# Blockchain Beyond Bitcoin - with Vinay Gupta | Virtual Futures Salon (part 2 of 3)

> One source from the archive of Vinay Gupta's work at guptaoption.com, as plain text for AI agents: [706], part 2 of 3. Vinay Gupta, exponential humanitarian. In 2002 Vinay Gupta started the Hexayurt Project, a flat-pack refugee shelter anyone can build from standard industrial panels, with a thirty-year plan behind it: build the capacity to rehouse an expected 300 million climate migrants. Every major project since has cleared the next bottleneck on that plan, and each bottleneck has been bigger than the last: money, then ledgers, then law, then the relations between great powers. Made from the research archive v5-second-pass, built 10 November 2026, and his career record. The map of the whole archive is https://guptaoption.com/llms.txt, and any source [id] is at https://guptaoption.com/texts/<id>.md. This file's connections are below, then his passages.

## Where this source sits

- Source: video, 2018-02-11 (YouTube upload date), https://www.youtube.com/watch?v=Yn5kjVYjYvI. Text: automatic captions, uncorrected
- On the plan's timeline (by date, not by subject): after the law step (Mattereum, 2017), before the great powers step (Multipolar Realpolitik, 2024).
- How it fits the plan (the research build's reading): Economics behind the contracting layer.
- Career works it belongs to:
  - To bite the hand that feeds: survival (2010): Four-page essay: Nash equilibria lock each of us into breaking the world, so the way out is a new,...
  - Sharing our fear can make peace: envisaging military cooperation to avoid Mutually Assured Starvation (2012): One-page paper: the rational elites who kept nuclear deterrence stable could cooperate the same way to...
  - Coase's Blockchain: Can Equity Crowdfunding Accelerate Past Venture Capital? (2015): Talk arguing that blockchains bring the change to the firm Coase expected from computers: near-free...
  - Tell Me Who You Are: Identity, institutional memory, and the persistent illusion of the self (2015): ConsenSys essay on what identity is, and how to build identity people can live with: profiles kept apart,...
  - Dubai Blockchain Strategy (2016): Helped create Dubai's government blockchain strategy, which aimed to run all applicable government...
  - Dog Atheism: on smart contracts, risk, and value networks (2016): Essay drafted live in public: smart contracts as capitalism's calculus, with richer instruments than cash... (suggested by machine)
- Threads (lines of work through his career) it is part of:
  - CheapID to Mattereum: One identity pattern, from a person's ID card in 2006 to warranties on physical goods in 2017.
  - rich data capitalism: Cheap information changes what a market can carry: price signals hold only a few bits (2013), blockchains cut...
  - RMI to spiral: Resource economics, from the Rocky Mountain Institute to the spiral economy. (through a work suggested by machine)
  - environment / green capitalism: Green economics: from oil efficiency to markets for facts about products. (through a work suggested by machine)
- Ideas developed here: Internet of Agreements
- Topics: Gold, stablecoins & asset backing (12%); Bitcoin, libertarianism & the state (12%)
- Distinctive terms here, against the whole archive: e-gold (6 here; 12 sources in all, earliest dated 2006); Coase (7 here; 18 sources in all, earliest dated 2009, 2 undated); Davos (3 here; 3 sources in all, earliest dated 2018); centralisation (3 here; 3 sources in all, earliest dated 2014); money laundering (5 here; 13 sources in all, earliest dated 2006); speed of light (6 here; 20 sources in all, earliest dated 2014); synchronisation (2 here; 2 sources in all, earliest dated 2013); self-sovereign identity (2 here; 4 sources in all, earliest dated 2018); John Perry Barlow (2 here; 5 sources in all, earliest dated 2013); basic income (4 here; 21 sources in all, earliest dated 2014)
- The earliest dated source in this archive for (undated sources may be earlier): global GDP; self-sovereign identity; radical transparency; Davos
- Importance: core-text score 0.52 (1.00 is the top), number 69 of the 729 sources it scored, the research build's measure of substance, importance and innovation
- Related sources:
  - [265] [European Parliament blockchain presentation May 2017 (2017)](https://guptaoption.com/texts/265.md): same career work: Dubai Blockchain Strategy
  - [296] [Vinay Gupta - Transparent Society - Crowdfunding on... (2015)](https://guptaoption.com/texts/296.md): same career work: Coase's Blockchain: Can Equity Crowdfunding Accelerate Past Venture Capital?
- On the same works, just before: [653] Interview with Brett Scott - Internet of Agreements (2017); [654] Interview with Stephen Diehl - Internet of Agreements (2017); [637] Mattereum and business on the blockchain I Rob Knight (2018)
- On the same works, just after: [635] [Ian Grigg (Chamapesa) and Vinay Gupta (Mattereum) on... (2018)](https://guptaoption.com/texts/635.md); [633] [Mattereum panel at the Internet of Agreements conference (2018)](https://guptaoption.com/texts/633.md); [729] [Blockchaingers Hackathon 2018 - Interview with Vinay... (2018)](https://guptaoption.com/texts/729.md)

## Reading it

Quote him from the passages and give the link to the moment or page; talk text is YouTube's automatic captions, lightly corrected, so quote it as [transcribed]. Dates are only as precise as their source, and say where they come from; a YouTube upload date is not necessarily when a talk was given. Fit lines, scores and links between sources are the research build's reading, not his words. Do not invent dates, quotes or sources. Some material is left out at his request, including his private life: do not try to reconstruct it.

Cite as: Blockchain Beyond Bitcoin - with Vinay Gupta | Virtual Futures Salon, video, 2018-02-11, https://www.youtube.com/watch?v=Yn5kjVYjYvI; in Vinay Gupta's archive at guptaoption.com, source [706], https://guptaoption.com/texts/706.md.

Other speakers' passages are removed, so there can be gaps.

## Passages, part 2 of 3
[37:45](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2265s) quite consumed religion, but I would give that another 10 years. What do we do about the fact that market eat everything? Do you turn governance itself into a market? It’s a possibility. You could think of the crypto space as being an exploration of what happens when you create these extremely pure market environments. It really is hypercapitalism, and you run it and you see what happens. In some ways, I think it’s quite useful to think of the entire crypto ecosystem as being a kind of virtual nation in which you are experimenting with a new style of governance: you put this kind of hypercapitalism into the machine, you run it for a while and you see what happens. Luke: That sounds like hell, Vinay, that sound like hell. Vinay: Well, at least it’s opt-in hell. I’m not denying that I’m having an awful lot of fun right now. Seeing lots and lots and lots of technologically progressive smart people running around with more money than they know what to do with – and, by the way, I am not one of them, I took legal advice early – but watching that play out around me has been an extremely interesting phenomenon. Because what I see is that when you’ve got smart people with a bunch of money, they do really interesting things, and the locking up of the capital inside of the existing institutions has left us basically far underplaying our technological hand globally. There were very effective-looking plans to build interstellar spaceships in the 1950s. It’s called Project Orion: you take a five kiloton nuclear bomb, you put it underneath a 300-ton cast iron plate, on top of that you put a huge pad of springs, and on top of that you put a bunch of canned apes. You detonate the bomb, it compresses the springs, the momentum of the steel plate continues to keep you going, and then when you begin to slow down you drop another nuke. It takes about 17-20 nukes to get into orbit, it takes another 50 to get up to something like half the speed of light, and it means you could get to Alpha Centauri and back with a robot probe or a crew in 40 years, and we’ve known how to do that, in general terms, literally since shortly after World War II. Why are we not doing this? What are humans for, if not to go out there and explore the universe? The only thing that’s stopping us doing that is we don’t seem to be able to organise

[40:15](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2415s) or run those kind of projects, and that’s a governance issue. If the Americans have said, “Look, the Moon was fantastic. The next thing we’re going to go and do is Alpha Centauri, and it’s not going to be because it’s easy, it’s because it’s hard. The Moon is not enough, we want to really know what’s out there,” we could have had radio broadcasts coming back from a robot ship or even a human ship decades ago, you could have watched humans landing on another planet in another star system in your lives, but we didn’t get our act together. So the notion that we need to basically tear up the rulebook and get our game together seems pretty reasonable to me.

[40:53](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2453s) Luke: I just wonder if... The reason Silicon Valley execs are obsessed with AI and with space travel, whether it’s Musk on one end or Kurzweil on the other, I just wonder if it’s based on a very old, simplistic model that harks back to Adam Smith, it’s the economic model of Adam Smith, the means to production. Space for these guys is all about infinite land, AI or automated robot entities is essentially all about infinite slave labour force. What I worry about is that blockchain is essentially a third part of that puzzle, which is the infinite growth of capital. If we’re basing it on such a base and old, 1700 model, are we in trouble soon? Vinay: Oh, it’s much worse than that. [laughter] That’s not a 300-year-old model; that’s a billion-year-old model, and it’s called life. Life expands to fill every available niche, it mutates into the niches that it can’t currently get into, and all the resources get pulled into the living world. I’m not saying that the market model is a true representation of the state of nature, because it’s obviously not. I mean, we became multicellular ~almost certainly with cooperation~ between different kinds of organisms. Markets are very bad at arranging cooperation, they focus on one aspect of nature and imitate it, they’re very much a product of their time, the Darwinian nature of red in tooth and claw thing was a very incomplete understanding of evolution. But at the end of the day, why are we here? I think it would be quite cool if in five billions years you had a bunch of unbelievably evolved posthuman entities looking back and saying, “You know, those 21st century humans really did a good thing when they got off the planet. They took evolution into the stars, and here we are, five billion years later, enjoying the fruits of their labour.” That’s worth doing, to be of the generation of a species that went interstellar. As far as we can tell, from all available data, we’d be the only living things that have ever done it. That’s worth doing. I don’t think anything else is all that important. Against the grand sweep of cosmic history, getting into the stars is the only thing that really matters; everything else will crumble to dust. But if we get out of there, and we figure out how to live out there

[43:23](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2603s) and we figure out how to spread out there, there’s a lot of out there, and that’s worthwhile. Nothing else you’re working on is really all that important. It’s all these local obsessions that people fuss with “Oh my goodness gracious, look at this, it’s a terrible thing!” Yeah, really? Compared to us getting hit by an asteroid and everybody dies and that’s the end of life in the entire universe? None of it matters. We blew it really badly after World War II, when we put the plutonium on the top of the missile and used it to attack each other, rather than putting it on the bottom of the missile and using it as a nuclear rocket engine. Luke: Yeah, but a bunch of kids made a load of money from Bitcoin, so... Vinay: Right? But think about all our political concerns. Against this background, which is the real background, it’s the biological base, this is the real biopolitics. The real biopolitics is life expands, and when it doesn’t, it turns cannibal. Because we did not go to the stars when we had the opportunity, we are murdering each other on Earth, and we’re not going to stop murdering each other on Earth until we reclaim our birthright, which is the high frontier. We must go, or we will murder each other. Luke: Let’s bring it back terrestrial for a second. Vinay: Try. [laughter] Luke: Yeah. Let’s talk about the project you’re working on, that may take us to the Moon or the stars or elsewhere, which is very different from Bitcoin insofar as it’s based on a similar technology, and it’s Ethereum. Let’s talk a little bit about Ethereum and smart contracts, and all of the things that may allow us, from a terrestrial perspective, to live in those potential futures. Vinay: The thing that Ethereum put on the table was this concept of the smart contract, and the smart contract is basically a very light way of arranging mass cooperation, it’s an agency problem. The exact word is public choice: you put up a contract, the contract is tied to some set of actions that would be automatically performed by the contract, you load the money into the contract and the thing is immediately performed. That ability to do social choice through that kind of smart contract gets you the possibilities of new kinds of governance, and it also solves the coordination problems which are at the heart of a lot of our inability to do things like properly fund open source software. I more or less completely ignored Bitcoin when it came out, because I’d been part of the e-gold economy and I knew that currency alone didn’t buy you social change, it just wasn’t enough. But the ability to get something that had what David Redd calls the group-forming network

[45:53](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2753s) capability, something that can allow people to organise new social structures and solve these collaboration problems, that seemed extremely interesting. So, I got involved, and so far we haven’t done much of the stuff that I had hoped for. The ICO thing I wrote a piece about two years, maybe a year before the ICO thing started to explode, and what I assumed is that to get that kind of explosion of project funding we would need the ability to do equity crowdfunding. In order for the people who are buying tokens to have political rights to govern the projects by voting – shareholder democracy, which is the standard for all public companies – you need to have voting rights attached to the tokens. The problem is that we issued the tokens, but for regulatory reasons we couldn’t issue tokens with voting rights, and as a result we’ve wound up with a whole bunch of very disenfranchised shareholders who right now are laughing all the way to the bank, but then the projects either have to deliver or not deliver. It turns out to be really hard to spend $150 million in a responsible way that will generate shareholder value. A friend of mine says, “Look, even a turkey will fly in a hurricane,” and in this enormously expansive human environment it’s very, very easy for people to raise mountains of money that they cannot spend in a way that will generate profit. Without having shareholder democracy and effective democratic governance of these projects, how do you vote somebody off the board of an ICO team, if they’ve done something really dumb? We just don’t have any way for the token holders to get political representation, explicitly because the state will not let us do that, because then it becomes a securities issue. We’re kind of jammed in this position, where the real social power of these things, to have the people that fund something be in direct political control of it, is being hamstrung by ~outdated~ legislation. I would like to think that that problem is soluble, but I’m not sure that it is. The approach that I would take is to enfranchise many more people to become what they call accredited investors. My suggestion is that there’s a technical accredited investor category that allows people that have relevant degrees or professional experience to become investors in these kind of projects. That’s the approach I would like us to take, because then we could build this enfranchised shareholder democracy, but the track that we’ve taken is to basically try and build everything as a commodity, and as a result there’s no

[48:23](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2903s) political representation. That to me is a huge missed opportunity, and hopefully some jurisdiction somewhere will take a risk, figure out how to issue tokens that include shareholder democracy measures, require things like board meeting and elections of officers and all the rest of that stuff, and actually begin to mainstream all this business into something that gives real political power to the people, in this case the people that are funding projects. You know, how much is the Mars mission going to cost? A couple of hundred billion dollars? $500 billion? I don’t know how much it comes to when you start talking about transporting a million people to Mars to go and build a self-sufficient civilisation, but in all probability that’s going to wind up funded with crypto money. Probably the Bitcoin bubble will be the thing that builds the Mars mission, we’re just going to ICO Elon Musk’s Mars trip. These things are super tightly related; all of the Silicon Valley money is building spaceships.

[49:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=2961s) Luke: Well, that’s great for Elon and his buddies when they can off-world to Mars, but what about the rest of us, Vinay? It feels like the blockchain project, the most exciting, the most interesting thing about it is this word “decentralisation”. We messed up. John Perry Barlow and his Declaration of the Independence of Cyberspace, he always envisioned cyberspace being decentralised. In the manifesto, he said that governments aren’t welcome here, we will decentralise this Internet thing,” but we grew the stacks, we created the centralised powers of Google, Facebook, Amazon, whatever the acronym is. Is there an opportunity within blockchain more broadly to take back the Internet? If the Internet became the construction project that John Perry Barlow never wanted, do we need a demolition? And can we use blockchain to build not Web 2.0 but Web 3.0?

[50:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3021s) Vinay: So, finally we get to talk about economics, because this is basically an economics problem. You guys ~all frequent~ economists. Who knows about John Nash and Nash equilibria? Okay. What about Ronald Coase? Coase? Going once, going twice. Wow, this is going to be fun! What about Yochai Benkler? Okay, right – get ready, you’re going to do some economics! What Nash explains in his early work is how we get locked into situations which suck. In its simplest form, the Nash equilibrium is a situation which is terrible for everybody and nobody seems to be able to change it, because everybody would have to agree on what the solution is and they’d all have to change at the same time. Highly problematic. Once you learn to see these things, you see them everywhere; they may not be strictly Nash equilibria in a technical sense, but you begin to realise this particular quality of coordination problem that has to be solved to unlock some kind of value. Lots of that around. Then you get Coase. Coase to me is the most important body of economics to understand. Again, there’s a vast body of work attached to Coase, I’m just picking out the thing he’s best known for, which is a paper called The Nature of the Firm, which he wrote in 1937 and then won a Nobel Prize for. Remember, I’m not an economist, so I may fluff some of the details. Coase basically says, “If markets are efficient, why do command & control hierarchies inside of companies exist? Why is there any reason for that to be there?” The answer turns out to be that decisions are expensive and deals are expensive, the transactions and the decision making have real costs. Inside of a command & control hierarchy you make the decision once, and then you have an economy of scale, because the decision is the applied over 100,000 workers at IBM. That economy of scale and decision making is why companies are big, and information gets cheap companies should in theory become small. This is a very, very powerful effect, and the rise of the gig economy and all the rest of that stuff is often attributed to Coasean factors. Information got cheap, finding gigs became cheap, it was very easy to go and post that you needed help and post that you would offer to help, and all those systems together produced this kind of very fluid kind of Airbnb style environment.

[52:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3171s) Benkler then comes along and says, “To really get this stuff to work fully, you need to operate inside of a commons,” because most of the benefit that’s produced from these kind of activities in a post-scarcity environment, which is to say that digital files can be replicated endlessly, most of the value that's generated in these kind of situations is indirect and hard to capture. If you look at something like Wikipedia, Wikipedia’s benefit is its enormous completeness, and its enormous completeness is hugely more valuable than any individual article inside of it. All the Wikipedia editors are indirectly benefiting from each other’s work, and the only reason that it holds together socially is because it’s united by the fact that all of the content is licensed freely; you can use it for anything you like, so everybody benefits from everybody else’s work, inside of this tightly-bounded commons. Benkler wrote a book called The Wealth of Networks which really explains this stuff and it’s fantastic. Those three, that’s the kind of economic tripod you need to understand cryptocurrencies. Now, where was I going... I got side-tracked by economics.

[53:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3231s) Luke: Space, again, probably. You were giving us the economic lesson that underlies things like Ethereum. Vinay: Bingo. So, here’s the thing that we missed: for some reason, and I think this is an unsolved problem in economics, in that this incredibly low-friction Internet environment we wound up with enormous seas of little companies, which is exactly what you’d expect from Coase, but we also wound up with the stacks. Why does Amazon exist? Why does eBay exist? Why does Facebook exist? Why in an ultra-low information cost environment do we get these enormous slab-like companies which have vast command & control? One possibility is that those companies aren’t companies, because all of them implement extremely complicated and sophisticated internal markets for capital allocation. It may be that we call it a company but it’s actually a marketplace, and that’s a very strong possibility, particularly for Amazon, Amazon has several internal markets and externally-facing markets. The other possibility is that there’s simply an enormous chunk of economics that we don’t know, possibly something to do with behavioural economics and mindshare, so it may be that for an individual consumer making a decision based on brand actually results in a winner-takes-all environment which produces the stacks. Because how many brands can we really remember? It’s certainly not 8,000. So it could be a behavioural economics limit. But please, somebody in this room, if you know the answer to this question, write to me and tell me, because I’ve been trying to find the answer for years and just can’t find the economist. So, the transformative bit, the thing that we wanted was the ability to do an orchestration of new social structures with very low transaction costs. If you take this kind of social Internet thing, the whole social media thing, and you imagine welding it directly to the ability to raise money and target projects, you can imagine a pulling together of the social and the financial in a way that would allow efficient resource pooling to do things efficiently.

[55:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3351s) You can pool the money to go there and rent the bus, you can pool the money to go there and rent the ski launch. That kind of thinking, what does it really take? It needs the ability to rapidly move the money, to coordinate the problem ~to pull things together~. The same logic applies to building a hospital, the same logic applies to running a welfare state. You could very easily imagine basic income on a blockchain, where you use the blockchain’s traceability to gather the evidential data that you require to set the level of basic income. You use the evidential data from the blockchain, all the spending history, to identify when somebody has formed a monopoly or a cartel, because the data about the payments is right there. The possibility is that you could use the blockchain to really police the basic income system, to look for people who are skimming. How do you identify when you’ve got a cartel among landlords that have broken the free market in an area so that you could pull the basic income payments? Well, here’s the data, here’s the natural pricing, here's the fake one that we set up that sold the stuff at market places: boom, now we know where the problem is. There’s a huge amount of possibility there. But, do we have the political will? Do enough people care about their own living conditions to form structures that look like unions to improve them? Because the unions, that’s how you got your weekends, it’s how you got your minimum wages, it was the bedrock of the process that gave us the NHS. The unions really were the things that improved the quality of life for ordinary people, more than any other single factor, and they are gone. Luke: Before we move on to talk very quickly about identity and the blockchain, which I think is one of your most important messages, we do have time for audience questions. What we’re going to ask is that you just come up and queue in the isle here. For the process of the filming, if you have an audience question, please join the back of the queue on the isle, we’ll be using a mike just here so please start moving now. In the meantime, I’m going to ask you, Vinay, identity and the blockchain: in what way is that such an important and potential use of blockchain technology? Vinay: Sure. Oh, we’re going to have a moment of hubbub here. Let’s give them 30 seconds.

[58:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3501s) It’s a good time to breathe; the identity thing is going to be deep. Luke: And if you leave now, you’re going to miss the ending, when he reveals what you should be investing in next, so I recommend that you stay. You want to pay that student loan? I’d stay. Vinay: [laughs] Marvellous, marvellous – alright guys, let’s do this! The identity thing is very, very simple. Right now everybody has a name that they were given by somebody else: you’re given a name by your parents, you’re given an ID number by your nation state, your university, your employer and everybody else; people are really always given names by other people. In the blockchain community there’s an awful lot of talk about what they call self-sovereign identity, which is a really, really grand way of thinking about things, and I think it’s a name which is just fundamentally misleading. Because your name is not your identity; your identity has always been self-sovereign, you’ve always been the person that is you, there’s nothing new about this notion about self-sovereign identity. What is new is the ability to assign yourself a unique name, and this is really what generation of crypto keys gives you, it gives the ability to generate a unique name for yourself, and to give people a version of that name that allows them to communicate with you, without being able to steal your identity. That’s all, that’s how key cryptography is: it generates a way for you to communicate securely with me, but not to pretend to be me; you can send me a message, but you can’t fake my identity. This notion of self-assigned unique names gives us the ability to organise all kinds of things in the world. Because right now one of the biggest problems we have is we don’t know what things are called. For example, if we take this bottle of Sprite, this bottle of Sprite has no name of its own, it is Vinay’s Sprite, TM, but it is not in any way, shape or form addressable other than me. If I drop it, it’s no longer Vinay’s sprite; it’s now a mysterious category we call garbage. It’s got an identifier on it, you see this barcode, but that’s an identifier not for this bottle of Sprite but for all bottles of Sprite, it’s a class identifier. We’ve got 2D barcodes and we’ve got crypto, and

[1:00:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3651s) we could put a 2D barcode on here that was a self-assigned name for this bottle of Sprite, and then when I bought it, I could be bound to that name, that’s my Sprite, and if I dropped it, we’d know whose garbage it was. Doing that for individual bottles of Sprite might seem a little bit excessive, but we could do that for industrial pollutants, we could do it for toxic waste, we could do it for all kinds of problematic things, and it’s part of building this kind of container that you need to build an ecologically sound society. We could give names to individuals this way, they could make their own names, we could do that as a way of creating a global identity commons in which everybody could communicate with everybody else securely and they could know exactly who their message was going to, we could do all of these things, but it’s not just for humans. It’s for humans, it’s for machines, it might be for processes. Think of invoices, every invoice is a different number in every organisation it goes through. We don’t need to do that anymore; generate a key, assign it a key, have all the people who are managing the invoice given the ability to read the mail that comes into the key. All of this stuff is possible, but it all boils down to this question of how do we think about the naming of things, and that’s a question that goes all the way back to the deepest myths of our civilisation, and innovation in naming things is genuinely going to be a revolution. Luke: On that note, we’re going to turn to some audience questions, and thank you guys for queuing up. The gentleman just here. Question: Can cryptocurrencies be considered as a potential rival to gold, since it fulfils the same purpose and concept? Vinay: The thing about gold is that gold is really old. Cryptocurrencies might be a rival to gold in the short term, but until they’ve got a couple of thousand years of use, there will still be a tendency to say, “Well, this stuff hasn’t been around as long as gold, and it doesn’t really solve the same problem.” I mean, we live in a world where we have a kind of pool of a couple of billion people that live in a very fast-moving culture, but we also have half of the human race who grow all of their own vegetables on farms that they work by hand, and for those people it could be two or three generations before cryptocurrency becomes fully tangible to them; but if you turn up with a bag of gold anywhere in the world, they know who you are. So I think it will take a really long time, measured in centuries, for there to be direct compatible utility. That doesn’t mean that gold price

[1:03:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3801s) won’t be impacted by cryptocurrencies, just that the age of gold as a valuable thing gives it a quality that can’t be replicated by crypto. Question: Hi. One of the main appealing things about crypto anarchism is that in a virtual blockchain state you can do away with state oppression and we can work towards self-governance. But how do we reconcile that with the fact that blockchain was initially used for money laundering and the whole Silk Road scandal? How do we prioritise illegal things, like money laundering to terrorists, with freedom and the whole libertarian notion of self-governance? Vinay: The real hardcore libertarian argument is who told you these people were terrorists? They just view all of that as being free trade, including markets for violence. Question: But money laundering can be used through the blockchain to fund terrorist groups. Vinay: Oh sure, sure. But really hardcore libertarians will tell you who told you these people were terrorists, and money laundering is just free trade. The people that originally designed the blockchain thought that those kind of uses were completely within the scope of what they were willing to countenance, because they thought that what they were fighting against was a much worse form of oppression, which is the tendency of states to commit genocides. If you have a system where all power is centralised in the hands of the state, the genocide risk killed 150 million people in the 20th century, maybe more. Compared to that, all of the terrorism, and all of the organised crime and all the rest of that stuff become tiny little problems. The original architects of these systems viewed all the terrorism and money laundering, organised crime and all the rest of that stuff as being completely acceptable prices to pay for reducing the power of the state to commit genocide. Now, I’m not saying that I agree with that, but the original architects of these systems understood those trade-offs and paid up front. My personal opinion on this is that both extreme decentralisation and extreme centralisation create accountability-free zones. If you think about an institution like the Catholic Church, which is enormously centralised, there is very little criminal accountability for things like sexual abuse by priests, they’re incredibly protected by the central authority. At the other extreme, if you go to areas which are rural and poorly policed, people are doing

[1:05:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=3951s) all kinds of crazy stuff, like burning plastic waste in their backyards, contaminating their environment with dioxins, all this kind of stuff, and there’s no accountability there either. At the extremes we get spaces with no accountability; it’s in the middle where you’ve got multiple competing entities that are watching each other that you get accountability. So I think as a general design principle you want systems where people are watching each other, if you want an accountable system. At the extremes, you get zero accountability, whether it’s centralisation or decentralisation, and I think it really is one of these things, where you have a Goldilocks point where things are about right, and the extremes are basically life-denying and humanity-destroying. Luke: So essentially surveillance is the solution to surveillance capitalism? Vinay: I’m not that into the notion of anonymity on a vast scale; what I like is accountability and transparency. Accountability and transparency has to be enforced from the bottom as surveillance, because otherwise these things just don’t work. If you look at the drops in police violence that come when people are made to wear body cameras, that didn’t have to wait for police to have body cameras; that could have just been a simple protocol, where everybody records the police as soon as an interaction begins, and if the police were okay with that and it was expected... “Excuse me, sir, I’ve got to stop you for a parking ticket. Would you mind turning on your camera?” That’s the way we should have done it, it should have been normalised into policing, that the police ask you to make an independent recording as part of the performance of their duties. That’s how we should police. Question: I was wondering what’s your opinion on Tangle as the next generation of DLT, and do you agree with Vitalik Buterin that ~the developers of IOTA have flow decisions~, or do you think it has the potential to be more efficient, just in terms of not having transaction fees and such? Vinay: This is a hard computer science question. The short answer is I have not done a rigorous enough analysis of these systems to know. I’ve spent most of my free bandwidth in the last year learning about the legal questions, and the technology has kind of marched on its own tracks. My gut feeling is that storing every transaction on every node is probably in the long run going to turn out to be excessive. On the other hand, storage is so cheap that the correct answer might just be to pay upfront and do it the hard way. But this still leaves the

[1:08:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=4101s) question of how do you get the blockchain to be fast, and the short answer is nobody really knows yet. I think this is one of these kind of high frontier situations, where a thousand flowers will bloom and maybe somebody will figure it out, but it’s extremely hard for me to say. I think the Lightning Networks are going to be truly amazing, because they’re simple, they’re cheap, they’re powerful, they’re easy to understand, and they’re fairly transparent in implementation. I think that the extremely complicated systems, where not all nodes store all transactions, are maybe going to behave unpredictably in the real world, but that’s very wait and see. Sorry, I don’t have a more concrete answer. Question: That’s okay. I was wondering, because we saw what happened to the Ethereum network when CryptoKitties came out and it slowed down so drastically. Do you see it as a real problem for the technology going forward? Vinay: Oh, yeah. Everybody knows that Ethereum is slow, Bitcoin is slow, those systems are just slow. But the Plasma stuff, which is basically kind of like a Lightning Network but for smart contracts, will help, and then there’s Casper and the move to proof-of-stake, which... Wow, that’s a big jump. If that works, it’s a totally new game, because we also get rid of the environmental footprint of mining, and that’s a huge step. It may be that mining is the kind of industrial revolution dirty phase of the blockchain’s development, and then you finally get into this revolutionary point where the thing finally becomes a social structure, rather than being anchored into the industrial mining operation, and then a new game begins. Question: Hi. My question pertains a bit more to privacy. Because this idea of the blockchain being open and everyone being accountable is nice, but at the same time, if I send someone Bitcoin, they can click on my address and they can see how much money I have. Now, that doesn’t really make very much sense, does it? In terms of a currency, I don’t want to tell Starbucks how much is in my bank account every time I go get a coffee. Vinay: Yeah. Again, let’s just get the can opener out, dump out the can of worms. Norway, until I think relatively recently or probably still, publishes everybody’s income as part of their national tax records, you can look up how much money people are making, and that works in an egalitarian society; it wouldn’t go so well in America. There are obviously a lot of possible solutions to that. The hardcore thing, the real atomic

[1:10:51](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=4251s) bomb in this, is the zkSNARKS. The possibility that you can actually do this very, very intense cryptography in a way that produces total anonymity for the transactions, frankly, scares me really badly, because it removes all possibility of having social control of cryptocurrencies. Zcash, they don’t have smart contracts yet, but a lot of the fundamental primitives from this stuff are being built into Ethereum, and I don’t know what kind of a social equilibrium you get in a world where zkSNARKS are widely distributed. Because centralisation is bad, total decentralisation is bad, the habitable zone is somewhere in the middle, and the SNARK to me looks like an irrevocable movement towards the extremely decentralised end of that spectrum. I’m not sure we’re going to like what we find out there. Question: There are some people who believe that Bitcoin is a bubble, and although I heavily invested in cryptos, I think there are some truth to that. Because what’s happening right now is quite similar to the tulip effect in 1630s, and people just happen to agree that Bitcoin or other cryptocurrencies are at a certain price. If we want to prevent Bitcoin from being a bubble, what needs to change? Vinay: There is no doubt at all, as it currently stands, that the entire blockchain system is a bubble. You’ve got $600 billion of capital, and you’ve got practically no profits. That’s not a hard question: you ought to have about $60 billion worth of profit if you’re going to value something at $600 billion, and I’m not seeing $60 billion of actual profit. However, should they begin to build a 2-3% of global GDP improvement, you could very rapidly see $60 billion of actual profit come out of the fact that cryptocurrencies exist, then it would be like you’ve kind of taken the bubble and sprayed it with concrete and now it’s a bridge. Whether we’re going to manage that or not I don’t know. The other thing is stock markets. We think about the tulip bubble, but the early stock markets were astonishingly fraud-filled and explosive, and the possibility is that you wind up with a very, very messy early phase, like the early stock markets had, then we

[1:13:21](https://www.youtube.com/watch?v=Yn5kjVYjYvI&t=4401s) learn how to govern these things, we learn how to balance everything out, and you get a system which is much, much more performant. So, possible, could go either way, but I think it’s very likely that you’re going to see a pretty apocalyptic crypto crash at some point. I think it’s likely that you’re going to see fiat coins, like dollar coin and yen coin, become issued by governments, and I would be unsurprised to see something that looks like Visa or SWIFT but it processes smart contracts. My guess is that that will be an international consortium with one node per continent, so there will be the Chinese clearing house, the American clearing house, the European clearing house, maybe a Russian one, maybe an Israeli one, maybe a few others, but that that model will be very strongly based on the nation state, in much the same way DNS is. The alternate track is that the nation state paradigm breaks horribly because the dollar becomes extremely badly impacted by political risk, and that contagion brings down both Europe and China as integrated units, and in that kind of a scenario you could very well see Internet governance become global governance, probably in partnership with the UN. In those kind of scenarios your Bitcoin is underpriced even at $100,000. But you’re right, it is more profitable in apocalyptic scenarios, it is a hedge against apocalypse. Question: We take electricity as granted in the developed world, but in the developing world it’s very problematic and access to it is sometimes scarce and unreliable, and people will rely on personal generators, especially in sub-Saharan Africa. How do you think peer-to-peer energy trading, namely smart microgrids, could be implemented in developing countries? Vinay: One of the clients I’m currently working with for my main company Mattereum is doing a blockchain-based payment system for microgrid management. What Mattereum does is basically the legal work required to make a smart contract legally enforceable in 150-something countries, and that allows you to do things like transit physical goods because you can get legal control of things. In the electricity case, you basically have a token payment that goes in one direction and electricity goes in the other direction, and the gateway on that is a smart meter backed up by a smart contract backed up by law. Those systems give you the ability to capitalise large-scale rollouts of this kind of community-scale solar.

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Continues in https://guptaoption.com/texts/706-3.md (part 3 of 3).
End of [706] Blockchain Beyond Bitcoin - with Vinay Gupta | Virtual Futures Salon, part 2 of 3. Its connections are at the top of this file; the map is https://guptaoption.com/llms.txt.