# The Internet of Money - Type: #book - ASIN: B01L9WM0H8 - Authors: [[Andreas M. Antonopoulos]] - Highlights - probably the most important technological invention in computer science of the last 20 years. - Saying bitcoin is digital money is like saying the internet is a fancy telephone. - Bitcoin is a technology, it is a currency, and it is an international network of payments and exchange that is completely decentralized. - create a decentralized network that could achieve consensus, agreement, without any central controlling authority. - protocol - Every ten minutes, the entire network agrees on what transactions have happened, without any centralized authority, by a simple election that occurs electronically. - that money is older than writing. - money is a form of communication. - communicating value. - language. - "Here is a goat. I will take 20 bananas for my goat." That’s not really money because it’s a barter transaction, but it’s the first form of communication about value. - start exchanging something that you can’t eat—a - The first major transformational technology moment for money was when money stopped being about the tangible consumption of intrinsic value, but became something that referred to value, as an abstraction. - money: hard to find (scarce); easily transportable (at least when compared to a giant rock or a whole barrel of feathers); easy to divide (you can cut a gold coin into pieces and subdivide the pieces); and universally valued for aesthetic purposes. - If I deposit gold with someone trustworthy, they can give me a piece of paper that says that I have gold in this trustworthy vault. Then I could trade the paper instead of the gold. It’s easier to carry. As long as I can trust that my money is in the vault, then I’ve got a new form of money. - It took about 400 years for paper, as money, to become accepted broadly. It was a big aberration. - Peer-to-peer means that when you send out a transaction to the network, every peer treats it the same. - Today, if you go to an ATM machine and you put in your card, the bank may decide to give you your money. One day—as the people of Cyprus, Greece, Venezuela, Argentina, Bolivia, Brazil, and a list of - hundreds of countries over the last several decades and even centuries have discovered—one day, you go to the bank and the bank does not want to give you the money, because they don’t have to. That’s the essence of a master-slave relationship. - In a centralized system, the further out you are, the less control you have. The closer you get to the system, - permission - mechanism. If you paid essentially a tiny fee for your transaction, then because of the democratization of finance, your transaction is valuable and is not spam. - Less than 8 percent of these currencies exist in physical form; the rest is bits on ledgers. - But the fundamental difference is that these ledgers are controlled by centralized organizations, whereas in bitcoin, they’re not. Bitcoin has a decentralized network, an open network. - A network that allows you to replace trust in institutions, trust in hierarchies, with trust on the network. - The network acting as a massively diffuse arbiter of truth, resolving any disagreements about transactions and security in a way where no one has control. - A few years ago, WikiLeaks was completely cut off from the world’s financial system simply with extrajudicial pressure applied on the few major payment providers: Visa, MasterCard, the banking transfer system, PayPal, etc. Without any legal process, without any conviction, and perhaps, in my opinion, without absolutely any crime other than revealing the truth of crime, WikiLeaks was cut off from the world’s financial system. - Cars were slower than horses. Cars broke down all the time. Cars needed expensive gasoline that you couldn’t find anywhere. They required enormous amounts of infrastructure to work. The media focused on the part of the story that sold the most papers: car accidents, pedestrians mangled by cars. For more than two decades from the first cars, the story was that of infernal, disgusting, dirty, noisy machines that were far inferior to horses, that couldn’t go anywhere, that only weirdos would use, and that, most of the time, killed the occupants and everyone who came anywhere near them. - What they said was that this was dangerous technology that would burn down people’s homes. They ran story after story after story about people getting electrocuted, about homes burning down. - ridiculous. Like the head of IBM who once said, "I foresee a need for no more than five computers worldwide." Like the people who said that the telephone would never succeed. - The first cars were used as getaway vehicles. The first telephones were used to plot conspiracy. The first telegrams were used to run long-distance mail-fraud schemes and Ponzi schemes. The first forms of electricity were used to run medical hoaxes and scam people. These things always happen with a new technology, and they happen with bitcoin, too. - Criminals use the most cutting-edge technology because they operate in an environment with very high profit margins and very high risk. In that environment, competition is fierce. Using the latest technology if you’re already taking enormous risks isn’t that big of a deal. - Throughout history, the most amazing technology is adopted by criminals first. - world, $550 billion is transmitted every year as remittances from first-world countries. Much of that money is sent to five major destinations: Mexico, India, the Philippines, Indonesia, and China. - that means innovation occurs at the center, by one player, and requires permission. - Resistance is the first reaction. - automobiles, electrification, the internet, bitcoin. - time? Back then, most of the infrastructure was designed to deliver gas. In fact, gas lighting in major cities was pretty common. There were pipes that could deliver gas primarily to street lights but also for home lights, as well as heating. You couldn’t use that infrastructure for electricity. You couldn’t use it to distribute electricity to homes. - At first, the only use for electricity was really for factories because that’s where you could make the most use of electricity. - The very same companies that said, "We will never be able to do quality voice over the internet. We - and finally they will run all of traditional banking as an application on top of a decentralized trusted ledger. - simulating legacy banking on top of a decentralized ledger, on top of bitcoin, an open global blockchain, is trivial. - Humans create currency as a means of expressing their desires, of expressing their individuality. I thought, What happens when a five-year-old in a primary school can use a website to create Joeycoin to compete against Mariacoin in a game of popularity within their school? - We need to get used to a world where we have to judge currency not by who issued it, but by who uses it. Or rather, by how many people use it and what they use it for. - rare. - portable. - be difficult to forge; - fungible. - It’s based on the assumption that if you give me a dollar today, someone else will accept that dollar in exchange for something of value tomorrow. If I still believe that is the case, then it has value. Value comes from the assumption that I can use it again. - Why is bitcoin money? Because other people think it’s money. - A keychain is a far better metaphor. - So, you’ve got a “wallet” that doesn’t contain “coins”—because the coins are actually on the network and they’re not coins, they’re outputs—and what you’re really holding is a keychain. - Transactions are not from a sender to a recipient. Addresses don’t have balance in bitcoin. - An address controls outputs, and if you trawl through the blockchain and add up all of the outputs, you can figure out some notional balance. - So, the question you then have to ask is what happens when a farmer in Kenya who has a Nokia 1000 text-messaging phone, and suddenly that phone is a Bloomberg terminal, a loan-origination terminal, - a Western Union remittance-termination terminal, a stock market, is a bank—not a terminal to a bank, but a bank, on the phone? And what happens when that is afforded to the other 6 billion all over the world. Part of the reason bitcoin is unstoppable is because there is this great need for this technology. Banks in the developing world cannot extend services to these populations. Recently, I was talking to a banker who told me, “Half our population is 100 miles from the nearest branch, upstream, on a canoe. We can’t serve them.” But even the remotest village in the Amazonian basin has a cell phone tower, and someone in that village has a solar panel and a Nokia 1000 text phone. - possible. Why on earth would you stream music instead of buy it and store it locally? Because it costs nothing. - What happens when, for the first time ever, there is a system that can evaluate rules without human intervention and be trusted without having to put trust in any single human? - In bitcoin, we call this the removal of counterparty risk. If I create a transaction and I sign it, everyone on the bitcoin network can validate that transaction independently. They don’t have to ask anyone. They can go through the blockchain on their own machine, which they know is correct and true because they have been tracking it and building it based on proof of work. They can check that transaction, 350 bytes, and they can validate that transaction without asking anybody else. A self-verifying system, a system of rules that exists independent of human actors, that exists based on this network topology. - the CEO of Western Union said, “In the - medium term, we are not worried about bitcoin." I want that framed on my wall. It’s one of those phrases, like the boss of Kodak saying things like that when Nokia took away their lunch. Kodak - personhood. Personhood is required for financial ownership. In order to own money, in order to control funds, in order to have a bank account, to receive a bill, to pay someone, you must be a person. - Bitcoin. Uber. Self-driving cars. What happens when you mash the three together? - Pokémon cards, little cubes. They will start hoarding, trading, exchanging for favors, and then eventually getting into a fight over their imaginary currency that - That authorization has two external references: (1) to where the money’s coming from by referencing an unspent output on the blockchain, and (2) a reference to where I want to send the money — by creating a new encumbrance, a new limitation on who can spend the money, usually a public key or bitcoin address. That transaction contains no sensitive data. If you steal the information in the transaction, all you know is which address the money came from, which address the money’s going to, and how much. That’s it. The signature reveals nothing. The addresses reveal nothing. There are no identifiers. You could take the transaction and print it out. - You could post it on a billboard. You could shout it from the rooftop. A bitcoin transaction can be transmitted over completely unsecured Wi-Fi. By smoke signal. By light signal. With carrier pigeons. It doesn’t matter. Nothing in that message can be compromised. - Skype has a 128-character emoji alphabet which allows you to send various frowny faces, smiley faces, thumbs up, thumbs down, sunny days, beating hearts, birthday cakes—you know, all of those kinds of things. - In the script, I can take the hexadecimal representation of a bitcoin transaction and encode it in emoticons. I can then copy that into a Skype window anywhere in the world. - internet. I came up with an even more ridiculous harebrained scheme, which is the transmission of bitcoin transactions over shortwave, frequency-hopping, burst radio. - UTXO unspent transaction outputs and there are inputs. But those inputs don’t really correspond to senders. And a transaction has outputs, which don’t really correspond to receivers. Suddenly, you realize what you’re looking at is almost this quantum or atomic nature of bitcoin. - You’re losing me. This doesn’t quite match my experience. Things get complicated because bitcoin isn’t what you think it is. It’s a platform. It’s not a payment network. It’s not a currency. It’s not a banking system. It’s a platform that guarantees certain trust functions. -