 Andreas please come up to the stage can you hear me well very good Bitcoin is dead Bitcoin is just a silly idea it clearly can't possibly work it won't scale it will fail it has failed it is dead the true innovation at the heart of this technology the blockchain is the technology that matters and this technology will create new opportunities in fintech for banking and financial services companies across the world even while Bitcoin won't be able to succeed further blockchain is a joke blockchain doesn't actually work Bitcoin is the only thing that matters Bitcoin will completely change banking it will make banking obsolete all central banks will be destroyed in the path of Bitcoin and within just a decade every currency in the world will be dominated by Bitcoin both of these positions are ridiculous simple-minded pure isle and fundamentally wrong for every complex question there is one very simple solution and it is wrong this is a very nuanced space it is a space that is brand-new it is a space that has existed for only seven years and yes it does represent something truly revolutionary a fundamental change in our understanding of trust a change in the way we organize authority and trust from hierarchical systems to network centric flat systems a reimagining of what it means to have currency how currency derives its value a new system for disintermediating intermediaries a rebalancing of world affairs all of these things are true but we don't really know how this is going to play out which is the most exciting part of my job Bitcoin is one of the few spaces and one of the few experiences I've ever had in my life where I feel that I am sitting on the front rows of history observing history in the making history is not the past history is how we change the present to affect the future and we are doing this right now worldwide and by we I don't just mean Bitcoin I mean the much broader space so before we go to a very simplistic answer what is called in some spaces Bitcoin maximalism or to the opposite extreme where we discount Bitcoin as an unruly rag tag and our co-capitalist dream that is silly on its face and clearly serious people scientists people with PhDs have said that this will soon die before we go to these extreme two positions we really need to understand the nuance what is Bitcoin what is the blockchain what do these things have at the very core that gives them the characteristics they have how do you tell them apart what are the differences between the systems and what applications do they have and so my goal today is to really try to answer these questions so what is Bitcoin Bitcoin is the first blockchain Bitcoin is the largest open global blockchain that exists today Bitcoin is the first borderless transnational open system of access for financial payments and trust that enables innovation without permission with high resistance to censorship coercion and geopolitical manipulation Bitcoin is a mathematical proof system that is fundamentally neutral to participants it exhibits a principle that on the internet we call net neutrality and brings that to finance which of course terrifies people finance without concern for source destination or amount neutral routing of transactions equal for everyone that idea is terrifying where does authority come from where does trust come from it's almost as if suddenly we no longer pay attention to the New York Times and instead anyone can publish their opinion without an editor what will the world come to what the internet did for communication Bitcoin is doing for finance it is introducing a fundamentally different network centric and flat system that allows us to do transactions without recourse to authority or intermediaries and that derives trust from the collaboration and computation of thousands of nodes it uses a blockchain blockchain is one of several components that make Bitcoin work and if you focus too much on blockchain you may miss the point what is the most important technology of the internet what is the really important invention that makes the internet work TCP IP packet switching TLS but to take the internet and consider it only as a packet switching network means that the internet and an intranet the internet and your local area network are equivalent are they really was the real opportunity to be able to do packet switch networks or is the real power of the internet the fact that it is open global transnational borderless censorship resistant open access and anyone can innovate without permission this is the crucial issue where does the value of Bitcoin derive from yes it is a blockchain but it is a very special blockchain it is a blockchain that uses as its fundamental consensus mechanism proof of work and proof of work gives it certain characteristics that they're unattainable so far as we know with other consensus mechanisms Bitcoin is fundamentally open borderless transactional transnational censorship resistance etc etc etc all of these characteristics they are both what it is and what makes it powerful and ironically there are also the things that most critics of Bitcoin point to as its greatest weaknesses it cannot be allowed to exist if it is borderless and open to access if it has no ability to be controlled it cannot be allowed to exist and yet it exists Bitcoin forgot to ask for permission so out of this experiment this grand experiment that has lasted seven years we now have this really disruptive force that is forcing us to reimagine what it means to do a payments network and out of that we come up with the most brilliant marketing campaign in the history of disruptive technologies imagine if you've invented the new disruptive technology and you manage within four or five years to completely distract the incumbent by persuading them to follow in your footsteps and to adopt the central premise of your technology in order to disrupt their own business from the inside out if the Bitcoin community had presented banks with the idea of blockchain as we did and said here put a billion dollars into training people on how to do things our way and work in our space I mean someone should have gotten the Nobel Prize of marketing the Oscar of disruptive distraction but the truth is that the financial services environment seized on blockchain because they saw within it the possibility of using some elements of Bitcoin without being disrupted but blockchain is not the only thing that makes Bitcoin tick and so in this effort we see many similarities to the early internet in the early days of the internet when companies saw the internet and they saw that it had no editorial control no centralized security mechanism no barriers to access this represented a terrifying departure from the model of it and so as a result most companies resisted they built intranets using TCP IP and they put heavy firewalls all around to separate those intranets keep them controlled give them editorial access and control and tame the system they ended up with these islands of stagnant innovation that gradually became less and less secure and then we had the second wave of the internet where many of the most effective disruptive companies in the space took their internal IT infrastructure turned it inside out face the world put everything on the internet and fully harnessed the collaborative potential of keeping an open accessible system we no longer live in a world of Oracle and IBM we no longer live in a world of dominance through enterprise computing and enterprise software Apple is driving your IT faster than Oracle your systems are inside out or they are stagnant collaboration is the name of the game the most robust and secure systems are the ones that are on the internet subject to attack every single day subject to competitive disruption every single day and through that process they become robust ironic that 15 20 years later we're repeating this conversation with a blockchain so the question is if TCP IP isn't the magic sauce but the really interesting thing is the open access collaborative global network does that mean that intranets are useless does that mean that TCP IP on your LAN or your data center has no value of course not these are still very powerful technologies these are still very useful models of adopting however the best thing you can do with an intranet is interconnected to other intranets and for that you need the internet Bitcoin is the intranet of money Bitcoin is the de facto money of the internet does that mean that Bitcoin will always be the internet of money no does that mean that Bitcoin will always be the de facto money of the internet no what is special about Bitcoin is that it represents the open blockchain the blockchain that offers anonymity censorship resistance open access and innovation without permission that engine creates an explosion of innovative potential it connects the vast number of underbanked unbanked people around the world some four billion people who could become connected through a simple Android phone or even a simple Nokia text messaging phone to the global financial network the open blockchain will change this world and today there is one open blockchain that matters and that is Bitcoin I can't predict that it will always be the only open blockchain that matters or the dominant one why because it's not the best but in technology very often best is not what wins TCP IP wasn't the best in fact we now realize it had fundamental problems in scaling in addressing in routing technology and many other things and yet TCP IP was good enough at scale with network effect so fast that it became irreplaceable in fact it has now become unupgradable TCP IP is so embedded into global networking that it resists its upgrades to IPv6 and has resisted its own upgrade for almost 20 years IPv6 is coming IPv6 has been coming since 1995 any day now but clearly IPv4 is dead and the internet can't possibly scale beyond use net can't possibly scale beyond email can't possibly scale beyond attachments can't possibly scale to voice can't possibly scale to video can't possibly scale to HD video can't possibly scale to Oculus VR 3d 4k capabilities of course I can't it doesn't for a while until it does and then we shift the goal of what scaling means and Bitcoin can't scale to visa until it does Bitcoin can't scale to a global transactional network until it does but I can tell you what Bitcoin can scale to Bitcoin can scale to a seven to ten billion dollars secure transnational network that remains up and running 24 hours a day 365 days for seven years running without a single successful attack against the core protocol not because there have been no attempts but because Bitcoin has been under attack from day one 24 hours a day by some of the most sophisticated adversaries the world has seen why because Bitcoin has a seven billion dollar security bounty for breaking it it is a system that is on the internet and lives right there in the dirt in the war zone of internet security and it survives and as it survives it gets stronger every day so now if that's what Bitcoin is maybe maybe this will be the one that becomes the internet of money I can't predict that what I can tell you without any uncertainty is that the world of finance will forever be dominated within less than two decades by open global transnational censorship resistant largely anonymous fully encrypted and privacy protected payments networks based on the exact model of Bitcoin with optimizations and maybe that thing will be Bitcoin with optimizations maybe it will be something unrecognizable that we still call Bitcoin because hey the brand works or maybe we'll call it something else I remember how when I was an IT people kept telling me that Ethernet would not scale beyond one megabit ten megabits hundred megabits one gigabit it could never scale and so today we're running ten gig Ethernet over fiber but think about it for a second what part of that is still Ethernet the brand the frame size the switching algorithm nope the physical address maybe distribution mechanism no the network topology no none of that is the same none of that is the same what survived is the brand we still call Ethernet what we have today and so therefore the question is did Ethernet scale sure did as long as you keep changing what you call Ethernet can Bitcoin scale what depends what are the characteristics that are Bitcoin unalterably 21 million coin limited issuance with predictable issuance rate that is Bitcoin you cannot change that proof-of-work algorithm that is decentralized with anonymous participants that is Bitcoin you cannot change that everything else is up for negotiation we're going to maintain anonymity and privacy we're going to empower the world we're going to distribute these powerful tools of finance to everyone who has a smartphone and when you think about this we're not talking about everyone who has a smartphone having a bank account on their phone we're talking about everyone who has a smartphone having a bank on their phone of which they are the CEO a bank with the possibility of international wiring and settlement equity settlement market-making loan origination and termination liquidity generation and many other capabilities that today even many banks don't have in a single system and one day a decade from now a six-year-old will be able to open a bank on their phone and become a banker perhaps even issue their own currency and become a central banker that sounds insane but that is absolutely the world in which we now live the possibility of any individual on this planet issuing an unforgible global secure instantaneous currency is now within the reach of anyone the recipe exists will it be Bitcoin or will it be something else I don't know but it will be an open global private censorship persistent transactional and transnational network and so then the question becomes what are we going to do with blockchain and what's going to happen to the banks well some of the banks will adapt and blockchain will have some very interesting applications blockchain has certain useful characteristics as a technology blockchain in general is not an answer if you say I have a blockchain what that prompts me to do is start asking you questions it opens many questions for example what is the consensus algorithm what is the control structure and governance structure what is the model for currency generation or token generation what is the authority for issuance and what are the characteristics for security and so if you start asking those questions you can decide okay what type of blockchain is this is it open is it closed does it use proof of work or does it use a different consensus algorithm are we talking about a proof of authority signing instead of mining centralized network that is a consensus consortium between five or six banks for example with a closed permission-based access for specific participants maybe that's what we're talking about but when you're talking about that you need to understand what are the limitations of that technology what does it do and what does it not do just because it's blockchain doesn't mean it will do everything that you think it will do if I take a formula one car that is beautifully designed for running on a circuit I could say this car can go 250 miles an hour fantastic on what road because if I take it into downtown Milan my average speed will be 15 miles an hour because of traffic and if for what miraculous reason the road ahead of me opened up and I tried to hit 250 the car would disintegrate because of the road surface condition and so just because it's a powerful vehicle doesn't mean that if you put it in a different context it can operate it has to be suited for the purpose so let's examine some of the nuances first of all immutability one of the things that people suggest that block chains have as an inherent characteristic is immutability the fact that you can record something on that ledger and once you record it on the ledger it cannot be changed immutability is not a characteristic of block chains immutability is an artifact of a proof of work consensus system the blockchain the open blockchain bitcoin has immutability because even if you control 100% of the mining power you cannot recreate an alternative version of history by rewriting the blockchain without presenting valid proof of work that needs to be computed you can affect with the most immense amount of computation hundreds of hexahashes per second computation that doesn't currently exist on the planet let's say you did have that you could now affect hundreds of blocks you could rewrite the history of this afternoon but not yesterday and certainly not last week and most certainly not last year even if you controlled all the hashing in the world that is impossible to recreate the proof of work on the bitcoin blockchain even two days in the past the amount of computation is unfathomable also you've got to wait for everybody else to stop doing what they're doing while you recalculate the past because they continue moving into the future creating a longer blockchain while you're wasting your resources rewriting history immutability is a characteristic of proof of work not block chains that has some very serious implications censorship resistance and coercion resistance are a representative fact of the anonymity of mining the decentralized nature of mining if you combine those two facts you come up with some weird characteristics let's say you have a consortium consensus mechanism that controls banking I don't know why you'd apply that but let's say you built a blockchain that uses six banks that sign transactions in a round-robin fashion or Paxos Byzantine sophisticated consensus model that you bought at great expense from a very expensive consultant what happens when you are served with a judicial order to rewrite the history of the last year and make the balance of the bank account of WikiLeaks go to zero what happens if you're not served with a judicial order but simply blackmailed through market pressure by a regulator to do that not that that would ever happen I mean in a democracy we don't just cut off the finances of WikiLeaks without any judicial process do we so the problem is that you can actually coerce the participants in the system to rewrite the financial history of transactions that represents a moral hazard of extreme proportions the next question is why would you use such a thing for a settlement system and this is something that mystifies me okay swift is an antiquated pain in the butt it's expensive it's slow it's mired in geopolitical control the equity clearing systems are not as bad but they're still expensive and slow and certainly you're directing a lot of profit why not just implement a banking consortium that does settlement internally well I have an idea you know one of the things about having a centralized clearing house apart from the fact that they have maximum transactional efficiency they can operate at billions of transactions per second no problem right and a blockchain really can't replicate that level of efficiency there's no way you can do it physically it is impossible but let's say you get around that so what you're saying is you're going to replace a party that has no fiduciary interest in the equities that they're clearing in the instruments that they're clearing that is not a market maker and participant in this market that is completely independent by design and that gives you a guarantee of neutrality through separation of concerns and duties with a consortium of five banks that they themselves are market participants market makers and have enormous conflict of interest so until now at least the brokerage game is gained front running algorithmic trading dark pools the futures game is rigged the foreign exchange game is rigged but at least a settlement game isn't so you're going to give that to a consortium of banks to do without any oversight and you're going to do this with a blockchain that has what full encryption complete anonymity well that's a double-edged sword but if you make it fully transparent then the first time anonymous gets into that market and leaks that blockchain oh wow forget Panama papers this is Panama terabytes every transaction ever made I would love to see the black budgets of some governments come out when the blockchain leaks and how do you protect the keys how do you protect the keys that are used to sign this consensus algorithm you're creating an enormous concentration of risk there from a security perspective because if those keys are stolen even just as a denial of service attack they will lead to disastrous consequences but that's okay right because banks know how to keep information secret oh wait not even the NSA can do that there is no system in the world that we can design that can keep secret information secret forever bitcoins answer is to decentralize the power so massively or as much as possible that there is no place to press the button to pull the lever to exert control to force the system the whole point is decentralization now blockchains can effectively decentralize big parts of the financial system they will absolutely generate cost savings for banks they will affect the margins they will increase efficiency like intranets they will be very useful tools in fact I think you should implement an overlay blockchain on top of Bitcoin for settlement and replace swift swiftly but in the end it doesn't matter I'm not critical of blockchains because I am morally or ideologically opposed to banks continuing to do business I think banks have bigger problems than Bitcoin I have some questions about the practicability and applicability of blockchains without proof of work blockchains without decentralization blockchains that are closed and not open to access and blockchains that don't have permissionless innovation I don't think those things really deliver on the promise but more importantly in the end I don't care I really don't care I'm not interested in the 1% marginal decrease in cost of a settlement platform for interbank this that or the other I don't care for billion people are under banked and with an open blockchain we can change that and that's the team I'm on thank you thank you thank you thank you for your compelling view on the relationship between Bitcoin blockchain the future of our central banks we have a representative from the Bank of Italy the payment systems the currency we have in our wallet our financial institution clients and also on us as consultants so thank you before we go to the next speaker as you are so knowledgeable about Bitcoin I have a question on a comp I would say on the compelling story of the day who do you think is Satoshi Nakamoto do you know I have to inform you that we have journalists I don't know I don't care it doesn't matter Bitcoin is not a system of proof by authority or reference to authority it is a system of independent and neutral mathematical proof what that means is that it stands on its own without appeal to its author or creator I have no idea who Euclid was or even if Euclid existed Euclidean geometry is part of my daily life whether Euclid existed or not whether Euclid was a group of people or an individual whether Euclid was a nasty malicious pervert or saint it doesn't matter now some people will say yes but Satoshi Nakamoto has a million Bitcoin what happens if Satoshi Nakamoto sells all one million Bitcoin in one moment I'm a bit more worried about what happens if the Chinese central bank sells all of their dollars in one moment which percentage wise is a bigger problem about what happens if Saudi Arabia decides to change the fundamental supply characteristics of oil in one moment or even what happens if the Walmart family decides that the yuan is a better investment than the dollar and they exit market fundamentals mean that these things don't matter Bitcoin survives regardless and the identity of Satoshi Nakamoto the only thing it is guaranteed to deliver is sensationalist articles that give us more appeal to authority but in the end Bitcoin is not governed by Satoshi Nakamoto Bitcoin is governed by algorithms we have many questions coming from from the audience so as there are so many and time is passing quickly I would like maybe you to read one of them and maybe we we we answer these questions and send you know the name to the audience later on because otherwise we we wouldn't have time for the next speakers so is there any question you would like to answer let me see just a second I think the will the successive blockchain be defined by a push factor from the market or a pull factor from the audience as is happening now I'd like to shift that to tiny bits and talk about the open blockchain the global open blockchain Bitcoin as it exists today I said we forgot to ask for permission but we also don't need support this is not a system that is going to work better if banks support it and back it it is not a system that is going to have an increase in trust if we add intermediaries it it is not a system that will become better if we add identity and reputation systems thereby replicating the problems of the past and it is not a system that intends to replace visa as an experience for a developed nation consumer buying a cup of coffee at Starbucks that is not the point it is not a system that will replace national currencies Bitcoin will affect import export businesses international remittances in sourcing and outsourcing and cross-border transactions where the friction is greatest and it will serve those who are not being served by banks and therefore Bitcoin is irrelevant to banks because they cannot use it and they cannot use it because banks are fundamentally imprisoned within a regulatory system that does not permit them to use systems without identity and outside of that prison are four billion people who don't have identity to be part of that system and they can use Bitcoin and they don't care about banking and banking doesn't care about them thank you