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!




Comments
  1. yo!!!! @12:45 when he said that "if we continue like this then you will end up with people writing their names by moving stars in different constellation" my mind melted!!!!!

  2. fascinating talk, but gupta makes a relatively unsupported case for the necessity of space colonization: that humanity must grow like a virus or cannibalize itself is contradicted by the colonial history of the united states and many other countries; abundant resources and growth are often paired together with brutal competition and genocide.

    instead of "grow" as in expand, perhaps "thrive" would have been a better word–though then that could be achieved with cooperation, virtual reality, and other terrestrial means.

  3. 40:09 Centralization – Occultism. Cutting that bad weed from the root once and for all #Blockchain is just a tool to run interesting projects as one super network

  4. Interesting, when I can understand him. Gupta should work on his enunciation and modulation. Otherwise, thanks for this discussion.

  5. Investing into cryptocurrency is a bit controversial, because people have their own opinions on the subject, some more educated than others, so it's better to just trust your gut.

  6. 1:26 – great rant about Nerd Culture. I hope he is right, but a lot of nerds I know are drinking the coolaid of the SJWs and far left. I used to hope they would be more libertarian.

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