Luke Robert Mason: You are in for a real treat this evening; I am blessed to be able to wel­come Vinay Gupta to Virtual Futures. Tonight’s event has been orga­nized in col­lab­o­ra­tion with the University of Warwick and the Department of Economics’ 360 Lecture Series.

My name is Luke Robert Mason and I’m the Director of Virtual Futures. And for those of you who are here for the first time, the Virtual Futures con­fer­ence occurred at the University of Warwick in the mid 90s. And to quote its cofounder it arose at a tip­ping point in the tech­nol­o­giza­tion of first-world cul­tures. Now, whilst it was most often por­trayed as a techno-positivist fes­ti­val of accel­er­a­tion towards a posthu­man future, ​“the Glastonbury of cyber­cul­ture” as The Guardian put it, its actu­al aim, hid­den behind the brushed steel, the sil­i­con, the design­er drugs, the charis­mat­ic prophets, and the tech­no par­ties, was much more sober, and much more urgent.

What Virtual Futures did, or at least tried to do, was cast a crit­i­cal eye over the phe­nom­e­nal changes in how humans and non­hu­mans engaged with emerg­ing sci­en­tif­ic the­o­ry and tech­no­log­i­cal devel­op­ment. The Salon series com­pletes the conference’s aim to bury the 20^th cen­tu­ry and begin work on the 21^st. So, let’s begin.

Luke Robert Mason: Tonight, the leg­endary cryp­to thinker Vinay Gupta joins us for an event that serves as a warn­ing. A warn­ing of what might hap­pen when rad­i­cal new tech­nolo­gies are co-opted by oppor­tunists. When a fail­ure of imag­i­na­tion forces con­tin­u­a­tion rather than transfor­ma­tion. And where col­lec­tive action leads to con­for­mi­ty rather than resistance. 

Because it seems we’re at a cross­roads when it comes to blockchain, a tech­nol­o­gy that will dom­i­nate tonight’s dis­cus­sion. Either we can lever­age the toolset to enable an open, decen­tral­ized net­work of exchange, offer­ing us the abil­i­ty to build the Web and even soci­ety as we want­ed. Or, we can mere­ly use blockchain tech­nol­o­gy to rad­i­cal­ly stim­u­late all of the worst things about cap­i­tal­ism, by sim­u­lat­ing fiat mon­ey. The lat­ter, sad­ly, seems to be our cur­rent real­i­ty. And much of the hype around blockchain is being dri­ven by the belief in the infi­nite growth of its cryp­tocur­ren­cy coun­ter­part, Bitcoin.

And if the get-rich-quick oppor­tu­ni­ty of Bitcoin is the rea­son that you’re here tonight, then I would leave the room now. Instead, spend the time fin­ish­ing your appli­ca­tion for your intern­ship at one of the big four account­ing firms. Because the future doesn’t need peo­ple like you, but the past will wel­come you with open arms.

If, how­ev­er, you have a gen­uine inter­est in rad­i­cal­ly rethink­ing eco­nom­ics, and if you’re open to the idea that blockchain might reveal the pos­si­bil­i­ty that our species might actu­al­ly be col­lab­o­ra­tive rather than com­pet­i­tive, then I implore you to put your hands togeth­er and join me in wel­com­ing Vinay Gupta to the Virtual Futures stage.

So Vinay, very sim­ply, what is blockchain? What is it? And more impor­tant­ly, what should it be?

Vinay Gupta: Hm. Well, so, I have a new way of telling this sto­ry. You know, I’m con­tin­u­al­ly fig­ur­ing out how to explain it. Because the way that lan­guage works is that when some­thing new occurs, we give it a name which is kind of like some­thing we already know, right. The clas­sic is ​“horse­less car­riage.” And then we spend a long time explain­ing what it is to peo­ple. There was a sort of five or eight-year peri­od when every­body explained the Internet. And then there was social media, and there was years and years and years of peo­ple explain­ing social media.

And then you get a gen­er­a­tion of peo­ple who are young enough that it’s always been there, and then you stop explain­ing it, because they learned what it was the first time, and at that point the name refers to the body of implic­it knowl­edge that they’ve acquired. 

So blockchain is in that space where we still have to explain it, because most of the peo­ple have gone from not hav­ing it around to hav­ing it around. But for kind of the folks that are your age or a lit­tle younger it’s kind of always been there, at which point it doesn’t real­ly need to be explained. It does how­ev­er need to be contextualized.

So the way that I think about this is that the whole blockchain sit­u­a­tion is dri­ven by physics. We think of it as being an eco­nom­ic sys­tem but actu­al­ly it’s a physics man­age­ment sys­tem. And the piece of physics that it’s man­ag­ing is the fact that the speed of light is real­ly slow. Three hun­dred thou­sand kilo­me­ters a sec­ond sounds fast to a human being, but if you’re doing com­pu­ta­tion on a com­put­er, you have a sil­i­con chip that’s maybe a cen­time­ter across, and you do com­pu­ta­tion by rac­ing light across it. Maybe 5,000 tran­sits of a piece of light to get one addi­tion. And what that means is that you can have com­put­er sys­tems that do sub­stan­tial work in rel­a­tive­ly short light dis­tances. Visa, for exam­ple, does one cred­it card trans­ac­tion in rough­ly the length of time it takes light to trav­el ten kilometers.

And what that means is that it’s impos­si­ble to syn­chro­nize the world, because the com­put­ers are mov­ing so quick­ly that they’re doing tons and tons and tons of com­pu­ta­tion in the length of time that it takes the light to trav­el some­where else to tell peo­ple what you’ve fig­ured out. And man­ag­ing that prob­lem is basi­cal­ly the key chal­lenge of our civ­i­liza­tion, because you can’t build a sin­gle glob­al syn­chro­nized world because of the speed of light lim­it. And we’re try­ing to find approach­es to man­ag­ing that, and there are sev­er­al multibillion-dollar projects to try and solve that prob­lem, each one of which shapes a dif­fer­ent part of our econ­o­my and a dif­fer­ent part of our reality.

Mason: Now, you’ve described blockchain as ​“one com­put­er per plan­et.” Could you just explain what you mean by that?

Gupta: So the objec­tive of the blockchain is to pro­duce a com­put­er which appears not to be sub­ject to the speed of light prob­lem. Let me run through the big sys­tems that han­dle speed of light, and I think that’ll help us put things into context.

The first big sys­tem is GPS. So, GPS, you have the Earth, and around the Earth you’ve got a net­work of satel­lites. The satel­lites have an atom­ic clock on them, and they send out a time sig­nal that says what time it is accord­ing to the satel­lite. Then on Earth, you take your phone out, and your phone lis­tens to the sig­nal from the GPS satel­lite. And this satel­lite says it’s 12:01 and it arrives at 12:01; this satel­lite says it’s 12:01 and a tenth of a microsec­ond; and when that arrives, you know that you’re fur­ther away from this satel­lite than you are from that satel­lite. And you basi­cal­ly tri­an­gu­late the dis­tance to all these satel­lites by lis­ten­ing to them tell you what time it is. We’re using the speed of light as a way of locat­ing our­selves. And GPS total­ly trans­formed the way that all kinds of things work. I mean, imag­ine try­ing to get around if the GPS net­work failed; we’d all be lost all the time. Disastrous.

The sec­ond sys­tem is high-frequency trad­ing. So this is the huge machines that man­age com­modi­ties trad­ing, and prac­ti­cal­ly all the phys­i­cal stuff in the world goes through these machines in its raw form. The clos­er you are to the exchange, the bet­ter your trad­ing advan­tage. So lit­er­al­ly every hun­dred meters out, the rent on the build­ings drops. And peo­ple are charg­ing on the orders of a mil­lion dol­lars a cubic meter to put com­put­ers close to these exchanges. And that’s run­ning more or less the entire com­modi­ties sys­tem. More or less any phys­i­cal object has gone through that system.

The prob­lem with that mod­el is that it’s geo­graph­i­cal. So for exam­ple, if you want to trade from China to those exchanges, you’re going to get to the exchange last. Or you’re going to have to come onto American soil under American law to get access to that trad­ing sys­tem. And in a world which is gen­uine­ly glob­al­ized, the idea that you’re going to have a sin­gle coun­try which runs the exchanges for the entire world seems a lit­tle improb­a­ble. If you put one exchange per con­ti­nent, which might be a sta­ble polit­i­cal equi­lib­ri­um, how then do you syn­chro­nize the exchanges? So that’s the sec­ond one of these machines with this kind of prob­lem, that it comes with a bunch of polit­i­cal con­text that we don’t want.

The third machine is Google Spanner, which is prob­a­bly a lot less well known than HFT. Spanner is how Google makes things like Google Docs work. You know the thing where you’ve got mul­ti­ple peo­ple edit­ing a doc­u­ment at the same time and it nev­er seems to go wrong? One part of that is a whole bunch of very clever math around oper­a­tors. And the oth­er part of that is Google Spanner, which is a syn­chro­niza­tion net­work of all of Google’s data cen­ters to atom­ic clocks. And they do an enor­mous amount of mea­sure­ment to know exact­ly how long it takes to send mes­sages between the data cen­ters. So your mes­sage works its way to the clos­est Google data cen­ter. They then log it into the Spanner sys­tem to fig­ure out what time it hap­pened at. And then they sequence the things in time so that you get a coher­ent edit­ing expe­ri­ence rather than the chaos of every­thing being desyn­chro­nized. And you know, I use that mul­ti­ple times every week, and if it didn’t work, my pro­duc­tiv­i­ty would drop by like 10 or 20%. I mean, that’s a major util­i­ty in much the same way that GPS is.

So along comes blockchain. And blockchain attempts to fix the prob­lem with Spanner, which is that Spanner, although it’s geo­graph­i­cal­ly dis­trib­uted runs under the con­trol of a sin­gle cor­po­ra­tion. So HFT, you have a sin­gle nation, a sin­gle geo­graph­i­cal point in space. With the Spanner mod­el you have a sin­gle cor­po­ra­tion. And if you want access to the time sys­tem you’ve got to go through that corporation.

The blockchain achieves glob­al dis­tri­b­u­tion, so it works every­where. And it’s not under a sin­gle entity’s polit­i­cal con­trol. So it’s the first of these syn­chro­niza­tion machines which has any pos­si­bil­i­ty of being a sta­ble, glob­al trade sys­tem. Because it doesn’t bake in either cor­po­rate or gov­ern­ment con­trol. And that’s not as sim­ple as that means indi­vid­ual anar­chy, right. That’s a cute way of think­ing about it, but it’s not where the real sto­ry is. The real sto­ry is that it allows us to begin to con­ceive of build­ing gov­er­nance struc­tures above the lev­el of a nation-state, which might even­tu­al­ly be able to address glob­al problems.

Mason: And this is where some of your inter­est in the blockchain came from. So you’re an inter­est­ing indi­vid­ual. You men­tioned the word ​“anar­chy,” Vinay, and I’m not sure what we can and we can’t talk about. But to what extent do the advances in soft­ware, cryp­tog­ra­phy, and dis­trib­uted systems—to what extent do you think they can tack­le some of the prob­lems that you’re per­son­al­ly inter­est­ed in?

Gupta: Well, so let’s think about this in terms of kind of the long arc, right. Around 2001, I got seri­ous­ly inter­est­ed in the future of the world. This is about six months before 9‍/‍11, I kind of had this sud­den awak­en­ing of like, ​“Wait a minute. Something is real­ly wrong out there.” And I got much more inter­est­ed in glob­al issues in my per­son­al life. After 9‍/‍11 I spent basi­cal­ly twelve years going from ener­gy pol­i­cy to nat­ur­al dis­as­ter man­age­ment. I invent­ed a refugee shel­ter called the hexa­yurt, which is extreme­ly suc­cess­ful at Burning Man but I can’t get the human­i­tar­i­an agen­cies to use the damn thing, because it lasts too long.

And so dur­ing that kind of twelve-year arc, what I fig­ured out was that there were a cou­ple of fun­da­men­tal prob­lems that you can eas­i­ly state. The first prob­lem is that when human beings feel that they lack of some­thing they need, they become aggres­sive, and there are only two places that the aggres­sion can go. You can direct it at oth­er human beings through mech­a­nisms includ­ing eco­nom­ic com­pe­ti­tion, or you can direct it at nature in the form of extrac­tive industry.

And that’s pret­ty much all we’ve got. So unless we find ways of get­ting every­body what they need, we’re going to con­tin­ue to be exposed to enor­mous amounts of vio­lence. And expo­sure to vio­lence is not sim­ply some­thing that hap­pens to losers. The win­ners are also exposed to vio­lence, because if you’re the per­son who’s wield­ing the stick you’re just as exposed to the vio­lence as the per­son get­ting hit. And nobody real­ly wants to live a life that’s dom­i­nat­ed by violence.

So, you have to think in terms of resource abun­dance as being the way that we unpick human psy­cho­log­i­cal violence—and to some degree phys­i­cal vio­lence. But get­ting to resource abun­dance is extreme­ly dif­fi­cult, because so many of our sys­tems are run on pure com­pe­ti­tion. And even worse they’re run on sta­tus com­pe­ti­tion, which is an end­less tread­mill. So if social sta­tus is cou­pled to mate­r­i­al con­sump­tion, you’re going to wind up with an infi­nite con­sump­tion of resources. You’ll lit­er­al­ly wind up with peo­ple writ­ing their name by mov­ing stars into new con­stel­la­tions in a thou­sand years if we con­tin­ue to have a soci­ety that’s dom­i­nat­ed by sta­tus com­pe­ti­tion. Because sta­tus com­pe­ti­tion that con­sumes mate­r­i­al resources will nev­er be sat­is­fied. We’ll always push what­ev­er lim­its we have right to the edge.

So what I want­ed to try and fig­ure out through that twelve-year arc was how do we build the essen­tial mech­a­nisms of life at a cheap enough lev­el that any­body can afford them, even the peo­ple that are already very poor. Most of the work on pover­ty assumes that the solu­tion is to make poor peo­ple wealth­i­er so that they could com­pete in the mar­ket for resources, but then you have this lad­der prob­lem. If instead you take the price of essen­tial goods and ser­vices and you bring it down to the point where the poor can afford them, on their exist­ing bud­gets, nobody gets polit­i­cal­ly annoyed, right. Nobody sab­o­tages markets. 

“Oh look, we’ve got this amaz­ing $15 cell phone and it’s almost as good as an iPhone 2! What about that?” Everybody’s delighted.

If you say, ​“Well what I want to do is orga­nize farm­ers in Bangladesh to dou­ble their wages,” you sud­den­ly have problems.

So, I took a very seri­ous crack at that, came to the con­clu­sion it was total­ly pos­si­ble, spent twelve years dis­cov­er­ing that nobody would fund it, and then decid­ed that I was going to try the Elon Musk mod­el of just take a bil­lion dol­lars out of mar­ket cap­i­tal­ism and fund the research myself. And that’s what I’m doing in blockchain.

Mason: And how’s that going, Vinay? [laugh­ter]

Gupta: You know…war to the knife, knife to the hilt.

Mason: Now, you start­ed in a real­ly inter­est­ing place inso­far as how you came to blockchain. And that was with this weird obses­sion with colo­nial­ism and the cur­rent state of the West. Could you explain how colo­nial­ism and blockchain interface?

Gupta: Right. Well, strap in. Who here is from a coun­try that was invad­ed by the British, includ­ing Scotland and Wales? [laugh­ter]

Mason: So, 60%, wel­come to the University of Warwick. It’s a good thing.

Gupta: So I used to say to peo­ple the secret to under­stand­ing European his­to­ry is that the Norman Conquest nev­er end­ed. You got a bunch of Vikings that con­quered a cor­ner of France, camped out for 150 years or so and then came to London. And basi­cal­ly invad­ed the coun­try. Then they did Wales, then they did Ireland, then they did Scotland. Then North America, South America, Africa, India, China, and now we call them lawyers. And that kind of ongo­ing wave of this very aggres­sive approach to resource-grabbing has become the dom­i­nant mod­el, right. I mean, Britain invad­ed some­thing like a hun­dred and…ninety coun­tries? We invad­ed coun­tries that don’t even exist.

So in that con­text, you think all that’s over, right, and it’s real­ly not. The his­to­ry of, for exam­ple, polit­i­cal assas­si­na­tions in Africa is pret­ty much any­time any­body stands up and says, ​“African Union, Pan-Africanism, we’re going to get every­body togeth­er. We’ve got half of the world’s hab­it­able land­mass and most of the world’s remain­ing untapped nat­ur­al resources, let’s nego­ti­ate,” they get shot. Right. There’s just no deny­ing that polit­i­cal vio­lence is used to keep resources cheap, and we all ben­e­fit from that. I mean, if you look at the price of fair trade cof­fee com­pared to nor­mal cof­fee, imag­ine how much a fair trade lap­top is going to cost. Five, ten thou­sand dol­lars? It could be a fac­tor of five increase of the cur­rent price of a machine, it could be a fac­tor of ten.

So, whether we like it or not, there’s an enor­mous amount of vio­lence baked into the goods that we buy every day. And right now the vis­i­bil­i­ty of that vio­lence is destroyed by mar­kets. When you pay for some­thing in cash, the infor­ma­tion about the object that you’re buy­ing is only what the man­u­fac­tur­er wants to tell you. If it’s not print­ed on the box, you don’t know. And nobody is going to put on the box of your device a URL for a cam­era where you can watch some­body man­u­fac­tur­ing it. Nobody’s going to show you where the raw mate­ri­als came from by hav­ing a drone fly over the mine once or twice a day and livestream­ing the stuff. It’s just not there. Technologically we could do it; social­ly, real­ly nobody wants to know. And if you think that that’s a bad prob­lem with elec­tron­ics, wait until you see meat con­sump­tion. We’re in a posi­tion where we sev­er the knowl­edge about the suf­fer­ing that cre­ates our world from every trans­ac­tion that we com­plete in the marketplace.

So the inter­face is that blockchain has the pos­si­bil­i­ty that if we get our game togeth­er, you can track the entire his­to­ry of an object through every sin­gle phase of trans­for­ma­tion that caused it to exist. And if any one of those phas­es is moral­ly unac­cept­able to you you might be able to do things like pool mon­ey to change it. It’s not just as sim­ple as you buy brand A or brand B. If you can see the prob­lem is way up the pipe, maybe you could get direct access to the point up the pipe where the prob­lem is. You know, ​“This coltan min­ing thing, that’s com­plete­ly unac­cept­able, how much would it cost to fix that? Oh, $28 mil­lion? Okay, let’s crowd­fund that.” Because if you’ve got the glob­al vis­i­bil­i­ty of what is hap­pen­ing and where things are wrong, it becomes pos­si­ble to effi­cient­ly tar­get resources at repair.

Mason: Well that sounds all very well and good, and it feels the response to that right now is corruption—that’s the legit­i­mate form of resis­tance in this case. But if we use blockchain to enable anti-cor­rup­tion, will we sur­vive the truth? So essen­tial­ly, will we sur­vive the bur­den of rad­i­cal trans­paren­cy from a social per­spec­tive? [crosstalk] I mean, what will it actu­al­ly do to us?

Gupta: Yes. Well, here we have to look to our friend and guru Nick Land, right.

Mason: Nick Land comes back to the University of Warwick. Alright, the dread [shop?]. Okay.

Gupta: So, the whole kind of Cthulhu trip. Does every­body know about the American writer H.P. Lovecraft?

Mason: This is the University of Warwick. There is one VF alum­ni who was here in 1995 when Nick Land was in the phi­los­o­phy depart­ment here—the con­ti­nen­tal phi­los­o­phy depart­ment here at the University of Warwick. And yet it will fall on deaf ears, Vinay, but I feel it is an impor­tant history.

Gupta: Let’s do it. So H.P. Lovecraft was an American hor­ror writer. And he’s very wide­ly mis­un­der­stood. He’s been out of fash­ion for about a hun­dred years, because peo­ple thought that he was writ­ing pulp fic­tion about non­sense. Terrible ten­ta­cle mon­sters, rrr, he’s kind of the orig­i­nal hen­tai guy. [laugh­ter] It’s not that fun­ny. [laugh­ter]

Mason: These are eco­nom­ic stu­dents going, ​“How did we get from Bitcoin to ten­ta­cle monsters?”

Gupta: [laughs] So. The thing is that Lovecraft is not writ­ing about mon­sters, right. What he’s writ­ing about is sci­ence. What he says, very clear­ly, is that sci­en­tif­ic knowl­edge is con­tin­u­al­ly destroy­ing our feel­ing that we’re at the cen­ter of the uni­verse. First we dis­cov­ered that time is near­ly infi­nite, then we dis­cov­ered that space is near­ly infi­nite. We dis­cov­ered that the unknown mys­ter­ies of things like DNA are com­plete­ly out­side of human under­stand­ing as we cur­rent­ly have it. We have no idea how this stuff works. Evolutionary his­to­ry is just this aston­ish­ing­ly destruc­tive process. And here we are, sit­ting here as sort of repli­cat­ing lumps of biome.

Now, Lovecraft says humans can’t han­dle this kind of truth, and he tells sto­ries about mon­sters which embody these kinds of truths. So you have kind of a 200 mil­lion year-old thing that lives under the sea, and the impor­tant thing about it is not that it’s kind of a giant Godzilla with a ten­ta­cle mask; the impor­tant thing about it is that it’s 200 mil­lion years old and it’s still alive. And the hor­ror that he’s try­ing to con­vey is that humans being are tiny.

So, right now there are sev­en and a half bil­lion human beings alive, head­ed for nine. And, that’s a real­ly big num­ber. If you work in com­put­er sci­ence, you think that’s big­ger than you could fit in a 32-bit int. It’s a big num­ber. It’s very hard to con­ceive of. One in a mil­lion? Well, there’s…sort of 7,000 peo­ple like that, right? It’s a real­ly big number.

And when you start think­ing in logis­ti­cal terms, how much let’s say tooth­paste do sev­en and a half bil­lion peo­ple con­sume in a day? And then you think well maybe a third of human beings have a tooth­brush; the rest are using like twigs, or their fin­gers. And you kind of do the math and it turns out to be like 200 mil­lion tons a week, or some absurd number. 

And there’s a point where your sense of the world just breaks when you look at the world as it is from this kind of God’s‑eye view, rather than inside the very tightly-contained con­fine­ments of our ordi­nary lives. The objec­tive, sta­tis­ti­cal view on real­i­ty is aston­ish­ing­ly tox­ic to our ordi­nary mod­els, and it will usu­al­ly pro­duce aston­ish­ing­ly deep per­son­al crises when peo­ple begin to glimpse what the objec­tive frame looks like. It’s a very hard thing psy­cho­log­i­cal­ly, and if you wan­der into that ter­ri­to­ry, there’s a writer called Robert Anton Wilson who has a very nice set of keys for get­ting back to some kind of nor­mal bal­ance, once you’ve glimpsed the enor­mi­ty of the situation.

Mason: Let’s pull from mon­sters just for a sec­ond and go back to the thing that is prob­a­bly the rea­son at least half the audi­ence are sit­ting here, which is they saw the word ​“Bitcoin” on a poster and went, ​“I should prob­a­bly know about that!”

Gupta: Yes.

Mason: I know that’s going to come up in an inter­view, and I am fas­ci­nat­ed to know how many of the indi­vid­u­als here have mon­ey in Bitcoin cur­ren­cy or Ethereum right now, by a show of hands. Alright. Everybody else, look around. Keep your hands up. Now, keep your hands up if you just got into that mar­ket say in the last eigh­teen months.

Gupta: About half.

Mason: Alright. That’s a shame for you lot, that’s all I’m say­ing. It’s going to be a rough ride—you’re the smug bug­gers, but it’s going to be a rough ride. 

So look, Bitcoin is the thing that this com­mu­ni­ty, to a degree they think they can pay their stu­dent loans with. And let’s talk a lit­tle bit about Bitcoin, what it is and how it func­tions. Because you start­ed with some­thing which was the pre­cur­sor to Bitcoin, which was e‑gold.

Gupta: Oh, back.

Mason: So tell us about e‑gold, how that went tits up, and why those peo­ple with their hands up a sec­ond ago should be pet­ri­fied.

Gupta: Ha ha. So e‑gold was a 1990s lib­er­tar­i­an cur­ren­cy, and it was account-based. So they had a serv­er, they gave you an inter­face that looked like elec­tron­ic bank­ing, and the accounts were denom­i­nat­ed in grams of phys­i­cal gold that you could request them to send to you, in a full reserve system.

It was start­ed by an oncol­o­gist in Florida called Doug Jackson, in his bed­room on a spread­sheet, and gold afi­ciona­dos would send him coins in the mail. He’d weigh them and he’d put them in a box. And peo­ple could then do trans­ac­tions. And the sys­tem grew and grew and grew and grew, until there was an enor­mous amount of mon­ey in there. I think it was like $120 mil­lion of gold reserves. Which, by Bitcoin stan­dards you’d think that’s not a lot of mon­ey, but that gives you a sense of how dis­tort­ed the Bitcoin sto­ry is. 

And what that gave you was a sys­tem which is more effi­cient than mod­ern blockchains. You could make micro­pay­ments down to a third of a cent prof­itably. And you could do a $100,000 trans­ac­tion in lit­er­al­ly two sec­onds from a WAP phone. It was a very effi­cient system.

They kept ask­ing for a bank­ing license from the American gov­ern­ment so that they could be nor­mal­ized into the main­stream finan­cial sys­tem. The American gov­ern­ment kept say­ing, ​“You’re not using cur­ren­cy, so it’s not a bank.” And then about 2005 arrest­ed all of them for bank­ing with­out a license (which I thought was kind of ironic.) 

But that sort of thing gave us a taste of what you got in a kind of lib­er­tar­i­an envi­ron­ment. It was not nec­es­sary to have iden­ti­ty doc­u­ments to open an e‑gold account. You could lit­er­al­ly just send them gold or send them mon­ey and they’d open up an account, and they’d put cred­its up. They weren’t doing any of the KYC. All of that sort of stuff is very close to what lat­er hap­pened with blockchain. And I’m fair­ly con­vinced that the whole decen­tral­iza­tion thing starts when peo­ple who know about the fall of e‑gold are just like, ​“Right, that’s not hap­pen­ing again. We’re com­ing back with a big­ger stick.” And this is where you get Bitcoin—it comes out of that culture.

As for Bitcoin itself, there are two fun­da­men­tal ways of under­stand­ing it, right. If we take the tech­nol­o­gy that imple­ments it as being a sep­a­rate sto­ry and we just say okay, ​“With that tech­nol­o­gy, what have they done?” there are two ways of think­ing about it. The first is they’ve cre­at­ed a mon­e­tary pol­i­cy that you can buy into. So, you put your mon­ey into Swiss francs, you get Swiss mon­e­tary pol­i­cy; you put your mon­ey into the Zimbabwean dol­lar, you’re going to get Zimbabwe’s mon­e­tary pol­i­cy. Where you put your mon­ey is a choice, and you’re buy­ing the mon­e­tary pol­i­cy of the state that you’re invest­ing in, in the same way that you’re buy­ing the cor­po­rate gov­er­nance and mar­ket­ing skill—product skill, what­ev­er you want to call it—corporate effec­tive­ness of a com­pa­ny whose shares you buy. So with the tech­nol­o­gy tak­en, they then imple­ment a mon­e­tary pol­i­cy which is this kind of decay­ing thing where they’re going to con­tin­ue to print mon­ey but they’re going to halve the amount of mon­ey that they’re going to print every cou­ple of years, and even­tu­al­ly they will print no more mon­ey and that’s your mon­ey sup­ply. If you like that mod­el, you buy Bitcoin.

The sec­ond thing is that they’ve basi­cal­ly gone—probably accidentally—and cre­at­ed a hedge against dol­lar volatil­i­ty. So, the dol­lar is volatile because Americans are insane.

Mason: You heard it here first.

Gupta: I mean, it’s just not easy to under­stand why America is in the con­di­tion that it’s in right now. But it might lit­er­al­ly be some­thing in the water. I mean Rome was destroyed by lead poi­son­ing, and the Americans had a long exper­i­ment with destroy­ing their civ­i­liza­tion with lead poi­son­ing in the form of lead­ed gaso­line. It may well be that there’s an envi­ron­men­tal con­t­a­m­i­nant that’s dri­ving them up the wall. Either that or it’s cul­tur­al prob­lems of a kind that are almost unimag­in­able in Europe. But one way or the oth­er, Americans are nuts. And you can tell that—

Mason: Any Americans in the room?

Gupta: Yeah, one or two. Is it true, are you nuts? Sorry. [laugh­ter] So the crux of this is when you’ve got the world’s largest nuclear super­pow­er, with a mil­i­tary bud­get that is equal to every­body else’s mil­i­tary bud­get com­bined, elect­ing peo­ple that you real­ly prob­a­bly wouldn’t hire to run a burg­er fran­chise? You kind of have to stop and think like, ​“Okay—” And by the way, that’s not just the cur­rent pres­i­dent; that’s the whole of Congress, right. It’s the whole of the Senate. The American sys­tem pro­duces an enor­mous amount of mup­petry, and that sys­tem has been per­va­sive for decades, right. They’re real­ly in trou­ble. In a way that you’re not real­ly see­ing— The European coun­tries still gen­er­al­ly elect pret­ty high-quality lead­er­ship; whether you like them or dislike them, they’re gen­er­al­ly com­pe­tent. The American sys­tem seems to con­tin­u­al­ly throw up total spanners.

So, in this kind of sit­u­a­tion, hav­ing the world’s reserve cur­ren­cy be in the hands of a pop­u­la­tion that makes such unpre­dictable gov­er­nance deci­sions is super dan­ger­ous. And if the dol­lar breaks because they elect a left-wing pres­i­dent and then you get armed insur­rec­tion in the south of the coun­try, which is a very plau­si­ble sce­nario, you can eas­i­ly imag­ine that Bitcoin would sud­den­ly become an inter­na­tion­al trade cur­ren­cy. And that is a very unex­pect­ed question. 

You have sim­i­lar prob­lems in Europe. So, the Spanish Civil War left an enor­mous amount of unre­solved issues between anar­chists and fas­cists in Spain. The Greek Civil War left sim­i­lar issues between com­mu­nists and fas­cists in Greece. And Italy’s only been a coun­try for what, 120 years? Something like that? Bit longer—Garibaldi? Before that, it was war­ring city-states, basi­cal­ly one per city, and the split between the north of Italy where they’re essen­tial­ly cul­tur­al­ly sim­i­lar to Austria, and the south where they’re much more in the Greek mod­el, has nev­er been for­mal­ly resolved.

So the prospect that you could see large-scale armed con­flict in the south of Europe, as peo­ple redraw their maps and fight about their wel­fare states, that seems very plau­si­ble to me. And in that sit­u­a­tion, what then hap­pens to the Euro, and what do you do with refugees in the mil­lions who sim­ply take their EU pass­ports and start walk­ing? And that is one of the rea­sons that the cur­rent Bitcoin price could be thought of as being ratio­nal. Because if you think of it as a hedge against polit­i­cal may­hem in the large, Euro-American pow­er bloc, maybe it’s not that irra­tional to have a $600 bil­lion hedge.

Mason: So what you’re essen­tial­ly telling us, Vinay, is the only way Bitcoin can match its val­u­a­tion is if we have a com­plete col­lapse of Western civilization.

Gupta: Oh, a cou­ple of civ­il wars isn’t the col­lapse of Western civ­i­liza­tion; we’ve lived through worse in liv­ing mem­o­ry. [crosstalk] But— 

Mason: But isn’t that—? [laugh­ter]

Gupta: But.

Mason: Right? Fuck. But, is there anoth­er option? Could we see a $20 tril­lion B2B Internet? Could we see Bitcoin match its val­u­a­tion through some­thing which is essen­tial­ly egal­i­tar­i­an, some­thing that’s a lot more pos­i­tive than all-out collapse?

Gupta: Well, let’s talk about the sce­nario and then we’ll decide whether it’s pos­i­tive. So the oth­er way this this could work is this. Right now… Well, so let’s think about how the Internet devel­oped, right. The Internet had basi­cal­ly three phas­es. The first ver­sion of the Internet we talk about as the Internet of Ideas. And that was the peri­od before we got cred­it card pro­cess­ing. And in that peri­od it was impos­si­ble to make any mon­ey online, so all that was online was people’s hob­bies. And that Internet was an amaz­ing Internet, because it was rel­a­tive­ly small, it was gen­er­al­ly pop­u­lat­ed by peo­ple that were nerdy as hell, and it was very very effi­cient for mov­ing infor­ma­tion around because every­thing was done as text. So if you liked to read what real­ly smart peo­ple had writ­ten about weird, eso­teric hob­bies, that was the Internet for you and many of us still miss it.

Then a bunch of peo­ple fig­ure out how to use cryp­tog­ra­phy to pro­tect cred­it card trans­ac­tions. All you’ve got to keep is a 16-digit num­ber and a cou­ple of oth­er bits of meta­da­ta secret for long enough for some­body to run a trans­ac­tion for shoes. And this becomes the Internet of Shopping. And the Internet of Shopping is a vast thing. It’s like a tril­lion dol­lars, it’s three of the world’s five largest com­pa­nies, and it’s the dom­i­nant paradigm. 

And real­ly noth­ing changed when social media came along. Social media sim­ply was the Internet of Advertising for the Internet of Shopping—nothing changed. And that’s run­ning to the present day.

Then you get this blockchain thing and you get the pos­si­bil­i­ty for a new thing. Everybody has a dif­fer­ent name for that, I call it the Internet of Agreements. We could say the Internet of Contracts, you could say smart contracts—whatever it was. But it’s an Internet that’s got the abil­i­ty to do a new class of rep­re­sen­ta­tion, specif­i­cal­ly the 90-day pay­ment invoice.

So, invoic­es with long pay­ment terms are how the real world works. The sup­ply chain is $45 tril­lion a year, and most of that $45 tril­lion will be paid for by an invoice which is sent from one per­son to anoth­er per­son as a PDF file. You might get a bit of automa­tion using things like SAP, but for the most part business-to-business com­merce is done in very archa­ic ways. You have a sea con­tain­er that makes its way through a kind of $200 mil­lion robot port that cov­ers forty-one acres, and it’s still being man­aged by a kind of four-inch-thick wad of doc­u­ments that are duct-taped to the door. This makes no sense at all. 

So the prospect is that you could take that entire world of box-shifting and 90-day invoic­es, and you could build an elec­tron­ic rep­re­sen­ta­tion of that stuff in a way that would allow you to run it effi­cient­ly. Sea con­tain­ers bumped glob­al GDP by on the order of 7% because they got rid of huge amounts of the dif­fi­cul­ty of shift­ing goods around the plan­et. And if you just fixed the paper­work on sea con­tain­ers that’s like 3% of glob­al GDP.

So there could be a multi-trillion-dollar per year eco­nom­ic ben­e­fit from blockchain, in form of vast sav­ings. And then on top of that there’s the new mar­ket devel­op­ment. So if you rent an Airbnb, it comes with what­ev­er fur­ni­ture was in the Airbnb. But you can imag­ine a sit­u­a­tion where you had an emp­ty Airbnb, and you just kind of picked the stuff that you want­ed in it from some set of tem­plates that had been designed by inte­ri­or design­ers. And then all of the ven­dors who had com­po­nents of those things would run them into the house and set them up just like they were in the pic­tures. And you could move into exact­ly the place you’d always want­ed. And then when you leave there every­body comes and gets their stuff back and it’s all pooled out into these pools again.

The rea­son we don’t do things like that is because the deliv­ery ser­vices are flaky; it’s hard to insure all these fun­ny lit­tle trans­ac­tions for short rental of goods; the logis­tics of get­ting all that stuff in and out are night­mar­ish. And all of that stuff is amenable to things like smart con­tracts, robot ware­hous­es, and self-driving vans. If you put all of that stuff togeth­er, it’s pret­ty easy to imag­ine that you could put in an image of what you want­ed to a machine, it would go and pull all of the resources out of the var­i­ous places that were rent­ing it, assem­ble it there… You have a team that basi­cal­ly catch­es the stuff as it comes off the robot trucks and then does the final lay­out, and you move in. Wow, that would be amaz­ing, right?

And those kind of things are the things which pro­duce enor­mous changes in the base ways that peo­ple live. Things that you would use every day for the rest of your life if they exist­ed, kind of like GPS is now for peo­ple that want to nav­i­gate. So you could see a very very very rad­i­cal shift into this kind of post-industrial, hyper-fluid econ­o­my. And if that actu­al­ly hap­pens, which I think is like­ly but the ques­tion is how long, again the kind of val­u­a­tions that you see with things like Bitcoin might become jus­ti­fi­able. But it requires change at that kind of scale to jus­ti­fy a $600 bil­lion bubble.

Mason: I’m not going to let you get away just yet on the Bitcoin issue, because you’ve said Bitcoin will die, it is the MySpace of dig­i­tal cur­ren­cies. So I want to quiz you just a lit­tle bit more with regards to what you think will hap­pen with Bitcoin and how gov­ern­ments will look at Bitcoin. Because gov­ern­ments have allowed Bitcoin to exist. Bitcoin doesn’t exist in a sort of state­less vac­u­um that you hope blockchain will allow. And the big issue with blockchain is what some peo­ple are call­ing the anti­so­cial issue. So to bet on Bitcoin is to essen­tial­ly bet on the inef­fec­tive­ness of the cur­rent form of human order, the gov­ern­ment. So we have this weird ten­sion going on between gov­ern­ment and gov­ernance, Bitcoin and blockchain. Where do you see all this play­ing out, Vinay?

Gupta: Well, I mean, we have to face the fact that our gov­ern­ments are basi­cal­ly use­less. They’re ter­ri­ble insti­tu­tions. Because every­thing in soci­ety has accel­er­at­ed by a fac­tor of 100 or 1,000 in the past 400 years, but we still vote once every four years. And the fact that we haven’t done any update to the machin­ery of democ­ra­cy doesn’t chal­lenge the pur­pose of democ­ra­cy, or even change the cor­rect polit­i­cal phi­los­o­phy of democ­ra­cy. But what it chal­lenges is the machin­ery of democracy. 

So we should prob­a­bly have updat­ed our democ­ra­cy when we invent­ed rail­roads. We prob­a­bly should’ve updat­ed it again at the advent of mass pub­lish­ing of news­pa­pers. We should’ve done anoth­er lit­tle update for radio, and a much big­ger update for tele­vi­sion. We should’ve done an update for the Internet. There’s been gen­er­a­tion after gen­er­a­tion after gen­er­a­tion after gen­er­a­tion of polit­i­cal change in the way that the economies work—the polit­i­cal economies. But we haven’t updat­ed this four-year vot­ing business.

And even rel­a­tive­ly tiny changes I think could give us much bet­ter gov­ern­ment. For exam­ple, one pet scheme of mine is that rather than re-electing 600 MPs once every four years, we could just con­tin­u­ous­ly elect MPs one at a time. Every two weeks an MP stands down, there’s an elec­tion in their seat, anoth­er one comes up, and you basi­cal­ly have just a cal­en­dar that runs for four years dur­ing which time every MP stands down and some­body else comes in. And the thing just goes coun­ty by coun­ty by coun­ty in some kind of order. Maybe you start at the North. Just that change would con­tin­u­al­ly pres­sure gov­ern­ment to work with what peo­ple want­ed. Because if things were going bad­ly, you’d just lose seat after seat after seat after seat, and you could watch the encroach­ing major­i­ty die. And it would get rid of this four-year slam thing that we cur­rent­ly do.

Now, you might need some buffer­ing and some of this and some of that. But even some­thing as com­plete­ly prag­mat­ic and lim­it­ed in scope for error as that still strikes peo­ple as being unthink­able change. So the static-ness of gov­er­nance in an expo­nen­tial, accel­er­at­ing tech­no­log­i­cal change environment…the gov­ern­ment just gets worse and worse and worse and worse rel­a­tive to state-of-the-art insti­tu­tions. So, there’s your first problem.

The sec­ond prob­lem is that the mar­ket turns out to eat every­thing. I mean, it hasn’t quite con­sumed reli­gion, but I would give that anoth­er ten years. So what do we do about the fact that mar­ket eats every­thing? Do you turn gov­er­nance itself into a mar­ket? It’s a pos­si­bil­i­ty. You could think of the cryp­to space as being an explo­ration of what hap­pens when you cre­ate these extreme­ly pure mar­ket envi­ron­ments. It real­ly is hyper­cap­i­tal­ism. And you run it and you see what hap­pens. And in some ways, I think it’s quite use­ful to think of the entire cryp­to ecosys­tem as being a kind of vir­tu­al nation in which you are exper­i­ment­ing with a new style of gov­er­nance. You put this kind of hyper­cap­i­tal­ism into the machine, you run it for a while, you see what happens.

Mason: That sounds like Hell, Vinay. That sound like Hell.

Gupta: Well, at least it’s opt-in Hell, right? And you know, I mean I’m not deny­ing that I’m hav­ing an awful lot of fun right now. I mean, see­ing lots and lots and lots of tech­no­log­i­cal­ly pro­gres­sive smart peo­ple run­ning around with more mon­ey than they know what to do with? And by the way I am not one of them. I took legal advice ear­ly. But watch­ing that play out around me? has been an extreme­ly inter­est­ing phe­nom­e­non. Because what I see is that when you’ve got smart peo­ple with a bunch of mon­ey they do real­ly inter­est­ing things. And the lock­ing up of the cap­i­tal inside of the exist­ing insti­tu­tions has left us basi­cal­ly far under­play­ing our tech­no­log­i­cal hand globally.

There were very effective-looking plans to build inter­stel­lar space­ships in the 1950s. It’s called Project Orion. You take a five kilo­ton nuclear bomb, you put it under­neath a 300-ton cast iron plate, and on top of that you put a huge pad of springs and on top of that you put a bunch of canned apes. And you det­o­nate the bomb, it com­press­es the springs, the momen­tum of the steel plate con­tin­ues to keep you going, and then when you begin to slow down you drop anoth­er nuke. And it takes about sev­en­teen or twen­ty nukes to get into orbit, it takes anoth­er fifty to get up to some­thing like half the speed of light. And it means you could get to Alpha Centauri and back with a robot probe, or a crew, in like forty years. And we’ve known how to do that, in gen­er­al terms, lit­er­al­ly since short­ly after World War II. Why are we not doing this? What are humans for, if not to go out there and explore the universe?

The only thing that’s stop­ping us doing that is we don’t seem to be able to orga­nize or run those kind of projects. And that’s a gov­er­nance issue. If the Americans had said, ​“Look, the Moon was fan­tas­tic. The next thing we’re going to go and do is Alpha Centauri, and it’s not going to be because it’s easy, it’s because it’s hard, the Moon is not enough. We want to real­ly know what’s out there,” we could have had radio broad­casts com­ing back from a robot ship or even a human ship decades ago. You could’ve watched humans land­ing on anoth­er plan­et in anoth­er star sys­tem in your lives. But we didn’t get our act togeth­er. So, the notion that we need to basi­cal­ly tear up the rule­book and get our game togeth­er seems pret­ty rea­son­able to me.

Mason: I just won­der if…the rea­son Silicon Valley execs are obsessed with AI and with space travel—whether it’s Musk on one end or Kurzweil on the oth­er, I just won­der if it’s based on a very old, sim­plis­tic mod­el that harks back to Adam Smith—it’s the eco­nom­ic mod­el of Adam Smith, the means to pro­duc­tion. Space for these guys is all about infi­nite land. AI or auto­mat­ed robot enti­ties is essen­tial­ly all about infi­nite slave labor force. And then, what I wor­ry about is that blockchain is essen­tial­ly a third part of that puz­zle, which is the infi­nite growth of cap­i­tal. If we’re bas­ing it on such a base and old 1700 mod­el, are we in trou­ble soon?

Gupta: Oh, it’s much worse than that. [laugh­ter] That’s not a 300 year-old mod­el. That’s a bil­lion year-old mod­el and it’s called life. Life expands to fill every avail­able niche. It mutates into the nich­es that it can’t cur­rent­ly get into. And it fills…all the resources get pulled into the liv­ing world.

So I’m not say­ing that the mar­ket mod­el is a true rep­re­sen­ta­tion of the state of nature—because it’s obvi­ous­ly not. I mean, we became mul­ti­cel­lu­lar almost cer­tain­ly through coop­er­a­tion between dif­fer­ent kinds of organ­isms and mar­kets are very bad at arrang­ing coop­er­a­tion. They focus on one aspect of nature and imi­tate it. They’re very much a prod­uct of their time, right. The Darwinian nature of red in tooth and claw thing was a very incom­plete under­stand­ing of evo­lu­tion. But at the end of the day, why are we here? I think it would be quite cool if in five bil­lions years you had a bunch of unbe­liev­ably evolved posthu­man enti­ties look­ing back and say­ing, ​“You know, those 21^st cen­tu­ry humans real­ly did a good thing when they got off the plan­et. They took evo­lu­tion into the stars, and here we are five bil­lion years lat­er enjoy­ing the fruits of their labour.” That’s worth doing, to be of the gen­er­a­tion of a species that went inter­stel­lar. As far as we can tell, from all avail­able data we’d be the only liv­ing things that have ever done it. That’s worth doing.

I don’t think any­thing else is real­ly all that impor­tant. Against the grand sweep of cos­mic his­to­ry, get­ting into the stars is the only thing that real­ly mat­ters. Everything else will crum­ble to dust. But if we get out of there and we fig­ure out how to live out there and we fig­ure out how to spread out there, there’s a lot of out there. And that’s worth­while. Nothing else you’re work­ing on is real­ly all that impor­tant. It’s all these local obses­sions that peo­ple fuss with, ​“Oh my good­ness gra­cious, look at this, it’s a ter­ri­ble thing!” Yeah, real­ly? Compared to us get­ting hit by an aster­oid and every­body dies and that’s the end of life in the entire uni­verse? None of it mat­ters, right. We blew it real­ly bad­ly after World War II when we put the plu­to­ni­um in the top of the mis­sile and used it to attack each oth­er rather than putting it in the bot­tom of the mis­sile and using it as a nuclear rock­et engine.

Mason: Yeah…but a bunch of kids made a load of mon­ey from Bitcoin, so.

Gupta: Right? But think about all our polit­i­cal con­cerns. Against this back­ground, which is the real back­ground, it’s the bio­log­i­cal base, this is the real biopolitic. The real biopolitic is life expands, and when it doesn’t it turns can­ni­bal. Because we did not go to the stars when we had the oppor­tu­ni­ty, we are mur­der­ing each oth­er on Earth. And we’re not going to stop mur­der­ing each oth­er on Earth until we reclaim our birthright, which is the high fron­tier. We must go, or we will mur­der each other.

Mason: Let’s bring it back ter­res­tri­al for a second.

Gupta: Try. [laugh­ter]

Mason: Yeah. Let’s talk about the project you’re work­ing on that may take us to the Moon or the stars or else­where, which is very dif­fer­ent from Bitcoin inso­far as it’s based on a sim­i­lar tech­nol­o­gy, and it’s Ethereum. So let’s talk a lit­tle bit about Ethereum, and smart con­tracts, and all of the things that may allow us, from a ter­res­tri­al per­spec­tive, to live in those poten­tial futures.

Gupta: Well, so the thing that Ethereum put on the table was this con­cept of the smart con­tract. And the smart con­tract is basi­cal­ly a very light way of arrang­ing mass coop­er­a­tion. It’s an agency prob­lem. There’s an exact word I’m look­ing for. It is the…public choice. You put up a con­tract. The con­tract is tied to some set of actions that would be auto­mat­i­cal­ly per­formed by the con­tract. You load the mon­ey into the con­tract and the thing is imme­di­ate­ly performed. 

So that abil­i­ty to do social choice through that kind of smart con­tract gets you the pos­si­bil­i­ties of new kinds of gov­er­nance. It also solves the coor­di­na­tion prob­lems which are at the heart of a lot of our inabil­i­ty to do things like prop­er­ly fund open source soft­ware. So I more or less com­plete­ly ignored Bitcoin when it came out, because I’d been part of the e‑gold econ­o­my and I knew that cur­ren­cy alone didn’t buy you social change. It just wasn’t enough. But the abil­i­ty to get some­thing that had what David Reed calls the group-forming net­work capa­bil­i­ty, some­thing that can allow peo­ple to orga­nize new social struc­tures and solve these col­lab­o­ra­tion prob­lems, that seemed extreme­ly interesting.

So, I got involved. And so far, we haven’t done much of the stuff that I’d hoped for. The ICO thing, I wrote a piece about two years, maybe a year before the ICO thing start­ed to explode. And what I assumed is that to get that kind of explo­sion of project fund­ing, we would need the abil­i­ty to do equi­ty crowd­fund­ing. So in order for the peo­ple who are buy­ing tokens to have polit­i­cal rights to gov­ern the projects by voting—shareholder democ­ra­cy, which is the stan­dard for all pub­lic companies—you need to have vot­ing rights attached to the tokens. The prob­lem is that we issued the tokens, but for reg­u­la­to­ry rea­sons we couldn’t issue tokens with vot­ing rights. And as a result we’ve wound up with a whole bunch of very dis­en­franchized share­hold­ers who right now are laugh­ing all the way to the bank, but then the projects either have to deliv­er or not deliv­er. And it turns out to be real­ly hard to spend $150 mil­lion in a respon­si­ble way that will gen­er­ate share­hold­er value.

A friend of mine says, ​“Look, even a turkey will fly in a hur­ri­cane.” And in this enor­mous­ly expan­sive human envi­ron­ment, it’s very very very easy for peo­ple to raise amounts of mon­ey that they can­not spend in a way that will gen­er­ate prof­it. So with­out hav­ing share­hold­er democ­ra­cy and effec­tive demo­c­ra­t­ic gov­er­nance of these projects, how do you vote some­body off the board of an ICO team if they’ve done some­thing real­ly dumb? We just don’t have any way for the token hold­ers to get polit­i­cal rep­re­sen­ta­tion, explic­it­ly because the state will not let us do that because then it becomes a secu­ri­ties issue. So we’re kind of jammed in this posi­tion where the real social pow­er of these things, to have the peo­ple that fund some­thing be in direct polit­i­cal con­trol of it, is being ham­strung by out­mod­ed leg­is­la­tion. And I would like to think that that prob­lem is sol­u­ble, but I’m not sure that it is.

The approach that I would take, which is to enfranchize many more peo­ple to become what they call accred­it­ed investors— So my sug­ges­tion is that there’s a tech­ni­cal accred­it­ed investor cat­e­go­ry that allows peo­ple that have rel­e­vant degrees or pro­fes­sion­al expe­ri­ence to become investors in these kind of projects. That’s the approach I’d like us to take, because then we could build this enfranchized share­hold­er democ­ra­cy. But the track that we’ve tak­en is to basi­cal­ly try and build every­thing as a com­mod­i­ty, and as a result there’s no polit­i­cal rep­re­sen­ta­tion. And that to me is a huge missed oppor­tu­ni­ty. And hope­ful­ly some juris­dic­tion some­where will take a risk, fig­ure out how to issue tokens that include share­hold­er democ­ra­cy mea­sures, require things like board meet­ings and elec­tions and offi­cers and all the rest of that stuff, and actu­al­ly begin to main­stream all this busi­ness into some­thing that gives real polit­i­cal pow­er to the peo­ple, in this case the peo­ple that are fund­ing projects.

And that stuff, I mean… You know, how much is the Mars mis­sion going to cost, right? A cou­ple of hun­dred bil­lion dol­lars? Five hun­dred bil­lion dol­lars? I don’t know how much it comes to when you start talk­ing about trans­port­ing a mil­lion peo­ple to Mars to go and build a self-sufficient civ­i­liza­tion. But in all prob­a­bil­i­ty that’s going to wind up fund­ed with cryp­to mon­ey. Probably the Bitcoin bub­ble will be the thing that builds the Mars mission—we’re just going to ICO Elon Musk’s Mars trip. You know, these things are super tight­ly relat­ed. All of the Silicon Valley mon­ey is build­ing spaceships.

Mason: Well, that’s great for Elon and his bud­dies, when they can off-world to Mars, but what about the rest of us, Vinay? So it feels like the blockchain project, the most excit­ing, the most inter­est­ing thing about it is this word ​“decen­tral­iza­tion.” So we messed up. John Perry Barlow and his Declaration of the Independence of Cyberspace? He always envi­sioned cyber­space being decen­tral­ized. In the man­i­festo, he said that the gov­ern­ments aren’t wel­come here, we will decen­tral­ize this Internet thing. But we grew the stacks. We cre­at­ed the cen­tral­ized pow­ers of Google, Facebook, Amazon, what­ev­er the acronym is. Now, is there an oppor­tu­ni­ty with­in blockchain more broad­ly to take back the Internet? If the Internet became the con­struc­tion project that John Perry Barlow nev­er want­ed, do we need a demo­li­tion? And can we use blockchain to build not Web 2.0 but Web 3.0?

Gupta: So, final­ly we get to talk about eco­nom­ics. Because this is basi­cal­ly an eco­nom­ics prob­lem. So you guys are all fre­quent econ­o­mists. Who knows about John Nash and Nash equi­lib­ria? Okay. What about Ronald Coase? Coase? Going once, going twice? Wow, this is going to be fun! What about Yochai Benkler? Okay, right. Get ready, you’re going to do some economics!

So, what Nash explains in his ear­ly work is how we get locked into sit­u­a­tions which suck. In its sim­plest form, the Nash equi­lib­ri­um is a sit­u­a­tion which is ter­ri­ble for every­body and nobody seems to be able to change it, because every­body would have to agree on what the solu­tion is and they’d all have to change at the same time. Highly prob­lem­at­ic. And once you learn to see these things, you see them everywhere—they may not be strict­ly Nash equi­lib­ria in a tech­ni­cal sense, but you begin to real­ize this par­tic­u­lar qual­i­ty of coor­di­na­tion prob­lem that has to be solved to unlock some kind of val­ue. Lots of that around.

Then you get Coase. Coase to me is the most impor­tant body of eco­nom­ics to under­stand. And again, there’s a vast body of work attached to Coase, I’m just pick­ing out the thing he’s best known for. Which is a paper called The Nature of the Firm, which he wrote in [1937] and then won a Nobel Prize for. And remem­ber, I’m not an econ­o­mist, so I may fluff some of the details. 

So, Coase basi­cal­ly says look, if mar­kets are effi­cient, why do com­mand and con­trol hier­ar­chies inside of com­pa­nies exist? Why is there any rea­son for that to be there? The answer turns out to be that deci­sions are expen­sive and deals are expen­sive; the trans­ac­tions and the deci­sion mak­ing have real costs. And inside of a com­mand and con­trol hier­ar­chy you make the deci­sion once, and then you have an econ­o­my of scale, because the deci­sion is the applied over 100,000 work­ers at IBM. And that econ­o­my of scale and deci­sion­mak­ing is why com­pa­nies are big, and when infor­ma­tion gets cheap com­pa­nies should in the­o­ry become small. 

So this is a very very pow­er­ful effect, and the rise of the gig econ­o­my and all the rest of that stuff is often attrib­uted to Coasean fac­tors. Information got cheap, find­ing gigs became cheap, it was very easy to go and post that you need­ed help and post that you would offer to help, and all those sys­tems togeth­er pro­duced this kind of very flu­id kind of Airbnb-style environment.

Benkler then comes along and says look, to real­ly get this stuff to work ful­ly, you need to oper­ate inside of a com­mons because most of the ben­e­fit that’s pro­duced from these kind of activ­i­ties in a post-scarcity envi­ron­ment (which is to say that dig­i­tal files can be repli­cat­ed end­less­ly) most of the val­ue that’s gen­er­at­ed in these kind of sit­u­a­tions is indi­rect and hard to cap­ture. So if you look at some­thing like Wikipedia, Wikipedia’s ben­e­fit is its enor­mous com­plete­ness. And its enor­mous com­plete­ness is huge­ly more valu­able than any indi­vid­ual arti­cle inside of it. So all the Wikipedia edi­tors are indi­rect­ly ben­e­fit­ing from each other’s work, and the only rea­son that it holds togeth­er social­ly is because it’s unit­ed by the fact that all of the con­tent is licensed freely. You can use it for any­thing you like, so every­body ben­e­fits from every­body else’s work, inside of this tightly-bounded com­mons. And Benkler wrote a book called The Wealth of Networks which real­ly explains this stuff and it’s fantastic. 

And those three, that’s the kind of eco­nom­ic tri­pod you need to under­stand cryp­tocur­ren­cies. Now, where was I going? I got side-tracked by economics.

Mason: Space, again, prob­a­bly. You were giv­ing us the eco­nom­ic les­son that under­lies things like Ethereum and makes it different.

Gupta: Ah, bin­go. So, here’s the thing that we missed. For some reason—and I think this is an unsolved prob­lem in economics—in this incred­i­bly low-friction Internet envi­ron­ment, we wound up with enor­mous seas of lit­tle com­pa­nies, which is exact­ly what you’d expect from Coase, but we also wound up with the stacks. So, why does Amazon exist? Why does eBay exist? Why does Facebook exist? Why in an ultra-low infor­ma­tion cost envi­ron­ment do we get these enor­mous slab-like com­pa­nies which have vast com­mand and control?

Now, one pos­si­bil­i­ty is that those com­pa­nies aren’t com­pa­nies, because all of them imple­ment extreme­ly com­pli­cat­ed and sophis­ti­cat­ed inter­nal mar­kets for cap­i­tal allo­ca­tion. So it may be that we call it a com­pa­ny but it’s actu­al­ly a mar­ket­place. And that’s a very strong pos­si­bil­i­ty, par­tic­u­lar­ly for Amazon. Amazon has sev­er­al inter­nal mar­kets and externally-facing markets.

And the oth­er pos­si­bil­i­ty is that there’s sim­ply an enor­mous chunk of eco­nom­ics that we don’t know, pos­si­bly some­thing to do with behav­ioral eco­nom­ics and mind­share. So it may be that for an indi­vid­ual con­sumer mak­ing a deci­sion based on brand actu­al­ly results in a winner-takes-all envi­ron­ment which pro­duces the stacks. Because how many brands can we real­ly remem­ber? It’s cer­tain­ly not 8,000. So it could be a behav­ioral eco­nom­ics lim­it. But please, some­body in this room, if you know the answer to this ques­tion write to me and tell me, because I’ve been try­ing to find the answer for years and just can’t find the economist.

So, the trans­for­ma­tive bit. The thing that we want­ed was the abil­i­ty to do orches­tra­tion of new social struc­tures with very low trans­ac­tion costs. And if you take this kind of social Internet thing—the whole social media thing—and you imag­ine weld­ing it direct­ly to the abil­i­ty to raise mon­ey and tar­get projects, you can imag­ine a pulling togeth­er of the social and the finan­cial in a way that would allow effi­cient resource pool­ing to do things effi­cient­ly. You can pool the mon­ey to go there and rent the bus. You can pool the mon­ey to go there and rent the ski launch. 

And that kind of think­ing, what does it real­ly take? It needs the abil­i­ty to rapid­ly move the mon­ey, to coor­di­nate the prob­lem to pool things [inaudi­ble]. Same log­ic applies to build­ing a hos­pi­tal. Same log­ic applies to run­ning a wel­fare state. You could very eas­i­ly imag­ine basic income on a blockchain, where you use the blockchain’s trace­abil­i­ty to gath­er the evi­den­tial data that you require to set the lev­el of basic income. You use the evi­den­tial data from the blockchain—all the spend­ing history—to iden­ti­fy when some­body’s formed a monop­oly or a car­tel, because the data about the pay­ments is right there.

The pos­si­bil­i­ty is that you could use the blockchain to real­ly police the basic income sys­tem, to look for peo­ple who are skim­ming. How do you iden­ti­fy when you’ve got a car­tel among land­lords that have bro­ken the free mar­ket in an area so that you could pull the basic income pay­ments? Well, here’s the data, here’s the nat­ur­al pric­ing, here’s the fake one that we set up that sold the stuff at mar­ket places, boom, now we know where the prob­lem is. 

There’s a huge amount of pos­si­bil­i­ty there. But, do we have the polit­i­cal will? Do enough peo­ple care about their own liv­ing con­di­tions to form struc­tures that look like unions to improve them? Because the unions, right, that’s how you got your week­ends, it’s how you got your min­i­mum wages, it was the bedrock of the process that gave us the NHS. The unions real­ly were the things that improved the qual­i­ty of life for ordi­nary peo­ple more than any oth­er sin­gle fac­tor, and they are gone.

Mason: Now, before we move on to talk very quick­ly about iden­ti­ty and the blockchain, which I think is one of your most impor­tant mes­sages, we do have time for audi­ence ques­tions. What we’re going to ask is that you just come up and queue in the aisle here. For the process of the film­ing, if you have an audi­ence ques­tion please join the back of the queue on the aisle. We’ll be using a mike just here so please start mov­ing now. And in the mean­time, I’m going to ask you, Vinay, iden­ti­ty and the blockchain. In what way is that such an impor­tant and poten­tial use of blockchain technology?

Gupta: Sure. Oh, we’re going to have a moment of hub­bub here. Let’s give them thir­ty seconds.

Mason: Yeah, let’s give you thir­ty sec­onds to move.

Gupta: It’s a good time to breathe; the iden­ti­ty thing is going to be deep.

Mason: And if you leave now you’re going to miss the end­ing, when he reveals what you should be invest­ing in next, [laugh­ter] so I rec­om­mend that you stay. You want to pay that stu­dent loan? I’d stay.

Gupta: [laughs] Marvelous, mar­velous. Alright guys, let’s do this! So, the iden­ti­ty thing is very very sim­ple. Right now, every­body has a name that they were giv­en by some­body else. You’re giv­en a name by your par­ents, you’re giv­en an ID num­ber by your nation state, your uni­ver­si­ty, your employ­er and every­body else. People are real­ly always giv­en names by oth­er people. 

So, in the blockchain com­mu­ni­ty there’s an awful lot of talk about what they call self-sovereign iden­ti­ty. Which is a real­ly real­ly grand way of think­ing about things, and I think it’s a name which is fun­da­men­tal­ly mis­lead­ing. Because your name is not your iden­ti­ty. Your iden­ti­ty has always been self-sovereign—you’ve always been the per­son that is you. There’s noth­ing new about this notion of self-sovereign identity.

What is new is the abil­i­ty to assign your­self a unique name. And this is real­ly what gen­er­a­tion of cryp­to keys gives you. It gives the abil­i­ty to gen­er­ate a unique name for your­self, and to give peo­ple a ver­sion of that name that allows them to com­mu­ni­cate with you with­out being able to steal your iden­ti­ty. That’s all public-key cryp­tog­ra­phy is. It gen­er­ates a way for you to com­mu­ni­cate secure­ly with me, but not to pre­tend to be me. You can send me a mes­sage, but you can’t fake my identity.

So this notion of self-assigned unique names gives us the abil­i­ty to orga­nize all kinds of things in the world, because right now one of the biggest prob­lems we have is we don’t know what things are called. For exam­ple, if we take this bot­tle of Sprite, this bot­tle of Sprite has no name of its own. It is Vinay’s Sprite…(TM). But it is not in any way, shape or form address­able oth­er than me. If I drop it, it’s no longer Vinay’s Sprite, it’s now a mys­te­ri­ous cat­e­go­ry we call ​“garbage.”

And it’s got an iden­ti­fi­er on it—you see this bar­code. But that’s an iden­ti­fi­er not for this bot­tle of Sprite but for all bot­tles of Sprite. It’s a class iden­ti­fi­er. So we’ve got 2D bar­codes, and we’ve got cryp­to. We could put a 2D bar­code on here that was a self-assigned name for this bot­tle of Sprite. And then when I bought it, I could be bound to that name—that’s my Sprite. And if I dropped it we’d know whose garbage it was.

And doing that for indi­vid­ual bot­tles of Sprite might seem a lit­tle bit exces­sive, but we could do that for indus­tri­al pol­lu­tants. We could do it for tox­ic waste. We could do it for all kinds of prob­lem­at­ic things. And it’s part of build­ing this kind of con­tain­er that you need to build an eco­log­i­cal­ly sound society.

So, we could give names to indi­vid­u­als this way—they could make their own names. We could do that as a way of cre­at­ing a glob­al iden­ti­ty com­mons in which every­body could com­mu­ni­cate with every­body else secure­ly, and they could know exact­ly who their mes­sage was going to. We could do all of these things, but it’s not just for humans, right. It’s for humans, it’s for machines, it might be for processes. 

Think of invoic­es, every invoice is a dif­fer­ent num­ber in every orga­ni­za­tion it goes through. We don’t need to do that any­more. Generate a key, assign it a key, have all the peo­ple who are man­ag­ing the invoice giv­en the abil­i­ty to read the mail that comes into the key. All of this stuff is pos­si­ble, but it all boils down to this ques­tion of how do we think about the nam­ing of things. And that’s a ques­tion that goes all the way back to the deep­est myths of our civ­i­liza­tion. And inno­va­tion in nam­ing things is gen­uine­ly going to be a revolution.

Mason: So on that note, we’re going to turn to some audi­ence ques­tions, and thank you guys for queu­ing up. The gen­tle­man just here.

Audience 1: Can cryp­tocur­ren­cies be con­sid­ered as a poten­tial rival to gold, since it ful­fills the same pur­pose and concept?

Gupta: So the thing about gold is that gold is real­ly old. Cryptocurrencies might be a rival to gold in the short term, but until they’ve got a cou­ple of thou­sand years of use, there will still be a ten­den­cy to say, ​“Well…you know, this stuff hasn’t been around as long as gold, and it doesn’t real­ly solve the same prob­lem.” I mean, we live in a world where we have a kind of pool of a cou­ple of bil­lion peo­ple that live in a very fast-moving cul­ture. But we also have half of the human race who grow all of their own veg­eta­bles on farms that they work by hand. And for those peo­ple it could be two or three gen­er­a­tions before cryp­tocur­ren­cy becomes ful­ly tan­gi­ble to them. But if you turn up with a bag of gold any­where in the world, they know who you are. So I think it will take a real­ly long time mea­sured in cen­turies for there to be direct com­pat­i­ble util­i­ty. But that doesn’t mean the gold price won’t be impact­ed by cryp­tocur­ren­cies, just that the age of gold as a valu­able thing gives it a qual­i­ty that can’t be repli­cat­ed by crypto.

Audience 1: Thank you.

Mason: Thank you.

Audience 2: Hi. So one of the main appeal­ing things about crypto-anarchism is that in a vir­tu­al blockchain state, you can do away with state oppres­sion and we can work towards self-governance. But how do we rec­on­cile that with the fact that blockchain was ini­tial­ly used for mon­ey laun­der­ing and the whole Silk Road scan­dal? How do we pri­or­i­tize ille­gal things like mon­ey laun­der­ing to ter­ror­ists with free­dom and the whole lib­er­tar­i­an notion of self-governance?

Gupta: Well, the real hard­core lib­er­tar­i­an argu­ment is, who told you these peo­ple were ter­ror­ists? They just view all of that as being free trade, includ­ing mar­kets for violence.

Audience 2: But mon­ey laun­der­ing can be used through the blockchain to fund ter­ror­ist groups. 

Gupta: Oh sure, sure. But real­ly hard­core lib­er­tar­i­ans will tell you, ​“Who told you these peo­ple were ter­ror­ists? And mon­ey laun­der­ing is just free trade.” Right? The peo­ple that orig­i­nal­ly designed the blockchain thought that those kind of uses were com­plete­ly with­in the scope of what they were will­ing to coun­te­nance. Because they thought that what they were fight­ing against was a much worse form of oppres­sion, which is the ten­den­cy of states to com­mit geno­cides. So if you have a sys­tem where all pow­er is cen­tral­ized in the hands of the state, the geno­cide risk killed 150 mil­lion peo­ple in the 20^th cen­tu­ry, maybe more. So com­pared to that, all of the ter­ror­ism and all of the orga­nized crime and all the rest of that stuff become evap­o­rat­ing tiny lit­tle prob­lems. The orig­i­nal archi­tects of these sys­tems viewed all the ter­ror­ism and mon­ey laun­der­ing and orga­nized crime and all the rest of that stuff as being com­plete­ly accept­able prices to pay for reduc­ing the pow­er of the state to com­mit geno­cide. Now, I’m not say­ing that I agree with that, but the orig­i­nal archi­tects of these sys­tems under­stood those trade-offs and paid up front.

My per­son­al opin­ion on this is that both extreme decen­tral­iza­tion and extreme cen­tral­iza­tion cre­ate accountability-free zones. So if you think about an insti­tu­tion like the Catholic Church, which is enor­mous­ly cen­tral­ized, there is very lit­tle crim­i­nal account­abil­i­ty for things like sex­u­al abuse by priests. They’re incred­i­bly pro­tect­ed by the cen­tral author­i­ty. At the oth­er extreme, if you go to areas which are rur­al and poor­ly policed, peo­ple are doing all kinds of crazy stuff like burn­ing plas­tic waste in their back­yards, con­t­a­m­i­nat­ing their envi­ron­ment with diox­ins, all this kind of stuff. And there’s no account­abil­i­ty there either. So at the extremes we get spaces with no account­abil­i­ty; it’s in the mid­dle, where you’ve got mul­ti­ple com­pet­ing enti­ties that are watch­ing each oth­er, that you get accountability.

So I think as a gen­er­al design prin­ci­ple, you want sys­tems where peo­ple are watch­ing each oth­er, if you want an account­able sys­tem. At the extremes, you get zero account­abil­i­ty whether it’s cen­tral­iza­tion or decen­tral­iza­tion. And I think it real­ly is one of these things where you have a Goldilocks point where things are about right, and the extremes are basi­cal­ly life-denying and humanity-destroying.

Mason: So essen­tial­ly sousveil­lance is the solu­tion to sur­veil­lance capitalism?

Gupta: Yeah, I’m not that into the notion of anonymi­ty on a vast scale; what I like is account­abil­i­ty and trans­paren­cy. And account­abil­i­ty and trans­paren­cy has to be enforced from the bot­tom as sousveil­lance, because oth­er­wise these things just don’t work.

I mean, if you look at the drops in police vio­lence that come when peo­ple are made to wear body cam­eras, that didn’t have to wait for police to have body cam­eras, that could have just been a sim­ple pro­to­col where every­body records the police as soon as an inter­ac­tion begins. And if the police were okay with that and it was expect­ed you know, ​“Excuse me sir, I’ve got to stop you for a park­ing tick­et. Would you mind turn­ing on your cam­era?” That’s the way we should’ve done it—it should’ve been nor­mal­ized into polic­ing that the police ask you to make an inde­pen­dent record­ing as part of the per­for­mance of their duties. That’s how we should police.

Audience 3: Hi. I was won­der­ing what’s your opin­ion on Tangle as next gen­er­a­tion of DLT, and do you agree with Vitalik Buterin that the devel­op­ers of IOTA have like, tech­ni­cal­ly flawed deci­sions, or do you see maybe it has the poten­tial to be more effi­cient, just in terms of not hav­ing trans­ac­tion fees and such?

Gupta: Okay. So this is a hard com­put­er sci­ence ques­tion. The short answer is I have not done a rig­or­ous enough analy­sis of these sys­tems to know. I’ve spent most of my free band­width in the last year kin­da learn­ing about the legal ques­tions, and the tech­nol­o­gy has kind of marched on its own tracks.

My gut feel­ing is that stor­ing every trans­ac­tion on every node is prob­a­bly in the long run going to turn out to be exces­sive. On the oth­er hand, stor­age is so cheap that the cor­rect answer might just be to pay up front and do it the hard way. But this still leaves the ques­tion of how do you get the blockchain to be fast, and the short answer is nobody real­ly knows yet. So I think this is one of these kind of high fron­tier sit­u­a­tions where a thou­sand flow­ers will bloom and maybe some­body will fig­ure it out…but, it’s extreme­ly hard for me to say. I think the Lightning Networks are going to be…truly amaz­ing, right. Because they’re sim­ple, they’re cheap, they’re pow­er­ful, they’re easy to under­stand, and they’re fair­ly trans­par­ent in imple­men­ta­tion. I think that the extreme­ly com­pli­cat­ed sys­tems where not all nodes store all trans­ac­tions, are maybe going to behave unpre­dictably in the real world, but that’s very wait and see. Sorry I don’t have a more con­crete answer.

Audience 3: That’s okay. Well, I was won­der­ing just because we saw what hap­pened to the Ethereum net­work when CryptoKitties came out and slowed down so drastically. 

Gupta: Oh sure. There’s no doubt—

Audience 3: Do you see it’s a real prob­lem for the tech­nol­o­gy forwards?

Gupta: Oh, yeah yeah. Everybody knows Ethereum is slow, Bitcoin is slow­er—those sys­tems are just slow. But the Plasma stuff, which is basi­cal­ly kind of like a Lightning Network but for smart con­tracts, will help. And then there’s Casper and the move to proof-of-stake, which…wow that’s a big jump. But if that works, it’s a total­ly new game because we also get rid of the envi­ron­men­tal foot­print of min­ing. And that’s a huge step. It may be that min­ing is the kind of Industrial Revolution dirty phase of the blockchain’s devel­op­ment, and then you final­ly get into this rev­o­lu­tion­ary point where the thing final­ly becomes a social struc­ture rather than being anchored into the indus­tri­al min­ing oper­a­tion, and then a new game begins.

Audience 3: Thank you.

Mason: Thank you.

Audience 4: Hi. My ques­tion per­tains a bit more to pri­va­cy. Because this idea of the blockchain being open and every­one being account­able and stuff is nice, but at the same time if I send some­one Bitcoin, they can click on my address, they can see how much mon­ey I have. Now, that doesn’t real­ly make very much sense, does it? In terms of a cur­ren­cy I don’t want to tell Starbucks how much is in my bank account every time I go get a coffee.

Gupta: Yeah. So, again, let’s just get the can open­er out, dump out the can of worms. So Norway, until I think rel­a­tive­ly recent­ly or prob­a­bly still, pub­lish­es everybody’s income as part of their nation­al tax records. You can look up how much mon­ey peo­ple are mak­ing. And that works in an egal­i­tar­i­an soci­ety, it wouldn’t go so well in America.

There are obvi­ous­ly a lot of pos­si­ble solu­tions to that. The hard­core thing, the real atom­ic bomb in this, is the Zk-SNARKs. So the pos­si­bil­i­ty that you can actu­al­ly do this very very very intense cryp­tog­ra­phy in a way that pro­duces total anonymi­ty for the trans­ac­tions, frankly scares me real­ly bad­ly. Because it removes all pos­si­bil­i­ty of hav­ing social con­trol of cryp­tocur­ren­cies. Zcash, they don’t have smart con­tracts yet but a lot of the fun­da­men­tal prim­i­tives from this stuff are being built into Ethereum. And I don’t know what kind of a social equi­lib­ri­um you get in a world where Zk-SNARKs are wide­ly dis­trib­uted. Because you know, cen­tral­iza­tion bad, total decen­tral­iza­tion bad, hab­it­able zone is some­where in the mid­dle, and the SNARK to me looks like an irrev­o­ca­ble move­ment towards the extreme­ly decen­tral­ized end of that spec­trum. I’m not sure we’re going to like what we find out there.

Mason: Thank you.

Audience 5: My ques­tion is, so there are some peo­ple who believe that Bitcoin’s a bub­ble. And although I heav­i­ly invest­ed in cryp­tos, I think there are some truth to that. Because what’s hap­pen­ing right now is quite sim­i­lar to the tulips effect in 1630s, and peo­ple just hap­pen to agree that Bitcoin’s a cer­tain price, or oth­er cryp­tocur­ren­cy’s a cer­tain price. And if we want to pre­vent Bitcoin from being a bub­ble, what needs to change?

Gupta: Okay, so there is no doubt at all, as it cur­rent­ly stands, that the entire blockchain sys­tem is a bub­ble. Right. You’ve got $600 bil­lion of cap­i­tal, and you’ve got prac­ti­cal­ly no prof­its. Right? That’s not a hard ques­tion. You ought to have about $60 bil­lion worth of prof­it if you’re going to val­ue some­thing at $600 bil­lion. So I’m not see­ing $60 bil­lion of actu­al profit. 

However, should they begin to build a 1, 2, 3% of glob­al GDP improve­ment, you could very rapid­ly see $60 bil­lion of actu­al prof­it come out of the fact that cryp­tocur­ren­cies exist. Then it would be like you’ve kind of tak­en the bub­ble and sprayed it with con­crete and now it’s a bridge. Whether we’re going to man­age that or not I don’t know.

The oth­er thing is stock mar­kets. We think about the tulip bub­ble, but the ear­ly stock mar­kets were aston­ish­ing­ly fraud-filled and explo­sive. and the pos­si­bil­i­ty is that you wind up with a very very messy ear­ly phase like the ear­ly stock mar­kets had. Then we learn how to gov­ern these things, we learn how to bal­ance every­thing out, and you get a sys­tem which is much, much more performant. 

So you know, pos­si­ble, could go either way, but I think it’s very like­ly that you’re going to see a pret­ty apoc­a­lyp­tic cryp­to crash at some point. I think it’s like­ly that you’re going to see fiat coins like dol­lar coin and yen coin, become issued by gov­ern­ments. And I would be unsur­prised to see some­thing that looks like Visa or SWIFT but it process­es smart con­tracts. And my guess is that that will be an inter­na­tion­al con­sor­tium with one node per con­ti­nent. So there’ll be the Chinese clear­ing house, the American clear­ing house, the European clear­ing house, maybe a Russian one, maybe an Israeli one, maybe a few oth­ers, but that that mod­el will be very strong­ly based on the nation-state, in much the same way DNS is.

The alter­nate track is that the nation-state par­a­digm breaks hor­ri­bly because the dol­lar becomes extreme­ly bad­ly impact­ed by polit­i­cal risk, and that con­ta­gion brings down both Europe and China as inte­grat­ed units. And in that kind of a sce­nario you could very well see Internet gov­er­nance become glob­al gov­er­nance, prob­a­bly in part­ner­ship with the UN. So, in those kind of sce­nar­ios your Bitcoin is under­priced even at $100,000.

[To Mason:] But you’re right, it is more prof­itable in apoc­a­lyp­tic sce­nar­ios, it is a hedge against apocalypse.

Mason: So let’s hope for destruction.

Audience 6: My ques­tion is, we take elec­tric­i­ty as grant­ed in the devel­oped world, but in the devel­op­ing world it’s very prob­lem­at­ic and access to it is some­times scarce and unre­li­able and peo­ple will rely on per­son­al gen­er­a­tors, espe­cial­ly in sub-Saharan Africa. How do you think peer-to-peer ener­gy trad­ing, name­ly smart micro­grids, could be imple­ment­ed in devel­op­ing countries? 

Gupta: So, one of the clients I’m cur­rent­ly work­ing with for my main com­pa­ny which is Mattereum is doing a blockchain-based pay­ment sys­tem for micro­grid man­age­ment. So what Mattereum does is basi­cal­ly the legal work required to make a smart con­tract legal­ly enforce­able in 150-something coun­tries. And that allows you to do things like tran­sit phys­i­cal goods because you can get legal con­trol of things.

So in the elec­tric­i­ty case, you basi­cal­ly have some kind of token pay­ment that goes in one direc­tion and elec­tric­i­ty goes in the oth­er direc­tion. And the gate­way on that is a smart meter backed up by a smart con­tract backed up by law. And those sys­tems give you the abil­i­ty to cap­i­tal­ize large-scale roll­outs of this kind of community-scale solar.

Individual-scale solar, so solar lights where you’ve got a lit­tle bit of solar pan­el, a cou­ple of bat­ter­ies and some LEDs, have rev­o­lu­tion­ized Africa. They’re sav­ing house­holds on the order of $100 per house­hold per year, which is often 5 or 10% of their income. And there are sto­ries about areas where the solar lights arrived, and sud­den­ly peo­ple start­ed putting roofs on their hous­es because they just had enough mon­ey to do cap­i­tal invest­ment. But you can’t get mod­ern ameni­ties with this kind of palm-sized solar pan­el. You need sys­tems where when you want to run a heavy appli­ance, you’ve got some­thing with a big bat­tery that you can draw on that refills, and you don’t want to put one of those on your roof because you don’t use enough pow­er and you don’t have enough mon­ey… And you can sort of see that there’s a whole bunch of ques­tions about how you get an orga­ni­za­tion of com­mu­ni­ty will around doing some­thing that requires pool­ing funds. And that prob­lem is a good fit for this tech­nol­o­gy. So I think we’re going to see a lot of cap­i­tal­iza­tion of small-scale solar and wind off that kind of technology.

Mason: Thank you. Next question.

Audience 7: Hi Vinay. You men­tioned ear­li­er that you thought the cryp­tocur­ren­cy mar­ket in gen­er­al is in a bub­ble. And some­thing that I’ve been think­ing about a lot is what would the mech­a­nism have to be for that bub­ble to burst. And I would love to get your opin­ion on what would the actu­al mech­a­nism look like. For exam­ple, with the Global Financial Crisis it was a lack of liq­uid­i­ty. What would the bub­ble burst­ing actu­al­ly looks like, and what would need to hap­pen? What’s the like­li­ness of that sce­nario ever tak­ing place?

Gupta: So, I think there’s basi­cal­ly three obvi­ous ways it could go, and in all prob­a­bil­i­ty what hap­pens will not be one of the three obvi­ous ways. So I could talk about these things as sce­nar­ios but real­i­ty is always stranger than fic­tion or prediction.

So the first thing is that you could sim­ply see the bub­ble be that some­body comes out with a new tech­nol­o­gy which is so much bet­ter than the exist­ing cryp­tos that every­thing pulls out of one and dumps into the oth­er. We came pret­ty close to the Flippening last year, where Ethereum was real­ly march­ing pret­ty hard up on Bitcoin. And if that had got­ten much clos­er, I think you could have seen pan­ic sell­ing of Bitcoin and pan­ic buy­ing of Ether. I am not a finan­cial advi­sor, I do not hold any of these assets, my lawyers tell me I can’t trade. Okay, fine.

The sec­ond pos­si­bil­i­ty is that you get inter­ven­tion from the state, right. So, the American gov­ern­ment says, ​“Well, we’ve kind of had enough of this Bitcoin thing. Let’s arrest every­body.” And you sort of think, ​“They couldn’t,” and actu­al­ly they could. The approach that they’d prob­a­bly take is that they would sug­gest that the fun­da­men­tal pur­pose for Bitcoin was actu­al­ly laun­der­ing drug mon­ey, and then they’d use the amaz­ing­ly enthu­si­as­tic American seizure laws to sim­ply con­fis­cate all of the mon­ey that any­body ever made from touch­ing Bitcoin ever. And they’d freeze like two mil­lion bank accounts and it would be an enor­mous dis­as­ter. And the peo­ple that had stocked up a bunch of gold in their hous­es against that pos­si­bil­i­ty would be sit­ting much hap­pi­er than the ones who had it all liq­uid or in fiat. So that’s kin­da sce­nario two.

Scenario three is mass pub­lic dis­il­lu­sion­ment. And mass pub­lic disillusionment…you know, right now it’s kind of hard to imag­ine that that would hap­pen because every­body’s mak­ing mon­ey. If peo­ple real­ized that the bat­ting aver­age on their ICOs is like 1 in 1,000, which is pret­ty much what it’s like for ven­ture cap­i­tal, right. If they start see­ing the same kind of risk-return that ven­ture cap­i­tal sees… On aver­age, ven­ture cap­i­tal los­es mon­ey. The peo­ple who make mon­ey in ven­ture cap­i­tal make a huge amount of mon­ey, but the aver­age VC fund los­es mon­ey. If that turns out to be true for ICOs as well, there’ll be a point where peo­ple sud­den­ly will be get­ting dis­il­lu­sioned and then they’ll start to bolt out of the market.

So it’s only mas­sive, mas­sive indus­tri­al adop­tion of these tech­nolo­gies that pro­vides any kind of sta­bil­i­ty to that bub­ble, and part of the rea­son that I’m doing the thing that I’m doing with my life right now is to attempt to build the inter­face into the indus­tri­al ecol­o­gy so that we can actu­al­ly expand into indus­tri­al space rather than being stuck in finan­cial engi­neer­ing. Because finan­cial engi­neer­ing is huge­ly volatile. If we have mass deploy­ment of cryp­tocur­ren­cies and smart con­tracts deep in the indus­tri­al base solv­ing real prob­lems, these things become much more sta­ble, and that’s what I’m real­ly work­ing on, that’s why Mattereum exists.

Audience 6: Thank you. Thank you.

Audience 7: Hi. Cryptocurrency is a real­ly hot top­ic right now.

Gupta: Mm, No kidding.

Audience 7: Bitcoin and Ethereum trans­ac­tions are quite slow.

Gupta: Yep.

Audience 7: But also quan­tum com­put­ing is a real­ly hot top­ic as well. In the cryp­to­graph­ic world we have prob­lems with scal­a­bil­i­ty, we have slow trans­ac­tions. Do you think these things will be solved, and to what extent, before quan­tum com­put­ing itself is com­plete? And once quan­tum com­put­ing is com­plete, how much of a step back or for­ward do you think the cryp­to­graph­ic world will take?

Gupta: Yeah yeah, that’s a good ques­tion. So, I think the Lightning Networks will turn out to be super effec­tive. I real­ly think the Lightning Networks are going to be a big step for­ward. A lot of the stuff that I wrote about Bitcoin being stuck in a tech­no­log­i­cal back­wa­ter and unable to evolve is true, but they final­ly start­ed to take it seri­ous­ly and the Lightning Networks are a good man­i­fes­ta­tion of that.

The quan­tum com­put­ing thing, again, comes in two lay­ers. So, there’s the break­a­bil­i­ty of a lot of the exist­ing cyphers under the load of quan­tum com­put­ing. And I am not sure how vul­ner­a­ble most of this stuff is, but the gen­er­al assump­tion is pret­ty vul­ner­a­ble. There are quantum-resistant algorithms—the one that I remem­ber read­ing about was NTRU, and I have a feel­ing there’s a second-generation vari­ant of that algo­rithm. So you would require a peri­od in which you took the exist­ing cryp­tog­ra­phy, and ran NTRU beside it, and then migrat­ed every­thing over to NTRU with­out los­ing the record of who owned what in the process. That would be a hairy job, but it wouldn’t be game-ending. And NTRU, as I say, that’s the quantum-resistant algo­rithm that I remem­ber. I seem to remem­ber that there’s a ton more com­pu­ta­tion required to do the encryp­tion, and much much more storage.

So with all that said, I think the break­through that’s more like­ly to turn every­thing upside down is homo­mor­phic encryp­tion. So I think it’s much more like­ly that we’ll get effi­cient homo­mor­phic encryp­tion ear­ly than quan­tum com­pu­ta­tion ear­ly. Because so much mon­ey is going into research on homo­mor­phic encryp­tion. And if that cracks, I think you’ll see unbe­liev­ably dra­mat­ic and rapid changes that are com­plete­ly impos­si­ble to con­cep­tu­al­ize, because homo­mor­phic encryp­tion is so com­plete­ly coun­ter­in­tu­itive I don’t think any­body’s even writ­ten sci­ence fic­tion about how the world would look if that hap­pened. So I think homo­mor­phic encryp­tion might turn out to com­plete­ly blind­side us, and I can’t even imag­ine what hap­pens in the cryp­to space if that happens. 

Audience 7: Thank you.

Gupta: Does any­body want an expla­na­tion of homo­mor­phic encryp­tion? No, jok­ing, joking.

Audience 8: I won­der if I could ask you to speak about adop­tion and deploy­ment, par­tic­u­lar­ly meth­ods against inter­ven­tion, or for inter­ven­tion. Normally when the gov­ern­ment or the nation-state comes up in your con­ver­sa­tion, it’s after a dis­as­ter or some kind of emer­gency. Are there pos­i­tive steps that are gov­ern­ment or a nation-state should be tak­ing towards some of these goals? And what might they be?

Gupta: So, a cou­ple of years ago a friend of mine asked me what the Dubai blockchain strat­e­gy should be. So I went out to Dubai, and I had a chat with them, and sud­den­ly they had a blockchain strat­e­gy and it was what I had sug­gest­ed might be a good one. 

Now, I have mixed feel­ings about Dubai. It’s a real­ly com­pli­cat­ed place, but it’s also a haven of futur­ism and rel­a­tive lib­er­al­ism, rel­a­tive to a lot of the oth­er coun­tries around it. And they’re not doing bad work in terms of think­ing glob­al­ly and try­ing to engi­neer things like solu­tions to cli­mate change. They’re real­ly putting their mon­ey where their mouth is on that stuff.

So, what I sug­gest­ed to them was that they should take all of the doc­u­ments that the gov­ern­ment issued and store them on a blockchain, so that when you came to the gov­ern­ment with a copy of a gov­ern­ment doc­u­ment that had been issued by anoth­er depart­ment, they could find it inter­nal­ly and ver­i­fy that it was actu­al­ly there. It wasn’t very com­pli­cat­ed. It’s a big job to imple­ment, but it’s a pret­ty straight­for­ward thing to imag­ine. And if we had mul­ti­ple gov­ern­ments that all did that with all the doc­u­ments that they issued, gov­ern­ments could check with each oth­er to see whether a doc­u­ment was cor­rect­ly issued. So, you could ask the American government’s inter­nal blockchain to see whether this tran­script from Carnegie Mellon was a real tran­script that indi­cat­ed some­body real­ly did have a degree. Right?

And that abil­i­ty to just pull togeth­er all of the infor­ma­tion about your­self with prop­er dig­i­tal sig­na­tures, from every­body that issued you those doc­u­ments, would make life so much sim­pler. And it doesn’t have to go with stor­age of the doc­u­ment. You just need to store the hash of the doc­u­ment, and the doc­u­ment needs to include some way of regen­er­at­ing the hash, and if you have that kind of sys­tem, you could have a sys­tem where the proof of the doc­u­ments is very easy to obtain, and I think that would help every­body in a real­ly day-to-day sense. And that’s the sim­plest base case. If we did that for all of the gov­ern­ments in the world life would improve in a real­ly big way. 

Above that lay­er, you then get into the ques­tion of kind of tech­no­log­i­cal accel­er­a­tion as nation­al strat­e­gy. And I think that would be a talk for anoth­er day.

Mason: Yeah. Let’s leave that for a talk for anoth­er day and let’s give the stu­dents who did stay some­thing to walk away with, which is my final ques­tion, Vinay. How can the stu­dents in this room, arguably the blockchain and Bitcoin natives, how can they pre­pare for the pos­si­ble Bitcoin—or blockchain, sorry—enabled futures?

Gupta: Ah, well. So, there’s the answer which I always give, which is read 1990s cyber­punk sci­ence fic­tion. Right? The cyber­punk sci­ence fic­tion is what all of us read and that’s how we got into this stuff. And it’s real­ly use­ful because it pre­dict­ed a kind of dystopi­an future world filled with kind of weird nan­otech­nol­o­gy, arti­fi­cial intel­li­gences that were flaky and didn’t real­ly work prop­er­ly, anony­mous dig­i­tal cash trans­ac­tions, and peo­ple hack­ing each oth­er’s machines to pro­duce polit­i­cal change. So that stuff is only real­ly like five years out now. That stuff has gone from being wild sci­ence fic­tion to being tech­nothrillers with­in my life­time. Because you know, a tech­nothriller? is sci­ence fic­tion that includes the president.

I think there’s a more pro­found ques­tion here, which is what is it like to be in a polit­i­cal elite? So I came back from Davos. And, I was not in the white badge area of the secu­ri­ty and the heads of state and all the rest of that, I was kind of in the Davos fringe. And the Davos fringe is the most fun I’ve had in like ten years. It was amaz­ing! Because it was filled with huge amounts of enthu­si­asm, as peo­ple ran around spend­ing their investor mon­ey throw­ing great par­ties and telling every­body that it was a real­ly good thing to do with their investor money.

But it was filled with this kind of aggres­sive opti­mism, right. The future’s so bright, we’ve got to wear shades. They were real­ly push­ing this notion that every­thing was fan­tas­tic. And this is more or less always how it is with elites. The elites have big smiles on their faces because life is great. And the fact that we’ve got nerds, who have his­tor­i­cal­ly been very bad­ly dis­crim­i­nat­ed against, which is usu­al­ly ableism against autists, all of that kind of nerd cul­ture stuff is now becom­ing eco­nom­i­cal­ly dom­i­nant and there­fore fash­ion­able. And the nerds are becom­ing an elite. And usu­al­ly the elites are very nasty people.

So, to me the ques­tion here is can we be a bet­ter elite than the pre­vi­ous gen­er­a­tions of elites. Or are we going to in the long run become as hat­ed as invest­ment bankers were for just the same rea­sons? And that to me is a ques­tion about morals. The thing that I think is crit­i­cal to nerd cul­ture is this: the way that what I’m going to loose­ly term ​“jock cul­ture” works is aggres­sive com­pe­ti­tion to fig­ure out who’s in charge, fol­lowed by giv­ing orders. And this is a real­ly good way to orga­nize mil­i­tary engage­ments. And I think that jock cul­ture is an evo­lu­tion­ary throw­back to trib­al bat­tles. First we have a fight to fig­ure out who’s in charge, and then you orga­nize every­body and you exe­cute a strat­e­gy and you go and kill the oth­er guys.

Nerd cul­ture I think is the peo­ple that were back at home knap­ping the flint, mak­ing the weapons, start­ing the fires, find­ing the food, iden­ti­fy­ing where the game was going to be, nav­i­gat­ing long dis­tances, build­ing the canoes and every­thing else. And most of those jobs require more than a sin­gle human to be able to do the job properly.

So in nerd cul­ture, the aggres­sion is mas­sive­ly with­drawn and sup­pressed, and a lot of peo­ple find that this makes peo­ple seem kind of emas­cu­lat­ed. ​“Aren’t men sup­posed to be aggres­sive and take up a lot of space?” The nerds pull all of that stuff in, to enable large-scale coop­er­a­tion to solve prob­lems which are too big for a sin­gle guy. Making a canoe on your own is going to take you months. You need twen­ty peo­ple to be able to raise a barn. To run a flint knap­ping econ­o­my, you need the abil­i­ty to get some­body to trav­el a long dis­tance to bring you the stones, you need a guy would could do the chip­ping and the flak­ing. So I think the nerds are the orig­i­nal coop­er­a­tors. They’re the peo­ple that in the human species that fig­ured out how to solve a prob­lem which is too com­pli­cat­ed to solve with com­mand and con­trol, and I think they’ve got the emo­tion­al and the psy­cho­log­i­cal wiring for that kind of col­lec­tive activ­i­ty. Nerds are real­ly good at work­ing with each other.

So, I think that there’s a pos­si­bil­i­ty that this new elite, which I occa­sion­al­ly call the Nerd Reich, is going to turn out to be much less bru­tal than pre­vi­ous elites have been. But that’s only a poten­tial­i­ty. We have to real­ize that poten­tial­i­ty by actu­al­ly being the best ver­sion of nerd cul­ture we can imag­ine, which is one in which coop­er­a­tion gen­uine­ly does out­weigh com­pe­ti­tion. It builds on Stallman’s foun­da­tions of open source, it builds on mod­els like Linux and espe­cial­ly Wikipedia, and it cre­ates some­thing which looks more like the out­break of glob­al sci­ence than the out­break of one eco­nom­ic aris­toc­ra­cy over­tak­ing anoth­er. I’d like to see some­thing that didn’t look like feu­dal­ism being replaced by indus­tri­al­ism being replaced by post-indus­tri­al­ism. I’d like to see some­thing that looks like the inven­tion of the sci­en­tif­ic method, fol­lowed by the explo­sion of knowl­edge that came with it. And if we can stick true to those prin­ci­ples, the pos­si­bil­i­ty is that nerd cul­ture real­ly will save the Earth. 

Mason: Well there we go. If you are a nerd, it’s going to be a good— [applause] Those are the nerds, those are the nerds.

Gupta: You are my people!

Mason: What a won­der­ful mes­sage to end on. So before we close out, there’s a cou­ple of thank yous. I want to thank the University of Warwick Department of Economics for host­ing us this evening. Virtual Futures kind of coopt­ed their 360 Lecture Series, to turn it into some­thing we do almost every week in London, and we’re going to do more here at the University of Warwick. I want to thank the entire team for help­ing us film this evening, to Pai, since you are Head of Department, for allow­ing us to be here. A spe­cial thanks to Ian O’Donoghue from the Theatre Studies Department for allow­ing us to retro­fit our stage. And if you like what we do here, in terms of Virtual Futures, you can find out more about us at VirtualFutures on Twitter, Instagram, and Facebook. We’re look­ing for peo­ple to come to us with concepts.

But before you leave, I want to end with a warn­ing. Because a warn­ing is how we end every sin­gle Virtual Futures. And the warn­ing is this: the future is always vir­tu­al, and some things that may seem immi­nent or inevitable nev­er actu­al­ly hap­pen. Fortunately our abil­i­ty to sur­vive the future is not pred­i­cat­ed on our capac­i­ty for pre­dic­tion. Although, and on those much more rare occa­sions, some­thing remark­able does come of star­ing the future deep in the eyes and chal­leng­ing every­thing it seems to promise. I hope you feel we’ve done that this evening. Please join me in thank­ing the incred­i­ble Vinay Gupta. [applause]