 For the conclusion of our video series, I have the honor and the pleasure to receive Andres Antonopoulos to speak about Bitcoin and blockchain The first set of questions I would have for you Andres is about the Bitcoin currency What is the potential of the Bitcoin currency and how it can really address the financial inclusion? Well for the first time we have an opportunity to make Very powerful financial services available to everyone Simply by downloading an application on a smartphone But I think also potentially using an application with SMS on an even simpler phone Already we're seeing smartphones costing 25 euros or less and Over the next few years we're going to see that price drop even further which means that Given the value that you can get from having a bank in your smartphone That's a that's a worthy investment that will drive economic inclusion One of the things I expect to see is just like we saw adoption of cellular telephony Jump ahead and bypass an entire generation of fixed line Telephones and many places of the world people went directly to sell the telephony from having nothing at all I think we're going to see a similar leapfrog where people will go directly to digital currency bypassing traditional money bypassing traditional banking and that can have a significant impact on The more than four and a half billion people who have very limited access to banking And two and a half billion people who have no access to banking whatsoever Perfect and what about the impact of Bitcoin currency on other countries like Greece Argentina or maybe China I Think it's too early to really start seeing that impact But we can already foresee what kind of impact it's going to have today if a currency is in hyperinflation if a government is pursuing policies that are insane or corrupt or intended to Pay debt by confiscating the savings of seniors and retirees Simply through inflation, which is a tactic we see in many countries The end result is that they have to be able to take the entire population hostage They have to be able to apply currency controls They have to be able to hold people from leaving the system When the ship is sinking you have to keep everyone on the ship And Bitcoin allows people to abandon ship. It allows them to exit it allows them to opt out from hyperinflation catastrophe now today that Option is only available to a tiny tiny fraction less than a tenth of a percent maybe of these Populations and we're seeing already that people are taking advantage of that option. So When hyperinflation strikes in Venezuela, you wouldn't expect many people to have access to Bitcoin But we see an enormous spike in Bitcoin sales, which means that some people are using it The same thing has happened in Greece in Argentina in Cyprus and other countries. It's still tiny It's not going to have any impact on the broader economy or the middle class but imagine 10 years from now When the option of a hyperinflation catastrophe for the middle class and paying off the debts or inflation for the government is Not an option Because 15 20 percent of the population can simply leave the currency and even knowing that Even without the population leaving simply the knowledge that that is possible changes the behavior of governments. It changes their Options it reduces their options. They don't have the option to do that kind of monetary policy Because they face competition from a currency that they cannot control. So I think At the moment nothing happens in these countries nothing significant But we can already foresee that in 10 years or less the game will have changed completely Perfect now. I would like to speak about the Bitcoin as a platform Could you remind us, please the the importance of the anonymous proof-of-work? Contenses algorithm and how it drives most of Bitcoin properties So you have to think of the blockchain technology and the anonymous proof-of-work as mechanisms as architectures and The purpose of these architectures is to increase the decentralization of the system So the blockchain architecture allows you to do decentralized applications Proof-of-work allows you to make those even more decentralized anonymous proof-of-work Even more decentralized having a native asset even more decentralized Having to expend Extrinsic energy even more decentralized all of these things increase the decentralization In fact, my theory is that there are certain features of the Bitcoin technology That don't just increase the decentralization, but they increase it in a stepped level So not just increasing it linearly but creating a new plateau of decentralization By pushing it up quite dramatically proof-of-work and anonymous access to proof-of-work Open participation in the consensus is one of those features that creates a step to increase in decentralization decentralization in turn is The thing that creates all of the interesting features of Bitcoin it allows Bitcoin to be open to be borderless transnational and global to be neutral To be open to participation open to access open to the consensus algorithm and open to innovation without asking For permission it allows it to be immutable and censorship resistance and Without intermediaries or counterparty risk all of these features come from the increase in Decentralization that is enabled by features like the open proof-of-work consensus algorithm perfect, so about decentralization Do you think that we succeeded with Bitcoin to invent a new form of governance? absolutely, yes, so The really interesting thing about Bitcoin is that it enabled us to achieve in the area of trust a new level of decentralization that had never been achieved before and That set the new standard if you like and What it does is it allows you to have this open global Platforms that gives you neutral interpretation of the rules of trust through consensus and That creates a new standard for governance meaning that if you want to operate Corporation or an organization Instead of using a hierarchical system of governance You can instead use a network-centric flat system of governance and of course the most obvious application for that is to implement the issuance and Transmission of currency But that's just one of the applications that you can do once you have an open neutral platform for trust About the decentralized governance. Do you think that it's really efficient because bitcoins? Happens to have a lot of critics about the efficiency of this way of governing. Yes, absolutely. It's not efficient It's not efficient. It's not meant to be efficient. This is an explicit design trade-off Bitcoin creates liberty In return for reduced efficiency. So we choose to have a system that is less efficient That can't scale if you want efficiency if you want the trains to run on time if you want Perfect coordination choose dictatorship very efficient brutally efficient one might say Decentralized governance isn't efficient. What it is is liberty. So this is a an explicit design trade-off It's not an accident the system chooses to Decrease efficiency in order to increase liberty in order to increase openness to allow for borderless operation censorship resistance Neutrality open participation open access open innovation all of those features come from decentralization at the cost of Efficiency and that's okay because it's a price worth paying. We already have efficient efficient systems of payment They exclude four and a half billion people. They are full of censorship. They concentrate power. They're corrupt We already have those. This is a system that gives us an alternative approach Now I'd like to speak about your vision about the future of Bitcoin according to you what are the most interesting Developments that are upcoming in the Bitcoin platform, I think it's We can look at this from a number of different perspectives we can look at the core technology and then we can look at some of the applications that are being created with this core technology in Both cases what we're seeing is the effect of exponential growth in the innovation with an open innovation platform and financial Technology for the very first time Anyone can participate in innovation. They can invent something and they don't need to ask for permission so what in banking has been this very very slow process of Incremental innovation that takes decades to show any movement whatsoever now We're seeing the type of innovation we see on the internet being applied to banking and it's accelerating really really fast in The core technologies in Bitcoin We're seeing the introduction of new capabilities at the core layer that increase both the scalability as well as Introduced new features. So we've seen for example of the last year The introduction of time-based parameters for the programming of money, which is a really important innovation So now you can control the timed release of payments as well as introduce time constraints in the scripting of Bitcoin This has already been used to create very exciting applications over the next three months We're expecting the introduction of a system a new architecture change called segregated witness Which both increases the capacity of the Bitcoin blockchain by a factor of three approximately it also Changes some of the ways that transactions are encoded solving some minor problems in Bitcoin Reducing effects like transaction Mali ability And improving the way hardware wallets and other devices can operate with Bitcoin So a few basic architecture changes on the back of that What we're seeing is the ability to introduce more features into Bitcoin much faster So segregated witness gives us the ability to upgrade Bitcoin and upgrade the scripting language much faster than before and Already we're seeing many proposals coming out on how to make upgrades in the programming of Bitcoin One example of that is using a new signature mechanism called snore signatures We're seeing the introduction of more privacy and confidentiality mechanisms. We're seeing Cross-chain connections, which allow us to implement blockchains that have two-way pegging For the transfer of value between them automatically and in the decentralized way. We're seeing the introduction of Technologies that allow us to create Bidirectional payment channels. This is a very interesting technology called lightning network bidirectional payment channels allow you to build a whole layer of Routed payments on top of Bitcoin that can operate on a millisecond scale delivering millions of transactions per second And which are completely off the chain, but still exhibit all of the trust relationships of Bitcoin So all of these technologies are coming on now. We're seeing the first developments We see codes that can be tested and simulated and it will probably take about two years before we see these Being implemented in the consumer-facing side and the user interfaces of wallets exchanges and things like that On the other hand in terms of applications I think we're beginning to see the impact of Bitcoin in certain areas where traditional payments are very difficult and the two most interesting areas in my mind are remittances and currency controls so moving money into a country from immigrants who work abroad and are trying to send money to their families This is an area where the traditional payment system is slow. It's expensive It's insecure and it's full of controls and where the poorest people in the poorest countries pay the most to transfer money We're beginning to see the impact that Bitcoin can have in that space by facilitating remittances The other area is import-export. So doing trade cross-borders companies that import goods or export goods or both Can now find ways to do that much easier by using Bitcoin as the currency to do cross-border payments Again, these are areas where traditional financial payments are slow insecure and expensive and Bitcoin makes them fast cheap and secure So those are obviously areas where Bitcoin can have a big impact Perfect and what would be the main challenge that would be coin face during the next years? I think the main challenge the Bitcoin faces is that it represents a Significant change in the way people interact with money. It is probably the fourth or fifth major technological advancement of currency since the beginning of human civilization and when you change a technology like money that is one of the most ancient technologies we have in our civilization and which is such an influential technology and one that has become Almost invisible to us people don't speak about money as a technology. They don't really think of it as a technology But it is and when you change it for the fourth or fifth time in human history There is resistance when we moved from gold coins to paper money. There was a lot of resistance It took almost 400 years for society to adapt to this new concept it took another 30 years to adapt to credit cards and Bitcoin represents kind of the next adaptation. So it takes time the understanding the language understanding the technology its complexity Obviously the culture needs to adapt to new ways of thinking and talking about money But at the same time Bitcoin needs to adapt to become easier to use easier to secure and easier to understand So both of those things are happening and it takes time And they will happen, but that's the fundamental challenge, which is that people don't like change and it takes time to absorb and adopt a new technology and About the regulation what kind of Regulation do you expect to come in the next years? So I think there's a big difference between regulating Bitcoin and regulating companies that operate in Bitcoin I think the regulators are probably going to regulate some of the systems that touch traditional banking specifically exchanges and Bitcoin companies that behave as banks which means that they take control of other people's money And that's probably a good thing because when people take control of other people's money They tend to steal it both in the traditional banking environment and in Bitcoin So whether that's going to be effective or not we'll see I mean regulation hasn't been effective in stopping banks from stealing people's money I don't know how effective it's going to be in Bitcoin, but it's not an area. I'm very interested in as For regulating Bitcoin itself, that's where things get interesting the the issue being discussed among regulators today Is whether they should regulate Bitcoin or should not regulate Bitcoin? But the problem is they haven't addressed the question of whether they can or cannot regulate Bitcoin and the answer is rather simple They cannot regulate Bitcoin because they have no control Over the Bitcoin system. It is a global open system, which means that their regulation could simply consist of banning it By law in which case that law will be ignored in the countries Where the law doesn't matter and will be fought in the countries where the law does matter or They're going to have to look at other ways of approaching this because the system itself Is not subject to any country's regulation directly. So this is going to be an interesting space We're going to see a lot of arguments. We're going to see a lot of pressure We're going to see a lot of political manipulation especially in countries that See the concept of individualism and individual control self-expression freedom of association freedom of speech Freedom of economic activity as threats to the government status Those countries are going to find it very hard To accept that Bitcoin is and will continue to be more liberal countries countries that believe in You know the principles of the Enlightenment and the Renaissance will probably find it a bit easier to adopt systems that empower individuals What do you advise for a developer interested in the blockchain? Should he be interested first in Bitcoin or Ethereum? I think both Because both it offer interesting and different perspectives on the same technology So if you're looking at these open global blockchains like Bitcoin and Ethereum Bitcoin will will demonstrate some of the areas Where you have a seven-year history of extremely robust proof-of-work based Open blockchain that is primarily used for currency applications, but has other applications too And offers this concept of sound money. Ethereum gives you much more flexibility It can be interesting for developing decentralized applications The security model is slightly different and it's not as mature yet So I think both of those offer interesting perspective and developers should really look at both perfect another topic We have today any very intensive buzz about the blockchain of the technology behind Bitcoin Is it really? Do you think that the invention behind Bitcoin is really about blockchain? And can we really separate Bitcoin from box it from blockchain? I think it's it's really demonstrates that people don't yet understand this technology Blockchain is not the technology behind Bitcoin It's one of the technologies behind Bitcoin But it's not the most interesting part of Bitcoin The real power behind Bitcoin is decentralization blockchain is one of the capabilities within Bitcoin one of the tools within Bitcoin That increases decentralization. So blockchain is an architecture It's an architecture that allows us to increase decentralization within Bitcoin But the goal is decentralization the blockchain is just the means to that goal and the goal of decentralization decentralization is not achieved by blockchain alone. It's achieved by the combination of a blockchain architecture an Open participatory proof-of-work consensus algorithm that rewards with a native asset and Requires the investment of extrinsic energy all of these things increase decentralization and they increase them in stepped ways That create the features of Bitcoin. So Bitcoin is open borderless neutral censorship resistant with open participation open innovation and access Those capabilities don't come from blockchain technology. They come from decentralization And so what's really interesting about Bitcoin and other open global blockchains is their degree of decentralization To simply say I'm using a blockchain is to say I'm using a database with signatures and hashing and You can use a database with signatures and hashing to create something that is very centralized and has none of the capabilities and features That we see in open global blockchains, and that's boring. It's not really a very interesting technology In fact, it's a rehash of technologies. We already have what's really powerful about Bitcoin What's really interesting about Bitcoin is how it changes the model of global governance Once you have massive levels of decentralization and the platform itself is neutral and you can't do that simply with a Blockchain so I think it's important to separate those and understand where the capabilities really come from Perfect so still about the the blockchain buzz do you think that banks and big companies do really need blockchain? I think banks can use blockchain to achieve small and Incremental savings and operational efficiencies in areas where their technology is so far behind the mainstream That it's almost a joke the fact that today the clearing houses and the Coordination systems for clearing equities and bonds and over-the-counter securities and futures are still using effectively messaging technology from the 1970s Is the only reason why blockchain is useful in the banks because compared to that Anything they build will be less centralized and more efficient. So it gives them an opportunity to build something new I think there's also a danger there though, and it's something we don't commonly discuss If you have a clearing house that operates to clear transactions between banks equities bonds futures derivative securities whatever One of the most important functions of the clearing house is that the clearing house itself is not a market participant The clearing house is a neutral fiduciary agent that has no participation in the market So I think we're rushing into this idea that we can replace the clearing house by a consortium of banks The problem is then the people responsible for clearing our market Participants in fact, they are the market makers in that market and that creates a massive conflict of interest What you had before which was a separation of concerns between the market participants and the clearing house is erased now There's a lot more possibility for collusion Corruption front-running and insider trading which the clearing house prevented. I don't know how that's a real improvement Maybe it's more efficient and less expensive for the banks, but at what cost? At the cost of greater possibility for corruption and collusion so again I'm skeptical about the use of blockchain in the banking environment What I can tell you is that the banks really have very little use today for open global blockchains Because open global blockchains Essentially mean the replacement of banking as an institution with banking as a network protocol and an application Which takes away all of the power and control the banks have To use an open blockchain is to give up all control and unfortunately their industry is not able to make that choice So they're likely to face Significant disruption from open global blockchains while at the same time playing with these little sandbox closed blockchains that dilute conflict of interest protections and offer minor incremental operational efficiencies and To finish would you comment more about the open the need for an open blockchains and how this openness is driving real innovation? Yeah, I mean it's the difference between the internet of money and the intranet of money and We already have seen that play out When the internet first started to have an impact in commercial environments Many companies decided that the best way to use the internet was to create little intranets Insights that were closed controlled and firewalled where they ran a subset of carefully controlled corporate applications And we now know that those are the environments where innovation goes to die and in those corporate environments you have stale information reduced security capabilities and useless content and The applications that run in there are a restricted set of applications that nobody wants to use So you end up with people who carry two phones on them They have the blackberry that runs outlook and connects to the intranet for running Microsoft exchange and You know wikis with stale information and then they have an iPhone or Android phones So they can work like normal human beings with all of the rest of the applications on the internet where all of the interesting stuff happens that exact scenario is now playing out with Bitcoin and the open global blockchain Which is that the real promise there is to create an internet of money an open network that is completely open to participation For everyone in the world that sees no borders that is completely transnational and global that is neutral and censorship-persistent and That is magical that allows billions of people to innovate on their own to choose to Produce financial systems and not just consume them to participate in a global economy to transcend borders to create both Hyperlocal community trade as well as international trade from the comfort of their own phone with full empowerment and control and security Without any intermediaries without any counterparties without corrupt banks and corrupt governments. That's a powerful idea The idea of taking that technology and creating a little sandbox for the use of a corporation or bank That's boring. It doesn't really do any of the interesting things That the open global blockchain does now of course that doesn't mean it's not going to be done Hundreds and hundreds of companies are going to try to recreate the magic of the internet of money in the liquid in a bowl you know in a bottle and create a contained closed controlled system and That system eventually will deliver Very little or no innovation because when you isolate something When you keep it under control it cannot innovate at the same pace as an open system It cannot offer neutrality because with the power of control comes the responsibility of control And so you can't have neutrality. You can't have censorship resistance. You can't have openness All of those features evaporate immediately and what you're left with is Basically a closed financial system and we already have Many of those we have them PayPal Venmo Apple Pay credit cards visa mastercard. We already have those. There's no reason to recreate them on a blockchain database Thank you very much Andres. It's a pleasure. Thank you so much for having me. Hope to see you soon. Yes