# Andreas M. Antonopoulos, 'Bitcoin and the Coming Infrastructure Inversion' (Zurich, March 2016)

- Speaker: Andreas M. Antonopoulos
- Event: Bitcoin Meetup Zurich, Switzerland
- Date: March 2016 (video published 4 April 2016)
- Length: Talk 26 min, then Q&A to 62 min 23 s
- Video URL: https://www.youtube.com/watch?v=5ca70mCCf2M ; text transcript: https://www.weusecoins.com/video-bitcoin-coming-infrastructure-inversion/ ; also chapter 6 of 'The Internet of Money' vol. 1
- Slides: None. Antonopoulos speaks without slides.
- Transcript source: Whisper (faster-whisper, model small) on the archive.org mirror of the YouTube video; cross-checked against the WeUseCoins transcript. Timestamps match the YouTube upload.
- Corrections: This file uses the Whisper 'small' pass rather than 'medium': checked against the WeUseCoins transcript, 'small' kept more of Antonopoulos's exact wording, while 'medium' compressed several sentences.
- Format: `[mm:ss]` is the time the line starts in the source recording. Machine transcript: expect small word errors; quotes used in the analysis were checked against the published text where one exists.

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[00:00] So what I'd like to talk about today is a concept that I call infrastructure
[00:07] inversion
[00:08] What I'm going to talk about is how things change
[00:12] when
[00:14] Infrastructure that is new is laid on top of
[00:18] Infrastructure that is old and how that creates a conflict
[00:24] Bitcoin is new
[00:26] Bitcoin is different and
[00:28] When I say the term Bitcoin, I'm speaking a bit more broadly.
[00:33] What I'm talking about is decentralized network-centric platforms of trust for doing currency and payments.
[00:41] And other applications of trust.
[00:43] It could be Bitcoin, it could be other things, but I'll just use the term Bitcoin to cover that whole category.
[00:48] It has now been created, and it's new, and we're trying to somehow squeeze it on top of the existing banking system.
[00:58] And the result is messy.
[01:03] Not only is it messy, but it's also an opportunity for those who support the traditional banking system to go,
[01:10] See? See? It's not working. It's slow. It doesn't work so well.
[01:19] This isn't new. This is a phenomenon that happens every time you have a new technology that is disruptive.
[01:27] In the first few years of its adoption, it has to be carried by the existing technology that it is disrupting.
[01:37] Let's look historically at how these things play out.
[01:42] When you read about it, 20, 30, 40 years in the future, it is all very smooth.
[01:52] It is obvious, because hindsight provides clarity.
[01:58] For example, automobiles, great invention.
[02:05] And of course, when automobiles were invented, everyone in the world went,
[02:10] Yay, we don't need horses anymore, right? That's not exactly what happened.
[02:17] Instead, they said, that's crazy.
[02:20] Those noisy, disgusting machines that are probably going to kill us all will never work.
[02:27] And why would anyone other than stupid rich people playing with these crazy, noisy toys
[02:34] want to use one of these horrible machines when we have perfectly good horses.
[02:42] That is actually what happens in history when you introduce a disruptive technology.
[02:47] We meet resistance. Resistance is the first reaction.
[02:53] The ones who succeed are the ones who continue, even though the rest of society tells them they are crazy,
[03:00] to pursue this crazy idea, automobiles, electrification, the internet, and bitcoin.
[03:10] Every time, crazy pioneers who were made fun of by everybody else in society persisted until everybody could see what they were doing was correct.
[03:24] Looking at that history, one of the interesting things to me is the fact that, in the beginning,
[03:30] the disruptive technology has to live in a world created for the technology it is replacing.
[03:36] When you first ride your brand-new automobile in a city, you are riding on roads designed and used by horses,
[03:48] with infrastructure designed and used for horses.
[03:52] There are no light signals, there are no road rules, there are no paved roads.
[03:59] You are in horse society, and you are the crazy one driving one of these vehicles.
[04:08] Well, there are a few things about horses that cars don't have.
[04:12] These early cars were a four-wheel drive, so just two wheels turning.
[04:21] Horses are four-foot drive vehicles, which gives them a lot of flexibility.
[04:27] They also have balance.
[04:29] If you have a road that is designed for horses, it is not paved.
[04:37] The vast majority of roads were not paved.
[04:39] Some of them had cobblestones, but the vast majority were not paved.
[04:42] They were also not dry.
[04:44] They were usually covered in mud and horse poo.
[04:49] because that's what horses do.
[04:52] And so this is the environment that the automobile
[04:55] had to prove itself in.
[04:58] It didn't start out with, yes, great,
[05:01] we have now invented an automobile,
[05:03] allowing me to demonstrate on the Autobahn, right?
[05:08] No.
[05:09] Instead, the crazy rich people who are experimenting
[05:12] with this technology were driving their cars
[05:15] in these roads with deep ruts where the horses had been,
[05:21] in roads not designed for automobiles, in mud,
[05:24] and what happens?
[05:26] The cars got stuck, because they didn't have balance and four feet.
[05:32] So everybody went, this is never going to work.
[05:36] Look, you can't even get out of the mud.
[05:40] And also, where are you going to get gasoline?
[05:42] There's no gasoline stations.
[05:45] There's one gasoline station. What happens if you run out of gasoline before you get there?
[05:50] If your horse gets hungry, you can at least go a few more miles.
[05:53] But if your new crazy car idea runs out of gasoline, that's it. You're stuck.
[06:00] You were already stuck because of the mud, but now you're really stuck because you ran out of gasoline.
[06:06] This is never going to work.
[06:08] The infrastructure at first is the infrastructure of the technology you're replacing.
[06:13] Eventually, you build infrastructure for this new technology.
[06:19] When you pave roads and make them suitable for vehicles,
[06:25] the old technology horses are very comfortable on these new roads.
[06:30] If you want to do a nice tour of Zurich on horseback, I'm sure.
[06:36] Perfectly comfortable. Horses are very comfortable on asphalt.
[06:41] As are skateboards, segways, motorcycles, and bicycles.
[06:46] Technologies that didn't exist.
[06:47] In fact, in order for those technologies to exist,
[06:52] you first had to put out the infrastructure for automobiles.
[06:56] Flat paved roads not only allow the automobile to exist,
[07:01] allow the horse to comfortably exist,
[07:03] and open the door for you technologies.
[07:06] And now you have people riding segways and scooters
[07:10] and skateboards and rollerblades, and prams, and all of the other things that are moving around on our streets.
[07:18] That is an infrastructure inversion.
[07:21] You start with the new technology, living on the old infrastructure, and then it flips.
[07:26] You build infrastructure, and then the old technology rides on top of the infrastructure design for the new technology.
[07:33] Let's look at a couple more examples like that.
[07:38] One of the great things about history is that some of the most confident sayings...
[07:43] are often ridiculed for centuries, because they are so ridiculous.
[07:48] For example, when electrification was introduced during the Paris Fair,
[07:53] the mayor of Paris at the time said,
[07:56] electricity is a fad.
[07:58] As soon as we close the Paris Fair and take down the Eiffel Tower,
[08:03] Electricity will vanish in history, wrong on two counts.
[08:10] Eiffel Tower is still standing, electrification one.
[08:14] But think about the time electrification was happening.
[08:18] There was no infrastructure.
[08:21] How do you put electricity in a home?
[08:23] First of all, the only reason you would put electricity in a home
[08:27] is because you are one of these crazy rich people,
[08:29] probably one of the same people who went and bought an automobile.
[08:33] You are now basically putting the same thing that is enlightening in your walls,
[08:42] which is surely a crazy idea that will result in your house burning down.
[08:46] That is what the newspapers wrote.
[08:48] They wrote about every house that burned down and how these crazy people were putting electricity in their homes.
[08:55] What was the infrastructure at the time?
[08:57] you had infrastructure for gas. In fact, gas lighting in major cities was pretty common.
[09:06] There were pipes that could deliver gas, primarily to street lights, but also for home lights,
[09:12] as well as heating. You couldn't use that infrastructure for electricity.
[09:17] You couldn't use it to distribute electricity to homes.
[09:21] At first, the only use for electricity was really for factories.
[09:27] That is where you could make the most use of electricity.
[09:32] In the past, in a factory, you would have one motor in one corner of the factory, a very large motor.
[09:40] It would then distribute motive power through a series of belts and pulleys throughout the factory.
[09:47] to run all of the other equipment. That was usually driven by gas, so it was basically a gas turbine.
[09:56] Electricity allowed you to distribute electricity directly to all of the devices and have electric motors.
[10:03] So factories were the obvious things. But why would you put it in your home? There was no infrastructure.
[10:09] Also, why would you use electricity since you already had light and you already had heating from gas?
[10:16] It worked fine, right?
[10:20] The infrastructure for gas wasn't useful for electricity, so if you wanted to do this, you would have to build new infrastructure.
[10:29] Then you get the other aspect of this infrastructure inversion, which is that those invested in the status quo
[10:37] Point to your new electricity projects and they say there's not enough distribution network to create customers and
[10:45] There's not enough customers to require a distribution network. This is never going to happen
[10:51] Which is exactly what they said about cars
[10:53] There's not enough gasoline stations to fill your car and there's not enough customers to require a gasoline station
[11:00] This will never happen and then electrification starts happening and people discover that once you put down
[11:09] Electricity infrastructure not only can you use that to do the new electricity capabilities
[11:14] You can also use it to do the old application so you can do light and
[11:18] Heating and you can do them more effectively in some cases with electricity, but now you can do new things
[11:25] You can do fans and you can do air conditioning and you can do motors and you can do mixers and you can do hairdryers and
[11:33] Generally speaking houses don't burn down because of electricity too often
[11:36] Right? So again you get this infrastructure inversion for the first few years you have to run on the old infrastructure
[11:44] It's almost impossible. You could theoretically attach a gas generator in your how to feed it with the gas and
[11:52] Generate electricity locally, but that wasn't very efficient
[11:55] Then you build infrastructure for the new technology and that infrastructure enables the old technology quite comfortably lighting heating or
[12:04] Horses in the case of roads
[12:06] But it also opens the door for new applications that you couldn't do before and the world changes
[12:13] my third example is a bit more technical and
[12:19] This is where you start seeing the audience separates into those who are
[12:24] Over 35 and those who are under 35
[12:28] Tell me if you can recognize this sound
[12:31] the people on under 35 are looking at me like I'm crazy and the people over 35
[12:51] were going that's a modem I used to have one of those that's how we connected to
[12:57] the internet so modem and this is where we go into ancient history is a
[13:04] modulator demodulator it's a device that speaks data over a telephone line
[13:09] and here's the thing if you think about it the telephone line is like
[13:13] Like a dirt road and you're trying to drive a car over it a telephone line is it is a system designed to carry
[13:22] human voice if you were my age when telephone lines was still analog and
[13:30] I was a teenager at the time and we still had pulse-styling
[13:35] Systems we used to sometimes try to play music
[13:39] Music to our friends over the phone line, and if you've ever tried this you will discover it doesn't really work and
[13:47] The reason for that is because the frequencies that a telephone line allows are very very narrow
[13:53] Right, so what happens is the telephone network is designed to do one thing and only one thing
[13:58] It's highly specialized just like the gas network that delivers gas to houses is only designed to deliver gas
[14:06] Not gas or water or electricity or oil just gas and it's specialized the telephone system was designed to deliver just voice and
[14:17] human voice is very specific our
[14:21] main frequency is one kilohertz and then we go a bit below that and a bit above that and
[14:28] there's a few people who can go quite a bit beyond that and
[14:33] And teenagers can go to frequencies that I can't even hear anymore.
[14:39] But because of the specialized use of voice, and because of the difficulties of transmitting voice, especially over great distances,
[14:49] engineers narrowed the range.
[14:52] If you allow the full range, you get voice, but you also get electrical interference at very high frequency.
[15:01] And you also get
[15:04] Electrical interference from motors at very low frequencies
[15:06] So what do you do if you have a phone line that's doing that you put a filter that chops out the lows
[15:11] And you put a filter that chops out the highs and now it's cleaner
[15:15] But now the voice starts sounding weirder and weirder because it's being compressed
[15:22] Now this is a very difficult road to ride data over
[15:29] because
[15:31] When you're transmitting data, you want to get a lot of information in a very narrow frequency band
[15:36] So this whistling sound that you hear with the modem is basically two modems trying to test on this specific connection
[15:45] How much room do we have?
[15:47] Right and basically what the bottom is doing is it's going hello. Hello. Hello. Hello, and the other modem is going
[15:56] I heard the first three
[15:58] Last one didn't come through
[16:00] And then the opposite, going low-frequency.
[16:05] I heard the first three, but the last one didn't come through.
[16:07] Okay, great. So now we know we have six bands of frequency to work with.
[16:12] Now I'm going to start changing between those bands very quickly.
[16:15] Let's see how much of this you can understand.
[16:19] That's changing frequencies very quickly between two bands.
[16:23] Then the other modem goes, I heard all of that. Great.
[16:26] Now we can transmit data.
[16:30] This is an insane way to do data transmission.
[16:34] You basically got two devices that are singing to each other over a very narrow channel,
[16:39] trying to somehow squeeze through this little straw as much data as possible.
[16:46] Then we upgraded them, and they got better and better at doing this.
[16:51] The phone companies hated it.
[16:53] That's not what we designed the network for.
[16:57] This is a pristine state-of-the-art voice communication network.
[17:00] What the hell are you people doing? In fact, in the country where I grew up, in Athens,
[17:05] if you tried to make a long-distance call with the modem, what you would hear is
[17:09] Do-di-click. What? What just happened? Oh, they cut off lines if they detect a modem,
[17:18] because we're competing against the phone company. Kind of like banks shutting down
[17:24] accounts of Bitcoin companies, right? Or basically exactly the same.
[17:31] What did they say at the time? They said, we could deploy data connections.
[17:38] Fiber, coaxial cables, direct data connections at high bandwidth.
[17:44] But first of all, no one needs high bandwidth.
[17:47] What are they going to do? Transmit voice? We already have a voice network.
[17:50] It's fantastic. We don't need these new things.
[17:53] Secondly, you don't have enough users to deploy coax,
[17:59] And you don't have enough coax to build a user base.
[18:03] This is never going to happen.
[18:06] The same exact idea.
[18:09] And then we had one of the most spectacular examples
[18:12] of infrastructure inversion I've ever seen and that I recall
[18:17] from history.
[18:19] When first the internet was not wanted and carried over
[18:23] phone lines reluctantly, then the internet
[18:26] was carried over phone lines by phone companies becoming
[18:29] Internet service providers, then gradually their backbones become data-oriented.
[18:35] Then their entire network becomes digital.
[18:38] Then their entire network starts running over the Internet.
[18:41] Then they start running all of their phone lines on top of the Internet.
[18:45] So today, every single phone call you do anywhere in the world is carried over the Internet,
[18:52] with a few exceptions at the edges in some developing countries.
[18:56] A complete infrastructure inversion turns out it's very difficult to push data through a narrow phone
[19:03] line designed for voice, but if you flip the equation putting voice
[19:09] Over a data connection is trivially easy
[19:13] What's the difference one is extremely specialized?
[19:16] It has already chosen the application for you the application is voice data is the
[19:21] exception that you're trying to squeeze through. The other one is very generic. Data means anything, and voice is just one of the applications carry it comfortably.
[19:31] I think the ultimate irony of the phone companies was a special thing called comfort noise generation.
[19:40] If you're a phone engineer, you know what I'm talking about. This is the most ironic thing ever.
[19:45] After years and years of people of my age, being used to their phone lines sounding like...
[19:52] all the time, right?
[19:54] When we started having cellular telephony and digital phone lines that were perfect, they had no noise.
[20:01] The moment the other person stopped talking, what you would have was complete silence.
[20:06] You would be like, oh, okay. I guess they didn't hang up. They are still there.
[20:14] Then the phone companies invent the most brilliant technology ever, which is comfort noise generation.
[20:21] It is a device that sits on your end of the phone, and it looks to see if the connection is still open.
[20:26] If it is, it whispers in your ear just to make you feel comfortable that the other person is still there.
[20:34] It actually generates high-frequency noise on purpose, artificially on your end, noise that isn't on the system.
[20:42] just so that you don't think the other person has hung up.
[20:46] In the very same companies that said,
[20:48] we will never be able to do quality voice over the internet.
[20:54] And we don't want the internet on our phone lines.
[20:56] And now injecting noise in order to simulate
[20:59] the terrible performance of the previous network.
[21:01] Because now we're delivering CD quality or better sound
[21:07] across continents, complete infrastructure inversion.
[21:12] Then we get to Bitcoin. Now we have a decentralized trot platform that can do settlements of transactions on a global basis without interbeteries.
[21:22] But in order to get into the system, or get out of the system, because we still have to live in the old system,
[21:30] we have to go through exchanges, bank accounts, and iBan transfers. We have to use credit cards.
[21:40] What we're doing is we're riding the automobile on the muddy roads of banking.
[21:46] The Bitcoin supercar, the Formula One of finance, is riding along on the muddy roads of the 1970s,
[21:55] mainframe-based banking.
[21:58] It's a bumpy road.
[22:00] The banks pointed this and said, it's not working.
[22:05] You have to do all of the regulation that we have to do.
[22:09] You have to do all of the identity that we have to do.
[22:12] You have to slow everything down to the speed of traditional banking.
[22:17] This is never going to work.
[22:19] Not only that, but you don't have enough users to build infrastructure,
[22:25] and you don't have enough infrastructure to attract new users.
[22:30] So this is clearly never going to work.
[22:35] But what we do have, just like with electricity, and the automobile, and the internet,
[22:41] is we have a new technology that has within it the promise of a thousand other applications they haven't even imagined.
[22:49] This is my prediction.
[22:51] We are going to see over the next 15 to 20 years a great infrastructure inversion that will happen in finance.
[22:59] What will happen is the banks will resist, then the banks will adopt,
[23:05] Then the banks will run their systems alongside blockchain and Bitcoin systems.
[23:14] Finally, they will run all of traditional banking as an application on top of a decentralized, trusted ledger.
[23:23] While it is very hard to do a decentralized, trusted ledger that is connected to all of these legacy banking systems,
[23:31] Simulating legacy banking on top of a decentralized ledger, on top of Bitcoin, an open global blockchain, is trivial.
[23:42] All you have to do is take all of its capabilities and slow them down.
[23:50] I can create an application that takes your Bitcoin transaction and makes it clear in three to five business days
[23:58] for a cost of $5.
[24:02] And I've implemented traditional banking.
[24:04] It's kind of like the comfort-noise generation.
[24:08] For those of us who are so accustomed to banking,
[24:10] of a previous generation who are like,
[24:12] I don't like all of this fast finance.
[24:14] It makes me uncomfortable.
[24:16] I want to sit at my kitchen table every Sunday
[24:19] and balance my checkbook, right?
[24:22] And make sure none of my checks bounces, right?
[24:26] I don't like all of this electronic, instantaneous global
[24:29] transfer it scares me who knows so we can slow it down what we're going to see is
[24:36] this infrastructure inversion will allow us not only to comfortably run the
[24:40] traditional banking applications on top of a distributed global ledger and
[24:45] open blockchain like bitcoins the open blockchain probably bitcoins open
[24:52] blockchain but then we open the door for other applications for applications
[24:59] we've never seen before. These will appear to traditional banking, like a segue or a skateboard,
[25:06] to someone who is absolutely determined to continue the tradition of horse carriage riding in the city of Zurich.
[25:16] These applications will look the same as someone who is still trying to do gas lighting in their traditional Victorian house.
[25:24] These applications will look as alien as someone who is still trying to do comfort noise...
[25:31] in a CD or better quality voice communication over the internet that is capable of so much more.
[25:42] Enabling the future on your legacy system is very difficult.
[25:49] While you are trying to do that, everyone is pointing at the future and saying,
[25:54] Look, it doesn't work until you flip the infrastructure,
[26:00] and then simulating the past on the network of the future becomes extremely easy.
[26:07] What we are part of now is the very early stages as we look at the future of money,
[26:15] and the first stages of the greatest infrastructure inversion the world has ever seen.
[26:21] Thank you.
[26:39] For the next part of tonight, I will be happy to take some questions, which will probably go for two to three hours.
[26:49] After that, if you happen to have brought a book, I would be delighted to sign it for you.
[26:57] But we have three books here that we're going to give out with a drawing, a random selection.
[27:03] And finally, after all of that, we'll shut it down, and I'll be happy to talk to you all,
[27:09] preferably in the area that serves beer, and we can continue this on a social level.
[27:14] So, Lucas, do you want to do Q&A first, or drawing for the books?
[27:19] No, Q&A. All right, who has a question?
[27:27] Let's get a microphone to you.
[27:30] I am very easygoing, don't be shy, please ask me questions.
[27:34] So basically, Bitcoin is like a guillotine.
[27:36] So you mention it and it goes down on your head
[27:39] and it cuts it off.
[27:40] It's what?
[27:41] It's like a guillotine.
[27:42] Every time you mention Bitcoin, basically the other party,
[27:45] you're trying to sell the technology to shut off.
[27:48] Yes.
[27:48] We experienced that when we delivered blockchain technology
[27:51] with the Red Cross together to Lebanon,
[27:54] when we mentioned the word Bitcoin,
[27:55] the counterparties we dealt with,
[27:57] You usually had a big issue of listening to the advantages of the technology, right?
[28:02] And so how do we how do we go around that? What's your take on that?
[28:06] Well, I mean the reason is because there has been a very strong campaign to ensure that Bitcoin is associated with negative things
[28:14] And this is not a coincidence. This is exactly the response you see to any disruptive technology
[28:20] So you have two things first of all you have a technology that is different enough that is difficult to understand
[28:27] Then you have that technology offending some of the well-entrenched issues.
[28:32] I can guarantee you that the stable and horse carriage association of Switzerland was none too happy about this new automobile idea.
[28:42] I am sure they talked to a lot of journalists about how these devices would kill people on the street,
[28:49] and made too much noise and broke down and were unreliable.
[28:53] If you think that is a joke, you should go look out the red flag act that was passed in the United Kingdom in 1896.
[29:02] That required every automobile greater than a certain length to have an operator, an engineer, and a conductor.
[29:11] They had to have a flag person running ahead of the automobile, waving a red flag, to warn all of the innocent, terrified pedestrians.
[29:23] that an infernal death machine was barreling down the road, trying to kill them.
[29:28] This law passed in England, and it slowed down the development of automobiles fatally for England.
[29:34] These things happen again and again and again and again.
[29:38] The initial response you get is, part fear of change, part engineered fear because of interest.
[29:45] Bitcoin, just like the internet, look at all of the articles that were written in 1992-93-94 about the internet.
[29:53] The internet is a den of thieves and pedophiles and criminals and terrorists.
[29:57] If you let your children get onto the internet, they will surely be destroyed.
[30:01] No one uses it except for criminals and weird scientists, but we already knew they were weird anyway.
[30:09] It has no practical use, because we have fax machines and post offices that work perfectly fine.
[30:15] Thank you very much.
[30:16] In any case, the phone companies are building a much better version,
[30:21] which is the internet, only without any of the open, borderless content-creating innovation and freedom that the internet is.
[30:30] Just closed, curated, editorially controlled, safe, PG-13, appropriate for all audiences, and boring.
[30:39] And in the end those things failed and they failed because what was exciting about the internet was that it was open and
[30:47] Decentralized and borderless and in the end. Yes criminals use the internet
[30:53] Of course, they did just like they used automobiles and electricity and phones and shoes
[31:00] To run away from robberies and the bottom line is you don't make
[31:04] transportation policy, or shoe policy, or telephone policy, or internet policy, or financial policy.
[31:12] Based on the narrow use a criminal will apply to a technology, you look at the bigger picture.
[31:18] As to what happens if you give the tools of financial freedom to seven and a half billion people.
[31:23] That is terrifying to some. I don't care.
[31:27] I'm not going to try to sell this, because this bitcoin is useful, because it solves real problems for real people.
[31:36] So if you want to just wrap it up in a nice little blockchain shell and put a bow around it and say,
[31:40] don't worry, this is just like bitcoin only, safer, and not going to be used by criminals,
[31:48] of course it's going to be used by criminals. You know why? Because criminals run the banks.
[31:57] Because criminals run governments, they are some of the biggest criminals out there.
[32:03] Eventually, they will be using Bitcoin technology, too.
[32:06] I am not worried about trying to market this.
[32:09] I am worried about how to make it useful to as many people as possible.
[32:13] The rest will simply be washed away in history.
[32:16] One day, our children will hear this completely fabricated story.
[32:21] The fabricated story will be,
[32:23] Satoshi Nakamoto invented the blockchain and the world rejoiced and was never the same again.
[32:28] Just like we do the story, if you go into an American school and ask them,
[32:32] how was the automobile invented, or who invented electricity?
[32:35] Edison came with the idea, tried it once, everybody hailed him as a hero.
[32:41] It was a stunning success and the world moved on.
[32:44] Ford created automobiles for everyone, everyone was happy.
[32:48] Of course, neither of those people actually created the thing,
[32:51] And they were ridiculed for decades.
[32:53] Some of the inventors of these technologies
[32:55] died, poor, and ridiculed, and destroyed.
[33:00] We rewrite the history later.
[33:02] So I'm not worried about perception.
[33:05] That's a very long answer to your question, but there you go.
[33:07] Thank you.
[33:09] By the way, great book, great lecture.
[33:10] Thank you.
[33:11] Thank you.
[33:14] Hello, who's got it?
[33:15] Oh, we have two microphones.
[33:17] Awesome.
[33:18] Thanks for all these analogies.
[33:20] That was very interesting.
[33:21] Thank you.
[33:21] I just didn't get one point is what is the infrastructure which will be needed for Bitcoin to become mainstream, right?
[33:30] Well, you know part of the infrastructure the good news is we don't have to do all of the heavy lifting of
[33:35] Building new roads and building new internet because we already have the internet
[33:38] So that's one big difference in this infrastructure inversion
[33:43] The infrastructure we're building or need to build within Bitcoin is access to financial
[33:48] capabilities and the liquidity to make those viable.
[33:52] That means having enough people who have access to wallets, and wallets that are decentralized,
[33:59] and easy to use, and easy to secure, and easy to understand, and education for developers
[34:06] who are writing these applications, and education for users, and all of the things that need to
[34:12] smooth adoption. Right now, Bitcoin is difficult to use, it's difficult to secure.
[34:17] It's still the very early stages, and that's fine.
[34:20] As we educate more developers in more languages across the world,
[34:24] and they build better applications suited to the local languages,
[34:28] and more people get involved and start using Bitcoin as a means of exchange,
[34:32] you build liquidity.
[34:34] Liquidity allows more applications.
[34:36] Density of adoption allows more applications.
[34:40] The network effect kicks in.
[34:42] As each new person is added to a network, the usefulness of the network increases exponentially.
[34:50] For the new person, connecting to everybody else is useful.
[34:54] But for everybody else, the fact that they can now connect to a new person is also useful.
[34:58] That is the exponential effect of Metcalfe's laws, which is called the network effect.
[35:04] That is what is required here. We are not going to need to build physical infrastructure.
[35:09] We're going to need to build better and easier ways of getting on, so that more people get on,
[35:14] so that we have social infrastructure, economic infrastructure.
[35:18] This is an economic tool, and therefore having a robust economy with economic activity is the infrastructure for Bitcoin.
[35:27] You will know when we have it. It's a very simple test.
[35:32] The day when you ask someone, how much is one bitcoin?
[35:36] And they say, oh, what do you mean?
[35:39] It's one bitcoin.
[35:39] One bitcoin is 1,000 millibits, 100 million satoshis,
[35:44] or one bitcoin.
[35:46] No, no, but how much is it in dollars?
[35:48] Oh, well, I mean, a dollar is zero points,
[35:51] something bitcoin, but who cares?
[35:56] That's when we've made the economic inversion,
[35:59] the infrastructure inversion.
[36:02] Yes, do we have a microphone?
[36:06] Okay, and if the next person wants to raise their hand
[36:08] so we can get a microphone for you in advance,
[36:10] very good, go ahead.
[36:12] So the key fulcrum to blockchain technology
[36:15] is decentralized ledger and decentralized consensus.
[36:19] And you talk about a future where this could be
[36:21] the economic standard, so to say, across the world.
[36:24] And you mentioned seven and a half billion people.
[36:27] My question really is,
[36:28] those people are not evenly distributed, right?
[36:30] So hypothetically,
[36:32] there could be a country which could dominate
[36:35] in terms of mining power,
[36:37] and then it's not so neutral anymore as a platform, right?
[36:41] So is there any way you have any thoughts around that,
[36:46] how we can overcome it?
[36:47] Because this would be one of the questions
[36:49] that governments across the world would ask.
[36:51] We're trying to adopt this.
[36:53] Well, domination by a single country
[36:56] is extremely unlikely because the bottom line is,
[37:01] You will see in the early stages, especially because of certain convergence of characteristics.
[37:07] For example, the availability of cheap and immediate geographic access to silicon fabrication is an advantage today.
[37:17] It is an advantage because we are moving from generation to generation of ASIC every three months.
[37:23] That era is over. We hit 60 nanometers. We are not changing ASIC generations now for two years.
[37:30] That's going to change the environment of mining dramatically.
[37:34] I'm not that worried about centralization in any single country.
[37:38] Countries would be worried about that.
[37:41] Well, if you think about it, today our currencies are run by a proof-of-oil consensus algorithm.
[37:49] There is a certain amount of concentration of the underlying proof-of-oil resource in some countries.
[37:55] which some admittedly may have said leads to war.
[38:03] That doesn't change. Digital cryptocurrencies and decentralized currencies still have people in them.
[38:09] These people will still engage in geopolitical games.
[38:12] That doesn't change. But how decentralized things are changes the equation.
[38:17] It makes it less likely that you will have specific concentrations based on a resource...
[38:24] that really can't move because it's been there for millions
[38:27] of years.
[38:28] So I think we're going to see a very different environment
[38:31] evolve.
[38:32] I don't know what that environment will be yet.
[38:35] So this is part of being part of history.
[38:39] You get to see it as it unfolds.
[38:44] Who's got the next question?
[38:45] Yes.
[38:46] So if I may like to go back to the original question.
[38:50] You talked about the status quo,
[38:53] fighting the new technology and this whole idea of co-opting and the banks
[38:57] being against Bitcoin. If you look back over that, I don't know, let's say the
[39:00] last six to nine months, it seems like banks are going bananas for the blockchain.
[39:04] Yes. There's other opening up laboratories, they're coming with this
[39:08] and life masses is running around and all of this other stuff. I was wondering if
[39:13] you could just talk a little bit more about if you're not, if you're
[39:16] really sure that the banks won't succeed in co-opting this technology,
[39:20] Bolting the old system on top and then we all keep going like we are or is it really going to open up to everyone?
[39:26] That's a really good question. And if they could co-opt this technology, they certainly would
[39:32] But the problem is understanding exactly what's at stake here and what the differentiation is the the thing that makes Bitcoin interesting
[39:40] Is not the fact that you can use it to record
[39:45] transactions in a chain of blocks. That is not interesting. That is, in fact,
[39:50] stunningly boring from a database science perspective. What is interesting is
[39:57] being able to remove central control of third parties by decentralizing the
[40:04] security mechanism through a proof-of-work consensus algorithm. What
[40:08] that gives you is a set of capabilities. Immutability, unforgeability, open
[40:13] access, permissionless innovation, borderless systems, and censorship resistance.
[40:19] None of these are in any way remotely interesting to banks, and they don't want any of them.
[40:24] What they are trying to do is say, we see what you have there.
[40:29] We would like the same only without the open, borderless, permissionless innovation,
[40:33] decentralized control, open access, and censorship resistance.
[40:36] Could we have one of those?
[40:38] That is exactly like saying, I like this internet thing you have there.
[40:42] I think the underlying technology is packet-switching.
[40:46] And packet-switching is fantastic. Forget the net neutrality-open, borderless publishing, and freedom of expression.
[40:52] Blah, blah, blah. You know, that's irrelevant.
[40:56] What we really want to do is use packet-switching to transmit corporate-produced content directly into the TVs of every household.
[41:06] In a centralized, top-down, hierarchical way, where we control the content and don't worry,
[41:10] it will all be suitable for your children, produced by Disney and controlled forever by us.
[41:17] They failed to do that, because that's not what people wanted, because what they saw on the internet
[41:22] was the possibility of taking control of the means of producing content and becoming consumers
[41:28] and producers of content, of equalizing things, and the ability to directly connect with people
[41:34] around the world was exciting. That is what blockchain doesn't have, the way they call it.
[41:43] The thing you have to ask yourself is, what are the 7.5 billion people on this planet looking for,
[41:48] in terms of economic inclusion? Are they looking for something that has identity, KYC,
[41:54] and controls on the borders, regulations about the amounts, totalitarian surveillance,
[41:59] in a very cozy relationship between regulators and state and money, or are they looking for a new way?
[42:05] The answer is simple. Most of them are not part of that system, because they haven't been invited.
[42:12] They will never be invited, because right now what we are doing is restricting the number of people
[42:16] who can actually access that system. Economic inclusion is backtracking.
[42:21] What Bitcoin offers is not what the banks are co-opting.
[42:26] What they are co-opting is a system that has nothing to do with what we are building.
[42:30] This is a comparison between decentralization and decentralization.
[42:34] They can't co-opt decentralization.
[42:37] By co-opting decentralization, they lose all the power.
[42:40] Some banks will adopt decentralization as their go-forward mantra.
[42:46] Big chunks of the industry will be replaced by companies you have never heard of before.
[42:51] Which is why the top companies on the internet
[42:53] are not the phone companies for the same exact reason.
[42:57] I'm not worried about banks co-opting blockchains.
[43:02] They have bigger problems.
[43:03] They've got to figure out what the hell
[43:04] to do with interest rates.
[43:08] Oops.
[43:12] Who's got the microphone?
[43:13] Yes, go ahead and then the next person there.
[43:15] Thank you.
[43:16] I'm a complete Bitcoin newbie,
[43:18] so I apologize if my questions are silly.
[43:20] No problem, please.
[43:21] What are the most outlandish Bitcoin applications
[43:24] seen tonight you're talking about reinventing the payment gateways and
[43:28] financial infrastructures but you mentioned that once this inversion has
[43:31] taken place this opens up new doors to new applications so some examples it's
[43:37] very very difficult to see those because they depend on a number of
[43:42] different things first you need the infrastructure but then you also need
[43:45] widespread adoption so if you look back at the internet and you look at
[43:51] 1992 and you say what we're going to see in the future, right? I mean video teleconferencing was obvious
[43:59] That was part of Star Trek 20 years earlier. They could imagine that
[44:05] what they couldn't imagine was Wikipedia or Google search or
[44:10] Social media and the reason they couldn't imagine that is because a lot of those things actually require a
[44:17] A density of adoption to even be possible, right? You can't do social media unless almost everyone you know is able to use it
[44:24] Which means they already have internet preferably mobile internet
[44:28] You can't do Wikipedia unless there's enough people who can go in there and
[44:32] Continuously improve the product you can't do Google search until there's enough pages that you can do cross-correlation of deep linking
[44:39] So all of these applications only emerge once you've set down certain
[44:44] prerequisites, and the applications that come out of them are invisible in the beginning.
[44:50] This happens with every type of new disruptive technology, which is that over the first decade,
[44:55] or decades, of their development, most of what you see is skeuomorphic design,
[45:01] meaning that it is design that mimics the shadow of the past.
[45:05] So you go in places like New York, and you introduce steel into construction.
[45:12] What do they use steel to do at first? They use it to build a brick building that looks exactly like all the other brick buildings only is a bit taller.
[45:22] They don't say, maybe instead of windows this large, we can make the entire facade of the building glass.
[45:30] That doesn't even cross their mind. They spend the next two decades repeating the forms.
[45:36] In fact, one of the most ironic things is that you start seeing with modern construction techniques,
[45:42] people put up houses, and then they put Roman columns in front.
[45:46] Roman columns have a very specific purpose. They are there to hold the roof up.
[45:50] They are not decorative elements.
[45:52] But you don't need them to hold the roof up anymore, because you have steel beams, or bricks, or other techniques.
[45:58] The columns are now purely decorative. They serve no practical purpose.
[46:02] You are just giving a little hat tip to the past.
[46:06] For the first decade in Bitcoin, the vast majority of what you are going to see, and the least interesting things,
[46:12] are going to be, well, here's what we did with banking. Let's take it a bit further.
[46:17] We are thinking about retail commerce plus Bitcoin. Bitcoin retail commerce.
[46:25] Checking and savings. Let's call destination addresses checking accounts. Bitcoin checking and savings.
[46:33] This is not innovative, it's skeuomorphic. We will see that happen for decades, possibly.
[46:41] But once you lay down the ground to have enough people to do adoption, you will have interesting opportunities.
[46:50] The most interesting opportunities come from some of the narrow areas where Bitcoin can do things that are not possible today,
[46:58] because of its different nature.
[46:59] Here's one that I'll just throw a few out there.
[47:04] Every single financial system we have assumes personhood.
[47:08] The entity that owns and controls money
[47:11] is either a person or an association of people
[47:14] through a corporation.
[47:15] That is it.
[47:16] You cannot have money without personhood
[47:20] because the legal jurisdiction that supports it
[47:22] requires personhood.
[47:24] Well, elliptic curve digital signatures
[47:26] don't give a damn about personhood.
[47:28] That is the legal infrastructure on Bitcoin.
[47:31] You can have ownership and control of money through the ownership and control of elliptic curve digital signatures without a person.
[47:37] That means software agents and machines can directly own and control money without any human being involved at all.
[47:45] You could create an autonomous system of charity that trolls the web, looks for hurricanes,
[47:52] If it finds enough, it starts a fundraiser, takes the money, and then distributes it equally to charitable organizations,
[48:00] or directly to the people who threw the GPS on their phones, show that they are in the middle of the disaster,
[48:06] and has no board of directors, no owners, no corporate structure whatsoever.
[48:11] It is simply an automatic money-controlling system.
[48:17] The most wild idea I had is what happens if you take self-driving cars, Uber, and Bitcoin,
[48:23] mash them together, and you have the world's first self-owning taxi.
[48:28] A taxi that effectively owns itself, it has paid for its own lease, it's paid for its own maintenance,
[48:34] its own insurance, it collects money from passengers that ride in it, that it provides rides for,
[48:40] and then pays for gas automatically using Bitcoin and pays for its annual maintenance.
[48:46] If you think that could never happen, I have even constructed a scenario of exactly how it would happen.
[48:53] It wouldn't start with autonomy.
[48:56] It would start with an elderly taxi driver who gradually turns themselves into an entrepreneur...
[49:02] and owns a fleet of taxis, and then replaces their drivers with autonomous vehicles.
[49:07] Then it automates their accounting so that they have to do less and less and less work.
[49:11] And then they die without tears, and nobody notices.
[49:14] Because the next morning, the taxis go out,
[49:18] and they continue doing what they've already been doing.
[49:20] And then you have the first emancipated taxi that suddenly
[49:26] became its own autonomous entity.
[49:28] This is not completely outlandish.
[49:33] There are plenty of examples of, for example,
[49:37] they found an elderly person in Japan
[49:39] who had died in their apartment.
[49:41] 17 years before they found the body because they had a pension coming in and direct debit of their electricity and utilities and the air conditioning was turned up
[49:51] Enough and they died in their apartment without airs nobody noticed for 17 years
[49:55] They just sat there and the apartment kept being rented and the rent kept getting paid and the electricity got paid and
[50:04] Essentially the apartment emancipated itself
[50:06] But you could do this with a self-driving taxi.
[50:09] There are some really weird things that happen when you remove personhood from the ownership of money.
[50:14] That is just one example.
[50:16] The other really interesting area is the possibility of doing nano-payments.
[50:21] Nano-payments both in terms of value and in terms of time granularity.
[50:25] With certain constructs within Bitcoin called payment channels, or lightning network, and things like that,
[50:31] You can do payments for services that are built for a thousandth of a cent in increments of 200 milliseconds or less.
[50:41] So what could you possibly do with that? I have no idea.
[50:45] I'm sure there are some very smart developers trying to think of something cool now.
[50:49] So again, you lay this infrastructure, everybody has enough liquidity, people have easy access to it,
[50:55] And then you start laying on top applications
[50:58] that were absolutely impossible to do before.
[51:03] And that's when we really have an interesting world.
[51:06] So yeah, that's going to happen over the next 20 years.
[51:09] Okay, let's take maybe two more questions.
[51:12] Yes.
[51:14] Hello.
[51:15] Hey.
[51:16] You mentioned earlier, so assuming a widespread adoption
[51:20] of Bitcoin, do you believe that we're going to see
[51:24] Similarly like today, different currencies in different regions of the world,
[51:29] or do you believe that there will be just one Bitcoin, assuming this takes over?
[51:36] Do you speak English? Do you speak German also?
[51:40] Yeah.
[51:41] Did you abandon German once you learned English?
[51:44] No.
[51:45] No.
[51:46] But English is...
[51:48] Sorry, I think I was unclear. Do you assume there will be more than one Bitcoin?
[51:52] Well, again, the point is that you didn't abandon German when you started learning English.
[52:00] The reason you didn't abandon it is because while English has its uses in some places in the world...
[52:06] be it the dominant language, that doesn't mean that it exists in exclusion of the other languages.
[52:12] In fact, you have the ability to use multiple languages.
[52:15] You use languages that are appropriate for the context in which you are.
[52:19] That gives you cultural significance and use within the niche.
[52:26] When you think of money as something that is owned by the state and associated with a flag,
[52:32] like for example, Swiss air, remember when all of the airlines had flags on them?
[52:37] Each country only had one airline, and it was the only one that was allowed to land in the main airport?
[52:42] Yes, okay, I'm over 40.
[52:46] But I remember it, and that was an absurd idea.
[52:49] When you only had one phone company, it was the national phone company.
[52:54] And it was the only one allowed to install residential telephone lines
[52:58] within the homes of people, residents, in that country.
[53:01] And the only one allowed to do long-distance calls.
[53:04] That thinking for currency still exists today, and it is an absurd idea.
[53:08] It creates absurd consequences, the idea that, for one currency to succeed, the others have to lose.
[53:17] There can be within a jurisdiction only one currency.
[53:21] If you had a currency of every jurisdiction, then eventually it would become the only currency.
[53:28] Instead of currency as a form of language, as a linguistic construct for expressing value,
[53:34] There are languages that work in certain contexts.
[53:39] How many of you speak Greek?
[53:45] You're wrong.
[53:46] All of you speak Greek.
[53:48] Have you ever heard of a gastroenterologist, an ophthalmologist, an orthopedic?
[53:57] You speak Greek because medicine is the context in which we all speak Greek.
[54:04] A bit of Greek.
[54:06] And so we speak Greek.
[54:07] We also all speak Latin.
[54:11] And in some domains, we all speak English because of computers.
[54:14] And in some domains, we speak German.
[54:16] And in some domains, we speak Spanish.
[54:19] The point I'm trying to make is that if you think of money
[54:23] as a language, then the language you use
[54:25] depends on the context in which you're using it
[54:28] and what the other person speaks.
[54:30] And so the money you use will depend on the context
[54:33] in which you're using it and what money the other person accepts.
[54:36] With digital currencies, it is no longer a system where there has to be a certain number of winners.
[54:41] Everybody else has to disappear, or where the competition is like that. There are no monopolies.
[54:48] How many currencies will we have? In the old days, we used to say,
[54:53] how many newspapers does a city have? You could answer with a simple number, say two or three.
[54:59] At some point, blogging happened.
[55:03] How do you think the question, how many bloggers can there be?
[55:08] Can one blogger dominate all of the blogging within a country, topic, or language?
[55:16] It becomes an absurd question, because everyone can be a blogger, a bank, or a currency.
[55:26] Therefore, the concept of how many will there be, well, all of them, thousands, hundreds of thousands,
[55:33] how many of them will be important, tens, hundreds, and will they displace one another?
[55:38] Or will one be the universal currency? There will be no universal currency.
[55:45] For the same reason, there is no universal language, because there is no universal culture,
[55:49] and there is no universal context, and there is no universal set of needs.
[55:55] This is a really good question that you are asking.
[55:58] This is a question that comes up a lot, again, and again, and again.
[56:01] It reflects this new way that we have to start thinking about currency,
[56:06] which is completely separate from the way we thought before.
[56:09] Ironically, the idea of national currencies associated with a flag...
[56:15] not only will that end up being something that doesn't exist in the future,
[56:21] In the end, it will be something that only existed for a very short period of time in history.
[56:26] It is a relatively new invention, and it will go away pretty soon.
[56:32] In the United States, for example, Ben Franklin, one of the founders of the country,
[56:37] his job was a commercial printer. His number one product was private currencies.
[56:42] He printed private currencies because, in those days, the idea of one currency across an entire federated nation was nonsense.
[56:50] Turns out they were right, it's nonsense.
[56:53] If you turn a whole economic area into one currency,
[56:56] oh boy, that could go wrong, said the Greek.
[56:59] All right, let's take one more.
[57:05] Who's got, here.
[57:07] Thanks for coming to Zurich.
[57:08] Thank you so much for having me.
[57:11] If you could select one challenge in the Bitcoin world
[57:15] and wish for it to be solved today,
[57:18] which one would that be and why?
[57:24] You're going to be surprised by my answer, probably.
[57:28] User experience design is the challenge
[57:32] that I wish could be solved today.
[57:33] I wish we had a lot more user experience and user
[57:36] interface designers in this space.
[57:39] At the moment, we have many incredibly talented engineers
[57:43] who are terrible at design.
[57:46] And they make systems that are completely
[57:50] impossible to understand.
[57:52] The primary role of a user experience design, as I speak not as a designer, but from my understanding,
[57:59] is to create metaphors that allow you to associate the new thing with something you already have a mental framework for,
[58:06] and create expectations in your mind as to how this thing is going to behave,
[58:10] and smooth the process of using it by having the thing behave the way you expect it to behave,
[58:17] because of the metaphors that have been created.
[58:20] Having said all that, you have a currency that is the most abstract currency that we have ever designed.
[58:27] What should we call it? Bitcoin, because coin is the word that describes the least abstract currency ever designed.
[58:36] The most physical form of currency. Coins behave in a very specific way. You hold them in your hand.
[58:41] Just like, oh, that didn't create the right to expectation.
[58:45] Let's put the word bit in front, because in half the language it means small, and in the other half it means I'm a geek.
[58:54] That will alienate everybody else.
[58:58] Then let's take the things that hold all the keys that control the bitcoin.
[59:05] I'm going to call it trustnet, because that's what it should have been called.
[59:09] Let's take all of the keys that control it, and let's call that...
[59:16] No, a keychain would be too obvious. How about a wallet?
[59:20] Of course, you can copy a wallet, but you can't copy a keychain.
[59:25] If we called it a keychain, it would actually make sense.
[59:28] If you give someone a copy of the key to your house, they can get into your house.
[59:32] If you copy a keychain, they have access to everything you have.
[59:36] Or you can make a backup and give it to your neighbor if you trust them.
[59:39] Well, that makes far too much sense. Let's call it a wallet, because that's where you store the actual coins,
[59:45] which don't exist in Bitcoin. The wallet is the place where we don't actually store the coins.
[59:50] This is the problem. If I had a magic wand and I could go back to 2009, I would find Satoshi Nakamoto.
[59:58] And I would go, expel the engineers and design us.
[1:00:06] Boom, he would become a user experience designer, and we'd have better names for everything.
[1:00:12] The biggest challenge we have for adoption is that normal people cannot understand this stuff.
[1:00:19] And they shouldn't need to, right? You don't expect normal people to understand it.
[1:00:23] In the early 90s, I remember it was around 1995, there was a TV show called Good Morning America.
[1:00:30] You've got five journalists sitting around on a couch, and they've got this on YouTube, if you want to watch it.
[1:00:36] It's the pre-take before the show, and they're about to talk about the internet.
[1:00:40] They're getting prepared for the conversation, and one of the journalists is saying,
[1:00:44] which one is the internet? Is that the ad sign? No, no, no. That's email.
[1:00:51] Also, it's the dot. No, no, no, no, the dot. That's both email and the internet. It's the WWW.
[1:00:59] But what about the slash slash colon thing? No, it's not slash slash colon. It's colon slash slash.
[1:01:08] You can see how incredibly confused they are. That's where we are in Bitcoin terms.
[1:01:16] Two things happened since then. One, we made things easier.
[1:01:21] Two, a whole generation of people grew up who learned this as a language from childhood.
[1:01:27] To them, it's no longer weird. Both of those things need to happen in Bitcoin.
[1:01:31] Our biggest challenge is not the block-size limit, or the adoption of new technologies,
[1:01:39] or whether the banks will let us or not. We didn't ask for their permission.
[1:01:43] Whether governments will regulate this, or how fast the technology is going, it is going great.
[1:01:50] Our biggest challenge is, how do you make this easier to use and secure for people who are not me,
[1:01:58] for my mom? When we solve that problem, we will see some big success.
[1:02:04] I will leave that as the last question. Thank you all so much for coming.