 a better or rater or educator in the space. Obviously his writings for wonderful books. And I think he's inspired very many people along the way and he's kind of got the back of the crypto community. So without further ado, we welcome Andreas to the stage. Hi, everyone. I'm just going to switch presentations really quickly. No, no, don't worry about it. I got it. I got it. I got it. There we go. Fantastic. All right. I managed to use a Mac. Amazing. So I'm going to mostly do Q&A today, which I think a lot of people enjoy the Q&A and I certainly enjoy it. So if you want to ask questions, you have to put them on the Slido because I'm just going to switch the Slido and I'm going to start answering questions right off the Slido. And that gives an opportunity for the people who are watching on the live stream to also ask questions. But don't tweet out the Slido code because then Reddit and Twitter will start asking questions. And you don't want to see those questions, right? Why did you betray everyone and write an Ethereum book? Trader! So thank you so much for coming here today. If you don't know what I do, I've written a number of books. Mastering Bitcoin is a book about how Bitcoin works. It's the first one there. Mastering Ethereum is about how Ethereum works. These are technical books with software engineers. They're also suitable for computer science, college-level people. It's also good for people who have a technical aptitude and want to learn a bit more about coding. But if that's not your thing, these two books, The Internet of Money, Volume 1 and Volume 2, are a collection of all of the talks I've given, edited to remove all of the mistakes I made while giving those talks and make me sound absolutely accurate and prescient and everything I say. And they're all like self-contains little stories, like four or five pages. And I tell people that my initial goal for these books was to make them the perfect toilet book. You can jump in at any point, read four or five pages in five to seven minutes, good timing. And then I can deliver really important principles and memes directly into your brain when you're at your most vulnerable. And you can do that to your friends, too. You're like, yeah, this will get them reading. And what you do is you remove all of the other reading materials, including shampoo bottles from Reach, and then you put the books right there. And they sit down and they don't have anything else to do. Yeah, you see the plan? It's working. So you can also get all of this information online. All of my work is Creative Commons free and available. Again, the Slido right there, hash AA, capital L London. So you can ask questions. Today's talk is going to be short. I want to talk about the killer app. What is the killer app? So first, let's start with Bitcoin. What is the killer app for Bitcoin? Let's try again. What is the killer app for Bitcoin? Money. Money is the killer app for Bitcoin. Money is the killer app for Bitcoin. And you can look at different aspects of money. Some people are like, really, it's more about payments, medium of exchange, more about keeping value, so store value. Maybe it's about capital fly to remittances to third world countries or developing countries. Maybe it's about monetary sovereigns. Yeah, steak. Yeah, guns and beer. No, okay, I went too far. And maybe it's just about being able to be in control. Maybe it's about having access to financial services because you don't, because you either live in a country where those things are not available, or because you're part of the population that is for whatever reason excluded, right? You walk into a bank, and as soon as you start typing out your name in the application form, they're like, thank you very much for coming in today, sir. Your name is too unpronounceable for an esteemed institution like, ah, lovely British bank. Please this way, security. And you can't get a bank, right? Which happens to a lot of people. I realized when I started becoming a nomad, and I started traveling continuously, that my inability to produce sufficient documentation about my address, because I didn't really live in one place, disqualified me from banking. The fact that I'm American disqualifies me from banking worldwide because they don't want to touch Americans. They have to do too much reporting. So the moment I say, and I'm also an American citizen, they're like, security. And in the US, they want, you know, two utility bills and proof of address or rental contract, blah, blah, blah, blah, blah. And I had none of those things because I didn't live in one place. I'm like, how about a short-term rental in Airbnb for two weeks? Denied. Denied. Denied. Again and again, I could not open. And that's before I answered the next question, which is, what do you do for a living? The usual answer is e-commerce. E-commerce. I mean, digital currencies, e-commerce. Because if you save the B word, not banking, bitcoin, again, it's like truck dealer, security. And so that's the end of that conversation. Money is the killer app because money as an app hasn't existed before. And money is a very important part of how we organize society, and it's no longer a privilege. It is a fundamental requirement for modern life anywhere in the world. And at the same time, it's something that is often denied to a lot of people. It's often something that's very difficult and expensive. And sometimes you find out that even if you have money, even if you have a respectable job and a respectable paycheck and respectable savings in the bank, you lack these weird qualifications. I got asked most recently when I went back to Greece, and I was trying to deal with some banking situation in Greece. They asked me for proof of my landline. Land what? Landline. Sir, I haven't had a landline since 1989. Get with the century already. But no, landline, they wanted proof of permanent address as provided by a landline. All right. So, you know, my landline is installed in my castle right next to where I park my steam engine in the telegraph office. Now, turn on my oil lamp and let's have dinner by the fireplace. So, the funny thing is that money is not something you can take for granted. Here's the thing. We often talk about, and I often get questions about, what comes next? What do we do other than finance? What is the blockchain application? Can we do voting? Can we do real estate? Can we do logistics on the blockchain? Right? And if you have conversations with traditional corporations, they don't want to touch money at all. They're not interested. It's an over-regulated space. It's full of risk. They don't want anything to do with it. So, you go into these corporate meetings and you're like, listen, 6 billion people who are in banks. We can rise them out of poverty. Money is an important application. We can give opportunity to people who are downtrodden. Think about what we can do to change people's lives. And while you're seeing all of that, Todd, next to you, goes, we could track bananas on the blockchain and do a logistics blockchain. And you're like, but the people who are impoverished, and he goes, bananas on the blockchain! And your boss goes, Todd, you're a genius. Give that man a bonus. Let's install hyperledger, or a clone of Ethereum, or some other distributed ledger technology so we can track bananas on the blockchain. You saved us. We can really make some money with this. Nobody wants to hear about what is the important application. The important application matters to those who are principled about the grassroots effort that we're involved in. So, forget about selling this to your boss. But every time someone asks you about building that next generation application, tracking real estate on the blockchain, voting on the blockchain, changing the nature of the nation-state governance model on the blockchain, and even bananas on the blockchain, first, we have to do money right. We can't build any of the other things until we get money right. And part of the reason we have to get money right is because this lays down the foundation. And that foundation is what is required for broad adoption. Until Bitcoin came along, the state of security among all of the people I know around me was so horrific, they all had passwords like password one, two, three, four. What? It's my birthday. What? It's fine. They didn't care about their personal privacy and security. And the reason they didn't care is because the impact of having your privacy violated is not felt directly, right? So, you're like, I'm doing the Farmville on the Facebook, and ads are coming in, and they're so personalized that I'm losing privacy any second now. And 25 years from now, our government is a hellhole, fascistic dictatorship, but I get to play Candy Crush. So, you don't really see the impact of gradually eroding democracy and erosion of all of our social institutions and the destruction of privacy across an entire generation because that happens later. In the meantime, you're playing Candy Crush, so it's okay. But you put Bitcoin on someone's phone, and suddenly they're like, I need a plan. I need some security here. Can I do a three-factor authentication with a quantum secure code? And then suddenly they start throwing out words. You're like, I don't know. I'm not sure. A people wallet will be good enough. I really need a hardware wallet. And people start upgrading their security. And you're like, great, Jim. I'm so excited you finally got it. Like, how much Bitcoin did you buy? I'm like, 11 pounds. 11 pounds. And it was up to 13 last week. And they're like security, long passwords. People get excited. More importantly, when you have money on your phone, it changes your perspective. Now it's a wallet. It's not just a phone. And suddenly you understand why someone will want to steal it. And that creates this really interesting situation because, for the first time, people are using public key cryptography in a civilian setting in the largest deployment of public key cryptography we've ever seen in the world. Until Bitcoin, the largest deployment of public key cryptography was the Department of Defense, United States Department of Defense. And now it's Bitcoin. And that is because people need security in order to protect money. Now, if people need security to protect money, they protect their keys. They back up their keys because it's their money. And if those keys are well protected and well backed up, now you can do interesting things like put a voting system on it. Otherwise, they don't care about security. Also, if you don't have censorship-resistant money, you can't build any of the other applications so that those applications can be borderless, neutral, censorship-resistant, global, publicly verifiable. If we build those other applications without a foundation of sounds and secure money, those applications will be centralized. Those applications will be censorable. Those applications will be country-specific. They won't be interoperable. They won't be on open APIs. We need to lay that foundation. Now, this is a message that's very easy to explain to people who are interested in Bitcoin. So let's switch to Ethereum. Because when you tell people in the Ethereum space, guess what? You need Bitcoin. They don't believe you. They're like, we can do everything that Bitcoin does except security, just as well with smart contracts. There are some fundamental trade-offs. The flexibility you need in order to do smart contracts does not go well with building very robust, secure, nation-state-resistant sound money, which is why, on the other hand, when you talk to Bitcoin, people are like, we can do smart contracts too. They're like, no, don't. Even if you could, you don't want to. The compromises you'll need to make, the flexibility you'll need to introduce, will undermine all of the things that make Bitcoin secure sound robust money. Let us do our thing, let them do their thing, and let's play together. Bitcoin takes a lot of flak. Money for criminals, drug dealers, terrorists, pornographers, same things they said about the internet. That's great, because it provides distraction for Ethereum to go to unicorns, rainbows, puppies, and distributed finance. But you can't do all of that if you don't have a secure basis to on-ramp everybody. You can't do all of that if your network can be attacked and denied service and shut down in certain countries. Bitcoin provides the foundation that allows Ethereum people to be freaky. I love freaky, because there's a lot of innovation and creativity there. It's like a big brother who's like, you can dress any way you want, kid, and if anybody gives you any trouble, I'll show them. Right? That's Bitcoin. So, what's the killer app of Ethereum? Yeah? Okay, what else? Stable coins? The Dow. I'm not kidding. Governance. The Dow, the centralized autonomous organizations, reinventing the modern corporation, building systems of governance. Everything interesting on Ethereum is a programmable system of governance that is decentralized. Stable coins on Ethereum, which are decentralized, they are based on a foundation of a governance model that's using smart contracts. Everything interesting that's happening in Ethereum is governance. Ethereum is a platform for governance. Let's not talk about how you do governance for Ethereum. That's a whole other problem, but you can do governance with Ethereum. And maybe it's going to be another version of Ethereum, and maybe it's going to be a different blockchain that does smart contracts and virtual machines, and maybe none of that is going to make the price go up. I'm not talking about price or investment. I'm talking about what is the purpose of a programmable, flexible smart contracts platform where you can do public verifiability of the execution and state of a smart contract. And the use of that is governance. And if you combine governance with sound money, something magical happens. You can do some really incredible things, but you can't do any of those until you first lay a platform for sound money. And what are the killer apps for other blockchains that are out there? I don't know yet. This is a beautiful ecosystem full of different things that are evolving in parallel to occupy different ecological niches or application niches that will do different things. And some of them are shit. That's okay. The beautiful thing about this open source space is we learn as much when they fail as when they succeed. No, we learn more when they fail. You sit back and you watch that beautiful explosion, and you're like, hmm, I wonder what happened there. Let's tear it apart and find out. That post-mortem of the destruction is actually a great, let's not do that. So now we know one way in which proof of stake systems blow up. Great. Let's not do that. Delegated proof of stake systems that have collapsed into infighting, lobbying, accusations, and lawsuits. Oh, great. Now we know how delegated proof of stake systems fail. We learned a lot from that experiment. We now know how DAOs fail. Yeah, re-entrancy bugs. Nobody was talking about re-entrancy bugs before the DAO. We've learned a lot since. So if other systems in the broader ecosystem of blockchains run experiments, you should have a bit of faith. You should have a bit more faith in the thing that you believe in to say, let them do their thing. I don't need to warn other people that they're scams or shitcoins. Maybe they are. Maybe they're not. I'm not the oracle. Maybe other people should do their own research and find out for themselves. And maybe some of those experiments are going to teach us something useful. I'm particularly fascinated by privacy coins, which are doing some amazing work in zero-knowledge proofs and range proofs, for example. Like, for example, Zcash had a catastrophic inflation bug because of an error in the white paper that described the joint computation mechanism to bootstrap the zero-knowledge snark. We wouldn't have learned that unless Zcash tried to do it first. Now, it really sucks for them because we don't know how many coins were created in the meantime, but it doesn't suck for us because we can learn now that, okay, if we were to introduce zero-knowledge snarks into Bitcoin, we have to consider the trade-off against the sound monetary properties. And maybe it's a risk that's too big, or maybe it's a risk worth taking. At least we know one way in which it fails. Maybe there are more. Maybe we'll find them. Let them play a bit more. We need guinea pigs. We need experimentation. And I don't want this space to close up and round up the wagons and go, nobody else will succeed. There can be only one. Gargan. There's only one leader. There's only one doctrine. There's only one true faith. That's not science. That's religion. I don't do religion. Feel free to do it if you want. I don't do litmus tests. I don't do purity tests. I do intellectual curiosity. And my intellectual curiosity is peaked by all of these experiments going on. So sound money, governance, privacy, non-fungible tokens, utility tokens, even ICOs. ICOs are all shit, right? Yes. They're also the greatest revolution that's going to ever happen to finance, because they're going to allow a global pool of startups to access capital anywhere in the world from the most organic early-stage funding all the way through mega-corporation or mega-dow, because they've reinvented the corporation. And they're going to offer the most incredible opportunity to billions of people around the world who are impoverished and have no access to investment opportunities, to invest in great ideas, to learn how to do due diligence, to become better investors, and with that, to secure a better future for their families. The entire VC to stock market space is about to get disrupted by the greatest new developments in funding for early-stage startups that has ever happened. And right now, all of them are shit. Can you hold those two ideas in your head at the same time? Can you say, right now it's a zoo, but out of that is going to come the biggest revolution in finance? Can we say right now it's a lot of people who are doing a lot of scams? The traditionalists in this space say, we need vetting and regulation in order to fix the problems of the new model of decentralized crowdfunding. We need to introduce an 18th century model of committee-based oversight and regulation. I say, in order to fix the problems of decentralized crowdfunding, we need to introduce decentralized vetting, decentralized due diligence, decentralized reputation scoring. We can build all of the tools to improve the quality of investments, the quality of research, the quality of reputation management, so we can better serve investors. We can build programmable escrow systems that allow us to ensure that the founder can't run away with the money without the approval of the rest of the board. Or even yet, better, that the founder and the board only get one quarter's worth of funding until the shareholders say, you're doing pretty good, we'll give you another quarter. And they vote to give them another round and another round and trickle out the money. Because if you're a young idealist who just came out with the best idea and the best team and the best execution, the worst thing that could possibly happen to you is $100 million in your bank account. Because within one month, you'll be wondering how it was possible to spend so much money on cocaine, champagne, and strippers. You thought your CFO had things under control. Turns out, your CFO was doing most of the coke. A lot of money really, really fast destroys startups. I've seen it again and again. I've worked with people where you watch their personality change when suddenly they become richer than they ever imagined, and they start taking shortcuts. So even the possibility that they might become rich, they start taking shortcuts. Greed is a very powerful emotion. Can we regulate that? Can we build systems that gradually deliver funds? I think we can. So before you automatically close your mind and say, this is just all noise, yes, a lot of it is, but some of it isn't. And it's really important to maintain that curiosity and be ready for the next wave of innovation that's actually going to improve things. So look out and recognize there isn't one killer app. There's one killer app usually for each one of these different systems because they can only do one thing well. You can't be a master of all trades because then you become terrible at all of them. We can't have one system that does sound money and smart contracts and low fees and unlimited scalability and full decentralization and nation-state resistance security. Although I'm pretty sure I read that in a brochure of a new blockchain that just came out. They claim to do all of those things. When you see claims like that, you have to think there's one of two things going on. Either they don't even understand the fundamental engineering trade-offs. And that's really disparaging. It's like, so you think you can do all of these things, you really don't understand the fundamentals, or they're just lying. That's a bit more reassuring because lying can understand. If you've been in this industry so long and you can't understand that there are trade-offs and you refuse to believe that there are trade-offs, well, then I can't really help you. There are going to be killer apps coming in many different ways in many different dimensions. And remember the other important advantage, if it's not useful to you, that doesn't mean it's not useful. It just means you, in that particular domain, are privileged. When you hear Warren Buffett say, I don't need crypto, of course you don't need crypto. You're a white-haired old man with billions of dollars. Have you been denied banking services? Unlikely. Jamie Dimon, I see no use for crypto. Of course you don't see any use for crypto. You haven't met a single person in your life who's not a millionaire. You asked these people to talk about their life. One of them recently said that they think you need ID to buy things at a supermarket. They were talking about how we should introduce ID at voting. Do you know why? They've never been to a fucking supermarket. Their butler does that. I've met people who have been stranded by the side of the road because their cars were refueled by the staff, and they didn't know what the little orange light was. And when the car stopped working, they didn't know how to put gas in it. Not 15-year-olds, 30-year-olds, right? So when you say, I don't need this technology, what you're saying is, my life already has this in it, and that's why I don't need it. But think about the people who do need that. Maybe you don't need governance because you have good... Okay, wait, I'm in Britain. You do need governance. Maybe you do need governance. You can run another bloody referendum and do what the majority wants. Well, you'll end up with Boris Johnson. I think I can actually still vote here. Maybe I should come back. Just for that one vote. We're like, hello, I'm a yank. I heard you're having troubles. Let me vote. So, to sum it up, the killer apps are usually very specific. Before we build the next generation of killer apps, we have to lay strong foundations. And often enough, the strong foundations represent technologies that are actually boring. Nobody wants to hear that instead of building AI-driven, deep neural network, drone-based delivery systems for tour routing of drugs on the dark market using smart contracts, what they should actually be building is a decentralized exchange or a wallet that actually works for real human beings that can be understood by people who don't have a degree in computer science. Those are the boring things, but they're the necessary things so we can get to the next level. We're going to do rounds of building boring infrastructure to open up the space for applications that bring new users, which then overwhelm the scale of our infrastructure and requires to build more boring infrastructure to create more room for more applications and rinse and repeat. And hopefully we will continue to do that without failing too bad for 25 years, just like the internet has. Start building simple. Build strong foundations. Don't snare at other people's ideas of what is the next step or what is the killer app. Understand that your needs don't represent everybody's needs. Understand that an app that's not useful to you might be useful to someone else. And understand that in a permissioned environment, you need to have permission to innovate. But in a permissionless environment, you only need a market size of two. You and your buddy who want to make one app to do something really weird that no one else is interested in. And that's the beauty of the internet. That's the beauty of open permissionless systems. You can build that. And maybe when you build it, you discover, actually, there's a few other people who wanted to use it, right? So killer app, money, killer app, governance, killer app, privacy. And then we'll see what comes next. Thank you. Thank you very much, Andreas. That was better than EastEnders, I think. Remember, as Andreas switches over to Slido, hopefully the question's been coming in. If you smell pizza, do not move, okay? If you move to the left, you will be banned from Coinscrown forever. You're never coming back. So just stay still, because it does interrupt everyone. So it'd be good to move into the Q&A. And then here, Andreas is Pearls of Wisdom. I think we're ready for this. Let's go. Let me see if I can put it in watch mode. I don't know if I can do that when I'm locked in. No, don't give me a dictionary. No. See, this is what happens when you try to use a Mac. Let's see if this works. This should put it in present mode. No, it isn't. That's fine. Just leave it like this. This is good enough. All right. I have one very, very important request to make. It has been my experience that by the time I finish all of my presentations, book signings, and things like that, and I go to get the pizza and beer, there's no frigging pizza and beer. So at this point, Paul, please, one IPA, two slices of pizza, any kind. Thank you very much. Yeah. Can everybody see this Slido? Everybody happy with it? Okay. And you can also use that. The code is hashtag AACapitalLondon on Slido.com. Let's start with the first question and see what happens. If and when Bitcoin reaches one sat equals $1, will transaction fees be $100? No. They won't be, I think. I don't know. We've got to consider the fact that we cannot get there with the scalability we have here. Not just the scalability on the second layer, but the scalability on the blockchain itself. I think a lot of people think that the scalability debate was about which avenue of scalability should we pursue to the exclusion of all others to solve all of the scalability problems forever. The truth is, there is no solution to scalability that is forever. There is a solution to scalability now. And as soon as we do that, it opens the door for people to write applications that do things at a greater scale, which they immediately do, which then uses up all of the scale we just built, which then creates a scalability problem again. If you haven't heard this talk, I've done it before, but I remember when sending an email took three days to cross the internet. And then the infrastructure got better, and you could send an email in seconds, and then someone invented what's called MIME, multi-part internet mail extensions, or, as we know them today, attachments, and then the internet melted down. Because people started attaching things to email, and the capacity wasn't there. And then we started putting images in emails, and then the internet melted down, so we had to build a lot more infrastructure. And then people tried to start attaching videos, and then we invented the web, and then things really melted down. And then eventually we could do video on the web, and then things melted down again. And then eventually we could do voice across the web, and then the internet melted down again. And in every one of these stages, the capacity that's created gives an engineer a bright idea, and they go, huh, I wonder what I could do with all of that bandwidth. And immediately they have 100 ideas, and they implement half of them, and the next day there's no internet left, right? I was once given a one gigabit fiber connection to the home, and one of the places I was living semi-permanently, it was a few years back before I became a full nomad. It was like a gigabit internet connection. I wonder what I could do with that. 50 ideas come to my head. I call up the internet service provider. I'm like, yeah, I have a one gigabit fiber internet, fully symmetrical, one gig down, one gig out to my home. I'm like, yes, you do, sir. Great. Can I actually use it? Absolutely, sir. No, no. I mean, can I actually use it? Of course, sir, why would you not be able to use it? I was like, because I'm an engineer, I can actually use it. Like, yes, yes, of course you can use it. Okay, can you put that as a note on my account that I called, and you said I could use it, and I will use it, and I warned you I would use it. Okay, great. We're good. Thank you. Upgrade router, upgrade switch, and then I pegged it. For the entire time I lived there, the utilization of that fiber line was one gig up, one gig down, 24 hours a day. And somewhere in the vast ISP realm, there was an engineer going, I told him we could use it. I didn't know he would. And there's a little map of the city where I lived. And there's one huge red dot over my house, which is like, how is 80% of our capacity going to one house? How did you let that happen? This is what happens in scaling. So I don't know how we're going to solve this. The bottom line is that the scaling debate wasn't really about which solution we do. It was really about who has the power to decide that. And then there was a lot of people going, I do. And a lot of other people going, no, you don't. I do. And I was sitting back going, oh, boy, I'd better not get involved in this one, because it's going to turn ugly, and it turned ugly. We are going to do all of the things. We're going to do layer two. We're going to do optimization within transactions. We're going to do compression. We're going to do network optimizations. We're going to do signature compression. We're going to do signature aggregation and batch verification. We're going to increase the base block size. We will have to. And by doing all of these things, including side chains and connecting through layer two to multiple networks that can take more capacity and be used for different applications, we will get to a point where we have the ability to onboard the billions of people who need this technology. And how much of the fee is going to be? All I can tell you is that the fees are going to represent the cost of the intermediaries that exist. The current financial system is expensive because it feeds the profits of giant intermediaries, and that cost is passed to you. If we can do it with fewer intermediaries, it's going to cost less. So is it going to cost $100 to make a transaction? I don't think so. I mean, we're trying to make it so that Wells Fargo and Western Union can't charge you even $35 to move money across borders. It would be really embarrassing if we couldn't beat that price. We'll need to do lots of different things. I don't know the answer yet, but I'm an optimist when it comes to engineering. Proof of work means tons of pollution. Do you want the planet to die? Yes, as long as I get rich. I don't have children. I'm taking it with me. No. First of all, Bitcoin doesn't cause tons of pollution. Proof of work doesn't cause tons of pollution. Pollution isn't caused by energy consumption. Pollution is caused by some forms of energy production. If you produce energy with solar panels, you're taking sunlight that was going to fall on a patch of grass and turning it into electricity. You're not producing pollution. Instead, what you're doing is you're subsidizing the cost of solar panels and making them cheaper and more efficient for everybody, which is actually better for the environment. I'm not going to say this is an environmental plan. If you're concerned about pollution, we should be having the real discussion. The best way to allocate resources is markets. The best way to have markets incorporate the cost of pollution is carbon taxes and carbon markets. If we do that, the miners will see an elevated cost of using electricity from carbon-producing sources. Because they are highly mobile and because it doesn't matter what time of day and location you do mining at, they will immediately migrate to sources of electricity that do not have a carbon impact. They will leave those sources of electricity with a high carbon impact for the usual players who cause most of the pollution. Weapons manufacturers, the war machine, oil companies, plastics companies, a dozen companies in the world produce a significant percentage of the entire carbon footprint. You buy from them every day. They have cute names like Johnson and Johnson, and Pal Molliv, and Tesco, and ESO, and British Petroleum. Bitcoin is not destroying the planet. Bitcoin is using the cheapest form of energy that exists, which is waste energy that can't be used for anything else because it's either too far from sources of demand or because it's produced at times when there is no demand. For example, solar panels in the middle of the day when no one is running their lights. Are you concerned that the Facebook Libra coin will result in a truly... It's gone. It's gone. And it's gone. Oh, there it is. It went down. Are you concerned that the Facebook Libra coin will result in truly decentralized permissionless coins like Bitcoin getting replaced? If they can build a truly decentralized permissionless coin, I will fricking join the board of Facebook. They can't. Yes. This show is sponsored by Paul's MacBook Pro. Facebook can't do that. The five pillars, or if you like, the broad principles of the types of blockchains we care about are open, borderless, decentralized, neutral, censorship-resistant. You can add to that publicly verifiable, immutable. Could I have a bottle of water at some point, please? Thank you. And Facebook can't do any of those. Why? They're not an open source project. They're not operating across different countries. They have legal jurisdiction in specific countries. And in those specific countries, there are laws about what you can do with money, laws that Bitcoin doesn't have to deal with, because it's an open source decentralized project that doesn't have anyone you can stomp on to stop them from doing the things that we're doing. But Facebook does have people you can stomp on. So, as a result, they say, let's do an open network where anyone can join. And all of the regulators in every country go, whoa, whoa, whoa, whoa. Actually, that's all that has to play out. First, they're going to have a committee meeting inside Facebook, and they're going to say, let's build a completely open, decentralized cryptocurrency, and the lawyers at Facebook who outnumber everybody are going to go, whoa, whoa, whoa, whoa, whoa. We can't allow that. They can't be borderless because they have to abide by the regulations that prohibit transfers across borders without knowing your customer and anti-money laundering. They have to vet every participant in the transaction. They can't be neutral because they can't just transfer value from anyone to anyone for any purpose. You can't buy certain things with money through the traditional payment systems. Now, you're probably thinking, drugs. Well, yes, in some countries, drugs. In Saudi Arabia, it's Bibles, right? In every country, it's a different set of moral codes, some of which you agree with, some of which you don't. And we don't allow the morality of different countries to impose a single set of rules that are the least common denominator. We don't say, well, in one country, it's actually illegal to pay for a driver's license for a woman. We can't have women driving around on their own without a guardian, plenty of countries where that's the case. So, we actually have already a system that does not abide and is not regulated based on the least common denominator of all jurisdictions, and that's the internet. But you can't do that with money. Facebook cannot be neutral. Facebook cannot be censorship-resistant. There is a requirement in law to censor transactions of certain types. Try it. Go to your bank tomorrow and send a wire transfer to Ahmadinejad and see how long your bank account lasts, right? Not allowed to do it. So, Facebook cannot build an open decentralized cryptocurrency because they're prevented by law to do so. No company can do what Bitcoin does. So, what do they really compete with? What they really compete with and who should be terrified by this, or banks? Because banks are currently now squeezed between a rock and a hard place, or Bitcoin and a face coin. Because on the one hand, they've got an open decentralized, lawless jungle zoo of cryptocurrencies that they can't play in, they can't compete, they can't co-opt, they can't sue, they can't buy, and they can't even get the government to shut it down even though they've been trying. So, that's out of bounds. And then, the thing they pride themselves the most, which is being progressive technology companies, well, Silicon Valley can do better. And if you think face coin is coming, so is Apple Coin, and Amazon Coin, and Twitter Coin, and every other Silicon Valley giant, Uber Coin, Airbnb Coin, whatever. Everybody's going to get into this game eventually, especially if Facebook shows that it's successful, and suddenly the banks are competing for the same fundamental financial services with a whole bunch of Silicon Tech giants who not only know how to do user experience and user interface better, I mean, imagine banking plus Candy Crush together. The banks will lose a whole generation of customers. I remember when I was a customer here in the UK, Nat West was giving out toasters to students in order to get us. And guess what? I got a toaster. Yes, sir, I got a toaster. It was a crap toaster. It was. It was like one of those really, really cheap Argos models that fell apart within two months. But I still got a toaster, which is more than I can say about my Greek bank. But imagine what goodies Facebook can give you. And the best part of this is that they have to compete with these giants who actually have perfected the art of using artificial intelligence to tickle your dopamine receptors. And they're going to deliver banking to you. Now, this is a horrific surveillance capitalism dystopia in which everything you do will be tracked. All of your payment information will be sold to everyone everywhere and destroy your privacy, destroy democracy forever in all developed countries. But for the banks, it's worse. Their profit margins are going to go down by at least 8%. And that's really serious. Crypto Cobain was here. Hi there. Come on. What is happening here? Okay, can we, we're being spammed here. I can't believe this. Okay. Hi Andreas, do you believe that the Lightning Network second layer is the best scaling solution for Bitcoin or other other interesting scaling solutions? Again, the issue here is not which scaling solution solves scaling. The issue is which scaling can we do now? Which scaling can we do now without other trade-offs? And which scaling do we do first? So my opinion, which changed by the way, in 2014, I thought we should do big blocks. And then I changed my mind. And part of the reason I changed my mind is because I was paid off by Block Street. That's what you'll hear on Reddit. No, part of the reason I changed my mind is because I've never been paid by anybody to do this. I wish I could get paid. I get paid by Patreon. Part of the reason that I changed my mind is as I saw the debate play out, I had made some very specific predictions in 2013. I said that as we develop this technology, the protocol is going to become ossified. That means that it will gradually harden. As the protocol gets deployed to more devices, as more people participate in the consensus rules, it's going to get harder and harder to introduce disruptive change. Now, I thought we had two or three years until that window closed. When the scaling debate happened, and I thought a pretty straightforward technical conversation that was happening on Segwit suddenly got derailed into this really, really ugly battle over who should have power, I realized the window is closed. It's already closing much faster than I thought. Then I'm thinking, what is the most important thing we need to get into the base layer before that window closes? What is the thing we can't do on layer two? The answer to me is obvious, privacy. We have to do privacy on layer one. We cannot do privacy effectively on layer two. If you build a layer two privacy solution with layer one being wide open, that's like building SSL on top of a wide open internet. The intelligence agencies will have a field day and turn it into a surveillance system. We need to build privacy on layer one, because we can build it well in layer two. Can we do scaling in layer two effectively? Yes, we can. It's not a final solution. It's a magnifying effect. We can take every one transaction that happens on layer one and multiply its effect, so we can do hundreds, thousands, maybe even tens of thousands of transactions on layer two, which gives us leverage. What do we use that leverage to do? Optimize layer one further, compress transactions, compress signatures, fit as much as we can. Every little thing we do on layer one now gets magnified by a factor of 100,000 or 10,000 in layer two. Once we build sophisticated wallets that can use layer two, we can now make incremental improvements of 10% in layer one, and those balloon up to very big scale in layer two. Then eventually, we will have to do an increase in the block size. Absolutely. That's sensible to do when we have established sufficient incentive mechanisms, when we can achieve levels of decentralization, where we don't have to sacrifice decentralization and mining in order to increase the block size, when we can ensure the more people have skin in the game, so they're running fully validating nodes so that our system is robust in all of service attacks, because if we make it so expensive to run a node now that only companies run it, only in data centers, well, companies can be coerced. They're the easiest organization to push around. They have lawyers who are going to say, whoa, whoa, whoa, whoa, whoa. You can't do that. The government sent us a letter. It had a letterhead and everything. In fact, we got a letter from a tiny, tiny town in Texas, and they had a star of a sheriff on it. We give up. This is too hard. So we need individuals, individuals with courage, to be running nodes all over the world in weird little holes, hanging off lamp posts, running underground. This needs to be a grassroots environment, and we can't sacrifice decentralization to do scaling now, because then we lose everything. So, yes, lightning is the important first step. It is not the last step, and it is not the step we take instead of scaling on the base blockchain. It's just the step we need to take first, because we need to do privacy on the base chain. What will happen to Bitcoin if it's banned by the United States or another major world power? Do you see this as a likely scenario? Yes in the UK, not in the United States. So here's the thing. Compare and contrast the Constitution of the United States with the Constitution of the United Kingdom. Oh, shit. You don't even have one. Here's the bottom line. In the United States, we have a very strong rule of law, and it is especially strong when it comes to freedom of speech. In fact, over the last 15 years, the Supreme Court has repeatedly said that money is a form of speech when it is used for political campaigning. They have gone so far as to say that Congress has no right to regulate campaign contributions because money is speech. Now, they can't really walk that back very easily. So the moment that the United States goes, it's banned. Many of the big companies that are based in Silicon Valley that now have billions of dollars and thousands of lawyers are going to go, ha ha, we'll see about that. And then they're going to sue the government before the law goes into effect. Then they're going to get a temporary restraining order that says this would really screw our billion-dollar business. So hold your horses there. I think this is unconstitutional. This will go all the way to the Supreme Court. Now what happens there? We don't know. But here's the best part. Neither does the government. Now imagine the scenario where it goes all the way to the Supreme Court. The Supreme Court says, no, actually, Bitcoin is money, and therefore it's protected by the Constitution. Now at that point, they're fucked. A ruling like that really messes things up because now that has a trickle down effect. Now you can't regulate any of it. Not just. You can now put some minor restrictions as they call time, manner, and place restrictions on speech. Regulation of speech is subject to very, very strict scrutiny, constitutional scrutiny, based on specific elements. You can limit it only in terms of time, manner, and speech, and you cannot limit it based on content. You also can't limit it a priori, and you can't limit it when it's used for the expression of political ideas or association with political parties. So they get an outcome like that in the Supreme Court. Who knows? Screwed. They're not going to attack it directly. China will. China has. They've banned Bitcoin 17,462 times. Has Bitcoin been eradicated from China? Of course not. Still there. It's removed all of the Chinese companies from China from participating in it, but all of the people who want it, including the people who wrote the law to ban Bitcoin, and now stuff their wallets with Bitcoin as fast as they can, they still have it. We're not going to see straightforward bans. There's not enough collusion and cooperation. If governments could get together and make decisions where they all agree, how about we fix climate change? We won't, right? So every time one government goes, it's banned, another government goes, come to us. And right now it's Malta next year. It's going to be Singapore the year after. It's going to be Guernsey Islands or whatever, right? So there's always that variety. This is asymmetric warfare. You cannot fight a globally decentralized system from locally imposed regulation by 194 different legislators that can't agree on anything in 194 countries. To what extent do we have a right to privacy in our financial lives? Should we be incentivized to be public? Does privacy perpetuate or enable injustice? That's a great question. Privacy is a human right. It is also the fountain head for all of the other human rights. If you don't have privacy, you don't have freedom of expression, you don't have freedom of association, you don't have freedom of assembly. I saw a really stunning picture, which was this week in Hong Kong, they're protesting against the extradition law that China is trying to pass so they can extradite dissidents to China and disappear them into the gulags. And so they're protesting really, really hard, but they learned. Last time they did protests, they used their subway cards to track who went to the protests. So this time they had lines of people lining up with masks on so they can't do facial recognition in the stations, buying tickets with cash and using paper tickets that are untraceable. They learned an important lesson. Without financial privacy, you don't have political rights. And this happens all around the world. It can happen here just as easily. So it's a fundamental right. We should not incentivize people to make their private financial information public because what happens is the people who are powerless will be forced to make their information public. And the people who are powerful, who for centuries have maintained their financial privacy, including criminals, will elect to remain private. They will put their bank accounts in Switzerland. You can read their names. They're in the Panama Papers. You remember when the Panama Papers were released and we found out that the world's financial elite had been stashing trillions of dollars in foreign bank accounts and then all of them got prosecuted and half of them went to jail? Oh no, they just killed a journalist who wrote the story and no one went to jail, right? So you think they're going to give up their financial privacy? No. It's up to you to decide if you wanted. And does it perpetuate or enable justice? Justice is a fundamental requirement for peace. Peace is not the absence of war. Peace is the presence of justice. As Martin Luther King said, without justice there is no peace. You want to fix the world, give financial future and take people out of poverty. If we continue to let fear dominate our political life and we continue to separate people into those who have the privilege of a future for their children and those who don't, those who don't will come and kill us. And they have every right to do so. That is the next one place to stop. Andres, thank you very much.