Bitcoin (CURRENCY:BTC) and cryptocurrency advocate Andreas Antonopoulos literally wrote the book on Maserting Bitcoin was interviewed by James in Panama City, Panama during the Cryptobuyer Panamchain Conference.
James West: My guest this segment is Andreas M. Antonopoulous. He is the author of Mastering Bitcoin. Andreas, thank you for joining me today.
Andreas Antonopoulos: Thank you so much for having me.
James West: Andreas, you spend significantly all of your time in the Blockchain/bitcoin universe. What is the difference – and pardon me for this most elemental question – between Blockchain and Bitcoin?
Andreas Antonopoulos: Bitcoin is the original technology that uses a data structure called the Blockchain as one of its underlying components. And it uses that in order to achieve certain properties, and these properties are decentralization, censorship resistance, borderless operation, neutrality, and openness. That’s the definition.
The truth is that the term Blockchain has been hijacked, mostly by financial technology companies, to piggyback on the idea of these properties – these positive properties. But in fact, to enable mostly the banks to try to do business as usual without changing anything. So Blockchain is a marketing term that strips all of the interesting properties of openness, neutrality, decentralization, borderless action, and censorship resistance, and turns it into a slow, inefficient database that allows banks to remain in control of centralized, surveillance-focused money, without any of the interesting properties.
James West: Hmm. That is one heck of an answer. The government, then, perceives bitcoin as a threat, because if a government loses control of its currency, historically, we’ve observed the government loses control. And so if bitcoin is, in fact, going to disintermediate the government-controlled currencies and thereby the way in which they remain in control, how is it that bitcoin can be allowed to survive by governments that control large military organizations and have demonstrated historically a willingness to suppress such subversive technologies?
Andreas Antonopoulos: I think control is an illusion, and maintaining the illusion of control with the illusion of power is delusion. The bottom line is that technologies like bitcoin are not allowed; they simply never ask for permission. They exist despite government control, and historically, attempts by governments to control technologies have proven again and again and again to be utterly futile. The progress of knowledge, and the use of knowledge by people who have very little to lose to gain personal independence, freedom from oppression, corruption and control, historically, has been an unstoppable force.
Governments have tried to control the printing press, governments have tried to control the internet, governments have tried to control radios, governments have tried to control many forms of expression and communication. In the end, they fail, and they will fail again here. So it’s not a matter of them approving or not approving of this technology. The question is not whether they have the authority to control this technology; no one is questioning their authority. What smart technologists do is question their ability to control this technology. They have all the authority in the world, they simply do not have the means to apply that authority on something as decentralized, diffuse and powerful as cryptocurrency.
James West: Is it safe to say, in your opinion, then: are we in the midst of a global revolution whereby normal, everyday citizens are actually taking control of their financial destiny by disintermediating government through the choice of cryptocurrencies over FIAT currencies?
Andreas Antonopoulos: Arguably, in the truest sense of the word revolution, where revolution is turning in a circle, we are returning back to financial independence and sovereignty for individuals. For thousands of years, people have been able to trade and engage in commerce without surveillance, without control, with complete anonymity. They did so when currency was precious metals, they did so when currency was the exchange of other tokens, and for decades and decades during the era of cash – perhaps centuries during the era of cash – cash is a bare instrument with zero transaction fees, with no surveillance, and complete anonymity.
Governments are trying to persuade us that unless every transaction is monitored and every individual is identified, the world will descend into chaos. That’s a lie. We have had anonymous commerce for thousands of years. The idea of all commerce being under surveillance is itself a historical anomaly, a fascist dream, and it has already failed before it was even put into place.
James West: The opinion, or the perception, of a large portion of the population – and we won’t even talk about where their interests are aligned – suggests that governments maintain control by printing money; they become self-enriched through the dilution of the monetary supply, which, at the end of the day, is to some degree supposed to be a representation of the total potential output of a nation, combined with its actual assets. And so, since the time that FIAT currencies have been separated from that real relationship, they’ve been able to dilute the monetary supply to their own benefit without any interruption, without any interference, without even any participation of the average citizen.
There is some discussion in circles that are probably sponsored by those interests, who suggest that the programmers and the developers of Blockchain and bitcoin are, essentially, creating their own money and are, in fact, just a new version of the old central banker that has yet to mature to the point of hyperinflation that has gripped most of the world’s currencies. How do you respond to that?
Andreas Antonopoulos: I mean, it’s a fundamental misunderstanding of how the technology works, which isn’t surprising, because quite honestly, the average person on the street doesn’t understand how money or banking or fractional reserve or Central Banks work. They don’t. if you talk to the average person, they have this constructed mythology about money that is about as factually accurate as Santa Claus. The average person on the street, if you ask them, will tell you that for every piece of paper they have in their wallet, there is some mythical fortress full of gold corresponding to that. They still believe that currencies are denominated by the gold standard; that is a pervasive mythology that exists throughout society.
They also believe that the value of a currency is assigned by a government and controlled by a government. Economists, of course, know this isn’t true, and anyone who’s educated in monetary policy understands this isn’t true.
It’s not surprising that with a technology like cryptocurrencies, which is complex, new, and poorly understood, that people don’t understand how it works, how it acquires its value, and how its supply is constrained.
The truth is that with some cryptocurrencies – not all, but some cryptocurrencies – the supply is constrained in a such a way that the developers have no ability to modify it. And that would be the case for bitcoin and many other cryptocurrencies in the space. So hyperinflation, in itself, is not technically possible, because the developers are not in control. Control, instead, is diffused among thousands of parties, tens of thousands of parties who participate in the system. But it’s difficult to understand the idea of a system of rules without rulers, a system of deterministic anarchy, which is what cryptocurrencies are. Meaning, there are no leaders, but there are very specific rules. The lack of leaders doesn’t mean a lack of rules; quite the opposite.
In cryptocurrencies, the rules are absolutely predictable. I cannot tell you what the interest rate will be for the US dollar will be next Friday; I can tell you what the interest rate will be for bitcoin in the year 2140, and as long as the algorithm continues to operate that way, that’s exactly what it will be.
James West: Okay. Let’s focus a bit on the potential for hyperinflation, which is by all accounts, especially in your book, it’s very clear that this is the best mechanism we have to protect ourselves from the hyperinflationary, self-interested, government-driven FIAT currency. Is not every time there’s a fork in the cryptocurrency, an actual case of inflation, if not hyperinflation? And secondarily to that, is it not true that if all of our transactions are going to be across a range of cryptocurrencies, then aren’t those cryptocurrencies ultimately dilutive to the global GDP potential of the planet, and therefore, ultimately subject to hyperinflation if no regulation is in place to determine how many currencies there are, how much of each currency there is?
Andreas Antonopoulos: I don’t think so. I mean, first of all, I’m not an economist, and secondly, I’m interested in the technology behind this, not just the economics. But from the perspective of an economist, I would think that in the presence of a free market where these currencies operate with a free exchange rate, and they each have predictable issuance schedules, the market is going to match the supply of those currencies to the actual underlying productivity, eventually, in the long term, and arrive at an equilibrium price that represents the underlying value.
Part of the reason we have these explosions of hyperinflation and these issues with FIAT currencies is because there are enormous barriers to arbitrage between different currencies – borders, limitations on capital transfer and flow – which allow governments to effectively take an entire population hostage. So let’s take an example that’s relevant here in Latin America, which is the example of Venezuela.
If everybody in Venezuela had the option to use any currency they want, then the hyperinflation that happens in the bolivar not only would not affect the vast majority of the population, it wouldn’t happen in the first place, because as soon as the government tried to dilute the value of the cryptocurrency, the population would exit that currency, arbitrage away the difference, and deflate it in response, reaching equilibrium.
The only reason it can go out of control is because this method of indirect taxation, theft from the productive classes, is only possible if you can apply currency controls, take the entire population hostage, and take them on a suicide drive into oblivion of the monetary system. And that is no longer possible. Today, the number of people who can exit a failing national currency is a fraction of the population; tiny, tiny numbers who have the technical literacy, the access to capital, the use of electronic technology, digital technology like smart phones, to say, You know what? You take your currency wherever you want; I’m going to move some of mine into bitcoin or some other cryptocurrency.
But fast-forward 10 years, and imagine what happens when 10, 15, 20 percent of the population can exit at a time of hyperinflation? Can say, You know what? You go ahead and do whatever you want; I’m going to put my wealth somewhere else.
At that point, it starts becoming an equilibrium force. Potentially, governments won’t even attempt to do these things of currency manipulation, because they already know that it will be futile, because the population will exit. So I tink we’re seeing an end, or the beginning of the end, to that. By enabling global flows of traffic without restriction, by allowing populations to exit from failing currencies.
James West: All right. So let’s consider that for a second: if every government, and this is the case, I’m sure you will acknowledge, that is running a deficit, which is essentially an extension of the ability to print their own money for their own interests, and the way that this debt is maintained is that each country acknowledges another country’s debt by holding some of that debt, and the implied trade-off is that ‘I’ll hold your debt, you hold my debt, and that way, we can keep printing, because right now we’re only measuring debt in trillions, and over the next 20, 30, 40, 50 years, we can go to quadrillions, quintillions, septillions’.
Yeah, so at what point does the government step in to try to limit the effect of bitcoin by digitizing their own currency and calling it bitcoin?
Andreas Antonopoulos: I mean, they can digitize their own currency and call it whatever they want; it doesn’t change the fact that that currency will be centrally controlled, will have an unpredictable and uncontrolled issuance rate, and will share none of the interesting properties of these cryptocurrencies. So just because they call it something doesn’t make it so. And if people really do have a choice to choose whichever currency they want to use, then they’ll call it whatever they want, they’ll issue it, and no one will use it. And so then what?
If the end of monetary policy is a race to the bottom for every government in the world to issue quadrillions in debt, we know what happens next. This costs $1.00 today, $10.00 tomorrow, $1,000 on Friday, $100,000 the week after, a trillion dollars the week after that, and currency becomes meaningless.
There’s this moment I watched in a BBC documentary where they were interviewing someone in Zimbabwe who was trying to buy something with a wheelbarrow stacked with cash, and the cash equivalent of these quadrillions of notes was about $2 or $3. They were moving this wheelbarrow, and the journalist from the BBC was perplexed by this and said, ‘Aren’t you worried that someone’s going to steal your cash?’ And the person said ‘No, I’m worried that someone’s going to steal my wheelbarrow, because that’s actually worth something.’
This is the end of monetary policy; that is the endgame, and we see it play out again and again. Historically, that is how all FIAT currency goes. Some currencies are the exception, but the rule is that.
James West: Okay. Not to make you nervous or more, perhaps, concerned wit p ersonal security than you already are, but you’ve just advocated for the end of monetary policy, which is the mechanism of control exercised by all governments, ex-military. So if the end of monetary policy implies the end of monetary control, then is not the military option truly representative of the threat of government trying to suppress the expression of freedom that all human beings are essentially instilled with at birth?
Andreas Antonopoulos: I mean, I’m not advocating for anything; I’m simply observing and predicting what will happen based on the historical patterns. In the end, if people have a choice, they will exercise it, and exercise it to their best interest. I think one of the troubling aspects of where we’re going in this world is, the more and more dictatorships and extreme governments resort to violence against their own people. But one of the peculiar things that happens with a monetary crisis is that in order to have the soldiers pull triggers against their own people, they have to be fed. And the moment you can’t feed them with the currency that your government prints because they no longer can spend that, they stop pulling triggers, or, as we’ve seen historically again and again and again, they turn the guns around, as happened in Albania in Timisoara Square in 1989 when the dictator invited a million people from all over Albania to tell them about their new food policies, and the soldiers stopped pointing the guns at them, and 24 hours later, Ceausescu was dead.
As has happened historically in hyperinflation environments. And I’ll give you an example: recently I was watching on television in Venezuela where they had two medium-level soldiers posing for the cameras with the bounty that they were given for preserving the peace. And they had two or three rolls of toilet paper and two or three bars of soap. They’re not being bought off or bribed with luxuries; we’re already in the end stage, where the best bribe that can be given is the absolute barest essential of toilet paper and soap. How long before the government can’t even afford toilet paper? Because what they’re printing is toilet paper.
And that that point, that whole system of violence falls apart, right? So you can only coerce people so long. I’m not advocating for that. I think that’s a terrible outcome. One of the reasons I’m interested in cryptocurrencies is not the potential for disrupting monetary policy, but for preventing monetary policy from devolving into this state. If cryptocurrency was already in place and a viable exit for a significant percentage of the population, these countries wouldn’t get to the point of hyperinflation and monetary collapse, because the productive middle classes and labour classes would exit before that happened.
So the point here is, it’s almost as if these countries are in, like, imagine a big room, and it’s on fire, right? And the officials are telling everybody, there’s no fire, don’t worry about it. All we’re doing is pointing at the exit signs. If that’s a crime, then they’re going to say that we started the fire, right? We didn’t start the fire; we’re just pointing at the exit.
Andreas Antonopoulos: And people have a choice. They can stay in there or they can exit, and more and more people are beginning to discover that it’s safer outside.
Now, the interesting thing is that until now, exit from a country meant physically removing yourself: refugees, flight, and that creates its own dangers – exploitation, human despair, catastrophe, tragedy. But one of the interesting things that happens with cryptocurrency is your ability to stay put, stay in place, and economically exit without leaving the country. Continue to trade with your neighbours, engage in commerce with other people; exit only from the currency, and stay where you are, so you don’t have to abandon your home, your family, your country. And that, I think, has the potential for a peaceful transition to a world with more choice, and that’s why I’m interested in this technology.
James West: Okay. As the devil’s favourite advocate, I want to challenge you on the concept of the security and the decentralized nature of cryptocurrencies. First of all, I’d like to ask you: is not the entire bitcoin ecosystem centralized on the internet?
Andreas Antonopoulos: So, centralized and decentralized are not a true/false statement; centralization and decentralization is a scale, right? So I think the interesting question is, are these systems more or less decentralized than other alternatives we have already? And I would argue that they are more decentralized than, in fact, anything we’ve ever had before in the financial domain.
Are they as decentralized as they could be? No, and yes, the internet is currently required in order to run this infrastructure. But one of the really important things to realize is that what these technologies do is, they convert money into a datatype, into a piece of content, that then becomes something you can transmit over any medium of communication. What people don’t realize is that the internet is simply one transport mechanism. You don’t need the internet in order to operate cryptocurrencies. You could operate cryptocurrencies over shortwave radio. You could operate cryptocurrencies off mesh wi-fi. I could use smoke signals and semaphore flags to transmit a bitcoin transaction in 260 bytes. Money has now become pure data, completely detached from the medium of exchange, completely detached from the medium of communication, free to flow. Any form of communication that is possible is now also a form of commerce, is now also a form of currency transmission. All communication is financial communication, because financial communication can be done on any means of communication.
So the internet is the best, most convenient, most decentralized mechanism we have today to transmit bitcoin, but in the absence of the internet, we can transmit bitcoin through any other means of communication.
James West: Okay. Then you say you could use smoke signals and semaphore code to send a transaction; you have 470,000 followers, give or take, is that the right number, on Twitter?
Andreas Antonopoulos: Something like that.
James West: And so, if I was to extrapolate that from the fact that you’re obviously an authority in the space, and I look at the global population relative to your Twitter following, which is an imperfect example admittedly, but you can send smoke signals and transmit transactions that clearly demonstrates to me that there’s a level of sophistication going on there that requires a book to explain it.
Andreas Antonopoulos: Yes.
James West: And so how am I going to transact in the absence of a, you know, government-maintained internet?
Andreas Antonopoulos: You won’t. Not today, and quite honestly, you don’t need to. But necessity is the mother of invention, and there’s no greater necessity than the despair of a monetary collapse. It’s striking to me that when I talk to people, mostly in Western developed nations, they ask me why this system is necessary. But when you talk to people in Latin America, when you talk to people in countries that are undergoing monetary crisis, why is not the question; how, is the question. And the thirst to learn. And the risks people will take, and the amount of difficulty they will go through and complexity and learning they will go through, in order to secure the future of their family, is astonishing to me.
So in the West, people will not even bother to try to figure out how a bitcoin ATM works and it’s too much hassle, and I don’t need it, and in any case I can just use my Visa card. If that bitcoin ATM was the difference between your family escaping a distressed country, you would learn how to use it. And that’s what I’ve seen: when I visit countries where there is an element of crisis, even small crisis – my home country, Greece. People are much more willing to become creative, to learn difficult things.
And we’re still in the very early stages. This is still, I think, the equivalent of where the internet was in the 90s. at that time, I was already using the internet. I could see this incredible potential, I could see where it was going, and I kept telling everyone around me, and they said Nah, it’s too difficult! You have to get a modem, you have to find an ISP, your phone number, and plug it in, and I don’t even know what half the plugs in the back of my computer do, and I have to set the IRQ for Comm 3 on my PC and I don’t understand any of it. And then open a browser, and download this – impossible, right?
It’s important to separate having a vision of what comes in the future from what is possible today for the majority of people, and I think there you have two big differences: the difference between those who have financial privilege and do not, and the difference between a generation that is born directly into a world where cryptocurrencies have always existed, and a generation for whom cryptocurrencies are something alien and strange.
When you talk to someone in their 20s or younger and you ask them ‘What do you think of money on the internet?’ Like, well, obviously, of course! How else could it be? The idea of money being controlled by governments and controlled within borders is already alien to the next generation. In 20 years, that generation is in charge, and then it will be very difficult to explain the consensus algorithm of a central bank of 12 people who are not elected, deciding on the interest rate for an entire country and then taking the entire population hostage. They will say ‘That’s not possible; you must be joking. There’s no way we actually ran money that way, it makes no sense.’ So that’s the generational gap. It’s happening today.
When a 10-year-old starts using cryptocurrency today, they are not allowed to open a bank account in many countries till they’re 16, in other countries until they’re 18. That ten-year-old walks into the bank at 16 and is told that they can only access their money Monday to Friday, 9 to 5, that they have to pay a fee to store their money in somebody else’s hands, that the interest rate they’ll get for their deposits is 0.01 percent, but if they spend more than they have, the interest they’ll pay is 25 percent. And they will walk straight out of that bank and say “You know what? You’re insane! I’ve been using cryptocurrencies for six years, and this stuff makes no sense.”
James West: All right. I’m going to demonstrate to you unequivocally the full scope of my ignorance now and suggest to you that, wasn’t gold a superior alternative to cryptocurrencies in that it has a finite supply, it takes great effort to extract, its value is apparent to even the most unsophisticated individual who happens across it, and yet governments have still managed to corrupt and more or less destroy its value as a reserve currency? So, at the end of the day, I’m not convinced that the bitcoin or the Dash or the Rippl or the Ethereum, even, with its smart contracts, is a superior choice to a global monetary system than something that is naturally controlled by scarcity.
Andreas Antonopoulos: Yeah. If I could hold a gold deposit in my head by memorizing 12 words and transmit it in a matter of seconds anywhere on the planet using any communication device, divisible by 8 to 10 or 18 decimal points, for any payment as small as a micropayment or nanopayment, or a payment as large as an inter-country transfer in the billions of dollars; if I could do that with gold, then gold would be superior. Gold is very effective of many things, but portable it is not. It’s heavy, it’s difficult to subdivide, it’s difficult to measure its quality, it is not self-evidently unforgeable, because as we’ve seen again and again, it can be substituted for other metals and hidden; and it cannot be transmitted electronically in seconds anywhere around the world, or carried across a border in my head through 12 memorized words. Cryptocurrency can.
In many ways, I think the characterization as ‘digital gold’ applies. We’ll wait and see what history has to say.
James West: Okay. I’m going to worry that concept just a little bit more, if you don’t mind. The very un-transportability of gold, to me, is a positive. You can’t carry it away while I’m sleeping, walk into my house and walk away with gold. On the other hand, with bitcoin, you have 12 words that are going to reveal exactly the extent, existence and portability of your fortune, and I’m a bad actor in the global society, then it would be far preferable to me to hold you down and strangle you, assuming that I was able to, and force you to reveal your 12 words and exactly how I access your cryptocurrency. Or threaten your family in exchange for giving me that information. Whereas, with gold, if it’s hidden, it’s not to say that I couldn’t also torture you and get you to reveal the location of your gold, but then I’m also faced with the additional challenge of transporting it.
So I mean, I just don’t see the superiority of bitcoin over gold in that sense.
Andreas Antonopoulos: Yeah. I mean, fair enough. There’s nothing forcing you to use a cryptocurrency instead of gold, and in fact, one of the interesting aspects of cryptocurrency is, they actually make ownership of gold easier, because you can use cryptocurrency to buy gold very easily across borders. So I think sophisticated investors, but also just regular people who want to have security, will diversify into different assets that give them different properties.
I think that programmable digital money is easier to secure in the long run than any form of physical system, because we can use physical security for our digital money in the form of locks and vaults and guards and dogs and guns. You can use those things to secure digital keys. But you can also use programmable features: enforceable time delays, enforceable multi-signature capabilities that separate controls between multiple people. Various forms of trust intermediaries that you might have. All of which can make the control and ownership of digital assets far more secure than control and ownership of physical assets.
At some level, they have parity, meaning that you can physically secure both gold and a digital key in a vault; but in other ways, programmable systems are going to be much more secure in the future, because you can do things to a programmable asset that you simply can’t do to a physical asset.
So, you know, I don’t think we should look at these things as ‘choose one or the other’, whether that’s choose between one cryptocurrency or another cryptocurrency or it’s between choose a cryptocurrency, a precious metal, or FIAT currency. I think we need to start getting comfortable with the idea that we now live in a world where people have choice, and they will use that choice responsibly to diversify and have assets in different categories which give them the best ratio of risk and stability. That’s up to every individual. What I’m interested in is choice.
James West: Okay. Much as I’d like to spend the rest of my time holding you down and trying to get you to give me your 12 words, I’m going to finish instead with the final question, which takes us to the ultimate in elementary: who is Satoshi Nakamoto, and how did he come up with this idea?
Andreas Antonopoulos: I don’t know. Obviously, I don’t know. I don’t want to know. I don’t think it’s relevant. I think the one thing that Satoshi Nakamoto, the persona, which may be one person, may be a man, may be a woman, may be three different people, may be a hundred different people: the one thing that the Satoshi Nakamoto persona taught us was, in the value of a mathematically elegant system that does not require us to trust, or appeal to the authority of, anyone.
The number one lesson of the Satoshi Nakamoto persona is, it doesn’t matter who Satoshi Nakamoto is. And I’ve used this analogy before: I can use Euclidean geometry to do calculations and know that it works in a Euclidean space, even if Euclid was an asshole. Even if Euclid was a fraud. Even if Euclid didn’t exist, but was a fabrication of some school of philosophy, a coalition between multiple mathematicians, a historical anomaly that was written after the fact – it doesn’t matter. It stands alone as objective truth because it works, and the same thing applies to cryptocurrencies. It is better to not have a founder who is present. The best thing Satoshi Nakamoto ever did was disappear. The second-best was invent bitcoin.
James West: That’s phenomenal. I’m going to leave it there. Thank you very much for your input today.
Andreas Antonopoulos: Thank you so much.