Bitcoin evangelist Andreas Antonopoulos wows Canada's Senate Committee on Banking
As regulators around the world attempt to get a handle on the emerging virtual- and crypto-currency phenomenon, today, Canada’s Senate Committee on Banking, Trade and Commerce is meeting in a session called “Study on the use of digital currency.”
In one of the more illuminating discussions, the senators heard from prominent bitcoin developer, Blockchain.info Chief Security Officer, and former financial services network security technician Andreas Antonopoulos. The conversation covered lots of ground, and repeatedly left the senators making remarks like “most impressive,” and “I’m sure [the traditional financial services industry] is desperate to hire you back.”
While the entire two hour session is worth watching (video below), several of the more interesting topics addressed include the risks of attaching identity to transactions, the opportunity for nation states and individuals to create alternate blockchain-based crypto-currencies other than bitcoin, and the biggest threats and opportunities for bitcoin’s continued growth.
When asked by one of the senators why he discourages regulators from mandating that every bitcoin transaction include a record of the identity of the parties involved, a measure meant to prevent money laundering, Antonopoulos answers:
Attempts at imposing identity on bitcoin, will, in my opinion, always be ineffective because there will always be channels through which non-identifiable transactions can be introduced, either in bitcoin or other currencies, while simultaneously removing one of the major advantages.
Today I have recieved three automated phone calls from Visa fraud prevention because I’ve used my credit card in Canada. This is something that happens to me every time I travel and is a symptom of the fact that by releasing an identifier that allows others to pull from my account and ties every transaction I do to every activity I do. I am not only giving up my privacy, but endangering my personal financial security every time I use a credit card. This system is non-viable
I watch every few weeks on the news that yet another group has 50M consumer credit cards and identities lost. And for the average consumer that means means months of identity protection and risk. These are the intermediaries that handle our identities, and what we have seen over the last several decades is that protecting these information security securities in a way to protect this kind of theft is not possible.
The mistake is tying identity to every transaction and and creating systems that can continuously draw from our accounts. Bitcoin is fundamentally different and to break that in order to tie an identity that anyone can easily bypass if they have ill intent would not result in protecting us more, but instead would result in cause more harm to consumers. Antonopoulos further speaks to the monetary policy underlying bitcoin, which he compares to that of a precious metal such as gold. Put another way, in the early days, bitcoin, like gold, is abundant and relatively easy to “mine,” but as time goes on, the commodity, which is by definition in finite supply, becomes more scarce and more expensive to produce. Addressing the committee’s concerns that this policy doesn’t allow for central banks to adjust monetary supply to meet demand growth, he says:
Bitcoin’s monetary policy is is just one recipe that is possible. And what bitcoin and other crypto currencies allow is for us to create monetary policies at will and then fix them in place for each one of these currencies.
And if bitcoin’s monetary recipe is wrong, people will move to another currency that has the same characteristics of decentralized organization but with a different monetary recipe. It is simply one of the possible choices.
I don’t know if it is right or wrong, but I do know what it is going to be in 30 years, exactly. I can tell you for the millionth decimal point exactly how many currency units will exist in 140 years from now in bitcoin. And so what it provides, whether you like that recipe or not, whether you agree with it or not, it provides certainty, it provides predictability, it allows lets people adjust expectations for that.
Whether that’s better or not is up for debate. With this new model you can build your own currency which has a different monetary policy. If it’s better, it gets to win. It’s an open competition. Antonopoulos added a bit of levity to the proceedings when he called bitcoin “nerd money” and admitted that he, like most of the crypto-currency’s most ardent advocates today, started out as a dissenter:
I think it’s important to note that my initial reaction to first identifying bitcoin was, ‘this is nerd money, it can’t possibly work.’
In fact, when Satoshi Nakamoto invented bitcoin and first announced it on the crypto-mailing list, pretty much everyone around him reacted in essentially the same way.The circle of advocates which is now numbering in the millions, consists entirely of people who started out as very strong skeptics.
The difference is the first time I saw it that was my reaction, the second time I saw it, and read the paper, and understood that this is not a currency, it was a decentralized network model for financial security and trust which allows for currency but also allows many other things. That literally blew my mind and I understand that this is much bigger. When asked what was the risk to bitcoin’s growth, Antonopoulos responds:
I think there are some very significant security problems related to the ownership and control of bitcoin keys and bitcoin wallets for the end user. The Simple truth is, we’ve been doing information security for a handful of decades and the truth is that that industry is not very effective. The nice thing about bitcoin is that that risk is compartmentalized, so there’s no systemic risk.Antonopoulos then compared the state of bitcoin today, to the state of the early internet in the 1990s. For example, many dissenters predicted that the internet would never become mainstream because people would struggle to find anything useful in the disorganized web of information. Obviously, Google founders Larry Page and Sergey Brin saw that as an opportunity, and those entrepreneurs tackling bitcoin’s security issues, as well as other challenges have the same opportunity to create massive innovation and lasting value.
Looking forward, Antonopoulos explained that he’s less excited about bitcoin’s ability to impact Western and first-world economies, and more excited about the impact it can have on the rest of the world.
Most interesting thing is not what bitcoin can do for Western, developed countries, because we have fairly sophisticated banking systems. I am fascinated by the idea of deploying bitcoin on a Nokia feature phone in Kenya, in Lagos, in Nigeria and bringing online people who have never had access to financial services with international credit and who could now be connected to everyone else in the world on an equal footing. That is very exciting to me and I think that is also where the biggest need lies.Watch the full Senate Committee session video below: