The future of money isn't Bitcoin and Bitcoin isn't the future of money

Transcript

hello everybody Welcome to our weekly show about Bitcoin and and the future of money and so much more my name is Paul B think and my co-host today is Tim poor CEO and co-founder of identify he actually will be kind of the host today I will I will um sit back and and let Tim do most of the talking Our Guest today I'm very honored to announce him is name is Mr Dave Burch he is a a very well-known payment consultant is a British author and director of consult Hyperion specialist electronic transaction consulting firm that advices governments and large companies on electronic identity and electronic money I didn't make it up myself it's all here on Wikipedia I made it up you made it

you some Coast writers to um to update your Wikipedia entry um as as you can all see he's a very well- read man he has a lot of books there in the background all of them very very interesting books U so Dave um we spoke last week um at the at the blockchain conference oh I'm at Bitcoin conference Bitcoin conference last week Bitcoin next year it will be called the blockchain conference at in and there we exchanged a little bit we had some differences of opinion in terms of of money and privacy and other things but um so thank you so much for being on the show thank you for the invitation and and I'm going to um give the floor to Tim well thank you very much first of all I'm very honored to be interviewing

Dave here that's my pleasure Tim thank you and uh I've been uh digitally stalking you for a while now as you know so I uh I I do know a few things about you but I've done my homework a little bit more extensively before the show um just to uh get the details right uh so first of all I was curious if you could maybe tell a bit about yourself because you've been working on consult Hyperion uh since around the time I was born 1986 um that gets me on your side right right away so could you could you maybe tell us a bit more about that yeah sure I mean consult hyperium was founded in the in the middle of the 1980s and uh many

of the founders had a defense background mine was a secure secure Communications background and and we knew a lot about encryption and security and reliability and we thought that uh we would find some opportunities to work for you know I guess mainly in defense and Industry and it happened that of course when I write my book I will explain how this was Visionary strategic business planning by me wasn't really it was just complete luck uh it happened that the very first contract we ever won uh was with the London Stock Exchange and it

happened that at that time in the middle of the 1980s the financial markets uh wanted to be able able to it was the time of the Big Bang in London the explosion in financial services and people wanted to be able to move data around faster and secure securely over networks and that was an opportunity for us and we began working with uh the financial markets U Stock Exchange Bank of England from there we moved into working with the retail banks that took us into uh SM you have to understand the sort of the arc so in the mid 1980s if you had a PC and you wanted to connect it to the bank of England you had a secure piece of

Hardware a tamper resistant board that went inside the PC which cost I don't know $10,000 and that had the same security as the chip that you have on your chip and pin card now which cost 50 cents so we were in that period where we went from these complex expensive custom devices to to Smart cards and then to Sims in Mobile phones and and so on so that's what that's what took us into these markets and it turned out we were quite good at it and so we work around the world for uh Banks Telos card schemes that kind of thing Okay cool so um how did you uh end up being a specialist if I can call you a specialist or an expert on uh within the payments industry because you said that

you originally came from secure Communications I I did but and my my colleagues uh you know KN actually knew and know far more about security than I do but um when we began to work for the banks I I got very interested in um you know this was the you know this is pre- internet remember this is late 80s early 90s and I I knew a lot about satellite Communications so I did a lot of work on using satellites to to move data around got very interested in what the data was used for um payments became the uh consumer re retail Mass Market version of that

and we've always been very interested in things that change the mass Market I became very fascinated in it in the early 1990s we were fortunate enough to be chosen by Nat Westbank as it then was for a project called mondex your listeners will all have forgotten all about this but in the 1990s various Banks and organizations around the world had a go uh at Cash replacement using chip cards you're very I'm sure you're utterly bored with the history of chipper and chip niip in the Netherlands uh in the UK it was mondex and Visa in Germany it was gkart and there were a million others at the time

danmon Sam sppa and so on and so on and so on and um and so we were involved in in planning the security and and developing some of the systems and so on and that got me and of course um if you're forced to digitize something if you're forced to write some software for something uh in my mind I guess I'm from that Legacy software World um you have to really understand it if you're going to write a bit of code for something you have to really understand it and when we started writing code for money I realized I didn't really understand money and so I became very fascinated

with the topic to cut a long story short in uh 1997 we organized the first of us which still run to this day we organized the first uh consultant Hyperion Forum uh to bring together experts to discuss these things I had one of the luckiest phone calls of my whole life because I went to the library to find out which was the best book on the history of money and the best book of the on the history of money money was by a chap called Glenn Davies from the University of Wales and I called him up he didn't know who I was I asked him will you come and talk to these technology guys about money and he

very graciously accepted gave a fabulous talk which completely changed my perspective on this I realized that I didn't know anything about where money came from how money worked the history of money the potential future of money the drivers on money and in particular I didn't understand the complexity of the interrelationship between technology and money there's a there's a they're they're they're interrelated but in a in a much more interesting and much more complex way uh than you might first think and so I became very fascinated by that as it happened that was the kind of thing that our clients were interested in as well uh and so we became I like to

think we became the consultancy of choice uh in some of those areas and we' we've continued with that to this day so yes I won't pretend it was a brilliant a lot of it was accidental but the core point is and I think the Bitcoin generation is rediscovering this for themselves just just the same as I discovered back in the early 90s is when you sit down to write the code for something you you need to understand it and we all think that we know what money is because we never really think about it uh but and when you're forced to sit down and think about it hold on a second where does this work where does it come from what does it do how is it a platform um it's a fantastically interesting topic yeah

and I I I still find it fascinating today so to one more question on this part um what was the part which uh amazed you most during that time when you were discovering the inner workings of money and money creation um well you and you you always see these things through a sort of rationalization looking backwards but I think at some point in that process I was slightly shocked to realize that the way money worked I sort of assumed that it was the inevitable regression up a sort of evolution we we'd uncovered the perfect way that money should work and it's now a law of physics that you have

a central bank and you have commercial Banks and blah blah blah and you have National currencies and of course as I began to study and learn I began to realize this is just a the way things are this is just the result of a series of historical accidents and technological developments and actually there's no reason why money will work like this in the future and in fact I I firmly believe money won't won't work like that in the future so so the realization that money is a technology and the way it works is a construct it's it's not that you've uncovered a law of nature um to me that I that was quite a profound Discovery I many many other people I'm sure knew this all along but

I didn't so it was quite a discovery okay so before we uh we go to bitcoin because this show is about Bitcoin of course but before we go to bitcoin um what did you see as the biggest challenges ahead for financial institutions before Bitcoin was invented uh how did that play out um or was that process perhaps interrupted by the arrival of Bitcoin um well I I think if if you if we go back three or four years um the the challenge for well I can only for the financial institutions that we work for banks primarily um the big challenge is was and actually

probably still is in a slightly different way dis intermediation so once it became clear that other organizations could run payments could run money could do all of these things I don't want to be utterly tedious on the topic but you you probably also need to go back and understand the regulatory co-evolution at the same time because this was through the period of electronic money licensing and the first payment services directive and it became clear that the direction of travel would take things like payments away from financial institutions so that other people could it then I mean depending on which models that you use

uh you can see payments as a kind of uh I mean I'm paraphrasing it because this isn't quite how I see it but you could sort of see payments as a kind of Gateway into the financial system and if they lose payments uh you know because they have they I mean Banks if they lose payments because they have an intermediary between them and the customer that handles this Facebook or Apple or Google or Microsoft or ven Mo or anybody else I mean I think it's sort of interesting we're talking the day after Facebook launched their P2P payment service in the US then um the banks might be reduced to the role of utility

executional factories sitting behind that and uh for some banks actually who knows that that might be a good choice but I've been to enough business school lectures to know that there's a difference between becom a pipe um as a strategic Choice uh and choosing a tactical approach to operational excellence which can keep your Market position there's a difference between that and becoming a pipe because you didn't see what was coming because you were out maneuvered because you were just reduced to the role of a pipe so I think that disintermediation is still true now because as this conversation goes on um we we're going to disagree at some point about how important Bitcoin

is in all of this it's I I don't think Bitcoin has changed those Dynamics on the retail banking side I don't okay it's interesting because uh last week during the national Bitcoin Congress um I wasn't there unfortunately but um I did see it live so I was happy to be able to see it live it's a very enjoyable event I thought it was a they had a very good program very good mix of speakers looks very good I agree um but you said that the future of money isn't Bitcoin that's right the future of Bitcoin isn't money could you maybe a little bit on that because I think well they're confused by that quote H when I went to the very first I went to the very first

European Bitcoin conference which was in Prague I I can't be bothered to Google it but I think it was 2011 uh now um most of the people in the room were very very young uh and dynamic and energetic which I'm not um but I can remember I can remember digicash and hash cash and millison uh and all these other things so I can remember the branches on The evolutionary tree that have grown into Bitcoin and so my mental model was slightly different I I mean I'm I'm going to annoy people by saying this but I thought there was a sort of slightly religious aspect to the

first Bitcoin conference I went to it's if Satoshi Nakamoto was a prophet who had this thing had come into his head and he had shared it with people there didn't seem to be any awareness that this is a family of protocols that have roots and can grow further right so in in my head Bitcoin was a stage on this growth and I'm sure other things will come afterwards and it will mutate and grow so I never saw Bitcoin as the uh as the end product but as I read the original paper and as I listened to the discussions and and then went back and and bounced these around with my colleagues I got more and more interested in the blockchain technology

and the idea of permissionless innovation on an albeit computationally expensive platform and I found I could not get excited or enthusiastic about the currency um so in other words so the reason why I turned this into the sound bite well the reason why I turned it into the sound bite is because I live on Twitter and I needed to be retweeted and I understand how to get retweeted yeah you know so but the reason I turned into sound is because I don't think the future of money is Bitcoin if I was to make a choice right now if I was the if I was the uh the friendly dictator in the UK and I wanted to make the UK

economy more efficient by replacing physic physical cash with electronic cash I would I would want something more like mzza than Bitcoin I mean I would want uh you know simple account to account transfers I would add uh a snonymous front end because I have privacy issues about that but in terms of cost and efficiency and speed you may as well have effectively something like PayPal but run by the bank of England just a big database and if I send you some money it's just a few bites changing in a database and it all works absolutely fine so so the future of money I don't see as being uh Bitcoin I mean I certainly see the future of

money as being devolved and in many cases private and much richer and more interesting uh I think there's a link between communities and currencies which will flower under the new technology but I I wouldn't see Bitcoin as the I mean I don't you'd have to convince me that the design goals for a currency were such that they could be met by Bitcoin and that's really not clear to me at all okay um so the future of money isn't Bitcoin and then I said the future of Bitcoin isn't money because I think the Bitcoin technology the what we will use Bitcoin for in the future uh whether it's uh as we would do whether it's storing uh letters of

credit or dishwasher warranties or you know side chains for particular Industries or smart contracts for something or other or colored coins for NDA whatever the future of Bitcoin is that future isn't money that future is I don't want to say it but it's more closely linked to uh identity and reputation um and and so on so that so I boiled all that down into the little sound bite and I know it I know it would annoy the purists to say that but hey it got retweeted like a gazillion time so I won yeah that's why I was curious about about that part uh just to hear it from your side um but you mentioned that you think it might be a good idea if I'm

correct correct me if I'm wrong but uh As I understood it you said that you thought you think it might be a good idea if people would have a bank account directly with the Central Bank um Paul just moved back from Ecuador back to the Netherlands uh he has some experience over there maybe Paul would like to say something about this yeah and Dave to what extent are you aware of this system in Ecuador I I I know the system in Ecuador yeah yeah so I just moved back from Ecuador and it was being rolled out um as I lived there and I was actually one of the first people to uh to use it to experiment with it there was there's just only a few places in the country where you can use it but there was this um fish soup store where close to where

I live where I where I bought where I used the system and the merchant loved it because instead of paying 3% to diner Club they just paid three cents to the central bank and instead of having to wait three days they got it in three seconds um so for the merchant it was it was a very convenient tool um but what do you think of the system I think the EC equadorian system illustrates um illustrates a great many of the key points in money so uh so for people who are listening who don't understand the situation there Ecuador operates what economists would call a currency board so so in Ecuador the uh the unit of account is the US dollar and if you want

and it's US dollars that circulate uh and there are also actually rather interestingly there are some US Dollars like 50 cent coins which are not tender in the US but but IL legal in Equador there's already a parallel currency in a way it's just just 40 40 million dollars in total or so but yeah there is a coin circulating that is only accepted in in in in Ecuador but within Ecuador they see as dollars so there's no that's exactly right and that's but I think don't you think that's very fascinating I mean the little story of that tells you so much about money and what money is now and so I would say well you know look if you want to have an efficient National electronic money system then what they're doing is a really good

thing right because for the remember cash discriminates most heavily against the poorest people it's the poorest people who have their money stolen taken away from them in bribes they lose it uh they have to spend time queuing to get it or transporting it around to pay bills and so on so the cost of cash fall most heavily on the poorest people so as a national project the idea of replacing cash with this electronic uh money Ecuador pezer or whatever that I mean everybody has can have access to a feature phone and so uh that's actually a really really good thing however what yeah what about the

counter arguments a lot of people say well then of course uh there's a privacy privacy thing of course and secondly um then you're depending on the on the capacity of the central bank to create more and more of those units until it's hyp until that's the problem put so so so put privacy to one side for a moment because that that that's a general issue with all of these and I have the same general problem and I and I think the same general solution with all of these things so so put privacy to one side and let's imagine they'd come up with a with a solution which had appropriate privacy safeguards in it I still would be uncomfortable with the Ecuadorian system and the reason for that is because the reason why the electronic money will

have value to the merchant is because it's redeemable at par now if the ecuatorian government is going to hold a one toone US dollar Reserve against the units of electronic currency that are issued that's absolutely fine I have no problem with that whatsoever ever in fact if they applied to issue it in the European Union under the provisions of a European electronic money issuing license that's exactly what they H to have to do there are very strict provisions on what you can do with your float uh in Europe but many people have the suspicion I I'm not saying this I'm just reporting what other people have said many people have the suspicion that the government will uh issue electronic currency for which

there's no reserve and in order to pay their own bills and to to uh pay public sector workers and so on and so forth that's a general impression like most of my friends and people I know that especially ones that are educated or having um businesses they do fear that at some point we'll see a parallel currency there um so you have like an EO dollar and a US dollar because the the backing will at some point and the the equa dollar will slide against the usly I I I I agree with that completely but that's not a function of the technology I mean that would you know you know in in that particular example you could use that technology as they do in Kenya to issue electronic money that

has a stable 100% reserve and the thing works beautifully and you have a whole new economy building up on top of it and that it's reasonable for Ecuador to aim for that but you need a transparency to make that work because people have got to be able to log on I mean you know what I mean I've got to be able to log on to the central bank and see there's one US dollar there for every electronic US dollar that's been issued un and unless I can do that um you know I I might have some suspicions so we we already mentioned privacy here uh a few times but um a little while ago on Twitter I believe uh as a in a reaction to one of Paul's tweets uh you mentioned that people

should have the right to privacy um but not so much to be anonymous but if I understand correctly the Privacy itself would be that you are the person who has the choice to decide whether what kind of information you'd like to share with anybody else so in that case you would also have the right to be anonymous right I made a uh I made a a little video I'm just going to look for it now um which was originally done not not really as a joke but to make a point I'll see if I can find it I'll post the link in so you could imagine a situation where my identity is cryptographically protected so that I'm private unless I do something wrong in which case the

identity can be revealed so or so to take a very simple version of this right um uh uh I have a I have a mobile banking application on my phone the mobile banking application generates a key pair the private key goes to the bank the bank gets me to log in it knows I'm Dave Burch it then signs the key and sends it back with a certain set of attributes this person is over 18 they live in the UK but not my name okay so now I can transact in complete confidence you can transact with me in complete confidence you don't know who I am but you know for certain that Barkley knows who I am right in interact with me because they know

cryptographically for sure Barkley's know who I am so the fact that you don't know who I am doesn't matter the transaction can still proceed but if I do something wrong if I break the law the police can get a warrant and go to barles and of course barles will tell them i' da Birch I can't I can't use it to do anything bad so this would be a system with a trusted third party in the system right this would possible in a trustless system like Bitcoin for example yeah yeah so um this is a nice nice link I think um because you're apart from having a lot of knowledge being well cred credential on the part of uh payments uh you're also well credentialed on identities uh

the two are linked yeah they are very interl I think yeah and um so what do you see is the key issues surrounding Bitcoin because the example that you've just mentioned is uh uh based on a trust based system so one where you have an intermediary where you have trusted third party uh but Bitcoin itself is a trustless system so what are the key issues surrounding Bitcoin and ident ities well look so yes I I mean I do believe the relationship between money and identity is um is very close I'm in fact I'm probably at the extreme end of that spectrum because I think in reputational groups where you can

authenticate uh the relevant attributes with with certainty then the use of money as an intermediary begins to Fall Away because you can maintain the shared Ledger of uh cross claims within the group with with certainly and so this is what people this is the the idea of the new Neolithic yeah so when we were in a little tribe together in the Stone Age each of us could remember all of our obligations right iow you I don't know a stone or whatever else they had in the Stone Age I don't know uh uh you're going to help me uh Milk The Cow I will help you collect stones for a wall whatever we can we can remember all of

those things so we we don't we don't need money um and so so I'm at the extreme end I think you can you can see a situation where a sophisticated identity infrastructure which manages these reputations and the cross obligations that go with them you know takes over so I you know I I can genuinely being accused of being an identity extremist I mean it's not going to happen for a long time same here by the way so but but Dave I always I always wonder with these schemes also when I look think back of of the times in Mesopotamia with the with the clay tablets I understand this scheme of of interrelated deps and claims and all and

all of that but what is the unit of account in such a scheme then that that's a really interesting question that's going to waste the rest of the half an hour if we spend our time talking about this but uh but you see the unit of account um might not be so if you don't have an intermediary I I'll give you an example I I don't know what a dollar will be worth in 50 years time right like when I'm retired hopefully um I don't know how much things but I know that I will need so many kilowatt hours per day to heat my house so in a way a savings account that lets me store away kilowatt hours is more useful than a savings account that

lets me store away dollars because I don't know how many kilowatt hours those dollars are going to buy in the future so I might prefer to have the certainty of the kilowatt hours rather than intermediary so what's the unit of account well there's lots of units of account there's water and electricity and energy and uh I mean if you want to summarize it for argument purposes you can you can go down the sort of uh the sort of long Finance route and say you have your you have your credit rating and you have parking space you know and this is about it um so I so I can you know I picking a unit of account when you have to work between these but if you don't have to

work between them then you don't need a unit of account uh that balances each of them but as you know that that's an extreme position and although I hold it I wouldn't say it was a universal uh view of the future so you would see the future money system which would be based on identities as merely a scoreboard if I say that correct well I think I think you know look again it's all to do with sound bites identity is a new identity is the new money yeah is a much better sound bite than Mutual cross obligations in reputational groups will be the basis for you know Commerce that's too long the publisher didn't uh yeah like one so so for a short hand we'll say identity

is the new money but but you but you know what I mean now what what does that mean for what do that mean for Bitcoin so the argument with the argument with Bitcoin is um I mean let's distill it down um and I will I will make caricatures of the argument to infuriate Paul and then we'll then we'll use them as Straw Men for discussion so the first one is people don't want money that is controlled by the government or something they want money that is like gold and is uh you know uncontroversial whatever so that's the first I think Paul probably thinks that's true I I really don't I I don't want money that's outside Democratic

control I don't want to live in a society where uh we don't have uh we don't have influence over these things it's all very well to be nostalgic about the gold standard but the gold standard ended in a global recession because you know that was that's not a good outcome that's not the sort of thing we want um so so argument one is we want money that's not under government control I'm not sure that's true not obvious to me at all we might not like the way money works right now we might want money to work in better ways but can I already counted this argument and we move to the next one um because you say Dem Democratic control let's just assume that means that the majority can vote for a certain change

or whatever with Bitcoin we clearly see that it is a consensus driven protocol where people when they form a majority can make certain changes so um it's not like a static thing at all La I don't I don't quite understand the the point the thing is if well you said you don't want to be you don't want to subject yourself to something that you cannot control democratically right yes my point is that Bitcoin is not just a static thing that will not change anymore as we see for example with the whole block size debate that I'm sure you're following you can see that people are trying to form a consensus as to whether they want to increase the size or not so it's not U that's BAS my reputation to your point that it is

indeed something that can change based on the on the on the desires of the users that that use a system yeah or look at Greece for example uh it might not be uh the best way of making this point but the idea would be that if that this would be a democratic money system then if the M majority of the the Greeks would vote for reopening the banks tomorrow that they would reopen but but that's I'm you know democracy allows people to vote for stupid things I'm I'm sorry but that's just part of the way it works I you know if it was up to me uh I would I would

certainly uh narrow the franchise slightly it's it's not obvious to me that absolutely everybody should be voting um but I'm afraid there's until somebody can come up with a better alternative we're we're sort of stuck with that private Curr currencies you know you you you don't have to have theat currencies in order to have that element of control uh you know this is the sort of Neo hakan perspective that we were discussing last week in Amsterdam which is you can have uh currencies that are issued by private organizations um but under rules that are democratically set rules which set what reserves they have to hold or or you know whatever or

yeah you could argue even that there is no such thing as a public entity because a public entity is is in a in a way it's a group of people sharing a piece of land with a board of directors that's what a country is basically right even though there there is not not a very firm contract uh with that particular organization you could you could sort of see any public entity as just a bunch of people collectively owning a piece of land which is true in a way in a way the world already consists of all s of um public currencies that we call or private currencies that we call public currencies but I think where we going to perhaps is a world where people can form

collectives even though they're not even based in the same country and come up with their own system like for example Bitcoin now actually I I agree with one part of that I mean we're not that's a win that's a win we're we're not so far apart on some of those aspects so I I've written quite a few times that I think the future of money BEC because technology lowers the cost of creating money lowers the cost of monetary experimentation you would expect to see more currencies and I've I mean I can't prove this I don't think but I feel uh with some reasonable that the currencies which are going to be linked to communities um you can see currencies

which reduced the cost of transactions within a community um potentially at the expense of raising the transaction cost between communi you can sort of see that and so that suggests to me that those communities will be the basis of the currencies however as you've pointed out Community Now does not mean what community meant in the Stone Age right so in the Stone Age the reputational group was geographically very limited and it had kinship bonds to to support reputation could you Im so what your what what you've just said sounds to me like could you imagine uh for example an is iic diaspora that has an electronic din that they use between absolutely I

can imagine that completely yeah could could I imagine um a goldb currency that some people wanted to use absolutely can I imagine currencies that are based on hyperlocal groups I can imagine all of those things can you imagine brand-based currencies you know this is the sort of Edward debono um you know currency as a as a kind of advanced law I can imagine all of those things so I agree with you about Community being the basis yeah of future currencies I I don't quite see how that takes you to bitcoin though okay for enough isn't isn't that just the the the prime example of how a community

of like-minded people gets together and come up with their own currency yeah that might well that might well be true and if it was a plausible hypothesis that Bitcoin Co had sprung into existence as the perfect way of implementing currency uh that might be an argument but that's like you saying to me like 200 years ago hey look you know this guy J he's invented this steam engine for pumping water out of Mines this is the perfect steam engine we should all be using that and I'm saying actually what he's invented is an engine and the fact that people can build on that engine improve it and take it in direction is

absolutely fantastic but it does not seem to me that that engine is going to be what we all be using in 50 years time or a 100 years time and I I think I can support that and I and I'm not just saying that in a sort of using trivial and inappropriate historical metaphor I'm saying it because I think if you were to sit down and try to get a mandate for the requirements for a new kind of money um I don't I don't think they would match with the Bitcoin requirements I've said the issue about uh control which actually no nobody is arguing with me about this on Twitter at the moment so I don't know either nobody's listening or I'm so utterly convincing that that they've got no

argument um so that's the first thing the second thing is the issue about uh the sort of anonymity of Bitcoin the not really anonymity but sort of anonymity so rather than have uh some something like that either something that's fully accounted and has no privacy or something with this sort of weird sort of anonymity where you can actually be tracked I would like to have money that offered actual privacy cryptographically uh provided privacy so I so I want money where it's one of the design goals that provided you're obeying the rules again under Democratic control uh your transactions are private and if

there's you misbehave or there's some susp sup then they can be revealed and that needs to be a construct not a byproduct of the way the thing is implemented so I think that's that's an important aspect to it as well I I don't know how I don't know how you feel about the idea of building in privacy like that I mean presumably that's more appealing to you well for me the most important um aspect is that people um come up with something that they voluntarily agree with and I guess this system um could be something that people could on and then it's fine with me okay so that that would be a step forward in that as well yeah but we Tim maybe I can because we uh we have to

wrap up anytime soon so let me just um give them give them the Flack to to to Tim and see if there's any remaining questions he has for Dave um you you wrote a book of course on uh which is titled identity is money um thank you for mentioning it yeah no problem to be honest I at the same time I do have to admit that I haven't read it yet but it is on my watch list and I mean that sincerely um all I care is that you paid for it well I haven't so I'll go try and download it somewhere after no but the first thing that comes to mind when reading that title is but is identity really the money there isn't it the reputation that intertwines with

that identity I I I I agree with that completely but as I said earlier on it's not a very good book title yeah it's it's about sound bite probably but uh but you're right it's about uh it's about um ultimately it is more about reputation and for reputation to work you need to have this um sorry I've just posted the if anyone's interested in the video link about about uh I think you might find it mildly interesting to look at this little video about uh two different kinds of ways of paying for things okay um uh if you have uh something that's based on reputation something that's based on trust I want that to have a hard infrastructure in

the sense that I want the identification the authentication the reputation I want all of those things to be real and built on Real uh cryptography right and so this is why this is why I keep cycling back to this point about the blockchain as an immutable record of things um that sort of fits with my Notions of of managing reputation the idea that you're you're I mean this is a trivial version of it but the idea that you are a sort of wallet and in this wallet you have coins which say uh I I have this loan or I live in this country or or whatever these and I can take these coins out and

and demonstrate ownership of the coins to people in order to do something in order to gain access to something or exchange so you know I I I want to get access to your house so I have to show you that this I have this Airbnb booking it's me I own the I I don't see exactly how that would work yet but I can sort of see that that's a useful way of thinking moving forward so when uh last question then because we have to wrap up I would I would love to continue this conversation much longer but we have to end it at some point I I literally that's a very bad thing I never get bored talking about these things I can I can I can do it as an Olympic sport I would love to join you on that

one as soon as we get to that point um but the last question then uh about reputation and you mentioned the example of storing it on a blockchain to what extent do you think it's a good idea to store reputation on a blockchain because the whole idea of uh well at least the Bitcoin blockchain uh is the immutability part and um if you want to forgive somebody do you do you have to actually store this reputation on the blockchain and can it also become dangerous in some form that that's actually a very good point and and deserves more discussion in its own right I think um a the Bitcoin blockchain is a is a computationally very expensive way of

maintaining this ledger so if we want to find applications for the blockchain that blockchain we need to look for applications where the uh public nature of the record of the immutable record outweighs the computational expense which by the way I think isn't true for a lot of the potential applications that are being discussed because they're they're between trust groups and and the cost of managing a shared Ledger between trust groups uh you know is is much much less than the cost of maintaining a ledger which must be censorship resistant to all forms of Bad actors so so if you're going to find

applications there you got to find things where the Persistence of this public record in a in a weird way has to meet some kind of private uses right because otherwise if you just giving stuff away for free like how is there a business on top of that so this really interesting combination uh of of transparency and privacy and security is a very fertile ground I think uh for for new kinds of applications so the example I used in the Netherlands last week I said uh and this is not my example this is an example that goes back to the 1930s uh and that's the idea that it's

it's very I mean there's sound bites coming again warning um you can't rob a glass bank that's the sound bite right if you can make a if you can make a bank out of glass it's very difficult for people to steal money from it because if people are inside stealing money everybody walking past can see so can you can you take the concept of a glass bank and build that using blockchains and the answer to that seems to me to be quite possibly yes right and there are other things you need to do this I see there was more discussion on Twitter today about Eric Hugh's uh mid90s idea about open book accounting homomorphic encryption maintaining public ledgers with private

information on you know I don't know what the answer to that is but I can see that if guys like you can find a way of anchoring identity in the blockchain there is a possibility for building blockchain applications which have this incredible transparency which is a which is a very beneficial public good and make the computational expense worthwhile while maintaining private information which means businesses you know can use them so I'm I think that's a very fertile area thought okay interesting yeah I could keep asking you more questions for many more hours but uh I you guys I I I genuinely don't know where this is going

any more than anybody else is going but unless we question each other like this we we don't make progress I I love being questioned and and and critical thinking in this area is really really very vital great same here I always love to uh uh invite people to challenge my thinking and my sometimes biased views on something no mine My Views are biased too we we all have that issue I guess I actually thought you you want you use the example of the glass Bank to um to make it very clear how fragile Banks still are built from no it's a it's a it's a multi-purpose met but no I was I was using it to point

out about transparency the the blockchain might be a way of constru ing private institutions which are transparent and open to inspection and that would be that would be an interesting new way of running some businesses yeah yeah first question sorry yeah we're really gonna wrap it up we need to we need to wrap it up that thing yeah one one more just a little side note then perhaps because um it's more of a philosophical question but the first question that arises to my mind when you mention the idea of a gloss bank is do we still need kyc AML regulations then GL but yeah well AML uh I mean I'm going to say something quite controversial

here because I think the answer with AML might well be no AML is what you have to have because you can't see all of the transactions if you if you have a transparent infrastructure where the uh the police or the government where legitimate law enforcement agencies can follow the trail of trans transactions then why would you need AML if if you can see all the transactions you don't need AML right well as long as you have kyc kyc is a little different and I can see why binding to legal entities is for you know is OB we none of us want to live in a lawless world we want kyc but we want reasonable kyc we don't have a strong

enough digital identity infrastructure at the moment to make kyc as simple and or more cost effective than it is now that's one of the reasons the costs keep escalating but the technology might provide for a way of doing kyc in a more efficient way which actually makes it better makes it more useful right okay we have some people asking where the video link is but I'll put the video link in the show notes so everyone can um can look it up thanks very much Paul I'll post it on Twitter on a minute as well right well thanks so much Dave for being on the show and and oh thank you it's been so interesting guys I'm I'm flattered to be asked yeah let's do it again in the future and we'll be very exciting year I guess with all these new insights and and Technologies coming together that's

great thanks very much guys bye bye