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 20th century and begin work on the 21st. 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 21st 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…™. 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 20th 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]

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