Category Archives: The Anatomy

Approximately 70% of all bitcoins have not moved in 6 or more months

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Back in May I published a blockchain analysis piece on Coindesk that utilized graphs created by John Ratcliff.  Ratcliff published several new charts yesterday that provide a fuller picture of this overall movement.

bitcoin age

The chart above visualizes nearly 6 years of token movements.

Is there a way to isolate the past year and if so, what does the past year look like? That’s what the next chart illustrates:

bitcoin distribution by age

What conclusions can be drawn from these charts?

1) that token movement (velocity) strongly correlates with a rapid increase in market prices (e.g., more velocity during the bull runs, less during price decreases); you can see that in the first chart with large bumps in April 2013 and then again in November 2013

2) because of the large dip in prices over the past year, most tokens are inactive in part because the owners are still “underwater”

3) that monthly liquidity is still only around 10% (more on consumption below)

4) the “tx volume” chart on Blockchain.info is no longer entirely valid due to a combination of the usual mixing and mining rewards but also because of increased advertisement spam (e.g., metadata within OP_RETURN), increase in P2SH and Counterparty tx’s.  Only a full traffic analysis can provide a more accurate breakdown.

What is especially interesting is to see the “overhang” or rather the “underwater” coins that are moving from the 3 months to the 6-12 month band. What this effectively shows is that owners of those UTXOs purchased them during the bubble of November-December 2013 and are still willing to wait and hold onto these coins until the price rebounds.  If there is no upward change in prices then some (or all) of these coins will eventually move into the next band sometime in the spring of 2015.

What other conclusions can be made?

This is a sobering chart for advocates or entrepreneurs within the merchant payment processing vertical.  What this shows is that despite the near quadrupling of merchants that now accept bitcoin as payments (this past year increased from ~20k in January to ~76k through September), on-chain activity has not seen a corresponding increase by consumers.  They are all effectively fighting for the same thin slice of liquid coins, a segment which empirically has not grown. This does not mean that there are no consumers, only that when paired with data from Bitcoin Day’s Destroyed, there probably hasn’t been any real on-chain growth beyond the exceptions in #4 above. Thus on any given day, payment processors (collectively) likely only process 5,000-6,000 bitcoins still. Other additional activity could be taking place off-chain in trusted third parties (like hosted wallets and exchanges such as Coinbase).

Too reuse an analogy from Chapter 14 (p. 224 and 230), that also means that since 3,600 bitcoins are created each day to pay for security, that with this ratio (3,600 : 6,000) every other mall patron is effectively being guarded by a mall cop which in laymens terms means there is massive security overkill still taking place.  This is not a big deal today but when coupled with analysis from Dave Hudson, network transaction fees will have to increase by several orders of magnitude to replace the seigniorage that currently incentivizes miners.  This is best illustrated in the cost per transaction metric on Blockchain.info.

As I mentioned on a panel on Tuesday this collective “hodling” (hoarding) behavior is understandable given the future expectations of price appreciation.  Yet it is probably not a good characteristic for a modern “currency,” for reasons discussed in Chapter 9 and also Why Market Prices Do Not Double With a Block Reward Halving.

Panel for Follow The Coin with Tina Hui and Jackson Palmer

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On Tuesday I was a panelist on a new segment from Follow The Coin, hosted by Tina Hui.  The other panelist was the creator of Dogecoin (among other projects), Jackson Palmer.

Below are transcribed comments I made throughout the recorded portion with the approximate time they were said.

[2:46]

Ditto.  When I first got involved with Bitcoin a few years ago, I was really excited, I did some mining.  I built some machines in China and slowly but surely I kind of became more of a skeptic.  I guess that’s what people know me for.  I wouldn’t say I’m anti-Bitcoin, I think there is a lot of Koolaid that is continually circulated.  I think Jonestown would be very  jealous of the Koolaid in this space.  Right now, the phrase I was talking to Jackson earlier was, you know how people are saying “Be your own bank”?  I’m not saying you can’t be your own bank but what happens in reality is, like “Be your own textile factory” or “be your own data center” — for whatever reason that just doesn’t work out in reality.  I’m not saying it can’t work out in this space but it looks like people prefer to be nannied, prefer to have costumer assurance.  I probably just lost a few friends and followers but that’s how I kind of look at things.  It’s become BINO: Bitcoin in name only.  I have a whole talk on that otherwise.

[4:39]

I’d have to agree for the most part.  For listeners, the use cases I think are interesting with the actual technology are pretty mundane.  I was talking to Everett from Bloomberg, there is this thing called Consolidated Audit Trail.  Back two years ago, the SEC put together something called Rule 613.  The idea was to get all these institutions together in the financial industry to actually track every single transaction.  That seems like a mundane, unsexy thing but at the same time this might be something that a blockchain may be able to do in some capacity because you have people who do not necessarily trust each another, you have a lot of them.  Maybe you don’t need Bitcoin’s blockchain, maybe you can use some kind of other ledger, a proof-of-stake based ledger.  I do think the technology does have some interesting potential but probably not for a lot of the things that are being funded.

[7:13]

Sure, so I’ll be mean, I’ll say something not nice.  Tipping is a neat idea but in practice what ends up happening a lot and we see this on reddit and LTBCoin and stuff like that, is it incentivizes begging.  So we end up having this magnet to rewarding behavior that you really don’t want to have.  Obviously there are people who do take tipping seriously and put together some good comments and stuff like that.  For example, with LTBCoin.  If you are not familiar with it, Adam Levine had this really cool idea: “hey, how about we reward people who make comments.”  That sounds great, you are part of the message, part of the community.  What ended up happening is that attracted just tons of bots basically, people just spamming.  We see this with reddit too with the different tippers.  Some guy the other day, 2 or 3 days ago said, “hey, I literally made sock puppets to collect as many tips as I could.”  And he collected something like 50,000 satoshi worth, which is not a whole lot but that’s a lot just spending time spamming around to try and get.  It has some interesting ideas, the question is, how do you filter out the froth from legitimate players in this.  And I’m not sure there is a real silver bullet to that.  Maybe it just has to be part of the ecosystem, we’ve lived with it this far maybe it is something we have to soldier on with.

[9:24]

So I’ll be mean again.  There really is no correlation between tipping and then encouraging that behavior in a restaurant.  Most of the literature doesn’t point to the reason why China is stagnating for example isn’t because a lack of tipping in the country.  It’s a cultural thing here in the US, I’m not anti-tipping.  My wife and I tip, maybe on the lower side of scale of things.  I think it is a funny activity that people do and I’m not against it, but I’m not sure it’s providing a good marketing signal to the participants or the people who receive it.

[10:11]

I don’t put tipping addresses for two reasons.  The first one is, actually I talked with Victoria van Eyk at Changetip yesterday, and she said, “Tim, you shouldn’t use this reason.”  But I’ll tell you the first reason why, I don’t want to accept candy from strangers.  I’m not sure where that coin came from, maybe it is a Silk Road coin.  Obviously that is something way down the line, I don’t think anyone is going to bust me for accepting some tip that way.  But I do think we should be judicious against who we receive money from, especially in this era of Alex Green and just the amount of scammers and bad apples in this space you don’t know where that money comes from.  The other, and this is nothing against Changetip, it’s just how it is efficient: it’s all off-blockchain.  The whole purpose of this blockchain space is to provide decentralization, if we’re accepting tips from centralized silos it just reinforces that.  So again, I’m not anti their service, but it kind of defeats the purpose if you have to rely on a centralized service to do all that.

[14:17]

Just like you said, it’s unsexy to build these vigilante services because they become centralized and who are you to decide who is the bad guy and stuff like that.  So you end up recreating the system that we’re in right now, for better and for worse.  There are some tools, if you guys are interested, there is a company called Bitreserve.  They just released their transparency initiative called Reservechain and Reserveledger.  The idea is you use the Merkle root to trace back to make sure all the tx’s are accounted for.  Obviously multisig is one of the few areas I’m not bearish on, it’s legit.  Whether or not you can build an entire company around just multisig, I don’t know, we’ll find out.  Taking that internally for financial controls, segregating.   Even hardware wallets, actually I just tweeted about that the other day.  Hardware wallets seem like they have, I hate to say it, maybe they do have some potential — that’s not sexy again, who wants to carry around a wallet, a smartphone and then a hardware wallet with your private keys.  Maybe that’s something that user behavior will end up changing or maybe it’s not.

[18:04]

So there is this thing called “affinity fraud.”  And just like the name affinity, when you were in school you had affiliations, it’s kind of the same idea.  It happens a lot in Bitcoin because there are so many self-identified libertarians essentially.  So if you pretend to be a libertarian you can — no offense to anyone here — I’m about to lose some more friends here.  They are identifiable targets, it happens in religions, it happens in just about any ‘affinity’ essentially.  It’s not something that can be stopped immediately, there’s going to be bad actors that know they can take advantage of this.  You have to be judicious.  Again, I’m not sure if there is a way you can build a startup, fund it somehow and then go after these guys.  It becomes this public goods issue.  Again, I’m not saying the only solution is a government, but it seems like there is a perverse incentive to not get rid of these actors.  Because what happens is, is especially with thefts and scams is these people need to launder the money and move their money – exit somehow.  And to do so, they end up having to use — it creates demand for these other services.  So in a way, there is a perverse incentive to not get rid of these actors because creates more demand for the underlying currency.  Again, I’m not saying that it is going to stay the way it is, I’m sure I’m going to get a lot of emails saying, “no Tim you are wrong.”  But so far no body has done much to get rid of these guys and maybe there is a reason why, maybe everyone is sort of benefiting from this underlying demand.

[22:29]

I will argue that Satoshi pre-mined.  And I’m not saying that because I hate Satoshi.  Is Satoshi here?  Does anyone know Satoshi?  You can prove it either way by signing.  The reason I argue that is the biggest complaint with pre-mining is you have this allocation that took place before anyone else could particpate, that’s the bottom line.  Satoshi only advertised Bitcoin on one obscure mailing list and then preceded to mine basically for an entire year without advertising it again and without doing any effort at all to do PR.  He could have run a testnet.  He could have done mulligan, “hey, we have these people, it’s been a year now, we’re going to reset it.”  And if you add up all the coins that were basically coinbase free, that were just the coinbase transaction or plus one tx, that is about 4.8 million bitcoins (see p. 163) that were basically handed out for free.  Without any merit.  Again, I’m not saying that you need to confiscate those guys.  But what we’re having today is capacity issues with blocks right now: about 30% to 40% of capacity on any given day.  Dave Hudson has been doing a lot of good research on this.  And so these miners are essentially doing more work today than they were at the beginning.  And they’re not being rewarded any more than they were then.  That’s an issue with the static rewards.  So I would argue that it is essentially a pre-mine, he could have said testnet for the first year and didn’t.

[25:24]

Mine what, Bitcoin?  So home mining, industrial mining?  The only way most people are making money off of Bitcoin is price appreciation.  You mine, you hope that it will increase in value.  But you might as well just buy coins at this point.  The only people who are really making money are Bitfury, a few places in China (see Chapter 5) and this is because they’re able to scale it and benefit off the energy.  This is not to say you can’t possibly do it in maybe certain locations here in the US, like Washington I believe has 3 cents a kilowatt hour.  And they were in the news for setting up some certain sites.  But in general in this day in era, with ASICs it’s very difficult to actually have any margin.  The argument is, ceteris paribus, it should take one bitcoin to actually make one bitcoin just because of the way the difficulty is auto-adjusted every two weeks.  So on the margins there really is no profit except maybe a few different entities that can scale, like Bitfury.

[27:22]

So many questions.  So to give you an idea, the Gini coefficient in Bitcoin is 0.88 (see p. 129), perfect number 1.0 is unequal.  I’m not some kind of egalitarian marching in the street.  But a 0.00 is just the opposite, basically it’s perfectly even distribution.  Bitcoin basically has a Gini coefficient higher than North Korea.  I’m not saying that’s a good thing or bad thing, it kind of disincentivizes some people to join because they think they can no longer participate in the “get rich quick.”  The whole asymptote itself was just one “get rich quick” idea.  Again, I’m not saying it was a scam, I’m not saying that at all.  As far as the hording versus the savings.  So people get this often confused: the protocol itself does not have any mechanism to actually save.  It is simply a lockbox.  So it is essentially a digital mattress.  There is nothing wrong with that.  If you just want to hold onto it.  But there is no mechanism to take that money within the protocol and lend it out.  And what we’re seeing is we can build out lending platform, through like BTCJam.  So as a result you have, if you actually look at liquidity, on any given month you have about 10% of all mined tokens ever are actually liquid (see Chapter 12).  You have about 90% of tokens that haven’t moved for over a month and about 50% that haven’t moved in more than 6 months.  And this is because there is nothing built into the protocol to actually put these into active, lending purposes or any of these other financial instruments.  So that kind of creates a stagnant economy.  Well you wouldn’t call it a currency.  Like you’d call that some kind of commodity.  There is no velocity of gold even though it’s legal.  You just kind of bury it.  Again, I’m not against if you guys want to hold coin.  That’s the rational thing to do.  The rational thing is, if you believe it is going to appreciate in value you hold onto it.  Everyone thinks it’s going to go to the moon.  Everyone is actually [acting] rational.  So it’s not actually being used as a currency, it’s being used as a commodity and that makes sense because everyone thinks it’s going to raise and appreciate.

[29:52]

It’s hard to know how much money laundering has occurred.  I mean unless you can identify ever single transaction and know what the intent was, you don’t know how much.  Again, I’m not saying that this doesn’t take place with fiat.  Everyone’s always saying fiat is number 1.  We have the ability with a blockchain to actually monitor this stuff.  And actually it defeats the whole purpose if you have to identify everybody along the way because then it adds all this costs and stuff like that.  So it’s this weird paradox.  [Question: So you’re actually pro-bitcoin?]  I’m on the fence with the technology.

A panel on smart contracts with industry developers and educators

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Earlier today I participated in a virtual panel covering smart contracts called, “Let’s Talk Smart Contracts.”

The panel included: Adam Krellenstein (Counterparty), Oleg Andreev (CoreBitcoin), Pamela Morgan (Empowered Law), Stefan Thomas (Codius, Ripple Labs), Stephan Tual (Ethereum), Tim Swanson (Of Numbers), Yurii Rashkovskii (Trustatom) and it was moderated by Roman Snitko with Straight.

Below are some transcribed notes of my own statements.

Introduction starting at 09:06:

Hey guys, great to be here.  Thanks for the invite, thanks for organizing this.  So I’m here because you guys needed another white guy from Europe or something like that (that’s a joke).  So the definition I have of smart contracts, I have written a couple books in this space, and the definition I use is a smart contract is “a proposed tool to automate human interactions: it is a computer protocol – an algorithm – that can self-execute, self-enforce, self-verify, and self-constrain the performance of a contract.”  I think I got most of that definition from Nick Szabo’s work.  For those of you who are familiar with him, look up some of his past writings.  I think that the primary work he is known for is the paper, “Formalizing and Securing Relationships on Public Networks.”  And he is basically considered the [intellectual] grandfather of this space.  I’m here basically to provide education and maybe some trolling.

From 22:02 -> 24:15

I think I see eye-to-eye with Adam here.  Basically the idea of how we have a system that is open to interpretation, you do have reversibility, you do have nebulousness.   These are things that Nick Szabo actually discussed in an article of his called “Wet code and dry” back in 2008.  If you look back at some of the earlier works of these “cypherpunks” back in the ’90s, they talked about some of these core issues that Oleg talked about in terms of being able to mitigate these trusted parties.  In fact, if you look at the Bitcoin whitepaper alone, the first section has the word “reverse” or “reversibility” around 5 times and the word “trust” or “trusted” appears 11 times in the body of the work.  This was something that whoever created Bitcoin was really interested in trying to mitigate the need for any kind of centralized or third party involved in the process of transactions to reduce the mediation costs and so forth.

But I suppose my biggest criticism in this space, it is not pointed to anyone here in particular, is how we have a lot of “cryptocurrency cosplay.”  Like Mary Sue Bitcoin.  I’m not sure if you guys are familiar with who Mary Sue is: she is this archetype who is this kind of idealized type of super hero in a sense.  So what happens with Bitcoin and smart contracts is that you have this “Golden Age” [of Comics] where you had the limited ideas of what it could do.  Like Superman for example, when he first came out he could only jump over a building and later he was pushed to be able to fly because it looks better in a cartoon.  You have only a limited amount of space [time] and it takes too long to jump across the map.  So that’s kind of what I see with Bitcoin and smart contracts.  We can talk about that a little bit later, just how they have evolved to encompass these attributes that they’re probably not particularly good at.  Not because of lack of trying but just because of the mechanisms of how they work in terms of incentives for running mining equipment and so on.  So, again we can talk about that later but I think Adam and Oleg have already mentioned the things that are pretty important at this point.

40:18 -> 41:43

I’m the token cynic, huh?  So actually before I say anything, I would like to mention to the audience other projects that you might be interested in looking at: BitHalo; NotaryChains is a new project that encompasses some of these ideas of Proof of Existence created by Manuel Araoz, he is the one who did POE.  NotaryChains is a new project I think that sits on top of Mastercoin.  The issue that people should consider is that proof of existence/proof of signature: these are just really hi-tech forms of certification.  Whether or not they’re smart contracts I guess is a matter of debate.

There is another project: Pebble, Hyperledger, Tezos, Tendermint, Nimblecoin.  With Dogethereum their project is called Eris which apparently is the first DAO ever.  A DAO for the audience is a decentralized autonomous organization, it’s a thing apparently. SKUChain is a start-up in Palo Alto, I talk about them in chapter 16.  They have this interesting idea of what they call a PurchaseChain which is a real use-case for kind of updating the process from getting a Letter of Credit to a Bill of Lading and trying to cut out time and mediation costs in that process.  There are a few others in stealth mode.  So I really don’t have a whole lot to add with cynicism at this point, we can go on and come back to me in a little bit.

59:41 -> 1:02:35

The go to deficiency guy, huh?  They’re not really saying anything particularly controversial, these things are fundamentally — at least from an engineering perspective — could be done.  The problem though I think runs into is what Richard Boase discussed in — if listeners are interested — he went to Kenya and he did a podcast a few weeks ago on Let’s Talk Bitcoin #133.  I really recommend people listen to it.  In it he basically talks about all of these real world issues that run into this idealized system that the developers are building.  And as a result, he ended up seeing all of these adoption hurdles, whether it was education or for example tablets: people were taking these tablets with bitcoin, and they could just simply resell it on a market, the tablet itself was worth more than they make in a year basically; significant more money.  He talked about a few issues like P2P giving, lending and charity and how that doesn’t probably work like we think it does.

I guess the biggest issue that is facing this space, if you want issues, is just the cost benefit analysis of running these systems.  There is a cost somewhere to run this stuff on many different servers, there is different ways to come up with consensus for this: for example, Ripple, Stellar, Hyperledger, they’re all using consensus ledgers which require a lot less capital expenditures.  But when you end up building something that requires some kind of mining process itself, that costs money.  So I think fundamentally in the long-run it won’t be so much what it can do but what can it economically do.

So when you hear this mantra of let’s decentralize everything, sure that’s fine and dandy but that’s kind of like Solutionism: a solution looking for a problem.  Let’s decentralize my hair — proof of follicle — there is a certain reductio ad absurdum which you come to with this decentralization.  Do you want to actually make something that people are actually going to use in a way that is cheaper than an existing system or we just going to make it and throw it out there and think they’re going to use it because we designed [wanted] it that way.  So I think education is going to be an issue and there are some people doing that right now: Primavera De Fiillipi, she’s over at Harvard’s Berkman Center — she’s got something called the Common Accord program.  And also Mike Hearn; listeners if you’re interested he’s made about 7 or 8 use-cases using the existing Bitcoin blockchain including assurance contracts — not insurance contracts — assurance contracts.  And he’s got a program called Lighthouse which hopes to build this onto the actual chain itself.  So there are things to keep in mind, I’m sure I’ll get yelled at in a minute here.

1:23:58 -> 1:28:10

Anyone listening to this wanting to get involved with smart contracts: hire a lawyer, that’s my immediate advice.  I will preface by saying I don’t necessarily agree with policies that exist and so on; I don’t personally like the status quo but there is no reason to be a martyr for some crusade led by guys in IRC, in their little caves and stuff like that.  That’s not towards anyone here in this particular chat but you see this a lot with “we’re going to destroy The Fed” or “destroy the state” and the reality is that’s probably not going to happen.  But not because of lack of trying but because that’s not how reality works.

Cases right now are for example: DPR, Shavers with the SEC, Shrem now with the federal government, Karpeles [Mt. Gox] went bankrupt.  What’s ended up happening is in 2009, with Bitcoin for example, you started with a system that obviated the need of having trusted third parties but as users started adopting it you ended up having scams, stolen coins, people losing coins so you ended up having an organic growth of people wanting to have insurance or some way to mediate these transactions or some way to make these things more efficient.  And I think that it will probably happen — since we’re guessing, this is speculative — I think that this will kind of happen with smart contracts too.  That’s not to say smart contracts will fail or anything like that.  I’m just saying that there will probably just be a few niche cases initially especially since we don’t have much today, aside I guess from Bitcoin — if you want to call it a smart contract.

What has ironically happened, is that we have created — in order to get rid of the middlemen it looks like you’ve got to reintroduce middlemen.  I’m not saying it will always be the case.  In empirical counter-factual it looks like that’s where things are heading and again obviously not everyone will agree with me on that and they’ll call me a shill and so on.  But that’s kind of where I see things heading.

I have a whole chapter in a book, chapter 17.  I interviewed 4 or 5 lawyers including Pamela [Morgan] of different reasons why this could take place.  For example, accredited investor — for those who are unfamiliar just look up ‘accredited investor.’  If you’re in the US, in order to buy certain securities that are public, you need to have gone through certain procedure to be considered a ‘sophisticated investor.’  This is one of the reasons why people do crowdsales outside of the US — Ethereum — because you don’t want to have to interact with the current legal system in the US.  The reason I mention that is because you end up opening yourselves to lawsuit because chains — like SWARM — cannot necessarily indemnify users.  That’s legal terminology for being able to protect your users from lawsuits from third parties; they just do not have the money, the revenue to support that kind of legal defense.  Unlicensed practice of law (UPL) is another issue.  If you end up putting up contracts on a network one of the issues could be, at least in the US, are bar associations.  Bar associations want to protect their monopoly so they go after people who practice law without a license.  I’m not saying it will happen but it could happen.

My point with this is, users, anyone listening to this should definitely do your due diligence, do your education.  If you plan to get involved with this space either as an investor or developer or so on, definitely at least talk to a lawyer that has some inkling of of an idea [on this].  The ones I recommend, in addition to Pamela here are: Ryan Straus, he is a Seattle-based attorney with Riddell Williams; Austin Brister and James Duchenne they’re with a program called Satoshi Legal; and then Preston Byrne, who’s out in London and he’s with Norton Rose Fulbright.

1:52:20 -> 1:54:43

Guys look, I understand that sounds cool in theory and it’s great to have everything in the background, but the reason you have to see these “shrink wrapped” EULAs [end user license agreements] and TOSs [terms of service] is because people were hiding stuff inside those agreements.  So if you hide what’s actually taking place in the contract you end up making someone liable for something they might not actually agree to.  So I’m not sure, I think it’s completely debatable at this point.  If we’re trying to be transparent, then you’re going to have to be transparent with the terms of agreement.

I should point out by the way, check out Mintchalk.com, it’s run by guys named James and Aaron in Palo Alto, they’re doing contract building.  ACTUS is a program from the Stevens Institute, they’re trying to come with codified language for contracts.  Mark S. Miller, he’s got a program over at Google, he does something with e-rights.

I mention all of this because, we already have a form of “polycentric law” if you will in terms of internationally with 200 different jurisdictions vying for basically jurisdiction arbitrage.  Ireland and the Netherlands have a tax agreement that Facebook, Google, Pfizer they take advantage of.  It’s this Double Irish With a Dutch Sandwich.  In fact my own corporation is incorporated in Delaware because of the legal arbitrage [opportunities].  Obviously smart contracts might add some sort of new wrinkle to that, but people who are listening to this, don’t expect to be living in some Galt’s Gulch tomorrow or something like that.

For example, when you have something that is stolen, there is something called Coinprism which is a colored coin project.  They can issue dividends on stock.  The cool thing with that is, “hey, you get to decentralize that.”  The double-edged side of that is if that when that get’s stolen: people steal stuff like bitcoins and so forth, what happens to the performance of that dividend?  If the company continues paying that dividend in knowing that the person had been stolen from: if somebody stole from me and I tell the company, “hey, it was stolen” and they continue paying, then I can sue them for continuing to pay a thief.  If they stop paying then it defeats the purpose of decentralization because anonymity is given up, identity has taken place.  Obviously this moves into another area called “nemo dat” it’s another legal term talking about what can be returned to the rightful owner, that’s where the term “bona fide” comes from.  Anyways, I wanted to get that out there.  Be wary of disappearing EULAs, those have a purpose because people were being sued for hiding stuff in there.

2:10:05 -> 2:12:23

So I think everybody and all these projects are well-intentioned and have noble goals but they’re probably over-hyped in the short-run, just like the Segway was.  It eventually leads to some kind of burnout, or over-promise and under-delivering.  I’m not saying this will happen, I’m just saying it could happen.  I actually think the immediate future will be relatively mundane, such as wills and trusts kind of like Pamela was talking about.

One particular program is in Kenya there is something called Wagenitech which is run by Robin Nyaosi and he is wanting to help farmers move, manage and track produce to market to bypass the middleman.  That doesn’t seem like something really “sexy,” that doesn’t seem like the “Singularity” kind of thing that everyone likes to talk about.  But that is needed for maybe that particular area and I think we might see more of that along with PurchaseChain, NotaryChains, some of these things that we already do with a lot of the paperwork.

Again, blockchains and distributed ledgers are pretty good at certain things, but not everything.  It has real limitations that vocal adopters on the subreddit of Bitcoin like to project their own philosophical views onto it and I think that it does it a very big disservice to this technology long-term.  For example, LEGO’s can be used to make a car but you wouldn’t want to go driving around in one.  A laptop could be used as a paper weight but it’s not particularly cost effective to do that.  And so what I think we’ll end up running into a tautology with smart contracts, it’s going to be used by people who need to use them.  Just like bitcoin is.  So what we’re going to have is a divergence between what can happen, this “Superman” version of Bitcoin and smart contracts, versus the actual reality.

So for example, people say it’s [Bitcoin] going to end war.  You had the War of Spanish Succession, there was a Battle of Denain, a quarter million people fought that in 1712 and it was gold-based [financed by specie].  Everyone that says bitcoin is going to destroy fiat, if the state exists as it does today there’s always going to be these institutions and types of aggression.  I do think smart contracts do add collateral and arbitration competition and it does take away the problem of having trust in the system itself, but the edges are the kryptonite.  And always will be.  So we need to focus on education and creating solutions to real actual problems today with the actual technology and not just some hypothetical “Type 2” civilization where we are using [harvesting] the Sun for all of our energy.