Blockchain Beyond Bitcoin – with Vinay Gupta | Virtual Futures Salon

Luke: You are in for a real treat this evening – I am blessed to be able to welcome Vinay Gupta to Virtual Futures. Tonight’s event has been organised in collaboration with the University of Warwick and the Department of Economics 360 Lecture series My name is Luke Robert Mason, I’m the Director of Virtual Futures. For those of you who are here for the first time, the Virtual Futures conference occurred at the University of Warwick in the mid ‘90s, and, to quote its co-founder, it arose at a tipping point in the technologisation of first world cultures. Whilst it was most often portrayed as a techno-positivist, festive acceleration towards a posthuman future, the Glastonbury of cyberculture as the Guardian put it, its actual aim, hidden behind the brushed steel, the silicon, the designer drugs, the charismatic prophets, and the techno parties, was much more sober and much more urgent What Virtual Futures did, or at least try to do, was cast a critical eye over the phenomenal changes in how humans and non-humans engaged with emerging scientific theory and technological development. The Salon series completes the conference’s aim to bury the 20th century and begin work on the 21st, so let’s begin Tonight, the legendary crypto thinker Vinay Gupta joins us for an event that serves as a warning, a warning of what might happen when radical new technologies are co-opted by opportunists, when a failure of imagination forces continuation rather than transformation, and where collective action leads to conformity rather than resistance. Because it seems we’re at a crossroads when it comes to blockchain, a technology that will dominate tonight’s discussion. Either we can leverage the toolset to enable an open, decentralised network of exchange, offering us the ability to build the Web and even society as we wanted, or we can merely use blockchain technology to radically stimulate all of the worst things about capitalism, by simulating fiat money The latter, sadly, seems to be our current reality, and much of the hype around blockchain is being driven by the belief in the infinite growth of its cryptocurrency counterpart, Bitcoin If the get-rich-quick opportunity of Bitcoin is the reason that you’re here tonight, then I would leave the room now. Instead, spend the time finishing your application for your internship at one of the big four accounting firms; because the future doesn’t need people like you, but the past will welcome you with open arms. If, however, you have a genuine interest in radically rethinking economics, and if you’re open to the idea that blockchain might reveal the possibility that our species might actually be collaborative rather than competitive, then I implore you to put your hands together and join me in welcoming Vinay Gupta to the Virtual Futures stage. [applause] Vinay, very simply, what is blockchain? What is it? More importantly, what should it be? Vinay: I have a new way of telling this story, I’m continually figuring out how to explain it. Because the way that language works is that when something new occurs, we give it a name which is kind of like something we already know, the classic is horseless carriage, and then we spend a long time explaining what it is to people. There was a sort of 5-8 year period when everybody explained the Internet, and then there was social media and then there was years and years and years of people explaining social media. Then you get a generation of people who are young enough that it’s always been there, and then you stop explaining it, because they learnt what it was the first time, and at that point the name refers to the body of implicit knowledge that they have acquired. Blockchain is in that space where we still have to explain it, because most of the people have gone from not having it around to having it around, but for the folks that are your age or a little younger it has kind of always been there, at which point it doesn’t really need to be explained; it does, however, need to be contextualised The way that I think about this is that the whole blockchain situation is driven by physics We think of it as being an economic system, but actually it’s a physics management system, and the piece of physics that it’s managing is the fact that the speed of light is really

slow. 300,000 kilometres a second sounds fast to a human being, but if you’re doing computation on a computer, you have a silicon chip that’s maybe a centimetre across, and you do computation by racing light across it, maybe 5,000 transits of a piece of light to get one addition. What that means is that you can have computer systems that do substantial work in relatively short light distances. Visa, for example, does one credit card transaction in roughly the length of time it takes light to travel 10 kilometres What that means is that it’s impossible to synchronise the world, because the computers are moving so quickly that they’re doing tons and tons and tons of computation in the length of time that it takes the light to travel somewhere else, to tell people what you’ve figured out. Managing that problem is basically the key challenge of our civilisation, because you can’t build a single global synchronised world because of the speed of light limit. We’re trying to find approaches to managing that, and there are several multibillion-dollar projects to try and solve that problem, each one of which shapes a different part of our economy and a different part of our reality Luke: You’ve described blockchain as one computer per planet. Could you just explain what you mean by that? Vinay: The objective of the blockchain is to produce a computer which appears not to be subject to the speed of light problem Let me run through the big systems that handle speed of light, and I think that’ll help us put things into context The first big system is GPS. GPS is you have the Earth, and around the Earth you’ve got a network of satellites, the satellites have an atomic clock on them, and they send out a time signal that says what time it is according to the satellite. Then on Earth you take your phone out, and your phone listens to the signal from the GPS satellite: this satellite says it’s 12:01 and it arrives at 12:01, this satellite says it’s 12:01 and a tenth of a microsecond, and when that arrives, you know that you’re further away from this satellite than you are from that satellite, and you basically triangulate the distance to all these satellites by listening to them tell you what time it is. We’re using the speed of light as a way of locating ourselves, and GPS totally transformed the way that all kinds of things work. I mean, imagine trying to get around if the GPS network failed; we’d all be lost all the time – disastrous The second system is high-frequency trading This is the huge machines that manage commodities trading, and practically all the physical stuff in the world goes through these machines in its raw form. The closer you are to the exchange, the better your trading advantage; literally every hundred metres out the rent on the buildings drops, and people are charging on the orders of a million dollars a cubic metre to put computers close to these exchanges, and that’s running more or less the entire commodities system, more or less any physical object has gone through that system. The problem with that model is that it’s geographical For example, if you want to trade from China to those exchanges, you’re going to get to the exchange last, or you’re going to have to come onto American soil under American law to get access to that trading system In a world which is genuinely globalised, the idea that you’re going to have a single country which runs the exchanges for the entire world seems a little improbable. If you put one exchange per continent, which might be a stable political equilibrium, how then do you synchronise the exchanges? That’s the second one of these machines with this kind of problem, that it comes with a bunch of political context that we don’t want The third machine is Google Spanner, which is probably a lot less well known than HFT Spanner is how Google makes things like Google Docs work. You know the thing where you’ve got multiple people editing a document at the same time and it never seems to go wrong? One part of that is a whole bunch of very clever math around operators, and the other part of that is Google Spanner, which is a synchronisation network of all of Google’s data centres to atomic clocks, and they do an enormous amount of measurement to know exactly how long it takes to send messages between the data centres. Your message works its way to the closest Google data centre, they then log it into the Spanner system to figure out what time it happened at, and then they sequence the things in time so that you get a coherent editing experience, rather than the chaos of everything being desynchronised I use that multiple times every week, and if it didn’t work, my productivity would drop by 10-20%. I mean, that’s a major utility, in much the same way that GPS is Along comes blockchain, and blockchain attempts to fix the problem with Spanner, which is that Spanner, although it’s geographically distributed, runs under the control of a single corporation. With HFT you have a single nation, a single geographical point in space; with the Spanner model you have a single corporation, and if you want access to the time system, you’ve got to go through that corporation The blockchain achieves global distribution, so it works everywhere, and it’s not under a single entity’s political control. It’s the first of these synchronisation machines which has any possibility of being a stable,

global trade system because it doesn’t bake in either corporate or government control And that’s not as simple as that means individual anarchy; that’s a cute way of thinking about it, but it’s not where the real story is The real story is that it allows us to begin to conceive of building governance structures above the level of a nation state, which might eventually be able to address global problems Luke: And this is where some of your interest in the blockchain came from. You’re an interesting individual: you mentioned the word “anarchy”, Vinay, and I’m not sure what we can and we can’t talk about, but to what extent do the advances in software, cryptography and distributed systems, to what extent do you think they can tackle some of the problems that you’re personally interested in? Vinay: Well, let’s think about this in terms of kind of the long arc. Around 2001 I got seriously interested in the future of the world, this is about six months before 9/11, I kind of had this sudden awakening of like “Wait a minute, something is really wrong out there,” and I got much more interested in global issues than my personal life. After 9/11 I spent basically 12 years going from energy policy to natural disaster management, I’ve invented a refugee shelter called the hexayurt, which is extremely successful at Burning Man but I can’t get the humanitarian agencies to use the damn thing, because it lasts too long During that kind of 12-year arc, what I figured out was that there are a couple of fundamental problems that you can easily state. The first problem is that when human beings feel that they have lack of something they need, they become aggressive, and there are only two places the aggression can go: you can direct it at other human beings through mechanisms, including economic competition, or you can direct it at nature in the form of extractive industry, and that’s pretty much all we’ve got. Unless we find ways of getting everybody what they need, we’re going to continue to be exposed to enormous amounts of violence And exposure to violence is not simply something that happens to losers; the winners are also exposed to violence, because if you’re the person who is wielding the stick, you’re just as exposed to the violence as the person getting hit, and nobody really wants to live life that is dominated by violence So, you have to think in terms of resource abundance as being the way that we unpick human psychological violence, and to some degree physical violence, but getting to resource abundance is extremely difficult, because so many of our systems are run on pure competition, and, even worse, they are run on status competition, which is an endless treadmill. If social status is coupled to material consumption, you’re going to wind up with an infinite consumption of resources: you’ll literally wind up with people writing their name by moving stars into new constellations in a thousand years, if we continue to have a society that’s dominated by status competition. Because status competition that consumes material resources will never be satisfied; we’ll always push whatever we have right to the edge What I wanted to try and figure out through that 12-year arc was how do we build the essential mechanisms of life at a cheap enough level that anybody can afford them, even the people that are already very poor. Most of the work on poverty assumes that the solution is to make poor people wealthier so that they could compete in the market for resources, but then you have this ladder problem. If instead you take the price of essential goods and services, and you bring it down to the point where the poor can afford them on their existing budgets, nobody gets politically annoyed, nobody sabotages markets. “Look, we’ve got this amazing, $15 cell phone and it’s almost as good as an iPhone 2! What about that?” and everybody is delighted. If you say, “What I want to do is organise farmers in Bangladesh to double their wages,” you suddenly have problems So, I took a really serious crack at that, came to the conclusion it was totally possible, spent 12 years discovering that nobody would fund it, and then decided that I was going to try the Elon Musk model of just take a billion dollars out of market capitalism and then fund the research myself, and that’s what I’m doing in blockchain Luke: And how is that going, Vinay? [laughter] Vinay: You know, war to the knife, knife to the hilt Luke: You started in a really interesting place insofar as how you came to blockchain, and that was with this weird obsession with colonialism and the current state of the West Could you explain how colonialism and blockchain interface? Vinay: Right – well, strap in. [laughter] Who here is from a country that was invaded by the British, including Scotland and Wales? [laughter] Luke: There we go, ~60% of the~ University of Warwick, and that’s a good thing Vinay: I used to say to people that the secret to understanding European history is that the Norman Conquest never ended. You got a bunch of Vikings that conquered a corner of France, camped out for 150 years or so and then came to London and then basically invaded the country. Then they did Wales, then they did Ireland, then they did Scotland, then North America, South America, Africa, India, China, and now we call them lawyers. That

kind of ongoing wave of this very aggressive approach to resource grabbing has become the dominant model. I mean, Britain invaded something like 190 countries, like we invaded countries that don’t even exist In that context, you think all that’s over, and it’s really not. The history of, for example, political assassinations in Africa is pretty much anytime anybody stands up and says, “African Union, Pan-Africanism, we’re going to get everybody together. We’ve got half of the world’s habitable landmass and most of the world’s remaining untapped natural resources, let’s negotiate,” they get shot. There’s just no denying that political violence is used to keep resources cheap, and we all benefit from that. If you look at the price of fair trade coffee compared to normal coffee, imagine how much a fair trade laptop is going to cost. 5,000-10,000 dollars? It could be a factor of five increase of the current price of a machine, it could be a factor of ten. Whether we like it or not, there’s an enormous amount of violence baked into the goods that we buy every day, and right now the visibility of that violence is destroyed by markets. When you pay for something in cash, the information about the object that you’re buying is only what the manufacturer wants to tell you; if it’s not printed on the box, you don’t know And nobody is going to put on the box of your device, a URL for a camera where you can watch somebody manufacturing it, nobody is going to show you where the raw materials came from by having a drone fly over the mine once or twice a day and livestreaming the stuff – it’s just not there. Technologically we could do it; socially, really nobody wants to know And if you think that that’s a bad problem with electronics, wait until you see meat consumption. We’re in a position where we sever the knowledge about the suffering that creates our world from every transaction that we ~complete~ in the marketplace So the interface is that blockchain has the possibility that if we get our game together, you can track the entire history of an object through every single phase of transformation that caused it to exist, and if any one of those phases is morally unacceptable to you, you might be able to do things like pool money to change it. It’s not just as simple as you buy brand A or brand B; if you can see the problem is way up the pipe, maybe you could get direct access to the point up the pipe where the problem is. “This coal town mining thing, that’s completely unacceptable How much would it cost to fix that? – $28 million. – Okay, let’s crowdfund that.” Because if you’ve got the global visibility of what is happening and where things are wrong, it becomes possible to efficiently target resources at repair Luke: That sounds all very well and good, and it feels the response to that right now is corruption, that’s the legitimate form of resistance in this case. But if we use blockchain to enable anti-corruption, will we survive the truth? Essentially, will we survive the burden of radical transparency, from a social perspective? What will it actually do to us? Vinay: Here we have to look to our friend and guru Nick Land, the whole Cthulhu trip Does everybody know about the American writer H. P. Lovecraft? Luke: This is the University of Warwick. There is one alumni who was here in 1995 when Nick Land was in the philosophy department here, the continental philosophy here at the University of Warwick, and yet it will fall on deaf ears, Vinay, but I feel it is an important history Vinay: Let’s do it. H. P. Lovecraft was an American horror writer, and he’s very widely misunderstood. He’s been out of fashion for about 100 years, because people thought that he was writing pulp fiction about nonsense, terrible tentacle monsters. He’s kind of the original hentai guy. [laughter] It’s not that funny. [laughter] Luke: These are economic students going, “How did we get from Bitcoin to tentacle monsters?” Vinay: [laughs] The thing is that Lovecraft is not writing about monsters; what he’s writing about is science. What he says, very clearly, is that scientific knowledge is continually destroying our feeling that we’re at the centre of the universe. First we discovered that time is nearly infinite, then we discovered that space is nearly infinite, we discovered that the unknown mysteries of things like DNA are completely outside of human understanding as we currently have it, we have no idea how this stuff works. Evolutionary history is just this astonishingly destructive process, and here we are, sitting here as replicating lumps of biome. Now, Lovecraft says humans can’t handle this kind of truth, and he

tells stories about monsters which embody these kinds of truths. So you have a two-hundred-million-year-old thing that lives under the sea, and the important thing about it is not that it’s kind of a giant Godzilla with a tentacle mask; the important thing about it is that it’s two hundred million years old and it’s still alive, and the horror that he’s trying to convey is that humans being are tiny Right now there are 7.5 billion human beings alive, headed for 9 billion, and that’s a really big number. If you work in computer science, you think that’s bigger than you could fit in a 32-bit int, it’s a big number, and it’s very hard to conceive of. One in a million? Well, there is sort of 700,000 people like that. It’s a really big number When you start thinking in logistical terms, how much let’s say toothpaste do 7.5 billion people consume in a day? Then you think maybe a third of human beings have a toothbrush, the rest are using twigs or their fingers, you do the math, and it turns out to be 200 million tonnes a week or some absurd number There’s a point where your sense of the world just breaks, when you look at the world as it is from this kind of god’s eye view, rather than inside the very tightly contained confinements of our ordinary lives. The objective, statistical view on reality is astonishingly toxic to our ordinary models, and it will usually produce astonishingly deep personal crises when people begin to glimpse what the objective frame looks like. It’s a very hard thing psychologically, and if you wander into that territory, there’s a writer called Robert Anton Wilson, who has a very nice set of keys for getting back to some kind of normal balance, once you’ve glimpsed the enormity of the situation Luke: Let’s pull from monsters just for a second and go back to the thing that is probably the reason at least half the audience are sitting here, which is they saw the word “Bitcoin” on a poster and went, “I should probably know about that.” Vinay: Yes Luke: I know that’s going to come up in an interview, and I am fascinated to know how many of the individuals here have money in Bitcoin currency or Ethereum right now, by a show of hands. Alright. Everybody else, look around, keep your hands up. Now, keep your hands up if you’ve just got into that market say in the last 18 months Vinay: About half Luke: Alright. That’s a shame for you lot, that’s all I’m saying. It’s going to be a rough ride – you’re the smug buggers, but it’s going to be a rough ride. So look, Bitcoin is the thing that this community, to a degree, they think they can pay their student loans with. Let’s talk a little bit about Bitcoin, what it is and how it functions Because you started with something which was the precursor to Bitcoin, which was e-gold Tell us about e-gold, how that went tits up, and why those people with their hands up a second ago should be petrified Vinay: E-gold was a 1990s libertarian currency, and it was account-based: they had a server, they gave you an interface that looked like electronic banking, and the accounts were denominated in grams of physical gold that you could request them to send you in a full reserve system. It was started by an oncologist in Florida called Doug Jackson, in his bedroom on a spreadsheet, and gold aficionados would send him coins in the mail, he’d weigh them and he’d put them in a box, and people could then do transactions. The system grew and grew and grew and grew, until there was an enormous amount of money in there, I think there was like $120 million of gold reserves Which, by Bitcoin standards, you’d think that’s not a lot of money, but that gives you a sense of how distorted the Bitcoin story is. What that gave you was a system which is more efficient than modern blockchains: you could make micropayments down to a third of a cent profitably, and you could do a $100,000 transaction in a literally two seconds from a WAP phone. It was a very efficient system They kept asking for a banking license from the American government so that they could be normalised into the mainstream financial system, the American government kept saying, “You’re not using currency so it’s not a bank,” and then in about 2005 arrested all of them for banking without a license, which is kind of ironic. But that sort of thing gave us a taste of what you got in a kind of libertarian environment. It was not necessary to have identity documents to open an e-gold account, you could literally just send them gold or send them money and they’d open up an account and ~they’d put credits up~, they weren’t doing any of the KYC All of that sort of stuff is very close to what later happened with blockchain, and I’m fairly convinced that the whole decentralisation thing starts when people who know about the fall of e-gold are just like, “Right, that’s not happening again. We’re coming back with a bigger stick,” and this is where you get

Bitcoin, it comes out of that culture As for Bitcoin itself, there are two fundamental ways of understanding it. If we take the technology that implements it as being a separate story, and we just say, “With that technology, what have they done?” there are two ways of thinking about it. The first is they’ve created a monetary policy that you can buy into. If you put your money into Swiss francs, you get Swiss monetary policy; if you put your money into the Zimbabwean dollar, you’re going to get Zimbabwe’s monetary policy Where you put your money is a choice, and you’re buying the monetary policy of the state that you’re investing in, in the same way that you’re buying the corporate governance and corporate effectiveness of a company whose shares you buy. With the technology taken, they then implement a monetary policy which is this kind of decaying thing, where they’re going to continue to print money, but they’re going to halve the amount of money that they print every couple of years, and eventually they will print no more money and that’s your money supply. If you like that model, you buy Bitcoin The second thing is that they’ve basically gone, probably accidentally, and created a hedge against dollar volatility. The dollar is volatile because Americans are insane Luke: You heard it here first Vinay: I mean, it’s just not easy to understand why America is in the condition that it’s in right now, but it might literally be something in the water. Rome was destroyed by lead poisoning, and the Americans had a long experiment with destroying their civilisation with lead poisoning in the form of leaded gasoline. It may well be that there’s an environmental contaminant that’s driving them up the wall; either that, or it’s cultural problems of a kind that are almost unimaginable in Europe. But one way or the other, Americans are nuts Luke: Any Americans in the room? Vinay: Yeah, one or two. Is it true? Are you nuts? Sorry. [laughter] So, the crux of this is when you’ve got the world’s largest nuclear superpower, with a military budget that is equal to everybody else’s military budget combined, electing people that you really probably wouldn’t hire to run a burger franchise, you kind of have to stop and think, “Okay…” And, by the way, that’s not just the current president; that’s the whole of Congress, it’s the whole of the Senate The American system produces an enormous amount of muppetry, and that system has been pervasive for decades. They’re really in trouble, in a way that you’re not really seeing The European countries still generally elect pretty high quality leadership – whether you like them or dislike them, they’re generally competent – the American system seems to continually throw up total spanners In this kind of situation, having the world’s reserve currency be in the hands of a population that makes such unpredictable governance decisions is super dangerous, and if the dollar breaks because they elect a left-wing president and then you get armed insurrection in the south of the country, which is a very plausible scenario, you can easily imagine that Bitcoin would suddenly become an international trade currency, and that is a very unexpected question You have similar problems in Europe. The Spanish Civil War left an enormous amount of unresolved issues between anarchists and fascists in Spain, the Greek Civil War left similar issues between communists and fascists in Greece, and Italy has only been a country for 120 years – something like that, a bit longer, with Garibaldi – and before that it was warring city states, basically one per city, and the split between the north of Italy where they’re essentially culturally similar to Austria, and the south where they’re much more in the Greek model, has never been formally resolved. So the prospect that you could see large-scale armed conflict in the south of Europe, as people redraw their maps and fight about their welfare states, that seems very plausible to me. In that situation, what then happens to the Euro, and what do you do with refugees in the millions who simply take their EU passports and start walking? That is one of the reasons that the current Bitcoin price could be thought as being rational, because if you think of it as a hedge against political mayhem in the large, Euro-American power block, maybe it’s not that irrational to have a $600 billion hedge Luke: So, what you’re essentially telling us, Vinay, is the only way Bitcoin can match its valuation is if we have a complete collapse of Western civilisation Vinay: Oh, a couple of civil wars isn’t the collapse of Western civilisation; we’ve lived through worse in living memory. But [laughter] Luke: But, is there another option? Could we see a $20 trillion B2B Internet? Could we see Bitcoin match its valuation through something which is essentially egalitarian, something that’s a lot more positive than all-out collapse? Vinay: Well, let’s talk about the scenario and then we’ll decide whether it’s positive

Let’s think about how the Internet developed The Internet had basically three phases. The first version of the Internet we talk about as the Internet of ideas. That was the period before we got credit card processing, and in that period it was impossible to make any money online, so all that was online was people’s hobbies. That Internet was an amazing Internet, because it was relatively small, it was generally populated by people that were nerdy as hell, and it was very, very efficient for moving information around because everything was done as text. If you liked to read what really smart people had written about weird, esoteric hobbies, that was the Internet for you, and many of us still miss it Then a bunch of people figure out how to use cryptography to protect credit card transactions, all you’ve got to keep is a 16-digit number and a couple of other bits of metadata secret for long enough for somebody to run a transaction for shoes, and this becomes the Internet of shopping. And the Internet of shopping is a vast thing, it’s like a trillion dollars, it’s three of the world’s five largest companies, and it’s the dominant paradigm And really nothing changed when social media came along: social media simply was the Internet of advertising for the Internet of shopping, nothing changed, and that’s running to the present day Then you get this blockchain thing, and you get the possibility for a new thing. Everybody has a different name for that: I call it the Internet of Agreements, we could say the Internet of contracts, you could say smart contracts, whatever it is, but it’s an Internet that’s got the ability to do a new class of representation, specifically the 90-day payment invoice Invoices with long payment terms are how the real world works. The supply chain is $45 trillion a year, and most of that $45 trillion will be paid for by an invoice which is sent from one person to another person as a PDF file. You might get a bit of automation using things like SAP, but for the most part business-to-business commerce is done in very archaic ways. You have a sea container that makes its way through a kind of $200-million robot port that covers 41 acres, and it’s still being managed by a kind of four-inch-thick wad of documents that are duct taped to the door; this makes no sense at all. The prospect is that you could take that entire world of box-shifting and 90-day invoices, and you could build an electronic representation of that stuff in a way that would allow you to run it efficiently Sea containers bumped global GDP by on the order of 7%, because they got rid of huge amounts of the difficulty of shifting goods around the planet, and if you just fixed the paperwork on sea containers, that’s like 3% of global GDP So there could be a multi-trillion-dollar per year economic benefit from blockchain, in form of vast savings, and then on top of that there’s the new market development If you rent an Airbnb, it comes with whatever furniture was in the Airbnb. But you can imagine a situation where you had an empty Airbnb and you just picked the stuff that you wanted in it from some set of templates that had been designed by interior designers, and then all of the vendors who had components of those things would run them into the house and set them up just like they were in the pictures, you could move into exactly the place you’d always wanted, and then when you leave, everybody comes and gets their stuff back and it’s all pooled out into these pools again. The reason we don’t do things like that is because the delivery services are flaky, it’s hard to insure all these funny little transactions for short rental of goods, the logistics of getting all that stuff in and out are nightmarish, and all of that stuff ~is imitable~ to things like smart contracts or robot warehouses and self-driving vans. If you put all of that stuff together, it’s pretty easy to imagine that you could put in an image to what you wanted in a machine, it would go and pull all of the resources out of the various places that were renting it, assemble it there, you have a team that basically catches the stuff as it comes off the robot tracks and then does the final layout, and you move in. Wow, that would be amazing, right? Those kind of things are the things which produce enormous changes in the base with ways that people live, things that you would use every day for the rest of your life if they existed, kind of like GPS is now for people that want to navigate. So you could see a very, very radical shift into this kind of post-industrial, hyper-fluid economy, and if that actually happens, which I think is likely but the question is how long, again, the kind of valuations that you see with things like Bitcoin might be justifiable. But it requires change at that kind of scale to justify a $600 billion bubble Luke: I’m not going to let you get away just yet on the Bitcoin issue, because you’ve said Bitcoin will die, it is the Myspace of digital currencies, so I want to quiz you just a little bit more with regards to what you think will happen with Bitcoin and how governments will look at Bitcoin. Because governments have allowed Bitcoin to exist,

Bitcoin doesn’t exist in a stateless vacuum that you hope blockchain will allow, and the big issue with blockchain is what some people are calling the antisocial issue: to bet on Bitcoin is to essentially bet on the ineffectiveness of the current form of human order, the government We have this weird tension going on between government and governance, Bitcoin and blockchain Where do you see all this playing out, Vinay? Vinay: Well, we have to face the fact that our governments are basically useless, they’re terrible institutions. Because everything in society has accelerated by a factor of 100 or 1,000 in the past 400 years, but we still vote once every four years. The fact that we haven’t done any update to the machinery of democracy doesn’t challenge the purpose of democracy, or even change the correct political philosophy of democracy, but what it challenges is the machinery of democracy. We should probably have updated our democracy when we invented railroads, we probably should have updated it again at the advent of mass publishing of newspapers, we should have done another little update for radio and a much bigger update for television, and we should have done an update for the Internet. There’s been generation after generation after generation after generation of political change in the way that the economies work, the political economies, but we haven’t updated this four-year voting business Even relatively tiny changes I think could give us much better government. For example, one pet scheme of mine is that rather than re-electing 600 MPs once every four years, we could just continuously elect MPs one at a time. Every two weeks an MPs stands down, there’s an election in their seat and another one comes up, and you basically have just a calendar that runs for four years, during which time every MP stands down and somebody else comes in, and the thing just goes county by county by county in some kind of order, maybe you start at the north. Just that change would continually pressure government to work with what people wanted. Because if things were going badly, you’d just lose seat after seat after seat after seat, and you could watch the encroaching majority die, and it would get rid of this four-year slam thing that we currently do. Now, you might need some buffering and some of this and some of that, but even something as completely pragmatic and limited in the scope for error as that still strikes people as being unthinkable change. The static-ness of governance in an exponential, accelerating technological change environment, the government just gets worse and worse and worse and worse relative to state-of-the-art institutions. There’s your first problem The second problem is that the market turns out to eat everything; I mean, it hasn’t quite consumed religion, but I would give that another 10 years. What do we do about the fact that market eat everything? Do you turn governance itself into a market? It’s a possibility. You could think of the crypto space as being an exploration of what happens when you create these extremely pure market environments. It really is hypercapitalism, and you run it and you see what happens. In some ways, I think it’s quite useful to think of the entire crypto ecosystem as being a kind of virtual nation in which you are experimenting with a new style of governance: you put this kind of hypercapitalism into the machine, you run it for a while and you see what happens Luke: That sounds like hell, Vinay, that sound like hell Vinay: Well, at least it’s opt-in hell I’m not denying that I’m having an awful lot of fun right now. Seeing lots and lots and lots of technologically progressive smart people running around with more money than they know what to do with – and, by the way, I am not one of them, I took legal advice early – but watching that play out around me has been an extremely interesting phenomenon Because what I see is that when you’ve got smart people with a bunch of money, they do really interesting things, and the locking up of the capital inside of the existing institutions has left us basically far underplaying our technological hand globally There were very effective-looking plans to build interstellar spaceships in the 1950s It’s called Project Orion: you take a five kiloton nuclear bomb, you put it underneath a 300-ton cast iron plate, on top of that you put a huge pad of springs, and on top of that you put a bunch of canned apes. You detonate the bomb, it compresses the springs, the momentum of the steel plate continues to keep you going, and then when you begin to slow down you drop another nuke. It takes about 17-20 nukes to get into orbit, it takes another 50 to get up to something like half the speed of light, and it means you could get to Alpha Centauri and back with a robot probe or a crew in 40 years, and we’ve known

how to do that, in general terms, literally since shortly after World War II. Why are we not doing this? What are humans for, if not to go out there and explore the universe? The only thing that’s stopping us doing that is we don’t seem to be able to organise or run those kind of projects, and that’s a governance issue. If the Americans have said, “Look, the Moon was fantastic. The next thing we’re going to go and do is Alpha Centauri, and it’s not going to be because it’s easy, it’s because it’s hard. The Moon is not enough, we want to really know what’s out there,” we could have had radio broadcasts coming back from a robot ship or even a human ship decades ago, you could have watched humans landing on another planet in another star system in your lives, but we didn’t get our act together. So the notion that we need to basically tear up the rulebook and get our game together seems pretty reasonable to me Luke: I just wonder if… The reason Silicon Valley execs are obsessed with AI and with space travel, whether it’s Musk on one end or Kurzweil on the other, I just wonder if it’s based on a very old, simplistic model that harks back to Adam Smith, it’s the economic model of Adam Smith, the means to production. Space for these guys is all about infinite land, AI or automated robot entities is essentially all about infinite slave labour force. What I worry about is that blockchain is essentially a third part of that puzzle, which is the infinite growth of capital. If we’re basing it on such a base and old, 1700 model, are we in trouble soon? Vinay: Oh, it’s much worse than that. [laughter] That’s not a 300-year-old model; that’s a billion-year-old model, and it’s called life. Life expands to fill every available niche, it mutates into the niches that it can’t currently get into, and all the resources get pulled into the living world. I’m not saying that the market model is a true representation of the state of nature, because it’s obviously not. I mean, we became multicellular ~almost certainly with cooperation~ between different kinds of organisms. Markets are very bad at arranging cooperation, they focus on one aspect of nature and imitate it, they’re very much a product of their time, the Darwinian nature of red in tooth and claw thing was a very incomplete understanding of evolution. But at the end of the day, why are we here? I think it would be quite cool if in five billions years you had a bunch of unbelievably evolved posthuman entities looking back and saying, “You know, those 21st century humans really did a good thing when they got off the planet They took evolution into the stars, and here we are, five billion years later, enjoying the fruits of their labour.” That’s worth doing, to be of the generation of a species that went interstellar. As far as we can tell, from all available data, we’d be the only living things that have ever done it. That’s worth doing I don’t think anything else is all that important. Against the grand sweep of cosmic history, getting into the stars is the only thing that really matters; everything else will crumble to dust. But if we get out of there, and we figure out how to live out there and we figure out how to spread out there, there’s a lot of out there, and that’s worthwhile. Nothing else you’re working on is really all that important. It’s all these local obsessions that people fuss with “Oh my goodness gracious, look at this, it’s a terrible thing!” Yeah, really? Compared to us getting hit by an asteroid and everybody dies and that’s the end of life in the entire universe? None of it matters We blew it really badly after World War II, when we put the plutonium on the top of the missile and used it to attack each other, rather than putting it on the bottom of the missile and using it as a nuclear rocket engine Luke: Yeah, but a bunch of kids made a load of money from Bitcoin, so Vinay: Right? But think about all our political concerns. Against this background, which is the real background, it’s the biological base, this is the real biopolitics. The real biopolitics is life expands, and when it doesn’t, it turns cannibal. Because we did not go to the stars when we had the opportunity, we are murdering each other on Earth, and we’re not going to stop murdering each other on Earth until we reclaim our birthright, which is the high frontier. We must go, or we will murder each other Luke: Let’s bring it back terrestrial for a second Vinay: Try. [laughter] Luke: Yeah. Let’s talk about the project you’re working on, that may take us to the Moon or the stars or elsewhere, which is very different from Bitcoin insofar as it’s based on a similar technology, and it’s Ethereum Let’s talk a little bit about Ethereum and smart contracts, and all of the things that may allow us, from a terrestrial perspective, to live in those potential futures Vinay: The thing that Ethereum put on the table was this concept of the smart contract,

and the smart contract is basically a very light way of arranging mass cooperation, it’s an agency problem. The exact word is public choice: you put up a contract, the contract is tied to some set of actions that would be automatically performed by the contract, you load the money into the contract and the thing is immediately performed. That ability to do social choice through that kind of smart contract gets you the possibilities of new kinds of governance, and it also solves the coordination problems which are at the heart of a lot of our inability to do things like properly fund open source software. I more or less completely ignored Bitcoin when it came out, because I’d been part of the e-gold economy and I knew that currency alone didn’t buy you social change, it just wasn’t enough But the ability to get something that had what David Redd calls the group-forming network capability, something that can allow people to organise new social structures and solve these collaboration problems, that seemed extremely interesting So, I got involved, and so far we haven’t done much of the stuff that I had hoped for The ICO thing I wrote a piece about two years, maybe a year before the ICO thing started to explode, and what I assumed is that to get that kind of explosion of project funding we would need the ability to do equity crowdfunding In order for the people who are buying tokens to have political rights to govern the projects by voting – shareholder democracy, which is the standard for all public companies – you need to have voting rights attached to the tokens. The problem is that we issued the tokens, but for regulatory reasons we couldn’t issue tokens with voting rights, and as a result we’ve wound up with a whole bunch of very disenfranchised shareholders who right now are laughing all the way to the bank, but then the projects either have to deliver or not deliver. It turns out to be really hard to spend $150 million in a responsible way that will generate shareholder value A friend of mine says, “Look, even a turkey will fly in a hurricane,” and in this enormously expansive human environment it’s very, very easy for people to raise mountains of money that they cannot spend in a way that will generate profit. Without having shareholder democracy and effective democratic governance of these projects, how do you vote somebody off the board of an ICO team, if they’ve done something really dumb? We just don’t have any way for the token holders to get political representation, explicitly because the state will not let us do that, because then it becomes a securities issue. We’re kind of jammed in this position, where the real social power of these things, to have the people that fund something be in direct political control of it, is being hamstrung by ~outdated~ legislation. I would like to think that that problem is soluble, but I’m not sure that it is The approach that I would take is to enfranchise many more people to become what they call accredited investors. My suggestion is that there’s a technical accredited investor category that allows people that have relevant degrees or professional experience to become investors in these kind of projects. That’s the approach I would like us to take, because then we could build this enfranchised shareholder democracy, but the track that we’ve taken is to basically try and build everything as a commodity, and as a result there’s no political representation. That to me is a huge missed opportunity, and hopefully some jurisdiction somewhere will take a risk, figure out how to issue tokens that include shareholder democracy measures, require things like board meeting and elections of officers and all the rest of that stuff, and actually begin to mainstream all this business into something that gives real political power to the people, in this case the people that are funding projects You know, how much is the Mars mission going to cost? A couple of hundred billion dollars? $500 billion? I don’t know how much it comes to when you start talking about transporting a million people to Mars to go and build a self-sufficient civilisation, but in all probability that’s going to wind up funded with crypto money. Probably the Bitcoin bubble will be the thing that builds the Mars mission, we’re just going to ICO Elon Musk’s Mars trip These things are super tightly related; all of the Silicon Valley money is building spaceships Luke: Well, that’s great for Elon and his buddies when they can off-world to Mars, but what about the rest of us, Vinay? It feels like the blockchain project, the most exciting, the most interesting thing about it is this word “decentralisation”. We messed up John Perry Barlow and his Declaration of the Independence of Cyberspace, he always envisioned cyberspace being decentralised. In the manifesto, he said that governments aren’t welcome here, we will decentralise this Internet thing,” but we grew the stacks, we created the centralised powers of Google, Facebook, Amazon, whatever the acronym is. Is there an opportunity within

blockchain more broadly to take back the Internet? If the Internet became the construction project that John Perry Barlow never wanted, do we need a demolition? And can we use blockchain to build not Web 2.0 but Web 3.0? Vinay: So, finally we get to talk about economics, because this is basically an economics problem You guys ~all frequent~ economists. Who knows about John Nash and Nash equilibria? Okay What about Ronald Coase? Coase? Going once, going twice. Wow, this is going to be fun! What about Yochai Benkler? Okay, right – get ready, you’re going to do some economics! What Nash explains in his early work is how we get locked into situations which suck In its simplest form, the Nash equilibrium is a situation which is terrible for everybody and nobody seems to be able to change it, because everybody would have to agree on what the solution is and they’d all have to change at the same time. Highly problematic. Once you learn to see these things, you see them everywhere; they may not be strictly Nash equilibria in a technical sense, but you begin to realise this particular quality of coordination problem that has to be solved to unlock some kind of value. Lots of that around Then you get Coase. Coase to me is the most important body of economics to understand Again, there’s a vast body of work attached to Coase, I’m just picking out the thing he’s best known for, which is a paper called The Nature of the Firm, which he wrote in 1937 and then won a Nobel Prize for. Remember, I’m not an economist, so I may fluff some of the details. Coase basically says, “If markets are efficient, why do command & control hierarchies inside of companies exist? Why is there any reason for that to be there?” The answer turns out to be that decisions are expensive and deals are expensive, the transactions and the decision making have real costs. Inside of a command & control hierarchy you make the decision once, and then you have an economy of scale, because the decision is the applied over 100,000 workers at IBM. That economy of scale and decision making is why companies are big, and information gets cheap companies should in theory become small. This is a very, very powerful effect, and the rise of the gig economy and all the rest of that stuff is often attributed to Coasean factors. Information got cheap, finding gigs became cheap, it was very easy to go and post that you needed help and post that you would offer to help, and all those systems together produced this kind of very fluid kind of Airbnb style environment Benkler then comes along and says, “To really get this stuff to work fully, you need to operate inside of a commons,” because most of the benefit that’s produced from these kind of activities in a post-scarcity environment, which is to say that digital files can be replicated endlessly, most of the value that’s generated in these kind of situations is indirect and hard to capture. If you look at something like Wikipedia, Wikipedia’s benefit is its enormous completeness, and its enormous completeness is hugely more valuable than any individual article inside of it. All the Wikipedia editors are indirectly benefiting from each other’s work, and the only reason that it holds together socially is because it’s united by the fact that all of the content is licensed freely; you can use it for anything you like, so everybody benefits from everybody else’s work, inside of this tightly-bounded commons. Benkler wrote a book called The Wealth of Networks which really explains this stuff and it’s fantastic Those three, that’s the kind of economic tripod you need to understand cryptocurrencies Now, where was I going… I got side-tracked by economics Luke: Space, again, probably. You were giving us the economic lesson that underlies things like Ethereum Vinay: Bingo. So, here’s the thing that we missed: for some reason, and I think this is an unsolved problem in economics, in that this incredibly low-friction Internet environment we wound up with enormous seas of little companies, which is exactly what you’d expect from Coase, but we also wound up with the stacks Why does Amazon exist? Why does eBay exist? Why does Facebook exist? Why in an ultra-low information cost environment do we get these enormous slab-like companies which have vast command & control? One possibility is that those companies aren’t companies, because all of them implement extremely complicated and sophisticated internal markets for capital allocation. It may be that we call it a company but it’s actually a marketplace, and that’s a very strong possibility, particularly for Amazon, Amazon has several internal markets and externally-facing markets. The other possibility is that there’s simply an enormous chunk of economics that we don’t know, possibly something to do with behavioural economics and mindshare, so it may be that for an individual

consumer making a decision based on brand actually results in a winner-takes-all environment which produces the stacks. Because how many brands can we really remember? It’s certainly not 8,000. So it could be a behavioural economics limit. But please, somebody in this room, if you know the answer to this question, write to me and tell me, because I’ve been trying to find the answer for years and just can’t find the economist So, the transformative bit, the thing that we wanted was the ability to do an orchestration of new social structures with very low transaction costs. If you take this kind of social Internet thing, the whole social media thing, and you imagine welding it directly to the ability to raise money and target projects, you can imagine a pulling together of the social and the financial in a way that would allow efficient resource pooling to do things efficiently You can pool the money to go there and rent the bus, you can pool the money to go there and rent the ski launch. That kind of thinking, what does it really take? It needs the ability to rapidly move the money, to coordinate the problem ~to pull things together~. The same logic applies to building a hospital, the same logic applies to running a welfare state You could very easily imagine basic income on a blockchain, where you use the blockchain’s traceability to gather the evidential data that you require to set the level of basic income. You use the evidential data from the blockchain, all the spending history, to identify when somebody has formed a monopoly or a cartel, because the data about the payments is right there The possibility is that you could use the blockchain to really police the basic income system, to look for people who are skimming How do you identify when you’ve got a cartel among landlords that have broken the free market in an area so that you could pull the basic income payments? Well, here’s the data, here’s the natural pricing, here’s the fake one that we set up that sold the stuff at market places: boom, now we know where the problem is. There’s a huge amount of possibility there. But, do we have the political will? Do enough people care about their own living conditions to form structures that look like unions to improve them? Because the unions, that’s how you got your weekends, it’s how you got your minimum wages, it was the bedrock of the process that gave us the NHS. The unions really were the things that improved the quality of life for ordinary people, more than any other single factor, and they are gone Luke: Before we move on to talk very quickly about identity and the blockchain, which I think is one of your most important messages, we do have time for audience questions. What we’re going to ask is that you just come up and queue in the isle here. For the process of the filming, if you have an audience question, please join the back of the queue on the isle, we’ll be using a mike just here so please start moving now. In the meantime, I’m going to ask you, Vinay, identity and the blockchain: in what way is that such an important and potential use of blockchain technology? Vinay: Sure. Oh, we’re going to have a moment of hubbub here. Let’s give them 30 seconds It’s a good time to breathe; the identity thing is going to be deep Luke: And if you leave now, you’re going to miss the ending, when he reveals what you should be investing in next, so I recommend that you stay. You want to pay that student loan? I’d stay Vinay: [laughs] Marvellous, marvellous – alright guys, let’s do this! The identity thing is very, very simple. Right now everybody has a name that they were given by somebody else: you’re given a name by your parents, you’re given an ID number by your nation state, your university, your employer and everybody else; people are really always given names by other people. In the blockchain community there’s an awful lot of talk about what they call self-sovereign identity, which is a really, really grand way of thinking about things, and I think it’s a name which is just fundamentally misleading. Because your name is not your identity; your identity has always been self-sovereign, you’ve always been the person that is you, there’s nothing new about this notion about self-sovereign identity. What is new is the ability to assign yourself a unique name, and this is really what generation of crypto keys gives you, it gives the ability to generate a unique name for yourself, and to give people a version of that name that allows them to communicate with you, without being able to steal your identity. That’s all, that’s how key cryptography is: it generates a way for you to communicate securely with me, but not to pretend to be

me; you can send me a message, but you can’t fake my identity This notion of self-assigned unique names gives us the ability to organise all kinds of things in the world. Because right now one of the biggest problems we have is we don’t know what things are called. For example, if we take this bottle of Sprite, this bottle of Sprite has no name of its own, it is Vinay’s Sprite, TM, but it is not in any way, shape or form addressable other than me. If I drop it, it’s no longer Vinay’s sprite; it’s now a mysterious category we call garbage It’s got an identifier on it, you see this barcode, but that’s an identifier not for this bottle of Sprite but for all bottles of Sprite, it’s a class identifier. We’ve got 2D barcodes and we’ve got crypto, and we could put a 2D barcode on here that was a self-assigned name for this bottle of Sprite, and then when I bought it, I could be bound to that name, that’s my Sprite, and if I dropped it, we’d know whose garbage it was Doing that for individual bottles of Sprite might seem a little bit excessive, but we could do that for industrial pollutants, we could do it for toxic waste, we could do it for all kinds of problematic things, and it’s part of building this kind of container that you need to build an ecologically sound society We could give names to individuals this way, they could make their own names, we could do that as a way of creating a global identity commons in which everybody could communicate with everybody else securely and they could know exactly who their message was going to, we could do all of these things, but it’s not just for humans. It’s for humans, it’s for machines, it might be for processes. Think of invoices, every invoice is a different number in every organisation it goes through We don’t need to do that anymore; generate a key, assign it a key, have all the people who are managing the invoice given the ability to read the mail that comes into the key All of this stuff is possible, but it all boils down to this question of how do we think about the naming of things, and that’s a question that goes all the way back to the deepest myths of our civilisation, and innovation in naming things is genuinely going to be a revolution Luke: On that note, we’re going to turn to some audience questions, and thank you guys for queuing up. The gentleman just here Question: Can cryptocurrencies be considered as a potential rival to gold, since it fulfils the same purpose and concept? Vinay: The thing about gold is that gold is really old. Cryptocurrencies might be a rival to gold in the short term, but until they’ve got a couple of thousand years of use, there will still be a tendency to say, “Well, this stuff hasn’t been around as long as gold, and it doesn’t really solve the same problem.” I mean, we live in a world where we have a kind of pool of a couple of billion people that live in a very fast-moving culture, but we also have half of the human race who grow all of their own vegetables on farms that they work by hand, and for those people it could be two or three generations before cryptocurrency becomes fully tangible to them; but if you turn up with a bag of gold anywhere in the world, they know who you are. So I think it will take a really long time, measured in centuries, for there to be direct compatible utility. That doesn’t mean that gold price won’t be impacted by cryptocurrencies, just that the age of gold as a valuable thing gives it a quality that can’t be replicated by crypto Question: Hi. One of the main appealing things about crypto anarchism is that in a virtual blockchain state you can do away with state oppression and we can work towards self-governance But how do we reconcile that with the fact that blockchain was initially used for money laundering and the whole Silk Road scandal? How do we prioritise illegal things, like money laundering to terrorists, with freedom and the whole libertarian notion of self-governance? Vinay: The real hardcore libertarian argument is who told you these people were terrorists? They just view all of that as being free trade, including markets for violence Question: But money laundering can be used through the blockchain to fund terrorist groups Vinay: Oh sure, sure. But really hardcore libertarians will tell you who told you these people were terrorists, and money laundering is just free trade. The people that originally designed the blockchain thought that those kind of uses were completely within the scope of what they were willing to countenance, because they thought that what they were fighting against was a much worse form of oppression, which is the tendency of states to commit genocides. If you have a system where all power is centralised in the hands of the state, the genocide risk killed 150 million people in the 20th century, maybe more. Compared

to that, all of the terrorism, and all of the organised crime and all the rest of that stuff become tiny little problems. The original architects of these systems viewed all the terrorism and money laundering, organised crime and all the rest of that stuff as being completely acceptable prices to pay for reducing the power of the state to commit genocide Now, I’m not saying that I agree with that, but the original architects of these systems understood those trade-offs and paid up front My personal opinion on this is that both extreme decentralisation and extreme centralisation create accountability-free zones. If you think about an institution like the Catholic Church, which is enormously centralised, there is very little criminal accountability for things like sexual abuse by priests, they’re incredibly protected by the central authority. At the other extreme, if you go to areas which are rural and poorly policed, people are doing all kinds of crazy stuff, like burning plastic waste in their backyards, contaminating their environment with dioxins, all this kind of stuff, and there’s no accountability there either. At the extremes we get spaces with no accountability; it’s in the middle where you’ve got multiple competing entities that are watching each other that you get accountability So I think as a general design principle you want systems where people are watching each other, if you want an accountable system At the extremes, you get zero accountability, whether it’s centralisation or decentralisation, and I think it really is one of these things, where you have a Goldilocks point where things are about right, and the extremes are basically life-denying and humanity-destroying Luke: So essentially surveillance is the solution to surveillance capitalism? Vinay: I’m not that into the notion of anonymity on a vast scale; what I like is accountability and transparency. Accountability and transparency has to be enforced from the bottom as surveillance, because otherwise these things just don’t work. If you look at the drops in police violence that come when people are made to wear body cameras, that didn’t have to wait for police to have body cameras; that could have just been a simple protocol, where everybody records the police as soon as an interaction begins, and if the police were okay with that and it was expected… “Excuse me, sir, I’ve got to stop you for a parking ticket. Would you mind turning on your camera?” That’s the way we should have done it, it should have been normalised into policing, that the police ask you to make an independent recording as part of the performance of their duties That’s how we should police Question: I was wondering what’s your opinion on Tangle as the next generation of DLT, and do you agree with Vitalik Buterin that ~the developers of IOTA have flow decisions~, or do you think it has the potential to be more efficient, just in terms of not having transaction fees and such? Vinay: This is a hard computer science question The short answer is I have not done a rigorous enough analysis of these systems to know I’ve spent most of my free bandwidth in the last year learning about the legal questions, and the technology has kind of marched on its own tracks My gut feeling is that storing every transaction on every node is probably in the long run going to turn out to be excessive. On the other hand, storage is so cheap that the correct answer might just be to pay upfront and do it the hard way. But this still leaves the question of how do you get the blockchain to be fast, and the short answer is nobody really knows yet. I think this is one of these kind of high frontier situations, where a thousand flowers will bloom and maybe somebody will figure it out, but it’s extremely hard for me to say. I think the Lightning Networks are going to be truly amazing, because they’re simple, they’re cheap, they’re powerful, they’re easy to understand, and they’re fairly transparent in implementation. I think that the extremely complicated systems, where not all nodes store all transactions, are maybe going to behave unpredictably in the real world, but that’s very wait and see Sorry, I don’t have a more concrete answer Question: That’s okay. I was wondering, because we saw what happened to the Ethereum network when CryptoKitties came out and it slowed down so drastically. Do you see it as a real problem for the technology going forward? Vinay: Oh, yeah. Everybody knows that Ethereum is slow, Bitcoin is slow, those systems are just slow. But the Plasma stuff, which is basically kind of like a Lightning Network but for smart contracts, will help, and then there’s Casper and the move to proof-of-stake, which… Wow, that’s a big jump. If that works, it’s a totally new game, because we also get rid of the environmental footprint of mining, and that’s a huge step. It may be that mining is the kind of industrial revolution dirty phase of the blockchain’s development, and then you finally get into this revolutionary point where the thing finally becomes a social structure, rather than being anchored into the industrial mining operation, and then a new game begins

Question: Hi. My question pertains a bit more to privacy. Because this idea of the blockchain being open and everyone being accountable is nice, but at the same time, if I send someone Bitcoin, they can click on my address and they can see how much money I have. Now, that doesn’t really make very much sense, does it? In terms of a currency, I don’t want to tell Starbucks how much is in my bank account every time I go get a coffee Vinay: Yeah. Again, let’s just get the can opener out, dump out the can of worms. Norway, until I think relatively recently or probably still, publishes everybody’s income as part of their national tax records, you can look up how much money people are making, and that works in an egalitarian society; it wouldn’t go so well in America There are obviously a lot of possible solutions to that. The hardcore thing, the real atomic bomb in this, is the zkSNARKS. The possibility that you can actually do this very, very intense cryptography in a way that produces total anonymity for the transactions, frankly, scares me really badly, because it removes all possibility of having social control of cryptocurrencies Zcash, they don’t have smart contracts yet, but a lot of the fundamental primitives from this stuff are being built into Ethereum, and I don’t know what kind of a social equilibrium you get in a world where zkSNARKS are widely distributed. Because centralisation is bad, total decentralisation is bad, the habitable zone is somewhere in the middle, and the SNARK to me looks like an irrevocable movement towards the extremely decentralised end of that spectrum I’m not sure we’re going to like what we find out there Question: There are some people who believe that Bitcoin is a bubble, and although I heavily invested in cryptos, I think there are some truth to that. Because what’s happening right now is quite similar to the tulip effect in 1630s, and people just happen to agree that Bitcoin or other cryptocurrencies are at a certain price. If we want to prevent Bitcoin from being a bubble, what needs to change? Vinay: There is no doubt at all, as it currently stands, that the entire blockchain system is a bubble. You’ve got $600 billion of capital, and you’ve got practically no profits That’s not a hard question: you ought to have about $60 billion worth of profit if you’re going to value something at $600 billion, and I’m not seeing $60 billion of actual profit. However, should they begin to build a 2-3% of global GDP improvement, you could very rapidly see $60 billion of actual profit come out of the fact that cryptocurrencies exist, then it would be like you’ve kind of taken the bubble and sprayed it with concrete and now it’s a bridge. Whether we’re going to manage that or not I don’t know The other thing is stock markets. We think about the tulip bubble, but the early stock markets were astonishingly fraud-filled and explosive, and the possibility is that you wind up with a very, very messy early phase, like the early stock markets had, then we learn how to govern these things, we learn how to balance everything out, and you get a system which is much, much more performant So, possible, could go either way, but I think it’s very likely that you’re going to see a pretty apocalyptic crypto crash at some point. I think it’s likely that you’re going to see fiat coins, like dollar coin and yen coin, become issued by governments, and I would be unsurprised to see something that looks like Visa or SWIFT but it processes smart contracts. My guess is that that will be an international consortium with one node per continent, so there will be the Chinese clearing house, the American clearing house, the European clearing house, maybe a Russian one, maybe an Israeli one, maybe a few others, but that that model will be very strongly based on the nation state, in much the same way DNS is The alternate track is that the nation state paradigm breaks horribly because the dollar becomes extremely badly impacted by political risk, and that contagion brings down both Europe and China as integrated units, and in that kind of a scenario you could very well see Internet governance become global governance, probably in partnership with the UN. In those kind of scenarios your Bitcoin is underpriced even at $100,000. But you’re right, it is more profitable in apocalyptic scenarios, it is a hedge against apocalypse Question: We take electricity as granted in the developed world, but in the developing world it’s very problematic and access to it is sometimes scarce and unreliable, and people will rely on personal generators, especially in sub-Saharan Africa. How do you think peer-to-peer

energy trading, namely smart microgrids, could be implemented in developing countries? Vinay: One of the clients I’m currently working with for my main company Mattereum is doing a blockchain-based payment system for microgrid management. What Mattereum does is basically the legal work required to make a smart contract legally enforceable in 150-something countries, and that allows you to do things like transit physical goods because you can get legal control of things. In the electricity case, you basically have a token payment that goes in one direction and electricity goes in the other direction, and the gateway on that is a smart meter backed up by a smart contract backed up by law. Those systems give you the ability to capitalise large-scale rollouts of this kind of community-scale solar Individual-scale solar, so solar lights – where you’ve got a little bit of solar panel, a couple of batteries and some LEDs – have revolutionised Africa, they’re saving households on the order of $100 per household per year, which is often 5-10% of their income. There are stories about areas where the solar lights arrived, and suddenly people started putting roofs on their houses, because they just had enough money to do capital investment. But you can’t get modern amenities with this kind of palm-sized solar panel; you need systems where when you want to run a heavy appliance, you’ve got something with a big battery that you can draw on that refills, and you don’t want to put one of those on your roof because you don’t use enough power and you don’t have enough money… You can sort of see that there’s a whole bunch of questions about how you get an organisation of community will around doing something that requires pooling funds, and that problem is a good fit for this technology. So I think we’re going to see a lot of capitalisation of small-scale solar and wind off that kind of technology Question: Hi Vinay. You mentioned earlier that you thought the cryptocurrency market in general is in a bubble, and something that I’ve been thinking about a lot is what would the mechanism have to be for that bubble to burst. I would love to get your opinion on what would the actual mechanism look like For example, with the Global Financial Crisis was a lack of liquidity. What would the bubble burst actually looks like, what would need to happen, and what’s the likeliness of that scenario ever taking place? Vinay: I think there’s basically three obvious ways it could go, and in all probability what happens will not be one of the three obvious ways. I could talk about these things as scenarios, but reality is always stranger than fiction or prediction The first thing is that you could simply see the bubble be that somebody comes out with a new technology which is so much better than the existing cryptos that everything pulls out of one and dumps into the other. We came pretty close to the flippening last year, where Ethereum was really marching pretty hard up on Bitcoin, and if that had got much closer, I think you could have seen panic selling of Bitcoin and panic buying of Ether I am not a financial advisor, I do not hold any of these assets, my lawyers tell me I can’t trade – okay, fine The second possibility is that you get intervention from the state. The American government says, “Well, we’ve kind of had enough of this Bitcoin thing. Let’s arrest everybody,” and you sort of think, “They couldn’t,” and actually they could. The approach that they’d probably take is that they would suggest that the fundamental purpose for Bitcoin was actually laundering drug money, and then they’d use the amazingly enthusiastic American seizure laws to simply confiscate all of the money that anybody ever made from touching Bitcoin ever, and they’d freeze like two million bank accounts and it would be an enormous disaster, and the people that had stocked up a bunch of gold in their houses against that possibility would be sitting much happier than the ones who had it all liquid or in fiat. That’s scenario two Scenario three is mass public disillusionment Mass public disillusionment, right now it’s kind of hard to imagine that that would happen because everybody is making money. If people realised that the betting average on their ICOs is like 1 in 1,000, which is pretty much what it’s like for venture capital, if they start seeing the same kind of risk-return that venture capital sees… On average, venture capital loses money; the people who make money in venture capital make a huge amount of money, but the average VC fund loses money. If that turns out to be true for ICOs as well, there will be a point where people will suddenly get disillusioned and then they’ll start to bolt out of the market. So it’s only massive, massive industrial adoption of these technologies that provides any kind of stability to that bubble, and part of the reason that I’m doing the thing that I’m doing with my life right now is to attempt to build the interface into the industrial ecology so that we can actually expand into industrial space rather than being stuck in financial engineering, because financial engineering is hugely volatile If we have mass deployment of cryptocurrencies and smart contracts deep in the industrial base solving real problems, these things become

much more stable, and that’s what I’m really working on, that’s why Mattereum exists Question: Cryptocurrency is really hot topic right now Vinay: No kidding Question: Bitcoin and Ethereum transactions are quite slow, but also quantum computing is really hot topic as well. In the cryptographic world we have problems with scalability, we have slow transactions. Do you think these things will be solved, to an extent, before quantum computing is complete? And once quantum computing is complete, how much of a step back or forward do you think the cryptographic world will take? Vinay: Yeah, that’s a good question. I think the Lightning Networks will turn out to be super effective, I really think the Lightning Networks are going to be a big step forward A lot of the stuff that I wrote about Bitcoin being stuck in a technological ~back war~ and unable to evolve is true, but they finally started to take it seriously and the Lightning Networks are a good manifestation of that The quantum computing thing, again, comes in two layers. There’s the breakability of a lot of the existing cyphers under the load of quantum computing, and I am not sure how vulnerable most of this stuff is, but the general assumption is pretty vulnerable There are quantum-resistant algorithms, the one that I remember reading about was NTRU, and I have a feeling there’s a second generation variant of that algorithm. So you would require a period in which you took the existing cryptography, ran NTRU beside it and then migrated everything over to NTRU without losing the record of who owned what in the process. That would be a hairy job, but it wouldn’t be game-ending And NTRU, as I say, that’s the quantum-resistant algorithm that I remember. I seem to remember that there’s a ton more computation required to do the encryption, and much, much more storage With all that said, I think the breakthrough that’s more likely to turn everything upside down is homomorphic encryption. I think it’s much more likely that we’ll get efficient homomorphic encryption early than quantum computation early, because so much money is going into research on homomorphic encryption If that cracks, I think you’ll see unbelievably dramatic and rapid changes that are completely impossible to conceptualise, because homomorphic encryption is so completely counterintuitive, I don’t think anybody has even written science fiction about how the world would look if that happened. So I think homomorphic encryption might turn out to completely blindside us, and I can’t even imagine what happens in the crypto space if that happens. Does anybody want an explanation of homomorphic encryption? Joking, joking! Question: I wonder if I could ask you to speak about adoption and deployment, particularly methods against intervention, or for intervention Normally when the government or the nation state comes up in your conversation, it’s after a disaster or some kind of emergency Are there positive steps that are government or a nation state should be taking towards some of these goals? And what would they be? Vinay: A couple of years ago a friend of mine asked me what the Dubai Blockchain Strategy should be, so I went out to Dubai, I had a chat with them, and suddenly they had a blockchain strategy and it was what I had suggested might be a good one. Now, I have mixed feelings about Dubai, it’s a really complicated place, but it’s also a haven of futurism and relative liberalism, relative to a lot of the other countries around it, and they’re not doing bad work in terms of thinking globally and trying to engineer things like solutions to climate change, they’re really putting their money where their mouth is on that stuff What I suggested to them was that they should take all of the documents that the government issued and store them on a blockchain, so that when you came to the government with a copy of a government document that had been issued by another department, they could find it internally and verify that it was actually there. It wasn’t very complicated; it’s a big job to implement, but it’s a pretty straightforward thing to imagine. If we had multiple governments that all did that with all the documents that they issued, governments could check with each other to see whether a document was correctly issued. You could ask the American government’s internal blockchain to see whether this transcript from Carnegie Mellon was a real transcript that indicated somebody really did have a degree That ability to just pull together all of the information about yourself with proper digital signatures from everybody that issued you those documents would make life so much simpler, and it doesn’t have to go with storage of the document. You just need to store the hash of the document, the document needs to include some way of regenerating the hash, and if you have that kind of system, you could have a system where the proof of the documents is very easy to obtain, and I think that would help everybody in a really day-to-day sense. That’s the simplest base case. If we did that for all of the governments

in the world, life would improve in a really big way. Above that layer, you then get into the question of technological acceleration as national strategy. I think that would be a talk for another day Luke: Let’s leave that to a talk for another day, and let’s give the students who did stay something to walk away with, which is my final question, Vinay: how can the students in this room, arguably the blockchain natives, how can they prepare for the possible blockchain-enabled futures? Vinay: There’s the answer which I always give, which read 1990s cyberpunk science fiction The cyberpunk science fiction is what all of us read and that’s how we got into this stuff, and it’s really useful, because it predicted a kind of dystopian future world filled with weird nanotechnology, artificial intelligence as it were flaky and didn’t really work properly, anonymous digital cash transactions of people hacking into machines to produce political change. That stuff is really only like five years out now. That stuff has gone from being wild science fiction to being techno thrillers within my lifetime A techno thriller is science fiction that includes the president I think there’s a more profound question here, which is what is it like to be in a political elite? I came back from Davos, and I was not in the white badge area of the security and the heads of state and all the rest of that, I was kind of in the Davos fringe, and the Davos fringe is the most fun I’ve had in like 10 years – it was amazing! Because it was filled with huge amounts of enthusiasm, as people ran around spending their investor money, throwing great parties and telling everybody that it was a really good thing to do with their investor money. But it was filled with this kind of aggressive optimism: the future is so bright, we’ve got to wear shades. They were really pushing this notion that everything was fantastic, and this is more or less always how it is with elites The elites have big smiles on their faces, because life is great. And the fact that we’ve got nerds, who have historically been very badly discriminated against, which is usually ableism against autists, all of that kind of nerd culture stuff is now becoming economically dominant and therefore fashionable, and the nerds are becoming an elite, and usually the elites are very nasty people So, to me the question here is can we be a better elite than the previous generations of elites, or are we going to, in the long run, become as hated as investment bankers were for just the same reasons? That to me is a question about morals. The thing that I think is critical to nerd culture is this The way that what I’m going to loosely term jock culture works is aggressive competition to figure out who is in charge, followed by giving orders. This is a really good way to organise military engagements, and I think that jock culture is an evolutionary throwback to tribal battles. First we have a fight to figure out who’s in charge, and then you organise everybody and you execute a strategy and you go and kill the other guys Nerd culture I think is the people that were back at home knapping the flint, making the weapons, starting the fires, finding the food, identifying where the game was going to be, navigating long distances, building the canoes and everything else. Most of those jobs require more than a single human to be able to do the job properly. So in nerd culture the aggression is massively withdrawn and suppressed, and a lot of people find that this makes people seem kind of emasculated – aren’t men supposed to be aggressive and take up a lot of space? – the nerds pull all of that stuff in, to enable large-scale cooperation to solve problems which are too big for a single guy Making a canoe on your own is going to take you months, you need 20 people to be able to raise a barn. To run a flint knapping economy, you need the ability to get somebody to travel a long distance to bring you the stones, you need a guy would could do the chipping and the flaking. So I think the nerds are the original co-operators, they’re the people in the human species that figured out how to solve a problem which is too complicated to solve with command & control, and I think they’ve got the emotional and the psychological wiring for that kind of collective activity Nerds are really good at working with each other So, I think that there’s a possibility that this new elite, which I occasionally call the Nerd Reich, is going to turn out to be much less brutal than previous elites have been, but that’s only a potentiality. We have to realise that potentiality by actually being the best version of nerd culture we can imagine, which is one in which cooperation genuinely does outweigh competition. It builds on Stallman’s foundations with open source, it builds on models like Linux, and especially Wikipedia, and it creates something which looks more like the outbreak of global science than the outbreak of one economic aristocracy overtaking another. I’d like to see something that didn’t look like feudalism being replaced by industrialism being replaced by post-industrialism; I’d like to see something that looks like

the invention of the scientific method, followed by the explosion of knowledge that came with it. If we can stick true to those principles, the possibility is that nerd culture really will save the Earth. [applause] Luke: There we go, if you are a nerd, it’s going to be a good… [applause] Those are the nerds, those are the nerds… [applause] Vinay: You are my people! Luke: What a wonderful message to end on Before we close out, there’s a couple of thank yous. I want to thank the University of Warwick Department of Economics for hosting us this evening. Virtual Futures kind of co-opted their 360 Lecture series, we do it almost every week in London, and we’re going to do more and here at the University of Warwick I want to thank the entire team for helping us film this evening, to Pai, since you are Head of Department, for allowing us to be here. A special thanks to Ian O’Donoghue from the Theatre Studies Department for allowing us to retrofit our stage. And if you like what we do here, in terms of Virtual Futures, you can find out more about us @VirtualFutures on Twitter, Instagram and Facebook. We’re looking for people to come to us with concepts Before you leave, I want to end with a warning, because a warning is how we end every single Virtual Futures. The warning is this: the future is always virtual, and some things that may seem imminent or inevitable never actually happen. Fortunately, our ability to survive the future is not predicated on our capacity for prediction, although, and on those much more rare occasions, something remarkable does come of staring the future deep in the eyes and challenging everything it seems to promise. I hope you feel we’ve done that this evening – please join me in thanking the incredible Vinay Gupta!