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“Blockchain” or Bitcoin: Understanding the Differences
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[Organizer] Andreas, please come on stage. [applause] [Andres] Hello everyone. Can you hear my voice? well. 1. Bitcoin is dead. [Laughter] Bitcoin is just a stupid idea It obviously doesn’t work. It cannot be expanded. It will fail. It has failed. It’s dead The real innovation at the core of this technology, the blockchain, is the most important This technology will create new opportunities in financial technology (“fintech”) in the banking industry Create new opportunities for financial services companies around the world, even if Bitcoin cannot succeed further 2. Blockchain is a joke. Blockchain is actually useless Bitcoin is the only important thing.Bitcoin will revolutionize banking It will make the bank obsolete. All central banks will be destroyed on the path of Bitcoin In just ten years, every currency in the world will be dominated by Bitcoin Both views are absurd, simple-minded, naive, and fundamentally wrong. For every complex problem, there is a very simple solution, but it is wrong. This is a very delicate area. This is a whole new field This is an industry that has only existed for seven years Yes, it does represent something truly revolutionary: our understanding of trust has fundamentally changed, Our organizational power changes from a hierarchical system to a flat network-centric system What does this mean to’currency?’ How does currency gain its value? ‘Reimagined This is a new decentralized organization, which is a rebalancing of world affairs All of this is happening, but we dont know how this will develop – This is the most exciting part of my work Bitcoin is one of the few and amazing experiences in my life There, I feel like Im sitting in the front row of history, observing the history that is being created History is not the past, history is how we change the present to influence the future We are doing this globally now “We” means more than just Bitcoin.I mean a wider space Before we come to a very simple answer, it is called “only Bitcoinism” in some fields Or the opposite extreme. We think Bitcoin is an unruly, useless, anarchic capitalist dream On the surface, this is stupid… Some scientists, some “serious” people with PhDs, predicted that Bitcoin would die many times Before we get into these two extreme positions, we really need to understand the nuances What is Bitcoin? What is blockchain? What is the core of these things? What are their characteristics? How do you tell them? What is the difference between these systems? What are their applications? My goal today is to try to really answer these questions What is Bitcoin? Bitcoin is the first blockchain Bitcoin is the largest open global blockchain in existence Bitcoin is the first borderless, transnational, open financial payment and trust access system It can realize innovation without permission, and has strong resistance to censorship and coercion It is not subject to geopolitical manipulation Bitcoin is a mathematical proof system that is basically neutral to the participants [identities] It embodies the principles on the Internet: we call it the “net neutrality” principle and apply it to the financial system -Of course it scares people Don’t know the source, purpose, and amount of financing? Is an equal trading channel for everyone? This idea is terrible Who will allow [involving power]? Where does trust come from? Its like, all of a sudden, we no longer follow the New York Times On the contrary, anyone can publish their opinions without editing What will this world look like? The role of the Internet in communication is the same as the role of Bitcoin in finance It introduces a completely different web-centric flat system Without relying on authoritative institutions or intermediaries, transactions can be completed under a completely credible mechanism Through the collaboration and calculation of thousands of nodes This is done through blockchain technology, but blockchain is one of the several components that make Bitcoin work If you pay too much attention to the blockchain, you may miss the point What is the most important technology of the Internet? What is a truly important invention? What makes the Internet play its true value? TCP/IP? Packet switching? TLS? If this is the case, treating the Internet as a packet-switched network means The Internet and your local area network are equivalent Is it really? Is the Internet just a packet-switched network? Or the power of the Internet lies in: it is open, global, transnational, borderless, Resist censorship, open access, anyone can innovate without permission? This is a crucial question Where does the value of Bitcoin come from? Yes, it is a blockchain, but it is a very special blockchain It is a blockchain that uses proof of work as its basic consensus mechanism Proof of work gives it some features that we cant match Mechanism for negotiating with other nodes Bitcoin is fundamentally open, borderless, transnational, anti-censorship, etc. All these characteristics are its essence and power Ironically, they are also considered by most Bitcoin critics to be its biggest weakness “If it is borderless and open, it cannot be allowed to exist.” “If it cannot be controlled, it cannot be allowed to exist!” But it does exist. Bitcoin does not need to request permission This grand experiment has been going on for seven years, and we now have this truly disruptive power This prompted us to reimagine the payment network In addition, we [saw] the most exciting marketing campaign in the history of disruptive technology Imagine if you invent a new disruptive technology, and within four to five years, You managed to completely distract the incumbents and convince them to follow in your footsteps And adopt your core technology, [inducing them] “Subvert their own business from the inside out.” If the Bitcoin community proposes a blockchain idea to the bank (like some of us do) And said, “Invest a billion dollars in training personnel to embrace blockchain technology” This person deserves the Nobel Prize in Marketing, the Troy Oscar In fact, financial services caught the word “blockchain” because they saw some of its meaning: Use certain elements of Bitcoin, those technical elements that will not be opposed by regulators But blockchain is not the only selling point of Bitcoin In this effort, we have seen a lot of similarities with the early Internet In the early days of the Internet, when the company saw that it had no editorial control, There is no centralized security mechanism, no barriers to entry… This is very different from their model Therefore, most companies refuse to use TCP/IP to build an intranet and set up a large number of firewalls around it Separate them, control them, give them editing access, and “tame” the system They ended up getting these stagnant islands and these islands are gradually becoming more and more insecure Then we ushered in the second wave of the Internet. Many of the most efficient and disruptive companies have appeared. In this field, they open their internal IT infrastructure to the world from the inside out Put everything on the Internet and take full advantage of the collaborative potential of maintaining an open system In this world, we no longer live in the world of Oracle and IBM [dominant] enterprise computing and software Apple pushes your IT construction faster than Oracle Your system is either from the inside out or stagnant Cooperation is the name of the game The most powerful and secure systems are those on the Internet that are vulnerable to attacks Competitive destruction and interference every day Through continuous training in this process, they become stronger Ironically, 15-20 years later, we are repeating all this again in the blockchain field The question is: if TCP/IP is not magic sauce, the really interesting aspect is Open access, a collaborative global network.Does this mean that the intranet is useless? Does this mean that the TCP/IP protocol on your LAN or data center has no value? of course not. These are still powerful technologies and still useful patterns However, the best thing you can do is intranet to interconnect it with other intranets For this, you need internet Bitcoin is the Internet currency Bitcoin is the de facto currency standard of the Internet Does this mean that Bitcoin will always be Internet currency? no Does this mean that Bitcoin will always exist as a de facto currency standard on the Internet? no The special thing about Bitcoin is: it represents an open blockchain; the blockchain it provides Anonymity, censorship resistance, open access, and innovation without any permission That engine will trigger an explosion of innovation potential It connects a large number of people around the world who have insufficient bank deposits and who cannot access banking services Approximately 4 billion people can access this system through a simple Android phone, Or use a simpler Nokia mobile phone and send text messages to connect to the global financial network. Open blockchain will change the world Today, there is an important open blockchain, that is Bitcoin I cannot predict that it will always be the only important open blockchain, or the dominant blockchain why? Because it may not be the “best”. But many times, in terms of technology, the “best” is not the ultimate winner TCP/IP is not “the best” In fact, we now realize that it has fundamental problems in scalability, addressing, and routing. And there are many other problems However, TCP/IP is good enough in scale; it has a network effect and is so fast that it becomes irreplaceable It has become difficult to upgrade now TCP/IP is embedded in the global network so that it refuses to upgrade to IPv6 by itself, For nearly 20 years, it has resisted its own upgrade “IPv6 is coming soon.” IPv6 has been around since 1995 [Laughter] Any day now…but obviously, IPv4 is dead, and the Internet cannot surpass Usenet The Internet cannot have emails and attachments, voice, video, and high-definition video, to Oculus VR 3D 4K function Of course it is impossible In a period of time, it may encounter bottlenecks, and then there will be new technologies and new growth.Knowing that we change the goal of “expansion” again, it will encounter new bottlenecks again Bitcoin cannot be extended to Visa unless it does this. Bitcoin cannot be extended to the global trading network unless it does this But I can tell you what Bitcoin can expand to: A secure multinational network worth US$7-10 billion 24 hours a day, 365 days a year, for seven years, uninterrupted operation, The core protocol did not suffer a successful attack Not because no one tried, but because Bitcoin was attacked from day one, Some people are attacked 24 hours a day [365 days a year] by some of the most experienced hackers in the world [How do I know this]? Because cracking Bitcoin can get its $7 billion security bonus This is a system that lives on the Internet. It survived on the battlefield filled with smoke on the Internet. It survives and gets stronger every day If Bitcoin continues to grow like this, it may become Internet currency But i can’t predict But what I can tell you is that the financial world will be dominated by such a system In less than two decades in the future, through an open, global, transnational, censorship-resistant, and basically anonymous way, Based on the precise model of Bitcoin, a privacy-protected payment network Of course there is a great optimization Maybe it will be something completely different from what we call Bitcoin now, but the brand still works Maybe we can call it another name I remember that when I was in the IT industry, people always told me that the scale of Ethernet would not exceed 1Mb. Then 10Mb, then 100Mb, then 1Gb “It can never be scaled.” However, today we run 10Gb Ethernet on fiber Think about it: Which part of it is Ethernet? It may be the brand, frame size and physical address; it may be Switching algorithm? Do not. Distribution mechanism? Do not. Network topology? Do not. These are not the same. What has survived is the brand. We still call todays network “Ethernet” So the question is: Is Ethernet scalable? Of course, as long as you keep changing what you call Ethernet Can Bitcoin scale? it depends What are the unchangeable characteristics of Bitcoin? The 21 million coin limit and predictable issuance rate is Bitcoin. You can’t change it Decentralized proof-of-work algorithms and anonymous participants? That’s bitcoin You cannot change it. Everything else can be negotiated We will maintain anonymity and privacy. We will empower the world We will distribute these powerful financial tools to everyone who owns a smartphone When you think about this, we are not saying that everyone with a smartphone will have a bank account We are talking about everyone who owns a smartphone owns a bank and they are the CEO of this bank Banks with functions of international wire transfer and settlement, market making, and loan origination And termination, generating liquidity, and many other capabilities that even many banks dont have today About ten years from now, one day, a six-year-old child will be able to open the “bank” on their mobile phone And become a “banker”, maybe even issue their own currency, and become a “central banker” It sounds crazy, but in the world we live in now, its definitely possible Any individual on this planet can issue unforgeable, global, safe, instant currency Just like a recipe.Will it be Bitcoin? Could it be something else? I do not know But it will be an open, global, private, censorship-resistant network of transactions and transnational Then the question becomes: how will we embrace the blockchain? What will happen to the bank? Some banks will adapt. Blockchain may have some very interesting applications Blockchain has certain useful technical characteristics. Generally speaking, blockchain is not an answer If you say, “I have a blockchain,” this prompts me to ask you questions It brings a lot of problems For example, what is the consensus algorithm? What is the control/governance structure? What is the model of currency or token generation? Who has the distribution rights? What are the characteristics of security? If you start dealing with these issues, you can decide what type of blockchain it is. Is it open or closed? Does it use proof of work, or is it a different consensus algorithm? Should we use “certificate of authority”? Sign instead of mining, Does it adopt a centralized system as a consensus alliance? For example, between five or six banks? Model of closed access to specific participants based on permissions? Maybe that’s what we are looking at But when you talk about this, you need to understand the limitations of the technology What does it do and what it does not do? Just because it is a blockchain does not mean it will do everything you think it will do If I have a Formula One car, its design is very beautiful and suitable for [driving] on the track, I can say… This car can reach 250 miles per hour Great, but which way to go? If I take it to the center of Milan, my average speed is 15 miles per hour due to traffic conditions. But even for miraculous reasons, the road in front of me was empty, I tried Traveling 250 miles per hour, the car will disintegrate due to road conditions Just because it is a powerful tool does not mean you can put it in a different environment It still works It must be suitable for this environment Let’s take a look at some of the nuances.First, immutability People think that an inherent characteristic of blockchain is immutability [E.g.] Once you can record something on the ledger, he cannot change it But immutability is not a feature of blockchain; Immutability is the product of the proof-of-work consensus system The open blockchain, Bitcoin, is immutable because even if you control 100% of the mining power, You cannot recreate an alternate version of the history Rewrite the blockchain without providing valid proof of work This requires a lot of calculations You can only use the maximum amount of calculations (tens of billions of hash calculations per second) to influence… Assuming you do have this computing power, you can now influence hundreds of blocks You can rewrite the history of this afternoon, but you cant rewrite yesterday, and certainly you cant rewrite the record of last week And certainly not rewriting last years record Even if you control all the computing power currently in the world, this is impossible Rewrite Bitcoin’s proof of work and even the blockchain of the past two days The amount of calculation is incredible You have to wait for others to stop [Proof of Work] while you recalculate the past They will continue into the future, creating a longer blockchain, and you are wasting resources to rewrite history Immutability is a feature of proof of work, not blockchain This has some very serious effects Resistance to censorship and coercive resistance [depends on] the anonymity and decentralization of mining If you combine these two facts, you will find some strange characteristics Suppose you have a consortium consensus mechanism that controls the banking industry I dont know why you want to do this, but suppose you build a blockchain with six banks participating, Sign transactions in a round-robin manner or using a complex Byzantine consensus model You bought it for a big price from a consultant.[laughter] What happens when you receive a judicial order ordering you to rewrite last year’s history? Zero WikiLeaks’ bank account? What happens if you do not get a judicial order, but are only blackmailed by market pressure? Or the regulator to order you? Not that it will happen… I mean, in a democratic country, we won’t cut off the source of WikiLeaks funds without any judicial process, right? [laughter] The problem is that you can actually force the participants of the system to rewrite the ledger Rewrite the financial history of transactions This represents an extreme moral hazard The next question is: Why do you want to adopt such a thing in the settlement system? This confuses me? SWIFT is an outdated system, very expensive, slow, and unable to extricate itself from being under geopolitical control Equity clearing systems are not bad, but they are still expensive and slow Of course, your profit is huge Why not set up an internal settlement bank consortium? Okay, I have an idea. One of the benefits of centralized clearing houses is that they have the greatest transaction efficiency. (Billions of transactions per second is fine) Blockchain cannot replicate this level of efficiency You cannot do this. Physically impossible But lets assume you [ignore] it When you mean you want to replace a political party that has no trust interest in stocks And their liquidation tools, not market makers and participants, This is a completely independent design, which gives you some guarantee of neutrality By separating concerns and responsibilities… the consortium of five banks itself Is there a significant conflict of interest between market makers and participants? At least until now, the brokerage industry is still full of grab runs, algorithmic trading and dark pools The futures market is manipulated, the foreign exchange market is manipulated, but at least the settlement market has not Do you plan to give this to a bank consortium and let it operate without any supervision? Or are you planning to use a fully encrypted and completely anonymous blockchain to do this? Well, this is a double-edged sword However, if you make it completely transparent, then anonymous people enter the market for the first time And those leaked blockchains, forget the Panama files! This is Panama Terabytes (meaning that every grey transaction is recorded in the block data)! [Laughter] Every transaction has I would love to see what happens to some government black budgets when blockchain data leaks out? How do you protect the private key? How do you protect the keys used for signing in the consensus algorithm? From a security perspective, you create a huge concentration risk there If these keys are stolen, even a denial of service attack will lead to disastrous consequences But that’s okay, right? Banks know how to keep information confidential… Oh wait, not even the National Security Agency can do it There is no system in this world that we designed to keep information confidential forever Bitcoins answer is to decentralize power as much as possible so that its impossible Press the button/pull the lever and apply force to control this system The point is decentralization Blockchain can effectively decentralize most of the financial system They can definitely bring cost savings to banks They affect profit margins and increase efficiency Like intranets, they will be very useful tools… Actually, I think you should implement an overlay on top of Bitcoin for settlement And quickly replace SWIFT! [laughter] In the end, none of these matter I am not criticizing the blockchain because I am against the continued operation of banks morally or ideologically I think banks have bigger problems than Bitcoin I have some questions about practicality-applicability to those blockchains without proof of work And decentralization; closed blockchain Blockchain that does not allow free innovation I dont think [that kind of blockchain] really fulfilled its promise In the end, I really don’t care I am not interested in the 1% reduction in marginal cost of this and that inter-bank settlement platform I do not care 4 billion people have no bank deposits Through an open blockchain, we can change it This is our goal now.Thank you. [applause] [Organizer] Thank you, Andreas. [Andres] Thank you. [Organizer] Thank you for your compelling view on the relationship between Bitcoins Blockchain, and the future of our central bank. We have a representative of an Italian bank here, he is responsible for the payment system and currency Our wallets, our financial institution clients, we act as consultants Before we move on to the next speaker, since you know Bitcoin so well, I have a question In todays compelling story Who do you think is Satoshi Nakamoto? do you know? [Laughter] I must tell you that we have reporters in the room, so… [Andres] I don’t know. I do not care. It’s ok. Bitcoin is not a system of proof of authority, or even a reference to authority This is an independent system, neutral, based on mathematical proofs This means that it exists independently and there is no risk of appealing to its author or creator I dont know who Euclid is, or even if Euclid really existed Euclidean geometry is part of my daily life regardless of whether Euclidean exists Whether he is a group of people or an individual, he is a nasty malicious pervert or a saint It’s ok.Some people will say, “Yes, but Satoshi Nakamoto has a million bitcoins.” “What would happen if Satoshi Nakamoto sold one million bitcoins?” What I am more worried about is what will happen if the central bank of China sells all the US dollars in an instant? [Laughter] From a percentage point of view, this is a bigger problem! If Saudi Arabia decides… What happens when the basic supply of oil is changed in an instant? If the Wal-Mart family decides that the renminbi is a better investment and they sell the U.S. dollar, what will happen? Market fundamentals mean [Satoshi is not important] Bitcoin survived anyway The only thing Satoshi Nakamoto guarantees to provide is a sensational article… This is because we are more interested in authority Finally, Bitcoin is not under the control of Satoshi Nakamoto. Bitcoin is controlled by an algorithm. Thank you. [Organizer] Thank you, Andreas. [applause] [Andrs] Do we have time to ask questions? [Organizer] Our audience has many questions. Because there are too many of you Time flies, please choose a question Maybe [will answer later] the rest of the questions, otherwise we dont have time for the next speaker What question do you want to answer? [Andrs] Let me see, it only takes a second. [Organizer] Of course. [ANDREAS] I think “The success of blockchain is defined by market drivers… Or there is a “traction factor” that is happening now. I want to change it a little bit and talk about the global open blockchain, Bitcoin, just like it exists today I said that we “forgot to authorize” but we dont need authorization either This system does not need bank support.If the bank supports it, it wont work better. If we add intermediaries, this system will not increase trust If we add the identity and reputation system, it wont get better This will only replicate past problems It is [not intended] to replace Visa in developed countries, allowing consumers in this country to buy a cup of coffee at Starbucks This is not the point. It is not a system that will replace the national currency Bitcoin will affect import and export business, international remittances, insourcing and outsourcing Outsourcing and cross-border transactions are where the friction costs are greatest It will serve those who do not have bank services Bitcoin has nothing to do with banks because they can’t use it They cannot use it because the banking industry is basically imprisoned in the regulatory system They are not allowed to use the system without access qualifications There are four billion people outside that prison who are not eligible to be part of the system But they can use bitcoin They dont care about banking, banking doesnt care about them Thank you.[applause].
