 Hi everyone. I'm really excited to be in Cologne. This is my first time in Cologne. I've been to a bunch of other German cities, most of all to Frankfurt. Though usually I don't leave the airport. I'm usually flying through. Very exciting to see so many people here. When I first booked this event, I was told that Cologne has a very, very small meet-up organization. This is not a very small meet-up organization, so good work. I'm going to do a general talk today. I want to talk about the basics of Bitcoin. I understand that we have mostly a beginner group here, a lot of people who are new to Bitcoin. Let me see by a show of hands. How many people here are relatively new to Bitcoin? That's almost more than half the audience. How many people have Bitcoin or have used Bitcoin? It seems like your newbies work pretty fast. As always, if you don't have Bitcoin or have not used Bitcoin, please come and talk to me afterwards. I would be happy to help you set up a wallet, and give you one or two euros in Bitcoin, not Bitcoin, or maybe one or two millibits. In order for you to experience how Bitcoin works and to try it out. Can everybody hear me in the back? Can you understand my English? Excellent. I wish I could do this in German. I cannot. Okay, so what is Bitcoin? Bitcoin is not a company. Bitcoin is not a service. Bitcoin is not an organization. In fact, if anything, I would call it a disorganization. Bitcoin is a protocol. It's an internet system. It's a system that allows anyone in the world to be able to make a payment, or run a trusted application with someone else, without having to trust the other person. If you look at it from that perspective, Bitcoin is a platform that offers trust between people who have no other basis to trust each other. They do not need to trust each other because they can trust the platform. If I had my choice in order to name this thing, I would probably not call it Bitcoin. I would call it Trustnet, but Satoshi called it Bitcoin. Here we are. Bitcoin enables us to do something we've never done in history before, which is to establish for the first time a global financial network that is completely without borders, that allows any person anywhere in the world to transact with any other person. You may hear that the magic ingredient for Bitcoin is blockchain. That is not entirely true. We are hearing that mantra a lot now, especially from financial institutions that are desperately trying to avoid being disrupted by this technology. They will say, the magic behind Bitcoin, the technology behind Bitcoin, is the blockchain. The blockchain isn't the only technology behind Bitcoin. It is one of four technologies that work together for essential ingredients that make Bitcoin what it is. What Bitcoin is, its primary characteristic, is that it is an open, borderless, neutral, and censorship-resistant platform that everyone can use. Those are the characteristics. Open means that anyone can participate in Bitcoin. You don't need permission, registration, file an application, or show identification. You simply download an app. In fact, you don't even need to download an app. You can just write an app yourself and participate in Bitcoin directly. If you are a coder, you can write your own app, and then you don't even need to download anything. Just write code, join the network, done. It is open because everyone can participate not just in the payment network, not just in the currency, but can also participate in the consensus network, and can also innovate without asking for anyone's permission. In many systems that are centralized, if you want to build a new application, you have to ask permission by the central owner. Let's say you want to write an application that does better routing for Deutsche Bahn, or offers you a better mobile service with Deutsche Telekom. How do you do that? You have to ask Deutsche Telekom, can I please write an application? Will you please make that application run on your network? They will say, great, we will run a focus study. We will see how many hundreds of thousands or millions of people would like to use this application. If it is big enough, then we will spend the money required to invest in deploying this application. In Bitcoin, the process is slightly different. You say, I want an application. Does anybody else want this application? Ah, one more person. Great, we have a market. Two is all it takes. I will send stuff on port X. You receive stuff on port X. We will communicate with this protocol. We have an application. I don't need to focus study it. I don't need to ask anyone for permission. I can write an application for me and my friend. Why would I do that? Maybe my friend has special needs. Maybe my friend has a disability they can't see, or they can't read, or they have a cognitive disability. If I wanted to create an application for Deutsche Bank for my half-blind friend, or for my friend who had a cognitive disability, if Deutsche Bank didn't build it, I wouldn't get it, either with my friend. But in Bitcoin, if I care enough about writing an application for my friend, I can write a Bitcoin wallet that is for people with vision problems, with very, very big letters. I can write a Bitcoin wallet that speaks the payments to you, for blind people. I can write a Bitcoin wallet where the password is not numeric or letters, but pictures of animals, for people with cognitive disabilities, to give them security and control over their money. I can create an application for just one person. In order to run that application, all I have to do is run that application. I don't need to ask anybody's permission. This creates a very magical environment. This is what we call permissionless innovation. It ensures that innovation happens at the edge of the network, driven primarily by the users who care about that application. There's no committee, there's no focus group, there's no any way of registering the application. So then the question becomes, how many applications run on the Bitcoin platform? We have no idea. We have no idea. It's like saying, how many applications run on the internet? We have no idea. Some of the applications are invisible. Some of them we don't know exist, but they're out there and they work. We have no idea. We have no idea if there's a 12-year-old Turkish programmer writing an anti-air-to-gun Bitcoin wallet right now. I hope they are. We have no idea. They could be, right? When a country says, let's ban Bitcoin, I hope there's some 12-year-old programmer who's saying, how about we write a Bitcoin wallet in the correct language and unban it really quickly, make it available broadly? If Russia is afraid of Bitcoin, they're going to be much more afraid of a Bitcoin wallet that speaks Russian. And so this permissionless innovation creates this very vibrant environment where people can create new things. We've seen this before. It happened on the internet, and it's still happening. It's why Bitcoin itself exists. Bitcoin itself is an application that refused to ask for permission. Bitcoin itself is an application that came out of the unknown. And for many years, nobody knew it was running. But it was, getting stronger every day. So Bitcoin is this thing that is open. It allows permission to access for everyone, permission to participate for everyone, permission to innovate for everyone, without permission. It's borderless. We use that word, but it has some very important implications. The internet is borderless. The internet doesn't care which country you're in. People can try to put up firewalls, but for the most part, they can be bypassed. So the internet is a true global network. Well, Bitcoin is also a true global finance network. And this is terrifying. For many organizations, this is absolutely terrifying. The idea of a financial network that has no borders is completely unprecedented in history. The only thing that existed before that, that truly had no borders, was Roman coins. Roman coins stretched for the largest empire the world had ever known, and they were borderless. Everybody used them. Even if they weren't Roman, Bitcoin could become something like that. It is the first truly international, borderless, global, transnational financial network. The first truly borderless, global, transnational currency. What happens when you open the borders for everyone to participate? Very interesting things happen. Very scary things to some people. But we live in a world in which billions of people have no access to financial services, none whatsoever. They have access only to cash. Even those who do have access to financial services, maybe they have a bank account, but they can only use one currency. They can't import, they can't export, they can't borrow from someone in another country, they can't lend to someone in another country, they can't convert to another currency, they can't trade internationally, they can with Bitcoin. And so that changes the world in ways that we don't yet understand. We don't yet know what that will do. It will allow billions of people to join a global economy. When cell phones were first launched, I remember buying my first cell phone. In 1991, I bought a cell phone. I was wealthy enough as a student in London to buy a cell phone. It was about the size of this microphone. It had an antenna that was twice the size of this mic. And if I charged it for eight hours, I could make 20 minutes of phone calls before I run out of battery. But only if I was very near some of the central locations in London where there was actual cell coverage. And that was it. And for that privilege, I paid 25 pence a minute. And if someone called me, I paid 25 pence a minute. So when people called me, I would like, Hi, this is Andrew. Yes, quickly, faster. Yes, bye. I really can't afford to talk to you for very long. And if you looked at cell phone technology at that time, you might think, this is a tool for the rich, right? This is the kind of thing someone has in their Rolls-Royce. Someone who has an assistant. Someone who has the privileges of living in London. Even for a student, you know, that's the kind of thing that only a student in a first-world country could afford. Now who has a cell phone? Not just everyone. But the really funny thing is how it completely cross-class divides. When I had a cell phone back then, my first cell phone, it was a status symbol, right? So I would sit in the corner of my university holding my gigantic cell phone and look very, very cool. I thought it was very impressive. None of the girls did. But still, I look like a businessman. I couldn't actually afford to make phone calls, so I just talked to myself. But if you see someone on the street today and they have a Bluetooth headset, what kind of job do they do? Usually it's a plumber, a builder, a construction worker, a taxi driver. You will not see an executive with a Bluetooth headset anymore. Hell no. Because the ultimate status symbol today is to hire someone to hold your cell phone. If you are really rich, you don't hold a cell phone. You have someone coming behind you who holds the cell phone. It's weird how that flipped, right? It went from being a status symbol of wealth to being a status symbol of the working class. And now if you go to places like Brazil, rural Brazil, you go to a village on the Amazon River Basin, which is 100 miles from the nearest town by canoe. Everyone has a cell phone. They don't have electricity. They don't have running water. They don't have a clinic. They don't have a bank. But they all have a little Nokia cell phone and a little solar panel so they can communicate with the world. And there's a cell phone tower that will support their communications. Because it's easy to deploy. And this happened across the world. We call that leapfrogging. The idea that in some countries, the new technology will completely overcome the old technology. They will never see a landline. They will never see a traditional phone. For them, telephony started with Nokia and ended with Nokia. And will always be that. So what happens when an Android phone which today costs 30 to 40 euros for the cheapest version costs 10 euros? What happens when an Android phone that costs 10 euros with a very, very basic data service is a bank? What happens when that Android phone allows you to originate and terminate loans, to do wire transfers? When it gives you not just the power of a bank account, but the power of a banker? What happens when everyone with an Android phone in South Saharan Africa, in Southeast Asia, in South America can become a banker? And that's what Bitcoin is going to do. That's what technologies like Bitcoin are going to do. And that's what borderless really means. It means the possibility to create a unified world financial system that is open to everyone, without the concerns of politics, without the concerns of geography. In fact, you don't even need to be a human to own Bitcoin. Bitcoin is software money, and software money can be owned by software. Maybe a self-driving car will own its own money. Maybe your fridge one day will have a Bitcoin wallet. I don't know why, but who knows? There's probably some 12-year-old designing exactly that. So open, borderless, neutral. What does neutral mean? Neutral means that Bitcoin doesn't care who sent and who received. It doesn't care what amount is being sent or received. All it cares about is, does this transaction validate based on the rules? And if it does, it goes. And if it doesn't, it doesn't go. Simple. There's no blocking. There's no censorship. There's no opportunity to say, but the sender isn't rich enough. But the recipient is in Zimbabwe. Doesn't matter. None of it matters. You don't know who the sender is. You don't know who the recipient is. You don't know where they are. Sender, recipient, and value irrelevant. Completely neutral. A platform that can be used without concern about the humans who are behind it. Or the cars. Or the refrigerators that are behind it. And finally, censorship-resistant. Bitcoin resists censorship. That means that if I make a transaction, someone else can object to it. They can petition their government. They can sue in court. They can get a court order. Saying this transaction should not happen. And yet, it did. And now what? There's no changing that. What happens in Bitcoin happens. And once it's happened, it cannot be undone. It simply cannot be reversed. It can't be stopped. It can't be seized. It can't be frozen. It can't be reversed. If you, as the sender, decide to apply a digital signature in order to initiate a transaction with your Bitcoin, that transaction will happen. There is absolutely no way to stop it. And once it's happened, there is absolutely no way to reverse it. It becomes fact. Some people find this terrifying. What could happen in the world if anybody could do a transaction whenever they want? You know, they said the same thing about the internet. What would happen to the world if everybody could have an opinion? Because money is an opinion. There's really very little difference. What Bitcoin does is it turns money into a form of speech. And once money is a form of speech, once it's carried over the communications networks of speech, it becomes, for all practical purposes, speech. How do I know this? I put $150 million Bitcoin transaction into a photo of nine cats. And then I posted it on the internet. And the point was this. If you think you can stop Bitcoin, what you are saying is equivalent to, I can stop people from posting photos of cats on the internet. And we all know that's impossible. Because that's what the internet was made for. I've created a transaction that got converted into emojis on Skype. So you can take a transaction, 250-300 bytes, and you can convert it into 250-300 emojis. So your transaction becomes thumbs up, dancing man, birthday cake, little star, smiley face, whatever. And then you post that anywhere. Spray paints on a wall. You post it in Skype. You post it on Facebook. And anybody can then take that, decode it back to a transaction, and post it on the Bitcoin network, and the transaction will go through. And it's valid. How do you censor money when money is any form of speech we want? Picture, video, text, emoji, anything. When Bitcoin can be 12 words. How do you stop people from communicating 12 words? By the time you say, hey, don't do that, I've already said four of them. How do you stop Bitcoin from moving across borders? When a refugee can take their money, convert it into Bitcoin on the black market, memorize 12 words, and walk across the border. And even if they're completely naked, they're carrying their money in their head as 12 words. Wealth is speech, and that changes everything. This is what Bitcoin is. And in order to achieve these characteristics, open, borderless, neutral, censor-persistent, you need the recipe. And the recipe has four ingredients. It's a blockchain, yes. But it's also a system of proof of work, a consensus algorithm that is open for everyone to participate in. And in order for the blockchain to work and be decentralized, it has to have a consensus algorithm that is open for everyone to participate. Otherwise, the participants can be coerced into censoring the blockchain, into reversing its transactions. But in order for it to have an open consensus algorithm, the participants need to have some kind of reason to keep it secure and to be honest. With Bitcoin, the reason is a competition. And that competition has a reward. But the only way you can make a reward is if you have a native currency. So the consensus algorithm can only be open if you have a native currency to reward people with. And the reward only works if, when you cheat, there's a punishment. And the punishment is the extrinsic risk of energy you must commit before participating in the competition. And those are the four elements. An open blockchain can only remain open if it has an open participatory consensus algorithm, which can only work if you can reward the participants with a native currency, which will only work if they're punished through the expenditure of external energy if they try to cheat. Take any one of those elements away, and you no longer have an open, borderless, neutral, censorship-resistant network. What you have is a fancy database where the participants can be coerced to change it, to rewrite it, to censorship. And it is no longer neutral. And if it is no longer neutral, it cannot be borderless. Because you cannot take a position of neutrality if your local government is forcing you to censor. If you can, you must. And if you must, you will. And if you do, borders are back. And in order to ensure that you keep such a system healthy, you cannot make it open, because you can't secure it if the participants can censor it. So openness goes away, borderless goes away, neutral goes away, and censorship-resistant goes away. And what are you left with? Microsoft SQL Server data-centred edition with hashes. Only it's more expensive. Probably the next speaker will disagree with all of that, but we'll see. It's going to be fun. That is Bitcoin in a nutshell. It seems simple. It's very complicated. It seems like it's a form of money. It seems like a payment network. You might look at it and say, It is not. It is the fifth most radical revolution in money we have seen as a human species. It will shake the foundations of our society. It will transform everything. And the more I look into it, the more I learn about it, the more I understand how deep this invention is, how influential it will be. And it seems like such a simple proposition. Let's build a world where we have a system of finance that is open, borderless, neutral, and censorship-resistant. And yet, the very idea of saying those words together when related to finance is radical. It's revolutionary. And as one philosopher once said, at a time of universal deceit, simply speaking the truth is a revolutionary act. Bitcoin speaks the truth. Thank you.