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Participants:
Adam B. Levine (ABL)Host
Andreas M. Antonopoulos (AA)Co-host
Dr. Stephanie Murphy (SM)Co-host
Manuel Aroz (MA) - Founder/Chief Developer
ProofOfExistence.com
Balaji S. Srinivasan (BSS)Silicon Valleys Ultimate Exit
(Intro MusicFade In)
ABL: Hi and welcome to episode 65 of Lets Talk Bitcoin, a twice
weekly show about the ideas, people and projects building the digital
economy and the future of money. Visit us at letstalkbitcoin.com for
our daily guest blog, all our past episodes, and of course, tippingaddresses. My name is Adam B. Levine and this episode is about
disruption. In a fiat world, everything is subject to change and thats
exactly what happened in Argentina one recent November night.
Andreas, Stephanie, and I talk cryptocurrency and corruption, black
markets and opportunity. Then, Coinpunk is a project founded in part
by a grant from the Bitcoin Foundation. Simply put, they allow Bitcoin
payments on mobile devices without needing a native application. As
we sometimes do, LTB is happy to share the first transaction ever
made using this important innovation. Later, Andreas is in Argentina
for the Latin American Bitcoin Conference. He caught up with Manuel
Aroz, the founder and chief developer of ProofOfExistence.com, the
blockchain notary service, to talk about fixing moments in time, how
Bitcoin 0.9 will change the game for meta-services using it and more.
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And finally, we step back from Bitcoin and look for a moment at the
larger world we live in. Bitcoin is disruptive financial tech that hasnt
yet been stopped because those who wish it ill cant find a head to
chop off or a body to drag into court. BSS has been thinking about
where all this is heading and its an idea worth hearing. We end
todays show with Silicon Valleys ultimate exit. So, capital controls?
I know somebody mentioned capital controls. Enjoy the show.
(Intro MusicFade Out)
AA: One of the things that weve discussed plenty on this show is the
idea that Bitcoin is far, far more important to the other six billion.
Those who are under-banked on banks living in oppressive regimes,
living in countries with hyper-inflation, living in countries where
burning your money is not as good as, is better than spending it, but is
not as good as burning goat s**t. In those particular countries, Bitcoin
is not just a fad. Its not just a new technology. Its potentially a life-
saver. Its an exit. Nowhere is this more true today than the country
of Argentina, where the Latin America Bitcoin Conference is going to
begin next weekend. I will be going there as well as a number of other
Bitcoin people. Its going to be a rather important show and just intime, the Argentinian government decided to throw yet another log on
the fire of Bitcoin and on the devaluation and inflationary destruction
of the Argentinian currency. If youve been paying attention there,
theyve suffered from hyperinflation for years and the government has
responded to this by turning the screws on currency controls and
trying to keep a panicked population locked-in on a sinking ship of
currency. The latest news is that theyve imposed a foreign currency
credit card transaction surcharge. Basically, they apply a tax of 20%already on any transactions where an Argentinian credit card is used
to purchase something outside of Argentina. Credit cards were one of
the few remaining ways to essentially exit the Argentinian money into
U.S. dollars or other currencies. As of this week, theyve raised that
from 20% to 35%.
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SM: Whooo!
AA: Again, punishing rates and really an indication of outright panic
by the Argentinian government. Theyre doing this at a time when
there is another option and that option is Bitcoin. Im very excited tobe visiting Argentina because I think it might be, not the first state to
adopt Bitcoin, but the first state whose population adopts Bitcoin
while the government stays stuck on a currency nobody wants to use.
Theyre already talking about splitting the currency into a foreign
version and a domestic version similar to what happens in Cuba where
there is one version of the currency for tourists, which is much
stronger and you can get essentially much better returns and there is
another version of the currency for internal use which is much, muchweaker. Theyre proposing doing that with their Argentinian money
but before they actually have a chance to do that, a big chunk of the
population is already using Bitcoin for exactly that purpose and that
adoption may accelerate. Keep in mind, Argentina has electricity.
They have internet. They have a literate and technologically-savvy
population. They have all of the prerequisites and preconditions to hit
that tipping point and do mass evacuation of currency. The only thing
thats stopping them are these broken currency controls that simply
cant stand in the way of Bitcoin. So, is Argentina going to be the next
tipping point?
SM: It seems obvious that it is. Youre right, Andreas, this is just
panic on the part on the government and people arentdumb, they can
see it. If theres a better option for them, theyre going to take that.
The question is, will the Argentinian government try to make it illegal
to buy Bitcoin, somehow, or to use Bitcoin.
ABL: Invariably, yes is the answer to that. Itsnot like its the first
time were seeing this movie, right? This has all happened before in
Argentina by itself, but in South America and in parts of Africa this is a
fairly common way that things go. I think the better question is, can
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Bitcoin help to break this cycle? Because, the only way you can get
away with doing things like this is if there is no other option. If Bitcoin
is an option and its available to everybody, regardless of what your
local government wants you to do. Does that mean that local
governments can no longer pull off maneuvers like this?
SM: I hope so. That would really go a long way to making the world
better for ordinary people.
AA: Were going to find out soon enough, because even if they try to
ban Bitcoin, this is an environment where the rule of law is weak as it
is in most countries where you have these kind(s) of extreme
measures. What that means is that there is just enough corruption
within the political class that even if something like that is illegal, the
people with money can bribe people to turn a blind eye to their use of
Bitcoin. What that will do is it will create the conditions necessary for
capital flight into Bitcoin. When capital flight does not involve a flight,
when it doesnt involve a suitcase full ofmoney crossing the border,
when it involves simply, the installation of an applicationthe balance
of power between people in currency and between people and nation-
state has shifted forever in the favor of people.
SM: But is it really that easy? If you live in Argentina, how do you buy
bitcoins?
AA: Thats the beautiful part about it, which is what you need there is
a compensating flow that balances things out and that compensating
flow is essentially remittances. What you do is you balance
remittances coming in from people outside Argentina who are sending
money home, and instead of sending U.S. dollars and converting intoArgentinian pesos, theyll send Bitcoin. You need local people willing
to buy Bitcoin. You balance remittances from war with capital flight
from inside the country and the nice thing about is you need to
balance it, perhaps, on a 1000:1 ratio; One rich person within doing
flight against a thousand migrants sending money home and
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immediately, you have a well-balanced flow. I dont think it will be
difficult to find buyers within Argentina and I dont think it will be
difficult to find Bitcoin sellers within Argentina if you kick in the
remittances flow.
ABL: The free market really does solve this problem pretty elegantly,
right? There are few exchanges operating in South America right now
and there are multiple countries that have currency controls in South
American. What youll see is that if you find these national exchanges,
they tend to have very very high fees and they also tend to do small
volume but the volume over time is growing. Those companies being
out there are like beacons to other companies that say, Man, theyre
making 15% on their transaction fees? Thats crazy! We can do thatfor 10% and make a huge profit! Again, this problem does solve itself
over time. The question is, Are we allowed to solve the problem or
are the solutions de-facto black market solutions because its illegal
to trade in the currency?
AA: When the currency is in this condition the only market is the
black market. Thats the important thing to remember. That what, to
us, seems alien and extreme and only under the worst possible
circumstances and frowned upon by law, in many other countries is
the norm. The black market is much more powerful in countries like
Argentina. So, think about people who have moved their money
outside Argentina yet still need toI dont knowbuy apartments, buy
cars, live in Argentina, spend money in Argentina; mostly rich people,
but hey, theyve already done the hard work of air-lifting their currency
out and they can use Bitcoin to bring it back in. I was reading a while
ago that some people were buying stock on the Argentinian stockmarket with pesos, that is also listed on the New York Stock
Exchange and then selling the stock in New York for dollars.
Essentially, using the stock market to do currency arbitrage and move
money out of the country. Any single avenue, any door left open is so,
so attractive to people trapped in a sinking currency that they will go
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to extreme lengths and measures in order to exit the sinking currency.
Theyll be willing to deal with uncertainty with risk, with exchange
rate risk, with legal risk, with bribing, with whatever they need to do to
save whatever value they have in their meager savings. People are
willing to do a lot more work to adopt Bitcoin in a country like that
than they are to adopt Bitcoin in a country like the U.S. I think thats
the main lesson of Bitcoin. Its all about the other six billion.
SM: I just looked on localbitcoins.es, which is the Spanish Local
Bitcoins - Spanish language version. I looked at the Comprarbitcoins
en Argentinaand in Buenos Aires theres several listings for local
sale, both for Argentinian pesos and for U.S. dollars. It looks like this
is already starting; what are we going to see happen next?
ABL: How are the rates?
SM: Well, I dont know becausewell, actually, this looks pretty good.
Somebody is selling bitcoins for $995 US, which is below market rate.
Thats like BTC-E rates, right now, currently. Somebodys selling for
$1113 US and some of these people have a lot of feedback so it looks
like theyve been getting some sales.
ABL: Well, Im sure its going to be a rapidly growing market over the
next couple of months, specifically, the next couple of years. I just
talked with a guy who started up a podcast in Portuguese and I believe
its the first Bitcoin podcast in the Portuguese language. I think that
really, all of the non-English language areas are a little behind the
Western world in terms of where we are, thinking about Bitcoin, but
theyre not far behind and theyre catching up really fast.
AA: The motivations are clearly aligned in a much stronger way than
they are here. I predict that 2014 will be the year of Bitcoin in the
peripherae, if you like. Its not going to be in the developed world. Its
going to be playing out massively as a tsunami of capital flight in the
developing world. Thats where were going to see most action in
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Bitcoin. The center of gravity has shifted. The hotspots are going to
be (the) Middle-East, Southeast Asia, and Latin America. Thats really
exciting I think, for Bitcoin. It opens a whole new level of possibility
even for those of us who are here, in the U.S. It means great things as
weve seen with the price increase because of China.
(MusicFade-In/OutCoinpunk Promo - Start)
Kyle DrakeHi, this is Kyle Drake. Im working on Coinpunk and were
Allentown, PA and this is the Allentown, PA subway that accepted
Bitcoin. Were going to demonstrate for the first time ever a pure
website based QR-code scanning Bitcoin wallet. Coinpunk actually
can do a QR code-scan now without even having a native application
installed. I think that this the first time that anyone has ever done a
QR-code port based point of sale transaction for Bitcoin with just a
web browser and no native applications installed. Apples been
banning Bitcoin applications so its kind of, a huge problem in the
community. We're going to solve that problem right now.
(P2P transaction discussion beginningbuyer instructed on how to
initiate the transaction by Kyle (seller). Transaction is then completed
via QR code Bitcoin payment. The transaction is successful although
the verbal dialogue is recorded poorly.)
(MusicFade-In/OutCoinpunk PromoEnd)
AA: Hi, everyone. Andreas Antonopoulos here. Im in Buenos Aires,
Argentina getting ready for the Latin American Bitcoin Conference. As
part of my visit here, Im meeting much of the Bitcoin community, but I
have a special guest, someone whos been very influential in exploringthe other layers of protocols that can be installed on top of Bitcoin,
the types of application that come after a currency. My guest here
today is Manuel Aroz, who is the founder and chief developer for
ProofOfExistence.com and Proof of Existence is a notarization service
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that allows you to digitally sign data and prove their existence.
Manuel, tell me a bit about how you got involved with Bitcoin.
MA: Well, I heard about it in 2010, three months before the crash, the
first $30 crash, if Im correct.
AA: Okay. Yes.
MA: At first I was interested in the technology aspect. I was studying
at the universitythe distributed systems and cryptography course
and I was just learning that the distributed time-stamping problem was
impossible to solve and the next day, I read about Bitcoin and how
they solved it. They created an economic system which is
decentralized, so I was really impressed by that. I started mining alittle bit with my GPU, which was at the time, enough to mine. After
that, I started investing some money, some savings. In 2013, I started
to get involved in the development aspect. I started to read code from
other projects and I decided I wanted to try and develop something
myself. Thats when I created Proof of Existence. At first, the idea for
Proof of Existence came first unlinked to Bitcoin. I wanted to make a
web service where you could certify a document in a centralized way.
That meant that people had to trust my servers and my authority to
certify the document. But, as I was reading about Bitcoin every day,
suddenly, the connection came to me and I said, Why dont we certify
this document with the blockchain? which requires no trust.
AA: Mmm-hmm.
MA: I thought that would be difficult, (that) the technical aspect
would be difficult but it proved really simple. I discovered that the
programming aspect for Bitcoin is really, really simple.
AA: Yes.
MA: I created the whole site in less than a week, in my spare time. I
created a technical experiment and it got some good reception at first,
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but over the last two weeks, someone posted it on ? news and it went
somewhat viral on Twitter. Its now grown a bit more and many people
are becoming interested in it.
AA: Lets just quickly describe what Proof of Existence is. Theproblem youre solving is the problem of attestation, digital attestation
of digital notarization. In a traditional sense, if you want to prove that
someone has a document, like a deed to a house or a stock certificate
or has created a new idea, for example, like a patent or a copyright.
They want to prove that this idea existed at a specific point in time.
Today, the way you do that is you go to a public notary, in most
countries, and they will basically sign and stamp on that piece of
paper and put it in a public register which is like a paper version of ablockchain, but its distributed. If somebody wanted to confirm that,
they would have to go back to that notary and get a letter that proves
in the register they had your information. You solve this by essentially
fingerprinting or getting a hash of any document. You can put any
data stream in this?
MA: Yeah, any digital file.
AA: Any digital file. And you create a fingerprint. What type of
fingerprint is that? How many bits?
MA: Its SHA-256.
AA: SHA-256, ok. So, youve basically got a 256-bit signature and
then, how do you insert that into the blockchain?
MA: I had read thatI didnt invent the technique myselfI had read
that other people had embedded data in the blockchain so I started toresearch on that. There is two main methods or at least, at that time,
the most common methods wereone was the data fragment for new
mined blocks which the miners control.
AA: So this is the coin base that goes into the first transaction?
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MA: Yeah. That was out of my reach because I was not a big miner at
the moment. The other method is to embed the data inside a Bitcoin
address and send the transaction to that address so that this
transaction gets stored in the distributed ledger for Bitcoin, which is
the blockchain. In that way, you have a distributed means of storing
that data. The basic idea is you replace the public key associated
with a Bitcoin address with arbitrary data which, in fact, renders the
address useless because
AA: There is no private key corresponding to it.
MA: Yeah, exactly.
AA: Okay, this is what in Bitcoin-speak, is an un-spendable output, atransaction that you send money to, and that money disappears
because it cannot be redeemed as an input into another transaction.
MA: Yeah, exactly.
AA: Or more bluntly speaking, people call this dust because
theoretically, the purpose of the blockchain is to transfer value not
data.
MA: Yeah.
AA: Right. I bristle when I hear that description because to me,
Bitcoin is a protocol and currency is just the first application. Im
really excited to see other applications. The basic problem being
described that Satoshi solves which is achieving distributed
consensus without a trusted third-party has so many more applications
than currency and theres no reason to bootstrap a new blockchain
every time you want to build a new application. Its much easier to
have the security of five Peta-hashes of mining behind you.
MA: Yeah.
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AA: Did you get that kind of criticism? Did people tell you (that) what
youre doing is a waste of time, its bad dust, that youre using the
blockchain wrong?
MA: Yes, I still get a lot of emails saying, Stop spamming theblockchain, from the Bitcoin core developers. Not personal emails
but when people discuss the service on the forums, the general
reactionthey dont seem to like it.
AA: Were talking about a tiny amount of data there, right? SHA-256
is what, 40 bytes of data?
MA: Yeah, its 32 (bytes) I think.
AA: 32. So, its a tiny amount of data. Youre basically using up two
addresses, two outputs.
MA: Two others.
AA: Do you do that in a single transaction or two transactions?
MA: Single transaction.
AA: Single transaction, one input, two outputs.
MA: Yes.
AA: And you actually spent some Bitcoin doing this?
MA: Yeah.
AA: Whats the minimum amount you spend for one of these?
MA: Im not sure because I changed it, but I think its a Satoshi or just
above the dust threshold.
AA: Oh, 5,432 Satoshis, right, yeah, or something like that.
MA: Right.
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AA: It uses a small amount of Bitcoin. This Bitcoin is forever lost and
certainly, thats an argument for not doing it exactly this way. You
mentioned to me recently there are better ways of doing it now.
MA: Yeah.
AA: So do you want to talk a bit about those?
MA: Yeah. Many people have suggested better ways to store data in
the blockchain. Using this method, the clients, they can prune these
transactions because they dont needto store these outputs in the
UTXO, which is the Unspent Transaction-Outputs, which is a pretty
scarce resource for the network.
AA: When transactions are put into the blockchain, each transaction
creates an output that in the future could potentially be used as an
input in a future transaction. It can be spent. Each client, in order to
be able to figure out what can be spent to create transactions, has to
keep a database in memory, usually, of all the outputs that are in the
blockchain currently, that have not yet been spent. That includes all
of the money that Satoshi mined, a ton of dust from other services that
create un-spendable output. The key issue here is not whether its un-spendable, but whether its provably un-spendable because if you dont
know if its un-spendable you have to keep it around forever, but if you
can prove that its un-spendable, then you can just discard it. The only
purpose of it is for archival purposes, right, so it can stay in the
blockchain.
MA: Yeah.
AA: OP-return is an operant inside the transaction scripting languageso for our audience, within each transaction, even the simple transfer
of value for, say, Alice pays Bob for a cup of coffee, is actually a tiny
script in a FORTH-like language, that is evaluated by a state machine
and that allows the Satoshi client and all Bitcoin clients to be very
flexible in the types of transactions they can process. Up to now, with
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your solution and all the other solutions for embedding data, you had
to abuse that system.
MA: Yes.
AA: You had to use it in a way that it wasnt intended. With OP-
return, you can simply say, This is a data value that has no spendable
use, so you can then prune it. Is that correct?
MA: Yeah.
AA: So, this is a major development. Essentially, OP-return, which
was a very deliberate move I think to create this capability. This
makes it possible for all kinds of other protocols to be embedded on
top. Ive described it as similar to port 80, where you can then shove a
ton of other protocols through it like with HTTP. Would you agree?
Can you see possibilities for future protocols?
MA: Yeah. In fact, theres quite a few projects working and adding a
protocol layer over Bitcoin. For example, the Mastercoin projectIve
actually contributed some code in that project in that first month and
we had the same problemwanting to embed data in the blockchain
and some people didnt like it. This was one of the reactions from the
development team, Okay, people are going to use the blockchain for
other uses other than a monetary system. So, lets support that from
the protocol in a way that it doesnt hurt the monetary system.
AA: A more efficient way of doing it.
MA: Yeah.
AA: Now, this still creates a bigger blockchain but that wasnt themain problem because the blockchain isnt growing very fast when
youre adding 32 bytes. The problem was the memory footprint of the
transactionbecause you can never get rid of that. You can never
summarize it. You can never prove it. With Proof of Existence, the
main use is obviously to prove a piece of data existed at a specific
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point in timeI know Ive used it for the safe paper wallet project and
one of the main uses for me was to decode signing, so that people
could verify that the code they were downloading from safe paper
wallet was secure and was the exact same code I had uploaded. The
big danger is that a hacker could come in, replace it with a code that
has, for example, a compromised random-number generator, and
suddenly, their paper wallets are no longer secure. Traditionally,
websites would do this by having the downloadable file and the MD5 or
SHA on the same page and that doesnt work. The reason it doesnt
work is because if youre a hacker and youve replaced the file, you
can replace the SHA, too. I know some people had previously
suggested, oh, lets go back and Google cache or a way-back machine
and confirm it was like that before, but with this youve 5 Peta-hashes
of mining power guaranteeing it so, for code signing, Proof of
Existence is absolutely amazing. I can think of a couple of other
immediate applications, patents being one of them. Trademark
application for proof of use and perhaps, copyright if youre writing
something that you want to prove existence, but I can imagine there
are a lot of others. What strange applications or interesting
applications have you seen of your service?
MA: Well, I was contacted this week by an Australian guy who told
me he had uploaded his whole genome, his DNAnot uploaded, sorry,
he uploaded the hash to the blockchain. Essentially, he proved (that)
he himself existed at a certain time in a fully anonymous and
distributed way.
AA: Wow. That is fascinating. DNA fragment, fingerprinted and then,
embedded in the blockchain, proving that this person existed at thisparticular moment in time. That is truly an incredible application and
certainly not one that Satoshi wouldve imagined, necessarily.
Although, it is exactly the kind of thing that a distributed ledger of
asset tracking with consensus validation is perfect for.
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MA: Yeah.
AA: I have no idea how he would use this or what value it would have
but its definitely very interesting.
MA: Yeah.
AA: What other occupations have you seen? Anything else like that?
MA: Yeah, theres also the idea to certify communications between
parties which are involved in any sort of agreement so you can prove
that the other party didnt answer because if you both agree that
youre going to upload any communication and certify it with the
blockchain, then you can prove that certain communications talked at
a given moment in time.
AA: You can do it like registered mail, perhaps, or service of process
when you want to serve legal papers to someone and prove that you
sent it by sending it through the blockchain. That is fascinating.
MA: Exactly.
AA: These are all examples of the basic science that Satoshi solved
which, for laypeople, the idea is that if you have two parties trying to
communicate across an insecure medium, or two or more parties,
them being able to achieve consensus when other people can
intercept, delete or corrupt their messages. That problem is called the
Byzantine Generals problem. Its a problem that was first described in
1975, I believe, by a distributed computing scientist and when Satoshi
first published his paper, the immediate response was well, that could
never work because that would be a solution to the Byzantine
Generals problem. (It) turns out its working. We dont know if its the
perfect solution but it is certainly an optimized solution and seems to
be working. So, thank you very much both for talking to us but also for
developing the kinds of applications that really show the future of
Bitcoin, the protocol, above and beyond Bitcoin, the currency. I hope
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to hear more during this conference. Manuel Aroz, thank you so
much for joining us.
MA: Okay, thank you, Andreas, it was really nice to meet you in
person.
AA: Thank you.
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8/13/2019 LTB65
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BSS: I can talk about Y Combinator, I guess you all know about that.
Let me introduce myself briefly while things are loading here. My
name is Balaji Srinivasan. Theres actually twelve people with mysame first and last name in the Bay area alone. In fact, I randomly ran
into another one of them at Stanford and founded a genomics company
with them. I go by my full initials BSS and I am a Stanford lifer. I got
my B.S., M.S., & Ph.D. at Stanford and in 2006 started teaching
computer science and statistics there. I left Stanford in early 2008,
scandalizing the department to found a genomics company which has
become very successful. Our names Counsyl and we test about 3% of
all births in the United States. I also taught a MOOC at
startup.stanford.edu that has become quite successful but Im going to
talk about something fairly different today. Can we go? Yes? Ok.
Alrightwhat Im going to talk about today is something Im calling
Silicon Valleys Ultimate Exit. So, as motivation here, its a bit topical,
is the USA the Microsoft of nations? We can take this sort of thing and
we can expand it - code-base is 230 years old, written in an
obfuscated language - system was shut down for two weeks straight -
systematic FUD on security issues - fairly ruthless treatment of key
suppliers - generally favors its rich enterprise customers but we still
have to buy it. If we think about Microsoft itself, theres a great quote
from Bill Gates in 1998 - what displaced Microsoft, what did he fear, it
wasnt Oracle or anybody like that, what he feared were some guys in
a garage, who happened to be ultimately Larry and Sergey back in
1998. The thing about what Larry and Sergey did is - theres no way
they could have reformed Microsoft from the inside. At that time,
Microsoft already had 26,000 employees, joining its numbers as 26,000
and 26,001 and trying to push for 20% time or free lunches - they
probably wouldnt have gone too far. So, what they had to do was
start their own company. They had to exit and with success in that
alternative, then Microsoft would imitate them. This is actually
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related to a fundamental concept in political science, the concept of
voice versus exit. A company or a country is in decline, you can try
voice, or you can try exit. Voice is basically changing the system from
within, whereas exit is leaving to create a new system, a new startup,
or to join a competitor sometimes. Loyalty can modulate this.
Sometimes thats patriotism, which is voluntary, and sometimes its
lock-in, which are involuntary barriers to exit. We can think about this
in the context of various examples and start to get a feel for this. So,
voice in the context of open-source would be a patch, exit would be a
fork. Voice in the context of a customer would be a complaint form,
whereas exit would be taking your business elsewhere. Voice in the
context of a company, thats a turnaround plan. Exit is leaving to
found a startup. Voice in the context of a country is voting, while exit
is emigration. So, if there are those two images on the left is the
Norman Rockwell painting on voice - on the right is actually my dad in
the center, and thats a grass hut on the right-hand side, so he grew up
on a dirt floor in India, and left, because India was an economic basket
case and theres no way that he could have voted to change things
within his lifetime, so he left. It turns out that, while we talk a lot
about voice in the context of the US and talk about democracy. Thats
very important, but you know, were not just a nation of immigrants,
were a nation of emigrants. Were shaped by both voice and exit,
starting with the Puritans, you know, they fled religious persecution.
The American Revolutionaries which, you know, left Englands orbit.
Then, we started moving west, leaving the East Coast bureaucracy to
go to the Western nations. Later, late 1800s, Ellis Island, people
leaving pogroms, and in the twentieth century fleeing Nazism and
Communism. Sometimes, people didnt just come here for a better life.They came here to save their life. Thats, you know, the airlifting at
the end of Saigon. Its not just the US thats shaped by exit. Silicon
Valley itself is also shaped by exit. You can date it back to the
founding of Fairchild Semiconductor with the Traitorous-Eight, the
founding of Fairchild the fact that non-competes are not enforceable
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in California, and the fact that DC funds disruption, not just
turnaround. The concept of forking in open source, if you think about
the back button, that is, in some ways, the cheapest way to exit
something and of course the concept of the startup itself. That right
there, if you guys havent seen, is one of Y Combinators first ads.
Larry and Sergey wont respect you in the morning. So, the concept
here is that exit is actually an extremely important force in
complement to voice and its something that gives voice its strength.
In particular, it protects minority rights. In the upper left corner, for
example, you imagine two countries. Country 1 is following policy A
and country 2 is following policy B. Some minority is potentially
interested in following policy B, but policy A is very stridently
promulgated by the majority. However, theres some other country,
maybe a smaller country, maybe another country, thats actually quite
into B, and so that person leaves. Theyre not necessarily super into
B, but they think it might be interesting, thus B question-mark. What
happens is that all the other guys in A see that people are actually
leaving. They really care about this particular policy so much that
they actually left. It could be a feature where people are leaving for a
competitor. It could be a bug that you havent fixed so people fork the
project and take it somewhere else - what happens is that exit
amplifies voice. Its a crucial additional feature for democracy is to
reduce the barrier to exit, to make democratic voice more powerful,
more successful. A voice gains much more attention when people are
leaving in droves. I would bet that exit is a reason why half of this
audience is alive. Many of us have our ancestors who came from
China, Vietnam, Korea, Iran, places where theres war or famine,
economic basket cases. Exit is something that I believe we need topreserve, and exit is what this talk is about. So, exit is really a meta-
concept. Its about alternatives. Its a meta-concept that subsumes
competition, forking, founding, and physical emigration. It means
giving people tools to reduce influence of bad policies on their lives
without getting involved in politics, the tools to peacefully opt-out. If
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you combine those three things, this concept of the US is the
Microsoft of nations, the quote from Gates, and Hirschmans treatise,
you get this concept of Silicon Valleys Ultimate Exit. Basically, I
believe that the ability to reduce the importance of decisions made in
D.C. in particular without lobbying or sloganeering is going to be
extremely important over the next ten years. You might ask, Why?
What does this have to do with anything? So, the reason why is that
today, its Silicon Valley versus what I call the paper belt. Theres four
cities that used to run the United States in the postwar era, Boston
with higher-ed, New York City with Madison Avenue, books, Wall
Street, and newspapers. Los Angeles with movies, music, Hollywood,
and of course, D.C., with laws and regulations formally running it. I
call them the paper belt, after the rust belt of yore. In the last twenty
years, a new competitor to the paper belt arose out of nowhere,
Silicon Valley. By accident, were putting a horse head in all of their
beds. We are becoming stronger than all of them combined. To get a
sense of this - Silicon Valley is reinventing every industry in these
cities. That X up there is supposed to be a screenplay for the paper of
LA, and LA is going to iTunes, BitTorrent, Netflix, Spotify, Youtube -
that was really the first on the hit list, starting in 1999 with Napster.
New York right alongside - AdWords, Twitter, Blogger, Facebook,
Kindle, Aereo. Were going after newspapers. Were going after
Madison Avenue. Were going after book publishing. Were going after
television. Aereo figured out how to put a solid-state antenna in a
server farm so you dont have to pay any TV fees for all of their
recording. Recently, Boston was next in the gunsights - Khan
Academy, Coursera, Udacity and most interestingly, DC. By DC, Im
using it as a metonym for government regulation in general, becauseits not just DC. It includes local and state governments. Uber,
AirBnB, Stripe, Square, and the big one, Bitcoin are all things that
threaten DCs power. It is not necessarily clear that the US
government can ban something that it wants to ban anymore. The
cause of this is something I call the paper jam. The backlash is
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beginning. More jobs predicted for machines, not people. Job
automation is a future unemployment crisis looming. Imprisoned by
innovation as tech wealth explodes, you know, Silicon Valley, poverty
spikesthey are basically going to try to blame the economy on
Silicon Valley, and saying that it is iPhone and Google that done did it,
not the bailouts and bankruptcies and the bombings. This is
something which we need to identify as false and we need to actively
repudiate. We must respond via voice. The obvious counterargument
is that the Valley reduces prices. The top is a little small, but thats a
famous graph - consumption spreads faster today. That shows the
absolute exponential rise of technologies over the last century.
Anything that is initially just the province of the 1%, whether it be
computers or cell phones, quickly becomes the province of the 5% and
the 10%, that MVP that barely works that someone is willing to pay
thousands and thousands of dollars for allows you to fix the bugs, to
get economies of scale, to bring it to the 10% and then the 20% and
the 50% and the middle class and the 99 percent. Thats how we got
cell phones from a toy for Wall Street to something thats helping the
poorest of the poor all over the world. Technology is about reducing
prices. The bottom curve there is Moores Law. By contrast, the paper
belt raises them. Theres the tuition bubble and the mortgage bubble
and the medical care bubble and too many bubbles to name. The
argument that the Valley is a problem is incoherent, but its not going
to be sufficient to respond via voice. We can make this argument, but
the ultimate counter-argument is actually exit. Not necessarily
physical exit, but exit in a variety of different forms. What theyre
basically saying is - rule by DC means people are going back to work
and the emerging meme is that rule by us is rule by terminators whoare going to take all the jobs. Whereas, we can say, and we can
argue, DCs rule is more like an overrun building in Detroit, and down
right there is actually, like a Google data center, right? So, we can go
back and forth verbally, but ultimately, this is about counter-factuals.
They have aircraft carriers. We dont. We dont actually want to fight
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them. (It) wouldnt be smart. We want to show what a society run by
Silicon Valley would look like without actually affecting anyone who
still believes the paper belt is actually good. Thats where exit comes
in. What do I mean by this? What do I mean by Silicon Valleys
ultimate exit? It basically means, build an opt-in society, ultimately
outside the US, run by technology. This is actually where the Valley
is going. This is where were going over the next ten years. Thats
where mobile is going. Its not about a location-based app. Its about
making location completely irrelevant. Larry Page, for example, wants
to set aside a part of the world for unregulated experimentation.
Thats carefully phrased. Hes not saying, Take away the laws in the
US. If you like your country, you can keep it. (Its the) same with
Marc Andreessen. The world is going to see an explosion of countries
in the years ahead. Doubled, tripled, quadrupled countries. Since the
end of the Cold War, weve just been seeing them burst up in all kinds
of places and some of the best will have lessons for all the rest.
Singapores health care system is an example to the rest of the world.
Estonia actually has digital parking meters and all kinds of things. We
can copy those things without necessarily taking the risk. Let them
take the risk and then, we can copy them. It amplifies voice. So,
importantly, you dont have to fight a war to start a new company. You
dont have to kill the former CEO in a duel. So, a very important meta-
concept is to create peaceful ways to exit and start new countries.
You know, two of the founders of Paypal - Peter Thiel is into
seasteading. Elon Musk wants to build a Mars colony. You can
scale it back, too. Even on Hacker News, just recently, within the
realm of someone on startup #1 or startup #2, these guys just went
and bought a private island. Its random. Its in the middle of Canada.Its freezing cold. Theres sticks over there. It doesnt exactly look
like Oahu. But, the best part is this, the people who think this is weird,
the people who sneer at the frontier, who hate technology - they wont
follow you out there. Thats the thing about exit is you can take as
much or as little of it as you want. You dont have to actually go and
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get your own island. You can do the equivalent of dual-booting or tele-
commuting. You can opt-out to whatever level that you prefer. Simply,
going onto Reddit rather than watching television is a way of opting
out. There is this entire digital world up here which we can jack our
brains into and we can opt-out. The paper belt may stop us from
leaving and thats actually what I think of as one of the most important
things over the next ten years, is to use technology, especially mobile,
to reduce the barriers to exit. With it, we can build a world run by
software. Heressome examples. 3-D printing will turn regulation into
DRM. Itll be impossible to ban physical objects, from medical devices
to drones to cars. You can 3-D print all these things and there are
entire three-letter regulatory agencies that are just devoted to banning
goods. With Bitcoin, capital controls become packet filtering. Its
impossible to do bail-ins if everyones on Bitcoin, to seize money as
they did in Cyprus or in Poland. With Quantified-Self, medicine is going
to become mobile and youll be able to measure yourself. With
Telepresence, your immigration policy is going to turn into your
firewall. Double robotics is just the start. Any bots, these robots that
you can control remotely, moving around like a Doomvideo game,
soon theyll behumanoid on their side and theyre going to get pretty
good, so you can be anywhere in the world with a humanoid robot
walking around on your side and without paying a plane ticket.
Drones, warfare is going to become software. Laws are going to
become code. Management via robotics is going to become
automation and property rights are going to become a network effect
if you know about Bitcoin smart property. Technological details, these
are topics for the next MOOC. You can sign up at
coursera.org/coursestartup. Itll be better the third time around. But,thats what I think. If you want to think big, if you want to think about
things that are next, build technologies as minimal or as maximal as
you want for what the next society looks like. It could be something as
simple as allowing middle-class people to make tax shelters. Apps
that allow people to travel and relocate better because its a huge pain
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to move from city to city. Anything you can think of that reduces the
barrier to exit that produces lock-in. If we work together we might be
able to build something like this. Thanks.
(Applause)
(Outro MusicStart)
ABL: Thanks for listening to episode #65 of Lets Talk Bitcoin. 35%
Is Nothing to Sneeze At was producedand edited by Adam B. Levine
and featured Stephanie Murphy, Andreas M. Antonopoulos, and Adam
B. Levine. Coinpunk Firstwas presented courtesy of Kyle Drake with
editing for content by Adam B. Levine. Proof of Existence was
produced by Andreas M. Antonopoulos, edited by Adam B. Levine and
featured Andreas M. Antonopoulos and Manuel Aroz. Silicon Valleys
UItimate Exit was played courtesy of Y Combinator Talks. Music was
provided by Jared Rubens. Questions or comments? Email
[email protected]. Have a good one.
(Outro MusicFade-to-Cut)
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