General (Interview) Transcription
Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
Male:
All right. Let's have the introductions. *00:00:03, of course, the
man needs no introduction in this space but I'll give him a short
one anyway. So, he is a Bitcoin developer, commentator. He’s
actually not in L.A. If you *00:00:17 tomorrow. So, he came out
to LA before. The *00:00:22 experience is such a success that
they brought him back to do a second round, and he graciously
volunteered to come and talk to us. He speaks around the world
about Bitcoin at conferences, and you know, he's just here to
support us. So, we really welcome him. He’s also the Chief
Security Officer of blockchain.info as a *00:00:46. But without
further ado, Andreas Antonopoulos.
A. Antonopoulos:
So, I got here a bit late because of the hellish LA traffic. So, how
many people have got Bitcoin in this room? Okay. And how
many people do not have Bitcoin yet? And how many people have
not really heard much about Bitcoin and are new to this? Okay,
great. Well, this is going to be -- this is an audience that’s mostly
friendly, so I'm going to preach to the choir *00:01:35.
For those of you who have not heard much about Bitcoin, Bitcoin
is a digital currency but it's so much. It's also a platform for doing
a lot of very interesting things, like for example, voting or
*00:01:52 or stock exchange or bond issuance. And a lot of people
in this room are really excited about this because it's the first peerto-peer *00:02:02.
I don't really have prepared topic today. So, I'm going to talk a bit
about some of the things that I've been thinking about and talking
about at conferences in the last month that I have, things to do with
the world currencies and how it's changing, and so what things are
happening in currencies. I've been working in the Security
Distributed Systems for just about 20, 24 years now, and I was
there during the birth of the internet, if you like, or the consumer
internets in 1989 when I first joined.
Now, I wasn't one of pioneers of the internet. I was a 16-year-old
kid standing right behind them, looking over their shoulder, like,
oh, this is really cool. And so now, I feel very much the same
about Bitcoin. I'm a bit older now so I can actually *00:03:03 all
of it but it's something that really excites me because what I see is
the -- what the internet did for communications Bitcoin is now
doing for currencies. It’s taking the power from centralized
organisations and pushing it out and empowering individuals.
And it's also creating a very decentralized network that allows
people to innovate without permission. And it's also connecting a
lot of things that used to separate networks and bringing them into
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Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
one network. And I'll talk a bit about these analogies and what
they mean. So before the internet, there was a phone network and
it was the public network, and there was a financial services and
transactions network. There was the telegraph and there was TV
and there was cable TV and stuff like TD and all these different
networks. Some of them *00:03:58 some with monologue, and
they all serve different purposes, and they were all closed
networks, which means that in order to connect to them, you have
to get permission.
That's how finance works today. There is a network for
international wire transfers. It’s called SWIFT. There’s a network
for doing commodities changes. There’s a network for doing
payments, it's called Visa. There’s another network for doing
payments, it's called MasterCard. There’s another network for
doing payments etcetera, etcetera. And s all of these things are
very separate. Some of these networks support only very large
payments in millions of dollars. Others support only very small
payments, just like in the past you had data networks, like, for
example, X25. They’re more suitable for very, very small RC
traffic. And they didn't had high capacity networks, like,
*00:05:03 networks that could do very, very high bandwidth but
couldn't do point to point.
And the internet drew all of that together and it created one
network that can do *00:05:16. And that one network that can do
everything changed the world because one thing that happens
when you have networks that can do everything and actually does
all that is that people can transform it into new things that haven’t
imagined before. The reason the internet works is * 00:05:40 is
because it's completely neutral, and also because it's completely
dull. The internet is the dullest network of them all. It’s far duller
than the networks it replaced.
ITN, very sophisticated, whole books of specifications on how it
used to work, X25 very sophisticated, internet dull, dull as rocks.
It could basically transmit packets from A to B very slowly at very
low quality. And it didn't make any decisions about what those
packets contained, it didn't care. It didn't care whether what you
were transmitting was a financial transaction or difficult to
*00:06:30 or email or any of those things. All it did was move
data from one place to another. It’s a very inefficient way
seemingly. But what it did is it decentralized the power of
networking and that made all the difference.
So, here comes a Bitcoin, and we're hearing many of the same
things that we heard in the early days of internet. You see, when
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Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
the internet was growing up in the 90s, the telecom companies told
us that you could never do voice on the internet because package
switch networks are really not suitable for voice. And they told us
you could most certainly not do video because that requires quality
of service that are *00:07:13 that requires highly engineered,
structured hierarchal network, otherwise you can't possibly do it.
And they also told us that it would fall apart very often because it
doesn't have *00:07:28 based specialized companies to look after
it, take care of it, charge you $12 a minute and long distance for
doing all of that.
And they were wrong. And the reason they were wrong is because
a few support rules applied at scale in a decentralized fashion can
create margin *00:07:51. And they can create a wealth of different
capabilities within the network and eventually you solve those
scaling problems and you solve the quality service problems and
the networks keeps rolling because it can do everything, and
because the people who connect to it don't have to ask permission
to innovate they can write an application and launch it and make it
available for the whole world, and compete on an equal footing
with everybody else who’s on the network, because the network
doesn’t discriminate.
Bitcoin is too slow. Bitcoin can’t possibly be a real card. Bitcoin
can’t do micro payments. Bitcoin can’t do mega payments.
Bitcoin can’t do a quality of service. Bitcoin will be eaten alive by
fraud. We really, really need the banks to build specialized
networks to protect us from of all these things. That sounds
awfully familiar. It sounds awfully similar to the same things that
telecom companies were saying in the beginning of the 90s and
*00:08:57 do voice.
And today, more than 75% of long distance calls happened on the
Skype. And what used to be a good path of the revenue model of
companies like AT&T disappeared in a decade because not only
could the internet do voice, and not only could the internet do
voice at scale and at distant quality, pretty bad at first then it was
slightly better, then eventually *00:09:32. Now, full stereo CD
quality voice in some cases and getting better yet, you do all of
those things for free, for free, those things that billion dollar
networks were needed for before, and now you could do those
things for free. And that business is called, this is no longer
necessary.
And the internet wasn't designed to destroy the telecoms business
for some. It wasn’t designed to destroy the media companies. It
wasn't designed to destroy the entertainments industry. It was
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Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
designed to move packets from A to B. That’s it. Everything else
came later. Now we have a currency that is designed to move
value from A to B. That’s it. Everything else is coming. Now,
we're building the next Google, the next Yahoo, the next billion
dollar industry. Or more importantly, the next application we
never imagined, the next system for enabling remittances to bring
some relief to billions of people depends on relatives who were all
sending money each week and who currently pay exorbitant fees to
companies like Western Union and others.
We're going to *00:11:00 all of these applications because now we
can build *00:11:02. Have you ever wondered why no one built a
bank out of their garage or a payment network out their garage or
new financial instrument out of their garage? The reason is
because previously in order to build something that connects the
payment network or to financial services industry, you needed to
ask permission and the answer was always, no. Well, there’s a bit
more nuance than that. It wasn’t exactly no. It was what, yes, but
you'll have to protect consumers and that means paying a lot of
money to comply with regulators, which conveniently happens to
be a lot of money the banks are really paying are very comfortable
paying because *00:11:48 small will come of that field and eat
their business because it costs 20 to 30 million dollars to get a
money transmittal’s license in 45 states or 48 states.
Regulation, which is now being proposed for Bitcoin, hasn't been
about consumers for a lot of time. It’s been a very convenient tool
to stop any form of competition to the bank industry. If regulation
worked, then after 2008 thousands of bankers should *00:12:28.
We all know that, everyone knows that. Everyone in this country
knows it. But when you say things like that, you are a radical,
you're radical. I am a radical when I say things, like, when
millions of people lose their homes to mortgage fraud, someone
should have gone to jail. I’m a radical in this when banks can
essentially control funds coming out of the Fed and get zero per
cent interest loans, but don't be late for a day on your credit card
payment because we're going to ramp up your rates at of 35% and
send you right back into poverty and then you’ll go to jail.
When we found out after 2008 that the *00:13:12, no one went to
jail. When we found out that LIBOR international banking
overnight rate system that controls the interest rate of every loan in
the world, that market was reduced, no one has gone to jail. In fact
if I remember, the only people who went to jail were hedge fund
managers who stole from rich people. You can't do that.
*00:13:36 stole from a lot of people. *00:13:40 defrauded a
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couple of million *00:13:42 they can't fight back. So, this industry
is right for disruption.
And I think it's a really corrupted industry. I know because I work
in it. I worked doing data centers and high-speed networks and
I've learned how these things work. I learned that there’s a
solution of a free market on the frontend. But behind the scenes, it
matters when we have one foot of extra fiber between you and the
old arrangement at 60 *00:14:17 rather, or one of the other data
centers that connects the Euro Stock Exchange or to some of the
other exchanges. Because if you can *00:14:29 by micro seconds,
they just skim off pennies of every dollar that was with the
exchange. This is a bit like competing in the Paralympics
*00:14:46 nobody. It’s like competing against *00:14:52 and you
can open your eyes. That's how Wall Street plays this game. They
ensure that it’s rigged from the very beginning and no one else has
a chance.
So now, they’re about to discover innovation at scale on a global
level with internet scale currency, and that's what happening. But
that's only was service because this goes a lot deeper. We're
changing the very nature of currency and cooperation. And that
has a ripple effect because currency is a tool of power. I used to
think that there would be a few Altcoins, and overtime I've come to
realize that in fact we're going to have a lot more than I've got. So
all of you knows Bitcoin, but you're probably heard of a few
others, Litecoin, Dogecoin, Peercoin, Primecoin, *00:15:47, lots of
little coins.
We're now at 200 coins and counting. So, who thinks we're going
have hundreds of coins by next year? Right. How about
thousands? How about tens of thousands? How about hundreds of
thousands? How about millions? Yeah.
Male:
Recently.
A. Antonopoulos:
So, I used to say we would have thousands but I can't really say
why you would have more because after all you can't really have
monetary value for all of these currencies, and therefore why
would people create them. Go to a primary school and watch what
happens when you have young humans in an environment where
currency doesn't exist. They invent currency. They started trading
rubber bands, Pokémon, baseball cards, *00:16:56 bracelets,
bubble gum, anything, everything becomes tradable. It’s a bit like
really, all these types of cigarettes Joey and Maria are competing
over control over the color of rubber band market. This is true,
you'll see it. Children create currencies. Why? Because they see
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Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
it as a form of expression because it allows them to express and
relate popularity, because it allows them to socialize.
And so, at some point in December, I saw a site called CoinGen
Ohio. And CoinGen Ohio is a site that allows you to go to
*00:17:44 and create a currency. You don’t need to know
anything about Bitcoin D or C++ or blockchain or proof of work or
SHA256 or elliptic curve sect, 256K block, none of that. What
you do is you go and give it an name, bummer for you. Great.
Yeah, but you have a little *00:18:07 balances. How many do you
want to exist? How often do you want them to be issued? What
algorithm do you want to be issued by? Right, fill that all in, pay
attention to Bitcoin, 50 bucks, hit submit, 10 minutes later you got
an executable. You ran that executable as far as mining your coin,
then you create a currency.
Now that can be done this year for point one Bitcoin. It will be
free by the end of the year because I mean, there will be charges
for the novelty, so like, a custom *00:18:42. So, there are going to
be trounced and eventually you're going to have a *00:18:46
currency market where anyone can go in and rate the currency for
free in five minutes without knowing anything about currency. So
fast forward a couple of years and I'm thinking this is the
environment in private school. Joey has now left the rubber band
business because he got trounced by Maria because he launched a
cryptocurrency for Maria coin pre-mined, that’s a bit of a problem.
But Joey plans to give all of his friends mining gear so that they
can mine with smart move.
And there's a competition between these currencies and they’re
going to get traded, why not. At the same time, there's a boy band
out of Canada and they were launching *00:19:41 coin or whatever
coin right. And maybe a couple of corporations are trying to
fundraise and they launch a coin. And then you've got branding
coins and reputation coins. Maybe I'm going to launch Andreas
coin *00:19:57. I’m going to pre-mine it heavily because the point
being that currency is not just a means of transaction and it’s not
just a means of storage value.
At its very basic level, currency is the way we express value. And
so, if you look at it from that perspective, currencies are language.
We speak value to each other by exchanging green pieces of
cotton, *00:20:26 drugs and cocaine. And it's true that expression
we say what you have to give me, product or service has value to
me. And I’m going to tell you that in the language of US dollars.
It’s the language. It’s an inherent part of social activity. Currency
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happens because trade happens, and trade happens because we're
social being.
And so within the social environment, currency will be merged
even if you don't know anything about it. For people then currency
started with barter points, but it goes much further back than that.
In fact, we're finding more and more examples or currency in
archeological things, and anthropologists and economists are
beginning to realize that currency is probably one of the most
ancient technologies of our culture, of our civilization. Homo
Sapiens have been doing currency for millennia, possibly for
hundreds of thousands of years, approximately for billions of
years.
I wouldn't be surprised if we find out one day that the first wheel
was sold for carts because currency as we've dated it, it could be as
old as fire, shells, stylistics, coconuts, beans, nuts, giant *00:22:04.
Papua New Guinea have it, other islands, Polynesian Islands,
feathers, all of these things have been currency at times. The
characteristic of currency is pretty simple. You need something
that is where. So, it’s not rare. It’s abundant and has zero value,
right? You need something that's difficult to fake because as soon
as it has value, people tried to fake it. It needs something that’s
easy to transport, has a high density of value.
So, for example if I want to go and buy a goat I don't have to carry
the weight 10 goats in currency to the market because then I just
carry another goat, divide the goat with, right. It needs to be
abstract. Most of the currency doesn't have a reuses because then
its value is determined only by how it relates to other things. It’s
an abstraction, right? If the currency is used, you use chocolates
for currency try * 00:23:07 you will have a serious relation issue.
Units of currency will be consumed and not traded. That will be
*00:23:23.
So, some of the best currency is currency you can use any other
way, currency that is purely abstract. In San Francisco, I think it
was about 50 years ago, there was a guy called Norton and he had
*00:23:48 business. He -- I think it was actually more than 50
years ago, during the *00:23:53. He was one of the people who
built quick access instead of pulled by it, a smart decision, right,
sold quick excess, made a lot of money that lasted *00:24:05. And
then with his last money, he went to the store and he bought a
uniform, a general's uniform *00:24:20 sash, the whole thing. He
bought shoulder pads, you know. This was in San Francisco,
might have been the beginning of the *00:24:30 era or not, but
certainly very flamboyant.
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And so, he then went out and walked the streets and declared
himself emperor *00:24:41 San Francisco and he said, I am the
emperor. He fired Congress. He fired *00:24:50. He made
treaties with the Queen of England and a few others -- he wrote
letters to them. And then something interesting happened.
Emperor Norton launched a currency, and he managed to persuade
a store in San Francisco to take that currency and gradually the
idea spread, and more and more people started using Emperor
Norton’s money.
And then something interesting happened. People started
counterfeiting Jim Norton money, which is really fascinating
because you don't counterfeit something useless. You don’t
counterfeit something that has no value. So in a way,
counterfeiting is the ultimate flattery for currency. It’s like
currency has arrived when people started counterfeiting it, right?
Because there's a voice, there's a reasons. You need to counterfeit
it because you want to use it and therefore it’s useful.
And by that time, Emperor Norton’s money was pretty widespread.
*00:25:54 counterfeiting on many other things that collapsed
*00:25:58 in San Francisco you could go about and buy things
with Emperor Norton’s money. But what would happen if
Emperor Norton has a digital currency that could not be
counterfeited? What started as a fact gradually sometimes through
rigid rule of law became widespread, went viral, adoption happens.
So as adoption happens, the value of that currency as a means to
exchange started growing until it became a real currency, at least to
the people of San Francisco, this was a very real cards and people
started buying things with it, big things.
And so, it crossed over. It crossed over *00:26:47, from fad, from
ridiculed idea to units of monetary exchange with full standing
next to the national currency. We're going to see a lot more of that
because now the line between monetary value and fad is getting
greyer. So now, we combine these two ideas. Imagine a world
where *00:27:13 can create currency as a means of expressions,
every band, every brand, every reputation metric, every
corporation, every nation states, random individuals, developers
*00:27:25 they can do better, making slight tweaks throughout the
currencies, and suddenly you realize we will have tens of
thousands of currencies and probably hundreds of thousands of
currencies and maybe even millions of currencies.
And most of them will be worthless and it doesn’t matter.
*00:27:46 will achieve the most important goal of currency which
is, they will become a means of expressions, a language by which
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Joe can communicate *00:27:54 with his friends. And to Julie, this
currency is valuable, whether you're think it is or not, and perhaps
to some of the friends it’s valuable. So, what does it mean for
currency to be valuable? What gives the currency value? What
makes money work? Well, up to 2008, the answer was simple,
sovereignty. The sovereign power of a nations state, king,
emperor, ruler or whatever, creates currency and then enforces that
currency through a monopoly, by forcing people to use it either by
saying you can only pay taxes in this currency, or in more
aggressive states you can't choose any other currency except this
one. And in very aggressive states, if you are caught for
*00:28:49.
But through all of these, there’s an implied monopoly of force
which is applied by sovereign. After 2008, currency could be
created by individuals, and it has no monetary value until it's
adopted. But once it's adopted, it can actually become powerful.
Now the question is, how powerful can it get, and that's where I
think things start getting interesting because I think we haven’t
realized yet the answer to that, because a currency that has user
adoption on a global scale suddenly becomes bigger than any
national currency because it transcends all orders.
People often asked me, which countries are going to adopt Bitcoin
first, what do you think? And that's a bit like asking which phone
company is going to go internet first, it doesn’t matter. It really,
really doesn’t matter. The simple answer is this, the world's most
populous economy and the world's largest economy in terms of
volume of transactions and value is already adopting Bitcoin. And
that is not a country, it's the internet. It’s community based around
a mean and a common communications network. If the internet
adopts Bitcoin, countries don't matter anymore, not who adopts
Bitcoin doesn't matter, countries themselves started fading.
And the reason for that is because now the power of currency on a
global scale starts reversing the very essence of currency. And this
is the idea after 2008 sovereignty creates currency, after 2008
currency broadly adopted creates its own sovereignty. It creates its
own purchasing power. It creates its own financial empire and
then the choices of the users using that currency start affecting the
world around them. It's a reality distortion view.
So imagine a world in which Bitcoin is adopted broadly among
thousands of other currencies. And now people have a choice for
the first time in history whether they use their own currency, their
national currency, the one they were born into *00:31:14 or
whether they use the currency *00:31:17 that require the currency
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that’s accepted every place, the currency that can be transmitted
every instantly, cheaply, securely. And if more and more people
start making that choice, again it’s over because obviously it's a
better -- it's a better currency. And you might argue that point. It
might be something else but the world of sovereign currencies
ended in 2008. The only issue is no one noticed yet.
So, fast forward 21st, and I imagine a student that belongs to
economics, his first year, studying currency and as one of the entry
level courses, Currency 101, this student’s professor has given him
a task to write about pre-blockchain currencies. It’s bit like writing
about *00:32:19 with PowerPoints creating constitutions in 1776.
It’s an alien world we don't really understand. As a student you
have to do it. You're trying to understand what the purpose of this
exercise is but your professors believe that this will give you some
insight into the current state of the world, by giving you something
to compare.
So, he's trying to find a paper or she’s trying to find a paper about
pre-blockchain currencies. And this specific topic, if that's the way
they always *00:32:56 specific topics for the paper is the 2008 one
percent attack on the US dollar led by the proof of state system that
collapsed global currencies. And so, this student is trying to
understand. And if you put yourself in the head of that student, it
is impossible to fathom why a country of 300 million individuals
running a hundred plus trillion dollar total economic output would
put the power of monetary policy in twelve dudes’ hands at the
Federal Reserve. It is impossible to fathom because anyone who
understands the very basis of history knows that power corrupts,
and absolutely power corrupts absolutely, and power in the form of
money corrupts faster than any other power. And absolute power
over the form of money is the most corrupting influence of them
all.
And therefore, you do not put that power in the hands of 12 people
because those 12 people control the fate of 300 million by deciding
whether their savings, their retirements, their college funds, their
children's future will still be there 10 years from now, or whether it
will be a pile of paper or cotton in this case, not worth the cotton
it's printed on. It’s hard to fathom from our respective *00:34:43
countries what happens when a currency implodes from
hyperinflation. But historically, every currency in the history of
mankind eventually does exactly that.
And the reason is really simple. We hear about how scary
deflation is. Who's scared of deflation? Deflation is scary because
-- why is deflation scary? I bought a laptop this year that had more
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power than all the super computers on the planet that *00:35:28 for
less than a thousand dollars, that's deflation. That's price deflation,
very real price deflation. That is exactly what happens when you
have growth, development and innovation pushing prices down.
Now what if you owe someone a thousand dollars, and that $1,000
starts increasing in value and a year from now it’s worth $10,000?
That kind of sucks right? But if you have a $1,000 in the bank and
a year from now that’s worth $10,000 equivalent, then that's kind
of nice.
So who owns most of the money? And more importantly who
owes most of the money. You see, the problem is if you are a
government, your entire monetary system is based on that. And so,
if you owe trillions of dollars then deflation absolutely really
sucked. In fact, what you really want to do is safe that junk pile of
money and turn it into nothing, which will destroy the future of
every city in your country, but who cares. They're not sure
whether it's in the corporations that buy, the *00:36:52 is set by
you, and you'll just get re-elected. So in that environment,
deflation hurts those who owe and it helps those who save. And
so, of course, governments hate deflation. They owe all the money
and individuals, especially in countries that save a lot, actually
enjoyed deflation.
There's another reason behind this weird situation, which is that
we've only ever seen deflation during a catastrophic collapse of
event. Let me tell you what I mean by that. Let’s say you were in
20 years ago, and the interest rate has gone down to zero. So you
can't take it any lower, and you can purchase as much money as
you can, as much money as you want as long as *00:37:48. And
so, the printing presses start printing like crazy, and money is
flowing out of central bank, but nobody wants it because everyone
knows that the economy is dead. So, you have a resulting
catastrophic collapse of events. People stop buying stuff because
they're broke because they have no *00:38:18. When people stops
buying stuff that has a ripple effect throughout the economy.
That's not the same deflation that gets me a laptop really cheap
year after year. That's deflation where they have to drop the prices
of apples year after year because no one is buying apples, a whole
of different style of depression right or deflation.
And so in a world where currencies are based on that and
currencies were issued by central banks that can print unlimited
amounts of currency, deflation is a bad thing because it only
happens when you have catastrophic collapse in demand and that
bankrupts governments. But in a world where you have currencies
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that are based on assets, than Bitcoin is not a debt-based currency.
It’s an assets-based currency.
You cannot have that spiral of infinite printing that leads to
collapse in demand. There, it’s more like the deflation of
increasing purchase of power. It's not because I have stopped
buying anything that dropped the prices. It’s because I am getting
effectively wealthier because I now have more purchasing power.
Then that's a very different model. It’s actually a model that
existed with gold. But the problem with gold is you can't sell or
buy it.
So, here's the thing. We don't really know what's going to happen
with Bitcoin with the deflation of economy, but what we do know
is that something new has happened. We now live in a world
where currencies can be created by individuals with no effort in
very little time. And because people create currencies to express
language, they will. So, *00:40:05 for example, imagine a decade
from now and you're in a remote part of Australia and the two
dominant forms of currency are doge or the Australian dollar. And
the Australian money has a picture of the queen on it, and doge has
a picture of a dog *00:40:33. Here's the thing, because the people
who used this do not care. And the reason they do not care is
because if they can buy six eggs with the money that has a picture
of the queen of it and they can buy six eggs with the money that
has picture of the dogs on it, that money has value, same value, the
same purchasing power.
In fact, for the vast majority of history, the people using the money
with the old white baby on it have no idea who this old white baby
was. They now have no idea what the hell this dog is, why it's in
the money and what's wrong with its eyes. It looks really weird
and funny. And the point here being that if you have a currency
that starts with a fad then it crosses that magical moments of
adoption where if it becomes widespread enough to have real
impact purchasing power, then it doesn't matter. It becomes
currency. Currency is a state of acceptance. Currencies are not
created into that state of acceptance unless you have a monopoly.
Now, currencies can be created without its monetary value, and
then emerge into monetary value as they crossed a magical critical
mass of user adoption. The interesting thing is that user adoption
doesn't have to be universal, it is entirely hyper local. So, the
question for that person living in a remote part of the rural
Australia is, will Paul take doge for eggs. Not, will some banker
across the world take Doge for something. It’s really hyper local,
and as long as that works, then that currency has value.
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So, we arrive in a point where the fundamental difference between
the currencies has disappeared. The influence doesn't matter. The
currency with a dog or the currency with an old white lady pretty
much works the same. And guess what, you know what, the
biggest difference between the two is? One of them has a fixed
monetary policy with predictable issuance, deterministic and
predictable issuance, a monetary policy based on an algorithmic
curve that cannot be modified. One has removed uncertainty and
risk of future monetary policy by putting itself on a *00:43:09 and
saying this is show it will be through the power of consensus, and
the other one has an old white lady on it.
And I don't think most people have realized that this is a
fundamental change in the way society operates the currency
because now, we can take the fad and take it all the way to global
currency because it has the mechanics of global currency from day
one. Portable, high density value, transportable, unforgeable,
predictable issuance, and you put those five things together and it
means nothing if you're making Joe coin because you know it
doesn't really matter what monetary policy is in a primary school,
but if that coin goes from there to achieve a global success or even
a local success among a few million people, there are seven-and-ahalf billion people out there.
So now, let's ask this question again, how many currencies will
there be in 1 years? And that question is entirely meaningless
because it is exactly the same as asking a decade ago how many
bloggers will there be, how many publishers will there be and the
answer is all of us. We will all create currencies at some point
*00:44:31. So, to wrap this up and go back to this analogy, this
creates a very difficult situation. Most people cannot imagine a
world in which their currency is not determined by a guaranteed
system of institutions and regulations at all authorities and high
priests money who have meetings and publish minutes in
PowerPoint followed by believer.
I was in a room during one of these meetings when I was in a
hedge fund trading forum *00:45:07 trading forum so then
watching the Federal Reserve I think it was Greenspan at the time.
And they have the -- they have the press this, for the public speech
that Greenspan is about to give. They had a dozen experts in the
room and their job was to figure out what the policy would be
before Greenspan said the first word, right? That was their job,
paying hundreds of thousands of dollars to these experts to watch
Greenspan and work out *00:45:50 and go. And by that point,
they have to already make the decision.
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So, you have people in the room going, okay, and the experts right.
So, he was looking kind of funny. He wasn't smiling enough, may
be a bit gruff, I don't know. I’m not very optimistic on the future
of the currency oh god, sell, sell, sell, sell, sell, sell, right. And this
was before Greenspan said good afternoon. And by that point,
they were already three seconds into a high frequency trading
billions of dollars based entirely on the slight twitch of the left
eyebrow. This is how monetary policy works in our world and it’s
fucking insane and that's how it works.
Yeah, people are not ready to give that up. People are not ready to
understand the idea that you can strip away all the bullshit. And
the idea, the fundamental idea is well, if that's not the person who's
in charge, who at least I can watch on TV and look for the twitch
of the eyebrow, who the hell was in charge? And that's a natural
question to ask when your entire life, your entire culture, your
entire civilization has been based on centralized decision making
on consensus systems. Centralized systems that depends on
authority, centralized systems that require you to understand the
motives of those authorities that require you to understand the
interests and motivations and incentives and mindset of these
authorities because they control right, they pull the levers of power
or whether it's the prime minister, the president, the Congress, the
head of a cooperation, all of these hierarchical institutions have
someone who exerts power. And therefore, our common
understanding or authority is, why are they doing what they're
doing and can I understand why they're going to do the next thing.
I don't think they know what they’re doing. Really, they don’t.
People operate on a perfect information but if you're trying to
understand the idea of the decentralized system, it seems insane.
So, when you try to explain Bitcoin to people, the first question
they asked you is, yeah, I understand no one's running it, but who's
running it? Yes, I understand no one's in control but what if the
guy who invented it decided to come in and steal all the money? It
doesn't work like that. Is Satoshi a good person? It doesn’t matter,
right? It’s a very difficult concept to understand because every
other hierarchical system, every other system for decision making,
every other system for consensus, every financial system in the
world depends on understanding the very essence of that question.
And when you have no one that *00:48:59, when there are no
levers of power for anyone to pull, when you operate based on an
algorithm, that concept is difficult for people to understand, very
difficult. So, they always seek the center, where is it, where is
Bitcoin, who is Bitcoin, who controls this.
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I went to Bloomberg. The very first question from a journalist
was, so yeah, but can someone just make as many as they want?
No, it doesn’t really work. But how hackers will figure it out, then
they will steal all the Bitcoin. Well, no it doesn’t really work that
kind. So, I got news for you too. We have no idea who Euclid is.
We don't know. Was Euclid 00:49:49 one scientist,
mathematician, geometrician? Was this several working together
under a pseudonym? Or was it just a mesh up of the work of three
different people who ended up mistakenly in the history books
being attributed to the same person? Most importantly, was Euclid
a nice person? Or did they create Euclidean Geometry to fuck the
future? Is there a hidden trapdoor? How do you know that two
parallel lines never meet? Do you really?
Maybe the way Euclid *00:50:43 if you go far enough those two
parallel lines would meet and then you're going to be in trouble.
The point being, we have no idea. We have no idea. And it
doesn't matter because we can use Euclidean Geometry to
understand the movement of objects, to understand surfaces, to
understand everything. And it doesn’t matter if Euclid was a nice
person, three people, an alien from the future, the NSA. It doesn’t
matter if Euclid was straight or gay. It doesn't matter if Euclid was
insane. We can still use Euclidean Geometry. And the point is, it
doesn’t matter who Satoshi is, it doesn’t matter. Elliptic curve
works the same, SHA works the same. I can read the algorithm
and I understand how it works. There will be 21 million coins,
that's it. It's not going to show up the 21 as 37 and say you know
what yeah, the 21 million coin thing, it's kind of a lame idea, so I
just made a little change and now we're going to have 42, okay, we
don't. No one has power over Bitcoin to do that, rather everyone
has power over Bitcoin.
So, we live in a new world where authority is not derived from the
author, funny thing that, the word authority itself has the word
author right in it. We need to adjust to that world. We need to
adjust to a world where who issues the currency and who controls
the currency are two different things, and in fact no one controls
currency. And understanding that concept *00:52:41 to
mainstream people is going to be difficult because it contradicts,
not just years of understanding of how things works. Currency is
imbedded into our culture so deeply that by three, four years old,
children start asking questions. And if you pay attention, they ask
really good questions that most of us have no clue how to answer.
What is money mommy? Why don't you have more money
mommy? Why can't you make your own money mommy? And if
you pay attention really, they're asking very smart questions
because we can't answer most of those questions.
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Most of us have no idea what money is. So, we depend on
authority. Well, I’ve got good news. We’ve been through this
before. You see, before the era of the internet, before internet
publishing, opinion and authority of opinion was derived from the
author. And in fact, it was derived from the size of the author’s
printing press. And if you had a printing press that is four storeys
tall and three football fields long, and a sign on the building says
the New York Times, you have authority. And that authority is
derived from the fact that you can buy ink by the barrel, print
600,000 copies, and put that idea in the heads of millions of
people.
And so, before the internet publish era, we looked for authority
based on the name that is on the top of that piece of paper and that
created authority. And it created authority because through the
natural monopoly over the issuance of opinion, we had institutions
that carefully vented, filtered, editorially control that opinion, until
out of all of the morass of knowledge and data, information was
gradually distilled into this tiny little consumable morsel, the entire
world in 10 pages, and those 10 pages telling the state of the world
today. Okay, here's the problem. Sometimes Julie did not play
truant and sometimes there were no WMD. Judith Miller was full
of shit even though she told us there were WMD.
And sometimes, all of these organizations that are built to carefully
distill that knowledge into *00:55:33 fail, and one day we woke up
in this new world where anyone is publishing, we didn't know
what to do with that because how do you know that this
anonymous blogger has an opinion that matters, you actually have
to read it and think, and that's hard. And then, you have to try and
decide by reading more things and thinking which things are real,
which are not and which things matter and which are not. And we
now live in a world where an Egyptian blogger who writes about
the things that they see with their own eyes a hundred yards away,
they see the security forces beating people up, and they write about
that to a worldwide audience instantly, that person has more
authority than Judith Miller who was full of shit because they're
right there, because we understand now the difference between
authority and truth.
And so, we now live in a world where we have to make those
decisions ourselves. Well, now we're doing the same for currency.
Now, the currency does not depend on who issues it but it depends
on who uses it. If lots of people like the currency and uses it, that
currency acquires power, monetary value emerges, exchange value
emerges, and that currency starts being useful for more and more
people. It's a viral thing. It’s a mean, and if you follow that path,
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you’re right in the world where, as I said before, sovereignty no
longer creates currency, currency creates sovereignty. And with
that, I'll close and take some questions. Thank you.
Male:
I have a question for you. And *00:57:41 but, I was having the
same -- a very similar discussion about authority and the power
*00:57:46 last night for dessert and, you know, it seem a lot of
terrible things happen *00:57:53 governments abusing their control
and power. So, I wanted to ask you, you talk about students
looking at a history book 20 or 30 years, and when they looked at
the history book and they discussed the topic of the switch from
pre-blockchain to post-blockchain or what's the chapter on the
world in a fight in that transitionary period? Who are the heroes?
Who are the villains? How does that transition happen and what's
the timelines?
A. Antonopoulos:
That -- that's a very good question. I think people asks the same
type of overestimate and underestimates the fight. In some ways
so far there is no fight. At least here and the places where there
will be a fight, haven't been reached yet by these currencies. I
think for example that in countries that have rule of law, due
process however weak that maybe, and I think it’s pretty weak
here, however weak that maybe, it's really hard to do a full frontal
attack or something like currency. People react badly into that.
In the countries where there is no rule of law, you have the
opposite phenomenon, where if the government says we’re betting
that, like okay, *00:59:34 what's new? I didn't stop *00:59:41. I
like *00:59:41. And so, the problem there is that the rule of law is
weak, so it's the authority behind it. And so as a result, that fight
doesn’t play out quite as expected. I used one analogy, for
example, have you heard of the Russia *00:59:57 Bitcoin?
Female:
Yes.
A. Antonopoulos:
Okay, they didn't create it. They actually told the banks not to put
it on their *01:00:03 Bitcoin, no they didn't, yes they did, no, they
didn't, trying to bet on Bitcoin, no they didn't, yes, they did, no,
they didn't, they will, no they won't, yes they will. And this has
been going on for a few months now. And guess what, it doesn't
matter. Certainly, it doesn't matter for people of Russia and China.
The dollar has been illegal or was illegal for 20 years, and guess
who had all the dollars in Russia, the politburo, the more that they
banned dollars, they started stuffing their own suitcases with
dollars. So, what happens in totalitarian regimes like that is really
simple. There are people who are above the law and there are
people who are below the law. The people who are below the law
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know that there are people above the law. And so, therefore they
don't really believe in law. They understand that it's all about
people, really.
And so, the people who are above the law do the things that are
illegal because they can. And the people who are below the law
bribes the people who are above the law to let them do things that
are illegal. So first, the politburo stuffs their suitcases with money.
Then, the military stuffs their suitcases with money. Then the
police force stuffs their suitcases with hard dollars. And then the
people starts stuffing their cases with hard dollars and bribing the
police to look the other way with dollars until eventually the rule is
such that nobody use them anymore.
I'll give you an example. I went to Argentina in November where
it is absolutely illegal to transact currencies without a license,
absolutely illegal. In fact there was a currency crisis and the
difference between the official rate for the Argentinian peso was
about 5.5 per dollar, and the un official rate which was climbing
about 12 black market rate, almost twice as much, right. And so, I
walked out and *01:02:03 and on the first corner, there was a
person who looked at me and *01:02:11 and make the correct
deduction *01:02:15 I'm not rich. *01:02:19 to an Argentinian,
rich, and he want change -- exchange dollars *01:02:28.
Well, clearly, I was in a very bad neighborhood, a den of thieves
because here was illegal activity happening in broad daylight.
Well, guess what happened at a block later, dollars, dollars,
exchange dollars, dollars at a block later, and a block later, and a
block later, and then I'm walking down the main thoroughfare, the
commercial district, and I can't go a block without four or five
different people offering to exchange my dollars for pesos at 12
pesos a dollar. So, the fight hasn't started here, and has started but
is meaningless there.
There’s this quote that’s attributed to Gandhi but think it's
*01:03:24 about many times, but I can find the humors which is,
first they laugh at us , no first they ignore us, then they laugh at us
then they fight us, then we win. And so, with Bitcoin we're
currently at the laugh at us stage. We went through the ignore
stage, the first four-and-a-half years. We’re at the laugh at us
stage. I think at some point we're going to give them a fight, but
here's how the fight plays out. And keep in the mind that the
important to realize is, this already happened with the internet.
Now, it's like, oh, the internet is everywhere. It’s everything. We
all use it, it's great, it's fantastic. We build billion dollar businesses
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on it. It was not like that at first. At first, the internet was a den of
thieves, pornographers, terrorists and pedophiles and the telecom
companies wants nothing to do with this weird technology that a
bunch of *01:04:23 with ponytails and fedoras had built. And if
we just let anybody *01:04:29 then the world would end and
terrorists would take over and use it for communication and oh, my
god, that all kinds of things would happen. And there was a really
big fight against the internet.
When I was living in *01:04:41, the local phone company actually
use software or some analog system to detect when you were
trying to do model calls internationally and shut the connection
down. They replaced services because they could charge
exorbitant rates for long distance. And if you could get a high
speed modem call and then multiplex 10 or 15 voice calls
underneath, you could build a kind of *01:05:10 where you open a
little shop in Athens, and you have people who could then use that
and through an American provider, then do dial up from the States
and dial anywhere in the world for like a tenth of what the Greek
telecom charge.
So, what they do, they banned modem calls. They banned modem
calls. And that worked exactly as much as Russia banning Bitcoin.
It’s like putting a fence on a path -- *01:05:46 guarded path going
through a park and there’s this fence that’s three feet wide
blocking the concrete path and says park closed. It’s nothing to the
internet *01:05:57. You can just go like this, walk pass it and then
you can get back from the path and keep going. It’s just a three
feet wide fence in the middle of the path that says park closed,.
Okay. Could you *01:06:12 money, that's what that looks like in
international settings. So, there is no fight and I think at some
point, there will be a fight. I don't know how bad it will be. I'm
sure that at some countries people would be killed for owning
cryptocurrencies.
Male:
I guess -- I guess my fear or my desperate mind but it's that, you
know, if you’re one of those 12 most powerful people in the room,
and you’re entire powers were -- your power depends on the ability
of 12 person, and if you’re a government, and your entire power
and structure is existential and dependant on your ability to issue
debt and to be able to fund your government through the exiting
financial system, and you have all along *01:06:59 all the control,
then is this fight going to be a much greater fight than, say, the
power of struggle over the internet or other?
A. Antonopoulos:
Yeah, obviously, probably. But it's going to be just a few time
because this is not something that you can contain within one
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country, it’s global. And it's not something that you could stop
because it's digital and it's fluent. Money is now a content type.
Think about that a second. If you’re *01:07:31 money is the
content type, a Bitcoin transaction is 300 bytes, 300 bytes. You
can write *01:07:41. Even better, I can first transmit that on a
shortwave radio. I imagine you're in an environment where
Bitcoin is absolutely that. You’re finding a similar or a stereo or
something like that, not now, a decade from now when you can
actually fund yourself a wallet of Bitcoin.
And all of the data networks are being blocked for Bitcoin, where
the only mean is someone with a shortwave receiver in an
adjoining country that is willing to take a 300 byte first transmitted
transaction and put it on the Bitcoin network. And now, you can
do millions of dollars for transfers with a laptop on a softwarebased radio, and a rail line. So, you take a laptop, *01:08:32 where
you got to the forest near the rail track. And then when no one's
looking, you hook up the antenna to the rail track and use the entire
rail tracks and antenna, you press enter and it goes vroom, and four
seconds later, it's done. You turn it off and you run away. How
the hell do you stop that? How could you stop someone from
transmitting 300 bytes of information? I could include smileys.
There are 64 smileys on *01:09:04. That's a base 64 *01:09:06. I
can include 300 bytes of a transaction and well, someone do the
math for me, right? Maybe 60 smileys, 60 smileys. So, I can send
60 smileys and that's a Bitcoin transaction, as long as the recipient
converts it back into a Bitcoin transaction and transmit it, that
one’s for -- how the hell do you stop that, right? Do you remember
during the hostage situation? I think it was -- I remember where it
was city of *01:09:47 the situation. One of the GIs who is
*01:09:53 during the *01:09:54 confession that they videotaped or
something like that, I don't remember if it is that one but some
American GI sitting there, and he’s saying I am a spy for the
American *01:10:06 please forgive me. And he’s blinking
Moore’s.
You could blink a Bitcoin transaction, right? Sounds really terrible
anyway. The point that I'm saying is once you convert money into
data, a content type, and the process of transacting is simply
getting that 300 bytes content type to any connected node
anywhere in the world and inject it to the Bitcoin network, there’s
absolutely nothing you can do you stop people from transacting.
You can only impose sanctions after the fact. Here's another
important lesson, especially for officials and dictators, and that is
that one month after you stop paying your troops, they stop
shooting the people and they start shooting you. *01:10:59 learned
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that during a speech he delivered in front of two million people
*01:11:02 Square. When he started talking, they started shouting
to the dictator, the soldiers started shooting into the crowd, but
they were too hungry and eventually they gave up and they turned
around and started shooting at the generals.
And it’s the Soviet Union fact, that was the beginning, and it
happened because they were starving and it happened because you
can have all of the balls and of the guns and all of the things if
you're a vicious dictator, but you don't have content to the
governed, and you need to keep paying the soldiers so they can
keep pulling the triggers. Now, if all of the people divest
themselves from the national currency and suddenly you can buy
eggs with a cryptocurrency that you can't buy with the national
currency, then the soldiers wants cryptocurrency and then they stop
shooting the people and they start shooting the dictator.
So, there's enormous power simply in the consensus mechanism
because at its core, Bitcoin is *01:12:10 system. It depends on the
content of the governed because it depends on the consensus of the
user, and if you don't have that, if you don't have political
legitimacy, then your lack of political legitimacy very quickly
leads to a lack of value to currency because now the people have a
choice. I think it's a very interesting development to see how it
goes.
Male:
Well said.
A. Antonopoulos:
So, *01:12:41 with files in them. But if this *01:12:48 and
someone makes up I can *01:12:50 because I don't want to give
people an opportunity to essentially *01:12:59 jail for no reason.
And so, but here's my secondary plan for doing that in jail, what
I'm going to do is replace cigarettes with cryptocurrency as the injail *01:13:16, that’s my plan, all right, and because you don't have
computers to give proof of work, my idea is that you face it all on a
pencil and paper proof of work system based sudoku, and in fact
scientifically you can do that because Sudoku is an isometric
algorithm. You can verify it very quickly but it takes a lot of effort
to solve a large Sudoku and if you can see that with numbers with
the previous.
Male:
It actually scares me that you’ve thought about this.
A. Antonopoulos:
Well, the reason I thought about this is because you Sudoku is a
good way to explain to people how proof of work algorithm works.
Everybody understands Sudoku because you can, come on, I'll
show you one, you can figure if it's correct or not. That it’s hard to
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do. That’s what isometric algorithm is. But then I started thinking
about how do adapt that to a pencil and paper frigid based
currencies *01:14:09.
Male:
All right, questions, questions. *01:14:16 your name.
Female:
Mrs. Sofia, thanks so much for being here.
A. Antonopoulos:
Thank you.
Female:
Just a quick question on Mt. Gox. I think a lot this of this
*01:14:23 security in commissions or perhaps *01:14:26 on the
part of management? What is your overall thought because as you
know the PR outcome is quite negative?
A. Antonopoulos:
So apparently when I said that Gox was grossly incompetent, I
don’t criticize or supported Gox and leading more people to buy
into Gox before it collapse because I didn't say outright a reproach.
I had no evidence to say that. I said at least they are grossly
incompetent. Hardly that is an endorsement, at least *01:14:59
that is a yes. That is silly for Gox. So, we won't know yet but the
good news is that we will find out because there are *01:15:13 and
they’re referencing evidence. So, here's the interesting thing. Gox
will not get bailed out. Gox will not *01:15:23 because it’s all the
public *01:15:25. Gox will not be restructured with a long
guarantee from the government. Gox will not get zero percent
loans.
All of us debasing our currency *01:15:35 by Gox will not get to
whitewash their walls, acquire a few smaller companies and
pretenders and sold them to our *01:15:43. Gox will not destroy
the entire economic foundation of Bitcoin in order to pretend its
still solvent, no, that's country wide.
Female:
So *01:15:59?
A. Antonopoulos:
We will get answers because all of the evidence is on the
blockchain and because there’s a lot of evidence. And I think the
nice thing about computers is that you can *01:16:09. So, Bitcoin
is the most transparent financial system we’ve ever had. And I
think we will get answers because there will be a serious
investigation because this is unlike all the other situations, a banker
who is going to jail. Germany is already doing it but also Preet
Bharara who is the U.S. attorney for the Southern District of New
York, a complete hypocrite and career prosecutor who’s trying to
prosecute Bitcoin because he failed to prosecute the real banks and
is now prosecuting Gox.
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Female:
You have to do an investigation *01:16:47?
A. Antonopoulos:
I was invited at some point to explain transaction *01:16:52 ability
and I declined, right, to go and talk to prosecutors who failed to
prosecute banks and then go after Bitcoin, sorry.
Male:
There's-- there's a mike out here *01:17:07 the mike and put it on.
If you guys want to ask questions *01:17:14.
A. Antonopoulos:
I don't mean disrespect by sitting down. I’m a bit tired, sorry.
Male:
Hi, my name is Jordan. I first of all want to say think thanks for
taking the time *01:17:23. My question, the amount of the dollar
was based on gold value back in the day and it was based on our
12 *01:17:36 most of the currency. What will the Bitcoin’s value
be based on?
A. Antonopoulos:
Bitcoin’s value is based on the combined computation and the
combined economic activity of all its users, and that's a pretty solid
foundation. And I think it's getting more solid every day. It’s not
entirely solid yet, and we could see a lot of incomes but it’s got a
good start. I think it's -- to my point earlier, its adoption, to create
value of currency, its economic activity, one thing that people are
missing is that *01:18:24 that Bitcoin will replace the economic
activity occurring in other currencies. Like, if you get Amazon to
adopt Bitcoin, then almost the money that’s floating for amazon in
the form of dollars will now float Bitcoin in the form of Bitcoin.
That is exactly the same thing as saying in 1992, if we get AT&T
to adopt internet, then all of the fax that’s floating AT&T’s
network will now flow over the internet and we will win by having
all the fax traffic. And that's missing the point because the internet
didn't replace telephones. It rendered them irrelevant and it's not
going to replace -- it didn't replace all of the vinyl. It rendered it
irrelevant.
And so, what Bitcoin is doing now, which is very interesting is it's
not replacing dollar economic activity because the dollar economy
is stagnant unless you’re building frozen bonds and financing
derivatives. What it’s doing is it’s generating economic activity.
It’s generating its own economic activity through hundreds of
vibrant start-ups. They’re actually innovating things that people
*01:19:39 people’s lives. And we're doing a job fare *01:19:43 in
May. We’re going to have hundreds of developers and thousands
of companies looking for developers.
Now, for those of you who are a bit younger and maybe you have
just entered the industry, a job fare is something that happened
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before 2008. That’s when companies have jobs and they invite
people to compete for these jobs. Yeah, it's radical and we're
doing that to Bitcoin. That is real. That's economic activity.
Right now, there are hundreds of start-ups and we've only just
started. So, stop thinking about Bitcoin as a form of payment
system that replaces Visa so that we can do shopping faster online.
That’s not what it's about.
Bitcoin is not about shopping in the developed world. Bitcoin is
about everything else, everywhere else. And that's the key
message here, which is that if you think about what the internet
did, it didn't just replace the telephone network and then just
become a bigger telephone network. It created whole new
industries. It created whole new applications. It created whole
new forms of living and interacting, *01:21:03 and expression,
etcetera. And Bitcoin is creating whole new industries now, and
those industries will eventually become more valuable until one
day a Bitcoin company will *01:21:15 like Chase, JP Morgan &
Chase that are fucking discount. And if you think that can't
possibly happen, just remember who was buying who when AOL
bought Time Warner, right? And no one thought that was possible
in 1992 but it can happen.
Male:
Thank you.
A. Antonopoulos:
Thank you.
Male:
I actually have a question. Hi.
A. Antonopoulos:
Yeah.
Male:
Yeah, hi, my name is John.
A. Antonopoulos:
Let's get a microphone to you.
Male:
All right. Hi, my name is John. I'm just curious, you know, we're
talking about this democratization of currency, and I think it's
great. But my question is this, what is *01:21:55 of hoarding this
wealth? There’s no diminish aspect to it. So, this could be
decentralization of wealth *01:22:01 people, you know, some
bankers that were not in Wall Street that’s securitized. So, the
commodity, what’s to stop that from happening?
A. Antonopoulos:
Well, I think what’s to stop that from happening is the fact that
*01:22:19 economics talk about this idea of hoarding, but you
know *01:22:23 sell products, I now sells services for Bitcoin, and
I now had a difficulty selling products for Bitcoin. All I need to do
is discount it in order to include projected *01:22:40. I think is out
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of battery. I was discounting the products to include the projected
value -- projected value of Bitcoin in the future. So, let's have
*01:22:54 Bitcoin, right, *01:22:55 a product for Bitcoin right. If I
think that Bitcoin is going to rise 20% in the next year, well, they
can *01:23:04 sell it for point eight Bitcoin because then I can
generate some of that value through appreciation. So, I’m going to
drop the price. Meanwhile, a person that’s buying is going to see a
significant discount by using that currency because deflationary
effect is painted to the pricing.
If you think about it from a different perspective, when buyer and
seller meet, I'm using the discount rate to find the *01:23:31 point
of pricing where my hoarding instinct as a merchant because I
want to hoard Bitcoin overwhelms through discounting the
hoarding instinct to the buyer until they buy. I want that Bitcoin
just as much as they want to keep it, so I keep discounting until
they give me their Bitcoin for my product. And at some point, I
discount deep enough that they’re willing to give up their Bitcoin
and it happens to be either the price of which they were willing to
give up their Bitcoin is exactly the price of willing to discount for
it because that's the equilibrium point to supply demand, discount
stopped. And I did that, it was my business.
The brilliant part of that is if you operate the deflationary business
model, you find that there were some interesting extra novelties.
For example, California *01:24:21 8.25 per cent sales tax and as a
merchant that means I'm costing a lot for my customers. That was
a problem, but if I'm discounting, it’s not so bad. But here’s the
interesting thing. I collect that 8.25 per cent in Bitcoin at the
beginning of the year, and I pay it to California in dollars at the
end of the year. I was collection 8.25 per cent when Bitcoin was
$7 and I was paying taxes in dollars when Bitcoin was $107. So,
that 8 per cent appreciated it by a 1000 per cent, I actually made
money collecting sales tax. I also make money on the shipping
costs. I make money on every single thing that in a traditional
business was overhead because deflationary effect changed the
profit equation. Now, I'm not saying that continues for ever. All
I'm saying is it’s not as simple as people think. Deflationary
environment changes both sides of the equation, not just the
buyers.
And so, hoarding becomes an instinct unless you actually want
something. If I want eggs and I have Bitcoin, eventually I'm going
to buy eggs because I can't eat Bitcoin. And so, hunger will
override my hoarding instinct. And then you take that basic idea
and you take it out to, well, that's a very huge motorcycle, it comes
in red, I really want it. I have some Bitcoin, such a huge
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motorcycle, I'll buy that motor cycle and yeah, I did it *01:26:10
but I actually financed this in dollar and kept my Bitcoin.
Anyway, yeah, so hoarding is a problem, and it's only a problem
until you discount to fight it.
There are other problems in Bitcoin. There’s the equilibrium
between early adopters and late adopters. There might become a
problem overtime. And that’s only a problem if they also hoard
*01:26:40 redistribute that coin into the circulation. But again, that
is really Bitcoin, the currency and its monetary issuance policy,
and the fact that it was four years before anybody notice that it’s
actually working versus Bitcoin the network, the technology, the
invention, the idea which can apply to a hundred new currencies
that might have different monetary policies and may not have a
*01:27:04 early adopters, and because now we have a choice. The
nice thing is you can move out of Bitcoin just as fast as you moved
in. It's harder to move out of a monopoly currency, but once you
do, you could switch to many other currency really, really fast. So,
we'll see how this plays out.
Male:
Thank you.
A. Antonopoulos:
Thank you.
Male:
Hi, I'm Peter.
A. Antonopoulos:
Hi, Peter.
Male:
My question is regarding your thoughts on how an open currency
like Bitcoin could affect politics. So, strictly I want to give you an
example of *01:27:39. We've seen some Congressman accept
Bitcoins as donations. What if in the next presidential elections,
the two candidates starts accepting Bitcoins and outside parties like
Russia and Chinese politicians start pushing Bitcoin towards their
accounts? Aren’t we in a way almost criminalizing politics?
A. Antonopoulos:
Oh, my God that would be like free voting doesn’t really matter
anymore money can just buy politicians. That would be horrible.
How is that different from what we have now? It's not really
because it's very easy to bypass those things. I think it actually
creates some interesting incentives. First of all, it will create an
environment where Bitcoin is legitimized and legitimized in the
cultural sense, legitimized in the nine people on the Supreme Court
said so sense. Citizens united said that money is speech, political
speech that can be used for political contributions, and if Bitcoin is
used for campaign contributions, good luck banning that. There is
a heavy Supreme Court, the President *01:28:56.
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So that's actually a good thing. In fact on the huge advantage for
using Bitcoin for campaign contributions, and one better, there's
only one better religious tithe. And I'm not religious but I think
that's also, because if you're a religious institution, you actually
have three of the five parts of the First Amendment on your side.
So then, if you're doing Bitcoin religious tithing, you have
established religion on your side. You have money as a form of
free expression, and you have freedom of association. Whatever
*01:29:39 no ban, no possible demand at that point, right. So,
we’re already seeing churches begin to accept Bitcoin and that's a
very interesting game. It’s going to be very difficult to push that
out. It's also a great advantage for tithing because it has the builtin dominoes effect, but yes, money and politics is going to be
interesting. We're going to have to figure on how to do politics
differently.
Male:
Thanks.
Male:
I am Jeremy from *01:30:13. We’re a grassroots *01:30:16
decentralized *01:30:18 L.A. I like the *01:30:21 real estate you
are talking about.
A. Antonopoulos:
Awesome.
Male:
So, my question is actually two questions. One of them is about
the Bitcoin foundation. So, they have -- they’re responsible for
maintaining, updating Bitcoins to some extent and to some people
that might sound like centralization. So, I was wondering what
people talk about that and how that's *01:30:49. I will imagine
that you don't like centralization, so I’d like to *01:30:53. So,
when you went to that, my second question *01:30:57.
A. Antonopoulos:
All right, sure. The Bitcoin Foundation does not control the
Bitcoin code in any way whatsoever. They pay the salary of Gavin
Andresen and he’s one of about 12 developers. And some of the
others are paid by our people, and some of them work as
volunteers and some of them are not paid by anyone. And they are
very independent. Again, if you follow the development band list,
you'll see that there’s no centralization of *01:31:26 developers.
They *01:31:27 agree on most basic things.
It was plenty and very, very powerful and *01:31:33 on whatever
single feature, a code feature and there’s a whole structure of
opinions from people who want things to be tightly and nicely
regulated and completely radical anarchists who wants to grow
past that limitation. And so, there's a very *01:31:50. The other
thing to realize is that core developer is not a title. It’s role. So, a
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core developer is someone who has written code had was accepted
into Bitcoin core. That's what it means. That’s all it means.
There is no one going I, Kevin Andresen, by the power vested in
me, Bitcoin Foundation anoint you core develop. It’s none of that.
It's a completely decentralized organization. No one is in control
and the Bitcoin Foundation really pays *01:32:25 one the
developers who doesn't even take orders from them, strictly he
doesn’t and to operate completely independent. He just has now
the time to operate completely independent because someone is
paying his salary, but you know, Bitcoi Foundation is not a
centralized *01:32:40.
And that doesn’t mean I like what the Bitcoin Foundation is doing.
I’m just saying they don't have control of the codes. I don't like the
idea of single US-based foundation, made of a board that’s
*01:32:56 towards the funding, founding members that has very
little responsiveness to the members, very little transparency is
really mostly calculated by white dudes, and if not that, it’s
calculated by English speaking North American people in a
currency that needs to be *01:33:14. So, those are the problems of
the foundation, not the way Bitcoin is coded.
Male:
Second question is, you're speaking about when the fights begin at
part of that was the text classification *01:33:37 here at least. How
does that in your mind affect people's desire to do no limits
transaction *01:33:46 policies like, you know, text *01:33:50
policies actually if currency *01:33:52?
A. Antonopoulos:
I don't think that was really fact. I think it was more of a -- they
had to make it really one way or another and they picked one way
and really either way, it would be wrong. Let me explain what I
mean by that. If I buy British Pound Sterling in my *01:34:19
account as an investment and then sell it to you later, I pick out
*01:34:24 tax because it's an investment. If I fly to London and I
buy British Pound Sterling at the airport and I buy a ticket to
London Zoo, I won’t pay *01:34:36 no gains tax. It’s predated by
the currency.
Same thing to different treatments, depending on how I use it, a
use case, I use *01:34:45. The answer, Bitcoin is a currency is
wrong. The answer of Bitcoin is a commodity on the capital gains
is also wrong. The answer is, Bitcoin is whatever it is when you
use it based on how you use it, is the correct answer *01:34:59.
And so, we're going need to fix it. Can we innovate around this?
Oh, hell, yeah. Well, first of all, *01:35:05 that can do the text
reporting, pretty interesting thing.
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What happens if you actually report every single purchase on
Bitcoin? So, the blockchain is a ledger, right. It’s a public ledger.
Let’s say I'm running *01:35:22 micro payments for content, and
I'm charging a *01:35:27 for a piece of content, 50 cents. And
then I *01:35:33 and then I produce an IRS report and I deliver
three file boxes with 7,000 pages of addendum for my capital
gains. So, that’s up to $6.75. It’s 7,000 pages. Because that's
exactly what's going to happen now.
I mean, if you take it to this natural logical *01:35:59, the
companies that need to do that will do that. So, use algorithm to
minimize capital gains *01:36:05 of Bitcoins and spending them at
the time when they have the least exposure to capital gains tax.
And then, I’m going to voluminously report all of that to the IRIS
until the IRS can check a single one of these reports because they
would take the entire budget of the entire government and just
check one of them. And one of your achieve a change in
regulation and pretty soon thereafter.
Because it doesn't pay and the whole point is if you look at the
IRS, the IRS is really one of the least *01:36:38 organizations in
the US government. All it cares about is that you pay for
everything, everything you do, laminates that and pay, further pay,
*01:36:47 pay, *01:36:51 pay, you know, that's all they do, and
they do -- and that doesn't really matter. They don't do political
considerations. They do can we tax this? The answer is always
yes. Should we tax this? The answer is always yes. And so, what
-- if you look at the behavior of the IRS, overtime they try to make
it easy for you to give them all your money. This is making it hard
for you to give them all your money. So, they're going to change it
to make it easier. I'm not worried about that. I don't think this was
anything other than a misunderstanding of the scales and the
problems that’s going to be created because it doesn't really create
that much of a problem. *01:37:36 we can innovate * 01:37:38.
Male:
Thanks.
A. Antonopoulos:
Thank you.
Male:
All right. We're going to do two more questions, and before we do
that I just want to say we're going to clear out these chairs as soon
as this is over, and there's some wine and some beer here, and
there's networking, so feel free to hang out here and just say helot
to your friends. All right, enjoy your * 01:37:56.
A. Antonopoulos:
I'm going to hang out in the evening. Anybody wants to go for
drinks, I will happily join them.
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Male:
All right, so two more questions and then we'll just hang out.
Male:
Hey, thank you, Andreas.
A. Antonopoulos:
And Michael, if you could plug in on the digital video thing or not,
that'll be great.
Male:
Oh.
A. Antonopoulos:
We can?
Male:
I don't think we can.
A. Antonopoulos:
No, we’ll talk about it *01:38:17, right.
Male:
*01:38:24
A. Antonopoulos:
Okay, in some level *01:38:28 question.
Male:
Exactly. It’s impossible *01:38:33
A. Antonopoulos:
I think we’re going see some very interesting developments now in
terms of *01:38:39. The key issue here is if you build an Altcoin,
you have to then create a momentum behind the chain that Altcoin
is based on the blockchain in order to secure it. And if you don't,
we've seen what happens Terracoin, Feathercoin, other currencies
in the their early stages have been subject to *01:39:00 attack. But
contrary to popular perception, you can’t actually do *01:39:07
attack on Bitcoin. It’s almost ridiculous to even contemplate one
because of the enormous *01:39:11 power. But you can do it on
*01:39:14 Alcoins. So, Altcoins are really susceptible to this.
And the moment that you build an Alcoin, it requires its own
chain. You now have to get the level of user adoption where it can
be attacked or find a niche proof of work algorithm that will be
outside the scope of A6 and most common usages of GPUs and
things like that. So, it won’t really be worth any body’s time, but
if you get really successful then it is worth their times so they can
find *01:39:39. It’s all kinds of complicated considerations.
The other consideration is political. Let me give you an example.
Let's say you want to create a coin that implements as its policy the
guarantee basic income, like, they do *01:39:54 suggesting in
*01:39:55 where very *01:39:56 and instead of issuing them to
miners, you issue them to the poorest people in the network, right,
a great idea, innovation, interesting, different politics. Someone
might want to do that.
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Now, you have to find miners who not only would mine this
because * 01:40:14 actually agree with that political perspective.
So, you're looking for people to adopt the concept in order to
acquire a security. If you took that and put it on a Etherium, now
you don't need that anymore because now they’re mining
*01:40:30 all the Etherium, and they don’t care about what niche
political innovation or feature or what niche commercial
innovation you're doing, and they don’t need to support that.
They're just supporting the Etherium or Bitcoin or something else.
So, there's this basic compromise, do you put it on an existing
blockchain, then you lose some control, you make your own. It’s
just very similar to what we've seen in technology *01:40:54. We
have an initial period of experimentation followed by massive
fragmentation, followed by consolidation and standardization and
then you have performance optimization that goes to the late
stages.
So, for example, I can protocol. When IP was out, it wasn’t the
only protocol out there. It was competing with dozens of others
and then you have this explosion and suddenly we have hundreds
of competing protocols, and then most collapsed and then they
consolidated and then they got optimized and now it’s ancient, it’s
25 years old. And so, you're going to see the same thing happen in
Bitcoin. *01:41:33 actually allow you to do some interesting
things, like HTTP allows to build an *01:41:37 of new protocols
and features on top of the existing systems that are really a whole
lot of network. You’re going to see things *01:41:45 enables you
to do that. There's an older competing proposals in Toronto.
Recently, we did an interview with Peter Todd who's suggesting an
alternative system called *01:41:55 to understand how that works.
That’s coming up on Let’s Talk Bitcoin and that's very interesting
too.
Male:
Is that also *01:42:05 change?
A. Antonopoulos:
No, it actually allows you to mine multiple. It’s kind of like -- it's
difficult to explain *01:42:11 to explain just that question, but it's
mining a tree of loss with multiple layers in difficulty and the
potential Altcoins in a single mining operation. It's an alternative
to *01:42:28 and we're going to see more. It is still early days. All
these functions will be worth *01:42:33 lots of really, really smart
people, much smarter than me worked on this, so I don't know.
Male:
Thank you.
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A. Antonopoulos:
Let's take the last question in the evening. Thank you so much,
then I’ll tell you *01:42:45 today.
Male:
*01:43:04
A. Antonopoulos:
Oh, that's a really good question. So, this is *01:43:15 Bitcoin is
reversible and that there’s no recourse for buyers, which is
fundamentally wrong. In fact, we now have the ability of
*01:43:26 that is far, far better than the existing system. So, let me
give you an example. If I buy something from eBay and I use
PayPal and it goes bad, I get to use PayPal’s arbitration rules. I
don't have a choice. That's why I'm using. PayPal lacked
*01:43:42 capability and they will apply their arbitration rules. If I
buy something with my Visa card, I'm going to use Visa arbitration
rules. If I buy something with my AMEX, I’m using my AMEX’s
arbitration rules. Depending on the payments system I used, I will
log into it a specific arbitration system and that's how I get
recourse.
Now, Bitcoin has this interesting feature. It was used on 1st of
November 2014, an external feature that is fully featured in
November 2013 called Multi-sec. Multi-sec allows you to create a
transaction that in order to execute it requires not one but multiple
signatures or sub sets of a signature. So, let's say I'm selling you
something, right. Instead of doing a one signature transaction,
we're going to do a two or three signature transaction. Two or
three means that there are three keys involved mine, yours and a
third party, and it takes two signatures to execute the transaction.
if all goes well, you and I signed it, done.
If it doesn't go well, if I got a complaint, I go talk to the third party
and I use it as arbitrator and I say hey, well, I didn't get my widget,
can I -- can you make a transaction *01:44:55 my money back and
make a transaction with me. I sign, Paul signs, I get my money
back. You go to Paul and you say hey bud, I sent the widget and
they’re trying not to pay me. Here’s the tracking number for you
yes, here's their signature, you can see *01:45:11 Paul signs, you
sign, you get the money.
But here’s the interesting thing. We actually now chose who’s
going to be arbitrator instead of being fixed, we now have a
*01:45:20. So now, I can disrupt any transaction between two
individuals and pay anyone to do the arbitration. I’m doing a real
estate transaction, I’m going to pay a specialist in real estate out of
the market of thousands of people to do arbitration with different
purviews of levels and quality. I made them pay PayPal to act as
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an intermediary and do long sig with me and my transactions if I
want their arbitration rules because it was also last *01:45:48.
Instead of two or three, I can do nine or fifteen. I can do a number
of combinations. Some of those signatures can be algorithmic,
robotics, isometrics which only sign after a specific date or only
signed if the exchange *01:46:01 or only sign if the *01:46:03.
And now you could say, I'm going to do a transaction, here's a list
of conditions. So, you can actually -- the problem that we have in
this decentralized system, is not solved by a centralized institution
as before. It’s solved instead by *01:46:24 decentralized solution.
The true use of programmable money allows you this, not just
officially, but also in a highly predicable deterministic manner that
everyone *01:46:37 puts the power back in the individuals, not the
network. The network is done. It doesn't decide for you which
arbitration you're going to use. You as an individual at the edges
of the network add innovation. And so that's what *01:46:50 does.
Male:
*01:46:57?
A. Antonopoulos:
Only if you centralized that power, but you know theoretically in
the future, we can do a 100 or 300 signatures. You can create a
full voting system whereby if all of the buyers from a specific
merchants agree that the merchants *01:47:17 the transactions go
through, and if they remove their consent to *01:47:20, some of
these could be robots, some of this could be based on reviews who
knows, some of them could be automated by UPS tracking
numbers automatically signing transactions.
Male:
If things like --
A. Antonopoulos:
You have choice now. If you trade, *01:47:36 choice to reimplement the old hierarchical centralized institutions, go ahead
and you can do that but that's a bad choice.
Male:
No, we don't need now an entity to be able to go out *01:47:52
some type of fraud where, you know, let's say some sort of
*01:47:56.
A. Antonopoulos:
Sure, you do. You need contractual integrity. Any financial
system requires the ability to enforce contracts --
Male:
So I have one point--
A. Antonopoulos:
-- when it doesn't have to be a monopoly of a monopolistic system
of authority where only one institution can enforce transactions.
Now, you have a market based solution where you can pick who
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enforces the transactions, who are the specific transaction if you
want.
Male:
I have *01:48:20 at one point it seems like you do need the
government to get involved for the police or FBI whoever it may
be to *01:48:28?
A. Antonopoulos:
No, you don't because -- you don't because simply the signature
will be verified by the blockchain or it will not be verified by the
blockchain. This is adjudication by verifiable scripting transaction.
And the nice thing about that is that you don't need third parties.
You can construct contract materials.
Male:
*01:48:48
A. Antonopoulos:
You can create Bitcoins. So, yeah, that's a good conversation. We
need to keep having the conversation. One, I'll give a little effort
to finish this, which is for every problem in a decentralized
solution, there is a centralized simple, obvious solution at it’s
wrong. And we should take things *01:49:10 slight more context
but infinitely more empowering, scalable, predictable solution.
And it's going to be hard to re-build financial services that
provided us with a simple wrong answer to services that are
empowering and scalable and decentralized. It’s going to take
work to do that, decentralized market, decentralized contracts,
decentralized decision making. Decentralized everything is the
*01:49:41 and it's harder between the simple centralized
corruptible wrong answer, but it's a better world.
I got one more thing to talk about very briefly. I want to *01:49:52
a video. I’m going to be announcing this in more detail tomorrow.
Yeah, all right. So, one of the things I enjoy doing today was
visiting Satoshi Nakamoto. So, I visited Satoshi today. Not the
Satoshi Nakamoto who built Bitcoin, no, *01:50:21 Satoshi
Nakamoto. The really delightful warm, nice old man, who lives in
Los Angeles *01:50:31 Satoshi Nakamoto, who’s struggling to set
up his Wi-Fi because he doesn’t understand technology that well.
And who quite obviously is not Satoshi Nakamoto, and I deliver
the keys to Dorian Nakamoto Fundraiser which started about a
month ago, a month-and-a-half ago, and deliver 47-and-a-half
Bitcoin to Dorian Nakamoto’s account.
And here's the best news, not only was he absolutely delighted by
the response of this community and the incredible generosity of
this community, but more importantly he decided to get involved
in the community. He’s interested in Bitcoin and he's keeping the
Bitcoin and will be using it. And so, I’ve got an old video I made
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Andreas M. Antonopoulos - L.A. Bitcoin Meetup - April 2014 - YouTube (360p)
with him which I’m going to be publishing later tonight when I get
to the hotel, which is Dorain Nakamoto thanking the Bitcoin
community for their incredible generosity. I wanted to show it to
you *01:51:32, but that's what I was doing this morning, and it was
quite an awesome experience. So, that's all I have. Thank you.
D Nakamoto:
Good afternoon, Bitcoin Community. Thank you very much for
your support throughout this ordeal that I’m still fighting. And I
would like you to see this magazine which came out in April. It
will be -- no, actually March 14 issue, this year. The Bitcoin face
the mystery man behind the cryptocurrency. And I'm not Satoshi
Nakamoto as portrayed as a creator. My name is Dorian Satoshi
Nakamoto. And of course, if I was the real creator, I would never
use my real name. So, from that point of view, I'm sure you guys
would know the Satoshi Nakamoto is not me, but Leah think so,
and Newsweek said so, but it's not true.
Okay, I received a Bitcoin account from Andreas and I'm very
thankful, for you always people in US, Europe, in Asia and Africa
and South America, who supported me throughout. Thank you
very much. I want to hug you, that’s 2,000 of you who donated
and I'm very happy. Each one gives me attack in my heart. Thank
you very much. And I will like to further state that I'll be one of
the Bitcoin user, Bitcoin Community person, who would contribute
even if it's a little part of this world for good of human kind as
Andreas and many out of you endeavour to make the world a little
bit better for everybody, especially for poor people. Thank you
and I'll keep my Bitcoin account for many, many years and
hopefully I can also contribute as you did to me. Thank you.
A. Antonopoulos:
All right.
Male:
Hey
A. Antonopoulos:
That was amazing. I was so done, thank you so much.
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