Dear viewer, these subtitles were generated by a machine via the service Trint and therefore are (very) buggy. If you are capable, please help us to create good quality subtitles: https://c3subtitles.de/talk/878 Thanks!
And our next speaker
is Zucco,
and I don't think
I need to introduce him
because there is a huge crowd of people
who probably came to this hall
just to listen to this talk,
maybe even came to the Congress just to
listen to this.
So the founder
of the cash,
zuka, a round of applause, a
huge, huge round of applause.
Oh, my God, there's so many people,
I think I've never stood in front of this
many people before in my life.
Thank you. Thank you.
Thank you all for being here.
I'm Zucco and
I'm the founder of Z Cash.
And
a long time ago, I worked on Deji
Cash, which was the first cryptocurrency
in 1996 for David Chom,
who is one of the first
cryptographers who made cryptography
into an open public science
instead of a military secret.
But then three years ago, I got
an opportunity to
create cash with a bunch
of other scientists.
And cash is a combination of
Bitcoin technology with
encryption.
But this talk is not mostly about that.
It's not about cash.
It's about what I've been doing
and learning in the last three years as
I travel the world
talking to people who are using cash and
building all these related technologies,
all these other coins and Ethereum
and smart contracts and all that other
stuff. So so this talk is
a brief survey
of 50 different weird things that
I've learned in the last couple of years.
And it's very
it's very much just this is just my
opinions and
biases. And there's a whole bunch of
important stuff that's not included in
this talk because I'm blind spots.
So don't take it as objective
truth. And my main questions
that I hope to tell
you my opinion about is all
of this cryptocurrency technology
and block chain and cerium and all that,
is it just is it just hype
or is it a real thing?
Is it is a really revolutionary or what?
And is it revolutionary for good or for
evil?
OK, real quick,
Bitcoin was a revelation when it went
Satoshi Nakamoto came up with it in 2008.
Bitcoin, as you probably mostly
know, is this amazing
technique to
maintain a global consistent
ledger that everyone on the
planet can simultaneously agree
roughly to within the last
few hours of the contents
of this ledger.
And it uses this concept of proof of
work, which enables mining, which
is one of the things that helps prevent
this ledger from being fragmented.
So different people believe different
things or getting rolled
back or reverted.
And then the whole point of it,
of using all that through technology is
just to be digital cash,
electronic digital cash
without relying on any
central party.
That's the whole point of it. So you have
this ledger and then all you do is
keep track of who owns how many bitcoins
in the ledger.
And that's an awesome breakthrough.
It was a computer science and
cryptography breakthrough.
And it came out
and it meant a lot to me personally
because I had struggled for
at least a decade to invent such a thing
and failed. And so I had concluded that
it was probably impossible.
And so when Satoshi did it, it was
quite the revelation.
And it has led to everything else
in this talk.
There's a typical pattern, I think,
that new
inventions take about five years
to get traction and really become
mature enough for people to rely on them
and get more than a fringe
degree of usage.
And then they typically take another five
years after that. So about 10
years total before they before
they reach their potential and start
helping start providing value
in larger and larger amounts to larger,
larger and larger numbers of people.
So Bitcoin is past the first five
years, Mark. It has reached
maturity and has proven
that people actually use it for things.
And then in 2013
of its Veeteren came up with the concept
of Ethereum and thorium is
the can is it's a world computer.
So like Bitcoin is a worldwide
ledger.
Ethereum is a worldwide computer and
there's just one computer and everyone
has to line up and take
turns submitting their program.
So it's in fact a timesharing machine if
anybody knows what those were.
It's the world time sharing service
and
the way it works
briefly, Ethereum, is that
all of the miners are validators that
in Bitcoin, all of those nodes are
just making sure the ledgers kept up to
date and internally consistent.
And in theory, and what all those nodes
are doing is running the programs that
the users have submitted and then
they're all agreeing on the results of
the program. And that's how everyone can
rely on the programs to get
run correctly.
But that's very inefficient.
And in fact, both Bitcoin in theory have
the exact same scaling
limitation or flaw, which
is that there's sort of one
bucket of service.
One one.
Yeah, there's in Bitcoin's case, there's
one total amount of transactions,
which is about three transactions per
second, averaged over
like a day.
And in this case, there's one sort of
number of programs that we can run on,
on the theory of universal shared time
sharing system, and it doesn't scale up.
So if you get twice as many
people who want to make transactions or
who want to run programs,
then either half of them
just don't get to do it.
Or in the case of Bitcoin, the
the price goes up, the price doubles or
whatever, until whoever
can't afford it doesn't get to do it.
And the other half who pay more, you get
to do it.
That's a fundamental problem.
Then there's block chain, which I'm not
going to talk much more about in this
talk. It's the it's
a few years ago, a bunch of
bankers and
industrial enterprise
companies said this bitcoin
stuff is weird and revolutionary and
scary and creepy, and we're not going to
touch it with a ten foot pole.
But let's take this
component out of it, which we call block
chain and use that for our businesses.
And
I actually think that's a good idea for
some things, but it'll probably be
five years since 2014.
So it'll probably be a couple more years
before we find out if it's really a good
idea.
And in the meantime, I'm really amused
that in 2017, a lot of those same
banks and enterprises
have decided that Bitcoin is cool after
all. And if you're in this cool after
all, and they're actually going to use
that.
So forget about blocking because they're
way too much else to talk about in this
talk.
Hey, cryptography is super awesome.
And that's one of my favorite things
in the 1970s, David, from
the man that I mentioned and Whit
Diffie and.
You know, her vest and schmear and all
these other people.
Were they acted
as activists, they courageously
arrested control of the
the nascent science of cryptography
and made it part of our communal
public knowledge and our
our heritage instead of being military
secrets and.
Almost all of the cryptography that
underlies the whole Internet and every
computer in every database and every cell
phone and everything today grew
out of this this flourishing
starting in the 70s.
And a neat fact is
that Bitcoin and a theory are
built with only two of the
concepts, two of the
building blocks from cryptography,
digital signatures and secure hash
functions.
So for one thing, it's really awesome
that you can invent a whole new
thing using just digital signatures and
secure hash functions.
And for another thing, it's a really good
question as to what else you could invent
if you start using some of the other
primitives from cryptography like
encryption and your knowledge proofs,
which is part of this project
to do that, to use encryption and zero
knowledge proofs in in a cryptocurrency.
OK, then there's this completely other
different kind of technology that came
out in 2015 called Lightning Network.
And by the way, I'm talking
fast because I want to have lots of
questions.
Lightning Network is a new idea that was
just discovered in 2015,
is an attempt to overcome this scaling
limitation in Bitcoin.
And the idea of it is
if you have a ledger which can't
scale, so as you have more and more
people who want to make transactions,
they exceed the
capacity of that ledger to hold new
transactions then.
We'll use that ledger to record
deposits,
which can then be leveraged by this
other off chain protocol called
the Lightning Network, and that one can
scale can do zillions of transactions
at very small amounts, micro
transactions.
And the reason that one works.
Dissent in a decentralized way without
relying on any third party is
that if there's conflict
or disagreement over who got the micro
payments, that can be resolved by
reference to the central unscalable
shared ledger.
OK, so
when we started coming up with the stuff
we don't don't start reading, if I put up
on your word, you'll start reading and
stop listening to me when we're when
people were coming up with these kind of
ideas like Setto Shoes, original paper
said this is a way to make decentralized
digital cash.
So he had a clear idea about
what the purpose was.
And people who invented these other
technologies may have had imaginations
about what people would use it for.
But what do you what have people
actually used it for so far?
I think it's really useful to learn from
real world experience and what people are
using it for.
As of today, maybe surprising,
the most important by monitoring,
if you measure importance by money, the
most important use of all
of these is
gambling
or or maybe it's investment
for the long term, or maybe it's
funding
funding new startups by using this
these coins as a funding mechanism.
So the top line here is people
who buy and sell.
Coins, including Bitcoin and a few
humanzee cash on
exchanges, and it's
pretty mind boggling since
this just really blew up during twenty
seventeen, but right now, as of the end
of twenty seventeen, there's half
a trillion dollars worth of
money, which is a pretty unreliable,
sort of potentially illusory measure.
It's like take take
all the coins of all kinds, all the
bitcoins and all the ether and all those
cash and whatever, and then multiply
by how much someone paid today
for one of those coins and add all those
numbers up and it comes up to five
hundred billion dollars.
But I don't know
how meaningful that number is, but it's
absolutely clear that a large number of
people around the world who are
spending or risking or investing
a whole lot of money and just.
Hoping that the price will go
up
and I think in my opinion, that's both
good and bad, or it could be both good
and bad, but you'll have to form your own
opinion, most definitely big.
And then the other big thing that
happened in twenty seventeen was people
discovered they could use these coins as
a way to fund their new project or their
new startup.
So they invent a
business or a technology
or both.
And then they invent a new coin to go
with it, and then they sell those coin,
the newly generated coins that they just
invented to buyers,
and five billion dollars worth of such
coins have been sold in twenty
seventeen.
Innumerable new projects,
like hundreds, I guess, of new projects.
Some of the biggest ones have raised
hundreds of millions of dollars, each
like for one particular project.
Well, it's really interesting, and that
could be both good and bad in different
ways, I definitely think it's good and
bad. It's both good and bad in different
ways, in my opinion.
The thing that I like best about it is
that there's a combination of a
scientific breakthrough because Bitcoin
turned out to work like
remember I said this is a great
breakthrough. It wasn't just for me, but
for all of computer scientists
like Bitcoin basically did a thing that
computer scientists had been confidently
telling one another in rigorous proofs
was impossible.
And so that broke open this whole field
of things that were previously
believed to be impossible.
And now with Bitcoin and Ethereum,
we know that a lot of those
things are actually possible.
So there's this sudden
frontier of new technologies
that were previously thought to be
impossible, that are are
now suspected to be possible.
And it's combined with five billion
dollars worth of
money now in the hands of
either inventors
or scammers or
whatever.
But at least
at least some of that five billion
is going to be funding people to.
Try to implement and deploy these new
possibilities.
Of course, by my by my rule of thumb,
it might take five years before
we find out for sure whether any of them
actually all we know which of the new
possibilities really work.
I'm sure some of them will, but we
probably won't know for a while.
And I also wonder what will happen to the
the market in the money in the interim of
five years, because that's a long time
for those buyers who bought those coins.
Bitcoin was actually used at the
beginning of twenty seventeen for retail
purchases, but not for very much.
There was about a billion dollars in
twenty seventeen of people buying stuff
with Bitcoin on the Internet, mainly
buying games from steam I think, but.
But OK, that was already not big,
but it was something and it was growing,
so that was good in my opinion,
but now it's dead because of the
aforementioned scaling problem.
Now, the
cost of sending a Bitcoin transaction has
skyrocketed from something on the order
of 10 cents or a dollar, maybe at the
beginning of twenty seventeen.
And now it's skyrocketed to at least ten
dollars on a bad day.
It might cost, I don't know, maybe forty
dollars or something to make a Bitcoin
transaction.
And it doesn't matter how much bitcoin
you're transferring.
So if you're transferring a million
dollars worth of Bitcoin or one hundred
dollars worth of Bitcoin, it's still
going to cost you ten or twenty
or forty dollars for
that transaction.
Will, that totally kills the use case of
buying steam games over Bitcoin.
So
so that billion dollars a year may fall
to zero next year, for all I know, unless
someone very rapidly solves the scaling
problem.
OK, the next thing is crypto kitties.
Behold, this is this was surprising
and hilarious to me.
It turns out that if you give people a
world computer that can compute any
computation, they
screw around with it for like two years,
trying to figure out how it works.
They sell five billion dollars worth
of investments in their new startups
and then they invent a game with
collectible cute
kittens kitties that you can
collect and own and buy and sell.
And each kitty is unique.
And then you can breed two kitties
together to make kittens.
And the world computer is crunching away,
making sure that your kittens are the
real correct offspring
of the parent kittens so that nobody can
counterfeit kittens.
And so far and this launched one month
ago like three weeks or
something ago, and so far, apparently
about twenty million dollars worth of
cute kittens have been traded around.
And I think this is a harbinger of things
to come. I think next year we will see
more and more games on
these networks,
except the scaling problem
is also going to hit etherial next
year like a hit Bitcoin this year
momentarily. Already the Ethereum
pipes were clogged with crypto kitties
and so people couldn't get their
important Icko funding through
and they were complaining.
And that's going to happen a lot more
next year.
And then the last thing, stock markets,
this was what Bitcoin was supposedly
for originally.
With the Silk Road and all that, and
it may have been important to
Bitcoin at some point in like 2013
or whatever.
But nowadays, it doesn't seem that
important to me, actually, because
one hundred million dollars a year is
just my estimate, there's it's hard to
tell different like researchers
scrape dark market websites and try to
sum up what they see.
But of course, not everything is shown on
the is visible that way.
And and then law enforcement busts
these markets. And then you find out
from, like court cases what
they learned. So this is a very rough
estimate, but basically.
Seven hundred billion dollars a year is a
very, very rough estimate for total
illegal drugs around the whole world,
that's one about one percent of the
global economy is
maybe illegal drugs.
But that's also extremely rough because
no one knows how to count that either.
But online drug markets are
a teeny tiny fraction of that, and
they're also a teeny tiny fraction of
speculation and school funding.
And I wouldn't be surprised if crypto
kiddies are more important than
underground drugs on on the Internet next
year.
What's next here?
Oh, yeah, so.
So every time I talk to people from my
industry, they blow my mind
by espousing this new
technological invention, they've thought
of like
prediction markets, they're going to tell
the future and like replacing
Uber with Anthurium program and
all these things. And I'm not even going
to try to summarize.
I can't even I don't even have the time
and brainpower to tell how many of these
ideas are even plausible.
I'm going to wait five years and see how
many of them have actually worked.
But I do know very much about what some
of the problems are. The first one I keep
telling in this talk is scaling, scaling,
scaling.
It's it's
completely changed.
What people can and do use Bitcoin
for during 2017,
and I guess it's going to completely
change what people can use Ethereum
for in twenty eighteen.
So I guess maybe no one will be able to
afford to trade their crypto
kiddies at a certain point, although I
guess you can prove that you
still have it. So that's interesting.
Like if you trade crypto kitties then
once etherial fills up and nobody
can afford to
make it a serious transaction for
such a low value thing as trading crypto
kitties, then I guess you just keep yours
after that.
That's cool.
I just thought of that. But the other
thing is safety
is a huge ongoing problem.
The total amount of Bitcoin that's
probably been lost or stolen.
Here's another number that nobody really
knows how to measure.
But this is an estimate.
The total amount of Bitcoin that's
probably been lost or stolen ever
since it was invented is about 10 billion
dollars worth of Bitcoin today.
And the total amount of ether
that's been lost or stolen in the last
two years or however many years that it's
been running is one billion dollars worth
of either lost or stolen.
And a lot of that it's almost even worse
with ether's and with Bitcoin because
you can lose or get
or make vulnerable your money by a coding
error in script, the script
you're writing to running through him.
So I think this is a pressing issue
that's likely to get even worse next
year. And a lot of those
numerous projects that are trying to.
Improve on the state of the art innovate
technologically are aiming to improve
on one of these two things.
Yeah, like I said earlier, I think we'll
see more gaming if we can
afford it, maybe
people will switch to other coins that
have less loaded networks or somebody
will make a breakthrough in scaling.
Here's a snapshot of the
marketplace for trading, this is the
thing that all those people
who are trading five hundred billion
dollars worth of
trading are looking at all day long.
And there's a whole bunch of different
coins on here.
All of these well, there's
like this is just the first 14
lines of like a 900 line
website because there are literally
hundreds and hundreds of coins
of various kinds.
That one with a red circle slash
in the middle there, that's not even a
coin, it's actually a Ponzi scheme.
And like I don't just mean it's a bad
investment. I mean, it's literally a
Ponzi scheme where they actually take
your money and put it in your pocket and
lie to you about what you got,
put it in their pocket. I mean, but
anyway but I think basically
all the rest of them are more or less
legitimate technology
projects with interesting users
and enthusiastic communities.
And these are my five
these are the five that I'm most
interested in. And I wanted to tell
you something about
what they have in common, is that they
have really active
and sort of impassioned user
communities and developers that are
improving them.
Bitcoin, I guess you know about, and
one thing that I love about it is that
it's super stable.
They have now as of 2017,
they've conclusively demonstrated that
they won't change.
The Bitcoin protocol will not
get changed in a backward, incompatible
way. And so it's extremely stable
and predictable now.
And it has this very
broad, widespread and very
committed, impassioned
users who it's basically like a cult.
And that's cool.
That's awesome, and the
other ones actually have really
impassioned user communities
as well, and they tend to be
separate communities because, you know,
people tend to clump together.
And between some of them, there is
like tribal enmity.
I try to I try to
set the example in the Sikh community
that we have a much more porous community
boundary and we're all we're all members
of the other communities as well, because
we love them, too. And we're all just
friends here. But not everyone is like
that.
The 300 billion is the is again,
that's that somewhat mysterious number
about the total numbers of bitcoins
that exist multiplied by the current
price of a Bitcoin, which is some
kind of estimate of how important it is
to somebody.
Rich people, I guess.
Ethereum is the next biggest from that
same measure, and Ethereum
is super important because it's got the
developer community like
the network effect of developers,
because developers who are inventing new
stuff, they're making a new game
or they want to make a new app that
they're going to sell
access to or whatever, or they're just
hacking in their bedroom and they
want to see what they can do and write
some scripts and share them with other
people. Almost all of those people go to
work on Ethereum because that's it's
inviting and easier
than working on the other systems.
And that's really important history of
of like the computer industry tells us
that the network effect of developers is
super important for the long term.
What's going to be the most important
technology and the most widely used?
Because that's what you learn from like
Microsoft and
like the World Wide Web, for example.
So that's something super important about
a theory.
OK, Bitcoin cash is an interesting case.
It just now sprang out of nothing
this year.
And what it is, is it's a form
of bitcoin.
So they.
They copied the Bitcoin code base, but
they also copied the Bitcoin ledger,
right?
So everybody who at that moment
owned Bitcoin, then the
next moment they also owned they still
own this Bitcoin, but they also own the
same amount of Bitcoin cash because
because they copied the ledger.
Makes sense. And then
and then they they made
some tweaks. But the important thing
about it is that they're the refuge
from the Bitcoin civil war that's raged
for the last three years between
liberals who wanted to upgrade
the protocol, the Bitcoin protocol,
and conservatives who wanted to keep the
Bitcoin protocol stable.
And the conservatives won on Bitcoin.
And all of the people who
wanted to change the Bitcoin protocol
have started migrating
en masse altogether.
And they're heading toward Bitcoin cash.
I was sort of annoyed when this happened
because they could have headed towards
Vikash, which I was the
you know, we launched it a year ago and
Anzai cash is just as good as
Bitcoin cash is at, which is
not very good at scaling
up and sending more transactions.
Like you can send a few more transactions
than Bitcoin can, but not a lot more.
However, what we didn't have was giving
every current Bitcoin holder some of our
coin.
See, so when Bitcoin Cash launched just
a few months ago, they both had a
social moment that
the people who had lost in the in the
social battle needed somewhere to go
and to be together, and
they gave everyone free coins
if they would come there.
So that was really interesting how
successful that was. And now it's more
important than money or cash and less
important than Bitcoin and Ethereum.
If you believe that number as a measure
of importance.
Monero is a really important
coin. It's one of the older ones.
And I love it because the maturer
community really values privacy.
And it's a very community oriented,
like anticorporate, decentralized
zeitgeist in their community
and.
I really don't like to talk shit
about other coins because
it doesn't do anybody any good, and I
really want.
More and better.
More and better invention and sharing
and creation and value creation, but I
do have to say I have a problem
with Monero, which is the technology
is just not good enough for
security.
And I can't go into
the details right now because.
It's complicated and I
don't have slides,
but basically Manara
was invented before certain
breakthroughs in cryptography that we
were able to use cash, cash and so
in cash we can use we can leverage
encryption.
We can make it so that in order
for an attacker to extract private
information about the users, the attacker
has to literally break encryption.
Like crack it.
Yes. Or
the core of cryptography
has to do something which would
also enable them to destroy the whole
Internet and all the computers in the
world or take over all the computers in
the world. And encash isn't
quite there like we've we've deployed.
Encryption in cash,
which is a victory, and I'm very proud
of it, but it's not
ubiquitous enough and good enough in
cash.
So we have a lot of work to do, but.
It's possible to make.
Much more reliable.
Privacy technology than General currently
has, something that's really good about
Monero is that they have this active
and enthusiastic
community, also a cult,
and that's great because they.
They encourage and support researchers
to improve it.
And unlike Bitcoin, Monroe
is not averse to backwards and compatible
upgrades and improvements,
so they will hopefully continue to
improve their technology.
Zarkasih. I'm not going to say too much
about we launched it more than a year
ago. It's based on a bunch of
like hardcore science
it.
It includes backwards, compatible,
clear text transactions, and
that's the worst thing about its
security, as contrasted with one
area where there's no backwards,
compatible, clear text transaction.
So you have to kind of leap all the way
to the higher tech
transactions.
And in cash, we decided to try to make it
easy to get Bitcoin users to get on
board by giving them a Bitcoin like
starting point.
So that's a good thing for the cash,
adoption and usage, but it's a
bad thing for geocache, cash, privacy.
The other thing I want to say about cash
is that I'm really not going to be
satisfied if by the end of like
let's say twenty eighteen people still
call it a privacy coin
because it's like when Netscape added
encryption to the Web browser,
it didn't make a privacy browser.
It didn't make it good for browsing
the privacy web.
No, it's just encryption is a necessity
for the Web. Like you can't have you
can't use the Web for anything that's
important without encryption.
And similarly, I don't think you can
really use decentralized
networks, world computers
or cryptocurrency for anything
that's important.
I mean, for anything other than
speculation if you
don't have encryption or something
similarly strong to protect privacy.
So, yeah, in fact, one of the things that
we're probably going to be focusing on in
the Zikos Development team in
2018 is the scaling question.
I have a little bit of time to go into
that, so I told you a little bit about
lightning, right?
And it's a beautiful idea
and I may just totally misunderstand it.
And a lot of the makers of lightning are
here. So if I told you I'd tell you wrong
things, then they should come up to the
microphone right away
during Q&A, which is in 15 minutes.
But from my understanding,
there's a fundamental there's a couple of
potential fundamental problems that
prevent lightning from being a scaling
solution.
So remember, the first step in
lightning is that you take your Bitcoin
and you commit it to.
To be leveraged for being able to do off
chain lightning payments, well, currently
it costs like at least 10, 20 dollars
to do that step.
So if you
only have ten dollars worth of Bitcoin,
you just can't use lightning, right?
Am I missing something?
So that doesn't seem
like a complete scaling solution for,
like the entire world, in my opinion,
because most people don't have ten
dollars worth of Bitcoin and never could
have, no matter what.
But maybe there's a solution that someone
is already thinking about that I don't
understand. And if so, I hope it doesn't
take five years to deploy it.
But that's one possibility.
And we're what I want to do with the cash
is watch that carefully, because the
lightning people have done a lot of
really solid engineering.
They have multiple teams working on it
and they just finalized their one point
zero specification and they've done
interrupt testing.
And there's a button somewhere in this
building where if you go poke
the button, it sends a micropayment
over the Bitcoin test net
to demonstrate that lightning actually
works over the Bitcoin. WestNet, but I
don't think it could work on the main net
because you. Well, I guess it could.
You just have to put in like 20 bucks
into your button and then that would work
anyway. So Lightning Network is a really
great possibility. Then there's the
the Bitcoin cash approach that resulted
in that like three year long civil war
that's finally over.
Thank God was just we'll
just make the box bigger and tune up
the parameters, like increase the
capacity of the network.
And there
are a lot of detailed arguments
that I'm not sure how to
evaluate about whether that's good or bad
or indifferent.
But one thing I'm really sure is that
it's not going to result in a whole lot
more scaling, I don't think.
I mean, so far the
cash and Bitcoin cash have roughly
quadrupled the capacity.
But if we get four times as many users
in eighteen as we got in 2017, then we'll
be back to where we started.
And I really don't know if you can just
keep doubling it every year.
What happens? So that's a it's a
possibility it might work.
I would tend to
try to wait and see both scientific
and empirical validation
of how it works in practice.
There a third thing, oh, if your home is
working on this concept called shirting
and I love the Assyrian people because
for like four years now,
ever since I first heard about etherial,
like before it even like
the first moment it was being designed,
I've always said, that's
awesome, but way too complicated,
ambitious to actually work.
And then they would go ahead and do it
and it would actually work.
And so then I would be amazed and then
it would iterate again, they would say,
we're going to do this next thing.
And I would say that's.
Brilliant, and I love that, but that
you'll never pull it off and they would
pull that off, so the next thing that
they're doing, which I don't think they
could ever really succeed at, is taking
a theory and making it so.
It's still a single world computer, but
it paralyzes the computations
to like thousands of,
like, subnetwork and
then nizza the computations back together
again in time for
you to receive your newly bred Krypto
kitty. So that's what they're working on.
It's called Sharding.
And I don't know, with
lightning sharding and just
turning up the parameters.
I don't know.
I think we'll learn a lot in the next
year from people's attempts to
do that.
All three of them.
And so that's what we're doing.
It's just sort of watching those like
hawks trying to figure out what's going
to work and what we should copy or if we
need to come up with a fourth idea
ourselves to make some cash more widely
usable.
OK, I'm almost out of time, thank
goodness. OK, this is my last flight.
So I've been traveling the world.
I like to say I'm an imaginary coin
salesman. I've been traveling the world
telling people about the virtues of cash.
It's been really nice giving this talk,
which is mostly not about the virtues of
cash, but
these are not the most important
countries in the world.
There are several important continents
with billions of people that are not even
mentioned on this slide.
But these are six interesting ones.
The top three are the most important if
you believe in total
amount of coins bought and sold
that day as being a measure of
importance. So
Japan buys and sells more crypto coins
every day than any other country does.
Ten minutes, no questions.
Actually, I might stop for ten minutes.
You guys should start coming up with your
questions.
And I think it would be cool if
the first question came from a woman.
So if you're a woman and you have a
question, you should hurry to the.
So.
So there's this perfect storm of things
happening in Japan, which is that the
government has this very
simple and reasonable regulatory
framework, which makes it apparent
to all the businesses and the industry
on the right hand side and all the people
who might want to gamble their
savings that
the government considers cryptocurrency
used to be a legitimate, normal, real
thing.
And I think that's actually because of
Mt. Gox, which is the biggest
cryptocurrency exchange ever.
And then it was
all of the bitcoins disappeared.
We all close our eyes and to 10.
And when we open them, the bitcoins were
gone. And it was like the most Bitcoin
ever that disappeared.
And that thing was headquartered in
Japan. So and that was, what,
five years ago now.
So maybe in addition to technologies
being turned into products or
conceptions being turned into products,
also, it takes five years for disasters
to be turned into laws.
But as of this year, the government
of Japan passed some laws explaining
what?
Businesses and people would be required
to do around cryptocurrency and just the
fact that the laws exist has
encouraged people to buy and sell them at
high rates of speed.
That's why Japan is the most important
country. US is the second most important
country.
I spent a lot of time talking to United
States regulators and law enforcement and
people like that, and they largely
have their hearts in the right place,
like they want to not discourage
the development of potentially valuable
technology and they want to protect
consumers from being robbed or
or scammed and so
forth. But on the other hand, it takes
them for fuckin ever to get anything
done. And
and there are literally dozens, like
60 or 80 different
agencies in the United States that are
that potentially are
empowered to regulate
and oversee different kinds of financial
and technological things.
So nobody even knows which agency is
actually got the authority to make which
kinds of rules about stuff.
And they're making progress over the last
couple of years.
They're heading in the right direction.
And the fact that they seem to be have
their hearts in the right place from the
perspective of entrepreneurs and be
heading in the right direction from the
perspective of entrepreneurs, has
encouraged the industry and the United
States in Silicon Valley.
And people in the United States are
buying lots and lots of bitcoins and
other coins every day.
And South Korea is a really fun,
interesting case. It's one of the biggest
markets in terms of people
buying it. And it's really mainstream in
South Korea, like, I think more so than
almost anywhere else.
Like half maybe of all people
are aware of Bitcoin
as a thing that they might consider
buying. And
there are these major like the
the chat app that every single Korean
person uses all day long.
It the company behind that chat app
has bought a cryptocurrency exchange and
the gaming service like
Steam that that half of Koreans are
playing games on every day that
has launched its own cryptocurrency
service. So there's a lot going on in the
industry, in the community, but the
Korean government, South Korean
government can't seem to make up its
mind. The other day, the prime minister
of South Korea was publicly wringing
his hands, saying that all this coin
stuff might lead the nation's youth
into corruption
or maybe lead them to drugs.
And I wasn't sure why.
I thought that was what he's worried
about, but.
China is an interesting case or anything.
Yeah, OK, so there's all this interesting
stuff going on, like the government of
Venezuela just announced that they're
going to launch their own cryptocurrency,
but they don't appear to know what one
is.
OK, but I want to save some more time
for questions, so my original questions
at the time was, is this all
hype and mania and craziness
in tulips or what?
My answer is, it's definitely not just
hype. There's definitely a lot of hype.
And I don't know if it's like 50 percent
or 99 percent of the
money that's currently at stake
is going to disappear or flee
in the future or 10 percent
or whatever.
There's definitely a lot of hype, but
there's definitely a lot of things going
on here which are not which are real
things that were previously impossible
and are now definitely possible and are
are demonstrated to be valuable to
people.
Is it going to be used for good or ill?
Well, I didn't actually say anything
about that. You have to make up your own
mind. You tried to give just a lot of
empirical facts about things I've
observed.
But for my personal conviction,
this kind of technology is inherently
empowering.
And my conviction is that when you
empower people, them
using it for good and to help
each other and lift each other up is
going to outweigh them using it
in order to oppress smaller groups or
harm each other or do ill.
That's just what I think.
That's my beliefs about humanity.
So I think in the long run, at the large
scale, these technologies are going to be
very, very good and very
powerful and disruptive.
And that's what I think.
OK.
Thank you so much.
We have a lot of time for questions, so
step up to the microphones and.
OK, microphone six.
OK, thanks.
We'll talk here.
We're six here.
Oh, hello.
So since Christmas just
passed and you talk to normal people at
the family table and try to explain
cryptocurrency, which is all time,
what how would you explain
to people to invest into
cryptos?
So what's the motivation
for them, which is not just
speculation. So what should be a
motivation for normal people to buy
cryptocurrency?
That's a good question.
I think the only good
reason right now is just speculation
which you excluded.
So and I try not to give investment
advice.
I guess if somebody were like my
family at Christmas were demanding
investment advice, I would tell them not
to invest more than they could afford to
lose.
We're going to take the next one from
microphone three.
Hi, thanks for talk.
How is your view on this
child and the parent child
train approach that some cryptocurrency
so doing at the moment of solving
the problem?
It's one of those things that goes into
that slide called new technology that I
don't know yet.
I don't really know how to evaluate.
There's a lot of those.
There's a lot of different ideas that
people who are way smarter than me seem
to think are great ideas.
And I'm very
empirically oriented.
So I'm going to wait and see if they can
get it running first.
Thanks.
Now we have a question from the
Internet, from someone who is watching
the stream right now.
Thank you. In one of your slides, you
said that only a tiny fraction of
transaction actually used illegal stuff
that does this number come from.
What is the source?
That's a good question.
This estimate of
drug of illegal drugs is
from there's a couple of studies.
One was by the RAND Corporation
and one was by some academic
researchers who I can't remember right
now, I'm sorry.
And mostly what
they were doing was just visiting
darknet Web sites and
counting up
how many drugs were for sale, at what
price, which would be expected
to underestimate.
And so therefore, I doubled the number
when I wrote this slide.
So it's that kind of estimate.
Nobody knows, but at least I'm honest
about it. Sorry.
Next, her phone number
four, that's what this little Tildy
means, is that it's really uncertain
before the. Yeah,
thank you for your talk.
And what are you thinking about?
Proofer stage alternatives to
proof of work.
That's a good one, proof of stake is this
really interesting concept,
this.
Seems very promising, and it's to switch,
you know, how Bitcoin uses proof of work,
where your computer is doing
some unfordable, it's basically
paying a cost in a way that it can prove
to everyone else that it paid a cost.
That's proof of work.
And the cost in this case is the cost of
computing. A bazillion shot to fifty six
hashes in cash.
It's a different thing that is
more friendly to GPS instead of ASX.
But whatever it's still the whole point
of it is just proving that you paid a
cost. And then that is the basis
of where we don't think
anyone will attack the network
by paying so much
cost that they can outweigh all of the
other miners in the whole network.
That's the whole concept of proof of
work, which was the breakthrough really
institutions paper.
And then there's this newer concept
called Proof of stake, which is that we
could replace that way.
Instead of proving
very showing that you did something
costly, you could
verifiably lock up some of
your money, some of your crypto money
in order to show
that you're in
order to limit how much someone could
attack the network by doing this, because
they would have to lock up a whole bunch
of crypto money. And then there's a
really neat thing about proof of stake,
which is that
you can then confiscate and redistribute
their money if they if you can
verify that they were lying or attacking
the network. So that's interesting.
But basically, it is boils down to
another one of those technologies that
I'm not sure about yet. There are a lot
of smaller coins that have deployed
proof of stake, but they're not big
enough and important enough for people to
attack them, refer to them, be stressed,
tested yet.
So I'm not convinced by the empiricism of
that observation.
And there's a lot of good scientific
research on proof of stake, which looks
pretty promising. So I consider it a
really promising thing for the future.
Hope that helped.
Thank you.
Thank you. The next question is
microphone one.
Hello.
I have a question regarding the usability
of cryptocurrency as real
currencies for everyday use.
Everything I've seen with Bitcoin,
it's insanely valuable and insanely
volatile and it's insanely expensive
to do transactions.
And it's all things that make currency
useless, equally useless
if they are worth nothing.
You can't use a currency if it's to.
Yeah, if it's too valuable,
you can't use it either.
What would be needed from a technical
standpoint to make cryptocurrency
as an everyday currency that
actually can be used to do
real stuff?
Well, I don't know if the volatility
in the value is the most important factor
it might be, but I could imagine
if we could solve the other problems
which we know about, like safety,
like you X is the number one
thing, right? Like if you ever tried
to help some random newbie
who's not a total geek use
a cryptocurrency for anything, it's just
hell, it's ridiculous.
So we can't really go blaming economics
when that's the way the U.S.
is an obvious stumbling block.
And then there's the skill problem that
we just talked about, where a
currency by necessity is only
useful and valuable when, like everyone
else, you know, is also using it.
And so, A, we would have to bootstrap
to get to that scale.
But being under the current technology,
you could support it if we did.
So that's another obvious fundamental
stumbling block where you can't really
blame economics when we can't even supply
the fundamental behavior in the first
place.
OK, then yes, there's an economics
question. And my sense, my very
vague sense is that
you can fix you can
people will be willing to spend money
in order to gain
value despite the volatility
and other questions, because either
you could hold your money.
And there's a lot of ways maybe.
That's my answer. Thank you.
Thank you. They look huge.
Hey, look, women.
You're late.
I tried to,
you know, the already on
the Internet and they have a question
about women, cats on
the Internet. So many things.
OK, I have a lot of questions, but I'll
limit it to one
to sort of touch what you were saying
about you being super important.
I found even during the course of this
conference, it's been challenging talking
to people with a really strong technical
focus on the importance of U X and
actually, you know, adopting
and using technology useful.
And so what would your persuasive
argument to technically minded
people be for, like, you know, if
you had to do the hard sell?
I'm not so good at that, but I'm
empirical or
empirically persuasive, you know, Moxie
Marlinspike. I love that guy.
Is he here?
Moxy Marlinspike gave a talk
once and he said
the strategy for the first sort of era
of the cypherpunk project was, we'll
make tools that are really good for us to
use step two.
We'll make everyone else be like us.
Right.
And it was like, oh, you're right.
That was what we were doing back then,
wasn't it? Yeah.
So I mean I mean, I was part of
that mia culpa.
So empirically, what we've
learned in the last, you know, 15 years
is that you is king
and network effects, positive network
effects are king. So that's why Facebook
is super duper important in diaspora is
not.
Is that good enough answer?
Yeah, thank you.
So now we'll have to take
that question from the Internet.
We'll be right in my my voice, it might
be from a woman that we'll never know.
Thank you.
Two brief questions.
First one, how can you make a
cryptocurrency private untraceable
at the same time?
And the second one, do you think digital
currencies might be outlawed?
And what happens then?
Good questions. The first one alludes to
my least favorite tweet that I ever made
where I said we could make easy cash,
private, untraceable sums.
I forget exactly how I put it, but
if you read the whole thread instead of
just the tweet, what
I was saying, that
this will probably work at
least as long as the criminals whom I
was complaining about at the time
want to cash out to Fiat,
because the way our whole
financial system works, both with
paper cash and bank transfers
and swift and everything else
and credit cards and everything else, is
that the the gateway
between the different networks
is controlled by financial institutions.
And it's the financial institutions job
to spy on and report
on their customers on behalf of their
local governments
anyway. So basically, I guess my argument
is the cash and
bitcoin are not really different
or really much worse for that
kind of regulation than
the whole rest of the current system is,
if that makes sense.
And the other question was, will
governments outlaw cryptocurrency?
That's a really good question.
And we've already gotten empirical
evidence about that because some have,
like China,
has outlawed
various uses of cryptocurrency.
South Korea has outlawed like two out
of three uses of cryptocurrency, but has
allowed the third.
Venezuela doesn't really have laws, but
the police go around extorting miners and
stealing their money.
Russia, like every other day, they put
out another announcement from a different
part of the Russian government saying
they will or will not outlaw
crypto currencies.
And at the same time, other countries
like Japan is the leading example.
But a lot of other countries, big and
small, are making completely different
sorts of policies. So that's pretty
interesting patchwork of different
policies.
My prediction for the United States is
that there no way you're going to outlaw
cryptocurrency in the United States and
it's one of the most important countries
by this measure
and that they're heading towards instead
legitimizing the more and more.
Jay, back to microphone
one.
You didn't tell us anything about this
ceremony, maybe you want to say something
about that.
Thanks for saying that, because I forgot
to mention that there's a ceremony like
training session happening today.
At some point, I guess it'll be on the
schedule as a self organized event.
But the ceremony is this really
complicated thing. We don't have time to
explain where the kind of
the kind of zero knowledge proofs used
in Vikash. You're required to generate
the certain public like cryptographic
value, and you want to make sure it
was generated in a correct way so that
nobody could insert a back door into
cryptographic value.
And so the ceremony is a process to get
multiple people who are all like
preventing each other from inserting a
back door. So the more people like
an attacker would have to compromise all
of the participants and
surreptitiously backdoor all
of their computers at once in order to
get a back door into the cryptographic
value.
And we are we already did this more
than a year ago for for the first release
of the cash. But we're currently in the
process of doing it again with a lot more
people, because the first time around for
performance computational
cost reasons, we couldn't only handle six
people and the first ceremony.
And right now we're doing another
ceremony which should be able to handle
any number of people, like practically
at least 100 maybe, and
even more than 100 people show
up and offer to help.
Then we could probably do that, too.
But but it also
the new ceremony is not just for XXIII's,
for it's useful for this kind of
efficient general purpose.
Zero knowledge proof for any other
cryptocurrency or even for non
cryptocurrency is for proving the
correctness of your identity
and some kind of future government ID
system or proving
that some kind of server computed
correctly on your data.
So anyway, it's just general purpose
here. Knowledge proofs, which are a
really powerful, interesting new tool.
And if you look in the schedule, I'm
sorry, I don't know if anyone knows, but
there's supposed to be a
zero knowledge ceremony,
too, so that you can participate in the
current second generation ceremony.
And it supposed to be I think it's six
thirty today.
It's right after this time.
Right after this talk.
Thank you.
And you are now responsible for another
50 meters along the line
somewhere. It's probably for
the ceremony.
I'm responsible for one for
the line to the ceremony.
I didn't understand.
Sorry. All right.
Let's take another question, OK?
Involve me being responsible for
something, so I'm happy to not know what
it was, you're responsible for a lot of
things by now, you know?
Yeah.
Including answering more questions.
I'm responsible for a lot of things right
now, including answering more, a
microphone, pick a microphone,
I pick Debra.
OK, it seems
like centralized protocols are winning.
I mean, in social networks and
in payment systems that are in a very
entrenched position.
You have these mobile
networks like MySpace.
I've got my own thing.
Do decentralized protocols
and systems have sufficient
advantages that they are going to take
over? That's a really super great
question. I don't know for sure.
And one I mean, so the pessimistic
thing, like I'm a veteran of trying
to produce decentralized privacy,
preserving user, protecting things that
turn out not
to be as appealing as the centralized
user
vulnerable, making alternative.
So the pessimistic answer is no.
Sure. Like as soon as
as soon as Bitcoin and if you humanzee
cash turn out to be a real threat, then
like Facebook will just make Facebook and
everyone use that. But there's a better
answer, which is that those centralized
systems, they do, they have the ability
to scale up really high and fast and
scale in terms of the network effect
seems to be the most important thing.
But they also have like a self limiting
factor, like Facebook can't get much
bigger than it is.
Right, because I don't
know, because different countries are
different people or different
other social networks aren't willing
to join it or something. I don't know the
same with like religions and
nations, like nations or super awesome.
And they're very high scale.
And there's a lot of value from having
everyone be part of the same nation.
But they're also kind of like self
limiting, like the United States can't
get it much bigger than it is no matter
how it tries.
Anyway, and so I kind of hope that
decentralized things can break, that
ceiling can be bigger than that, because
everyone can be willing to rely
on a decentralized network even
when they are unwilling to share a nation
or a religion or a language or an social
network or whatever.
I hope so.
Thank you. Thanks.
We've been told that we are consistently
ignoring the microphone number two.
OK, I'm so sorry for number
two
now going to be number two.
Sorry.
Have have there been any useful
applications for society for
cryptocurrency so far besides
maybe donating to organizations
like WikiLeaks where it's blocked, which
can't be done like applications
but can't be done by traditional
currencies?
Yeah, well, I think the donating one is a
good, useful example
and that's still ongoing.
There are a lot of organizations that
maybe not because they're being targeted
by a national a powerful major national
government, but for other reasons they
can't accept like people
in their country or whatever.
I've also seen in the
morass hell
of Venezuela how both the fiat currency
and the government and the banking
system are all inoperable.
People can use crypto currencies to
transfer money across the border
in Venezuela, but that's of limited
scope and value right now.
But it's more than nothing.
I like your question because it was
empirical.
Other empirical uses
crypto could make people happier.
Besides that,
there's probably more that I'm not
thinking of.
I tried so far pretty hard.
So who is it that we're overlooking that
we're supposed to like,
OK, so people at the microphone
number six are jumping and waving there
butt who is where you guys are shouting
out?
Why are they shouting five?
Let's say they just shout the loudest.
Well, the five is popular, I guess.
Five, yeah.
Thanks.
So my question was concerning,
why should I choose to
make a contract on Ethereum
or any other block chain
compared to a classic
yeah contract
not on the block chain.
I mean, I have all these disadvantages,
a codas writing the contract, which
most of the time not legal experts,
just a single block can
problem.
So let me ask you, I think
they shouldn't have called them smart
contracts and they shouldn't have called
them contracts. They should just call
them programs because we know what those
are like. Right.
So the point in my opinion.
The point.
A very enthusiastic crowd
anyway, so maybe
you can use programs to accomplish some
of the same things that you would have
used a contract for, I don't know, maybe
not. There's a lot of caveats, but that's
my starting point.
Thanks, yeah.
OK, so there is an acrobatic
number happening next to the microphone
number six, I think we have
to get down to.
Wow.
Could you please explain a bit about how
Zeki snarks work
Zik snarks are a very
sophisticated cryptographic technique, so
it's hard for me to understand myself,
much less explain.
There's one
component of it that I think is helpful
for people, which is the notion
of a zero knowledge proof.
Bye bye bye metaphor.
Which is that.
If he.
If you're colorblind and
I have to billiard balls, that's
one's red and one's green, and
I want to prove to you that they're
different from each other, but not by
telling you this is the red one.
So this is a weird case, but bear with
me, so O0 is proof
is a weird concept because it means that
you can prove something to someone
without giving them any other
information. Other than that, the thing
you said is true.
So it's kind of like.
I am a truth teller, and it's impossible
for me to lie, sort of,
but you want to not expose
any other information. So with
the billable example, I might want to
prove to you that I have two different
colored balls, but
I don't want to give you any information
about which ones.
The red one.
And the way you can accomplish that
is I can give you the balls
and I can ask you to hold them behind
your back and swap them back and forth
or don't swap them.
But you're choosing whether or not to
swap them. And you're not telling me.
And then you reveal them to me.
And then I just tell you whether or
not you swap them.
But I don't tell you that's the red one,
because that's the thing I don't want to
give away.
So when I do that, so you bring it out
from behind your back and I say if you
swapped them and then you think to
yourself, well, he might
they might both be green
and he's just fooling me and he just
guessed.
Right. So then what we do is we do it
again. You hold him behind your back
again and you swap them or don't you
bring them out again? And this time I
tell you, no, you didn't stop them this
time.
So you think to yourself, well, maybe he
gets twice, but then you keep doing
that over and over. So you do it like 100
times in a row. And every time you do it,
I correctly tell you whether or not you
swap them, but I never say that's the
right one.
At the end of this, you're convinced
there must be two different colors, but
you've gotten zero information about
which ones, the red one.
So that's a very
simple metaphor that shows the concept
of a zero knowledge proof.
And there's still like 15 math ideas,
half of which I don't understand to
explain the case marks.
Thank you.
But by the way, there's an explainer
series on our website, Zeder Cash,
such blog, and go to the
section explainers and that has much
more technical details.
The other question,
it's not OK.
We have people next to the microphone
number three, who don't shout,
don't dance. They just stand there in
silence. And I think we should do more
patience and modesty
by letting them ask the last question
for this talk.
Hello. Yeah, thanks for your talk.
I actually have a bunch of questions, but
I'm just going to ask two.
So
two questions. Let's talk talking about
centralization.
What do you think about the growing
inequality? So basically, you have a few
people who hold most of the bitcoins are
also other coins and who are able
to decide which, you
know, if it's going to fluctuate, how
much, and it's going to have a huge
effect. Yeah, and the second
one, I recently read in the news that
you started working together with JP
Morgan.
So, I mean,
I'm confused.
What was what why would you do that?
And don't you think that the financial
world will eventually destroy most
cryptocurrency because they can.
OK, the
first question, the second question
is why would I why would we work with
J.P.Morgan?
We.
We have been able to help
them make this block chain
that they could potentially
use for their enterprize block
chain use cases in the financial
industry.
So that might be valuable to them
or their customers, and
it was also really helpful
for.
Persuading
people from that world like the
regulators and the,
you know, the start ups in the
enterprises over in USA,
that I could point to JPMorgan as an
example of how privacy
is important for business.
Privacy is important for commerce because
a lot of people don't learn from argument
or theory, they
only learn from example.
So it's really useful for me to be able
to instead of having to go around.
What I had to do previously was go around
saying privacy is going
to be important for normal old mainstream
taxpaying commerce.
And after we did that deal with JP
Morgan, I got to name drop JP Morgan and
say, for example, this is why
the most valuable bank in the world is
working with our technology, because
privacy is necessary for commerce.
And that went a lot further with that
crowd and your other
and and you said, don't I think the
financial industry is going to destroy
cryptocurrency because they can't.
No, I don't think they can.
So, no, I don't think they can.
The first of your questions,
what was it again was a good one.
Inequality.
Oh, yeah. That's a really good one.
Yeah. I don't have time for anymore.
It's a really important question.
And hopefully future technology,
something, something. But it's definitely
true. There is a lot of inequality.
Bob, thank you for the really important
question.
Thank you all.