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ASH BENNINGTON: If you love our crypto content or are looking to learn even more about crypto, be sure to checkout and subscribe to our new youtube channel after this video dedicated to all things crypto. Find new videos every week. Be sure to check the link in the description. ASH BENNINGTON: Andreas, welcome to Real Vision. It's such a pleasure to have you. ANDREAS ANTONOPOULOS: Thank you so much, Ash. It's a pleasure to be on the show. ASH BENNINGTON: Yeah. Andreas, it's actually kind of interesting. In 2017, when I first joined Coindesk, I was very interested in cryptocurrency as an asset class. And after I'd been there for a few days, one of my colleagues took me aside and said, you really need to read this book.
And of course, that book is the purple book that's on top of your stack right there, "Mastering Bitcoin." And it was really the beginning of my journey into the technology. It was the rabbit hole that I went down. So it really is-- it's terrific to have you on this show. ANDREAS ANTONOPOULOS: Thank you. ASH BENNINGTON: So Andreas, tell us a little bit about your background. You're of course-- so your background is in computer science. You've done a great deal of security research even prior to your interest in blockchains. Tell us a little bit about your journey and how you got started. ANDREAS ANTONOPOULOS: Yeah, I'm a geek. Basically, I got my first computer when I was just past 10 years old, and my life became that since. I love technology. I have a fascination with computers. I fell in love with them at age 10, and I never stopped.
It was what I was meant to do. And so I eventually managed to get into a university, and I graduated from the University of London with a master's degree in data communications, networks, and distributed systems. So my focus was always on distributed systems. This was very early on in the development of the internet, which effectively was the distributed system. And I just happened to be in the right place at the right time. This was in the early '90s, and already, I was interested in cryptography and obscure applications of cryptography. I always saw cryptography as an interesting way to implement social change, governance, political goals, and in a movement which is now known as cypherpunk.
So I was interested in the writings of the cypherpunks back in the '90s, and at that point, they were experimenting with digital currencies based on cryptography. This is, obviously, almost 20 years before Bitcoin. And these things pave the way. I was interested then. I got involved. I met some of the early pioneers in that space when I was a student in London. And then I worked in information security and managed to be busy enough to miss the first couple of years of Bitcoin. And then, in 2012, I read an article about it. It was related to a site for gambling. I completely dismissed it and thought, this isn't for me; not interesting. And then I read another article about it, and this time, there was a whitepaper attached. I read the famous whitepaper by Satoshi Nakamoto, and it derailed my life.
It literally derailed my life. I dropped everything. I switched from being a freelance consultant. I was doing a bunch of work in cloud computing, and distributed systems, and information security, and I was like, OK, this is what I'm going to do. I'm going to do this and nothing else. This is going to be my main focus-- which, at the time, was not a profitable decision, in fact. It was a crazy decision. It was a leap of faith. And I started working full time, even though nobody wanted to pay me to do anything of the kind, burned through all my savings, and established my work in that space. And then, two years later, this came out. I'd never written a book -- RAOUL PAL: Hi, I’m Raoul Pal. Sorry to interrupt your video - I know it’s a pain in the ass, but look, I want to tell you something important because I can tell that you really want to learn about what’s going in financial markets and understand the global economy in these complicated times. That’s what we do at Real Vision. So this YouTube channel is a small fraction of what we actually do. You should really come over to realvision.com and see the 20 or so videos a week that we produce of this kind of quality of content, the deep analysis and understanding of the world around us. So, if you click on the link below or go to realvision.com, it costs you $1.
I don’t think you can afford to be without it. ANDREAS ANTONOPOULOS: burned through all my savings, and established my work in that space. And then, two years later, this came out. I'd never written a bookbefore I wrote my first book. Now I'm writing my sixth book, and the rest is history. ASH BENNINGTON: Andreas, what was it that you connected to at such a visceral level when you read the whitepaper? ANDREAS ANTONOPOULOS: What I connected to was I understood immediately that this was not just money but a platform-- specifically, a very decentralized distributed system that enabled us to do something that we had never been able to do before, which was establish trust across vast distances without coordination-- trust without a central authority. And, of course, if you have a network that enables you to conduct some kind of transaction with another person with complete trust in the system without having to trust that other person, without having to even know that other person, the obvious first application is money. But that's not the only application. And so then, that seed immediately started branching out and blossoming into 1,000 ideas that just washed over me.
And I spent the next four months obsessively reading, writing, coding, and consuming all information. Like many people, I think, in the beginning, I was very skeptical, because it was like, OK, this is very elegant, very interesting. Surely there's a catch, right? There is something here that I'm missing. So I went at it. I'm going to debunk this. I'm going to find the weakness. So I started reading the source code. I'm like, OK, you can't break it that way. Let's try this way. You can't break it that way either. And just kept hammering at it with every possible angle that I could come up with. I'd trained as an information security professional in attacking systems and finding the weaknesses, and I attacked it ferociously. And after months of doing this, I finally managed to persuade myself that this is a hell of a lot deeper than I thought, it's more elegant than I thought, it's more robust than I thought, and this could go a very, very long way. ASH BENNINGTON: That's a wild story.
That's so cool, the idea that you jumped in trying to break it and debunk it and found, nope, it's actually the opposite. ANDREAS ANTONOPOULOS: I'm still trying to debunk it. There's always this little voice in the back of my head going, there has to be a catch. I still approach things with skepticism. I don't assume that this is meant to succeed or that it can survive every form of attack. It's just that it has this right balance of incentives and disincentives and these robust features that make it survivable, like the internet. And that means that the community that's built around it can react to different forms of social attacks, economic attacks, political attacks, legal attacks, and, of course, technical attacks and shore up the system.
And so over time, I've become more and more confident. And, of course, you can measure that confidence in terms of how much money is sitting in the center of the table that has not yet been stolen. So 10 years ago, I could say, oh, how robust is this system? Well, I think it can secure $100 million. How do I know? Well there's $100 million sitting in the center of this table protected by nothing else than smart cryptography, and it's still there tomorrow. Therefore, no one managed to grab it. Well, now, that conversation has reached a point where you say, Oh there's a trillion dollars sitting in the center of the table. The reason it's still there isn't because no one has tried to grab it. It's because everyone is trying to grab at it 24 hours a day for 12 years and failing. And if you see that, it creates a level of confidence, right? These systems are robust because they are continuously stressed-- or, as Nicholas Nassim Taleb says, "antifragile." They thrive through adversity, they adapt to attacks, they evolve to defend.
And we've watched that in real time. ASH BENNINGTON: I notice you've written, obviously, not just about Bitcoin. I think the red book, underneath Mastering Bitcoin, is Mastering Ethereum. So you've written very broadly about this subject, and we've talked a lot about it. So let's describe what it is at the biggest level. What are blockchains, distributed ledger technologies, especially for someone who is relatively new to the field or to an investor who's maybe gotten the bug because of the price action? What exactly are these technologies? What do they do, and why are they so effective? ANDREAS ANTONOPOULOS: Yeah, so I think the word "blockchain" itself has been so horribly abused by marketing that it misses the point. And it's a bit of a sore point for those of us who study this technology.
It's a reductionist term in that you could look at a modern automobile and say, oh, it's a carriage that rides on inflatable pneumatic tires, ooh! And then say, the technology behind this is pneumatic tires. It's not. It's not the tires, it's not the transmission, it's the internal combustion engine. But if it's an electric car, it's not that either. It's more the combination of all of these unique technologies. Now, a blockchain in itself is simply a database. What's interesting about Bitcoin and similar technologies is, who has the right, the ability, the power to record new information into that blockchain and under what conditions? And what these things are are mechanisms that will allow us to distribute that power broadly throughout thousands, tens of thousands, hundreds of thousands, perhaps even millions of participants over the internet, none of whom need to trust each other, all of whom can follow a set of rules that are encoded in software that implements those rules for them to check everybody else's work in a kind of adversarial but very healthy kind of peer review mechanism. And out of that emerges what is called, in our industry, consensus-- which is a common understanding of what the true state of the shared ledger is that everyone agrees to without everyone having to trust anybody else as to whether that is true or not, but having arrived at the same conclusions simultaneously or almost simultaneously by following the same set of rules. So what is this technology? It is a mechanism for decentralizing trust.
It is a mechanism for taking institutions we have today, which are hierarchical in nature, where power, trust, governance, and oversight are these different mechanisms we use to balance things. So you can vest trust in an intermediary, a custodian, a bank, a central bank, a government. But when you vest that trust, they have to follow rules. Those rules are encoded in laws, and then you put a layer of oversight on top to say, let's watch them so they don't break these rules.
Well, this system takes that and flattens it like a pancake, spreads it out across a whole network, uses the internet as the underlying platform, and say, no one has power. Everyone has to agree. The rules are universal. If you follow the rules on a voluntary basis, you participate in the system. Everybody checks everybody's work, and what emerges is trust in the system, rather than any of the participants or holders of power.
It's a machine for trust that is global. And that is a staggering statement if you understand distributed systems. The implications of that are Earth-shattering, because, obviously, money, yes, but so much more in our society depends on having institutions of trust, and those institutions of trust don't scale. They're easily corrupted. They have this pyramidical shape that creates concentrations of power at the top. And so the ability to flatten that architecture and distribute it, it changes a lot. ASH BENNINGTON: And I often give metaphors as well for ways to understand Bitcoin, but it's important to point out that when you do this, you're doing it with an understanding of the actual source code for how the system works. For people who haven't read your books, the O'Reilly books, I actually have a copy open right in front of me in Kindle right now, and it is a detailed walkthrough of the individual components of the source code that make this function. One of the things that's interesting about Bitcoin is we often talk about how the whitepaper was established in 2008, but this is very much a system that's evolving.
Can you give us some understanding of how it's changed since 2008 until the present and why those changes are so important to understanding the functionality? ANDREAS ANTONOPOULOS: Yeah, absolutely. The system emerged with a whitepaper, but interestingly enough, a very pointed historical fact is that Satoshi later revealed, I wrote the software first to prove to myself that it worked before publishing the paper. And if that doesn't tell you everything you need to know about the ethos of software development that goes into systems like this, it's like even the founder of this system did not quite believe that this would work until they wrote the software and applied it. This is about applying technology. It's not about writing a paper. It's not about having an opinion or a theory. It's about putting code onto computers, running it, and then seeing what happens. And this code evolves. It evolves in a very conservative fashion, and people often don't understand this very careful balance in Bitcoin, which is you have a set of rules, OK, but how can these rules change if no one is in control? And who determines these rules? And how do I check these rules? And the way-- the simple answer to this is there are developers who work collaboratively to develop software.
This is in a category of software known as open source software, which means the software itself is available for anyone to collaborate, to contribute, but most importantly, to inspect, to review, to audit. So we know exactly how it works. You can read the code if you understand-- and it's in many different programming languages-- or you can take a book like this that kind of breaks it down into simpler pieces. But the developers who write this code, sure, they write it, and then they release it into the wild after a long, detailed collaborative process. And then, nothing happens, because code on its own doesn't do anything. But the users of the system-- the exchanges, the merchants, the individual wallets, myself-- decide whether we want to run this code. And that decision is our vote in the consensus system. Because when I install a certain piece of code, I am adopting all of the rules that are in that piece of code. Sometimes there are competing versions, and if I adopt a different set of rules, I end up on a different blockchain that has slightly different set of rules.
We call that "forking," because the two chains fork apart. But the bottom line is that there is an initial kind of deliberative process which is kind of meritocratic, technocratic, of developers, and they propose changes, and they introduce these changes. But in order for these changes to be adopted, both the users of the system who put their money behind it and the miners who participate in the industrial-style process of verification and security have to adopt these rules. There are some elaborate mechanisms for voting, and these are mechanisms simply to coordinate, to ensure that we're not introducing something that lots of people object to, because in order for the rules to go into effect, they have to reach a very, very high standard of consensus. You want to get upwards of 90% agreement on the network so as not to cause any disruption to the network.
And effectively, that means that the rules themselves are subject to filibuster. They're subject to a lot of debate, and they operate almost as a constitutional guarantee. And while developers may propose amendments to these constitutional rules of Bitcoin, unless you have a massive majority of approval, these changes don't go forward. And if you disapprove, if you disagree, all you have to do is change the rules that you decide to use or run a different set of rules. And then you and whoever else agrees with you, run your own chain. And that has viability. So it's a system of constitutional rules with infinite possibility of secession.
It's a very weird concept. You can walk away and make your own game, and if nobody comes, then you probably didn't make a good choice. And if everybody follows you, then you were clearly in the right. But no one can be forced. And so that makes the system interesting, because its evolution depends on bringing all of these different constituencies into agreement to voluntarily adopt a change in the rules. There have been maybe a dozen changes to the underlying rules of Bitcoin that have had fairly significant effects on the operation of the network and brought it forward, and a new one is being planned for 2021, a modification called Taproot. No point in going into that, but right, now we're in the lobbying stage where, basically, the discussion is how do we bring this to the floor in order to propose this amendment, and what are the rules under which it will be adopted? So we're in that stage. ASH BENNINGTON: Yeah, you've talked quite a bit about the evolution of Bitcoin. I'm curious about what your view is right now on the current state of play in Bitcoin and actually, also, into the future with the proposed changes in Taproot. ANDREAS ANTONOPOULOS: Well, Bitcoin continues to be doing what it was meant to do, which is provide a very stable, conservative, secure network for the exchange of money.
And when I say "stable." I don't mean stable in terms of its valuation against the US dollar. It cannot be stable at that level, because you're valuing something that has an economy of 25 million people doing about a trillion in capitalization, trying to value that in a unit-- the US dollar-- which is used by a billion people if you count all of the different countries that use it as reserve and, of course, multi-hundred trillion economy. So as a result, those two will never be at the same level of volatility. However, in terms of stability, what I mean is a network that has produced a block, on average, every 10 minutes since January 3, 2009 without fail, like a heartbeat of a new economic system. A network that doesn't go down, that cannot be stopped, that cannot be interfered with, that is resistant to censorship, takeover, manipulation, delay, denial of service, or any other kind of attack.
Bitcoin itself has never been hacked. And the reason for that is not because it's unhackable, but because it's decentralized enough that there is no one place that you can attack. So its development continues to be very, very conservative. This is a system that operates 24 hours a day, 365 days a year, in seven continents and 194 countries and territories-- basically, everywhere. Anywhere that you can have a satellite receiver or cell phone with data services, you can access the Bitcoin network and transact on it. That means we never turn off. We never shut down. We don't have a maintenance window. There is no day off. There is no business day. There is no downtime. There is no closing bell. We had an opening bell. So far, no closing bell. And that means that all maintenance and changes and evolution of the system has to happen while it's in flight. Some people have described this as trying to do maintenance on one of your jet engines while in flight, and that's a pretty accurate description. Obviously, as you can imagine, that means a lot of testing, quality assurance, and very, very careful and conservative stewardship of this code base. ASH BENNINGTON: We've talked a lot about the core functionality of Bitcoin.
I'm curious, one of the topics that comes up a great deal on Real Vision is layer 2 solutions, using Bitcoin as the base layer to extend the technology. Can you talk a little bit about what your views are on where we are with layer 2 solutions? ANDREAS ANTONOPOULOS: Yes. So one of the core tenets, the fundamental aspects of a blockchain is in order for it to be secure and decentralized, everybody checks everybody's work. Now, as you can probably imagine, that does not scale to a global level if what we want to do is dump the entire world's retail transactions onto this system.
It especially doesn't scale if you look a couple of steps beyond that, because if we were to dump the world's retail transactions onto an instantaneous global digital currency like this, very quickly, you'd be thinking, OK, what about machine-to-machine transactions? What about microtransactions? And then you start dealing with 10, 100, 1,000 times more demand for this system. So we have to be looking out for much bigger scale. You cannot do that on the basis of everybody checks everybody's transaction. So in order to scale it without losing the elements of decentralization and robustness that make it resilient to attacks, we are developing, we are seeing the development of a layer of technology above it. So the layer of technology above it, for those of your audience who understand the traditional financial system, if you think of Bitcoin as Fedwire or SWIFT, then the layer above it is the ACH network, and the layer above that, maybe, is credit card and debit card transactions.
You can't put everybody's debit card on Fedwire. The system would crash. You don't want to. You don't need to do. But at the same time, we don't want to lose the security characteristics. We don't want to lose the decentralization characteristics. The most prominent of these networks is called the Lightning network. It's the Layer 2 for Bitcoin. Other blockchains like Ethereum have their own layer 2 solutions, and there are many being developed that are layer 2 across chains. The goal of these systems is to be able to create very fast transactions on a peer-to-peer basis or person-to-person basis, where you can do transactions as small in value as 1/1,000 of a penny, do them as fast as several per second-- perhaps even hundreds or even thousands per second-- and do so for fees that 1/1,000 of a penny or less. Now, that opens the door for a whole new category of applications when you break the second barrier, when you break the dollar barrier, and you go subsecond, subpenny payments, now we're talking about microtransactions. I've coined a term called "streaming money" to really capture this idea of being able to trickle tiny, tiny amounts of money on a continuous basis to someone.
It really puts the expression "cash flow" into perspective, because we are approaching a moment when, just like when we transitioned from VHS to Netflix or from cassette players to music streaming, money, which is currently batched on a weekly, monthly basis with checks and things like that-- especially in the US-- we can imagine a transition where it becomes a flowing system of streams. Getting paid your salary by the minute-- why not? What's the impediment there? The impediment is the efficiency of the traditional payment system.
So layer 2 isn't just about solving the scalability of layer 1. I look at that from a perspective of a future vision what we talk about applications of money that are not possible with any traditional financial system, that open the door for all kinds of things we haven't even imagined yet. ASH BENNINGTON: Yeah, I find this absolutely fascinating, this notion that people talk about the role that blockchain and Bitcoin are going to have in supplanting the current financial system. But the question of what lies beyond that we haven't even thought about yet today, that will be powered by these new technologies. ANDREAS ANTONOPOULOS: Yeah. Yeah, indeed. And we haven't touched on so many other subjects. I mean, for me, there are two other broad categories of future developments that I think have enormous impact and a third that is a bit further out. The first one is a category of applications called decentralized finance, or DeFi. Decentralized finance are basically financial instruments that are programmed. The way Bitcoin is programmable money, these are financial instruments.
They could be securities. They could be loans. They could be novel currencies that have a peg to value to, for example, the US dollar, or the euro. They could be various forms of derivatives, futures, and other exotic financial instruments we haven't even conceived of yet. Because you basically take the domain of creating financial instruments, and you add to it the programmability of a web application. And the opportunities are endless. The other category that I think is extremely interesting is this category called NFT, or non-fungible tokens. These are tokens that, instead of representing units of currency, represent unique objects, items, or properties in the form that is distinguishable from one another-- basically, non-fungible. So let's think of an art piece that is represented by a deeds document that is a digital token that can be traded like Bitcoin, or the deed to your house, or your car, or any other physical item, or a specific piece of land, or who knows what else. So these things are very interesting. It's basically taking things that exist in the real world or taking digital intellectual property-- like a song or a brand-- and tokenizing it so that it becomes something that can be digitally traded.
We haven't even scratched the surface in that domain. And finally, the third one that I look further into the future is the opportunity of applying this to the areas of identity and human governance-- so is the ability to have tokenized human identity where you do not have to reveal who you are, but you can reveal various aspects. So I can prove that I have a degree from a University using a non-fungible token without telling you my name. I can prove that I am licensed to drive without giving you my entire history. I can prove that I am creditworthy, or trustworthy, or whatever-- so these various tokens that you can assign to individuals is that allow you to be in control of these things, not a government, not a corporation like Facebook. And then, the possibility of taking those and using them for governance purposes. The ability to vote in my homeowner's association, in my parent-teacher association, in my municipality, and all the way up into voting at the United Nations as one of 7 and 1/2 billion citizens of this planet with a digital voting token.
Radical direct democracy is possible with these technologies. So these are things we're talking about 10, 15, 20, 25 years into the future. But if you understand how this technology works, and you see the seeds we're planting today, you can see these as natural developments that come out of this technology. ASH BENNINGTON: Yeah, All of those things are absolutely fascinating to me. The governance component, zero-knowledge proofs. I just hosted a panel on NFTs at ETH Denver. Really fascinating stuff. And DeFi, actually, funny enough, Sebastian Moonjava, my colleague here at Real Vision, said it looks like Andreas is up on the Polkadot message board. Is that really him? Is it someone pretending to be him? Is that him? You have to find out. ANDREAS ANTONOPOULOS: Yeah, it was me.
I did run a node briefly there. My attitude towards these technologies is if I find something interesting and I want to investigate it further, I don't read the whitepaper; I read the source code. I don't look at the financial charts; I run the code on my own servers so that I can see how it works, and play with it, and try to understand it in a more deep fashion. So it's more of an applied, I get my hands dirty. And I've done that with a number of technologies, to the consternation of some of the people in our industry. Generally speaking, it's seen almost as heresy to look at other technologies other than the one other people have chosen. But I don't see these different blockchains as competing with each other.
I see them competing with the status quo, for sure. And I see them all carving out niches that are fairly self- contained where their differentiation is unique, and durable, and robust. And so I write technical books, like the Mastering series, but I also write more philosophical books about where I think this future is going, like the Internet of Money series books that I've written, which are non-technical. They're for a general audience. And these are about my vision of the future, the implications I think this has on economics, politics, society, history, with references from the biological world and other areas to explain how this technology may apply to our lives. ASH BENNINGTON: It's so interesting. That was actually going to be my next question to you, Andreas, about the philosophical divides in the space.
I think it's hard sometimes for people to understand who are outside of the space just how-- I guess the polite way to say it is how intense the debate is, particularly between the Bitcoin community and some of the other projects that are happening. It's interesting to me, also, because you are a classic OG Bitcoin guy, and yet you have interest in some of these other projects. In some ways, that's actually atypical in this space. Tell us a little bit about your feeling about that divide between Bitcoin and some of the other projects and where you feel you come down on it. ANDREAS ANTONOPOULOS: I think one of the things that's happened in this space is that we broke through a barrier of control, vetting, and authorization. Innovation in financial services was gated by gatekeepers-- gatekeepers like the Securities and Exchange Commission, the Futures and Trading and Commodities Commission, the various regulatory agencies, money service agencies, et cetera, et cetera. All of these governmental organizations basically act as gatekeepers that protects consumers-- at least supposedly, that's the primary role-- but they also keep things in a nice, tidy box with a lot of preset assumptions about what is and isn't a financial instrument, what is and isn't a commodity, et cetera.
And every now and then, those boxes start leaking. The boundaries break, and they have to scramble to adapt. Well, the introduction of blockchains in 2009 basically just demolished all the walls, and it gave the ability to anyone to innovate without permission, without authorization, and without oversight, and go in any direction they wanted, and throw something out there in the world that is, from the get-go, global, robust, unforgeable, and scalable. And, of course, that throws a big old disruptive monkey wrench in the entire established regulatory framework. Now, you can look at this two ways. You can say "Wild West," right? It's like, imagine if we had a communications network where anyone could say anything they wanted on video and post it on a channel? Already happened. Or anyone could pretend to be a journalist, or anyone could make music without having to go through a recording studio first to be carefully vetted. Well, the internet did all of those things in the domains of media and entertainment, TV, newsgathering, et cetera.
But now, it's done it to finance. The end result is that hundreds of thousands of people went out and did things. And many of these things were opportunistic grabs in order to bamboozle people into parting with their money. As you can expect, if you go into a Wild West environment, there's going to be a lot of snake oil salesmen-- in fact, that's where the expression comes from-- who will try to sell you something. This has created a degree of defensive skepticism from those who see the differentiation between something that is very robust, has true fundamentals, and is very real-- like Bitcoin-- and everything else.
I take a slightly more nuanced approach than that. I think that there's still-- 99% of everything else may not have much of a future. But that doesn't mean that some of those things, that all of those things don't have a future, or that we're going to end up with just one system that wins everything. This is, like the internet, it's a frontier. Even if you say most of the search engines will fail, most of the social media platforms, will fail most of the video platforms will fail, well, that still doesn't mean you only end up with one-- at least, I hope not.
That's not a healthy state. The bottom line is that we have to embrace both the good and the bad of unfettered, wide-open innovation. The good, we are now seeing the greatest level of innovation in cryptography, in distributed systems, and in financial services that we have seen in the past 300, 400 years. Never happened before, it's unprecedented, and it is giddy in its excitement and its possibilities. And at the same time, we're seeing the most audacious scams, and Ponzi schemes, and pyramid schemes, and thefts that are happening and a lot of naive buyers and investors getting bamboozled. So there is a lot of defensiveness there.
I'll tell you something. My ability to look at the technology that exists in other systems and say, I can be interested in the technology without thinking it's a good investment, as well as I can be interested in this technology without assuming that it's necessarily going to win or survive, comes from conviction and understanding of the strengths and market fit that Bitcoin already has. And I think those who feel that they need to protect others from being led astray, into looking at anything other than Bitcoin, I think honestly, they lack conviction. Bitcoin doesn't need them defending it.
It has real utility, it has real strength, and you can't bamboozle people into going the wrong way for very long. And it's OK to have intellectual curiosity. In fact, I think it's a terrible mistake not to have intellectual curiosity, not to be open to other things. And this isn't religion. This is science. And in science, we don't say, this is the one true doctrine, and if you shall look astray, you're a heretic. What we say is, evaluate, verify, analyze, review, and decide for yourself. And that's all I'm doing. ASH BENNINGTON: Yeah, I think that's very well said. With that said, to talk a little bit about Ethereum, the subtitle of your book, I should say, written with, co-written with Gavin Wood-- who's, of course, been on Real Vision and was just on in January-- the subtitle is Building Smart Contracts and DAPs. Tell us your view of where we are right now, what the current state of play is for smart contracts, and why you find it such an appealing space-- enough to write a very thick O'Reilly book describing the functionality. ANDREAS ANTONOPOULOS: So smart contracts are neither smart nor contracts, but they basically give the blockchain the ability to run complex, open-ended programs.
Bitcoin does not run complex, open-ended programs, and that is by choice, because complex, open-ended programs are not always secure, and you don't want your money being underwritten or protected by complex, open-ended programs. However, that conservative approach is also limiting. Ethereum goes for the open, general-purpose, open-ended programs. And that allows you to do all kinds of interesting things from creating tokens, to decentralized finance, various instruments, et cetera, et cetera. Now, that comes at a cost. The cost is that in order for that system to be able to evolve, you have to have much faster iteration. You will stumble many times on that path. You're going to have some spectacular and catastrophic losses.
It's even-- it's the Wild West of the Wild West. It's Dodge City. And in there, you have this accelerated development, this accelerated innovation, and it creates tremendous opportunities for experimentation. In order to do that, it's discarded some of the conservative principles of Bitcoin. So I see Ethereum as very complementary. I see it as being able to explore the far reaches of innovation that Bitcoin doesn't want to venture into, or shouldn't want to venture into, because that would undermine its primary function of doing robust money that resists even state-level attacks. Ethereum can go off and do that because it has, among other things, as its backing its bigger brother, its robust sound money that it could use as a reserve currency, as a fallback currency, as a trading pair in markets, as a liquidity source, and all of these other things that Bitcoin does well.
I think they're beautifully synergistic. The future of Ethereum, of course, is much more uncertain than that of Bitcoin. Because Ethereum's use cases is so much more open, because it's a programmable blockchain with so many different possibilities, you tend to get whiplash if you tried to pay attention to what's the current model of what Ethereum is pursuing right now. Is it ICOs, like it was in 2017? Is it tokens, like it was shortly before and shortly after? Is it decentralized finance, which it's been doing for the last 2 and 1/2, three years? Is it non-fungible tokens? The simple answer is all of the above, and whatever sticks. And that can be disorienting, confusing, and very much look like a scattershot approach to innovation. But I think it has tremendous value, because it allows us to look at many different avenues and fund them.
And what's happened is, as much as people want to bash DeFi as running off on a tangent, it already, now, has economic activity that is greater than the five next biggest chains that follow it. So clearly, it has found some market fit. ASH BENNINGTON: Are there any examples, Andreas, that you find intriguing right now, either in DeFi space or in the broader Etherium ecosystem, that have really caught your attention as something that currently is something that's worth thinking about? ANDREAS ANTONOPOULOS: Well, I think certainly, as I mentioned before, the non fungible tokens. But I think one of the things that caught my attention three or four years ago when it first launched and continues to have my attention is the concept of a decentralized stablecoin. So I need to explain just a tiny bit, but a stablecoin is a completely digital token that lives on the blockchain but whose value is pegged to the value of a fiat currency like the US dollar. And there are a number of those, but in all of the cases bar a handful, they are backed 1 to 1 by physical US dollars or US dollar deposits in banks that collateralize 1 to 1 these tokens.
The thing about that is that the token, the stablecoin, is decentralized, but the bank deposits are very much centralized, and they're subject to all kinds of counterparty risks-- the bank going bankrupt, the government coming in and seizing those deposits, thereby pulling the rug from underneath the collateralization principal, all kinds of things that can happen there, including the problem of hypothecation, right? Which is, how many of the actual dollars are also spoken to in some weird real estate loan for a casino on the side that you didn't know about, and you thought they're 100% backing this, but they're also backing a couple of the things you didn't know about? So rehypothecation and over- or under-collateralization. In the Ethereum domain, there is a stablecoin called Dai.
And Dai is a US-dollar-pegged stablecoin that is collateralized entirely by cryptocurrency. And it is over-collateralized, kind of the opposite of fractional reserve banking. It's multiple-reserve banking, meaning that for every one dollar of Dai you have out there, you have $1.50 or more in corresponding crypto assets. And the entire system is automated, so that you can have various things like margin calls and requirements for collateralization operate independently based on these smart contracts. That's never happened before, and it is an application that really has caused people to pause and pay attention. Already, the world's governments and central banks are paying very close attention to stablecoins, because they understand that while Bitcoin isn't a direct threat, because it's playing in a different space, dollar- pegged stablecoins or euro-pegged stablecoins, those are a direct threats to the sovereignty of national currencies and the sovereignty and control of the central bank.
But at least in those cases, they see the threat, but they think, hey, we can always go in and snatch the dollars from their bank accounts. Well, you can't with Dai. And if they are smart about this, they would be even more concerned about the emergence of a truly independent dollar-pegged stablecoin that is not under the control of anyone and can't be stopped. It has the same unstoppable characteristics of Bitcoin, but with the units of account and price stability of the dollar. And if I was Christine Lagarde or Janet Yellen, I would be having Dai nightmares every night. ASH BENNINGTON: Yeah, it's very interesting. Of course, we saw some of those nightmares play out in the regulator's reaction to Diem, the Facebook stablecoin. ANDREAS ANTONOPOULOS: Right, formerly known as Libra. Yes, absolutely. And they get it, again, because, again, that is intended to be a stablecoin, and that represents the third partner in this triangle of power I think it's important to realize that what Facebook is doing with Diem-- or Libra, as it was known-- isn't a direct threat to Bitcoin, but it is very much a direct threat to traditional retail and investment banking-- Chase, PayPal, et cetera-- because it brings a much bigger user base and the technological know-how of a company like Facebook right into the middle of FinTech.
And at the same time, it threatens sovereignty of governments. So I've described this weird relationship between these three elements of power as the three-body problem. The number of possible permutations of attraction and repulsion between these bodies that are all gravitating around each other, the form of nation-state currencies, currencies by the sovereign for the sovereign, ultimately, and by the will of the sovereign, fighting against Bitcoin, which I see as currency of the people, by the people, and for the people, truly independent, humanistic currency that is under the control of no one. And then, out comes a third category, which is currency by the corporations, for the corporations, and of the corporations, which creates the spectrum of almost feudalism, neofeudalism. Companies like Facebook can monetize money better than they can monetize anything else. And if they get the power of sovereignty over money, yeah, nation-states are in big trouble, and so are the rest of us.
It's a terrifying prospect. ASH BENNINGTON: And as physics nerds will know who know about n-body problems, there is no closed-form solution to a three-body problem. ANDREAS ANTONOPOULOS: Yes, it's also a great sci-fi book by Cixin Liu. ASH BENNINGTON: Yes. Actually, having this kind of conversation reminds me to ask you, are there any technologies that aren't yet on our radar, that are, perhaps, very experimental that you're looking into, that are not traditional Bitcoin, Ethereum ecosystem type of technologies but that you find intriguing? ANDREAS ANTONOPOULOS: I think-- yes, absolutely. And I would say probably the biggest one of those is zero-knowledge proofs. One of the things that people don't realize has happened with Bitcoin is that by providing an economic engine behind applied cryptography, it's created a golden age of applied cryptography research that has never happened before. We now have the largest deployment of public key cryptography in civilian hands ever, and it's already getting to the point where it's going to surpass even military deployments of cryptography. So that is exciting. The fact that it now has funding to the level of more than a trillion dollars means that the appetite for primary research has accelerated. There are currently literally thousands of PhDs being written every year on these topics, and some of those are in an area of applied cryptography called zero-knowledge proofs, which seem almost magical.
These are areas of mathematics where you can prove that something is true without revealing what it is. And that sounds impossible, but trust me, it's not. And what it allows you to do is create blockchains, and cryptocurrencies, and voting systems where, for example, you can prove that everybody voted and their vote was counted without knowing what anybody voted for, or you can prove that every transaction on the blockchain is valid and follows the rules, but not know anything about who sent it, who received it, and how much money it contains.
This creates the possibility of an enduring, individualized superpower level of privacy that can undo the surveillance capitalism and surveillance nationalism curses that have descended upon us over the last decade. We can actually walk back a lot of the losses of privacy in a very aggressive way, I think, which is absolutely warranted-- seize back control over private information by asserting the right to privacy, not through a petition, but through cryptography. We Will not ask for our privacy to be given back to us. We will take back our privacy through the application of mathematics. ASH BENNINGTON: I think it's probably fair to say that there are going to be some folks out there who we are not going to be so excited to see that happen, especially large corporations whose business model depends on it, but also nation-states who will say, look, there are really bad actors out there who want to do scary and terrifying things, and this handcuffs our ability to deal with them.
What are your feelings about that? I mean, I think we all probably agree that it's not a terrible thing that big corporations are not going to be able to monetize our data at quite the same level, but what are your thoughts about some of the legitimate concerns that law enforcement has about things like terrorism and drug trafficking? ANDREAS ANTONOPOULOS: Well, I have some political opinions about that which are probably neither here nor there. I see drug trafficking as a health crisis that should be dealt with through health care and not through a war on drugs that has failed on every possible criterion that you might apply to it. But the bigger issue is this.
Law enforcement does have the ability to continue to do investigations, to acquire witnesses, and to secure convictions. In fact, these blockchains systems, from the perspective of the individual user, create an unforgettable forensic trail of your activities. As long as you individually are under reasonable suspicion-- or perhaps even probable cause for investigation-- then you can be investigated. And, of course, the information that's on your computer can be used to convict you. Most sophisticated law enforcement agencies see that as a positive step in law enforcement. What these technologies do is they make it impossible to do dragnet surveillance of everyone without suspicion.
And to anyone who says that the only way to fight terrorism, to fight drug dealers, to fight all of these other criminal and social dangers is through the continuous, unaccountable surveillance of billions of people and the acquisition of power to impose that surveillance without recourse to everyone without suspicion, without oversight, without controls, is trying to sell you fascism wrapped up in a nice yellow bow that says, "save the children." And what I want to save the children from is fascism. Because I think they're at much greater danger of growing up in a society like totalitarian China, like authoritarian Russia, and potentially like some of the Western democracies that are looking at these, not with horror, but with a glint in their eye and some degree of jealousy as to the possibilities that opens, and say, no, that is not OK. You do not strip billions of people of the fundamental right of privacy and the ability to pursue their own self-interest and the safety and security of their families in order to satisfy this power-hungry idea of how you should run what you call democracy, but no longer is.
Here's the truth. If you give 7 and 1/2 billion people access to their own money in a completely anonymous, transferable bearer instrument, we're back to where we were less than 500 years ago with gold, and we're back to where we were less than 50 years ago with the financial system before the introduction of the Bank Secrecy Act and all of these surveillance streams that occurred. Correct me if I'm wrong, but the horrific things that happened in history before these times did not happen because people had excess privacy in their financial transactions. If anything, what history teaches us is they happened when people were stripped of that privacy and stripped of their freedoms. So I'm quite happy to go to a world of independent control over our money. And I think if you give 7 and 1/2 billion people that kind of access to money, what they do is they buy food, shelter, clean water, and education for their children. And that fights terrorism. ASH BENNINGTON: Yeah, that complex question, and a very nuanced answer. As we think ahead, Andreas, as we begin to look forward, what would you like to leave our viewers with in terms of what you're going to be looking out for, what your view of the future is, and what's important for them to know as we make some of the transitions that we've just discussed today? ANDREAS ANTONOPOULOS: I think it's important to broaden the perspective on what these things are and how you, personally, can be involved with these things.
So no matter who you talk to, probably the first thing you hear about Bitcoin is investment. And invest in it with one specific goal, which is to get rich. And if you look at it like that, you're missing the whole point. Yes, Bitcoin can be an investment, among other things. But Bitcoin and other cryptocurrencies are not get-rich-quick schemes, they're get-free-slow schemes. They give you freedom. They give you liberty. And so how do you approach this? Before you start thinking about investing, one of the first things I would talk about is how to earn cryptocurrency by learning about cryptocurrency. So here, in this space, technical skills, being adept with this technology, pays dividends not only in this industry, but in adjacent industries and other areas of your life. You learn a skill. This skill transcends the possibility of the price going up or down, or whether you got the timing right. And if you earn it, none of us buy our dollars on a currency exchange, right? We work, and we get paid every month.
And you know what? I work, and I get paid in Bitcoin every month, and Ethereum, and other cryptocurrencies. And my relationship with these systems is different because I've earned them. I haven't invested in them. And I also pay salaries. I pay contractors all around the world. I use it as a day-to-day currency. I am part of a new economy that occurs on the internet. And in doing so, I've not only added my creative potential to this new economy, I've also withdrawn it from the traditional financial system. That's empowering, and it also allows me to use my skills to develop this technology, and it gives you a completely different perspective. So when you approach this, don't look at it just as an investment. Look at it as a technical skill. Look at it the way you would look at learning what the internet is in 1997 or learning how to make mobile apps in 2007.
Look at it as how it could influence your career or change the nature of your job. And you don't have to invest anything in order to learn this instead of your time. ASH BENNINGTON: Yeah, I absolutely agree. It's one of the points that I make continually on Real Vision. The most important thing to invest, especially for young people, is your time in understanding these quantum shifts in the way the world is moving, and to really understand the world as it's going to be 10, 20, 30 years in the future. ANDREAS ANTONOPOULOS: Yeah, and just in case you thought that part of that was trying to sell you my books, one of the things you have to realize is in this space, we operate on an open source foundation and in an open source culture. That means that almost everything I do is available not only for free on the internet under open licenses-- you can take any one of these books and you can mash it up and turn it into a university course with a simple attribution.
You don't even need my permission. You can download and read these for free. You can download and watch any of the videos for free, and also ad-free, not even monetized, on my YouTube channel. And there are also thousands of other resources developed in a similar spirit. We build community first. We share our knowledge. And then, the rest will happen on its own. ASH BENNINGTON: Yeah, available on GitHub now. ANDREAS ANTONOPOULOS: Yeah, exactly-- for free. ASH BENNINGTON: Andreas, thank you so much for joining us. ANDREAS ANTONOPOULOS: Ash, it's been my pleasure. Thank you so much. NICK CORREA: Thank you for watching this interview. This is just a taste of what we do at Real Vision. To learn more about the complex world of finance, business, and the global economy, click on the membership link in the description. Give us 7 days to change your life.
This will be the best dollar you'd ever invest..
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