 And his newest book is just came out eight days ago called the Internet of Money which is a masterpiece to read Please help me welcome Andrea Santanopoulos Good morning everyone Let's start with a quick poll here. How many of you have used a digital currency like Bitcoin at least once and How many of you own Bitcoin at this moment or any other digital currency? Okay We can fix that if you like later on today come find me I would be delighted to demonstrate to you how to set up a Bitcoin wallet on your smartphone and I will give you your first fraction of a Bitcoin not a whole Bitcoin and Show you how a transaction works because Bitcoin and the digital currency revolution it has started is best demonstrated and Experienced then explained It's actually very difficult to explain Bitcoin. I've spent the last five years Learning how to explain Bitcoin. That is my full-time job Unfortunately, the developers keep making new stuff, which I then have to explain all over again so for a moment Forget everything you think you know about Bitcoin forget everything you've heard about Blockchain and let's start from basics In 2011 I heard about Bitcoin for the first time and My reaction was exactly the same as the reaction of everybody else who heard about Bitcoin the first time including its founder and that reaction was ha nerd money That's probably just for gambling Six months later. I heard about Bitcoin again and this time I read the white paper that launched this system and My background in computer science and distributed systems allowed me to see Behind the illusion of what I thought Bitcoin was and it blew my mind In my life, I have now had six occasions in which I have become absolutely obsessed With a system of technology to the point of forgetting to eat forgetting to sleep and consuming as much knowledge as I possibly can my first computer when I was 10 years old my first programming language experience my first modem my first Access to the web the first time I used the web browser The first time I downloaded and installed the Linux operating system and Then Bitcoin When I've discovered it I spent four months consuming as much as I could except food I Lost 26 pounds on the highly inadvisable diet of Obsession I have not emerged from that Because I keep finding new layers of depth to understand this and The reason it's so fascinating is Because it isn't what it appears to be at first glance Bitcoin isn't money the blockchain isn't a system of currency. It is a platform of trust It's not a company. It's not a product. It's not a service. You sign up for it's not a currency currency is just the first application it is The concept of decentralization applied To the human communication of value because what is money? In Q told us it's an illusion It's imaginary and the reason we don't grasp that is because it's so deeply embedded in our civilization Money is one of the oldest technologies the humanity has It precedes writing How do we know that the very first samples of writing we have our spreadsheets They are tallies and ledgers of debts owed and Money pre-existed that writing You might even speculate that Money had an oral tradition Until it needed to invent a written tradition. So writing was created for it In the history of money that now spans tens of thousands of years There have been maybe five major changes from pure barter exchange To the introduction of the first abstraction of value shells feathers beads nuts stones and Then precious metals and then paper money and then plastic money and now network money Bitcoin Introduces a platform on which you can run currency as an application on a network without any central points of control a System completely decentralized like the internet itself It is not money for the internet, but the internet of money And what is money? Money is a language Money is a linguistic abstraction Money is a language that we use to communicate Value to each other money simply allows us to express value and that value may have economic Consequences, but it also has other consequences We use money to express and create social bonds and relationships and associations and To create organization Bitcoin is The first system of money That is not controlled by any entity That is completely decentralized and what that does is it introduces the very same things that the internet Brought to communication if money is speech If money is a language and you disconnect it from all other media and You make it pure speech pure content an internet content type a protocol designation Money over IP it completely separates it from all of these previous notions of nations sovereign issuers Institutions that control and so we go from institution-based money to network-based money and Of course, everyone will welcome this with open arms Not a chance What do you think they said the first time someone was presented with a gold depository certificate instead of a gold coin They said That's not money Go away What do you think happened in? 1950 the first time someone showed up at a motel and presented their diners club membership card and said I'll pay with this piece of paper That's not money go away and Now we're on the verge of a new transformation of money We're on the verge of creating the first completely global completely borderless completely decentralized and Completely open form of money one where you can build Applications because this money is programmable and you don't need to ask anyone's permission to launch an application Any more than you need to ask permission to launch an application on the internet and the only Requirements to have a successful application on the internet of money is two interested participants That is your market segment and you have an application and A million applications will flourish When you push innovation to the edges of the network when you remove the requirement for permission What happens? exponential explosion in innovation the applications that could not be built on the old systems of money because they required permission because they required a Significantly large market segments because they required adoption by many in order to be available at all now None of those requirements exists Anyone in the world can download an application or use even a feature phone with text messaging and immediately acquire The same powers that institutions of banking have today and when I say anyone That's only scratching the surface Because ironically enough not only does Bitcoin and blockchain currency not recognize borders It also does not recognize people It doesn't matter if you're a person or refrigerator or a self-driving car Throughout the history of money ownership of currency required Personhood either as an individual or as an association of individuals in a corporation Bitcoin can be owned by machines Bitcoin can be owned by software agents machines can pay each other and That is not just about economic activity. It's the basis for market-based security systems It's the basis for creating bonds of authentication between devices It's the basis of new applications that have never been done before Bitcoin and blockchain technology unifies the systems of money Today we have systems of money for small payments Systems of money for large payments. We have systems of money for payments between individuals We have systems of money for payments between companies. We have systems of money for payments between governments Does that remind you of something? That's how communication used to be before the internet We had systems of communication for pictures systems of communication for letters Systems of communication for short distance and long distance and the internet came and unified all of those What the internet of money does is it creates a single network which can do a micro transaction to a giga transaction in Seconds anywhere in the world for any participant without permission But if you just look at the application of money, you're missing the point Because you can take the language the building blocks of this platform and Use them to construct other languages that communicate value Tokens reward points Brand loyalty coins Today there are over a thousand digital currencies using the design pattern the recipe of Bitcoin Most of them are junk some of them are not and Over the next decade. We are going to see tens of thousands and then hundreds of thousands of coins Some will have economic use some will simply be expressions of loyalty affiliation They will represent items in the physical world the title for a house The controlling key for a car That can be transferred from one owner to another and five seconds later That owner can step into the car and drive away because the car can validate the new standard of ownership We cannot yet imagine what applications. We're going to build around this But one of the interesting things we're beginning to observe is That money arises out of the social construct of Homo sapiens spontaneously It even arises in primates You can teach monkeys money you can teach dolphins money you can teach grays parrots money and They will learn how to exchange abstract tokens for food and then use them to build social relationships They'll also invent strong-arm robbery Beat up the other monkey take away its pebbles eat the bananas And we see that same thing happen in children toddlers invent money in kindergarten blocks and rubber bands and Pokemon cards and other little tokens abstractions of value that they exchange to strengthen social bonds to express loyalty and friendship To learn about sharing Children will be building currencies Only this time these currencies will be global Unforgible and scalable on day one Few years from now Maria will be launching Maria coin in her kind of garden to compete against Joey coin and It won't really matter to anyone Until of course Justin Bieber launches Justin Bieber coin and it happens to surpass the market capitalization of 30 nations on this planet And we are all writing horrified opinion editorials about how the world is going to hell What's happening with this technology is? astonishingly deep and For certainly some of the companies in this room It's a bit scary banking has never been the most innovative sector in the world Because there is a very careful balance between innovation and the conservative fiduciary duty that exists in banking that must exist When you control other people's money and yet with Bitcoin You don't control other people's money In Bitcoin, I control my money. I have complete and Total authority over my Bitcoin. It cannot be seized. It cannot be frozen It cannot be censored my transactions cannot be intercepted and they cannot be stopped and I can do so With almost complete anonymity and so can anyone five minutes after they download an application and money has changed forever and banking has changed forever the idea that you can proceed in the industry of money in the industries of commerce and Maintain the same conservative attitude That has existed now for centuries ever since merchants in Venice and Amsterdam Started issuing depository certificates and providing banking services That is gone That is gone You cannot operate closed Systems that have borders and require permission to join at a rate of innovation that is controlled by the most conservative tendencies within your organization because now you are competing with a technology that enables exponential growth Exponential innovation at the edges without permission by anyone in the world and It's not about anyone in this room Why? We represent the privileged elite I can go on to a brokerage account Open it up online and be trading on the Tokyo stock market within 12 hours in yen That is the privilege that I have One and a half billion people have that privilege Six billion people can operate mainly in one currency and perhaps have some basic banking services Four billion people are significantly underbanked and an astonishing two and a half billion people are completely unbanked They will leapfrog They will never have a relationship with a bank Every single child born today Will never have a bank account They will have a bank app a Bank app that doesn't give them an account a bank app that makes them a banker an International banker in an app They will not be permitted to open a bank account until they're 16 years old By that time I hope they will have at least Six or more years of experience with digital currencies And I would like to watch them walk into a bank branch to have someone explain to them what? Three to five business days means it is highly likely the children born today We'll never get a driving license because they'll have self-driving cars, but they will also never use paper money Because by the time they get to an age where they really start using money. There is no paper money It will seem as anachronistic as a fax machine or horse and buggy seems to us exponential innovation on a global basis Giving access to the other six billion They have enormous need and This system offers them a solution It's not ready yet It's nascent It's complex. It's impossible to use for most people In 1989 I sent my first email In order to do so. I had to compile a version of the Unix mail program Using a C compiler and Unix command line skills. I had to set it up on the command line type out my email and That email was transmitted Across the great internet in an astonishing three days Exactly 20 years later my mother Replicated that experience with a swipe Bitcoin today and All of the currencies that are built on that recipe are just at the same level that the internet was in 1991 only now We have the internet and so the rate of exponential growth has already started the innovation is Growing at an astonishing rate. I spend every single day full-time Trying to keep up with Bitcoin just one currency and it's almost impossible do not Under estimate this do not listen to the people who tell you that Bitcoin is just for pornographers terrorists Drug dealers and gamblers Remember that they said the exact same thing about the internet and when you give it to two or three billion people They're not interested in those things They're interested in sharing cat videos And now we have an internet of a billion cat videos When you take digital currency mainstream and give it to the four billion people who have been isolated from international finance and commerce and You give them the opportunity to control their money Against the spotted governments and corrupt banks that are stealing from them You give them the opportunity to control their future You give them the opportunity to transact with everyone in the world to own Title on their own property in a fully transferable digital token that is recognized everywhere Control over finance that cannot be seized frozen or censored They will buy food healthcare sanitation education shelter Because that's what we do and They will not be denied This technology do not under estimate where this is going The internet of money was launched on January 3rd 2009 It's coming. It's coming faster than you can imagine It's deeper than you can fathom it's more sophisticated than you can immediately understand It takes years of study just to see all of the implications and it is a gift To the entire world a technology that represents the sixth greatest innovation in The technology of money the most ancient technology of our civilization. Thank you. Should we do some questions? We've got plenty of time for questions Christian what determines the buying power of the currency? How does it stabilize and what's required to stabilize it? So if I would buy some bitcoins Who can manipulate the value of that? Everyone The buying power of Bitcoin is determined in exactly the same way that the buying power of the euro the British sterling the Japanese yen or the US dollar is determined through market forces of supply and demand in International liquid markets that operate around the clock One of the fundamental differences is that Bitcoin trading never ceases has been going continuously for seven years the network never stops every ten minutes bitcoins hard beats and Transactions are processed the exchanges never closed there is no closing price for Bitcoin It is a rolling average and in that trading a Market capitalization of approximately 12 billion dollars is now traded internationally What is 12 billion dollars for a global currency? It's a guppy swimming in shark infested waters and every trader every whale goes in there and Just kicks that price around So right now the experience of living on Bitcoin, which I have been doing full-time for more than three years Is a roller coaster? It's an absolute roller coaster I've seen shifts of 20 or 30 percent in a day and yet if you look at the long-term trend volume goes up transactions go up and volatility keeps dropping and The beauty of it is I can't sell that to an American. I can't sell that to a Brit. I Don't need to sell it to an Argentinian. I don't need to sell it to a Brazilian I don't need to sell it to a Venezuelan. I Went to a conference and an Argentinian told me I'm not worried about volatility Our currency has volatility like this Bitcoin has volatility like this I Would rather be going in that direction and you don't need to tell them why Their government threw people out of airplanes not more than 35 years ago for disagreeing They already know why the separation of state and money is a good idea and so Volatility is Relative any other questions come on. Yeah, let's get a microphone to you one second Okay, so only one oh short. Sorry. Where are we? There you are. Sorry. Thanks. Great great speech Obviously, it sounded a little bit like one side of the coin. So we also read All these, you know, big hacks and I don't know on Bitfinex, you know, they I think they stole 40% of the money I think also this autonomous organization have been hacked and all these things Can you just reflect a little bit on on the on the dark side or of those aspects that might not? Win our full trust into this evolution. Absolutely The steering wheel was not invented in no 30 years after the automobile was introduced Why because the first automobiles had two leather straps that you pulled left or right To move the car to steer the car They used horse rains To steer cars That's called skeo morphic design. It means keeping a shadow of the form of past in your new system failing to see the new dimension and Replicating the past Here's a currency that is not centralized where your money is your money your keys your money Not your keys Not your money So what is the first thing we do with this new system we build? centralized institutionals of custodial control That take other people's money and hold it for them Well, guess what the entire history of banking the entire system of regulation and oversight is Based on the simple centuries old understanding that when somebody else holds your money Chances are they're going to run away with it And the entire system of regulation is designed to prevent that and yet it still happens all the time in hedge funds in banks in National currencies all the time and so of course if you replicate custodial accounts Exchanges that take other people's Bitcoin and concentrate it It happens again even worse because there are no oversight and regulations in most of these spaces The answer is really simple Stop centralizing the decentralized currency stop trying to replicate the banking past in the future of money and The important thing to realize is that security in Bitcoin is an emergent property That exists because of the decentralization of control and power if I want to hack a million customers Bitcoin And they're holding their keys. I have to hack a million customers If they all give their keys to one person or one organization Then we've got a honeypot a Honeypot that attracts the attention of every hacker on the planet and Notice what's happened over seven years and with a market capitalization of 12 billion dollars Bitcoin is the largest Cryptographic deployment in the world the largest public key infrastructure in the world the largest security honeypot in the world and It is not secure because it doesn't get attacked It is secure because it generates immunity by being attacked all the time 24 hours a day by the most sophisticated attackers this planet has and if you in that environment set up a centralized custodial exchange using PHP and my sequel and You park a hundred and fifty million dollar honeypot in there You're inviting the sharks Bitcoin banks get hacked Bitcoin exchanges get hacked Bitcoin has not Been hacked and cannot be hacked because there is no point of Control that you can apply pressure on it's completely decentralized All right, maybe one more question yes Where does supply of Bitcoin come from and how do you how are you sure the market doesn't get over supplied? The supply of Bitcoin is determined algorithmically based on a geometrically declining supply function meaning that In the beginning every ten minutes fifty new Bitcoin are created So every block the heartbeat ten minutes Created fifty new Bitcoin this Bitcoin is used as a reward in a game theory based Security model that ensures that every transaction is independently validated by completely anonymous actors who have to stake Electricity is a guarantee of the security work They've done and if they succeed in doing the security work of validating transactions correctly They earn as a reward based on a probabilistic return That reward 50 Bitcoin every ten minutes. That's how currency is introduced into the economy Every four years it gets cut in half 50 to 25 in November of 2012 and This year in July This past July we had our second halving event which was celebrated with birthday parties all over the world and Bitcoins reward went from 25 to 12 and a half Bitcoin as A system is designed to have a monetary policy that is purposely deflationary and Simulates the issuance of precious metals it gets harder and harder and harder to mine gold at greater and greater and greater cost and Bitcoin is the same the idea being that less and less is issued over time If you follow that geometric curve at some point you reach the end in the year 2141 Bitcoin is no longer issued 21 million coins is the asymptotic cap. It will never reach 21 million coins That is part of the protocol is unchangeable part of the protocol And it is a rule enforced by every system that participates in the Bitcoin network It is meant to be sound money, but it's not the only monetary policy that exists There are several other currencies that implement different monetary policies The idea is really for Bitcoin to serve as a very very Solid reserve currency for many other things Please Do you have to give to? Companies here who are from non financial institutions about how they should take tactical steps to think about Experimenting with the blockchain in terms of storing value. I think understanding that it's not just currency understanding that it is a platform for trust understanding that it can be used as a historical record of truths that can register information Information that it can be used to create all kinds of tokens that can be exchanged between your customers your suppliers your manufacturers that it can also be used simply as a currency for any cross-border transactions import export activities remittances based flows paying associates and affiliates all of the things that today are expensive slow and difficult Become cheap fast and easy when you use one of these digital currencies But it's still early for now learning about it. Here's the one important thing you must understand You will hear a lot about blockchain and Most of what you hear about blockchain is not the internet of money. It is the intranet of money The internet is where you run front page an outlook an antiquated software in a closed little Enclave of your corporate backwaters with stale content and boring apps and in the end It's full of viruses anyway, because you can't keep it secure Blockchain that is not open that is not public that is not borderless that is not open for innovation Is not what we're talking about here and that's a really important distinction It may be useful if you want to run a clearing house between three banks, maybe But it's not the internet of money Thank you. By the way Everybody who asked the question gets a free copy of my book come and see me in the back there. Thank you so much