Tag Archives: World

INS Ecosystem’s Founder Peter Fedchenkov at World Blockchain Forum, London

one in this room has experienced as a consumer the grocery industry it's one of the largest consumer markets in the world with eight point five trillion dollars of volume expected by 2020 and today when you come to a grocery store you the very end of the very long be supplied chain and this supply chain is expensive to operate and is limiting customer choice when you come to the store and you think you purchase what you want you actually purchase what retailer makes the highest profit on and in the 21st century we believe that consumers have to decide what breath they want but products they need whether they want to purchase from local or national manufacturers that's why we created INS Ecosystem a decentralized marketplace that directly connects grocery manufacturers and consumers

Discover New Value of the Blockchain World

It’s been five years I still remember it was in May 2014 that I organised the first Global Bitcoin Summit at the Beijing International Convention Centre How time flies In the next couple of minutes, I will share with you a story that’s exciting informative and even passionate about blockchain I think for those who are not here you may regret some time later because this speech can be the most exciting speech of today I am confident Thank you But before my speech I want to show you a short video about our journey before we talk about the present and the future ok? If I have three minutes, I want to say that I love blockchain, why? Because I am emotionally attached to it I witnessed the development of bitcoin and blockchain in China I have a lot of feelings Today I am seeing a lot of old friends but more new friends So I really look forward to it ok, Let’s start The topic of my sharing is blockchain&new dimension building Mainly, I will cover 4 sections About me, blockchain, nebulas chain and the evolution that is happening It won’t take too long But I promise it will be very informative It will be gist May be a little bit hard to understand But I want you to really think about it I want to give you truly useful stuff The first section is about myself Where was China’s blockchain born? I think It was born in the Bitsclub that I started at the end of 2013 It is China’s first blockchain technology community the first blockchain technology community In 2014 I started NEO It’s China’s first blockchain project I also initiated China’s first ICO But let’s leave it for now I will talk about it later In 2015 I started Gempay China’s first cross-border bitcoin payment and wallet app In July 2016 before joining Ant Financial I founded ICO 365, China’s first ICO intermediary service platform It is poised to become the portal to the blockchain world You will see its development going forward At the end of 2016, I was invited to join Ant Financial of Alibaba Group to form and was responsible its only blockchain team its only blockchain department I think it was valuable experience But today, standing here, I represent the Nebulas a new blockchain project Then why did I choose to leave Alibaba? Was I not paid enough? I will explain later Here are some pictures of the summits that I organised I hope I can do a better job going forward If you are not happy with some details of today’s meeting Please bear with us But the most important thing is that I am here ready to share with you something valuable I will try These are pictures of our previous summits A lot of people The picture on the top left is the summit at Beijing International Convention Centre in 2014 Next to it is the one in HK Down below is our summit last May The one at Renaissance Beijing Capital hotel had more than 1000 attendees Here are 6 of the 7 founders of Bitsclub Including Da Hongfei, he is the head of NEO now Juxie, Me, Lan Ling, Feichuan, also a founder of Nebulas chain, and Chu Xiahu The picture was taken in 2014 if I remember correctly It brings back a lot of memories But has Ethereum anything to do with us? A little bit Why? When Vitalik made his first China trip He was to speak at our Bitsclub at a sharing event In May, he attended our first Global Bitcoin Summit and gave a speech about Ethereum After the summit, I went back to Shanghai thinking, Vitalik had this blockchain project named “Ethereum” It was fun At Bitsclub, since we had held more than a dozen sharing events Maybe, maybe in China We could launch an equally interesting blockchain project They then elected me to act in the capacity of CEO We then launched our own project On the left-side of the screen is a post I tweeted in my Wechat’s Moments on June 9th 2014 I spent a whole night thinking about it It was NEO v1 NEO version 1 I decided to name it NEO(the Chinese means Small Ant) more powerful than Ant But When I named my project “Small Ant”, Ant Financial was not called “Ant Financial” yet So, anyways It was a happy coincidence As NEO’s founder What should I do? Two things stroke me as being very important To find the right people and to find enough money In terms of people, we found NEO’s current CTO He is also NEO’s co-founder, Zhenwen Zhang With regard to money, things became interesting I have some stories Around June or July 2014 I talked with almost all major angel investors, individual and institutional in China Including the famous Charles Xue who is now an enthusiastic blockchain investor But back then, barely any investor was willing to give us money Why? Because they couldn’t wrap their mind around this thing We said we were a non-profit project We didn’t have a company We would invest for some tokens No, at that time it was still investing to get shares But still, nobody understood With the exception of only one, Pre-Angel’s Wang Lijie in Shanghai I talked with him for an entire afternoon He said he thought this thing is cool It reminds him of the “Matrix” So he said,”ok, we will give you 200,000” But was 200,000 enough? Obviously not

If we were to launch this project, 200,000 was far from enough Then what could we do? So I told my co-founders If we think this is cool if we think this is something we can do Then we do it! So we pitched in I contributed 50,000 RMB There were 9 co-founders Each contributed from 10,000 to 50,000 In total, we got about 600,000 So we started NEO very fun That’s how China had its first ICO ICO is never a result It is a process Because we didn’t have money Because on one would invest in us We were forced to do it Had someone told me that what we were doing could generate thousands of times of return Did I dare to believe him? No We only thought it was fun and that it would create value That’s how China got its first ICO I see there are a lot of ICO projects today but you need to ask yourself What is it that ICO can bring and what is our ultimate goal? I hope you can seriously think about this question Rather than blindly following the trend The second section of my speech is about blockchain Here I try to use three slides to explain what blockchain is It’s challenging Then what is blockchain? I only have three slides Each slide only has one or two sentences I think, blockchain is really about confirming your ownership of data For the first time your data belongs to you We have BAT, Baidu, Alibaba and Tencent Our data is analysed by Alibaba and Tencent everyday But can you say that you own your data? No But blockchain Based on a decentralised relationship of cooperation allows you to own your data Is it possible that in the future assured that we own the data we use AI we feed our data into AI like our location data so that it would run some analysis and give us some BTCs or ETHs Wouldn’t that be more fun? That’s why I say blockchain is a confirmation of ownership of data Then what is the Internet? I think Internet is about communication of data Then what is token? That might sound a little bit hard to understand Token is a carrier of ownership For example, I sing a song It might sound awful But I can still turn that song into my data and share it with others eople can give me rewards But what if I share this song with an AI a machine my data A picture I draw A song I sing All my information is my data So to some extent, bitcoin is just a type of data The second slide That is the core spirit of blockchain It has three parts The first is community Blockchain in essence is bottom up It’s not top down When we started NEO The philosophy was to make it open, open-source, shared and non-profit None of the BAT companies No major institution can do that At Ant Financial During the half a year I was there Our team filed for about 70 blockchain patents Why did we do that? Was it necessary? It’s just big company’s mindset Community We see a lot of blockchain communities A lot of ideas like this come from a community The second part is Token Token is a flow of value I have already covered this part Then what is the third part? Tool When people talk about blockchain, they talk about enterprise-level blockchain But what is enterprise-level blockchain? I think enterprise-level blockchain only sees blockchain as a tool But should we agree? No

For example, 20 years ago, what was Internet to people? I remember in 2000, when I was in college we did something called company website We would polish a company’s information put it on a website, then you got a company website Companies would boast that they had a company website on the Internet! It was just like putting out an ads on a TV or over the radio something like that But how many people would still visit these company websites? Even the website of a company as powerful as Ant Financial When the Internet users reach 1 or 2 billion What can be born out of that? Tencent, QQ, Facebook, Uber, Airbnb, Every app could creates more value than the companies and teams that did company websites collectively could So I think, for blockchain being a tool is part of its value, but is by no means the entire story The third aspect is classification of blockchains As I just mentioned we have public chains, private chains and consortium chains Public chains include Bitcoin, Ethereum and Nebulas They represent an open, open-source and sharing spirit You see here, the words marked in yellow less, what is less? Trustless, Permissionless It means you don’t need trust and there is no privilege Even if Satoshi Nakamoto, the creator of Bitcoin were here he can’t change any code Why? Because he doesn’t have any privilege That’s the basic spirit of public chains Then what are consortium chains? They are enterprise-level blockchains including private chains, featuring TrustBased and PermissionBased What are TrustBased and PermissionBased? To put it simply It is based on trust and privilege For example, both Alibaba and Ping’an want to build a consortium chain Both want to be the boss Both want to have a super-administrator account Both want to have control But is that correct? I think we need to think about it I think the best representative of blockchain is still public chains They are a totally disruptive innovation Only disruptive innovations can create the greatest value The third section, Nebulas chain What is Nebulas chain? In two sentences First, it is the world’s first blockchain search engine And the second? It discovers a new dimension of the value of blockchain Let me explain We talked about what blockchain is Now let’s look at the problems facing the blockchain world I will use another graph with 6 words to explain The first problem is standard or criteria to determine what blockchains are good ones Now we don’t have a standard Everyone claims that their blockchain is the best and is No 1 in the world But really, what kind of blockchains are good? If you target a specific area, you can always find untapped value So we have to think about what kind of standards we want to build Secondly, the upgrading of system and protocols Blockchain systems are different from ordinary systems At Alibaba, or at Ant Financial Around 3 or 4 in the morning when most people are sleeping these companies are upgrading their servers All systems and all software are written by men So they are prone to bugs or mistakes So they need fixes Then, system upgrading If you go to an App Store you would find some software that needs to be upgraded But can blockchain be upgraded? No Why? Blockchain has to be online 24/7 otherwise it will split, into several coins To put it simply, if blockchains are not online the system will break down That’s why people have been debating about the expansion of bitcoin but have yet a conclusion There are divisions among communities That’s why after Ethereum was upgraded it split into two coins one is ETH and the other ETC So upgrading of system, fixing of bug are a very important issue What kind of blockchain systems have the potential to become a good blockchain system? Any idea? For me, I think a system that can keep iterating has the potential to become a good system This system should be able to change itself, self-evolve and iterate fast This is important Bitcoin has not changed nor iterated for years That’s why we have Ethereum But Etheneum’s problems have remained unsolved for several years So you have Nebulas Then what is the third problem? It’s the search of contracts and DApps In the future, there will be a lot of addresses, smart contracts and DApps Then how do you know what Dapps are valuable for you or what DApps are useful for you? How can you quickly find out contracts that will be helpful for you and DApps that will be useful I think that’s an important issue This picture, in my opinion, is a classic one It summarises the three problems I just explained Each represents a property or a quadrant We say digital assets are one dimensional They are a line What do they represent digital assets like bitcoin? Bitcoin is basically digital cash something that I transfer to you and you transfer to me But what about the Y-axis? It’s DApp Thanks to Ethereum for proposing the concept of smart contract as a result,we have many more contracts and apps It opens a space in which there are a lot of apps and a lot of contracts But if there are millions of contracts and apps ordinary people will have no way to judge which one is good and which one is bad like the Internet before Google came out you only got some personal recommendations for some websites You could’t find apps or contracts that are truly valuable for you So at Nebulas, we put forward the idea of criteria of value and established a Z-axis we try to mark on this axis all the addresses, contracts and DApps in the blockchain world to find the addresses, contracts and DApps that are truly valuable for our users So you will see when there are good contracts there will be some criteria of value I will quickly walk you through this We will release our technology white paper soon It is a self-evolving mechanism As I mentioned how could you ensure that a blockchain iterates fast and how could you ensure its quick evolution? We have our own protocol We call it Nebulas Force At the bottom layer we will build a Virtue Machine on which the entire protocol will be built If there are new features we will test them on sub-chains If they pass the tests they will be smoothly moved to our main chain and be integrated into our main chain This is our incentive Because developers in the blockchain world do not have any incentives On the contrary, if you develop a DApp you will have to pay for its fuel So for developers we will put in place a DIP Developer Incentive Protocol as a reward for your DApp We work like an Apple Store We share revenue with you You don’t have to do an ICO You will have your value monetised on our Nebulas chain Here is proof of devotion It’s our new consensus algorithm It’s not to render the poor poorer and make the rich richer Nor will it consume electricity or computing power We use this measurement of value to find truly influential things that will truly contribute to the system thus creating value Here is a picture of the Nebulas World If we say that Nebulas has established a rank then what can it do? You can develop an DApp Store or a search engine or an ads platform on it If what it offers is a measurement of value then the room for imagination is huge This is our core team we will update their information on our new website We have many Tsinghua students that are developing some core algorithms for us with some PHD students ands some former SQL China employees and some former Ant Financial employees We have two co-founders Me and Robin Zhong We were colleagues at Ant Financial’s blockchain team Aero Wang is a good friend Me and Aero are co-founders of NEO I have said a lot But the last section is the most important to be frank So I will be very serious It will take a few minutes if you are willing to hear me out thank you! I entered the blockchain world at the end of 2012 By 2013 Bitcoin users in the world, not blockchain because there was no blockchain amounted to 2 million At the beginning of 2017 when I was still at Ant Financial, I saw a report saying that the number of digital assets and blockchain users reached 20 million you know that in April, May and June and July and August ICO was all the rage Maybe I can make the judgement, that now there are 50m uses of digital assets and blockchain But even if it’s only 20 million, compared with 2 millions back in 2013 in just 3 years the number increased 10fold So we have reason to expect that, in another 3 years, by 2020 our user number will go up 10 fold again from today’s 20 million to 200 million and by 2025 we will have more than 1 billion users I think that is highly likely and we are preparing, planning and making arrangements for this new era Why? With such a conviction You will view today’s blockchain and digital assets from a totally different angle

Bear in mind if you think that blockchain is the next internet with 1 or 2 billion users then what should you make of blockchain and digital assets today? How can you prepare for that? You need to ponder over this Today the size of global digital assets is 100 billion dollars I think soon before 2020 when user number will have increased 10 times this figure will also increase 10 times to a trillion dollar level A trillion dollar marke does not disappear without any reason What can a trillion dollar market create? Blockchain grew from a community to an segment all the way to an industry I was lucky that I rode all the trends A trillion dollar market will create a truly large value chain with relevant services Let’s compare Because I was talking about blockchain and the Internet all the time So let’s compare the two first the Internet in 1997 only had 12m users all over he world in 2007 the number was more or less 130m and in 2017 it is 37 billion So it went through three stages The first stage, or stage 10 is Internet of Information with portals such as Sina and Yahoo providing information and news as well as catalogues to users Google was born during that stage It was just born and was poised to be the main player in the next stage of Internet development or the Internet of Applications represented by Apps such as Google, Facebook and Twitter These are apps that were born on the Internet So I call this stage the Internet of Applications In 2007 iPhone came out and looked set to play a main role in the next stage the Internet of Mobility People use phones everyday They can not live without their phones It is the era of mobile Internet represented by iPhone, Wechat and Alipay In 2017 The idea of bitcoin emerged This graph shows my understanding of blockchain 10 is value flowing represented by cryptocurrency such as bitcoin It is digital cash which you can transfer or transact it’s a flow of value 20 represents value programming What was the 000001 added to 1

0? It was Satoshi Nakamoto He wrote a paper in 2008, yet no one believed him In 2009, he spent about 1 year getting about 1m bitcoins Starting from 2010 more people started to join him By 2013, there were 2 million users Now its 50m In 2013, we call it value programming Ethereum put forward the idea of smart contract to program value and judge conditions in a decentralized eco-system of contracts and apps Now maybe I can make a bold prediction on value measuring represented by our Nebulas Rank that allows us to rank and analyse all the content, contracts and addresses in the blockchain world This is the most important takeaway from this section So what is it? Blockchain is a living organism Blockchain an economic entity A lot of times we ask what blockchain can do for us as a car dealer or real estate salesperson or people doing other things What can blockchain do for us? But that’s wrong You need to think in the way that when the world of blockchain becomes enormous what you can do for it Just like they way you treat Internet You can’t say, I want to make a company website so what the Internet can do for me? 20 years, it could only host a company website for you but you need to have a longer-term view, by thinking what you can do for the Internet We have Wechat QQ and Facebook So what I am trying to say in the fourth section is this It is a living organism It in itself represents value It is a new eco-system that’s truly driven by technology It is a brand-new world I remember a year ago I was here hosting “Chain Show” Global Blockchain Projects Roadshow A year ago, on 6th of August at the Shanghai International Convention centre One year later, even to my surprise I am standing here sharing with you something serious about blockchain I don’t think I am doing a commercial or promotion for Nebulas and I hope you can identify with it I hope we stay in touch and hope to see you next year Thank you!

How Blockchain Technology Will Disrupt the World of Retail

Hey and welcome to Retail 90 I'm your host Tom We're hearing a lot about Blockchain at the moment but what even is it? And what could it mean for online retailers? First then the technical part, a blockchain simply records data in chronological order

The difference is the data is never stored centrally but it's distributed across multiple computer networks around the world And because the data base is distributed no one party can ever make any changes so it becomes permanent This makes it ideal for digital currencies such the famous Bitcoin but it's not all about banking the list of uses is growing and diversifying and the potential for retail is huge as well as protecting consumers from fraudulent transactions by creating a smart contract which holds back funds until everyone is satisfied – it can also be used to reduce other types of fraud and build consumer trust It creates a permanent record of a product's journey from supplier to customer so it can prove origin and authenticity whilst improving visibility on the supply chain What about warranties? Blockchain offers the possibility of recording all purchase transactions so no more shoeboxes full of receipts

And when it comes to customer loyalty how about the idea of using blockchain to record loyalty points for awards schemes Blockchain provides a better customer experience and for retailers it streamlines the exchange of information So where will this take us in the future? Well blockchain is likely to be a part of a product's whole life cycle even through to tracking new owners in the case of a resale And while it's hard to build trust in the wild wild west of today's internet Blockchain can fix that issue of trust which for online retailers can only be a good thing

But what do you think? Let us know your thoughts

Free Thoughts, Ep. 212: Your World on the Blockchain (with Brock Cusick)

Aaron Powell: Welcome to Free Thoughts, I'm Aaron Powell Trevor Burrus: And I'm Trevor Burrus

Aaron Powell: Joining us today is Brock Cusick He's an attorney working in the foreign exchange and derivative markets Welcome to Free Thoughts, Brock Brock Cusick: Hi Aaron Thanks for having me on

Aaron Powell: What is a blockchain? Brock Cusick: A blockchain is a new kind of database That's how I think about it It's really the core of what Satoshi [00:00:30] Nakamoto, the inventor, of Bitcoin really invented He If you think about Bitcoin, it's decentralized money We've had decentralized money before Gold coins are decentralized money, and they've been around for thousands of years It's really the blockchain which is a new type of database that was his core invention

It's really what's [00:01:00] creating a lot of change in the world right now Trevor Burrus: It's decentralized but what does it allow us to do? Aaron Powell: Or just give us a [crosstalk 00:01:10] Just tell me a sketch of how it works Trevor Burrus: First that, and then we get to the application Brock Cusick: The thumbnail sketch, the blockchain, if you think about a database, a database is like a ledger, like an Excel spreadsheet If you think it's something regular most people might be familiar with

[00:01:30] It's just a list of entries with arbitrary data that you can write to them Usually if you've ever tried to work with a spreadsheet on someone you have an issue of version control where you could put things in your spreadsheet and then they could end up changing it If you want to trust this spreadsheet is accurate, the way I sort of trust my to do list at work, which I maintain in this spreadsheet, I don't share it with anyone, [00:02:00] because I don't want anyone else going in there and deleting things off my to do list that I need to do, because otherwise I'll forget and they won't get done When you have databases you usually have to have a trusted person to maintain and run the database and verify that any changes made to the database are appropriate The blockchain is new in the sense that it can be an open [00:02:30] network, which means anyone in the world can access it, anyone in the world can attempt to write into it and yet it still maintains its integrity even though it's open to the entire world

That's what really new about it and that's what really fascinating The way it works is it relies on a number of different underlying technologies to make this work Basically it uses [00:03:00] cryptography which is asynchronous Let me back up a little bit It uses cryptography which is very easy to check but very hard to do to verify that transactions that enter into the database are appropriate, so that you can send a transaction to the database, to the blockchain, and it can be incorporated according to the rules

It's arranged in such a way [00:03:30] that if you want to send an incorrect or I could say a transaction that breaks the rules and you want to fake it, the way you have to do it, because of the way the blockchain is set up, is you have to burn an amount of electricity about equivalent to what the country of Yemen uses in a day to falsify one transaction Trevor Burrus: That's what you mean by hard to do is just computing power? Brock Cusick: Yeah You can do it with computing power but [00:04:00] what you can do is falsify a single transaction The maximum payout of that falsification is whatever the value of the transaction is If you transfer $100,000 to someone, or $1,000 to someone, and then you want to transfer a false transaction, you want to move that money to an account you control instead of the other person

That's the maximum payout [00:04:30] The cost is always the electricity cost of the entire network Trevor Burrus: Just to make sure that I'm clear about his, because Aaron knows way more about blockchains than I do, and it's a little bit hard to put your brain around If we use a metaphor, for example, you talked about using a trusted ledger, held by a third party If I transfer money to you via my bank, that's depending upon the fact that [00:05:00] we trust the bank

You trust the bank and I trust the bank, right? Brock Cusick: Exactly, right Trevor Burrus: The blockchain takes the place of the bank or another third party by encoding a series of, again I might be getting this wrong, tell me if I'm wrong Coding a series of indicators of a transaction that is very, very distributed and hard to break, and therefore it verifies between you and me without having to have a third [00:05:30] party Is that kind of correct? Brock Cusick: No, you got it There is the ledger of the blockchain is, the blockchain is the ledger of all the bitcoin transactions that have existed since the software was implemented in 2007

What it does is it's run on thousands of nodes all around the world who don't know each other They all independently verify every attempted [00:06:00] transaction If you want to send money, send bitcoin from your account to my account, you have to submit a transaction to the ledger, you sign cryptographically with the same signature, the same public key cryptography that you used to receive the money in the first place You sign it and say, "I received [00:06:30] this money three months ago When I received it, this was the public key I used

Here I'm signing this transaction with the exact same public key" And you submit that to all the nodes globally They verify that it's the same public key They verify it's the correct digital signature Then as long as your transaction that you've submitted meets the rules of the bitcoin network, they record it to the blockchain

Aaron Powell: This brings up the nature [00:07:00] of this ledger and the nature that all of the transactions, including the addresses that the transactions were originating from and going to are stored in this public ledger that goes back to the very beginning Brock Cusick: Yes Aaron Powell: Brings up the question of privacy, because bitcoin often gets pitched as not just a better way to send money around but one that's couch more privacy [00:07:30] or less susceptible to having our transactions snooped on, but now our transactions are all happening in public I'm curious about that because one of the early applications of bitcoin, on of the early big uses of it was the infamous Silk Road where people were buying and selling drugs and all sorts of actually awful things too with bitcoins How private is it if you can log, if I sent Trevor 20 bucks, [00:08:00] you can log in and see that here is my wallet, here is Trevor's wallet and here is the $20 flowing to it? Brock Cusick: The privacy features of the base bitcoin feature set, just are like the core feature set have been definitely oversold by a lot of people who I don't think maybe understood exactly how the network works

Every bitcoin transaction happens in public, every bitcoin transaction is verified by every node, which [00:08:30] is open source software that anyone in the world can run If the IRS is running a bitcoin node, and they probably are honestly or the FBI is They just being part of the bitcoin network, they receive a copy of every single transaction that's submitted to bitcoin You have to register when you open your account at bitcoin It's an open network, you just have to download free software

It assigns you a random number I think the numbered accounts in Switzerland You [00:09:00] have a numbered account, it doesn't have your name on it, but once the authorities connect you to the numbered account, all the transactions in and out of that account are public record Trevor Burrus: Here is maybe a strange question, but I think it's one that a lot of people want to ask about bitcoin which is, what makes bitcoin valuable? Brock Cusick: It's rare Every commodity in the world that has a fixed quantity, there are some level of demand that meets that fixed quantity [00:09:30] and that supply and demand curve tells you what the price is

Things with higher demand and lower quantity are worth more, like gold Gold is rarer than silver, so gold is worth more than silver Gold has other qualities that make it useful as money That's true for any commodity, concrete, blacktop, tons of wheat, whatever What makes bitcoin rare though, that's somewhat [00:10:00] interesting, because if you think of bitcoin as a digital commodity, the entire reason that Napster works and the entire reasons that bit torrent works is you can copy digital files infinitely

Once something is a digital file you think of that as being infinitely suppliable You can make as many copies as you like and you can share them around the world for free Bitcoin is mathematically rare If you are familiar at all with the network you know that there are computers that are involved [00:10:30] in the network called miners The bitcoin miners, they are a global network of computers that are competing with each other to find an exceptionally rare number, and it's so rare that this huge global network of computers which all together has more computing power than google or Amazon or an of these companies

They only can find one of those numbers [00:11:00] every 10 minutes It's very simple for anyone with a very small low power computer, like a raspberry pie or your phone, or whatever This number is very simple for the small computers to verify how rare the number is

It's extremely hard, in fact, it's impossible, mathematically impossible to fake how rare the number is You can't just make up a number and hope it's rare It actually has to be rare [00:11:30] That rarity That rare number that's found once every 10 minutes is recorded to the bitcoin blockchain along with the transactions that people submit every 10 minutes

That's the people that are verifying You can submit, you could make up a bitcoin blockchain yourself, you can download the current blockchain, make a copy of it and then make a whole bunch of transactions and submit them, but you can't fake that rare number That's mathematically impossible [00:12:00] If some third party out in the world receives your copy of the block chain, and someone else's copy of the blockchain, they can look at those, the nodes that is appended to that block of transactions, and they can see which one is rarer, which one required more electrical power to discover and generate? That's how bitcoin's rarity is created and from there just simple supply and demand means that it's a commodity [00:12:30] and it therefore has a market price Aaron Powell: In finding and then the computer that finds those, that finds that number gets rewarded

That's what they are mining for is they are mining for bitcoins Brock Cusick: Right One of the rules of the network, and these rules are all agreed by, they are agreed socially by all the miners Everyone who participates in the network is essentially accenting to abide by the rules of the network by participating [00:13:00] One of the rules is that whoever finds this number, when you submit that block of transactions, you get to do two things, you get to create a few bitcoins for yourself

And you get to keep all the transaction fees that are in all the transactions that happened since the last rare number was discovered On average these rare numbers are found every 10 minutes That means you basically get to collect 10 minutes worth of the [00:13:30] transaction fees on the bitcoin network Trevor Burrus: You mentioned this previously but I might do like sort of fill in the history, you mentioned Satoshi Nakamoto A lot of people, I was hearing about bitcoin, because I ran in libertarian circles in 2010, 2011 and unfortunately did not buy any bitcoin even though people were telling me to

At that point it was like a dollar or something along those lines [00:14:00] Where did this come out of, was this some sort of dark internet place where so many people were mining these bitcoins? And also if I'm correct I believe that at beginning it was easier to mine bitcoins and it's getting progressively more difficult, correct? Brock Cusick: Yeah I don't remember exactly where Satoshi first posted about it I saw the post once but I don't remember the website Satoshi, it's a fake [00:14:30] name, it's a pseudonym, we don't know who the person is, although there is lots of speculations obviously

He just posted and shared the open source software And then from the open source community, ever since the beginning, lots of people have been involved and then Satoshi himself stepped out of development after a couple of years and hasn't been seen since It's now just in the world so to speak [00:15:00] Regarding your difficulty, you are absolutely right One of the rules of the network, the bitcoin network is that it wants to discover the rare number once every 10 minutes

That its goal Sort of like the federal reserve has an insulation target, the bitcoin network has a 10 minute block time target As more people compete to find this number, more computing power is added to the network [00:15:30] As that happens, the numbers get discovered more often If the average time for the discovery falls below 10 minutes, what happens is every two weeks the network agrees to adjust the difficulty upward, to get back to 10 minutes average block time

Aaron Powell: I think that answer, a couple of follow ups, but I think they gave us an opportunity to then pivot into [00:16:00] some of the other topics we are gonna discuss There is that 10 minute target and then there is ultimately a fixed supply of bitcoin, because the number of bitcoins you win for solving it halves every so often- Brock Cusick: Few years I think Aaron Powell: Yeah, but I think ultimately it will stop with what is it? 21,000,000 bitcoins in circulation? Brock Cusick: That's right, 21,000,000 Aaron Powell: Which is supposed [00:16:30] to be in the year 2040 roughly? Brock Cusick: Mm-hmm (affirmative) Aaron Powell: First, when that happens, when there is no longer any bitcoins to be mined and given that the bitcoin network is depending on these miners to effectively to maintain it, to process transactions and maintain the integrity of it

What happens then? Is there a reason for, because it's this enormous amount of computing power and it's a high cost, because you have to pay for the electricity for all of this on top of the equipment [00:17:00] What's the incentive for miners to continue to mine even after there is no bitcoins to be extracted from the virtual ground? And then also how does this play into There is a lot of controversy in the community right now, because there is supposed to be a fork of bitcoin network coming up in middle November

And part of that has to do with the amount of time it takes to process transactions has been going up [00:17:30] because the blockchain is limited in size and it can't keep up with the number of transactions as bitcoin grows What's happening in the bitcoin world right now to address those issues and then how do the things that are happening impact this question of what happens after 2040? Brock Cusick: It's actually really great that you ask those two questions together because they are very [00:18:00] related Satoshi when he created bitcoin, he understood back at the time that you need to reward the miners in order for them to provide the service, because the miners aren't in the bitcoin business for the benefit of themselves to have this digital money They are in it to make money for themselves, it's a business for them You have to reward them somehow

Over the [00:18:30] long term, any sort of payment network really needs to make itself profitable based on the transaction fees, because people use the network and their usage is what cost money and so the most, the incentive structure that's most aligned with the users is the charge rate transaction fee Back in the day, back when bitcoin was first started, and hardly anyone was participating in it [00:19:00] For the most part no one really needed bitcoin, no one needed to pay money for this It was all just sort of for fun This is before it really had a market value

It wasn't generating any transaction fees What Satoshi did and he also did this to distribute the 21,000,000 widely is he put all 21,000,000 bitcoins in a potential either pool [00:19:30] for miners to reward themselves It started back in the day, in the very beginning that every time a miner found the rare number to mine a block, they got 50 bitcoins and basically zero transaction fees, because no one was paying transaction fees Over time these two, the whole design of the network was to eventually have those two numbers switch places Where the mining reward would be [00:20:00] zero bitcoins, but the transaction fees would be high

That's what we are seeing, which is nowadays I think nowadays there is, I just looked it up and now I can't remember, something like 200 bitcoins per day maybe 250 in transaction fees are paid A bitcoin is worth $5,000 at the moment roughly, the price moves around That's [00:20:30] a lot of money Those are the transaction fees, and that's where we are now We might even be generating more money from transaction fees, than from the mining reward already

The idea is that by 2040, assuming bitcoin remains popular, assuming people keep using it, the transaction fees only go up from here That gets to your second point about the congestion on the network The reason that people are paying transaction fees [00:21:00] is because they want their bitcoin transactions recorded to the blockchain The miners get to choose which transactions to include in any given block, a 10 block of bitcoin transactions The miners are most inclined to include the transactions that hey, a transaction fee because they can choose

You have to realize then that the transaction fee is the market price [00:21:30] where all the users are competing to get into a given block and to have their transactions processed faster That's what driving up the transaction fees, that's what's creating the revenue from the miners, and therefore that's what securing the network If you expanded the capacity of the blockchain to the point where no one has to compete to get into a block anymore, no one's gonna really pay transaction fees, not very much The revenue of the network goes down and then the miners are gonna stop [00:22:00] putting as many computing resources or as much electricity into finding the number Now the rarity of the network itself is lower and the security of the users is lower

There is a real balancing act there There is a real balancing act that I think the developers and the miners, and the users are all trying to edge forward without any one of them getting too much advantage over the other, because if the miners are [00:22:30] too successful at keeping the number of transactions that you can include low, you drive up the transaction cost to the point where fewer people want to use bitcoin On the other hand if the users are too successful in getting the size of the transaction blocks expanded, then the transaction fees go down the miners quit and the security of the network degrades It's a balancing act Trevor Burrus: This [00:23:00] balancing act

It sounds like something that people are working through, but is this a problem? Is this something that is concerning people? I guess connected to this other question? Because I hear people kind of criticizing there are flaws in bitcoin that are gonna make it go down in value and not be the perimeter one anymore You have people creating other cryptocurrencies like Ethereum, or things like Ethereum [00:23:30] to deal with perceived problems in bitcoin, kind of the ones that you've discussed? Brock Cusick: I don't think of Ethereum as a real competitor to bitcoin The reason I say that is because, like I said, Satoshi Nakamoto invented the blockchain, to bring us back to the beginning, it's a new type of database, it's open, it's decentralized, it's trusted without any central third party being the person you are trusting His [00:24:00] first use case was bitcoin which is money, and the bitcoin network is optimized to be good at being money Ethereum is optimized to be good as a medium for computing

The developers at bitcoin, every time they face a trade-off or an engineering decision, they are gonna, obviously they can make mistakes, but they are gonna do their very best to make the decision that makes bitcoin better money [00:24:30] If the Ethereum developers are similarly focused on being the world computer, they are gonna make different trade offs They are gonna make trade offs that make Ethereum better as a computer Will Ethereum always have a market price? You have the ether coins on the Ethereum network? Yeah They should because you need to be able to pay for computers on the Ethereum world computer to do their job

Ethereum needs to have an internal market price Ethereum's [00:25:00] market price is a servant to the Ethereum world computer, whereas on bitcoin the market price and it's value as money is the end in and off itself I think that over the long term, because their designs will never fully converge, you'll have multiple blockchains, at least one per use case so to speak Trevor Burrus: What do you mean use case, when it's being [crosstalk 00:25:28]? Brock Cusick: There is the money use case, the computing [00:25:30] use case It's possible another coin come along that wants to be global internet money that would compete with bitcoin directly and maybe eventually supplant and replace bitcoin

I don't think it's likely just because of the lead bitcoin has and the market penetration it has, but I admit that it's possible I don't think Ethereum is gonna be that, because Ethereum has a different use case Ethereum wants to be a world computer The designers are gonna make trade-offs Trevor Burrus: That's get to [00:26:00] the question which I think Aaron was gonna ask which is, if Ethereum is not money or you are kind of saying it's not as good for money, but it has value, that gets into the bigger topic here which is what is the blockchain good for that's not just money? Brock Cusick: That's true

The blockchain as I said is decentralized money has been around for a long time The blockchain is [00:26:30] what's new And the blockchain allows ledgers recordings that don't require a third central party to be the trusted party Obviously banks use ledgers, but they are hardly the only type of company out there that uses ledgers Lots of companies use ledgers, airlines have sky miles

There is also ledgers of [00:27:00] useful information like the phone book Everyone in the world, maybe not in the world but in each country, each jurisdiction, if you want to know someone's phone number, at least back in the day of landlines, you looked it up in the phone book The phone company was the central trusted party that maintained the phone book You could trust that when you looked up somewhere in the Yellow Pages or in the White Pages that that was the correct number That's an example of a ledger

That's an [00:27:30] example of a ledger If you heard any discussion out there about blockchain for identity, what they are essentially saying is, we can now make a phone book without a phone company You can now have a central phone book where instead of recording money transactions you record your phone number or your email address or some other personal data that you don't mind being public Now you've got a blockchain that's in the center there that's a trusted party and that's a trusted ledger You still have to find [00:28:00] an incentive model to make it work, so that the people out there have an incentive to maintain the ledger and to secure the ledger against being hacked

As long as that incentive model exists, you now have a different ledger, it's not a money ledger It's an identity ledger The blockchain, if you look out in the world and you think about where are there lists of names or other very important information that is [00:28:30] maintained by someone? They are basically just paid to maintain that list That's a potential target for blockchain disruption Aaron Powell: I want to eventually talk more about these, the kinds of industries that might be disrupted by this tech and the kinds of ways that this tech could invent new industries or really change the way that we do things

Before we get to that, we need to just go back to bitcoin for a little bit and ask about [00:29:00] the recent innovations in and around the bitcoin network that there are ways to do cool things on top of it or address some of the concerns that we talked about with transaction cost or speed or whatever else without embracing a different sort of coin or changing the underlying bitcoin protocol Two of the things that get talked about are [00:29:30] so called sidechains and then like level two protocols Brock Cusick: Yep Aaron Powell: What are those and what are some of the interesting things happening within those? Brock Cusick: Those are both very interesting They achieve different things

I'll talk about level two first if you don't mind The most common level two protocol that gets discussed a lot is called the lightning network As I mentioned before, the [00:30:00] bitcoin network can record, has very poor performance That's the trade off that was made for the decentralized trustless nature It's decentralized, it's trusted, but it only takes, it only takes in seven transactions per second globally

Everyone in the world who uses bitcoin has to share those seven transactions per second and there is billions of people in the world Obviously that's a problem if everyone wants to submit a transaction Bitcoin [00:30:30] at the moment is impossible to use as a way to say buy coffee, because there is just too many transactions out there, they could never all be recorded The solution that was proposed a few years ago and is now finally almost ready for rolling out to the consumers is this level two protocol called the lightning network What you do and the reason it's called level two is, [00:31:00] instead of recording a payment to the bitcoin network

You submit a transaction to the bitcoin network that opens a channel between you and somebody else, a payment channel, and you commit a certain amount of bitcoin to it Say a $1,000 As a metaphor that's almost like submitting, depositing $1,000 at a bank to open a checking account You [00:31:30] now have a checking account and it's got $1,000 in it Without the bank instead it's recorded to the blockchain and it's decentralized and no one can, as long as they don't steal your digital keys that secure the cryptography that you open the account with, no one can take that money or move it without your signature

Now you have this channel and it was submitted to the seven transactions per second, and [00:32:00] you paid your fee, whatever the fee is at the moment, maybe it's a dollar, maybe it's $5 to get a transaction submitted You did have to pay a fee to the bitcoin network, to the miners to get this transaction submitted Once it's open you now have this channel that's got $1,000 worth of bitcoin in it Now whenever you want to transfer money to that third party you don't have to submit the transaction to the bitcoin network You can just send them only along the channel you have opened, just between the two of you by exchanging signatures

[00:32:30] You can say, "All right, we are updating the debit and credit to say, "Instead of $1,000 to me and zero to you, it's now 990 to me and 10 to you" And you both sign that with your digital signature, and it's a good transaction Now they have $10 Any time they want to close the channel out after that they can submit a new transaction to the bitcoin network that says $10 to some account they control and 990 [00:33:00] to an account you control Or you can just leave the channel open

You can keep sending money back and forth like this, just between the two of you without ever getting the bitcoin network involved That's why it's called layer two You are existing at a layer above the bitcoin network It's a private channel, it's only between you and them It's more private now because these transactions individually are not public records

The only public records is that you open the channel of $1,000 in the first place Trevor Burrus: [00:33:30] Just as an analogy to this, if I'm understanding correctly, would it be like going to get a rental car and they swipe your credit card, and they authorize it for more than maybe the eventual charge you owe or is that a bad analogy? Brock Cusick: I think my first analogy about the checking account was better Another one could be say you open an account with, say you do a lot of shopping on eBay, and you also sell a lot of stuff on eBay You open a channel to eBay And [00:34:00] you put $1,000 into it

You now every time you buy something off eBay, instead of submitting a new bitcoin transaction, you submit a lightning network transaction just between you and eBay on your private channel Every time you sell something on eBay they send you money on the channel As long as you are still doing business with eBay, you just keep the channel open The useful thing here is eBay can now play [00:34:30] the role of middle man, because it have a lightning network channel to everyone else who buys themselves on eBay Say your dad also uses eBay, and you want to pay him $10 for lunch

Submitting that $10 transaction to bitcoin would cost you $2 in fees and it would take six hours or a day to confirm It's not convenient You could submit a transaction to eBay and say, "Hey, I want to pay my dad $10, we both have lightning channels with you I'm gonna send you 10 and [00:35:00] then you send him 10" eBay says, "Well, if I keep a penny I'll do it

If I get to keep a penny I'll do it" Now you can have instantaneous transfers between you and anyone else in the world as long as you can make a daisy chain of lightning network channels You might have an account with eBay, and maybe someone else has an account with Amazon, a lightning channel open to Amazon, because that's where they do their shopping eBay and Amazon [00:35:30] have a lightning channel between them because eBay pays Amazon for cloud services It's three parties but again, the cost of a lightning transaction since it's not submitted to the bitcoin network is only the cost of the computer and the electricity to confirm a simple, do a simple cryptographic calculation

It takes a fraction of a second The actual cost is probably not a penny but a thousandth of a penny or a millionth of a [00:36:00] penny You can do an infinite number of transactions between you and someone else as long as you pay those very, very small transaction costs, and it's solved instantly, not 10 minutes or an hour from now Aaron Powell: If that's a level two, that's example of a level two network, then that's a sidechain? Brock Cusick: A sidechain is completely different The level two networks like I said, they are good for payments

They allow bitcoin to be bitcoin but only faster and cheaper A sidechain adds [00:36:30] entirely new functionality As we've discussed, the bitcoin network has rules, and when you participate in the bitcoin network, you can only submit transactions that follow those rules If you submit a transaction that tries to do something else or has data in it, it doesn't make sense to the bitcoin network, the transaction is just gonna get rejected If you wanted to do something else entirely you can set up a new blockchain with different rules

People have done [00:37:00] that, like Ethereum Whenever you start a new blockchain like that, there is a bootstrapping problem We have to attract users because without users the cryptocurrency has no value If the cryptocurrency has no value, there is no incentive to people like miners to participate or to lend resources to the network It's a real hard bootstrapping problem, and it's also filled with a lot of scams unfortunately, because people will start a new blockchain [00:37:30] and they'll try to build up a value for it, but instead of rewarding all the coins to the miners they've kept 20% of the coins to themselves

It's sort of a get rich quick scheme A sidechain is like that, but instead of creating a whole new network, you just create a new set of rules and you agree to what's called Atomic Swap protocol, which allows you to exchange cons on your network for [00:38:00] bitcoin at a one for one ratio The benefit of this is that they will then [inaudible 00:38:07] of a one for one fixed exchange rate with bitcoin, the value of your coins are the value of bitcoins The bootstrapping problem of creating a valuable coin is totally sidestepped Your new blockchain can have completely different rules

It can do completely different things in bitcoin It might have blocks that are a gigabyte in size [00:38:30] or might perform arbitrarily total incomplete transactions like Ethereum does What a sidechain does is it adds new functionality to bitcoin by allowing people to move their bitcoin to the sidechain, doing whatever it is that that other chain does, and then moving those coins back to bitcoin when they are done and without [00:39:00] any market risk as long as you are willing to accept the market risk of your bitcoin changing in value Trevor Burrus: Aaron had mentioned previously that we have other things that we can do, or you had mentioned that if you have anything with a ledger where you need a third party like a phone book to verify a transaction then it has possibilities of blockchain application, and you had mentioned that maybe Ethereum is more [00:39:30] useful to these things We kind of got on that a little bit

If you start really thinking about sort of the world where the blockchain is running free, what sort of things that people may be surprised, could have an application to the blockchain, what sort of areas that are not explicitly money? Brock Cusick: There is first order effects and second order effects You might be familiar with the story where lots of people predicted cars, no one predicted Walmart Trevor Burrus: [00:40:00] Good point Brock Cusick: Walmart is the second order effect of consumers being able to drive to a store and the car has a large trunk Now they can do book shopping

Walmart and Costco are second order effect of the personal car The first order effect is all the companies out there are that are currently paid to maintain a ledger are under threat Because now ledgers can be [00:40:30] anything that is blockchain To tie it back to a sidechain Say I create a sidechain whose only purpose is to write and create a phone book

You create a phone book and you list names, phone numbers and email addresses, whatever you want to be public, since this is all purely voluntary You can transfer bitcoin to that sidechain, [00:41:00] you can pay the transaction fee to record your name and your phone number and your email to that ledger It collects a transaction fee paid in bitcoin because of the one for one exchange rate You sign it with your digital signature, so everyone knows it's actually you Then you transfer the change back to the bitcoin network

You now have a sidechain that's a phone book or maybe the domain name service that records all [00:41:30] of the website addresses in the world that's a bitcoin powered sidechain Any companies out there are under threat because of that That's the first order effect Second order effect I think is very interesting because those are harder to guess, but I have a couple that I like to think about One is how regulators are gonna be affected

[00:42:00] As Aaron mentioned when we started, I'm an attorney, so I think about laws and regulators a lot Right now there is a lot of regulations that affect us as consumers on a day to day basis without us really being aware of it, because we are not regulated directly We are regulated indirectly by having say our banks be regulated There are certain transactions you can't engage in because the bank won't let you Or the bank will, if you engage in certain [00:42:30] types of transactions or with certain types of counter parties or your transactions are a certain size like you withdraw over $10,000 in cash from your account, it all gets automatically reported to various regulators

That law is something that would be very hard to enforce against consumers directly But it's easy to enforce against the bank, because it's one bank, it's a big target, they've got a compliance department, who can check on these things [00:43:00] and could be held accountable You have all these laws The bitcoin network doesn't have a compliance department It doesn't report things automatically

If the United States tried to force it to change its rules the servers might just move to Peru, or China, or Singapore, or wherever It's very hard to nail down It's very hard to regulate Regulators are gonna have to approach things very differently [00:43:30] Any time we have

And that's true for not just banks, but if you think about currently the debate in privacy with The NSA has servers installed at AT&T's headquarters, so they can listen to all phone transactions That's only possible because AT&T cooperates with them If AT&T, if the phone book becomes decentralized and all the communications switch from [00:44:00] phone conversations to encrypted voice channels and everything about AT&T gets decentralized, now there is no office for the NSA to put its servers at It would have to take a different approach to achieving national security, which I think is good I think national security is a useful thing to have, but it's gonna force them to adapt, and that's gonna be a second order effect

There is probably gonna be a lot of gnashing of teeth and wailing, because no one likes [00:44:30] change Aaron Powell: I'm gonna ask about one potential use that I have no idea about but my boss John Samples who heads our First Amendment Project at the Cato Institute when I was telling him we are doing this episode asked me to ask this He was curious if blockchain or related tech could do anything about the current widely believed in problem of fake news You talked about distributed identity [00:45:00] systems and verified NNC systems, is there some way that we can kind of address these questions of what's authentic, what's not? Brock Cusick: Yeah, I think there is actually Let's take an example of the identity blockchain, the phone book blockchain

We'll build in a couple of more features You've got a phone book blockchain and you record your name and your couple of pieces of identity that [00:45:30] are yours Maybe an email address, maybe a Twitter handle That's your online social identity and is recorded to the blockchain Now we have already discussed the concept of the lightning network

The lightning network allows thousands of small cheap, instantaneous transfers of value What if the phone book blockchain, or sidechain had a lightning network but not for money? For trust, so that every time I interact with you [00:46:00] on Twitter, every time we exchange you reply, every time you reply to me or we send a DM, there could be an anonymous sort of little up-vote or tick to you or to me saying, "This person is a real person I've interacted with them for the last six years I've had conversations with them I think they are a real person I think they are trustworthy

" I could even write reviews [00:46:30] like Amazon You can write someone five stars Maybe you get a limited number of likes every week from the blockchain Instead of the blockchain giving out bitcoins it gives out likes that you are allowed to reward the people Over time, in a very organic way you can verify to the blockchain that this is my identity, and I have [00:47:00] 500 people who've all been interacting with me for the last five years, versus an account that maybe registers a comment on a news article or maybe they submit something to Reddit, but that account doesn't have that sort of history

It doesn't have that weight, the social weight, because it's fake It would be exceedingly hard for the, not impossible This is just like bitcoin, it's not impossible to fake a bitcoin transaction [00:47:30] It's just exceedingly expensive for the amount of value you get out of it Imagine if every time [inaudible 00:47:39] whoever wants to submit or a political operative wants to submit a fake news article

They can't just have fake a news article They have to fake six years or seven years or 10 years worth of social interaction It's now cost prohibitive Trevor Burrus: [00:48:00] That's a really good example of where people, where this can go A lot of people think that this is confined to bitcoin

We are still, to a bunch of people it's strange and so new It seems like this could get even bigger in terms of how disruptive so to speak or I wouldn't even call it disruptive, I would call it progressive that we can apply this to many different things How big can this general blockchain technology get? [00:48:30] The second question is this It seems at some point the governments of the world might start getting upset about it, because they might be- Aaron Powell: Especially considering that this all originates among, the early people behind this and the early conversations when bitcoin was still a very small thing was quite Gold Scourge and this is libertarians and anarchists, the cipher punks and so on That there's always been a strong anti- [00:49:00] authority, anti-government strain to all of this

Brock Cusick: Very strong anti-authority Not just anti-government, they are anti any form of authority They don't like Microsoft, they don't like Google, they don't like the banks They just want to be very independent That's true and the government is, we have I think as a preview, look at the fights we have constantly over encrypted communications

That is [00:49:30] an ongoing permanent fight with the government So far America is a fight that privacy people are winning, but it's not easy Now multiply that by 1,000 because bitcoin and all these other ledgers, they don't just encrypt communications, they potentially encrypt everything They encrypt finance They encrypt money

Now let's combine [00:50:00] a few potential blockchains that are all decentralized If you combine decentralized encrypted money and decentralized encrypted communications, and a decentralized phone book which could also record say a mailing address, a PO Box You probably won't want your home address on the public record, but a PO Box could be okay, or any sort of centralized receipt, [00:50:30] place for receipt of packages

You combine all that with self driving cars I can now communicate with you over an encrypted channel, we can agree to exchange goods and services for money on that encrypted channel We can send each other the money over the encrypted channel, either bitcoin channel Then I can call up a self driving car, give it a box and the box is [00:51:00] a form of encrypted, because the box itself is brown paper, it's opaque, and the self driving car will drive it to you There is now, you have basically the entire economy could become encrypted

Trevor Burrus: This is libertopia we founded Brock Cusick: Yeah, the physical economy, not just communications but the physical economy and the finance networks could al become encrypted at certain levels of sophistication if blockchains become [00:51:30] sufficiently developed and sufficiently mature and sufficiently widely accepted There is no guarantee we get there obviously, but that's a future that people are gonna think about and people are gonna worry about, especially on the regulatory side Trevor Burrus: Do you think governments can stop this? Brock Cusick: They can make it hard They could make it really hard

In fact, they can, here is an example, everyone involved in bitcoin has, everyone involved [00:52:00] in bitcoin has some level of exposure to the market price of bitcoin The miners are mostly in China, because China has very cheap electricity Their hydropower out in the Himalayas is almost free China has all the miners You might think the US regulators have very little leverage over the bitcoin network because the miners are all in China and the nodes are global

Bitcoin only has a market value because [00:52:30] rich people, and by rich I mean the developed world, wants to buy If bitcoin is banned in the US and Japan, and Western Europe, what do you think is gonna happen to the market price? Trevor Burrus: Plummet Brock Cusick: Go through the floor It's gonna go through the floor, if no one can buy it In that sense, the regulators do have some leverage over the miners, at least indirectly because they want to sell the bitcoin for the highest possible price [00:53:00] to the greatest number of buyers

They want the transaction fees volumes to be high There is some leverage there Trevor Burrus: Should people buy bitcoin with that in mind? Brock Cusick: Whether they could attack the networks directly really depends on how widely they are adopted Trevor Burrus: With that in mind and other concerns and also positives that you've raised, should people buy bitcoin? Do you think it's a good investment? Brock Cusick: [00:53:30] It's a gamble If it becomes the global reserved currency for all computing resources, it's worth a hell of a lot more than $6,000

If it gets banned by all the world's governments it's worth nothing Aaron Powell: With those potential threats in mind and with the interesting innovations that we've talked about, the sidechains and the level two and the way that this can then [00:54:00] interface with other things in our lives, what do you think the next say five to 10 years in this space look like? Brock Cusick: Next five to 10 years are still building out I think what's really fascinating, it's hard for me to guess I predicted that a recent upgrade to the bitcoin network called Segregated Witnesses, just got adopted this summer I thought it was gonna get adopted two years ago

I even made a bet with a friend of mine for [00:54:30] 50 bucks that the SegWit would be adopted and that micro-transactions would be a thing like a big thing by last October Obviously I was completely wrong I completely missed how big a faction within the bitcoin network was resistant to SegWit being adopted Without those protocol upgrades, the seven transaction per second limit [00:55:00] is gonna prevent bitcoin from ever being widespread adopted It could end up being a replacement for gold, but all of the wild eyed fantasies of libertopia will not come true because the process throughput is too limited

On the other hand, SegWit's been adopted now, the lightning network finally has everything it needs to go and I've seen indications that the technology needed to support [00:55:30] sidechains should be available within the next six months I haven't seen any organized resistance to it If those two things actually go through and we actually have lightning network in sidechains by say March, the next five to 10 years are gonna be prototyping out the technologies, the consumer facing technologies on the level two protocols and on the sidechains that really add functionality and throughput [00:56:00] to bitcoin and really allow it, give it the growth head groom it needs to actually become a global currency Aaron Powell: Thanks for listening This episode of Free Thoughts was produced by Tess Terrible and Evan Banks

To learn more visit us at wwwlibertarianismorg