Bitcoin and the coming “Infrastructure Inversion” – Zurich Meetup March 2016


[ANDREAS] What I would like to talk about today
is a concept that I call “infrastructure inversion.” How things change when new infrastructure is laid on
top of old infrastructure, and how that creates conflict. Bitcoin is new. Bitcoin is different. When I say “Bitcoin,” I am speaking more broadly about
decentralized, network-centric platforms of trust… for currency, payments, and other applications. But I will just use the term “Bitcoin” to cover
that whole new category which is being created. Now we are trying to somehow squeeze it on top
of the existing banking system. The result is messy. Not only is it messy, but it’s also an opportunity for
those supporting the traditional banking system to say, “See? It is not working so well. It is slow.” This is new. This is a phenomenon every
time you have a new disruptive technology. In the first few years of its adoption, it must be
carried by the existing technology that it is disrupting. Historically, how does this play out? When you will read about it in twenty to forty years
[from now], it will seem [like a] smooth [transition]. It will seem obvious, because hindsight provides clarity.
For example, automobiles were a great invention. Of course, when automobiles were invented, everyone in
the world thought, ‘Yay! We don’t need horses anymore.’ Except that is not exactly what happened.
Instead, they said, “[Those machines] are crazy!” “Those noisy, disgusting machines
will never work and probably kill us.” “Why would anyone, other than stupid rich people,
want to use one of these horrible machines, when we have perfectly good horses?” That is what happens [throughout] history when
[someone] introduces a disruptive technology. We meet resistance. Resistance is the first reaction. The [inventors] who succeed are
those who continue to pursue it, even though the rest of society tells them they are crazy. Automobiles, electrification, the internet, and Bitcoin. Every time, crazy pioneers made fun of by
everybody else in society for their crazy ideas… persisted until everybody
could see that they were correct. Looking at that history, one of the really
interesting [aspects] to me is, in the beginning… the disruptive technology must [exist] in
a world created for the technology it is replacing. When you first drive your brand-new automobile in a city,
you drove on roads designed for and used by horses, with infrastructure designed for and used by horses. There are no light signals, no road rules,
no pavement. You are in a horse society. You are the crazy one, driving in one of these vehicles.
There are a few things horses have that cars don’t. Early cars were front-wheel drive,
just two wheels [driven by the engine]. Horses are four-foot drive vehicles, which
gives them a lot of flexibility and balance. If you have a road designed for horses, such as
how the vast majority of roads were not paved. Some of them had cobblestones,
but the vast majority were not paved or dry. They were usually covered in mud and
horse poo, because that is what horses do. This is the environment in which
the automobile needed to prove itself. The [response] didn’t start with, “Great,
we have now invented an automobile!” “Allow me to demonstrate on the Autobahn.” No. Instead, crazy rich people experimented with the
technology by driving their cars in roads with deep ruts, in mud, not designed for automobiles.
What would happen? The cars got stuck. They didn’t have balance and four feet.
So everybody said, “These will never work.” “Look? You can’t even get out of the mud.”
Also, where would you buy gasoline [for them]? There are no gas stations yet, right?
What happens if you run out of gas? If your horse is hungry, you can at least [continue] for
a few more miles, but if your car runs out of gasoline… That is it. You are stuck. You were already stuck because of the mud, but now
you are really stuck because you are out of gasoline. “This will never work.” At first, the infrastructure is built
for the technology you are replacing. Eventually, you build infrastructure for this new
technology. Then something really interesting happens. When you pave roads and make them suitable for
vehicles, horses are still comfortable on the new roads. If you want, you can go on a nice tour of Zurich
on horseback. Horses are comfortable on asphalt. As are skateboards, Segways,
motorcycles, and bicycles. These are [vehicles] that didn’t exist [before].
In fact, in order for them to exist, you first needed… [build] out the infrastructure for automobiles. Flat paved roads not only allowed the automobiles
and horses to comfortably exist, but opened the door… for more new technologies. Now people can ride Segways, scooters, skateboards,
rollerblades, and prams to move around on our streets. That is an infrastructure inversion. A new technology
must start by [existing] on the old infrastructure, then it flips and you build new infrastructure, and
old technology rides on top of the infrastructure… designed for the new technology. Let’s look at a couple more examples. Some of the most confident [historical quotes
about technology] are often later ridiculed. For example, when electrification was introduced
during the *Paris Fair, the Mayor of Paris said, ‘Electricity is a fad. As soon as we close the fair and take
down the Eiffel Tower, electricity will vanish in history.’ Wrong on two counts. The Eiffel Tower
is still standing, and electrification won. Think about the time when electrification
was happening. There was no infrastructure. How do you put electricity in a home? [At first], the
only reason would be that you are a crazy rich person, probably the same people who bought an automobile. Basically, [they were] putting lightning
in your walls, which is surely a crazy idea… that will result in your house burning down. That is what the newspapers wrote about every house
that burned down, how crazy people were putting… electricity in their homes. The infrastructure at the time was for gas.
Gas lighting in major cities was pretty common. There were pipes that could deliver gas primarily
to streetlights, but also home lights and heating. You couldn’t use that infrastructure
for distributing electricity to homes, so at first the only use for electricity was in factories.
That is where it could be the most useful. In the past, you would have one very large motor
in a corner of the factory, which was then distributed… with a series of belts and pulleys throughout
the factory to run all of the equipment. That was usually driven by gas, so a gas turbine. You can distribute electricity directly to all devices from
an electric motor. Factories were the obvious use case. But why would you put it in your home?
There was no infrastructure [at the time]. Also, why would you use electricity when you already
had light and heating from gas, and it worked fine? The infrastructure for gas wasn’t useful for electricity.
You would need to build new infrastructure. The other aspect of infrastructure inversion is, those
invested in the status quo pointed to this electricity… project and said, “The distribution network
is not big enough to create customers.” “There are not enough customers to require
a distribution network. This will never happen,” which is exactly what they said about cars. “There are not enough gasoline stations to fill your car,
or customers to [justify building more] stations.” “This will never happen.”
Then electrification starts happening. People discovered that once you put down electricity
infrastructure, you can not only use that for… electricity’s new capabilities, but you can also
use it for the old applications, light and heating. You can do them more effectively in some cases. You can also do new things, like fans for air
conditioning, motors, mixers, and hairdryers. Houses don’t burn down
because of electricity too often. So you see this infrastructure inversion. In the first
few years, you need to run on the old infrastructure. It is almost impossible. Theoretically, you could attach
a gas generator and generate electricity locally. But that wasn’t very efficient. Then you build infrastructure for the new technology,
which enables the old technology quite comfortably: lighting or heating [in the case of electricity],
horses in the case of roads [for automobiles]. This also opens the door for new applications
that you couldn’t do before, and the world changes. My third example is a bit more technical. This is where you will see the audience separate
into those who are over or under 35 [years old]. Tell me if you can recognize this sound:
[dial-up modem noises]. [Laughter] The people under 35 [years old] are looking at me
like I’m crazy; the people over 35 [years old] know, “That is a modem! I used to have one of those.”
That is how we connected to the internet. This is where we go into ancient history.
A modem is a modulator / demodulator device. It speaks data over a telephone line. If you
think about it, a telephone line is like a dirt road, and you are trying to drive a car over it. A telephone line is part of a system
designed to carry the human voice. I was a teenager when telephone lines were
still analog and we had pulse dialing systems. We would sometimes try to play music to our
friends over the phone line; if you ever tried this, you discovered that it doesn’t really work. The reason is, the frequencies that
a telephone line allows are very narrow. The telephone network is designed to do only one thing.
It is highly specialized, just like the gas network… is only designed to deliver gas to
houses, not water, electricity, or oil. Just gas. The telephone system
was designed to deliver just voice. Human voice is very specific. Our main frequency is
one kilohertz, [with a range] a bit below or above that. A few people can [hear] quite a bit beyond that.
Teenagers hear frequencies that I can’t hear anymore. Because it is specialized to voice, and
there are difficulties transmitting even voice, especially over great distances,
engineers narrowed the range. If you allow the full range, you also get
electrical interference at a very high frequency… and interference from motors at very low frequencies. What would you do with a phone line like that?
You put a filter that chops out the lows and highs, and then it was cleaner. The voices sound weird because
they are being compressed. This is a very difficult road to write data over. When you are transmitting data, you want a lot
of information in a very narrow frequency band. The whistling sound you hear is basically two
modems trying to test this specific connection. How much room do we have? The modem is basically
saying, “Hello? Hello? Hello? Hello?” [increasing pitch] The other modem says, “I heard the first three
hellos, but the last one didn’t come through.” Then it tests in the opposite [direction],
“Hello? Hello? Hello? Hello?” [dropping pitch] “I heard the first three, but the last one didn’t
come through.” Okay, we now have a connection. “We know we have six bands of frequency to work with;
now I will change between those bands very quickly.” “Let’s see how much of this you can understand.”
[static noise] Then the modem responds. [static noise] “I heard all of that. Great! Now we can transmit data.”
This is an insane way to [handle] data transmission. You basically had two devices singing
to each other over a very narrow channel, trying to squeeze as much data as possible
through this little straw [of a phone line]. Then we upgraded them and
they became better at doing this. The phone companies hated it.
‘This is not what we designed the network for.’ “This is a pristine, state-of-the-art voice communication
network. What the hell are you people doing with it?” In Athens, where I grew up, if you tried to
make a long-distance call with a modem, you would hear [beep, beep, static, click].
[Laughter] ‘What? What just happened?’ Oh, they cut off lines if they detect a modem.
We are competing against the phone company. Like how the banks are shutting down
the accounts of Bitcoin companies, right? What did they say at the time? “We could deploy
direct data connections, fiber and coaxial cable, at high bandwidth, but no one needs high bandwidth.” “What will people do, transmit voice?
We already have a voice network. It’s fantastic.” “We don’t need these new things. Also, there
aren’t enough users to deploy coaxial cable.” “You don’t have enough coaxial cable to build
a user base. So the internet will never happen.” [Disbelief based on] same exact idea. Then we saw one of the most spectacular examples
of infrastructure inversion that I can recall in history. At first, the internet was not wanted and [settled
for being] carried over phone lines, reluctantly. Then it was carried over phone lines when [some]
phone companies became internet service providers. Gradually, their backbones become data oriented.
Then their entire network becomes digital. Then their network starts running over the internet.
Then they run phone lines on top of the internet. Today, every single phone call is carried over the
internet, with some exceptions in developing countries. A complete infrastructure inversion, because it was very
difficult to push data through a narrow phone line… designed for voice, but if you flip the equation,
voice over a data connection is trivially easy. What is the difference? One is extremely specialized
and has already chosen the application for you: voice. Data is the exception you are trying to squeeze in. The other [system] is generic. Data can be anything,
and voice is just one of the applications, carried comfortably. The ultimate irony from the phone companies was
a special [feature] called comfort noise generation. If you are a phone engineer,
you know what I’m talking about. This is the most ironic thing ever. After many years,
people my age were accustomed to their phone line… sounding like [static noise] all the time. When we got cellular telephony and digital
phone lines that were perfect, they had no noise. When the other person stopped talking, you would
hear complete silence and wonder, ‘Did they hang up?’ They didn’t hang up, they were still there,
but there was none of the [static noise]. Then the phone companies invented comfort
noise generation, the most brilliant thing ever. A device on your end of the phone will
check to see if the connection is still open. If it is, it will whisper [some static] in your ear,
just to let you know that the person is still there. It generates high-frequency artificial noise on purpose,
just so you know that the other person did not hang up. The very same companies that said, “We will never
be able to [handle] high-quality voice over the internet.” “We don’t want the internet on our phone lines.” Now they are injecting noise to simulate the
terrible performance of the previous network, because we are delivering higher quality
sound on the internet, across continents. A complete infrastructure inversion.
Now [we are dealing with] Bitcoin. A decentralized trust platform for transaction
settlement on a global basis, without intermediaries. But in order [leave the current] system, we still
need to live in the old system [for a while]. Through exchanges, bank accounts,
IBAN transfers, and credit cards. We are riding the Formula One super-car
of finance on the muddy roads of banking. We are riding along on the muddy, bumpy
roads of 1970s mainframe based banking. The banks point to this and say, “Look! It’s not working.
You need to [add] the same regulations that we have.” “You need to [require] identities and slow everything
down to the same speed as traditional banking.” “This will never work.” “You don’t have enough users to build infrastructure,
or enough infrastructure to attract new users.” “Clearly, this will never work.” But just like with electricity, the automobile,
and the internet, we have a new technology… with the promise of thousands of other
applications they haven’t even imagined yet. This is my prediction: we will see infrastructure inversion
over the next fifteen to twenty years in finance. The banks will resist it, then the banks will adopt it.
Then the banks will run their systems alongside… Bitcoin and blockchain systems. Finally, they will run traditional banking as
an application on top of a decentralized ledger. While it is very hard connect a decentralized trusted
ledger with all of these legacy banking systems, simulating legacy banking on an open
global blockchain like Bitcoin is trivial. Take its capabilities and slow them down.
I could create a Bitcoin application that… clears your transaction in three to five
business days, for a [fee] of $5. [Laughter] I have implemented traditional banking,
like the comfort noise generation for phone calls. For those of us in a previous generation who are
accustomed to banking and don’t like fast finance. “It makes me uncomfortable. I want to sit in my
kitchen every Sunday and balance my checkbook.” “I need to make sure none of my cheques bounce.
I don’t like electronic, instantaneous, global transfer.” “It scares me. So can we slow it down?” This infrastructure inversion will allow us to
comfortably run traditional banking applications.. on top of an open blockchain like Bitcoin,
but it will also open the door for other applications. For applications that we have never seen before,
which will appear to traditional banking like… a Segway does to someone determined to
continue the tradition of horse carriages, or someone who still has gas lighting
in their traditional Victorian house. These applications will seem alien to those [accustomed
to] comfort noise over voice communication channels, when the internet is capable of so much more. Enabling the future on your
legacy system is very difficult. While you [may] try to do that, everyone will be
pointing at the future to say, “Look, it doesn’t work!” Until you flip the infrastructure and easily
simulate the past, on the network of the future. What we are part of now, is the very early stages. The first stages of the future of money, the greatest
infrastructure inversion the world has ever seen. Thank you. [Applause] [ANDREAS] For the next part of tonight,
I will be happy to take some questions. [This event will probably continue
for] two to three hours after that. If you have brought a book,
I would be delighted to sign it for you. We also have three books here that we
will give out through a random selection. Finally, we will shut down. I would be
happy to continue talking with you all, preferably in a social area that serves beer. Lucas, [should we do] the question-and-answer
session first, or the drawing for the books? Q&A, all right. Who has a question?
Let’s get a microphone to you. I am very easygoing. Don’t be shy.
Please ask me questions. [AUDIENCE] So Bitcoin is like a guillotine? Every time
you mention it, it will come down and cut your head off. Or the other party you are trying
to sell the technology to shuts off. [ANDREAS] Yes. [AUDIENCE] We have experienced
that when [we talked about] blockchain technology. We mentioned the word “bitcoin,” and the parties
we dealt with usually had an issue with listening… to the advantages of the technology.
How do we [go passed that]? What is your take? [ANDREAS] There has been a very strong campaign to
ensure that Bitcoin is associated with negative things. This is not a coincidence. This is exactly the
response you see to any disruptive technology. You have a technology that is difficult to understand,
and also that is offending entrenched [interests]. I can guarantee you that stables and horse carriage
associations in Switzerland were none too happy… about the new automobile idea either. I’m sure they talked to journalists about how
these devices would kill people on the street, make too much noise, break down,
and were unreliable [machines]. If you think that is a joke, you should look at
the Red Flag Acts passed in the United Kingdom, which required every automobile greater than a certain
length to have an operator, engineer, and conductor. They were also required to have a flag person running
ahead of the automobile to warn pedestrians… that an infernal death machine was
barreling down the road trying to kill them. This law, passed in England, slowed down
the development of automobiles, almost fatally. These things happen again and again. The initial response is part fear of change,
part engineered fear [against real] interest. Just like the internet.
Look at the articles written in 1992 through 1994. “The internet is a den of thieves,
pedophiles, criminals, and terrorists.” “If you let your children use the internet,
they will surely be destroyed.” “No one uses it, except for criminals and scientists,
but we already knew they were weird anyway.” “It has no practical use. We already have fax machines
and post offices that work perfectly fine, thank you!” “In any case, the phone companies are
probably building a much better version… of the internet, without the open innovation, borderless
network, and freedom that the internet offers.” “[We want] a closed, curated, editorially controlled,
safe, PG-13 appropriate [internet] for all audiences.” Boring! In the end, they failed. The internet was exciting
because it was open, decentralized, and borderless. Yes, of course criminals use the internet, just like
they used automobiles, electricity, phones, and shoes… to run away from [police during] robberies. You don’t [write] policies for transportation,
shoes, telephones, the internet, or finance… based on the narrow ways that
criminals will apply a technology. You need to look at the bigger picture. What happens when you give the tools
of financial freedom to 7.5 billion people? That is terrifying to some. I don’t care.
I will not try to sell this. Bitcoin is useful. It solves real problems for real people. If you want
to wrap it up in a nice little blockchain bow and say, “Don’t worry. This is like Bitcoin, only safer.
It will not be used by criminals.” Of course it will be used by criminals. Do you know why?
Because criminals run the banks. [Laughter] Because the criminals run governments.
They are some of the biggest criminals out there. Eventually, even they will use Bitcoin technology too.
I am not worried about trying to market this. I am worried about how do we make this
useful to as many people as possible. The rest will simply be washed away in history. One day, our children will hear this
completely fabricated story about… how Satoshi Nakamoto invented the blockchain,
the world rejoiced and it was never the same again. If you go into an American school and ask,
how was the automobile invented? Who invented electricity?
“Edison came with the idea.” “He tried, succeeded, everybody hailed him as a hero.
It was a stunning success and the world moved on.” “Ford created automobiles and everyone was happy.” Of course, neither of them [were the only people to]
create these things. They were ridiculed for decades. Some of the other inventors died
poor, ridiculed, and destroyed. We rewrite the history later.
I am not worried about perception. That was a very long answer to
your question, but there you go. [AUDIENCE] Thank you. By the way, great book
and great lecture. [ANDREAS] Thank you. [AUDIENCE] Hello?
[ANDREAS] Oh, we have two microphones. [AUDIENCE] Thanks for all of these
analogies, that was very interesting. I just didn’t [understand] one point: what infrastructure
does Bitcoin need to become mainstream? [ANDREAS] Well, the good news is,
we don’t need to do all of the heavy lifting. We already have the internet. That is one big difference.
The infrastructure we are building in this inversion… is about access to financial capabilities
and the liquidity to make those viable. That means enough people with access to
wallets that are decentralized and easy to use; wallets that are easy to secure and understand. We need education for developers to write
these application, and education for users. These things will smooth adoption.
Right now, bitcoin is difficult to use and secure. It is still in the very early stages, so that is fine. As we educate more developers, in more languages,
across the world, and they build better applications… suited to the local languages,
more people will become involved. People will use bitcoin as a means of exchange and
build liquidity, which allows for more applications. Density of adoption leads to network effects
as each new person is added to the network. The usefulness of the network increases exponentially.
Connecting each person is useful to everyone else. That is the exponential effect of Metcalfe’s law.
That is what will be required here. We will not need to build [as much] physical
infrastructure, but better and easier ways… [joining the network] so that more [even more] people
join, creating social and economic infrastructure. This is an economic tool. Therefore, having robust
economic activity is infrastructure for Bitcoin. You will know when we have it.
There is a very simple test. When you can ask someone, “How much is one bitcoin
worth,” and [their response is], “What do you mean?” “It is one bitcoin. One bitcoin is one thousand millibits.
One bitcoin is also 100 million satoshis.” “But how much is it worth in dollars?”
“Oh, a dollar is 0.000… something bitcoin.” “But who cares?” [Laughter] That is when you will
know that we have achieved infrastructure inversion. Yes. Do we have a microphone here? If the next person
raises their hand, we can pass you one in advance. Very good. Go ahead. [AUDIENCE] The key fulcrum to blockchain technologies,
decentralized ledgers, and decentralized consensus… You talked about a future where this could
be the economic standard across the world. You mentioned seven and a half billion people.
My question is, those people are not evenly distributed. Hypothetically, there could be a country
which dominates in terms of mining power. Then it is not so neutral anymore as a platform, right?
Is there any way we can overcome this? This will be a question that governments around
the world would ask, if we are to adopt this as well. [ANDREAS] Domination by a single
country is extremely unlikely because… In the early stages, there will be a convergence
of factors, like cheap access to silicon fabrication, which is an advantage today because we are moving
[through] generations of ASICs every three months. But that era will be over. We have hit 16 nanometers.
We will not be changing ASIC generations for two years. That will change the mining [ecosystem] dramatically.
I am not worried about centralization in a single country. If countries would be worried about that…
Well, if you think about it, many of our currencies… are run by a proof-of-oil consensus algorithm. There is a certain amount of concentration in
the underlying oil resource in some countries; admittedly, this may have led to war. That doesn’t change. Decentralized digital currencies
could be used by people who will still engage in… geopolitical games, so that doesn’t change. How decentralized they are can change the equation. Specific concentration based on a resource that
[hasn’t] moved for millions of years will be less likely. I think we will see a very different environment evolve.
I don’t know what that environment will be yet. This is what it means to be part of history as it unfolds. Who has the next question? Yes?
[AUDIENCE] If I may go back to the original question, you talked about the status quo fighting new
technology and the banks being against Bitcoin. If you look back over the last six to nine months,
it seems the banks are going [crazy] for blockchain. They are opening laboratories, coming up with ideas,
and Blythe Masters is running around [talking about it]. Can you talk a bit more about if you are really sure
that banks won’t succeed in co-opting this technology? Will they vault the old system on top and
[force us to] keep going like we are [now]? Will it really open [finance] to everyone? [ANDREAS] That is a really good question. If they
could co-opt this technology, they certainly would. Understand exactly what is at stake here,
and what makes Bitcoin interesting. It is not the fact that you can use it to
record transactions in a chain of blocks. That is not interesting, that is stunningly boring
from a database and computer science perspective. It is the ability to remove centralized control and third
parties by decentralizing the security mechanism… through a proof-of-work consensus algorithm. That gives you a set of capabilities: immutability,
unforgeability, open access, permissionless innovation. Borderless systems and censorship resistance. None of this is remotely interesting to [most] banks.
They don’t want any [of those characteristics]. They are trying to say, “We see what you have here.
We would like the same [thing], but without the open, borderless, permissionless innovation and decentralized
control, or the open access and censorship resistance.” “Could we have a blockchain like that?”
That is like saying, “I like this internet thing.” “The underlying technology of
packet switching is fantastic.” “Forget the net neutrality, open borderless
publishing and freedom of expression part.” “That is irrelevant. We really want to use packet
switching to transmit corporate content directly… into the televisions of every household,
in a centralised and hierarchical way.” “We should control the content. Don’t worry, it will
all be suitable for your children, produced by Disney.” “It will be controlled forever by us.” They failed to
[build] that because that is not what people wanted.” They saw the possibility of taking the means of
producing content and becoming content creators, equalizing the ability to connect
with people around the world. That was exciting. That is what “blockchain”
[the way that banks want it] doesn’t have. You must ask, what are the 7.5 billion people on this
planet looking for, in terms of economic inclusion? Are they looking for something that [requires]
identity and ‘Know-Your-Customer’ (KYC)? Something controlled by borders and regulations?
Totalitarian surveillance? A cosy relationship between… regulators and, state, and money? Or are they looking for a new way?
The answer is simple. Most of them are not part of the [current] system.
They haven’t been invited, they never will be invited. Right now, we are restricting the number
of people who can access that system. Economic inclusion is backtracking. The banks are not co-opting what Bitcoin is offering. They are co-opting a system that has
nothing to do with what we’re building. They can’t co-opt decentralization;
by doing so, they lose all power. Some banks will adopt decentralization going forward.
Big chunks of the industry will be replaced by… companies you have never heard of before. The top companies on the internet are not the
phone companies, for the same exact reason. I’m not worried about banks co-opting blockchains. They have bigger problems, like figuring out
what to do with interest rates. [Laughter] Who has the microphone? Yes, go ahead.
The next person there. Thank you. [AUDIENCE] I am a complete Bitcoin newbie, sir.
I apologize if my questions are silly. [ANDREAS] No problem, please. [AUDIENCE] What are
the most outlandish bitcoin applications you have seen? Tonight, you were talking about reinventing the
payment gateways and financial infrastructure, and once this inversion has taken place,
this opens up doors to new applications. What are some examples.
[ANDREAS] It is very difficult to [think of them now]. They depend on a number of different [factors].
First, you need infrastructure and widespread adoption. If you [went] back [to] 1992 and asked, “What
applications will we see on the internet in the future?” Video teleconferencing was obvious. It was in Star Trek
about twenty years earlier. They could imagine that. They couldn’t imagine Wikipedia,
Google search, or social media. They couldn’t imagine it because those things
require a density of adoption to even be possible. You can’t do social media unless almost everyone you
know is able to use it; they must have internet [access], preferably mobile internet. You can’t do Wikipedia unless there are enough
people who can continuously improve the product. You can’t do Google search until there are enough
pages for cross-correlation and deep linking. All these applications only emerge once
you have established certain prerequisites. Those prerequisites and the early applications
are invisible [to most people] in the beginning. This happens with every new disruptive technology.
Over their first decades of development, most of what you see is skeuomorphic design,
which is something that mimics or shadows the past. For example, when you introduce steel in New York,
what is the first thing they use it for in construction? They use it for a brick building that looks exactly
like all the other brick buildings, only a bit taller. They don’t think, ‘Maybe instead of windows this
large, we can make the entire facade out of glass.’ That doesn’t even cross their mind.
They spend the next two decades repeating old forms. One of the most ironic [aspects of] modern construction
techniques are Roman columns in front of houses. But Roman columns had a very specific purpose:
to hold the roof up. They were not decorative elements. You don’t need them anymore, because you have
steel beams, brakes, and other techniques. The columns are now purely decorative. They serve
no practical purpose, except as a hat-tip to the past. For the first decade in Bitcoin, the vast majority of
what you will see [shall reflect traditional banking]. “Here is what we did with banking. Let’s take it
a bit further, like retail commerce plus bitcoin.” “Checking and savings? Let’s call bitcoin
addresses ‘checking and savings accounts.'” This is not innovative, it is skeuomorphic.
We will see that happen for decades, possibly. Once you lay the foundation and have enough people
for adoption, you can [pursue] interesting opportunities. For me, the most interesting opportunities
[will be in] the narrow areas where Bitcoin can… do what was not possible [before] today. Here is one example I will throw out there. Every single financial system
we have assumes personhood. The entity that owns money is either a person
or association of people, through a corporation. That is it. You cannot have money without personhood.
The legal jurisdiction supporting it requires personhood. Elliptic curve digital signatures, the infrastructure
of Bitcoin, don’t give a damn about personhood. You can have ownership of money through the control
of elliptic curve digital signatures without a person. Software agents and machines can directly control
money without any human being involved at all. You could create an autonomous system of charity
that starts a fundraiser when it is notified of a hurricane, and then distributes the money equally to
[local individuals] or charitable organizations, through the GPS on their phone that is
correlated with a natural disaster zone. [This autonomous organization] would
have no board of directors, no owners, no corporate structure whatsoever. It is simply
an automatic money control and distribution system. The most wild idea I have: what happens if you
[combine] self-driving cars, Uber, and bitcoin? The world’s first [autonomous] taxi, which effectively
pays for its own lease, maintenance, and insurance. It collects money from passengers, provides rides,
and then pays for more gas automatically using bitcoin. If you think that could never happen,
I have constructed a scenario of how it could. It wouldn’t start with [full] autonomy, but
a taxi driver who becomes an entrepreneur. [They come to] own a fleet of taxis, replace their drivers, and automate their
accounting so there is less work to do. Then they die without heirs, but nobody notices.
Because the next morning, the taxis drive out… and continue doing [their job on their own].
You have the first emancipated taxi! [Laughter] It suddenly became its own autonomous entity.
This is not completely [science fiction anymore]. There are plenty of examples [already]. For example,
an elderly Japanese person died in their apartment… and their body wasn’t found for seventeen years. They had a pension coming in,
with direct debit for their utilities. They died in their apartment, without heirs.
Nobody noticed and they sat there for seventeen years. The rent and electricity kept being paid.
Essentially, the apartment emancipated itself. You could do this with a self-driving taxi. Weird things happen when you remove
personhood from the ownership of money. That is just one example. Another interesting possibility
is nano-payments, both in terms of value and time. [Increasing the] granularity [of money], with certain
constructs in Bitcoin called payment channels. You could bill for services by the thousandth
of a cent, in time increments of milliseconds. What could you possibly do with that? I have no idea,
but I am sure there are some very smart developers… trying to think of something cool. Once you lay this infrastructure and everybody
has access to enough liquidity, then you can build… applications that were absolutely impossible before. That is when we will have an interesting world.
That will happen over the next twenty years. Let’s take two more questions. [AUDIENCE] Hello. You mentioned earlier… Assuming widespread adoption of Bitcoin, do you
believe we will have currencies for different regions? Or do you believe there will be just one,
bitcoin, assuming this takes over [finance]? [ANDREAS] Do you speak English?
Did you abandon German once you learned English? [AUDIENCE] Nope. Uh, maybe I was unclear…
[ANDREAS] The point is, you didn’t abandon German… when you started learning English. While English has its uses and may be the dominant
language in parts of the world, that doesn’t mean… it exists in exclusion of the other languages.
You have the ability to use multiple languages. You use languages that are appropriate for the context
in which you are, which give cultural significance… within the niche, right? If you think of money as something that is owned
by a state and associated with a flag, like Swissair… Remember when all airlines had flags on them, and each
country allowed one airline to land in the main airport? Yes, I am over forty years old. [Laughter]
I remember it, and that was an absurd idea. Just like when you only had a national phone company
that was allowed to install residential telephone lines… and do long-distance calls. That thinking for currency still exists today.
It is an absurd idea and creates absurd consequences. The idea that, for one currency to succeed,
the others must lose. Or that there can only be one… within a jurisdiction. That [rather than a] currency for every jurisdiction,
it would eventually become the only currency. Instead, if you think of currency as a form of language,
as a linguistic construct for expressing value, there [can be currencies] that work in
certain contexts [just like] languages. How many of you speak Greek?
Wrong. All of you speak some Greek. Have you heard of a gastroenterologist?
Ophthalmologist? Orthopedic? You are speaking Greek. Medicine is the context in which
we are all speaking [some] Greek. We also all speak Latin in some domains.
We speak English in other domains [like computers]. We speak [some] German and Spanish [too]. The point I am trying to make is,
if you think of money as language, then the language you use depends on the context,
and what language the other person speaks. The money you use will depend on the context
and what money the other person accepts. With digital currencies, this is no longer a system
where there will just be a certain number of “winners,” and everything else must to disappear
and competition is [a zero-sum game]. There are no monopolies.
How many currencies will we have? In the old days, we would ask, “How many newspapers
does this city have?” The answer was a single digit. Two or three. Then blogging happened.
How many bloggers can there be in a city? Will one blogger dominate all blogging
within a single country, topic, or language? It is an absurd question. Everyone could be a blogger.
Now everyone can be a bank, or have a currency. Therefore, “How many will there be?”
Hundreds. Thousands. Hundreds of thousands. How many of them will be important? Tens,
maybe hundreds. Will they displace one another? Will one of them become the universal currency? There will be no universal currency, just as
there is no universal language or culture. There is no universal context or set of needs.
This is a really good question you are asking. It comes up again and again, [reinforcing] that we
need to start thinking about currency in a new way, completely separate from the way we thought before. The idea of national currencies associated
with flags will not only [cease to] exist in the future, but it will have only existed for
a very short period of time in history. It is a relatively new invention
that will go away pretty soon. For example, in the United States, the Founding Father
named Ben Franklin was a commercial printer. His [most popular] product was private currencies,
because in those days, the idea of one currency… across an entire federated nation was nonsense. It turns out they were right. It is nonsense.
If you put a [diverse] economic area under one currency, that will go very wrong, said the Greek. [Laughter] All right, let’s have one more question. Who has it? [AUDIENCE] Thanks for coming to Zurich.
[ANDREAS] Thank you so much for having me. [AUDIENCE] If you could select one challenge
that Bitcoin [faces], and it could be solved today, which one would that be and why? [AUDIENCE] You will probably be surprised
by my answer: user experience design. That is the challenge I wish could be solved today. I wish we had more user experience
and interface designers in this space. At the moment, we have incredibly talented engineers
who are terrible at design, making systems that are… impossible to understand. From my understanding, the primary role of
a user experience designer is to create metaphors… that [help] you to associate something new
with something already in a mental framework. That creates expectations in your mind
for how a [given application] will behave, which will smooth the process of using it. Bitcoin is the most abstract currency that we
have ever designed. What should we call it? Bitcoin. Because “coin” describes the
least abstract currency ever designed? The most physical form of currency. Coins behave in a very specific way:
you can hold them in your hand. Oh, that didn’t create the right to expectation.
And let’s also put the word “bit” in front. In many languages, it means “small.”
In other languages, it means “I am a geek.” [Laughter] That will alienate everybody, right? Let’s name [the software] that holds
the keys that control bitcoin a “wallet.” No, “keychain” would be too obvious.
How about “wallet”? Can you copy a wallet? Oh no, you can’t copy a wallet. But you can copy
a keychain. [We should have] called it a keychain. Then it would actually make sense.
You can give someone a copy of your house key. Or you can make a backup and give it
to your neighbor, if you trust them. But that makes far too much sense. Let’s call it a wallet,
where you store coins which don’t [physically] exist. The wallet is not where you actually store the coins;
[they are on the blockchain]. This is the problem. If I had a magic wand and could go back to 2009,
I would find Satoshi Nakamoto and turn him… into a user experience designer.
“Expelli-engineerus! Accio designer!” Boom, we would have better names for everything. The biggest challenge for adoption is that
normal people cannot understand this stuff. They shouldn’t need to, just as you don’t expect normal
people to understand the internet of the early 1990s. Around 1995, I remember a TV show called ‘Good
Morning America’ with five journalists on a couch. There is a copy on YouTube,
if you want to watch it yourself. It is the pre-take before the show,
where they will talk about the internet. They were preparing for the conversation.
One of the journalists asks, “Which part is the internet?” “It is the @ sign?” “No, that is email.”
“Oh. Is it the ‘dot com’ part?” “No.” “It is the ‘www’ part.”
“What about the slashes and colons?” You can see how incredibly confused they are!
That is where we [currently] are with Bitcoin. Two things happened [with the internet] since then:
we made things easier to use, and a whole generation… grew up learning this language [of the internet].
To them, it is no longer weird. Both of those things need to happen in Bitcoin.
Our biggest challenge is not the block size limit. It is not whether the banks will let us use it,
or whether governments will try to regulate this. We didn’t ask for their permission. It is not how fast this technology
is developing; it is developing great. Our biggest challenge is, how do you make this easier
to use and secure, for people who are not me? For my mom? When we solve that problem,
then Bitcoin will see some really big success. I will leave that as the last question.
Thank you all for coming! [Applause]

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