Key Insights & Memorable Quotes
Below are the most popular and impactful highlights and quotes from The Internet of Money:
There are a billion people, right now, with access to the internet and feature phones who could use bitcoin as an international wire-transfer service.
Six and a half billion people on this planet have no connection to the world of money. They operate in cash-based societies with very little access to international resources. They don’t need banks.
As the adage of the entire internet once went, “I just replaced your entire industry with 100 lines of Python code,” that’s exactly what we’re doing with bitcoin.
This isn’t about nation-states anymore. This isn’t about who adopts bitcoin first or who adopts cryptocurrencies first, because the internet is adopting cryptocurrencies, and the internet is the world’s largest economy. It is the first transnational economy, and it needs a transnational currency.
At the end of the day, bitcoin is programmable money. When you have programmable money, the possibilities are truly endless. We can take many of the basic concepts of the current system that depend on legal contracts, and we can convert these into algorithmic contracts, into mathematical transactions that can be enforced on the bitcoin network. As I’ve said, there is no third party, there is no counterparty. If I choose to send value from one part of the network to another, it is peer-to-peer with no one in between. If I invent a new form of money, I can deploy it to the entire world and invite others to come and join me. Bitcoin is not just money for the internet. Yes, it’s perfect money for the internet. It’s instant, it’s safe, it’s free. Yes, it is money for the internet, but it’s so much more. Bitcoin is the internet of money. Currency is only the first application. If you grasp that, you can look beyond the price, you can look beyond the volatility, you can look beyond the fad. At its core, bitcoin is a revolutionary technology that will change the world forever. Join
One of my favorite words is a French word: sousveillance. It is the opposite of surveillance. Surveillance means to look from above; sousveillance means to look from below. In their dream of nation-states controlling all of our financial futures, they made one major miscalculation. It’s a hell of a lot harder for a few hundred thousand people to watch 7 1/2 billion. But what do you think happens when 7 1/2 billion of us stare back? When the panopticon turns around? When our financial systems, our communication systems, are private, and secrecy is an illusion that can’t be sustained? When crimes committed in the names of states and powerful corporations are vulnerable to hackers and whistleblowers and leakers? When everything eventually comes out? We have a great advantage because the natural balance of the system is one in which individuals can have privacy but the powerful cannot have secrecy anymore.
There are almost 200 currencies of the world, but there’s only one international currency. There are almost 200 currencies controlled by central banks and governments, but there is only one mathematical currency today, and that is bitcoin. We are going to build more of them. Cryptographic currencies are going to be a mainstay of our financial future. They are going to be a part of the future of this planet because they have been invented. It’s as simple as that. You cannot un-invent this technology. You cannot turn this omelette back into eggs.
Bitcoin is a dumb network supporting really smart devices, and that is an incredibly powerful concept because bitcoin pushes all of the intelligence to the edge. It doesn’t care if the bitcoin address is the address of a multimillionaire, the address of a central bank, the address of a smart contract, the address of a device, or the address of a human. It doesn’t know. It doesn’t care if the transaction is carrying lots of money or not much money at all. It doesn’t care if the address is in Kuala Lumpur or downtown New York. It doesn’t know, it doesn’t care. It moves money from one address to another based on a simple locking script. And that means that if you want to build a new application on top of bitcoin, you can upgrade the devices and you can build an application. You don’t need to ask for anyone’s permission to innovate. Write the app, launch it on your endpoint, and bitcoin will route it, because bitcoin is a dumb network. That is the power of innovation on the internet. It’s innovation without permission. It’s innovation without central approval. It’s innovation without a broad network upgrade. And that means bitcoin is not a specific financial network. It’s not a financial network for large transactions or small transactions, fast transactions or slow transactions. It’s whatever you want to use it for, based upon what you choose to do at the endpoint.
Bitcoin represents a fundamental transformation of money. An invention that changes the oldest technology we have in civilization. That changes it radically and disruptively by changing the fundamental architecture into one where every participant is equal. Where transaction has no state or context other than obeying the consensus rules of the network that no one controls. Where your money is yours. You control it absolutely through the application of digital signatures, and no one can censor it, no one can seize it, no one can freeze it. No one can tell you what to do or what not to do with your money. It is a system of money that is simultaneously, absolutely transnational and borderless. We’ve never had a system of money like that.
If you read anything about bitcoin, you’ll see the very same things that they said about the internet in the early '90s. It is a haven for pedophiles, terrorists, drug dealers, and criminals. How many of you in this room have bitcoin? How many of you in this room are terrorists, pedophiles, drug dealers or criminals? Audience laughs You see the thing about bitcoin is while they push this story, every now and then someone who has never heard of bitcoin notices an important thing: it’s still not dead, which is always surprising because every two or three months there is an article that says it’s dead. That’s great marketing. Because every time someone hears it’s dead and three months later they hear it’s still not dead, they think, "Huh, this thing really tends to survive." I call bitcoin "the internet of money,” but perhaps we should call it “the zombie of currencies.” It is the currency that is the undead. The
Bitcoin isn’t a digital currency. It’s a cryptocurrency. It’s a network-centric money. I really like the idea of a network-centric money. A network that allows you to replace trust in institutions, trust in hierarchies, with trust on the network. The network acting as a massively diffuse arbiter of truth, resolving any disagreements about transactions and security in a way where no one has control.
Sometimes I speak to various regional banks, the ones that are not afraid of bitcoin. They tell me things like 80 percent of our population is a hundred miles from the nearest bank branch and we can’t serve them. In one case, they said a hundred miles by canoe. I’ll let you guess which country that was. Yet, even in the remotest places on Earth, now there is a cell-phone tower. Even in the poorest places on Earth, we often see a little solar panel on a little hut that feeds a Nokia 1000 phone, the most produced device in the history of manufacturing, billions of them have shipped. We can turn every one of those into, not a bank account, but a bank. Two weeks ago, President Obama at South by Southwest did a presentation and he talked about our privacy. He said, ”If we can’t unlock the phones, that means that everyone has a Swiss bank account in their pocket." That is not entirely accurate. I don’t have a Swiss bank account in my pocket. I have a Swiss bank, with the ability to generate 2 billion addresses off a single seed and use a different address for every transaction. That bank is completely encrypted, so even if you do unlock the phone, I still have access to my bank. That represents the cognitive dissonance between the powers of centralized secrecy and the power of privacy as a human right that we now have within our grasp. If you think this is going to be easy or that it’s going to be without struggle, you’re very mistaken.
What bitcoin gives us is a hard promise: the program will execute exactly as specified.
Bitcoin today, and all of the currencies that are built using that recipe, are at the same stage that the internet was in 1992. Only now we have the internet, and so the rate of exponential growth has already started. The innovation is growing at an astonishing rate. I spend every single day, full-time, trying to keep up with bitcoin and it’s almost impossible.
Do not underestimate this. Do not listen to the people who tell you that bitcoin is just for pornographers, terrorists, drug dealers, and gamblers. Remember that they said the exact same thing about the internet. But when 2 or 3 million people got online, we found out that they are not interested in those things—they are interested in sharing cat videos, and now we have an internet of a billion cat videos.
Today, I want to talk about dumb networks. I want to talk about smart networks. I want to talk about the value of open source when it meets finance. And I want to talk about the festival of the commons. Bitcoin is a currency. Bitcoin is a network. Bitcoin is a technology. And you can’t separate these things. A consensus network that bases its value on currency does not work without the currency. You can’t just do the blockchain without a valuable currency behind it, and the currency doesn’t work without the network. Bitcoin is both. It is the convergence of a participatory consensus network and a global, borderless currency that is fungible, fast, and secure. Today, I want to talk a bit about the bitcoin network and focus on one concept that has some parallels to the early internet.
4.1.1. The Blockchain and Proof-of-Work Why is bitcoin immutable? What gives bitcoin the characteristics of immutability? What is it that makes it unchangeable? The first answer that comes to mind for most people is "the blockchain." The blockchain makes bitcoin immutable because every block depends on its predecessor, creating an unbreakable chain back to the genesis block, and if you change something it would be noticed. Therefore, it’s unchangeable. That is the wrong answer, because it’s not really "the blockchain" that gives bitcoin its immutability. That’s a really important nuance to understand. The blockchain makes sure that you can’t change something without anyone noticing. In security we call that "tamper-evident": if you change it, it is evident. You cannot tamper with it without leaving evidence of your tampering. But there’s a higher standard in security. We call it "tamper-proof": something that cannot be tampered with. Not just “will be visible if it’s tampered with,” but “cannot be tampered with.” Immutable. The characteristic that gives bitcoin its tamper-proof capability is not "the blockchain”; it’s proof-of-work.
Bitcoin is not a currency. Bitcoin is the internet of money. As a technology, it can bring economic inclusion and empowerment to billions of people in the world. I’ll give you one example of a specific application that is going to fundamentally change the lives of more than a billion people in the next five to ten years. Every day, an immigrant somewhere cashes their paycheck and stands in line to wire 50 percent of that paycheck back to their home country to feed their extended family. Here in the US, 60 million people have no bank accounts, yet they cash their paychecks and send them abroad. Overall in the world, $550 billion is transmitted every year as remittances from first-world countries. Much of that money is sent to five major destinations: Mexico, India, the Philippines, Indonesia, and China. In some of these places, remittances represent up to 40 percent of the local economy. Sitting on top of that flow of $550 billion are companies like Western Union, and they take, on average, a cut of 9 percent of every single one of these transactions out of the pockets of the poorest people of the world. Imagine what happens when one day one of these immigrants figures out they can do the same thing with bitcoin — not for 15 percent, not 10 percent, not 5 percent, but for 5 cents. Not a percentage; a flat fee. What happens when they can do that? They can, right now. There is a startup company that is handling remittances between the US and the Philippines. They’re doing a few million dollars right now, but they’re going to start growing. There’s $500 billion sitting behind that dam. When you’re an immigrant and you can change your financial future by not paying 9 percent to send money home, imagine what happens if every month, instead of sending 91 dollars home, you send 100 dollars home. That makes a difference. There are a billion people, right now, with access to the internet and feature phones who could use bitcoin as an international wire-transfer service.
We’ve seen what happens with the development of the cell-phone technology that was deployed in Africa faster than any other technology ever in the history of humanity. We see small villages, where they have no running water, wood fires to cook with, and no electricity — yet there’s one little solar panel on top of a mud hut and that solar panel is not there for light. It’s there to charge a Nokia 1000 feature phone. That phone gives them weather reports, grain prices at the local market, and connects them to the world. What happens when that phone becomes a bank? Because with bitcoin, it can be a bank. What happens when you connect 6 1/2 billion people to a global economy without any barriers to access?
There are 2 billion people who have no bank accounts at all. There are another 4 billion people who have very limited access to banking. Banking without international currencies, banking without international markets, banking without liquidity. Bitcoin isn’t about the 1 billion. Bitcoin is all about the other 6 1/2. The people who are currently cut off from international banking. What do you think happens when you suddenly are able to turn a simple text-messaging phone in the middle of a rural area in Nigeria, connected to a solar panel, into a bank terminal? Into a Western Union remittance terminal? Into an international loan-origination system? A stock market? An IPO engine? At first, nothing, but give it a few years.
If you read anything about bitcoin, you’ll see the very same things that they said about the internet in the early '90s. It is a haven for pedophiles, terrorists, drug dealers, and criminals. How many of you in this room have bitcoin? How many of you in this room are terrorists, pedophiles, drug dealers or criminals?
I was invited to do a talk at the Bundesbank, the German Federal Bank. They were paying me for this speaking engagement, but they didn’t know how to do bitcoin, which is a real problem because I usually get paid in bitcoin. So, we agreed to do a wire transfer. It took 16 days. First, they asked for my account number. Then, the next day they said they needed the SWIFT number. By that time, my bank was closed, so I couldn’t get the SWIFT number. The next morning, I got the SWIFT number and I sent it to the Germans. By that time, their bank was closed. The next morning, they used the SWIFT number and discovered it was the wrong SWIFT number. It was the SWIFT number for US dollars, not for foreign currency. So, they sent me an email, but by that time my bank was closed. The next day, I got the other SWIFT number and I sent it to the Germans, but by that time their bank was closed. They sent me the wire. My bank took one look at this wire and said, "Bundesbank. Never heard of them. Sounds dodgy. Let’s freeze this for 14 days, just in case it bounces.” This is the third largest central bank in the world. This is the German Federal Bank. They do not bounce checks. 14 days later—and this is the great part—they said, "Money held. Money released." They released 80 dollars of the total amount, which was a four-figure amount. 80 dollars. Why 80? What the hell is that? What am I going to do with that? Just hold all of it. Are you teasing me? This makes no sense.
What does the word “checking” mean? It means an account on which you can write checks. I know this is America and we’re 25 years behind on fintech. The rest of the world doesn’t do checks, I guarantee you. What is a check? A check is the device by which a grandma can make 20 people in line behind her in the supermarket simultaneously groan. I use it to pay my rent every month. I don’t know why. I can’t do it any other way. It’s insane that I’m signing a piece of paper and sending it through the postal system in 2015. So that my landlord can walk it through the bank and deposit it. So that it might clear three to five business days later, after they’ve charged him five dollars to own his own money.
Here’s a little thought experiment: Let’s take three radically disruptive technologies and mash them together. Bitcoin. Uber. Self-driving cars. What happens when you mash the three together? The self-owning car. A car that pays for its Toyota lease, its insurance, and its gas, by giving people rides. A car that is not owned by a corporation. A car that is a corporation. A car that is a shareholder and owner of its own corporation. A car that exists as an autonomous financial entity with no human ownership. This has never happened before, and that’s just the beginning. Audience member gasps: "Oh shit!" I can guarantee you that one of the first distributed autonomous corporations is going to be a fully autonomous, artificial-intelligence-based ransomware virus that will go out and rob people online of their bitcoin, and use that money to evolve itself to pay for better programming, to buy hosting, and to spread. That’s one vision of the future. Another vision of the future is a digital autonomous charity. Imagine a system that takes donations from people, and using those donations it monitors social media like Twitter and Facebook. When a certain threshold is reached and it sees 100,000 people talking about a natural disaster, like a typhoon in the Philippines, it can marshal the donations and automatically fund aid in that area, without a board of directors, without shareholders. One hundred percent of donations goes directly to charitable causes. Anyone can see the rules by which that autonomous altruistic charity works. We are beginning to approach things we have never seen before. This is not just a currency. Now, let’s look at how the bitcoin community is addressing this incredible potential with their design choices and metaphors. Oh boy, it’s a mess.
Bitcoin is digital money. But that doesn’t really capture it. It’s more like the internet of money. But really it’s a consensus decentralized network based on blockchain technology and a proof-of-work algorithm that allows a digital token to act as a reward system for a game-theoretical competition between decentralized miners who validate—and "Oh my…,” it immediately goes off the cliff.
To summarize, we’ve inverted the very basic and most fundamental equation of currency. For millenia, until the year 2008, sovereignty defined currency. Sovereignty was the basis upon which currency could be created, and that currency allowed that sovereignty to be expressed. The monopolistic control of currency is the basis of sovereignty. Now, the internet has a currency. The internet is going to use that currency to create sovereignty. After 2008, currency creates sovereignty. The internet has its own currency, which means that the internet has purchasing power. Which means the internet has economic freedom. Which means the internet can exert that economic freedom in a post-nationalist way, in a way that ignores borders and makes the nation-state not obsolete, but simply less relevant. When an Egyptian blogger can not only blog about the revolution but also fund that revolution in bitcoin, and they can connect with people from all around the world who share their ideas for self-determination and freedom, they are expressing their own sovereignty as an individual, and they are expressing the sovereignty of their community through the use of that currency. This is the world we now live in: a world in which currencies can coexist, and where currency and its user adoption create sovereignty. Thank you.
devices and you can build an application. You don’t need to ask for anyone’s permission to innovate. Write the app, launch it on your endpoint, and bitcoin will route it, because bitcoin is a dumb network. That is the power of innovation on the internet. It’s innovation without permission. It’s innovation without central approval. It’s innovation without a broad network upgrade. And that means bitcoin is not a specific financial network. It’s not a financial network for large transactions or small transactions, fast transactions or slow transactions. It’s whatever you want to use it for, based upon what you choose to do at the endpoint. Compare that to the current banking system. The current banking system is built around very smart networks, absolutely and tightly controlled to deliver very specific applications to very dumb endpoints. Even with your most sophisticated online banking, all you can do with your bank is access some HTML that delivers a set of services that they decided they were going to give you. You get no APIs, no ability to run additional applications, no ability to upgrade or innovate or change anything unless the entire network changes to support your new application. The current system has networks for large payments, small payments, or fast payments, but it’s not all of the above. Bitcoin is all of those things because it’s not discriminating, it’s neutral, it doesn’t care, it’s dumb. The power of pushing intelligence to the edge, of not making decisions in the center, moves the innovation into the hands of its end users and gives those end users the ability to build applications that are so niche that only a handful of people around the world need them. And they can build those applications without asking for anyone’s permission.
Bitcoin is not a smart network. Bitcoin is a dumb network. It really is a dumb network. It is a dumb transaction-processing network. It’s a dumb network for verifying a very simple scripting language. It doesn’t offer a complete range of financial services and products. It doesn’t have automation and incredible features built in. Bitcoin is simply a dumb network, and that is one of its strongest and most important features. When you design networks, when you architect network systems, one of the most fundamental choices is this: do you make a dumb network that supports smart devices, or do you make a smart network that supports dumb devices? 5.1.1. The Smart Network - Phones The phone network was a very smart network. The telephone at the end of that network was a very dumb device. If you had a pulse-dialing phone, that thing had maybe four electronic components inside it. It was basically a switch on a wire with a speaker attached to it. You could dial by flicking the hook up and down fast enough. The phone was a dumb device; it had no intelligence whatsoever. Everything the phone network did was in the network. Caller ID was a network feature. Call waiting was a network feature. And if you wanted to make the experience better, you had to upgrade the network but you didn’t need to upgrade the device. That was a critical design decision because, at that time, the belief was that smart networks were better because you could deliver these incredible services just by upgrading the network for everyone. There is one small disadvantage with smart networks. They have to be upgraded from the center out. And that means innovation occurs at the center, by one player, and requires permission. As a result of smart network design, innovation only happens when a feature is needed by all of the subscribers of the network, when it is compelling enough to disrupt the function of the entire network to upgrade it. 5.1.2. The Dumb Network - Internet The internet is a dumb network. It’s dumb as rocks. All it can do is move data from point A to point B. It doesn’t know what that data is. It can’t tell the difference between a Skype call and a web page. It doesn’t know if the device on the end is a desktop computer or a mobile phone, a vacuum cleaner, a refrigerator, or a car. It doesn’t know if that device is powerful or not. If it can do multimedia or not. It doesn’t know, it doesn’t care. In order to run a new application or innovate on a dumb network, all you have to do is add innovation at the edge. Because a dumb network can support smart devices, you don’t need to change anything in the network. If you push intelligence to the edge of the network, an application that only has five users can be implemented so long as those five users upgrade their devices to implement that application. The dumb network will transport their data because it doesn’t know the difference and it doesn’t care. 5.1.3. Bitcoin’s Dumb Network Bitcoin is a dumb network supporting really smart devices, and that is an incredibly powerful concept because bitcoin pushes all of the intelligence to the edge. It doesn’t care if the bitcoin address is the address of a multimillionaire, the address of a central bank, the address of a smart contract, the address of a device, or the address of a human. It doesn’t know. It doesn’t care if the transaction is carrying lots of money or not much money at all. It doesn’t care if the address is in Kuala Lumpur or downtown New York. It doesn’t know, it doesn’t care. It moves money from one address to another based on a simple locking script. And that means that if you want to build a new application on top of bitcoin, you can upgrade the
The issue here is that we’re now creating a system that is threatening the largest industry in the world, and that is finance. They are going to object. They are going to push back, and they’re going to use the most common and effective emotional tactic there is, which is fear. They will treat you in such a way as if you are idiots and try to persuade you that this is something to fear. When people hear that message, maybe the next day they come to one of these meetups and they meet a dentist who owns bitcoin, an architect who owns bitcoin, a taxi driver who uses bitcoin to send money back to their family—normal people who use bitcoin to give themselves financial power and financial freedom. Every time that message is broken by cognitive dissonance, bitcoin wins. All bitcoin really has to do is survive. So far, it’s doing pretty well.
innovation that was pioneered by one of the big banks, I think in 2007. They realized that if you were close to the overdraft limit, if instead of running the big transaction first they flipped the order of the transactions and ran a lot of small ones, you’d pay a 25-dollar fee for every one of them, and they could maximize their fees. That’s the kind of innovation they were focused on.
