Bitcoin and the Blockchain | Rick Falkvinge | TEDxBucharest

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The Internet brings much more changes than we could possibly ever imagine. As for any disruptive technology, the generation who invents it can only think of the new technology in terms of what it's replacing. But it's the generation after them who sees the new technology in its own right, in its own potential and builds things on it on its own merits.

In a true Future Spoiler, Rick shares with the audience how Bitcoin and it's underlying technology, blockchain technology, will influence the power struggles for the next decades,

Rick is the Founder of the Swedish Pirate Party, the first Pirate Party. Under his leadership the Party had a resounding success at the 2009 European Elections with two elected representatives. TIME Magazine shortlisted him as one of the world’s most influential people.

Good evening, Bucharest!

Future spoilers, getting to know things
that happen in the future

before they actually happen.

That's cheating, isn't it?

Do we love cheating?

Yes, we love cheating!

When I was a politician
and doing interviews for television,

I would sometimes taunt the reporters,

when I saw they were still
setting up the camera

and weren't really ready yet.

I would say things like:

"Well you know, I'm a politician,

so it's not really cheating
unless you get caught doing it."

They would get all stressed out
and try to get the camera rolling

in case I would say
something like that again.

That was fun.

So, future spoilers.

A bit of background about me.

I'm Rick Falkvinge,
I'm Falkvinge on Twitter.

In case I say something insightful,
something funny, or just plain dumb,

feel free to quote me on Twitter.

Because I love
seeing my name on Twitter,

especially when I say
something dumb - that's funny.

So, a bit of my background.

My claim to fame is that I founded
a new political party in 2006

with a mission of defending
the Internet and civil liberties.

It spread to 70 countries,

so it was quite successful
by any measure,

and I led it for its first five years
in its original country, Sweden.

Under my leadership, we put
two people in the European Parliament,

so that was good.

And we did this using new methodologies.

We became the biggest party
and the most coveted youth demographic

on less than one percent
on the competition's budget.

So we had two orders of magnitude
of cost-efficiency advantage.

The methods we were using,
we call them swarm methodologies -

we were decentralizing wildly.

And they can be used by, frankly,
any business or social cause,

or, well, almost any.

There's a small asterisk there.

But, as a result of this,
I got a number of awards,

like I was named the IT person
of the year from the Swedish IT industry.

"Foreign Policy" magazine named me

one of the world's
Top 100 Global Thinkers,

and people at "Time" magazine named me

one of the world's
100 Most Influential People.

That's quite humbling really.

I'm not saying they're incorrect,
but it's still quite humbling.

So, today's entertainment:
spoilers for the future.

We're going to be talking about Bitcoin.

We're going to be talking about
the underlying technology for Bitcoin,

what's called the blockchain.

And we're going to be looking
at some conclusions

for the power struggles
for the next decades

when we realize the implications of this.

So, Bitcoin blockchain technology,
and how the power is about the ledger.

Bitcoin.

How many of you in here
have heard of Bitcoin before?

Let's see a show of hands.

OK, so that's about half,
I'd say, giving it a ballpark.

How many in here have used Bitcoin,
or are carrying Bitcoin right now?

Another show of hands.

One or - . Okay, so that's
a few scattered hands.

So, going through this just briefly,

what Bitcoin is.

In 2008, somebody with a Japanese name
solved a really difficult problem.

And that problem was:

How to make many people agree on a set
of data, a set of facts - like a language.

How do you make a group agree
on what a language is?

It evolves quite naturally.

How do you encode this into technology?

It turned out

that if you can make 51 percent
of people agree that this is the data set,

then we're all good.

That sounds very easy,
that sounds very intuitive,

but it's a really hard problem
to solve in technology,

and this was called blockchain technology.

So, what this does is,
it does away with the idea

that you must have somebody
at the central point

to establish what the data is.

You don't any longer
need somebody to go to

to ask what does this word mean,

or how much does this person
have in their bank account?

It's all distributed.

Everybody and nobody knows
the entire set of data.

And that has enormous implications,

which we'll get back to
many times in this presentation.

So, these crazy guys thought,

"Hey, this is a cool technology,

let's use this to create
a new form of money!"

Which is obviously the first idea you get
when you create something, right?

But the deal here was

that there was
no central point of control, right?

There's no centralized bank.

Instead there's this distributed idea,
like a language.

So, just like a language where everybody
knows the meaning of the word,

this is a distributed bank,

where everybody participating
knows every account and how much is in it.

And, this doesn't just work,

it turns out that this actually
blows banking out of the water.

My first Bitcoin transaction
was on a Sunday in April 2011.

I sent the value of a cup of coffee,
a very small amount,

to a friend on the other side
of the planet.

They had the money instantly.

Nobody was able to prevent
or track this transaction

or seize the funds in transit.

In fact, no blockade whatsoever

on the national or individual level
was consulted.

I didn't pay anything in fees
to do this transaction,

and last but not least, I didn't log on
to any bank of any kind.

I didn't identify myself to anybody.

I sent a value of a cup of coffee.

I could've sent millions and it would
still be instant and without fees.

And when you look at this -

I mean the first time you use Bitcoin,

it feels like you are jumping
40 years into the future.

But what's really happening

is that it's banks that for some reason
have stopped developing.

So they're not any longer fulfilling
the expectations we have -

just beginning with the fact
that I did this on a Sunday, right?

And then moving on to no fees
to the other side of the planet,

instant and so on.

So I observed then that Bitcoin
is going to do to banking

what the email did to postal services.

This is going to obliterate
today's banking.

But, with any money,
it's only as good as it's usability.

So what can you use Bitcoin for?

Early 2011, it was kind of limited.

You could use Bitcoin to -

or rather you could use
US dollars to buy Bitcoin,

which you, in turn, could use
to buy back your US dollars.

So it wasn't very useful.

You could also use it
to buy weed, and smoke the weed,

but, then again, you could do that
for US dollars already,

so it wasn't very useful.

And then, for some famous
or infamous reason,

you could also use Bitcoin to buy socks
made from wool from alpaca animals.

And that was the total
you could use Bitcoin for.

Things have changed a bit since then.

Today, there is no single good or service
that you cannot buy with Bitcoin.

You can't buy them from any body,

but if you are picking up
something to buy,

you can buy that with Bitcoin today.

And, notably, including from countries
that are normally under financial blockade

by order of the United States,

like Iran or other people where
you can't usually use a credit card.

You can use Bitcoin there,
and they are starting to take notice.

But not from any body.

If we're looking
at Bucharest for instance,

you can observe
that there are three businesses

in the entire central city

that deal in Bitcoin.

And obviously that's not
too impressive at this point.

But this is going to change.

It'll only be a matter of time
before everybody accepts Bitcoin.

And the reason for that is
that the transactions are so dead simple.

You see somebody bringing you a coat,

you scan that coat with your phone,

you see an amount
and get an "Accept" button.

And that's it.

It's simpler than
a credit card transaction.

And it's not just simpler
than a credit card transaction.

The reason this will succeed

is that it's also cheaper
than a credit card transaction.

Much, much cheaper - remember
how I said this has no fees?

Credit cards typically take
3-5% of every transaction.

Bitcoin eliminates that,

so this will succeed
on purely commercial grounds.

It roughly doubles the profit margin.

It has some way to go
in terms of usability,

and, in particular,
with storing and keeping Bitcoin.

So we can observe from past technologies

that they typically take 10 years
until they reach maturity.

That means we can predict
that this will have a breakthrough

in the 2019 to 2020 time frame,

which is supported by the data set
of how transaction volume is growing.

So, let's take a look
at the blockchain technology,

the underlying blockchain technology.

I mean, this has been used
to create a currency, right?

A currency called Bitcoin.

But it could be used to track any asset.

Any, any asset.

And that has enormous implications.

If you are at the central point of control
and get to determine who owns what,

you have an enormous power.

You essentially control society.

Who owns that house?

Who owns that fortune?

Who owns this plot of land?

Today the government does that,

and they are about to lose that ability.

Just something as simple
as passing through nation borders:

you can see customs seizing valuables,

and people using Bitcoin are just smiling
and walking straight through.

There was an event on Cyprus recently

where the government needed a bailout
from the International Monetary Fund.

But in order to get the money they needed
to even get the bailout,

they decided to seize and confiscate
bank savings from ordinary people.

They went into ordinary banks

and just took a good chunk
of people's money,

which caused panic
across Europe at the time,

because most people realized
this might happen in my country too.

And it didn't take many months
until politicians realized that:

"Hey, what they did at Cyprus
actually worked.

We can just swoop in
and take people's savings.

How convenient?"

So, this obviously had a reverberation
in the Bitcoin community as well, right?

If people realize that banks
aren't just unnecessary,

trusting banks can actually hurt you
or hurt your savings.

And Bitcoin strikes directly
at the power of a central bank,

and by extension it strikes directly
at a government's ability

to regulate funds, transactions, taxation.

A government can no longer seize
somebody's wealth or income.

So, where does that leave taxation?

That's an open question completely today.

And in the next steps, we can observe
that you have tools and technologies

for things like
self-arbitrating contracts.

Today, if you're signing a contract,
and you disagree,

you go to a judge, and the judge
decides who's in the right.

If the contract can do that,
you don't need the judge,

you don't need the court.

This is Ethereum technology.

In the next step again,
you have incorporation.

You can issue shares,
you can issue dividends,

with counterparty technology
built on the blockchain.

And you obviously ask yourself:

"Well, what court could possibly
recognize such a company?"

But they're not using courts,

they're using self-arbitrating contracts
with Ethereum technology.

In the next step again,

you can use the blockchain
for land registry, social services,

using BitNation technology.

And these technologies are actually

outcompeting the government's
core services on its own terms.

So if Bitcoin shows that
we don't need a central bank,

the blockchain technology asks:

"Exactly why do we need
a central government?"

And this is not
a hippy anarchist question.

This is a matter of seeing
that technologies in the pipeline

are actually outcompeting the government

and the core services
a government provides,

which obviously has enormous implications.

So we can observe
how the power is in the ledger,

the ability to not just know,
but to determine who owns what.

If you control who owns what,
you're essentially controlling society.

And with Bitcoin and the blockchain,
we've seen how money cannot be seized,

because everybody is in agreement
on who owns what.

And pointing the gun at somebody

is not going to change
this distributed agreement,

any more than pointing a gun at somebody

and telling them to change
the meaning of a word

has an effect on a language.

So, let's toy with the idea
of scaling that up a bit.

Imagine land registry being
on the blockchain in the same way,

and you're bringing a bigger gun
to a plot of land.

You're parking a tank on a plot of land,

and all of a sudden
that doesn't have an effect,

just like pointing a gun at somebody

doesn't make it possible to change
the meaning of a word or a bank account.

This is when we're starting
to realize enormous implications, right?

And these are not just geek dreams,
these are not just nerd dreams.

I mean it's easy to dismiss this
as just a couple of computer geeks

who are totally socially inept,

who can't get laid
if their lives depended on it,

and -

(Laughter)

- and still dreaming about a future
where technology reigns, right?

In 1995, these people predicted
that we would socialize online much more

than we would over letters
and phone calls,

and they were laughed at.

It was ridiculous.

It was just geeks dreaming, right?

That was in 1995.

But geeks tend to see technology
before most people,

because they deal with it and
build things using it on a daily basis.

So, that was 20 years ago.

And today, these same geeks are predicting

that banks will be as obsolete then
as the postal industry is today.

And moving further up, in forty years,

we can observe that blockchain technology

will probably have outcompeted
a lot of governmental core functions.

The technologies
in the pipeline just today,

we can see them
outcompeting land registry,

we can see them outcompeting
incorporation, equity, dividends, courts.

These are core, core government functions,

and this is just what we can see today.

This is what we can see today.

So, in closing -

Yeah, obviously the government won't
let go of its power without quite a fight.

But that's
a bring-out-the-popcorn scenario.

In closing, the Internet
brings much more change

than we could possibly first imagine.

We knew that it would bring
more change than we had imagined,

we just didn't know quite what.

But this is typical for
a very disruptive technology,

because the generation that invents it

can only think of a new technology
in terms of what it replaces.

It's the generation after them

that sees the new technology
in its own right, in its own potential,

and builds things on it on its own merits.

And that's what's happening now.

This was the case with electricity,
this was the case with the printing press,

this has been the case
with every major disruptive technology,

and it's now the case with the Internet.

So, in summary, we are learning
that the Internet was -

When the Internet arrived,
you know what they said?

Media said that this might compete
with the fax machine.

We're finally learning, I think,
or people are about to learn,

that the Internet
was something just slightly more

than a glorified fax machine.

And this fight is going
to stand over finance,

over core governmental functions,

over the next couple of decades.

And hat's my spoiler
for the future to you tonight.

Thank you.

(Applause)