Coin Perspective — Andreas Antonopoulos

This interview was initially released under my personal account in July 2019.

Recently, during the WeAreDevelopers Congress 2019, in Berlin, I had the chance to sit down and talk with the most renowned Bitcoin evangelist in the crypto space — Andreas M. Antonopoulos who I have been happily supporting on Patreon for the past years and I encourage everyone to do so as well. He is a great source of inspiration and wisdom for many. You can follow him on Twitter here.

DS: Recently, we have celebrated 10 years of Bitcoin. Is there anything in particular where your personal opinions about the crypto space evolved significantly over time?

AA: Oh, yes. Oh boy. A lot of things have changed. I’ve learned a lot about the technology that I didn’t understand in the beginning and I’m still learning now. I keep discovering new and interesting things about Bitcoin that I didn’t understand. Every year, even this year. It’s a very long journey to learn.

I‘ve changed my mind on a number of things for example in terms of whether we should do scaling first or privacy first. Initially, I thought that scaling was urgent on layer 1 but then as I looked at how that debate unfolded I discovered that, in fact, I think privacy is more important in the origins of layer 1 and scaling can be done in layer 2. I have changed my mind about that.

I changed my mind about how quickly internal forces would try to fight for power and how bitter these fights would get and how much drama and ego and personality would come into that. Which I didn’t want to get involved with. I was expecting we would be attacked from the outside. Attacked by governments, attacked by corporations, by banks, attacked by intelligence agencies and you know, shadow organizations.

Now there’s a possibility that some of the internal fighting is being driven by external agents, but it might also not be. Human ego explains enough of it that you don’t need to go to external conspiracies. I was surprised by that. I thought at this point governments would be fighting back harder, and it seems like instead, we’re fighting each other.

But at the same time, the other thing that really surprised me is that even when we fight each other and even when some of the people in this fight have hundreds of millions of dollars or even billions of dollars, they were unable to take over or control Bitcoin and everybody who’s tried so far to take control has failed. Many of them have failed so spectacularly that they’ve lost a lot of money trying. And reputation damage.

Bitcoin is more resilient than I thought at first. I thought when Mt.Gox failed that might be the end, now I laugh because it takes a lot more to kill Bitcoin and after seeing that now when a big exchange fails, I no longer worry, yeah, I really think that’s the biggest surprise — Bitcoin is much more resilient than I ever expected.

DS: Can you imagine a scenario where Lighting Network (LN) may fail and will not be able to actually scale and to reach the goal that we like about Bitcoin — to bank the unbanked. Do you think it is possible?

AA: Yes. Absolutely. First of all, there’s no such thing as succeeding or failing to scale. The scale is a scale, it’s not a point in time. You never succeed in scaling because the moment you succeed to scale to one level you create the possibility of applications that didn’t exist before, so you fail to scale to the next level, and then when you succeed to that you fail to the next. It’s a moving target.

DS: I mean it in a way that people in the developing countries may not be actually able to use Bitcoin because of the transaction fees.

AA: That’s very far that in terms of scaling to that level to scaling to 4, 5, 6 billion people, the internet over 35 to 40 years has not been able yet to scale to that level. We’re talking about something that may take a long time to happen. Hopefully, it will happen faster than the internet.

LN itself isn’t the final answer. LN is one step that takes us further and LN itself will change and Bitcoin underneath it, the base layer will change to scale more and then we’ll invent something else to scale even more. Maybe there will be layer 3 and 4 technologies.

We have a long road to go and that road requires us to continuously improve engineering in order to reach greater and greater goals. There is no magic bullet, there is no one technology that will solve everything and the Lighting Network isn’t going to get us to the end goal. It is one step that we need to take now.

DS: Speaking of LN — there are many other protocol upgrades coming up like MASTs, Schnorr signatures and so on. Do you think if these are integrated into the protocol, will Bitcoin make others like Ethereum obsolete?

AA: No, I don’t. And I don’t think that’s the case. In fact, I don’t think that Bitcoin would want to or we, as Bitcoiners, we should not want to make Ethereum obsolete and there is a reason for that.

And that reason is that I believe that there are fundamental design trade-offs that need to be made in order to be good in very flexible smart contracts. And there are completely different design trade-offs that need to be made in order to have globally robust uncensorable payments that are resistant to state intervention and interference. Doing one stops you from doing the other. So, for us to do flexible smart contracts we would have to give up some of the robust payment systems that we have.

That is the same reason why Ethereum can’t do robust state-level censorship-resistant payments. Because of the choices that the protocol had made to specialize in flexible smart contracts. There is a very good coexistence. Ethereum needs Bitcoin for robust payments, and Bitcoin needs Ethereum for some of the other things that Bitcoin doesn’t want to do.

And I believe we’ve been building the whole ecosystem and also in having platforms that are appropriate for the uses that they’re appropriate for. You don’t try to make one tool to every job. You don’t do plumbing with a hammer. You know, if you try to make your hammer also work for plumbing it’s not a good hammer anymore.

DS: Let’s talk about privacy and blockchains. Do you think with all the protocol upgrades we mentioned that Bitcoin will be able to compete with Monero, Zcash, Grin or others?

AA: I don’t know. I think that Bitcoin needs better privacy fungibility on the base layer. I think that if we don’t have better privacy and fungibility on the base layer, Bitcoin will be attacked using its fungibility as the attack point, and that may prove to be a very difficult attack to resist.

Meaning that, if nation-states decide to use the lack of privacy to track down which of their citizens are using the system and punish them after they use the system that can discourage a lot of people from participating, meaning that only criminals will be able to use Bitcoin because when you make Bitcoin a crime, only criminals can use it. The governments will say that it is to stop the criminals but in fact, it’s to only allow criminals to use it.

I think we need privacy and fungibility at least at a basic level. We may not have the greatest privacy and fungibility. One of the things that have come to my attention, I think to everybody’s attention in the last year, has been that there was not an obvious trade-off between privacy and monetary soundness, which is that the systems that have very robust privacy may be subject to inflation bugs where you can introduce new monetary units without anybody noticing it.

Obviously, the best example is the fundamental bugs that were discovered in the multi-party computation genesis of Zcoin and other systems based on zkSNARKS that may have been exploited to create an inflation bug but the part of the problem is because of the strong privacy we don’t know and we can’t know if they’ve been exploited.

There may be similar bugs in Monero and we don’t know. Privacy has that one side effect. It may be that it’s best for Bitcoin not to have that much privacy because it also needs to be sound money. Maybe, if Bitcoin can do atomic swaps, or even better — atomic off-chain swaps through Lightning Network — we would have two currencies that have strong privacy, so you can go in and out of the super privacy when you need to and use the monetary soundness of Bitcoin to keep the value of the currency. We will see.

DS: Maybe a similar question for Ethereum — do you actually see some serious competition when it comes to smart contract platforms?

AA: Oh, yeah, Ethereum has much more serious competition for smart contract platforms than Bitcoin has for sound money. And in fact, I don’t think there’s anything competing with Bitcoin for sound money and security, but there’s probably five or six platforms that have competed with Ethereum for smart contracts.

DS: Which one?

AA: Well, I mean EOS, Tron … I think Qtum is the other, or RSK. I don’t even know most of them. I don’t think they’re doing such a good job competing with Ethereum. But at the same time, that’s a lot more competition than Bitcoin has.

There is a bit of irony there. And the irony is that a lot of Ethereum hardcore maximalists or fans spent most of the 2017 shouting at Bitcoin — “We’re coming for you, the flippening is going to happen” — and while they were paying attention to chasing Bitcoin they should have looked in their rear-view mirror with those five other things coming up to their back chasing Ethereum’s lead of the smart contract market.

I actually think this is healthy and important to have vibrant competition in the marketplace for different approaches and different ideas and let the marketplace decide. We’re not going to have one solution for everything. We’re going to have many different solutions, some of the more specialized than others and we can’t decide in advance which one is going to succeed, we’re going to have to try and see.

DS: What about Proof-of-work (PoW) versus Proof-of-Stake (PoS). I guess you still consider PoW as superior when it comes to security properties.

AA: Well, I think the proof of work has qualitatively different security properties that cannot be equivalent to proof of stake.

DS: Never?

AA: Not with the current Proof-of-Stake systems that we have seen. One of the differences is the fact that with PoW if you try to attack the historical past of a chain then you incur an actual cost. So even if you have a hundred percent of the miners colluding together to change the past they still have to do mining, they still have to use electricity to rewrite the past.

With a PoS system when all of the participants agree they can rewrite the past at zero cost. So that’s a fundamental difference between the two. Now, that doesn’t mean you can’t use PoS, it just means that you get different results for PoS. And it might be very suitable for some purposes.

On the other hand, I think that this still means that you need at least one Proof-of-Work system on the planet to provide immutability possibly for all of the PoS chains to be stronger.

And also, we still don’t know about PoS yet. And the reason we don’t know is because nobody has run it at the scale of PoW yet. Keep in mind that PoS was invented before PoW. Proof-of-Work was invented as a way to do it better than PoS. And now we reinvent PoS and it is exciting research. Proof-of-Stake today is very different than it was two years ago. This is an area where the research is developing in a very fast-paced and a lot of very interesting research is happening.

But the difference between a research paper and running a production network with billions of dollars that people are trying to attack every day is vast. Until you’ve done the second thing, until you’ve run a production network under attack with billions of dollars, I can’t tell you how secure it is. So right now, if you ask me, how secure is Bitcoin — it is a hundred billion dollars times ten years secure. That’s the answer. I know it is because it’s managed to not have that money stolen from the chain for 10 years.

DS: Do you expect some hiccups on the Ethereum transition to PoS…?

AA: Yes. Hiccups are part of the design methodology of Ethereum. Meaning that Ethereum has a very different development methodology than Bitcoin. Bitcoin is very conservative and very slow-moving. Ethereum is very fast-moving and it has been a specific decision — not just by the developers but I think by the whole community — to accept hiccups in order to get a faster pace of innovation.

So yes, there will be hiccups, hiccups a part of the roadmap. In Ethereum hiccups are a feature not a bug.

And you need to know that if you’re developing for Ethereum. You need to know the things will change and they will break while you’re trying to run systems on top of that. You know, that’s one of the trade-offs that I don’t want Bitcoin to do because that would be a problem.

DS: What about crypto and regulations? Do we need them? If yes what kind of regulations?

AA: Crypto doesn’t need regulations because crypto is the most regulated system on the planet. It’s regulated by mathematics.

It’s predictable to a hundred and fifty years into the future, and It’s regulated in a way that no group of humans can violate the regulations and corrupt it. So, from that perspective crypto is now the most regulated system we’ve ever built. It’s predictable very nicely.

Systems that built on top of crypto, especially systems where people control other people’s money, custodial exchanges, basically banks that operate with cryptocurrencies — they’re not crypto, they’re not blockchains and those do need to be regulated. Any system where someone can run away with the money needs to be regulated. And those systems should be regulated because otherwise, people will lose their money.

Or even better, instead of those systems being regulated those systems should be replaced by systems that are not custodial, like decentralized exchanges, and not using exchanges as wallets by users who seem to fail to learn the most important lesson in crypto which “is not your keys, not your coins”. Every round of new users has to learn that lesson the hard way. Those need to be regulated or replaced.

DS: Within the Bitcoin community there are more opinion streams regarding how, and if at all, should the crypto community cooperate with the regulators. There are people, like crypto-anarchists, that want to focus solely on building the new parallel system, but at the same time, there are people even from Bitcoin core, like Bryan Bishop who actually encouraged SEC to get the developers community engaged more when it comes to crafting crypto legislation. What should be the role of the bitcoin community when it comes to this?

AA: There is no one Bitcoin community. The Bitcoin community is a multifaceted thing and different people have different opinions. Ultimately, the regulators cannot regulate the protocol unless they write C++ and submit pull requests to the protocol, and even then if they do write C++ and they submit pull requests, and even if the core developers accept these pull request if those pull requests involve introducing KYC or AML to Bitcoin — I would stop running that code. I would refuse to operate, and I know many others would refuse to operate, and then we would have two Bitcoins. One which has KYC, AML, and one which doesn’t. I would use the one which doesn’t.

Regulators can only regulate the things that people accept. This is not their domain. They cannot regulate the global infrastructure from the local jurisdiction. They cannot regulate the expression of software through the application of bureaucracy, and they cannot regulate code unless they write code and persuade others to run that code.

DS: What about Bitcoin derivatives like the ETF, futures, etc. Is it good, bad or irrelevant for the Bitcoin ecosystem?

AA: Bitcoin derivatives are not Bitcoin.

DS: But does it have any impact?

AA: Of course it has an impact. It allows rich people to trade pieces of paper that pretend to be Bitcoin and make lots of money over people who don’t understand the piece of paper they just bought isn’t actually Bitcoin. And what that does is it generates a lot of liquidity on the market and maybe it has an impact on the price.

But remember the price isn’t Bitcoin either. You show me on the blockchain or the client where the price is. It’s not there and you show me on the blockchain where the trading happens. It’s not there either.

DS: But do you think these things kind of help to reach the more widespread adoption in general?

AA: Not really. I don’t think so. Liquidity helps. Yes, that’s true. But there are many ways to create liquidity without inviting Wall Street to piss all over your protocol.

DS: About Blockchain in general. Do you see any meaningful use cases apart from cryptocurrencies?

AA: Yes. I think there are lots of meaningful use cases. I think most of those meaningful use cases are a bit far in the future. And, I also think that it is important not to underestimate the important use case of money. Money is a very important use case.

It is the most important use case. It is the basis of all commerce, which forms the basis of many aspects of society. A lot of the other things can’t happen without money being done first, and done right and done securely. And also, a lot of the other things don’t matter as much unless you get the money, right.

So, everybody who’s looking for applications beyond the money is not paying attention to the fact that money is a very important application. It is an important application not just in terms of how much money you could make, but it is an important application in terms of how it affects freedom and society.

But I see applications in terms of governance which are very important. How people organize consensus about human activity, not payments. How you run a company. How you run an organization. How you run an association. How you run an employment’s cooperative or collective.

Any kind of human organization where you have voting that requires trust, where you have the distribution of money which requires trust. Or where you have decision-making. Governance is to me the killer application for the Ethereum-like blockchains. And it’s the next thing you build on top of money.

DS: I wonder what about tokenization of assets? Is it meaningful?

AA: Here is the problem. It is a lot easier to tokenize digital assets. Tokenizing physical assets introduces counter-party risk which cannot be solved by blockchains. It’s still better than trading paper because it’s more efficient than trading paper, but it doesn’t remove the fundamental problem of counter-party risk.

But in terms of tokenizing digital assets like reputation, content, intellectual property or virtual goods music, articles, movies, game items, the hammer of Thor, the sword of Princess Xena — those things that you want to buy in your game. Those can be very nicely tokenized and that’s a pretty big industry and it is a very interesting kind of human activity around entertainment I think people underestimate. One of the statistics that strikes me always is that the game industry which is just silly little industry is actually bigger than the global movies, TV, and sports industry put together. So, you know there is an opportunity to do tokenization there. That’s a very big industry and it’s also an industry that’s very centralized and where gamers don’t have enough economic opportunity. So, it’s pretty cool.

DS: In 10 years from now, what do you think of the role of Bitcoin, as a protocol, in our society?

AA: I can make predictions about the role of Bitcoin in our society 10 days from now. It would be difficult to say ten weeks from now impossible to say 10 months from now and I need to be an absolute fool to even discuss 10 years. I’m constantly surprised so I can’t really answer that question. I think the impact of decentralized blockchains that are open, public, transparent and resistant to society will be enormous — maybe five, ten, or twenty years from now.

Whether that will be Bitcoin, whether Bitcoin in the same format as today or something very different, whether we’ll call it bitcoin — those I don’t know. But once open public blockchains were invented. You can’t change the course of history.

DS: Maybe the same question about Ripple. Will it be still in existence and will it have some role?

AA: I have no idea.

DS: Which other projects in the crypto space, in general, do you consider to be the most interesting?

AA: You know, I don’t want to endorse or discourage any of the projects in the space. Primarily because I don’t have the time to do in-depth research for all of the different projects and all of the different developments. And if I say something it’s usually out of date or incorrect by the moment I say it. I’m obviously interested in a bit more than Bitcoin, but at the same time Bitcoin still is the only open, public, borderless, censorship-resistant, neutral blockchain that has achieved as much success over ten years as it has.

Everything else is following in its steps and learning some of the lessons the hard way. And we’ll see I think we’re going to have a vibrant ecosystem. I think there’s room for more than one for sure. Maybe two, maybe three, maybe five. Who knows. I think people are going to do a lot more experimentation, but I don’t want to say any specific projects.

DS: Okay, the last one. The legendary crypto pioneer David Chaum is working on a new cryptocurrency protocol, called Elixxir, do you have some take on it?

AA: I have not really heard much about it. But it’s great. David Chaum was one of the people who got me interested in digital currencies back in the early ’90s. I read his work. It was part of the Cypherpunks movement that excited me as a young man in University, that started the journey that ended up being the Bitcoin. I think everybody in the cryptocurrency space owes a great deal of gratitude to David Chaum. I’m very glad that he’s working in the space. It’s amazing. We come full circle.

DS: Thank you!

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