When the crypto bubble burst in 2018, you
pointed out that five key factors, which crypto
needed in order to succeed as a technology.
Can you briefly tell us about
what these factors are?
Scalability was one of them.
If none of the technology has really scaled,
although we started to see some changes in
that over the last couple of years.
This is not a simple problem.
It’s not like we can just go down to the bookstore
and get the O’Reilly book
on scaling decentralized systems.
It is an unsolved problem, and people become
very impatient waiting for these problems
to be solved.
We’ve been trained by Wired magazine to think
that technology changes every 15 seconds.
But problems that are unsolved
still take a long time.
The Internet was 25 years before anybody was
really using it in the mainstream.
That’s a long time, 25 years.
I also talked about the user experience.
The user experience is atrocious in this space.
If you can get your mom to use an exchange
in under two weeks you’re a super genius.
And we need to eliminate centralized choke
points, and that’s actually a battle I think
that the crypto space is losing.
So the distribution, I feel like Satoshi figured
out how to do consensus without centralized
authorities, but the distribution model of
Bitcoin and most of the coins after it is
exactly the same it’s top down.
And so I felt that was a missed opportunity,
we can change the way that money is distributed
particularly with gamified money.
Wrote an article on gamifying
the delivery of money.
A lot of people have used that term now to
just think of it as like reward bucks, but
it can actually change radically how we distribute
money across an economic system.
And I think that’s going to be one of the
biggest game changers that folks can get that right.
A killer app is something that’s definitely
missing in this space.
We can’t even get the user interface right.
So I don’t know how
we’ve gotten to the killer app.
We certainly have not reached
that Netscape moment.
When Netscape came out in the Internet, people
understood the power of the Internet.
But before that it was very abstract to people.
People can understand text and pictures and
reading and sending things out to people without
a central intermediary.
That’s really what HyperText
Transfer Language was all about, right,
HyperText Transfer Markup Language.
And we don’t have that in the crypto space,
the crypto space is still out there hawking
the equivalent of TCP/IP and DNS.
It’s okay, do you want to buy some TCP/IP?
No, I don’t.
I want to buy stuff on Amazon and I want to
read digital books and I want to send cat
pictures to people I don’t care about TCP/IP
or DNS or any of the other stuff under it.
I care about it as an engineer,
but the average person doesn’t.
And the last thing is to transcend the net.
To transcend the net, was it a call to arms
that I think is probably the farthest out
from the five things that I was talking about.
And that’s because the Internet has become
a series of centralized choke points as well.
We like to think of the Internet as something
that’s incredibly decentralized and distributed.
It was designed that way initially, it was
designed as a way to route around countries
getting wiped off the map from a nuclear strike.
It was designed by Darpa and all those universities
back in the day to route around significant
disaster, but it’s become just a centralized
system and it can easily be cut off as we’ve
seen in many countries where there are just
protests and they’ve managed to shut down
most of the Internet where most of the communications
in that country by killing the routing and
So I believe we need to have a peer-to-peer
distributed system that transcends the Internet
that is unstoppable.
That’s very interesting.
So, nowadays, in the latest few weeks, months,
Bitcoin started surging again.
And so do you think that’s a sign that we
made some progress in this checklist that you made.
So is the surge connected with some improvements
regarding those key points that you mentioned?
So from a trading standpoint,
I never look at it like that.
I tend to look at it as the market is simply
moving in one direction or another, I’m largely
indifferent to it.
That said, there have been a number of things
in world events that have started, I think,
to move us back towards a bull.
You start to see a lot of capital flight out
of China as currency controls come in.
There are other places where tremendous amounts
of currency controls are strangling the population
in Venezuela, and places in Turkey where you
have sort of this decline in democracy in
this chaos, in this currency control, so that
is where decentralized crypto start to see
a lot of capital flight.
And you also do have some
progress in this space.
I would say it’s a little premature to start
calling it true progress.
I think there’s been progress made over the
last year and a half, as we’ve been through
the bear, but I’m not sure that it’s enough
to justify the resurgence.
That said, there are interesting things like
Radix the other day did a cool publicity stunt
where they ran the entire history of Bitcoin
transactions in 15 minutes.
So that certainly addresses scalability, that’s
still an alpha technology or a beta technology,
but that shows some level of progress in a
permissionless decentralized system.
So I think we’re starting to make progress
and certainly even we’ll talk about Libra,
but Libra in some ways represents progress
as well in that the mainstream is starting
to get involved in it in a way that we’ve
never seen before.
All right, getting talking about Libra,
which is the Facebook coin
everyone is talking about nowadays.
In your latest article you define the advent
of Libra as an extinction level event for
the old financial world order.
What do you mean by that?
I think it could dramatically change it.
So for instance, they’re setting it into a
basket of currencies as opposed to a specific
currency, which means they can adjust that
monetary policy at any time that they see fit.
They can drop a currency or add a currency
which would punish that currency, which would
be a nation state currency.
So that nation state currency, they may be
able to influence a nation state currencies
policies in order to be included in the basket
of currencies, because they want to participate.
In addition, if you start to think about,
you know, maybe half of the people on the
Bitcoin network having a hundred Libra each
which is incredibly conservative, that money
gets minted or destroyed
when fiat comes into it.
So the equivalent fiat is going to be something
in the range of $80 billion.
For that, which is just sitting in the banks
and in accruing money, they can play the different
banks off of each other
in order to compete with them.
And in addition, the Federal Reserve Banks
are not going to have as much power over their
individual currency if an international sovereign
currency in many ways is able to influence
people’s behavior and has a tremendous amount
of buying and selling behind it.
And on the back end they also have a secondary
coin which is a deflationary coin which rewards
all of the oligarchy behind the situation.
So that’s going to be very interesting itself
in that you really have a secondary monetary
policy, that stealth and can mop up even more
of the fiat in the world.
So they’re going to have tremendous amounts
of reach if the platform is successful,
they have the potential to be doing trillions of
dollars worth of transactions and mopping
up and moving that fiat money into their system
and hoarding it in their coffers which means
they get to buy a lot of lobbyists, they get
to change what banks are able to do, because
they’re able to rewrite
the laws in their favor.
And it’s always been the province of banks
to influence how the laws have been made in their favor.
So that’s going to start to change as they
face giant multinational corporations.
Still Facebook promised that Libra would be
completely disconnected from real-life identities
and that’s why it’s reassuring people that
it will not use their data as it used to do in the past.
But still, you fear for people’s privacy,
Again, anybody who thinks that they’re not
going to tie an I.D. to this is insane.
There is a 0.0% chance.
They’ve already said that the Calibra wallet
which is the first wallet that will be released
is going to go through Know Your Customer
anti-money laundering, they’re going to face
tremendous pressure from governments everywhere,
especially if the platform is large, to conform
to existing KYC AML laws.
So I have my own personal challenges with
them or problems with them, I think KYC laws
are a misguided attempt to stop a very real
problem, but they have created more property
theft combined than all other
property theft in the world.
So I think they’re a very flawed system, because
we basically centralize all of the data and
the hackers know right
where to go and steal it.
So you have Equifax lose half the data of
the United States and they’re still trusted.
So, there will be other wallets on the system,
but again, if you look at the folks that are
behind this, they’re all from the old world
guard, they all have to deal with existing
wallets, they’re going to face tremendous
pressure from governments.
There’s just a 0% chance.
In addition, they’re going to make a lot of
money from understanding the social dynamics
of how the money is being used.
Using predictive analytics artificial intelligence,
that’s really how Facebook has made its money.
And a lot of these other companies
have made their money.
If you look at Visa and MasterCard and all
of these companies they’ve made it by understanding
your behavior better than you understand your
behavior, so even if they don’t have an KYC
AML process they’re going to be able to peer
through your wallet into the other bits of
your social life that are tied together and
they’re going to understand your behavior
and track it across the network.
You envision a kind of cyberpunk dystopia,
where Libra and Facebook established kind
of global domination over people.
But you also envisioned a way out of this
situation, where people can preserve their freedom.
And so what is the way out, the possible way
out from this kind of cyberpunk dystopia?
Well, having worked in open source for a decade,
I believe very strongly in open source.
I’ve seen it win out over proprietary technologies.
I was working with Linux when we were still
talking to companies about it and they were
like: “Why would I use this crazy communist
open source cancer?
We’ll just use Solaris or a proprietary Unix.”
That conversation is over.
Linux and Open Source
are absolutely in the world.
Everything from the public cloud to your smartphone
runs on open source software.
All of the innovations in the world from artificial
intelligence to big data started in open source.
So open source often starts out uglier.
Open source developers tend to be hardcore
engineers, they want to work on the back end.
Then the engine and they don’t always think
about the interface, so it takes a little
bit longer for it to come to fruition.
It’s oftentimes open platforms start, like
I said, they start off ugly, but they start
to gain their momentum and their understanding
and their strength in foundation over time.
Proprietary platforms usually taken early
lead in open source software often is able
to overtake them in the long run.
And we end up seeing an open Internet versus
a proprietary corporate Internet.
But more often than not, open platforms went
out in the end.
And so I’m hopeful that it continues to go
in that direction this way as well.