Bitcoin in 2015 and beyond

Transcript

welcome everybody to this special episode of our weekly interactive Bitcoin show we're very honored to have Mr Andreas andonis as our guest today he's the author of the book monstering Bitcoin and is one of the best spokespersons that the community has my co-hosts are Economist tud eer and of course also blockchain expert yob harto and aneta Bo who's responsible for the most Bitcoin friendly city in the world r&m in Holland I know we have a lot of people watching the show live today and I urge them to use the Q&A tool to ask Andreas questions and the best and or most popular questions will be addressed later in the show we have like half an hour maybe slightly more yesterday I watched Andreas for three hours in the

Joe Rogen show and I can tell you that almost made my wife divorce me so's try to keep it within the 45 minutes or so Andreas first of all thank you so much for all the education you've been providing to all of us when it comes to bitcoin and making the world understand how important blockchain technology is so thank you very much for that to start with oh thank you so much for having me on the show I'm really excited as I mentioned to you uh previously I'm uh huge fan of the Netherlands I've been to Holland uh more than a dozen times and visited uh most of the biggest cities in Holland and I certainly hope to come and visit again soon yeah you even went to a famous chees toown do you remember the

name of the Zone because oh I I've been to I've been to a number of them I was touring a by motorcycle around Holland and every time I'd find a a city or town like guda or Adam or emal or whatever I would stop take a photo I'm pretty sure all those are Dutch cities but anyway any cheeselike City I would stop and take a photo under the sign which is obviously something very silly that only tourists do but it was it seemed like the right thing to do right I was born in hen I live most of my life there so I'm very honored you should send me the picture I so first of all um you're a half Greek so I was wondering what is your opinion on the whole situation in Greece right now and do you think grexit so Greece leaving the euro is likely or

even desirably and is is it a chance for Bitcoin possibly yeah what's happening in uh Greece is that uh for a while now the main political parties that existed uh before the crisis have supported uh extreme austerity measures that have got to the economy in order to pay off the Greek bonds and now Greece uh because it's in the Euro has lost one of the most important monetary levers which is the ability to uh reduce interest rates in order to uh Shore up the economy at in a time of Crisis and um without that control uh the austerity has has literally gotted the economy so um in

the recent uh weeks uh there was an election for the president the Constitutional president of the Republic uh which is uh almost an an honorary role kind of like the Queen of England uh doesn't have much power but if that election fails to reach a super majority they have to call National parliamentary elections and that's exactly what happened they failed to reach a super majority and in the next election at the moment uh the the seira party is pulling ahead and the cira party has said that they will end austerity and uh come back to the table with the Europeans to negotiate uh settlement uh which will involve some form of uh debt forgiveness

uh so basically Greece is now um putting on the table and saying look if you don't if you don't write off uh some of this uh debt we're going to exit the Euro and quite honestly I don't think that's going to happen I think merely the threat of exiting the Euro um will be enough uh and already we're seeing from the German bundes bank and others uh whispers about managing the situation by accepting a partial write off now about 83% of uh Greek's public debt is held uh by other National governments in Europe and National Banks and central banks in Europe not individuals and so yeah this is

basically going to force a a renegotiation of the debt we'll see what happens it's going to be a very interesting period because essentially the idea that the Euro crisis is over is is a joke um it's it's far from over in fact uh it's only grown since 2008 yeah what about your friends and family in uh in Greece do they support the Euro or do they want to leave the Euro I I don't think anybody in Greece is really uh it's not a matter of supporting the Euro or leaving the Euro it's a matter of uh the the austerity measures that have been imposed on Greece have destroyed the entire middle class and um unemployment is at ridiculous levels and so the current path that was

negotiated with the European Union is not sustainable um you know as with many other countries what's happened is the the bankers got to bail out the national government got a bail out and the people got shafted so yeah I don't think most people support the current situation now whether renegotiating the debt will require an exit from the Euro or not really that's a tactical question question yeah but like in your ideal world do we still have National currencies or we just stop with central banks and only use voluntary currencies like Bitcoin well that remains to be seen I I don't think we're going to see a big impact for Bitcoin or transition to bitcoin it's um relatively unknown in

Greece uh it's not really the kind of place where there'll be uh a massive Exodus to a cryptocurrency at this point how come people in GRE not using cryptocurrency so far um compared to for example a country like Holland well there are small Pockets um but generally Greece tends to lag behind on issues of Technology by about five years so it hasn't yet reached a level of adoption that's going to be meaningful in these discussions all right I live in in Ecuador and they're going to launch their own payment system which is not yet a currency it's basically the dollar but then they made they make digital and they allow people with feature phones

and smartphones to to um transfer dollars from phone to phone and everyone has a phone here so basically it lives a lot of unbanked people then out of the their situation that they can't pay electronically so in that sense I guess it's good but what do you think of those um of those developments and is that a threat to bitcoin or do you see a certain um Synergy between those new government schemes and cryptocurrencies I don't think it's a threat at all I think in fact what it is is a training opport Unity it teaches people how to use mobile wallets they're going to use um the Ecuadorian payment system on their mobile phones and uh at some point uh they're going to be exposed to the possibility of using

Bitcoin as well as their Ecuadorian payment system and then they'll be able to compare the two and they'll notice for example that um one can be used for completely International Commerce without any barriers uh without any fees without any currency controls and the other one will be severely restricted and only be used internally within Ecuador so I I don't think Wald Gardens um threaten Bitcoin Open Standards uh when when competing directly with closed systems uh tend to win because they provide more value for each node in the system so just like uh Compu serve introducing email uh and AOL introducing

email without being connected to the internet millions of people here in the US in the early internet age that was great for the internet because once they got a taste of email then they wanted it and eventually they figured out that the internet email was the one they wanted uh and uh very quickly both AOL and comp serve were forced to convert um to full internet email so I I don't think this is a threat I think it's an opportunity just like Apple pay and other competing systems all of these systems what they do is they familiarize consumers with the idea of mobile wallets and then uh given the choice between a mobile wallet that is closed and a mobile wallet that is truly Global not controlled by governments with no currency controls and International in scope people will

choose the latter um T you were wondering about um some of the what what Andreas or what you also experience at conferences nowadays with with the price going down in the general sentiment is that something you want to elaborate on you're still uh mute sorry unmute right I was curious yeah it's been uh it's been a couple months that I've been to the last Bitcoin conference I'm getting back up to speed but uh Andreas doesn't uh doesn't take a lot of breaks so I'm curious yeah what what do he what do you experienced on the ground uh how are people talking about what's happening uh with the price and like with um the kind

of activity like are the companies still um uh survive are they profitable are they growing which companies do we see um are maybe uh in a little bit of trouble we heard recently there was a an exchange that closed down so uh yeah I'm curious what are your thoughts what are you hear on the ground oh this is uh rather interesting to me is this essentially two perspectives on bitcoin especially if you look at how the uh media is covering Bitcoin uh 2014 is described as a bad year for Bitcoin purely based on the price decline um you know there's like oh well Bitcoin is down uh to 25% of

what it was at the beginning of the year which is true except for it was up uh 56 fold on the previous year and they forget to mention that so um you know the price to me is is is volatile will continue to be volatile um it's finding a new equilibrium point um and I I don't think there's any major threat that the price will go to a point where Bitcoin becomes unusable because Bitcoin continues to be useful even if a Bitcoin is worth only a dollar um the main thing that's happened though in the Bitcoin space over the last year is um consumer adoption on a fairly

large scale broad uh brand awareness uh and awareness of the name Bitcoin which has reached more and more people over time I massive deployment of multi- signature technology a massive deployment of hierarch cold deterministic wallet technology a blossoming in the area of mobile wallets we started out the year with maybe one or two broadly deployed mobile wallets now we have more than a dozen very very good wallets um we started the year with maybe two exchanges that were viable uh now we have two dozen exchanges with quite a bit of liquidity you know so in and and we started the year with a handful of startups and now we have hundreds of startups that have hired

thousands of people developing on bitcoin using it as a platform and building upon it we've seen the launch of Bitcoin 2.0 companies as a technology Bitcoin has absolutely thrived in 2014 um it's stronger than ever uh the amount of hashing power dedicated to securing the network uh has grown immensely all of the important metrics except for the price have been being trending upwards and at a very rapid pace so I think it's important to look at that you know if um if in the early days of the internet we had uh a price against that to measure adoption uh it would have probably been disappointing and people would have been

writing obituaries in fact they did write obituaries about the internet there's a beautiful site called Bitcoin obituaries.com where you can see all of the obituaries written over the last four years uh for Bitcoin um the only problem with this with this attitude is that Bitcoin refuses to die it is a Relentless anomaly in the system it refuses to uh conform it refuses to be regulated it refuses to just go away and you turn around after reading the 100th obituary and guess what bitcoin's still there all it has to do is continue to survive and continue to grow adoption because everything that's added to the Bitcoin ecosystem increases the value of the entire ecosystem if one company

creates Innovation every company in the system gains from that Innovation and that's the advantage of an open system and the reason why an open system and an open network like Bitcoin will innovate faster uh will deliver more value to each of the stakeholders the users than a closed system and as far as I'm concerned things are going absolutely great um you know the price is has been disappointing certainly if you joined Bitcoin uh in the beginning of 2014 or towards the end of of 2013 for those of us who have been in Bitcoin for three or four years now the the you know we've seen this before we've seen it go up we've seen it go down we've seen it go up again um I bought my first Bitcoin at $7 I can tell you I it looks pretty good

from my perspective so I think it's important to a longterm you have to take a long-term Vision with Bitcoin this is still a 5-year-old technology uh it's barely outside its infancy and um from a technology perspective Bitcoin is stronger than ever how do you counter people that um for example that bought earlier this year when they listen to you or any of the other um presentations or they went to a conference and they bought it for a few hundred bucks orbe like $600 and out they could I me because sometimes I listen to these people they say well I bought Bitcoin was $6 700 I shouldn't have listened to you and I it's it's a it's worth half how do you account to those arguments typically well if they did listen to me

uh what I have been saying quite consistently is to not uh buy Bitcoin as an investment the best investment you can make in Bitcoin is to develop your skills to learn how to program in Bitcoin how to use it as a platform to learn the technology to use it in real life and if you want to invest invest only a small amount um and invest for the long term if you're disappointed after one year uh because of your investment in Bitcoin uh and if you put too much money in Bitcoin then you weren't listening to what I was saying so I I think it's important to look at the long term this is still a technology that it's in infancy um the the banking system that it's competing with has existed for hundreds of years and

developed for hundreds of years and certainly has had its own share of problems and bankruptcies and fraud and things like that and so you know I I don't think um it's unexpected to see a new technology like Bitcoin go through uh some volatility and some ups and downs if you did buy Bitcoin at the beginning of the year for at 600 then um you you should have bought only a small amount uh as part of a diversified portfolio and you should probably hold on to that and see how things play out on a three to fiveyear period not on a 12 month period right ear you said it's important to develop your program skills um we have an interesting question from

one of our listeners Mike bter he has a few blockchain Bitcoin IDs with uh with proof of concept as showcase I have no idea how to commercialize on it or to find funding for further development any advice um I I think uh build a prototype Bitcoin is is a kind of space where if you build a prototype application you have an instant Global audience that can use it in any country and if you build a prototype and it works and it adds value you'll have an option and the funding will come uh I I think funding a Bitcoin company is not very difficult um what you need to do is first build a product that works and get

it out to people so they can try it and use it and if it solves a real problem then the funding will come there's plenty of people in Bitcoin who have Bitcoins that they want to invest uh who can invest in companies like that uh as well as uh an enormous amount of venture capital funding Angel investment funding and all kinds of other Investments have poured into Bitcoin where already seeing investment in 2014 in Bitcoin uh exceeded uh the total annual investment in 1994 in the internet so in terms of an asent technology funding is the least of the problems you have in Bitcoin most of the problems have to do with finding the technical skills uh hiring the developers finding people who understand

Bitcoin to implement your vision uh and then bringing a market to product to bring bringing a product to Market and executing with focus on your vision I I find that a lot of the startups I talk to have a very big difficulty achieving focus and keeping their focus on their core product because they're they're pulled in a thousand directions um every person who tries out their product says oh that's nice but what if it did this and what if it also did that and before you know it you've tried to Ram 56 features into the product and you've completely lost Focus um so if if you have a good idea if you can build a prototype and if you can execute with absolute focus on one idea and do it

well I think the funding will come right well talking a bit more about adoption Anette is also here Anette um you're party responsible for the the great success of RM which is um the most Bitcoin friendly city in the world um so we're all very proud of your results there um you have some questions to Andreas with regards to adoption right and how to basically um uh stimulate real life Bitcoin use can you elaborate on that um yeah well for instance I was curious Andreas um do you also think that Bitcoin is uh um uh tend to be used in real life situations as a point of

sale uh payment solution or more as an internet uh coin yeah I I'm I'm not so sure that uh Bitcoin is very easy to use at point of sale my personal experience has been that it is much more useful for online e-commerce uh websites and for buying things online um buying things in person it tends to be a bit clumsy uh I think we're going to see a massive improvement with the implementation of the payment protocol which is uh Bitcoin Improvement proposal 7071 and 72 those allow for much more seamless interaction between a

merchants and a c customer and you can Implement that over NFC or uh low energy Bluetooth Wi-Fi or a number of other protocols um I I'm not quite sure that the whole scan my QR code and send the payment is convenient enough for the uh typical retail small value transaction like buying a cup of coffee or you know buying uh a small piece of crafts or arts or uh something from a bakery that kind of uh retail however I think there's always room for people who are fascinated by the technology to use it in real life uh as an experiment so um most of what I've seen is really experimental at this

point of time I use Bitcoin almost on a daily basis I earn most of my income in Bitcoin so I try to use it as much as possible and not convert it back to dollars because that saves me money um but that makes me an exception I would say the the majority of bit coin users are probably not using Bitcoin on a daily basis um it's it's just a matter of time you know I I remember again if you do the comparison to the early internet when I had an email address nobody even knew what email was and um at first it was very difficult to find anybody else who had email to communicate with and uh it took quite a while until it became a mainstream

technology I think uh bitcoin's adoption is progressing very well well but I I'm not sure retail is the killer application that's going to launch Bitcoin I'm much more interested in areas where uh the friction of transaction is much higher quite honestly visa and MasterCard do a pretty good job of helping you buy a cup of coffee it's not difficult to buy a cup of coffee in the western worlds where people are banked and they have a Visa card buying a a cup of coffee is a lot easier using a credit card um try sending money to losos Nigeria from London and then you find some real friction and some really high costs and

I think those are the areas where Bitcoin can shine so but that's only uh if you look at how to use it in that real life situation but uh not in the subject of the needing a confirmation or not well you know I I don't think uh for most small value retail transactions I don't think you need a confirmation you don't need to wait 10 minutes in order to get a Bitcoin transaction to work there are different technologies that can be used uh if you have a properly signed transaction and you can check that the inputs haven't been spent already and it's propagated uh across the network well enough the chances of

that being double spent are pretty low and the risk of a double spend is pretty low most retailers if they're selling a small value item like a cup of coffee will be willing to take that risk in the same way that they're willing to take the risk of a charge back on a credit card by not obtaining a signature for small amounts and so um I think uh we're also going to see Bitcoin payment processors offer some basic insurance services whereby they will cover the risk of a zero confirmation transaction and once the merchant processor sees that the transaction is propagated even with zero confirmations it will guarantee that amount um and then just handle it as an

insurance risk and do you think side chains can play a role there to possibly we have a separate side chain for micr payments where confirmations are faster and and things of that nature possibly um I think side chains is still an academic topic and um until we see implementations of side Chains It's hard to say exactly what you can do it seems to me that nowadays people are um using side chains as uh Panacea like any problem you think you have in Bitcoin uh let's let's introduce side chains to the conversation and see if that solves it and uh you know I think side chains is a great technology if it if it's

implemented correctly and it works we haven't seen that yet so for the time being um I would I would like to see what can we do today with Bitcoin that makes um people's life easier that has an impact on the life of people today and I think for that we really need to look at the unbanked the underbanked uh crossb transactions uh foreign remittances International Trade import export uh paying contractors um or paying subcontractor companies um in other countries I think those are the killer applications where Bitcoin can solve some major problems today where there's a lot of friction and cost and you side chains for that

because we have a question from Rico Brower and he asks so why isn't Bitcoin shining just yet in international money transfer market and are people sending money home already are big companies sending money internationally what needs to happen to make it to make it more mainstream adopted in that in that area um Western Union has been doing International money transfer since 1896 let me repeat that 1896 now I think uh to put in perspective Bitcoin is 5 years old so the argument of come on hurry up solve the problems six six years right quick quick six years do what others have done in 114 years now I

mean it doesn't work like that it's even though it is possible to do it takes time to deploy the infrastructure to develop the applications um you know multii technology is one year old we've got great adoption of that but still you know we're looking at very early days it's going to take uh several years before we see Bitcoin having um a significant impact in the remittances space because there's two aspects it's not just a technology problem the networks of of remittances and the channels of remittances um are established with uh specific communities and specific cultures specific ethnic

groups and and have established for centuries and so you know it takes time to disrupt a market that is that well established I think Bitcoin has tremendous potential in those areas but let's not assume that Bitcoin Will Shine from year five uh most people hadn't heard of it last year so we need to give it some time and be patient with the technology the potential is there we just need to keep working on improving the user experience making the security easier for people uh helping people understand the technology and developing new applications and it will happen so um like Le um asks to a certain extent one can compare the

evolution of Bitcoin to the spread of TCP IP and the internet as a whole and think you also andreos and T and others make this comparison but to what extent does bit Bitcoin actually compare to the internet Revolution or does it develop quicker maybe even well I I I've said before before that I think uh Bitcoin will develop a lot faster than the internet it it took about 20 years from the day I got an email address until the day my mother got an email address um and I think in Bitcoin years we're probably going to do it in eight uh years or so uh rather than 20 years and the reason for that is because we don't need to deploy infrastructure we don't need to create a

mobile Revolution all of those things have already happened because of the internet so adoption of Bitcoin is lot easier at simply downloading an application uh what we need to do is work on better user interfaces and user experience but uh I think we're going to see uh bitcoin's adoption progress and and become mainstream and massively disrupted for a lot of Industries much much sooner than the 20 years it took for the internet to do that yeah I think the the evidence is already there yeah absolutely and and not just that we also have to think about what Bitcoin is going to do to the internet because keep in mind the internet disruptive wave hasn't ended it's still going and it's still peing um and the

first 20 years of deployment and mainstream adoption of the internet and we've still only reached about uh one quarter of humanity uh with the internet and now we have the internet with a payment system and a currency that is just as open with open protocols and apis and Bitcoin will actually accelerate both the adoption and make more useful internet infrastructure itself um so the two play into each other the internet makes it easier for Bitcoin to be adopted and Bitcoin fuels internet adoption even more so because now an internet connection is not just a communication exchange it is also a banking system and so there's so much more reason to have an internet

connection if you don't have uh banking facilities where you live um I think those two are going to work together in Synergy and we're going to see an acceleration of Internet adoption just as we see an acceleration of Bitcoin adoption at the same time one of the main um developments you expect for Bitcoin on the protocol level 2015 I think Tor had something to say about internet and Bitcoin but he was am I sorry yeah um I was just gonna say that people don't realize like the Three core Protocols of of the internet FTP and tcpip were developed in 71 and 1974 that's like 40 years ago and then only

in 1995 was like the the year when it became mainstream and that's I mean Bitcoin is only five years old the Bitcoin protocol and we're already seeing uh mainstream players uh really being very open about it supportive about it uh so yeah that that's what I wanted to say with that the evidence is already there that the growth rate is is much higher yeah okay good so what do I expect to see in the protocol development well there's a lot of exciting things happening I think we're going to see more and more development of multi-c technology I think it's now fairly well established uh that it can work and is working uh we're seeing

about 5% of uh funds in Bitcoin now held in multi signature addresses that's a major milone and only just about a year year and a half since multisig technology was introduced that's working very well we're also seeing the hierarchal deterministic wallets which allow you to have um near infinite addresses in a structured fashion in the form of a tree and and yet be able to backup import export or restore your entire wallet with just 12 or 24 English words and that's an enormously powerful technology we're also beginning to see the combination of the two technologies

with hierarchical deterministic multi which is using HD wallets uh with multisig addresses together uh and again that's an enormously powerful technology whether it's for personal use um for multiactor authentication and secure use of HD wallets or whether it's for corporate use and you're looking at using multi- signature for corporate governance so you can distribute the responsibilities and create uh Audits and controls checks and balances to protect against theft all of those things are developing you know this is programmable money and we're beginning to see see some of the features that can be added to programmable money and keep in mind neither of these two features were part of the original Bitcoin these are all things that were developed just in the last two years and they show the

flexibility of Bitcoin as an underlying protocol and its ability to support uh really interesting applications um I'm expecting in 2015 uh one of the things we're going to see is a lot more heavy use of the um end loock time facility or feature which is the ability to delay the uh execution of transactions and essentially post data transaction to a specific block or specific time and together with multi signature you can do some very interesting uh programmable escrow with automated execution using the combination of multisig and nlock time those uh you know Peter Todd has

been working on an extended feature there called uh check clock time verify for enhancing the capability of nlock um at the same time we're going to see some optimizations beginning to happen in the protocol I think we've seen standardization efforts uh have succeeded quite well Gavin Andre's main focus in according to what he's talking about lately has been um sorry let me just prefix Gavin andreon is probably the most prolific developer he's also the chief scientist of the Bitcoin foundation and uh one of the Lead Core developers he's been focusing primarily on optimization techniques uh most

recently he published uh um he published a write up on using invertible Bloom filters in order to cut down on the propagation time of blocks across the network to solve uh some some problems of uh concentration and block size now he's uh written another article where he's talking about his own experiments in building 20 megabyte and 200 megabyte blocks in order to see how well the software scales uh so we're together with as of the latest version 010 that was released a few weeks ago um you can now prune the blockchain and only keep a subset of the blockchain which allows

nodes to carry a much lighter load on the dis space so we're beginning to see these optimization efforts come to fruition uh which are going to allow the Bitcoin Network to scale up in terms of number of transactions per second people have been worried for a long time because there is an implied upper limit to the number of transactions that can occur now um the reason that limit exists is because the block size is limited to one megabyte and that limits how many transactions per second you can put through the network an absolute maximum of about seven transactions per second in the smallest size of transaction um but that limit is entirely artificial so we're already seeing efforts to to raise that and see

what impact it will have on the network and to make it possible to scale that up which is just in time because we don't need seven transactions per second yet but if we start seeing exponential adoption of Bitcoin and growth uh then we will very quickly have a need for much bigger scale of transaction volume so it's good that that work is happening now I I think 2015 is going to be uh a year of significant optimization within the core protocol while at the same time most of the startups are going to be working on platform plays which is developing new applications on top of the Bitcoin platform applications that take advantage of multi- and HD wallets and lock time and other features uh to

offer novel applications things that don't exist today and what about um the whole the bits spend Scandal we saw earlier where around $5 million in Bitcoins or stolen um do you think like if exchanges would massively start using multii and more of those features then we can progress towards more healthier exchange system well so so I think the the fundamental problem there was not one of Technology because at the same time if you look specifically at uh bitstamp you have a hot wallet that held somewhere between 9 and 10% of the deposits but at the same time if you look at the sum of

the deposits those were much much more than the total volume going through the exchange which means the people were using the exchange as a wallet they were doing their exchange their trading and then they leave the Bitcoin on bitstamp that is a very bad idea that has always been a bad idea and it's shocking to see again and again that people don't learn the basic lesson which is unless you control the keys it's not your Bitcoin your keys your Bitcoin not your keys not your Bitcoin somebody else is in control if you allow other people to take custodial control of your Bitcoin then uh hacks and losses and thefts and embezzlement and scams and fraud are

going to happen um the problem with a hot cold wallet structure is that um it doesn't scale if a for example you only keep say 2% of your deposits in a hot wallet that means that you can only handle a spike in volume up to 2% of your deposits anything bigger than that you're going to introduce delays for withdrawals which are going to create a panic which is going to force you to bring more of your funds online into a hot wallet um but even at two or 3% a hot wallet can become enormous especially if people are using the exchange as a deposit location exchanges themselves should encourage their

customers not to keep their money on the exchange because it increases the risk for the exchange and so even if you had multisig in this case I don't think it would really help uh because once again just in order to support the volume of transactions and withdrawals bitstamp had to keep a very large amount of its funds in a hot wallet and that structure does not scale and never will scale I'm hoping we're going to see more developments and distributed exchanges but that is not an easy problem to solve it's a very difficult problem to solve which is why we haven't seen any successful Solutions um again we see this dichotomy you know bit stamp is not an ex an example of a problem with a

Bitcoin protocol it's an example of a problem with trying to use uh custodial accounts which have always failed in the traditional banking environment just as much as they have in Bitcoin to to ask another question in relation to that and yes I did some number crunching and looked at the bitstamp volumes of last year and multiplied it by 0.3% which is I don't know could be the average fee that they're asking and based on that their profits were around 15,000 Bitcoins last year if you up the uh percentage to half a percent per transaction that would be 25,000 Bitcoins so basically it's

possible that they've lost their entire earnings of last year uh with this 9% loss uh that's not theirs it was not their money it was their customers money so do you think it's likely that they'll um be able to make whole their customers or is is this going to be a long-term effort uh I don't know what are your what's your take on how bitstamp is going to be able to to solve this well I mean that's H that's that's the problem really is that if you have a hot wallet that is that big then it exposes you to risk um so you know even as I said before the average hot wallet is going to be between you know maybe 3% to 10% of customer deposits and any

healthy exchange isn't going to have a profit margin much larger than that so loss of a hot wallet means you lose a years of your profits um in most businesses that will put you out of business I'm hoping that with the right infusion of cash and because of uh bit stamps you know so far good reputation um it appears that this was not fraud at least you know I'm not going to make any judgments at this point because um we can't jump to any conclusions but so far uh the the indication is that this was not fraud but but in fact an external theft and so I'm hoping bitm will be able to weather the storm and and um rebuild from that they may need some

external investments in order to support their operational cash flow while they recoup this uh this loss but but it's it's a terrible it's a terrible situation and and again it's it shows the same thing which is that um customers keep making the same mistake which is they entrust their funds to a centralized repository uh where they do not have control of the keys and and that is is going to continue to fail we're going to continue to see failures of that type again and again and again if you give other people your Bitcoin it's not your Bitcoin anymore right so we got a question from um Yim

Bak asking what would you say is the biggest risk for cryptocurrency as at the moment um I I don't really know I mean I don't I don't see any major risks for cryptocurrency as far as I'm concerned um this technology is a superior form of money it's a superior payment system it works it's efficient it solves real problems for real people in the world today and so from that perspective I I don't think there's anything that can stop uh cryptocurrencies from succeeding the only question is whether they will

succeed in the short term or whether there will be some delay and it will take longer for cryptocurrency adoption to happen but um I if this is a Level Playing Field where the competition is between an efficient cryptocurrency like Bitcoin and a currency managed by a central bank Committee of 12 wise white men who make decisions about the entire economy um to me The Logical outcome is that the cryptocurrency wins it's as simple as that it's Superior technology now of course in real life when you when you um introduce a technology like that there's going to be resistance by those

who have uh the most to lose by the introduction of such technology there's going to be a period of time where it's difficult for the public to accept and the mainstream to accept this new technology and to understand how it works um and to absorb it into society and there will be setbacks uh thefts frauds um bad people will use uh Bitcoin to do bad things just like they use dollars to do bad things but uh the media is going to make a much bigger point when they use Bitcoin rather than when they use dollars uh and so we're going to have setbacks like that but again as I said in the long term I don't think um anything can stop this technology from succeeding it's now

proven um to a very large audience that uh this system works and can scale uh and that's all it takes um another question from Ruland CRA and this question also a lot of votes are you worried about bitcoin's fungibility the bit stamp hack shows that some people are calling for blacklisting the stolen coins and theonomous nature of Bitcoins makes this theoretically possible are you worried about that um I think blacklisting is a stupid idea I think if we go down that road it will threaten the fungibility of Bitcoin but in order for blacklisting to work it would have to be introduced in the core protocol I don't I can't imagine that that would be an acceptable change

either among the develop ERS or um by the miners so if such a change was introduced I don't think um I don't think the consensus of the network would accept it they wouldn't upgrade to that version of the protocol um so yeah blacklisting is a bad idea it won't stop it won't stop uh theft but it will uh create problems for Bitcoin fungibility in the long run and the truth is that uh even if that money was stolen from bitstamp it's going to circulate back into the Bitcoin economy it's not going to just disappear and so it doesn't really matter um and I think we should just let it continue to circulate we don't have a

choice right can I can I ask you Andreas what's your um uh if you look to the 2.0 projects or even 3.0 projects what are your favorite ones on that level is it more the equity side or is it more like um improving government systems what are the ones your really interested I I find ethereum and counterparty to be very interesting in terms of the capabilities that they offer today I think um among many of the uh 2.0 projects there is this almost uh naive utopian Vision that government will be simply replaced by a small algorithm and I think that ignores some

realities of human nature um and and also introduces some Concepts which are rather dangerous like for example Universal identity for human beings um I I think those are um ideas that won't really find Solutions very soon however in terms of um automating contracts uh and creating uh more sophisticated programmable money and programmable financial instruments I'm very excited about those possibilities and I think that as we see implementation happen because you know realistically we don't yet have major implementations of Bitcoin 2.0 other than counterparty I I do expect um well okay I I probably

misspoke there because I don't want to just mention that one but you know counterparty mastercoin NXT blah blah blah blah blah blah and theoretically ethereum side chains and others they're all exploring uh the ability of the Bitcoin protocol or other protocols to carry application layer uh platform capabilities on top and I think that's a very exciting development because it really shows the implementation of blockchain Technology as a base protocol uh for other traffic and that's that's really exciting because I think that's really a distinguishing characteristic of these types of of cryptocurrencies that they're not just money that

currency is just the first application on what is the internet of money and that other application can be built on top are you familiar with any of the decentralized rating systems like um identify um name you got a few I don't remember all the names is that something you look into and and are very excited about um if it's a reputation system that we're talking about um I think that uh identity and reputation systems um are best implemented on a local level um and the any attempt to build Global identity and reputation systems uh will

fall into the Trap of trying to to solve societal issues with technology in a way that they can't be solved uh human beings can't do or human beings can't scale to do identity and reputation on a global scale and uh such systems uh I think are really problematic in a number of ways because uh part of the things that make reputation and identity workable for humans is the fact that we can forget and forgive and machines never forget and never forgive and that can create a very dangerous Society okay thank you I'm M no you're not oh okay yeah but

at the same time uh when it comes to Global reputation Andreas you can you can still form like for example after having this conversation we can trust each other and also we can we can um Express that trust in a rating that we give each other so would it be possible based on those interactions and real life trade and conversations to to build a solid Global decentralized reputation system I I don't think so and part of the reason for that is because um most machine-based identity reputation systems assume um first of all they assume unitary identity that a human being only has one identity and that identity spans every context of that human being and that's

fundamentally wrong human beings have different identities in different contexts and the reputation metric that would be attached also assumes that your behavior today is predictive of your behavior tomorrow and um I think I believe in the inherent capability of human beings to change sometimes to change for the better sometimes to change for the worst and past behavior is not always a good predictor of human behavior in the future okay and that's the fundamental problem with these systems because they're algorithmic they assume continuity in time uh which doesn't really apply to um you know a biological entity right okay we have a few minutes

left we have a lot of questions we cannot possibly um do them all but one of the most uh let's just focus on one of the most voted ones um Hank F asks um already something you briefly addressed but do two-way backed side change indeed make altcoins Superfluous theoretically and that's the fundamental problem we're talking about something that is entirely theoretical I've read the paper it sounds fantastic uh I'll wait until I've seen code that actually works um until then we can assume that side chains solve all problems including global warming uh but um you know it's I I don't don't get me wrong I'm a huge fan I think side chains

are actually a fantastic technology that can introduce some uh amazing features it's just that it seems to me that every problem we find nowadays the answer seems to be side chains because it's almost like a rosar test uh you know every person sees whatever they want to see in that picture it expresses all of their vision and um desire uh because it's still a bit vague uh we can assign to it all the characteristics that that we want to the actual implementation is not going to be uh as perfect as the paper it never is and we'll impose its own constraints and limitations once we know what those constraints and limitations are we can make decisions to

which applications will be suitable uh for side chains where they'll be suitable uh as an implementation as a complete different alt chain or altcoin and then we'll see where side chains apply I'm pretty sure you won't be able to solve everything with side chains but I'm looking looking forward to seeing an implementation which altcoins do you own by the way are you able to um di Che with us or is it something for yourself 99.999% of my um currency is in Bitcoin and that's even counting US Dollars um I own um Bitcoin first US dollar second um a bit of namecoin a bit of Litecoin

a bit of Doge um and I think I've got a couple a few tiny fragments of maybe pure coin Prime coin things like that and most of this was donated to me so the only coin I think I actually went out and bought was namecoin uh when I was experimenting with the namecoin technology and US Dollars other than that everything else has been donated to me as tips and most of the time I just use it to tip back other people or it's sitting somewhere on my cryptsy account um but you know quite honestly Bitcoin is risky enough as an investment to fulfill my risk appetite uh and I speak personally um in terms of my personal

risk appetite and therefore I don't feel the need to augment that with additional risk from even more volatile altcoins outside of Bitcoin and so for every person it's different but honestly I because I get paid in Bitcoin uh for a lot of the work I do I end up holding a lot more Bitcoin than most people do and I hold more Bitcoin than US dollars so that volatility is is just about enough and as much as I can handle on a day-to-day basis I don't need to add to that by day trading Doge or something that right and um what a question from timore what do you think that decentralized internet can mean to our

data when it comes to privacy and security so things like made safe and what what is your opinion on that um I'd like to amend my previous answer sorry I forgot I also own uh quite a bit of ether uh so I did purchase ether uh during the ethereum sale because I'm very interested in using it to experiment on the beta I already played with the proof of concept and I wrote some scripts and I enjoyed doing that so I I did purchase some ether so I could play with um the Prototype when it comes out um what I think of decentral is ation um I'm very interested in made safe and other technologies that allow us to

better uh to do better price Discovery and resource allocation for resources that currently are not priced and not allocated such as Community shared Wi-Fi Community shared disk space um generally speaking I think the combination of what we call a sharing economy whether that's Airbnb and Lyft or distributed Wireless Wi-Fi bandwidth storage space CPU space whatever that is uh and the use of crypto tokens to allocate resources more efficiently I think we've barely scratched the surface there uh I think that will end up being a multi-billion dollar industry um that in its own right will be incredibly disruptive and will

replace many existing Industries with a much more efficient um shared economy version uh I I do believe in the general idea of decentralize everything I think decentralization is the theme of this century and cryptocurrencies is simply an expression of that theme and so uh using those to enhance the sharing economy and to do price discovery on resources that we already hold as individuals and use those to trade with others directly um I think that's great also uh Marriot uh hotels charge me $15.95 for w so you Marriot because you're trying to block the other Wireless services and I'm looking forward to MFE that's just one more

incentive perfect um well almost running out of time but I just wanted to also address the whole situation with uh women and Bitcoin I know it's one of your hot topics Andreas um you prefer conference for example where we don't only see guys but also um female entrepreneurs and and developers participating well we have Anette here so maybe you guys can discuss among yourselves how come that there's still such a limited amount of of women in in the whole Bitcoin and sphere Annette why don't you go ahead yes yes well um well I think it's it's in a way it's uh expected that women are

in less numbers than men because I think the audience that attracts uh to bitcoin are either way the tax heavy people and in that area women are already um less um visible than men and uh well you have the groups of of traders that are interested in Bitcoin and I think that's another area where women are not so uh well presented and um well people who are looking to invest in in promising startups for example that's another area where women are not so well presented so I think well it the whole subject is a sum of all the parts where women are

well will tend to be less visible than than men but uh they are there I know they're there I'm not the only one fortunately and uh well I'm I'm I also would like to thank you Andreas that uh uh you as one of the role models in in Bitcoin have an active uh opinion on diversity and I saw on your website that you don't even attend uh or that you don't even speak at conferences when they don't um adopt an um anti-harassment policy for example and I think that's uh uh very good to raise awareness amongst other people and well

maybe make it a bit more welcome also for women to uh to come and take a look yeah than thank you so much Anette um I I have to say that my experience with this has been rather disappointing because once I started talking about this topic I got two reactions uh one was extremely hostile response from um some of the uh male Personalities in the space uh including death threats and threats of violence um and at the same time I heard from literally dozens of women uh telling me about their negative

experiences where uh when attending a Bitcoin Meetup or Bitcoin conference they have been harassed uh dismissed ridiculed sexually assaulted sexually uh propositioned um and and treated in a way uh that is truly appalling and disgusting and a part of the issue here as Annette said is that Finance Libertarians um and Technology are already areas where women are under represented but there are also areas where uh some of the men in the space are actively hostile um Andor exploitative Andor predatory towards

women and what that means is that the experience of the average uh person who gets into Bitcoin is very different depending on whether they're male or female uh males who enter Bitcoin um generally are find it to be an exciting Space full of opportunity and interesting people and women who enter a Bitcoin uh go to these meetings and they uh are received in a way where they are objectified talk down to touched inappropriately propositions asked for dates commented on their looks you know all kinds of behavior that is that is really ju juvenile at best uh and

dangerously predatory in some cases uh and for the most part the organizers of these events turn a blind eye even uh when they're notified of these things they tend to revictimized the victim uh and eventually push women out of this space so it's not just a matter of women being underrepresented it's also a matter of this being a space that is actively hostile to women uh in many cases so what I would encourage people to do is if if you have a conference certainly if it's a conference I'm attending I do not attend conferences unless there is not just a published anti-harassment policy but one that is enforced uh which has a reporting structure so that uh if someone is being

harassed or they experience this kind of behavior they will report it to someone who's trusted uh someone who will take action in a specified Manner and who will follow the policy to exclude the harasser and not punish the victim again um most of these incidents don't go reported because the people who are exploited um are not in a position of power in this industry and if they say anything they end up getting kicked out of the of the group uh rather than the The prominent person who harassed them so I I think this is still a relatively toxic environment it has changed a bit in the last year uh as Bitcoin goes mainstream its values become more

mainstream as well and gradually we're seeing more and more people from different parts of life um male female um you know different races different ethnicities uh different sexual orientations uh people from different social uh status or economic uh status joining Bitcoin and we are seeing the diversity increase gradually uh but it's still it's still very much a white male uh 30 to 45 dominated area and so we need to be aware of what image we give to the outside world and how welcoming we are or how hostile we are uh to those who are trying to join because Bitcoin

only succeeds if we um make it as diverse as possible so yeah that's that's a topic I really care about and uh as I've said before I I just simp about a year and a half ago I took a pledge and I said I'm not going to any conference unless they have and enforce a sexual harassment policy it's very easy to do that if you speak at conferences you should expect that um you will notice I will not go to certain very large well-known conferences um happening uh and if you wonder why I'm not at these conferences usually it's because the uh organizers of the conference uh either refuse to implement such a policy or make a joke of it and don't really enforce it or

because uh the lineup is almost entirely male dominated uh one of these conferences I went to recently took uh some of the best speakers in the space and um put them all in a single panel called women in Bitcoin which was a complete joke uh I mean here you had uh VCS and investors and lawyers and uh smart contract Specialists and all kinds of bright people who had lots of interesting things to talk about but they were put on a to talk about the fact that they were female um that's that's not diversity that's a joke let's hope that's a is a woman then well I I I like to think that uh she is at a conference and uh you know maybe be

great okay well let's let's wrap up any questions any more questions I can tell you I get a lot of death threats and hate mail for saying that too um well I think it's reasonable diversity is a good thing for for the Bitcoin sphere also to um to get to more wides skill adoption and to get a better um let's say a better uh Ambience within within the industry uh any other questions maybe from Anette yort before you wrap up no thank you oh thanks um Andreas tell tell us a bit more about your book and where I think it's it's also available um for free because it's open source but tell us a bit more about where we can get

your book and um and what the audien is ah thank you the book is called mastering Bitcoin it's been a work that uh took about a year and a half to finish uh it was published on December 11th it's available on amazon.com Barnes & Noble and the O'Reilly web store you can buy it online as either paperback from O'Reilly media which is a well-known publisher or you can buy it as an ebook for Kindle Nook or any other uh EOD mobile or PDF reader um you can also find all of the source code of the book it's under a creative common license and available on GitHub for free and the audience for the book is

primarily developers but generally anybody who's technically minded who wants to understand Bitcoin in depth can learn from uh from that book and I'm working now with uh some universities in order to use the book as a basis for uh an undergraduate course in computer science uh or potentially as an elective course uh at a master's postgraduate level for finance business administration economics and computer science um so um I've received enormous support from the uh community in this uh hundreds and hundreds of people helped with the book reviewed the book and supported me through this so I'm very happy it's finally out um and I can tell

you in the months before was published I never wanted to write a book again and uh now that it's published I'm already thinking about writing the next one cool and the audio version will be um recorded by Morgan Freeman right yes exactly um either that or I'm going to read it myself and uh you know U that that might be a possibility we'll see the pro it's a technical book you can't really do an audio version I I don't know how you read C++ code in audio version it doesn't really well thanks Andreas to have you on the show and um and thanks everyone also to your Y andet and of course all the people that have been watching and asking questions so um it's yeah a

little bit more than half an hour eventually but it's because we could have talked for for a few more hours I better understand Joe Rogan now three hours is a bit too much but one hour filled easily with you yeah thank you so much Paul for hosting me yeah it was it was a pleasure so hopefully we do it again then in the future see you guys bye thank you bye