Thoughts on the future of programmable money

A discussion with Andreas M. Antonopoulos

James A. Donald discussed by mail with Satoshi in late 2008 and challenged him on the development of Bitcoin, scaling abilities and security issues.

- “You will not find a solution to political problems”, he said.

- “Yes, but we can win a major battle in the arms race and gain a new territory of freedom for several years.”, Satoshi replied.

Ten years later, Bitcoin network is out of reach from any governmental attack and pushes the boundaries of innovation, influencing each layer of our society.

In this interview on the future of programmable money with Andreas M. Antonopoulos, we took a deep look on where the crypto industry stands regarding economic and governance opportunities in order to foresee the upcoming developments of the crypto-space that will, like Satoshi said, help us in gaining new territories of freedom year after year.

Crypto use and Economic situation

The common ground of cyberspace allows quick integration of any technology and their implementation in the multitude of applications developed every day. This smooth reality of the digital era might be a reason for Andreas and others supporting the idea for a faster adoption of Bitcoin in online retail shops (digital world) than in brick and mortar retailers (analog world). But there is more than a simple gap between digital and analog worlds. While the digital space is quite steady, our tangible world suffers from fragmented rates of development.

Therefore, the idea behind Andreas saying “Korea doesn’t need Bitcoin (…yet)” makes sense.

Because of various states of reality co-existing in the analog environment, the adoption rate of Bitcoin and its necessity differs.

The latency between a discovery and its worldwide application create asymmetric expansions, leading to various economic situations.

The state of where we stand is relative to the geographical region we look.

Hence, on the economic side, Andreas believes that in places where financial services are trusted and working, like Japan or Korea, the necessity to use crypto-currencies is not obvious. The centralized architecture of such countries lay upon trusted processes and stable economic activities providing enough faith in the system while outcompeting the current abilities of a blockchain based payment system.

In the current economy, money is bounded by physical economic regions such as the Euro. Therefore, the rise of new industries increasing the pie of our economy has to be supported by monetary inflation which is supposed to support the scaling of the European ecosystem, and in fact, this economic policy applies for any physically bounded system. It is believed that wealth will be distributed in the real economy for all the users of a same inflated currency without affecting the purchasing power of individuals living in this ecosystem. Unfortunately, this is a lie and developed countries are suffering from this economic architecture.

However, crypto-currencies deliver an alternative. In the digital economy, the development of new ecosystems will always involve the creation of new money (token) valued according to its use. The global economy becomes fragmented into various ecosystems which are not physically bounded anymore but become bounded by their use. In this sense, a newly created industry or use case do not drain the value of existing ones when not in competition. Hence, inflation remains bounded within fragmented economic environments without reaching the whole set of individuals. The value from an ecosystem providing Peer-to-Peer booking solutions with its own token, do not enter in competition with a newly created Dapp providing blockchain based supply chain solutions. Therefore, creation of new money for new use cases protects the value of existing ecosystems while allowing economic growth.

The most advanced countries use crypto-currencies for speculation purposes and custody services while the less advanced ones, without financial institutions or corrupted powers (e.g. Venezuela) would try to use them as a daily payment system, a store of value, and a new means to reach legitimate forms of governance.

There lies the economic schelling point driving adoption at the global scale: increase in speculation from developed countries drives up the market capitalization of the whole digital economy, leading to a fall in volatility and allowing the use of crypto-currencies as a reserve of value for those who need.

The loop giving value to decentralized systems starts with the failure of centralized ones who push populations to other forms of governance.

Thibault: “In this understanding you acknowledge that centralization gives value to decentralization?”

Andreas: “Yes.”

Thibault: “But don’t we bound our economic reality to parallel economies in terms of thinking trust? For the value of a decentralized paradigm to be conserved do we need the existence a centralized one?”

Andreas: “I think centralized institutions do not scale. They scaled two centuries ago for an industrial society that was relatively disconnected, right? But in today’s environment where you have a massively interconnected globe, centralized solutions don’t scale because they give too much power to very few players who abuse that power consistently. And so, those systems do not serve humanity. And the question is can we serve humanity better with decentralized power? I think so. I think we need new institutions for our new globalized society. And the existing institutions are failing. I mean, to me, that’s the theme of my generation. It’s surviving the failure of institutions. Institutions that are no longer able to solve the global problems we have.

And it’s quite all right if you think it’s okay to leave 4, 5 billion people behind in order to preserve the institutions supported by tradition. Sure. That’s a political position to take. I think it’s an immoral political position to take. And so, I don’t think we can leave behind billions of people just to preserve some institutions. They don’t deserve being preserved.”

Now, while populations of more developed countries may not see the interest of having a truly decentralized financial system, some populations have an instant need for those and use crypto with the accurate philosophy of peer-to-peer solutions.

Thibault: “People got to be fully aware all the time.”

Andreas: “Yes, and you know, measuring the progress of a society based on economic metrics alone, you could look at Korea and consider it a miracle of westernization, but it’s not. It’s a society full of its own contradictions, its own inequalities, and it’s all structural problems, right? It’s not a society where the success has been equally enjoyed, let’s put it that way, and it’s not my place to criticize because it’s not my culture. But, you know, every society has its inequalities and structural problems.”

Thibault: “But economically speaking, if Bitcoin is the present day choice bringing hope to third world countries, does its predestined scenario, meaning the 21 million hard-cap, makes it a passive venture that won’t be able to face future challenges and economic growth?”

Andreas: “So I think there’s a misunderstanding that in order for a currency to operate you have to be able to increase the supply. What people don’t realize is that we can further subdivide bitcoin into even smaller units. Subdividing units doesn’t change the value of each one of the units. It’s not inflation. It’s not like increasing the supply.”

Thibault: “It’s a fractal.”

Andreas: “It’s fractal, right. It’s like the joke that says,

- a guy walks into the pizza shop, and the shop owner says, ‘Would you like me to cut it into six pieces or eight?’

- And the guy goes, ‘Oh I’m really hungry. Let’s cut it into eight.’.

So, it doesn’t change the amount of pizza you are going to eat if you cut it into smaller pieces. The thing is we’ve got to think about money as a unit of measurement. It’s not a unit of value. The value is in the economic activity that happens. The money itself is a unit of measurement. If you, instead of measuring something in meters, you measure it in centimeters or millimeters, it doesn’t change. My height is 1.71 meters, if I measure that in angstroms, it hasn’t changed my height. I’m going to come up with a much bigger number, but it hasn’t changed my height. So, if we think of money simply itself as a unit of measurement, then the unit itself is irrelevant or arbitrary. No matter what sized economy you take, you can measure it with that unit; you’re just going to come up with a different number. So, we can change the granularity of the unit without changing the size of the economy.”

DAO governance and government’s legitimacy

The Yellow Vest movement in France is a direct response to the fall of French philosophic concepts such as the “Social Contract” by Rousseau. The population suffers from an unequal representation in the circles of power. As French philosopher Juan Branco says, politic has become more a career bootstrap than a way of improving social wellness. The illegitimacy of a state fragments the society which can start acting as an independent organism again and so do distributed systems. When listening to Yellow Vests, a large part of their narrative is built around “we don’t acknowledge any leader, outside or inside of our movement, there is no head to cut, this is our strength”. The parallel is made. The Yellow Vest movement is the tangible representation of the technological evolution supporting Bitcoin and more broadly DAOs. In the fear of seeing their movement attacked and shut down, Yellow Vests have intuitively structured their organization in a distributed fashion preventing both external threat such as government repression and internal attack by expressing a clear consensus preferring non-representation to misrepresentation. These arguments mirror the narrative behind DAOs. In this understanding I believe DAOs to become the new frame for the modern “social contract” in our modern societies. Their distributed architecture is aligned with the needs of a population seeking for non-centralized governance.

Thibault: “How can decentralization and specifically DAOs gain such a level of legitimacy?”

Andreas: “Legitimacy is gained through success. If the system works and delivers results, legitimacy follows. And the systems that don’t deliver results lose legitimacy very, very quickly. So, the social contract in France is not doing so well. Same thing is happening in the United States. To me the Yellow Vests really mirrors what happened with occupy Wall Street just after the financial crisis. And that was a movement that was not only violently crushed, in the same way Yellow Vests is being attacked, but also it’s a movement that has suffered from a lack of focus because it brought all of the grievances together from different parts of society with no agreement as to what was the goal. It’s very easy to discredit a movement like that because it’s a movement of complaints and not a movement of solutions. I don’t think Yellow Vests is going to be any more successful than occupy Wall Street was. So, the state didn’t create legitimacy and then succeed because of that legitimacy. It succeeded delivering something to people which then gave it legitimacy. To me, legitimacy is something you earn after you succeed in delivering value.”

Therefore, I want to emphasize on the possibility to frame such movements at a global scale thanks to DAO technology that would set clear frame to the solutions sought while keeping the decentralized fashion of those movements making them efficient, legit and hopefully successful.

Zero-sum game vs collaborative value

Language defines our identity. By trading coins, we express our willingness to swap our identity from one vision to another and possibly exit the changing vision of an ecosystem that isn’t ours anymore. Those shifts are the direct consequences of political decisions adopted by an ecosystem. The fundamental link between token and identity converges to a singularity, the direct representation of value. This way of thinking value liquifies our ability to substitute our membership from a given ecosystem to another according to our profound principles. Therefore, the value and legitimacy of a governing entity becomes subject to high competition thanks to ease of exit by its users. This might be the true definition of democracy. In a feedback loop, the number of individuals giving allegiance by connecting their identities to those systems, meaning attaching their value, ultimately defines the value of money itself.

Thibault: “Can this relative principle-based form of value (shifting value based on principles), compete with the absolute zero sum game of institutional entities and economic war?”

Andreas: “Yes, well I think one of the characteristics of our industry (crypto-industry) is that the vast majority of it is based on open source, it’s not a zero sum game. It’s a very collaborative environment where the research that happens in one project benefits all the other projects, and that not only applies to the successes, it also applies to the failures. If one project fails, every project gets to study how they failed and learns even more than if they had succeeded. We learned more from the DAO failing than we learned from the DAO succeeding, for example. And that feedback loop strengthens all of the projects in our space. So, I don’t see it as a zero-sum game. I think that fundamental principle of an open source culture, which is a really strong part of the ethos of cryptocurrency and open blockchains, is absolutely not zero-sum. And I’ve done a talk about that specifically in Argentina.”

End word

Thibault: “You often say that when you get interested into something you lose weight because you just get too interested about it and…”

Andreas: “Yes, I’ve had some moments of obsession.”

Thibault: “You look like you’re losing weight those days. Are you currently interested about something that you don’t want to talk about?”

(laughs)

Andreas: “Oh, no! Thank you so much! No, I’ve just been doing more exercise and better eating.”