WENCES CASARES: It’s hard to have a rigorous discussion about Bitcoin without understanding money. And the best way to understand money, is to understand the history of money. Anthropologists agree that there is no tribe, much less a civilization, that ever based its commerce on barter. There’s no evidence, barter never happened. And that’s counter intuitive to most of us, because we are taught in school, that we first bartered and then we made money because barter was too complicated. Well, barter never happened, and that’s one of the key sort of myths about money. So then, you would ask the anthropologists like, okay so how did we do commerce before money, if there was no barter? There was no commerce? No, there was plenty of commerce. And the way that commerce would happen is that, let’s say that someone in our tribe had killed a big buffalo and I would go up to a person and say, “Hey, can I have a little bit of meat?” And that person would say, “no,” or “Yes, Wences, here’s your meat.” And then, you would go up to the person and say, “Hey, can I have a little bit of meat?” And that person would say “Yes, here’s your meat.” And basically, we all had to keep track, in our heads, of what we owed other people, or what other people owed us. And then someone would come to me and say, “hey, Wences, can I have a little bit of firewood?” And I would say, “Sure, here’s your firewood.” And now, I have to remember that I owe that person a little bit, that this person owes me a little. And we all went around about our business, with these ledgers in our minds of who owes us what, and what do we owe to whom. Very subjective system.
Often, these debts didn’t clear, or cleared in ways that were not satisfactory to both parties, until about 25,000 years ago. Someone very, very intelligent, came up with a new technology that really took off, which they came to me and said, “Hey, can I have a little bit of firewood?” And I said, “Sure, here’s your firewood.” And this person said, “This time, we’re gonna try something different. Here are some beads for you.” And I said, “I don’t want beads, I don’t care for beads, I don’t need beads.” He said, “It’s not about that. We’re gonna use beads, as the objective ledger of our tribe. Instead of each of us having to remember what we’re owed, the beads are gonna keep track for us, an objective ledger to keep track of debts.” And it was such a successful technology that it took off. And in a couple thousand years, it became impossible to find a tribe or civilization that didn’t have some form of objective ledger. In some cases it was one point shells. In other places, it was salt, in other places, rocks or beads. But, this form of keeping track of debts, with an objective ledger took off, and anthropologists go as far as saying that, if you describe a tribe’s environment in detail, they can predict what’s going to emerge as an objective ledger, as money. Because it’s always something that has six qualities, the most important of which, is that it be scarce. And it makes sense, because if it’s not scarce, we can create, you know, if we were to use tree leaves, for example, we could create debts that are owed to us out of thin air, and that wouldn’t be good, that wouldn’t be a good ledger. But also has to be durable. If it’s something that decays or corrodes, it doesn’t store the information well. It has to be divisible. It has to be transportable, recognizable, and fungible.
And this system really worked until about, 5,000 years ago, when trade began to extend a lot geographically, and we began to trade with other tribes. And different tribes were using different ledgers. So they couldn’t trade with each other. And what happened then, about 5,000 years ago, is that gold emerged as the first universal ledger to keep track of debt. And it was gold, because it was universally scarce. That was the most important consideration. But also it was very, very durable. Fairly divisible, transportable, recognizable, and fungible. And that’s why for 5,000 years gold has been the best store of value we have ever seen. It’s incredible that today, if you need to leave $5,000, for someone, for your daughter, not your daughter or your granddaughter, but some great, great, great, great, great, great, great, great granddaughter of yours. 40 generations from now, 900 years from now. We don’t know how to do that. If you leave it in just dollars, it’s not going to be worth very much. We know of no security, that will last that long. The only thing that we know can carry value for that long, is you need to buy $5,000 worth of gold, lock it in a vault, and give the key to that person 900 years from now. And it’s incredible that in the 21st century, this is the best answer we have.
This is why Bitcoin is so relevant. Because it’s the first time in 5,000 years that we have something that is incredibly superior to gold in each one of these six characteristics. It’s much more scarce than gold. There will never be more than 21 million Bitcoins. It’s much more divisible than gold. Bitcoin is composed of a million pieces called Satoshis. It’s much more durable, divisible, transportable. You can attach a Bitcoin to an SMS message, or, or an email and send it for free and in real time across the world. And it’s incredibly easy to verify. The second you get a Bitcoin, you know that it’s a good Bitcoin.
BILL BARHYDT: Bitcoin itself is what we call deflationary, which means that over time, the amount of Bitcoin in circulation if you look at a chart, would actually approach a fixed value of 21 million, never quite approach it, but it will asymptotically in math terms, approach that line of 21 million over time. And it does that, by the amount of Bitcoin being mined, or created, being cut in half every so often, right? Right now it’s every few years. And then it’ll be every few months, and then et cetera, et cetera. Right? And so that these halvenings actually create a predictable rate at which Bitcoin is created. That rate, like I said, will asymptotically approach 21 million over several years. And at that point though, if Bitcoin is being used for money transfer applications, there are institutional investors buying it like digital gold, that will drive the price higher, but if the price shoots up, to let’s say, a trillion dollars, right? And there’s only 21 million, it’s still not a problem, because you can subdivide Bitcoin down to eight decimal places. So you can get to the point where one satoshi, which is 0.0000001 Bitcoin, could be worth a thousand dollars. So the ability to subdivide Bitcoin into tiny amounts called satoshis, which are, you know, in today’s value, fractions of a penny, could eventually be worth, thousands of dollars in their own right, right? So that gives the utility of Bitcoin a lot of legroom for the longterm because even if the value goes up to trillions, you’ll be able to subdivide it into small amounts to make it useful for small payments. So cryptocurrencies eventually will look like, traditional commodities, in my opinion. Whether it’s gold, or platinum, or other metals, or is probably the best, but it could look like oil and gas, things like that. And so they are starting to trade in in a fashion that’s more and more similar, to traditional commodities. But the difference right now is, they’re not as liquid yet. Right? So that means that the price is very inefficient, or the markets for cryptocurrencies are very inefficient. So most people who are holding cryptocurrencies, are long-term holders, they’re not selling, okay? So that actually means that the price of Bitcoin and Ether, for example, is largely driven by the volume of buyers. So if there are large volumes of buyers coming into the market, it drives the price higher because there are not a lot of sellers. But if the buyers dry up, then the price goes down, regardless, because there are still not a lot of sellers. So that’ll change over time because if the price skyrockets, so for example, if institutional money starts to come into the cryptocurrency market in large numbers, which I think it will, that will force the price higher, because there’s not enough cryptocurrency to go around. And that’ll also cause some of the holders to loosen up their purse strings, because they’re going to want to reap the profits that they’ve been waiting for for 10 to 15 years, by the time that happens. And that’ll also create more liquidity in the system, which will create a really positive feedback loop, which should drive the price even higher. The other thing that I think is very relevant is, you’re starting to see more traditional types of financial products being applied to cryptocurrencies, derivatives, options, non-deliverable forward contracts. You know, things like that, that actually will help make the cryptocurrency market more efficient over time, close a lot of what we call arbitrage loopholes, which is kind of like free money, in the system for traders. And as those loopholes get closed, the market becomes more efficient, more liquid, and it becomes better for everyone.
BRAD TEMPLETON: What Bitcoin creates is a ledger that needs no bank. And that’s actually pretty important because if you think about what is a bank, at least as far as the money transfer and the checking and the savings, not the loan part, but the financial, the moving money part of a bank, it’s really a secure ledger. The bank does not just have a little file, that says your account has $3,000 in it. They insist that when you write something, they make a note in their ledger, that $1,000 was transferred from your account to someone else’s account and so on. And that’s important to make it secure. Well, what the designers of Bitcoin created was a way to make a ledger that’s secure, and that everyone can trust, but that no one owns or controls. And this allows people to have money that can be, free of the influence of governments, which is both bad if you’re a government, and great, if you don’t like what governments do, with their monetary policies. It lets the policy be set by consensus and software. So Bitcoin basically has found a way, to always know what the majority thinks. And by always knowing what the majority thinks, you get something you, you hope you can trust. In theory, if, someone controlled more than half of the computers in the world they could take over Bitcoin, but that’s pretty unlikely.
TONY SALDANHA: Blockchain is the underlying programming, on top of which, cryptocurrency—Bitcoin—has been developed. Let me distinguish the two. Bitcoin is just one little application of blockchain. It is something that most enterprises will shy away from because it is speculative. And I’m not here to preach that companies go out and start trading using Bitcoin, that would be a mistake. Blockchain is, basically think of it as an Excel spreadsheet. It is basically a big, big ledger, in which everybody can put transactions, but none of the cells, none of the values of those transactions, can be messed around with. Can be changed without everybody else saying, “Oh, wait a minute!” You know, “that particular cell was changed.” And because of that, it is known to be unhackable. Now, the value of having an underlying platform that is available to the entire world to see, if you have the appropriate kind of authorization, and is known to be secure is obvious, right? Because we know one of the biggest challenges when it comes to technology is somebody changing the values of my data. If you have an underlying platform that’s known to be unhackable, that provides a huge competitive advantage for most people. So potential uses of blockchain could be, everything from, let’s take a voting mechanism. By the way, blockchain is being used for voting, in places like Dubai for their stock exchange or even Latvia, Lithuania, and Estonia, for their actual people voting processes. But there are more mundane uses of blockchain. You could use blockchain, for example, for intracompany financial transactions, between the companies and both, within companies as well. So instead of having your money, go from your company, to a bank, to another company, what if there was a common platform, where you could actually have the best information, that could not be hacked. That would eliminate the middlemen. That is the promise of blockchain. It has the ability to eliminate the middleperson because everybody has equal access to one version of the truth.
BRIAN BEHLENDORF: One of the real strengths is being able to take these systems that today depend very much on bureaucracy, and paperwork, and very human processes for sure, but processes that get bogged down and actually automate them. And cut the cost of a lot of this, but also by automating them, improve the auditability of them. People pay a lot of money to have third-party auditors come in and make sure that the claims that are in their books are actually real. It’s a tremendous burden. And it’s why bureaucracy often requires three signatures to do anything interesting. To send a shipping container, for example, from Asia to the United States. About half the cost of that is in the paperwork involved in coordinating between 20 to 30 different organizations for sign-offs from the bill of materials, all the way to the person that’s delivered to. If blockchain technology can help us automate these systems, make them more efficient, they may also ensure that we keep the opportunities for fraud and the opportunities for corruption to a minimum. If we make it hard to steal people’s land, or to ship illicit product in shipping containers, or simply approving a permit for construction on your home, holding that up for days or months until you pay me an expediter fee—which all too often happens in home remodeling—If we can make these processes a bit more automated more transparent, then I think we can do a lot to improve society.
ELAD GIL: Some people are talking about the web three, or internet three, and how all infrastructure is gonna flip over to decentralized, cryptocurrency-based systems. I’m much more skeptical about that, at least in the short run. In part because centralized systems tend to be dramatically more efficient than decentralized systems. In other words, if you look at the costs of running a centralized system, it’s much lower. You have bargaining power around the underlying hardware. You have economies of scale in terms of how you deploy it and where you place it. And also just running these systems is much simpler, if you have a centralized approach.
BEHLENDORF: Every use case I could give you around where blockchain technology is applicable, you could always come back to me as a technologist and say, “Wouldn’t this be more efficient, faster, cheaper to do as a central database? Isn’t somebody just gonna pull a Google or pull an Amazon, and build a central database to track all the fish supply, catches and shipping, you know, this or that?” And the answer is always yes, that it is more efficient and cheaper, but it’s also expensive when you think about the cost of having politically, and from a business perspective, having a central actor in a marketplace. Many marketplaces simply don’t want that. The banks of the world don’t want one big bank at the center. People who care about their land title care about, worry about the corruptibility of the land title office. In certain countries that’s a big issue. Blockchain technology allows us to build the same kind of systems, but in a world where we don’t want to or we can’t trust central actors. And, that’s hard to wrap your head around, especially because everyone believes they can be trusted, right? Hey, if I’m the center of the market, you can trust me. What do you mean you can’t? It feels like a very personal affront perhaps even to say that but it’s essential, I think, to realize you can’t really grow your market beyond those who can really trust you, if that’s your business model. So that’s, I think, hard for people, for some people to get the conceptual model around, just like it might’ve been hard in 1993 to understand what it means to send email to somebody at the other side of the planet, or to buy a television or buy a car through a website. You would’ve been told you were crazy to think that people would be doing that in 1993. Now we kind of take it almost for granted. So, these are the challenges, but I see many people addressing these challenges.