earn fees, that sounds like a proof-of-stake to me. It does introduce the kind of hybrid mechanism for committing funds to a system that supports the network and earning some reward in return for that by securing transactions. I would still call that a proof-of-stake system. And I'm actually going to be doing a talk about Lightning at the end of today. Please, yes. I'm an absolute newbie in this front, so it may be a newbie question also. The last thing you said was about freedom, and that is very important to me. I think that cash, well, it's good in the vanish, I agree with you, is still more anonymous and still more safe than Bitcoin, as I understand it. How can you make Bitcoin really anonymous if it is possible at all? Yes, Bitcoin is not yet strongly anonymous. It is weekly pseudonymous, as we would say. But there's actually a lot of work. We recently had a conference in Milan called Scaling Bitcoin, and I would say half the conference at least was about addressing privacy, anonymity, and fungibility of the currency, which is extremely promising development. There's a lot of technologies coming down the pipeline in Bitcoin to make Bitcoin more and more anonymous and to strongly protect your privacy. There's also a number of other related cryptocurrencies which you can move your money into and out of in order to increase your anonymity and privacy under certain conditions. I'm a huge believer that we need strong privacy and anonymity in every aspect of our financial life. Thank you. That's a great question. What does it mean when the bulk of the mining is done in China and in Iceland, and it's not done anymore by the regular folks? What effect does that have? Well, this is primarily a result of two very, very strong incentive systems that have existed. The first one is that, because of the very, very rapid advancements in silicon fabrication for mining chips in Bitcoin, things are moving so fast that the average piece of equipment that you buy to do Bitcoin mining has a shelf life of two to three months, which means you can't take it very far from the silicon fabrication plant, which is in China. You need to exploit it locally. You put it on a boat, try to ship it to America. By the time it arrives, it's worthless. This is a major problem because it's created incentives where the companies that produce these chips are much better motivated to spend the first three months mining with them until they're worthless and then shipping them out to customers. We've seen this happen again and again. That could only happen when the advancements were between 1,000 and 10,000 percent a year increase in performance. Now we've reached Moore's law, the front end of silicon manufacturing at 16 nanometers, so all of that slows down, which means that these devices, when produced, maybe have a two-year usable shelf life that changes the economics quite dramatically. I expect we're going to see a re-decentralization of mining. The other thing that's happening in China that people don't realize is that they have the need to install, I believe the last statistic I read, one new power plant every 16 hours gets turned on. New power plant, 50 megawatt power plant, gets turned on every 16 hours in China. It has been for almost a decade, and they're still not keeping up. A lot of those are not connected to a distribution network, which means that if you have a province or region and you put a hydroelectric dam, you put it with the plan to support electricity 15 years from now, which means that now you're using it at 20% capacity, the rest of that electricity is being wasted. You can't ship that electricity anywhere. By installing a mine there, you're actually doing a very environmental thing, which is consuming electricity that is otherwise wasted and subsidizing hydroelectric, which we are seeing happening. Bitcoin has a tendency to go where the electricity is cheapest. Because it deals with excess capacity, it can actually act as a way to subsidize alternative energy. I'm not particularly worried about the fact that most of the mining is concentrated in China, because most of the software development is concentrated in America, and it turns out those two are nicely balanced with each other. Political risks exist in every country, but it's no greater in China. In fact, I would argue that the political power of the Chinese government to go into a province that's making 30-40% of their tax income off this mining farm and shut it down is rather limited. They will find that every person they talk to has been bribed by the mining farm. So who's going to execute that order? Thank you. Let's make this the last question. I have a question. Thanks for coming to Amsterdam. Banks, they play a huge role in our economy. So far. So far. What's going to happen how is it going to be that the banks rolled in 2018? Are they going to disappear? No, they're not going to disappear. If you go to Central Bank, New York, and you go there with maybe your wife or your significant other, and you're visiting Central Park, they have these beautiful horse carriages that you can ride around Central Park. Apparently horse carriages didn't disappear with the invention of the automobile. So banks won't either. They'll be the kind of institution that has significantly less power is mostly used for legacy applications. Maybe governments will use them more. What they're doing right now with a blockchain that they're building, the centralized blockchain is really... Well, the centralized blockchain is a contradiction in terms. The purpose of a blockchain is to increase decentralization, a centralized blockchain is like a horseless carriage with a horse. And so if you do a horseless carriage with a horse, that's a horse carriage. And we already have those. So you didn't really change anything. It's like saying the technology behind the automobile is the pneumatic tire. Let's adopt pneumatic tires and pull horses in front. It won't work. Now, I hope they spend another billion dollars trying to figure out it won't work training lots and lots of blockchain engineers who will eventually come to Bitcoin and Ethereum and do some interesting projects. But banking as an institution is obsolete. Banking is now a protocol. Banking is an app. And that world is never going to go back. It just may take 20, 30 years until you see that ripple through the world. But it will. And there's absolutely nothing that can stop it. Thank you. Okay, one last quick question, and then we'll wrap it. Thank you. Thank you. I'm sorry. I'm kind of new with this. Great. Forgive me if my question is obvious. But how can you say that Bitcoin, for example, eventually will contribute to make it easy to support terrorist groups, for example? Oh, well, I mean, first we'd have to displace the most important funding mechanisms that terrorist groups have, which is the US dollar and oil, some of which we gave to them directly through our governments. Who are we fighting this time? I think, wait, wait, we were against al-Qaeda until now we're helping them in Syria. Or are we with Daesh now? I don't know. I can't keep up with all of that. Bottom line is that we live in a world where criminals use money. They use telephones. They use shoes. Most of them drink water. We don't ban technologies because criminals use them. What we do is we make those technologies as broadly available as possible, because 99.99% of humanity will use those technologies for food, sanitation, healthcare, education, and those are promising technologies. On the fake promise that we're going to stop terrorism by controlling everybody's money, we exclude four and a half billion people from the current financial system. I don't accept that bargain. I'm not concerned about whether criminals will use it. I'm much more concerned about the fact that we can make everybody else part of a global financial system with full access to all of the tools that we enjoy in this room. Thank you.