BITCOIN LUNCH WITH ANDREAS ANTONOPOULOS

 

BITCOIN LUNCH WITH ANDREAS ANTONOPOULOS: Like most bitcoin experts and specialists, I have been specializing in this field for a very short period. However, I have been interested in computers and programming since I was 10 years old. I've been involved in cryptocurrencies and digital money from the late 1980s to the early 1990s, I participated in different conferences. In the early 1990s, when cryptocurrencies were still very new and many attempts had been made to publicize cryptocurrencies like Digicash and other very select ones.

So, I've been involved in cryptography and security for two decades, I specialize in computer security and cloud systems as part of my job as a consultant, and I worked in the area of security for many years. Around 2010, while working in a start-up, having recently survived the recession, I decided I was sick of making up useless things for banks and defense companies, and that I wanted to do something meaningful with my life. Fortunately, bitcoin appeared and I've dedicated my professional career to it since September last year when I gave up everything to do it full-time.

A couple of months ago, I signed agreements with O'Reilly Media, so I'm currently writing the definitive technical book on bitcoin for them. I hope you all buy it; I'm going to promote it whenever I get it. So, that's my experience, I'm a programmer, a poker, an entrepreneur. I started six companies that, like most start-ups, failed, almost all of them, but they were successful enough to move forward and finance subsequent projects. I'm not interested in bitcoin, because I'm libertarian, I'm not libertarian, at least not in every sense of the word, rather I consider myself a kind of Carl Menger anti-system and I'm more than sick of people using my money to get there they're stealing, looking for profitability and exploiting things to make more money, without generating real improvements in the world; for this reason, I'm interested in bitcoin.

My main motivation to get involved in bitcoin, which I turned into a slogan, is: "The other six thousand and five hundred million." The reason bitcoin is important to me is because of the 7.5 billion people that exist on this planet, only 1 billion people have access to banking services, credit, issuance of checks, and any possibility to send and receive money internationally. This is not the case by chance, nor because other individuals do not have money or productive capacity, but it's because of policies and infrastructure, and why I'm interested in bitcoin it's because I think bitcoin can change this simply by incorporating a smartphone, you don't even have to be that smart, it's possible to bring banking services to any part of the world and you don't even need to have connectivity or electricity 24 hours a day to achieve it.

For me, bitcoin is about taking money from government dominance, where it has existed only for the past hundred years or so, and free him from corrupt controls and influences to turn it into a mathematical, scientific, and technocratic system that exists independently of governments, corporations, of corrupting influences and acting simply as a means that we can trust and on which our daily interactions may depend on. I think bitcoin has some of these features and, although I'm not sure it's going to be the prevailing cryptocurrency, I'm sure the cryptocurrencies are here to stay.

Cryptocurrencies were invented and are not going to disappear because they are an important invention, I think they will over time be recognized as probably the most important invention in the fields of economy and technology, in the 21st century, since the introduction of the Internet. In general, I would call cryptocurrencies currencies that depend on their operational cryptographic primitives and a mutual understanding of how the software works. Bitcoin is a special type of cryptocurrency as it is the first to be based on a distributive proof-of-work principle that is saved in a distributed database, known as the blockchain. The concept of distributed proof of work is what makes bitcoin special.

Cryptocurrencies, as I mentioned before, have existed since the late The 1980s and they all suffered from the same problem, which eventually led to their disappearance and which is the main problem that solves bitcoin and is, therefore, the reason for its success and the problem was that while cryptography could be used to establish ownership of a digital asset, it could not be prevented from simply being copied and reused over and over again, you could not avoid double-spending. So all cryptographic money systems before bitcoin used a centralized third, to make reconciliation at the end of the day, at the end of a period, or at some point. A trusted third party was needed to issue and reconcile transactions to ensure that no one was making unfair treatment or double-spending within the cryptocurrency.

Therefore, the most important invention of bitcoin is the blockchain and what it did was allow a network of distributed nodes to reach a consensus, that is, agree on the common state of the network by demonstrating that each of these nodes has participated in that network through a system called proof of work. The proof-of-work system is simply as if you have to solve a very difficult problem and then prove you solved it.

Let's take sudoku as an example, everyone is familiar with sudoku, it's hard to figure out which numbers fit into the squares, right? But it's very easy to check if it was solved correctly, rows and columns can be added and if the result is correct, the solution is successful. Easy to verify, difficult to solve. It happens the same with the proof of work that is used in bitcoin, it's very easy to verify, but it's very difficult to solve; what's so special about it is that it takes 10 minutes to figure it out, that's its foundation,

So it's always going to take 10 minutes. If there is more computing power, it will be more difficult, but it will take 10 minutes to solve it anyway. If there is less computing power, it will be easier, but it will take 10 minutes to solve it anyway. The main problem of the bitcoin proof of work is solved once every 10 minutes. This is the heart rate of the bitcoin network and what does it allow? It allows the entire network to reach a consensus every 10 minutes on the latest network status and its transactions. Then, every 10 minutes, the entire network reaches a consensus on a block and says:

"Transactions up to this point have been verified and agreed upon by all."

And on that, another block of transactions is added, which depends on the previous one, and while reaching a consensus on the new block, it strengthens the security of the previous one, so network security is built on the fly. To understand how this works, you have to know that the amount of computing power that would be needed today to damage the bitcoin network, in terms of money,

exceeds $400 million. Nearly 500 million dollars just to damage the bitcoin network, that is, calculate the problem of the job test faster than the rest of the participants, so that they can fool the network for 10 minutes, and it would cost $400 million.

For the next 10 minutes, you would have to keep fooling the net and expect no one to notice, so, from that perspective, it's a very robust network. I think the feature that attracts libertarians the most, specifically, it's the fact that bitcoin is a fixed-issue currency because it has a predictable issuance rate that starts at 50 bitcoins per block every 10 minutes, and then it shrinks every 4 years. It was reduced in 2012 to 25 bitcoin, in 2016 it will be reduced to 12.5, by 2020 it will be reduced to the number it is and... I'm better at computer science than in math and doing calculations in my head.

HOST: It's 6.25.

ANDREAS ANTONOPOULOS: Thank you. If that pattern is followed, by 2140 all bitcoins will have been issued and the network will be continuously adjusted through that process so that it always takes 10 minutes to issue each block and each block always receives a diminishing reward, so by 2140 all coins will have been issued. If you understand your economy right now, the bitcoin network operates at an inflation rate of about 2%, which means it's created around 2% of new bitcoins each year, i.e., available bitcoin supply is increased by 2%.

However, demand for bitcoin is rising at a much faster rate and, as a result, this creates a persistent and deliberate deflationary effect on the currency. The deflationary characteristic of this coin refers to the idea that, whatever happens, only 21 million coins will be issued, currencies that will have to grow in value to cover the current value of the entire bitcoin economy, and this not only includes the M0, which refers to the amount of bitcoin in circulation; any other currency, it also includes the M1, the M2, the M3, and the M4, Transactions can be issued outside the chain, they can be issue bitcoin that is not reconciled with the 21 million, reserve models can be effectively made fractional, like those of banks, with bitcoin.

Now, the value of bitcoin is greater than the amount of bitcoin in circulation, which now is around 1.2 million, 1.3 million until this morning. Assuming bitcoin is going to continue to work well and in monetary terms, Bitcoin will work well as your technology doesn't get ponded if it continues to grow, it will have to encompass a larger economy and therefore deflate. That's the basic concept that makes bitcoin so attractive to people because they know it has a predictable broadcast, therefore, it has a predictable value curve, therefore, investments can be made based on this, knowing that no one can inflate the currency until it is destroyed, which is what seems to be happening with all the coins in the world, simultaneously, in a large experiment fully agreed.

This is why Bitcoin is attractive to libertarians, to anti-system like me and any individual, regardless of their political affiliation, because it's a technocratic, scientific, mathematical currency predictable that it doesn't depend on the whims of any government, nor does it depend on the control of any corporation, nor any individual, or any group of hippie programmers, or anyone else. Bitcoin always depends on and will depend on the overall consensus of all who participate in this great experiment and that's what makes it special, because if you can trust his code and read it, and understand how it works, then you can invest in the idea that bitcoin can survive manipulation.

Now, since the advent of bitcoin, more than a hundred alternative currencies have emerged, these so-called alternative currencies are extremely interesting because they represent the evolutionary environment surrounding bitcoin, are the other species, and within this monetary system, and within this monetary system, each currency is evaluated effectively through an aptitude function.

Is this a useful currency for daily transactions?

Does it work as a valuable reserve for long-term use?

Is it predictable in terms of volatility? so, it could be used in medium-term holdings based on capital investments?. It is backed by large economies that can guarantee?. That it will have a stable value? Is it backed by the gross domestic product of a large economy? All these characteristics exist in the ecosystem and every currency is indeed evaluated by this aptitude function. Traditional fiddria coins skip everything this process by establishing a buyer's market, since you have to pay your taxes in currency trust and the government buys in fiduciary currency, a legal domain and a fixed value are established.

each currency is effectively evaluated using an aptitude function. Cryptocurrencies, on the other hand, have to compete directly: if you don't like one, you choose a different one from the so many there are to choose from. The cost of changing a balance from one cryptocurrency to another equals the cost of turning that money into a new cryptocurrency and, because they are extremely fungible, that cost is very low. So exchanges between currencies have commissions less than half a percentage point or 50 basis points direct transactions between virtual currencies are extremely fungible, extremely easy to exchange.

At first, I said that I am very interested in bitcoin as a cryptocurrency, but not necessarily in bitcoin as such because if it disappears, it will be replaced very quickly. When I look at bitcoin, I see an evolution very similar to the one we have witnessed in the peer-to-peer network area, which is also largely used within bitcoin. The first generation of a peer-to-peer network, Napster, suffered from a very fatal failure: was a centralized network, controlled by a centralized organization that was also a registered corporation and received countless lawsuits.

The second generation, Kazaa, was a registered corporation with centralized software, but a decentralized network and received countless demands. The third was a decentralized network with centralized software and a decentralized organizational organization, making it more difficult to sue. With Gnutella there was a decentralized network with decentralized software and decentralized companies, now they had to chase individual users, and with BitTorrent that became even harder to do.

So, what took place was a process evolution that developed over 12 years with a fascinating result where government attacks on peer-to-peer systems helped them develop an adaptive function to assess their ability to survive government attacks.

The result was that the government pushed BitTorrent and turned it into an unstoppable network protocol. Later, with the help of governments that care about freedom of expression and other subtleties began to lash out at peer-to-peer networks with port filtering and attacks filtering protocols, and things like that, so BitTorrent was encrypted and started jumping between ports. I predict that something very similar will happen in the bitcoin space. It is extremely easy to set up an alternative currency that solves exactly the problems bitcoin fails to solve whatever they are at the time, and if they are big enough to overcome the effect of the bitcoin network everyone will go end masse to the new currency, as long as there is a system that makes it possible to convert bitcoin to this new currency in a fungible way.

So cryptocurrencies are here, they will be part of the financial future of this world, will be like tradable goods, even though they are a particular kind of assets because they are not commodities themselves, they are not strictly currencies, they are not shares, they form a particular class of assets. They are here to stay and... live on bitcoin. Now the questions.

GOVERNMENTS MIGHT BE INTERESTED IN INVESTIGATING BITCOIN, COULD THAT OVERSTEER ITS APPEARANCE

SAFE INVESTMENT? WHAT IF ANOTHER CRYPTOCURRENCY REPLACES BITCOIN?

WOULD YOU ADD RISK TO THE INVESTMENT?

ANDREAS ANTONOPOULOS: I'm not here to tell you that bitcoin is a secure investment, quite the opposite. Bitcoin is not a secure investment, it is the first experiment in implementing a globally distributed currency, this is something that's never happened before, we have no idea how it's going to turn out. So, if someone tells you that bitcoin is a safe bet, he's lying and he's blatantly lying. I think a lot of the people inside bitcoin have a very palpable feeling of being spoking in history because this had never happened before, we had never before had a currency that could allow a distributed consensus without a third.

We had never had a successful digital currency that did not have a ruler behind it, we had never had a currency that could be transferred instantly unrestricted across borders and we had never had a deflationary currency, which deflated not because of a total collapse in demand, but because of its restricted supply. So we have to rely on all the things we know or think we know about money, for example, a lot of people say: "Oh, bitcoin is deflationary, that's terrible for coins.

" Yes, it's terrible for coins fiddria, as the only reason we've seen deflationary fidaires or the only deflationary currencies we've seen are those where there's a complete collapse in demand because it's not possible to have a deflationary fiduciary currency. If you have unlimited printing capability, why would the currency be deflated? Unless there's a total collapse in your demand. So the only circumstance under which a fiduciary currency deflates is whether there is a catastrophic collapse in its demand. So is the catastrophic collapse of demand bad?

Well, yes! Of course, it is, but that doesn't mean deflation is a bad thing, it just means that collapse catastrophic demand is a bad thing and the only time we've seen deflation has been under that circumstance. Bitcoin is a very risky investment, I am reckless with my bitcoin investment, I've invested a lot more than I should. I invested in bitcoin professionally, I've invested all my savings and now I'm writing a book, and I have a second proposal for a book entitled: "Why bitcoin failed and how can we succeed next time," because if everything goes wrong, at least I have an editorial proposal.

ANDREAS ANTONOPOULOS: Honestly speaking, I've invested in three different cryptocurrencies, and, in any right now, I like to have investments in three cryptocurrencies. I've also invested in traditional investment vehicles, albeit to a lesser extent, and I can say that the value of bitcoin could well collapse. What can I guarantee you? No one can confiscate your bitcoins, no one can steal your bitcoins, no one can bail out your bitcoins, no one can seize, confiscate or inflate which paper currency your bitcoins.

HOST: But what happened to Mt. Gox customers when they closed it?

ANDREAS ANTONOPOULOS: They seize their dollars!

HOST: Okay.

ANDREAS ANTONOPOULOS: They didn't close it, it's still working, and in fact, it's still working pretty well.

HOST: But they went after certain customers, didn't they?

ANDREAS ANTONOPOULOS: No, they went after the fiduciary currency because when you're a currency regulatory body and the only tools you have are regulation tools for fiduciary currency, and you're trying to go after bitcoin, the Sunoco you can attack is their fiduciary money in and outs, and that's what they did. But this is fascinating because what happens is that you have an exchange...

HOST: Could you give a little more context to people who don't know about Mt. Gox and have never heard of it?

ANDREAS ANTONOPOULOS: Of course. Currently, Mt. Gox handles approximately 50% of the volume of bitcoin transactions, which is an exchange found in the Shibuya neighborhood of Tokyo, Japan. As I said, it handles more than 50% of the volume of transactions, the next big...

ANDREAS ANTONOPOULOS: Mmm?

HOST: Does that mean Mt. Gox owns a portion of the blockchain?

ANDREAS ANTONOPOULOS: No, actually, blockchain is where bitcoin inhabits and is shared by everyone. Surprising as it may seem, Mt. Gox performs almost all of its transactions outside the blockchain, which means that until you make an Mt. Gox withdrawal, your bitcoins don't exist, it's kind of like a fractional reserve or as a simulated order. It doesn't liquidate your bitcoins in the blockchain until you try to withdraw them, until then they're just a reservation in your name.

HOST: It's like having a liquid asset. ANDREAS ANTONOPOULOS: Yes, exactly.

ANDREAS ANTONOPOULOS: Mt. Gox is an exchange and, like any other foreign exchange, it allows us to exchange US dollars, euros, yen, and I think another six or seven currencies. The best option to buy bitcoin with U.S. dollars is probably Coinbase.com. Coinbase. com is a San Francisco-based U.S. provider that allows you to connect Automated Clearing House directly with a bank account, this allows you to withdraw money from a current account to buy bitcoin, it's that easy. One of the reasons why it's hard to buy bitcoins because it has a very interesting feature not seen in any currency: all digital bitcoin transactions are irreversible.

Bitcoin is digital gold or digital cash, in the sense that if you fall to the ground and someone picks it up, it belongs to that person. If a person loses a suitcase full of cash, you can't go to the police station and say: "Help me get my suitcase back full of cash, " isn't it, it's completely unrecoverable.

Bitcoin is very similar because transactions cannot be reversed, if I send bitcoin to a specific address it's like I'm taking a gold bar, putting it on a platform, press a button and teleport it. If the recipient wants to return it, they can do it, but there's nothing I can do to get her back.

HOST: No authority can be appealed to.

ANDREAS ANTONOPOULOS: Exactly. HOST: It's not like with credit cards.

ANDREAS ANTONOPOULOS: Of course, there's not a centralized third party because if it existed, that third party would assume the risk of the money recipient's counterpart and that's the fundamental problem. Now, just because of the problem of the reversibility of digital transactions, 40% of the cost of Visa, Mastercard, and American Express are intended for fraud prevention. That doesn't exist in bitcoin, the buyer takes the risk, if you gave someone your bitcoins, if you entrust them to someone else, it's your loss.

However, with bitcoin you can be your bank, so you don't need to trust any other counterparty. I keep 5% of my bitcoins online and the remaining 95% I encrypt with secret keys printed on paper, also called paper wallets, which I keep in a safe. These bitcoins do not exist online, they cannot be redeemed online, the keys have never been online, they cannot be confiscated, they can't be stolen, they can't be checked because they're on a piece of paper. So... yes?

HOST: I have a question about what you just said, that "they can't be checked,"

I know that recently there have been some problems with Trojans accessing CGminer and emptying people's wallets.

ANDREAS ANTONOPOULOS: Yes.

HOST: Nobody knows what you mean by what you said because you can technically be checked and emptied your wallet.

ANDREAS ANTONOPOULOS: Not if it's a paper wallet. because...

HOST: Not if it's a paper wallet.

ANDREAS ANTONOPOULOS: Right

HOST: But if you store your bitcoins conventionally in an online wallet, which is what a lot of people do, and you store it locally, someone can access it remotely through "a back door" without you detecting it.

ANDREAS ANTONOPOULOS: Yes, you can be checked, but the fundamental point is that bitcoin leads to a whole new world of computer attacks. To date, if you were poker and you compromised a network of machines using a botnet, you could monetize it by generating spam. Now you can monetize it by mining bitcoin, which is a much more direct and much more efficient way to monetize with botnets, and that changes the course of computer attacks forever. Besides, how many of you trust that your computer is secure enough to store your entire net financial equity in it?

I am an IT security expert with more than 20 years of experience in the field and I certainly wouldn't put all my net worth on my computer, even though I can secure it I don't trust it to be safe, I even plug my camera with a sticker, because I assume she's engaged and I assume that everything I do in her is monitored, including my passphrases, my keys, and everything else. So, when I use my bitcoins, I boot a whole new machine from a CD, I print the paper wallet using a USB-connected printer that completely disconnected the network, and then I transfer those bitcoins to that wallet whose keys have never been online.

That way I know that, whatever happens, if my computer is checked, if the website of the site I use is compromised, my money is safe, although this is just a method of many. However, bitcoin has some problems significant because it's still an experiment if you tried to present it to the general public, with computers unsafe we have today and with the lack of operational security and computational hygiene that there is, it would be chaos. You can't just take a general-purpose computer and turn it into a bitcoin wallet unless someone who knows what he's doing does it.

As a result of this, what we are seeing is the gradual emergence of an entire industry of hardware wallets for bitcoin that is unalterable and that give it a certain dimension physical to this digital system, because after all, it is much easier to protect physical systems than to protect digital systems. In short, if you could physically encrypt your bitcoin, you could physically secure them and the use of physical security is something that we have hundreds or thousands of years of experience in, while we have very little experience in the use of digital security.

People who think that bitcoin is just the internet money is missing out on overview because bitcoin is the Internet of money, it is a platform, a protocol, a transaction language, and a network that allows a whole series of overlapping protocols, application programming interfaces, applications, different types of transactions, and even novel financial instruments are built on it.

We could imagine a context in which bitcoin functions as a reserve currency in the proof of stake of a transactional currency that is more agile in real-time, for example. We could also imagine a context in which bitcoin is a language used to create escrow transactions or to create funds trustees; all of this can be accomplished programmatically, rather than through legal instruments such as fiat currencies. In the case of bitcoin financial instruments can be implemented programmatically and this allows all kinds of innovation, no need for prior authorization because no permission is needed to access the network, and unleashes the kind of improvements we witness with the advent of the Internet because it serves as an accessible money platform.  If you take that platform and hand it over to a world where 6.5 billion people have never had access to financial services, magical things happen.

WHAT IS A CHAIN ​​OF BLOCKS?

The concept of the blockchain allows verification that certain activities occurred during or after a certain date, through a process in which all participants in the network agree that these activities did occur.

The blockchain is a distributed, reliable, and time-stamped database, and such a database has never existed before. As an algorithmic structure of computing, it encompasses concepts such as the eventual consistency model, replicated databases, and distributed systems.

This database provides a fundamental computer structure that allows a distributed system, based on a period that in the case of bitcoin is 10 minutes, to achieve consensus on the shared state of the network without requiring third-party involvement. It is a revolutionary invention of computing and allows many modes of use in addition to monetary, so, for example, it can be used to digitally notarize assets.

One of the projects I've been working on is on paper wallets and when you build one, you are building an instrument in which people will encrypt their keys, to which they will then send money, which you will have to trust for the next five to ten years, and that it will be a kind of safe for cold storage. That is why it is very important that the code that generated those keys can be trusted. Very recently we had a significant security breach, but so far bitcoin has outlived them all and that is one of the reasons why it works so well ...

HOST: It was in May, right?

ANDREAS ANTONOPOULOS:  No, this happened about two weeks ago. Android has a bug in Java, in a specific module called safe random number generator. As you can imagine, this generator is part of a fairly large Java library and if there is a bug in it, it can cause some problems. If you are familiar with random number generation,

you will know that the biggest problem you have is that you never know if a random number is random. For example, if I was asked to generate five random numbers and I said, "6 6 6 6 6", that would be a perfectly random sequence.

Of the billion numbers it could have generated, it so happened that the first, the few five I mentioned were the same number and there is no way to prove otherwise truth? A random number generator will be good to the extent that it can be continually tested and evaluated. Anyway, Android had a terrible flaw whereby it generated the first random number with 256 bits of entropy and the second with only 8 bits

entropy, which means they were the same number, and because a transaction signature in bitcoin is a secret exponent multiplied by a random number If there are two signatures in sequence with the same random number, the secret exponent is easy to guess. That's bad.

IS IT POSSIBLE THAT THE BLOCKCHAIN ​​GROWS TOO LOT AND IS NO LONGER COMPATIBLE WITH USERS? HOW IS THIS RESOLVED?

ANDREAS ANTONOPOULOS: With a structure called the Merkle tree.

HOST: What is it called?

ANDREAS ANTONOPOULOS: Merkle tree, named after a man's surname was Merkle, M-E-R-K-L-E. He invented this data structure which is a binary tree where each root node has two children and the hashes or values ​​of those children are linked to getting a result that is printed on the parent node. Simply put, think of a tree whose branches can be summarized within the parent node, so it is possible to group your content.

Bitcoin works this way internally, so that, when you sign a block with your proof of work, you are not signing every single transaction, instead you are signing the root node of the tree that has two children, People depend on 1 in 100 or 500 merchants applying some detection mechanism counterfeiting and, through that, contribute to the gradual expulsion of counterfeit money from the economy, until you reach a level of general confidence in the currency enough to believe that someone else will accept it.

This is how coins work, they do not work based on perfect security, but good enough so that they can use it without major inconvenience. Simply put, as long as the currency reaches that level of security, it will be good enough to be used. With bitcoin, sometimes you enter into theoretical questions such as "What would happen if the National Security Agency invested 400 million dollars in technology to steal my coffee? " Well, they would steal your coffee But there are probably easier ways to do it, like with a fake $ 20 bill. This assuming that bitcoin is to be compared with what it is replacing if it is believed to be replacing fiat money.

IS BITCOIN ANONYMOUS?

ANDREAS ANTONOPOULOS: Bitcoin is not anonymous at all.

HOST: Okay, give us some of the premises, why is that the case?

ANDREAS ANTONOPOULOS: at least to some extent, it appears to be. The blockchain is a global ledger that stores each transaction that has been done in it, it begins in 2009 with a transaction-specific that the creator of bitcoin made, and all subsequent transactions are recorded in it, so if you have access to a copy of the blockchain, all the history of transactions that have been made in bitcoin will be available as of August 13, 2009. Each bitcoin that is created for the first time has its genesis within a new block when it is minted, essentially doesn't have a serial number, but that bitcoin it is sent from its block of origin to the miner who earned it, who then sells it or buys something with it and processes the transactions of others, and all those transactions are recorded on the blockchain.

Right now 6.8 million fractional bitcoin coins are belonging to 2.5 million addresses. It is not known who the owners of each of those addresses are, but it is possible to continue the trace of each of those bitcoins. So if someone finds out what my address is, I could track every bitcoin I've ever received and sent, and I could find out what transactions I have made. Today bitcoin is a privacy threat and this is an aspect that we must solve before it spreads throughout the world.

HOST:  I create a new address every time I withdraw bitcoin from Coinbase.

ANDREAS ANTONOPOULOS: You can create one address at a time… yes.

HOST: You can create as many addresses as you want, but ultimately, they are still linked to your bank account, a record of that data.

ANDREAS ANTONOPOULOS: Similarly, the new address is linked to the old address from which you sent the transaction since simply by association, it is possible to link two addresses to each other and trace them.

HOST:  Because of the metadata.

ANDREAS ANTONOPOULOS: It is a fully traceable system; it is all the metadata that you would love having someone who wants to completely violate anyone's rights.

HOST: Despite that, somehow the system depends on establishing your identity, so if you have a coin, does your name appear on the blockchain?

ANDREAS ANTONOPOULOS: No, just the addresses. But if an address is associated with an identity, then it is possible to associate all the transactions corresponding to that identity. Either way, there are two ways to prevent this from happening, the first is a system of services called mixers or mix masters and, like the mix masters on Freenet or the Cypherpunk mailing list, just like the mix masters on Freenet or the Cypherpunk mailing list, what they do is they take a bunch of bitcoin inputs, combine them, and then they redistribute the outputs.

This also ruins any type of brand, since in the mixer the bitcoins are mixed in such a way that when the brand is redistributed it is no longer useful. This is how it works, all the bitcoin is thrown into a big glass and combine with all the others.

HOST: Does this mess up the time stamp too?

ANDREAS ANTONOPOULOS: Yes, but it's still not good enough, not even close to being. Mixers that run cryptographically secure are required, by default and that they generate new addresses in each transaction. It is also worth mentioning that most communications underlying bitcoin are not encrypted.

WHAT IS PROOF OF WORK AND HOW IS IT RELATED TO BITCOIN MINING?

ANDREAS ANTONOPOULOS: Proof of work as a process does two things: First, it creates new bitcoins; second, it secures existing transactions.

HOST: So once all the bitcoin is issued, what is going to be the motivation to continue ...

ANDREAS ANTONOPOULOS: Ah yes, today each block comes with a reward of 25 bitcoins and all transactions that are included in a block have a small surplus, which is the transaction fee or the mining commission. When you make a 1 bitcoin transaction, you are deducted a 0.05 that goes to the miner, and by including that small surplus each time that you carry out a transaction ... if you look at a block right now you will see that a miner earns 25.125376 bitcoin, those .125376 are the sum of all commissions. Now if we imagine a deflationary environment, eventually these rates will be significant and if they do not reach be, fewer people will mine, but no problem, the difficulty will decrease, the network will be recalculated and the value of mining will increase.

One of the characteristics of Bitcoin is that these things are not final, but are based on a feedback loop rigorous, which creates efficient markets by assuming that feedback will exist and by having it quickly evaluated. So the hash power for mining will change and the network will dynamically adapt so that it always takes 10 minutes to resolve the proof-of-work problem. We have been seeing a surprising increase in hashing power today, it went from 300 terahashes per second in June to 400 terahashes per second in July and today it is 539 terahases. It doubled in 2 months, we're talking about bitcoin being the world's largest supercomputer right now undoubtedly.

HOST: Is this because people are buying all those dedicated processors to mine?

ANDREAS ANTONOPOULOS: Yes, they are useless for anything other than to execute the SHA-256 hashing algorithm faster than any other computer system in the world.

HOST: And that is why if you look at mining profitability calculators, you will see that bitcoin mining is not profitable.

ANDREAS ANTONOPOULOS: That's great because ...

HOST: It's great if you're not a miner.

ANDREAS ANTONOPOULOS: No financial system should be profitable if it works properly. The financial services industry that generates 8% of GDP is proof that it is a twisted and corrupt system because no financial services industry could extract 8% of GDP as marginal profit if it worked efficiently, that percentage should be much lower. Honestly, it is an industry that does not generate enough services, food generates services that have tangible value, but are not equivalent to 8% of the economy, which seems to be reserved for bankers.

WHAT IS THE CURRENT TYPICAL RATE TO BUY A GOOD WITH BITCOIN?

ANDREAS ANTONOPOULOS: Making a transaction in bitcoin implies an optional commission, In the sense that if you do not pay it, the miners will assign a low priority to the processing of your transaction. If you pay it, the minimum cost per transaction is half a cent. For that cost, you can transfer from a Satoshi to a billion dollars, that is, paying half a cent you can send from one Satoshi to a billion dollars anywhere in the world.

HOST: Half a penny equals 0.5% of a dollar.

ANDREAS ANTONOPOULOS: One dollar. Half a penny represents a percentage far less than a billion dollars, but best of all, it is a fixed fee that depends on the costs of the transaction. This is where it gets interesting since if you try to buy me a cup of coffee and I am a merchant, a business person, who understands that bitcoin is a deflationary currency, I will also understand that if you have bitcoin you are less likely to want to use them to buy a cup of coffee instead of keeping them for five years until its value equals a thousand cups of coffee.

This is how we get into a conflict because I want to own those bitcoins as much as you and keep them for 5 years until they are worth the same as a thousand cups of coffee, but I also want you to buy me a cup of coffee because I have a cafeteria. Therefore, I will start discounting the prices of my coffee until I reach the optimum point where my deflationary appetite is with your deflationary aversion and the discount is good enough to make me buy the damn cup of coffee.

HOST: But only with bitcoin, not with dollars.

ANDREAS ANTONOPOULOS: Yes, only with bitcoin. We have been watching this unfold over and over again, since that bitcoin deflation is not due to a collapse in supply, but rather a characteristic integrated into the currency, traders can trade with it, they can incorporate it into their prices by adding a discount. This is working with discounts of between 30 and 40%, merchants are making these discounts, shipping their products, and then they recover the difference with the bitcoin they received. For example, if I sell you something and instead of selling it to you for $ 20, I sell it to you for $ 12 or $ 14, I will receive the equivalent in bitcoin now and ...

HOST: Those bitcoins will go up in price.

ANDREAS ANTONOPOULOS: That is why I will keep them with confidence that their value will exceed $ 20 or even more, and since I'm giving you a really good discount, you're willing to exchange them for something with a current value of $ 12.

HOST: This is exactly how it worked with gold, silver, and deflated fiat currencies that were received for gold.

ANDREAS ANTONOPOULOS: There is a big difference, gold and fiat currencies cannot be infinitely subdivided, but Bitcoin can be subdivided almost infinitely, so the complexities and difficulties involved in making change disappear as the currency continues to deflate. That is why we are now in bitcoin.

 

HOST: But gold could be subdivided if we say that an ounce of gold is one unit and can be divided into one billion units.

ANDREAS ANTONOPOULOS: No, not really.

HOST: But it can be done in calculations.

ANDREAS ANTONOPOULOS: Well yes, but this is different. Bitcoin can be subdivided practically; I can give you a fraction of bitcoin.

HOST: Yes, that is correct.

ANDREAS ANTONOPOULOS: Right now and with my phone I have that ability, just like any Bitcoin user. Something else to keep in mind is that fiat currencies traditionally have completely separate networks for the transmission of micropayments, milipagos, mini-payments, payments, kilo-payments, giga-payments, mega-payments. All of these travel through different networks, the Swift network is used for Giga payments, the Visa network is used for payments, and yet another network for micropayments, this is just an example, but the point is that.

Traditional payment systems have distinctions for each specific case. Instead, bitcoin ranges from the smallest to the largest transaction, all on the same network Pay at the same flat rate and this is something that has never happened before. It is also worth mentioning that the current fee is half a cent, determined entirely by the market, so if the value of bitcoin increases, the fee will decrease accordingly. Now I want to talk briefly about what I think will be the fundamental applications of bitcoin because I have not mentioned them at all, the main one will be the transfer of international remittance funds, which means Western Union is following the same route as Columbia Records, plain and simple.

HOST:  Western Union?

ANDREAS ANTONOPOULOS: Adapt or die, advance or become extinct are the options. So, the main application of bitcoin will be the sending of remittances, then it can be applied in making international payments by subcontracting, in importing and export in foreign trade, and interbank transfers.

HOST: And the reason you're saying this is that...

ANDREAS ANTONOPOULOS: Higher cost and…

HOST: Lower efficiency, yes.

ANDREAS ANTONOPOULOS: Lower efficiency, higher transaction cost, higher cost, higher demand. If you look at it from that perspective, I think that remittances have priority because they already have a market of 115 billion dollars that, on average, has rates between 10 and 30% per transaction, and the poorer the country, the higher the commission; is the definition of a dysfunctional market, but luckily it can be fixed pretty quickly with bitcoin. Now, something that also seems very good to me is that there is an interesting balance, it is not possible to make the remittances consistent with the currency, since eventually a

flow imbalance problem if only sending Suppose you need to convert the US dollars to pesos to send money from the United States to Mexico through bitcoin, then you convert dollars to bitcoin and bitcoin to pesos and get pesos. You will eventually turn to the demand for bitcoin in Mexico, right? The problem is that remittances only flow in one direction, nobody sends money from Mexico, right? Except for the rich who are trying to escape from there. So what can be done is to balance remittances with capital flight and say: "Hey, we are the red cross of coins. Are you having a crisis? Here comes Bitcoin!

HOST: Don't you buy other things? Food and everything else?

ANDREAS ANTONOPOULOS: In pesos, yes, they do not have local markets to buy in bitcoin, if they did, then they could maintain a closed economy but since it is not yet possible to maintain it because they do not have the volume necessary when José sends María some pesos via bitcoin, she has You have to convert them to Mexican pesos to be able to use them in the local economy. It is not feasible to have income without its corresponding expenses and the way to solve this is to look for all wealthy people who have had currency controls, bailouts, and confiscatory taxes and allow them to escape using bitcoin. Now, this is already happening in Argentina.

HOST:  So rich people take their pile of pesos, convert it to bitcoin, and send it anywhere they want in the world.

HOST:  And then some receive remittances in the form of bitcoin and convert them to pesos, is that right?

ANDREAS ANTONOPOULOS: Yes, and in that way, there is a kind of balance. Now, if we look at Argentina, for example, we will see that it is at an inflection point because it has rigorous capital controls, incredible difficulties with their international affairs, an extremely monetary and fiscal situation corrupt, and massive hyperinflation. Also, currency controls have arrived at the point of closing some of the last available capital outflows. To understand the seriousness of the situation, it is worth mentioning that people buy shares in the Argentine securities that are also listed on the New York Stock Exchange as a way to convert pesos to dollars. That is, they buy shares in pesos and sell them in dollars on the Stock Market New York Stock Exchange as a way to get money out of the country. Very few people can do that.

HOST: People are even buying new dealership cars nowadays in Argentina.

ANDREAS ANTONOPOULOS: To store them as a store of value. Even though when they are removed from the dealership they lose 21% of their real value. one of the conference participants said, "Look, to understand why bitcoin is powerful, you have to witness a scene like the one I saw of two Argentine men over 60 years, who did not have any technical experience, exchanging QR codes with their lawyers at a table to make a real estate transaction ", since they both had their funds outside the United States and had no way of converting them to dollars they made the entire transaction through bitcoin, and you have to take into account that these were people who had no understanding of bitcoin, but the right incentive.

The reason I think Argentina is in the middle of a transition it's because you meet the criteria, you have all these controls, but you also have an educated population, widespread internet access, widespread access to electricity, and widespread access to smartphones; are the necessary conditions to arrive at a tipping point. Therefore, if what happened in Cyprus happens in Argentina. next year, they will close all the doors that can be closed and there will be only one door open, the one they cannot close: bitcoin.

HOST: Regarding what you said about remittances that serve to balance capital flight, Don't you think that people who receive money in bitcoin are just going to store it? If we live in a system that is breaking down so fast, why would anyone want to transfer their bitcoin to any fiat system?

ANDREAS ANTONOPOULOS: Because there are people who have no other disposable income who live precariously, and if they need to buy food for their children, that's what they are going to do.

HOST: I mean the people who are trying to get their money out of the country, I assume that most have a lot more money than they need.

ANDREAS ANTONOPOULOS: Ah, they do, I thought you were referring to the people who receive remittances ...

HOST: I understand that, but people who convert their money to bitcoin to send it abroad are going to want to keep it for the longest time

ANDREAS ANTONOPOULOS: And they will!

HOST: ... in your environment because the value of bitcoin continues to skyrocket as this entire currency crisis unfolds.

ANDREAS ANTONOPOULOS: One of the reasons bitcoin represents a relatively attractive store of value is because if you accept that other people will continue to find it useful and if it is accepted that other people who have invested in it will continue to defend the existence of its network and for these only two nodes are needed, it instantly becomes a much more attractive proposition than other currencies. The key here is to remember that there are 192 fiat currencies and the US dollar is the world's reserve currency, Therefore, if we ask an American,

"Is Bitcoin better than the US dollar?"

the answer will be "no" and will remain so until the last minute. The last currency to answer "yes" to this question will be the US dollar unless it starts to go bad. But the point is to remember that there are 192 other fiat currencies in the world, among which are the Zimbabwean dollar and the Argentine peso, which are coins whose intrinsic value is less than goat feces because goat feces burn slower than paper money. I remember that I heard this in an interview in which they asked a person, that he was in a cafe in Zimbabwe paying for a cup of coffee with a stack of bills why didn't burn the money if it was worth so little and this person replied: "For that, we burn goat feces that are consumed more slowly."

He summed up the country's monetary policy in a single expression, "Our money is worth less than goat feces." If we consider this, from this perspective, why is bitcoin not being adopted in Zimbabwe? Because they lack the requirements.

HOST: They don't have enough internet access or enough computing power. No access to electricity, No smartphones.

ANDREAS ANTONOPOULOS: Electricity, even more, essential than having smartphones or the internet, the most important thing is electricity. First electricity, then the internet, and then smartphones, but what happens is that as the world continues to move up the scale technological, bitcoin is descending to be more accessible, so now it is possible to use bitcoin without the need for a smartphone because it can be done via SMS. There is a company that developed a gateway that connects mobile money to the Kenyan currency, M-Pesa, to bitcoin, so that any M-Pesa user automatically has an equivalent account in bitcoin that they can use and that they can operate instantly without having to configure it. It is brilliant.

HOST: And for that, you don't need a smartphone, right?

ANDREAS ANTONOPOULOS: No, it is not necessary, it can be used via SMS

HOST: To use it, do I have to enter the complete password?

ANDREAS ANTONOPOULOS: No, a special PIN is used. The company manages the account.

HOST: Ah, it is centralized.

ANDREAS ANTONOPOULOS: As centralized as all mobile banking services.

HOST: But it's still part of the decentralized bitcoin system.

ANDREAS ANTONOPOULOS: M-weight is completely interchangeable and independent of any monetary control, therefore, you can convert Kenyan currency from M-Pesa to bitcoin and from bitcoin to any currency in the world instantly.

HOST: It seems to me that Bitcoin is gold or some kind of digital precious metal.

ANDREAS ANTONOPOULOS: Yes.

HOST: And today we have gold, which is a store of value and can be used as a medium of exchange, etc. but we also have silver, platinum, cars, real estate, artwork, and all kinds of assets, right?

ANDREAS ANTONOPOULOS: Yes.

HOST: You can even invest in wheat and other things. Gold is perhaps, leaving fiat currencies aside, the most accepted asset, but there are many alternatives

ANDREAS ANTONOPOULOS: Yes.

HOST: And there are exchange values ​​between them, right?

ANDREAS ANTONOPOULOS: Yes. P: And they fluctuate but ...The same thing happens with alternative currencies, there are exchange values ​​between them and, I think I've said it before, but I don't think we will face a world where there is only one cryptocurrency, it is highly unlikely. I think we can face a world where there are 0 cryptocurrencies, where bitcoin fails and nothing replaces it, and all kinds of prohibitions arise, but that would be a scenario extremely unlikely.

I think the most likely scenario we will face will be a world with more than 180 fiat currencies, with more than 5 or 6 strong global cryptocurrencies competing in a global financial system. That's why we have Bitcoin, we have Litecoin represents silver while Bitcoin represents gold, which curiously is a comparison made by its creator very similar to the one you did, but the transactions of Litecoin are lighter, in general. We also have some very cool coins like Primecoin which is a currency that instead of using a proof of work with prime functions, of hash, uses a proof of work that tries to discover specific types of prime numbers using a prime polynomial sieve or something like that.

Another interesting coin is Freicoin which is a demurrage coin, therefore, if you keep it, it loses value throughout the time, it has a negative interest rate. Devcoin and other charity coins exist in which a percentage of your transactions go to developers or charities or other designated organizations, so they essentially have a fee incorporated and a financing scheme. Bitcoin is a public offering initial for its founders, right? One of the predictions I made is that if bitcoin succeeds, Satoshi will be the world's first "trillionaire", by definition.

HOST: Nobody knows who he is, right?

ANDREAS ANTONOPOULOS: And not just Satoshi, but several other bitcoin participants will become the world's first "trillionaire" and that is very reasonable. So, we have all these altcoins and I imagine a world where ... In fact, bitcoin is not very efficient in transactional matters, it is probably better as a store of value because it has many advantages to be one, such as its deflationary quality and it has many disadvantages to be used in economic transactions.

I wouldn't be surprised at all at the emergence of a very light currency to use in daily transactions, whose proof of stake was backed by bitcoin. Therefore, if you had bitcoin, you could use anyone in the proof of the stake of this new currency and thus mine it, that is, anyone who owns the old coin can mint the new coin, or you can implement a one-to-one exchange or something like that.

HOST: I wanted to point out something, I like how you anticipate the creation of so many coins, but what I anticipate is a little different from that. I think a lot about the idea of ​​colored coins and envision a system, shortly, where we not only have x amount of pure cryptocurrencies that derive their value from the blockchain or other tasks that they carry out for the benefit of their owner but also witness a complete transition of all stocks and shares from all the companies in the stock market to the blockchain. We could get to a point where we can ask people to pay us in GM stock to preserve our money's value.

ANDREAS ANTONOPOULOS: But the stocks are based on fiat currency.

HOST: Correct. Well, I think this shows the superiority of cryptocurrencies and bitcoin in general. Shortly, we could trade a currency backed by gold and transmitted through the bitcoin blockchain using a colored coin.

ANDREAS ANTONOPOULOS: Yes, in fact, coins can be assigned to specific weights of verified property gold. You could also recreate a currency backed by some store of value.

HOST: And still allow the blockchain to be the accounting record where everything is valued.

ANDREAS ANTONOPOULOS: I would say that bitcoin today is backed by silicon, in a very basic level, because the fundamental way in which bitcoin is created is through the computing requiring general-purpose computers or special-purpose silicon, so if you have silicon, you have bitcoin, that is the process, it is also scarce, it has a rate of development predictable according to Moore's Law, and it is universal, so it is a good way to back a currency, and at an essential level bitcoin is backed by the internet.

HOST: You mentioned that bitcoin is not a safe investment.

ANDREAS ANTONOPOULOS: Yes.

HOST: And you were very emphatic about that. I mentioned some things that worried me and you said

that those weren't problems. So what are bitcoin's problems?

ANDREAS ANTONOPOULOS: Oh, there are a couple of problems. The first is that I expect the regulatory environment to get complicated, either short-term, medium-term, or both. This is because we currently have a currency that can be manipulated, with which certain people have made a lot of money and Those people are not willing to let us play with our cryptocurrency that cannot be manipulated, that for one thing. Then there is the automatic reaction type that most legislators have, who says: "With bitcoin, you can buy drugs." Well yes, of course, you can buy drugs with bitcoin, otherwise, it wouldn't be very good money, would it? It wouldn't have much transactional utility if it didn't use to buy drugs, which are one of the main commodities in the world.

So with bitcoin, you can buy drugs, much less efficiently than can be bought with dollars, but if drugs are bought using bitcoin, only I would be adding a small coin to the mountain of dollars that were used to plant, harvest, collect, process, distribute, deliver and possibly sniff those drugs. The problem is that many of the regulators are reacting to bitcoin in the same way they reacted to the Internet, which goes something like this: "This is new, these are strange, this is not under our control, therefore, it must be bad".

They should classify us as terrorists, pedophiles, and whatever comes on the list. There is a beautiful bitcoin cartoon where there is a guy in a store with a box that says "bitcoin" in the front and there's a guy dressed like Uncle Sam, whose shirt says "sliders" on the front, he asks her, "How would you like me to wrap this up?" and behind it is rolls of wrapping paper that say "terrorism" and "child pornography."

So there is a very great risk that the United States government or anyone else another government begins to intervene, although this is probably a lesser risk. There is a risk that we have some serious flaws that have not yet been discovered and that completely ruin the network. Some risks combined with other unexpected events could cause a total mistrust in the network and cause everything to be destroyed.

Honestly if tomorrow morning someone blows up a public building and to get there, pay the taxi with Bitcoin place pays the taxi with bitcoin, the next morning the headline "Bitcoin finances terrorism" in USA Today. Those are the kinds of risks that concern me, they are not problems real, practical, and fundamental that have to do with the value of bitcoin, but rather they are external political influences. If any of this happens to bitcoin, it will slow down in the United States and only in the United States but will continue to advance in the rest of the world, there is no way to stop bitcoin altogether.

HOST: I would rather say that it will accelerate it in the rest of the world.

ANDREAS ANTONOPOULOS: Probably.

HOST: Because the more the United States abuses the world's reserve currency. The more attractive bitcoin becomes in the rest of the countries.

ANDREAS ANTONOPOULOS: Yes, earlier I was talking about the week before doing this presentation in "Surviving and triumphing over the crisis of socialism", I was doing a series of seminars for Russia Today, the television station, who are very excited about bitcoin and the Chinese media, who are also very excited about bitcoin, invited me to do presentations for them.

HOST: why?

ANDREAS ANTONOPOULOS: Why? For bothering the United States. Because if you are China you say: "Well, Bitcoin may be a reserve currency that nobody controls, but the one we have now is controlled by our enemy, I prefer to have one that is not controlled by anyone. "

HOST: Even if they don't control it themselves.

ANDREAS ANTONOPOULOS: Even if they don't control it, yes, because it is a great advantage to control the world reserve currency.

HOST: Could anyone find out who is making the price go up? Who were the big buyers after the Cyprus thing?

ANDREAS ANTONOPOULOS: This is a market that is too complex. completely global, which works 24 hours, and is highly liquid, making it extremely difficult to monitor. There aren't even the analytical tools to do it right now. So, I would say if they listen to predictions or even analyses of the markets of bitcoin. Take them with a grain of salt. First of all, because they come from the same people that they did not see what was coming. Secondly, because they are doing a market analysis of a coin without having the necessary tools or historical experience to do it. So, they have no idea.

HOST: There were a lot of articles that said: "It was the Russians who had money in Cyprus ..."

ANDREAS ANTONOPOULOS: Maybe, yes.

HOST: But how did they know? Or they didn't know.

ANDREAS ANTONOPOULOS: No, they didn't know.

HOST: There is a way of knowing where certain app downloads are occurring on a phone.

ANDREAS ANTONOPOULOS: Source Forge maintains download charts by country, and we saw big spikes in downloads in Cyprus. We recently saw big spikes in downloads from China. China made a documentary of an hour and a half on bitcoin. That was broadcast on official television stations for 2 weeks. And an hour and a half documentary cannot be shown unless has been approved by the higher echelons. So it is clear that both Russia and China now backs bitcoin from a national interest perspective or at least from the perspective of "Let's find something to upset America," either works for me.

HOST: So if we get very involved in bitcoin, we could be helping the enemy.

ANDREAS ANTONOPOULOS: Well, if the enemy is the American people, yes. They will be helping the enemy. I hope to help the American people as much as possible. They have my contact cards. Thanks for feeding me. I appreciate it.

HOST: I hope you enjoyed it.

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