So let’s get started. Why are we here? We’re here because eight years ago a person under the pseudonym Satoshi Nakamoto created a new technology. And this technology is the blockchain technology that is part of bitcoin. Now, this technology is not just one thing. In fact, there’s four different technologies coordinated together. Bitcoin was the culmination of decades of research into cryptography and digital currencies. It started back in the 1970s with the invention of public key cryptography which is a mathematical trick for doing things like digital signatures and encryptions with public and private keys. And if you don’t understand any of that, it’s okay. You don’t have to understand that in order to use the system. It helps, but you don’t have to. So over the years many people who were involved in this technology, in cryptography over the 80s and 90s started thinking about how could we use cryptography to create systems of commerce and systems of money. And there were many interesting inventions in this but there was one fundamental problem that no one could seem to solve. And this problem was really simple. Digital information is easy to copy. Right? There’s no such thing as unique copy of a digital item. If you have a JPEG, or a text file, or a word document how much does it cost to make a copy of that? Zero. And how many copies can you make? Infinite. And how different is each copy? Not at all – they’re all identical. So you can’t make something that is digital and rare which is a bit of a problem because one of the most important characteristics of money is that it is rare. If it’s abundant, it’s not very good money. Why don’t we use hair as money? [audience laughs] Would be a lot of bald people who’d be very upset about that scheme myself included. I would be very poor in that environment. But we don’t use things that are abundant in nature. We don’t use things that you can find everywhere. For thousands of years people used various things they could find in nature but never things that were common. So people used seashells for money. Right? But guess where they didn’t use seashells? By the seashore. [audience laughs] Because you can’t use seashells as money by the seashore because you can just find it everywhere. But if you were at a mountainside then you could use seashells as money because there it’s rare. And so you see the fundamental concept of money (which is it has to be rare) conflicts with digital information which is not rare. And so one of the ways we tried to get around that was to have people check the digital information. So what you could do is you could take a digital piece of money. You could give it a serial number so it has a number inside it and you could sign it with a key – digital signature. And then if somebody tried to spend it you have a big list of all of the serial numbers and when somebody spends it, you go to that list and you go “okay”. Scratch that one. That one’s been used. And then you go to the next serial number. And that way you can only use it once. So you can make it rare. Right? As long as you register all the serial numbers and as long as you scratch out the ones that have been used you can use a digital thing as money. Reward cards do that. If you have a card for a store, a gift card – right – for an electronics store how do you know that you’re not going to use it twice? Well, when you go in and use it they’re going to type it into the computer and they’re going to cancel that gift card and then you can’t use it again. So we can make digital information that can’t be copied. You can copy the number on the gift card but it’s going to be useless because once you spend it it can’t be used again. One small problem with this scheme. You need someone to sit in this central position that has the list of all the serial numbers and they’re responsible for writing off every single one. That causes two problems. One : you have to always be able to communicate with the central database. Right? And small differences in time are a problem. I remember in the early 90s maybe late 80s when ATMs had this problem where if you had just $10 in your bank account and you went to one ATM and you withdrew $10 if you went to another ATM one block away very, very quickly and withdrew $10 again the bank wouldn’t notice. [audience laughs] They fixed that quickly. [audience laughs] But as a student it was very useful in London because I often had a balance of just 10 in my bank account. So the problem is you always have to be able to communicate with this central party. The other problem it causes is this central party is a single point of failure. Right? If their network goes down, if they go out of business, if they’re shut down, the system goes away. So a lot of the people involved in digital currency said let’s set up digital currencies and we’ll make central parties, and we’ll make our own system of money. And they made their own system of money and the government of the world the various governments looked at that and said “You can’t do that.” “You can’t make your own system of money.” “That’s our job.” “What you’re doing is not allowed.” And sometimes the banks would sue these companies or the government would come in one day take all the servers away and there goes your system of digital money. So that was the problem. In 2009 Satoshi Nakamoto solved this problem. It’s called the double-spend problem. He managed to create – or she, or they – we don’t know who it is – managed to create a system whereby you could make sure that nobody could double-spend but you didn’t have to have one central location. Instead, what happens is everybody participates in this system across the network and everybody has a copy of the list of what – effectively almost like serial numbers exists and who has spent them and who owns them and when you present a transaction it’s copied to everyone and everyone can check that it’s correct and hasn’t been spent before and every ten minutes the entire network gets together to agree on the current state of that ledger. And that ledger is called a blockchain. And sometimes people say, well, what is a blockchain? Can you explain a blockchain in, like less than 20 words? And my favourite answer was Peter Todds who said “Yes. It’s a chain of blocks.” [audience laughs] Two words – done. [audience laughs] Which is funny because it’s true because that’s what a blockchain is. It’s a chain of blocks. What are the blocks? Blocks are just containers that contain lots of transactions and they’re chained together with digital fingerprints so that one block depends on the information that was in the previous block which depends on the information that was in the previous block so you know you what sequence they came in. If you have the fingerprint from the previous block in your current block you know that the current block could only have been created after the previous block. So you chain them together and you have this historical record. Fairly simple technology. Of course, that’s not the only technology in these systems. There’s another really important technology called proof of work, which is a consensus algorithm which is, okay, so you have this chain of blocks but inevitably if everybody’s keeping a copy of this chain of blocks all around the world how do you know which one is real? How do you know which one is the most recent? How do you know that you don’t have an old copy? And how do you know that someone’s not faking it? And so the really interesting invention by Satoshi Nakamoto was to say have to commit work – computer work. You have to make your computer do some work. And that work takes power. You know, if you have your computer crunching away – I don’t know if you’ve ever noticed when you’re doing something fancy on your laptop and all of the fans turn on and your laptop gets really loud and then five minutes later it’s still hot. You can’t actually can’t use it as a laptop anymore. It has to become a tabletop because it’s burning your lap. [audience laughs] So that’s computer work. And what computer work means is that it’s consuming electricity (sometimes quite a lot of electricity) and it’s converting that electricity into two things : heat and information. And so because there is only so much energy in the world and because there’s only so many computers in the world and because it’s not easy to set up a system like that that’s a good way to know that the other person really validated the ledger. And so behind this system of bitcoin and all other – or most other open public blockchains is this idea that all of the participants who are verifying the security and checking to produce this chain of blocks in a way that everyone can trust are spending energy as a guarantee that they’re telling the truth. And the way it works is a simple competition. If I want to create a block on the blockchain I first have to burn a lot of energy. I’m committing this energy. I’m staking it. I’m putting a pledge. And that’s my guarantee. And if I burn this energy and correctly validate all of the transactions I check each transaction and say has this been spent before? Is this person lying? Is that signature correct? Do the amounts add up? I do all of the rules. I check all of the rules. Great. Then if I produce this block and I prove how much energy I put in and that block is acceptable to everybody else I get a small reward. I get paid the fees and I get paid some new bitcoin. And that’s the competition. It’s a really simple idea, really. It’s market economics applied to this competition. Now, what stops me from lying? Nothing really except that I’m going to put all the electricity produce a block that contains a lie. Everybody else will see that block – will say “That’s a lie” “That signature was wrong” “That transaction didn’t add up” “That one had been spent previously” – whatever it might be. “You didn’t do the work” “You didn’t securely check the rules so we’re all going to ignore your block” and they ignore my block. Now I don’t get reward. But the problem is I’ve already spent the electricity and come the end of the month I’m going to get an electricity bill. Now, if you’re doing this on a small scale it might not matter. Could be doing it with your laptop – eh you’ve burned a dollar of electricity, produced a fake block, everybody rejected it, you lost your dollar of electricity. Today, on a global basis we’re talking at several millions of dollars of electricity per day. So now if you have a warehouse with 200,000 of these computers burning power in order to check the blocks and as they’re burning that power they’re checking the rules and if they make a mistake and produce a block that’s not valid instead of getting a reward which is worth quite a lot of money they get nothing. Now at the end of the month when they get the electricity bill the electricity bill says $250,000 and they go “urgh” and they haven’t made the money. So now cheating – that can get really expensive really fast. Well, that’s the whole point. So these two simple inventions together – using a chain of blocks to create an ordered history of all of the transactions that have ever happened together with saying open to everyone, everyone can participate. No one’s special. No one’s in charge. Everybody has to check the rules. And if everybody checks the rules then they get a small reward. The electricity they guaranteed to put down will get repaid by this small reward and people who play fair make money and people who cheat lose money. We don’t need to have anyone as a boss. We don’t need to have the blockchain police. The blockchain police is how much money we’re going to lose if you try to cheat. And so this system creates a new model for doing network consensus. What do I mean by “network consensus”? How do you get hundreds of thousands of people around the world to agree every ten minutes on one version of the truth even when they could make money by lying? That’s the problem that Satoshi Nakamoto solved. And that problem – well, the obvious thing you can do with it is make a system for money. You can make a currency. Because if you get it everybody in the world to agree on what the truth is every ten minutes then you can agree – oh – the truth of he has 2 bitcoin, but now he spent 0.5 bitcoin and this person got 0.2 bitcoin. That’s the truth we’re all agreeing on. Be can agree on other things like how about we agree on who’s voted in the last election. How about we create a corporation and vote on what things to do with the corporation and count the votes of the directors with the same mechanism. How about we use it to decide the truth about who owns that piece of land or whether they sold that piece of land to someone else and record the ownership of land. How about we use it to decide who owns a car and who a car is registered to so that you can sell your car and you don’t need to tell a central location like the register of vehicles or the department of transportation, as we do today. Just like you don’t need to tell a central location this gift card has been used we can all simultaneously agree yes, that car got sold. Ten minutes ago the entire network agreed on that. We all committed electricity. Everybody agrees that is the new truth. So this system suddenly becomes much more than just money. It’s a way to make decisions and find truth and trust people you’ve never met on the internet to be fair. Not because someone’s watching, not because someone’s in charge but because if they cheat, they lose money. Market-based economics applied to network-based decision making. And this thing can happen across the globe. It doesn’t matter which country they’re in. Countries don’t matter on the internet. It doesn’t matter what the religion, gender, nationality, age, of the other person is. It doesn’t matter if their status as a living person even is. With blockchain systems you can do transactions between machines without people. You can have machines owning money and transferring money to each other. You can have machines owning other machines and transferring the ownership of other machines to each other. We can do all kinds of new things. So this technology that was created in 2009 is a system for agreeing on truth globally without anybody being able to cheat and the first application is money. It’s commerce. Because if you make it impossible to cheat you can make commerce much more effective and much cheaper for everyone. You can give people access to the things they don’t have access today. Billions of people don’t have a bank account. Why do they not have a bank account? Many – because they have no identity documents, because they don’t have the ability to read or write or understand numbers. But you don’t need an identity document on the blockchain because the blockchain doesn’t care who you are. The blockchain doesn’t even care if you’re a human being. The blockchain only cares if your transaction adds up. And that fundamental truth is neutral so you get this concept of neutrality. Now, there’s a few other little things that I find exciting because of my particular political interests which are the fact that because the system runs everywhere and is a participatory system with all of these computers which run around the world – and you don’t need to know where they are and you don’t need to know who’s running them because they have to tell the truth – you can’t force them to do anything. So on this system no one can seize somebody else’s money. No one can freeze an account. No one can say “This transaction is allowed.” “This transaction is not allowed.” A transaction only has two states. It’s either correct or incorrect. There’s no such thing as “allowed” or “not allowed” because no one’s in charge. If the transaction is incorrect it will go through and no one can stop it. There’s no such thing as this person is allowed to access the network and this person is not allowed to access the network. You can’t separate people by caste, religion, tribe, nationality. Everyone is allowed because they didn’t ask for permission. They just download an app. In fact, they don’t even need to download an app. They can write the app themselves. With this book, you could actually write a bitcoin-compatible wallet without downloading it. Just download a book, read it, understand it, program your own wallet. Now you have access to the bitcoin system. No one can stop you from accessing and using this technology. So it opens up the possibility of seven and a half billion people becoming connected to each other in a way that allows them to trust the authenticity of the transactions they see on the blockchain, to know whether someone voted, whether they bought a car. Not know who that person is but if they’re presented with evidence they know they belong to that car or that car belongs to them. They know that they have voted. They know that they have made the payment whatever that payment may be. A completely open system based on the internet with no borders, with no banks, with no governments, with no corporations, with no companies in between. Just person to person. The same thing that the internet did for the flow of communication, for the ability of any human being anywhere who has even the slowest, most basic access to the internet to speak with the same voice as the biggest newspaper on the planet now anybody with even the slowest access to the most basic internet has the ability to transact with the power of the biggest bank in the world. Actually, they have the power to do it faster, cheaper, and more securely. The internet just happened to banking and banking is going to completely transform. and finance is going to be completely transformed, and investments and funding for startups is already being completely transformed. And next : legal contracts and registration of land and registration of assets like vehicles are going to be completely transformed. And no one can stop this because all it is is mathematics. You cannot prohibit the application of mathematics once people understand how it works. This is pure science. And so this system is opening a new door. It’s going to create historic change throughout the world. And it’s not just bitcoin. It’s this broader space. I call it the open public blockchain. It’s all of the systems like bitcoin that are open for anyone to participate that are public, that give free access to everyone, where anyone can innovate without asking for permission to systems that are completely neutral. They don’t care who is the source or destination or even if it’s a person. They only care if it validates by the rules. Systems that are completely borderless the do not even see borders any more than the internet does and systems that are completely censorship-resistant. You cannot shut them down. You cannot shut them up. You cannot stop them from operating. No one can. No one is in control except for mathematics. Thank you. oh