2.1 Balaji S. Srinivasan - Bitcoin as the Flag of Technology

All right, so there's some stuff I've been tweeting about, some stuff I've been thinking about, about how Bitcoin becomes essentially the flag of technology. It encodes the implicit values of the technology community explicitly. So let me explain first what I mean by the flag. Go through the values and talk about why I think this actually happens. So, you know, when I talk about a flag, you guys have seen like the, you know, the bitcoin mooning tech flags and so on. Essentially the idea is that what I mean by technology, first technology is culture that Silicon Valley built and exported. So of course it's the unicorns and the apps and the products. But more than that, it's a culture that gave rise to these things. It's the books that Paul Graham and Jessica Livingston, Ben Horowitz, Peter Thiel, the Britain. We have exported this culture worldwide that says how to and why to build and scale these globally competitive tech companies. And not all flags are geographical. Some of them represent movements. So the Gadsden flag, you know, liberty, the pride flag, and in this sense the Bitcoin flag, it represents values, not necessarily a geography per se. And a flag is something to align behind. So the thing about the tech community is these are folks who have, you know, strong opinions. They have, they have their own companies, they have their own interests. But whether it's Dorsey of Twitter, Reid Hoffman of LinkedIn, Peter Thiel of Facebook, Mark Anderson of A16Z, Thiel obviously has its own things besides just Facebook. These folks who kind of have their own baronies and principalities are nevertheless aligned behind Bitcoin because it's many people's first choice and many people's second choice. So it becomes the community's first choice as sort of a shelling point that everybody can agree on. A useful precedent for this is Linux. So Linux, everybody can profit from it, but nobody can corrupt it. And thus Facebook and Google, even though they're big competitors on many other different axes, they cooperate on Linux because it's a demilitarized zone. One party cannot deprive the other of their contributions. So that gets to the concept of the flag. Let's talk about the values. Bitcoin and technology are both international. So here's a map of all the tech unicorns. There's from 2017, 2019, it's even more international. And here's the geographical distribution of crypto traders there. As you guys know, all around the world, Bitcoin and technology are capitalists. I mean, technology is Synonyms with venture capital, 1000x, upside property rights. What bitcoin is, it's literally a ledger of transactions. It's something where everything that it does is about the exchange of money, the exchange of profit. Bitcoin and tech are decentralized. I love the street from Ben McEvins. You know, the great thing about tech monopolies is how many there are to choose from. If you do any market map, you know, whether it's fintech or biotech or whatever, you'll have hundreds, hundreds, thousands of logos. There's, there's all of these different tech companies, all these different approaches. And not only is bitcoin itself decentralized in the sense of, you know, miners and nodes and what have you, it also has given rise to this entire crypto ecosystem. So that even if bitcoin security models attack, we've got proof of stake, we've got all these other possibilities out there. Now, I'm not saying it's perfectly decentralized, but it's on a continuum towards that ideally. And so there's many centers of power. Bitcoin and tech are hyper deflationary. So if you look at this amusing kind of thing from the top, this is actually from like nine years ago. These were all the things that you needed to buy to equal a smartphone. So that smartphone, that piece of technology, reduced your cost of everything else if you had it in the same way, like if you hold bitcoin, it reduces your cost of everything else if you hold it. It's a fundamentally hyper deflationary thing. And we're in the middle of that. Bitcoin and tech are both networked. So technology is about a network like association. It's folks who are near each other ideologically. They're separated by the so called geodesic distance, which is the number of degrees of separation in social network as opposed to the great circle distance, which is the distance over, you know, like a globe. And like, if you look at the bitcoin meetups, they're all around the world. It's not like just clustered in one geographic area. It is something which is a truly networked international phenomenon. Bitcoin and tech are cryptid. So like the crypto wars, you know, these were fought in the late 90s. You know, there are folks like, you know, Adam Back and others who are involved in this. But basically from the beginning, tech has been about encryption. Indeed, without encryption we wouldn't have HTTPs, we wouldn't have ssh, we wouldn't have ssl, we wouldn't have essentially the tech industry we do today, and we certainly wouldn't have bitcoin where it's about public and private key pairs. Bitcoin and tech are digital, like this graphic above shows. From an iPad, you can find maps, you can order food, you can listen to music, you can write documents. Essentially everything either has to be digital, digitized, or for those that can't directly be digitized or interfaced to, it has been. Bitcoin hasn't just digitized money and gold, but it's led to this entire crypto industry where we're digitizing stocks, bonds, commodities, all this type of stuff. Bitcoin and tech are volatile. So, you know, it's a great quote from, you know, Mark and Ben. The best thing about startups, you only ever experience two emotions, euphoria and terror. And those are the emotions of a crypto trader as well. So volatility, you know, the thing is, anything you bootstrap from the beginning just has high volatility. Just the nature of it. You think it's going to the moon, then you think it's going to zero, and then it's back and back and forth. Bitcoin and tech are ambitious. So, you know, any startup, any founder, has a hallucination about the future, something incredibly improbable that they are just willing into existence. And one of the very, very first posts about bitcoin was Hal Finney responding to Satoshi and saying, hey, if you bitcoin wins, that gives each coin a value of about 10 million. Is it really 100 million to one against? Can we make this happen so that like incredibly insane utopian sort of thing is just there? It's encoded in the value. Satoshi believed his message board post would change the world. He was right. And then, perhaps most importantly, bitcoin and tech are quietly revolutionary. They accomplish revolution not by standing on street corners with science saying, who's Dr. Power? Not like that, but rather by lots, millions of private actions. So, you know, this is a crash in albums and the rise of streaming. This is the crash of action medallions and the rise of Uber. This is the crash of print media revenue and the rise of Google and Facebook and, you know, similarly, this is basically the rise of bitcoin. And what it's led to is, you know, millions of private actions quietly, you know, people's homes and on their phones have led to a situation where, you know, the head of the imf, you know, the People's bank of China, the president, all these people are talking about bitcoin, talking about cryptocurrency and whether they're saying positive or negative things, it doesn't even really matter. What matters is that something that was incredibly obscure or post on the message board is causing gyrations. Every major bank, every major politician, every, you know, technology entrepreneur, every VC knows about it. And, and that's this incredible achievement for just 10 years. Okay, so the future, basically I think of crypto as restoring many traditional American rights. Freedom of speech, freedom of contract, freedom of association, protection against unreasonable search and seizure, the right to privacy. These things are accomplished not just by Bitcoin, but by technologies like zcash, technologies like Ethereum. There's a whole allied spectrum of things together where we're starting to defend our rights cryptographically rather than through, you know, fallible humans and fallible laws. And the thing about this is not only does it restore many traditional US rights, it nevertheless appeals internationally. It's kind of what, you know, America used to be like a signal to the world of what, you know, the right way to live was of our values. And it's something which is non violent, it's capitalist, it's anti war, it's like kind of what, you know, I think the best America stands for. I think this is the big axis of the 2000 and twenties where. This is a great article, you should read it. If you haven't heard of modern monetary theory, read all about it. This is going to make every bitcoiner a millionaire. It's going to make everybody else a millionaire as well if it goes through. But essentially it's a premise that it takes the true statement, the observation that the state can't pronounce print money and it turns it into the recommendation that the state should print money to solve all its problems, to pay for, pay for everything, to monetize it out. And this video, Hamilton versus Satoshi, I think that is what the 2020s are going to be about. East coast versus West coast, land versus cloud, state versus network, centralized versus decentralized, nationalist and socialist versus international capitalist, Hamilton versus Satoshi and MMT versus VTC. So I think that amidst this, in the 2020s, people will start aligning behind bitcoin and what it represents in the crypto community. And this goes from kind of the edges of tech to the center in the same way that seed investing went from the edges of tech to the center over the course of the 2010s. So thank you very much. My Twitter, if you want more, I guess I could take a question or two. Is there a microphone? Yeah, I'll put the slides on. Yeah, I guess I'm curious. You seem to understand that this is eventually going political. And I'm wondering if you ever think there'll be a state of emergency where essentially states are going to start attacking individuals that are known entities within the space. Yeah, it's a great question. So I think that the thing that happened with the Huawei CFO being like kind of detained in Canada, I think is something that's gonna happen much more frequently in the future where like known individuals, tech people are sort of detained by states as like this geopolitical thing if they're large crypto holders and so on. So yeah, I mean, like, I've got my math book just in case they do that for me. Yeah. If nation states wanted to destroy Bitcoin, what do you think would be the most effective way to do it? So I think China took a good swing at it in 2017 and the price increased 20x. So I'm not giving a flip answer, but that's actually like they took a pretty good swing. And now I don't know if the reports are true, but something I saw, China's now banning any mention that blockchain is a scam on social media. If that's true, that's amazing. That's an incredible U turn, you know, if you can't beat them, join them in a sense. And I think China's more competent than the US on tech stuff like, you know, in the sense of just as a neutral observation, many more Chinese politicians know what a firewall is than an American politician. They probably define it. You know, they're engineers as opposed to lawyers or what have you. But let's say that you really wanted to truly fight bitcoin. What would you give? So I think the predator prey, let's say it's China first you block port 8333, right. So you just try to stop packets that are bitcoin related from coming in. Okay. So then you respond with, you know, packet or like a port randomization. You pick different ports at a time. Then they respond by essentially doing, you know, packet inspection. Then you try to tunnel it over SSH or some other protocol. Then they do deep packet inspections. They do some ML to try to look for bitcoin like characteristics. And then at that point it gets to interesting predator prey. The algorithm you use would have to be something where you could publish it, people could read it because it's open source, and nevertheless the random seed would still protect against it. You have to use enough different protocols, enough different obfuscation. I think you can, given that synchronizing the blockchain takes a relatively small amount of data. I think it would still. This is where the one MB thing actually becomes handy. I think it would still be possible probably to protect the blockchain and make it something that people could sink amongst themselves. Another backup is actually the blockstream satellite. Whether it's actually launched or not is a good concept because nations have airspace, but space, space is actually something where you can fly something over it. You can't do geostationary necessarily, but you can beam down access to for example, the bitcoin blockchain and other chains. So I think that's where the predator prey would happen, would be at the network level. And in the event that you could successfully interfere with it, you would cause essentially a temporary partition where let's say all the mining is in China, all the transactions are in the rest of the world. And then you get chain extension happening in China, but transaction happening in the rest of the world. You have this peekaboo problem as the chains sync up. That could lead to issues you might have to go to like a semi, semi trusted model for a time. It could lead to a fork between like a China coin and the rest of the world coin. And so I think, you know, preparing for something like that, where there's a possible network partition and eventual consensus, that to me is one of the biggest threats against BTC beyond the snatching ground. But I think it's feasible to protect incentive for aware of. Yeah. So given the alignment in values between that you mentioned during your talk between like bitcoin and kind of like traditional American values, if you will, that we used to export around the world, how would you think about reconciling the lack of broad based traction that we see in like the wider consumer sector in the United States and like what do you see as being potential tipping points for that activation energy to actually hit? Great question. So I think today, and probably still for a while, crypto appeals to two different kinds of demographics to, you know, the power users and the marginalized, not the people in the middle. And let me explain. So the power users are like developers or financiers. These are people who have the problem of moving a million dollars around the world or paying a million people one dollar at a time. You're trying to do things with money that are pushing the system that, you know, the normal banking system won't let you do. On the other end are those folks who are the, you know, of course the unbanked, but also the unbankable, the Deep platform, even devices. So the unbanked are of course, the sympathetic ones who are in India or Africa. They don't actually have a bank account. The unbankable are the less sympathetic ones. They're like marijuana entrepreneurs or folks who can't get a bank account. The deplatform, those are being pushed off of PayPal or what have you. And devices which are like machines that wouldn't have a bank account in the first place. So for those folks or things on the edges, you know, the power users and the folks who are marginalized in some sense, that's where crypto is useful today. And there's some entities like Binance that are both at the same time. You know, they're both a power user of money and they're like quasi unbanked and on like peripheries of the system. I think what happens is that eventually, you know, once you start building tools for yourself, eventually it comes into the middle. Linux is again, a good analogy. Linux was a power user's tool for a long time, and everybody gave up on Linux on the desktop. And then it actually happened because you had Android, and then arguably iOS is also BSD based. So you had Unix on the desktop and that became everybody's desktop. It just sort of rebranded and changed. It became something for the next desktop. So the equivalent of that within crypto, I think, is probably VR. So by, you know, the late 2000s, when everybody has millions of Oculus headsets, we're sort of opting into VR. You're spending all that time you spend looking at screen. A good chunk of it's in VR. And then for an environment like that, digital currency is like the only, only kind of option. So I think that's where the thing truly goes vertical. But until then, or until like some kind of inflection points, it's going to be a producer technology. You can get very far. All right, any more? Good. Okay, we'll call it. Thank you.